IndiaBulls Real Estate

<DIV> <TABLE align='"center"'> <TBODY> <TR> <TD align='"center"'></TD></TR></TBODY></TABLE>The current macro scenario does not augur too well for the real-estate sector with issues such as funding challenges, tapering demand and slowing launches clouding prospects. The sharp de-rating of stocks in the sector in the past one year clearly reflects the market's pessimism.<BR><BR>Yet, the decline in realty stock prices offers an opportunity to invest in select stocks. Indiabulls Real Estate (IBREL) is one such company.<BR><BR>With projects that are likely to yield revenues in the near future, a bank of prime mill land in Mumbai, a cash-rich balance-sheet and diversification measures that have resulted in the company bagging power projects, IBREL's per share earnings could well double over the next two years.<BR><BR>At the current price of Rs. 288 the stock trades at ten times its estimated consolidated per share earnings for FY-10. The stock has fallen 60 per cent from the time of our 'Book Profit' call in October 2007.<BR><BR>The stock is, however, suitable only for investors with an above-average risk appetite. A complicated holding structure for projects and subsidiaries and aggressive growth plans add to the company's risk profile.<BR>Rapid growth<BR><BR>IBREL concluded its first full financial year (after the demerger from Indiabulls Financial Services) in 2007-08 and quickly ramped up its sales to Rs 141 crore. Huge cash raised from warrant issues to promoters was parked in interest-earning instruments, taking the 'other income' component to a whopping Rs 624 crore, bolstering total income.<BR><BR>While this cannot be viewed as a sustainable income, the deployment of this cash can be expected to ramp up revenues through additional business. One near-term revenue trigger for Indiabulls is likely to arise from lease rentals from the mill projects — Jupiter and Elphinstone — likely to be completed before FY-09.<BR><BR>These projects, listed as real-estate investment trusts in Singapore, would ensure a steady stream of revenues (in the form of dividends) from the rentals.<BR><BR>Equipped with about 3.5 million sq ft of office space at a prime location, a substantial part of the Jupiter Mill complexes have already been leased out. Interestingly, the lease rentals recently signed at the Jupiter Mills complex (at Rs 325 per sq ft) is also substantially higher than the Rs 275 per sq ft given to anchor tenants in the previous year.<BR><BR>The rising rentals suggest that the projects, primarily offering commercial space, could well be an exception to the weakening rates seen in some regions.<BR>Powered assets<BR><BR>The other high potential business for IBREL over the medium term may be its foray into power generation.<BR><BR>Of the Rs 2,190 crore of equity capital of this fully-owned subsidiary, over 70 per cent has come through private funding channels such as Farallon Capital and the LN Mittal group.<BR><BR>That this company has managed to bag power generation projects from State electricity boards through competitive bidding, lends confidence. While 5,447 MW of coal-based projects are under development as per schedule, it has recently bagged a 1,320 MW thermal project. The company's execution track record in other nascent businesses is a point in its favour.<BR><BR>Another promising revenue stream could arise from its 3,000-acre SEZ at Nashik, an industrial belt between Delhi-Mumbai.<BR>More cautious moves<BR><BR>In the residential segment, the company appears to favour cautious moves on launches; it resorted to just a single pre-sale of premium apartments in New Delhi in recent times.<BR><BR>The premium market, with less sensitivity to interest rates, appears a better target customer at this point in time.<BR><BR>Most of the malls planned by IBREL in major cities are expected to be leased out by late 2009.<BR><BR>While the company is in talks with international single-product retailers for the same, Indiabulls hypermarket and department stores are expected to be the anchor tenants in these malls.<BR><BR>We view this as a backward integration measure that may not, however, help profitability in the short term. We also do not view the retail segment to be a key earnings driver at this point. Increasing supply of mall space may well lead to weakening lease rates over the next couple of years.<BR><BR>IBREL's main advantage could be its possession of mall space in key space-constrained areas in Mumbai, apart from less penetrated markets.<BR><BR>Cash and investments, amounting to over Rs 5,700 crore on IBREL's books, are a source of comfort at a time when most realty developers are witnessing a funds crunch and are able to raise funding only at prohibitive rates. That most of the land that is being developed is fully paid for, is a comfort factor. However, the latest annual accounts suggest that a good part of the surplus was parked in inter-corporate deposits with promoter-group companies.<BR><BR>While this amount appears to earn reasonable interest and can be called back at a week's notice, such a move cannot be viewed as a good practice, from a governance perspective. While low land costs have ensured that the company enjoys strong operating profit margins, rising commodity costs may yet pose a threat.</DIV>

IndiaBulls Real Estate

The current macro scenario does not augur too well for the real-estate sector with issues such as funding challenges, tapering demand and slowing launches cloudi…

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Infosys Technologies

<DIV>With bulging cash coffers and inorganic growth aspirations, Infosys Technologies has for long been scouting for suitable acquisitions. It seems to have finally found an ideal candidate in the Axon Group.<BR><BR>Axon has been a consulting and solutions implementation partner of SAP for the past 14 years. Implementation of SAP, Microsoft or Oracle software packages, is usually an enterprise-wide exercise for most clients. These services also command higher billing rates compared to application development and maintenance services. Axon's strength in consulting and solutions implementation is evident from the fact that the company derives 19 and 69 per cent revenues respectively from these two services.<BR><BR>Strengthening its package implementation (enterprise solutions) and consulting services practice, penetration into a client segment where Infosys does not have a big presence (for instance, government clients) and expanding its EMEA (Europe and Middle-East Area) footprint may be key payoffs for Infosys from this proposed acquisition. The acquisition may also add to Infosys' strengths in providing enterprise solutions to the BFSI and manufacturing segments. It may, however, be a few years before Axon may add significantly to Infosys' EPS.<BR>Reasonable valuation? <BR><BR>At £407 million (Rs 3,258 crore), the buyout consideration is approximately twice Axon's 2007 revenues. Its current market capitalisation is £391.6 million (Rs 3,135 crore). The company has grown its revenues at a compounded annual rate of 53 per cent over the past three years. The valuation may, therefore, not be too expensive. With nearly $2 billion (over Rs 8000 crore)cash in its kitty, funding this acquisition may not be a problem for Infosys.<BR>Lower margin profile<BR><BR>This could have set the tone for the creation of a high-margin business for Infosys. But the (net profit) margin profiles for the two companies are quite different; Axon's 10 per cent being much lower than Infosys' 27 per cent levels due to the former's different cost structure and higher tax rates. A wage cost structure that is 48 per cent of revenues and a tax incidence of 31.5 per cent means that Axon has much lower margins compared to Indian players. Only 350 of its 2,000-odd employees are working offshore (low-cost destinations), that too on application management services. Infosys derived $993 or 24 per cent of its 2007-08 revenues from consulting and package implementation services. Within this, 33 per cent was from SAP package implementation and related services.<BR>Newer verticals<BR><BR>Over the next few years, Infosys could look at creating a larger offshore component and leverage its global delivery model in the enterprise solutions services line to include Axon's clients, thus optimising costs. Axon's clients comprise those in segments such as government and oil and gas, areas where Infosys is yet to make significant headway. These offerings may turn out to be complementary. The other benefits that Axon bring are strong business process consulting expertise — an area that is not yet a key strength of Indian players — and a substantial presence in the Europe and the fast growing West Asian region (61 per cent of revenues for Axon).<BR><BR>With enterprises in the Americas and Europe looking to expand in the Asia-Pacific region and West Asia, replication of business processes becomes critical. That could well provide considerable business opportunities for Infosys, with added enterprise solutions expertise to tap. Other opportunities for Infosys include the possibility of up-selling and cross-selling services to Axon's clients.<BR><BR>In its own business, Infosys has embarked on a series of initiatives for achieving non-linear growth.<BR>Growth initiatives<BR><BR>Its latest version of Finacle tries to offer the entire gamut of banking services and includes features such as Islamic Banking and Wealth Management.<BR><BR>With the investment phase nearly over for this product, this may pave the way for multiple revenue streams in the form of licensing, implementation (with minimum customisation) and maintenance revenues.<BR><BR>Finacle also has substantial domestic presence. Delivering services through a different platform such as Software as a Service (SaaS) is also an initiative.<BR><BR>Together, these initiatives might see a growth in revenues without a proportional growth in manpower recruited, thus enabling margin expansion over a two-three year period.<BR><BR>The acquisition is not a done deal yet. Axon may have counter offers from other suitors that may better Infosys' offer, hurting the acquisition or escalating the price.<BR><BR>A prolonged slowdown in the US and Europe would mean lowering or postponing spends on enterprise solutions implementation.<BR><BR>The sunset clause on STPI in 2010, may increase tax incidence for Infosys.<BR><BR>However, apart from changing its service mix in favour of high-margin services and initiatives on achieving non-headcount-linked growth, Infosys has headroom to steer key operating metrics and manage margins.<BR><BR>This makes Infosys one of the best placed Tier-1 IT services player in countering the current challenging macro environment and achieving growth. In this light, investors with a two-year horizon can consider buying the stock.<BR><BR>At Rs 1,740, the stock trades at 17 times its likely 2008-09 earnings.</DIV>

Infosys Technologies

With bulging cash coffers and inorganic growth aspirations, Infosys Technologies has for long been scouting for suitable acquisitions. It seems to have finally found an idea…

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Real estate sector in turmoil

