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Directors Report of Persistent Systems Ltd.

Mar 31, 2015

Dear Members,

The Directors are pleased to present the Twenty Fifth Annual Report of your Company along with the Audited Statement of Accounts for the financial year ended March 31, 2015.

Business overview and State of Company''s Affairs

Traditionally, your Company has focused on building software products and through the years has established market leadership position in outsourced product development. Working with leading product companies of the world has helped your Company identify and track next generation technology trends ahead of the market. Your Company focused on building expertise in cloud computing, analytics - especially big data, collaboration and mobility ahead of the market and today works with or has a partnership with all the leaders in these segments. In line with your Company''s strategy to provide full-lifecycle services, since 2011, your Company has partnered with platform technology leaders to establish sell-with partnerships to approach customers jointly.

Additionally, your Company has also established an IP business primarily by acquiring end-of-life and non-strategic products from your Company''s customers. To allow the IP group independent access to customers, during the year, your Company created an independent brand Accelerite (www.accelerite.com). Accelerite is a Persistent brand and looks and feels like a Silicon Valley product start-up.

Your Company''s business can be classified into three segments - account-led, platform-led and IP-led corresponding to outsourced services business, sell-with business and IP-led business respectively.

While working with enterprise customers acquired through sell-with partnership, your Company has observed that because of new technology there are two very distinct kinds of projects being planned in the enterprise. One set of projects can be classified as IT Modernization projects where the focus is on upgrading existing systems to improve efficiency. The other set of projects can be classified as digital transformation projects. Digital transformation projects are focused on changing business and engagement models with customers. Your Company was also able to observe that digital transformation projects can be best implemented with the product development lifecycle that is ingrained in your Company''s product development DNA. This has opened up a large new market for your Company. So far, your Company was focused on ISVs, companies whose business is software. Now, as more and more enterprises are becoming software driven businesses, every business which is keen on digital transformation is potentially a customer for your Company.

During the year under review, the Company''s revenue grew 13.3% year on year to Rs. 18,912.52 Million and profit after tax grew 16.6% to Rs. 2,906.31 Million on a consolidated basis. During the year, the services revenue grew 11.7% while the IP revenue grew 20.5% in INR terms on a consolidated basis.

The Financial Highlights reflecting the state of Company''s affairs are provided elsewhere in this Annual Report.

Talent Additions during the Year

Your Company continues to attract high caliber quality talent in the industry. During the financial year 2014-15, your Company recruited 1,824 employees on a consolidated basis consisting of regular employees, trainees / interns, consultants, business consultants, contract consultants consisting of (technical and non-technical) professionals. The Company attracts a steady stream of experienced US returned professionals that provides a very strong middle management group to your Company.

Your Company''s human resource strength as on March 31,2015 was 8,506 personnel (including trainees and associates) on a consolidated basis spread across 11 countries. The technical strength was 7,861 employees which comprised among others, 6,883 graduates (Engineers and Technicians), 895 post graduates and 26 Ph.Ds. on a consolidated basis.

The attrition rate increased from 14.4% in the previous year to 15.5% during the year. This increase in attrition was strategic and pre-planned in nature. There was also a significant increase in the distribution of overseas employees which now constitutes 9% of the total work force.

Your Company recruits fresh talent from various engineering colleges in India. During the year under report, your Company added a batch of 755 new graduates through campus; recruiting students with software background across your Company locations.

Fresh graduate recruitment is one of the most important sources of hiring the talent into your Company. In fact, it makes up close to one third of our total hiring during each financial year. Talented employees are the core of any IT company. At Persistent, we use Campus hiring as a platform to meet new career aspirants and to identify intelligent, committed youth, who can prove to be valuable assets for your Company in the future. With this motto in place, Persistent takes huge efforts to identify bright students through campus recruitment drives and to nurture them to acquire competencies relevant to our business.

1. On-Campus Recruitments - Each year, your Company visits local colleges and some top notch institutes such as IITs, BITS, and NITs to hire employees. Some of the prominent Campus recruitment initiatives include,

i. Lecture series by experts from your Company at selected colleges

ii. Seminars

iii. Project Competitions

iv. Felicitation of Academic Toppers

v. Online portal with technical content

vi. My Passion Challenge, a platform that pushes the limit and encourages selected students to brush up their concepts before they join your Company.

vii. Your Company also encourages students'' Involvement in certain Company''s events.

2. Off-Campus Recruitments - This recruitment strategy offers us the flexibility to align staffing sources with the business demand. Your Company strongly believes in nurturing ''Industry-Academia'' partnerships, which is why we have designed the following campus recruitment activities.

a. BE Projects - Under these projects, Mentors from your Company provide guidance to students for their projects. Till date, we have guided approximately 600 students from 170 projects. Many of these students have now joined Persistent.

b. Persistent Day - Students get a chance to visit Persistent facilities as an industrial visit and interact with the employees. Till date, 3,000 students have benefitted from this activity.

c. IIT Graduates - Persistent hires fresh graduates from renowned IITs for its Technical / Design related staffing requirements.

d. Internship Programs - Students from various local colleges are invited to do their internship and gain corporate experience at your Company. Later, these interns have a chance to be placed in your Company based on the business needs and their academic and internship performance.

Happy Persistent

Various initiatives were started in your Company to promote meritocracy and inclusivity. A special program called Ascent launched to recognize and nurture high performers in the organisation. A speical program called ''Ascent'' launced to recagnise and nurture high performers in the organisation. A three tier program has been created to groom current and future leaders of the Company. As a part of this program for middle managemnet, out of about 700 people, 33 employees were identified to undergo an intensive two year program to take-up leadership positions for future. About 90 employees were selected for year long ''ChangeMakers'' program, who were given exposure to different and key activities across the organisation. This group has also worked on various ideas and activities towards proposing various improvements and changes to the operational issues in the organisation.

There is a special focus to involve employees in the policy making process. A group called ''Policy Council'' was constituted which has been meeting regularly to examine the various policies and processes in the organsiation especially policies impacting employees and their day-to-day functions. The council has proposed several simplification and modification to policies which has also ensured improved engagement levels and ownership among employees.

The Employee welfare and engagement activities saw a lot of strength through the year. Various interesting initiatives were organized with a special focus on employees and their families. Events like Bring Kids to Office and Children''s Carnival need a special mention as they were greatly appreciated. The annual Pulse event marked the beginning of the 25th year of your Company, with employees and families participating with a lot of enthusiasm. Various technical engagement initiatives like Semicolons and iShare were greatly appreciated and a large number of employees participated in these initiatives.

Prerana, is the forum, for the women run by women in your Company had special focus on women in leadership during this year. A special mentoring program is launched for aspiring women to be nurtured to be future leaders. Various lectures by Women leaders were also arranged from time to time to motivate women in your Company. A special health event Urjaa which was a Surya Namaskar challenge saw very enthusiastic participation by employees across the globe which resulted in substantial contribution towards charity.

There were various activities held for employees in association with the Persistent Foundation to help employees contribute towards activities for the betterment of the society.

Continuous Learning

Persistent University is established as a centralized strategic function for driving ongoing skills development across your Company.

The University serves as a one-stop learning solution with offerings for employees at all levels to enhance their technical, business communication, management and behavioral skills, and includes the Entry Level Training Program, Role Based Training Program, Project request trainings, boot camps, management and leadership programs and organisational trainings. Employees can learn anytime-anywhere to keep abreast with the latest technologies and build the competitive edge. Multiple learning methodologies are offered, including in-class trainings, remote trainings, blended trainings, Massive Online Courses, in-house built self-learning and assessments for internal certification.

Employees can choose from a variety of courses using a combination of different learning methodologies, and create their own individual learning plan which is in line with the enterprise, project and individual aspirations.

Training details during the financial year 2014-15:

Your Company covered 88% of the employees through at least one training this year, and 81% employees passed at least one internal certification.

The total investment for In-Class training was 2,113 person months and totaling to 27,191 enrollments.

In addition, the total investment for online learning including in-house Massive Open Online Courses (MOOC) was 1,100 person months and totalling 12,000 enrollments.

Total enrollments for internal certifications were 10,000.

70 mid-management employees are undergoing training through the leadership programs viz. Arjuna or Leap.

Your Company also covered 2,100 executive level employees with Communication Enhancement Program this year.

Your Company also launched Full Stack Training to align employees for new technology requirements in the market and covered 150 employees in Q4.

Infrastructure

During the financial year 2014-15, the total built-up capacity owned by your Company in India was 1,15,478 m2 which is adequate for 8,800 people. During the year, your Company completed the civil work to upgrade the new builiding Bhaskar acquired in Goa.

The details of owned facilities of your Company are as under:

Location Year of Acquisition Total Built-up Total Seating Completion area (m2) Capacity

Pune

Kapilvastu 1994 202 35

Panini 1998 929 80

Bhageerath 2002 12,170 586

Aryabhata - Pingala 2007 31,680 2,618

Hinjawadi 2012 41,446 3,173

Goa

Charak 1997* 3,280 392

Bhaskar 2014 3,762 311

Nagpur

IT Tower 2003 3,708 352

Gargi and Maitreyi 2011 17,279 1,263

Grenoble, France 2000** 1,022 50

Total 1,15,478 8,860

* Company started to occupy this premises from October 2005 onwards.

** Company acquired this premises in August 2011 as part of the acquisition of the Grenoble team.

Awards and recognitions during the financial year 2014-15

During the financial year 2014-15, your Company continued its tradition of winning various awards and getting new recognitions. Your Company was a proud recipient of the following awards during the year:

1. DQ Live Business Technology Awards 2015 for ''Excellence in the Implementation & Use of Technology for Business Benefits in Analytics Category''

2. Runner-up Award by Computer Society of India (CSI) for Beyond Search: Enabling Digital Transformation.

3. Global Learn Tech Award for Learning Technologies Solution to Persistent Systems Limited.

4. Tata Institute of Social Sciences (TISS) LEAPVAULT CLO Awards Corporate University Persistent Systems.

5. South Asian Federation of Accountants (SAFA) - ''Best Presented Annual Report Awards 2013''.

6. ''Gold Award for Financial Performance, Corporate Governance, Social Responsibility, Environmental Responsibility and Investor Relations'' at The Asset Corporate Awards 2014 from The Asset, Asia''s leading issuer and investor-focused financial monthly publication for the fifth consecutive year.

7. League of American Communications Professionals (LACP), Florida, USA -

a. Gold Award for excellence within its Competition Class on the development of its Annual Report.

b. Silver Category - for the communications materials across all categories of competition of the past year with the production of its Annual Report.

c. Ranked 27th among Top 100 Communications Materials of 2014.

8. Awarded the ''Certificate of Recognition'' for the fifth consecutive year at 14th ICSI National Award for Excellence in Corporate Governance, 2014.

9. Awarded the ResearchBytes IC Award 2014 for ''Best Investor Communication Practice - Small Cap''

10. Global Learn Tech Award for Chief Learning Officer of the Year to Dr. Shubhangi Kelkar, Chief Learning Officer of the Company.

Corporate Social Responsibility

Sustainability, consciousness, actions on environment and climate change awareness and contributions to reducing social imbalance are the corner stones of your Company''s Corporate Social Responsibility (CSR).

Your Company conducts business in a sustainable and socially responsible manner. This principle has been an integral part of your Company''s corporate values for more than two decades. Your Company is committed to the safety and health of the employees, protecting the environment and the quality of life in all regions in which your Company operates.

Your Directors are convinced that your Company''s continued focus on sustainability will help to grow the long-term value of your Company and to realise our strategic priorities. CSR strengthens the motivation of your Company''s employees and their identification with your Company and thereby creates the basis for a strong global team.

To institutionalise the CSR initiative of your Company, your Company formed a Public Charitable Trust by the name ''Persistent Foundation'' in the financial year 2008-09.

During the year under report, Persistent Foundation was able to create excitement among employees to participate in socially relevant causes. With the cooperation of the employees of your Company, Persistent Foundation has set up several well-defined programs and activities for the promotion of education, health, community welfare. These activities are carried out through projects undertaken by the Foundation with the support of the employees and through reputed social organisations and institutions.

In addition to contributing Rs.50.97 Million to Persistent Foundation, your Company made donations of Rs. 0.99 Million to various charitable institutions directly. Thus, during the year under report, your Company donated Rs. 51.96 Million i.e. more than 2% of the Average Net Profits of the Company made during three immediately preceding financial years.

Report on CSR activities of your Company under the provisions of the Companies Act, 2013 during the financial year 2014-15 is given elsewhere in this Annual Report.

CSR Committee and CSR Policy

The Board of Directors of your Company has constituted the CSR Committee to help the Company to frame, monitor and execute the CSR activities of the Company under its CSR scope. The Committee defines the parameters and observes them for effective discharge of the social responsibility of your Company.

The Board of Directors of your Company has further approved the CSR Policy of the Company to provide a guideline for CSR activities of the Company. The CSR Policy is also uploaded on the Company''s website at - http://www.persistent.com/ investors/csr-at-persistent

The CSR Policy covers the following focus areas which the Company undertakes through its social initiatives:

1. Health

2. Education

3. Community Development

4. Assistance in Natural Calamities

The constitution of the CSR Committee is provided elsewhere in the Annual Report.

Financial results

The highlights of the financial performance on a consolidated basis for the year ended March 31,2015 are as under:

Particulars (Amount in USD Million (Amount in Rs. Million % except EPS and Book except EPS and Book Change Value) Value) 2014-15 2013-14 2014-15 2013-14

Total Income 323.83 279.17 19,850.67 17,001.69 16.76%

Profit before interest, deprec iation and taxes 78.98 73.12 4,841.62 4,453.07 8.73%

Finance Cost 0.05 0.01 3.37 0.53 535.85%

Depreciation 15.31 16.85 938.53 1,025.95 -8.52%

Provision for income tax 16.21 15.33 993.41 933.82 6.38%

Net profit for the year 47.41 40.93 2,906.31 2,492.77 16.59%

Transfer to general reserve 16.92 16.33 1,037.20 994.30 4.31%

Net worth* 224.96 203.93 14,055.29 12,223.44 14.99%

Earnings per share (EPS) (Basic)** 0.60 0.53 36.84 32.04 14.98%

Earnings per share (EPS) (Diluted)** 0.59 0.51 36.33 31.16 16.59%

Book value per equity share** 2.81 2.55 175.69 152.79 14.99%

[Conversion Rate USD 1 = Rs. 61.30 for Profit and Loss items; USD 1 = Rs. 62.48 for Balance Sheet items (financial year 2014-15) and USD 1 = Rs. 60.90 for Profit and Loss items; USD 1 = Rs. 59.94 for Balance Sheet items (financial year 2013-14)].

*Net worth = Equity Share Capital Reserves and Surplus (including Hedge Reserve).

**The basic and diluted earnings per share and Book value per share for the year ended March 31, 2014 have been restated pursuant to the issue of bonus equity shares in the ratio of 1:1 (One bonus equity share of Rs. 10 for every one equity share of Rs. 10 held).

The highlights of the financial performance on an unconsolidated basis for the year ended March 31,2015 are as under:

Particulars (Amount in USD Million (Amount in Rs. Million % except EPS and Book except EPS and Book Change Value) Value) 2014-15 2013-14 2014-15 2013-14

Total Income 218.30 200.11 13,381.69 12,186.74 9.81%

Profit before interest, depre ciation and taxes 64.98 65.75 3,983.35 4,004.44 - 0.53%

Finance Cost 0.05 0.01 3.37 0.53 535.85%

Depreciation 8.02 9.59 491.69 584.08 -15.82%

Provision for income tax 14.61 15.34 895.32 934.13 -4.15%

Net profit for the year 42.30 40.82 2,592.97 2,485.70 4.32%

Transfer to general reserve 16.92 16.33 1,037.20 994.30 4.31%

Net worth* 216.85 200.51 13,548.76 12,018.68 12.73%

Earnings per share (EPS) (Basic)** 0.54 0.52 32.87 31.94 2.91%

Earnings per share (EPS) (Diluted)** 0.53 0.51 32.41 31.07 4.31%

Book value per equity share** 2.71 2.51 169.36 150.23 12.73%

[Conversion Rate USD 1 = Rs. 61.30 for Profit and Loss items; USD 1 = Rs. 62.48 for Balance Sheet items (financial year 2014-15) and USD 1 = Rs. 60.90 for Profit and Loss items; USD 1 = Rs. 59.94 for Balance Sheet items (financial year 2013-14)]

*Net worth = Equity Share Capital Reserves and Surplus (including Hedge Reserve).

**The basic and diluted earnings per share and Book value per share for the year ended March 31, 2014 have been restated pursuant to the issue of bonus equity shares in the ratio of 1:1 (One bonus equity share of Rs. 10 for every one equity share of Rs. 10 held).

Material Events Occurring after Balance Sheet Date

There were no material changes and commitments affecting the financial position between the end of the Financial Year and the date of this Report.

Outlook and Priorities for FY 2015-16

Your Company''s strategy of enterprise digital transformation is getting widespread interest and has enabled your Company to work with enterprise customers, a much larger and hitherto untapped market for your Company. Your Company also made significant investments in IP and automation to execute well in this large market that has become available for your Company.

The technology roadmap for the next few years is robust. Infrastructure getting built on cloud, analytics, collaboration and mobility broadly classified as SMAC is well accepted and is mainstream. It is part of every Company''s modernization plan. Beyond SMAC, the emergence of sensors and connected devices have created data sources that are generating large amount of data that needs to be harnessed for effective operations. Technology advances have made machine learning based automation a reality. Technology disruptions and discontinuities create opportunities and your Company is well set to capitalize on those opportunities.

Liquidity

Your Company continues to maintain adequate amount of liquidity to meet its strategic and growth objectives. Your Company has ensured a balance between earning adequate returns on liquid assets and the need to cover financial and business risks. As at March 31,2015, your Company, on an unconsolidated basis, had cash and cash equivalents (including investments) amounting to Rs. 7,605.09 Million as against Rs. 5,838.11Million as at March 31,2014. The details of cash and cash equivalents are as below:

(In Rs. Million) Particulars As on As on March 31, 2015 March 31, 2014

Investment in Mutual Funds 5,904.60 4,071.36

Fixed Deposits with scheduled banks 438.99 523.93

Tax free Government Bonds (quoted) 775.76 775.76

Cash and Bank balances 485.74 467.06

Total 7,605.09 5,838.11

Bonus Shares - 2015

On the occasion of the Silver Jubilee Year, your Company issued bonus shares in the ratio of 1:1 i.e. (1 bonus share for every 1 equity share held in the Company) by capitalisation of the Securities Premium Account.

