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Directors Report of MphasiS Ltd.

Mar 31, 2016

Dear Shareholders,

The have pleasure in presenting to you the twenty fifth Annual Report of your Company for the year ended 31 March 2016.

FINANCIAL PERFORMANCE

Key aspects of the financial performance of Mphasis are tabulated below:

(Rs. million)

CONSOLIDATED STANDALONE

Particulars Year ended Year ended Year ended Year ended 31 March 2016 31 March 2015 31 March 2016 31 March 2015

Revenues 62,839 59,915 30,890 31,886

Expenses 52,901 50,507 24,379 24,569

Profit before taxation 9,390 9,377 6,090 7,317

Net Profit 6,694 6,746 4,584 5,530

Transfer to General Reserve 458 553 458 553

Note: the figures are rounded off to the nearest integer.

A detailed analysis of performance is available in the section headed Management Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.

OUTLOOK

Disruptive technological innovations are transforming the world around us in unpredictable ways. The emergence of digital business has given way to new business designs by blurring the digital and physical worlds. While technologies such as mobility and cloud have been dominating the imagination of enterprises for the past couple of years, new disruptive trends like Artificial Intelligence (AI) and automation have only now started having a tangible presence. Trends such as the growing use of Internet of Things (IoT) and social media networks are generating considerable amounts of data both structured and unstructured which will prove useful only if deciphered to one''s advantage. Graph theory based algorithms and AI driven business is emerging and will define the future of our business.

While our Customers continue to focus on digitally transforming their organizations, we are committed to providing our Clients with the most innovative solutions to help them succeed in their digital transformation journey. In order to enable our customers to successfully ride this wave of generational shift, we have brought and will continue to offer dedicated centers and several transformational initiatives and industry-specific offerings for our clients.

In the automation space, we launched InfraGraf, a Big Data complex event processing engine which enables our Customers to innovate and make strategic decisions regarding their technology infrastructure. In Artificial Intelligence, we are building solutions for regulatory risk and compliance, incorporating cognitive models and smart data that empower intelligent system behaviours.

To further our commitment towards Digital, Mphasis has established a dedicated Digital Organization to unify the series of offerings under Digital Transformation, Experience, Operations and Engineering that Mphasis has offered since 2014. Our charter is to take digital to our focused vertical (BCM & Insurance) with a very solutions-centric focused approach grounded in bringing digital visions to life. Our commitment to innovative solutions will further be strengthened with establishment of cognitive hubs in select domain areas such as Risk and Compliance.

Mphasis has been established as a unique brand and recognized as the partner of choice in digital transformation. This is an ongoing journey, we must continue to nurture our culture of experimentation to stay ahead.

At Mphasis, we believe in continuous transformation to re-invent ourselves to co-create with our Clients and deliver higher value, thus staying in the path of relevance. In the past twelve months, we had interesting wins in Digital, Regulatory Risk and Compliance and Application Management Services (AMS). These wins were enabled by our intense focus, individual brilliance and hand to hand combat. Next phase of wins would require a concerted strategy and Mphasis will continue to bring a differentiated value proposition to our Clients.

We expect our Direct Business to grow faster than the market, fueled by new generation services. We will see growth coming in areas such as Digital, Risk & Compliance, Automated Infrastructure Management and Robotic automation infused Business Process Management. Protectionism and immigration tightening could cause some turbulence.

Digital Risk is focused on reducing volatility and injecting new generation technology. Mortgage Risk and Compliance areas continues to be subjected to changes in regulatory environment. Cognitive models will bring radical change in this arena and we are committed to working with our Customers in their transformation journey. Interest Rate changes in the US will have a significant bearing on the transaction volume. We are confident of leveraging our brand and staying ahead of the curve.

Hewlett Packard Enterprise (HPE) is an important Customer and with the new MSA with committed volume, we have to focus on generating greater value for HPE. HPE''s spin-merger partnership with CSC for HPES business, presents us with an opportunity to build new relationships. This will be more towards FY18 and beyond. Having experienced decline of business over many years, we expect stability to return in the second half of FY17.

In summary, we look at the future with greater confidence and optimism.

DIVIDEND

Your directors are pleased to recommend a final dividend of Rs.20 per equity share of Rs.10 each for the financial year ended 31 March 2016, subject to your approval at the ensuing Annual General Meeting.

CHANGE IN CONTROL

As a result of the completion of the sale and purchase of shares pursuant to the Share Purchase Agreement executed on 4 April 2016, for sale of shares in the Company by EDS Asia Pacific Holdings, EDS World Corporation (Far East) LLC and EDS World Corporation (Netherlands) LLC ("Outgoing Promoters") to Marble II Pte. Ltd. (the "Current Promoter"), the Current Promoter had acquired the entire stake from the Outgoing Promoters on 1 September 2016, being 127,106,266 (one hundred twenty seven million, one hundred six thousand two hundred and sixty six) Equity Shares, representing 60.47% of the paid up Share Capital ("Change of Control").Consequent to the Change of the Control, the Outgoing Promoters have ceased to (i) hold any shares in the Company, (ii) hold control of the Company, and (iii) be promoters of the Company. In addition, further to the completion of acquisition of shares by the Current Promoter under the open offer ("Open Offer") to the Public Shareholders, as per the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Regulations"), the Current Promoter had acquired 2,178 (Two thousand one hundred seventy eight) Equity Shares, from the Public Shareholders, under the Open Offer.

The shareholding of the Current Promoter, post the acquisition and Open Offer, is 127,108,444 equity shares representing 60.47% of the paid up share capital of the Company.

Further to the above, your Company forms part of Blackstone group of companies.

HPE AGREEMENT

Further to approval of the members under the Listing Regulations, vide the results of the Postal Ballot declared on 23 May 2016, your Company has entered into an Amended and Re-stated Standard Services Agreement with Hewlett Packard Enterprise Co., Palo Alto, USA ("HPE") for availing and/or rendering services to HPE, its subsidiaries, group companies, and associates. The agreement is for an initial term of 5 years which shall automatically renew for 3 consecutive terms of 2 years. The Minimum Revenue Commitment by HPE is $990 Million in 5 years.

ENTERPRISE RISK MANAGEMENT

The Company has an elaborate Enterprise Risk Management (ERM) Programme to proactively identify, assess, mitigate, monitor and reports risks across the enterprise. ERM at Mphasis seek to minimize the adverse impact of the risks on our business objectives through risk assessment and mitigation while providing reassurance to Customers, Shareholders, Employees, etc. The updates on the development and implementation of the ERM Programme are reviewed by the Audit Committee on a quarterly basis. A detailed analysis on the formulation, implementation and monitoring of the Risk Management Plan is available in the section headed Management Discussion and Analysis of Risks and Concerns.

CORPORATE GOVERNANCE

A report on Corporate Governance along with a certificate from the Auditors confirming the compliance for the year ended 31 March 2016 is annexed and forms part of this report.

EMPLOYEES

Mature People Practices are the hallmark of a great organization. In 2010, the Mphasis HR team embarked on a journey committed to establishing mature people practices and systems. As a first step, in this journey, Mphasis was assessed and certified at Level 3 of People Capability Maturity Model (PCMM) in April 2013. However, the need of the hour is to create predictive and optimized people processes. In January 2016, Mphasis was assessed and certified at Level 5 of PCMM. What makes this certification significant is that it covered a total of 22 process areas with workforce practices spanning across various business units in the organization. This is a critical step to ensure integration of people practices and complete alignment to the organizational strategy.

As the focus on Digital continues, building an organization that is agile and customer-centric becomes imperative. This means there is a need for faster decision making such that the customer experiences quick and effective responses in every interaction. One of the ways by which your Company enabled this was through creating a group of Empowered Leaders with decision making authority similar to that of the Executive Committee Leaders. Each empowered leader thus became the owner of the business he works with and is empowered to take decisions that are beneficial to the Client. This was a big step in our transformation to a nimble and client centric organization with a high level of autonomy and ownership.

Even as Mphasis empowers the leaders, the focus is also to enable the workforce with the right skills. Towards this endeavor, the entire training curriculum for the Campus Hires has been revamped. An exclusive engagement plan targeting specific areas of interest, leadership communication, networking and fun at work is being promoted for the fresh talent at Mphasis.

Building and nurturing the architect community has been another important focus area. To be the company of choice, to be perceived as an organization where one can learn, build new capabilities and have an edge over the competition have been the driving forces for this initiative. This has been achieved by providing differentiated learning opportunities through internationally recognized certification along with a host of other benefits. Organization restructuring has been a key component of the transition leading to delayering for better Employee Engagement & Communication.

HR processes were also exposed to the digital disruption. The year 2016 was a technology revolution in the staffing process with job seekers increasingly using digital channels and devices to search for jobs in Mphasis. Along with social recruiting activities, your Company has been successful in taking the Employee Engagement on to a digital platform by showcasing culture, fun at work and commitment to social responsibilities.

Your Company reached more than 500,000 people on Facebook, creating more than 1,000,000 impressions & growing followers by 200%. More than 450,000 organic impressions were created on Twitter and the engagement rate increased by more than 1900%.

Every year at Mphasis, the Company recognizes stellar performance and celebrates the brightest stars across the Company in the Annual Rewards and Recognition Program.

Integrated Leadership Development (ILD) is our indigenous and innovative approach to identifying and grooming top talent. Open to all Middle and Senior Level Managers, the ILD framework focuses on the individual taking charge and displaying key behaviors that are indicative of one''s ''will'' to invest one''s time and effort in becoming part of the top talent at Mphasis. This ''will'' is measured through participation in a variety of opportunities that define leadership behavior. Since its inception in 2013, we have now completed 2 cycles of ILD and a set of 13 leaders are part of talent pool through a rigorous set of assessments.

COMMUNITY OUTREACH

CORPORATE SOCIAL RESPONSIBILITY

Mphasis has always been committed to meaningful Corporate Social Responsibility (CSR) and it is closely aligned with the organization''s mission of being at the confluence of People, Profit and Planet. Our CSR activities are being carried out through Mphasis F1 Foundation. The Company has a CSR Policy as required under the provisions of law and the same is hosted on the website of the Company (www.mphasis.com) at http://www.mphasis.com/CorporateGovernance.html. The CSR Committee of the Board approves the CSR Budget and monitors the implementation of the CSR Policy.

At Mphasis, we understand the need to impact our societies beyond the world of business. As front-runners in technology related-solutions, our efforts in Corporate Social Responsibility hone on these strengths- bringing ''disruptive'' technologies into the realms of Education, Livelihood and Inclusion and covered the following:

EDUCATION

Our goal is to create a world where children want to stay in school(s) that improve their learning outcomes and equip them for future that is poverty-free. Using the latest technologies, our partners develop tailor-made tools to cater to the specific needs on the ground. Headstreams- the Arivu -Disha Program and Nasscom Social Innovation Awards for Education are classic programs which the Company has been supporting under the focus for Education.

LIVELIHOOD

Sustainable livelihood is the axle on which education, poverty alleviation and empowerment rest. Our vision is to capture India''s demographic dividend by equipping young men and women with skills that match the demands of local markets.

Through digital empowerment and vocational training, we strengthen local communities with technological literacy and specific skills that enable youth to improve their lifetime earnings potential. By scaling global technologies to the local level, we tailor-make our efforts to meet specific needs on the ground. Mphasis - Nudge Gurukul and wifi Villages are few programmes of Mphasis under the focus for Livelihood.

INCLUSION

We are committed to breaking barriers of exclusion and marginalization through education, empowerment and awareness. Through our partnerships, we work tirelessly to ensure that persons with disabilities, marginalized clusters and women have every opportunity to learn, grow and advance in their careers. In parallel, we sensitize communities on the need for accessibility and universal design- creating an inclusive, barrier-free culture. As pioneers in the space of disability inclusion, our efforts galvanize the strengths of technology and universal design to ensure accessibility across spaces of academia, work and travel. Make India Accessible with The National Centre for Promotion of Employment for Disabled People (NCPEDP), Habitat for Humanity and Kickstart Cabs are support by the Company under the focus for Inclusion.

During the year, the Company spent Rs.123.7 Million as against mandated spend of Rs.138.60 Million.

The Company could not expend the mandated CSR spent as the Company focused on on boarding credible implementation partners who had FCRA registration and co creating programs that had the potential to create long lasting social impact in our chosen focus areas. Our CSR spend has increased from Rs.21.8 Million during FY14-15 to Rs.123.7 Million in FY15-16.

PREVENTION OF SEXUAL HARASSMENT

Your Company''s Code of Business Conduct (COBC) provides broad directions as well as specific guidelines for all business transactions. The emphasis is on human rights, prevention of fraudulent and corrupt practices, avoidance of conflict of interest, prevention of Sexual Harassment and unyielding integrity at all times. Mphasis is committed to the provision of a workplace, free of Sexual Harassment ("SH") and to provide a redressal mechanism for all complaints of SH without fear or threat of reprisals in any form or manner whatsoever. The work place in context of SH is not restricted to the office but includes extended work areas such as Client''s place, work related travel, cafeterias and Company sponsored events, to name a few.

In compliance with the Sexual Harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has established Internal Complaints Committees at all its locations. During FY 2015-16, 45 complaints were received, out of which 39 complaints were closed in terms of the aforesaid Act, as on 31 March 2016. Complaints outstanding have since been investigated and disposed within the prescribed time limits.

ESTABLISHMENT OF VIGIL MECHANISM

Mphasis Code of Conduct requires directors, officers and employees to observe high standards of business and personal ethics in conduct of their duties and responsibilities. As employees and representatives of the Company, they must practice honesty and integrity in fulfilling their responsibilities and comply with all applicable laws and regulations. The Company has a Whistleblower Policy to enable persons who observe unethical practices (whether or not a violation of law), to approach the Whistleblower Custodian without revealing their identity, if they choose to do so. This Policy governs reporting and investigation of allegations that are breach of Code of Business Conduct. This Policy covers all Mphasis group companies and its affiliates and further extends to all Mphasis suppliers and contractors engaged by the Company.

