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Notes to Accounts of Blue Star Infotech Ltd.

Mar 31, 2015

1. COMPANY OVERVIEW

Blue Star Infotech Limited (''Blue Star'' ''BSIL'' or the ''Company'') along with its wholly owned direct and controlled subsidiaries (the ''Group'') is an Information technology and software services organisation. The company provides technology, consultancy and outsourcing services.

As of 31 March 2015, Blue Star Limited and other promoters owned 51.78% of the Company''s equity share capital and have the ability to control its operating and financial policies. The Company''s registered office is in Mumbai and it has three subsidiaries, one company under common management and control and three step-down subsidiaries across the globe.

2. share capital

The Company has only one class of shares referred as equity shares having a face value of Rs. 10/- each. Each shareholder is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. All dividends proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting.

During the year ended 31 March 2015, the amount of dividend recognized as distributable to equity shareholders was Rs. 4/- per share. The total dividend appropriation for the year ended 31 March 2015 amounted to (Rs. in Lakhs) 522.40 (Previous year (Rs. in Lakhs) 486) including corporate dividend tax of (Rs. in Lakhs) 90.40 (Previous year (Rs. in Lakhs) 70.60).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholders.

3. shareholders holding more than 5% shares

As at 31 march 2015, Blue Star limited holds 28.69% (30,98,025 shares) of the company’s shares (29.83% (30,98,025 shares) as of 31 march 2014) and mr. ashok mohan advani holds 7.36% (795,165 shares) of the company’s shares (7.66% (7,95,165 shares) as of 31 march 2014).

4. Stock Option Plan

1. The Company has implemented Employee Stock Option Plans for the key employees of the Company and its subsidiaries through the Blue Star Infotech Limited - Key Employee Stock Option Trust (the ''Trust'') formed for the purpose. All the options issued by the company are equity share based options which have to be settled in equity shares only. The shares to be allotted to employees under the Blue Star Infotech Limited - Key Employee Stock Option Scheme (the ''ESOP scheme'') were purchased by the trust from the open market and acquired through fresh issue of shares by the Company.

Post 16 February 2013, as per SEBI mandate, the Company is required to issue fresh shares to the Trust for a consideration to meet its obligations under the ESOP scheme. Pursuant to the ESOP scheme, the Board at its meeting held on 23 July 2014 approved issue of 4,15,000 shares to the Trust for subsequent issue to eligible employees under the ESOP scheme.

5. Notes:

a) The shareholders, in the Annual General Meeting held on 22 July 2011 had approved the grant of 10,00,000 employee stock options in accordance with the ESoP Scheme, equivalent to 10% of the issued and paid up share capital of the company as at 31 march 2011.

b) By virtue of a postal ballot, the shareholders accorded their approval, the result of which was declared on 12 December 2013 for the additional grant of 5,00,000 employee stock options in accordance with the ESoP Scheme, equivalent to 4.81% of the issued and paid up share capital of the company as at 31 march 2013.

c) the compensation committee granted 5,15,000 options on 31 august 2012 at Rs. 60 per share, 170,000 options on 29 march 2013 at Rs. 57 per share, 4,67,000 options on 29 may 2013 at Rs. 52 per share, 95,000 options on 18 December 2013 at Rs. 83 per share and 2,71,000 options on 18th December 2014 at Rs.188 per share to key managerial employees of the company and its subsidiaries (including an executive director of the company). the grant price is based on the closing market price prevailing on the date prior to the date of grant, on the stock exchange recording highest volume.

d) There is one employee (Ml Sunil Bhatia - chief Executive Officer and managing Director) in the Group who has been granted options (9,82,000) which exceeds 5% of the Issued capital.

e) There is a potential dilution by 8,10,912 options/shares in future, which is representative of shares required by the trust to meet the obligation towards options to be exercised in future. The options/ shares to the extent not held by the trust and to be exercised in future will be allotted by the company to the Trust at the option grant price.

