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Directors Report of Megasoft Ltd.

Mar 31, 2015

The Directors have pleasure to present their report of your company on the business and operations for the 15 months period ended 31 March 2015.

Financial results (Rs.lakhs)

Particulars Standalone

For the 15 months For the period ended year ended 31 March 2015 31 December 2013

Revenues 5,337.13 5,061.82

Total expenditure 4,775.76 4,293.17

Finance cost 316.45 541.61

Depreciation 304.08 276.92

Operating profit/(loss) (59.16) (49.88)

Profit before tax 11.53 311.30

Less: Taxes (50.02) 20.98

Profit after tax 61.55 290.32 Earnings per share (equity shares, par value Rs. 10 each)

Basic C) 0.14 0.66

Diluted f) 0.13 0.62

Particulars Consolidated For the 15 months For the period ended year ended 31 March 2015 31 December 2013

Revenues 10,072.85 10,550.75

Total Expenditure 7,596.87 8,297.53

Finance Cost 1,202.59 1,119.43

Depreciation 1,354.74 1,187.04

Operating profit/(loss) (81.35) (53.25)

Profit before tax 24.44 291.69

Less: Taxes (49.37) 23.94

Profit after tax 73.82 267.74

Earning per Share (equity shares,par value 10 each)

Basics() 0.17 0.60

Diluted() 0.16 0.57

Overview

During the financial period ended 31 March 2015 (15 months), your company recorded consolidated revenues of Rs. 10,072.85 lakhs as compared to Rs. 10,550.75 lakhs in the previous year. The consolidated profit was Rs. 73.82 lakhs as compared Rs. 267.74 lakhs in the previous year.

Change in financial year

In compliance with the provisions of the Companies Act, 2013, your company decided to change its financial year from "January- December" to "April-March". Accordingly, the last financial year of your company was extended up to 31 March 2015 covering a period of fifteen months commencing from 1 January 2014. Your company shall henceforth follow its financial year commencing from 1 April and ending on 31 March, every year.

Dividend

On account of inadequacy of profits during the financial year ended 31 March 2015, the Board of Directors of the company have not recommended dividend.

Share capital

The paid-up equity share capital as on 31 March 2015 was Rs. 4,426.73 lakhs comprising of 4,42,67,293 equity shares of Rs. 10 each. During the year under review, the company has not issued shares with differential voting rights nor granted stock options or sweat equity.

Material changes from end of financial year to date of this report

The company received the title and completed the registration formalities on 23 May 2015 for lands situated at Madhapur (0.75 acres) and Nanakramaguda, Hyderabad (acquired through amalgamation of Visual Soft Technologies Limited in 2006-2007) allotted by TSIIC (previously APIIC). Out of 15.61 acres originally allotted at Nanakramguda, Hyderabad, as per the directions of Government of Telangana, your company surrendered 7.29 acres and retained the balance land.

Directors and Key Managerial Personnel

Your company re-appointed Mr R Janardhana Reddy [DIN- 02544300], Mr Anil Kumar Sood [DIN-00086577] and Mr Anish

Mathew [DIN-02545538] as Independent Directors with effect from 26 December 2014 to hold such office for a term of five years through a postal ballot process under the Companies Act, 2013. The company has received declarations from all the independent directors of the company confirming that they meet with the criteria of independence as prescribed both under section 149 (6) and Schedule IV of the Companies Act, 2013 and clause 49 of the Listing Agreement with the stock exchanges. Mr SV Ramkumar [DIN-00460119], a Non-Executive Independent Director of your company resigned on 13 August 2014. The board of directors places on record their sincere appreciation for the contribution and valuable service rendered by Mr SV Ramkumar during his tenure.

Ms Leona Ambuja [DIN-07138817] was appointed as an Additional Director with effect from 31 March 2015 to fulfill the requirement of appointing a Woman Independent Director on the Board of your company and now it is proposed to appoint her for a period of five years at the ensuing Annual General Meeting. In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the company, Mr GV Kumar [DIN-00059107] and Mr D Sudhakar Reddy [DIN-00047707], directors of your company, retire by rotation and are eligible for reappointment. The KMP positions, CFO and Company Secretary, have fallen vacant by end of the current financial year and the company is in the process of filling these positions within the prescribed time limits under the applicable laws.

Board meetings

The Board of Directors met five (5) times during the financial year. The provisions of Companies Act, 2013 and listing agreement were adhered to while considering the time gap between two meetings.

Remuneration policy

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is available on the website of the company and the terms of reference are given separately in the Corporate Governance Report.

