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Notes to Accounts of Subex Ltd.

Mar 31, 2015

1. CORPORATE INFORMATION

Subex Limited, a public limited company incorporated in 1994, is a leading global provider of Operations and Business Support Systems (OSS/ BSS) to communication service providers (CSPs) worldwide in the Telecom industry.

The Company pioneered the concept of a Revenue Operations Center (ROC) - a centralized approach that sustains profitable growth and financial health for the CSPs through coordinated operational control. Subex''s product portfolio powers the ROC and its best-in-class solutions enable new service creation, operational transformation, subscriber-centric fulfilment, provisioning automation, data integrity management, revenue assurance, cost management, fraud management and interconnect / inter-party settlement. Subex also offers a scalable Managed Services Program. The CSPs achieve competitive advantage through Business Optimization and Service Agility and improve their operational efficiency to deliver enhanced service experiences to their subscribers. The Company has a development center in India and sales offices in the form of wholly owned subsidiaries/ branches in UK, USA, Singapore, Australia, Dubai and Canada.

2. ACCOUNTING UNDER THE PROPOSAL APPROVED BY THE HON''BLE HIGH COURT

(a) During the year ended March 31, 2010, the shareholders of the Company approved the Board''s proposal (hereinafter referred to as ''the Proposal'' for transferring amounts from the Securities Premium and Capital Reserves as on or arising after April 1,2009) (upto March 31,2012) to a Business Restructuring Reserve (BRR) to be utilised from April 1,2009 for certain Permitted Utilisations as mentioned in the Proposal.

The Proposal was approved by the Hon''ble High court of Karnataka on May 4, 2010 and was registered with the Registrar of Companies on May 11,2010, thereby completing all the requirements for the order to be effective.

3. FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)

a) During the year 2006-07, the Company issued Foreign Currency Convertible Bonds (FCCB I) aggregating to US$ 180 Million, with an interest rate of 2% p.a. payable semi-annually in arrears, with terms of conversion being :

i) Exchange rate for conversion of FCCB : RS. 44.08/ US1$

ii) Conversion price : RS. 656.20 per share

iii) Redemption date : March 09, 2012

iv) Premium payable on redemption : US$ 14.05 Million.

v) Listing on the London Stock Exchange

The bonds were available for conversion at any point in time during the period prior to the redemption date. During the year 2009-10, the Company presented to restructure the FCCBs I by offering a discount of ~30% on the face value of the existing bonds in return for new FCCBs ("FCCBs II") having a face value of US$ 126 Million.

Pursuant to the offer, the FCCBs I Bondholders, with a face value of US$ 141 Million exchanged their bonds for new FCCBs with a face value of US$ 98.70 Million. The remaining FCCBs I bondholders holding bonds with a face value of US$ 39 Million (out of the original bondholders holding US$ 180 Million) did not choose the option for restructuring. The terms and conditions applicable for the new FCCB II bonds, for the US$ 98.70 Million face value, were as under :

i) Interest rate : 5% p.a. payable semi annually

ii) Exchange rate for conversion of FCCB : RS. 48.17/ US1$

iii) Conversion price : RS. 80.31 per share

iv) Redemption date : March 09, 2012

Note - 26| FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBS)

v) Premium payable on redemption : US$. 23.23 Million.

vi) Listing on the Singapore Exchange Securities Trading Limited

Both the bonds were initially redeemable on or by March 9, 2012, if not converted into equity shares as per terms of issue. Based on an approval received from the Reserve Bank of India and bond holders, the redemption date was extended to July 09, 2012.