Post Bonus Issue, the Company''s paid-up capital is Rs. 80,00,00,000 (Rupees Eighty Crore only) consisting of 8,00,00,000 (Eight Crore) equity shares of Rs. 10 (Rupees Ten only) each.

Dividend

In January 2015, your Directors declared an Interim Dividend of Rs. 10 per share (pre bonus issue) on the paid-up equity share capital out of the net profits of your Company during the year under report. Total outflow on account of interim dividend payout including dividend distribution tax amounted to Rs. 479.98 Million.

Your Directors have recommended a Final Dividend of Rs. 2.50 per share for the Financial Year 2014-15 and a Special Silver Jubilee Dividend of Rs. 2.50 per share, on the expanded capital base post 1:1 Bonus Issue. The total outflow on account of final dividend and dividend distribution tax would amount to Rs. 481.43 Million. The payment of aggregate dividend of Rs. 5.00 per share (post bonus issue) is subject to the approval of the Members.

Thus, including the proposed final and special silver jubilee dividend, the effective dividend during the financial year 2014-15 is Rs. 20 per share on pre-bonus capital base. Thus the dividend already paid and recommended to the Members on a consolidated basis is Rs. 15 on pre-bonus shares and Rs. 5 on post bonus shares as against Rs. 12 for the financial year 2013-14. The total outflow on account of total dividend and dividend distribution tax would amount to Rs. 961.41 Million as compared to Rs. 561.58 Million in the previous year. The payout ratio for this year is 33.1% as compared to 22.5% in the previous year.

Out of the interim dividend declared in January 2015, Rs. 0.15 Million was unclaimed as on March 31, 2015.

Transfer to reserves

Your Company proposes to transfer an amount of Rs. 1,037.20 Million to the General Reserve and an amount of Rs. 594.36 Million is proposed to be retained in the Statement of Profit and Loss.

Fixed Deposits

In terms of the provision of Sections 73 and 74 of the Companies Act, 2013 read with the relevant rules, your Company has not accepted any fixed deposits during the year under review.

Appointment of statutory auditors

The Members of the Company at the Annual General Meeting of the Company held on July 26, 2014 appointed M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117365W/W-100018) and M/s. Joshi Apte & Co., Chartered Accountants (Firm Registration No. 104370W) as the Joint Statutory Auditors of the Company to hold such office till the conclusion of the Annual General Meeting in the calendar year 2019 and 2017, respectively.

M/s. Deloitte Haskins & Sells LLP and M/s. Joshi Apte & Co. have confirmed their eligibility and willingness to accept office, if appointment is ratified by the Members of the Company. Further, in terms of the Clause 41(1)(h) of the Listing Agreement, the statutory auditors of your Company are subjected to the Peer Review Process of the Institute of Chartered Accountants of India (ICAI). M/s. Deloitte Haskins & Sells LLP and M/s. Joshi Apte & Co. have confirmed that they hold a valid certificate issued by ''Peer Review Board'' of ICAI; and have provided a copy of the said certificate to your Company for reference and records.

The ratification of appointment of Statutory Auditors is subject to the approval of the Members of the Company.

Your Directors propose ratification of appointment of M/s. Deloitte Haskins & Sells LLP and M/s. Joshi Apte & Co. as the Joint Statutory Auditors of your Company.

Secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013, the Board of Directors had appointed M/s. SKO & Associates, Practising Company Secretaries as the Secretarial Auditors of the Company for the financial year 2014-15.

Accordingly, the Secretarial Auditors have given their report, which is annexed hereto as Annexure A. The comments of the Board on the observations of the Secretarial Auditors are given after Annexure A above.

The Board has re-appointed M/s. SKO & Associates, Practising Company Secretaries as the Secretarial Auditors of the Company for the financial year 2015-16.

Board Meetings

The details pertaining to the composition, terms of reference, etc. of the Board of Directors of the Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.

Directors and Key Managerial Personnel

In the last Annual General Meeting, the appointment of Mr. Mritunjay Singh as an Executive Director was confirmed and Ms. Roshini Bakshi was appointed as an Independent Director on the Board of the Company.

The appointment of all the 6 (Six) Independent Directors was made for a period of 5 (Five) consecutive years for a term up to conclusion of the 29th Annual General Meeting to be held in the calendar year 2019. Pursuant to the provisions of the Companies Act, 2013, they are not liable to retire by rotation.

At present, your Company has 6 (Six) Non-Executive Directors who are Independent Directors pursuant to the provisions of the Clause 49 of the Listing Agreement. Pursuant to Section 149 of the Companies Act, 2013, every listed company shall have at least one-third of its total strength of the Board of Directors as Independent Directors. Based on the present composition of the Board of Directors and the number of Independent Directors, the Company complies with this requirement.

In terms of Section 152 of the Companies Act, 2013 and Article 137 of the Articles of Association of your Company, Dr. Anand Deshpande, Director is liable to retire by rotation at the Twenty-fifth Annual General Meeting.

Dr. Anand Deshpande has confirmed his eligibility and willingness to accept the office of the Director of your Company, if confirmed by the Members at the ensuing Annual General Meeting. In the opinion of your Directors, Dr. Deshpande has requisite qualifications and experience which would be useful for your Company and would enable him to contribute effectively to your Company in his capacity as the Director of your Company.

In the opinion of your Directors, your Company will continue to benefit from Dr. Deshpande in his capacity as the Director and Chairman and Managing Director of your Company. Your Directors, therefore, recommend that the proposed resolution relating to appointment of Dr. Deshpande be passed.

In terms of the Listing Agreement, the Company conducts the Familiarisation Program for Independent Directors about their roles, rights, responsibilities in the Company, nature of the industry in which the company operates, business model of the company, etc., through various initiatives. The details of the same can be found at: http://www.persistent.com/ investors/familiarisation-programme

Declaration of Independence by Independent Director

The Board confirms that all Independent Directors of the Company have given a declaration to the Board that they meet the criterion of independence as prescribed under Section 149 of the Companies Act, 2013.

Committees of the Board

During the year under report, the Board of Directors of your Company reconstituted the Committees of the Board. The details of the powers, functions, composition and meetings of the Committees of the Board held during the year are given in the Report on Corporate Governance section forming part of this Annual Report.

Audit Committee

The details pertaining to the composition, terms of reference, etc. of the Audit Committee of the Board of Directors of the Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report. The recommendations of the Audit Committee were accepted by the Board of Directors of the Company from time to time.

Compensation and Remuneration Committee

The Compensation and Remuneration Committee of the Board (formerly known as ''Compensation Committee'') was constituted on April 23, 2004. In terms of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("SEBI ESOP Guidelines"), the Company re-constituted Compensation and Remuneration Committee for the administration and superintendence of the employee stock options schemes on October 4, 2007. The Committee was reconstituted by the Board of Directors at its meeting held in July 26, 2014.

The Board of Directors at its meeting held in April 2014 named this Committee as the Nomination and Remuneration Committee for the purpose of provisions under the Companies Act, 2013 with respect to the terms of the Compensation and Remuneration Committee of the Company covered under the statutory terms of the Nomination and Remuneration Committee.

The details pertaining to the composition, terms of reference, etc. of the Compensation and Remuneration Committee of the Board of Directors of the Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.

The Remuneration Policy of the Company is as follows:

Your Company pays remuneration by way of salary, benefits, perquisites and allowances (fixed component) and performance incentives (variable component) to its Executive Directors. Annual increments are decided by the Compensation and Remuneration Committee of the Board of Directors.

i. The remuneration of full time directors (Managing Director and Executive Director) is divided in the following proportion:

a. Fixed portion is 60% of the Annual Gross Salary.

b. Variable portion by way of Bonus is 40% of the Annual Gross Salary. The variable portion of the remuneration is payable in terms of the targets set for various parameters including consolidated revenue and consolidated net profits.

c. Such perquisites and benefits as authorised by the resolution passed by Members of your Company from time to time.

ii. The Independent Directors are entitled to payment of commission of a sum not exceeding 1% per annum of net profits and eligible Independent Directors are entitled for Employee Stock Options under ESOA - X Scheme of the Company which were granted to them before April 1,2014.

iii. The total managerial remuneration not to exceed 11% of the net profits of the Company and the total remuneration to the managerial persons not to exceed 10% of the net profits of the Company in accordance with section 197 of the Companies Act, 2013.

Nomination and Governance Committee

The Board of Directors at its meeting held in April 2014 named this Committee as the Nomination and Remuneration Committee for the purpose of provisions under the Companies Act, 2013 with respect to the terms of the Nomination and Governance Committee of the Company covered under the statutory terms of the Nomination and Remuneration Committee.

The details pertaining to the composition, terms of reference, etc. of the Nomination and Governance Committee of the Board of Directors of the Company and the meetings thereof held during the financial year are given in the Report on Corporate Governance section forming part of this Annual Report.

The appointment policy of the Company is as follows:

The Board of Directors decides the criterion for the appointment of new director on the Board from time to time. The criterion may include candidate''s expertise area, age, industry experience, professional background, association with other companies and such other things.

Once the criterions are determined, the Board directs the Nomination and Governance Committee to compile profiles of suitable candidates through networking, industry associations and business connects.

The Nomination and Governance Committee considers each and every profile on the decided parameters and shortlists the candidates. Shortlisted candidates are then interviewed personally or through tele-conference by the Members of the Committee.

Once the Committee is convinced about a candidate''s competency, his business acumen, commitment towards his association with the Company and his availability for the Company on various matters on time-to-time, it recommends the candidate to the Board of Directors for further consideration for appointment.

Employees'' remuneration

In terms of the provisions of Section 197(12) of the Act read with Rules 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annexure B of the Directors'' Report. Employee stock option plans Your Company has various stock option plans for its employees. Details of the stock options granted under various employee stock option schemes are annexed to this Report as Annexure C.

During the year under report, no employee has been granted stock options, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of your Company at the time of grant.

In line with the guidance note on "Accounting for employee share based payments" issued by the Institute of Chartered Accountants of India and the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 issued by the Securities and Exchange Board of India, your Company has calculated the employee compensation cost using the intrinsic value of stock options. Had the compensation been determined under the fair value method described in the guidance note, your Company''s net income and basic and diluted earnings per share would have reduced to the proforma amounts as shown in the table below:

(In Rs. Million) Particulars Year ended March 31,2015 March 31, 2014

Profit after tax 2,592.97 2,485.70

Add: Employee stock compensation under intrinsic value method 31.71 -

Less: Employee stock compensation under fair value method (34.51) (44.22)

Proforma profit 2,590.17 2,441.48

Earnings Per Share Basic

- As reported 32.87 31.94

- Pro forma 32.83 31.38

Diluted

- As reported 32.41 31.07

- Pro forma 32.38 30.52

Weighted average exercise prices and weighted average fair values of options:

The Binomial tree valuation model has been used for computing the weighted average fair value of the stock options granted during the financial year 2014-15 considering the following inputs:

Particulars March 31, 2015 March 31, 2014 Scheme XI Scheme XI

Weighted average share price (Rs. 632.32 NIL

Exercise Price (Rs. 5 NIL

Expected Volatility 35.08% NIL

Life of the options granted (Vesting and exercise period) 4 Years NIL

Dividend Yield 1% NIL

Average risk-free interest rate 7.8% NIL

Expected dividend rate 60% NIL

No new shares were granted to Independent Directors of your Company during this Financial Year. Shares held by Independent Directors of your Company as on March 31,2015 are as under:

Name of the Shares held Shares held Shares held Shares acquired Total Director (through (through (through through Bonus Shares exercise of allotment market Issue held vested Stock under a pre purchase / Options) IPO scheme) IPO

Ms. Roshini Bakshi Nil Nil Nil Nil Nil

Mr. Pradeep Bhargava 3,500 Nil Nil 3,500 7,000**

Mr. Sanjay Bhattacharyya 3,500 Nil Nil 3,500 7,000@

Dr. Anant Jhingran Nil Nil Nil Nil Nil

Mr. Prakash Telang 3,500 Nil 2,000 5,500 11,000*

Mr. Kiran Umrootkar Nil Nil Nil Nil Nil

"Shares held jointly with Mrs. Abha Bhargava @Shares are held jointly with Mrs. Rita Bhattacharyya ''Shares are held jointly with Mrs. Anjali Telang

During the financial year 2014-15, pursuant to the resolutions passed by the Compensation and Remuneration Committee of the Board of Directors by way of circulation, Independent Directors, employees including ex-employees exercised their stock options for shares which were already vested in their name. During this exercise, 5,34,321 (Five Hundred and Thirty Four Thousand Three Hundred Twenty One only) i.e. 1.34% Equity shares of the total Paid-up Capital (after considering issue of bonus shares in 1:1 ratio made by the Company) were transferred from PSPL ESOP Management Trust to the eligible employees including ex-employees at an aggregate value of Rs. 97.72 Million under various ESOP Schemes of your Company.

Your Company has ten ESOP Schemes under which options were granted to various permanent Independent Directors, employees and the employees of its subsidiary companies, details of which are given elsewhere in this Annual Report.

Your Company has established a new Persistent Employee Stock Option Scheme 2014 (PESOS 2014) for senior employees of the Company. The details of the Scheme are included in the Annexure C to this Report.

Shares Suspense Account

Your Company had opened an ''Unclaimed Securities Suspense Account'' on behalf of the allottees who were entitled to the equity shares under the initial public offering. Some of the equity shares could not be transferred to the respective allottees due to technical reasons. Such shares were held in ''Unclaimed Securities Suspense Account'', to be transferred to allottees as and when they approach your Company.

The Company strives to ensure that the Equity Shares are credited to the demat account of the respective Members of the Company. During the period under report, the Company voluntarily approached all the 24 Members for making the applications to the Company for the unclaimed securities. In response, your Company received applications from 5 (Five) Members for crediting the shares from the unclaimed securities held in the said Suspense Account to their respective accounts. The Equity Shares along with the Bonus Shares were credited to their respective demat accounts before March 31,2015.

The details of equity shares (after considering the issue of bonus shares in the ratio of 1:1) held in an ''Unclaimed Securities Suspense Account'' are as follows:

Sr. Particulars Details No.

1. Aggregate number of shareholders in the 24 Share holders Unclaimed Securities Suspense Account lying at the beginning of the financial year 2014-15

2. Aggregate number of the outstanding equity 960 Equity Shares shares in the Unclaimed Securities Suspense Account lying at the beginning of the financial year 2014-15

3. Number of shareholders who approached issuer 5 Members for transfer of shares from Unclaimed Securi ties Suspense Account during the financial year 2014-15

4. Number of shares transferred from Unclaimed 200 Equity Shares Securities Suspense Account during the financial year 2014-15

5. Aggregate number of shareholders in the Unclaimed 19 Share holders Securities Suspense Account lying at the end of the financial year 2014-15

6. Aggregate number of outstanding equity shares in 760 Equity Shares the Unclaimed Securities Suspense Account lying at the end of the financial year 2014-15

Note - Voting rights on the above mentioned equity shares are kept frozen till the rightful owner of such equity shares claim the shares.

Institutional Holding

As on March 31,2015, the total institutional holding in your Company stood at 37.7% of the total share capital. Particulars required as per Section 134 of the Companies Act, 2013

As per Section 134 of the Companies Act, 2013, your Company has provided the Consolidated Financial Statements as on March 31, 2015. Your Directors believe that the consolidated financial statements present a more comprehensive picture as compared to standalone financial statements. These documents will also be available for inspection during the business hours at the Registered Office of your Company and the respective subsidiary companies. A statement showing financial highlights of the subsidiary companies is attached to the consolidated financial statements.

The Annual Report of your Company, though does not contain full financial statements of the subsidiary companies, your Company will make available the audited annual accounts and related information of the subsidiary companies, upon request by any Member of your Company.

Consolidated financial statements

Consolidated financial statements of your Company and its subsidiaries as at March 31,2015 are prepared in accordance with the Accounting Standard 21 (AS - 21) on ''Consolidated Financial Statements'' issued by the Institute of Chartered Accountants of India, and form part of this Annual Report.

Subsidiary Companies, Associate Companies and Joint Ventures

The details of the subsidiaries and associates of your Company as on March 31,2015 are as under:

(In Rs. Million) Name of the Entity Status Period of Total Inicme Establishment As on March 31,2015

Persistent Systems, Wholly Owned October 2001 8,122.86 Inc., USA Subsidiary

Persistent Systems Wholly Owned April 2007 353.44 Pte. Ltd., Singapore Subsidiary (Co. Reg. No. 200706736G)

Persistent Systems Wholly Owned April 2011 395.20 France S.A.S., Subsidiary France

Persistent Systems Wholly Owned September 720.38 Malaysia Sdn. Bhd., Subsidiary 2013 Malaysia

Persistent Telecom Step-down subsidiary January 2012 1,059.86 Solutions Inc., USA (Wholly Owned Subsidiary of Persi stent Systems, Inc.)

CloudSquads, Inc., Step-down subsidiary February 2014 93.44 USA (Wholly Owned Subsidiary of Persi stent Systems, Inc.)

Sprint Telecom Associate Company March 2011 1.57 India Private Limited

Klisma e-Services Associate Company March 2012 - Private Limited

Name of the Entity Net Profit/(Loss) AS on March As on March As on March 31,2014 31,2015 31,2014

Persistent Systems, Inc., USA 5,715.41 372.11 27.78

Persistent Systems Pte. Ltd., Singapore (Co. Reg. No. 200706736G) 122.47 114.67 45.99

Persistent Systems France S.A.S., France 275.22 61.84 9.26

Persistent Systems Malaysia Sdn. Bhd., Malaysia 69.63 92.84 6.57

Persistent Telecom Solutions Inc., USA1, 263.51 (315.87) (60.78)

CloudSquads, Inc., USA 15.84 (3.20) (2.73)

Sprint Telecom India Private Limited 1.79 - -

Klisma e-Services Private Limited 2.18 (0.24) (5.84)

The Policy for determining material subsidiaries of the Company is available on the Company''s website at http://www. persistent.com/investors/policy-on-material-subsidiary

Particulars of Loans given, Guarantees given and Investments made

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report. (Refer notes 12, 14, 16, 19 and 41 of the standalone financial statements)

Related Party Transactions

The Policy to determine materiality of related party transactions and dealing with related party transactions as approved by the Board of Directors is available on the Company''s website at http://www.persistent.com/investors/policy-on-related- party-transactions.

