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Directors Report of Subex Ltd.

Mar 31, 2015

Dear Members,

The Directors have pleasure in presenting the 21st Annual Report the Company on the business and operations together with the audited results for the year ended March 31,2015.

FINANCIAL RESULTS Amount in RS. Lakhs

Continuing Operations consolidated standalone

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

Total Revenue 35,983.31 34,005.16 30,567.57 29,366.59

Profit/(Loss) Before 8,489.42 6,771.84 2,467.13 4,377.98 Interest, Depreciation, Exceptional Items & Taxes

Interest, Depreciation 6,506.03 6,953.70 5,430.02 5,990.14 & Amortization

Other Income 90.20 444.12 277.79 302.89

Profit/(Loss) before 2,073.59 262.26 (2,685.10) (1,309.27) Exceptional items & tax Exceptional Items - - - 1,497.04

Profit/(Loss) before 2,073.59 262.26 (2,685.10) (2,806.31) tax

Provision for taxes 572.34 936.38 154.91 146.57

Profit/(Loss) after 1,501.25 (674.12) (2,840.01) (2,952.88) tax

Discontinuing Operations:

Profit/(Loss) from (474.18) (478.71) - - discontinuing operations before tax

Tax expenses of (5.62) (8.44) - - discontinuing operations on ordinary activities attributable to discontinuing operations

Profit/(Loss) after tax (479.80) (487.15) - -

APPROPRIATIONS

Interim Dividend - - - - Preference Dividend

Dividend proposed - - - - on equity shares

Provision for tax - - - - on Dividends

Transfer to General - - - - Reserve

Surplus/(Deficit) 1,021.45 (1,161.27) (2,840.01) (2,952.88) carried to Balance Sheet

RESULTS OF OPERATIONS

During the financial year ended March 31,2015, the total revenue on a standalone basis was RS.30,567.57 Lakhs as against the revenue for the previous year which was RS.29,366.59 Lakhs. The Company has during the year under review incurred a loss of RS.2,840.01 Lakhs as against loss of RS.2,952.88 Lakhs in the previous year.

On a consolidated basis, the total revenue stood at RS.35,983.31 Lakhs as against RS.34,005.16 Lakhs during the previous year. The profit for the financial year 2014-15 was RS. 1,021.45 Lakhs as against loss of RS. 1,161.27 Lakhs in the previous year.

DIVIDEND

The Directors have not proposed any dividend to be paid for the financial year 2014-15.

During the year, the Company has transferred an amount of RS. 1,30,630 pertaining to the unclaimed final dividend of financial year 2006-07 to the Investor Education and Protection Fund as the same were lying unclaimed for a period of 7 years.

SHARE CAPITAL

As at March 31,2015, the authorised share capital of the Company was RS.497,00,00,000 (Rupees Four Hundred and Ninety Seven Crores only) divided into 49,50,40,000 (Forty Nine Crores Fifty Lakhs and Forty Thousand only) equity shares of RS.10 (Rupees Ten only) each and 2,00,000 (Two Lakhs only) preference shares of RS.98 (Rupees Ninety Eight only) each.

As at March 31, 2015, the paid-up share capital of the Company stood at RS.182,92,25,750 (Rupees One Hundred Eighty Two Crores Ninety Two Lakhs Twenty Five Thousand Seven Hundred and Fifty only) consisting of 18,29,22,575 (Eighteen Crores Twenty Nine Lakhs Twenty Two Thousand Five Hundred Seventy Five) equity shares of RS. 10/- each.

BUSINESS

Your Company is a leading global provider of Business and Operations Support Systems (B/OSS) that empowers communications service providers (CSPs) to achieve competitive advantage through Business and CAPEX Optimisation - thereby enabling them to improve their operational efficiency to deliver enhanced service experiences to subscribers.

The company pioneered the concept of a Revenue Operations Center (ROC®) - a centralized approach that sustains profitable growth and financial health through coordinated operational control. Subex''s product portfolio powers the ROC and its best-inclass solutions such as revenue assurance, fraud management, asset assurance, capacity management, data integrity management, credit risk management, cost management, route optimization and partner settlement. Subex also offers a scalable Managed Services program with 30 customers.

Subex has been awarded the Global Market Share Leader in Financial Assurance 2012 by Frost & Sullivan and has been the winner of Pipeline Innovation Award 2013 in Business Intelligence & Analytics; Capacity Magazine Best Product/ Service 2013. Subex has continued to innovate with customers and have been jointly awarded the Global Telecoms Business Innovation Award 2014 along with Telstra Global; in 2012 with Idea Cellular for Managed Services and in 2011 with Swisscom for Fraud Management.

Subex''s customers include 29 of top 50 operators* and 33 of the world''s 50 biggest# telecommunications service providers worldwide. The company has more than 300 installations across 70 countries (*Total Telecom Top 500 Telecom Brands, 2013 and #Forbes'' Global 2000 list, 2014).

Further details on the business of the Company is provided in the Management Discussion and Analysis section of the annual report.

SUBSIDIARIES

SUBEX TECHNOLOGIES LIMITED

For the year ended March 31, 2015, Subex Technologies Limited earned a net gain of RS.3.67 Lakhs as against a net loss of RS.403.59 Lakhs last year.

Certificate of Dissolution of Subex Technologies Inc was received during year.

SUBEX (UK) LIMITED

For the year ended March 31, 2015, the consolidated income of Subex (UK) Limited was RS.30,519.87 Lakhs as against RS.32,380.87 Lakhs last year, and the net profit was RS. 1,759.89 Lakhs as against a net profit of RS. 714.59 Lakhs last year.

Subex (Asia Pacific) Pte Limited and Subex Inc are direct subsidiaries of Subex (UK) Limited.

SUBEX AMERICAS INC

For the year ended March 31, 2015, the consolidated income of Subex Americas Inc was RS.3,894.88 Lakhs as against RS.2,812.88 Lakhs last year, and Net Profit was RS.1,499.32 Lakhs as against a profit of RS.66.74 Lakhs last year.

Subex Azure Holding Inc., is a wholly owned subsidiary of Subex Americas Inc. There were no transactions during the year under review.

SUBEX MIDDLE EAST (FZE)

The Company has received a trade license for Subex Middle East (FZE). Operations of this company will commence during the year 2015-16.

FINANCE

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)

As on March 31, 2015, the Company had outstanding FCCBs aggregating to US$ 1,000,000 under its US$ 180,000,000 2% Convertible Unsecured bonds ("FCCBs I") and US$ 1,400,000 under its US$ 98,700,000 5% Convertible Unsecured Bonds ("FCCBs II"). In July 2012, pursuant to the exchange offer of FCCBs I and FCCBs II, the Company issued US$127,721,000 5.70% Secured Convertible bonds with a maturity period due July 2017 ("FCCBs III"). Principal amount of US$ 36,321,000 were mandatorily converted during 2012-13 and US$ 3,250,000 and US$ 6,620,000 were subsequently converted into equity shares during 2012-13 and 2014-15 respectively. Pursuant to the mandatory and subsequent conversions held in 2014-15 and previous years, US$ 81,530,000 is currently outstanding under FCCBs III as on March 31,2015.

The maturity period of un-exchanged FCCB I worth US$ 1,000,000 and the un-exchanged FCCB II worth US$ 1,400,000 was extended to March 2017.

FIXED DEPOSITS

Your Company has not accepted any deposits from the public.

EMPLOYEE STOCK OPTIONS SCHEMES

Your Company has introduced various Stock Option plans for its employees. Details of these are given below.

EMPLOYEE STOCK OPTION PLAN-1999 (ESOP-I)

This scheme was instituted during 1999 and managed by Subex Foundation with a corpus of 1,20,000 equity shares initially. Since the scheme was formulated prior to the promulgation of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the Company has discontinued the scheme.

EMPLOYEE STOCK OPTION PLAN-2000 (ESOP-II)

During 1999-2000, your Company established the Employee Stock Option Plan 2000, under which options have been allocated for grant to the employees of the Company and its subsidiaries. The Company has obtained in-principle approval for listing up to a maximum of 8,83,750 equity shares to be allotted pursuant to exercise of options granted under the scheme. This scheme was formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

In accordance with the scheme, a Compensation Committee has been formed, which grants options to the eligible employees. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vest over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2008-09, the Company amended the ESOP 2000 scheme by inclusion of provisions allowing employees to voluntarily surrender their vested/unvested options at any time during their employment with the Company.