Out of the US$ 98.70 Million of FCCBs II, bonds having a face value of US$ 31.90 Million were converted into equity shares as of March 31,2010 and bonds with a face value of US$ 12 Million were converted during the year ending March 31,2011, retaining a closing balance of US$ 54.80 Million outstanding FCCBs II bonds.

b) Pursuant to the approval of the holders of ”US$ 180 Million 2% convertible unsecured bonds",[of which US$ 39 Million was outstanding ("FCCBs I")] and "US$ 98.70 Million 5% convertible unsecured bonds", [of which US$ 54.80 Million was outstanding ("FCCBs II")], at their respective meetings held on July 5, 2012 and exchange offers received under the exchange offer memorandum dated June 13, 2012, holders of US$ 38 Million out of FCCBs I and US$ 53.40 Million out of FCCBs II offered their bonds for exchange and secured bonds with a face value of US$ 127.72 Million ("FCCBs III") were issued with maturity date of July 7, 2017. The Company has been legally advised that there is no tax incidence arising from the above restructuring.

c) The terms and conditions of FCCB III are as under:

i) Interest rate : 5.70% p.a. payable semi annually

ii) Exchange rate for conversion of FCCB : RS. 56.06/ US1$

iii) Equity Conversion price : RS. 22.79 per share

iv) Redemption date : July 07, 2017

v) Listing on the Singapore Exchange Securities Trading Limited

vi) Second ranking paripassu charge in respect of all movable properties, present & future, covered under the Existing security and First ranking charge in respect of all movable properties, present & future, other than & to the extent covered by the existing security. First ranking charge on FCCB Repayment fund on a paripassu basis jointly & equally with SBI & Axis Bank Ltd. The promoters of the company have pledged their share towards securing the repayment of FCCB III.

vii) Mandatory conversion of bonds with a face value of US$ 36.32 Million into equity shares at the aforesaid conversion price on July 07, 2012. During 2012-13, 2013-14 and 2014-15, FCCB III with a face value of US$ 3.25 Million, US$ Nil and US$ 6.62 Million, respectively, were converted into equity shares of the Company, retaining a closing balance of US$ 81.53 Million as at March 31,2015 (Previous Year : US$ 88.15 Million).

The Company has, during 2013-14 and 2014-15, received approvals from the FCCB holders for deferment of the semi-annual interest payments falling due on January 2013, July 2013, January 2014, July 2014 and January 2015 to be settled with the principal on the redemption date. These have accordingly been categorized as long-term liabilities.

d) Pursuant to approval of the RBI dated April 27, 2012 and requisite approvals under the trust deed of the holders of the Company''s US$ 180 Million convertible unsecured bonds and US$ 98.70 Million convertible unsecured bonds, the maturity period of the un-exchanged portion of FCCBs I of face value US$ 1 Million and FCCBs II of face value US$ 1.40 Million stands extended to March 9, 2017, with its other terms and conditions remaining unchanged.

e) FCCB I : As at March 31,2015, the face value of the US$ 1 Million FCCBs (Previous Year US$ 1 Million) amounts to RS. 625.03 Lakhs (Previous Year: RS. 599.16 Lakhs) and is included in Note 5 - Long Term Borrowings.

The premium payable on maturity has been accrued by a charge to Securities Premium.

FCCB II :As at March 31, 2015, the face value of the US$ 1.40 Million FCCBs (Previous Year US$ 1.40 Million) amounts to RS. 875.05 Lakhs (Previous Year: RS. 838.87 Lakhs) and is included in Note 5 - Long Term Borrowings.

The premium payable on maturity has been accrued by a charge to Securities Premium.

FCCB III :As at March 31, 2015, the face value of the US$ 81.53 Million FCCBs (Previous Year US$ 88.15 Million) amounts to RS. 50,956.17 Lakhs (Previous Year: RS. 52,815.00 Lakhs) and is included in Note 5 - Long Term Borrowings. Subsequent to the year ended March 31, 2015, the company has received an intimation for conversion of FCCB''s III of US$ 5 Million, leaving an outstanding of FCCB III bonds of face value of US$ 76.53 Million.

f) The Board in its meeting on May 14, 2015 has 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 equity share. As a result of the reset of conversion price, subject to necessary approvals, the said bonds of face value of US$ 76.53 Million would potentially be converted into 329,988,530 shares at an exchange rate of RS. 56.05.

4. EMPLOYEES STOCK OPTION PLAN (ESOP)

The Company during the years 1999-2000, 2005-2006 and 2008-09 has established ESOP II, ESOP III and ESOP IV respectively.