During the year under review, the Company had not entered into any material transaction with any party who is related to it as per the Companies Act, 2013. There were certain transactions entered into by the Company with its foreign subsidiaries and other parties who are related within the meaning of Accounting Standard (AS - 18). Attention of Members is drawn to the disclosure of transactions with such related parties set out in Note No. 29 of the Standalone Financial Statements, forming part of this Annual Report. The Board of Directors confirms that none of the transactions with any of related parties were in conflict with the Company''s interest.

The related party transactions are entered into based on considerations of various business exigencies, such as synergy in operations, sectoral specialisation and the Company''s long-term strategy for sectoral investments, optimization of market share, profitability, legal requirements, liquidity and capital resources of subsidiaries.

All related party transactions are entered into on an arm''s length basis, are in the ordinary course of business and are intended to further the Company''s interests.

Corporate governance

A separate section on Corporate Governance with a detailed compliance report as stipulated under the Listing Agreement and any other applicable law for the time being in force forms an integral part of this Report.

Management discussion and analysis

Report on Management Discussion and Analysis as stipulated under the Listing Agreement and any other applicable law for the time being in force based on audited, consolidated financial statements for the financial year 2014-15 forms part of this Annual Report.

Business Responsibility Report

Report on Business Responsibility as stipulated under the Listing Agreement and any other applicable law for the time being in force describing the initiatives taken by the Management from an environmental, social and governance perspective forms an integral part of this Annual Report.

Conservation of energy, technology absorption, research and development, foreign exchange earnings and outgo

Your Company has made the necessary disclosures in this Report in terms of Section 134(3) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014. Your Company strives to conserve energy on a perpetual basis. Your Company has procured various energy saving devices and systems, which help in conserving energy. Bulk of the electric fixtures is equipped with electronic ballast which has resulted in significant savings in the energy cost.

Carbon management and sustainable development provide business with some of the greatest opportunities towards sustainability. Your Company reduced carbon footprints by taking energy conservation measures. Your Company continues to take various measures on energy saving.

Your Company has reduced excessive illumination levels to standard levels in all common areas by using switching or delamping and aggressively controlled lighting with new sensor technologies. Like in the previous year, your Company has continued to maximise the use of energy efficient flat monitors, VRV air-conditioning systems, solar energy for hot water, LED logo on buildings, LED lighting in common areas, installation of power management software for desktops, WattMiser system in AHUs, En-power Computer Management system and VFD Installation for Fresh Air AHU systems for conservation of energy. Your Company has used all LED light fittings at its Hinjawadi (E- building 2nd floor), Goa (Bhaskar) and Nagpur IT Tower facilities and have proposed to use the same in other facilities. Your Company has regulated working of lifts, vending machines, ventilation systems and water coolers in its premises.

Your Company has made efforts to ensure that there is no cool air leakage from its premises and has adopted measures to ensure optimum usage of air conditioners throughout its premises. A building automation system has been implemented to control working of air conditioners and to make them more power efficient. The power consumption of air conditioning has been reduced by 18% since the cold aisle containment work has been completed in Data center, Hinjawadi. VFD system has been installed for fresh air AHU''s in air-conditioning systems. As a part of your Company''s Green Movement, two 2.1 MW windmills are operational at Dhule and Sangli Districts of Maharashtra. During the financial year 2014-15, Dhule windmill generated 37,51,499 units and Sangali windmill generated 29,41,825 units.

Your Company has installed Ozone systems with air conditioning systems for balance locations. Modifications have been made in Data Centre arrangement to reduce power consumption. Ground water is used for landscaping to reduce consumption of treated water. A Sewage Treatment Plant was installed at the Gargi-Maitreyi, Aryabhata-Pingala facilities of your Company and recycled water through these plants is used for gardening.

Your Company celebrated ''Road Safety Week'' in the month January, 2015 at Nagpur to promote safety measures. Zero plate wastage week was another event celebrated in all PSL facilities.Your Company''s Bhageerath and Aryabhata-Pingala facilities are accredited under the Star Rating Scheme of BEE and all facilities of your Company have been recommended for ISO 14001:2004 & OHSAS 18001:2007 certifications. Further, your Company has been certified by American Global standards for ISO 14064-1:2006 (Green House Gases Inventory ) for all facilities in India. Best practices to preserve the environment are undertaken by your Company even during constructing its various premises by using crush sand, fly ash bricks and double glass unit, use of gypsum and recycled wood to protect the environment.

The Company has undertaken various initiatives to save energy. A rooftop solar power plant 250 KW is commissioned on the terrace of AR-PG on April 30, 2015 and it is expected to generate @ 4,15,000 units per year. The biogas plant has been made operational for kitchen waste at caterer kitchen at Hinjawadi and it will save 11 kg LPG/day. A sewage water treatment plants at Nagpur and Goa facilities has been installed and commissioned for the usage of its treated water in garden area. The chiller replacement work has been initiated at Bhageerath to ensure higher efficiency and usage of environment friendly gas in it. The Old UPS system is being replaced by higher efficiency UPS system to avoid losses. The replacement of UPS System work is in progress in all major facilities.

The capital investment on Energy Conservation Equipment during FY 2014-15 was Rs. 1,48,50,000 on setting up a solar power plant (i.e. a 250 KW Photo Voltaic Solar Power generation set-up).

It is your Company''s constant endeavor to conserve and save the Environment and has launched the Green Persistent Movement to support the same.

As power costs constitute an insignificant part of the total expenses, the financial impact of these measures is not material.

As your Company has not entered into technical collaboration with any entity, there are no particulars relating to technology absorption.

The particulars of expenditure on Research and Development on accrual basis are as follows:

(In Rs. Million) Particulars Year ended March 31, 2015 March 31, 2014

Capital expenditure 0.28 2.43

Revenue expenditure 61.96 37.18

Total research and development expenditure 62.24 39.61

As a percentage of total income 0.47% 0.33%

The particulars of foreign exchange earnings and outgo, based on actual inflows and outflows are as follows:

(In Rs. Million) Particulars Year ended March 31, 2015 March 31,2014

Earnings 11,980.46 10,821.83

Outgo 2,654.43 1,806.21

Adequacy of Internal Financial Controls

The Board is responsible for establishing and maintaining adequate internal financial control as per section 134 of the Companies Act, 2013.

The Board has laid down policies and processes in respect of internal financial controls and such internal financial controls were adequate and were operating effectively. The internal financial controls covered the policies and procedures adopted by the Company for ensuring orderly and efficient conduct of business including adherence to the Company''s policies, safeguarding of the assets of the Company, prevention and detection of fraud and errors, accuracy and completeness of accounting records and the timely preparation of reliable financial information

Directors'' responsibility statement

The Directors state that:

1. In the preparation of the annual accounts, the applicable Accounting Standards have been followed and there is no material departure;

2. Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at March 31,2015 and of the profit of your Company for that year;

3. Your Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities, if any;

4. The annual accounts have been prepared on a going concern basis;

5. Your Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

6. Your Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Extract of Annual Return

Pursuant to the provisions of the Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual return of the Company for the financial year ended on March 31,2015 is provided in the Annexure D to the Directors'' Report.

Vigil Mechanism (Whistle Blower Policy)

The details of the vigil mechanism (whistle blower policy) are given in the Report on Corporate Governance forming part of this Annual Report. The Company has uploaded the policy on its website at http://www.persistent.com/investors/ whistle-blower-policy

Risk Management Policy

Report on Risk Management based on the risk management policy developed and implemented at the Company for the financial year 2014-15 forms part of this Annual Report.

Performance Evaluation of the Board, its Committees and Directors

Your Company conducted the annual performance evaluation of the Board, its various Committees and the Directors individually. This was conducted in March and April 2015 by an External Management Consultant and the findings of the evaluation were presented at the meeting of the Nomination and Governance Committee and the Board of Directors. Recommendations and suggested areas of improvement for the Board, its various committees and the individual Directors were considered by the Board.

Disclosure of Cost Audit

The Company had filed Form 23C for appointment of Cost Auditor relating to its activities of generation of electricity from windmill turbine under the Companies (Cost Audit Report) Rules, 2011. However, based on another Circular issued by the Ministry of Corporate Affairs (MCA), the Company claimed exemptions from the requirement of the Cost Auditor for the said purposes and accordingly had written a letter dated December 19, 2012 to MCA, Cost Audit Branch, for withdrawal of the appointment of the said Cost Auditor as well as cancellation of the Form 23C so filed. Reply to the said letter is still awaited from the concerned office of the MCA.

Listing with the stock exchanges

The Equity Shares of the Company are listed on BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE) since April 6, 2010.

Listing fees for 2014-15 have been paid to both BSE and NSE.

Secretarial Standards

The Company will comply with the Secretarial Standards as and when they are made effective.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has in place an Anti Sexual Harassment Policy in line with requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. Internal Complaints Committee(s) (ICC) has been set up across all its location in India to redress complaints received regarding sexual harassment. The cases reported to such Committee(s) are investigated by the respective Committee(s) members and the detailed report thereon is presented to the Board of Directors on a regular basis. During the year, 4 (Four) cases were reported to the Committee(s) and they were duly disposed off.

The Board confirms that as at March 31,2015, there were no pending cases of anti-harassment in the Company.

Other matters

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under report:

1. Neither the Managing Director nor the Whole-time Director of the Company receive any remuneration or commission from any of its subsidiaries.

2. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company''s operations in future.

Acknowledgments and appreciation

Your Board places on record the support and wise counsel received from the Government of India, particularly the Department of Electronics and Information Technology, the Ministry of Corporate Affairs, the Ministry of Finance, the Ministry of Commerce and the Reserve Bank of India throughout the financial year.

Your Board extends its sincere thanks to the officers and staff of the Software Technology Parks of India - Pune, Nagpur, Goa, Hyderabad, Bengaluru, Visakhapatnam Special Economic Zone, Andhra Pradesh, SEEPZ Special Economic Zone, Andheri, Mumbai, Central Excise and Customs Department, Department of Revenue, Income Tax Department, Department of Electronics, Director General of Foreign Trade, Director of Industries, Department of Shops and Establishments, Development Commissioners, Pune and Hyderabad, Regional Director of Western Region, Registrar of Companies, Maharashtra, Pune, Sales Tax Department, Securities and Exchange Board of India, High Court of Judicature of Mumbai, ICGL Goa, Goa Industrial Development Corporation, National Stock Exchange of India Limited, BSE Limited, Central Depository Services (India) Limited, National Securities Depository Limited, Pune Municipal Corporation, Maharashtra State Electricity Distribution Company Limited, Telangana (erstwhile Andhra Pradesh) State Electricity Board, Maharashtra Industrial Development Corporation, Bengaluru Municipal Corporation, Karnataka Industrial Development Corporation, Karnataka Telecom including BSNL, Mobile / Internet Service providers.

Your Board also extends its thanks to Axis Bank, Bank of India, Bank of Tokyo Mitsubishi, BNP Paribas, Citibank N.A., HDFC Bank, State Bank of India, Syndicate Bank, and its officials for extending their excellent support in all banking related activities.

Your Board places on record its deep sense of appreciation for the committed services of the associates of your Company at all levels.

Your Board thanks the investors and shareholders for placing immense faith in them.

Your Board takes this opportunity to express its sincere appreciation for the contribution made by the employees at all levels in your Company. The consistent growth was made possible by their hard work, solidarity, cooperation and support.

For and on behalf of the Board of Directors

Dr. Anand Deshpande Chairman and Managing Director DIN : 00005721

Pune, June 13, 2015


Mar 31, 2014

The Members,

The Directors are pleased to present the Twenty Fourth Annual Report of your Company along with the audited Statement of Accounts for the financial year ended March 31, 2014.

Business overview

Your Company specializes in building computer software products. Your Company''s business is organized with a focus on the following three areas: Products (IP Business), Platforms (Solutions Integration) and Services (Product Engineering). Your Company has decided to brand the product business separately from the Persistent brand and has named it ''Accelerite'' (www.accelerite.com). Accelerite will be headquartered in the Silicon Valley and will help your Company provide clarity – the Persistent brand is for product development and the Accelerite brand is for products.

Your company has organized the development and engineering teams around three strategies: Account-Led, Platform-Led and Product-Led. Further, Account-Led teams are organized as Named Accounts and Growth Accounts.

Driven by growth in the platform based solutions and IP led business, the consolidated revenue of your Company recorded an increase of 15.2% in the US Dollar terms and 28.9% in the Rupee term during the year under review. The consolidated EBIDTA increased by 28.4% and net profit after tax went up by 32.9% during the same period.

A detailed overview of the business is described in the Management Discussion and Analysis (MD&A) section of this report.

Strategic Acquisition of CloudSqauds, Inc.

Persistent Systems, Inc. (PSI), a wholly owned subsidiary of your Company acquired CloudSquads, Inc. (CloudSquads) through stock acquisition in February 2014. CloudSquads is a twenty member team with headquarters in the Silicon Valley and a development team in Pune. CloudSquads, Inc. deploys, integrates and runs social communities on all leading enterprise social platforms – Salesforce, Lithium and Jive. Capabilities of the CloudSquads team complement your Company''s software product development expertise. CloudSquads has built expertise in consulting for enterprises that aligns well to the collaboration business of the Company and extend your Company''s offerings to better serve existing and new ISV and enterprise customer base. They also have IP around connectors for social platforms.

New Branch Offices

During the period under report, your Company established new branch offices in Germany and in South Africa to expand business presence in new geographies as a part of your Company''s growth strategy to diversify in other parts of the world and to support customers there. Your Company also incorporated a wholly owned subsidiary in Malaysia named Persistent Systems Malaysia Sdn. Bhd. during the period under report.

Talent Additions during the Year

Your Company continues to attract high caliber quality talent in the industry. During the financial year 2013-14, your Company recruited 1,816 employees on a consolidated basis consisting of regular employees, trainees / interns, consultants, business consultants, contract consultants consisting of (technical and non-technical) professionals. The Company attracts a steady stream of experienced US returned professionals that provides a very strong middle management group to your Company.

Your Company''s human resource strength as on March 31, 2014, was 7,857 personnel (including trainees and associates) on a consolidated basis spread across 11 countries. The technical strength was 7,326 employees which comprised, among others, 6,257 graduates (Engineers and Technicians), 857 post graduates and 20 PhDs on a consolidated basis.

The details on the employee count are given below:

India Overseas Total

Opening headcount (March 31, 2013) 6,429 541 6,970

Additions 1,612 204 1,816

Attrition 858 71 929

Closing headcount (March 31, 2014) 7,183 674 7,857

The attrition rate reduced from 14.4% in the previous year to 13.4% during the year. There was also a significant increase in the distribution of overseas employees which now constitutes 9% of the total work force.

Your Company recruits from various engineering colleges in India for fresh talent. During the period under report, your Company welcomed a batch of 530 new graduates through campus; recruiting students with software background across your Company locations.

Fresh graduate recruitment has always been one of the most important sources of hiring the right talent into Persistent. It provides a platform for your Company to meet the aspirants and identify intelligent, committed youth, who will become valuable assets to the organization. In the knowledge industry, employees form the core of the organization and your Company take efforts to get the best talent through its campus recruitment drives. Persistent visits local colleges and top notch institutes such as IITs, BITS, and Regional Engineering Colleges to hire employees.

To promote "Industry-Academia" partnerships, our Campus Recruitment team had launched a program called Campus Connect, under which the following activities were conducted:

a. Tech Talk: Renowned speakers shared valuable insights on their area of expertise

b. Industry Visits (Persistent Day): Opportunities were given for students to visit the office premises and interact with the employees of your Company.

c. Faculty Development Program: Your Company''s technical experts conducted training programs for college faculties

d. BE Project: The engineering students in different colleges are provided guidance in their curriculum projects by Persistent mentors throughout the year

e. Guest Lectures: Your Company sends its technical folks / HR folks to share / deliver guest lectures at various engineering colleges across India.

f. IIT Grads: Your Company also hires fresh graduates from renowned IITs for Technical / Design requirements

g. Internship: Students from different local colleges are given an opportunity to gain hands on corporate experience

Happy Persistent

Your Company worked on the theme of "Building a Happy Persistent" for this year. Various initiatives were planned around this theme, to improve motivation and satisfaction levels of employees. During the period under report, your Company conducted several internal surveys, the findings from these surveys helped your Company address employee concerns and work on improvement areas. The mood indicators on eMee, our next generation performance appraisal system, were used very effectively to track the Happiness Index of your Company, most employees who expressed themselves were satisfied that they were noticed when they changed their mood indicator. As and where appropriate their concerns were addressed.

Various employee welfare activities such as sports and cultural events that were organised for and by the employees had participation at all levels. Our annual PULSE invoked great interest from employees at all levels, this is an event conducted at various locations where all employees from the security guards to the top management participate. The final event at various locations showcased cultural talent and vigour amongst the employees of your company.

In the financial year 2013-14, there was a major focus on women''s safety. GPS is installed on the vehicles which are being used to drop women employees who are required to stay in office beyond a certain time. This helps ensuring better safety for the employees of your Company, particularly the women employees. There were lectures conducted by DCP Crime from the Police Department to educate employees on the various safety measures that they should follow at all times. Demonstrations on self-defense techniques conducted.

This year as well your Company celebrated Women''s week in the first week of March 2014. Various events like sessions by doctors, cookery show, donation drive etc. were conducted. A street play was performed by employees to highlight some issues faced by women in the society which was very well received.

Continuous Learning

Your Company considers continuous learning as an important activity towards continued human resource development. In this endeavour, courses, seminars and conferences in technical and domain specific areas were conducted. Your Company has adopted the Massively Online Courses approach to enable ''Anytime Anywhere learning'' to accelerate the pace of training in your Company. The total investment in terms of person months of your Company was 1,100 in learning and development and totaling 12,000 enrollments (contributing 600 person months of online learning).

A Mentoring program to groom those who were interested was launched this year. Your Company also conducted training courses for the benefit of the employees in different areas such as leadership skills, team building, personal effectiveness and foreign languages. Sixty employees at the leadership level had recently undergone a year-long Arjuna program which was completed in December 2013. Similarly, there is a year-long Architect school that has been initiated to groom technical leaders to perform Architect''s role in future.

Infrastructure

During the financial year 2013-14, the total built-up capacity owned by your Company in India was 12,21,492 sq. ft. which is adequate to seat 8,700 people.