f) In the event of any further rights or bonus issue of equity shares after vesting but prior to exercise of the options, the company/ Trust shall consider the grant of an appropriate number of additional options, at such price as may be determined by the compensation committee.

g) The company accounts for ''Employee Share Based Payments'' using the intrinsic value method. The intrinsic value of the stock options issued by the company to its employees for services rendered by them is measured as the amount by which the quoted market price of the company''s share as on the date of grant exceeds the exercise price of the stock option. considering that the stock options have been issued with an exercise price that equals the quoted share price on the previous day, there is no compensation cost recognised in the financial statements using the intrinsic value method.

k) For purposes of the proforma disclosures, the fair value of each option grant was estimated as at 31 March 2015 using the Black Scholes option valuation model with the following assumptions:

* dividend yield of 2.01%;

* risk free interest rate of 7.61 to 7.65%;

* expected volatility of 54.97% based on historical volatility; and

* expected option life of 2.00 years.

6. Operating lease obligations

a. The Company has taken office/residential premises under cancellable operating lease agreements that are renewable at the option of both the lessor and lessee. An amount of (Rs. in Lakhs) 426.06 (Previous year (Rs. in lakhs) 429.57) is recognised as lease expenses in the Statement of profit and loss for the year ended 31 March 2015. the future guaranteed lease payments under non-cancellable portion of cancellable leases are:

i) less than one year - (Rs. in Lakhs) 12.25 (Previous year (Rs. in Lakhs) Nil)

ii) later than one year but not later than 5 years - (Rs. in Lakhs) NIL (Previous year (Rs. in Lakhs) NIL)

b. The Company has leased out office premises and furniture under non-cancellable operating lease agreements that are renewable at the option of both the lessor and lessee. An amount of ('' in Lakhs) 488.77 (Previous year (Rs. in Lakhs) 488.76) is recognised as lease income in the Statement of profit and loss for the year ended 31 March 2015. The future guaranteed lease payments under non-cancellable leases are:

i) less than one year - (Rs. in Lakhs) Nil (Previous year (Rs. in Lakhs) 539.04)

ii) later than one year but not later than 5 years - (Rs. in Lakhs) Nil (Previous year (Rs. in Lakhs) Nil).

7. Contingent liabilities and commitments (to the extent not provided for)

i) Contingent liability not provided in respect of:

* Demand(s) raised by the Income Tax authorities for prior financial year(s) aggregating (Rs. in Lakhs) 441.85 (Previous year (Rs. in lakhs) 441.85) against which the company has filed appeal(s) with the commissioner of Income Tax (Appeals).

* Appeal(s) filed with the Income Tax Appellate Tribunal towards income-tax demands amounting to (Rs. in lakhs) 246.80 (Previous year (Rs. in lakhs) 702.85).

* Application(s) filed with the Deputy Commissioner of Income Tax towards income-tax demands amounting to (Rs. in lakhs) 276.83 (Previous year (Rs. in lakhs) 276.83).

the company is advised that it would get a favourable verdict and no demand would be eventually

sustained in any of the above matters. accordingly, no provision is made in the books in respect of these

contingent liabilities.

ii) Guarantees given on behalf of the company by banks

* Towards contract performance obligations (Rs. in lakhs) 46.51 (Previous year (Rs. in lakhs) 66.84).

* Towards Letter of Credit facilities on behalf of its subsidiary, Blue Star Infotech America, Inc. (Rs. in lakhs) 938.85 (Previous year (Rs. in lakhs) 898.58).

iii) Guarantee given by company on behalf of its subsidiary, Blue Star Infotech america, Inc. (Rs. In lakhs) 360.91 (Previous year (Rs. in lakhs) 601.00).

8. Dividend remitted in foreign currency:

There are no dividends remitted in foreign currency during the current and previous year.