These schemes have been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. As per these schemes, the Compensation Committee grants the options to the employees deemed eligible by the Advisory Board constituted for the purpose. The options are granted at a price, which is not less than 85% of the average market price of the underlying shares based on the quotation on the Stock Exchange where the highest volume of shares are traded for 15 days prior to the date of grant. The shares granted vest over a period of 1 to 4 years and can be exercised over a maximum period of 3 years from the date of vesting.

The Company has obtained in-principle approval for listing of shares upto a limit as mentioned below.

ESOP II : 8,83,750 shares ESOP III : 20,00,000 shares ESOP IV : 20,00,000 shares

5. EMPLOYEES STOCK OPTION PLAN (ESOP)

Fair Value Methodology

The fair value of options used to compute pro-forma net income and earnings per equity share have been estimated on the date of grant using Black-Scholes model.

The key assumptions used in Black-Scholes model for calculating fair value is: risk-free interest rate of 8% (Previous year 8%), expected life: 3 years (Previous year: 3 years), expected volatility of share: 54.49% (Previous year 54.49%), and expected dividend yield: 0% (Previous year 0%) The variables detailed herein represent the average of the assumptions during the pendency of the grant dates.

The Company adopted the amendments to Accounting Standard 11 "The Effects of Changes in Foreign Exchange Rates" that were notified during the year ended March 31, 2012. Pursuant to this amendment, exchange fluctuations arising on restatement of all long term monetary foreign currency assets and liabilities at rates different from those at which they were initially recorded or reported in the previous financial statements (whichever is later), are accumulated in a Foreign Currency Monetary Item Translation Difference account and are amortised over the balance period of such long term asset/liability. Consequently, exchange fluctuation losses (net) arising on restatement of such items have been deferred to the extent of RS. 5,111.21 Lakhs (Previous Year RS. 5,801.74 Lakhs) at March 31,2015.

6. EMPLOYEE BENEFIT PLANS

a) Defined Contribution Plans

The Company makes contributions to Provident Fund, Employee State Insurance scheme contributions which are defined contribution plan for qualifying employees. Under the Scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized RS. 219.18 Lakhs (Year ended 31 March, 2014 RS. 203.99 Lakhs) for Provident Fund contributions (excluding administration charges) and RS. 0.55 Lakhs (Year ended 31 March 2014 RS. 1.89 Lakhs) for Employee state insurance scheme contribution in the Statement of Profit and Loss.

* The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors, benefit obligation such as supply and demand in the employment market.

* The mortality rate is based on the table as specified by the Indian Assured Lives Mortality (2006-08) (modified) Ult.

Since the Company prepares consolidated financial statements in addition to these financial statements, both of which form part of the annual report of the Company, as permitted by Accounting Standard 17 "Segment reporting", the segment information is presented on the basis of the consolidated financial statements.

7. RELATED PARTY INFORMATION

i) Related Parties

Wholly Owned Subsidiaries

Subex Americas Inc.

Subex (UK) Ltd

Subex Technologies Ltd

Subex Azure Holdings Inc.

Subex (Asia Pacific) Pte Ltd

Subex Inc.

Subex Technologies Inc.

Key Management Personnel

Surjeet Singh, Managing Director & CEO

8. OPERATING LEASES

The Company has entered into lease agreement for certain properties and servers/computers which are cancellable at the option of the Company. The total rent charged to the Statement of Profit and Loss for the year towards such leases amount to RS. 1085.74 Lakhs (Previous year - RS. 1,081.32 Lakhs)

9. DEFERRED TAX

The Company has a net deferred tax asset as at March 31,2015 significantly arising from brought forward unabsorbed depreciation and tax losses, which has not been recognized as a matter of prudence in the absence of virtual certainty.

10. OTHERS

1 During the year, the Company has transferred RS. 1.31 Lakhs (Previous Year - RS. 1.60 Lakhs) to Investor Education and Protection Fund. Unclaimed dividend of RS. Nil as at March 31, 2015 (Previous Year - RS.1.31 Lakhs) represent dividends not claimed for the financial year NIL (Previous Year : for 2006-2007).