There are various channels to report actual or suspected fraud or violation of the Company''s Code of Conduct or Ethics policy i.e. through Email to the Whistle Blower Committee at whistleblower@mphasis.com, written complaint can be dropped into the Whistle blower drop box at the respective Company''s location and through telephone where a complaint can be left at the Whistle blower Hotline. The Chairman of the Audit Committee is the Ombudsperson under Whistle blower Policy. A complaint can be reported to the Ombudsperson (Ombudsperson@ mphasis.com) where the Complainant feels that the complaint has not been addressed or actioned in a timely and appropriate manner or if the complaint is against any member of the Whistle blower Committee or the Executive Council.

The Whistle blower policy is published on the Mphasis website making it accessible to all. Mphasis will keep the whistle blower''s identity confidential and prohibits retaliation against a whistle blower with the intent or effect of adversely affecting the terms or conditions of employment (including but not limited to, threats of physical harm, loss of job, punitive work assignments, or impact on salary or wages).

DIRECTORS & KEY MANAGERIAL PERSONNEL

Further to resignation of Dr. Friedrich Froeschl, the Board of Directors of the Company unanimously elected Mr. Davinder Singh Brar as the Chairman of the Board effective 11 December 2015.

Pursuant to provisions of Section 149 of the Companies Act, subject to approval of the shareholders, Ms. Jan Kathleen Hier was appointed as an Independent Director (Additional Director) on the Board for a period of 5 years effective from 11 December 2015. The Company has received declarations from Ms. Jan Kathleen Hier confirming that she meets the criterion of independence as per law and have consented for being appointed as an Independent Director. Pursuant to Section 161 of the Companies Act, 2013, Ms. Jan Kathleen Hier holds office until the date of ensuing Annual General Meeting. However the Company has received notice under Section 160 of the Companies Act, 2013, from a member along with requisite deposit proposing her candidature to the office of the Directorship. The Board of directors recommends her appointment as an Independent Director to the members of the Company.

Further to Change of Control, Mr. Amit Dixit, Mr. Amit Dalmia, Mr. David Lawrence Johnson, Mr. Paul James Upchurch and Mr. Dario Zamarian were appointed as the Non-Executive Additional Directors of the Company by the Board of Directors vide their resolution dated 1 September 2016. Pursuant to Section 161 of the Companies Act, 2013, the additional directors hold office until the date of the ensuing Annual General Meeting. However, the Company has received notices under Section 160 of the Companies Act, 2013, from a member along with requisite deposits proposing their candidatures to the office of directorship. Accordingly, necessary resolutions in relation to the appointment of the above directors are placed before the members at the ensuing Annual General Meeting and the Board recommends their appointment as Directors of the Company.

During the year, Dr. Friedrich Froeschl, Independent Director and Mr. Shankar Maitra, Director, resigned from the Board of the Company effective 26 October 2015. Dr. Froeschl was the Chairman of the Board. Further to Change of Control, Mr. James Mark Merritt, Mr. Lakshmikanth K Ananth, Mr. Stefan Antonio Lutz, Ms. Mary Teresa Hassett and Mr. Jeff Thomas Ricci resigned as the directors of the Company effective the closing hours of 1 September 2016. The Board places on record its appreciation for the services rendered by the resigned directors during their tenure.

As all the Non-Executive (Non-Independent) directors are additional directors there are no director liable to retire by rotation under Section 152 of the Companies Act, 2013. The additional directors are being proposed for the appointment as directors under Section 160 of the Companies Act, 2013 in the ensuing Annual General Meeting.

The profiles of the present directors including the directors seeking appointment at the ensuing Annual General Meeting are provided in the Annual Report.

STATUTORY AUDITORS

S R Batliboi & Associates LLP (registration No.101049W), Chartered Accountants, were appointed as the Statutory Auditors of the Company under Section 139 of the Companies Act, 2013, for a term of 3 years, from the conclusion of Twenty Fourth Annual General Meeting till the conclusion of Twenty Seventh Annual General Meeting to be held on 2018 subject to annual ratification.

The Company has received a certificate from the Statutory Auditors to the effect that the ratification of appointment, if made, would be in accordance with limits specified under the Companies Act, 2013. As required under SEBI Regulations, the Auditors have confirmed that they hold valid certificate issued by the peer Review Board of the Institute of Chartered Accountants of India.

A resolution proposing ratification of their appointment, from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting of the Company, at a remuneration to be fixed by the Board of Directors and billed progressively, is submitted at the Annual General Meeting for approval of the members.

As regards the observations made by the Statutory Auditors regarding the internal Financial Control with respect to Intercompany Revenue/ Cost allocation, your directors would like to clarify that the Management has taken necessary steps to strengthen the Internal Financial Controls with respect to transactions relating to intercompany revenue / cost allocation process.

SECRETARIAL AUDITOR

The Board had in its meeting held on 4 February 2016 approved the appointment of Mr. S P Nagarajan, Practicing Company Secretary, as the Secretarial Auditor of the Company for the financial year ended 31 March 2016. As required under the provisions of Section 204 of the Companies Act, 2013, the Secretarial Audit for Financial Year 2016 has been concluded and the Secretarial Audit Report in Form No. MR-3 is annexed and forms part of the Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Information as per Section 134(5) of the Companies Act, 2013, is annexed and forms part of the Report.

OTHER DISCLOSURES SUBSIDIARIES

As on 31 March 2016, your Company has subsidiaries in Australia, Belgium, Canada, France, Germany, India, Ireland, Mauritius, the Netherlands, People''s Republic of China, Republic of Indonesia, Philippines, Poland, Singapore, the United Kingdom and the United States of America.

In accordance with section 129 (3) of the Companies Act, 2013 the Consolidated Financial Statements are attached to the Annual Report. Further, a statement containing salient features of the financial statements of subsidiaries in the prescribed Form AOC-1 is annexed to this Report. The statements provides the performance and financial position of each of the subsidiaries.

The latest audited accounts of the subsidiary Companies are available for inspection of the members at the Registered Office and is also being uploaded on the website of the Company, www.mphasis.com. A copy of the same shall be sent to the members upon request.

EMPLOYEES STOCK OPTION PLANS AND RESTRICTED STOCK UNIT PLANS

Your Company''s Employee Stock Option Plans (ESOPs) are administered through the Mphasis Employees Equity Reward Trust (earlier BFL Employees Equity Reward Trust) and the Restricted Stock Unit Plans (RSUs) and Mphasis Employees Stock Option Plan - 2012 (ESOP 2012 Plan) are administered through Mphasis Employees Benefit Trust.

The shareholders at its Annual General Meeting held on 9 September 2015 approved the Restricted Stock Units Plan 2015 (RSU 2015) with the underlying shares not exceeding 25,00,000 shares. During the year, the Company obtained in-principle approval for the Restricted Stock

Units Plan 2015 (RSU 2015) from BSE Limited on 6 October 2015 and the National Stock Exchange of India Limited on 27 October 2015. Further to this, the ESOP Compensation Committee granted 440,550 stock units to eligible employees on 12 November 2015.

Your Company currently has three stock option plans in operation, namely, Mphasis Employees Stock Option Plan - 1998 (ESOP 1998 Plan) (Version I and II), Mphasis Employees Stock Option Plan - 2004(ESOP 2004) and Mphasis Employees Stock Option Plan - 2012 (ESOP 2012), in addition to, Mphasis Restricted Stock Unit Plan - 2010 (RSU 2010), Mphasis Restricted Stock Unit Plan - 2014 (RSU 2014) and Mphasis Restricted Stock Unit Plan - 2015 (RSU 2015).

During the year, 6,200 shares were transferred under ESOP 1998 Plan II and 89,850 shares were transferred under ESOP 2012 against exercise of options by the employees. Further, pursuant to exercise applications made by the employees, the Company has transferred 4,075 equity shares towards exercise of RSUs under RSU 2010 Plan and 40,094 equity shares under RSU 2014.

The information to be disclosed as per Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014, for the year ended 31 March 2016 is annexed and is also uploaded on the website of the Company at www.mphasis.com.

FORMULATION OF EMPLOYEE STOCK OPTION PLAN 2016

The Board of Directors of the Company, in its meeting held on 27 September 2016, has proposed to institute Mphasis Employee Stock Option Plan 2016 (ESOP 2016) with the underlying shares not exceeding 8.4 million equity shares, with a view to achieve management participation in the ownership and growth of the Company and to encourage value creation and value sharing with the Non-Executive Directors (other than the Independent Directors) and Employees.

The ESOP 2016 are proposed to be granted upto 20% discount to the Market Price or such other price as may be determined by the Board/ ESOP Compensation Committee. The ESOP 2016 Plan would confirm to the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and applicable provisions of the Companies Act, 2013. In line with the provisions of the law, necessary resolutions in relation to the ESOP 2016 are placed before the members for their approval.

EXTENSION OF TIME FOR HOLDING THE 25th ANNUAL GENERAL MEETING

Considering the Change of Control, the Company had made application to the Registrar of Companies, Karnataka, under Section 96 of the Companies Act, 2013, seeking extension of time for holding the Twenty Fifth Annual General Meeting till 31 December 2016. The Registrar of Companies, Karnataka, has vide its order dated 28 July 2016, approved extension of time for holding the Annual General Meeting till 31 December 2016. Accordingly, the Company has convened the 25th Annual General Meeting, on 4 November 2016, post completion of Change of Control processes.

DIRECTORS'' INTEREST AND RELATED PARTY DISCLOSURES

No director was interested in any contracts or arrangements existing during or at the end of the year that was significant in relation to the business of the Company. No director holds any shares or stock option in the Company as on 31 March 2016 except Mr. Balu Ganesh Ayyar, Chief Executive Officer, who holds 26,764 shares and Restricted Stock Units and Stock Options aggregating to 128,120 units. None of the directors had any other interest in the share capital of the Company as at 31 March 2016. The particulars of the contract or arrangements with the Related Parties in form AOC-2 is annexed and forms part of this report.

SHARE CAPITAL

The Issued Share Capital of the Company as on 31 March 2016 stood at Rs.2,102 million and Reserves and Surplus stood at Rs.60,829 million (consolidated basis) and Rs.43,173 million (standalone basis) respectively.

PARTICULARS OF EMPLOYEES'' REMUNERATION

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended by Companies (Appointment and Remuneration of Managerial Personnel) Amendments Rules, 2016, is given in an annexure and forms part of this report. However, in terms of Section 136(1) of the Companies Act, 2013, the Report is being sent to the Members excluding the aforesaid Annexure and shall be available for inspection of the members, till the date of the Annual General Meeting, at the registered office of the Company during working hours. Any Member interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Company.

In terms of proviso to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the particulars of the employees posted and working in a country outside India is not circulated to the members, but the same shall be filed with the Registrar of Companies while filing the Financial Statements and Board''s Report.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return as at 31 March 2016 in Form MGT-9 is annexed and forms part of the Report.

PARTICULARS OF LOANS, GUARANTEE OR INVESTMENTS

The particulars of Loans, Guarantees and Investments under Section 186 of the Companies Act, 2013 are disclosed in the financial statements of the Company.

DEPOSITS

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

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

A. CONSERVATION OF ENERGY:

Your Company''s operations involve low energy consumption. Mphasis is committed to conserving energy and efficient usage of energy. The key facilities have been awarded 5 star, 4 star or 3 star rating by Bureau of Energy Efficiency, Government of India (BEE) in the last 5 years. The rating is nationally accepted industry benchmark and Mphasis in India is certified by BEE.

The Company has installed lighting energy savers and LED light fixtures, occupancy sensors, enthalpy system, automatic operation of AC system at data center to minimize power consumption and solar inverters at certain facilities to promote sustainable energy usage. The carbon foot prints are monitored on a monthly basis and reported to Carbon Disclosure Project (CDP), an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. One of the Company''s facility at Bengaluru has been certified LEED (Leadership in Energy and Environmental Design) Gold by United Sates Green Building Council (USGBC).

The Company has launched an energy consumption monitoring tool to monitor the energy consumption and the carbon foot prints at each location. The data collected by the tool helps the management in monitoring and optimize the energy consumption at the locations. Your Company is one of the few IT companies in India who have implemented captive renewable energy generation in multi-locations as part of its sustainability initiatives.

B. TECHNOLOGY ABSORPTION:

Particulars relating to technology absorption are not applicable.

ACKNOWLEDGEMENT

Your directors acknowledge with thanks the continued support and valuable co-operation extended by the business constituents, investors, vendors, bankers and shareholders of the Company. The directors place on record their appreciation for the support from the Software Technology Parks of India, the Department of Electronics, the Government of India, Government of Karnataka, Maharashtra, Tamil Nadu, Reserve Bank of India, other governmental agencies, Trade Associations and NASSCOM.

Your directors would like to place on record their appreciation for the contribution made by the employees of the Company and its subsidiaries and associates.

For and on behalf of the Board of Directors

New York Davinder Singh Brar

27 September 2016 Chairman


Mar 31, 2015

Dear Members,

We have pleasure in presenting to you the twenty fourth Annual Report of your Company for the year ended 31 March 2015.

FINANCIAL PERFORMANCE

Key aspects of the financial performance of Mphasis are tabulated below:

(Rs. million)

CONSOLIDATED STANDALONE

Particulars Year ended Period Year ended Period ended ended 31 March 31 March 31 March 31 March 2015 2014* 2015 2014*

Revenues 59,915 26,460 31,886 13,752

Profit before taxation 9,377 4,218 7,317 3,074

Net Profit 6,746 3,027 5,530 2,231

Provision for Proposed Dividend 3,362 1,471 3,362 1,471

Tax on Dividend 685 250 685 250

Transfer to General Reserve 553 223 553 223

Note: Rounded off to the nearest integer.

* Represents five months period ended 31 March 2014. Accordingly, the previous year's figures are not comparable.

A detailed analysis of performance is available in the section headed Management Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.

OUTLOOK

Your Company's Customers and the market place are investing in becoming a Digital Enterprise. This trend is very potent and visible. Your Company has been transforming and investing to bring greater value to our clients in this space. The Service Excellence and Customer Centricity in traditional IT and BPO services has laid a good foundation for the Company to be invited for the Digital space. In FY 2015, we had some good wins in the Digital area.