<DIV>India continues its scorching pace of economic growth, many sectors that were not historically favoured by the government are gaining prominence. One such sector is real estate, which has a large employment generation potential and is a significant source of tax revenue. Additionally, this sector has attracted a large amount of foreign investment in recent times. Therefore, the government would do well to address the many complexities and ambiguities—on the indirect tax front—that the sector is facing.<BR><BR>Historically, the key indirect taxes that applied on the construction and real estate sector were works contract tax (now VAT) and stamp duty. With the expanding service tax net, various construction activities have been brought within the service tax net, notable among them being construction of commercial and residential complexes and renting of immovable property. The latest addition to this list was service tax on works contract, which was introduced in the last budget.<BR><BR>However, the amount of works contract tax payable, under both service tax and VAT, is anything but clear. The Supreme Court, in K Raheja development corporation's case in 2006, held that if a developer enters into a contract for sale of a residential apartment before construction is completed, it would be a works contract.<BR><BR>If the agreement is entered into after the flat or unit is already constructed, this would be an agreement for sale of immovable property and not a works contract. Broadly, this was based on the reasoning that an agreement to sell a flat that is under construction is an agreement to construct a flat for the eventual buyer of the flat. An agreement to construct a building/ apartment is a works contract.<BR><BR>Although this judgment was in the context of the definition of the term 'works contract' under the Karnataka Sales Tax Act, the service tax authorities were quick to adopt the ratio and demand service tax on the labour portion of the 'works contract.'<BR><BR>Sales of flats would anyway attract stamp duty and registration charges, which typically aggregate to 10% of the sale consideration. Before the Raheja case, the consideration passing from the buyer of a flat to the developer did not attract VAT or service tax. The Raheja decision deems this sale agreement to be a works contract if the flat is under construction.<BR>As India continues its scorching pace of economic growth, many sectors that were not historically favoured by the government are gaining prominence. One such sector is real estate, which has a large employment generation potential and is a significant source of tax revenue. Additionally, this sector has attracted a large amount of foreign investment in recent times. Therefore, the government would do well to address the many complexities and ambiguities—on the indirect tax front—that the sector is facing.<BR><BR>Historically, the key indirect taxes that applied on the construction and real estate sector were works contract tax (now VAT) and stamp duty. With the expanding service tax net, various construction activities have been brought within the service tax net, notable among them being construction of commercial and residential complexes and renting of immovable property. The latest addition to this list was service tax on works contract, which was introduced in the last budget.<BR><BR>However, the amount of works contract tax payable, under both service tax and VAT, is anything but clear. The Supreme Court, in K Raheja development corporation's case in 2006, held that if a developer enters into a contract for sale of a residential apartment before construction is completed, it would be a works contract.<BR><BR>If the agreement is entered into after the flat or unit is already constructed, this would be an agreement for sale of immovable property and not a works contract. Broadly, this was based on the reasoning that an agreement to sell a flat that is under construction is an agreement to construct a flat for the eventual buyer of the flat. An agreement to construct a building/ apartment is a works contract.<BR><BR>Although this judgment was in the context of the definition of the term 'works contract' under the Karnataka Sales Tax Act, the service tax authorities were quick to adopt the ratio and demand service tax on the labour portion of the 'works contract.'<BR><BR>Sales of flats would anyway attract stamp duty and registration charges, which typically aggregate to 10% of the sale consideration. Before the Raheja case, the consideration passing from the buyer of a flat to the developer did not attract VAT or service tax. The Raheja decision deems this sale agreement to be a works contract if the flat is under construction.<BR><BR>If the principle in the Raheja case is uniformly applied to all new apartments that are constructed, there could be an additional 8% (4% due to VAT and 4% due to service tax) impact on the difference between the cost of construction and the sale price of the flats! This is a huge burden that would be passed on to the prospective purchasers of flats, sharply increasing the cost of purchase.<BR><BR>To ensure a steady cash flow and reduce financing costs during construction, all flats are sold while they are under construction. Therefore, this burden would fall on every new flat that is constructed. Further, the VAT authorities can demand back taxes for many years, limited only by the period of limitation prescribed under the respective states' sales tax laws. The magnitude of this potential tax liability is quite staggering.<BR><BR>However, is an agreement for sale of a flat that is under construction really an agreement for construction of a flat? Or is it simply a financing arrangement, whereby the purchaser books a flat while it is under construction by the developer for himself as an entrepreneurial venture rather than on behalf of and under instructions from the buyer.<BR><BR>The gap in consideration between what the developer pays to the contractor (which is admittedly a works contract) and what the purchaser pays to the developer is clearly attributable to the value of land and the profit for the entrepreneurial risk taken by the developer.<BR><BR>If this amount is subject to up to an 8% additional tax, by considering this to be a works contract, it could almost finish off this industry just as it is about to take off! The sector is facing other disputes on taxability of lease rentals and credit available for inputs against service tax liability on lease rentals, but these are trivial as compared to the main issue on works contracts but also need clarification.<BR><BR>It seems that this industry is too important for the government to take a view that such issues should be left to the industry to sort out through recourse to litigation. Therefore, if the government takes a holistic view of the tax burden on this industry, it can enact appropriate measures to make the tax burden moderate, clear and easy to determine<BR><BR>via ET</DIV>

Real estate sector in turmoil

India continues its scorching pace of economic growth, many sectors that were not historically favoured by the government are gaining prominence. One such sector is real est…

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How well are we prepared for Commonwealth Games: PHD Chamber

<DIV>The Olympics ceremony came to a grand closure last weekend, with a spectacular display by China on all fronts, be it sports, courtesy, hospitality, infrastructure, air cleanliness level, rain dispersal, terror threat, transportation (Rail, Bus, taxi). All aspects covering such a major event were worked out to the minutest detail, and with luck favoring them things did run smoothly.<BR><BR>Commonwealth games are scheduled to be held in Delhi, from 3-17 October, 2010. Exactly 770 days are left from today. How well are we prepared for this mega event, which will showcase India to the world. The palpitations should have already started, now that the shield of another event is off. PHD Chamber has suggested construction of a 'preparedness level index' for CWG-2010 ensure that all projects are completed within the stipulated time frame.<BR><BR>According to PHD Chamber, the index should take into consideration 4 important benchmarks; Physical Infrastructure, Transportation, Environment and Human Resource Development mainly Sportspersons. This index should be updated every three months to assess the progress made and to take necessary corrective action in case of any delays.<BR><BR>CWG, which would involves some 5,000 athletes from 53 countries, will be the largest sporting event ever staged in India. Having staked India's reputation on the event, New Delhi is spending an estimated US$12bn to prepare the city for the games. With little more than 2 years left, plans to build state-of-the-art sports facilities and transport infrastructure, including new roads, at least 10 flyovers and new underground subway lines, have yet to be executed. Delhi's train stations require up-gradation and the city will have to add some 40,000 hotel rooms to cater to those expected to visit for the games.</DIV>

How well are we prepared for Commonwealth Games: PHD Chamber

The Olympics ceremony came to a grand closure last weekend, with a spectacular display by China on all fronts, be it sports, courtesy, hospitality, infrastructure, air clean…

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OVL, Imperial Energy agree on acquisition terms

<DIV> <TABLE align='"center"'> <TBODY> <TR> <TD align='"center"'></TD></TR></TBODY></TABLE>The boards of ONGC Videsh (OVL) and Imperial Energy announced that they hade reached an agreement on the terms of a recommended pre-conditional cash offer, to be made by Bidco, for acquiring the UK-based company. Bidco also offered to acquire the Imperial Energy convertible bonds. The two offers together value Imperial Energy at about £1.4bn ($2.). Bidco is a wholly-owned subsidiary of OVL incorporated in Cyprus formed for the purpose of making the offers. OVL is a wholly-owned subsidiary of Oil & Natural Gas Corp. (ONGC). Imperial Energy said that its Directors considered the terms of the offers to be " fair and reasonable". Imperial Energy Directors unanimously recommended the OVL offers to the shareholders and convertible bondholders. Imperial Energy is an independent upstream oil exploration and production company focused on the Commonwealth of Independent States (CIS) and, in particular, the Russian Federation. It is listed on the official list of the London Stock Exchange (LSE)</DIV>

OVL, Imperial Energy agree on acquisition terms

The boards of ONGC Videsh (OVL) and Imperial Energy announced that they hade reached an agreement on the terms of a recommended pre-conditional cash offer, to be…

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Infosys unveils big-bang acquisition

<DIV>Infosys announced that it will acquire UK-based Axon Group Plc for £4.701mn (Rs33.1bn, US$753mn). The transfer of ownership is expected to be completed by November, subject to the Scheme of Arrangement becoming effective, Infosys said. Axon is a business transformation consultancy that designs, implements and supports SAP solutions for large organisations. For the year ended December 2007, Axon had reported a profit after tax of £20.2mn (Rs1.6bn, US$37.4mn). Revenues for the year 2007 stood at £204.5mn (Rs16.6bn, US$378.3mn). Axon has about 2,000 employees. It has offices in the UK, North America, Malaysia and Australia. Axon's market capitalization as of Friday was £323mn. Investors didn't show much enthusiasm due to concerns that a rival bid could emerge. The market also seemed to be worried about the high price paid by Infosys and whether it will value accretive for the company.</DIV>

Infosys unveils big-bang acquisition

Infosys announced that it will acquire UK-based Axon Group Plc for £4.701mn (Rs33.1bn, US$753mn). The transfer of ownership is expected to be completed by November, subject …

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GDP falls sharply in first quarter

<DIV>The Indian economy grew at the slowest pace in three and a half years in the April-June quarter, as a spiraling inflation coupled with rising interest rates sapped consumer demand and curbed corporate investments. GDP in the fiscal first quarter grew by 7.9% as against 8.8% in the fourth quarter of the last fiscal year, the Central Statistical Organisation (CSO) said. The Indian economy had expanded by an impressive 9.2% in the first quarter of the previous fiscal year. GDP growth in Asia's fourth-biggest economy fell below the 8% mark after nine quarters.<BR><BR>Growth in the manufacturing sector slumped to 5.6% from 10.9% in the same quarter last year. Agriculture growth too slid to 3% versus 4.4% in the year-ago period. The construction sector did relatively better, posting a strong growth of 11.4% compared to 7.7%. The mining sector grew by 4.8% in Q1 FY09 versus 1.7% in the year-ago period, while electricity expanded by 2.6% as against 7.9% in the first quarter last year. Trade, hotels, transport & communications grew at 11.2% (13.1%) and finance, insurance, real estate & business services rose by 9.3% (12.6%).</DIV>

GDP falls sharply in first quarter

The Indian economy grew at the slowest pace in three and a half years in the April-June quarter, as a spiraling inflation coupled with rising interest rates sapped consumer …

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Market spurts as inflation softens for first time in 28 weeks

