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Directors Report of 3i Infotech Ltd.

Mar 31, 2015

Dear Shareholders,

The Directors present the Twenty Second Annual Report (the "Report") of the Company along with the Audited Financial Statements for the year ended March 31, 2015.

STATE OF THE COMPANY'S AFFAIRS

Financial Performance of the Company on Standalone and Consolidated basis:

Rs. in crores

Particulars Standalone Consolidated

Year ended Year ended Year ended Year ended March 31, 2015 March 31, 2014 March 31, 2015 March 31, 2014

Total Income 403.81 395.32 1,348.43 1438.50

Total Expenses 747.37 813.24 1,611.78 1,794.23

Profit/(Loss) before exceptional items and tax (343.56) (417.92) (263.35) (355.73)

Exceptional items 690.62 35.85 673.17 -

Profit/(Loss) before tax (1,034.18) (453.77) (936.52) (355.73)

Tax expense - - 14.17 15.97

Deferred Tax Expense - (17.67) (3.03) (18.45)

Tax Expense from earlier years 23.57 4.12 28.40 3.81

Profit/(Loss) after tax (1,057.75) (440.22) (976.06) (357.06)

Minority interest - - (0.21) (0.50)

Profit/(Loss) for the period (1,057.75) (440.22) (976.27) (357.56)

Earnings Per Share (Basic in Rupees) (Before (6.39) (7.15) (5.29) (6.33) exceptional items

Earnings per share (Basic in Rupees) (After (18.25) (7.78) (16.85) (6.33) exceptional items

TRANSFER TO RESERVES

There is no amount proposed to be transferred to general reserve this year due to unavailability of profits.

DIVIDEND

The Board of Directors regrets its inability to recommend any dividend (equity or preference) for the year ended March 31, 2015 due to non-availability of profits..

BUSINESS

Your Company has a comprehensive set of IP based software solutions (20 ), coupled with a wide range of IT Services to address the dynamic requirements of a variety of industry verticals including Banking, Insurance, Capital Markets, Asset & Wealth Management (BFSI). The Company also provides solutions for other verticals such as Government, Manufacturing, Distribution, Telecom and Healthcare.

The business activities of the Company are broadly divided into two categories viz: IT Solutions and Transaction Services. IT Solutions business comprises of software products and IT enabled services while the transaction services comprise of BPO and KPO services. The Company has good product portfolio and has dominant presence in fast growing emerging economies. The Product Business of the Company has wide base with more than 800 active customers who are satisfactorily using the Company's products.

The contribution to the revenue for the year from IT Solutions was 95% and that of Transaction Services was 5%.

Your Company has presence in 50 countries and seven geographies, viz. South Asia, Asia Pacific (APAC), China, Middle East and Africa (MEA), Kingdom of Saudi Arabia (KSA), Western Europe (WE) and North America (US). Your Company has marketing network around the world, including North America, Western Europe, Middle East and Africa and Asia Pacific.

The business of your Company is largely divided into Emerging Markets and Developed Markets. The share of the Emerging Markets to total revenue of the Company is about 62%, while that of Developed Markets is about 38%.

For detailed operations and business performance and analysis, kindly refer the Management Discussion & Analysis which forms a part of this Report.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

In terms of the CDR package, the Company was given a mandate to identify its non core business/assets for sale and utilize the proceeds to deleverage its balance sheet. The Master Restructuring Agreement (MRA) signed with the Lenders had also identified certain such assets. Therefore, as per this mandate, the following subsidiaries were divested during the year:

i. In August 2014, Professional Access Limited (US) was hived off along with the entire business of Professional Access Software Development Private Limited (India) to Zensar Technologies Limited (including its affiliates).

ii. In December2014, 3i Infotech (Western Europe) Limited and 3i Infotech (Flagship-UK) Limited were sold to Object way UK Limited.

On July 29, 2014, Locuz Inc. was incorporated as a step down subsidiary to tap business opportunities in the U.S. region.

Later, in February 2015, the name of one of the Company's step-down subsidiaries, 3i Infotech Outsourcing Services Limited was changed to "IFRS Cloud Solutions Limited" and its main objects were amended to include "providing solutions on implementation of International Financial Reporting Standards (IFRS) on the cloud platform".

As on March 31, 2015, the number of subsidiaries was reduced to 25 (twenty five) from 27 (twenty seven) at the beginning of the year.

As per the first proviso to Section 129(3) of the Companies Act, 2013 (the "Act") read with Rule 5 of Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of subsidiaries/associate companies/joint ventures in the prescribed Form AOC-1 is attached to the consolidated financial statements.

Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries are available on the website of the Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

Particulars of loans, guarantees or investments granted/made during the year are given under the notes to standalone financial statements forming part of the Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered into by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company has not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on related party transactions. The said policy can be viewed on the Company's website by accessing the following link: http://www.3i-infotech.com/content/investors/investors.asp under "Corporate Governance"

Details regarding related party disclosure are given under the notes to standalone financial statements which form part of the Annual Report.

REPORT ON CORPORATE GOVERNANCE

The Corporate Governance Report is appended herewith as Annexure /to this Report.

EXTRACT OF ANNUAL RETURN

In terms of the requirements of Section 92 (3) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return in the prescribed form MGT- 9 is attached herewith as Annexure II and forms part of this Report.

CAPITAL

a) Preference Capital:

The Company has not allotted any preference shares during the year and therefore as on March 31, 2015, the preference share capital remains unchanged at Rs.65,00,00,000/- (13,00,00,000 Preference Shares of Rs.5/-each). All the preference shares are held by IDBI Trusteeship Services Limited (ICICI Strategic Investments Fund).

b) Paid-up Equity Capital:

1) ESOS allotments:

The Company has not allotted any shares under the Employees Stock Option Schemes (ESOS) during the year.

2) Allotments against conversion of Foreign Currency Convertible Bonds (FCCBs):

During the year, the Company had received conversion notices from FCCB holders against which 2,96,61,822 Equity Shares of face value of Rs.10/- each were allotted by the Company at a premium of Rs.6.50/- per share.

3) Allotments of Equity Shares under the Corporate Debt Restructuring (CDR) Package:

On December 9, 2014, 14,44,747 Equity Shares of face value Rs.10/-each at a premium ofRs.9.74/-per Equity Share were allotted to a CDR Lender towards sacrifice as agreed under the CDR Package.

As a result of the aforesaid allotments, the paid-up equity share capital of the Company stands at Rs.6,03,75,09,470 as on March 31, 2015.

The Company has neither issued equity shares with differential rights as to dividend, voting or otherwise nor any shares (including sweat equity shares) to the employees of the Company under any Scheme.

EMPLOYEES STOCK OPTION SCHEMES

As per SEBI Circular (CIR/CFD/POLICY CELL/2/2015) dated June 16, 2015 relating to requirements specified under the SEBI (Share Based Employee Benefits) Regulations 2014, details of the Employee Stock Option Schemes (ESOS) of the Company are given in Annexure III to this Report.

PUBLIC DEPOSITS

During the year, the Company has not invited/accepted any deposit under Section 73 of the Act.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

Effective September 1, 2014, IDBI Bank Limited, the Lender and Monitoring Institution under CDR, nominated Mr. Shantanu Prasad as Director on the Board of the Company. Mr. Shantanu Prasad replaced Mr. N. S. Venkatesh, who was a nominee director representing IDBI Bank then. Further, Dr. Ashok Jhunjhunwala, Non-Executive Independent Director also stepped down as Director of the Company with effect from September 15, 2014.

Dr. ShashankDesai and Ms. Sarojini Dikhale were appointed as Additional Directors with effect from November 3, 2014 and July 28, 2015 respectively. It is proposed to appoint Dr. Shashank Desai and Ms. Sarojini Dikhale as Independent Directors for a period of 5 years effective September 23, 2015 at the ensuing Annual General Meeting of the Company.