9. Related party transactions

i) Blue Star Infotech (UK) Limited (BSIUK), the 100 % subsidiary of the Company has earned profits during the year ended 31 March 2015 and also has a positive net worth, as at the year-end.

ii) Blue Star Infotech America, Inc. (BSIA), the 100 % subsidiary of the company has earned profits during the year ended 31 march 2015 and also has a positive net worth as at the year-end.

iii) Blue Star Infotech (Singapore) Pte limited (BSISGPL), the 100 % subsidiary of the company has earned profits during the year ended 31 march 2015 and also has a positive net worth, as at the year-end.

iv) Blue Star Infotech Business Intelligence and analytics Private limited (BSIBIA) (Formerly known as Activecubes Solutions India Private limited), in which the company exercises complete managerial and administrative control and of which 48.97% of the equity is held by the company, is acquired on 1 august 2013 has earned profits during the year ended 31 march 2015 and also has a positive net worth.

related party disclosures:

Related party transactions are transfer of resources or obligations between related parties, regardless of whether a price is charged. Parties are considered to be related, if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial or operating decisions. Parties are considered to be related if they are subject to common control or common significant influence.

Names of related parties and description of relationship

Subsidiaries and related interests

(a) Blue Star Infotech America, Inc., uSA (100% subsidiary)

(b) Blue Star Infotech (uK) limited, uK (100% subsidiary)

(c) Blue Star Infotech (Singapore) Pte. limited, Singapore (100% subsidiary)

(d) Blue Star Infostack Solutions Pte. limited (100% subsidiary of Blue Star Infotech (Singapore) Pte. limited)

(e) Blue Star Infostack (Malaysia) Sdn. Bhd. (100% subsidiary of Blue Star Infotech (Singapore) Pte. limited)

(f) Blue7 Solutions LLc, uSA (100% subsidiary of Blue Star Infotech America, Inc., uSA)

(g) Blue Star Infotech Business Intelligence and Analytics Private limited (formerly known as Activecubes Solutions India Private limited) (48.97% of shareholding) (with effect from 1 August 2013) - with complete managerial and administrative control.

Associate

Blue Star limited (Holding 28.69% of the equity share capital of the company)

Promoters

Mr. Suneel M. Advani, chairman and managing Director Mr. Ashok M. Advani, vice-chairman

Entities in which one or more directors are common

(a) talwar thakore and Associates

(b) Modern family doctor Pvt. ltd.

Key Managerial Personnel & relatives

Mr. Sunil Bhatia, chief executive officer and Managing director Mr. vir Advani, relative of Promoters

Mr. Aloke Ghosh, chief financial officer and company Secretary (effective 2 June 2014)

Mr. v. Sudarshan, chief financial officer and company Secretary (till 31 May 2014)

10. Micro, Small and Medium Enterprises

There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31 March 2015. This information as required to be disclosed under the Micro, Small and medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the company and has been relied upon by the statutory auditors of the company.

11. Derivative instruments:

the company has entered into the following derivative contracts:

(a) Forward contracts and options contracts [being derivative instruments], which are not intended for trading or speculative purposes, but for hedging purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

there are outstanding foreign exchange Forward contracts and Foreign exchange options contracts entered into by the company as at 31 march 2015 of US $ 5,150,000 (Previous year US $ Nil).

12. staff benefits cost in accordance with Accounting standard 15 - employee Benefits (Revised 2005)

a) Defined contribution plans: the amount recognised as an expense during the year is (Rs. in Lakhs) 255.67 (Previous year (Rs. in lakhs) 181.75).

13. Segment information

The Company publishes standalone financial statements along with the consolidated financial statements in the annual report. In accordance with Accounting Standard 17, Segment Reporting, the Company has disclosed the segment information in the consolidated financial statements.

14. During the year 2013-14, the company had availed an overdraft facility of Rs. 500 Lakhs for working capital purposes from a scheduled bank. the drawdown amount against this limit as at 31 March 2015 is Nil (Previous year (Rs. in lakhs) nil).

the working capital borrowings are secured by exclusive hypothecation of all existing and future current assets and movable fixed assets of the company. currently, the rate of interest is 12.25% p.a.