The details of owned facilities of your Company are as under:

Year of acquisition Total Built-up Area Total Seating Location / Completion (sq. ft.) Capacity

Pune

Kapilvastu 1994 2,169 35

Panini 1998 10,000 125

Bhageerath 2002 131,000 560

Aryabhata – Pingala 2006 341,000 2,550

Hinjawadi 2011 446,125 3,161

Goa

Charak 1997* 35,310 383

Bhaskar 2013 40,490 308

Nagpur

IT Tower 2003 39,915 361

Gargi and Maitreyi 2011 164,483 1,227

Grenoble, France 2000** 11,000 50

Total 12,21,492 8,760

* Company started to occupy this premises from October 2005 onwards

** Company acquired this premises in August 2011 as part of the acquisition of the Grenoble team.

Awards and recognitions during the financial year 2013-14

During the financial year 2013-14, your Company continued its tradition of winning various awards and getting new recognitions. Your Company was a proud recipient of the following awards during the year:

1. Named in ''Leader Category'' on 2014 IAOP Global Outsourcing 100 Service Provider List.

2. Recognized as a ''Global Service Business Leader'' for the third consecutive year in Global Services 100 List (GS100).

3. Named ''Top 200 Best Under a Billion Companies'' in Asia Pacific by Forbes India for its sustained financial performance.

4. Recognized by Computerworld as a ''2013 Computerworld Honors Laureate'' in the Emerging Technology category.

5. South Asian Federation of Accountants (SAFA) – ''Best Presented Annual Report Awards 2012''.

6. Received ''Gold Award for Corporate Governance, Social Responsibility, Environmental Responsibility and Investor Relations'' at The Asset Corporate Awards 2013 by The Asset, Asia''s leading issuer and investor-focused financial monthly publication.

7. Awarded the Golden Peacock Award for ''Excellence in Corporate Governance – 2013''.

8. Awarded for the third consecutive time the ''Silver Shield for the Excellence in Financial Reporting'' by the Institute of Chartered Accountants of India.

Corporate Social Responsibility

Sustainability, consciousness and actions on environment and climate change and awareness and contributions to reducing social imbalance are the corner stones of your Company''s Corporate Social Responsibility (CSR).

Your Company conducts business in a sustainable and socially responsible manner. This principle has been an integral part of your Company''s corporate values for the last two decades. Your Company is committed to the safety and health of the employees, protecting the environment and the quality of life in all regions in which your Company operates.

Your Directors are convinced that your Company''s continued focus on sustainability will help to grow the long-term value of your Company and to realize our strategic priorities. CSR strengthens the motivation of your Company''s employees and their identification with your Company and thereby creates the basis for a strong global team.

To institutionalise the CSR initiative of your Company, your Company formed a Public Charitable Trust by the name ''Persistent Foundation'' in the financial year 2008-09.

During the year under report, Persistent Foundation was able to create excitement among employees to participate in socially relevant causes. With the cooperation of the employees of your Company, Persistent Foundation has set up several well-defined programs and activities for the promotion of education, health, community welfare. These activities are carried out through projects undertaken by the Foundation with the support of the employees and through reputed social organisations and institutions.

In addition to contributing Rs. 22.46 Million to Persistent Foundation, your Company made donations of Rs. 0.94 Million to various charitable institutions directly. Thus, during the year under report, your Company donated Rs. 23.40 Million i.e. 1.25% of the consolidated net profit of the financial year 2013-14.

Report on CSR activities of your Company under the provisions of the Companies Act, 2013 during the financial year 2013-14 is given elsewhere in this Annual Report.

CSR Committee and CSR Policy

The Board of Directors of your Company has constituted the CSR Committee to help the Company to frame, monitor and execute the CSR activities of the Company under its CSR scope. The Committee defines the parameters and observes them for effective discharge of the social responsibility of your Company.

The Board of your Company has further approved the CSR Policy of the Company to provide a guideline for CSR activities of the Company.

The CSR Policy covers the following focus area which the Company undertakes through its social initiatives:

1. Health

2. Education

3. Community Development

4. Natural Calamities

The constitution of the CSR Committee is provided elsewhere in the Annual Report.

Financial results

The highlights of the financial performance on a consolidated basis for the year ended March 31, 2014 are as under:

Particulars (Amount in USD Million (Amount in Rs. Million % except EPS and except EPS and Book Change Book Value) Value)

2013-14 2012-13 2013-14 2012-13

Total Income 279.17 243.04 17,001.69 13,231.13 28.5%

Profit before interest, depreciation and taxes 73.12 62.69 4,453.07 3,413.10 30.5%

Finance Cost 0.01 0.01 0.53 0.36 47.2%

Depreciation 16.85 14.38 1,025.95 782.86 31.1%

Provision for income tax 15.33 13.84 933.82 753.70 23.9%

Net profit for the year before exceptional and prior 40.93 34.46 2,492.77 1,876.18 32.9% period items

Net profit for the year after exceptional and prior 40.93 34.46 2,492.77 1,876.18 32.9% period items

Transfer to general reserve 16.33 13.36 994.30 727.24 36.7%

Net worth* 203.93 187.61 12,223.44 10,182.55 20.0%

Earnings per share (EPS) (Basic) 1.05 0.89 64.07 48.62 31.8%

Earnings per share (EPS) (Diluted) 1.02 0.86 62.32 46.90 32.9%

Book value per equity share 5.10 4.69 305.59 254.56 20.0%

[Conversion Rate USD 1 = Rs. 60.90 for Profit and Loss items; USD 1 = Rs. 59.94 for Balance Sheet items (financial year 2013-14) and USD 1 = Rs. 54.44 for Profit and Loss items; USD 1 = Rs. 54.275 for Balance Sheet items (financial year 2012-13)] *Net worth = Equity Share Capital Reserves and Surplus (including Hedge reserve)

The highlights of the financial performance on an unconsolidated basis for the year ended March 31, 2014 are as under:

Particulars (Amount in USD Million (Amount in Rs. Million % except EPS and except EPS and Book Change Book Value) Value)

2013-14 2012-13 2013-14 2012-13

Total Income 200.53 188.39 12,212.44 10,255.81 19.1%

Profit before interest, depreciation and taxes 65.75 56.27 4,004.44 3,063.30 30.7%

Finance Cost 0.01 0.01 0.53 0.36 47.2%

Depreciation 9.59 10.97 584.08 596.95 -2.2%

Provision for income tax 15.34 11.90 934.13 647.90 44.2%

Net profit for the year before exceptional and prior 40.82 33.40 2,485.70 1,818.09 36.7% period items

Net profit for the year after exceptional and prior 40.82 33.40 2,485.70 1,818.09 36.7% period items

Transfer to general reserve 16.33 13.36 994.30 727.24 36.7%

Net worth* 200.51 185.36 12,018.68 10,060.44 19.5%

Earnings per share (EPS) (Basic) 1.05 0.87 63.89 47.12 35.6%

Earnings per share (EPS) (Diluted) 1.02 0.83 62.14 45.45 36.7%

Book value per equity share 5.01 4.63 300.47 251.51 19.5%

[Conversion Rate USD 1 = Rs. 60.90 for Profit and Loss items; USD 1 = Rs. 59.94 for Balance Sheet items (financial year 2013-14) and USD 1 = Rs. 54.44 for Profit and Loss items; USD 1 = Rs. 54.275 for Balance Sheet items (financial year 2012-13)] *Net worth = Equity Share Capital Reserves and Surplus (including Hedge reserve)

Outlook and Priorities for FY 15

Your Company is at the threshold of some exciting opportunities. To swiftly respond to these opportunities, your Company has identified the following priorities:

1. Customer Focus: It is important to provide customers an absolutely awesome customer experience. This will be the top priority for your Company during the year. Your Company proposes to be the force multiplier for customers and do what it takes to ensure their success.

2. Continued focus on Platform Technologies: Your Company will invest in platform technologies and continue to strengthen expertise in these areas and work with partners to scale as the market demand is starting to rapidly pick-up.

3. Your Company will continue to focus on enhancing the IP-portfolio.

4. Happy Persistent: Success with customers is possible only through the creative hard work of your Company''s team members. Your Company has focused on creating a Happy Persistent environment in the Company.

Liquidity

Your Company continues to maintain adequate amount of liquidity to meet its strategic and growth objectives. Your Company has ensured a balance between earning adequate returns on liquid assets and the need to cover financial and business risks. As at March 31, 2014, your Company, on an unconsolidated basis, had cash and cash equivalents (including investments) amounting to Rs. 5,838.11 Million as against Rs. 4,081.94 Million as at March 31, 2013. The details of cash and cash equivalents are as below:

(In Rs. Million)

Particulars As on March 31, As on March 31, 2014 2013

Investment in Mutual Funds 4,071.36 3,116.18

Fixed Deposits with scheduled banks 523.93 531.69

Tax free Government Bonds (quoted) 775.76 166.19

Cash and Bank balances 467.06 267.88

Dividend

In January 2014, your Directors declared an Interim Dividend of Rs. 8 per share on the paid-up equity share capital out of the net profits of your Company during the period under report. Total outflow on account of interim dividend payout including dividend distribution tax amounted to Rs. 374.39 Million.

Your Directors have recommended a final dividend of Rs. 4 per share for the financial year 2013-14. The total outflow on account of final dividend and dividend distribution tax would amount to Rs. 187.19 Million. The payment of final dividend of Rs. 4 per share is subject to the approval of the shareholders.

Thus, including the proposed final dividend, the total dividend recommended for the financial year 2013-14 would be Rs. 12 per share as compared to Rs. 9 per share in the financial year 2012-13. The total outflow on account of total dividend and dividend distribution tax would amount to Rs. 561.58 Million as compared to Rs. 419.32 Million in the previous year. The payout ratio for this year is 22.5% as compared to 22.3% from the previous year.

Out of the interim dividend declared in January 2014, Rs. 0.25 Million was unclaimed as on March 31, 2014.

Transfer to reserves

Your Company proposes to transfer an amount of Rs. 994.30 Million to the General Reserve and an amount of Rs. 929.82 Million is proposed to be retained in the Statement of Profit and Loss.

Fixed Deposits

In terms of the provision of Section 73 and 74 of the Companies Act, 2013 (earlier Section 58A of the Companies Act, 1956) read with the relevant rules, your Company has not accepted any fixed deposits during the period under review.

Appointment of statutory auditors

M/s. Joshi Apte & Co., Chartered Accountants and M/s. S. R. Batliboi & Co. LLP (formerly known as M/s. S. R. Batliboi & Co.), Chartered Accountants, the joint auditors of your Company retire at the Twenty Fourth Annual General Meeting.

M/s. Joshi Apte & Co. have confirmed their eligibility and willingness to accept office, if reappointed. Further, in terms of the Clause 41(1)(h) of the Listing Agreement, the statutory auditors of your Company are subjected to the Peer Review Process of the Institute of Chartered Accountants of India (ICAI). M/s. Joshi Apte & Co., Chartered Accountants have confirmed that they hold a valid certificate issued by ''Peer Review Board'' of ICAI; and have provided a copy of the said certificate to your Company for reference and records.

M/s. S. R. Batliboi & Co. LLP have communicated their unwillingness to continue as the auditors of the Company for the next term of Audit in view of the restructuring of their operations in India.

Your Company has further received an eligibility and willingness letter from M/s. Deloitte Haskins & Sells LLP, Chartered Accountants to conduct the audit of the Company for the next term of Audit along with a confirmation that they hold a valid certificate issued by the ''Peer Review Board'' of ICAI.

The appointment of Statutory Auditors is subject to the approval of the Members of the Company. A proposal to change the Joint Auditors of your Company from M/s. S. R. Batliboi & Co. LLP to M/s. Deloitte Haskins & Sells LLP, forms part of the Agenda of the forthcoming Annual General Meeting.

Your Directors propose appointment of M/s. Joshi Apte & Co. and M/s. Deloitte Haskins & Sells LLP as the Joint Statutory Auditors of your Company.

Directors

During the period under report, Mr. P. B. Kulkarni retired from the Directorship of the Board of your Company in July 2013 and Dr. Dinesh Keskar resigned from the Directorship of your Company because of increase in professional commitments due to his promotion to an important role in Boeing Asia. The Board places on record its appreciation and thanks to Mr. Kulkarni and Dr. Keskar for the immense contribution made by them during their tenure of directorship at the Company.

In terms of Section 152 of the Companies Act, 2013 (earlier Section 255 of the Companies Act, 1956) and Article 137 of the Articles of Association of your Company, Mr. Nitin Kulkarni, Executive Director is liable to retire by rotation at the Twenty Fourth Annual General Meeting. Mr. Kulkarni has communicated his unwillingness to be re-appointed for the next term of the directorship.

Considering the retirement plans of Mr. Nitin Kulkarni, Executive Director, the Board inducted Mr. Mritunjay Singh, Chief Operating Officer as an Additional Director (Executive Member of the Board) of the Company from June 15, 2014.

Mr. Singh has confirmed his eligibility and willingness to accept the office of the Executive Director of your Company, if confirmed by the Members at the ensuing Annual General Meeting. In the opinion of your Directors, Mr. Singh has requisite qualifications and experience which would be useful for your Company and would enable him to contribute effectively to your Company in his capacity as the Executive Director of your Company.

At present, your Company has 5 (Five) Non-Executive Directors who are Independent Directors pursuant to the provisions of the Clause 49 of the Listing Agreement. Pursuant to Section 149 of the Companies Act, 2013, every listed company shall have at least one-third of its total strength of the Board of Directors as Independent Directors. Based on the present composition of the Board of Directors and the number of Independent Directors, the Company complies with this requirement.

During this Annual General Meeting, it is proposed to confirm the appointment of all the present Independent Directors to bring their appointment in tune with the provisions of the Companies Act, 2013.

Pursuant to the provisions of the Companies Act, 2013, the period of appointment of Independent Directors shall be 5 (Five) consecutive years from the date of their appointment at Annual General Meeting and they are not liable to retire by rotation.

The Company has received notices under Section 160 of the Companies Act, 2013 (Section 257 of the Companies Act, 1956) proposing appointment of 5 (Five) Non-Executive Directors who are Independent Directors and Mr. Singh as Director of the Company at the ensuing Annual General Meeting. Consequent to appointment as a Director, they will occupy the position of Directors of your Company.

In the opinion of your Directors, your Company will continue to benefit from Mr. Singh as well as 5 (Five) Non-Executive Directors who are Independent Directors in their capacity as Director of your Company. Your Directors, therefore, recommend that the proposed resolutions relating to appointment of these Directors be passed.

The Nomination and Governance Committee of your Company is constantly on the look-out for able candidates to join the Board as Independent Directors. The Nomination and Governance Committee is discussing with potential lady candidates to join the Board and will nominate one before the September 30, 2014 deadline.

Committees of the Board

During the period under report, the Board of Directors of your Company reconstituted the Committees of the Board. The details of the powers, functions, composition and meetings of the Committees of the Board held during the year are given in the Report on Corporate Governance section forming part of this Annual Report.

Employees'' remuneration

In terms of the provisions of Section 134 of the Companies Act, 2013 [earlier Section 217(2A) of the Companies Act, 1956], read with the relevant rules, the names and other particulars of the employees are set out in the Annexure to the Directors'' Report. However, having regard to the provisions of first proviso to Section 134 of the Companies Act, 2013 [earlier Section 219(1)(b)(iv) of the Companies Act, 1956], the Annual Report excluding the aforesaid information, is being sent to all the Members of your Company and others entitled thereto. Any Member interested in obtaining such particulars may write to the Company Secretary of your Company.

Employee stock option plans

Your Company has various stock option plans for its employees. Details of the stock options granted under various employee stock option schemes are annexed to this Report as Annexure A.

During the year under report, no employee has been granted stock options, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of your Company at the time of grant.

In line with the guidance note on "Accounting for employee share based payments" issued by the Institute of Chartered Accountants of India and the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 issued by the Securities and Exchange Board of India, your Company has calculated the employee compensation cost using the intrinsic value of stock options. Had the compensation been determined under the fair value method described in the guidance note, your Company''s net income and basic and diluted earnings per share would have reduced to the proforma amounts as shown in the table below:

(In Rs. Million)

Particulars Year ended

March 31, 2014 March 31, 2013

Profit after tax 2,485.70 1,818.09

Add: Employee stock compensation under intrinsic value method - 0.94

Less: Employee stock compensation under fair value method (44.22) (105.57)

Proforma profit 2,441.48 1,713.46

Earnings Per Share Basic

- As reported 63.89 47.12

- Pro forma 62.75 44.40 Diluted

- As reported 62.14 45.45

- Pro forma 61.04 42.84

Weighted average exercise prices and weighted average fair values of options:

The Binomial tree valuation model has been used for computing the weighted average fair value of the stock options granted during the financial year 2013-14 considering the following inputs:

Particulars March 31, 2014 March 31, 2013

Scheme X Scheme X

Weighted average share price (Rs.) NIL 466.43

Exercise Price (Rs.) NIL 537.25 – 559.40

Expected Volatility NIL 35.28% - 39.00%

Historical Volatility NIL 31.52% - 61.52%

Life of the options granted NIL 7 years (Vesting and exercise period)

Dividend Yield NIL 1.00%

Average risk-free interest rate NIL 7.90% - 8.60%

Expected dividend rate NIL 50%

No new shares were granted to Independent Directors of your Company during this Financial Year. Shares held by Independent Directors of your Company as on March 31, 2014 are as under:

Name of the Director Shares held Shares held Shares held Total Shares held (through exercise (through allotment (through market of vested Stock under a pre IPO purchase / IPO) Options) scheme)

Mr. Pradeep Kumar Bhargava Nil Nil Nil Nil

Mr. Sanjay Kumar Bhattacharyya 1,750 Nil Nil 1,750

Dr. Anant Jhingran Nil Nil Nil Nil

Mr. Prakash Telang 1,750 Nil 2,000 3,750(1)

Mr. Kiran Umrootkar Nil Nil Nil Nil

(1) Shares are held jointly with Mrs. Anjali Telang

During the financial year 2013-14, pursuant to the resolutions passed by the Compensation and Remuneration Committee of the Board of Directors by way of circulation, Independent Directors, employees including ex-employees exercised their stock options for shares which were already vested in their name. During this exercise, 4,67,199 (Four Lakhs Sixty Seven Thousand One Hundred Ninety Nine only) i.e. 1.17% Equity shares of the total Paid-up Capital were transferred from PSPL ESOP Management Trust to the eligible employees including ex-employees at an aggregate value of Rs. 52.64 Million under various ESOP Schemes of your Company.

Your Company has ten ESOP Schemes under which options were granted to various permanent Independent Directors, employees and the employees of its subsidiary companies, details of which are given elsewhere in this Annual Report.

Your Company proposes to establish a new Persistent Employee Stock Option Scheme 2014 (PESOS 2014) for senior employees of the Company. The details of the Scheme and related resulations have been included in the Notice of the Annual General Meeting. The Board of Directors of your Company recommends the proposed resolutions for establishement of this Scheme for approval of the Members.