Pursuant to the provisions of Section 149 of the Act, which came into effect from April 1, 2014, Mr. Hoshang N. Sinor and Mr. Ashok Shah were appointed as Independent Directors at the Annual General Meeting (AGM) of the Company held on September 16, 2014 to hold office for a period effective April 1, 2014 to September 30, 2015. The terms and conditions of appointment of Independent Directors are as per Schedule IV of the Act. They had submitted a declaration that each one of them meets the criteria of independence as provided under Section 149 (6) of the Act and there has been no change in the circumstances which may affect their status as Independent Director.

Mr. Hoshang N. Sinor, who has been on the Board for over 12 years, retires on September 30, 2015. In spirit of the provisions of the corporate governance, he does not offer himself for appointment as Independent Director for a fresh term thereafter. It is proposed to appoint Mr. Ashok Shah as Independent Director on the Board of the Company for a period of 5 years to hold office up to September 30, 2020.

During the year, with effect from November 11, 2014, Mr. Charanjit Attra, Executive Director and Chief Financial Officer, was redesignated as Executive Director - New Business Initiatives, Strategy and Finance, while Mr. Padmanabhan Iyer was appointed as the Chief Financial Officer of the Company on November 11, 2014.

Subsequently, he has resigned from the Board with effect from May 28, 2015 in order to pursue opportunities in other professional areas.

As per the provisions of Section 152 of the Act, Mr. Madhivanan Balakrishnan is liable to retire by rotation at this AGM and being eligible, seeks re-appointment. The Board of Directors recommends these appointments.

As on the date of this Report, the Board of the Company consists of 7 Directors, out of which four are Independent Directors, two are Nominee Directors and one is an Executive Director.

None of the Independent Directors have had any pecuniary relationship or transactions with the Company during Financial Year 2014-15, except to the extent of their directorship. None of the Directors or KMP of the Company is related inter-se.

Five meetings of the Board of Directors were held during the year. The details of the same are given on page no. 9 of the Annual Report.

Mr. Ninad Kelkar, Company Secretary, is the Compliance Officer of the Company and also one of the KMPs of the Company.

COMMITTEES

As on date of this Report, the Board has four committees-

i. Audit Committee

ii. Nomination and Remuneration Committee

iii. Stakeholders' Relationship Committee

iv Corporate Social Responsibility Committee

The Company also has an internal committee comprising of the Head-HR and the Compliance Officer of the Company to address the functioning of the vigil mechanism as mandated by the Act and assist the Audit Committee thereunder.

The detailed information regarding the committees of the Board, including composition of the Audit Committee, has been given in the Corporate Governance Report which forms an integral part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Act and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with (AS) - 23 on Accounting for Investments in Associates and (AS) - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statements presented by the Company include the financial results of its subsidiary companies, associates and joint ventures and form part of the Annual Report.

AUDITORS

M/s. Lodha & Co., Chartered Accountants were appointed as the Statutory Auditors of the Company at the previous AGM held on September 16, 2014 till the conclusion of the Twenty Fourth AGM of the Company to be held in the year 2017. As per the provisions of Section 139 of the Act, the appointment of Auditor is subject to ratification by members at every AGM. Accordingly, the ratification of the appointment of Auditor has been taken upas an item in the Notice of the forthcoming AGM for the approval of Members.

CONSERVATION OF ENERGY

Although the operations of the Company are not energy intensive, the management is highly conscious of the criticality of the conservation of energy at all operational levels. The requirement of disclosure of particulars with respect to conservation of energy as prescribed in Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, is not applicable to the Company and hence are not provided.

TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

The Company continues to use the latest technologies for improving the productivity and quality of its services and products.

During the year, your Company has taken the following technology initiatives:

Information Security Awareness programmes;

Strengthened its IPRs through technology innovation and appropriate security controls;

Improved utilization and delivery productivity by use of LEAN IT techniques for project delivery and

Partnerships with major technology providers and publishers for win-win relationships and go-to-market strategies.

RESEARCH AND DEVELOPMENT (R & D)

The solutions offered by the Company for various market segments are continuously developed and upgraded through the Global Development Centers (GDCs).

The GDCs function as the product research and development facility of the Company and focus on developing and expanding the Company's products and IPRs. Besides this, the Company is also in the process of upgrading its varied product lines to standard and latest technological platforms.

With a focus to further enhance the Company's software products, i.e. its Intellectual Property, based on market needs, the GDCs work in line with the Company's strategy for growth.

Expenditure on R & D

Rs. in Crores

Particulars 2014-15 2013-14

Revenue Expenditure 5.83 16.34

Capital Expenditure - -

Total 5.83 16.34

Total R&D expenditure as a percentage of total standalone revenue 1.44% 4.13%

FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services and export plans More than 19.60% of the revenue of the Company is derived from exports.

b) Foreign Export earnings and expenditure

During the year 2014-15, the expenditure in foreign currencies amounted to Rs. 111.19 crores on account of cost of outsourced services and bought out items, travelling and other expenses and interest. During the same period, the Company earned an amount equivalent to Rs. 78.55 crores in foreign currencies as income from its operations abroad (excluding income form Dubai Branch).

PERSONNEL

The Company has continued to improve the quality of Human Resource. The key facet has been better levels of productivity as compared to earlier years which has contributed in operating financial parameters showing a strong uplift. Regular interactions and career enhancements by way of bigger roles to talented employees have helped in strengthening the confidence of the employees in the tough financial scenario of the Company. The talent pipeline is looking healthy though attrition and retention remains a challenge for the industry and more so for the Company.

Your Company will continue to focus and build the human potential which would help in improving operating parameters in the coming year.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules is provided in a separate annexure forming part of this Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. In terms of Section 136, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

Disclosures pertaining to the remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annual Report as Annexure IV.

Prevention of Sexual Harassment at Workplace

The Company has in place a Policy aiming at prevention of Sexual Harassment at all Company's workplaces in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal)Act, 2013 and the rules thereunder. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. An internal Complaint Committee has been set up in the Company to consider and redress complaints received with respect to sexual harassment. During the year under review, the Complaint Committee has not received any grievances or complaints of the nature covered under the said Act.

PERFORMANCE EVALUATION

The Company's policy relating to appointment and remuneration of Directors, KMPs and other employees, including criteria for determining qualifications, positive attributes and independence of a director are covered under the Corporate Governance Report, which forms a part of this Report.

It is a practice of the Board of Directors to annually evaluate its own performance and that of its committees and individual directors. Details of the process of Board evaluation are also covered under the Corporate Governance Report.

QUALITY

The Company is committed to providing innovative and high quality products and services that meet or exceed customer expectations.

This includes-

Maintaining a quality focus on continuous improvement to our Products, Process and Services

Process adherence and governance ensuring lower Defect & On Time delivery

The Company's Quality Management System (QMS) addresses process required for entire Software Development Cycle (SDLC) and Project Management Life Cycle (PMLC) supported with industry standard templates and guidelines to ensure disciplined project execution, there by transforming business from taking corrective & preventive measures to the state of predicting outcomes. This framework is designed based on the CMMi Process framework to enhance productivity and to reduce inefficiencies.

The Company has achieved CMMi Level 3 certification to meet the Company's commitment towards quality & business process.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Owing to the losses incurred during the year, the Company has not been able to contribute monetarily towards CSR activities. However, the Company has taken many initiatives to sensitise and encourage its employees to participate in CSR activities at an individual level in order to keep alive in them the noble spirit of giving back to the society.

The Company has reaffirmed its concurrence with the concept of CSR through formulation of a specific policy on CSR and constitution of a CSR Committee, details of which are covered under the Corporate Governance Report.

AUDITOR'S REPORT AND SECRETARIAL AUDITOR'S REPORT

The auditor's report does not contain any qualifications, reservations or adverse remarks. The Company appointed a Woman Director on the Board on July 28, 2015 i.e. after the completion of the audit period. The report of the secretarial auditor, which is annexed herewith as Annexure V in accordance with Section 204 of the Act, is qualified to that extent.

DISCLOSURE REQUIREMENTS

Disclosures required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges are shown under the Corporate Governance Report (CGR). The CGR along with auditor's certificate thereon and the Management Discussion and Analysis form part of this Report.