2 The Company has during the year revised certain estimatess on useful life of the assets based on the assesment carried out on account of the application of Schedule II of the Companies Act, 2013. This has resulted in the depreciation charge and the loss for the year to be higher by RS. 51.32 Lakhs. The Company has in accordance with the transitional provisions available, adjusted RS. 9.46 Lakhs to retained earnings representing the value of assets whose life was Nil as of April 01,2014.

3 Research and Development cost for the year includes expenditure of RS. 1,414.96 Lakhs (Previous year - RS. 1,366.10 Lakhs). This is as certified by the management and relied upon by the auditors.

4 The Company does not have any outstanding foreign exchange forward contracts or other derivative instruments for the purposes of hedging the risks associated with foreign exchange exposures as at the year end.

5 The Company has RS. International transactions'' with ''Associated Enterprises which are subject to Transfer Pricing regulations in India. The Management of the Company, is of the opinion that such transactions with Associated Enterprises are at arm''s length and hence in compliance with the aforesaid legislation. Consequently, this will not have any impact on the financial statements, particularly on account of tax expense and that of provision for taxation.

6 In view of the losses incurred by the Company during the year ended March 31, 2013, the excess of the managerial remuneration paid to the directors during the FY 2012-13 over the limits prescribed under Schedule XIII of the Companies Act, 1956 has been treated as monies due from the directors, being held by them in trust for the Company, and is included under ''Short-term loans and advances'' amounting to RS. 123.80 Lakhs (Previous year RS.123.80 Lakhs). Other advances to directors paid during FY 2012-13 is RS. 110 Lakhs (Previous Year RS. 110 Lakhs)

The Company has taken necessary steps for recovery of the above amounts and these items along with other claims are a subject matter of arbitration which is in progress.

9 In the opinion of the management, considering the future operational plans and cash flows of its subsidiary, viz. Subex Americas Inc., the net outstanding being trade receivables of '' 13,046.76 Lakhs (Previous Year : RS. 14,521.33 lakhs) and of RS. 4,345.54 Lakhs (Previous Year : RS. 5,411.57 Lakhs) under Note 14 "Other Non-current Assets" and Note 15 "Trade Receivables", respectively, and loans and advances of RS. 1,844.20 Lakhs (Previous Year RS. 1,838.22 Lakhs) under Note 13 "Long-term Loans and Advances", are considered good and recoverable.

Further, based on the management''s assessment, there is no diminution, other than temporary, in the carrying value of its investment in the said subsidiary of RS. 12,495.74 Lakhs included in Note 12 "Non-Current Investments" and accordingly, no provision is required to be made at this stage.

Schedule III of the Companies Act, 2013 has become effective from April 1,2014 for the preparation of financial statements. Previous year''s figures have been regrouped / reclassified to be comparable with current year''s classification / disclosures.


Mar 31, 2013

1. CORPORATE INFORMATION

Subex Limited, a public limited Company incorporated in 1994, is a leading global provider of Operations and Business Support Systems (OSS/BSS) to Communication Service Providers (CSPs) worldwide in the Telecom industry.

The Company pioneered the concept of a Revenue Operations Center (ROC) - a centralized approach that sustains profitable growth and financial health for the CSPs through coordinated operational control. Subex'' s product portfolio powers the ROC and its best-in-class solutions enable new service creation, operational transformation, subscriber-centric fulfillment, provisioning automation, data integrity management, revenue assurance, cost management, fraud management and interconnect/inter-party settlement. Subex also offers a scalable Managed Services Program. The CSPs achieve competitive advantage through Business Optimization and Service Agility and improve their operational efficiency to deliver enhanced service experiences to their subscribers. The Company has a development center in India and sales offices in the form of wholly owned subsidiaries/ branches in UK, USA, Singapore, Australia, Dubai and Canada.

NOTE 2 Accounting under the Proposal approved by the Hon''ble High court

a) During the year ended March 31, 2010, the shareholders of the Company approved the Board''s proposal (hereinafter referred to as ‘the Proposal'' for transferring amounts from the Securities Premium and Capital Reserves as on or arising after April 1, 2009) (upto March 31, 2012) to a Business Restructuring Reserve (BRR) to be utilised from April 1, 2009 for certain Permitted Utilisations as mentioned in the Proposal.