Your Company has always been invested in working with clients to work with them in enabling customer facing channels, systems and processes. This expertise has enabled the Company to launch Digital Customer Experience Management Solution. Omni Channel Interaction, Persona based Digital Marketing, Closed Loop Experience Management are some of the aspects of this solution. These are examples of the strides that your Company is making in Digital area. Road ahead for all IT Services Companies is one of intense transformation while retaining some core values of Service Excellence and Customer Centricity. There seem to be gold rush towards Digital, such a rush does create lot of noise in the system. Your Company's role would be to bring real value to the clients, helping them generate good Returns on their Investment (ROI). This would require sustained commitment, deep expertise and good blend of domain expertise, specialized partnership, technology and process expertise.

Your Company's clients, especially in BFSI industry are investing heavily in Governance, Risk and Compliance (GRC) solutions and processes. Your Company has been playing an active role in this area, acquisition of Digital Risk in FY 2013 has further strengthened the Company's ability to serve the Clients in GRC. Your Company is focused on bringing innovation to help the Clients to be compliant with minimal disruption enabling them to leverage their existing investment. Such an innovation will be of great value and the Company is poised to test this innovation through pilots in FY 2016. Your Company will take greater stride in this team in FY 2016 to be acknowledged as a specialized player bringing unique value to our Clients.

Traditional IT Services and BPO space will experience greater cost compression. This trend will accelerate in FY 2016 and beyond. Innovative business/commercial model combined with ROI based automation will be key to success. Future success in this area is predicated on transformation from human heavy services to human light services by leveraging automation. Such a transformation would require management delicate stakeholder balance. Your Company will continue to stay committed for delivering to all the stakeholders including customers, employees and the society that we operate in. Building long term sustained value will be our main endeavor and we are confident, our customer intensity, our talented team and our track record give us the confidence that we will emerge successful as the world shifts to Digital.

SALE OF DOMESTIC BPO BUSINESS *

Your Company had executed a Business Transfer Agreement on 30 June 2015 for transfer of significant portion of domestic India business to Hinduja Global Solutions Limited. Further to this, a second definitive agreement was executed on 10 July 2015, to transfer certain portion of your Company's domestic India business to Karvy Data Management Services Limited. The execution of the above agreements is subject to regulatory approvals and fulfillment of closing conditions. The sale of the domestic business will result in transfer of about 10,000 employees of the Company.

Your directors are confident that the above transactions would release the bandwidth of the Senior Management and enable the Company to intensify the focus in Global business in Digital, Governance Risk and Compliance (GRC), Application Maintenance Services (AMS), International BPO business and Infrastructure Services (IS).

DIVIDEND

Your directors are pleased to recommend a final dividend of Rs. 16 per equity share of Rs. 10 each for the financial year ended 31 March 2015, subject to your approval at the ensuing Annual General Meeting.

INTELLECTUAL PROPERTY RIGHTS

The Company has filed its third patent application in the area of "Governance Risk and Compliance" (GRC) for the Banking and Capital Markets sector. This patent is a method and system for regulatory compliance for financial institutions using intelligent learning systems and transforms the experience of compliances for the users.

The Mphasis NEXT Labs and a Virtual Innovations Lab has been set up which work on developing core technologies, tools, utilities, solutions, thought leadership and frameworks thereby building an intellectual property asset portfolio for the Company. "HyperGraf" is the first Mphasis Next Labs solution, which is an Omni-channel digital 360° solution that transforms enterprise decision making by providing accurate, real-time and actionable Customer Engagement Insights across millions of data points spread over multiple customer engagement channels.

ENTERPRISE RISK MANAGEMENT

The Company has an elaborate Enterprise Risk Management (ERM) Programme to proactively identify, mitigate, monitor and reports risks across the enterprise. The updates on the development and implementation of the ERM Programme are reviewed by the Audit Committee on a quarterly basis. A detailed analysis on the formulation, implementation and monitoring of the Risk Management Plan is available in the section headed Management Discussion and Analysis of Risks and Concerns.

CORPORATE GOVERNANCE

Your Company strongly believes that the spirit of Corporate Governance fetches beyond the statutory acquiescence. Corporate Governance is a driver of sustainable corporate growth and long term value enhancement for the stakeholders. Your Company endeavors to meet the growing aspirations of the stakeholders and is committed to maintain the highest standards of transparency, fairness, accountability and equity in its operations. Your Company has complied with the requirements of revised Clause 49 of the Listing Agreement with the Stock Exchanges and the governance requirements under the Companies Act, 2013. A report on Corporate Governance is annexed and forms part of this report.

EMPLOYEES

In line with your Company's refreshed brand promise - Unleash the Next, the Human Resources (HR) Strategy too unleashed new dimensions of people practices in FY 2015. The rebranding exercise was a key milestone for your organization, and translating the new mission, vision and values into behaviors and actions was the core focus in the first quarter. Interactive workshops on Mphasis values, new lanyards and refreshed appreciation cards for peer recognition helped to bring the new brand to life for every employee.

Through the course of the year, HR at Mphasis expanded its footprint into the digital space as well. We reached thousands of candidates through Mphasis Careers on Facebook, Twitter, LinkedIn and Google . In an active effort to integrate social networks into our hiring process, we launched the #MphasisIntern campaign to recruit interns through Twitter and Slideshare. #MphasisIntern achieved 21.5 Million views through 46,600 tweets/retweets leading to a 300% increase in the followers of @mphasiscareers.

The Employee Engagement Team hosted several initiatives this year, with special focus on our employees' health and wellness. Going beyond the work place, we celebrated 'Bring your Child to Work' and 'Bring your Parents to Work', thus opening our doors to the extended Mphasis' families as well. To recognize long standing loyalty and support to your Company, 550 employees were felicitated for their tenure as part of the annual 'Pillars' program. An exclusive Mphasis Anthem was unveiled featuring Mphasis employees in the video which has achieved over 9000 views on Youtube. At Mphasis, we have created a group, known as 'Samaritan', of well-meaning individuals who have come together under the Employee Engagement banner to help make our Corporate Social Responsibility a more engaging and meaningful experience on a larger scale. These 'Samaritans' volunteer to contribute to various areas in our society dealing with issues relating to women, children, disability and education.

In our constant effort to enrich Mphasis as a workplace, we launched the MAPLE Survey in FY 2015. This survey is an indigenous employee survey, based on the net promoter score methodology. Taking employee empowerment to another level, many policy changes were implemented as per the recommendations shared by a closed group of employees.

Learning continues to be a key priority and an entire week was dedicated to it in FY 2015. The Learning Week, spread across five days of self-directed learning events, offered a total of 95 programs covering technical, domain and leadership topics. Leader Talks, Panel Discussions and 'Lessons from Movies' were offered as exclusive sessions and excitement was created through the use of social media with live tweets and contests for innovative tweets. Client University framework has been developed to cater to the needs of focused learning for each of our accounts.

In keeping with our strategy for FY 2015, Digital Guild was launched as one of the initiatives to promote the growth of specialists in the digital space at Mphasis. It is based on the traditional concept of an association of artisans or merchants. The framework will help us to create a group of specialists in certain fields that are aligned to our strategy.

While our flagship leadership programs such as Future Leaders Programs (FLP) and Aarambh, continued to build stronger leadership pipelines from young talent, our Integrated Leadership Development framework helped us to create a pool of ready leaders at front, middle and senior levels within Mphasis.

In order to enable employees to manage their careers better, the Career Management Portal was launched for all Mphasis employees. It enables employees to gather role related information, understand their roles better, gauge themselves accurately, check role requirements for other profiles and find aspirational match. It also helps employees to set and work towards their career goals and design development plans with action items to achieve those goals.

Being a Company with specialists having innovative and inquisitive minds, a new concept of innovation goal was developed in FY 2015. This empowers employees to think, innovate and improve their own competencies or productivity by including a self-driven goal, in agreement with the manager, aligned to the business outcomes. This goal focuses on innovation and customer centricity.

As on 31 March 2015, our total employees and strength (inclusive of billable contractors) stands at 33,301.

COMMUNITY OUTREACH

Corporate Social Responsibility

Mphasis has always been committed to meaningful Corporate Social Responsibility (CSR) and it is closely aligned with the organization's mission of being at the confluence of people, profit and planet. Our CSR activities are being carried out through Mphasis F1 Foundation. The Company has a CSR Policy as required under the provisions of law and the same is hosted on the website of the Company at http://www.mphasis.com/CorporateGovernance.html. The CSR Committee of the Board approves the CSR Budget and monitors the implementation of the CSR Policy.

"Ensure measurable social change through self-sustenance models in locations where Mphasis has a presence, creating brand distinction and visibility for our efforts globally", is the CSR vision of Mphasis and the driving tenets of our CSR are as follows:

1. Focus on a few topic areas and drive excellence in them;

2. Maximize impact with the deployed resources; and

3. Drive innovative solutions in the social space in line with the Company's motto of "Unleash the Next".

In line with the above, the CSR Policy of the Company focuses on the following:

1. Creating opportunities for the disadvantaged with an emphasis on persons with disabilities; and

2. Technology driven community development.

Mphasis also aims to orient our CSR strategy around an open CSR platform which will provide an interaction mechanism for a wider set of stakeholders, namely, non-profit organizations, companies, individuals, research institutes and technology incubators.

A major new program that we supported during the year was NASSCOM Social Innovation Forum (NSIF), India's leading "Tech for Good" Platform to identify, fund and mentor promising social enterprises leveraging technology.

CSR Committee

In terms of Section 135 of the Companies Act, 2013 and Rules made thereunder, the Board has constituted a CSR Committee comprising Mr. Narayanan Kumar, Mr. D S Brar, Ms. Mary Teresa Hassett and Mr. Balu Ganesh Ayyar as its members. As required under the Companies Act, 2013, the CSR Annual Report in the prescribed form is annexed and forms part of this Report.

During the year, the Company had spent Rs. 33.19 million (of which Rs. 21.88 million is recognized as CSR expenses as per the law), as against mandated spent of Rs. 139.30 million. Considering the new statutory framework under the Companies Act, 2013, sizeable time and efforts were spent in formulating an impactful and coherent CSR Policy, devising the strategy, formulating internal framework for grant making process, capacity building of the CSR team, monitoring and evaluation process and identifying credible partners with innovative project proposal and evaluating proposals for scalability and policy fitment. The Board believes that initial set up undertaken during the year in terms of the CSR Policy, CSR frameworks, CSR process and controls will enable the Company to scale up the CSR activities in future and support the Company's commitment to its meaningful CSR activities.

Prevention of Sexual Harassment

Your Company's Code of Business Conduct (COBC) provides broad directions as well as specific guidelines for all business transactions. The emphasis is on human rights, prevention of fraudulent and corrupt practices, avoidance of conflict of interest, prevention of Sexual Harassment and unyielding integrity at all times. Mphasis is committed to the provision of a workplace, free of Sexual Harassment ("SH") and to provide a redressal mechanism for all complaints of SH without fear or threat of reprisals in any form or manner whatsoever. The work place in context of SH is not restricted to the office but includes extended work areas such as client place, work related travel, cafeterias and Company sponsored events, to name a few.

In compliance with the Sexual Harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has established Internal Complaints Committees at all its locations. During FY 2015, 60 complaints were received, out of which 53 complaints were disposed in terms of the aforesaid Act as on 31 March 2015. Complaints not yet disposed are being investigated and are within the prescribed time limits.

Establishment of Vigil Mechanism

Mphasis Code of Conduct requires directors, officers and employees to observe high standards of business and personal ethics in conduct of their duties and responsibilities. As employees and representatives of the Company, they must practice honesty and integrity in fulfilling their responsibilities and comply with all applicable laws and regulations. The Company has a Whistleblower Policy to enable persons who observe unethical practices (whether or not a violation of law), to approach the Whistleblower Custodian without revealing their identity, if they choose to do so. This Policy governs reporting and investigation of allegations that are breach of Code of Business Conduct. This Policy covers all Mphasis group companies and its affiliates and further extends to all Mphasis suppliers and contractors engaged in rendering the services.

The Chairman of the Audit Committee is the Ombudsperson under the Whistleblower Policy. The complainant is provided access to the Ombudsperson where the complainant feels that the complaint has not been addressed in a timely and appropriate manner. The Whistleblower Policy is published on the Mphasis website at http://www.mphasis.com/contact.html. The Whistleblower campaign is carried across the Company on a periodic basis to ensure that the employees are aware of the existence of such reporting mechanism.

GREEN INITIATIVE

The Companies Act, 2013 has recognized the electronic delivery of the documents. In compliance with the provisions of the Companies Act, 2013, rules made thereunder and to support the green initiative in Corporate Governance, the Company proposes electronic delivery of Notices for General Meetings, Annual Reports and other communications to the members through e-mail. The e-mail addresses indicated in the respective Depository Participant (DP) accounts will be deemed to be the registered e-mail address of the members holding shares in dematerialized form and shall be used for electronic delivery of the documents. Members holding shares in physical form who have consented in writing for receiving documents by electronic mode shall be considered for electronic delivery of the documents. Members holding shares in electronic or physical mode, who have not registered their e-mail addresses and changes therein, are therefore requested to get their e-mail addresses registered or updated with the DP or the Company, as the case may be.

Full text of the above said documents will also be displayed on the website of the Company, www.mphasis.com and all other applicable requirements under the provisions of the Companies Act, 2013 and rules made thereunder will be duly complied with. In case any member would like to receive physical copies of these documents, the same shall be forwarded upon request.

Pursuant to Section 108 of the Companies Act, 2013 (Companies Management and Administration) Rules, 2014 and Clause 35B of the listing agreement, your Company is pleased to provide the e-voting facility to its members to vote on the resolutions proposed at the ensuing Annual General Meeting. The detailed instructions in connection with the e-voting are given in the Corporate Governance Report and notice of the Annual General Meeting.

DIRECTORS & KEY MANAGERIAL PERSONNEL

Ms. Mary Teresa Hassett was appointed on the Board as an additional director effective 30 September 2014. Pursuant to the provisions of Section 161 of the Companies Act, 2013, the additional director holds office until the date of the ensuing Annual General Meeting. However, the Company has received notice under Section 160 of the Companies Act, 2013, from a member along with requisite deposit proposing the candidature of the additional director to the office of directorship. Accordingly, necessary resolution in relation to the appointment of the director is placed before the members at the ensuing Annual General Meeting. The Board recommends the appointment of the director. Ms. Mary Teresa Hassett is also the Woman Director appointed under the provisions of the law.