FUTURE OUTLOOK

The Company will continue to technologically upgrade its products and concentrate on the Software Products, IT Services and IT enabled Services for its growth. The business outlook and the initiatives proposed by the management to address its financial risks have been discussed in detail in the Management Discussion and Analysis which forms a part of this Report.

FORWARD LOOKING STATEMENTS

This Report along with its annexures and Management Discussion & Analysis contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words 'anticipate', 'believe', 'estimate', 'expect', 'intend', 'will' and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward looking statements. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134(5) of the Companies Act, 2013, your Directors hereby confirm that:

a) in preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) they 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 as at March 31, 2015 and of the loss of the Company for the financial year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively and

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Based on the reviews of internal, statutory and secretarial auditors, external consultants, the management and respective committees of the Board, the Board is of the opinion that the Company's system of internal financial controls was adequate and the operating effectiveness of such controls was satisfactory during the financial year 2014-15.

ACKNOWLEDGEMENTS

The Directors are thankful to the Members for their confidence and continued support. The Directors are grateful to the Central and State Government, Stock Exchanges, Securities & Exchange Board of India, Reserve Bank of India, Customs and other government authorities, Lenders, CDR Cell, FCCB holders and last but not the least, its trusted clients for their continued support.

The Directors would like to express their gratitude for the unstinted support and guidance received from alliance partners and vendors.

The Directors would also like to express their sincere thanks and appreciation to all the employees for their commendable team work and professionalism.

For and on behalf of the Board

Sd/- Sd/-

Hoshang N. Sinor Madhivanan Balakrishnan

Chairman Managing Director & Global CEO

July 28, 2015 at Navi Mumbai


Mar 31, 2013

Dear Shareholders,

The Directors present the Twentieth Annual Report of the Company with the Audited Financial Statements for the year ended March 31, 2013.

OVERVIEW

a. Performance of the Company

The year 2012-13 was a critical year for the Company as this was the first year after the Company had agreed upon a restructuring package with the lender banks in India under the Corporate Debt Restructuring (CDR) Scheme of the Reserve Bank of India. Further, at the beginning of this year, the Company had successfully restructured the Foreign Currency Convertible Bonds (FCCBs) which were due for redemption in the current financial year. Accordingly, as per the restructuring terms agreed with the FCCB holders, the redemption tenure of the FCCBs was rescheduled till 2017. As a result of these restructurings, the debt repayment pressure was eased out which helped the Company focus on the business growth.

The business of the Company during the first quarter ended on June 30, 2012 was largely impacted by the aforesaid restructurings and low sentiment in the financial markets. The Company, under new management and with the re-energized business leaders, has been focusing on the business and achieving the growth targets from the second quarter ended on September 30, 2012. The Company, not only retained its existing customers, but also won new customers during this period. The new management is also looking for various options to infuse liquidity in the Company.

The synopsis of the financials stated below may be read in context of the above review.

b. Financials of the Company on Standalone and Consolidated basis:

Rs.in Crores

Particulars Standalone Consolidated Year ended Year ended Year ended Year ended March 31, 2013 March 31, 2012 March 31, 2013 March 31, 2012

Total income 416.19 540.62 1364.28 1730.59

Profit / (Loss) from ordinary activities after (379.45) (165.25) (383.58) (72.54)

finance costs but before exceptional items

Exceptional items 132.96 (87.22) (86.27) (181.42)

Profit / (Loss) from ordinary activities before tax (246.49) (252.47) (469.85) (253.96)

Tax expense 8.87 59.26 (14.06) (80.77)

Profit / (Loss) from ordinary activities after tax (255.36) (311.73) (483.91) (334.73)

Impact of discontinuing operations (14.42) (19.57) (22.67)

Profit / (Loss) after tax and discontinuing operations (255.36) (326.15) (503.48) (357.40)

Minority interest (1.49) (2.63)

Profit / (Loss) after tax, discontinuing operations (255.36) (326.15) (504.97) (360.03) and minority interest

Earnings Per Share (basic in Rs.) (Before (8.94) (12.08) (9.19) (8.51) exceptional items and discontinuing operations)

Earnings Per Share (basic in Rs.) (After (5.92) (17.37) (11.60) (19.14) exceptional items and discontinuing operations)

c. Corporate Debt Restructuring:

The Members are aware that during the year 2011-12, your Company restructured its bank loans under Corporate Debt Restructuring (CDR) mechanism envisaged under the Reserve Bank of India (RBI) guidelines. Accordingly, the Company had entered into a Master Restructuring Agreement (MRA) with the lender banks participating in the CDR package (CDR Lenders).

During the year, the Company has fully implemented the CDR Package and have created security as agreed under the MRA. The details of the encumbrances may be referred in note no. 2.3 of the Standalone Financials on page no. 86 of the Report. Further, the Company has also allotted equity shares against the conversion portion of the outstanding loans and interest (including accrued) for each quarter of the Financial year 2012-13. The details of such allotment have been disclosed under Section c on Page no. 3 of this Report.

TRANSFER FROM RESERVES

It is not proposed to transfer any amount to General Reserve Account this year.

DIVIDEND

Your Directors regret their inability to recommend any dividend (equity / preference) for the year ended March 31, 2013.

BUSINESS

Your Company has a comprehensive set of IP based software solutions (20 ), coupled with a wide range of IT Services to address the dynamic requirements of a variety of industry verticals including Insurance, Banking, Capital Markets, Asset & Wealth Management (BFSI), etc. The Company also provides solutions for other verticals such as Government, Manufacturing, Retail, Distribution, Telecom and Healthcare.

Your Company has a large customer base across the globe including Fortune 500 customers. The Company has physical presence in 50 countries and 6 geographies, viz. South Asia, Asia Pacific (APAC), Middle East and Africa (MEA), Kingdom of Saudi Arabia (KSA), Western Europe (WE) and North America (US). Your Company has marketing network around the world, including North America, Western Europe, Middle East and Africa and Asia Pacific.

The business of your Company is majorly divided into Emerging Market and Developed Market. The share of the Emerging Market to total revenue of the Company is about 60%, while that of Developed Market is about 40%.

For detailed operations and business performance and analysis, kindly refer the Management Discussion & Analysis which forms a part of this Report.

SUBSIDIARY COMPANIES

As of the date of this Report, the Company has 26 subsidiaries located in 6 different geographies i.e. South Asia, APAC, MEA, KSA, WE and US.

In keeping with the strategy of the Company to concentrate on its core area, during the current year, 3i Infotech (Kazakhstan) LLC, a non-operating step down subsidiary of the Company was sold on June 18, 2012. 3i Infotech (Australia) Pty Limited, a step down subsidiary of the Company was de-registered on May 23, 2012. Further, during the year, 3i Infotech Services (Bangladesh) Private Limited, one of the subsidiaries of the Company was wound up with effect from September 23, 2012.

As a result of the aforesaid steps, the number of subsidiaries was reduced to 26 (twenty six) as on the date of this Report from 29 (twenty nine) at the beginning of the year.

Accounts of the Subsidiaries

Pursuant to the provisions of Section 212(8) of the Companies Act, 1956, the Ministry of Corporate Affairs vide its circular dated February 8, 2011, has granted general exemption from attaching the balance sheet, statement of profit and loss and other documents of the subsidiary companies with the balance sheet of the Company. A statement containing brief financial details of the Company''s subsidiaries for the financial year ended March 31, 2013 is included in the annual report. The annual accounts of these subsidiaries and the related information will be made available to any Member of the Company seeking such information and are available for inspection by any such Member at the Registered Office of the Company upto the date of Annual General Meeting on all working days except Saturdays, Sundays and National Holidays. The annual accounts of the said subsidiaries will also be available for inspection at the head offices or Registered Offices of the respective subsidiary companies.