The Proposal was approved by the Hon''ble High court of Karnataka on May 4, 2010 and was registered with the Registrar of Companies on May 11, 2010, thereby completing all the requirements for the order to be effective.

b) Adjustments in the BRR during the previous year ended March 31, 2011

In accordance with the Proposal, the Board of Directors of the Company have approved the following for financial year ended March 31, 2011: transfer of 717,400.00 Lakhs during the year from the balances in Securities Premium Account and Capital Reserve to the BRR utilization of the BRR for permitted utilisations to the extent of 715,503.70 Lakhs (net).

c) Adjustments in the BRR during the previous year ended March 31, 2012

In accordance with the Proposal, the Board of Directors of the Company have approved the following for financial year ended March 31, 2012: transfer of 7346.69 Lakhs during the year from the balances in Capital Reserve to the BRR utilization of the BRR for permitted utilisations to the extent of 7 2,574.93 Lakhs (net of reversals).

d) Adjustments in the BRR during the current year ended March 31, 2013

In accordance with the Proposal, the Board of Directors of the Company have approved the following for financial year ended March 31, 2013: transfer of 7271.10 Lakhs during the year to Securities Premium, towards FCCB restructuring expenses 7359.58 Lakhs, towards reversal of unbilled revenue 7 206.00 Lakhs, towards provision for Receivables 7 752.90 Lakhs.

NOTE 3 Foreign Currency Convertible Bonds

a) During the year 2006-07, the Company issued Foreign Currency Convertible Bonds (FCCB I) aggregating to US$ 180 Million, with an interest rate of 2% p.a. payable semi-annually in arrears, with terms of conversion being :

i) Exchange rate for conversion of FCCB :744.08/ US$ 1

ii) Conversion price :Rs. 656.20 per share

iii) Redemption date : March 09, 2012

iv) Premium payable on redemption : US$ 14.05 Million

v) Listing on the London Stock Exchange

The bonds were available for conversion at any point in time during the period prior to the redemption date. During the year 2009-10, the Company presented to restructure the FCCBs I by offering a discount of ~30% on the face value of the existing bonds in return for new FCCBs ("FCCBs II") having a face value of US$ 126 Million.

Pursuant to the offer, the FCCBs I Bondholders, with a face value of US$ 141 Million exchanged their bonds for new FCCBs with a face value of US$ 98.70 Million. The remaining FCCBs I bondholders holding bonds with a face value of US$ 39 Million (out of the original bondholders holding US$ 180 Million) did not choose the option for restructuring. The terms and conditions applicable for the new

FCCB II bonds, f or the US$ 98.70 Million face value, were as under :

i. Interest rate : 5% p.a. payable semi annually

ii. Exchange rate for conversion of FCCB : 748.17/ US$ 1

iii. Conversion price : 7 80.31 per share

iv. Redemption date : March 09, 2012

v. Premium payable on redemption : US$. 23.23 Million

vi. Listing on the Singapore Exchange Securities Trading Limited

Both the bonds were initially redeemable on or by March 9, 2012, if not converted into equity shares as per terms of issue. Based on an approval received from the Reserve Bank of India and bond holders, the redemption date was extended to July 09, 2012.

Out of the US$ 98.70 million of FCCBs II, bonds having a face value of US$ 31.90 million were converted into equity shares as of March 31, 2010 and bonds with a face value of US$ 12 million were converted during the year ending March 31, 2011, retaining a closing balance of US$ 54.80 Million outstanding FCCBs II bonds.

b) Pursuant to the approval of the holders of "US$ 180 Million 2% convertible unsecured bonds", [of which US$ 39 Million was outstanding ("FCCBs I")] and "US$ 98.70 Million 5% convertible unsecured bonds", [of which US$ 54.80 was outstanding ("FCCBs II")], at their respective meetings held on July 5, 2012 and exchange offers received under the exchange offer memorandum dated June 13, 2012, holders of US$ 38 Million out of FCCBs I and US$ 53.40 Million out of FCCBs II offered their bonds for exchange and secured bonds with a face value of US$ 127.72 million ("FCCBs III") were issued with maturity date of July 7, 2017. The Company has been legally advised that there is no tax incidence arising from the above restructuring.