15. the previous year''s figures have been recast / regrouped / rearranged, wherever considered necessary.


Mar 31, 2013

COMPANY OVERVIEW

Blue Star Infotech Limited (''Blue Star'', ''BSIL'' or the ''Company'') along with its wholly owned, direct and controlled subsidiaries, Blue Star Infotech America,Inc., Blue Star Infotech (UK) Limited and Blue Star Infotech (Singapore) Pte. Limited is an Information technology and software services organisation. The Company provides technology, consultancy and outsourcing services.

1.1 Related party transactions

i) Blue Star Infotech (UK) Limited (BSIUK), the 100 % subsidiary of the Company has earned profts during the year ended 31 March 2013 and also has a positive net worth, as at the year-end.

ii) Blue Star Infotech America, Inc. (BSIA), the 100 % subsidiary of the Company has incurred a loss during the year ended 31 March 2013 but has a positive net worth as at the year-end. The management believes that the business loss is a temporary phenomenon arising mainly due to reduced margins in turnover consequent to transient adverse market conditions. Hence, no impairment of the investment in the subsidiary is currently deemed necessary in the books of account.

iii) Blue Star Infotech (Singapore) Pte Limited (BSISG), the 100 % subsidiary of the Company has earned profts during the year ended 31 March 2013 and also has a positive net worth, as at the year-end.

Related party disclosures:

Related party transactions are transfer of resources or obligations between related parties, regardless of whether a price is charged. Parties are considered to be related, if one party has the ability, directly or indirectly, to control the other party or exercise signifcant infuence over the other party in making fnancial or operating decisions. Parties are considered to be related if they are subject to common control or common signifcant infuence.

1.2 Micro, Small and Medium Enterprises

There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31 March 2013. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identifed on the basis of information available with the Company and has been relied upon by the statutory auditors of the Company.

1.3 Derivative instruments:

The Company has entered into the following derivative instruments:

(a) Forward Exchange Contracts and Foreign Exchange Options Contracts (being derivative instruments), which are not intended for trading or speculative purposes, but for hedging purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

There are outstanding Forward Exchange Contracts and Foreign Exchange Options Contracts entered into by the Company as at 31 March 2013 of USD 19,00,000 (Previous year USD 1,18,00,000).

(b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

Amounts receivable (net of payables) in foreign currency on account of the following:

1.4 Staf benefts cost in accordance with Accounting Standard 15 (Revised 2005)

a) Defned contribution plans: The amount recognised as an expense during the year is (Rs. in Lakhs) 200.76 (Previous year (Rs. in Lakhs) 288.42)

1.5 Earnings Per Share (EPS)

The amount considered in ascertaining the Company''s earnings per share constitute the net proft after tax and exceptional item (and includes post tax effect of any extraordinary items). The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprise the weighted average number of shares considered for deriving basic earnings per share and also the weighted average number of shares which could have been issued on conversion of all dilutive potential shares.

1.6 The company considers its entire business / geographical operations as a single segment. There are no separate reportable segments as per Accounting Standard 17, Segment Reporting prescribed by the Central Government, in accordance with Companies (Accounting Standards) Rules, 2006.

1.7 The previous year''s fgures have been recast / regrouped / rearranged, wherever considered necessary.


Mar 31, 2012

All amounts in the financial statements are presented in Indian Rupees Lakhs (Rs in Lakhs) and two decimal places thereafter, except for per share data or as otherwise stated. One Lakh is one tenth of a million.

The Company has only one class of shares referred as equity shares having a face value of Rs 10/- each. Each shareholder is entitled to one vote per share.

The Company declares and pay dividends in Indian rupees. All dividends proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting.

During the year ended 31 March 2012, the amount of dividend recognized as distributions to equity shareholders was Rs 2 per share. The total dividend appropriation for the year ended 31 March 2012 amounted to Rs 241.40 lakhs (Previous year Rs 348.67 lakhs) including corporate dividend tax of Rs 33.70 lakhs (Previous year Rs 48.67 lakhs).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholders.