During the year 2011-12, the employees voluntarily surrendered 2,41,012 stock options under ESOP 2000 scheme. Also, the company issued equivalent stock options to the aforesaid eligible employees under ESOP 2005 and ESOP 2008 scheme.

The tenure for grant of stock options under ESOP 2000 scheme has expired and the Company is only administering the outstanding stock options issued under the scheme.

EMPLOYEE STOCK OPTION PLAN-2005 (ESOP-III)

Under this scheme, an initial corpus of 5,00,000 options was created for grant to the eligible employees, with each option convertible into one fully paid-up equity share of RS.10/-. This scheme was formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The corpus of the scheme was further enhanced by 15,00,000 options during the financial year 2007-08. The Company has obtained the requisite in-principle approvals from the stock exchanges for the purpose of listing of equity shares arising out of exercise of options granted under the scheme.

The Compensation Committee grants options to the eligible employees in accordance with the provisions of the scheme. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vest over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2008-09, the Company amended the ESOP 2005 scheme by inclusion of provisions allowing employees to voluntarily surrender their vested/unvested options at any time during their employment with the Company.

During the year 2011-12, the employees voluntarily surrendered 9,64,969 stock options under ESOP 2005 scheme. Also, the company issued equivalent stock options to the aforesaid eligible employees under ESOP 2005 scheme.

EMPLOYEE STOCK OPTION PLAN-2008 (ESOP-IV)

During 2008-09, your Company instituted the Employee Stock Option Plan-2008 vide approval of shareholders through the postal ballot mechanism. A corpus of 20,00,000 options has been created for grant to the eligible employees under the scheme. The Scheme was formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Company has obtained the requisite in-principle approvals from the stock exchanges for the purpose of listing of equity shares arising out of exercise of options granted under the scheme.

The Compensation Committee grants options to the eligible employees in accordance with the provisions of the scheme. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vests over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2011-12, the employees voluntarily surrendered 10,19,583 stock options under ESOP 2008 scheme. Also, the company issued equivalent stock options to the aforesaid eligible employees under ESOP 2008 scheme.

Additional information regarding the employee stock options as at March 31, 2015 is given as "Annexure A" to this report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

Details of Loans, Guarantees or Investments covered under section 186 of the Companies Act 2013, are given in the notes to the Financial Statements.

The Company has received a trade license for Subex Middle East (FZE). Operations of this company will commence during the year 2015-16. It is proposed to invest in the capital of this subsidiary during the financial year 2015-16 upto an amount of AED 1,50,000.

MATERIAL CHANGES AND COMMITMENTS BETWEEN THE END OF FINANCIAL YEAR AND DATE OF THE REPORT

Principal amount of US$ 5,000,000 under the Company''s U.S$ 127,721,000 5.70% Secured Convertible bonds with a maturity period due July 2017 ("FCCBs III") were converted between the end of the Financial year March 31, 2015 and the date of this report. As such principal amount of US$ 76,530,000 of FCCB III are outstanding as on the date of this report.

The Board at its meeting held on May 14, 2015 approved the reset of conversion price of the FCCB III which are convertible into equity shares of the Company, from RS. 22.79 to RS.13.00 per share. As a result of the reset of conversion price and subject to necessary approvals, the said outstanding bonds of face value US $ 76.53 million would potentially be converted into 32,99,88,530 shares at an exchange rate of RS.56.05 and conjoint to that it is proposed to increase the authorized share capital from RS.497,00,00,000 (Rupees Four Hundred and Ninety Seven Crores only) to RS.547,00,00,000 (Rupees Five Hundred and Forty Seven Crores only).

CORPORATE GOVERNANCE

Your Company strongly believes that the spirit of Corporate Governance goes beyond the statutory form. Sound Corporate Governance is a key driver of sustainable corporate growth and long-term value creation for the stakeholders and protection of their interests. Your Company endeavors to meet the growing aspirations of all stakeholders including shareholders, employees and customers. Your Company is committed to maintaining the highest level of transparency, accountability and equity in its operations. Your Company always strives to follow the path of good governance through a broad framework of various processes.

Your Company has complied with all the requirements as per Clause 49 of the listing agreement of the Stock Exchanges, as amended from time to time. The Auditor''s certificate on compliance with Clause 49 is included in the section on Corporate Governance in this Annual Report. In addition, your Company has documented its internal policies in line with the Corporate Governance guidelines. The Management Discussion & Analysis of the financial position of the Company has been provided as a part of this report.

DIRECTORS

As per Article 87 of the Articles of Association of the Company read with the provisions of section 152 of the Companies Act, 2013, atleast two-third of the Directors shall be subject to retirement by rotation. One-third of such Directors must retire from office at each Annual General Meeting of the shareholders and a retiring director is eligible for re-election. Accordingly, Mr. Surjeet Singh retires by rotation and being eligible, has offered to be re-appointed at the ensuing Annual General Meeting.

Mr. Surjeet Singh was re-appointed as the Managing Director & CEO of the Company at the Board Meeting held on August 14, 2014 for a period of one year from October 5, 2014 to October 4, 2015. In accordance with the provisions of Sections 196, 197, 203 read with Schedule V and other applicable provisions of the Companies Act, 2013, the said re-appointment as Managing Director & CEO is being placed before the Members for their approval at the ensuing AGM.

Pursuant to the provisions of section 149 of the Companies Act, 2013 your Company has received a notice from a shareholder of the Company proposing the re-appointment of Mr. Anil Singhvi as an independent director of the Company to hold office for a term of 5 years. Similarly your Company has also received a notice from a shareholder proposing the re-appointment of Mr. Sanjeev Aga as an independent director to hold office for a period of 5 years. The said proposals are being placed before the shareholders at the ensuing Annual General Meeting which would need to be passed by means of special resolutions.

Pursuant to the recommendation of the Nomination and Remuneration Committee, the Board at its meeting held on March 26, 2015 appointed Ms. Nisha Dutt as an additional Independent Director for a tenure of five years subject to the approval of the shareholders at the 21st Annual General Meeting. Detailed profile of Ms. Nisha Dutt is given in the Corporate Governance section of this report.

Mr. Subash Menon founded the Company in 1992 and has been its Chief Executive Officer and Managing Director upto September 2012. Under his stewardship, Subex has transformed from a systems integrator in the telecom hardware space to a major player in the telecom software space with a focus in revenue maximisation. Mr. Subash Menon had charted the Company''s growth to a global thought leader in the telecom software space with the successful launch of several products and with over 180 customers across more than 70 countries across 6 continents. The Board recognizes his contribution towards the Company.

Mr. Subash Menon has continuously been absent from attending Board Meetings since October 2012 to May 14, 2015. The company has held 14 Board Meetings during this period and he remaind absent during all those meetings. He vacated his office of directorship under the provisions of section 167(1)(b) of the Companies Act, 2013 with effect from May 14, 2015.

The details regarding the familiarization program for Independent Directors is available on the website of the Company under the link http://www.subex.com/corporate-governance/.

BOARD MEETINGS

During the year, 5 Board Meetings were convened and held. The intervening gap between the meetings was within the period prescribed under the Companies Act 2013. The dates on which meetings were held are as follows:

1. May 29, 2014

2. August 14, 2014

3. November 12, 2014

4. February 03, 2015

5. March 26, 2015

PERFORMANCE EVALUATION

Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Board at its meeting held on February 3, 2015 carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION POLICY OF THE COMPANY

The Policy on Appointment of Directors and the Remuneration Policy of the Company forms a part of this report in Annexure - E. and the Details / Disclosures of Ratio of Remuneration to each Director to the median employee''s remuneration as Annexure - G

AUDIT COMMITTEE

The Audit Committee presently has 3 Directors as its members viz. Mr. Anil Singhvi, Chairman, Mr. Sanjeev Aga and Mr. Surjeet Singh. The role, terms of reference, the authority and power of the Audit Committee are in conformity with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Further details of the Audit Committee have been provided in the report on Corporate Governance forming part of this Annual Report.