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 its own performance, the directors individually as well as the evaluation of the working of its committees. The manner in which the evaluation has been carried out has been detailed out in the Corporate Governance Report.

Directors' responsibility statement

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of section 134(3)(c) of the Companies Act, 2013:

(i) in the preparation of the annual financial statements for the year ended 31 March 2015, the applicable accounting standards had been followed along with proper explanations relating to material departures;

(ii) 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 as at the end of the financial year and of the profit and loss of the company for the year;

(iii) 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;

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

(v) 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; and

(vi) 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.

Outlook

A detailed discussion on the performance of the company, industry structure, threats, opportunities, risks, future outlook and strategy is given separately in the Management's Discussion and Analysis section, which forms a part of this annual report.

Energy conservation, technology absorption and foreign exchange earnings and outgo In terms of Section 134(3)(m) of the Companies Act, 2013 and the rules framed thereunder, your Directors furnish the required details below:

(a) Conservation of Energy: Your company uses electric energy for all its equipments such as air conditioners, computer terminals, lighting and utilities in the work premises. All possible measures have been taken to conserve energy:

- through periodic energy audits to identify potential areas for saving

- by incorporating energy-efficient equipment

- through automation i.e. using timers, automatic level controllers, etc.

(b) Research and Development (R&D): Your company being a technology products company, Research and Development is the single most important investment into securing the future of the company. Especially in the area of Mobile technologies, which requires constant innovation to be ahead of market and competition, research and development becomes a necessity. This is also reflected in your company Brand Tag Line "Innovate. Lead." During the past year we have spent around 30% of resources on building technologies in packet core, convergent billing, policy management, 4G capabilities, mobile banking and wallet products. Apart from building new products and components, past year significant time has been spent in enhancing the capabilities of existing products making them more feature rich, flexible to manage and at the same time robust to handle higher performance demands. This has enabled your company not only to launch newer products but also enhance existing products during the year. Your company believes this will culminate into enhanced customer satisfaction and revenue there by. In an effort to further develop exclusivity of the technologies company is actively seeking patent grants on some of these areas. Addition of a new patent in Mobile Service Platform area in April 2015 is an example of the same.

(c) Technology Absorption: As the communication protocols and technologies are evolving, your company is keeping up the speed with them and actively absorbing them into product line as well as infrastructure planning. During the year, your company has adapted newer technologies like 4G, NFV, SIP, Cloud and Diameter into its product line and enhanced the capabilities of the products to match the demands of the market. Further your company also made conscious attempt to build technologies on Inter-operation between 3G and 4G, Wifi to GSM and Wifi to LTE areas.

(d) Foreign Exchange Earnings and Outgo: The details of foreign exchange earnings and outgo are given in note no. 29 and 28 of the Notes forming part of the standalone financial statements of the company.

Quality certifications

The company's quality management system (QMS) has its foundation on decades of experience and industry best practices that are aligned with international standard quality models and certifications.

ISO 9001:2008 - Quality Management System

QMS enhancing customer satisfaction The company is certified for ISO 9001:2008 by bsi, India. Our products & solutions therefore ensure customer satisfaction.

ISO 27001:2005 - Information Security

Information security management system enhancing Confidentiality, Availability and Integrity

The company is also certified for ISO 27001:2005 by Bureau VERITAS Certification, India. This assures that the company maintains confidentiality, integrity and availability of corporate and client information.

Risk management

Although the company has long been following the principle of risk minimisation as is the norm in every industry, it has now become a compulsion.

Therefore, in accordance with clause 49 of the listing agreement the Board members were informed about risk assessment and minimisation procedures after which the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the company.

The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues.

In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the company are imperative. The common risks inter alia are: Regulations, competition, Business risk, Technology obsolescence, Investments, retention of talent and expansion of facilities.

Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk.

As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same.

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 defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Audit monitors and evaluates 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.

Vigil mechanism / whistle blower policy

In order to ensure that the activities of the company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour, the company has adopted a vigil mechanism policy. This policy is explained in corporate governance report and also posted on the website of the company.

Related party transactions

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the company with the promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large.

All related party transactions are placed before the Audit Committee as also the Board for approval.

The Board of Directors of the company has, on the recommendation of the Audit Committee, adopted a policy to regulate transactions between the company and its related parties, in compliance with the applicable provisions of the Companies Act, 2013, the Rules framed thereunder and the Listing Agreement. This Policy was considered and approved by the Board and has been uploaded on the website of the company.