CAPITAL

a) Preference Capital:

As reported in Directors'' Report of the previous year, the Company had 20,00,00,000 6.35% Cumulative Redeemable Preference Shares of Rs. 5/- each aggregating to Rs. 100 crores, which were due for redemption on March 31,2012. In terms of the CDR package, the Company had negotiated with the Preference Shareholders to rollover/extend or convert the outstanding preference shares into Equity Shares. Out of the two Preference Shareholders, IDBI Trusteeship Services Limited (ICICI Strategic Investments Fund), holding 13,00,00,000 Preference Shares of Rs. 5 each agreed to extend the tenure of these Preference Shares on the following terms:

- Tenure: Extended for another 10 (Ten) years i.e. upto March 31, 2022 and

- Dividend rate: Reduced from 6.35% p.a. to 0.01% p.a.

The other Preference Shareholder, ICICI Bank Limited (holding 7,00,00,000 Preference Shares of Rs. 5 each) opted to convert the outstanding Preference Shares into Equity Shares as per the conversion price applied to the Equity allotments made under CDR package. Accordingly, 1,77,30,496 Equity Shares of face value Rs. 10/- each at a premium of Rs. 9.74/- per share have been allotted to ICICI Bank Limited in lieu of the Preference Shares held by them. These Equity Shares are under lock-in upto September 14, 2013 in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

The outstanding Preference Shares as on March 31, 2013 are 13,00,00,000 Preference Shares of Rs. 5/- each.

b) Increase in Authorised Capital:

In order to issue additional share capital as required under the CDR package, it was felt necessary to increase the authorised share capital of the Company. Pursuant to the approval of the members, obtained through Postal Ballot, dated May 31, 2012, the authorised share capital of the Company was increased from Rs. 550 Crores, (divided into Rs. 450 Crores consisting of 45 Crores Equity Shares of Rs. 10/- each and Rs. 100 Crores, consisting of 20 Crores Redeemable Preference Shares of Rs. 5 each) to Rs. 1200 Crores (divided into Rs. 1100 Crores consisting of 110 Crores Equity Shares of Rs. 10/- each and Rs. 100 Crores consisting of 20 Crores Redeemable Preference Shares of Rs. 5/- each.)

c) Paid-up Capital:

1) ESOS allotments:

No share allotment was done under the Employees Stock Options Schemes (ESOS) during the period under review. However 1,54,78,000 stock options were granted under ESOS Plan 2013 under existing ESOS Scheme, 2007 to some of its employees & Directors on May 1, 2013.

Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in the Corporate Governance Report.

2) Foreign Currency Convertible Bonds (FCCBs):

Till the date of this Report, the Company has received 46 conversion notices from the FCCB holders against which 9,71,11,993 Equity Shares of face value of Rs. 10/- each were allotted by the Company at a premium of Rs. 6.50/- per share.

3) Allotments of Equity Shares under the Corporate Debt Restructuring (CDR) Package:

28,28,40,922 Equity Shares were allotted under the CDR Package to the CDR lenders the details of which are mentioned below:

Sr. Date of Allotment Number of Equity Shares allotted

No.

1 June 29, 2012 21,67,32,584

2 July 31, 2012 2,14,70,504

3 October 31, 2012 2,15,83,884

4 February 15, 2013 1,37,38,639

5 March 15, 2013 89,30,813

6 April 23, 2013 3,84,498

Total 28,28,40,922

All Equity Shares allotted pursuant to the CDR Package and all the respective pre-preferential allotment holdings of the CDR Lenders are under lock-in as per the requirements of Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Asa result of the aforesaid allotments, the paid up equity share capital of your Company stands atRs. 57,19,39,464 as on the date of this Report.

PUBLIC DEPOSITS

During the year, the Company has not invited or accepted any deposit under Section 58A of the Companies Act, 1956.

DIRECTORS

During the year, Mr. V. Srinivasan was re-designated as non-executive director with effect from July 1, 2012. Subsequently, he resigned from the Board of Directors of the Company with effect from December 30, 2012. Mr. Amar Chintopanth, Deputy Managing Director resigned with effect from March 15, 2013.

Further, Mr. Dileep Choksi and Dr. Bruce Kogut, Independent Non-Executive Directors of the Company resigned effective May 13, 2013 and June 19, 2013 respectively.

The Directors placed on record their sincere appreciation towards services rendered by Mr. V. Srinivasan, Mr. Amar Chintopanth, Mr. Dileep Choksi and Dr. Bruce Kogut during their respective tenures as Directors of the Company.

In terms of the provisions of the Articles of Association of the Company, Dr. Ashok Jhunjhunwala and Mr. Hoshang N. Sinor are liable to retire by rotation at the forthcoming Twentieth Annual General Meeting of the Company and being eligible, have offered themselves for re-appointment.

NEW MANAGEMENT TEAM

During the year under review, Mr. Madhivanan Balakrishnan was appointed as Managing Director & CEO and Mr. Charanjit Attra, presently the Executive Director and Global CFO, was appointed as Executive Director of the Company for a period of 5 years with effect from July 1, 2012 to drive the business of the Company more aggressively. The Company would benefit from their varied experiences in the long term. The Members at the Nineteenth Annual General Meeting of the Company held on August 2, 2012 have approved the appointment of Mr. Madhivanan Balakrishnan and Mr. Charanjit Attra.

COMMITTEES

As on date of this Report, the Board has three committees-

i. Audit Committee

ii. Board Governance Committee

iii. Shareholders'' / Investors'' Grievances Committee

During the year, an internal committee known as Operations Committee was constituted to take decisions on operational matters including matters related to bank account operations, etc. of the Company.

Detailed information regarding the committees of the Board has been given in the Corporate Governance Report.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Accounting Standard AS 21 form part of this Annual Report.

The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies, associates and joint ventures.

AUDITORS

M/s. Lodha & Co., Chartered Accountants and M/s R. G. N. Price & Co., Chartered Accountants, retire as Joint Statutory Auditors of the Company and have given their consent for re-appointment. The Members would be required to appoint Auditors for the current year and fix their remuneration.

As required under the provisions of Section 224 (1B) of the Companies Act, 1956, the Company has obtained a written certificate from both the Auditors proposed to be re-appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section.

CONSERVATION OF ENERGY

Although the operations of the Company are not energy intensive, the management is highly conscious of the criticality of the conservation of energy at all operational levels. The requirement of disclosure of particulars with respect to conservation of energy as prescribed in 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, are not applicable to the Company and hence, are not provided.

TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

The Company continues to use the latest technologies for improving the productivity and quality of its services and products.

During the year, your Company has taken the following technology initiatives:

- External Global SAM (Software Asset Management) engagement was taken up for the customers on usage of the Company''s IPRs & third party for ensuring the best practices for the customers;

- 5S initiative was taken up to ensure a green and organized place;

- Information security awareness programs;

- Strengthened its IPRs through technology innovation and appropriate security controls;

- Partnerships with major technology providers and publishers for win-win relationships and go-to-market strategies;

- Improved productivity by usage of advanced cutting edge tools to enhance testing and compliance efficiencies;

- Continual improvements towards SAM compliance derived by the recognition of the certification of BSA (Business Software Alliance), an initiative alongside of FICCI and Government of Maharashtra;

- Through standardization of policies, processes and technology across its Global Development Centers (GDCs), sales and corporate offices, your Company has achieved certifications of: ISO/IEC 27001:2005 & ISO/IEC 9001:2008 for best practices in Data Center and support services and

- As part of our support to Green IT, we have partnered with Ecoreco as a life Member to ensure effective scrapping of old assets in an eco-friendly manner.

RESEARCH AND DEVELOPMENT (R & D)

The solutions offered by the Company for various market segments are continuously developed and upgraded through the GDCs.

The GDCs function as the product research and development facility of the Company and focus on developing and expanding the Company''s products and IPRs. Besides this, the Company is also in the process of migrating its varied product lines to standard and latest platforms.

With a focus to further enhance the Company''s software products i.e. its Intellectual Property, based on market needs, the GDCs work in line with the Company''s strategy for growth.