Shareholders holding more than 5% Shares

As at 31 March 2012, Blue Star Limited holds 29.83% of the company's shares. (30.98% as of 31 March 2011) and Mr. Ashok Mohan Advani (SEBI stipulated Permanent Account Number based holding) holds 7.69% of the Company's shares (7.99% as of 31 March 2011).

Stock option plan

1. The Company has implemented Employee Stock Option Plans for the key employees of the Company and its subsidiaries through the Blue Star Infotech Limited - Key Employee Stock Option Trust (the 'Trust') formed for the purpose. All the options issued by the Company are equity share based options which have to be settled in equity shares only. The shares to be allotted to employees under the Blue Star Infotech Limited - Key Employee Stock Option Scheme are purchased by the trust from the open market. Based on the details provided by the Trust, the position of the Key Employee Stock Option Plans of the Company as at 31 March 2012 is as under:

Notes:

a) The compensation committee at its meeting held on 25 October 2005 pursuant to ESOP Scheme 2003 decided to grant 3,82,000 equity shares to senior employees of the Company at the closing market price of Rs 117 as at 31 October 2005 on the National Stock Exchange with 10,000 equity shares vesting on 31 October 2006 and rest of the equity shares vesting on 31 October 2008. The offer price was revised to Rs 72 per share (the closing market price on 19 June 2006 on the National Stock Exchange) for 3,23,000 equity shares vide approval of the members at the Annual General Meeting held on 29 August 2006.

b) There is one employee who had been granted options equal to or exceeding 1% of the Issued Capital.

c) The diluted Earnings Per Share and Earnings Per Share are the same, as the shares covered under vested options are already issued and allotted and are held by the Trust.

d) In the event of any further rights or bonus issue of equity shares after vesting but prior to exercise of the options, the Company/ Trust shall consider the grant of an appropriate number of additional options, at such price as may be determined by the Compensation Committee.

e) The Company accounts for 'Employee Share Based Payments' using the intrinsic value method. The intrinsic value of the stock options issued by the Company to its employees for services rendered by them is measured as the amount by which the quoted market price of the Company's share as on the date of grant exceeds the exercise price of the stock option. Considering that the stock options have been issued with an exercise price that equals the quoted share price on the previous day, there is no compensation cost recorded in the financial statements using the intrinsic value method.

2.1 Operating lease obligations

a. The Company has taken office/residential premises under cancellable operating lease agreements that are renewable at the option of both the lessor and lessee. An amount of (Rs in Lakhs) 416.92 (Previous year (Rs in Lakhs) 349.59) is recognised as lease expenses in the Statement of profit and loss for the year ended 31 March 2012. The future guaranteed lease payments under non-cancellable portion of cancellable leases are:

i) less than one year - (Rs in Lakhs) NIL (Previous year (Rs in Lakhs) 155.74)

ii) later than one year but not later than 5 years - (Rs in Lakhs) NIL (Previous year (Rs in Lakhs) 9.8)

b. The Company has leased out office premises and furniture under non-cancellable operating lease agreements that are renewable at the option of both the lessor and lessee. An amount of (Rs in Lakhs) 369.91 (Previous year (Rs in Lakhs) 437.75) is recognised as lease income in the Statement of Profit and Loss for the year ended 31 March 2012. The future guaranteed lease payments under non-cancellable leases are:

i) less than one year - (Rs in Lakhs) NIL (Previous year (Rs in Lakhs) 392.40)

ii) later than one year but not later than 5 years - (Rs in Lakhs) NIL (Previous year (Rs in Lakhs) 1.87)

2.2 Contingent liabilities and commitments (to the extent not provided for)

i) Contingent liability not provided in respect of:

- Demand(s) raised by the Income Tax authorities for prior financial year(s) during the year aggregating (Rs in lakhs) Nil (Previous year (Rs in Lakhs) 3,196.41) against which the Company has filed appeal(s) with the Commissioner of Income-tax (Appeals).