c) The terms and conditions of FCCB III are as under:

i. Interest rate : 5.70% p.a. payable semi annually

ii. Exchange rate for conversion of FCCB : 7 56.06/ US$ 1

iii. Equity Conversion price : 722.79 per share

iv. Redemption date : July 07, 2017

v. Listing on the Singapore Exchange Securities Trading Limited

vi. Second ranking paripassu charge in respect of all movable properties, present & future, covered under the Existing security and

First ranking charge in respect of all movable properties, present & future, other than & to the extent covered by the existing security First ranking charge on FCCB Repayment fund on a paripassu basis jointly & equally with SBI & Axis Bank Ltd. The promoters of the

Company have pledged their share towards securing the repayment of FCCB III.

vii. Mandatory conversion of bonds with a face value of US$ 36.32 Million into equity shares at the aforesaid conversion price on July 17, 2012.

During the year FCCB III with face value of US$ 3.25 Million were converted into equity shares of the Company retaining a closing balance of US$ 88.15 Million.

d) Pursuant to approval of the RBI dated April 27, 2012 and requisite approvals under the trust deed of the holders of the Company''s US$ 180 million convertible unsecured bonds and US$ 98.70 million convertible unsecured bonds the maturity period of the un- exchanged portion of FCCBs I of face value US$ 1 Million and FCCBs II of face value US$ 1.40 Million stands extended to March 9, 2017, with its other terms and conditions remaining unchanged.

e) FCCB I : As at March 31, 2013, the face value of the US$ 1 Million FCCBs (Previous Year: US$ 39 Million) amounts to 7 542.81 Lakhs (Previous Year: 719,841.27 Lakhs) and is included in Note 5 - Long Term Borrowings.

The premium payable on maturity has been accrued by a charge to Securities Premium.

FCCB II : As at March 31, 2013, the face value of the US$ 1.40 Million FCCBs (Previous Year: US$ 54.80 Million) amounts to 7 759.99 Lakhs (Previous Year: 727,879.48 Lakhs) and is included in Note 5 - Long Term Borrowings.

The premium payable on maturity has been accrued by a charge to Securities Premium.

FCCB III : As at March 31, 2013, the face value of the US$ 88.15 Million FCCBs (Previous Year: US$ Nil) amounts to 7 47,852.27 Lakhs (Previous Year: 7 Nil) and is included in Note 5 - Long Term Borrowings.

NOTE 4 Employees Stock Option Plan (ESOP)

The Company during the years 1999-2000, 2005-2006 and 2008-2009 has established ESOP II, ESOP III and ESOP IV respectively.

These schemes have been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. As per these schemes, the Compensation Committee grants the options to the employees deemed eligible by the Advisory Board constituted for the purpose. The options are granted at a price, which is not less than 85% of the average market price of the underlying shares based on the quotation on the Stock Exchange where the highest volume of shares are traded for 15 days prior to the date of grant. The shares granted vest over a period of 1 to 4 years and can be exercised over a maximum period of 3 years from the date of vesting.

The Company has obtained in-principle approval for listing of shares upto a limit as mentioned below.

ESOP II : 8,83,750 shares

ESOP III : 20,00,000 shares ESOP IV : 20,00,000 shares

NOTE

The Company adopted the amendments to Accounting Standard 11 "The Effects of Changes in Foreign Exchange Rates" that were notified during the year ended March 31, 2012. Pursuant to this amendment, exchange fluctuations arising on restatement of all long term monetary foreign currency assets and liabilities at rates different from those at which they were initially recorded or reported in the previous financial statements (whichever is later), are accumulated in a Foreign Currency Monetary Item Translation Difference account and are amortised over the balance period of such long term asset/liability. Consequently, exchange fluctuation losses (net) arising on restatement of such items have been deferred to the extent of 7 2,765.65 Lakhs (Previous Year: 7 357.00 Lakhs) at March 31, 2013 and the loss for the year is lower by a corresponding amount.