<DIV>Intense buying throughout the day triggered by data showing a slower-than-expected GDP growth in Q1 June 2008 and softening of inflation, helped the market settle near day's high. The BSE 30-share Sensex jumped 516.19 points. Strong global cues and healthy rollover of derivatives positions also aided the rally. The market breadth was strong. Interest rate sensitives were the flavor of the day. All the BSE sectoral indices posted gains.<BR><BR>India's gross domestic product (GDP) grew 7.9% in the June 2008 quarter from a year earlier, easing from the previous quarter's 8.8% rise as industrial activity slowed due to monetary tightening. The GDP growth in the first quarter of the current fiscal year was lower than market expectations of a rise of a little above 8%. The government released the GDP data at about 11:00 IST today, 29 August 2008.<BR><BR>Foreign institutional investors (FIIs) were net equity sellers worth Rs 364.61 crore while mutual funds purchased shares worth Rs 281.07 crore today, 29 August 2008, according to provisional data on BSE.<BR><BR>The BSE 30-share Sensex jumped 516.19 points or 3.67% at 14,564.53. The Sensex struck an intra-day high of 14,586.16 in late trade. At the day's high, the Sensex gained 537.82 points. Sensex opened 230.68 points higher at 14,279.02, which was also its day's low.<BR><BR>The S&P CNX Nifty advanced 146 points or 3.46% to 4360. Nifty September 2008 futures were at 4364, at a premium of 4 points as compared to spot closing of 4360.<BR><BR>The BSE Sensex is down 5722.46 points or 28.20% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 6642.24 points or 31.32% away from its all-time high of 21,206.77 struck on 10 January 2008.<BR><BR>Derivative contracts for August 2008 series expired yesterday, 28 August 2008 with strong rollovers. As per reports, marketwide rollover of positions from August 2008 series to September 2008 series stood at 83% while that of Nifty was at 75%. In the previous series, marketwide rollover of positions stood at 79% as while that of Nifty was at 65%<BR><BR>The market breadth was strong on BSE with 1828 shares advancing as compared to 832 that declined. 96 remained unchanged.<BR><BR>The total turnover on BSE amounted to Rs 5408 crore as compared to Rs 4,063.05 crore yesterday, 28 August 2008. NSE's futures & options (F&O) segment turnover was Rs 43,170.27 crore, lower than Rs 66,164.24 crore on Thursday, 28 August 2008.<BR><BR>Grasim was the lone loser from the 30-member Sensex pack. The diversified firm was down marginally by 0.05% to Rs 1936.<BR><BR>Strong buying was witnessed in interest rate sensitive sectors viz. banking, real estate and auto, as the latest data showed inflation softened for the first time in 28 weeks.<BR><BR>India's largest state-run bank by net profit State Bank of India surged 7.23% to Rs 1404.10 on 11.56 lakh shares. It was the top gainer from Sensex pack.<BR><BR>HDFC Bank (up 5.40% to Rs 1281), and ICICI Bank (up 5.88% to Rs 671), advanced. The Bankex vaulted 6.27% to 7,009.69 and was the top gainer among the sectoral indices on BSE<BR><BR>Mid-cap bank shares also joined the rally. Oriental Bank of Commerce (up 8.06% to Rs 165), Bank of India (up 5.88% to Rs 266.35), Bank of Baroda (up 3.44% to Rs 283), Axis Bank (up 7.91% to Rs 723.70), and Kotak Mahindra Bank (up 9.54% to Rs 609.90), advanced.<BR><BR>Annual wholesale price inflation rose 12.40% in 12 months to 16 August 2008, below the previous week's 12.63% but remained stuck at 13-year highs, data released by the government after trading hours on Thursday, 28 August 2008 showed. No conclusion can be drawn from one week's inflation number, Finance Minister P Chidambaram said.<BR><BR>Inflation has nearly tripled from 4.39% a year ago and now is riding around the highest levels since the current inflation series began being compiled 13 years ago.<BR><BR>India's largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) rebounded after declining for previous three days. The stock advanced 2.67% to Rs 2129 on 7.68 lakh shares. On 26 Tuesday, August 2008, RIL confirmed media reports that it is planning to transfer 80% of its participatory interest (PI) in the D6 oil and gas block in the Krishna Godavari (KG) basin to four unlisted subsidiaries.<BR><BR>Auto shares rose. Tata Motors (up 5.59% to Rs 441), Maruti Suzuki India (up 3.44% to Rs 651.85), Bajaj Auto (up 1.33% to Rs 588.45), Mahindra & Mahindra (M&M) (up 1.57% to Rs 576) and Hero Honda Motors (up 0.40% to Rs 825.05), rose. The BSE Auto index gained 2.30% to 4,001.23<BR><BR>DLF (up 4.13% to Rs 487.60), Ansal Infrastrcutures (up 3.41% to Rs 100), Sobha Developers (up 3.87% to Rs 266), Indiabulls Real Estate (up 11.97% to Rs 290) edged higher from the realty pack. The BSE Realty index rose 5.10% to 4,995.25<BR><BR>Tata Steel, the world's sixth-largest steel maker by capacity, gained 4.86% to Rs 599.60. The company said after trading hours yesterday, 28 August 2008, its consolidated net profit rose 60.4% to Rs 3900.90 crore in Q1 June 2008 over Q1 June 2007, boosted by its Anglo-Dutch unit Corus.<BR><BR>India's largest oil exploration firm Oil & Natural Gas Corporation rose 2.50% to Rs 1024.70. British oil and gas explorer Imperial Energy said on Tuesday, 26 August 2008, that its management has agreed to a takeover from ONGC worth 1.4 billion pounds ($ 2.6 billion).<BR><BR>IT pivotals climbed up on fresh buying. Infosys Technologies, the country's second largest software services exporter advanced 2.92% to Rs 1749.50. The company said after trading hours on Monday, 25 August 2008, it has agreed to acquire UK based SAP consulting company Axon Group plc, for 407.1 million pounds or Rs 3310 crore. Axon reported profit after taxation of 20.2 million pounds (Rs 160 crore) on revenue of 204.5 million pounds or Rs 1660 crore in the year ended 31 December 2007.<BR><BR>India's third largest software services exporter Wipro jumped 4.59% to Rs 433 on reports the company may buy a German competitor that advises companies running business software made by SAP AG.<BR><BR>Satyam Computer Services (up 3.33% to Rs 420) and TCS (up 2.44% to Rs 813) advanced. The BSE It index gained 2.94% to 3,966.75<BR><BR>Telecom stocks were in demand. India's top cellular services provider by market capitalisation Bharti Airtel advanced 4.50% to Rs 839.85. A massive block deal of 1.01 crore shares was struck on the counter at Rs 813.95 at 11:59 IST on BSE. It was the top traded counter on BSE with turnover of Rs 867.79 crore.<BR><BR>Reliance Capital (Rs 310 crore), ICICI Bank (Rs 171.10 crore), Reliance Industries (Rs 163.50 crore) and State Bank of India (Rs 161.30 crore), were the other turnover toppers on BSE.<BR><BR>Reliance Communications, the country's second largest cellular services provider by market capitalisation jumped 2.61% to Rs 395.50.<BR><BR>Capital goods heavyweights rebounded after suffering steep losses yesterday, 28 August 2008. Bharat Heavy Electricals, the country's largest power equipment maker by sales, surged 4.86% to Rs 1708 after the company said it has secured a contract worth Rs 1155 crore for supply of power generation equipment to a plant in Punjab. The company made the announcement during trading hours today, 29 August 2008.<BR><BR>India's largest engineering & construction company by outstanding order book position Larsen & Toubro gained 3.53% to Rs 2589.90. The BSE Capital Goods index advanced 3.43% to 11,886.62<BR><BR>Cement shares rose despite recent foreign brokerage report which showed cement prices are set to decline 15-20% by fiscal 2009-10 due to increase in cement supplies. ACC (up 1.95% to Rs 563), Ambuja Cement (up 1.26% to Rs 80.30), and India Cement (up 2.91% to Rs 139.30), rose.<BR><BR>Ranbaxy Laboratories, the country's biggest pharma company by sales, recovered from day's low of Rs 490. It closed 0.88% higher at Rs 518.50. As per reports, the Foreign Investment Promotion Board (FIPB) on 27 August 2008 approved the acquisition of Ranbaxy by Japan's Daiichi Sankyo and the deal would now have to be cleared by the Finance Minister and the Cabinet Committee on Economic Affairs.<BR><BR>Reliance Infrastructure (up 5.31% to Rs 985), HDFC (up 3.75% to Rs 2332), and Jaiprakash Associates (up 5.38% to Rs 164.50), edged higher from the Sensex pack.<BR><BR>Reliance Natural Resources topped volumes chart clocking volumes of 1.41 crore shares followed by Bharti Airtel (1.07 crore shares), Chambal Fertilisers (81 lakh shares), IFCI (78.20 lakh shares) and Ispat Industries (75.60 lakh shares), in that order.<BR><BR>Among the side counters, Classic Diamond (up 20% to Rs 47.90), Malwa Cotton (up 19.90% to Rs 50.30), Shiva Cement (up 20% to Rs 12.17), Donear Industries (up 18.57% to Rs 44.90), and Atlanta (up 15.62% to Rs 196.15), surged.<BR><BR>Prudential Pharma (down 12.14% to Rs 38), Hitech Plastics (down 8.30% to Rs 65.20), and Savera Hotel (down 7.22% to Rs 56.50), slumped.<BR><BR>Motilal Oswal Financial Services galloped 2.84% to Rs 114.15 after the company said it has received in principle approval from Securities Exchange Board of India to set up mutual fund business in the country. The company made this announcement during trading hours today, 29 August 2008.<BR><BR>Jai Corp jumped 5% at Rs 324.30 on reports the firm plans to get into distribution and supply of city gas and liquified petroleum gas to its special economic zones (SEZ) in Mumbai and Navi Mumbai.<BR><BR>National Aluminium Company spurted 5.26% to Rs 388.15 on reports the company begun importing coal to overcome shortages, which forced the company to cut alumina output in July 2008.<BR><BR>Bharat Petroleum Corporation jumped 4.41% to Rs 298.30 after the company said its step down overseas unit has acquired 10% stake in Mozambique's Rovuma Offshore Area 1 block from US firm Anadarko Petroleum Corporation. The company made this announcement during trading hours on Thursday, 28 August 2008, when the stock had declined 4.38% to Rs 285.70 in a weak market.<BR><BR>Unitech gained 3.07% to Rs 157.85 after its telecom unit received 4.4 megahertz of spectrum in the GSM band in Madhya Pradesh. The company made the announcemnt after market hours yesterday, 28 August 2008. With this, the company has been allotted initial spectrum in six service areas out of the total 22 service areas, the statement added<BR><BR>The National Stock Exchange (NSE) today, 29 August 2008, kickstarted trading in the exchange-traded rupee futures for the first time in India. Good volumes were reported on day one with the front-month contracts seeing brisk activity. The contract size is $1,000 each.<BR><BR>Crude for October 2008 delivery rose $1.41 or to $117 a barrel today, 29 August 2008 as energy companies prepared for tropical storm Gustav. US crude had lost $2.56 at $115.59 barrel, yesterday, 28 August 2008 after the US government and the International Energy Agency pledged to release emergency stockpiles if Tropical Storm Gustav disrupted US oil production.<BR><BR>European markets, which opened after Indian markets, were trading higher. Key benchmark indices in UK, Germany and France were up by between 0.26% and 0.51%.<BR><BR>Asian markets, which opened before Indian markets were trading higher today, 29 August 2008. Key benchmark indices in China, Japan, Hong Kong, Taiwan, Singapore and South Korea were up by between 0.01% and 2.39%.<BR><BR>US markets rallied yesterday, 28 August 2008 on stronger than expected GDP growth and a drop in oil prices. Second quarter GDP came in at a better than expected 3.3%. Weekly jobless claims also dipped. The Dow Jones industrial average surged 212.67 points, or 1.85%, to 11,715.18. The S&P 500 index rose 19.02 points, or 1.48%, to 1,300.68, and the Nasdaq Composite index advanced 29.18 points, or 1.22%, to 2,411.64.</DIV>

Market spurts as inflation softens for first time in 28 weeks

Intense buying throughout the day triggered by data showing a slower-than-expected GDP growth in Q1 June 2008 and softening of inflation, helped the market settle near day's…

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Annual Report - Tech Mahindra - 2007 - 2008