Enhancing shareholder value

Your company believes that its shareholders are among its most important stakeholders. Accordingly, your company's operations are committed to achieving high levels of operating performance and cost competitiveness, consolidating and building for growth, enhancing the productive asset and resource base and nurturing overall corporate reputation. In the last few years, due to declining revenues and performance, the company had been unable to declare dividends and these issues have also impacted negatively on the share price of the company. However, your company is also committed to creating value for all its stakeholders by ensuring that its corporate actions positively impact the stock price and creation of Shareholder Value. In addition, your company is committed to keep in mind the socio- economic and environmental dimensions and contribute to sustainable growth and development.

Corporate social responsibility

The provisions for corporate social responsibility ("CSR") under the Companies Act, 2013, are not applicable to the company for the current financial year. However, your company has been, over the years, pursuing as part of its corporate philosophy, an unwritten CSR policy voluntarily which goes much beyond mere philanthropic gestures and integrates interest, welfare and aspirations of the community with those of the company itself in an environment of partnership for inclusive development.

Corporate governance

A report on Corporate Governance including the relevant Auditors' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the listing agreement with the stock exchanges is annexed. Management's Discussion and Analysis is also annexed.

Particulars of loans, guarantees & investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in note no.24 and 13 of the Notes forming part of the standalone financial statements of the company.

Subsidiary companies

The statement pursuant to Section 129 of the Companies Act, 2013 in respect of subsidiaries is attached (Annexure-1). The consolidated financial statements duly audited are presented as part of this report in accordance with the prescribed accounting standards and the Listing Agreement with the Stock Exchanges, wherever applicable. The Ministry of Corporate Affairs has granted general exemption from attaching the Balance Sheet, State of Profit and Loss and other documents of the subsidiary companies with the Balance Sheet of the company. The Board of Directors of the company has by a resolution given consent for not attaching the Balance Sheet of the subsidiaries concerned. A statement containing brief financial details of the company's subsidiaries for the financial year ended 31 March 2015 is included in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any member of the company seeking such information at any point of time and are also available for inspection by any member of the company at the registered office of the company. The company shall furnish a copy of annual accounts of subsidiaries to any member on demand.

Consolidated financial statements

The consolidated financial statements of the company prepared in accordance with the prescribed Accounting Standards form part of this Annual Report.

Fixed deposits

The company has not accepted any deposits from the public, and as such, there are no outstanding deposits in terms of the Companies (Acceptance of Deposits) Rules, 2014.

Particulars of employees

There are no employees falling within the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 [corresponding provisions - section 134(3)(q) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014] as amended and applicable to your company.

Employee stock option scheme

As required by clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the particulars of the stock option schemes are furnished as annexure to this report (Annexure-2).

Extract of annual return

The details forming part of the extract of the Annual Return in form MGT-9 has been given in the annexure appended hereto and forms part of this report (Annexure-3).

Auditors' Report

There are no qualifications, reservations, or adverse remarks or disclaimers in the Auditors' Report. Observations made in the Auditors' Report are self-explanatory and therefore do not call for any further comments under Section 134(1) of the Companies Act, 2013.

Auditors Statutory Auditor

The company's joint statutory auditors, M/s Srikanth & Shanthi Associates [Firm Registration No.004006S], Chartered Accountants and M/s TN Rajendran & Co. [Firm Registration No.005080S], Chartered Accountants, hold office as auditors of the company till the conclusion of the ensuing Annual General Meeting, and being eligible, offer themselves for reappointment. They have confirmed their eligibility in terms of Section 141 of the Companies Act, 2013 and the rules framed thereunder for reappointment as Auditors of the Company. The Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India as required under the provisions of revised Clause 49 of the Listing Agreement with the Stock Exchanges. Pursuant to the provisions of section 139 of the companies act, 2013, the auditors are proposed to be reappointed for a term of two years, subject to ratification by the members at every annual general meeting.

Internal Auditor

Mr R Balasubramanian (FCA-220677), Chartered Accountants, perform the duties of internal auditors of the company and their report is reviewed by the audit committee from time to time.

Secretarial Auditor

Pursuant to the provisions of Sections 204 of the Companies Act, 2013 and the rules framed thereunder, the company has appointed M/s M Damodaran & Associates (CoP-5081 / FCS-5837), Practicing Company Secretaries, to undertake the Secretarial Audit of the company. The Secretarial Auditors' Report, in the prescribed format, for the fifteen months period ended 31 March 2015 is annexed to this Directors' Report and forms part of the Annual Report (Annexure-4).