Shares Suspense Account

Your Company had opened an ''Unclaimed Securities Suspense Account'' on behalf of the allottees who were entitled to the equity shares under the initial public offering. Some of the equity shares could not be transferred to the respective allottees due to technical reasons. Such shares were held in ''Unclaimed Securities Suspense Account'', to be transferred to allottees if and when they approach your Company.

The details of equity shares held in an ''Unclaimed Securities Suspense Account'' are as follows:

Sr. Particulars Details No.

1. Aggregate number of shareholders in the Unclaimed Securities Suspense Account lying at 26 shareholders the beginning of the financial year 2013-14

2. Aggregate number of the outstanding equity shares in the Unclaimed Securities Suspense 520 Equity Shares Account lying at the beginning of the financial year 2013-14

3. Number of shareholders who approached issuer for transfer of shares from Unclaimed 2 Members Securities Suspense Account during the financial year 2013-14

4. Number of shares transferred from Unclaimed Securities Suspense Account during the 40 Equity Shares financial year 2013-14

5. Aggregate number of shareholders in the Unclaimed Securities Suspense Account lying at 24 Shareholders the end of the financial year 2013-14

6. Aggregate number of outstanding equity shares in the Unclaimed Securities Suspense 480 Equity Shares Account lying at the end of the financial year 2013-14

Note – Voting rights on the above mentioned equity shares are kept frozen till the rightful owner of such equity shares claim the shares.

Institutional Holding

As on March 31, 2014, the total institutional holding in your Company stood at 35.59% of the total share capital.

Particulars required as per Section 134 of the Companies Act, 2013

As per Section 134 of the Companies Act, 2013, your Company has provided the Consolidated Financial Statements as on March 31, 2014. Your Directors believe that the consolidated financial statements present a more comprehensive picture as compared to standalone financial statements. These documents will also be available for inspection during the business hours at the Registered Office of your Company and the respective subsidiary companies. A statement showing financial highlights of the subsidiary companies is attached to the consolidated financial statements.

The Annual Report of your Company, though does not contain full financial statements of the subsidiary companies, your Company will make available the audited annual accounts and related information of subsidiary companies, upon request by any shareholder of your Company.

Consolidated financial statements

Consolidated financial statements of your Company and its subsidiaries as at March 31, 2014 are prepared in accordance with the Accounting Standard 21 (AS - 21) on ''Consolidated Financial Statements'' issued by the Institute of Chartered Accountants of India, and form part of this Annual Report.

Subsidiary companies

The details of the subsidiaries of your Company as on March 31, 2014 are as under:

(In Rs. Million)

Name of the Entity Status Period of Total Income Net Profit/(Loss) Establis -hment As on March As on March As on March As on March 31,2014 31,2013 31, 2014 31, 2013

Persistent Systems, Wholly Owned October 2001 5,715.41 3,824.34 27.78 21.64 Inc., USA Subsidiary

Persistent Systems Wholly Owned April 2007 122.47 8.22 45.99 (5.29) ,Pte. Ltd., Singapore Subsidiary (Co. Reg. No. 200706736G)

Persistent Systems Wholly Owned April 2011 275.22 190.19 9.26 (33.10) France S.A.S. Subsidiary

Persistent Systems Wholly Owned September 69.63 N.A. 6.57 N.A.

Malaysia Sdn. Bhd., Subsidiary 2013 Malaysia

Persistent Telecom Step-down subsidiary January 2012 1,263.51 894.66 (60.78) 75.56 Solutions Inc., USA (Wholly Owned Subsidiary of Persistent Systems, Inc.)

CloudSquads, Inc., Step-down subsidiary February 2014 15.84 N.A. (2.73) N.A. USA (Wholly Owned Subsidiary of Persistent Systems, Inc.)

Corporate governance

A separate section on "Corporate Governance" with a detailed compliance report thereon forms part of this Annual Report.

Voluntary secretarial compliance certificate

Your Company annually obtains a certificate from a whole time Practicing Company Secretary on a voluntary basis for compliance of the provisions of the Companies Act, 1956 and the Companies Act, 2013. The same forms part of this Annual Report.

Management discussion and analysis

Report on Management Discussion and Analysis based on audited, consolidated financial statements for the financial year 2013-14 forms part of this Annual Report.

Business Responsibility Report

Report on Business Responsibility describing the initiatives taken by the Management from an environmental, social and governance perspective forms part of this Annual Report.

Conservation of energy, technology absorption, research and development, foreign exchange earnings and outgo

Your Company has made the necessary disclosures in this Report in terms of Section 134(3) of the Companies Act, 2013 (earlier Section 217(1)(e) of the Companies Act, 1956), read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988. Your Company strives to conserve energy on a perpetual basis. Your Company has procured various energy saving devices and systems, which help in conserving energy. Bulk of the electric fixtures is equipped with electronic ballast which has resulted in significant savings in the energy cost.

Carbon management and sustainable development provides businesses with some of the greatest opportunities towards sustainability. Your Company reduced carbon footprints by taking energy conservation measures. Your Company continues to take various measures on energy saving.

Your Company has reduced excessive illumination levels to standard levels in all common areas by using switching or de- lamping and aggressively controlled lighting with new sensor technologies. Like the last year, your Company has continued to maximise the use of energy efficient flat monitors, VRV air-conditioning systems, solar energy for hot water, LED logo on buildings, LED lighting in common areas, installation of power management software for desktops, WattMiser system in AHUs, En-power Computer Management system and VFD Installation for Fresh Air AHU systems for conservation of energy. Your Company has used all LED light fittings at its new premises at Bengaluru and Goa. Your Company has regulated working of lifts, vending machines, ventilation systems and water coolers in its premises.

Your Company has made efforts to ensure that there is no cool air leakage from its premises and has adopted measures to ensure optimum usage of Air Conditioners throughout its premises. A building automation system has been implemented to control working of air conditioners and to make them more power efficient. As a part of your Company''s Green Movement, two 2.1 MW windmills are operational at Dhule and Sangli Districts of Maharashtra. Your Company has installed Ozone systems with air conditioning systems for balance locations. Modifications have been made in Data Centre arrangement to reduce power consumption. Ground water is used for landscaping to reduce consumption of treated water. A Sewage Treatment Plant was installed at the Gargi-Maitreyi, Aryabhata-Pingala facilities of your Company and recycled water through these plants is used for gardening.

Your Company effectively manages waste by carrying out ''No Plastic Days'', shredding of paper, handing over e-Waste to authorized agencies of State Pollution Control Board and disposing of dry garbage on a daily basis to a NGO appointed by the Pune Municipal Corporation (PMC). Also, your Company has distributed 1,600 saplings till date and organizes ''No Printer Days'' to promote awareness amongst its employees.

Your Company''s Bhageerath and Aryabhata-Pingala facilities are accredited under the Star Rating Scheme of BEE and all facilities of your Company have been recommended for ISO 14001:2004 & OHSAS 18001:2007 certifications. Best practices to preserve the environment are undertaken by your Company even during constructing its various premises by using crush sand, fly ash bricks and double glass unit, use of gypsum and recycled wood to protect the environment.

It is your Company''s constant endeavor to conserve and save the Environment and has launched the Green Persistent Movement to support the same.

As power costs constitute an insignificant part of the total expenses, the financial impact of these measures is not material.

As your Company has not entered into technical collaboration with any entity, there are no particulars relating to technology absorption.

The particulars of expenditure on research and development (accrual basis) are as follows:

(In Rs. Million)

Particulars Year ended

March 31, 2014 March 31, 2013

Capital expenditure 2.43 -

Revenue expenditure 37.18 27.87

Total research and development expenditure 39.61 27.87

As % of total income 0.32% 0.27%

The particulars of foreign exchange earnings and outgo (accrual basis) are as follows:

(In Rs. Million)

Particulars Year ended

March 31, 2014 March 31, 2013

Revenue

Earnings 10,649.32 9,097.29

Outgo 1,587.85 1,367.85

Capital items

Outgo 165.77 140.71

Directors'' responsibility statement The Directors state that:

1. In the preparation of the annual accounts, the applicable mandatory Accounting Standards have been followed and there is no material departure;

2. Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at March 31, 2014 and of the profit of your Company for that year;

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

4. Your Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities, if any;

5. The annual accounts have been prepared on a going concern basis.

Extract of Annual Return

Pursuant to the provisions of the Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual return of the Company for the financial year ended on March 31, 2014 is as follows:

I. Registration and other details:

i. CIN: L72300PN1990PLC056696

ii. Registration Date: May 30, 1990

iii. Name of the Company: Persistent Systems Limited

iv. Category of the Company: Company limited by shares

v. Sub-category of the Company: Indian Non-Government Company

vi. Address of the Registered Office and Contact details: Bhageerath, 402 Senapati Bapat Road, Pune 411 016; Tel. No.: 91 (20) 6703 0000; Fax: 91 (20) 6703 0009; E-mail: investors@persistent.co.in Website: www.persistent.com

vii. Whether listed company: Yes

viii. Name, Address and Contact details of Registrar and Transfer Agent: M/s. Link Intime India Private Limited (Unit: Persistent Systems Limited) CIN: U67190MH1999PTC118368 Block No. 202, Second Floor, Akshay Complex, Off Dhole Patil Road, Pune 411 001 Tel. No.: 91 (20) 2616 0084 / 2616 1629; Fax: 91 (20) 2616 3503; E-mail: pune@linkintime.co.in Website: www.linkintime.co.in

II. Principal Business Activity of the Company:

Sr. No. Name and Description of main products / services NIC Code of the Product / % to total turnover of the Service Company

1. Software Development and IT Services 892 100%

vii. Remuneration of Directors and Key Managerial Personnel –

Your Company pays remuneration by way of salary, benefits, perquisites and allowances (fixed component) and performance incentives (variable component) to its Executive Directors. Annual increments are decided by the Compensation and Remuneration Committee of the Board of Directors.

The remuneration of full time directors (Managing Director and Executive Director) is divided in the following proportion:

a. Fixed portion which is 60% of the Annual Gross Salary.

b. Variable portion by way of Bonus which is 40% of the Annual Gross Salary. The variable portion of the remuneration is payable in terms of the targets set for various parameters including consolidated revenue and consolidated net profits.

c. Such perquisites and benefits as authorised by the resolution passed by Members of your Company from time to time.

Remuneration to other Directors:

Your Company''s policy on the Directors'' appointment and remuneration in terms of section 178(1) of the Companies Act, 2013:

a. The Independent Directors are entitled to payment of commission at a sum not exceeding 1% per annum of net profits and eligible Independent Directors are entitled for Employee Stock Options under ESOA - X Scheme of your Company.

b. The total managerial remuneration not to exceed 11% of the net profits of your Company and the total remuneration to the managerial persons not to exceed 10% of the net profits of your Company.

Statement on declaration by Independent Directors in terms of section 149(6) of the Companies Act, 2013

Your Company has received declaration from all its Independent Directors confirming that they fulfil all the criterion of being Independent Director as prescribed under the Companies Act, 2013 and the Listing Agreement.

The Directors have further confirmed that their directorships in other companies do not conflict with the interest of the Company.

Risk Management Policy

Report on Risk Management based on the risk management policy developed and implemented at the Company for the financial year 2013-14 forms part of this Annual Report.

Performance Evaluation of the Board of Directors

Your Company conducted the annual performance evaluation of the Independent Directors and the committees of the Board. This was conducted in April 2014 by an External Management Consultant and the findings of the evaluation were presented at the meeting of the Nomination and Governance Committee of the Board of Directors. Recommendations and suggested areas of improvement for the committees and the individual Directors were considered by the Committee.

Acknowledgments and appreciation

Your Board places on record the support and wise counsel received from the Government of India, particularly the Department of Electronics and Information Technology, the Ministry of Corporate Affairs, the Ministry of Finance, the Ministry of Commerce and the Reserve Bank of India throughout the financial year.

Your Board extends its sincere thanks to the officers and staff of the Software Technology Parks of India - Pune, Nagpur, Goa, Hyderabad, Bengaluru, Visakhapatnam Special Economic Zone, Andhra Pradesh, SEEPZ Special Economic Zone, Andheri, Mumbai, Central Excise and Customs Department, Department of Revenue, Income Tax Department, Department of Electronics, Director General of Foreign Trade, Director of Industries, Department of Shops and Establishments, Development Commissioners, Pune and Hyderabad, Regional Director of Western Region, Registrar of Companies, Maharashtra, Pune, Sales Tax Department, Securities and Exchange Board of India, High Court of Judicature of Mumbai, ICGL Goa, Goa Industrial Development Corporation, office of the Official Liquidator, Collector of Stamps, National Stock Exchange of India Limited, Bombay Stock Exchange Limited, Central Depository Services (India) Limited, National Securities Depository Limited, Pune Municipal Corporation, Maharashtra State Electricity Distribution Company Limited, Andhra Pradesh State Electricity Board, Maharashtra Industrial Development Corporation, Bengaluru Municipal Corporation, Karnataka Industrial Development Corporation, Karnataka Telecom including BSNL, Mobile / Internet Service providers.

Your Board also extends its thanks to Axis Bank, Bank of India, Bank of Tokyo Mitsubishi, BNP Paribas, Citibank N.A., HDFC Bank, State Bank of India, Syndicate Bank, and its officials for extending their excellent support in all banking related activities.

Your Board places on record its deep sense of appreciation for the committed services of the associates of your Company at all levels.

Your Board thanks the investors and shareholders for placing immense faith in them.

Your Board takes this opportunity to express its sincere appreciation for the contribution made by the employees at all levels in your Company. The consistent growth was made possible by their hard work, solidarity, cooperation and support.

For and on behalf of the Board of Directors

Dr. Anand Deshpande Chairman and Managing Director

Pune, June 15, 2014


Mar 31, 2011

The Directors are pleased to present the Twenty First Annual Report of your Company along with the audited statemenl of accounts for the financial year ended March 31, 2011.

Business overview

The Company completed its first year of listing on the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited on April 6, 2011. During the year, your Company was included in BSE - 500 and BSE mid-cap index in the first three months of listing.

The year under report was an excellent year for the growth of the Company and customer traction continued to be good. Your Company showed a significant improvement in business as compared to previous year. The consolidated revenue was USD 170.24 Million during the financial year 2010-11, in comparison with USD 127.31 Million for the financial yea, 2009-10. In Rupee terms, consolidated revenue was Rs 7,758.41 Million for the financial year 2010-11 as compared tc Rs 6,011.56 Million for the financial year 2009-10.

Your Companys focus on four technology thrust areas - cloud computing, analytics, collaboration and mobility have enabled growth of skills in areas that will dominate in the future, ahead of competition. Your Company has established custome, and partner relationships with all the leading software product companies in these areas. Anticipating growth in these areas, your Company is setting up a Technology Consulting Group which will leverage thought leadership in these fou. technology thrust areas. During the year under report, your Company generated specific requests from its customers fo. sell-with partnerships. We believe that there is a significant opportunity to pursue sell-with partnership with prominen! partners and generate new revenue opportunities.

Your Company continues to invest in the sales team having increased the sales team inclusive of pre-sales from 71 tc 108 during the year. The employee support to your Company was excellent as well; and your Company crossed employee mark of 6,000 during the financial year 2010-11. To enhance the international presence and focus within Europe, you, Company set up a subsidiary in France.

Financial results

During the financial year 2010-11, your Company recorded 29.1% growth in revenue in Rupee terms, on a consolidated basis which enabled your Company to maintain its track record of year-on-year growth for the twenty first successive year.

The total unconsolidated income of your Company amounted to Rs 6,453.89 Million (USD 141.63 Million) registering a growth of 25% over the previous year (in Rupee terms). The net profit after tax grew to Rs 1,335.87 Million (USD 29.31 Million), a growth of 14.1 % over the previous year (in Rupee terms).

The highlights of the financial performance for the year ended March 31, 2011 are as under

Particulars (Amount in USD Million (Amount in Rs Million % except EPS and except EPS and Book Change Book Value) Value) 2010-11 2009-10 2010-11 2009-10

Total income 141.63 109.30 6,453.89 5,161.14 25.0%

Profit before interest, depreciation and taxes 40.12 33.16 1,828.25 1,565.63 16.8%

Depreciation 8.67 6.88 395.09 324.95 21.6%

Provision for income tax 2.13 1.49 97.29 70.16 38.7%

Profit after tax 29.31 24.79 1,335.87 1,170.52 14.1%

Transfer to general reserve 11.73 9.92 534.40 468.20 14.1%

Net worth* 166.97 143.03 7,443.37 6,423.58 15.9%

Earnings per share (EPS)

Basic 0.78 0.77 35.41 36.37 -2.6%

Diluted 0.73 0.69 33.40 32.62 2.4%

Book value per equity share 4.08 3.40 186.08 160.59 15.9%

[Conversion Rate USD 1 = X 45.57 for Profit and Loss items; USD 1 = X 44.58 for Balance Sheet items (financial year 2010-11) and USD 1 = X 47.22 for Profit and Loss items; USD 1 = X 44.91 for Balance Sheet items (financial year 2009-10)] *Networth means Equity Share Capital + Reserves and Surplus (including Hedge reserve) + Stock options outstanding.

Consolidated results

During the financial year 2010-11, the total revenue of your Company and its subsidiaries amounted to Rs 7,758.41 Million (USD 170.24 Million) [previous year Rs 6,011.56 Million (USD 127.31 Million)] and the net profit after tax and prior period items amounted to Rs 1,397.37 Million (USD 30.65 Million) [previous year Rs 1,150.24 Million (USD 24.36 Million)].

Liquidity

Your Company continues to be a debt free Company and maintains sufficient cash to meet your Companys strategic objectives. Your Company has ensured a balance between earning adequate returns on liquid assets and the need to cover financial and business risks. As at March 31, 2011, your Company had cash and cash equivalents (excluding proceeds from initial public offering of the Company) amounting to Rs 2,567.98 Million as against Rs 1,653.49 Million as at March 31, 2010, which include investments in liquid mutual funds of Rs 2,500.42 Million as against Rs 1,561.73 Million as at March 31, 2010 and Rs 752.30 Million were in fixed deposits with scheduled banks, as against Rs 1.15 Million as at March 31, 2010.

Directors

During the year under review, Mr. Ram Gupta, Independent Director resigned from the directorship of the Company effective from June 8, 2010. Dr. Promod Haque, Non-Executive Director resigned from the directorship of the Company effective from November 1, 2010. The Board places on record its sincere appreciation for the valuable contribution to the growth of the Company made by Mr. Ram Gupta and Dr. Haque during their tenure as Directors of your Company.