<DIV> TECH MAHINDRA LIMITED <BR><BR>ANNUAL REPORT 2007-2008 <BR><BR>DIRECTOR'S REPORT <BR><BR>TO THE SHAREHOLDERS <BR><BR>Your Directors present their Twenty-first Annual Report together with the audited accounts of your Company for the year ended 31st March 2008. <BR><BR>FINANCIAL RESULTS: <BR><BR>Rs. in Million <BR><BR>For the year ended 31st March 2008 2007 <BR><BR>Income 37,023 27,586 <BR><BR>Profit before Depreciation and tax 9,083 6,980 <BR><BR>Depreciation (736) (463) <BR><BR>Profit before tax 8,347 6,517 <BR><BR>Provision for taxation (689) (615) <BR><BR>Profit after tax before non-recurring / exceptional items 7,658 5,902 <BR><BR>Non-recurring / exceptional items (4,401) (5,250) <BR><BR>Profit for the year after tax and non-recurring / exceptional items 3,257 652 <BR><BR>Provision in respect of earlier years written back 165 339 <BR><BR>Balance brought forward from previous year 4,261 4,540 <BR><BR>Profit available for appropriation 7,683 5,531 <BR><BR>Dividend - Interim (Paid) NIL (266) <BR><BR>- Final (Proposed) (668) NIL <BR><BR>Tax on dividend - On interim dividend NIL (37) <BR><BR>- On final dividend (113) NIL <BR><BR>Transfer to General Reserve (1,700) (65) <BR><BR>Balance carried forward 5,202 5,163 <BR><BR>DIVIDEND: <BR><BR>Your Directors have recommended a dividend of 55% (Rs. 5.50 per share of face value of Rs. 10) for the financial year ended on 31st March 2008. <BR><BR>CHANGES IN SHARE CAPITAL: <BR><BR>During the year under review, your Company allotted 146,168 shares of Rs.10 each on the exercise of stock options under its various Employee Stock Option Plans which increased the number of issued, subscribed and paid-up equity shares from 121,216,701 to 121,362,869. <BR><BR>BUSINESS PERFORMANCE / FINANCIAL OVERVIEW: <BR><BR>Your Company continues to excel in providing effective business solutions to its customers. Your Company's strategy of providing end to end solutions to leading telecom companies around the world by leveraging its telecom domain knowledge, excellence in technology and robust processes has resulted in strong growth in engagements of larger scale and scope. Your Company has emerged as an integrated service provider, combining its strength in the areas of Application Development and Maintenance, Infrastructure Management Services, IT Enabled Services, Business Process Management, Security Services and Business Intelligence Services. <BR><BR>During the year, your Company made significant progress in partnering customers in the networked IT solution space, helping Telecom Service Providers (TSPs) deliver services to enterprise customers. Substantial growth has been achieved in the billion dollar business transformation deal signed with BT last year. Your Company's ability to learn, delivery capability, domain expertise and project management capability has been greatly appreciated by the client. <BR><BR>In continuation with its efforts to enhance its leadership in the telecom domain, your Company continues to invest in developing competence in its chosen areas of focus. Your Company has made progress in delivering services for network solutions which form a significant area of spend by TSPs and cover traditional areas of network operations as well as new technologies such as WiMax and IPV6. These emerging businesses, in the opinion of your Company, have significant potential to scale up in the coming years. <BR><BR>Keeping in line with its strategy of expanding service offerings, your Company has significantly ramped up its BPO operations during the year under review. Your Company offers focused BPO and KPO solutions in the areas of service provisioning, service activation, incident and problem management, contract management, market research, customer care and billing. <BR><BR>During the year under review, your Company has made good progress on its strategy to target multi-year deals with end to end ownership of customer systems and the Company processes. This initiative has helped the Company further its objective of long term partnership with the customers. The Company seeks to become an integral part of the customer's transformation journey by offering superior value propositions. <BR><BR>Your Company has been continuously pursuing growth opportunities in related industries where the strong capabilities acquired by your Company can be leveraged effectively. In the previous year, your Company has been successful in making inroads into the cable industry. Your Company continues to invest in strengthening its marketing infrastructure across geographies. <BR><BR>Your Company continued to see strong and profitable growth in the financial year 2007-08 across all markets driven by good performance in existing and new areas of business. <BR><BR>During the year under review, total income increased to Rs. 37,023 Million from Rs. 27,586 Million in the previous year, at a growth rate of 34%. On a consolidated level, total income increased to Rs. 38,705 Million from Rs.29,350 Million in the previous year. <BR><BR>During the year, 77% revenue came from Europe, 17% came from USA and 6% came from Rest of the World (ROW). Your Company added 24 new clients across geographies, which include large global corporations. <BR><BR>The Profit before depreciation amounts to Rs. 9,083 Million (25% of revenue) as against Rs. 6,980 Million (25% of revenue) in the previous year. <BR><BR>Profit after tax, before exceptional items, has increased to Rs. 7,658 Million from Rs. 5,902 Million. On a consolidated level, profit after tax, before exceptional items, increased to Rs. 7,695 Million from Rs. 6,127 Million in the previous year, a growth of 26%. <BR><BR>During the year, your Company has entered into an agreement with a customer under which the Company has made an exclusivity payment of Rs. 4,401 Million to the customer. Accordingly, this payment has been disclosed as an exceptional item in the Profit and Loss account. <BR><BR>MANAGEMENT DISCUSSION AND ANALYSIS REPORT: <BR><BR>A detailed analysis of your Company's performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report. <BR><BR>INITIAL PUBLIC OFFERING (IPO): <BR><BR>Pursuant to the Listing Agreement with the Stock Exchanges, given below is the utilisation statement of the funds raised through IPO: <BR><BR>Rs. in Million <BR><BR>Year Projections Actual <BR><BR>Fiscal 2007 842 281Fiscal 2008 269 830Total 1,111 1,111 <BR><BR>AMALGAMATION OF SUBSIDIARIES: <BR><BR>With a view to streamline the operations, it was considered appropriate to merge two of the wholly owned subsidiaries of your Company, namely, iPolicy Networks Limited and Tech Mahindra (R & D Services) Limited with your Company. Necessary approvals were obtained from the respective Boards of Directors and Shareholders after which petitions were filed with the jurisdictional High Courts. The Hon'ble High Court of Bombay, the Hon'ble High Court of Karnataka and the Hon'ble High Court of Delhi, at their hearings held on 28th March 2008, 3rd April 2008 and 4th April 2008 respectively have approved the Scheme of Amalgamation between iPolicy Networks Limited and Tech Mahindra (R & D Services) Limited with your Company. The necessary Orders of the Courts have been received and filed with the respective Registrar of Companies and effective 20th May 2008 iPolicy Networks Limited and Tech Mahindra (R & D Services) Limited stand dissolved without winding-up. <BR><BR>QUALITY: <BR><BR>Your Company remains committed to the highest quality standards and has achieved several quality accreditations like ISO 9001:2000, ISO/IEC 20000-1:2005, ISO/IEC 27001:2005, SEI-CMMI Level 5 P-CMM Level 5 and SSE-CMM Level 3. These accreditations are a manifestation of the strength of your Company's processes and maturity of its system. <BR><BR>Your Company's Quality Management Group (QMG) is responsible for continuously improving business processes which are bench marked against the highest industry standards. Your Company's goal is to ensure greater customer satisfaction by improved quality, productivity and cycle time. <BR><BR>HUMAN RESOURCES: <BR><BR>During the fiscal year 2007-08, your Company along with its subsidiaries made a net addition of 3,135 employees. The employee strength increased to 22,884 as at 31st March 2008, compared to 19,749 a year before, an increase of 16%. BPO services registered significant growth, almost doubling the headcount to 3,445 from 1,755, a year before. <BR><BR>Employee Learning and Development/Interface with Academia: <BR><BR>The endeavour at your Company is to foster a competency driven organization and instill a culture of high performance. <BR><BR>Career enrichment is of key importance and the Education Services Group (ESG) at your Company actively involves itself in fostering a learning culture among all employees. Extending higher education opportunities for employees forms a core focus of the ESG and it coordinates postgraduate education programs from IIT Mumbai and BITS Pilani. <BR><BR>Along with technical know-how, your Company also ensures an all round development of its employees through its in-house soft skill training programs. The Behavioral training team handles mentoring, guidance and career outlining for all employees and is focused on facilitating organization-wide capability building through continuously enhancing the knowledge, skills and attitude. <BR><BR>Leadership Development: <BR><BR>In order to strengthen organization capability, your Company continues to focus on developing talent through two unique programs the 'Global Leadership Cadre' (GLC) and the Management Trainee (MT) program which hires the best talent from top academic campuses and grooms them through a focused program to take up higher managerial and decision making responsibilities. <BR><BR>In addition, the Technical GLC program is offered to internal candidates who have been outstanding performers in their current assignments and have the potential to take up techno commercial roles at critical positions. <BR><BR>INFRASTRUCTURE: <BR><BR>Your Company continued to invest in creating best in class facilities across the world in accordance with its business plans. Your Company is in final stages of completion of the first phase of its campus in Hinjewadi SEZ in Pune with 9,000 seats. During the year, your Company set up a development center at Belfast, Northern Ireland, having a seating capacity of 400 to provide end to end IT and BPO solutions to customers primarily in the European and US markets. A new development center with state of the art facilities was also opened in Chennai SEZ with a capacity of 1,400 seats. <BR><BR>SUBSIDIARY COMPANIES: <BR><BR>During the year under review, Tech Mahindra (Malaysia) Sdn Bhd. and Tech Mahindra (Beijing) IT Services Limited became subsidiaries of your Company. <BR><BR>As on 31st March 2008, your Company has 11 subsidiaries and 2 step-down subsidiaries. There has not been any material change in the nature of the business of the subsidiaries. As already reported in the previous Annual Report, Tech Mahindra (R&D Services) Pte. Limited, Singapore, a dormant step-down subsidiary of your Company had applied for voluntary closure and was struck off the Register of Companies with effect from 8th April 2007. <BR><BR>As required under the Listing Agreements with the Stock Exchanges, the Consolidated Financial Statements of your Company and all its subsidiaries are attached. The Consolidated Financial Statements have been prepared in accordance with Accounting Standard AS 21, AS 23 and AS 27 issued by The Institute of Chartered Accountants of India and show the financial resources, assets, liabilities, income, profits and other details of your Company and its subsidiaries and associate companies as a single entity, after elimination of minority interest. <BR><BR>Your Company has been granted exemption for the year ended 31st March 2008 by the Ministry of Corporate Affairs vide its letter dated 12th March 2008 from attaching to its Balance Sheet, the individual Annual Reports of each of its subsidiaries. Documents of the subsidiaries will be submitted on request to any member wishing to peruse a copy, on receipt of such request by the Assistant Company Secretary of the Company. However, as directed by the Central Government, the financial details of the subsidiaries have been separately furnished forming part of this Annual Report. These documents will also be available for inspection by any member at the registered office of the Company and the office of the respective subsidiary companies during working hours upto the date of Annual General Meeting. <BR><BR>EMPLOYEE STOCK OPTION PLAN: <BR><BR>Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure I to this Report. <BR><BR>CORPORATE SOCIAL RESPONSIBILITY: <BR><BR>Your Company, as a responsible corporate entity, believes firmly in meeting its social responsibility towards the development of the underprivileged in today's society. The Tech Mahindra Foundation is the CSR arm of your Company. Your Company contributes 1% of its PAT every year to fund the CSR activities undertaken on its behalf by the Foundation. During the year 2007-08, the Tech Mahindra Foundation has made total donations of Rs. 30 Million to meet its charitable objectives. Your Company and its employees have added Rs. 84 Million to the corpus account which stands at Rs. 304 Million. <BR><BR>The Tech Mahindra Foundation believes in the power of education to bring about a transformation in the lives of the underprivileged, besides being the essential and critical element in national development. The Foundation has focused on bringing about positive changes in the area of education for the economically disadvantaged by developing partnerships with reputed NGOs who share the Foundation's vision. It also seeks out organizations which have effective vocational training programs to enable young people to advance towards a better economic future. <BR><BR>Some of the activities undertaken by the Foundation in association with its NGO partners include providing educational support to the children of waste pickers and construction workers and to children with various physical disabilities. The Foundation has supported organizations running educational centres for slum children and seeking to improve quality of education in municipal schools. It has encouraged its partners to pay special attention to the needs of the girl child. <BR><BR>The year under review saw