Expenditure on R & D

Rs.in Crores

Particulars 2012-13 2011-12

Revenue Expenditure 32.71 27.13

Capital Expenditure

Total 32.71 27.13

Total R&D expenditure as a percentage of total standalone revenue 7.87% 5.02%

FOREIGN EXCHANGE EARNING AND EXPENDITURE

a) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services and export plans

Approximately 12% of the revenue of the Company is derived from exports. Your Company has marketing network around the world, including North America, Western Europe, Middle East & Africa and Asia Pacific.

The Registered Office of the Company is located at International Infotech Park, Vashi, Navi Mumbai, India. Some of the software development centers of the Company in India are also registered as Software Technology Parks of India, whereby the Company is required to fulfill its export obligations as laid down by the Government.

b) Foreign Export earnings and expenditure

During the year 2012-13, the expenditure in foreign currencies amounted to Rs. 2.68 Crores on account of import of capital goods, travelling and other expenses. During the same period, the Company earned Rs. 40.60 Crores in foreign currencies as income from its exports.

PERSONNEL

Your Company has over the last few years created a team of talented and dedicated professionals to achieve the Company''s goal. To retain and develop these employees, human resources group along with the senior management team has been working with an objective to enhance employee competence through various initiatives and maximizing employee contribution towards the organisational goals.

The Company has continued rolling out a number of initiatives to attract, retain and develop talent in the organisation. Since August 2012, your Company has launched "Connect" platforms through which all employees are being appraised of the situation and the steps being taken by your Company towards ensuring delivery of organisational goals. The Whole Time Directors alongwith the Head - HR and other senior management members have been addressing the employees on a periodic basis to provide information on development of the Company and to understand the concerns of the employees. Further, in a knowledge based industry, your Company understands that the employees are the main assets of the Company and it is necessary that they feel challenged to use their intellectual skills to the best of their abilities and add value to themselves even as they add value to the Company. To facilitate this, the Company has a feedback mechanism and steps are being taken towards employee growth and sustaining high level of motivation.

Your Company has engaged with partners to ensure that the talent pipeline is made more robust and the employee upskilling programs lead to achievement of a better value output from its employees.

Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of the Directors'' Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, this Report and Accounts are being sent to all the Members of the Company, excluding the Statement of Particulars of Employees under Section 217(2A) of the Companies Act, 1956. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company and the same will be sent by post.

QUALITY

Your Company is committed to deliver best quality products and services to all its customers. In order to meet its commitment, the Company''s business processes have been thoughtfully designed to develop solutions that fully meet customer expectations and are in accordance with industry and domain specific standards.

The Quality Management System (QMS) of the Company addresses the entire software development and project management life cycle and conforms to Capability Maturity Model Integration (CMMI) process framework. It has been objectively designed to standardise engineering and management practices, enhance productivity and reduce inefficiencies.

Your Company is focused to deliver quality at every stage of operations by driving improvement projects around key business and process metrics and imbibing industry wide best practices.

FUTURE OUTLOOK

The Company will continue to technologically upgrade the products and concentrate on the Software Products, IT services and IT enabled Services for its growth. However, in view of the general market outlook for developed markets and in view of the Company specific issues mentioned in earlier paragraphs, the outlook for the next year will be subdued.

FORWARD LOOKING STATEMENTS

This Report along with its annexure and Management Discussion & Analysis contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words ''anticipate'', ''believe'', ''estimate'', ''expect'', ''intend'', ''will'' and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward looking statements. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956, your Directors, hereby, confirm that:

a) in preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) they 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 as at March 31, 2013 and of the loss of the Company for the year ended on that date;

c) they 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 and

d) they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

The Directors are thankful to the Members and Investors for their confidence and continued support. The Directors are grateful to the Central and State Government, Stock Exchanges, Securities & Exchange Board of India, Reserve Bank of India, Software Technology Park of India, Customs and other government authorities, Lenders, CDR Cell, FCCB holders and last but not the least, its trusted clients for their continued support.

The Directors would like to express their gratitude for the unstinted support and guidance received from alliance partners and vendors.

The Directors would also like to express their sincere thanks and appreciation to all the employees for their commendable teamwork and professionalism.

For and on behalf of the Board

Sd/- Sd/-

Hoshang N. Sinor Madhivanan Balakrishnan

Chairman Managing Director & Global CEO

July 29, 2013 at Navi Mumbai


Mar 31, 2012

The Directors present the Nineteenth Annual Report of the Company with the Audited Statement of Accounts for the year ended March 31, 2012.

OVERVIEW

a) Financial Highlights:

The year 2011-12 was a challenging year for the Company. While the year started on an optimistic note and even the financial results and operations were growing in line with the projections, the situation started turning adverse by the end of second quarter and in the later half of this financial year and the Company reported a net loss for the year ended March 31, 2012.The downturn was attributable to various internal and external factors, which are discussed in detail in the Management Discussion and Analysis which forms part of this Report. The Financial Highlights for the year ended March 31, 2012 have been stated hereunder.

The global economic downturn resulted in the slowdown of business activities. The tight monetary environment made banks adopt a cautious approach while lending. Further, CRISIL downgraded its ratings on Company's bank facilities and commercial papers to 'CRISIL D/CRISIL D' from 'CRISIL A-/Stable/CRISIL A1'. As a consequence, the Company could not get re-financing facilities from the banks which resulted in severe liquidity crunch for the Company.

During the year, the revenue of the Company declined compared to previous year as the Company had to divest one of its business units in the USA consisting of Regulus group and J&B Software Inc, which were facing continuous decline in revenue. This was divested and the proceeds were used towards reduction of debt to the extent of about '580 crores. In India, HCCA Business Services Private Limited, a pay roll processing entity was also divested as part of the strategy to hive off non-core business. Further, due to non-availability of working capital funding from the banks, the Company also exited some of the working capital intensive and low margin businesses. All these factors have resulted in significant reduction in revenue and operations resulting in a loss during the year.

The brief financial highlights of the Company are as under. Though the previous year's figures are given against the current year's figures as a matter of record, you may note that the financials are not comparable with previous year, in view of the reasons mentioned above.

b) Financials of the Company on Consolidated basis:

Rs in crores Particulars Year ended Year ended March 31, 2012 March 31, 2011

Total Income 1730.59 2587.48

Profit/(Loss) from ordinary activities after finance costs but before (72.54) 261.21 exceptional items

Exceptional Items (181.42) -

Profit / (Loss) from ordinary activities before tax (253.96) 261.21

Tax Expense 80.77 7.64

Profit/(Loss) from ordinary activities after tax (334.73) 253.57

Impact of discontinuing operations (22.67) -

Minority Interest (2.63) (1.06)

Profit/(Loss) after tax, minority interest and discontinuing operations (360.03) 252.51

Earnings Per Share (Basic in Rupees) (8.51) 12.81 (Before Exceptional items and discontinuing operations)

Earnings Per Share (Basic in Rupees) (19.14) 12.81 (After Exceptional items and discontinuing operations)

The Members may note that the auditors, without qualifying the audit report, have brought to the attention of the Members certain matters which are re-produced below ad verbatim.

1. Note no. 2.26(D) regarding the financial statements of the Group having been prepared on a going concern basis, the appropriateness of which, interalia, is dependent on successful implementation of the scheme approved by the Corporate Debt Restructuring Cell as also that in the opinion of the management, no impairment is considered necessary.

2. Note no. 2.26(D) regarding exceptional write off/reversal of Unbilled Revenue of Rs137.62 crores and Rs2.91 crores in diminution in value of long term investment and both disclosed as exceptional items.

3. Note no. 2.26(D) regarding carrying amount of Rs27.23 crores for Payment Solution Software Product to be adapted for application in different geographies which in the opinion of the management will be localized in due course of time and commercially exploited thereafter.

4. Note no. 2.30(a) certain long overdue/slow-moving Trade Receivables/Unbilled Revenue aggregating to Rs225.98 crores in respect of which the management is confident of realising the same with concerted efforts in due course of time.

