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Directors Report of Blue Star Infotech Ltd.

Mar 31, 2015

DEAR MEMBERS,

The Directors present herewith the Eighteenth Annual Report on the business and operations of the Company together with the audited Financial Statements for the year ended 31 March 2015.

1. FINANCIAL RESULTS:

The company''s operating performance during the year ended 31 march 2015 as compared to the previous year is indicated in brief below:

(Rs. in Lacs)

Consolidated Standalone

2014-15 2013-14 2014-15 2013-14

Total income 27,064 27,657 14,415 13,234

Profit before interest, depreciation and tax 2,987 2,669 1,959 1,844

depreciation and Amortisation 438 380 349 339

Profit before tax 2,474 2,184 1,559 1,458

Provision for tax 627 592 390 420

Profit brought forward from previous year 1,817 1,487 1,169 1,038

Balance brought forward from previous year 6,449 5,552 6,207 5,759

Profits available for appropriation 8,266 7,038 7,376 6,797

Less: Transfer to General Reserve 117 104 117 104

Translation Adjustment (Net) 63 - 68 -

Dividend (Proposed) 432 415 432 415

Tax on Proposed Dividend 90 71 90 71

Balance carried forward to Balance Sheet 7,564 6,449 6,669 6,207

Publication of results of subsidiary companies

Section 129 (3) of the Companies Act, 2013, requires the company to attach along with the financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries. The performance and financial position of the subsidiaries and associate of the company, included in the consolidated financial statement, forms part of the Annual Report and is an integral part of the Directors'' Report.

The Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the subsidiary Companies have not been attached with the Balance Sheet of the Company. If any member so desires, the Company will make available these documents / details upon specific request by the member of the Company.

2. DIVIDEND

Your Directors are pleased to recommend payment of a dividend of Rs. 4/- per equity share of Rs. 10/- each during the year subject to the approval of the shareholders. (Previous year Rs. 4 per share of Rs. 10/- each).

3. operating results and business

During the year under review, total income of the Company was Rs. 144 Crores as compared to Rs. 132 Crores in the previous financial year, i.e. an increase of 9%. On a consolidated basis, total income decreased from Rs. 276 Crores to Rs. 271 Crores, a decline of around 2%.

The net profit after tax on a standalone basis for the year ended 31 March 2015 was Rs. 11.69 Crores as against Rs. 10.38 Crores in the previous year, an increase of around 13%. On a consolidated basis, the net profit after tax for the year ended 31 March 2015 was Rs. 18.17 Crores as compared to Rs. 14.87 Crores for the previous financial year marking an increase of 22% on a year to year basis.

4. DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of Directors had, on the recommendation of the Nomination and Remuneration Committee appointed Ms. Kalpana Trivedi as an Additional Director of the Company with effect from 30 March 2015. Her appointment as an Independent director for a period of 5 years will be subject to the members'' approval at the Annual General Meeting.

the erstwhile chief Financial officer and company Secretary Mr. V Sudarshan resigned from the services of the company effective 31 may 2014. Mr. Aloke Ghosh was appointed the chief Financial officer and company Secretary of the company effective 2 June 2014.

5. A STATEMENT ON DECLARATION BY INDEPENDENT DIRECTORS

a statement on declaration of Independence required to be made under section 149 of the companies act, 2013 has been obtained from each of the Independent Directors confirming their independence.

6. BOARD EVALUATION

Pursuant to the provisions of the companies Act, 2013 and clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of the directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and other committees. the criteria on the basis of which the evaluation has been carried out has been explained in the corporate Governance report.

7. POLICY ON NOMINATION AND REMUNERATION

the Board on the recommendation of the Nomination and Remuneration committee has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. the highlights of the policy on Nomination and Remuneration is provided as a part of the Directors'' report. the detailed policy is available on the website of the company.

8. meetings of the board

the Board of Directors met four (4) times on 14 may 2014, 23 July 2014, 17 october 2014 and 19 January 2015 during the financial year 2014-15.

9. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

the company at present has the following subsidiary companies:

a) Blue Star Infotech America, Inc. (BSIA)

the wholly owned subsidiary of the company, Blue Star Infotech America, Inc. achieved a total income of uS$ 196,35,989 (equivalent of Rs. 120.07 crores) for the financial year ending 31 march 2015 as compared to uSS 2,21,38,707 (equivalent of Rs. 134.19 crores) for the previous year. Despite a lower turnover, essentially due to reduction in low and negative margin business, a concerted effort to keep costs under check, the company reported a net profit of uSS 2,74,867 (equivalent of Rs. 1.68 crores) this year compared to a net loss of uSS 2,49,867 (equivalent of Rs. 1.50 crores) for the previous year marking a turnaround in profits after four consecutive years. the performance of the subsidiary is satisfactory and expected to progress in the ensuing year as well.

Your company made an additional investment of uSS 5,00,000 (equivalent of Rs. 3.04 crores) at par in the equity of the subsidiary in order to further the growth, operations and business of the company. with this investment, the paid-up capital of the subsidiary as at year end is uSS 23,50,000 (18,50,000 in the previous year). The investment is in shares of uSS 1 each.

b) Blue Star Infotech (UK) Ltd.

The total income of this wholly owned subsidiary, Blue Star Infotech (UK) Limited was £ 23,92,092 (equivalent of Rs. 23.59 crores) for the financial year ended 31 March 2015 as compared to £ 23,04,183 (equivalent of Rs. 23 Crores) for the previous year. The company registered a net profit of £ 207,016 (equivalent of Rs. 2.04 Crores) for the financial year ending on 31 March 2015 compared to net profit of £ 2,15,409 (equivalent of Rs. 2.15 Crores) for the previous year. The shrinkage in profits is due to addition of manpower in the sales team. The business is stable.

c) Blue star Infotech (singapore) Pte. Limited

The total income of the wholly owned subsidiary, Blue Star Infotech (Singapore) Pte. Limited was SGD 30,75,977 (equivalent of Rs. 14.62 Crores) for the financial year ended 31 March 2015 as compared to SGD 21,67,203 (equivalent of Rs. 10.45 Crores) for the previous year. The subsidiary registered a net profit of SGD 476,804 (equivalent of Rs. 2.27 Crores) for the financial year ending on 31 March 2015 compared to a net profit of SGD 3,46,802 (equivalent of Rs. 1.92 Crores) for the previous year.