the Foundation launching some innovative initiatives such as: <BR><BR>* Setting up of an employability portal which will help towards personal development and training of persons with disability; the software will be developed by employees of your Company; <BR><BR>* Development of an English language competence course for underprivileged school dropouts; and <BR><BR>* A scheme to improve education in Delhi Municipal schools by instituting a scheme to recognize and honour outstanding teachers (Shikshak Samman Scheme). <BR><BR>Your Company continued its policy of donating computer hardware to schools and charitable institutions. <BR><BR>During the year under review, your Company set up an educational Trust, 'Mahindra Education Foundation', along with another company from the Mahindra Group for the purpose of setting up educational college campuses to improve the availability of qualified professionals for industry. <BR><BR>CORPORATE GOVERNANCE PHILOSOPHY: <BR><BR>Your Company believes that Corporate Governance is a voluntary code of self-discipline. In line with this philosophy, it follows healthy Corporate Governance practices and reports to the shareholders the progress made on the various measures undertaken. Your Directors have reported the initiatives on Corporate Governance adopted by your Company which are included in the section 'Corporate Governance' in the Annual Report. <BR><BR>DIRECTORS: <BR><BR>Mr. Bharat N. Doshi, Hon. Akash Paul and Mr. Arun Seth retire by rotation, and being eligible, offer themselves for re-appointment. <BR><BR>DIRECTORS' RESPONSIBILITY STATEMENT: <BR><BR>Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representation received from the Operating Management, and after due enquiry, confirm that: <BR><BR>i. In the preparation of the annual accounts, the applicable accounting standards have been followed; <BR><BR>ii. They have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March 2008 and of the profit of the Company for the year ended on that date; <BR><BR>iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; <BR><BR>iv. The annual accounts have been prepared on a going concern basis. <BR><BR>AUDITORS: <BR><BR>M/s. Deloitte Haskins & Sells, Chartered Accountants, the Auditors of your Company, hold office up to the conclusion of the forthcoming Annual General Meeting of the Company and have given their consent for re-appointment. The shareholders will be required to elect auditors for the current year and fix their remuneration. Your Company has received a written confirmation from M/s. Deloitte Haskins & Sells to the effect that their appointment, if made, would be in conformity with the limits prescribed in Section 224 of the Companies Act, 1956. The Board recommends the re-appointment of M/s. Deloitte Haskins & Sells as the Auditors of the Company. <BR><BR>CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION: <BR><BR>In view of the nature of activities that are being carried on by your Company, Rule 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorption, respectively are not applicable to your Company. Your Company being a software solution provider requires minimal energy consumption and every endeavour has been made to ensure the optimal use of energy, avoid wastage and conserve energy as far as possible. <BR><BR>FOREIGN EXCHANGE EARNINGS AND OUTGO: <BR><BR>The foreign exchange earnings of your Company during the year were Rs.35,637 Million (Previous Year Rs. 27,381 Million), while the outgoings were Rs. 18,133 Million (Previous Year Rs. 16,340 Million). <BR><BR>PARTICULARS OF EMPLOYEES: <BR><BR>Your Company had 510 employees who were in receipt of remuneration of not less than Rs. 2,400,000 during the year or Rs. 200,000 per month during any part of the said year. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Directors' Report being sent to the shareholders does not include this Annexure. Any shareholder interested in perusing a copy of the Annexure may write to the Assistant Company Secretary at the Registered Office / Corporate Office of the Company. <BR><BR>DEPOSITS AND LOANS/ADVANCES: <BR><BR>Your Company has not accepted any deposits from the public or its employees during the year under review. <BR><BR>The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement are furnished separately. <BR><BR>AWARDS/RECOGNITION: <BR><BR>Your Company continued its quest for excellence in its chosen area of business to emerge as a true global brand. Several awards and rankings continue to endorse your Company as a thought leader in telecom industry. <BR><BR>Awards for the year <BR><BR>* Selected in the Leaders Category in 'The 2008 Global Outsourcing 100' <BR><BR>(IAOP's Annual Listing of the World's Best Outsourcing Service Providers) <BR><BR>* Winners of the 'Best Overall Recruiting & Staffing Oganization of the Year Award' (RASBIC Awards 2008) <BR><BR>* Employer Branding Award in 'Innovation in the recruitment category'(RASBIC Awards 2008) <BR><BR>* Product Innovation Award for Enterprise DRM (Frost & Sullivan, Mar'08) <BR><BR>* Vertical Growth Leadership in Telecom Software (Frost & Sullivan, Mar'08) <BR><BR>* 'Excellence in Information Technology' (IT Peoples Award) <BR><BR>ACKNOWLEDGEMENTS: <BR><BR>Your Directors gratefully acknowledge the contributions made by employees towards the success of your Company. Your Directors are also thankful for the co-operation and assistance received from its customers, vendors, bankers, STPI, regulatory and Governmental authorities in India and abroad and its shareholders. <BR><BR>For and on behalf of the Board <BR><BR>Place: Mumbai Anand G. MahindraDate : 28th May 2008 Chairman <BR><BR>Particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreement Loans and advances in the nature of loans to subsidiaries: <BR><BR>Rs. in Million <BR><BR>Name of the Company Balance as on Maximum outstanding 31st March 2008 during the year <BR><BR>Tech Mahindra (Americas) Inc. 100 218 <BR><BR>Loans and advances in the nature of loans to associates, loans and advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest or interest below section 372A of the Companies Act, 1956 and loans and advances in the nature of loans to firms/companies in which directors are interested - Nil <BR><BR>Annexure I to the Directors' Report for the year ended 31st March 2008 in terms of clause 12.1 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 <BR><BR>ESOP 2000: <BR><BR>Total options granted under the plan: <BR><BR>3,779,850 <BR><BR>a) Options granted during the year: <BR><BR>Nil <BR><BR>b) The pricing formula: <BR><BR>Under the scheme, all the options were granted prior to the listing of Company's shares. These options were granted, based on the annual valuation done by an independent chartered accountant. <BR><BR>c) Options vested: <BR><BR>244,390 <BR><BR>d) Options exercised: <BR><BR>111,930 <BR><BR>e) The total number of shares arising as a result of exercise of option: <BR><BR>111,930 <BR><BR>f) Options lapsed: <BR><BR>6,620 <BR><BR>g) Variation of terms of options: <BR><BR>In the Annual General Meeting of the Company held on 20th July 2007, the Scheme was amended to include the provision for recovery of FBT from the employees. <BR><BR>h) Money realised by exercise of options: <BR><BR>Rs. 8.07 Million <BR><BR>i) Total number of options in force: <BR><BR>350,090 <BR><BR>j) Employee wise details of options granted to: <BR><BR>i. Senior managerial personnel <BR><BR>Nil <BR><BR>ii. Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year: <BR><BR>Nil <BR><BR>iii. Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant: <BR><BR>Nil <BR><BR>k) Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 'Earnings Per Share': <BR><BR>Rs. 26.17 <BR><BR>l) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed: <BR><BR>The Company uses the intrinsic value-based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company's stock based compensation plan been determined in the manner consistent with the fair value approach, the Company's net income would be lower by Rs. 32.48 Million and earnings per share (Basic) as reported would have been Rs. 27.94. <BR><BR>m) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock: <BR><BR>No options were granted during the year. <BR><BR>n) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information: <BR><BR>ESOP 2004 <BR><BR>Total options granted under the plan: <BR><BR>10,219,860 <BR><BR>a) Options granted during the year: <BR><BR>Nil <BR><BR>b) The pricing formula: <BR><BR>Under the scheme, all the options were granted prior to the listing of Company's shares. These options were granted, based on the valuation done by an independent chartered accountant. <BR><BR>c) Options vested: <BR><BR>2,271,081 <BR><BR>d) Options exercised: <BR><BR>Nil <BR><BR>e) The total number of shares arising as a result of exercise of option: <BR><BR>Nil <BR><BR>f) Options lapsed: <BR><BR>Nil <BR><BR>g) Variation of terms of options: <BR><BR>In the Annual General Meeting of the Company held on 20th July 2007, the Scheme was amended to include the provision for recovery of FBT from the employees. <BR><BR>h) Money realised by exercise of options: <BR><BR>Nil <BR><BR>i) Total number of options in force: <BR><BR>5,677,701 <BR><BR>j) Employee wise details of options granted to: <BR><BR>i. Senior managerial personnel <BR><BR>Nil <BR><BR>ii. Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year: <BR><BR>Nil <BR><BR>iii. Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant: <BR><BR>Mr. Vineet Nayyar : 3,406,620Mr. C.P. Gurnani : 3,406,620Mr. Sanjay Kalra : 3,406,620 <BR><BR>k) Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 'Earnings Per Share': <BR><BR>Rs. 26.17 <BR><BR>l) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed: <BR><BR>The Company uses the intrinsic value-based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company's stock based compensation plan been determined in the manner consistent with the fair value approach, the Company's net income would be lower by Rs. 32.48 Million and earnings per share (Basic) as reported would have been Rs. 27.94. <BR><BR>m) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock: <BR><BR>No options were granted during the year. <BR><BR>n) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information: <BR><BR>i. Risk-free interest rate } }ii. Expected life } }iii. Expected volatility } NA }iv. Expected dividends and } }v. The price of the underlying share in } market at the time of option grant. } <BR><BR>ESOP 2006 <BR><BR>Total options granted under the plan: <BR><BR>5,357,305 <BR><BR>a) Options granted during the year: <BR><BR>72,000 <BR><BR>b) The pricing formula: <BR><BR>The options granted prior to the listing of Company's shares, were granted, based on the annual valuation done by an independent chartered accountant. <BR><BR>The grants made post-listing of the Company's shares on Stock Exchanges have been made as per the latest available closing price on the Stock Exchange with highest trading volume, prior to the date of the meeting of the Compensation Committee in which options are granted. <BR><BR>c) Options vested: <BR><BR>680,543 <BR><BR>d) Options exercised: <BR><BR>34,238 <BR><BR>e) The total number of shares arising as a result of exercise of option: <BR><BR>34,238 <BR><BR>f) Options lapsed: <BR><BR>Nil <BR><BR>g) Variation of terms of options: <BR><BR>In the Annual General Meeting of the Company held on 20th July 2007, the Scheme was amended to include the provision for recovery of FBT from the employees. <BR><BR>h) Money realised by exercise of options: <BR><BR>Rs. 3.42 Million <BR><BR>i) Total number of options in force: <BR><BR>4,193,028 <BR><BR>j) Employee wise details of options granted to: <BR><BR>i. Senior managerial personnel: <BR><BR>Nil <BR><BR>ii. Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year: <BR><BR>Nil <BR><BR>iii. Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant: <BR><BR>Nil <BR><BR>k) Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 'Earnings Per Share': <BR><BR>Rs. 26.17 <BR><BR>l) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed: <BR><BR>The Company uses the intrinsic value-based method of accounting for stock options granted after 1st April 2005. Had the compensation cost for the Company's stock based compensation plan been determined in the manner consistent with the fair value approach, the Company's net income would be lower by Rs. 32.48 Million and earnings per share (Basic) as reported would have been Rs. 27.94. <BR><BR>m) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock: <BR><BR>9th May 22nd JanuaryGrant Date 2007 2008 <BR><BR>Exercise price (Rs.) 1,559.00 826Fair Value (Rs.) 606.78 190.61 <BR><BR>n) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information: <BR><BR>9th May 22nd JanuaryGrant Date 2007 2008 <BR><BR>i. Risk-free interest rate 8.07% 7.52% <BR><BR>ii. Expected life 4 years 4 years <BR><BR>iii. Expected volatility 58.31% 52.25% <BR><BR>iv. Expected dividends and 5.52% 7.68% <BR><BR>v. The price of the underlying share in 1,544.25 706.25 market at the time of option grant. <BR><BR>MANAGEMENT DISCUSSION AND ANALYSIS <BR><BR>Industry structure, developments and Outlook Overview: <BR><BR>Tech Mahindra Limited is a leading provider of IT services and solutions to the global telecommunications industry. In fiscal 2007, it was ranked by NASSCOM as the sixth largest Indian IT services company in terms of export revenue. It was formed in 1986 as a joint venture between Mahindra and Mahindra Limited, one of the India's leading manufacturers of tractors and utility vehicles and British Telecommunications plc, one of the world's leading telecommunications company. <BR><BR>Global Telecom Market: <BR><BR>Tech Mahindra's coverage spans the entire telecom ecosystem comprising Telecom Service Providers (TSP), Telecom Equipment Manufacturers (TEM) and Independent Software Vendors (ISV). <BR><BR>The size of the global telecom services market grew by an estimated 8.9% in 2007, reaching US$ 1.4 trillion. An independent research agency forecasts that the global telecom market will show a compound annual growth rate (CAGR) of 4.5% between 2008 and 2011, reaching US$ 1.7 trillion. The mobile services sector continues to enjoy brisk growth and since 2006, it has become larger than the fixed line services sector. It is estimated that the revenue from mobile services will top US$1 trillion by 2011. <BR><BR>The