Human resources development

Your company recognises the importance of human resources and has created a performance driven environment where innovation is encouraged, performance is recognised and employees are motivated to realise their potential. Your company reinforced the best HR practices to attract, develop and retain talented employees. Your company has framed a strong, structured, and systematic recognition programs, which motivates the employees to excel.

Your company fosters a culture of open communication that empowers employees to articulate their thoughts and feelings freely, exchange ideas and contribute to organisational growth. Regular HR connect sessions helps the company understand the pulse on the ground and take necessary steps to keep the workforce engaged and motivated. A number of initiatives have been taken up that serve as effective platform for employees to connect and interact and share their goals and aspirations. Employees also receive feedback on technical, behavioral, other professional and personal areas on a regular basis.

Disclosure as required under section 22 of Sexual harassment of women at workplace (prevention, prohibition and redressal) Act, 2013 Your company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee ("ICC") has been set up to redress the complaints received regarding sexual harassment. All employees are covered under this policy.

Listing with stock exchanges

Your company's equity shares are listed on BSE [532408] and NSE [MEGASOFT]. Necessary stock exchange regulations are complied with from time to time. Applicable listing fee for the year 2015-16 has already been paid to the respective stock exchanges.

During the year, your company's equity shares have been delisted from the Madras Stock Exchange (MSE) on a voluntarily basis in terms of regulations 6 and 7 of the SEBI (Delisting of Equity Shares) Regulations, 2009, and due to proposed closure of the regional stock exchanges.

Acknowledgements

Your directors place on record their appreciation of the customers, bankers, Government of India and of other countries, Registrar and Share Transfer Agent, vendors and technology partners for the support extended. Your directors also wish to place on record their appreciation of the contribution made by employees at all levels without whom the growth of the company is unattainable. Your directors seek and look forward to the same support during future years of growth.

Disclaimer

The Ministry of Corporate Affairs vide its Circular No. 08/2014 dated April 4, 2014 clarified that the financial statements and the documents required to be attached thereto, the Auditor's and Boards' Report in respect of the financial year under reference (financial year commencing on or before 1 April 2014) shall continue to be governed by the relevant provisions of the Companies Act, 1956, schedules and rules made thereunder. Accordingly, whilst the financial statements and the Auditor's Report as aforesaid are prepared as per the requirements of the Companies Act, 1956, the company, as per its commitment to transparency and good governance, has to the extent possible provided the information in the Board's Report and the Corporate Governance Report as per the Companies Act, 2013.

For and on behalf of the Board of Directors

GV Kumar D Sudhakar Reddy

Managing Director Executive Director

Place: Hyderabad

Date : 26 May 2015


Dec 31, 2012

The Directors are pleased to present their report on the business and operations of your company for the financial year ended 31 December 2012.

Financial Results (Rs. millions)

Standalone Consolidated 31st December 31st December 2012 2011 2012 2011

Revenues 462 501 1,154 1,504

Total expenditure 409 394 939 1,098

Finance cost 33 28 106 98

Depreciation 34 41 123 129

Operating profit / (loss) (14) 38 (14) 179

Profit before tax 16 61 16 181

Less: Taxes 4 6 4 6

Profit after tax 12 55 12 175

Earnings per share (equity shares, par value Rs. 10 each)

Basic (Rs.) 0.27 1.25 0.26 3.95

Diluted (Rs.) 0.26 1.22 0.25 3.87

Overview

During the financial year ended 31 December 2012, your company recorded consolidated revenues of Rs. 1,154 million as compared to Rs. 1,504 million in the previous financial year. The consolidated profit was Rs.12 million as compared to Rs. 175 million in 2011.

Dividend

Your Directors do not recommend any dividend on equity shares for the year under review.

Outlook

A detailed discussion on the performance of your company, industry structure, threats, opportunities, risks, future outlook and strategy is given separately in the Management Discussion and Analysis (MDA) section, which forms a part of this annual report.

Subsidiary Companies

Pursuant to the provisions of Section 212(8) of the Companies Act, 1956, the Ministry of Corporate Affairs vide its circular dated 8 February 2011 has granted general exemption from attaching the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies with the Balance Sheet of the company, provided such companies publish the audited consolidated financial statements in the annual report. Accordingly, a statement containing brief financial details of your company''s subsidiaries for the financial year ended 31 December 2012 is included in the annual report. The annual accounts of these subsidiaries and the related detailed information will be made available to any member of the company / its subsidiaries seeking such information at any point of time and are also available for inspection by any member of the company / its subsidiaries at the registered office of your company. The annual accounts of the said subsidiaries will also be available for inspection, as above, at the head office / registered office of the respective subsidiary companies. Your company shall furnish a copy of the annual accounts of subsidiaries to any member on demand.