5. Attention is also invited to note no. 2.4.4 in financial statements in respect of Net Deferred Tax Assets recognized in the earlier years of Rs103.82 crores being carried forward in the Balance Sheet and expected to reverse in foreseeable future, on the basis of order book on hand and the Restructuring Scheme approved by the CDR Cell. However, we are unable to express an opinion as to when and to what extent the aforesaid net deferred tax asset would reverse in the near future.

The Members are requested to refer the relevant notes referred in the above observations which are self explanatory and reflect Board's/Management's response on these matters.

c) Financials of the Company on Standalone basis:

Rs in crores

Particulars Year ended Year ended March 31, 2012 March 31, 2011

Total Income 540.62 578.62

Profit/(Loss) from ordinary activities after finance costs but before (165.25) 108.15 exceptional items

Exceptional Expenditure/Items (87.22) -

Profit/(Loss) from ordinary activities before tax (252.47) 108.15

Tax Expense 59.26 (11.24)

Profit/(Loss) from ordinary activities after tax (311.73) 119.39

Impact of discontinuing operations (14.42) -

Profit/(Loss) after tax and discontinuing operations (326.15) 119.39

Earnings Per Share (Basic in Rupees) (12.08) 5.85 (Before Exceptional items and discontinuing operations)

Earnings Per Share (Basic in Rupees) (17.37) 5.85 (After Exceptional items and discontinuing operations)

The Members may note that the auditors, without qualifying the audit report, have brought to the attention of the Members certain matters. The observations from the Audit Report (on standalone financials) are re-produced below ad verbatim.

1. Note no. 2.21(D) regarding the financial statements of the Company having been prepared on a going concern basis, the appropriateness of which is interalia dependent on successful implementation of the scheme approved by the Corporate Debt Restructuring Cell as also that in the opinion of the management, no impairment provision is considered necessary.

2. Note no. 2.21(D) regarding Exceptional write off of Trade Receivables and reversal of unbilled revenues of Rs75.40 crores and disclosed as exceptional items.

3. Note no. 2.21(D) regarding carrying amount of Rs27.23 crores for Payment Solution Software Product to be adapted for application in different geographies which in the opinion of the management will be localized in due course of time and commercially exploited thereafter.

4. Attention is also invited to note no. 2.8.2 in respect of Net Deferred Tax Assets recognized in the earlier years of Rs103.66 crores being carried forward in the Balance Sheet and expected to reverse in foreseeable future, on the basis of order book on hand and the Restructuring Scheme approved by the CDR Cell. However, we are unable to express an opinion as to when and to what extent the aforesaid net deferred tax asset would reverse in the near future

The Members are requested to refer the relevant notes referred in the above observations which are self explanatory and reflect Board's/Management's response on these matters.

d) Corporate Debt Restructuring:

During the year, especially by the end of second quarter of the year, due to global economic slowdown when the business environment was gloomy, the bankers were also adopting conservative approach for funding the re-financings. As a result of this, the Company started facing liquidity crunch and it was not able to fulfill some of its repayment obligations. In order to overcome debt repayment obligations, your Company made a reference to the Corporate Debt Restructuring (CDR) cell on December 28, 2011 for restructuring of the debts of the Company through CDR Mechanism envisaged under the Reserve Bank of India (RBI) guidelines dated August 23, 2001 and subsequent amendments thereto. The final restructuring package was approved by CDR empowered group on March 16, 2012. The Master Restructuring Agreement has also been signed with the lenders participating in the CDR package ("CDR Lenders") on March 30, 2012. Some of the salient features of the CDR package are as follows:

- Restructuring of certain debt facilities availed by the Company and business operations of the Company;

- Conversion of 15% of the secured loans and 20% of the unsecured loans into equity;

- Conversion of interest on Term Loan and Working Capital Facilities for first 18 months (i. e from the cut-off date from October 1, 2011 to March 31, 2013) into equity;

- Availing additional debt upto Rs58.37 crores from some of the CDR lenders for certain immediate requirements of the Company;

- Restructuring of short-term loans into long term loans by reset of maturity dates of loans and reset of interest payment dates;

- Restructuring of the outstanding preference shares issued by the Company by conversion into equity shares and/ or rollover of the existing preference shares and

- Creation of security over certain assets of the Company and some of its onshore and offshore subsidiaries and enter into certain documents in favour of a security trustee/agent, as may be necessary for the benefit of the CDR lenders in order to secure the obligations of the Company under the CDR Package.

e) Restructuring of FCCBs:

During the year, the Company was also facing the challenge of redemption of outstanding Foreign Currency Convertible Bonds (FCCBs). The Directors are happy to inform you that through sustained efforts, the Company was able to restructure its debts and FCCBs and bring in stability to the Company.

There were two series of outstanding FCCBs worth Euro 20 Million (Euro Bonds) and USD 66.367 Million (USD Bonds) which were due in April 2012 and July 2012 respectively. 100% of the Euro Bonds and 96.33% of the USD Bonds were restructured, for their face value plus redemption premium, by issuing new US$ 125,356,000 5% Convertible Bonds due 2017 in exchange thereof. Further, the tenure of the remaining 3.67% of the USD bonds was extended till 2017 with a coupon of 4.75% p.a. payable semi anually.

The details such as the total bonds issued, bonds converted, number of shares allotted, number of bonds repurchased and expected number of shares to be allotted with respect to outstanding FCCBs have been given in detail in Corporate Governance Report at para No. VI(o).

TRANSFER FROM RESERVES

Your Company proposes to transfer Rs37 crores from the general reserve to the Profit and Loss Account. No amount is proposed to carried in General Reserve to the Balance Sheet this year.

DIVIDEND

In view of the financial loss reported during this year, your Directors regret to state their inability to recommend any dividend for the year ended March 31, 2012.

Further, during the year, due to inadequacy of profits, the interim dividend given to the preference shareholders for the period April to July 2012 was reversed and called back by the Board. Further, the Board decided not to declare any dividend to its preference shareholders for the remaining part of the year.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

During the year, unclaimed dividend of Rs221/- was transferred to the Investor Education and Protection Fund (IEPF), as required by the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001. The Company has also transferred to IEPF an amount of Rs321,900/- which was appearing as refund of application money received at the time of Initial Public Offering of the Company in April 2005.

BUSINESS

Your Company is a global Information Technology company committed to empowering Business Transformation.

Your Company has a comprehensive set of IP based software solutions (20 ), coupled with a wide range of IT Services to address the dynamic requirements of a variety of industry verticals including Insurance, Banking, Capital Markets, Asset & Wealth Management (BFSI) etc. The Company also provides solutions for other verticals such as Government, Manufacturing, Retail, Distribution, Telecom and Healthcare.

The contribution to the revenue for the year from IT Solutions was 95% and that of Transaction Services was 5%.

Your Company has a large customer base across the globe and about 71 of them are Fortune 500 customers. The Company has physical presence in 14 countries and 5 geographies, viz. South Asia, Asia Pacific, Middle East and North Africa,

Western Europe and North America. Your Company has marketing network around the world, including North America, Western Europe, Middle East and Africa and Asia Pacific.

The business of your Company is majorly divided into Emerging Market and Developed Market. The share of the Emerging Market to total revenue of the Company is 60%, while that of Developed Market is 40%.

For detailed operations and business performance and analysis, kindly refer the Management Discussion & Analysis which forms a part of this Report.

AWARDS & ACCOLADES

During the year, the Company has received the following recognitions:

- Retained its 4th position in the lending category of the IBS Sales League table published by IBS Intelligence, UK for the fourth consecutive year (2008-2011);

- Ranked 46th (6th among all Indian IT companies) in the year 2011 in the Fintech 100 list of Financial Services & Technology providers, published by American Banker;

- Locuz Enterprise Solutions Limited, a subsidiary of the Company, won the CRN Xcellence Award 2011;

- Winner of the Systems in the City Award for Best Marketing Material for the 2nd consecutive year, London;

- Award for the Best Takaful Technology Company for the 4th consecutive year at the 5th International Takaful Summit 2011;

- Certified by Wordblu as one of the "Most Democratic Workplaces" for the 2nd consecutive year, 2010 and 2011 and

- Won Technology Vendor of the year Award at the Middle East Insurance Awards.