Blue Star Infotech Singapore Pte. Ltd. has two wholly owned subsidiaries, one each, in Singapore and Malaysia viz. Blue Star Infostack Solutions Pte. Ltd. and Blue Star Infostack (Malaysia) Sdn. Bhd. which caters to the Banking and Insurance sector. The performance of the subsidiary is satisfactory. Blue Star Infotech Singapore Pte. Ltd. has made an additional investment of RM 500,000 in the equity of Blue Star Infostack (Malaysia) Sdn. Bhd. in order to further the growth, operations and business of the Company. With this investment, the paid-up capital of the subsidiary as at year end is RM 1,000,000.

10. directors'' responsibility statement

The Directors would like to inform the members that the Audited Accounts for the financial year ended 31 March

2015 are in full conformity with the requirement of the Companies Act, 2013. The Directors hereby confirm that:

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

(b) the directors had 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 and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively;

11. reservations and/or qualifications in the statutory auditors'' report

The Directors would like to inform that there were no qualifications, reservations or adverse remarks made by the

Auditors of the Company in their Audit Report.

12. reservations and/or qualifications in the secretarial auditors'' report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Jayshree Dagli & Associates, Practising Company

Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report provided in the Annual report forms part of the Directors'' report. the Directors would like to inform that there were no qualifications, reservations or adverse remarks made by the Secretarial Auditors of the company in their audit report.

13. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There were no orders passed by any regulators or courts or tribunals which can impact the going concern status and the company''s operations in future. Hence, the company has no information to furnish in this regard.

14. LOANS AND GUARANTEES UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Particulars of Loans and Guarantees covered under the provisions of Section 186 of the companies act, 2013 forms part of the Directors'' report and is provided in the annual report.

15. PARTICULARS OF CONTRACTS AND ARRANGEMENTS UNDER SECTION 188 OF THE COMPANIES ACT, 2013

The Particulars of the contracts and arrangements, provided in form Aoc 2, forms part of the annual report and is an integral part of the Directors'' report.

16. PARTICULARS OF EMPLOYEES

Information as per provisions of section 197(12) of the companies act 2013, read with rule 5(1) of the companies (Appointment and Remuneration of Managerial Personnel) rules, 2014, and the names of every employee employed throughout the financial year and in receipt of Rs. 60 Lakhs or more, or employed for part of the year and in receipt of Rs. 5 Lakhs or more a month, under rule 5(2) of the companies (Appointment and Remuneration of Managerial Personnel) rules, 2014, is a part of the Board''s report. However, this information is not being provided as part of the annual report but will be available to the shareholders on request to the company Secretary.

It may be noted that particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than Rs. 60 Lakhs per financial year or Rs. 5 Lakhs per month, are not circulated to the members in the Board''s report, but such particulars shall be filed with the Registrar of companies while filing the financial statement and Board reports:

Particulars shall be made available to any shareholder on a specific request made by them in writing before the date of such annual General Meeting wherein financial statements for the relevant financial year are proposed to be adopted by shareholders and such particulars shall be made available by the company within three days from the date of receipt of such request from shareholders and in case of request received even after the date of completion of annual General Meeting, such particulars shall be made available to the shareholders within seven days from the date of receipt of such request.

17. MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments other than what is already stated in the financials which will affect the financial position of the company during the period 31 March 2015 till the date of the report.

18. CONSERVATION OF ENERGY, TECHNOLOGY Absorption, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as per Section 134(3)(m) of the companies act 2013 read with rule 8 of the companies (Accounts) rules, 2014, relating to the conservation of energy, technology, absorption, foreign exchange earnings and outgoings respectively, is annexed to and forms part of this report.

19. RISK MANAGEMENT

The company has adopted a risk management policy which is elaborated in the Management Discussion and analysis report which is part of the annual report and forms part of the Directors'' report.

20. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The Company was required to spend Rs. 24.83 Lakhs by 31 March 2015 towards charitable and social causes, as part of its commitment to corporate Social Responsibility. the Board decided to expend these funds in support of the HRD Minister''s nationwide campaign of "Swachh Bharat/ Swachh vidyalaya" to build toilets in schools. Since the process of identifying NGOs specialised in this field has taken more time than anticipated, these funds could not be expended in the financial year 2014-15.

The Report on CSR activities is provided in the Annual Report and forms part of the Directors'' Report.

21. INVESTMENTS

The Company invests its surplus funds in debt based broad-based mutual funds or with reputed scheduled banks in liquid funds or short-term deposits, respectively, which are considered safe.

22. DIRECTORS

Mr. Sanjay Vaswani, Non-Executive-Promoter Director of the Company is liable to retire by rotation.

In accordance with the provisions of sections 152 of the Companies Act, 2013, Mr. Sanjay Vaswani, Director retires by rotation and, being eligible, offers himself for reappointment at the ensuing Annual General Meeting. The profile of the Director is stated in the explanatory statement to the notice of the Annual General Meeting.

23. EMPLOYEES STOCK OPTION PLAN (ESOP)

Disclosures required to be made under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOP and Companies Act, 2013 are given in note 2.1 of the Notes to the Financial Statements, forming part of the Accounts. The diluted EPS on considering unvested ESOPs is Rs. 9.24 per share as on 31 March 2015.

A brief summary of ESOPs is provided below:

Sr. Particulars ESOP Scheme 2003 (Amended 2015) No. 1 Options granted 15,18,000 (Including ESOP''s issued against lapsed options). Outstanding ESOP''s at no point of time have exceeded 14,71,000 grants as against 15,00,000 grants approved by shareholders.