key feature in the service provider industry is the increased competition due to the emergence of larger number of players. Convergence of traditionally distinct channels like cable, internet service providers and telecom service providers has presented new challenges to the telecom service providers. New technology adoption has enabled bundling of voice, video, data and mobility services causing disruption of historical boundaries between the players in each of these markets. <BR><BR>IT spend in the Communications Industry: <BR><BR>The communications industry is a significant contributor to the global spend on information technology services. According to an independent research agency, the worldwide IT spending by the communications vertical will reach US$ 315 billion in 2011 from US$ 275 billion in 2007. Out of this, IT services are expected to account for US$ 101 billion in 2011 from US$ 82 billion in 2007. <BR><BR>Due to increased competition in the segment, there are huge challenges for the traditional TSPs to maintain their revenue growth and profitability. The commoditization of voice as a service has resulted in voice becoming cheaper and declining voice revenue per subscriber. Newer value added services are being offered to attract new and retain existing customers. <BR><BR>To facilitate efficient launch of new services TSPs are looking to transform their systems and processes, reduce their operating expense, achieve greater efficiencies and faster time to market. This trend of telco transformation is expected to drive increased information technology spending by the service providers. <BR><BR>In response to the growing competitive pressures on the traditional voice revenue stream, more and more TSPs are looking at the enterprise segment as a growth area. TSPs are offering managed network services which help corporations realize the benefits of scale and optimization. This is one of the fastest growing segments for TSPs around the globe. <BR><BR>Opportunities: <BR><BR>Rapid Adoption of Outsourcing: <BR><BR>With mounting margin pressures and greater need for faster delivery of technology solutions, TSPs across the globe are adopting outsourcing at an increased pace. Outsourcing vendors, with their global delivery models, have demonstrated the ability to add value by offering quality solutions at a competitive price. Traditional industry challenges like data security and quality control have been overcome through adoption of international standards for the same. Because of these factors outsourcing today seems to be a viable option to most of the TSPs. While Tech Mahindra continues to increase its presence in TSPs favorable towards outsourcing, it is also expanding its footprint by targeting newer geographies and newer TSPs, which are yet to adopt outsourcing. <BR><BR>Dynamic Technology Landscape: <BR><BR>The changing customer needs are driving the change in technology landscape. Providing innovative services to customers at a rapid pace, in a cost effective manner, is one of the biggest challenges faced by TSPs. TSPs today embark on transformation journeys to fulfill the objectives of faster time to market and cost effectiveness. Tech Mahindra with its focus on the telecom vertical has been investing in new technologies to position itself to take advantage of the changing landscape. <BR><BR>Emergence of New Players: <BR><BR>Countries across the world are witnessing an increasing number of players in the TSP market. By enabling a favorable environment, governments are encouraging new roll outs in the TSP space. Due to the surge in competition, TSPs increasingly focus on cost efficiencies and product differentiation. Vendors with an ability to provide end-to-end solution to new entrants, benefit from this increased potential client base. <BR><BR>Tech Mahindra has successfully assisted new roll-outs across the world. With its comprehensive services portfolio, Tech Mahindra has the ability to service end-to-end needs of emerging telecom players. <BR><BR>Threats: <BR><BR>Emerging low cost destinations such as China, Philippines and Indonesia: <BR><BR>India remains the preferred offshore destination for IT Services for its cost effective solutions and huge talent pool. However several countries like China, Malaysia, Chile, Philippines, Singapore, Thailand and the Czech Republic are emerging as offshoring destinations due to their ability to provide low cost solutions as well. <BR><BR>Global IT service providers emerging as competitors through a growing Indian presence: <BR><BR>Global IT service providers, most of them are fortune 500 companies, such as Accenture, EDS, CapGemini and IBM are expanding their presence in India and pose a challenge to home grown IT service companies with their global client relationships, deep pockets and domain knowledge. <BR><BR>Availability of skilled/trained manpower: <BR><BR>A few other factors have diluted the Indian advantage - namely the expansion of global IT service and consulting companies in India. This has created significant pricing pressures and also created a strain on availability of skilled resources. While India has a large pool of trained and skilled resources, the demand has outpaced the supply leading to salary hikes and increased attrition. There is increased competition due to higher costs, skilled resources and wage inflation pressures. <BR><BR>Risks: <BR><BR>Economic slowdown: <BR><BR>The primary business of Tech Mahindra is the provision of IT services to the global telecommunications industry. Future revenue and profitability are dependent on growth in spending on IT services by companies in the telecommunications industry. This growth may not be sustained in future periods. IT spending by telecommunication companies will be impacted by the rate at which they increase their capital expenditures and operating expenditures to respond to growth in voice and data traffic and the commercial development of new services. If the clients' businesses do not grow in the markets in which they operate, in particular the United Kingdom and the United States, our clients may reduce their spending on the services and solutions we provide, which would have a material adverse effect on the business and prospects of the company. <BR><BR>High customer concentration: <BR><BR>In fiscal 2008, our top five clients and top ten clients accounted for 83% and 89% of the revenue, respectively. As service providers increase in size and further consolidation takes place in the industry, it is possible that an even greater percentage of our revenue will be attributable to a smaller number of large service providers and the loss of any such client could have a material adverse effect on our revenue and profitability. <BR><BR>Ability to attract and retain talent: <BR><BR>Our ability to develop new applications and attract new clients depends significantly on our ability to attract, train, motivate and retain highly qualified IT professionals. We face significant competition in hiring IT professionals, both in our university recruitment programs and in our lateral hiring. If we are unable to recruit talent or if our attrition rates increase, our ability to meet our client needs and win new clients will be constrained, we could lose market share and our business could be adversely affected. <BR><BR>Withdrawal of Tax benefits: <BR><BR>Currently, we benefit from certain tax incentives under Section 10A of the Income Tax Act for the IT services that we provide from specially designated 'Software Technology Parks' or STPs. As a result of these incentives, our operations in India have been subject to relatively low tax liabilities. Under current laws, the tax incentives available to these units terminate on the earlier of the ten year anniversary of the commencement of operations of the unit or 31st March 2010. To counter this, we plan to set up facilities in SEZ units at various locations as the units set up in SEZ area would also provide us with tax benefits similar to those in STPI. We have commenced operations at Chennai SEZ and more units are coming up at Chandigarh, Hinjewadi (Pune), Hyderabad, Jaipur and Bantala (Kolkata). There is no assurance that the Indian government will not enact laws in the future that would adversely impact our tax incentives and consequently, our tax liabilities and profits. When our tax incentives expire or are terminated, our tax expense will materially increase, reducing our profitability. <BR><BR>Currency Exchange Risks: <BR><BR>The exchange rate between the Indian rupee and the British pound and the rupee and the U.S. dollar has changed substantially in last year and may continue to fluctuate significantly in the future. During fiscal 2008, the value of the rupee against the British pound appreciated by approx 4.9% and the value of the rupee against the U.S. dollar appreciated by approx 10.8%. <BR><BR>Accordingly, our operating results have been and will continue to be impacted by fluctuations in the exchange rate between the Indian rupee and the British pound and the Indian rupee and the U.S. dollar, as well as exchange rates with other foreign currencies. Any strengthening of the Indian rupee against the British pound, the U.S. dollar or other foreign currencies could adversely affect our profitability. <BR><BR>Discussion on Financial Performance with respect to Operational Performance Overview: <BR><BR>The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India. <BR><BR>The Consolidated financial statements have been prepared in compliance with the Accounting Standard AS 21, AS 23 and AS 27 issued by The Institute of Chartered Accountants of India (ICAI). <BR><BR>The discussions on financial performance in the Management Discussion and Analysis relate primarily to the stand alone accounts of Tech Mahindra Limited. Wherever it is appropriate, information pertaining to consolidated accounts for Tech Mahindra Limited is provided. For purposes of comparison with other firms in this industry as well as to see the positioning and impact that Tech Mahindra Limited has in the marketplace, it is essential to take the figures as reflected in the Consolidated Financial Statements. <BR><BR>A. FINANCIAL POSITION: <BR><BR>1. Share Capital: <BR><BR>The authorized share capital of the company is Rs. 1,750 Million, divided into 175 Million equity shares of Rs. 10/- each. The paid up share capital stands at Rs. 1,214 Million as on 31st March 2008 compared to Rs. 1,212 Million on 31st March 2007. The increase in paid up capital during the year is due to conversion of options into shares by employees under Employee Stock Option Plan. <BR><BR>2. Reserves and surplus: <BR><BR>a) Share premium account: <BR><BR>The addition to the share premium account of Rs. 10 Million during the year is due to the premium received on issue of 146,168 equity shares on exercise of option under stock option plans. <BR><BR>b) General reserve: <BR><BR>General reserve stands at Rs. 2714 Million on 31st March 2008 compared to Rs. 1,014 Million on 31st March 2007. Rs. 1,700 Million has been transferred to general reserve from profit and loss account during the year. <BR><BR>c) Profit and loss account: <BR><BR>The balance retained in the profit and loss account as of 31st March 2008 is Rs. 5,202 Million compared to Rs. 4,261 Million as of 31st March 2007. <BR><BR>3. Loan Funds: <BR><BR>Loan funds as at 31st March 2008 stand at Rs. 950 Million of unsecured loans, compared to Rs. 490 Million in the previous year comprising of Rs.390 Million of unsecured loans and Rs. 100 Million of secured loans. <BR><BR>4. Fixed Assets: <BR><BR>The movement in Fixed Assets is shown in the table below: <BR><BR>Rs. in Million <BR><BR>As of 31st March 2008 2007 <BR><BR>Gross Book Value: <BR><BR>Land - free-hold 82 82 - lease-hold 325 221 <BR><BR>Buildings 1,411 1,411 <BR><BR>Leasehold Improvements 279 84 <BR><BR>Plant and machinery 999 739 <BR><BR>Computer equipments 1,656 1,245 <BR><BR>Furniture and fixtures 667 546 <BR><BR>Vehicles: <BR><BR>- Leased 50 67- Owned 36 33 <BR><BR>Intangible assets - - <BR><BR>Total 5,505 4,428 <BR><BR>Less: Accumulated depreciation & amortization 2,596 1,957 <BR><BR>Net block 2,909 2,471 <BR><BR>Add: Capital work-in-progress 1,385 546 <BR><BR>Net fixed assets 4,294 3,017 <BR><BR>The Net Block of Fixed Assets and Capital Work in Progress increased to Rs.4,294 Million from Rs. 3,017 Million as at 31st March 2007. During the year, company incurred capital expenditure of Rs. 1,928 Million (previous year Rs. 1,700 Million). The major items of Capital Expenditure included Leasehold -land and improvements, Plant and Machinery, Computer equipment and Furniture & Fixtures besides amount spent on civil works for Hinjewadi, Pune campus. <BR><BR>5. Investments <BR><BR>The summary of company's investments is given below: <BR><BR>Rs. in Million <BR><BR>Investments As at As at 31st March 31st March 2008 2007 <BR><BR>Investment in Subsidiaries 3,340 2,471Investment in Mutual Funds - 727Total Investments 3,340 3,198Less : Provision for diminution of value 354 366Net Investments 2,986 2,832 <BR><BR>I. Investment in Subsidiaries: <BR><BR>The company had investment in the following subsidiaries <BR><BR>a) Tech Mahindra R&D Services Limited: <BR><BR>Tech Mahindra R&D Services Limited (formerly known as Axes Technologies) was acquired in November 2005. TMR&D provides technology solutions to leading Telecom Equipment Manufacturers (TEM) in the areas of Research & Development (R&D), Product Engineering and Life Cycle Support. This acquisition has helped Tech Mahindra to strengthen its capabilities in the TEM (Telecom Equipment Manufacturer) segment. The board of the company (TML) has approved scheme of amalgamation for amalgamating TMR&D with itself, in its meeting dated 19th October 2007. As per the scheme, all the assets and liabilities of TMR&D would become the assets and liabilities of TML from the appointed date i.e. 1st April 2008. The jurisdictional High Courts of Mumbai and Karnataka have approved the schemes on 28th March 2008 and 3rd April 2008 respectively. The merger would result in operational synergies, enhance financial strength and rationalization of costs. <BR><BR>b) CanvasM Technologies Limited: <BR><BR>CanvasM was set up as a joint venture between Tech Mahindra Limited and Motorola Cyprus Holding Limited in October 2006 with an objective to provide software services and solutions to wire