SUBSIDIARY COMPANIES

As of the date of this Report, the Company has 29 subsidiaries located in 5 geographies.

a) Mergers and Amalgamations:

During the year, Fineng Solutions Private Limited and J&B Software India Private Limited, two of the Indian subsidiaries of the Company were merged with the Company. Further, aok in-house Factoring Services Private Limited and aok in- house BPO Services Limited were merged with 3i Infotech BPO Limited, a wholly owned subsidiary of the Company.

b) Divestment:

In keeping with the strategy of the Company to concentrate on its niche area, during the current year, the Company divested its entire stake in Regulus Group and J&B Software Inc. to an affiliate of Cerberus Capital Management, L.P, a private investment firm. The proceeds of such divestment were used towards reduction of debt to the extent of about Rs580 crores. As a result of this divestment, Regulus Group LLC, Regulus Integrated Solutions LLC, Regulus West LLC, Regulus Tristate LLC, Regulus America LLC, Regulus Holdings Inc., Regulus Group II LLC and J&B Software Inc. have ceased to be the subsidiaries of your Company. 3i Infotech (Canada) Inc. (formerly known as J&B Software (Canada) Inc., renamed with effect from June 16, 2011), a step down subsidiary of the Company, was dissolved with effect from November 3, 2011.

During the year, the entire stake in HCCA Business Services Private Limited was divested to Hinduja Global Solutions Limited.

As a result of the aforesaid steps of mergers, amalgamations and divestment taken by the Company, the number of subsidiaries were reduced to 29 as on the date of this report from 43 at the beginning of the year.

c) Investments:

During the year, the Company has not raised its stake, on its own or through its subsidiaries, in any of the subsidiary companies.

d) Accounts of the Subsidiaries:

As per Section 212 of the Companies Act, 1956, your Company is required to attach the Directors' Report, Balance Sheet and Profit and Loss Account of the subsidiaries to its Balance Sheet. As per circular no. 5/12/2007-CL-III dated February 8, 2011 issued by Government of India, a general exemption under Section 212 (8) of the Companies Act, 1956 has been granted. As per this Circular, a company need not make an application to the Central Government for seeking exemption from the requirement of attaching the Directors' Report, Balance Sheet and Profit and Loss Account of the subsidiaries to its Balance Sheet, provided the conditions mentioned in the Circular are fulfilled. Your Company has fulfilled these conditions and is eligible for this exemption. Your Directors believe that the audited consolidated accounts present a full and fair picture of the state of affairs and financial conditions of the Company and its subsidiaries. Accordingly, the Annual Report of your Company does not contain separate financial statements of these subsidiaries, but contains audited consolidated financial statements of the Company and its subsidiaries, as is done globally.

However, a statement of the Company's interest in the subsidiaries and a summary of the financials of the subsidiaries are given along with the consolidated accounts. The annual accounts of the subsidiaries, along with the related information, will be made available to the Members seeking such information at any point of time. The annual accounts of the subsidiaries are also available for inspection during business hours except Saturdays and holidays at the Registered Office of the Company and its respective subsidiaries.

CAPITAL

a) Preference Capital:

The Company had 20,00,00,000 6.35% Cumulative Redeemable Preference Shares of Rs5/- each outstanding aggregating to Rs100 crore, which were due for redemption on March 31, 2012. In terms of the CDR package, the Company negotiated with the preference shareholders to rollover/extend or convert the outstanding preference shares into equity. Out of the two shareholders, IDBI Trusteeship Services Limited-(ICICI Strategic Investments Fund) (holding 13,00,00,000 shares of Rs5 each) agreed to extend the tenure of redemption on the following terms:

- Tenure: Extended for another 10 (Ten) years i.e. upto March 31, 2022.

- Dividend rate: Reduced from 6.35% p.a. to 0.01% p.a.

The other shareholder, ICICI Bank Limited (holding 7,00,00,000 shares of Rs5 each) has opted to convert the outstanding preference shares into equity shares as per the conversion price applied to the equity allotments to be made under CDR package. The allotment shall be made upon receipt of approval of the Members through postal ballot.

b) Increase in Authorised Capital:

In order to reduce the leverage and overcome the liquidity crunch, the Company was considering various options of raising funds including by way of issuance of equity. For this purpose, it was necessary to increase the authorised capital of the Company adequately. Hence, vide resolution of the Members dated January 30, 2012, passed through postal ballot, the Authorised Capital of the Company was increased from Rs400 Crores divided into Rs300 Crores, consisting of 30 Crore Equity Shares of Rs10/- each and Rs100 Crores, consisting of 20 Crore Redeemable Preference Shares of Rs5 each, to Rs550 Crores, divided into Rs450 Crores, consisting of 45 Crore Equity Shares of Rs10/- each and Rs100 Crores, consisting of 20 Crore Redeemable Preference Shares of Rs5/- each.

Subsequently, in order to cater to the capital issuance needs under Corporate Debt Restructuring (CDR) package, it was felt necessary to further increase the authorized capital and hence an approval of the Members was sought through postal ballot to increase the authorised share capital of the Companys from Rs550 Crores, divided into Rs450 Crores, consisting of 45 Crore Equity Shares of Rs10/- each and Rs100 Crore, consisting of 20 Crore Redeemable Preference Shares of Rs5 each, to Rs1200 Crores, divided into Rs1100 Crores, consisting of 110 Crore Equity Shares of Rs10/- each and Rs100 Crores, consisting of 20 Crore Redeemable Preference Shares of Rs5/- each.

Further, as per the CDR package, the Company would have to allot equity shares upon conversion of certain portion of outstanding loans and the outstanding and accrued interest thereon. The Company also would have to allot equity shares against conversion of preference shares held by ICICI Bank Limited.

c) Paid-up Capital:

1) ESOS allotments:

No share allotment was done under the Employees Stock Options Schemes (ESOS) during the fiscal year 2012.

2) Foreign Currency Convertible Bonds (FCCBs):

During this year, the Company has not received any conversion notices from the FCCB holders.

During the year under review, the Company did not allot any shares and hence the share capital of your Company is Rs1,91,98,65,490 as on March 31, 2012.

POSTAL BALLOT

During the financial year 2011-12, the Members passed the following resolutions by way of postal ballot, the results of which were declared on January 30, 2012:

a) Enhancing the limit for creation of securities against loan;

b) Raising long term resources through further issue of securities;

c) Increase in the Authorised Capital of the Company;

d) Amendment to the Memorandum of Association of the Company;

e) Amendment to the Articles of Association of the Company and

f) Re-appointment of Mr. Amar Chintopanth as Deputy Managing Director.

Another Notice of Postal Ballot was also sent to the Members for approval of the following proposals by way of Postal Ballot, the results of which would be declared on May 31, 2012:

a) Increase in Authorised Capital and Amendment to the Memorandum of Association of the Company;

b) Amendment to the Articles of Association of the Company;

c) Authorization for restructuring of debts;

d) Allotment of equity shares on preferential basis;

e) Conversion of loans into equity shares and

f) Conversion of certain existing preference shares into equity shares and modification of terms of preference shares. For more details, please refer Part III, Postal Ballot section in Corporate Governance Report.

PUBLIC DEPOSITS

During the year, the Company has not invited/accepted any deposit under Section 58A of the Companies Act, 1956.

DIRECTORS

In terms of the provisions of the Articles of Association of the Company, Mr. Dileep Choksi and Dr. Bruce Kogut are liable to retire by rotation at the forthcoming 19th Annual General Meeting of the Company. Mr. Dileep Choksi and Dr. Bruce Kogut, being eligible, offer themselves for re-appointment.

During the year, Mr. Samir Kumar Mitter resigned from the Board of Directors of the Company with effect from December 1, 2011.

During the year, Mr. Ashok Shah was appointed as an Additional Director of the Company with effect from December 1, 2011. Mr. Ashok Shah, being an Additional Director, will hold office upto the date of the forthcoming Annual General Meeting of the Company. It is proposed to appoint him as Director of the Company at the ensuing Annual General Meeting.