- Appeal(s) filed with the Appellate Tribunal (India) towards income-tax demands amounting to (Rs in Lakhs) 175.50 (Previous year (Rs in Lakhs) 65.84).

The Company is advised that it would get a favourable verdict and no demand would be eventually sustained in any of the above matters. Accordingly, no provision is made in the books in respect of these contingent liabilities.

ii) Guarantees given on behalf of the Company by banks (Rs in Lakhs) 71.09 (Previous Year (Rs in Lakhs) 67.99).

iii) Guarantees given by Company on behalf of its subsidiary, Blue Star Infotech (UK) Limited (Rs in Lakhs) 27.18 (Previous year (Rs in Lakhs) NIL).

2.3 Related party transactions

i) Blue Star Infotech (UK) Limited (BSIUK), the 100 % subsidiary of the Company has earned profits during the year ended 31 March 2012 and also has a positive net worth, as at the year-end.

ii) Blue Star Infotech America Inc., the 100 % subsidiary of the Company has incurred a loss during the year ended 31 March 2012 but has a positive net worth as at the year-end. The management believes that the business loss is a temporary phenomenon arising mainly due to a temporary reduction in turnover consequent to transient adverse market conditions. Hence, no impairment of the investment in the subsidiary is currently deemed necessary in the books of account.

Related Party Disclosures:

Related party transactions are transfer of resources or obligations between related parties, regardless of whether a price is charged. Parties are considered to be related, if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial or operating decisions. Parties are considered to be related if they are subject to common control or common significant influence.

2.4 Micro, small and medium enterprises

There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2012. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company and has been relied upon by the statutory auditors of the Company.

2.5 Derivative Instruments

The Company has entered into the following derivative instruments:

(a) Forward Exchange Contracts and Foreign Exchange Options Contracts [being derivative instruments], which are not intended for trading or speculative purposes, but for hedging purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

There are outstanding Forward Exchange Contracts and Foreign Exchange Options Contracts entered into by the Company as at March 31, 2012 of US Dollar $ 1,18,00,000 and GbP £ Nil Cross Currency-Rupees {Previous year US Dollar $ 1,11,50,000 and GBP £ 80,000}

c) During the year, the Company has reversed provisions made towards incentive and sales commission relating to employees amounting to (Rs in Lakhs) Nil {Previous year (Rs in Lakhs) 235.00}.

d) During the year, the Company has revised its Privilege leave salary policy wherein the maximum number of encashable Privilege leave is reduced from 120 days to 55 days. As a consequence, there is reversal of leave salary provision by (Rs In Lakhs) 119.67 {Previous year (Rs in Lakhs) Nil}.

2.6 Exceptional Item (FY 2010-11)

Notice(s) demanding differential stamp duty of (Rs Lakhs) 46.99 and penalty of (Rs Lakhs) 33.98 was received during the year 2007-08, pursuant to disallowance of stamp duty concession availed by the Company in the year 2005. As per the Information Technology (IT) Policy issued by the Government of Maharashtra in the year 2003, 75% stamp duty concession was granted on purchase of property for establishing a new unit related to Information Technology in recognized private IT Parks. This matter was disputed by stamp duty authorities before the Honourable High Court, Bombay. No hearing was scheduled in the aforesaid matter by the Honourable High Court, Bombay for over three years. As a matter of commercial prudence, the Board of Directors decided to withdraw the petition(s) from the Honourable High Court, Bombay and pay the differential stamp duty and penalty without getting into the merits of the matter. Accordingly, in the year 2010-11 a total sum of (Rs lakhs) 111.37 was paid including (Rs Lakhs) 64.18 as penalty which has been disclosed as an exceptional item in the Statement of Profit and Loss.