2 Options vested 4,74,375

3 Options exercised 4,15,075

4 Vested and unexercised 49,400

5 Options lapsed 1,17,525

6 The exercise price Rs. 60 - grants made on 31 August 2012

Rs. 57 - grants made on 29 March 2013

Rs. 52 - grants made on 29 May 2013

Rs. 83 - grants made on 18 December 2013

Rs. 188 - grants made on 18 December2014

7 Variation of terms of Nil options

8 Money realised by exercise of options Rs. 2,53,74,025

9 Total number of options in force 9,85,400

10 Employee wise details of options granted to

a. key managerial Sunil Bhatia- Chief Executive Officer personnel; and Managing Director (982,000)

Aloke Ghosh-chief Financial officer and company Secretary (20,000)

b. any other employee NIL who receives a grant in any one year of option amounting to 5% or more of options granted during that year.

c. identified employees Sunil Bhatia- chief executive officer who were granted option, and managing Director (982,000) during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding nishith mathur-chief operating warrants and conversions) officer (226,000) of the company at the time of grant;

24. AUDITORS

M/s walker, chandiok & co. HP, (formerly walker, chandiok & co) chartered Accountants, (firm Registration No.: 001076N) mumbai, have been appointed as the Statutory Auditors of the company in the annual General meeting held on 23 July 2014. The company has placed the matter relating to their appointment, for ratification of members in the ensuing annual General meeting, for the residual portion of their term. A written certificate from the Auditors has been obtained by the company to the effect that the re-appointment, if made, would be in accordance with the limits specified under section 139 of the companies Act, 2013 read with section 142 of the companies Act, 2013.

25. AUDIT COMMITTEE

the composition of the Audit committee is covered in the corporate Governance report forming part of the Board''s report. the Board has accepted all the recommendations made by the Audit committee to the Board.

26. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

the company has an Internal control System, commensurate with the size, scale and complexity of its operations. the scope and authority of the Internal Audit (IA) function is pre- defined. the internal auditor function is entrusted to an independent firm of chartered Accountants of repute. To maintain its objectivity and independence, the Internal Auditors report to the chairman of the Audit committee of the Board.

the Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the company, its compliance with operating systems, accounting procedures and policies at all locations of the company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit committee of the Board.

27. WHIsTLE Blower POLICY

the company has a vigil mechanism named the whistle Blower Policy to deal with instances of fraud and mismanagement, if any.

this Policy of the company allows for disclosure by employees, customers and/or third-party intermediaries of such matters internally, without fear of reprisal, discrimination or adverse employment consequences, and also permits the company to address such disclosures or complaints by taking appropriate action, including but not limited to, disciplining or terminating the employment and/or services of those responsible.

The Whistle Blower Policy is available on the website of the Company.

During the year, no instances of fraud on the company or by the company were reported.

28. CORPORATE GOVERNANCE

the company has complied with the recommendations of the corporate Governance code as provided in clause 49 of the Listing Agreement with the stock exchanges.

A separate section on corporate Governance, together with a certificate from the company''s auditors confirming compliance, is set out separately, forming part of this Report.

29. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

the Management Discussion and analysis report has been attached to the annual report and forms part of the Directors'' Report.

30. EXTRACT OF ANNUAL RETURN

the details forming part of the extract of the annual return is annexed to and forms part of the Directors'' report.

31. GREEN INITIATIVE IN CORPORATE GOVERNANCE

Pursuant to the "Green Initiative in corporate Governance" by the Ministry of corporate affairs in allowing paperless compliances, the company has implemented the policy of sending the Notice with Balance Sheet, Profit and Loss account, Auditor''s Report, Director''s Report and Explanatory Statement etc. through email to those shareholders whose email addresses are registered with the company''s Registrar. Out of 12,345 shareholders, 4,424 shareholders (around 36%) have opted for receiving documents in electronic mode as of 31 March 2015.

32. ACKNOWLEDGEMENT

The Board places on record their sincere acknowledgement of the support from all the stakeholders of the company viz. clients, Vendors, Bankers, Employees and other Business Associates etc. for the support received from them during the year.



For and on behalf of the Board of Directors

Suneel Advani Mumbai Chairman and Managing Director 14 May 2015 blue Star Infotech Limited


Mar 31, 2013

Dear Members,

The Directors present herewith the Sixteenth Annual Report on the business and operations of the Company together with the Audited Financial Statements for the year ended March 31, 2013.

1. FINANCIAL RESULTS

The Company''s operating performance during the year ended March 31, 2013 as compared to the previous year is indicated in brief below:

(Rs. in Lakhs)

2012-13 2011-12

Total income 10,902 10,771

Proft before interest, depreciation and taxation 987 1,103

Depreciation 281 296

Proft before taxation 706 807

Provision for taxation 172 253

Proft after taxation 534 554

Balance brought forward 5,521 5,262

Profts available for appropriation 6,055 5,816

Less: Transfer to General reserve 53 55

Dividend (Proposed) 208 208

Corporate dividend tax 35 34

Add: Excess Provision for Dividend 2

Distribution Tax written back

Balance carried forward 5,759 5,521



2. DIVIDEND

Your Directors are pleased to recommend payment of a dividend of Rs.2/- per equity share of Rs.10/- each during the year subject to the approval of the shareholders (Previous year Rs.2/- per share of Rs.10/- each).

3. OPERATING RESULTS AND BUSINESS

During the year under review, total income of the Company was Rs.109 Crore as compared to Rs.108 Crore in the previous fnancial year, i.e. an increase of 1%. On a consolidated basis, total income increased from Rs.134 Crore to Rs.195 Crore, which is the highest ever for your Company till date.

The effects of the global recession continued to dominate the economic scenario for IT companies as well as other industries for a large part of FY 12-13. Despite a robust increase in sales volumes, your company had to invest signifcantly in business expansion which had an effect on the overall proftability growth. Tight control over costs and continued insistence on higher manpower productivity and other operational effciencies ensured that the business was proftable. The net proft after tax on a consolidated basis for the year ended March 31, 2013 was Rs.4.99 Crore as compared to Rs.3.57 Crore for the previous fnancial year.

4. LIQUID INVESTMENTS

The Company invests its surplus funds in debt based mutual funds and fxed deposits with banks, which are considered safe. As on March 31, 2013 about Rs.1.13 Crore were invested in liquid debt mutual fund schemes and Rs. 6.74 Crore in bank deposits.

5. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS The Company at present has the following subsidiary companies:

a) Blue Star Infotech America, Inc. (BSIA)

A 100% wholly owned subsidiary of the Company, Blue Star Infotech America, Inc. posted a total income of USD 16,324,379 (equivalent of Rs.88.77 Crore) for the fnancial year ending March 31, 2013 as compared to USD 13,084,898 (equivalent of Rs.65.86 Crore) for the previous year. The Company reported net loss of USD 309,399 (equivalent of Rs.1.68 Crore) this year compared to a net loss of USD 413,674 (equivalent of Rs.2.07 Crore) for the previous year.

As at the year end, there has been further erosion in the net worth of Blue Star Infotech America Inc. which is refected in the reduced net worth of the subsidiary. The management is of the view that this business loss is a temporary phenomenon arising due to strategic investments in substantially expanding the overseas sales teams and associated sales costs. Hence, no impairment of the investment in the subsidiary is deemed necessary at this time.

The company''s Joint Venture in the US titled Blue7 Solutions LLC with Trisept Technology LLC based in Milwaukee, State of Wisconsin provides expertise in travel services domain. The performance of the joint venture was satisfactory.

b) Blue Star Infotech (UK) Ltd.

The total income of this wholly owned subsidiary of the Company was £2,549,538 (equivalent of Rs.20.93 Crore) for the fnancial year ended March 31, 2013 as compared to £2,760,596 (equivalent of Rs.22.00 Crore) for the previous year. It registered a net proft of £145,520 (equivalent of Rs.1.19 Crore) for the fnancial year ending on March 31, 2013 compared to net proft of £13,807 (equivalent of Rs.0.11 Crore) for the previous year.

c) Blue Star Infotech (Singapore) Pte. Limited

A 100% wholly owned subsidiary of the Company, was incorporated in Singapore as on 27th January 2012 to cater to the needs of our existing global clients in the Asia Pacifc Region.

The total income of this wholly owned subsidiary of the Company was SGD 1,409,152 (equivalent of Rs.6.16 Crore) (Previous Year of SGD Nil) for the fnancial year ending March 31, 2013. It registered a net proft of SGD 195,875 (equivalent of Rs.0.86 Crore) for the fnancial year ending on March 31, 2013 compared to net proft of SGD Nil for the previous year.

The Company has a wholly owned subsidiary in Singapore titled Blue Star Infostack Solutions Pte. Ltd. which caters to the Banking, Financial Services and Insurance sector in Singapore and Malaysia. The performance of the subsidiary is satisfactory.

The Company has also setup a wholly owned subsidiary named Blue Star Infostack Malaysia Sdn. Bhd. in 2013 for catering to Malaysian clients.

Publication of results of subsidiary companies

Section 212(8) of the Companies Act, 1956 exempts the holding company from attaching the Balance Sheet and Proft and Loss Account of its subsidiaries. The Ministry of Corporate Affairs vide its circular No. 2/2011 dated 8th February, 2011 granted, subject to certain terms and conditions, permission on a general basis, to the Board of Directors of the holding company to allow for publication of the Annual Report without the subsidiary company''s fnancials. Accordingly, the Balance Sheet, Proft and Loss Account, Report of the Board of Directors and the Report of the Auditors of the subsidiary companies have not been attached with the Balance Sheet of the Company. The Company will make available these documents/details upon request by any member of the Company interested in obtaining the same. However, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the fnancial information of its subsidiaries.

6. DIRECTORS

In accordance with the provisions of the Companies Act, 1956, two of the Directors, Mr. Suresh N. Talwar and Dr. Prakash G. Hebalkar retire by rotation and being eligible, offer themselves for reappointment at the ensuing Annual General Meeting. Brief profles of these Directors are given in the notes to the notice of the ensuing AGM.

7. EMPLOYEES STOCK OPTION PLAN (ESOP)

Disclosures required to be made under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOP are given in note no. 2.1 of Notes to the Financial Statements, forming part of the Accounts.

8. DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors would like to inform the members that the Audited Accounts for the fnancial year ended March 31, 2013 are in full conformity with the requirement of the Companies Act, 1956. The Directors hereby confrm that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed.

b) For recognising exchange gains or loss on foreign exchange, the Institute of Chartered Accountants of India has announced and recommended new accounting standard AS30 to be adopted. Your Directors have thought that it is prudent and appropriate to adopt this standard with effect from April 1, 2008 although it is yet to become mandatory. In accordance with this standard, foreign exchange gains or losses not related to the operations for the period are transferred to an account called Hedging Reserve in the Balance Sheet.

c) The accounting policies are consistently applied, and reasonable, prudent judgments and estimates are made so as to give a true and fair view of the state of affairs of the Company at the end of the fnancial year, and of the profts of the Company for that period.

d) The Directors have taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company, and for providing and detecting frauds and other irregularities.

e) The Directors have prepared the annual accounts on a going concern basis.

9. AUDITORS

The Statutory Auditors M/s Walker, Chandiok & Co, Chartered Accountants, Mumbai, who retire at the conclusion of the ensuing Annual General Meeting, being eligible, offer themselves for re-appointment. A written certifcate from the proposed Auditors has been obtained by the Company to the effect that the re-appointment, if made, would be in accordance with the limits specifed under Section 224(1B) of the Companies Act, 1956.

10. CORPORATE GOVERNANCE

The Company has complied with all the recommendations of the Corporate Governance code as provided in clause 49 of the Listing Agreement with the stock exchanges.

A separate section on Corporate Governance, together with a certifcate from the Company''s Auditors confrming compliance, is set out separately, forming part of this Report.

11. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

As required by clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report is attached separately in the Annual Report, and forms part of the Directors'' Report.

12. PARTICULARS OF EMPLOYEES

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1) (b) (iv) of the Companies Act, 1956, this report is being sent to all the shareholders of the Company excluding the aforesaid information. The said particulars will be made available on request, and also made available for inspection at the Registered Offce of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Offce of the Company.

13. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as per 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, relating to the conservation of energy, technology, absorption, foreign exchange earnings and outgoings respectively, is annexed and forms part of this report.

14. GREEN INTIATIVE IN THE CORPORATE GOVERNANCE

Pursuant to the "Green Initiative in Corporate Governance" by the Ministry of Corporate Affairs in allowing paperless compliances, the Company has implemented the policy of sending the Notice with Balance Sheet, Proft and Loss Account, Auditor''s Report, Director''s Report and Explanatory Statement etc. through email after obtaining consent of the shareholders who are willing to receive the aforementioned document through electronic mode.

15. ACKNOWLEDGEMENT

The Board wishes to place on record its appreciation of the sincere efforts put in by the employees of the Company, in helping it reach its current growth levels.

Your Directors appreciate the continued support of employees, clients, investors, business associates, bankers, vendors, regulatory authorities and other stakeholders.

For and on behalf of the Board of Directors of Blue Star Infotech Limited

Place: Mumbai Suneel M Advani

Date: 9 May 2013 Chairman and Managing Director


Mar 31, 2012

The Directors present herewith the Fifteenth Annual Report on the Business and Operations of the Company together with the Audited Financial Statements for the year ended March 31, 2012.

1. FINANCIAL RESULTS:

The Company's operating performance during the year ended March 31, 2012 as compared to the previous year is indicated in brief below: (Rs in Lakhs)

2011-2012 2010-2011

Total income 10,771 11,004

Profit before interest, depreciation and taxation 1,103 1,496

Depreciation and Amortisation 296 228

Profit before taxation 807 1,268

Provision for taxation 253 377

Exceptional item Nil 64

Profit after taxation and Exceptional item 554 827

Balance brought forward 5,262 4,867

Profits available for appropriation 5,816 5,694

Less: Transfer to General Reserves 56 83

Dividend (Proposed) 207 300

Corporate Dividend Tax 34 49

Balance carried forward 5,519 5,262

2. DIVIDEND

Your Directors are pleased to recommend payment of a dividend of Rs 2/- per equity share of Rs 10/- each during the year subject to the approval of the shareholders. (Previous year Rs 3/- per share of Rs 10/- each).

3. OPERATING RESULTS AND BUSINESS

During the year under review, total income of the Company was Rs 108 Crore from Rs 110 Crore, i.e.; a decline of 2%. On a consolidated basis, total income increased by 4% to Rs 134 Crore from Rs 129 Crore.

The global economic scenario continued to be subdued for IT companies as well as other industries for a large part of FY 11-12. Exchange rate volatility was witnessed in the latter half of the financial year. Despite unchanged sales volumes, your company witnessed pressure on its operating costs. This was despite a prudent hedging of foreign currency thereby minimising foreign currency exchange losses, tight control over costs and continued insistence on higher manpower productivity and other operational efficiencies. The net profit after tax on a consolidated basis for the year ended March 31, 2012 was Rs 3.57 Crore as compared to Rs 8.40 Crore for the last financial year.

4. INVESTMENTS

The Company invests its surplus funds in debt based mutual funds which are considered safe. As on March 31, 2012 about Rs 5.55 Crore was invested in liquid debt mutual fund schemes.

5. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

The Company at present has following three subsidiary companies:

a) Blue Star Infotech America, Inc.

A 100% wholly owned subsidiary of the Company, Blue Star Infotech America, Inc. posted a total income of US$ 13,002,875 (equivalent of Rs 65.44 Crores) for the financial year ending March 31, 2012 as compared to US$ 13,617,635 (equivalent of Rs 62.06 Crores) for the previous year. The Company reported a net loss of US$ 413,674 (equivalent of Rs 2.07 Crores) this year compared to net loss of US$ 168,575 (equivalent of Rs 0.75 Crores) for the previous year.

As at the year end, there was further erosion in the net worth of Blue Star Infotech America Inc. which is reflected as erosion in the net worth of the subsidiary. The company infused further capital of US $ 1 Million (Rs 5.01 Crores) during the year in the subsidiary. The management is of the view that the business loss is a temporary phenomenon arising in unstable market conditions. As business volumes increase and economic growth gets recouped, the company is expected to see a turn around in profitability. As a result, no impairment of the investment in the subsidiary is considered necessary.

b) Blue Star Infotech (UK) Ltd.

The total income of this wholly owned subsidiary of the Company was £ 2,760,596 (equivalent of Rs 22.00 Crores) for the financial year ending March 31, 2012 as compared to £ 3,298,601 (equivalent of Rs 23.35 Crores) for the previous year. It registered a net profit of £ 13,807 (equivalent of Rs 0.11 Crores) for the financial year ending on March 31, 2012 compared to net profit of £ 97,082 (equivalent of Rs 0.70 Crores) for the previous year.

c) Blue Star Infotech (Singapore) Pte. Ltd.

This subsidiary was incorporated in January 2012 but has no tangible financial operations as of the date of this report.

Section 212(8) of the Companies Act, 1956 exempts the holding company from attaching the Balance Sheet and Profit and Loss Account of its Subsidiaries. The Ministry of Corporate affairs vide its circular No. 2/2011 dated 8th February, 2011 granted subject to certain terms and conditions, permission on a general basis, to the Board of Directors of the holding company to allow for publication of the Annual Report without the subsidiary company's financials. Accordingly, the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the Subsidiary Companies have not been attached with the Balance Sheet of the Company. The Company will make available these documents/details upon request by any member of the Company interested in obtaining the same. However, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial information of its subsidiaries.

6. DIRECTORS

In accordance with the provisions of the Companies Act, 1956, two of the Directors, Mr. Ashok Advani and Mr. Naresh Malhotra retire by rotation and, being eligible, offer themselves for reappointment at the ensuing Annual General Meeting. Brief profiles of these Directors are given in the notice to the ensuing AGM.

7. EMPLOYEES STOCK OPTION PLAN (ESOP)

Disclosures required to be made under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOP are given in note no. 2.1 of Notes to the Financial Statements, forming part of the Accounts.