line and wireless telecom service providers, cable companies, enterprise, media and broadcast companies, using SI expertise of Tech Mahindra and R&D investments of Motorola Cyprus. Tech Mahindra owns 80.1% of the shareholding while the balance 19.9% is held by Motorola Cyprus. <BR><BR>c) Tech Mahindra (Americas) Inc. <BR><BR>Tech Mahindra (Americas) inc. was incorporated in November 1993 to provide marketing support services for the USA and Canada region. It acts as a service provider for sales, marketing, onsite software development and other related services. <BR><BR>d) Tech Mahindra GmbH: <BR><BR>Tech Mahindra GmbH was established in July 2001 to provide marketing support in central Europe region. <BR><BR>e) Tech Mahindra (Singapore) Pte. Limited: <BR><BR>Tech Mahindra (Singapore) Pte. Limited is Tech Mahindra's representative in Singapore and acts as a service provider for sales, marketing, onsite software development and other related services. <BR><BR>f) Tech Mahindra (Thailand) Limited: <BR><BR>Tech Mahindra (Thailand) Limited was established in August 2005 to strengthen its marketing infrastructure in Thailand. <BR><BR>g) PT Tech Mahindra Indonesia: <BR><BR>PT Tech Mahindra Indonesia is Tech Mahindra's representative in Indonesia and acts as a service provider for sales, marketing, onsite software development and other related services. <BR><BR>h) iPolicy Networks Limited: <BR><BR>Tech Mahindra acquired Noida based iPolicy Networks Limited (iPolicy) in January 2007 to complement Tech Mahindra's strong security services capabilities. The board of the company (TML) approved Scheme of amalgamation for amalgamating iPolicy with itself, in its meeting dated 19th October 2007. As per the scheme, all the assets and liabilities of iPolicy became the assets and liabilities of TML from 1st April 2008. The jurisdictional High Courts of Mumbai and Delhi have approved the schemes on 28th March 2008 and 4th April 2008 respectively. The merger would result in operational synergies, enhance financial strength and rationalization of costs. <BR><BR>i) Tech Mahindra Foundation: <BR><BR>Tech Mahidndra Foundation was promoted by Tech Mahindra Limited as section 25 company with the objective of promoting social and charitable activities. TechM Foundation primarily concentrate on rendering assistance to the needy and under privileged people in the society. <BR><BR>j) Tech Mahindra (Beijing) IT Services Limited: <BR><BR>Tech Mahindra (Beijing) IT Services Limited was established in December 2007 to strengthen its marketing capabilities in China. <BR><BR>k) Tech Mahindra (Malaysia) Sdn. Bhd.: <BR><BR>Tech Mahindra (Malaysia) Sdn. Bhd. was established in May 2007 as Tech Mahindra's representative in Malaysia. It acts as a service provider for sales, marketing, onsite software development and other related services. <BR><BR>II. Investment in liquid mutual funds: <BR><BR>The company has been investing in various mutual funds. These are typically investments in short-term funds to gainfully use the excess cash balance with the company. The investments as at 31st March 2008 were Rs. Nil compared to Rs. 727 Million as at 31st March 2007. <BR><BR>6. Deferred Tax Asset: <BR><BR>Deferred tax asset remained unchanged at Rs. 14 Million as of 31st March 2008. Deferred tax asset represent timing differences in the financial and tax books arising from depreciation of assets, provision of debtors and leave encashment. company assesses the likelihood that the deferred tax asset will be recovered from future taxable income. <BR><BR>7. Sundry Debtors: <BR><BR>Sundry debtors increased to Rs.10, 574 Million (net of provision for doubtful debts amounting to Rs. 80 Million) as of 31st March 2008 from Rs.7,920 million (net of provision for doubtful debts amounting to Rs. 219 million) as of 31st March 2007. The increase is mainly on account of increase in volume of business. Debtor days as of 31st March 2008, (calculated based on per-day sales in the last quarter) were 98 days, compared to 84 days as of 31st March 2007. We continue to focus on reducing receivables period by improving our collection efforts. <BR><BR>8. Cash and Bank Balance: <BR><BR>The bank balances in India include both Rupee accounts and foreign currency accounts. The bank balances in overseas current accounts are maintained to meet the expenditure of the overseas branches and overseas project-related expenditure. <BR><BR>Rs. in Million <BR><BR>As of 31st March 2008 2007 <BR><BR>Bank balances in India & Overseas: Current accounts 799 90Deposit accounts 14 161Unclaimed dividend account 1 1Total cash and bank balances* 814 252 <BR><BR>* excluding unrealised (gain)/loss on foreign currency <BR><BR>9. Loans and Advances: <BR><BR>Loans and advances as on 31st March 2008 were Rs. 3,477 Million (Rs. 1,596 Million as on 31st March 2007). Significant items of loans and advances include payments towards other deposits and foreign exchange gains. <BR><BR>10. Current Liabilities and Provisions: <BR><BR>Current liabilities and provisions were Rs. 8,925 Million as of 31st March 2008 compared to Rs. 6,360 Million as of 31st March 2007. Liabilities and provisions increased mainly because of higher employee-related liabilities following increase in headcount. <BR><BR>B. RESULTS OF OPERATIONS: <BR><BR>The following table sets forth certain income statement items as well as these items as a percentage of our total income for the periods indicated: <BR><BR>Fiscal 2008 Fiscal 2007 <BR><BR>% of % of Rs. in Revenue Rs. in Revenue Million Million <BR><BR>INCOME: <BR><BR>Revenue from Services 36,047 100.0% 27,577 100.0% <BR><BR>Other Income 976 9 <BR><BR>Total Income 37,023 27,586 <BR><BR>EXPENDITURE: <BR><BR>Personnel 12,224 33.9% 8,445 30.6% <BR><BR>Operating and Other Expenses 15,616 43.3% 12,092 43.8% <BR><BR>Depreciation 736 2.1% 463 1.7% <BR><BR>Interest 100 0.3% 69 0.3% <BR><BR>Total Expenditure 28,676 79.6% 21,069 76.4% <BR><BR>Profit before tax and exceptional items 8,347 23.2% 6,517 23.6% <BR><BR>Provision for Taxation (689) 1.9% (615) 2.2% <BR><BR>Profit after taxation and before exceptional item 7,658 21.3% 5,902 21.4% <BR><BR>Exceptional items (4,401) 12.3% (5,250) 19.0% <BR><BR>Net profit for the year 3,257 9.0% 652 2.4% <BR><BR>Provision in respect of earlier year written back 165 0.5% - - <BR><BR>Excess provision for income-tax in respect of earlier period written back - - 339 1.2% <BR><BR>Profit available for appropriations 3,422 9.5% 991 3.6% <BR><BR>1. Revenue: <BR><BR>The company derives revenue principally from technology services provided to clients in the telecommunications industry. <BR><BR>The revenue increased by 30.7% to Rs. 36,047 Million in fiscal 2008 from Rs. 27,577 Million in fiscal 2007. This reflected an increase in the number of clients served during the respective years as well as an increase in the amount of business from these clients. Revenue from Europe as a percentage of total revenue were 76.9% in fiscal 2008 compared to 77.1% in fiscal 2007. Revenue from the United States increased to 17.3% in fiscal 2008 from 15.0% in fiscal 2007 while the share of revenue attributable to the Rest of the World segment was 5.8% in fiscal 2008 compared to 7.9% in the previous year. <BR><BR>Consolidated Revenue: <BR><BR>Consolidated Revenue for the fiscal 2008 stood at Rs. 37,661 Million compared to Rs. 29,290 Million last fiscal, a growth of 28.6%. Consolidated revenue grew at a CAGR of 58.5% over the last 3 years. <BR><BR>Consolidated revenue by Geography: <BR><BR>Europe contributed 73.6% of the consolidated revenue in fiscal 2008 while Americas and Rest of the World contributed 19.4% and 7.0% respectively. The revenue share from Europe, Americas and Rest of the World in fiscal 2007 was 72.5%, 18.4% and 9.1% respectively. <BR><BR>Consolidated Revenue by Segment: <BR><BR>For fiscal 2008, 89.2% of revenue came from TSP segment, 5.1% from TEM, 3.5% came from BPO segment while 2.2% from others. The revenue share in fiscal 2007 from TSP, TEM, BPO and Others segment was 91.3%, 6.3%, 0.2% and 2.2% respectively. <BR><BR>2. Other Income: <BR><BR>Other income includes interest income, dividend income, profit on sale of current investments, foreign exchange gain/loss and sundry balances written back. <BR><BR>Interest income mainly consists of interest received on bank deposits. Dividend income includes dividend received on long-term investments as well as that received on current investments. Exchange gain/loss consists of mainly realized or revaluation gain or loss on foreign currency transactions. <BR><BR>Other income is higher at Rs. 976 Million in fiscal 2008 compared to Rs. 9 Million in fiscal 2007. This was primarily due to high exchange gain of Rs.765 Million in this fiscal. <BR><BR>3. Expenditure: <BR><BR>Particulars 2007-08 2006-07 % Inc./ (Dec.) <BR><BR>Rs. in % of Rs. in % of Million Revenue Million Revenue <BR><BR>Personnel Cost 12,224 33.9% 8,445 30.6% 44.7% <BR><BR>Operating andOther Expenses 15,616 43.3% 12,092 43.8% 29.1% <BR><BR>Depreciation 736 2.1% 463 1.7% 59.0% <BR><BR>Interest 100 0.3% 69 0.3% 44.9% <BR><BR>Total Expenses 28,676 79.6% 21,069 76.4% 36.1% <BR><BR>Personnel cost includes salaries, wages and bonus, contribution to provident fund and other funds and staff welfare costs. The increase in personnel cost in absolute value is mainly due to increase in headcount and annual increments. <BR><BR>Operating and other expenses mainly include Subcontracting costs, Travelling expenses, Communication expenses, Rent, Software Packages and Repairs and Maintenance. The increase is due to increase in business volumes, increase in number of office locations in India and overseas and overall growth in business activity. <BR><BR>Increase in depreciation is mainly due to increase in investment in infrastructure and equipment to service our growing business. <BR><BR>The company incurred interest expense of Rs. 100 million during the year on borrowings. <BR><BR>4. Profit before tax: <BR><BR>Profit before tax increased by 28.1% to Rs. 8,347 Million in fiscal 2008 from Rs. 6,517 Million in fiscal 2007. Profit before tax as a percentage of revenue was 23.2% in fiscal 2008 compared to 23.6% in fiscal 2007. <BR><BR>5. Income Taxes: <BR><BR>The provision of current tax, deferred tax and fringe benefit tax for the year ended 31st March 2008 was Rs. 689 Million as compared to Rs. 615 Million in the previous year, a growth of 12%. As a percentage of revenue, provision for taxes reduced to 1.9% in fiscal 2008 from 2.2% in fiscal 2007. The effective tax rate in these years was 8.3% and 9.4% respectively. <BR><BR>6. Profit after tax before exceptional items: <BR><BR>Profit after tax before exceptional items increased by 29.8% to Rs. 7,658 Million in fiscal 2008 from Rs. 5,902 Million in fiscal 2007. Profit after tax as a percentage of revenue was 21.2% in fiscal 2008 and 21.4% in fiscal 2007. <BR><BR>Consolidated PAT: <BR><BR>Consolidated PAT before exceptional item and minority interest for the fiscal 2008 was Rs. 7,695 Million compared to Rs. 6,127 Million last fiscal, a growth of 25.6%. PAT as a percentage of revenue was 20.4% in fiscal 2008 compared to 20.9% in fiscal 2007. <BR><BR>7. Exceptional items: <BR><BR>During the year, the company entered in to an agreement with a customer under which it will have exclusivity for 90 days in negotiating an engagement. As per the terms of the agreement the company has made an 'exclusivity' payment of Rs. 4,401 million to the customer which is unconditional, irrevocable and non refundable. Accordingly, this payment has been disclosed as an exceptional item in the Profit and Loss account. The project will be executed with a consortium partner who will bear part of the exclusivity payment. This payment from the consortium partner will be accounted when it is contractually firmed up. <BR><BR>C. CASH FLOW: <BR><BR>The cash flow position for fiscal 2008 and fiscal 2007 is summarized in the table below: <BR><BR>Particulars Fiscal Year <BR><BR>2008 2007 Rs. in Rs. in Million MillionNet cash flow from operating activities* 2,097 32 <BR><BR>Net cash flow from (used in) investing activities (1,983) (1,424) <BR><BR>Net cash flow from (used in) financing activities 356 1,191 <BR><BR>Cash and cash equivalents at the beginning of the year 295 496 <BR><BR>Cash and cash equivalents at the end of the year 765 295 <BR><BR>* includes unrealized gain/(loss) on foreign currency <BR><BR>D. Internal Control Systems: <BR><BR>The company maintains adequate internal control system, which provides, among other things, reasonable assurance of recording the transactions of its operations in all material aspects and of providing protection against significant misuse or loss of company's assets. The company uses an Enterprise Resource Planning (ERP) package, which enhances the internal control mechanism. <BR><BR>E. Material developments in human resources including number of people employed: <BR><BR>During fiscal 2008, the company made substantial addition to human resources. The company had a net addition of 3,135 (previous year 9,256) employees mainly through campus recruitment in addition to lateral hiring. The global headcount of the company as on 31st March 2008 was 22,884, compared to 19,749 as on 31st March 2007, a growth of 15.9%. The company used various sources for attracting talent during the year. It hired Engineering Graduates and Science Graduates for technical positions whereas MBA's were recruited from premier management institutes such as IIM's, ISB, XLRI, London Business School etc., for the future leadership positions. <BR><BR>The attrition rate for the year 2008 and 2007 was 29.6% and 20.7% respectively. The higher attrition in the year 2008 was primarily due to high attrition in the BPO business. The company has been working towards containing the attrition rate by continuously investing in learning and development programs for associates, competitive compensation, creating a compelling work environment, empowering associates at all levels as well as a well-structured reward and recognition mechanism. <BR><BR>The company believes in promoting and nurturing work environment which is conducive to the development and growth of an individual employee, by employing the best HR practices such as performance management, reward and recognition policy, leadership development program, succession planning, open work culture and effective employee communication.</DIV>