AUDIT COMMITTEE MEETINGS

4 (Four) meetings of the Audit Committee of the Board were held during the financial year 2014-15. The dates on which meetings were held are as follows:

1. May 29, 2014

2. August 11,2014

3. November 12, 2014

4. February 03, 2015

AUDITORS

STATUTORY AUDITORS

M/s. Deloitte Haskins & Sells (ICAI registration number 008072S), complete their term as the Statutory Auditors of the Company at the ensuing Annual General Meeting under the provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules 2014. The Auditors have given an unqualified Audit Report for the financial year 2014-15.

The Audit Committee have proposed the appointment of M/s S R Batliboi & Associates LLP, Chartered Accountants, Bengaluru (Firm Registration Number 101049W as the auditors of the Company to hold office from the conclusion of the 21st Annual General Meeting upto the conclusion of the 26th Annual General Meeting. The Company has received from the proposed auditor a certificate of satisfaction of the criteria provided under section 141 of the Act. As such the Board places the said proposal for appointment of M/s S R Batliboi & Associates LLP, Chartered Accountants before the shareholders of the Company.

SECRETARIAL AUDITORS

Pursuant to the provisions of section 204 of the Companies Act 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed M/s V Sreedharan & Associates, a firm of Company Secretaries in practice to undertake the Secretarial Audit of the Company. The report of the Secretarial Audit is annexed herewith as "Annexure B". The Secretarial Auditors have given an unqualified report for the financial year 2014-15.

PARTICULARS OF EMPLOYEES

The particulars of employees required under Section 197 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed hereto in Annexure C.

CONSERVATION OF ENERGY

The operations of your Company are not energy-intensive. However, significant measures are taken to reduce energy consumption by using energy-efficient computers and by the purchase of energy-efficient equipment. Your Company constantly evaluates new technologies and invests to make its infrastructure more energy-efficient. Currently your Company uses CFL fittings and electronic ballasts to reduce the power consumption of fluorescent tubes. Air conditioners with energy efficient screw compressors for central air conditioning and air conditioners with split air conditioning for localized areas are used.

TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION Your Company has a strong R&D Division responsible for developing technologies for its products in the telecom domain. The Company holds several patents for its technological innovations. The telecommunications domain, in which your Company operates, is subject to high level of obsolescence and rapid technological changes. Your Company has developed inherent skills to keep pace with these changes. Since software products are the significant line of business of your Company, the Company incurs expenses on product related Research & Development on a continuous basis. These expenses are charged to revenue under the respective heads and are not segregated and accounted separately.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company has over the years shifted its focus from software services to software products. This has resulted in substantial foreign exchange earnings as compared to previous year. During the year 2014-15 total foreign exchange inflow and outflow is as follows:

i) Foreign Exchange earnings RS.26,710.06 Lakhs (Previous Year RS.27,867.41 Lakhs)

ii) Foreign Exchange outgo RS.15,429.51 Lakhs (Previous Year RS. 17,000.16 Lakhs)

Note: The foreign exchange outgo is inclusive of the inter company charges and the Previous Year''s figure have been restated accordingly.

CORPORATE SOCIAL RESPONSIBILITY

While it is not mandatory for your Company to constitute a CSR Committee as it does not satisfy the criteria mentioned in section 135 of the Act, the Board at its meeting held on August 14, 2014 has constituted a CSR Committee comprising of the following directors:

1. Mr. Anil Singhvi (Chairman)

2. Mr. Sanjeev Aga

3. Mr. Surjeet Singh

4. Mr. Karthikeyan Muthuswamy

Pursuant to CSR Policy adopted by the Board, the Company proposes to undertake such activities as may be useful and contributive in nature.

SUBEX CHARITABLE TRUST

Subex Charitable Trust (SCT) extends the outlook of Subex as a corporate entity into community service. SCT was set up to provide for welfare activities for under privileged and the needy in the society. SCT is managed by trustees elected amongst the employees of the Company. During the year, it has provided active support for education of economically challenged meritorious students, conducted blood and eye donation camp, donated clothes and toys to children, provided financial aid by way of payment of the water and electricity bills of a Centre which provides vocational training to destitute girls. A gist of activities undertaken by the Trust has been provided as a separate section in this Annual Report.

IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company has developed and adopted a Risk Management Policy. This policy identifies all perceived risks which might impact the operations and on a more serious level also threaten the existence of the Company. Risks are assessed department wise such as financial risks, information technology related risks, legal risks, accounting fraud etc. The Risk Management Committee assists the Board in fulfilling its corporate governance oversight responsibilities with regard to the identification, evaluation and mitigation of operational, strategic and external environment risks. The Committee also ensures that the Company is taking appropriate measures to achieve prudent balance between risk and reward in both ongoing and new business activities.

HUMAN RESOURCE MANAGEMENT

Detailed report on Human Resource management is given in the Management Discussion and Analysis Report section of the annual report.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

Pursuant to the provisions of section 134(5)(e) of the Act, the Company has in consultation with a reputed independent consultancy firm that specializes in advising corporates on internal financial controls, strengthened the existing financial controls of the Company. Such internal financial controls were found to be adequate for a size of the company. Further, it is believed that the controls are largely operating effectively since there has not been any identification of any major material weakness in the company. The directors have in the Directors Responsibility Statement under paragraph (e) confirmed the same to this effect.

Pursuant to the provisions of the Section 134(5)(f) of the Act, the Company during the year devised proper systems to ensure compliance with the provisions of all applicable laws. Each department of the organization ensured that it had complied with the applicable laws and furnished its report to the Head of department who then along with the Company Secretary discussed on the compliance status of the department. Any matter that required attention was immediately dealt with. The Company Secretary reported to the Audit Committee and the Board on the overall compliance status of the Company. In effect, such compliance system were largely found to be adequate and operating effectively. The directors have in the Directors Responsibility Statement under paragraph (f) also confirmed the same to this effect.

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

Subex has been certified for ISO 9001:2008 (Quality Management System) and ISO 27001:2013 (Information Security Management System). Your Company being in the IT space conducts internal audits of Information Systems twice a year covering projects and functional groups. Internal audits of such nature are conducted across all locations, Bangalore, UK and the US regions. A consolidated summary is prepared and, strengths and weakness across projects, functional groups is shared with all auditee. Reports are shared to the auditee to identify corrective and preventive actions. The corrective and preventive actions are reviewed by the internal auditors and closed based on the adequacy of evidences provided by the auditee.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has implemented a vigil mechanism policy to deal with instance of fraud and mismanagement, if any. The policy also provides for adequate safeguards against victimization of persons who use such mechanism and makes provision for direct access to the chairperson of the Audit Committee in all cases. The details of the policy is posted on the website of the Company under the link http://www.subex.com/corporate-governance/. There were no complaints during the year 2014-15.

DECLARATION FROM INDEPENDENT DIRECTORS

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

RELATED PARTY TRANSACTIONS

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

All related party transactions are placed before the Audit Committee and also the Board for approval. Prior omnibus approval of the Audit committee is obtained for transactions which are of a foreseen and repetitive nature. A statement giving details of all related party transactions entered into pursuant to the omnibus approval so granted are placed before the Audit Committee and the Board of Directors for their review on a quarterly basis. The Company has developed a Related Party Transactions checklist, for identification and monitoring of such transactions.

The company entered into sub-contracting arrangement with its subsidiaries, based on transfer pricing methodology, for development and enhancement of RMS products as well as marketing of its products by the subsidiaries across locations. The company also had simultaneously entered into marketing arrangements with its subsidiaries wherein there is a cross charge done by the subsidiaries towards its efforts for the same.

The Policy on Related party transactions as approved by the Board is uploaded on the Company''s website under the link http://www. subex.com/corporate-governance.

None of the Directors have any pecuniary relationships of transactions vis-a-vis the Company.

Particulars of Contracts or Arrangements with Related parties referred to in Section 188(1) in Form AOC- 2 is enclosed to this report in Annexure F

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed before the Regulators/Courts which would impact the going concern status of the Company and its future operations.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure D".

LISTING WITH STOCK EXCHANGES

The Company confirms that it has paid the Annual Listing Fees for the year 2014-15 to NSE and BSE where the Company''s shares are listed.