The Company has received notices from a shareholder proposing the appointment of all the existing Independent Directors for tenure as allowed under the provisions of the law. Accordingly, necessary resolution in relation to appointment of Independent Directors is also placed before the members at the ensuing Annual General Meeting. The Company has received declarations from all the Independent Directors confirming that they meet the criterion of independence as per law and have consented for being appointed as an Independent Director.

All of above Independent Directors are eminent personalities in their respective fields. Considering their vast experience and knowledge, the Board considers that their continued association would be of immense benefit to the Company.

Mr. Chandrakant D Patel resigned from the Board effective closing hours of 30 September 2014. He joined the Board in December 2012. The Board places on record its appreciation for the valuable services rendered by him during his tenure as a director.

Further, in accordance with Section 152 of the Companies Act, 2013, Mr. Shankar Maitra and Mr. Stefan Antonio Lutz will retire by rotation and are eligible for re-election.

Further to review of the assessment carried out and taking in to account the recommendations of the Nomination and Remuneration Committee, the Board recommends the appointment of the above directors in the ensuing Annual General Meeting.

The profiles of the present directors including the directors seeking appointment and re-appointment at the ensuing Annual General Meeting are provided in the Annual Report.

During the year, Mr. V. Suryanarayanan, Interim Chief Financial Officer was appointed as the Chief Financial Officer of the Company effective 1 August 2014.

STATUTORY AUDITORS

S R Batliboi & Associates LLP (registration No.101049W), Chartered Accountants have completed 7 years tenure as the Statutory Auditors of the Company. In view of the provisions of Companies Act, 2013 and the rules made thereunder, they are eligible to be re-appointed as auditors for another term of 3 years.

S R Batliboi & Associates LLP (registration No.101049W), Chartered Accountants, being eligible for re-appointment, in terms of provisions of Section 141 of the Companies Act, 2013, have expressed their willingness to continue in office from the conclusion of this Annual General Meeting till the conclusion of twenty seventh Annual General Meeting. A resolution proposing their re-appointment from the conclusion of this Annual General Meeting till the conclusion of the twenty seventh Annual General Meeting of the Company subject to ratification of their appointment at every Annual General Meeting, at a remuneration to be fixed by the Board of Directors and billed progressively, is submitted at the Annual General Meeting.

The Board recommends the appointment of the Statutory Auditors.

SECRETARIAL AUDITOR

The Board in its meeting held on 13 February 2015 approved the appointment of Mr. S P Nagarajan, Practising Company Secretary, as the Secretarial Auditor of the Company for the financial year ended 31 March 2015. As required under the provisions of Section 204 of the Companies Act, 2013, the secretarial audit for FY 2015 has been concluded and the Secretarial Audit Report in Form No. MR-3 is annexed and forms part of the Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Information as per Section 134(5) of the Companies Act, 2013, is annexed and forms part of the Report.

OTHER DISCLOSURES

SUBSIDIARIES

As on 31 March 2015, your Company has subsidiaries in Australia, Belgium, Bulgaria, Canada, France, Germany, India, Ireland, Mauritius, the Netherlands, People's Republic of China, Republic of Indonesia, Philippines, Poland, Singapore, the United Kingdom and the United States of America.

As per Section 129 of the Companies Act, 2013, statement containing salient features of the financial statements of subsidiaries in the prescribed form is annexed to this Report.

During the year, the Hon'ble High Court of Karnataka had approved the amalgamation of Mphasis Finsource Limited with the Company vide its Order dated 18 August 2014 with effect from 1 April 2013, being the effective date of the amalgamation. The copy of the Order was filed with the Registrar of Companies as required under Companies Act, 2013 and with the Stock Exchanges.

The latest audited accounts of the subsidiary Companies are available for inspection of the members at the Registered Office of the Company and is also being uploaded on the website of the Company, www.mphasis.com. A copy of the same shall be sent to the members upon request.

EMPLOYEES STOCK OPTION PLANS AND RESTRICTED STOCK UNIT PLANS

Your Company's Employee Stock Option Plans (ESOP) are administered through the BFL Employees Equity Reward Trust and the Restricted Stock Unit Plans (RSUs) and Mphasis Employees Stock Option Plan - 2012 (ESOP 2012 Plan) are administered through Mphasis Employees Benefit Trust.

Your Company currently has three stock option plans in operation, namely, ESOP 1998 Plan (Version I and II), ESOP 2004 and ESOP 2012, in addition to the RSU 2010 Plan and RSU 2014 Plan. During the year, 1,300 shares were allotted under ESOP 1998 Plan II and 4,702 shares were allotted under ESOP 2004 against exercise of options by the employees. Further, pursuant to exercise applications made by the employees, the Company has transferred 26,675 equity shares towards exercise of RSUs under RSU 2010 Plan.

The Company is in the process of aligning to the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and shall comply with the new regulations within the statutory time limits prescribed thereunder. The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and Companies (Share Capital and Debentures) Rules, 2014, are annexed and forms part of this Report.

Further to approval of the shareholders at its Annual General Meeting held on 30 July 2014, during the year, the Company obtained in-principle approval for the Restricted Stock Units Plan 2014 (RSU 2014) from Bombay Stock Exchange Limited on 28 August 2014 and the National Stock Exchange of India Limited on 1 September 2014. Further to this, the ESOP Compensation Committee granted 470,000 stock units to eligible employees on 20 October 2014.

DIRECTORS' INTEREST AND RELATED PARTY DISCLOSURES

No director was interested in any contracts or arrangements existing during or at the end of the year that was significant in relation to the business of the Company. No director holds any shares or stock option in the Company as on 31 March 2015 except Mr. Balu Ganesh Ayyar, Chief Executive Officer, who holds 17,010 shares and Restricted Stock Units and Stock Options aggregating to 94,000 units. None of the directors had any other interest in the share capital of the Company as at 31 March 2015. The particulars of the contract or arrangements with the Related Parties in form AOC-2 is annexed and forms part of this report.

FORMULATION OF RESTRICTED STOCK UNITS PLAN 2015 *

The Board of Directors of the Company, in its meeting held on 29 July 2015, has proposed to institute Mphasis Restricted Stock Unit Plan 2015 (RSU 2015) with the underlying shares not exceeding 2.5 million equity shares, with a view to achieve management participation in the ownership and growth of the Company and to encourage value creation and value sharing with key employees and to retain such key employees.

The RSUs are proposed to be granted at the face value of Rs. 10 per share and the shares arising out of the exercise of RSUs is proposed to be acquired from market. The RSU 2015 Plan would confirm to the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and applicable provisions of the Companies Act, 2013. In line with the provisions of the law, necessary resolutions in relation to the RSU 2015 are placed before members for approval.

SHARE CAPITAL

The Issued Share Capital of the Company as on 31 March 2015 stood at Rs. 2,101 million and Reserves and Surplus stood at Rs. 52,696 million (consolidated basis) and Rs. 38,394 million (standalone basis) respectively.

PARTICULARS OF EMPLOYEES' REMUNERATION

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in an Annexure and forms part of this report. However, in terms of Section 136(1) of the Companies Act, 2013, the Report is being sent to the Members excluding the aforesaid Annexure and shall be available for inspection of the members, till the date of the Annual General Meeting, at the registered office of the Company during working hours. Any Member interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Company.

In terms of proviso to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the particulars of the employees posted and working in a country outside India is not circulated to the members, but the same shall be filed with the Registrar of Companies while filing the Financial Statements and Board's Report.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return as at 31 March 2015 in Form MGT-9 is annexed and forms part of the Report.

PARTICULARS OF LOANS, GUARANTEE OR INVESTMENTS

The particulars of Loans, Guarantees and Investments under Section 186 of the Companies Act, 2013 are disclosed in the financial statements of the Company.

PARTICULARS REGARDING CONSERVATION OF ENERGY. TECHNOLOGY ABSORPTION. FOREIGN EXCHANGE EARNINGS AND OUTGO AND DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS

A. CONSERVATION OF ENERGY:

Your Company's operations involve low energy consumption. Mphasis is committed on conserving energy. The key facilities have been awarded 5 star, 4 star or 3 star rating by Bureau of Energy Efficiency, Government of India (BEE). The rating is nationally accepted industry benchmark and Mphasis has been the twelfth Company in India to be certified by BEE. The Company has installed lighting energy savers and LED light fixtures, occupancy sensors, enthalpy system, automatic operation of AC system at data center and solar inverters at certain facilities to minimize power consumption. The carbon foot prints are monitored on a monthly basis and reported to Carbon Disclosure Project (CDP), an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CII Godrej Green Building Council has awarded 'Greenco' rating for Mphasis Mangalore facility. One of our facility, WTC 4 Bengaluru, has been certified LEED (Leadership in Energy and Environmental Design) Gold by United Sates Green Building Council (USGBC). During FY 2015, the Company has invested Rs. 126 Million towards energy conservation equipments. Your Company is one of the few IT companies in India who has implemented captive renewable energy generation in multi-locations as part of its sustainability program.

B. TECHNOLOGY ABSORPTION:

Particulars relating to technology absorption are not applicable.

C. FOREIGN EXCHANGE EARNINGS OR OUTGO :

(Rs. million)

(a) Foreign Exchange earned in terms of actual inflows during the year 24,581

(b) Foreign Exchange outgo in terms of actual outflows during the year 4,321

D. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS:

There were no significant material orders passed by the Regulators or the Courts, Tribunals impacting the going concern status and companies operations in future.

DEPOSITS

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

ACKNOWLEDGMENT

Your directors acknowledge with thanks the continued support and valuable co-operation extended by the business constituents, investors, vendors, bankers and shareholders of the Company. Your directors wish to thank Hewlett-Packard Company for their continued support. The directors place on record their appreciation for the support from the Software Technology Parks of India, the Department of Electronics, the Government of India, Government of Karnataka, NCT Delhi, Maharashtra, Tamil Nadu, Gujarat, Madhya Pradesh, Chhattisgarh, Pondicherry, Orissa, Rajasthan, Reserve Bank of India, other governmental agencies, Trade Associations and NASSCOM.

Your directors would like to place on record their appreciation for the contribution made by the employees of the Company and its subsidiaries and associates.

For and on behalf of the Board of Directors

Santa Clara, CA (USA) FRIEDRICH FROESCHL 22 May 2015 Chairman


Oct 31, 2013

The revenues for the year grew by 7.5% from Rs. 54,907 million to Rs. 59,041 million. Total Direct channel revenue grew from Rs. 23,906 million in the previous year to Rs. 32,989 million in the current year. The revenues from the HP channel declined on account of the loss of certain clients by HP and also because of shift of certain businesses to HP''s captive delivery centres. At the end of the last quarter of this financial year, the share of HP business is at 40% of the overall revenues.

(Rs. millions)

Segment FY 13 % FY12 %

HP channel 26,052 44% 31,001 57%

Mature Market - Direct channel 28,931 49% 17,771 32%

Emerging Market - Direct channel 4,058 7% 6,135 11%

Total 59,041 100% 54,907 100%

Client concentration based on ultimate customer

Given below is the analysis of Client Concentration.

FY 13 FY 12

Revenues from Top Client 9% 9%

Revenues from Top 5 Clients 30% 31%

Revenues from Top 10 Clients 45% 43%

Clients Contributing more than:

$ 1 million Revenues 117 130

$ 5 million Revenues 41 39

$ 10 million Revenues 21 25

$ 20 million Revenues 11 9

During the year, the Company won several large deals with total contract value of in excess of $250 Mn to be executed over multiple years. Of the 76 new clients that were added during the year, 42 were Direct channel clients.

A segment analysis of the revenues for the current financial year is given below:

(Rs. millions)

FY 13 % FY 12 %

Banking and Capital Market 21,308 36% 14,164 26%

Insurance 6,985 12% 6,320 11%

Information Technology, Communication & Entertainment 11,592 20% 14,550 27%

Emerging Industries 19,156 32% 19,873 36%

Total 59,041 100% 54,907 100%

Banking and Capital Markets which is one of the focus areas has grown by 50% and the contribution to revenue has increased from 26% in 2012 to 36% of the aggregate revenues in 2013. Insurance segment has grown by 11% during the financial year as we continue to focus on increasing the wallet share from the existing key clients.

The Information Technology, Communication and Entertainment segment has declined during the financial year largely because a very significant portion of revenues from HP-based business which are classified in this segment had declined. The decline in Emerging Industries is largely driven by the Company''s decision to exit the India Government business where the collection timelines are putting a strain on the Company''s cash-flows and profitability.

Revenues by Geography

(Rs. millions)

FY 13 % FY 12 %

AMERICAS 42,230 72% 35,501 65%

EMEA 7,895 13% 8,146 15%

INDIA 4,871 8% 6,698 12%

ROW 4,045 7% 4,562 8%

Total 59,041 100% 54,907 100%

The acquisition of Digital Risk has increased our presence in the US market and is reflected in the increase in share of Americas revenue. The Company has decided to exit from the India Government business owing to long collection timeline involved which impacts our cash-flows and profitability.

Revenues by Service Type

(Rs. millions)

Service Type FY 13 % FY 12 %

Application Maintenance & Other Services 18,505 31% 18,179 33%

Application Development 13,021 22% 14,528 26%

Customer Service 3,105 5% 3,039 6%

Service / Technical Help Desk 2,025 3% 2,127 4%

Transaction Processing Service 2,857 5% 2,890 5%

Infrastructure Management Services 11,527 20% 13,443 24%

Knowledge Processes 7,622 13% 332 1%

License Income 379 1% 369 1%

Total 59,041 100% 54,907 100%

Application Maintenance involves maintenance of existing customer software and is mostly undertaken on annuity terms.

Application Development refers to customised software development services based on the requirements and specifications given by customers and documented in a Statement of Work.

Customer Services include receivables collection support, product support, enrolment etc. provided to clients through BPO operations.

Service/Technical Help Desk comprise of inbound and outbound customer interaction programs including technical product support, customer care and allied services.