Annual Report - Tech Mahindra - 2007 - 2008

 TECH MAHINDRA LIMITED ANNUAL REPORT 2007-2008 DIRECTOR'S REPORT TO THE SHAREHOLDERS Your Directors present their Twenty-first Annual Report together with the audited accoun…

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A dull day for bullion metals

<DIV> Gold and silver drop on Friday but manage to gain for the week<BR><BR>The strong dollar and falling crude prices once again took their toll on bullion metals on Friday, 22 August, 2008 and both gold and silver losses for the day but gained for the week that ended on that day. Barring five sessions, gold and silver prices had registered losses in all the trading sessions in the current month of August, 2008. Silver prices also fell on Friday.<BR><BR>On Friday, Comex Gold for December delivery fell $5.5 (0.65%) to close at $833.5 an ounce on the New York Mercantile Exchange. It fell to an intra day low price of $828 earlier. For the week, the yellow metal ended higher by 5.2%. With Friday's loss, gold has lost 9.1% in August, 2008 till date. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (18.65%) since then.<BR><BR>This year, gold prices have lost a marginal 0.4% till date as the dollar rallied against the euro. It has lost almost $88 in August till now. Gold ended July, 2008 lower by $11 (1.1%).<BR><BR>Prior to that, the yellow metal ended second quarter with a marginal gain of 0.7%. It ended June, 2008 with a gain of 4.1%. In May, it ended with a gain of higher by $22.5 (2.5%). Before May, in April, prices closed lower by 6.3%. For first quarter prices gained 10.7%. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices succumbed and fell by 5.5%.<BR><BR>On Friday, Comex silver futures for September delivery fell 25 cents (1.8%) to $13.477 an ounce. A day before silver registered largest one day gain in almost two years. With Friday's loss today's rise silver has lost almost 9% in 2008 till date. It ended July 2008 with a gain of 3%. For the second quarter, it had gained a paltry 1.4%. Silver had gained 16% in Q1. The metal also had gained for seven straight years.<BR><BR>Gold and silver prices have dropped 19% and 33% from their all time highs that they reached earlier this year.<BR><BR>Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, a lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies. Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices and vice versa.<BR><BR>At the currency markets on Friday, the U.S. dollar rose strongly mainly against the British pound. The pound lost ground after revised data showed the U.K. economy ground to a halt in the second quarter. The move aided a broad rebound by the dollar, which was also buoyed by falling crude-oil prices and a round of weak industrial new orders data for the euro zone. The dollar index, which measures the greenback against a trade-weighted basket of currencies, was at 76.81, up from 76.030 a day before.<BR><BR>Fed Chairman Ben Bernanke said on Friday that the declines in commodity prices and the stability of the dollar are encouraging as their trends are likely to slow inflation. He also stated that inflation will be further helped as the U.S. economy falls short of its growth potential for a time. Still, the inflation outlook is highly uncertain.<BR><BR>At the crude market on Friday, crude-oil futures dropped more than 5%, reversing the rally in the previous session, as a stronger U.S. dollar and ongoing concerns about a slowdown in demand pressured crude prices. Crude prices for October delivery closed at $114.59 (lower by $6.6 or 5.4%). For the week it managed to end higher by a little 0.6%. Prices also fell after tensions between Georgia and Russia eased a bit with the later pulling out its forces from Georgia borders.<BR><BR>Earlier this year, the weakening dollar and higher global demand for raw materials had led to records this year for commodities including gold. Gold reached a record in March as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. The Federal Reserve halted cuts to its target bank lending rate in April, after slicing it in seven steps to 2% from 5.25% in September.<BR><BR>Gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.<BR><BR>At the MCX, gold prices for October delivery closed lower by Rs 6 (0.05%) at Rs 11,701 per 10 grams. Prices rose to a high of Rs 11,707 per 10 grams and fell to a low of Rs 11,653 per 10 grams during the day's trading.<BR><BR>At the MCX, silver prices for September delivery closed Rs 63 (0.31%) lower at Rs 20,053/Kg. Prices opened at Rs 20,024/kg and fell to a low of Rs 19,951/Kg during the day's trading.</DIV>

A dull day for bullion metals

 Gold and silver drop on Friday but manage to gain for the weekThe strong dollar and falling crude prices once again took their toll on bullion metals on Friday, 22 August, …

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