Corporate Governance

In accordance with Clause 49 of the Listing Agreement with the stock exchanges, a separate report on Corporate Governance and Management Discussion & Analysis together with a certificate from your company''s auditors are provided as part of this annual report.

Disclosure as per the Companies (disclosure of particulars in the Report of Board of Directors) Rules, 1988

In terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, your Directors furnish the required details below:

(a) Conservation of Energy

The nature of your company''s operations is not energy intensive. Your company believes that it forms part of the duty to save energy and also install necessary apparatus which will help conserve energy. Your company''s computer terminals, air conditioning systems, lighting and utilities are modern technology-enabled to facilitate the optimal use of energy and power.

(b) Research and Development (R&D)

Your company is actively engaged in the research and development of software. Your company''s management team performs an end-to-end function by acting as the sounding board and mentors for the R&D team to develop their ideas to facilitate market launch. The teams will develop a unique approach and strengthen our positioning through tools, frameworks and methodologies to provide value-added services to clients.

(c) Technology Absorption

Your company believes that in addition to progressive thought, it is imperative to invest in research and development to ascertain future exposure and prepare for challenges. In its Endeavour to obtain and deliver the best, your company entered into alliances with major global players in the industry to harness and tap the latest and the best of technology in its field, upgrade itself in line with latest technology globally and deploy / absorb technology wherever feasible, relevant and appropriate. Your company also attached tremendous importance to indigenous development and technology up gradation through its extensive Research and Development operations. The benefits derived from these processes are phenomenal and improved the quality of your company''s world-class services.

(d) Foreign Exchange Earnings and Outgo

The details of foreign exchange earnings and outgo are given in note no. 28 & 27 - Notes to financial statements, forming part of the Balance Sheet and Profit & Loss Account of your company.

Particulars of Employees

There are no employees falling within the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended.

Fixed Deposits

Your company has not accepted any fixed deposits and as such no amount of principal or interest was outstanding as on the date of the Balance Sheet.

Explanation to qualification by Auditors in their Report

The auditors of your company have mentioned about the delays in remittances of statutory dues in their annexure to the auditors report at clause 9(a). Your company faced cash flow constraints during the year due to loss of one of the major customers in the last quarter of 2011. This resulted in delayed statutory payments. However, your company has remitted all the statutory payments due as on year end and does not have any pending dues on this account. To improve the cash flows, your company initiated and implemented several economic measures to reduce the gap.

Directors

Mr Anil Kumar Sood and Mr D Sudhakar Reddy, directors of your company, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

Mr S Ravindra Babu and Mr P Mukunda Reddy resigned during the year. Your Board of Directors place on record their appreciation for the services rendered by them during their tenure as directors of your company.

Human Resources Development

Your company recognises the importance of human resources as it represents the backbone of corporate success. Your company believes in nurturing human resources. Its focus is to enhance employee professional value and create a win-win for both. Your company reinforced the best HR practices to recruit and retain talented employees. Your company is confident of reaping the best from its talent pool and sharing benefits with employees on an equitable basis.

Auditors

The joint statutory auditors, M/s Srikanth & Shanthi Associates and M/s TN Rajendran & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office, if re-appointed.

Directors Responsibility Statement

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

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

(ii) 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 as at the end of the financial year and of the profit of the company for the year;

(iii) 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; and

(iv) the directors had prepared the annual accounts on a "going concern basis".

Employee Stock Option Schemes

As required by Clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the particulars of the stock option schemes are furnished as annexure to this report.

Acknowledgements

Your directors place on record their appreciation of the customers, bankers, Government of India and of other countries, Registrar and Share Transfer Agent, vendors and technology partners for the support extended. Your directors also wish to place on record their appreciation of the contribution made by employees at all levels without whom the growth of the company is unattainable. Your directors seek and look forward to the same support during future years of growth.

For and on behalf of the Board of Directors

Hyderabad G V Kumar D Sudhakar Reddy

23 February 2013 Managing Director Executive Director


Dec 31, 2010

The Directors are pleased to present their report on the business and operations of your company for the financial year ended 31 December 2010.