DIRECTORS'' RESPONSIBILITY STATEMENT

In accordance with the provision of Section 134(3)(c) of the Companies Act, 2013, the Board of Directors affirm:

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

b) that the accounting policies have been selected and applied consistently and it has made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2015 and of the loss of the Company for the year ended on that date.

c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provision of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) that the accounts for the year ended March 31, 2015 have been prepared on a going concern basis.

e) that internal financial controls have been laid down to be followed by the Company and such internal financial controls

were adequate and were operating effectively.

f) that systems to ensure compliance with the provisions of all applicable laws were in place and such systems were adequate and operating effectively.

APPRECIATION/ACKNOWLEDGEMENTS

We thank our clients, vendors, investors and bankers for their continued support during the year. We place on record our appreciation for the co-operation and assistance provided by the Central and State Government authorities particularly SEZ authorities, Customs and Central Excise authorities, Registrar of Companies, Karnataka, the Income Tax department, Reserve Bank of India and various authorities under the Government of Karnataka.

Your Directors also wish to place on record their deep appreciation to Subexians at all levels for their hard work, solidarity, co-operation and support, as they are instrumental in your Company scaling new heights, year after year.

For Subex Limited

Surjeet Singh Anil Singhvi Managing Director & CEO Director DIN:05278780 DIN: 00239589

Nisha Dutt Sanjeev Aga Director Director DIN: 06465957 DIN: 00022065

Mumbai, India May 14,2015


Mar 31, 2013

To The Members of Subex Limited

The Directors have pleasure in presenting the Nineteenth Annual Report of the Company on the business and operations together with the audited results for the year ended March 31, 2013.

Financial Results

Rs.in Lakhs

Consolida Standalone 2012-13 2011-12 2012-13 2011-12

Total Revenue 33,147.10 48,878.97 26,677.95 33,902.66

Profit/(Loss) Before Interest, Depreciation, Exceptional Items 4,024.92 14,063.28 3,338.21 9,700.20 & Taxes

Interest, Depreciation & Amortization 5,636.77 5,064.79 5,131.07 4,404.15

Profit/(Loss) Before Exceptional Items & Tax (5,608.47) 3,519.07 (3,456.42) 203.65

Exceptional Items 3,996.62 5,479.42 1,663.56 5,092.40

Profit/(Loss) Before Tax (5,608.47) 3,519.07 (3,456.42) 203.65

Provision for Taxes 386.24 334.97 (36.05)

Profit/(Loss) After Tax (5,994.71) 3,184.10 (3,456.42) 239.70

APPROPRIATIONS

Interim Dividend

Preference Dividend

Dividend Proposed on Equity Shares

Provision for Tax on Dividends

Transfer to General Reserve

RESULTS OF OPERATIONS

During the financial year ended March 31, 2013, the total revenue on a consolidated basis was Rs. 33,147.10 Lakhs. The Company has during the year under review incurred a loss of Rs. 5,994.71 Lakhs as against profit of Rs. 3,184.10 Lakhs in the previous year.

On standalone basis, the total revenue stood at Rs. 26,677.95 Lakhs. The loss for the financial year 2012-13 was Rs. 3,456.42 Lakhs as against profit of Rs. 239.70 Lakhs in the previous year.

TTie Directors have not proposed any dividend to be paid for the financial year 2012-13.

BUSINESS

Your Company is a leading global provider of Business Support Systems (BSS) that empowers Communications Service Providers (CSPs) to achieve competitive advantage through Business Optimisation, thereby enabling them to improve their operational efficiency to deliver enhanced service experiences to subscribers. TTie Company pioneered the concept of a Revenue Operations Center (ROC®) - a centralized approach that sustains profitable growth and financial health through coordinated operational control. Subex''s product portfolio powers the ROC and it has best-in-class solutions such as revenue assurance, fraud management, credit risk management, partner settlement, route optimisation, cost management, asset assurance, data integrity management and capacity management.

TTie Company has been declared global market leader in Business Optimisation for CSPs for five years in a row by analyst firm Analysys Mason. Business Optimisation improve the revenues and profits of the CSPs through identification and elimination of leakages in their revenue chain and includes fraud, revenue assurance, partner management, analytics, cost management and credit risk management. Subex conceptualizes and develops software products at its facilities in Bangalore and is focused on the telecom business segment. Subex has sales and support offices in the United States, UK, UAE, India, Singapore and Australia.

Commoditization of the industry is the largest threat that telecom operators around the world are facing. This, coupled with the need to roll out new products and services at regular intervals, is proving to

be a tough combination for the operators. Subex is well positioned to address the needs of the telecom operators and help them to overcome these challenges. The Company''s pioneering platform, the Revenue Operations Centre (ROC®) brings together business intelligence, domain knowledge and workflow support. ROC acts as the underpinning solution on which telcos can build their processes to achieve several objectives like, lower cost, higher margin, higher revenue etc. Further, Subex offers Managed Services around its products which enable the operators to take advantage of our deep domain expertise to improve their operational efficiency.

SHARE CAPITAL

As at March 31, 2013, the authorised share capital of the Company was Rs. 4,97,00,00,000 (Rupees Four Hundred and Ninety Seven Crores only) divided into 49,50,40,000 (Forty Nine Crores Fifty Lakhs and Forty Thousand only) equity shares of Rs. 10 (Rupees Ten only) each and 2,00,000 (Two Lakhs only) preference shares of Rs. 98 (Rupees Ninety Eight only) each.

As at March 31, 2013, the paid-up share capital of the Company stood at Rs. 1,66,63,99,620/- (Rupees One Hundred Sixty Six Crores Sixty Three Lakhs Ninety Nine Thousand Six Hundred and Twenty only) consisting of 16,66,39,962 (Sixteen Crores Sixty Six Lakhs Thirty Nine Thousand Nine Hundred Sixty Two) equity shares of Rs. 10/- each.

SUBSIDIARIES

SUBEX TECHNOLOGIES LIMITED

For the year ended March 31, 2013, Subex Technologies Limited earned an income of Rs. 2,323.68 Lakhs, on a consolidated basis, as against Rs. 4,833.43 Lakhs last year and a net loss of Rs. 1,603.37 Lakhs as against a net profit of Rs. 49.30 Lakhs last year.

Pursuant to the demerger in 2007-08, Subex Technologies Inc became a direct subsidiary of Subex Technologies Limited.

SUBEX (UK) LIMITED

For the year ended March 31, 2013, the consolidated income of Subex (UK) Limited wasRs.32, 152.02 Lakhs as againstRs.38,095.30 Lakhs last year, and the net profit was Rs. 584.37 Lakhs as against a net profit of Rs. 3,357.06 Lakhs last year.

Subex (Asia Pacific) Pte Limited and Subex Inc are direct subsidiaries of Subex (UK) Limited.

SUBEX AMERICAS INC.

For the year ended March 31, 2013, the consolidated income of Subex Americas Inc was Rs. 2,728.40 Lakhs as against Rs. 9,119.03 Lakhs last year, and net loss was Rs. 1,516.72 Lakhs as against Rs. 462.03 Lakhs last year.

Subex Azure Holding Inc., is a wholly owned subsidiary of Subex Americas Inc. There were no transactions during the year under review.

COMPLIANCE UNDER SECTION 212

The Ministry of Corporate Affairs (MCA) has vide General Circular No: 2/2011 dated February 8, 2011 and General Circular No: 3/2011 dated February 21, 2011 granted a general exemption stating that the provisions of section 212 of the Companies Act, 1956 in relation to subsidiaries'' accounts shall not apply subject to compliance of certain conditions. In accordance with the said circulars, the Board of Directors of the Company has in its meeting held on May 21, 2013, given the consent for not attaching the balance sheet of the subsidiaries concerned alongwith the balance sheet of the Company However, financial information of the subsidiary companies, as required to be provided by the said circulars, are disclosed in Note 39 to the Consolidated Financial Statements. TTie Company will make available the annual accounts of the subsidiary companies and the related information to any investor of the Company who may be interested in obtaining the same. TTie annual accounts of the subsidiary companies will also be kept open for inspection by any investor at the Registered Office of the Company. TTie Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)

As on March 31, 2013, the Company had outstanding FCCBs aggregating to US$ 1,000,000 under its US$ 180,000,000 2% Convertible Unsecured Bonds ("FCCBs I") and US$ 1,400,000 under its US$ 98,700,000 5% Convertible Unsecured Bonds ("FCCBs II"). In July 2012, pursuant to the exchange offer of FCCBs I and FCCBs II, the Company issued US$ 127,721,000 5.70% secured convertible bonds with a maturity period due July 2017 ("FCCBs III"). Principal amount of US$ 36,321,000 were mandatorily converted and US$ 3,250,000 million out of FCCBs III were subsequently converted into equity shares. Pursuant to the mandatory and subsequent conversions, US$ 88,150,000 is currently outstanding under FCCBs III.