8. DIRECTORS' RESPONSIBILITY STATEMENT

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2012 are in full conformity with the requirement of the Companies Act, 1956. The Directors hereby confirm that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed.

b) For recognising exchange gains or loss on foreign exchange, the Institute of Chartered Accountants of India has announced and recommended new accounting standard AS30 to be adopted. Your Directors have thought it prudent and appropriate to adopt this standard with effect from April 1, 2008 although it is yet to become mandatory. In accordance with this standard, foreign exchange gains or losses not related to the operations for the period are transferred to an account called Hedging Reserve in the Balance Sheet.

c) The accounting policies are consistently applied, and reasonable, prudent judgments and estimates are made 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 profits of the Company for that period.

d) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company, and for providing and detecting frauds and other irregularities.

e) The Directors have prepared the annual accounts on a going concern basis.

9. AUDITORS

The Statutory Auditors M/s Walker, Chandiok & Co, Chartered Accountants, Mumbai, who retire at the conclusion of the ensuing Annual General Meeting, being eligible offer themselves for re-appointment. A written certificate from the proposed Auditors have been obtained by the Company to the effect that the re-appointment, if made, would be in accordance with the limits specified under Section 224(1B) of the Companies Act, 1956.

10. CORPORATE GOVERNANCE

The Company has complied with all the recommendations of the Corporate Governance code as provided in clause 49 of the Listing Agreement with the stock exchanges.

A separate section on corporate governance, together with a certificate from the Company's Auditors confirming compliance, is set out separately, forming part of this Report.

11. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report have been attached, and forms part of the Directors' Report.

12. PARTICULARS OF EMPLOYEES

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1) (b) (iv) of the Companies Act, 1956, this report is being sent to all the shareholders of the company, excluding the aforesaid information. The said particulars will be made available on request and also made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

13. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as per 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, relating to the conservation of energy, technology, absorption, foreign exchange earnings and outgoings respectively, is annexed and forms part of this report.

14. GREEN INITIATIVE IN THE CORPORATE GOVERNANCE

The Ministry of Corporate Affairs has recommended a "Green Initiative in the Corporate Governance" by allowing paperless compliances by the Companies after considering Sections 2, 4, 5 and 81 of the Information Technology Act, 2000 for legal validity of compliances under Companies Act, 1956 through electronic mode.

In this regard, the Company has implemented this green initiative of sending the Notice with Balance Sheet, Profit & Loss Account, Auditor's Report, Director's Report and Explanatory Statement etc. through email after obtaining consent of the shareholders who are willing to receive the aforementioned document through electronic mode. The company has printed 11,000 copies of the Annual Report this year as compared to 15,000 copies last year.

15. ACKNOWLEDGEMENT

The Board wishes to place on record its appreciation of the sincere efforts put in by employees of the Company.

Your Directors appreciate the continued support of its clients, investors, business associates, bankers, vendors, regulatory and other authorities.

For and on behalf of the Board

of Directors of Blue Star Infotech Limited

Suneel M Advani

Chairman and Managing Director

Place: Mumbai

Date : 3 May 2012


Mar 31, 2011

The Directors present herewith the Fourteenth Annual Report on the Business and Operations of the Company together with the Audited Financial Statements for the year ended March 31, 2011.

1. FINANCIAL RESULTS

The Companys operating performance during the year ended March 31, 2011 as compared to the previous year is indicated in brief below:

(Rs. in Lakhs) 2010-2011 2009-2010

Total Income 11,004 11,162

Profit before interest, depreciation and taxation 1,496 1,704

Depreciation 228 223

Profit before taxation 1,268 1,481

Provision for taxation 377 87

Exceptional Item 64 Nil

Profit after taxation and Exceptional Item 827 1,394

Balance brought forward 4,866 4,197

Profits available for appropriation 5,694 5,591

Less: Transfer to General Reserves 83 139

Dividend (Proposed) 300 500

Corporate Dividend Tax 49 85

Balance carried forward 5,262 4,867

2. DIVIDEND

Your Directors are pleased to recommend payment of a dividend of Rs. 3/- per equity share of Rs. 10/- each during the year subject to the approval of the shareholders. (Previous year Rs. 5.00/- per share of Rs. 10/- each).

3. OPERATING RESULTS AND BUSINESS

During the year under review, total income of the Company was Rs. 110 Crore from Rs. 112 Crore, i.e.; a decline of 2%. On a consolidated basis, total income declined 5% to Rs. 129 Crore.

The global recession continued to dominate the economic scenario for IT companies as well as other industries for a large part of FY10-11. Despite decrease in sales volumes, your company was able to maintain its profitability. It was mainly the result of prudent hedging of foreign currency thereby virtually eliminating forex losses, tight control over costs and continued insistence on higher manpower productivity and other operational efficiencies. The net profit after tax on a consolidated basis for the year ended March 31, 2011 was Rs. 8.39 Crore as compared to Rs. 13.78 Crore for the last financial year.

4. INVESTMENTS

The Company invests its surplus funds in debt based mutual funds which are considered safe. As on March 31, 2011 about Rs. 17 Crore were invested in liquid debt mutual fund schemes.

5. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

The Company at present has following two subsidiary companies:

a) Blue Star Infotech America, Inc. (Formerly, USIN International, Inc.)

A 100% wholly owned subsidiary of the Company, Blue Star Infotech (America), Inc. posted a total income of US$ 13,617,635 (equivalent of Rs. 6,206 Lakhs) for the financial year ending March 31, 2011 [Previous year

US$ 16,284,543 (equivalent of Rs. 7,728 Lakhs)]. The Company reported net loss of US$ 168,575 (equivalent of about Rs. 75 Lakhs) this year compared to a net profit of US$ 24,932 (equivalent of about Rs. 3 Lakhs) last year.

As at the year end, there was an erosion in the net worth of Blue Star Infotech America Inc. which is reflected as negative net worth of the subsidiary. The management is of the view that this business loss is a temporary phenomenon arising in recessionary market conditions. As economic growth in the U.S. resumes, it is expected that the new year will see the company post better financial results. Hence, no impairment of the investment in the subsidiary is deemed necessary at this time.

b) Blue Star Infotech (UK) Ltd.