2.7 Earnings Per Share (EPS)

The amount considered in ascertaining the Company's earnings per share constitute the net profit after tax and exceptional item (and includes post tax effect of any extraordinary items). The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprise the weighted average number of shares considered for deriving basic earnings per share and also the weighted average number of shares which could have been issued on conversion of all dilutive potential shares.

2.8 The Ministry of Corporate Affairs, Government of India vide its General Circular No. 2/2011 (51/12/2007-CL-III) dated 08 February 2011 read with General Circular No. 3/2011 dated 21 February 2011 issued under section 212(8) of the Companies Act, 1956 has granted general exemption to companies from attaching the Balance Sheet and Statement of Profit and Loss of their subsidiaries under section 212(1) of the Companies Act, 1956 and clarified that this exemption is applicable for financial statements prepared on or after 31 March 2011.

2.9 The previous year's figures have been recast/regrouped/rearranged, wherever considered necessary in accordance with Revised Schedule VI forming part of the Companies Act, 1956 and effective for financial year commencing on or after 01 April, 2011.


Mar 31, 2010

1.Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Nil {Previous year (Rs.OOO)312}.

2.Contingent liability not provided for in respect of:

a)Income-tax demands against which the Company is in appeal:

As at As at March 31,2010 March 31,2009 Rs.000 Rs.000

i) With Income-tax Appellate Tribunal 8,584 15,526

ii) Commissioner of income-tax (Appeals) 35,082 15,256

Total 43,666 15,256

b)Notice(s)demanding differential stamp duty of (Rs.OOO)4,699 and penalty of (Rs.OOO)3,398 was received during the year 2007-08,pursuant to disallowance of stamp duty concession availed by the Company in the year 2005.As per the Information Technology (IT)Policy issued by the Government of Maharashtra in the year 2003,75%stamp duty concession was granted on purchase of property for establishing a new unit related to Information Technology in recognized private IT Parks.Accordingly,the Company has been legally advised that it is entitled to this duty concession.Consequently,the Company filed writ petitions before the Honourable High Court,Bombay.Pursuant to interim stay orders of the Honourable High Court,Bombay,the Company deposited a sum of (Rs.OOO)4,699 and provided bank guarantees for a sum of (Rs.OOO)3,020 to the Honourable High Court,Bombay,subject to further orders and outcome of appeal proceedings.No hearing has been scheduled in the matter by the Honourable High Court,Bombay as of date.

c)The Company has received a notice of demand under Karnataka Value Added Tax,2003 (KVAT)on 28 April 2010 for (Rs.OOO)6,276 (including Interest of (Rs.OOO)2,266 and penalty of (Rs.OOO)669)relating to the financial year 2005-06.Upon enquiry,the Company is informed that it is required to pay KVAT on certain services at 4%,wherein no tax has been paid earlier.Further,the authorities have contended that the sale of certain software licenses should be taxed at 12.5%instead of 4%charged by the Company.The Company does not agree with the contentions of the KVAT authorities and will appeal against this order within the prescribed time limit shortly. The Company is advised that it would get a favourable verdict and no demand would be eventually sustained in any of the above matters.Accordingly,no provision is made in the books in respect of these contingent liabilities.

3.Guarantees given on behalf of the Company by banks (Rs.OOO)6,084 (Previous Year (Rs.OOO)10,563)and by others (Rs.OOO)81,500 (Previous Year (Rs.OOO)81,500).

4.The Honourable High Court,Bombay approved a scheme of Amalgamation between Ashok Sunil &Company Private Limited (Ashok Sunil)with Blue Star Infotech Limited (BSIL)by its order dated May 2,2008.The Scheme became effective from July 7,2008,the date on which the certified copies of the order of the Honourable High Court,Bombay sanctioning the Scheme was filed with the Registrar of Companies,Mumbai,Maharashtra. Consequent to the Scheme becoming effective,717,918 fully paid-up equity shares (face value of Rs.10 each)of the Company previously held by Ashok Sunil were extinguished.A similar number of shares were issued and allotted to the shareholders of Ashok Sunil by the Company,on the scheme becoming effective.Post amalgamation, the share capital of BSIL remains unchanged.Further,there is no change in the Promoter and Public shareholding of the Company.In accordance with the Court order,the excess of net asset value of Ashok Sunil transferred to the Company over face value of shares issued by BSIL shall be credited to General Reserve Account of BSIL.Consequently, the free reserves of the Company increased by (Rs.OOO)1,125 during the year 2008-09.All the cost arising out of or incurred in carrying out and implementing the Scheme and matters incidental thereto,are borne by the Promoters.