TTie maturity period of the un-exchanged FCCBs I worth US$ 1,000,000 and the un-exchanged FCCBs II worth US$ 1,400,000 was extended to March 2017.

EMPLOYEE STOCK OPTIONS SCHEMES

Your Company has introduced various Stock Option plans for its employees. Details of these, including grants to Directors and Senior Management issued during the year are given below

EMPLOYEE STOCK OPTION PLAN-1999 (ESOP-I)

This scheme was instituted during 1999 and managed by Subex Foundation with a corpus of 1,20,000 equity shares initially. Since the scheme was formulated prior to the promulgation of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the Company has discontinued the scheme.

EMPLOYEE STOCK OPTION PLAN-2000 (ESOP-II)

During 1999-2000, your Company established the Employee Stock Option Plan 2000, under which options have been allocated for grant to the employees of the Company and its subsidiaries. The Company has obtained in-principle approval for listing up to a maximum of 8,83,750 equity shares to be allotted pursuant to exercise of options granted under the scheme. This scheme has been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

In accordance with the scheme, a Compensation Committee has been formed, which grants options to the eligible employees. TTie options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vest over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2008-09, the Company amended the ESOP 2000 scheme by inclusion of provisions allowing employees to voluntarily surrender their vested/unvested options at any time during their employment with the Company.

During the year 2011-12, the employees voluntarily surrendered 2,41,012 stock options under ESOP 2000 scheme. Also, the Company issued equivalent stock options to the aforesaid eligible employees under ESOP 2005 and ESOP 2008 scheme.

TTie tenure for grant of stock options under ESOP 2000 scheme has expired and the Company is only administering the outstanding stock options issued under the scheme.

EMPLOYEE STOCK OPTION PLAN-2005 (ESOP-III)

Under this scheme, an initial corpus of 5,00,000 options was created for grant to the eligible employees, with each option convertible into one fully paid-up equity share of Rs. 10/-. This scheme has been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The corpus of the scheme was further enhanced by 15,00,000 options during the financial year 2007-08. The Company has obtained the requisite in-principle approvals from the stock exchanges for the purpose of listing of equity shares arising out of exercise of options granted under the scheme.

The Compensation Committee grants options to the eligible employees in accordance with the provisions of the scheme. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vest over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2008-09, the Company amended the ESOP 2005 scheme by inclusion of provisions allowing employees to voluntarily surrender their vested/unvested options at any time during their employment with the Company.

During the year 2011-12, the employees voluntarily surrendered 9,64,969 stock options under ESOP 2005 scheme. Also, the company issued equivalent stock options to the aforesaid eligible employees under ESOP 2005 scheme.

EMPLOYEE STOCK OPTION PLAN-2008 (ESOP-IV)

During 2008-09, your Company instituted the Employee Stock Option Plan-2008 vide approval of shareholders through the postal ballot mechanism. A corpus of 20,00,000 options has been created for grant to the eligible employees under the scheme. The Scheme has been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.The Company has obtained the requisite in-principle approvals from the stock exchanges for the purpose of listing of equity shares arising out of exercise of options granted under the scheme.

The Compensation Committee grants options to the eligible employees in accordance with the provisions of the scheme. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vests over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2011-12, the employees voluntarily surrendered 10,19,583 stock options under ESOP 2008 scheme. Also, the company issued equivalent stock options to the aforesaid eligible employees under ESOP 2008 scheme.

Additional information as at March 31, 2013 required to be disclosed as per Securities and Exchange Board of India (Employee Stock Option Scheme and Stock Purchase Scheme) Guidelines, 1999 is given as Annexure I to this report.

CORPORATE GOVERNANCE

Your Company strongly believes that the spirit of Corporate Governance goes beyond the statutory form. Sound Corporate Governance is a key driver of sustainable corporate growth and long-term value creation for the stakeholders and protection of their interests. Your Company endeavors to meet the growing aspirations of all stakeholders including shareholders, employees and customers. Your Company is committed to maintaining the highest level of transparency, accountability and equity in its operations. Your Company always strives to follow the path of good governance through a broad framework of various processes.

Your Company has complied with all the requirements as per Clause 49 of the listing agreement of the Stock Exchanges, as amended from time to time. The Auditor''s certificate on compliance with Clause 49 is included in the section on Corporate Governance in this Annual Report. In addition, your Company has documented its internal policies in line with the Corporate Governance guidelines. The Management Discussion & Analysis on the financial position of the Company has been provided as a part of this report.

DIRECTORS

As per Article 87 of the Articles of Association of the Company read with section 255 and 256 of the Companies Act, 1956, atleast two-third of the Directors shall be subject to retirement by rotation. One-third of such Directors must retire from office at each Annual General Meeting of the shareholders and a retiring director is eligible for re-election. Accordingly, Mr. Anil Singhvi retires by rotation and being eligible, has offered to be re-appointed at the ensuing Annual General Meeting.

On September 27, 2012, Mr. Subash Menon resigned from the office of Managing Director & CEO of the Company and he continues on the Board as a Non-Executive Director.

Mr. Surjeet Singh resigned as Nominee Director from the Board of the Company on October 5, 2012. Subsequently, at the Board of Directors meeting held on October 5, 2012, Mr. Surjeet Singh was appointed as an Additional Director and as Managing Director & CEO for a period of one year from October 5, 2012 to October 4, 2013. In accordance with the provisions of sections 198, 269, 309 read with Schedule XIII and other applicable provisions of the Companies Act, 1956, the said appointment as Managing Director is being placed before the Members for their approval at the ensuing Annual General Meeting.

Further, pursuant to the provisions of section 260 of the Companies Act, 1956, Mr. Surjeet Singh holds office as an Additional Director upto the date of the ensuing Annual General Meeting. A separate notice under section 257 of the Companies Act, 1956 has been received from a Member signifying the intention to propose Mr. Surjeet Singh as a candidate for the office of Director and accordingly resolutions for his appointment is being placed before the members at the ensuing Annual General Meeting

At the Board Meeting on October 5, 2012, Mr. Sudeesh Yezuvath ceased to be the Chief Operating Officer (COO) of the Company and consequent to which he vacated his office as the director also.

AUDIT COMMITTEE

The Audit Committee presently has 3 Directors as its members viz. Mr. Anil Singhvi, Chairman, Mr. Sanjeev Aga and Mr. Surjeet Singh. The role, terms of reference, the authority and power of the Audit Committee are in conformity with the requirements of section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement. Further details of the Audit Committee have been provided in the report on Corporate Governance forming part of this Annual Report.

AUDITORS

M/s. Deloitte Haskins & Sells (ICAI registration number 008072S), the Statutory Auditors of the Company retire at the ensuing Annual General Meeting. The Statutory Auditors have communicated their willingness to accept office, if re-appointed and have confirmed that they are eligible as per section 224(1B) to be appointed as statutory auditors of the Company and are not disqualified to hold office as such in terms of section 226 of the Companies Act, 1956.

FIXED DEPOSITS

Your Company has not accepted any deposits from the public.

PARTICULARS OF EMPLOYEES

The particulars of employees required under Section 217(2A) of the Companies Act, 1956 and Companies (Particulars of Employees) Rules, 1975 as amended by Companies (Particulars of Employees) Amendment Rules, 2011, read with General Circular No. 23/2011 dated May 3, 2011 issued by MCA, are given at Annexure II appended hereto and forming part of this report. In terms of Section 219(1)(b) (iv) of the Companies Act, 1956, the report and accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Global Head- Finance, Legal & Company Secretary at the Registered Office of the Company.

INFORMATION UNDER SECTION 217(1) (e) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

A. CONSERVATION OF ENERGY

The operations of your Company are not energy-intensive. However, significant measures are taken to reduce energy consumption by using energy-efficient computers and by the purchase of energy-efficient equipment. Your Company constantly evaluates new technologies and invests to make its infrastructure more energy-efficient. Currently your Company uses CFL fittings and electronic ballasts to reduce the power consumption of fluorescent tubes. Air conditioners with energy efficient screw compressors for central air conditioning and air conditioners with split air conditioning for localized areas are used.

B. TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

Your Company has a strong R&D Division responsible for developing technologies for its products in the telecom domain. The Company holds several patents for its technological innovations. The telecommunications domain, in which your Company operates, is subject to high level of obsolescence and rapid technological changes. Your Company has developed inherent skills to keep pace with these changes. Since software products are the significant line of business of your Company the Company incurs expenses on product related Research & Development on a continuous basis. These expenses are charged to revenue under the respective heads and are not segregated and accounted separately.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company has over the years shifted its focus from software services to software products. This has resulted in substantial foreign exchange earnings as compared to previous years. During the year 2012-13, total foreign exchange inflow and outflow is as follows:

i) Foreign Exchange earnings Rs. 15,195.31 Lakhs (Previous Year Rs. 29,720.70 Lakhs)

ii) Foreign Exchange outgo is as below Rs. 2,760.06 Lakhs (Previous YearRs.2,222.95 Lakhs)

CORPORATE SOCIAL RESPONSIBILITY - SUBEX CHARITABLE TRUST

Subex Charitable Trust extends the outlook of Subex as a corporate entity into community service. The trust has been set up to provide for welfare activities for under privileged and the needy in the society. The trust is managed by Trustees elected amongst the employees of the Company. During the year, the Trust has provided active support for education of economically challenged meritorious students, financial assistance to old age homes, orphanages and to individuals who needed medical help. A gist of activities undertaken by the Trust has been provided as a separate section in this Annual Report.

HUMAN RESOURCE MANAGEMENT

Working environment and organization''s culture plays a key role in attracting right talents into any organization and retaining them. Your Company continued with it''s focused efforts in maintaining such a great working environment and organization culture that was built and developed over a period of time, since it''s inception. All senior members of your Company worked really hard and supported Human Resource function in maintaining this.

During the year ended March 31, 2013, your Company surged ahead on a lot of the initiatives that were launched in the previous year. Continued infusion of fresh talent and ongoing development and up-skilling of existing talent were the critical focus areas. Online Learning Management System called the Subex Academy, that was launched in the previous year has been completely rolled out. Your Company also refined the Subexians (Employee) engagement programme, which is an extremely critical (Employee) retention tool.

DIRECTORS'' RESPONSIBILITY STATEMENT

In accordance with the provision of Section 217(2AA) of the Companies Act, 1956, the Board of Directors affirms:

a) that in the preparation of the annual accounts for the year ended March 31, 2013, the applicable accounting standards have been followed. Pursuant to, and in accordance with, the approval of the Members and the Hon''ble High Court of Karnataka to a proposal for reduction of securities premium and capital reserve obtained during 2009-10, the Company has utilised the Business Restructuring Reserve for adjustment of certain expenses/impairments. Such adjustment being at variance with applicable accounting standards, necessary disclosure has been made in the Notes to the accounts in Standalone and Consolidated Financial Statements.

b) that the accounting policies have been selected and applied consistently and it has made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the loss of the Company for the year ended on that date.

c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provision of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) that the accounts for the year ended March 31, 2013 have been prepared on a going concern basis.

APPRECIATION/ACKNOWLEDGEMENTS

We thank our clients, vendors, investors and bankers for their continued support during the year. We place on record our appreciation for the co-operation and assistance provided by the Central and State Government authorities particularly SEZ authorities, Customs and Central Excise authorities, Registrar of Companies, Karnataka, the Income Tax department, Reserve Bank of India and various authorities under the Government of Karnataka.

Your Directors also wish to place on record their deep appreciation to Subexians at all levels for their hard work, solidarity, co-operation and support, as they are instrumental in your Company scaling new heights, year after year.

For Subex Limited

Karthikeyan Muthuswamy Surjeet Singh

Director Managing Director & CEO

Place : Mumbai, India California, USA July 9, 2013 July 11, 2013


Mar 31, 2012

Dear Members,

The Directors have pleasure in presenting the 18th Annual Report of the Company on the business and operations together with the audited results for the year ended March 31, 2012.

FINANCIAL RESULTS

Amount in Rs. Million

Consolidated Standalone

2011-12 2010-11 2011-12 2010-11

Total Revenue 4,77826 4,827.50 3,290.11 3,135.53

Profit/(Loss) Before 1,406.33 1,379.77 970.02 1,186.77 Interest, Depreciation, Tax, Amortization & Exceptional Items

Interest, Depreciation & 506.48 530.71 440.41 467.38 Amortization

Profit/(Loss) Before 899.95 849.06 529.61 719.39 Exceptional Items & Tax

Exceptional Items (547.94) (17.21) (509.24) 6.19

Profit/(Loss) Before Tax 351.91 831.85 20.37 725.58

Provision for Taxes 33.50 44.06 (3.60) 10.49

Profit/(Loss) After Tax 318.41 787.79 23.97 715.09

APPROPRIATIONS

Interim Dividend - - - -

Preference Dividend - - - -

Dividend Proposed on - - - - Equity Shares

Provision for Tax on Dividends - - - -

Transfer to General Reserve - - - -

Surplus/(Deflicit) Carried to 318.41 787.79 23.97 715.09 Balance Sheet

RESULTS OF OPERATIONS

During the financial year ended March 31, 2012, the total revenue on a consolidated basis was Rs. 4,778.26 million. The Company has made a Profit of Rs. 318.41 million for the financial year 2011-12 as against Profit of Rs. 787.79 million in the previous year.

On standalone basis, the total revenue stood at Rs. 3,290.11 million. The net Profit for the financial year 2011-12 was Rs. 23.97 million.

The Directors have not proposed any dividend to be paid for the financial year 2011-12.

BUSINESS

Your Company is a leading global provider of Business Support Systems (BSS) that empowers Communications Service Providers (CSPs) to achieve competitive advantage through Business Optimization, thereby enabling them to improve their operational efficiency to deliver enhanced service experiences to subscribers. The Company pioneered the concept of Revenue Operations Center (ROC®) - a centralized approach that sustains Profitable growth and financial health through coordinated operational control. Subex's product portfolio powers the ROC and it has best-in-class solutions such as revenue assurance, fraud management, credit risk management, cost management, route optimization, data integrity management and interconnect/inter-party settlement.

The Company has been declared global leader in Business Optimization for CSPs for five years in a row by analyst firm Analysys Mason. Business Optimization improve the revenues and Profits of the CSPs through identification and elimination of leakages in their revenue chain and includes fraud, revenue assurance, analytics, cost management and credit risk management. Subex conceptualizes and develops software products at its facilities in Bangalore and is focused on the telecom business segment. Subex has sales and support offices in the United States, UK, UAE, India, Singapore and Australia.

Commoditization of the industry is the largest threat that telecom operators around the world are facing. This, coupled with the need to roll out new products and services at regular intervals, is proving to be a tough combination for the telcos. Subex is well positioned to address the needs of the telecom carriers and help them to overcome these challenges. The Company's pioneering platform, the Revenue Operations Centre (ROC®) brings together business intelligence, domain knowledge and workflow support. ROC acts as the underpinning solution on which telcos can build their processes to achieve several objectives like, lower cost, higher margin, higher revenue etc. Further, Subex offers Managed Services around its products which enable the operators to take advantage of our deep domain expertise to improve their operational efficiency.

CHANGES IN SHARE CAPITAL

As at March 31, 2012, the authorised share capital of the Company was Rs. 247,00,00,000 (Rupees Two Hundred and Forty Seven Crores only) divided into 24,50,40,000 (Twenty Four Crores Fifty Lakhs and Forty Thousand only) equity shares of Rs. 10 (Rupees Ten only) each and 2,00,000 (Two Lakhs only) preference shares ofRs. 98 (Rupees Ninety Eight only) each.

At the Extraordinary General Meeting held on June 28, 2012, the authorised share capital of the Company was increased to Rs. 497,00,00,000 (Rupees Four Hundred and Ninety Seven Crores only) divided into 49,50,40,000 (Forty Nine Crores Fifty Lakhs and Forty Thousand only) equity shares of Rs. 10 (Rupees Ten only) each and 2,00,000 (Two Lakhs only) preference shares ofRs. 98 (Rupees Ninety Eight only) each.