During the financial year 2010-11, Mr. Prakash Telang and Mr. Kiran Umrootkar were appointed as Additional Directors both as Independent Members on the Board of your Company with effectfrom August 19,2010. Further, Dr. Dinesh Keskar was appointed as an Additional Director and as an Independent Member on the Board of your Company with effect from October 29, 2010. Mr. Sanjay Kumar Bhattacharyya was appointed as an Additional Director as an Independent Member on the Board of your Company with effectfrom May 12,2011. The term of Mr. Bhattacharyya, Dr. Keskar, Mr. Telang and Mr. Umrootkar as an Additional Director of yourCompany will expire attheTwenty First Annual General Meeting of your Company and they have confirmed their respective eligibility and willingness to accept office of Directorship of your Company, if appointed. The Company has received notices under Section 257 of the Companies Act, 1956, proposing an appointment of Mr. Bhattacharyya, Dr. Keskar, Mr. Telang and Mr. Umrootkar as Directors of the Company. Proposal seeking approval of the Members for the appointment of Mr. Sanjay Kumar Bhattacharyya, Dr. Dinesh Keskar, Mr. Prakash Telang and Mr. Kiran Umrootkar as Directors of the Company have been incorporated in the Notice of the forthcoming Annual General Meeting along with brief details about them.

In the opinion of your Directors, Mr. Bhattacharyya, Dr. Keskar, Mr. Telang and Mr. Umrootkar have the requisite qualifications and experience which would be useful to your Company and would enable them to contribute effectively to your Company in their capacity as Independent Directors of your Company.

It is, therefore, considered prudent that your Company should continue to avail of the services of Mr. Bhattacharyya, Dr. Keskar, Mr. Telang and Mr. Umrootkar as Directors and the Board recommends that the proposed resolution relating to the appointment of Mr. Bhattacharyya, Dr. Dinesh Keskar, Mr. Prakash Telang and Mr. Kiran Umrootkar as Directors of your Company be passed.

Mr. P. B. Kulkarni is liable to retire by rotation at the Twenty First Annual General Meeting and he has confirmed his eligibility and willingness to accept office of Directorship of your Company, if appointed. In the opinion of your Directors, Mr. Kulkarni has the requisite qualifications and experience which could be useful for your Company and would enable him to contribute effectively to your Company in his capacity as Director of your Company.

It is, therefore, considered prudent that your Company should continue to avail of the services of Mr. Kulkarni as Director and the Board recommends that the proposed resolution relating to re-appointment of Mr. Kulkarni as Director of your Company be passed.

The Company has received a notice under Section 257 of the Companies Act, 1956 proposing appointment of Mr. Nitin Kulkarni, Chief Operating Officer as a Director of the Company at the ensuing Annual General Meeting. Consequent to appointment as a Director, being in whole time employment, Mr. Kulkarni will occupy the position of Executive Director of the Company.

In the opinion of your Directors, your Company will continue to benefit from Mr. Nitin Kulkarnis strong delivery leadership and functional experience and would enable him to contribute effectively to your Company in his capacity as Director of your Company. Your Directors, therefore, recommend that the proposed resolution relating to appointment of Mr. Nitin Kulkarni, Chief Operating Officer as a Director of the Company, to be designated as "Executive Director and Chief Operating Officer" be passed.

Committees of the Board

During the year under review, the Board of Directors of your Company had re-constituted the Compensation Committee thereby merging the existing Remuneration Committee and the Compensation Committee of the Board.

The details of the powers and functions, composition and meetings of the Committees of the Board held during the year are given in the report on Corporate Governance forming part of this Annual Report.

Listing of Equity Shares of the Company

The Company had launched the Initial Public Offering in the financial year 2009-10. The issue opened from March 17, 2010 to March 19, 2010. The IPO was subscribed 93.58 times of the issue size. It was a record subscription in last 26 months in the Indian capital market. The allotment of 4,139,000 Equity Shares and transfer of 1,280,706 Equity Shares offered by the Selling Shareholders was made on March 30, 2010 at Rs 310 per share, the upper end of the price band. The Equity Shares were listed on the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited during the year under report on April 6, 2010.

Utilisation of funds received from IPO

Your Company had the following objects of the IPO (a) to establish the development facilities; (b) to capitalise the Subsidiaries for establishing development facilities and meeting fit outs and interior design costs; (c) to procure hardware; (d) to fund expenditure for general corporate purposes and (e) to achieve the benefits of listing on the Stock Exchanges.

Your Company intended to utilise the proceeds of the IPO accruing to the Company, after deducting the Companys share of the underwriting and management fees, selling commissions and other expenses associated with the Issue. The net proceeds collected amounted to Rs 1,200.60 Million which is to be utilised in the manner set forth below

(InRs Million)

Sr. Project Allocated amount Current status of Amount yet to be No. to be utilised from amount utilised from utilised from the Net the Net Proceeds the Net Proceeds Proceeds in future

1. Establishment of development facilities 760.20 203.91 556.29

2. Capitalise our Subsidiaries for establishing 29.59 29.59 - development facilities

3. Procuring hardware 204.50 92.92 111.58

4. Fund expenditure for general corporate 206.31 71.60 134.71 purposes

Total 1,200.60 398.02 802.58

The unutilised IPO funds of Rs 802.58 Million as on March 31, 2011, have been temporarily invested in interest bearing mutual funds. In view of the Companys plan for expanding its operations in SEZ facilities and pursuing non-linear activities, it is felt necessary that more flexibility be accorded for utilisation of unutilised IPO proceeds. Accordingly, the Board of Directors is seeking approval of the members at the ensuing Annual General Meeting for use / deployment of unutilized part of the IPO proceeds for (i) capitalising the subsidiaries of the Company not restricted to establishment of development facilities in SEZ, (ii) establishment of development facilities (iii) procuring software (iv) other general corporate purposes, in addition to the Objects of the Issue stated in the Prospectus of the IPO of the Company.

Acquisition of the OPD Business of Infospectrum

In February 2011, your Company acquired the OPD business of Infospectrum India Private Limited. This acquisition has enabled your Company to further tap the European markets and provide access to the customers from verticals like aerospace and defence, complex manufacturing, maritime, transportation and logistics, satellite imaging and geographic information systems. The acquisition would augment your Companys delivery organization in Nagpur for leveraging its growth plans. With this acquisition, the Companys Nagpur development centre will be 800+ employees with the Company on-boarding 200 experienced software professionals from Infospectrum, India.

Your Company will continue to look out for strategic opportunities for inorganic growth.

Joint Venture with Sprint Nextel Corporation

Your Company formed a joint venture with Sprint Nextel Corporation, the third largest wireless provider in the United States. The joint venture will provide national long distance, international long distance, internet services and managed services in India. Subject to the approval of the Foreign Investment Promotion Board, Sprint International Holding, Inc. will own 74% and your Company will own 26% of the equity in the joint venture company. The joint venture will commence its operation after regulatory approvals are received.

Infrastructure

During the financial year 2010-11, your Company has added a built-up capacity of around 81,000 sq. ft. and added 500 seats. With this, the total owned built-up capacity of your Company in India stands at 8,40,000 sq. ft. and seating capacity of 5,800. The construction of development centre at Nagpur and Hinjawadi is in progress which would increase seating capacity at Nagpur Centre by around 700 seats and at Hinjawadi by around 1,600 seats. The Company also operates in Hyderabad from the leased premises of approx. 1 5,000 sq. ft. having a seating capacity of 140.

The details of owned facilities of your Company are as under

Location Total Built Up Area Existing Built up Total Seating Existing Seating (sq. ft.) Area (sq. ft.) Capacity Capacity

Pune

Panini 10,000 10,000 125 125

Bhageerath 131,000 131,000 560 560

Aryabhata - Pingala 341,000 341,000 2,550 2,550

Hinjawadi* 423,000 200,570 2,980 1,350

Nagpur

IT Tower 32,000 32,000 361 361

New Building* 200,000 90,000 1,200 526

Goa 35,306 35,306 382 382

Total 1,172,306 839,876 8,158 5,854

*Building under construction

Persistent Systems and Solutions Limited (PSSL), wholly owned subsidiary of your Company, in additions to its operations in Special Economic Zone (SEZ) in Hyderabad at a leased premises of approx. 32,000 sq. ft, started its operations in SEZ at Hinjawadi, Pune at a leased premises of approx. 46,000 sq. ft.

Dividend

The Board of Directors recommended that as a policy, the dividend payout ratio be maintained in the range of 10% to 30% of the consolidated net profit after tax.

Your Directors declared Interim Dividend during the financial year 2010-11 in January 2011 at Rs 2.00 per share on the paid up equity share capital. In addition to this, considering that the Company had completed 20 years since its incorporation, an additional Special one-time dividend of Rs 2.00 per Equity Share was paid to the shareholders of the Company along with the first interim dividend. Total outflow on account of interim dividend payout including dividend tax was Rs 186.57 Million out of the net profits of your Company during the year under report.

Your Directors recommend a final dividend of Rs 1.50 per share for the financial year 2010-11. The tax on final dividend provided in the financial statements is Rs 9.97 Million. The payment of final dividend of Rs 1.50 per share is subject to the approval of the shareholders. Thus, including the proposed final dividend, the total dividend recommended for the financial year 2010-11 would be Rs 5.50 per share [previous year Rs 2.50 per share]. Out of the first interim dividend and Special one-time dividend declared in January 2011,Rs 0.26 Lakh was remained unpaid as on March 31, 2011.

Transfer of reserves

Your Company proposes to transfer Rs 534.40 Million to the general reserve out of the amount available for appropriations and an amount of Rs 2,913.39 Million is proposed to be retained in the Profit and Loss Account of your Company.

Employee stock option plans

Your Company has various stock option plans for its employees. Details of the stock options granted under various employee stock option schemes are annexed to this Report as Annexure A.

No employee has been granted stock options, during the year under review, equal to or exceeding 1 % of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant.

In line with the guidance note on "Accounting for employee share based payments" issued by the Institute of Chartered Accountants of India and the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 issued by the Securities and Exchange Board of India, your Company has calculated the employee compensation cost using the intrinsic value of stock options. Had compensation been determined under the fair value approach described in the

guidance note, the Companys net income and basic and diluted earnings per share would have reduced to the proforma amounts as under

(InRs Million)

Particulars Year ended March 31, 2011 March 31, 2010

Profit after tax 1,335.87 1,170.52

Add: Employee stock compensation under intrinsic value method 7.11 19.45

Less: Employee stock compensation under fair value method (60.70) (36.06)

Proforma profit 1,282.28 1,153.91 Earnings Per Share Basic

As reported 35.41 36.37

Proforma 33.99 35.85 Diluted

As reported 33.40 32.62

Proforma 32.06 32.16

Weighted average exercise prices and weighted average fair values of options

The Binomial tree valuation model has been used for computing the weighted average fair value considering the following inputs

Particulars March 31, 2011 March 31,2010

Scheme X Scheme IV and VII Scheme IX

Weighted average share price (Rs) 401.41 129.50 137.05

Exercise Price (Rs) 389.05- 403.25 122.24 109.48

Expected Volatility 31.90%, 32.56% 61.52% 61.52%

Historical Volatility 31.52% - 61.52% 31.52% - 61.52% 31.52% - 61.52%

Life of the options granted 7 years 14-15 years 12.5-15 years (Vesting and exercise period)

Dividend Yield 1.00% 1.64% 1.64%

Average risk-free interest rate 7.93%- 8.01% 5.90% 5.90%

Expected dividend rate 40% 58% 58%

Shares held by Independent Directors of the Company are as under

Name of the Director No. of Shares held

Mr. S. K. Bhattacharyya (1) NIL

Dr. Dinesh Keskar (2) NIL

Mr. P. B. Kulkarni 12,550 (*)

Prof. Krithivasan Ramamritham 10,500 (**)

Mr. Prakash Telang (3) NIL

Mr.KiranUmrootkar(3) NIL

(*) Out of these shares, 7,300 shares are held jointly with Mrs. Sudha Prabhakar Kulkarni

(**) Out of these shares, 7,000 shares are held jointly with Mrs. Saraswathi Krithivasan

(1) Appointed as an Additional Director on May 12, 2011

(2) Appointed as an Additional Director on October 29, 2010

(3) Appointed as an Additional Director on August 19, 2010.

During the year under review, pursuant to the resolutions passed by the Compensation Committee of the Board of Directors by way of circulation, employees, including ex-employees and Independent Directors of your Company exercised their stock options for shares which were already vested in their name. During this exercise, 4,94,051 (Four Lakh Ninety Four

Thousand and Fifty One only) Equity shares were transferred from PSPL ESOP Management Trust to the eligible employees, ex-employees and Independent Directors at an aggregate face value of Rs 4.94 Million under various ESOP Schemes of the Company.

Your Company has ten ESOP Schemes under which stock options were granted to various permanent employees. Independent Directors and the employees of its subsidiary companies, details of which are given in Annexure A to this report.

Shares Suspense Account

During the financial year 2010-11, your Company opened an Unclaimed Securities Suspense Account on behalf of the allottees who were entitled for the equity shares under the initial public offering and could not be transferred to the respective allottees due to technical / administrative reasons. Such shares were held in suspense account, which were to be transferred to them in case such allottee approached your Company. The details of equity shares held in an Unclaimed Securities Suspense Account are as follows

Sr. No. Particulars Details

1. Aggregate number of shareholders in the Unclaimed Securities Suspense Account 586 Shareholders lying at the beginning of the financial year 2010-11

2. Aggregate number of the outstanding equity shares in the Unclaimed Securities 24,400 Equity Shares Suspense Account lying at the beginning of the financial year 2010-11

3. Number of shareholders who approached issuer for transfer of shares from Unclaimed 558 Shareholders Securities Suspense Account during the financial year 2010-11

4. Number of shareholders to whom shares were transferred from Unclaimed Securities 558 Shareholders Suspense Account during the financial year 2010-11 (23,840 Equity Shares)

5. Aggregate number of shareholders in the Unclaimed Securities Suspense Account 28 Shareholders lying at the end of the financial year 2010-11

6. Aggregate number of outstanding equity shares in the Unclaimed Securities Suspense 560 Equity Shares Account lying at the end of the financial year 2010-11

Note -Voting rights on the above mentioned equity shares are remained frozen till the rightful owner of such equity shares claims the shares.

Institutional holding

As on March 31, 2011, the total institutional holding in your Company stood at 31.12%.

Subsidiary companies

During the period under report, your Company has five subsidiaries all of which are wholly owned subsidiaries viz. Persistent eBusiness Solutions Limited, India, Persistent Systems, Inc., USA, Persistent Systems Pte. Ltd., Singapore, Persistent Systems and Solutions Limited, India and Persistent Systems France SAS, France.

Subject to required approvals, the Board of Directors of your Company has approved merging of PeBS and PSSL with your Company. Your Company alongwith PeBS and PSSL is taking required steps for completing the merger process.

Persistent Systems France SAS, France

Your Company has been looking at expanding its business in new geographies. Towards this endeavour, the Company incorporated a wholly owned subsidiary Persistent Systems France SAS in France on April 11, 2011. Persistent Systems France SAS was primarily formed to explore the stragetic opportunities available to your Company in France. Persistent Systems France, SAS signed a definitive agreements acquire Agilent Technologies Software Marketing and development business based in Grenoble, France. Subject to customary closing conditions, the acquisition is expected to be completed finalised by August 1,2011.

Persistent eBusiness Solutions Limited

Persistent eBusiness Solutions Limited (PeBS) is an India based wholly owned subsidiary of your Company formed in May 2000. PeBS was formed mainly to provide software development, consultancy and system integration services to India based customers.

During the financial year 2010-11, PeBS recorded a total income of Rs 56.44 Million (USD 1.24 Million) [previous year Rs 63.79 Million (USD 1.35 Million)] and a net profit of Rs 5.09 Million (USD 0.11 Million) [previous year Rs 1.67 Million (USD 0.04 Million)].

Persistent Systems, Inc.

Persistent Systems, Inc., (PSI) is a California C-Corp., a US based wholly owned subsidiary of your Company formed in October 2001. PSI is engaged in providing services to the US based customers.

During the financial year 2010-11, PSI recorded a total income of Rs 2,325.36 Million (USD 51.03 Million) [previous year Rs 1,617.03 Million (USD 34.24 Million)] and a net profit of Rs 21.72 Million (USD 0.48 Million) [previous year net loss of f 18.98 Million (USD 0.40 Million)].

Persistent Systems Pte. Ltd.

Persistent Systems Pte. Ltd. (Co. Reg. No. 200706736G) is a Singapore based wholly owned subsidiary of your Company formed in April 2007. Persistent Systems Pte. Ltd. was primarily formed to concentrate on the business opportunities in ASEAN region.

During the financial year 2010-11, Persistent Systems Pte. Ltd., recorded a total income of Rs 9.87 Million (USD 0.22 Million) [previous year Rs 0.98 Million (USD 0.02 Million)] and a net profit of Rs 1.28 Million (USD 0.03 Million) [previous year net loss ofRs 9.98 Million (USD 0.21 Million)].

Persistent Systems and Solutions Limited

Persistent Systems and Solutions Limited (PSSL) is an India based wholly owned subsidiary of your Company formed in May 2008. PSSL was formed mainly to provide software development services as a unit in SEZ.

During the financial year 2010-11, PSSL recorded a total income of Rs 189.91 Million (USD 4.17 Million) [previous year Rs 66.96 Million (USD 1.42 Million)] and a net profit of Rs 24.40 Million (USD 0.54 Million) [previous year net profit of Rs 7.04 Million (USD 0.1 5 Million)].

Consolidated financial statements

Consolidated financial statements of your Company and its subsidiaries as at March 31, 2011 are prepared in accordance with the Accounting Standard 21 (AS - 21) on Consolidated Financial Statements issued by the Institute of Chartered Accountants of India, and form part of this Annual Report.

Particulars required as per Section 212 of the Companies Act, 1956

As per Section 212 of the Companies Act, 1956, your Company is required to attach the Directors Report, Auditors Report, Balance Sheet, Profit and Loss Account, Schedules to Accounts and Notes to Accounts of subsidiaries of your Company along with the Balance Sheet of your Company. Your Directors believe that the consolidated financial statements present a more comprehensive picture as compared to standalone financial statements. Your Company, therefore, applied to the Ministry of Corporate Affairs, Government of India for an exemption from such attachment as your Company presents the audited consolidated financial statements in the Annual Report.