Financial Results

Rs. million

Standalone Consolidated

for the year ended 31 December 2010 2009 2010 2009

Revenues 624 887 1679 3030

Total Expenditure 383 460 1145 2644

Finance Cost 70 134 151 228

Depreciation 57 143 143 243

Operating Profit / (Loss) 114 150 240 (85)

Profit / (Loss) before tax 50 (5) 214 (250)

Less: Taxes (3) (29) (3) (29)

Profit / (Loss) after tax 53 24 217 (221) Earnings per share (equity shares, par value Rs. 10 each)

Basic (Rs.) 1.20 0.55 4.90 (4.99)

Diluted (Rs.) 1.20 0.54 4.90 (4.89)

Overview

During the financial year ended 31 December 2010, even as your company recorded consolidated revenues of Rs. 1679 million compared to Rs. 3030 million in the previous financial year, net profit was Rs. 217 million compared to a net loss of Rs. 221 million in 2009. The turnaround was achieved partly through the sale of a business, enhanced focus on core business areas and a decline in interest outflow.

Dividend

Your Directors do not consider it prudent to recommend any dividend on equity shares for the year under review. Conservation of cash at this juncture and corresponding reinvestment in the companys business will translate into stronger returns over the foreseeable future.

Outlook

A detailed discussion on the performance of the company, industry structure, threats, opportunities, risks, future outlook and strategy has been provided separately in the Management Discussion and Analysis (MDA) section, which forms a part of this Annual Report.

Disposal Of Property at Hyderabad

Your company felt that the surest way of enhancing corporate value would be from exiting unsynergic assets and the proceeds from this invested either in the companys core business or debt liquidation. In this regard, the company obtained the consent of shareholders through a postal ballot process for the sale of the land and building (including furnishings & fittings) at Hyderabad and land at Vishakhapatnam. The result of this ballot was announced on 15 October 2010. In line with this consent, the company sold / disposed the Hyderabad property. As the said property was acquired through the amalgamation of VisualSoft the company, set the loss off to the amalgamation reserve (grouped under general reserve) created in terms of the scheme of amalgamation.

Subsidiary Companies

In accordance with the provisions laid down in Section 212 of the Companies Act, 1956, your company is required to attach the Directors Report, Balance Sheet and Profit and Loss Account of the subsidiary companies to its Balance Sheet. As per the requirements under Section 212(8) of the Companies Act, 1956, your company made necessary application to the Central Government, which was conferred the power to grant exemption from this requirement. In this regard, your company received approval from the Government of India, Ministry of Corporate Affairs, vide their letter no.47/715/ 2010-CL-III dated 9 December 2010, granting exemption from attaching the audited accounts of the subsidiary companies to the Annual Report for the financial year ended 31 December 2010. A statement, as directed by the Ministry, furnishing particulars of the subsidiary companies, forms part of this Annual report. Audited accounts of all the subsidiary companies are available at the registered office of the company for inspection by the members. The company will make these documents available upon request by any member of the company.

Corporate Governance

In accordance with clause 49 of the Listing Agreement with the Stock Exchanges, a separate report on Corporate Governance and Managements Discussion & Analysis, together with a certificate from the companys Auditors, are provided as a part of this Annual Report.

Disclosure as per the companies (Disclosure of particulars in the report of board of directors) Rules, 1988

In terms of Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, your Directors furnish the required details below:

(a) Conservation of Energy:

The nature of your companys operations is not energy-intensive. Your company considers its duty to conserve energy through relevant and modern asset investments like computer terminals, air conditioning systems, lighting and utilities to optimize energy use.

(b) Research and Development (R&D):

Your company is actively engaged in software research and development. The companys management team mentors R&D activity leading to market launch. The R&D team focuses on unique approaches that strengthen positioning with a blend of tools, frameworks and methodologies leading to value-added services.

(c) Technology absorption:

Your company believes that in addition to strategy, it is imperative to invest in business- strengthening research and development. In this regard, your company entered into alliances / tie-ups with major global players to access or deploy cutting-edge technologies wherever appropriate. Your company also invested in captive technology development through its extensive Research and Development, strengthening service quality.

(d) Foreign Exchange Earnings and Outgo:

The details of foreign exchange earnings (Rs. 623 million) and outgo (Rs. 79 million) are given in note no.10 & 9 of Schedule 17 - Notes to Accounts, forming a part of the Balance Sheet and Profit & Loss Account of your company.

Particulars of Employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the Directors Report. Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the company.

Fixed Deposits

Your company has not accepted any fixed deposits and as such no amount of principal or interest was outstanding as on the date of the Balance Sheet.