During the year ended March 31, 2012, your Company allotted 747 equity shares consequent to exercise of stock options under the ESOP 2005 scheme. As at March 31, 2012, the paid- up share capital of the Company stood at Rs. 69,31,07,720/- consisting of 6,93,10,772 equity shares ofRs. 10/- each.

On July 17, 2012, the Company allotted 8,93,35,462 equity shares pursuant to mandatory conversion of a principal amount of US$ 36.321 million out of the Company's US$ 127.721 million 5.70% Secured Convertible Bonds. As at the date of this report, the paid-up equity share capital of the Company stood atRs. 1,58,64,62,340/- consisting of 15,86,46,234 equity shares ofRs. 10/- each.

SUBSIDIARIES

SUBEX TECHNOLOGIES LIMITED

For the year ended March 31, 2012, Subex Technologies Limited earned an income of Rs. 483.34 million, on a consolidated basis, as against Rs. 646.31 million last year and a net Profit of Rs. 4.93 million as against a net Profit of Rs. 7.50 million last year.

Pursuant to the demerger in 2007-08, Subex Technologies Inc became a direct subsidiary of Subex Technologies Limited.

SUBEX (UK) LIMITED

For the year ended March 31, 2012, the consolidated income of Subex (UK) Limited was Rs. 3,809.53 million as against Rs. 3,217.74 million last year, and the net Profit was Rs. 335.71 million as against a net Profit is Rs. 115.99 million last year.

Subex (Asia Pacifc) Pte. Ltd and Subex Inc are direct subsidiaries of Subex (UK) Limited.

SUBEX AMERICAS INC.

For the year ended March 31, 2012, the consolidated income of Subex Americas Inc was Rs. 911.90 million as against Rs. 1,205.44 million last year, and net loss wasRs. 46.20 million as againstRs. 50.80 million last year.

In September 2011, the Company sold its activation business comprising service fulfilment solution to Netcracker Technology Corporation, a company operating in the US. The decision to sell the activation business was an outcome of a change in the Company's strategy to focus on its core products, i.e. ROC and Managed Services.

COMPLIANCE UNDER SECTION 212

The Ministry of Corporate Affairs (MCA) has vide General Circular No. 2/2011 dated February 8, 2011 and General Circular No. 3/2011 dated February 21, 2011 granted a general exemption stating that the provisions of section 212 of the Companies Act, 1956 in relation to subsidiaries' accounts shall not apply subject to compliance of certain conditions. In accordance with the said circulars, the Board of Directors of the Company, has in its meeting held on May 23, 2012, given the consent for not attaching the balance sheet of the subsidiaries concerned alongwith the balance sheet of the Company. However, financial information of the subsidiary companies, as required to be provided by the said circulars, are disclosed in Note 37 to the Consolidated Financial Statements. The Company will make available the annual accounts of the subsidiary companies and the related information to any investor of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection by any investor at the Registered office of the Company. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)

As at March 31, 2012, the Company had outstanding FCCBs aggregating to US$ 39 million under its US$ 180,000,000 2% Convertible Unsecured Bonds ("FCCBs I") and US$ 54.80 million under its US$ 98,700,000 5% Convertible Unsecured Bonds ("FCCBs II"). Both the FCCBs were originally due for redemption on March 9, 2012. In order to have adequate time to complete the restructuring activity, the Company had, pursuant to the approval of the Reserve Bank of India (RBI), extended the maturity period to July 9, 2012.

In July 2012, pursuant to the exchange of US$ 38 million out of FCCBs I and US$ 53.40 million out of FCCBs II under a cashless exchange offer, the Company issued US$127,721,000 5.70% Secured Convertible Bonds ("FCCBs III ") with a maturity period due July 2017 with a conversion price of Rs. 22.79 per equity share. As a part of the terms and conditions of FCCBs III, principal amount of US$ 36.321 million out of FCCBs III were mandatorily converted into equity shares at the aforesaid conversion price. Pursuant to the mandatory conversion, US$ 91.40 million is currently outstanding under FCCBs III. Also, the maturity period of the un-exchanged FCCBs I worth US$ 1 million and the un-exchanged FCCBs II worth US$ 1.40 million now stands extended to March 2017.

EMPLOYEE STOCK OPTIONS SCHEMES

Your Company has introduced various Stock Option plans for its employees. Details of these, including grants to Senior Management issued during the year are given below.

EMPLOYEE STOCK OPTION PLAN-1999 (ESOP - I)

This scheme was instituted during 1999 and managed by Subex Foundation with a corpus of 120,000 equity shares initially. Since the scheme was formulated prior to the promulgation of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, the Company has discontinued the scheme.

EMPLOYEE STOCK OPTION PLAN-2000 (ESOP - II)

During 1999-2000, your Company established the Employee Stock Option Plan 2000, under which options have been allocated for grant to the employees of the Company and its subsidiaries. The Company has obtained in-principle approval for listing up to a maximum of 883,750 equity shares to be allotted pursuant to exercise of options granted under the scheme. This scheme has been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

In accordance with the scheme, a Compensation Committee has been formed, which grants options to the eligible employees. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vest over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2008-09, the Company amended the ESOP 2000 scheme by inclusion of provisions allowing employees to voluntarily surrender their vested/unvested options at any time during their employment with the Company.

During the year 2011-2012, the employees voluntarily surrendered 241,012 stock options under ESOP 2000 scheme. Also, the Company issued equivalent stock options to the aforesaid eligible employees under ESOP 2005 and ESOP 2008 scheme.

The tenure for grant of stock options under ESOP 2000 scheme has expired and the Company is only administering the outstanding stock options issued under the scheme.

EMPLOYEE STOCK OPTION PLAN-2005 (ESOP - III)

Under this scheme, an initial corpus of 500,000 options was created for grant to the eligible employees, with each option convertible into one fully paid-up equity share of Rs. 10/-. This scheme has been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The corpus of the scheme was further enhanced by 1,500,000 options during the financial year 2007-08. The Company has obtained the requisite in-principle approvals from the stock exchanges for the purpose of listing of equity shares arising out of exercise of options granted under the scheme.

The Compensation Committee grants options to the eligible employees in accordance with the provisions of the scheme. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vest over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2008-09, the Company amended the ESOP 2005 scheme by inclusion of provisions allowing employees to voluntarily surrender their vested/unvested options at any time during their employment with the Company.

During the year 2011-2012, the employees voluntarily surrendered 964,969 stock options under ESOP 2005 scheme. Also, the Company issued equivalent stock options to the aforesaid eligible employees under ESOP 2005 scheme.

EMPLOYEE STOCK OPTION PLAN-2008 (ESOP - IV)

During 2008-09, your Company instituted the Employee Stock Option Plan-2008 vide approval of shareholders through the postal ballot mechanism. A corpus of 2,000,000 options has been created for grant to the eligible employees under the scheme. This scheme has been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Company has obtained the requisite in-principle approvals from the stock exchanges for the purpose of listing of equity shares arising out of exercise of options granted under the scheme.

The Compensation Committee grants options to the eligible employees in accordance with the provisions of the scheme. The options are granted at a price, which is not less than 85% of the average of the closing price of the equity shares during the 15 trading days preceding the date of grant on the stock exchange where there is highest trading volume during this period. Unless otherwise resolved, the options granted vests over a period of 1 to 4 years and can be exercised over a period of 3 years from the date of vesting.

During the year 2011-2012, the employees voluntarily surrendered 1,019,583 stock options under ESOP 2008 scheme. Also, the Company issued equivalent stock options to the aforesaid eligible employees under ESOP 2008 scheme.

Additional information as at March 31, 2012 required to be disclosed as per Securities and Exchange Board of India (Employee Stock Option Scheme and Stock Purchase Scheme) Guidelines, 1999 is given as Annexure I to this report.

CORPORATE GOVERNANCE

Your Company strongly believes that the spirit of Corporate Governance goes beyond the statutory form. Sound Corporate Governance is a key driver of sustainable corporate growth and long-term value creation for the stakeholders and protection of their interests. Your Company endeavors to meet the growing aspirations of all stakeholders including shareholders, employees and customers. Your Company is committed to maintaining the highest level of transparency, accountability and equity in its operations. Your Company always strives to follow the path of good governance through a broad framework of various processes.