NOTE 5 Employees Benefit''s Plans

a) Defined Contribution Plans

The Company makes contributions to Provident Fund, Employee State Insurance scheme contributions which are defined contribution plan for qualifying employees. Under the Scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognizedRs.229.59 Lakhs (Year ended March 31, 2012 Rs.307.51 Lakhs) for Provident Fund contributions 7 2.04 Lakhs (Year ended March 31, 2012 7 2.09 Lakhs) for Employee state insurance scheme contribution in the Statement of Profit and Loss.

b) Defined Benefit Plans

The Company offers Gratuity benefits to employees, a defined benefit plan. The following table sets out the funded status of Gratuity

liability and the amounts recognised in the financial statements:

¦ The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

¦ The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other relevant factors

NOTE 6

Since the Company prepares consolidated financial statements in addition to these financial statements, both of which form part of the annual report of the Company, as permitted by Accounting Standard 17 "Segment reporting", the segment information is presented on the basis of the consolidated financial statements.

NOTE 7 Related Party Information

i. Related Parties

Wholly Owned Subsidiaries

Subex Americas Inc.

Subex (UK) Ltd

Subex Technologies Ltd

Subex Azure Holdings Inc.

Subex (Asia Pacific) Pte Ltd

Subex Inc.

Subex Technologies Inc.

Key Management Personnel

Surjeet Singh, Managing Director & CEO, October 5, 2012 onwards

Subash Menon, Managing Director & CEO upto September 27, 2012

Sudeesh Yezhuvath, Wholetime Director & Chief Operating Officer upto October 5, 2012

NOTE 8 Operating Leases

The Company had non-cancellable leasing arrangement for its office premises which on renewal during the year got converted into cancellable operating lease arrangement. Rental expenses for operating leases included in the Statement of Profit and Loss for the year is 7 940.95 Lakhs (Previous year: 7 906.12 Lakhs)

NOTE 8 Commitments and Contingent Liabilities

(a) Receivables factored: Current Year -Nil (Previous Year: 72,661.10 Lakhs).

(b) Claims against the Company not acknowledged as debt:

I. Current Year - 715.97 Lakhs (Previous Year: 715.97 Lakhs). These claims relate to Indian Income Tax demands which are being contested by the Company.

II. Others : Current year - 7 956.84 Lakhs (Previous Year: Nil)

(c) Guarantees given to Subex Technologies Inc 7 2,171.40 Lakhs (Previous year: 7 2,171.40 Lakhs)

(d) The Company has received a demand of service tax of 7 3,607.60 Lakhs and equivalent amount of penalties under the provisions of the Finance Act, 1994 along with the consequential interest, for the period from April, 2006 to July, 2009 towards service tax payable on import of certain services. The Company has filed an appeal contesting the demand before the Central Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore. The Company has also obtained a stay against the said demand on March 27, 2013. In view of the Company, the demand is not sustainable. Further, the Company contends that in the event of the demand being upheld by the Appellate Authority, the Company is eligible to avail the service tax as input credit upon payment of the tax, excluding penalty and interest, if any.

NOTE 9 Others

1. Estimated amount of contracts, remaining to be executed on capital account and not provided for (net of advances paid) Nil (Previous year -Rs. 17.31 Lakhs)

2. Unclaimed dividend of 7 2.92 Lakhs as at March 31, 2013 (Previous Year - 7 4.08 Lakhs) represent dividends not claimed for the period from 2005-2006. No part thereof has remained unpaid or unclaimed for a period of seven years from the date they become due for payment requiring a transfer to the Investor Education and Protection Fund''. During the current year, the Company has transferredRs.0.59 Lakhs (Previous Year -71.80 Lakhs) to Investor Protection Fund.

3. Direct Taxes paid and others in the Cash Flow Statement comprises outflows on account of permitted utilizations from the BRR of 7 359.58 Lakhs (Previous Year -7120.50 Lakhs) and Direct Taxes Nil. (Previous Year - 7 391.70 Lakhs).

4. Personnel Cost for the year includes expenditure on Research and Development of 7 1,108.71 Lakhs (Previous year - 7 1,295.12 Lakhs). This is as certified by the management and relied upon by the auditors.

5. The Company has entered into the following derivative instruments for the purposes of hedging the risks associated with foreign exchange exposures.

NOTE 10

Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/ disclosures.

 
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