Transaction Processing includes claims and mortgage processing, account opening and maintenance, data processing and management.

Infrastructure Management Services include end-to-end managed mobility solutions covering workplace management & other support services, hosting services which comprise of mainframe or midrange, application & web hosting services and data centre services focused on migration, automation & other software services.

Knowledge Processes refer to the outsourcing of relatively high-level processes of the customer such as HR processes.

License Income pertains to the income from license sale in the health care space of the Company''s product,Javelina, developed by its foreign subsidiary and from Wynsure, a product of Wyde Corporation, acquired by the Company in 2011.

Revenues by Delivery Location

The following tables give the composition of revenues based on the location where services are performed.

(Rs. millions)

Delivery Location FY 13 % FY 12 %

Onsite 24,896 42% 17,548 32%

Offshore 34,145 58% 37,359 68%

Total 59,041 100% 54,907 100%

The increase in onsite revenue is on account of acquisition of Digital Risk.

Headcount * and Utilization

Management has continued its focus upon delivering quality at lower cost. A very important element of this is a sharp improvement in utilization rates which has meant that the same volume of business was delivered with fewer employees. The table below clearly depicts this strategic action.

FY 13 FY 12

Onsite

- Application Services 2,397 2,475

- ITO Services 244 301

- BPO Services 1,909 111

Offshore

- Application Services 8,868 9,727

- ITO Services 6,631 6,709

- BPO Services 15,525 15,912

Sales and Marketing 363 369

General and Administration 1,119 1,025

Total 37,056 36,629

* Note: Including billable contractors

Utilization Rates FY 13 FY 12

Excluding Trainees

Onsite

- Application Services 93% 93%

- ITO Services 94% 84%

Offshore

- Application Services 87% 83%

- ITO Services 92% 86%

- BPO Services 73% 79%

Blended

- Application Services 88% 85%

- ITO Services 92% 86%

- BPO Services 73% 79%

Including Trainees

Onsite

- Application Services 93% 93%

- ITO Services 94% 84%

Offshore

- Application Services 85% 78%

- ITO Services 89% 84%

- BPO Services 62% 70%

Blended

- Application Services 86% 81%

- ITO Services 89% 84%

- BPO Services 62% 70%

Revenues by Project Type

(Rs. millions)

FY 13 % FY 12 %

Time and Material 51,230 87% 47,519 87%

Fixed Price 7,811 13% 7,388 13%

Total 59,041 100% 54,907 100%

Significant revenues are generated principally from services provided on time-and-material (T&M) which are recognised in the period that services are performed.

Cost of Revenues

Cost of revenues primarily comprise of direct costs to revenues and includes direct manpower, travel, facility expenses, network and technology costs.

The consolidated cost of revenues of the Company is '' 43,396 million in FY 13 representing an increase of 9.1% over FY12 which is mainly due to Digital Risk. Cost of revenues were 74.9% of revenues compared to 74.3% during the previous financial year.

Selling Expenses

Selling expenses of '' 3,052 million for FY13 represented an increase of '' 170 million or 5.9% from FY12. Increase in selling expenses is on account of increased focus on Direct channel and reinvestment of the company profits for sales promotion activities in FY13.

General and Administrative Expenses

General and administrative expenses of '' 2,401 million for the year FY13 represented an increase of '' 304 million or 14.5% from FY12. General and administrative expenses in FY13 stood at 4.1% of revenues.The overall expense increase in current year includes expenses of Digital Risk.

Operating Profit

The operating profit in FY13 increased to '' 8,888 million from '' 8,766 million in FY12.Operating profit improved by '' 122 million in FY13 despite increase in manpower costs due to effective operational leverages.

Other Income

The other income for the year FY13 was '' 1,360 million as compared to '' 1,478 million in FY12. The reduction is due to provision for Mark to Market loss of '' 118 million made during the year. The gain on foreign exchange for FY13 was '' 34 million as against a gain of '' 182 million in FY12. The lower gain was mainly on account of exchange rate fluctuation arising out of restatement of assets and liabilities.

Interest expenses

Interest expense for FY13 was '' 330 million as against '' 147 million for FY12. The increase in interest expense was mainly on account of loan taken for the acquisition of Digital Risk.

Income Taxes

Income taxes were '' 2,514 million in the year FY13 as compared to '' 2,356 million in the year FY12. The effective tax rate has increased to 25.3% in FY13 from 22.9% in FY12 due to increase in surcharge and 2 units came out of the 100% tax holiday in the current financial year.

Net Profit

The net profit after taxes was '' 7,438 million for the year FY13, a decrease of '' 485 million or 6.1% over the net profit of '' 7,923 million in FY12. Cash provided from financing activities

In FY13, the Company paid '' 4,150 million on account of dividend and dividend tax as against '' 1,587 million in FY12. In FY13, the Company raised a loan of '' 4,893 Million to part fund the acquisition of Digital Risk.

Cash and cash equivalents

The Company''s cash and bank balances are held in various locations throughout the world. Cash and bank balances comprise of investments in mutual funds and deposits of any kind with banks. These balances also include amounts that are restricted in use, either as margin monies given to banks for guarantees issued in the normal course of business or amounts held in escrow accounts attributable to acquisitions/ commitments made.

An analysis of restricted cash balances as at 31 October 2013 and 2012 is given below.

(Rs. millions)

As at As at 31 October 2013 31 October 2012

Fixed Deposits - Escrow Account 11 31

Unclaimed Dividends 6 4

Total 17 35

Restricted cash as a % of total cash balances 0.3% 0.8%

Company''s treasury policy

The Company''s treasury policy calls for investing only in fixed deposits of highly rated banks, units of debt mutual funds and fixed maturity plans (FMP) for maturities up to 6 months. Stringent guidelines have been set for de-risking counter party exposures. The Company maintains balances both in Indian Rupee and foreign currency accounts in India and overseas. The investment philosophy of the Company is to ensure capital preservation and liquidity in preference to returns.

Off balance sheet arrangements

As part of its ongoing business, the Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or Special Purpose Entities ("SPEs"), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of 31 October 2013 the Company was not involved in any material unconsolidated SPE transactions.

Directors'' Report

Dear Shareholders,

We have pleasure in presenting to you the twenty second Annual Report of your Company for the financial year ended 31 October, 2013.

CONSOLIDATED FINANCIAL PERFORMANCE

Key aspects of the financial performance of MphasiS Group are tabulated below:

(Rs. million)

Year Ended Year Ended Particulars 31 October 2013 31 October 2012

Revenues 59,368 55,254

Profit before taxation 9,952 10,279

Net Profit 7,438 7,923

Provision for Proposed Dividend 3,572 3,572

Tax on Dividend 607 580

Transfer to General Reserve 540 611

A detailed analysis of performance is available in the section headed Management Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.

DIVIDEND

Your directors are pleased to recommend a final dividend of '' 17 per equity share of ''10 each for the year ended 31 October 2013, subject to your approval at the ensuing Annual General Meeting.

OUTLOOK

Customers are transforming the way they operate in response to the volatile economic conditions and fast-changing consumer preferences. As a result, their expectations from their technology spend and consequently, their service providers are changing to reflect the business priorities. While they continue to focus on their core business objectives of revenue growth, cost-efficiency and asset-efficiency, they are also focusing on enhancing the customer experience and responding to their changing preferences better.

Emerging technologies like Mobility and Data & Analytics are driving this transformation. The focus of technology spend is shifting from the back-end to the Customer, where it is being used on real-time basis to enhance customer experience and gain insights into customer behavior to drive growth and differentiation.

Your Company has always been customer-centric and responsive to changing customer needs. In 2013, your Company made rapid strides in emerging technologies - formed a dedicated unit and made significant investments in Mobility and Data & Analytics.

In the Mobility space, we launched Mobile Testing-as-a-Service covering Mobile Application Security Testing, an offering bundled with tools, processes and people in a pay-per-use model. In Digital Marketing, we are building solutions to address the customer experience across channels ranging from mobility to web and social media. In the Analytics space, we are building Data Discovery and Visualization Centre of Excellence and co-investing with our key clients to build industry specific solutions.

We are happy to report that our strategy resonates with our Customers and continues to deliver results. In 2013, our direct business grew 38% year on year and we added 42 direct clients. The business mix between HP and direct channel shifted from 57:43 in 2012 to 44:56 in 2013 thereby, reducing the client concentration risk.

While driving growth, your Company has been equally focusing on sustaining profitability within the band. We have sustained our gross margins at 25.10%. This has been possible because your Company had taken several actions to improve the operational efficiencies. These included consolidation of real estate, better workforce pyramid management, lean initiative and increased utilization across service lines.

We acquired Digital Risk in February 2013 to strengthen our capabilities in Mortgage Services in the US. During the year, we successfully completed the integration of Digital Risk and won 2 large deals with total contract value greater than $ 200 Million.

During the year, we received recognition from the analyst community on specific offerings in Capital Markets, Wealth Management, BPO services in Banking, European Life Insurance Policy Administration, Insurance Distribution Management Systems for Asia-Pacific region and Insurance billing and collection management solutions.

As we look at the year ahead, we will continue to improve our customer-centricity through strategic partnerships and drive growth in direct business. Towards this, we will;

- Expand service footprint in key clients by understanding their needs and aligning offerings that meets their business objectives.

- Enhance our focus and investments in strengthening key profitable portfolios (Testing, Enterprise Resource Planning, Customer Relationship Management, Mobility, Analytics and Platform Business Processing Outsourcing) to partner with our clients to drive growth, efficiency and customer-centricity.

- Transform delivery to enhance customer value and profitability - through innovation, tools & automation, LEAN and other cost optimization programs.

- Implement "Go-To-Market" transformation initiative aimed at driving higher sales productivity.

- Invest in grooming customer facing talent (delivery and Go-To-Market).

Your Company has witnessed early success in delivering above industry growth in our direct business over the last three years. We are confident of our strategy delivering our medium term goals. Your Company will continue to align with our Customer expectations, build relevant capabilities and engage with employees.

INTELLECTUAL PROPERTY RIGHTS

During the year, your Company has filed its first ever patent application - "Methods and Systems for Least - Cost Routing of Transactions for Merchants". This invention is a result of Company''s focus on Banking and Capital Market solutions and is expected to strengthen its offering in this vertical.

OTHER DEVELOPMENTS

Merger of MphasiS FinsourcE Limited

The Board had in its meeting held on 27 September 2013, considering the operational synergies and administrative convenience, approved amalgamation of MphasiS FinsourcE Limited with the Company effective 1 April 2013. Accordingly, the Company is in the process of submitting necessary application to the High Court of Karnataka.

MphasiS FinsourcE Limited, a wholly owned subsidiary of the Company, was formed in June 2006, exclusively for carrying out the outsourcing services for State Bank of India. The merger is approved consequent to non-renewal of the contract by State Bank of India.

Completion of Acquisition of Digital Risk

The Company completed the acquisition of Digital Risk and its subsidiaries in February 2013. The acquisition is the first by MphasiS in the Banking and Capital Markets Industry vertical. With the acquisition of Digital Risk, MphasiS is on its way to attain leadership position in US mortgage services market and has enhanced its on-shore presence in the US Market.

Digital Risk is headquartered in Florida and has about 1950 employees in US.

Change in the Financial year of the Company

The Companies Act, 2013 mandates a uniform financial year ending 31 March for the companies. The Board approved the change in the financial year of the Company from November - October to April - March every year with effect from 1 November 2013, in its meeting held on 27 September 2013. Accordingly, the financial year 2013 -14 will be for a five months period ending 31 March 2014.

Change in the Registered Office of the Company

Your Company has shifted its Registered Office from Bagmane Technology Park, Byrasandra, C V Raman Nagar, Bengaluru - 560 093 to Bagmane World Technology Center, Marathalli Outer Ring Road, Doddanakhundi Village, Mahadevapura, Bengaluru - 560 048, effective 15 March 2013.

SHARE CAPITAL

The Issued Share Capital of the Company as on 31 October 2013 stood at '' 2,101 million and Reserves and Surplus of the Group stood at '' 47,243 million.

CORPORATE GOVERNANCE

Your Company strongly believes that the spirit of Corporate Governance fetches beyond the statutory acquiescence. Corporate Governance is a driver of sustainable corporate growth and long term value enhancement for the stakeholders. Your Company endeavors to meet the growing aspirations of the stakeholders and is committed to maintaining highest standards of transparency, fairness, accountability and equity in its operations. Your Company has complied with the requirements of Clause 49 of the listing agreement with the Stock Exchanges. A report on Corporate Governance is annexed to this report.

EMPLOYEES

HR at MphasiS rallied around the foundation of our People Strategy-Autonomy, Purpose and Mastery. This powered, along with the support of the Leadership Team and the MphasiS Winning Culture and Values, us to reach new milestones of success.

Through the course of the year, learning has gone beyond mere learning hours to focus on the relevance of learning by differentiating between mandatory learning, role-relevant competency-based learning and other account / project specific learning. Moreover, there has been an increased focus on Individual Development Plans and Competency Development.

One of the key organizational differentiators in 2013 has been the launch of Integrated Leadership Development (ILD) wherein leadership development and talent management tracks were merged, a holistic perspective to developing a robust leadership pipeline. This approach moves away from the traditional manager-driven process of identifying talent. Leadership credits are earned through an array of leadership behaviors displayed through Action Learning Projects, Workplace Mentoring, Championing Competencies etc. These credits qualify leaders to be assessed on critical competencies to become part of the High Potential pool. Leaders thus identified go through an Accelerated Development program that grooms them for larger roles in the organization. With this approach, the initiative rests with the individual, thus building greater autonomy and mastery towards the end goal of joining the High Potential program.

Other leadership programs such as FLP (Future Leaders Program) and Aarambh have been institutionalized to build a leadership pipelines at different levels in the organization.

Towards our journey to be people processes organization, we reached a landmark this year in April 2013 with the PCMM Level 3 certification. This maturity level signifies that all workforce practices at MphasiS are based on competencies. The Global Learning Team at MphasiS was also recognized for its efforts and awarded two Best-in-Class Learning and Development awards by World HRD Congress: Best eLearning Adopter and Best Frontline Manager Training.