Explanation to observation by auditors in their report

In respect of the auditors observation on delays in repayment of dues to a bank in their annexure to the auditors report at clause 11, your directors wish to state that, the companys cash flow constraints during the year resulted in delayed repayments to the bank. However, the company has no overdue as of date. Directors

Mr S Ravindra Babu and Mr Anil Kumar Sood, Directors of the company, retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.

Mr G V Kumar is being reappointed as the Managing Director for a further period of five years with effect from 1 April 2011, subject to the approval of the members at the ensuing Annual General Meeting.

Mr D Sudhakar Reddy is being reappointed as an Executive Director for a further period of five years with effect from 1 April 2011, subject to the approval of the members at the ensuing Annual General Meeting.

Human Resources Development

Your company recognised the importance of human resources as a catalyst of success. Your company reinforced HR practices to recruit and retain talent leading to organisational value.

Auditors

The joint statutory auditors, M/s Srikanth & Shanthi Associates and M/s TN Rajendran & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and confirmed their eligibility and willingness to accept office, if re- appointed.

Directors responsibility statement

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

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

(ii) 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 as at the end of the financial year and of the profit of the company for the year;

(iii) 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; and

(iv) the directors had prepared the annual accounts on a "going concern basis".

Employee Stock Option Schemes

As required by clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the particulars of the stock options schemes are furnished as annexure to this report.

Acknowledgements

Your directors place on record their appreciation of the customers, bankers, Government of India and of other countries, Registrar and Share Transfer Agent, vendors and Technology Partners for the support extended. Your directors also wish to place on record their appreciation of the contribution made by employees at all levels without whom the growth of the company is unattainable. Your directors seek and look forward to the same support during the future years of growth.

For and on behalf of the Board of Directors

Hyderabad GV Kumar S Ravindra Babu

28 February 2011 Managing Director Chairman


Dec 31, 2009

The Directors are pleased to present their report on the business and operations of your company for the financial year ended 31 December 2009.

Financial Results

Rs million Standalone Consolidated For the year ended 31 December 2009 2008 2009 2008

Revenues 887 1238 3030 3262

Total Expenditure 460 1108 2644 2772

Finance Cost 134 84 228 219

Depreciation 143 164 243 260

Operating Profit / (Loss) 150 (118) (85) 11

Profit / (Loss) before tax (5) 178 (250) 368

Less: Taxes (29) 42 (29) 42

Profit / (Loss) after tax 24 136 (221) 326 Earnings per share (equity shares, par value Rs 10 each)

Basic (Rs) 0.55 3.08 (4.99) 7.36

Diluted (Rs) 0.54 3.10 (4.89) 7.33

Overview

During the financial year ended 31 December 2009, your company recorded consolidated revenues of Rs 3030 million compared to Rs 3262 million in the previous financial year. The Profit / (Loss) before tax at (Rs 250) million was lower compared with Rs 368 million in 2008.

Dividend

Your Directors do not recommend any dividend on equity shares for the year under review as the companys consolidated financials resulted in a loss.

FCCB

Your company issued 8,000 1.5% Foreign Currency Convertible Bonds ("FCCB") of US$ 1,000 each on a preferential basis on 16 September 2005 in terms of the approval of the shareholders of the Company at the Extra-ordinary General Meeting held on 26 August 2005 aggregating US$ 8 million. Following the conversion of FCCBs aggregating US$ 6 million into equity shares during earlier year, the balance FCCB aggregating US$ 2 million payable to the FCCB holders on redemption was negotiated and settled during the year.

Divestment of IT Services (BlueAlly) division

The Board of Directors of your company at its meeting on 19 August 2009 approved the divestment of the companys IT Services Division to an overseas company and in this regard the approval of the shareholders was sought and obtained through a postal ballot process. Your company disposed the IT Services division with effect from 1 October 2009 following the approval of shareholders.

Subsequent to the divestment of the IT Services division, the Board of Directors at a meeting held on 24 October 2009 approved the creation of a Business Reconstruction Reserve Account of Rs 1250 Million by appropriating Rs 450 million from the Securities Premium Account and Rs 800 million from General Reserve. The creation of the reserve account was to provide for diminution in the value of investments, impairment in the value of assets (including goodwill) and offsetting a loss from the sale of investments.