The total income of this wholly owned subsidiary of the Company was £ 3,298,601 (equivalent of Rs. 2,335 Lakhs) [Previous Year of £ 28,42,865 (equivalent of Rs. 16 Lakhs)]for the financial year ending March 31, 2011. It registered a net profit of £ 97,082 (equivalent of Rs. 69 Lakhs) for the financial year ending on March 31, 2011 compared to net profit of £ 24,932 (equivalent of Rs. 16 Lakhs) for the previous year.

Section 212(8) of the Companies Act, 1956 exempts the holding company from attaching the Balance Sheet and Profit and Loss Account of its Subsidiaries, subject to the approval of the Central Government. Accordingly, the Board in their meeting held on 25th January 2011, had resolved to make an application to the Central Government to waive the requirement of attaching the Balance Sheet and profit and loss account of the companys subsidiaries in the Annual Report. The ministry vide its circular No. 2/2011 dated 8th February, 2011 granted subject to certain terms and conditions, permission on a general basis, to the Board of Directors of the holding company to allow for publication of the Annual Report without the subsidiary companys financials. Accordingly, the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the Subsidiary Companies have not been attached with the Balance Sheet of the Company. The Company will make available these documents/ details upon request by any member of the Company interested in obtaining the same. However, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial information of its subsidiaries.

6. DIRECTORS

In accordance with the provisions of the Companies Act, 1956, two of the Directors, Mr. Sanjay N Vaswani and Mr. Suresh N Talwar retire by rotation and, being eligible, offer themselves for reappointment at the ensuing Annual General Meeting. Brief profiles of these Directors are given in the notes to the notice of the ensuing AGM.

Further, the Board of Directors unanimously decided at their meeting held on 15th to appoint Mr. Sunil Bhatia as the Companys Managing Director & CEO and Mr. K. P. T. Kutty as an independent Director of the company with effect from 15th April 2011, subject to the approval of the shareholders in the ensuing AGM. Brief profiles of these new Directors are given in the notes to the notice of the ensuing AGM.

7. EMPLOYEES STOCK OPTION PLAN (ESOP)

Disclosures required to be made under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOP are given in note no. B (5) of Schedule J Significant Accounting Policies and Notes, forming part of the Accounts.

Further, amendment in the ‘Blue Star Infotech Employees Stock Option Scheme, 2003 is proposed for members approval at the ensuing Annual General Meeting. Details of the modification proposed are contained in the notes to the notice of the ensuing AGM.

8. DIRECTORS RESPONSIBILITY STATEMENTS

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2011 are in full conformity with the requirement of the Companies Act, 1956. The Directors hereby confirm that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed.

b) For recognising exchange gains or loss on foreign exchange, the Institute of Chartered Accountants of India has announced and recommended new accounting standard AS30 to be adopted. Your Directors have thought it prudent and appropriate to adopt this standard with effect from April 1, 2008 although it is yet to become mandatory. In accordance with this standard, foreign exchange gains or losses not related to the operations for the period are transferred to an account called Hedging Reserve in the Balance Sheet.

c) The accounting policies are consistently applied, and reasonable, prudent judgments and estimates are made 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 profits of the Company for that period.

d) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company, and for providing and detecting frauds and other irregularities.

e) The Directors have prepared the annual accounts on a going concern basis.

9. AUDITORS

The Statutory Auditors M/s Walker, Chandiok & Co, Chartered Accountants, Mumbai, who retire at the conclusion of the ensuing Annual General Meeting, being eligible offer themselves for re-appointment. A written certificate from the proposed Auditors have been obtained by the Company to the effect that the re-appointment, if made, would be in accordance with the limits specified under Section 224(1B) of the Companies Act, 1956.

10. CORPORATE GOVERNANCE

The Company has complied with all the recommendations of the Corporate Governance code as provided in clause 49 of the Listing Agreement with the stock exchanges.

A separate section on corporate governance, together with a certificate from the Companys Auditors confirming compliance, is set out separately, forming part of this Report.

11. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report have been attached, and forms part of the Directors Report.

12. PARTICULARS OF EMPLOYEES

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1) (b) (iv) of the companies Act, 1956, this report is being sent to all the shareholders of the company excluding the aforesaid information. The said particulars will be made available on request, and also made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the company.

13. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as per 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, relating to the conservation of energy, technology, absorption, foreign exchange earnings and outgoings respectively, is annexed and forms part of this report.

14. GREEN INTIATIVE IN THE CORPORATE GOVERNANCE

The Ministry of Corporate Affairs has taken a “Green Initiative in the Corporate Governance” by allowing paperless compliances by the Companies after considering Sections 2,4,5 and 81 of the Information Technology Act, 2000 for legal validity of compliances under Companies Act, 1956 through electronic mode.

In this regard, the Company intends to implement this green initiative of sending the Notice with Balance Sheet, Profit & Loss Account, Auditors Report, Directors Report and Explanatory Statement etc. through email after obtaining consent of the shareholders who are willing to receive the aforementioned document through electronic mode.

The company has printed 15,000 copies of the Annual report this year as compared to 16,500 copies last year.

15. ACKNOWLEDGEMENT

The Board wishes to place on record its appreciation of the sincere efforts put in by employees of the Company, in helping it reach its current growth levels.

Your Directors place on record their appreciation for the support and assistance received from customers, investors, business associates, bankers, vendors, regulatory and governmental authorities.

For and on behalf of the Board of Directors of Blue Star Infotech Limited

Suneel M Advani Chairman and Managing Director

Mumbai, May 19, 2011


Mar 31, 2010

The Directors present herewith the 13th Annual Report on the Business and Operations of the Company together with the Audited Financial Statements for the year ended March 31, 2010.