A major area of focus was the engagement of employees. A structured approach was designed to create a climate where employees value, believe-in and enjoy the work they do to help your Company to be successful.

Our total employees strength (inclusive of billable contractors) stands at 37,056 as at 31 October 2013.

EMPLOYEES STOCK OPTION PLAN AND RESTRICTED STOCK UNITS PLANS

Your Company has stock option schemes with the philosophy of encouraging the employees to be partners in the business and to support the growth of the organization by creating value to its stakeholders.

Your Company''s Employee Stock Option Plan is administered through the BFL Employees Equity Reward Trust and the Restricted Stock Unit Plans and MphasiS Employee Stock Option Plan - 2012 are administered through MphasiS Employee Benefit Trust.

The second tranche of Restricted Stock Units granted under Restricted Stock Units Plan 2010 (RSU 2010 Plan) and the first tranche of Stock Options granted under MphasiS Employee Stock Option Plan - 2012 (ESOP 2012 Plan) vested during the year. Pursuant to the exercise applications made by the employees, the Company has transferred, out of the MphasiS Employees Benefit Trust, 45,125 equity shares towards exercise of RSUs under RSU 2010 Plan and 2,350 equity shares towards exercise of options under ESOP 2012 Plan.

Further to the Circulars of the Securities Exchange Board of India dated 17 January 2013 and 13 May 2013 on prohibition of acquisition of shares from secondary market, the Compensation Committee vide its resolutions dated 18 March 2013 and 5 June 2013 approved certain alignments in RSU 2010 Plan and ESOP 2012 Plan. The aligned schemes provides for allotment of shares upon exercise of RSUs / options by the employees. However, in respect of the grants already made under RSU 2010 Plan and ESOP 2012 Plan, the trust would continue to transfer the shares already acquired from the secondary market upon exercise of the RSUs / options by the employees from time to time. As at the date of the report, the MphasiS Employees Benefit Trust held 3,08,765 shares.

Your Company currently has three stock option plans in operation, namely, ESOP 1998 Plan (Version I and II), ESOP 2004 and ESOP 2012 in addition to RSU 2010 Plan. During the year 18,140 shares were allotted under ESOP 1998 Plan (Version I and II) and 1,402 shares were allotted under ESOP 2004, against exercise of options by the employees.

The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is annexed to this Report.

COMMUNITY OUTREACH

Corporate Social Responsibility

Corporate Social Responsibility (CSR) is not just philanthropic giving, but also about values of collaboration and honoring commitments. It is about setting standards where quality of service and benefit goes directly to the beneficiary, especially those that are marginalized. MphasiS'' CSR activities are being carried out through MphasiS F1 Foundation Trust. The CSR at MphasiS focuses on Education, Employability and Entrepreneurship Development. The Trust has supported programs that have impacted the lives of the communities which have remained at the periphery of the development.

The significant CSR initiatives at MphasiS involve programs aimed at promoting quality education of children, providing skill based employment opportunities to semi-educated youth in rural and urban areas and entrepreneurship program aimed at training youth who are school-dropouts, in urban slums of Bengaluru and Chennai.

During the year, MphasiS was awarded the Disability Matters Asia Pacific Award, 2013 by Spring Board Consulting.

Prevention of Sexual Harassment

Your Company''s Code of Business Conduct (COBC) provides broad direction as well as specific guidelines for all business transactions. The emphasis is on human rights, prevention of fraudulent and corrupt practices, avoidance of conflict of interest, prevention of Sexual Harassment and unyielding integrity at all times. MphasiS is committed to the provision of a workplace, free of Sexual Harassment ("SH") and to provide a redressal mechanism for all complaints of SH without fear or threat of reprisals in any form or manner whatsoever. The work place in context of SH is not restricted to the office but includes extended work areas such as client place, work related travel, cafeterias and company sponsored events, to name a few.

In compliance with the Sexual Harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has established an Internal Complaints Committee at all its locations.

GREEN INITIATIVE

In compliance with the Circular of the Ministry of Corporate Affairs (MCA) and to support the green initiative in Corporate Governance, the Company proposes electronic delivery of Notices for General Meetings, Annual Reports and other communication to the members through e-mail.

The e-mail addresses indicated in the respective Depository Participant (DP) accounts will be deemed to be the registered e-mail address of the members and shall be used for electronic delivery of the documents. Full text of the above said documents will also be displayed on the website of the Company, www.mphasis.com and all other requirements of the aforesaid MCA circular will be duly complied with.

Members holding shares in electronic mode are therefore requested to keep their e-mail addresses updated with the Depository Participant. Members holding shares in physical mode are also requested to participate and support the Company in this initiative by registering their e-mails IDs with the Company.

In case any member would like to receive physical copies of these documents, the same shall be forwarded upon request.

SUBSIDIARIES

As on 31 October 2013, your Company has subsidiaries in Australia, Belgium, Canada, France, Germany, India, Indonesia, Ireland, Mauritius, the Netherlands, Bulgaria, People''s Republic of China, Philippines, Poland, Singapore, the United Kingdom and the United States of America.

As the business prospects were not forthcoming in Srilanka, during the year, the Srilankan operations were ramped down. Consequently, after complying with necessary statutory formalities, it is proposed to close MphasiS Lanka (Private) Limited.

As per Section 212 of the Companies Act, 1956, companies are required to attach the directors'' report, balance sheet and the statement of profit and loss of their subsidiaries. The Ministry of Corporate Affairs vide its Circular No. 2/2001 dated 8 February 2011 has exempted companies from complying with Section 212 of the Companies Act, 1956. Your Company is in compliance of the section read with the provisions of the circular and will not be attaching the accounts of the subsidiaries. Your Company has presented the consolidated financial statements of the Group. The required information regarding each of the subsidiary is annexed to this report.

The annual accounts of subsidiary companies are available for inspection to the members at the registered office of the Company. A copy of the same shall be sent to the members upon request.

DIRECTORS

The following persons were appointed on the Board of your Company as additional directors:

(a) Mr. Narayanan Kumar and Mr. James Mark Merritt effective 15 February 2013;

(b) Mr. Lakshmikanth K Ananth effective 28 February 2013; and

(c) Mr. Shankar Maitra effective 5 December 2013

Pursuant to the provisions of Section 260 of the Companies Act, 1956 (presently Section 161 of the Companies Act, 2013), the additional directors hold office until the date of the ensuing Annual General Meeting. However, the Company has received notices under Section 257 of the Companies Act, 1956, from a member along with requisite deposit proposing the candidatures of the additional directors to the office of directorship. Accordingly, necessary resolutions in relation to the appointment of the directors are placed before the members at the ensuing Annual General Meeting. The Board recommends the appointment of the directors.

Mr. Francesco Serafini and Mr. Balu Doraisamy resigned from the Board effective 14 February 2013. Mr. Francesco Serafini and Mr. Balu Doraisamy joined the Board in July 2010. Mr. Francesco Serafini was also the Vice Chairman of the Board. Mr. Antonio F Neri resigned from the Board effective closing hours of 5 December 2013. Mr. Antonio F Neri was appointed as a director effective 1 March 2012. He was also the Vice Chairman of the Board.

The Board places on record its appreciation for the valuable services rendered by Mr. Francesco Serafini, Mr. Balu Doraisamy and Mr. Antonio F Neri during their tenure as directors.

Further, in accordance with the Articles of Association of the Company, Dr. Friedrich Froeschl, Mr. V Ravichandran and Mr. Chandrakant D Patel will retire by rotation and are eligible for re-election.

The Board of Directors recommends the re-appointment of Dr. Friedrich Froeschl, Mr. V Ravichandran and Mr. Chandrakant D Patel.

The profiles of the present directors of your Company are provided in the Annual Report.

DIRECTORS'' INTEREST

There was no interest of the directors in the share capital of the Company as at 31 October 2013. No director was materially interested in any contracts or arrangements existing during or at the end of the financial year that was significant in relation to the business of the Company. No director holds any shares or stock option in the Company as on 31 October 2013 except Mr. Balu Ganesh Ayyar, Chief Executive Officer, who holds 17,010 shares and Restricted Stock Units and Stock Options aggregating to 58,000 units.

SIGNIFICANT SHARE HOLDINGS

The following shareholders held more than 5% of the Company''s issued share capital as at 31 October 2013:

Name of the Shareholder Percentage Owned

Hewlett Packard Corporation through its wholly owned subsidiaries 60.49%

(EDS Asia Pacifc Holdings, EDS World Corporation (Far East) LLC & EDS World Corporation (Netherlands)) LLC Aberdeen Asset Managers Limited A/C

Aberdeen Global Indian Equity (Mauritius) Limited 8.80%

DIRECTORS'' RESPONSIBILITY STATEMENT

Information as per Section 217(2AA) of the Companies Act, 1956 is annexed and forms part of the Report.

STATUTORY AUDITORS

S R Batliboi & Associates LLP (registration No.101049W), Chartered Accountants, have expressed their willingness to continue in office and a resolution proposing their re-appointment at remuneration to be fixed by the Board of Directors and billed progressively, is submitted at the Annual General Meeting.

As regards the observation made by the Auditors, your directors would like to clarify that the following :

- Management has already taken necessary steps to strengthen the internal control system by integrating the operations of infrastructure business with the mainstream, thereby introducing controls which are applicable for the entire organization.

- The Automated Teller Machine (ATM) thefts have been done by third parties and no employees were involved. Management has taken additional precautions to prevent such thefts. All the ATMs are fully insured against risk of theft.

- The investigation regarding the supply of the leased assets in deviation of the purchase order is in progress and appropriate action will be taken after conclusion of the investigation. Moreover, the vendor who has not supplied items as per specification has agreed to make good the loss to the Company.

- The representations of the vendor to the Income Tax Department regarding the amounts owed by the Company are false and suitable legal proceedings have been initiated against the vendor.

- The investigation regarding the observations on the purchase order pertaining to infrastructure services business in India are currently under progress. As a matter of good governance, the management has initiated an investigation on receipt of observations and the same is under progress.

PARTICULARS OF EMPLOYEES'' REMUNERATION

Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report. However, in terms of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company

In terms of the Notification No.G.S.R.212(E) dated 24 March 2004 issued by the Department of Company Affairs, Ministry of Finance, Information Technology companies have been exempted from providing the particulars of employees including their remuneration, if they have been posted / working in a country outside India.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company''s operations involve low energy consumption. MphasiS is committed on conserving energy. The key facilities have been awarded 5 star, 4 star or 3 star rating by Bureau of Energy Efficiency, Government of India (BEE). The rating is nationally accepted industry benchmark and MphasiS has been the twelfth Company in India to be certified by BEE. The Company has installed lighting energy savers, occupancy sensors, enthalpy system, automatic operation of AC system at data center and solar inverters at certain facilities to minimize power consumption. The carbon foot prints are monitored on a monthly basis and reported to Carbon Disclosure Project (CDP), an international, not- for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information.

Particulars relating to technology absorption are not applicable. Information relating to foreign exchange earnings or outgo during the year under review is as follows:

(a) Activities relating to Export Export of Computer Software related services to Americas, Europe, Asia and Australia

(b) Initiatives taken to increase the exports Marketing efforts are being made through the subsidiaries and branches to increase exports.

(c) Development of new export market for product and services Marketing efforts are being made in emerging markets

(d) Total Foreign Exchange used ('' million) 6,585

(e) Total Foreign Exchange Earnings ('' million) 28,999

DEPOSITS

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

ACKNOWLEDGMENT

Your directors acknowledge with thanks the continued support and valuable co-operation extended by the business constituents, investors, vendors, bankers and shareholders of the Company. Your directors wish to thank Hewlett-Packard Company for their continued support. The directors place on record their appreciation for the support from the Software Technology Parks of India, the Department of Electronics, the Government of India, Governments of Karnataka, Maharashtra, Tamil Nadu, Gujarat, Madhya Pradesh, Chhattisgarh, Pondicherry, Orissa, Reserve Bank of India, other governmental agencies, Trade Associations and NASSCOM.

Your directors would like to place on record their appreciation for the contribution made by the employees of the Company and its subsidiaries and associates.

For and on behalf of the Board of Directors

Bengaluru FRIEDRICH FROESCHL

5 December 2013 Chairman


Oct 31, 2011

Dear Shareholders,

We have pleasure in presenting to you the twentieth Annual Report of your Company for the financial year ended 31 October 2011.

CONSOLIDATED FINANCIAL PERFORMANCE

(Rs. million)

Year Ended Year Ended Particulars 31 October 2011 31 October 2010

Revenues 50,980 50,365

Cost of Revenues 38,430 35,007

Gross Profit 12,550 15,358

Operating Profit 8,294 11,011

Profit before taxation 10,046 12,099

Net Profit 8,218 10,908

Provision for Proposed Dividend 1,365 840

Tax on Dividend 222 140

Transfer to General Reserve 782 997

Transfer to Capital Redemption Reserve - 5

A detailed analysis of performance is available in the section headed Management Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.

DIVIDEND

Your Directors are pleased to recommend a final dividend of Rs. 6.50 per equity share of Rs. 10 each for the year ended 31 October 2011, subject to your approval at the ensuing Annual General Meeting.

OUTLOOK

2011 can best be described as a year of volatility and macro economic uncertainties. We undertook the transformation journey to tackle (1) concentration risk of our HP business; (2) absence of growth in Direct channel business; and (3) creating greater value for our customers through industry vertical approach.

Our results for FY11 demonstrate good progress in Direct channel business, with our Infrastructure business leading the growth story. We made inroads into select verticals and are beginning to be known for our focus in the chosen spots. We also established a good foundation for business beyond HP ES, growing areas in HP Non ES. While all these efforts yielded encouraging results, our concentration of HP ES business had a negative impact due to its decline affecting our share of that business. We had pressures on margins, that we took steps to arrest, which yielded results in Q4.

Looking ahead towards FY12, economic uncertainty around Europe and absence of growth in US markets is leading many companies to believe in a long period of muted growth. On the IT services front, many enterprises have tightened their spend on discretionary projects. We expect the sales cycle to be longer and some customers may also go for vendor consolidation. We believe that the entire IT offshore industry will experience a lower rate of growth.