The Scheme of Arrangement was approved by the equity shareholders of the company at the Extraordinary General Meeting (Court Convened) of the company held on 4 January 2010. Pursuant to the petition filed by the company, the High Court of Judicature at Madras sanctioned the Scheme on 30 March 2010. The Appointed Date under the Scheme was 31 December 2008 and became effective on the date of filing the Court Order with the Registrar of Companies, Tamilnadu on 30 March 2010. The scheme has been duly given effect to in the accounts and the Board of Directors of the Company at its meeting held on 31 March 2010 has approved the utilization of the reserve to the extent of Rs 1246 Million for the year ended 31 December 2009.

Outlook

A detailed discussion on the performance of the company, industry structure, threats, opportunities, risks, future outlook and strategy has been given separately in the Management Discussion and Analysis (MDA) section, which forms a part of this Annual Report.

Subsidiary Companies

In accordance with the provisions laid down in Section 212 of the Companies Act, 1956 your company is required to attach the Directors Report, Balance Sheet and Profit and Loss Account of the subsidiary companies to its Balance Sheet. As per the requirements under Section 212(8) of the Companies Act, 1956, your company had made the necessary application to the Central Government which has been conferred with the power to grant exemption from the aforesaid requirement. In this regard, your company has received an approval from the Government of India, Ministry of Corporate Affairs, vide their letter no.47/722/2009-CL- III dated 7 January 2010 granting an exemption from attaching the audited accounts of the subsidiary companies to this Annual Report for the financial year ended 31 December 2009. A statement, as directed by the Ministry, furnishing particulars of the subsidiary companies, forms part of this Annual report. Audited Accounts of all the subsidiary companies are available at the registered office of the company for inspection by members. The company will make available these documents upon request by any member of the company.

Corporate Governance

In accordance with clause 49 of the Listing Agreement with the Stock Exchanges, a separate report on Corporate Governance and Management Discussion & Analysis together with a certificate from the companys Auditors are provided as part of this Annual Report.

Disclosure as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988

In terms of Section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, your Directors furnish the required details below:

(a) Conservation of Energy: The nature of your companys operations requires a very low level of energy consumption.

(b) Research and Development (R&D): Your company is actively engaged in the research and development of Software.

(c) Technology Absorption: Your company has not imported any technology during the year.

(d) Foreign Exchange Earnings and Outgo: The details of foreign exchange earnings and outgo are given in note no.11 & 10 of Schedule 17 - Notes to Accounts, forming part of the Balance Sheet and Profit & Loss Account of your company.

Particulars of Employees

We present the abridged accounts under Section 219 of the Companies Act, 1956. Pursuant to the Rules and Forms read with Section 219 of the Companies Act, 1956, the particulars of employees as required by Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employee) Rules, 1975) have not been provided in this report. These details are set out in the Annexure to the Directors Report, forming part of the complete version of Annual Report and are available for inspection at the Registered Office of the Company and upon written request from a shareholder, we will arrange to mail these details.

Fixed Deposits

Your company has not accepted any fixed deposits and as such no amount of principal or interest was outstanding as on the date of the Balance Sheet.

Explanation to observation by auditors in their report

In respect of the auditors observation on delays in repayment of dues to a bank in their annexure to the auditors report at clause

11, your directors wish to state that, during the year your company faced cash flow constraints due to the adverse global economic scenario which resulted in delayed payments to the bank. However, the company has no overdue as on the date of this report.

Directors

Mr D Sudhakar Reddy and Mr P Mukunda Reddy, directors of the company, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Human Resources Development

Your company recognises the importance of human resources as it represents the backbone of corporate success. Your company believes in nurturing human resources. Its focus is to enhance employee professional value and create a win-win for both. Your company reinforced the best HR practices to recruit and retain talented employees. Your company is confident of reaping the best from its talent pool and sharing benefits with employees on an equitable basis.

Auditors

The joint statutory auditors, M/s Srikanth & Shanthi Associates and M/s TN Rajendran & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office, if re-appointed.

Directors responsibility statement

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

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

(ii) the directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at the end of the financial year and of the profit of the company for the year;

(iii) 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; and

(iv) the Directors had prepared the annual accounts on a "going concern basis".

Employee Stock Option Schemes

As required by clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the particulars of the stock options schemes are furnished as annexure to this report.

Acknowledgements

Your directors take this opportunity to thank investors, customers, vendors, banks, regulatory and Government authorities for their sustained support. Your Directors also wish to place on record their appreciation of the contribution made by employees at ail levels.

For and on behalf of the Board of Directors

Chennai GV Kumar S Ravindra Babu

31 March 2010 Managing Director Chairman

 
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