1. FINANCIAL RESULTS

The Companys operating performance during the year ended March 31, 2010 as compared to the previous year is indicated in brief below:

(Rs. in Lakhs) 2009-2010 2008-2009

Total Income 11,162 12,901

Profit before interest, depreciation and taxation 1703 1,609

Depreciation 223 249

Profit before taxation 1,480 1,360

Provision for taxation 87 Nil

Fringe Benefit Tax Nil 47

Profit after taxation 1,393 1,313

Balance brought forward 4,197 3,601

Profits available for appropriation 5,590 4,913

Less: Transfer to General Reserves 139 131

Final Dividend (Proposed) 500 500

Corporate Dividend Tax 85 85

Balance carried forward 4,866 4,197

2. DIVIDEND

Your Directors are pleased to recommend payment of a dividend of Rs. 5/- per equity share of Rs. 10/- each during the year subject to the approval of the shareholders. (Previous year Rs. 5/- per share of Rs. 10/- each).

3. OPERATING RESULTS AND BUSINESS

During the year under review, total income of the Company was Rs. 111.62 Crores as compared to Rs. 129.01 Crores last year, i.e.; a decline of 13%. On a consolidated basis, total income declined 13% to Rs. 136.16 Crores.

The global recession continued to dominate the economic scenario for IT companies as well as other industries for a large part of FY 09-10. Despite decrease in sales volumes, your Company was able to maintain its profitability. It was mainly the result of prudent hedging of foreign currency thereby virtually eliminating forex losses, tight control over costs and continued insistence on higher manpower productivity and other operational efficiencies. The net profit after tax on a consolidated basis for the year ended March 31, 2010 was Rs. 13.78 Crores as compared to Rs. 15.55 Crores for the last financial year.

Barring any unforeseen situation, your Directors expect the growth in operational profitability to continue in the current year as well.

4. INVESTMENTS

The Company invests its surplus funds in debt based mutual funds which are considered safe. As on March 31, 2010 about Rs. 27.51 Crores were invested in liquid debt mutual fund schemes.

5. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

The Company at present has following two subsidiary companies:

a) Blue Star Infotech America, Inc. (Formerly, USIN International, Inc.)

The 100% wholly owned subsidiary of the Company, Blue Star Infotech America, Inc. posted a total income of US$16,284,543 (equivalent of Rs. 77 Crores) for the financial year ending March 31, 2010. The Company reported net profit after tax of US$ 4,789 (equivalent of about Rs. 3 Lakhs) this year compared to a net profit of US$141,531 (equivalent of Rs. 72 Lakhs) for the previous year.

b) Blue Star Infotech (UK) Ltd.

The total income of this wholly owned subsidiary of the Company was £ 2,842,865 (equivalent of Rs. 22 Crores) for the financial year ending March 31, 2010. It registered a net profit of £ 24,932 (equivalent of Rs. 16 Lakhs) for the financial year ending March 31, 2010 compared to net profit of £ 60,146 (equivalent of Rs. 44-Lakhs) for the previous year.

In terms of approvals granted by the Central Government, Ministry of Company Affairs vide its letter no 47/147/2009-CL-lll dated March 16, 2010 under Section 212(8) of the Companies Act, 1956, a copy of the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the Subsidiary Companies have not been attached with the Balance Sheet of the Company. The Company will make available these documents/details .upon request by any member of the Company interested in obtaining the same. However, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial information of its subsidiaries.

6. DIRECTORS

In accordance with the provisions of the Companies Act, 1956, two of the Directors, Dr. Prakash G Hebalkar and Mr. Naresh K Malhotra retire by rotation and, being eligible, offer themselves for reappointment at the ensuing Annual General Meeting (AGM). Brief profiles of these Directors are given in the notes to the notice of the ensuing AGM.

7. EMPLOYEES STOCK OPTION PLAN (ESOP)

Disclosures required to be made under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOP are given in note no. B (6) of Schedule J Significant Accounting Policies and Notes, forming part of the Accounts.

8. DIRECTORSRESPONSIBILITY STATEMENTS

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2010 are in full conformity with the requirement of the Companies Act, 1956. The Directors hereby confirm that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed.

b) For recognising exchange gain or loss on foreign exchange, the Institute of Chartered Accountants of India has announced and recommended new accounting standard AS30 to be adopted. Your Directors have thought it prudent and appropriate to Adopt this Standard with effect from April 1, 2008 although it is yet to become mandatory. In accordance with this standard, foreign exchange gains or losses not related to the operations for the period are transferred to an account called Hedging Reserve in the Balance Sheet.

c) The accounting policies are consistently applied, and reasonable, prudent judgments and estimates are made 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 profits of the Company for that period.

d) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company, and for providing and detecting frauds and other irregularities.

e) The Directors have prepared the annual accounts on a going concern basis.

9. AUDITORS

The Statutory Auditors M/s Walker, Chandiok & Co, Chartered Accountants, Mumbai, who retire at the conclusion of the ensuing AGM, being eligible offer themselves for re-appointment. A written certificate from the proposed Auditors have been obtained by the Company to the effect that the re-appointment, if made, would be in accordance with the limits specified under Section 224(1 B) of the Companies Act, 1956.

10. CORPORATE GOVERNANCE

The Company has complied with all the recommendations of the Corporate Governance Code as provided in Clause 49 of the Listing Agreement with the Stock Exchanges.

A separate section on corporate governance, together with a certificate from the Companys Auditors confirming compliance, is set out separately, forming part of this Report.

11. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report have been attached, and forms part of the Directors Report.

12. PARTICULARS OF EMPLOYEES

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1)(b) (iv) of the Companies Act, 1956, this report is being sent to all the shareholders of the Company "excluding" the aforesaid information.The said particulars will be made available on request, and also made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

13. CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as per 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, relating to the conservation of energy, technology absorption, foreign exchange earnings and outgoings respectively, is annexed and forms part of this report.

14. ACKNOWLEDGEMENT

The Board wishes to place on record its appreciation of the sincere efforts put in by employees of the Company, in helping it reach its current growth levels.

Your Directors place on record their appreciation for the support and assistance received from customers, investors, business associates, bankers, vendors, regulatory and governmental authorities.

For and on behalf of the Board of Directors of Blue Star Infotech Limited

Suneel M Advani

Chairman and Managing Director

Mumbai, May 13, 2010