As we look ahead for MphasiS, we have laid a good foundation for direct business growth and we feel optimistic around our growth with HP in newer areas.

Our focus going forward is to:

- Have a cost structure which is able to respond to the changing market dynamics.

- Continue to stay invested in our direct business growth and this will be done through increased focus in specific solutions, infrastructure business and in emerging markets.

- Accelerate our growth engine with newer areas of HP Non ES Business.

- Sharpen our value proposition in specific areas with HP ES.

- Accelerate our strategy execution, utilizing both our existing assets and selectively making acquisitions.

We will continue to strive and build an organization that is deeply aligned with our customers and will focus on delivering consistent results.

SHARE CAPITAL

The Issued Share Capital of the Company as on 31 October 2011 stood at Rs. 2,100 million and Reserves and Surplus of the Group stood at Rs. 36,780 million. There has been an increase in the capital during the year due to allotments on exercise of stock options and release of bonus shares, kept un issued due to dispute of title.

CORPORATE GOVERNANCE

A note on corporate governance and the Auditor's certificate on corporate governance are annexed to this report.

ACQUISITION OF WYDE

The Company acquired Wyde Corporation (Wyde) and its subsidiaries in August 2011. This strategic investment by the Company reinforces its focus on the Insurance vertical to deliver business value through domain specific solutions. Wyde is an international software vendor and creator of Wynsure - an industry leading Insurance Policy Administration Solution.

Wyde is headquartered in Minneapolis, USA, with a modern Research & Development (R&D) centre in Paris, France. Wyde has developed and deployed Wynsure at many leading insurance carriers in North America and Europe.

This investment is the second acquisition by MphasiS in the Insurance industry vertical, after acquiring AIG Software Systems Private Limited, the AIG captive subsidiary in India, in 2009. With the acquisition of Wyde, MphasiS can help customers transform their business across the entire insurance value chain.

EMPLOYEES

At MphasiS, we are striving to create a strong winning culture, driven by values and augmented by capability. Our people and leadership practices have all been aligned to enable this end objective. We have been successfully building a committed workforce which lays emphasis on the MphasiS value system even while sporting a relentless winning attitude and focusing on realization of organizational goals.

Our people management practices are getting structured towards inverting the traditional hierarchical pyramid and putting power in employees' hands. All our processes are being simplified with the objective of making the life of the employee easier by treating them as responsible adults. Our career progression framework provides them greater control over their future and growth at MphasiS. Our training strategy too is centered around building the requisite competencies for the growing employee population. The Mblaze program, an interactive workshop that focuses on foundational competencies and values, was delivered to more than 25,000 employees.

We covered a wide cross-section of developmental needs across behavioral, technical, domain, sales and leadership competencies. The focus on training this year has resulted in us providing 50 hours of training per employee.

We strongly believe that empowerment of those closest to the customer and of our people, across all roles, will create the maximum positive impact on our performance. Hence, we have introduced the Front Line Manager (FLM) program, giving more authority, responsibility and visibility to our front line managers in all units. A carefully constructed training roadmap for the Frontline Managers equips them to excel in their enhanced roles.

Talent Management has emerged as another key differentiator for MphasiS. Through various concerted initiatives, we have been able to create a healthy leadership pipeline at all layers of employees.

The Company, in order to nurture and retain its top talent and high potential employees, has set in place programs such as the Executive Talent Pool, Future Leader Program, Aarambh and the Leadership Talent Pool at different levels of the organization. These programs aim to train, coach and groom the next line of leadership to take on the challenges that come from an expanding and ambitious business such as ours. The top talent amongst the target groups are inducted into these talent pools after a stringent identification process. As part of these programs, the leaders go through a series of assessment, development interventions and coaching. The success of the programs is clearly evident from the induction of leaders from these talent pools into some of the critical positions across the Company.

Our uniquely designed Rewards and Recognition program reinforces our focus on inculcating a Winning Culture based on a strong value system. Employees get rewarded for delivering exceptional performances while living by the MphasiS values. This is capped with an Annual Awards program, where we identify the Heroes of MphasiS and celebrate them throughout the year.

The total employee strength grew from 39,962 employees on 31 October 2010 to 40,426 employees on 31 October 2011.

EMPLOYEES STOCK OPTION PLAN AND RESTRICTED STOCK UNITS PLANS

Your Company's Employee Stock Option Plan is administered through the BFL Employees Equity Reward Trust and the Restricted Stock Units Plans are administered through MphasiS Employees Benefit Trust.

Grants were made during the year under the Restricted Stock Units Plan 2010 and Restricted Stock Units Plan 2011. As a gesture of appreciation for their contribution in attaining the "One Billion Dollar Revenue Mark", the Company introduced the latter plan, under which it granted, on 1 April 201 1, 10 Restricted Stock Units to each eligible employee, entitling them to 10 equity shares of the Company.

In addition to the Restricted Stock Unit Plans, your Company currently has four stock option plans in operation, viz., ESOP 1998 Plan (Version I and II), ESOP 2000 Plan, ESOP 2003 Plan and ESOP 2004 Plan. Since July 2006, the Company has not granted any options to its employees under these Plans.

The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is annexed to this Report.

The Board of Directors of the Company, in its meeting held on 30 November 2011, has proposed to institute MphasiS Employees Stock Option Plan 201 2 (ESOP 201 2) with the underlying shares not exceeding 2,000,000 equity shares. This is done with a view to reward key managerial talent in line with the shareholders return and to encourage value creation and value sharing with such key employees. The options are proposed to be granted at market price as per the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The ESOP 201 2 would conform to applicable SEBI guidelines and applicable provisions of the Companies Act, 1956. In line with the provisions of the Act, the Company has sought Members' approval of this proposal by means of postal ballot.

COMMUNITY OUTREACH

Corporate Social Responsibility

The Company attaches highest importance to Corporate Social Responsibility (CSR) and believes that CSR is not just philanthropic giving, but is also about values of empathy and honoring commitments. It is also about setting standards where quality of service and benefit goes directly to the beneficiary, especially those most marginalized.

The Company works with the voluntary sector in implementing projects in the communities that we live and work in. Further the Company seeks to involve employees, clients, and other stakeholders, and encourage them to actively contribute their skills, time and expertise to such initiatives in the three focus areas of Education, Employability and Entrepreneurship development.

Amongst others CSR initiatives, the Company had undertaken training two villages on sanitation and hygiene, including constructing the toilet facilities, training and employment of 1 20 youth with disabilities and imparting of skill based training to semi-educated youths in rural areas.

Through its CSR, MphasiS this year entered into supporting Vidya Poshak's nurture merit program. Under this program, MphasiS provides scholarship for higher education to 50 SC/ST students. Overall, it has been supporting education of over 2,000 children across Karnataka, Maharashtra and Uttar Pradesh.

Prevention of Sexual Harassment Policy

The Company has a Policy for the Prevention of Sexual Harassment since 2008. The Policy is implemented by a Complaints Committee and Executive Committee. The Chairperson and Co-Chairperson are both external eminent women representing NGO's and with experience in the area for the Prevention of Sexual Harassment in the workplace. The Complaints Committee, among other things, administers the policy, investigates cases, recommends action and undertakes preventive activities in the Company.

Prevention of Sexual Harassment Awareness Campaign is conducted regularly across all MphasiS locations.

GREEN INITIATIVE OF MINISTRY OF CORPORATE AFFAIRS

MCA has implemented "Green Initiative in the Corporate Governance" vide Circular Nos. 17/2011 dated 21 April 2011 and 1 8/201 1 dated 29 April 2011 enabling electronic delivery of Notices for General Meetings, Annual Report containing Balance Sheet, Profit & Loss Account, Auditor's Report, Directors' Report and other communications to the members through e-mail.

With an intent to participate in the Green Initiative and in compliance with the provisions of the circular mentioned herein the Company proposes to send such documents in electronic form to the e-mail addresses of the members as available with the Depositories. The e-mail addresses indicated in the respective Depository Participant (DP) accounts, deemed to be the registered e-mail address of the members and shall be used for serving Notices for General Meetings, Annual Reports and other communications. Full text of the above said documents will be also be displayed on the website of the Company, www.mphasis.com and all other requirements of the aforesaid MCA circular will be duly complied with.

Members holding shares in electronic mode are therefore requested to keep their e-mail addresses updated with the Depository Participant. Members holding shares in physical mode are also requested to provide their e-mail addresses, quoting their Folio Number, to our Registrar and Share Transfer Agent, in the form provided by the Company. However, physical copy of the Annual Report would be provided to such shareholder upon request.

SUBSIDIARIES

As on 31 October 2011, your Company had subsidiaries in Australia, Belgium, Canada, France, Germany, India, Indonesia, Ireland, Mauritius, The Netherlands, Peoples Republic of China, Poland, Singapore, Sri Lanka, Tunisia, The United Kingdom and The United States of America.

As per Section 212 of the Companies Act, 1956, companies are required to attach the Directors' Report, Balance Sheet & Profit & Loss Account of their subsidiaries. The Ministry of Corporate Affairs vide its Circular No. 2/2011 dated 8 February 2011 has provided an exemption to companies from complying with Section 212. Your Company is in compliance of the section read with the provisions of the circular and will not be attaching the accounts of the subsidiaries. Your Company has presented the consolidated financial statements of the Group. The required information regarding each subsidiary is annexed to the this Report.

The annual accounts of subsidiary companies are available for inspection at the registered office of the Company and upon written request from any shareholder, your Company will send a copy.

DIRECTORS

The Board had, in its meeting held on 15 September 2011, subject to the approval of the shareholders, approved the re-appointment of Mr. Balu Ganesh Ayyar as the Chief Executive Officer (CEO) of the Company for a period of 5 years with effect from 29 January 2012 on revised terms. The necessary resolution for approving his re-appointment together with the terms thereof is in the notice of the Annual General Meeting. In November 2011, Mr. Ayyar received the Asia Viewer's Choice Award in the 10th CNBC Asia Business Leader Awards 2011.

Your directors regret to report the sad demise of Mr. juergen Reiners on 7 May 2011. Mr. Reiners joined the Board in July 2010. He held a variety of international senior management position at HP and other companies. His expertise and contribution in the Board were noteworthy. The Board places on record its grief over the sudden demise and expresses its gratitude for the contributions.

Mr. Prakash jothee resigned from the Board effective 14 November 2011. Mr. jothee had joined the Board in February 2009. The Board wishes to place on record its appreciation for the valuable services rendered by Mr. jothee during his tenure as a director.

Further, in accordance with the Articles of Association of the Company, Dr. Friedrich Froeschl and Mr. Balu Doraisamy will retire by rotation and are eligible for re-election. The Board of Directors recommends their re-election.

The profiles of the present Directors of your Company are provided in the Annual Report.

DIRECTORS' INTEREST

There was no interest of the Directors in the share capital of the Company as at 31 October 2011. No Director was materially interested in any contracts or arrangements existing during or at the end of the financial year that was significant in relation to the business of the Company. No director holds any shares or stock option in the Company as on 31 October 2011 except Mr. Balu Ganesh Ayyar, Chief Executive Officer, who holds 17,01 0 Restricted Stock Units of the Company.

SIGNIFICANT SHAREHOLDINGS

The following shareholders held more than 5% of the Company's issued share capital as at 31 October 2011:

Name of the Shareholder Percentage Owned

Hewlett Packard Corporation through its wholly owned subsidiaries 60.52% (EDS Asia Pacific Holdings, EDS World Corporation (Far East) & EDS World Corporation (Netherlands))

Aberdeen Asset Managers Limited A/c Aberdeen Global Indian Equity Fund 7.82%

DIRECTORS' RESPONSIBILITY STATEMENT

Information as per Section 217(2AA) of the Companies Act, 1956 is annexed and forms part of the Report.

STATUTORY AUDITORS

M/s. S.R.Batliboi & Co. (Registration No. 301003E), Chartered Accountants, have expressed their willingness to continue in office and a resolution proposing their re-appointment at remuneration to be fixed by the Board of Directors and billed progressively, is submitted at the Annual General Meeting.

As regards the observation made by the Auditors, your directors would like to clarify that the delays in remittance of service tax dues were on account of certain legal positions adopted by the Company as regards discharge of liability of service tax.

PARTICULARS OF EMPLOYEES' REMUNERATION

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report. However, in terms of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.

In terms of the Notification No.G.S.R.21 2(E) dated 24 March 2004 issued by the Department of Company Affairs, Ministry of Finance, Information Technology Companies have been exempted from providing the particulars of employees including their remuneration, if they have been posted to or are working in a country outside India.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company's operations involve low energy consumption. MphasiS is focused on conserving energy. Three key facilities have been awarded ratings by Bureau of Energy Efficiency, Government of India (BEE). Two facilities have been awarded rating of 3 star and one facility has been awarded rating of 5 star. These ratings are nationally accepted industry benchmark and MphasiS has been the twelfth Company in India to be certified by BEE.

Particulars relating to technology absorption are not applicable. Information relating to foreign exchange earnings or outgo during the year under review is as follows.

(a) Activities relating to export

Export of IT & ITES services to Americas, Europe, Asia and Australia

(b) Initiatives taken to increase the exports

Marketing efforts are being made through the subsidiaries and branches to increase the exports. The Company's M&A programme also contributes to the increase the foot print in the international market

(c) Development of new export market for product and services

Marketing efforts are being made in the emerging markets like Africa, Indonesia, Sri Lanka etc.

(d) Total Foreign Exchange Used (Rs. million)

7,204 (Standalone Financial Statements)

(e) Total Foreign Exchange Earnings (Rs. million)

30,057 (Standalone Financial Statements)

DEPOSITS

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

ACKNOWLEDGMENTS

Your Directors record their appreciation of the contribution made by the employees at all levels, who enabled the Company to perform well in the market place.

Your Directors acknowledge with thanks the continued support and valuable co-operation extended by the business constituents, investors, vendors, bankers and shareholders of the Company. Your Directors wish to thank Hewlett-Packard Corporation for their continued support. They also wish to place on record their appreciation for the support from the Software Technology Parks of India, the Department of Electronics, the Government of India, Governments of Karnataka, Maharashtra, Gujarat, Uttar Pradesh, Madhya Pradesh, Chattisgarh, TamilNadu, Pondicherry, Orissa and Andhra Pradesh, Reserve Bank of India, other governmental agencies and NASSCOM.