The Ministry of Corporate Affairs, Government of India, vide its Letter No. 47 / 13 / 2011-CL-lll dated January 20, 2011 granted an exemption to your Company from attaching full financial statements of its four subsidiaries under Section 212 of the Companies Act, 1956.

Further, in terms of general Circular No. 2 / 2011 and No. 5/12/2007-CL-lll dated February 8, 2011, the Ministry of Corporate Affairs has issued a direction under Section 212(8) of the Companies Act, 1956 granting general exemption to all the companies having subsidiaries and which require exemption from attaching the prescribed documents as mentioned in Section 212(1) of the Companies Act, 1956. Such exemption would be available to all the companies after fulfilling certain conditions prescribed in the above mentioned general circular.

Accordingly, the Annual Report does not contain full financial statements of the subsidiary companies. Your Company will make available the audited annual accounts and related information of subsidiary companies, upon request by any shareholder of your Company. These documents will also be available for inspection during the business hours at the registered office of your Company and the respective subsidiary companies. A statement showing financial highlights of the subsidiary companies is attached to the consolidated financial statements.

Awards and recognitions

Your Directors are glad to report that the Company continued its tradition of winning various awards. Your Company is proud receipt of the following awards during the period under report.

1. Samsung India Software Operations (SISO) Most Preferred Outsourcing Business Partner Award for the year 2009.

2. Persistents PaxPro Packaging Solution awarded the Consumer Goods Technology Readers Choice Survey Award for the fourth consecutive year.

3. Asias Best Employer Brand Award 2010-11 in the Western Region of India in the category Managing Health at the Workplace.

4. Bloomberg UTVs CXO Awards 2010 - The IT Chapter, in Indias Emerging Software Company of the Year category.

5. Institute of Company Secretaries of India (ICSI) Excellence in Corporate Governance Award 2010.

6. Institute of Chartered Accountants of India (ICAI) Award (Silver Shield) for Excellence in Financial Reporting for the year 2009-10.

7. Titanium Award at the Asset-Triple-A Corporate Awards 2010, for Excellence in Corporate Governance, Social Responsibility and Investor Relations.

8. League of American Communication Professionals (LACP) 2010 Platinum Award and Gold-Debut Award for Persistent Systems Annual Report 2010, and ranked 9th in the top 100 communication designs for the year 2009-10.

Other Significant Events

The following were the significant events during the year under review

1. Your Company celebrated its 20th anniversary on May 30, 2010.

2. Your Company celebrated 5* anniversary of its Goa centre on October 7, 2010.

3. Your Company launched PaxPro, a comprehensive suite of brand asset lifecycle management solutions for consumer product companies. The solutions captures industry best practices for most brand management process, including Artwork & Labelling, Packaging Specifications, Marketing Materials Management, New Product Introduction and Print Management.



Corporate governance

A separate section on "Corporate Governance" with a detailed compliance report thereon forms part of this Annual Report.

Voluntary secretarial compliance certificate

Your Company annually obtains a certificate from the Whole-Time Practicing Company Secretary on a voluntary basis for compliance of the provisions of the Companies Act, 1956. The same forms part of this Annual Report. The Institute of Company Secretaries of India, vide its letter dated February 15, 2011, appreciated the initiative taken by your Company, for obtaining the Voluntary Secretarial Compliance Certificate.

Management discussion and analysis

Report on Management Discussion and Analysis based on audited, consolidated financial statements for the financial year 2010-11 forms part of this Annual Report.

Outlook

Your Company is on the growth path.

Today, technology disruptions are forcing customers to either rebuild their products or create next-generation products to support the changes in the way businesses are governed and technology is being adopted.

The impact of Cloud is already being felt by the industry with the shift from software as a product to software as a service. According to IDC, Cloud Computing is a $ 166.2 Billion dollar market and is forecasted to grow by 26% annual rate between 2010 and 2013. Traditional ISVs lost between 10-20% of their revenue in the recent recession, while software-as-a-service (SaaS) based ISVs grew by 20% in the same period. Switching to a Cloud-based infrastructure is critical for ISVs as virtually every CIO today is investigating how to leverage Cloud-based applications.

Technology areas such as cloud computing, mobility, analytics and collaboration are set to redefine the market and will see your Company pay a vital role in delivering efficient, cost effective, time-to-market products.

Human resource management

Your Company continues to attract the best of talent in the industry. Your Company recruits from various engineering colleges in India for fresh talent. During the financial year 2010-11, your Company recruited about 3,403 employees on a consolidated basis (3,009 employees on standalone basis) consisting of regular employees. Trainees/ Interns, Consultants, Business consultants. Contract consultants consisting of (technical and non-technical) professionals as a part of growth plan during the financial year ended March 31, 2011, including several qualified and experienced professionals returning from USA. This steady stream of US returning professionals has provided a very strong middle management group to your Company.

Your Company had 6,360 personnel (including trainees and associates) on a consolidated basis (5,689 personnel on standalone basis) as on March 31, 2011. The technical strength at present is 5,960 employees which comprise 5,248 graduates (Engineers and Technicians), 694 post graduates and 18 PhDs on a consolidated basis.

During the period under report, your Company welcomed a batch of around 448 new graduates in July 2010 through campus recruiting students with engineering background across the Company locations.

Your Company considers training as an important activity towards human resource development. In this endeavour, several courses, seminars and conferences in technical and domain specific areas were conducted. Your Company also conducted training courses for the benefit of the employees in different areas such as leadership skills specifically for Grade 9.x and above, team building, personal effectiveness and foreign languages. The 2"" batch of around 38 employees successfully completed their Masters of Engineering degree program from the Post Graduate program offered at your Company in collaboration with the Birla Institute of Technology, Pilani during the year ended March 31,2011.

With a view to drive competency improvements, upgrade skills across the organization, make employees more versatile for moving across projects, your Company started the Assessment Center. The Assessment Centre also helps establish a common reference within the organization for various skills and grades and provide additional unbiased input to the appraisal system and career growth. The Assessment Centre currently offers technical assessments for developers in grade 3.x and leads in 5.x, in different skills and technologies.

Your Companys value proposition is based on providing value to our customers, through innovation and by consistently improving efficiency. With a view to create the resource bandwidth for the future, your Company initiated various measures such as investing in new skills, technologies, business models and training programmes for key technology areas.

During the period under report, your Company conducted an Employee Satisfaction Survey which helped your Company address employees motivation and growth more proactively.

The attrition for the year under report was 19.58% as against 13.65% for the previous financial year 2009-10.

Various employee welfare activities such as sports and cultural events that were organised for and by the employees had wide participation at all levels.

Corporate social responsibility

Corporate Social Responsibility encompasses within itself sustainability which means creating an awareness of climate change and social imbalance and demanded suitable action. The Company was promptly responsive to the call. Be it in infrastructure building or social initiatives, conservation, conscience and commitment became Companys watchwords.

Your Company conducts its business in a sustainable and socially responsible manner. This principle has been an integral part of your Companys corporate values for last two decades. Your Directors are committed to the safety and health of our employees, protecting the environment and the quality of life in all regions in which your Company operates.

Your Directors are convinced that the Company continued focus on sustainability will help to grow the long-term value of your Company and to realize our strategic priorities. Corporate social responsibility strengthens the motivation of your Companys employees and their identification with the Company- and thereby creates the basis for a strong global team.

To institutionalise the Corporate Social Responsibility initiative of your Company, your Company had formed a Public Charitable Trust by the name "Persistent Foundation" in the financial year 2008-09.

During the year under review, the Persistent Foundation was able to create excitement among employees to participate in socially relevant causes. In consultation with employees of your Company, the Foundation has set up a well-defined program. Currently, the Foundation has decided to focus on the organisations and institutions that are engaged in activities relating to promotion of education, health, community welfare and for national calamities, if any.

In addition to contributing Rs 10.77 Million to the Foundation, your Company made donations of Rs 0.73 Million to various charitable institutions during the year, aggregating to Rs 11.50 Million, about 1% of the consolidated net profit of the financial year 2009-10.

Report on CSR activities of Persistent Foundation during the financial year 2010-11 is given elsewhere in this Annual Report.

Employees remuneration

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

Conservation of energy, technology absorption, research and development, foreign exchange earnings and outgo

Your Company has made the necessary disclosures in this Report in terms of Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988. Your Company

strives to conserve energy on a perpetual basis. Your Company has procured various energy saving devices and systems, which help in conserving energy. Bulk of the electric fixtures is equipped with electronic ballast which has resulted in significant savings in the energy cost.

Carbon management and sustainable development provides businesses with some of the greatest opportunities towards sustainability. Your Company reduced carbon footprints by taking energy conservation measures. Your Company continues to take various measures on energy saving measures.

Your Company has continued to maximise the use of flat LCD monitors, VRV air-conditioning system, solar energy for hot water, LED logo on buildings, LED lighting in common areas, installation of power management software for desktops, WattMiser system in AHUs for conservation of energy. A building automation system has been implemented to control working of air conditioners and to make them more power efficient. Further, in view of your Companys commitment to green movement, your Company initiated the purchase of wind turbine.

During the previous financial year 2009-10, the Bureau of Energy (BEE), Ministry of Power, Government of India, New Delhi implemented the rating programme for the office buildings on the basis of 1 -5 star scale, with 5 star buildings being the most efficient in energy efficiency. As per the survey declared by BEE on November 12, 2009, BEE identified 25 energy efficient office buildings from all over India for Star ratings. Two of the office buildings at Pune were qualified for BEE rating of which Bhageerath premises of your Company secured two stars rating.

As power costs constitute an insignificant part of the total expenses, the financial impact of these measures is not material. As your Company has not entered into technical collaboration with any entity, there are no particulars relating to technology absorption.

The Companys internal R&D unit has been recognized as R&D centre by Department of Scientific and Industrial Research (DSIR) during the year under review.

The particulars of expenditure on research and development (accrual basis) are as follows

(In Rs. Million)

Particulars 2010-11 2009-10

Capital expenditure 8.80 -

Revenue expenditure 38.70 52.12

Total research and development expenditure 47.50 52.12

As % of total income 0.74% 1

The particulars of foreign exchange earnings and outgo (accrual basis) are as follows

(In Rs. Million)

Particulars 2010-11 2009-10

Revenue

Earnings 5,607.12 4,743.64

Outgo 637.43 405.24

Capital items

Outgo 103.64 107.67

Reappointment of statutory auditors

M/s. Joshi Apte & Co., Chartered Accountants and M/s. S. R. Batliboi & Co., Chartered Accountants, the joint auditors of your Company retire at the Twenty First Annual General Meeting and have confirmed their eligibility and willingness to accept office, if reappointed. Further in terms of Clause 41 (1 )(h) of the Listing Agreement, the statutory auditors of your Company are subjected to the Peer Review Process of the Institute of Chartered Accountants of India (ICAI); and hold a valid certificate issued by Peer Review Board of ICAI. M/s. Joshi Apte & Co. and M/s. S. R. Batliboi & Co. have confirmed that they hold a valid certificate issued by Peer Review Board of ICAI; and have provided a copy of the said certificate to your Company for reference and records.

Fixed deposit

In terms of the provision of Section 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposits) Rules, 1975, the Company has not accepted any fixed deposits during the year under review.

Directors responsibility statement The Directors state that

1. in the preparation of the annual accounts, the applicable mandatory Accounting Standards have been followed and there is no material departure;

2. the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at March 31, 2011, and of the profit of your Company for that year;

3. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities, if any;

4. the annual accounts have been prepared on a going concern basis.

Acknowledgments and appreciation

Your Board places on record the help and cooperation received from the Government of India, particularly the Ministry of Communication and Information Technology, the Ministry of Corporate Affairs, the Ministry of Finance, the Ministry of Commerce and the Reserve Bank of India throughout the financial year.

Your Company extends its sincere thanks to the officers and staff of the Software Technology Parks of India - Pune, Nagpur, Goa, Hyderabad, Central Excise and Customs Department, Income Tax Department, Development Commissioners, Pune and Hyderabad, Registrar of Companies, Maharashtra, Pune, Sales Tax Department, Securities and Exchange Board of India, the National Stock Exchange of India Limited, the Bombay Stock Exchange Limited, Central Depository Services (India) Limited, National Securities Depository Limited, Maharashtra State Electricity Distribution Company Limited, Andhra Pradesh State Electricity Board, Maharashtra Industrial Development Corporation, Department of Revenue and Ministry of Information Technology.

Your Board also extends their thanks to Bank of India, Citibank NA, State Bank of India, HDFC Bank Limited, Syndicate Bank, Axis Bank, Bank of Tokyo Mitsubishi, Japan, BNP Paribas and its officials for extending their excellent support in all banking related activities.

Your Board takes this opportunity to express their sincere appreciation for the contribution made by employees at all levels. The consistent growth was made possible by their hard work, solidarity, cooperation and support.

For and on behalf of the Board of Directors

Dr. Anand Deshpande

Chairman and Managing Director

Pune, June 13, 2011


Mar 31, 2009

The Directors are pleased to present the Nineteenth Annual Report of your Company alongwith the audited statement of accounts for the financial year ended March 31, 2009.

The year under report was largely overshadowed by the global economic crisis and recession. Amidst these challenges, the revenue on consolidated basis, grew in US Dollar terms by 21% year-on-year to USD 127.84 Million and in Rupee terms the growth was 40%, year-on-year amounting to Rs. 5,938.31 Million. This increase was attributed to the growth in business with your Companys existing customers and business from new customers as well.

Your Directors are taking all efforts to rationalise costs and improve operational parameters. Even in this challenging year, your Company continues to be debt free with a cash and cash equivalents of Rs. 940.02 Million.

During the year under report, Mr. Hari Haran joined Persistent Systems, Inc., as the President and will be responsible for overall Sales and Marketing. Your Company continued to make investment in sales and marketing. The sales team at Persistent Systems, Inc., was further strengthened with the appointment of Mr. Ramchandran Kumar as Senior Vice President - Strategic Accounts Sales, Mr. Michael Kerr as Senior Vice President of Sales and Mr. Bradley Scott, Vice President - Channel Sales. Further, with the view to diversify the business operations in European region, your Company appointed Dr. Jorg Turnhoff as Vice President - EMEA Sales in Germany.

During the financial year 2008-09, your Company continued its track record of growth despite challenging business environment. Albeit, it could have done better but for overall global economic slowdown.

The total income of your Company amounted to Rs. 5,270,68 Million (USD 113.47 Million) registering a growth of 29% over the previous year (in Rupee terms), however, the net profit after tax and extra ordinary items declined to Rs. 586.04 Million (USD 12.62 Million), a decline of 30% over the previous year (in Rupee terms).

The highlights of the financial performance for the year ended March 31, 2009 are as under

(Amount in USD Million (Amount in Rs. Million %

Particulars except EPS and except EPS and Change Book Value) Book Value)

2008-09 2007-08 2008-09 2007-08

Total income 113.47 102.06 5,270.68 4,098.87 29%

Profit before interest, depreciation and taxes 19.53 29.19 907.05 1,172.27 -23%

Depreciation 6.34 6.92 294.72 277.97 6%

Provision for income tax 0.25 0.55 11.56 22.00 -47%

Net profit for the year before exceptional and prior period items 12.94 21.72 600.77 872.30 -31%

Net profit for the year after exceptional

and prior period items 12.62 20.84 586.04 837.12 -30%

Transfer to general reserve 5.05 8.34 234.40 334.90 -30%

Net worth 77.44 84.21 3,926.04 3,381.95 16%

Earnings per share (basic) (EPS)

Including exceptional and prior period items 0.39 0.73 18.34 29.30 -37%

Excluding exceptional and prior period items 0.40 0.76 18.80 30.53 -38%

Earnings per share (diluted) (EPS)

Including exceptional and prior period items 0.35 0.58 16.34 23.34 -30% Excluding exceptional and prior period items 0.36 0.61 16.75 24.33 -31%

Book value per equity share 2.36 2.35 109.48 94.31 16%

[Conversion Rate: USD 1 = Rs. 46.45 for Profit and Loss items USD 1 = 50.70 for Balance Sheet items (financial year 2008-09) and USD 1 = Rs. 40.16 (financial year 2007-08)].

On a consolidated basis, the total income of your Company and its subsidiaries amounted to Rs. 6,006.84 Million (USD 129.32 Million) and the net profit after tax and exceptional items amounted to Rs. 660.92 Million (USD 14.23 Million).

Liquidity

Your Company continued to be a debt free company and maintains sufficient cash to meet your Companys strategic objectives. Your Company has ensured balance between earning adequate returns on liquid assets and the need to cover financial and business risks. As at March 31, 2009, your Company had cash and cash equivalents amounting to Rs. 940.02 Million as against 752.20 Million as at March 31, 2008, which include investments in liquid mutual funds of Rs. 871.09 Million as against Rs. 691.35 Million as at March 31, 2008.

Dividend

Your Directors declared Interim Dividend twice during the financial year 2008-09. First Interim Dividend was declared at Re. 0.60 per share on the paid up equity share capital on a pro-rata basis. Your Directors declared second interim dividend at Re. 0.40 per share on the paid up share capital on a pro-rata basis. The total dividend declared by your Directors for the ¦ financial year 2008-09 was Re. 1 per share amounting to Rs. 35.86 Million and dividend tax was Rs. 6.09 Million. Total outflow on account of dividend payout including dividend tax was Rs. 41.95 Million out of the net profits of the Company during the year under report.

Your Directors consider the same as adequate and recommend no further dividend for the financial year 2008-09. During the financial year 2008-09, your Company did not have any unclaimed dividend out of dividend declared till date.

Employee stock option plans

Your Company has various stock option plans for its employees. Details of the options granted under various employee stock option schemes form part of the Report on Corporate Governance and Notes to Accounts.

Subsidiary companies

Your Company had four subsidiaries viz. Persistent eBusiness Solutions Limited, India, Persistent Systems and Solutions Limited, India, Persistent Systems, Inc., USA and Persistent Systems Pte. Limited, Singapore as on March 31, 2009.

Persistent eBusiness Solutions Limited

Persistent eBusiness Solutions Limited (PeBS) is an India based wholly owned subsidiary of your Company formed in May 2000. PeBS is formed mainly to provide software development, consultancy and system integration services to the India based clients.

During the financial year 2008-09, PeBS recorded a total income of Rs. 85.09 Million (USD 1.83 Million) [Previous year Rs. 36.82 Million (USD 0.92 Million)] and a net profit of Rs. 4.53 Million (USD 0.10 Million) [Previous year Rs. 9.77 Million (USD 0.24 Million)].

Persistent Systems, Inc.