Mr. Amar Chintopanth, Deputy Managing Director, was re-appointed for a further period of three years with effect from January 17, 2012 vide a resolution passed by the Members through postal ballot.

Mr. N. S. Venkatesh was appointed as a Nominee Director on the Board of the Company by IDBI Bank Limited with effect from May 8, 2012 pursuant to the Master Restructuring Agreement signed with the CDR Lenders on March 30, 2012.

COMMITTEES

As on date of this report, the Board has three committees-

i. Audit Committee

ii. Board Governance Committee

iii. Shareholders' / Investors' Grievances Committee

The Fund Raising and Acquisitions Committee (FRAC) was discontinued effective October 21, 2011.

Detailed information regarding the committees of the Board has been given in the Corporate Governance Report.

AUDITORS

M/s Lodha & Co., Chartered Accountants, having their office at 6, Karim Chambers, 40, Ambalal Doshi Marg, Hamam Street, Mumbai - 400 023 and M/s R. G. N. Price & Co., Chartered Accountants, having their office at Simpson's Building, 861, Anna Salai, Chennai - 600 002 were appointed as Joint Statutory Auditors of the Company at the 18th Annual General Meeting and are due for retirement at the conclusion of the 19th Annual General Meeting.

Your Directors, based on the recommendations of the Audit Committee, recommend the re-appointment of M/s Lodha & Co. and M/s R. G. N. Price & Co. as the Joint Statutory Auditors of the Company to hold office from the conclusion of the 19th Annual General Meeting to the conclusion of the 20th Annual General Meeting. The Company has received letters from both the Auditors, wherein they have consented to act as Auditors and have confirmed that they are eligible and qualified to be appointed as Auditors pursuant to the Sections 224(1B) and 226 of the Companies Act, 1956.

CONSERVATION OF ENERGY

Although the operations of the Company are not energy intensive, the management is highly conscious of the criticality of the conservation of energy at all operational levels. The requirement of disclosure of particulars with respect to conservation of energy as prescribed in 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, are not applicable to the Company and hence, are not provided.

TECHNOLOGY ABSORPTION

During the year, your Company has taken the following technology initiatives:

- Improved consolidation by usage of cloud technologies: A public cloud SAAS for sale to fulfillment cycles and a private cloud for project management and ERP systems;

- Strengthened its IPRs through technology innovation and appropriate security controls;

- Partnerships with major technology providers and publishers for win-win relationships and go-to-market strategies;

- Improved productivity by usage of advanced cutting edge tools to enhance testing and compliance efficiencies;

- Continual improvements towards SAM (Software Asset Management) compliance derived by the recognition of the certification of BSA (Business Software Alliance), an initiative alongside of FICCI and Government of Maharashtra;

- Through standardization of policies, processes and technology across its Global Development Centers (GDCs), sales and corporate offices, your Company has achieved certifications of: ISO/IEC 27001:2005 & ISO/IEC 9001:2008 for best practices in Data Center and support services and

- As part of our support to Green IT, we have partnered with Ecoreco as a life member to ensure effective scrapping of old assets in a eco-friendly manner.

RESEARCH AND DEVELOPMENT (R & D)

The solutions offered by the Company for various market segments are continuously developed and upgraded through the GDCs.

The GDCs function as the product research and development facility of the Company and focus on developing and expanding the Company's products and IPRs. Besides this, the Company is also in the process of migrating its varied product lines to standard and latest platforms.

With a focus to further enhance the Company's software products, i.e its Intellectual Property, based on market needs, the GDCs work in line with the Company's strategy for growth.

Expenditure on R & D

Rs in crores Particulars 2011-12 2010-11

Revenue Expenditure 27.13 39.90

Capital Expenditure - -

Total 27.13 39.90

Total R&D expenditure as a percentage of total standalone revenue 5.02% 6.90%

FOREIGN EXCHANGE EARNING AND EXPENDITURE

a) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services and export plans More than 8% of the revenue of the Company is derived from exports. Your Company has marketing network around the world, including North America, Western Europe, Middle East & Africa and Asia Pacific.

The Registered Office of the Company is located at International Infotech Park, Vashi, Navi Mumbai, India. Some of the software development centers of the Company in India are also registered as Software Technology Parks of India, whereby the Company is required to fulfill its export obligations as laid down by the Government.

b) Foreign Export earnings and expenditure

During the year 2011-12, the expenditure in foreign currencies amounted to '36.88 Crores on account of import of capital goods, dividend, travelling and other expenses. During the same period, the Company earned Rs101.84 Crores in foreign currencies as income from its exports.

PERSONNEL

Your Company has talented and dedicated professionals to achieve the Company's goal. To retain and develop these employees, human resources group has been working with an objective to enhance employee competence through various initiatives and maximizing employee contribution towards the organizational goals.

The Company has a number of initiatives to attract, retain and develop talent in the organization. Some of them include Reach HR (HR query management system), the employee referral scheme, internal job rotation, training and development programs, overseas assignments, medical insurance, social functions, etc.

The Managing Director has been addressing the employees on a periodic basis to provide information on development of the Company and to understand the concerns of the employees.

Further, in a knowledge based industry, your Company understands that the employees are the main assets of the Company and it is necessary that they feel challenged to use their intellectual skills to the best of their abilities and add value to themselves even as they add value to the Company. To facilitate this, the Company has a feedback mechanism and steps are being taken towards employee growth and sustaining high level of motivation.

During the year, in view of the tough liquidity situation, rating down grading, Corporate Debt Restructuring (CDR), etc. quite a number of senior executives left the Company, which affected the operations of the Company. The Company is addressing this issue by close and transparent working with its employees. The attrition could continue to affect the operations of the Company to some extent in the coming year also.

Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of the Directors' Report. However, as per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, this Report and Accounts are being sent to all the Members of the Company, excluding the Statement of Particulars of Employees under Section 217(2A) of the Companies Act, 1956. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company and the same will be sent by post.

QUALITY

Your Company is committed to deliver best quality products and services to all its customers first time, every time. In order to meet its commitment, the Company's business processes have been thoughtfully designed to develop solutions that fully meet customer expectations and are in accordance with industry and domain specific standards.

The Quality Management System (QMS) of the Company addresses the entire software development and project management life cycle and conforms to CMMI process framework. It has been objectively designed to standardize engineering and management practices, enhance productivity and reduce inefficiencies.

Your Company is focused to deliver quality at every stage of operations by driving improvement projects around key business and process metrics and imbibing industry wide best practices.

FUTURE OUTLOOK

The Company will continue to technologically upgrade the products and concentrate on the Software Products, IT services and IT enabled Services for its growth. However, in view of the general market outlook for developed markets and in view of the company specific issues mentioned in earlier paragraphs, the outlook for the next year will be subdued.

FORWARD LOOKING STATEMENTS

This Report along with its annexure and Management Discussion & Analysis contains forward-looking statements that involve risks and uncertainties. When used in this Report, the words 'anticipate', 'believe', 'estimate', 'expect', 'intend', 'will' and other similar expressions as they relate to the Company and/or its businesses are intended to identify such forward looking statements. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This Report should be read in conjunction with the financial statements included herein and the notes thereto.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed that:

a) in preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) we 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 of the Company for that period;

c) we 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 and

d) we have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

The Directors are thankful to the Members and Investors for their confidence and continued support. The Directors are grateful to the Central and State Government, Stock Exchanges, Securities & Exchange Board of India, Reserve Bank of India, Software Technology Park of India, Customs and other government authorities, Lenders, CDR Cell, FCCB holders and last but not the least, its trusted clients for their continued support.

The Directors would like to express their gratitude for the unstinted support and guidance received from alliance partners and vendors.

The Directors would also like to express their sincere thanks and appreciation to all the employees for their commendable teamwork and professionalism.

For and on behalf of the Board

Sd/- Sd/-

Hoshang N. Sinor V. Srinivasan

Chairman Managing Director & Global CEO

Mumbai, May 16, 2012

 
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