Your Company has complied with all the requirements as per Clause 49 of the listing agreement of the Stock Exchanges, as amended from time to time. The Auditor's certificate on compliance with Clause 49 is included under section on Corporate Governance in this Annual Report. In addition, your Company has documented its internal policies in line with the Corporate Governance guidelines. The Management

Discussion & Analysis of the financial position of the Company has been provided as a part of this report.

DIRECTORS

As per Article 87 of the Articles of Association of the Company read with section 255 and 256 of the Companies Act, 1956, atleast two-third of the Directors shall be subject to retirement by rotation. One-third of such Directors must retire from office at each Annual General Meeting of the shareholders and a retiring director is eligible for re-election. Accordingly, Mr. Sudeesh Yezhuvath retires by rotation and being eligible, has offered to be re-appointed at the ensuing Annual General Meeting.

The present tenure of Mr. Subash Menon, Founder, Managing Director & CEO will expire on September 30, 2012. The Board of Directors has at its meeting held on August 9, 2012 approved the proposal for re-appointment of Mr. Subash Menon as Managing Director & CEO for the period from October 1, 2012 to September 30, 2017. In accordance with the provisions of Sections 198, 269, 309 read with Schedule XIII and other applicable provisions of the Companies Act, 1956, the said re-appointment is being placed before the Members for their approval at the ensuing AGM. The terms and conditions of the re-appointment including remuneration have been provided in the notice convening the Annual General Meeting.

The Board of Directors has, vide its resolutions dated July 6, 2012, appointed Mr. Surjeet Singh and Mr. Karthikeyan Muthuswamy as Additional Directors of the Company to hold office until the next Annual General Meeting of the Company. Separate notices under Section 257 of the Companies Act, 1956 have been received from Members signifying their intention to propose Mr. Surjeet Singh and Mr. Karthikeyan Muthuswamy as candidates for the office of Director and accordingly resolutions for their appointment are being placed before the Members at the ensuing Annual General Meeting.

AUDIT COMMITTEE

On May 18, 2012, the Board of Directors approved the resignation of Mr. V Balaji Bhat consequent to which he vacated the office as the Chairman and member of the Audit committee. With immediate effect, Mr. Anil Singhvi was appointed as the Chairman of the Committee and Mr. Subash Menon was appointed as a member of the Committee. At the Board Meeting held on August 9, 2012, Mr. Subash Menon stepped down as a member of the Audit Committee and Mr. Surjeet Singh was inducted as a member of the Audit Committee. The Audit Committee presently has 3 Directors as its members viz. Mr. Anil Singhvi, Mr. Sanjeev Aga and Mr. Surjeet Singh. The role, terms of reference, the authority and power of the Audit Committee are in conformity with the requirements of section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement. Further details of the Audit Committee have been provided in the report on Corporate Governance forming part of this Annual Report.

AUDITORS

M/s. Deloitte Haskins & Sells (ICAI registration number 008072S), the Statutory Auditors of the Company retire at the ensuing Annual General Meeting. The Statutory Auditors have communicated their willingness to accept office, if re-appointed and have confirmed that they are eligible as per section 224(1B) to be appointed as statutory auditors of the Company and are not disqualified to hold office as such in terms of section 226 of the Companies Act, 1956.

The Auditors have expressed an unqualified opinion on the financial statements for the year ended March 31, 2012. With regard to point 7(a) of the annexure to the standalone auditor's report, the management has taken note of the same and will put in place adequate measures to monitor the same.

FIXED DEPOSITS

Your Company has not accepted any deposits from the public.

PARTICULARS OF EMPLOYEES

The particulars of employees required under Section 217(2A) of the Companies Act, 1956 and Companies (Particulars of Employees) Rules, 1975 as amended by Companies (Particulars of Employees) Amendment Rules, 2011, read with General Circular No. 23/2011 dated May 3, 2011 issued by MCA, are given at Annexure II appended hereto and forming part of this report. In terms of Section 219(1)(b) (iv) of the Companies Act, 1956, the report and accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary & Compliance officer at the Registered office of the Company.

INFORMATION UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

A. CONSERVATION OF ENERGY

The operations of your Company are not energy-intensive. However, significant measures are taken to reduce energy consumption by using energy-efficient computers and by the purchase of energy-efficient equipment. Your Company constantly evaluates new technologies and invests to make its infrastructure more energy- efficient. Currently your Company uses CFL fittings and electronic ballasts to reduce the power consumption of fluorescent tubes. Air conditioners with energy efficient screw compressors for central air conditioning and air conditioners with split air conditioning for localized areas are used.

B. TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

Your Company has a strong R&D Division responsible for developing technologies for its products in the telecom domain. The Company holds several patents for its technological innovations. The telecommunications domain, in which your Company operates, is subject to high level of obsolescence and rapid technological changes. Your Company has developed inherent skills to keep pace with these changes. Since software products are the significant line of business of your Company, the Company incurs expenses on product related Research & Development on a continuous basis. These expenses are charged to revenue under the respective heads and are not segregated and accounted separately.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company has over the years shifted its focus from software services to software products. This has resulted in substantial foreign exchange earnings as compared to previous years. During the year 2011-12 total foreign exchange inflow and outflow is as follows:

i) Foreign Exchange earnings Rs. 2,972.07 million (Previous Year Rs. 2,893.49 million)

ii) Foreign Exchange outgo is as below Rs. 1,666.05 million (Previous YearRs. 1,384.46 million)

CORPORATE SOCIAL RESPONSIBILITY - SUBEX CHARITABLE TRUST

Subex Charitable Trust extends the outlook of Subex as a corporate entity into community service. The trust has been set up to provide for welfare activities for under privileged and the needy in the society. The trust is managed by Trustees elected amongst the employees of the Company. During the year, the Trust has provided active support for education of economically challenged meritorious students, financial assistance to old age homes, orphanages and to individuals who needed medical help. A gist of activities undertaken by the Trust has been provided as a separate section in this Annual Report.

HUMAN RESOURCE MANAGEMENT

The Human Resource function is committed to make real the Subex Vision of "Deliver Value to Excel and Lead". The commitment and hard work of every member of the Subex family has ensured that your Company lives by the values of Fairness, Commitment and Innovation that we espouse.

During the year ended March 31, 2012, your Company surged ahead on a lot of the initiatives that were launched in the previous year. Hiring new members into the Subex team, and focusing on the drivers of Subexian satisfication were the critical focus areas. To that end your Company focused on further developing its own online Learning Management System called the Subex Academy that was launched last year. This automated platform added significant value to training identification, design, delivery and evaluation. Communication within the Company was stepped up. Attraction, alignment, motivation and learning were the other critical focus areas.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provision of Section 217(2AA) of the Companies Act, 1956, the Board of Directors afirms:

a) that in the preparation of the annual accounts for the year ended March 31, 2012, the applicable accounting standards have been followed. Pursuant to, and in accordance with, the approval of the Members and the Hon'ble High Court of Karnataka to a proposal for reduction of securities premium and capital reserve obtained during 2009-10, the Company has utilised the Business Restructuring Reserve for adjustment of certain expenses/impairments. Such adjustment being at variance with applicable accounting standards, necessary disclosure has been made in the Notes to the accounts in Standalone and Consolidated Financial Statements.

b) that the accounting policies have been selected and applied consistently and it has made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of Affairs of the Company as at March 31, 2012 and of the Profit of the Company for the year ended on that date.

c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provision of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) that the accounts for the year ended March 31, 2012 have been prepared on a going concern basis.

APPRECIATION / ACKNOWLEDGEMENTS

We thank our clients, vendors, investors and bankers for their continued support during the year. We place on record our appreciation for the co-operation and assistance provided by the Central and State Government authorities particularly SEZ authorities, Customs and Central Excise authorities, Registrar of Companies, Karnataka, the Income Tax department, Reserve Bank of India and various authorities under the Government of Karnataka.

Your Directors also wish to place on record their deep appreciation to Subexians at all levels for their hard work, solidarity, co-operation and support, as they are instrumental in your Company scaling new heights, year after year.

For Subex Limited

Sudeesh Yezhuvath Subash Menon

Chief Operating officer & Founder, Wholetime Director Managing Director & CEO

Place : Bangalore Date : August 9, 2012



 
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