Persistent Systems, Inc., (PSI) is the US based wholly owned subsidiary of your Company formed in October 2001. PSI is engaged in providing services to the US based customers.

During the financial year 2008-09, PSI recorded a total income of Rs. 1,226.17 Million (USD 26.40 Million) [Previous year Rs. 709.38 Million (USD 17.66 Million)] and a net profit of Rs. 61.65 Million (USD 1.33 Million) [Previous year loss of Rs. 17.82 Million (USD 0,44 Million)].

Persistent Systems Pte. Limited

Persistent Systems Pte. Limited (Co. Reg. No. 200706736G) is a Singapore based wholly owned subsidiary of your Company formed in April 2007. Persistent Systems Pte. Limited is primarily formed to concentrate on the business opportunities in ASEAN region.

During the financial year 2008-09, Persistent Systems Pte. Limited, recorded a total income of Rs. 2.56 Million (USD 0.06 Million) [previous year Rs. 10.79 Million (USD 0.27 Million)] and a net profit of Rs. 0.39 Million (USD 0.01 Million) [previous year Rs. 2.65 Million (USD 0.07 Million)].

Persistent Systems and Solutions Limited

Persistent Systems and Solutions Limited (PSSL) is an India based wholly owned subsidiary of your Company formed in May 2008. PSSL was formed mainly to provide software development services as a unit in SEZ.

During the financial year 2008-09, PSSL recorded a total income of Rs. 35.25 Million (USD 0.76 Million) and a net profit of Rs. 8.33 Million (USD 0.18 Million).

Consolidated financial statements

Consolidated financial statements of your Company and its subsidiaries as at March 31, 2009 are prepared in accordance with the Accounting Standard 21 (AS - 21) on Consolidated Financial Statements issued by the Institute of Chartered Accountants of India, form part of this Annual Report.

Particulars required as per section 212 of the Companies Act, 1956

As per Section 212 of the Companies Act, 1956, your Company is required to attach the Directors Report, Auditors Report, Balance Sheet, Profit and Loss Account, Schedules to Accounts and Notes to Accounts of subsidiaries of your Company alongwith the Balance Sheet of your Company. Your Directors believe that the consolidated financial statements present a more comprehensive picture as compared to standalone financial statements. Your Company, therefore, applied to the Ministry of Corporate Affairs, Government of India for an exemption from such attachment as your Company presents the audited consolidated financial statements in the Annual Report.

The Ministry of Corporate Affairs, Government of India, vide its letter no. 47/10/2009-CL-MI dated February 17, 2009, granted an exemption to your Company from attaching full financial statements of the subsidiaries under Section 212 of the Companies Act, 1956.

Accordingly, the Annual Report does not contain full financial statements of the subsidiaries. Your Company will make available the audited annual accounts and related information of the subsidiary companies, upon request by any shareholder of your Company. These documents will also be available for inspection during business hours at the registered office of your Company and the registered office of respective subsidiaries. A statement showing financial highlights of the subsidiary companies is attached to the consolidated financial statements.

Key recruitments

During the financial year 2008-09, Mr. Hari Haran was appointed as President, Persistent Systems, Inc., wholly owned subsidiary of your Company (PSI). Further, Mr. Ramchandran Kumar was appointed as Senior Vice President - Strategic Accounts Sales, PSI; Mr. Michael Kerr as Senior Vice President of Sales for IBM initiatives, PSI; Mr. Bradley Scott, Vice President - Channel Sales, PSI. Your Company appointed Dr. Jorg Tumhoff as Vice President - EMEA Sales during the financial year 2008-09.

Significant events in the year 2008-09

1. Your Company had set up a new subsidiary "Persistent Systems and Solutions Limited" (PSSL) which was incorporated on May 22, 2008. PSSL obtained the Certificate of Commencement of Business on May 31, 2008. PSSL is formed mainly to provide software development services as a unit to be set up within a SEZ. PSSL has set up a unit in an SEZ at Cyberabad, Hyderabad.

2. To facilitate your Companys efforts to pursue offshore business opportunities in Canada through an onsite presence, your Company has set up an additional Branch Office in Quebec province in addition to the existing Branch offices in Ontario and British Columbia Provinces.

3. Your Company through its wholly owned subsidiary. Persistent Systems, Inc., established a research center at Indiana University, Bloomington to increase your Companys domain capability, to get access to faculty members who have domain expertise in areas of interest to your Company and its customers and to collaborate with Indiana University in research related activities.

4. The Company has opened a new Branch Office through its wholly owned subsidiary Persistent Systems, Inc. in Ohio to transact business with the Ohio State University Comprehensive Cancer Centre, Ohio.

5. Your Company submitted an application for setting up a Research Centre in affiliation of the University of Pune. The Research Centre would provide an impetus to research within the Company as a launching pad for new technologies and related service offerings. This research would help obtain solutions to the industry problems and would help in expanding your Companys knowledge base.

6. To institutionalise the Corporate Social Responsibility of your Company, your Company formed a public charitable trust "Persistent Foundation". The details of the trust are given under the head "Corporate Social Responsibility" in this report.

Initial public offering (IPO) of your Company

During the financial year 2008-09, your Company filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for the proposed Initial Public Offer (IPO) of your Company. Your Company further obtained in-principle approval from the Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited (NSE) to list its shares post IPO. However, due to adverse sentiments in the financial markets in India and abroad, your Directors decided to defer the IPO.

Awards and recognitions

Your Directors are glad to report the following awards received by your Company during the financial year 2008-09.

1. Your Company won the coveted NASSCOM Innovation Award for 2008, in the "Market Facing - Business Process and Business Model" category. The NASSCOM Innovation Awards is an annual event currently in its fifth edition and is a key initiative by NASSCOM to highlight the true innovators in the Indian IT industry. The award recognises companies that have made innovation a part of their organisational DNA and used the innovation engine to reinvent their processes, marketing and product development strategies.

2. Your Company won the ICAI Award for Excellence in Financial Reporting. The Annual Report for the year ended March 31, 2008, was adjudicated as a commendable entry amongst the entries received under the Category Information Technology, Communication and Entertainment enterprises.

3. Your Company ranked 9th on Fast Companys Fast 50 Reader Favorites of 2008. Fast Company was looking for companies using business as a force of positive change and helping its customers and your Company was identified as a company practicing it.

Dr. Anand Deshpande, Founder and the Chairman and Managing Director of your Company was honoured with the Career Achievement Award by the Indiana University School of Informatics. The Career Achievement Award is given to alumni in recognition of outstanding contributions and innovation that bring national acclaim and recognition to the field of informatics and honour and distinction to Indiana University.

Dr. Anand Deshpande was also honoured with the Top Management Consortium (TMC) Award of Excellence, 2007-08. The Top Management Consortium bestows Awards of Excellence to recognise and appreciate contribution in specific areas like industry, trade, service industry, public administration and for offering extraordinary services to the society.

Directors

Prof. Krithivasan Ramamritham, Director is liable to retire by rotation at the Nineteenth Annual General Meeting and he has confirmed his eligibility and willingness to accept office of Directorship of your Company, if reappointed. A brief profile of Prof. Krithivasan Ramamritham forms part of the notice of the ensuing Annual General Meeting.

In the opinion of your Directors, Prof. Krithivasan Ramamritham has the requisite qualifications and experience which would be useful to your Company and would enable him to contribute effectively to your Company in his capacity as independent director of your Company.

It is, therefore, considered prudent that your Company should continue to avail of the services of Prof Krithivasan Ramamntham as a Director and recommends that the resolution relating to the reappointment of Prof Krithivasan

Ramamntham, as Director of your Company be passed.

Committees of the board

During the year under review, the Board of Directors of your Company had constituted the Nomination and Governance Committee of the Board, The Committee was mainly formed to ensure overall diversity of representatives and provide guidance to the Board for appointment of top management and to address issues such as required expertise, background leadership skills, time available, conflict of interest, willingness to participate actively and amicable relationships of the proposed appointee within the industry as a director or member of the senior management. The detailed composition of the Committees of the Board forms part of the Report on Corporate Governance which is annexed to this Report.

Corporate governance

A separate section on "Corporate Governance" with a detailed compliance report thereon is annexed to this Report.

Voluntary secretarial compliance certificate

Your Company annually obtains a compliance certificate from the whole time Practicing Company Secretary on a voluntary basis to ensure compliance of the provisions of the Companies Act, 1956. The same is annexed to this Report The Institute of Company Secretaries of India, vide its letter dated September 22, 2008, appreciated the initiative taken by your Company, for obtaining Voluntary Secretarial Compliance Certificate.

Management discussion and analysis

Report on Management Discussion and Analysis based on audited, consolidated financial statements for the vear 2008-09 forms part of this Report.

Outlook

The economic slowdown continues through the first quarter. Since January 2009, representatives of your Company have met with executives for more than 150 customers and the long-term prospects look very good.

The economic slowdown which set in financial year 2008-09, may continue to show its effect in the financial year

2009-10. The financial year 2009-10 will be an overall challenging year for the world economy.

While the situation is challenging, there are definite growth opportunities and your Company is well poised to grab these. Your Company is exploring new growth areas and making use of its available resources to be prepared for business opportunity when the markets turnaround. The economic recovery, when it comes, will see many companies investing again in IT infrastructure and your Company sees opportunities to come.

The addition of senior seasoned executives to the sales team will help your Company to face the challenges of the economic turmoil and your management is cautiously optimistic about the future of your Company.

Human resource management

Your Company recruited about 1,500 (technical and non-technical) professionals as a part of growth planduring the year ended March 31, 2009, including several qualified and experienced professionals returning from USA. This steady stream of US returning professionals has provided a very strong middle management group. Your Company continues to attract the best talent available from various engineering colleges in India.

Your Company crossed the strength of 4,000 personnel during the year under report. The technical strength at present comprises 2,597 graduate engineers of which 206 are post graduates and 17 are the PhDs.

The consolidated human resource strength of your Company and its subsidiaries crossed 4,200 that include trainees and associates,

Your Company considers training as an important activity towards human resource development. In this endeavour several courses, seminars and conferences in technical and domain specific areas were conducted Your Company also conducted training courses for the benefit of the employees in different areas such as leadership skills, team building, personal effectiveness and foreign languages.

With a view to control attrition, your Company had taken various measures on the front of compensation, communication forum through skip level meeting, implementation of career tracks and arrangement with BITS Piiani to impart education

in MS Program to employees of your Company,

Your Companys value proposition is based on providing value to our customers, through innovation and by consistently improving efficiency. When the market starts to move again, there would be a large number of opportunities available, as businesses move to address the gap created by sudden retraction of capital and other expenditure and the emerging needs for the future. With a view to create bandwidth for the future, your Company initiated various measures such as

investing in new skills, technologies, business models and training programmes for key technology areas.

In addition to the earlier initiatives at Pune facility, your Company initiated a Yoga and Doctor facility at Nagpur and Goa during the year under review. Lectures were organised for the employees on "Diet for Professionals" and also for female employees for awareness about harassment and their rights. The Company has an effective mechanism for preventing harassment events including sexual harassment within the Company which ensures that each individual gets right to

work in a professional environment that promotes equal employment opportunities and prohibits discriminatory practices. The Company continued to provide facility for comprehensive health check-up for employees of age 30 and above. Further, cancer awareness session and free eye check - up camp were organised by your Company.

The attrition for the year under report was 13.54% as against 20.4% for the previous financial year 2007-08. Various employee welfare activities such as sports and cultural events that were organised for and by the employees had wide

participation at all levels.

As your Company plans to scale up the operations during the financial year 2009-10, it expects to hire additional 1,800 software professionals in its offshore development centres across Pune, Goa, Nagpur and Hyderabad.

With an objective to develop female leaders in the organisation by identifying, nurturing & empowering the leadership abilities in female employees, a Leadership Development forum "Prerana" was started on the occasion of Womens day. The focus of the forum was on providing leadership training to the female employees in the areas like work-life balance, people management skills, problem solving, project management and share their knowledge in different areas through various events/ activities lectures/ sessions/ seminars, group discussions, presentations. This also provides a platform to share the knowledge and experience with each other thereby building togetherness.

Corporate social responsibility

Your Company recognises its social obligations. As a responsible corporate citizen, your Company has a well defined " donation policy to earmark certain funds for donations. Donations are given primarily to organisations or institutions

that are engaged in activities relating to promotion of education, health, community welfare, police welfare related activities and in the events of national calamity.

In this endeavor, during the year under report, your Company donated major portion towards the health and education related activities followed by institutes for community welfare and the working for mentally challenged persons.

To institutionalise the Corporate Social Responsibility initiative of your Company, your Company has formed a Public Charitable Trust by the name "Persistent Foundation" (Foundation) during the year under report. TS?e Foundation will initially focus on making donations in the field of education, healthcare, community development and specific noticeable contribution to the cause of national or public importance. Your Company donated a sum of Rs. 13 Million towards the corpus of the Foundation during the year under report. The Foundation will also provide a platform to employees who wish to contribute in cash or in kind towards philanthropic activities.

Employees remuneration

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules 1975 as amended, forms part of this report. As per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956 the Annual Report is being sent to all the Shareholders of the Company, excluding, the statement of particulars of employees referred to hereinbefore. Any Shareholder interested in obtaining a copy of the said statement may write to the Company Secretary of the Company at the Registered Office of your Company.

Conservation of energy, technology absorption, research and development, foreign exchange earnings and outgo

Your Company has made the necessary disclosures in this Report in terms of Section 217(1)(e) of the Companies Act, 1956, read with the Company (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988. Your Company strives to conserve energy on a perpetual basis. Your Company has procured various energy saving devices and systems, which help in conserving energy. Bulk of the electric fixtures is equipped with electronic ballast which has resulted in significant savings in the energy cost.

Your Company has continued to maximise the use of flat LCD monitors, VRV air-conditioning system, solar energy for hot water and LED logo on the buildings for conservation of energy. A building automation system has been implemented to control working of air conditioners and to make them more power efficient.

Green Persistent Movement

As an organisation, your Company believes that reducing global warming is our social responsibility and we must ensure that we make our planet a better place to live. In our endeavor to conserve and save the environment, your Company launched the Green Persistent Movement. Your Company had taken a number of initiatives which would help us in making your Company Green and thereby contributing to a greener planet. The Green Persistent Movement was taken up with the following objectives in mind

1. To be an eco friendly organisation by being aware, sensitive and proactive towards development and protection of the environment.

2. To encourage and motivate employees to follow eco friendly practices leading to a nature friendly work place, life style and society.

The movement mainly covers for areas of environment conservation viz. conservation of energy, conservation of trees, pollution control and waste management.

The following initiatives were taken by your Company during the year under Report, under Green Persistent Movement

1. Thursday drives were conducted to motivate employees to follow environment friendly practices for a day in a week with an intention to make it a part of their lifestyle.

2. The conservation of energy campaign was introduced to bring down energy consumption and thus conserve energy. The energy conservation campaign had three initiatives viz. 100% CPU energy conservation, no hand driers and switch off cubicle lights and no lift day.

3. The conservation of trees campaign was introduced to spread awareness about conservation of trees and motivate the employees to contribute effectively towards the cause. Employees of your Company were encouraged to conserve trees and plant atleast one sapling in their vicinity. The conservation of trees campaign had three initiatives viz. sapling distribution, no printer day and celebrating green Dassera.

4. The pollution control campaign was introduced to promote pollution control activities and contribute towards a clean environment. The employees were encouraged to ensure that their vehicle does not contribute to air pollution than the prescribed norms. The pollution control campaign had three initiatives viz. PUC check, launch of car/ bike pooling page on your Companys intranet and no smoking day.

5. The waste management initiative was initiated to ensure the reduction in waste at all levels in routine activities. The waste management campaign has three initiatives viz. reduction in food wastage, no plastic day, reuse of paper used on one side.

6. This year, to celebrate Diwali in a special way, your Company presented its employees with CFL bulbs as Diwali gift to support the Green Persistent Movement. CFL bulbs use lesser electricity than conventional incandescent bulbs and thus help reduce greenhouse gas emissions. More than 12,000 CFL bulbs were distributed at all locations of your Company.

As power costs constitute an insignificant part of the total expenses, the financial impact of these measures is not material. As your Company has not entered into technical collaboration with any entity, there are no particulars relating to technology absorption.

The particulars of expenditure on research and development (accrual basis) are as follows (In Rs. Million)

Particulars 2008-09 2007-08

Capital expenditure - 1.30

Revenue expenditure 56.10 47.14

Total research and development expenditure 56.10 48.44

As % of total income 1 1

During the financial year 2008-09, most of the revenue of your Company was derived from the exports. Your Company has a strong business development team mainly in the US. Your Company continues to invest in the sales team and has staffed the team with experienced people during the year to ensure that your Companys focus on exports continues. Based on the development of the market for the Outsourced Product Development, your Company has expanded its activities in Europe and Canada and this will further add to the export earnings of your Company.

The particulars of foreign exchange earnings and outgo (accrual basis) are as follows

(In Rs. Million)

Particulars 2008-09 2007-08

Revenue

Earnings 5,030.19 3,754.24

Outgo 397.13 339.40

Capital items

Outgo 340.97 109.16

Reappointment of statutory auditors

M/s. Joshi Apte & Co., Chartered Accountants and M/s. S. R. Batliboi & Co., Chartered Accountants, the joint auditors of your Company retire at the Nineteenth Annual General Meeting and have confirmed their eligibility and willingness to accept office, if reappointed.

Directors responsibility statement

The Directors state that

1. in the preparation of the annual accounts, the applicable mandatory Accounting Standards have been followed and there is no materia! departure;

2. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at March 31, 2009 and of the profit of your Company for that year;

3. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities, if any;

4. the annual accounts have been prepared on a going concern basis.

Acknowledgments

Your company extends its sincere thanks to the officers and staff of the Software Technology Parks of India - Pane Naaour Goa Bengaluru Hyderabad Central Excise and cusotms Department Income Tax Department Registrar of Companies. Maharashtra State Electricity Distribution Company Limited. Maharashtra Industrial Devolopment Corporation, Department of Revenue and forst and ministry Information Technology.

Your Board also extends their thanks t0 Bank 0f india Citibank N.A., State Bank of India, HDFC Bank Limited Syndicate Bank, Bank of Tokyo Mitsubishi, Japan and its officials for extending their excellent supportin all banking related activites. Your Board takes this oppirtunity to express their sincere appreciation for the contribution made by employee at all levels. The consistent growth was made possible by their hard work,solidarity, cooperation and support.

For and on behalf of the Board of Directors

Dr. Anand Deshpande Pune, June 23, 2009 Chairman and Managing Director

 
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