5.a)Blue Star Infotech (UK)Ltd.(BSI-UK),the 100 %subsidiary of the Company has earned profits during the year ended March 31,2010 and also has a positive net worth,as at the year-end.The Company reduced its investment in the subsidiary from GBP560,000 to GBP300,000 during the year as the BSI-UK did not require these funds considering its current and expected scale of operations.As a consequence,the paid-up Capital of the subsidiary was reduced from GBP560,000 to GBP300,000.

b)Blue Star Infotech America Inc.,the 100%subsidiary of the Company hasearned profits during the year ended March 31,2010 and also has a positive net worth,as at the year-end.

6.Loans and Advances include amount due from a director -(Rs.OOO)Nil {Previous Year -(Rs.000)Nil},Maximum balance outstanding from a director during the year -(RsIOOO)150 {Previous Year -(Rs.000)750}

7.Micro,Small and Medium Enterprises

There are no Micro,Small and Medium Enterprises,to whom the Company owes dues,which are outstanding for more than 45 days as at March 31,2010.This information as required to be disclosed under the Micro,Small and Medium Enterprises Development Act,2006 has been determined to the extent such parties have been identified on the basis of information available with the Company and has been relied upon by the statutory auditors of the Company.

8.Derivative Instruments

The Company has entered into the following derivative instruments: (a)Forward Exchange Contracts and Foreign Exchange Options Contracts [being derivative instruments ],which are not intended for trading or speculative purposes,but for hedging purposes,to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables. There are outstanding Forward Exchange Contracts and Foreign Exchange Options Contracts entered into by the Company as at March 31,2010 of US Dollar $12,467,724 and GBP £ 180,000,Cross Currency -Rupees (Previous year US Dollar $19,900,000 and GBP £ 50,000)

9.Related Party Disclosures:

Related party transactions are transfer of resources or obligations between related parties,regardless of whether a price is charged.Parties are considered to be related,if one party hasthe ability,directly or indirectly,to control the other party or exercise significant influence over the other party in making financial or operating decisions. Parties are considered to be related if they are subject to common control or common significant influence.

Names of related parties and description of relationship

Subsidiaries

(a)Blue Star Infotech America,Inc.,USA (100%subsidiary)

(b)Blue Star Infotech (UK)Limited,UK (100%subsidiary)

Associates

Blue Star Limited (Holding 31%of the equity share capital of the Company)

Company in which promoters`have significant influence

Blue Star Design Engineering Limited

Company in which one or more directors are common

Reva Electric Car Co.(Pvt.)Ltd.

Promoters

Mr.Suneel M Advani,Chairman and Managing Director

Mr.Ashok M Advani,Vice Chairman

Key Management Personnel

Mr.Suneel M Advani,Chairman and Managing Director

10.Staff benefits cost in accordance with Accounting Standard 15 (Revised 2005)

a)Defined Contribution Plans:The amount recognised as an expense during the year is (RsOOO)21,578 (Previous Year (Rs000) 21,152:

11.The Ministry of Corporate Affairs,Government of India vide its Order No.47/234/2010-CL-III dated April 05,2010 issued under section 212(8)of the Companies Act,1956 has exempted the Company from attaching the Balance Sheet and Profit and Loss Account of its Subsidiaries under section 212(1)of the Companies Act,1956.

12.The previous years figures have been regrouped /rearranged wherever considered necessary.

 
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