For and on behalf of the Board of Directors

Bangalore FRIEDRICH FROESCHL

12 January 2012 Chairman


Oct 31, 2010

We have pleasure in presenting to you the Nineteenth Annual Report of your Company for the financial year ended 31 October 2010.

CONSOLIDATED FINANCIAL PERFORMANCE

(Rs. million)

Particulars Year Ended Year Ended 31 October 2010 31 October 2009

Revenues 50,365 42,639

Cost of Revenues 35,007 28,793

Gross Profit 15,358 13,846

Operating Profit 11,011 9,252

Profit Before Taxation 12,099 9,728

Net Profit 10,908 9,087

Provision for Proposed Dividend 840 733

Tax on Dividend 140 125

Transfer to General Reserve 997 837

Transfer to Capital Redemption Reserve 5 -

A detailed analysis of performance is available in the section headed Management Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report.

DIVIDEND

Your Directors are pleased to recommend a final dividend of Rs.4.00 per equity share of Rs.10 each for the year ended 31 October 2010, subject to your approval at the ensuing Annual General Meeting.

OUTLOOK

The year 2009 - 2010 reflected a comeback for the global economy in general and Indian economy in particular. The western economies stowed-off a serious collapse but there continues to be an uncertainity about the future. This uncertainity results in business deferring investment decisions.

While emerging from the challenging environment, your Company has through relentless execution and sustained performance, delivered strong financial results with record EPS and EPS growth - the highest in the history of your Company. Your Companys EPS on a consolidated basis, for the year ended 31 October 2010 stood at Rs.52.00 as against Rs.43.45 in FY 2009. Your Company reported a stellar performance by crossing the "USD One Billion Revenue Mark". These results are a reflection of your Companys focus on execution.

Looking ahead at the next stage of growth, your Company has challenged the current model of operation. The new structure allows effectively growing the direct business as well as to further the partnered business with Hewlett Packard; decentralize and move closer to the Customer; increase overall organizational effectiveness; and incubate new business ideas and innovate.

Building long term and deep relationship with our customers and employees remains an on-going focus. Your Companys partnership with Hewlett Packard has played an important role in creating larger opportunities for growth and in success.

Your Companys efforts to maintain operational efficiencies and grow business through strategic and geographic expansion will continue. With proactive action to transform for the next phase of growth, your Company will strive to build an organization that is deeply aligned with customers and empowers employees.

SHARE CAPITAL

The Issued Share Capital of the Company as on 31 October 2010 stood at Rs.2,099 million (including Rs.1.48 million held by the BFL Employees Equity Reward Trust) and Reserves and Surplus of the Group stood at Rs.30,887 million. There has been an increase in the capital on account of allotments during the year consequent to exercise of stock options under stock option plans of the Company and release of a few bonus shares, earlier kept under abeyance.

CORPORATE GOVERNANCE

A note on corporate governance and the auditors certificate on corporate governance are annexed to this Report.

OTHER DEVELOPMENTS

Mergers

Eldorado Computing Inc, USA

The Company had in March 2005, acquired Eldorado Computing Inc., a US based healthcare benefits management solutions company to strengthen footprint in US and enter in the healthcare insurance and payment market. Considering the operational synergy and administrative convenience, the Board had during the year approved merger of Eldorado Computing Inc. with MphasiS Corporation, USA. Accordingly, the said entity is merged with MphasiS Corporation, USA effective 1 March 2010.

MphasiS FinSolutions Private Limited

Your Company had during 2008-2009, to further establish its presence in insurance solutions, acquired AIG Systems Solutions Private Limited (since name changed to MphasiS FinSolutions Private Limited), a subsidiary of American International Group Inc, USA. Further to this, considering the operational synergies, the Board approved amalgamation of MphasiS FinSolutions Private Limited with the Company. Pursuant to a Scheme of Merger approved by the High Courts of Karnataka and Madras, dated 5 July 2010 and 17 September 2010, respectively, the merger of MphasiS FinSolutions Private Limited was consummated effective 1 November 2009 and the accounting to this effect has been carried out as per the Court Orders.

Acquisitions

Fortify Infrastructure Inc, USA

Remote Infrastructure Management (RIM) is one of the fastest growing segments in the Infrastructure Services Market. In order to give impetus to the direct ITO business with a focus on the SME segments, the Company acquired Fortify Infrastructure along with Inc. its wholly owned subsidiaries, Fortify North America Inc. and Wide Area Management Services Inc. Fortify is a USD 20 million company headquartered in Santa Clara, California, USA with over 20 customers for Remote = Infrastructure Management (RIM) based services in the mid market segment. The acquisition is expected to augment the capabilities of your Company in Infrastructure Services and enable the Company to move towards an offshore development model and further provide synergetic operational integration. Further to the acquisition, Fortify Infrastructure Services Inc. has been renamed as "MphasiS Infrastructure Inc."

Setting up of off-shore delivery centres

Considering the need to move to low cost delivery centres and counter the margin pressures, your Company evaluates its locational strategy and enhances its off shore delivery centres. Accordingly, the Company has set up an off shore global delivery centre in Colombo, Sri Lanka and a Near Shore Delivery Center in Poland.

Your Company also opened its near shore integrated development and delivery centre in Australia at the University of Wollongong. The strategic location of the centre has enabled your Company to work closely with the University of Wollongong on a range of initiatives including training, recruitment and research and development in the Information and Communications Technology (ICT) space.

The setting up of these new global delivery centres spells opportunity and is an important milestone in your Companys future journey.

EMPLOYEES

Your company holds its employees to the highest standards of ethics and compliance. To this effect, we have instituted our Winning Culture-the MphasiS Values System that governs our actions and decisions in all aspects of work. We are dedicated to driving a value based approach to work and building an organization that values learning and a talent hierarchy.

Your Company, to nurture and retain its top talent and high potential employees has set in place programs such as the Executive Talent Pool and the Leadership Talent Pool at different levels of the organization. These programs aim to " train, coach, and groom the next line of leadership to take on the challenges that come from our expanding and ambitious business plans. We also strongly believe that empowerment of those closest to the customer will deliver good results. Hence, we have introduced the Front Line Manager (FLM) program, giving more authority, responsibility and visibility to our front line managers in all units. Learning is a key component to ensuring that our talent is ready to take advantage of the opportunities that will come our way. Your Company has invested extensively in "Reflections" the 360 degree feedback and self development program in addition to expanding the courses offered on our Learning Portal, your Company works diligently with all business units to identify specific programs that will make them more effective in their operations.

Your Company believes that good work should be rewarded and celebrated. Rewards and recognition are one of the key drivers to achieve a motivated and dedicated work force. We have institutionalized the rewards and recognition programs at MphasiS to cater to the various roles and responsibilities our employees perform. This is capped with an Annual Awards function, where we celebrate the Heroes of MphasiS.

Your Company also believes in giving to the communities it operates in and to this effect, we have setup the Employee Contribution Portal where employees can donate funds to authorized NGOs directly from their salaries, making donations transparent and easy.

The total employee strength grew from 33,524 employees on 31 October 2009 to 37,268 employees on 31 October 2010.

EMPLOYEES STOCK OPTION PLAN AND RESTRICTED STOCK UNITS PLANS

Your Companys Employee Stock Option Plan is administered through the BFL Employees Equity Reward Trust.

The information to be disclosed as per SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, is annexed to this Report.

Your Company currently has four stock option plans in operation, namely, ESOP 1998 Plan (Version I and II), ESOP 2000 Plan, ESOP 2003 Plan and ESOP 2004 Plan. Since July 2006, the Company has not granted any options to its employees. The Company has a Restricted Stock Units 2010 plan, in respect of which no RSUs have been granted to the employees. The said plan is administered through MphasiS Employees Benefit Trust.

The Board of Directors of the Company, in its meeting held on 22 November 2010, as a recognition of successfully crossing the "One Billion Dollar Revenue Mark" (subject to the approval of the shareholders and applicable laws) approved a Restricted Stock Units 2011 Plan. The proposed plan, approving each of the permanent employees of the Company and its subsidiaries, as at 1 November 2010, being granted 10 Restricted Stock Units entitling them to 10 equity shares of Rs.10 each of the Company at the end of the vesting period, which is one year from the date of grant. The shares are offered at a nil exercise price at the end of the vesting period. The shares are proposed to be acquired from the market through an employee welfare trust. The necessary resolution for the approval will be considered at the ensuing Annual General Meeting.

SUBSIDIARIES

As on 31 October 2010, your Company had subsidiaries in Australia, Belgium, Germany, India, Ireland, Mauritius, The Netherlands, The Peoples Republic of China, Poland, Singapore, Sri Lanka, the United Kingdom and the United States of America.

Your Company has received the approval from the Ministry of Corporate Affairs, New Delhi vide its letter No. 47/711/2010-CL-lll dated 19 November 2010 granting an exemption under Section 212(8) of the Companies Act, 1956 from attaching the audited accounts of the subsidiaries to the Annual Accounts of your Company, for the financial year ended 31 October 2010. Your Company, however, continues to publish the consolidated financial statements of the Group. Further, the information regarding each subsidiary with regards to capital, reserves, total assets, total liabilities, details of investment, turnover, profit before taxation, provision for taxation, profit after taxation and proposed dividend is given as an annexure to the Directors Report.

The Annual Accounts of subsidiary companies are available for inspection at the registered office of the Company and the details of the Annual Accounts would be hosted on the website of the Company.

DIRECTORS

The following Directors were appointed on the Board of your Company as additional directors effective 15 July 2010:

(i) Mr. Francesco Serafini

(ii) Mr. Balu Doraisamy

(iii) Mr. Juergen Reiners

(iv) Mr. Gerard Brassard

Pursuant to the provisions of Section 260 of the Companies Act, 1956, the additional directors hold office until the date of the ensuing Annual General Meeting. However, the Company has received a notice under Section 257 of the Companies Act, 1956, from a member along with the requisite deposit, proposing the candidatures of the additional directors to the office of directorship. Accordingly, necessary resolutions in relation to the appointment of directors are placed before the members at the ensuing Annual General Meeting. The Board of Directors recommends the appointment of the directors.

Dr. Friedrich Froeschl was elected as the Chairman of the Board of Directors and Mr. Francesco Serafini was elected as the Vice Chairman of the Board of Directors, vide resolution passed by the Board of Directors dated 15 July 2010.

The following Directors resigned during the financial year effective 15 July 2010:

(i) Mr. Andreas W Mattes

(ii) Dr. Jose De La Torre

(iii) Ms. Vinita Bali

(iv) Mr. Craig Wilson

(v) Mr. K M Suresh

Your Board wishes to place on record its appreciation for the invaluable services rendered by these Directors during their tenure.

Further, in accordance with the Articles of Association of the Company, Mr. Nawshir Mirza and Mr. Davinder Singh Brar will retire by rotation and are eligible for re-election. The Board of Directors recommends the re-appointment of the directors.

The profiles of the present Directors of your Company are provided in the Annual Report.

DIRECTORS INTEREST

The interest of the Directors in the share capital of the Company as at 31 October 2010 is provided herein. No Director was materially interested in any contracts or arrangements existing during or at the end of the financial year that was significant in relation to the business of the Company. Other than Mr. Davinder Singh Brar, who held 918 shares, no other director held any shares or stock option in the Company as on 31 October 2010.

SIGNIFICANT SHAREHOLDINGS

The following shareholders held more than 5% of the Companys issued share capital as at 31 October 2010:

Name of the Shareholder Percentage Owned

Hewlett Packard Corporation through its wholly owned subsidiaries, 60.55%

(EDS Asia Pacific Holdings, EDS World Corporation (Far East) and EDS World Corporation (Netherlands))

Aberdeen Asset Managers Limited A/c Aberdeen International India Opportunities Fund 5.26%

DIRECTORS RESPONSIBILITY STATEMENT

Information as per Section 217(2AA) of the Companies Act, 1956 is annexed and forms part of the Report.

AUDITORS

M/s. S.R. Batliboi & Co., Chartered Accountants (Registration No. 301003E), have expressed their willingness to continue in office and a resolution proposing their re-appointment at a remuneration to be fixed by the Board of Directors and billed progressively, is submitted for approval of the shareholders at the ensuing Annual General Meeting.

As regards the observation made by the Auditors, your Directors would like to clarify that the delays in remittance of service tax and value added tax dues were due to refinement in the Companys interpretation of applicable tax laws. Your Company has taken adequate steps to strengthen relevant processes.

PARTICULARS OF EMPLOYEES REMUNERATION

Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report. However, in terms of Section 219(l)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary and General Counsel and Head Global Ethics and Compliance at the Registered Office of the Company.

In terms of the Notification No.G.S.R.212(E) dated 24 March 2004 issued by the Department of Company Affairs, Ministry of Finance, Information Technology companies have been exempted from providing the particulars of employees including their remuneration, if they have been posted / working in a country outside India. Members desirous of getting these details may write to the Company for the information.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Companys operations involve low energy consumption. However, efforts to conserve energy will continue. Particulars relating to technology absorption are not applicable. Information relating to foreign exchange earnings or outgo during the year under review is provided in the financial statements forming part of this Annual Report.

DEPOSITS

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

ACKNOWLEDGMENTS

Your Directors would like to place on record their appreciation of the contribution made by the employees at all levels, who, through their competence, hard work, solidarity, co-operation, support and commitment have enabled the Company to achieve its strong growth.

Your Directors acknowledge with thanks the continued support and valuable co-operation extended by the business constituents, investors, vendors, bankers and shareholders of the Company. Your Directors wish to thank Hewlett Packard Corporation for their continued support. They also wish to place on record their appreciation for the support from the Software Technology Parks of India, the Department of Electronics, the Government of India, Governments of Karnataka, Maharashtra, Gujarat, Uttar Pradesh, Madhya Pradesh, Chattisgarh, Tamil Nadu, Pondicherry, Andhra Pradesh, Reserve Bank of India, other governmental agencies and NASSCOM.

For and on behalf of the Board of Directors

Bangalore FRIEDRICH FROESCHL

5 January 2011 Chairman

 
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