Академический Документы
Профессиональный Документы
Культура Документы
Visionn 3
Corporate Information 8
Directors’ Report 11
Financials
Indian GAAP
Unconsolidated 33
Consolidated 75
US GAAP 99
i-flex is the leading IT solutions provider to the financial services industry worldwide. Oracle is the world’s
most successful enterprise software company. For years, i-flex and Oracle have worked together as partners
to empower banks and financial institutions and make them successful in their businesses.
With Oracle acquiring a majority stake in i-flex last year, the breadth and depth of the joint offerings of both
companies have become even more integrated, rich and powerful, to create a unified capability that is unique
in the industry. Today, we stand for:
• the most comprehensive range of solutions for financial institutions from a single source
• a unique combination of integrated and best-of-breed applications
• a business process-oriented approach that aligns IT initiatives with business needs and enables an
evolutionary transformation of IT infrastructure
• a strong commitment to open systems and industry standards, ensuring interoperability
• a partner-oriented approach to the market, ensuring comprehensive solution delivery
The superscript “n” in “i-flexn ” reflects the enormity of this combined impact. Through this consolidated,
potent, enriched and integrated portfolio of solutions and services, we now can accelerate our progress
towards realizing our vision – to empower financial institutions around the world with competitive advantage
and propel their businesses to greater growth and success.
1995
Software Limited), commences first year of operations • CITIL begins functioning as an independent standards • It attains SEI CMM Level 4, becoming the first financial software firm
company, creating next-generation software for the financial services industry worldwide; it focuses on in the world and one out of six companies worldwide to achieve this distinction at
building domain expertise and creating intellectual property in the financial services industry, making it that time • MicroBanker ranked as the No. 1 wholesale banking software in the
stand out among other Indian software companies of the era world by the International Banking Systems (IBS), UK
• CITIL establishes the Center of Excellence for business intelligence to provide • FLEXCUBE® makes its debut in November. This launch set the stage for
1996
1997
specialized consulting and software products, as well as services in data i-flex becoming the global leader in providing world-class solutions to the
warehousing and business intelligence financial services industry
• MicroBanker becomes the 6th international banking product in the world • FLEXCUBE sees accelerated growth; is ranked the world’s No. 2 banking solution
1998
1999
to be used by 100 customers • FLEXCUBE starts gaining traction and in the IBS Sales League Table • FLEXCUBE Information Center, a Web-enabled
international leadership business intelligence system, is launched, along with a Center of Excellence for
CRM • Java Center for financial services is established
in Rs. million
12000 11,385.93
2000.00 1,787.86
10000 1,708.88
40.00 270.00
35.00 240.00
Rs.
20.52
20.00 120.00
112.01
92.79
15.00 13.21 13.84 90.00
1200.00 1,149.83
1050.00
903.50
900.00
in Rs. million
750.00 720.91
669.33
600.00
548.39 472.33
450.00
328.33
300.00 264.03
173.87
150.00
0
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
• CITIL renamed i-flex solutions limited • Center of Excellence for e-services launched • Financial software development facilities established at Pune and Chennai
2000
2001
• Separate business unit established to address the Applications Services Provider • Fully-owned subsidiaries set up in USA and Singapore • i-flex solutions b.v. in
(ASP) market • i-flex solutions b.v., a 100 percent subsidiary of the company, opened Amsterdam, The Netherlands, becomes operational • i-flex Consulting™ is launched
in Amsterdam, The Netherlands
18%
Asia Pacific 46%
Services
28% Revenue
Europe
1%
Latin America &
Caribbean
Region-wise revenues Operating revenues
5% 2%
Other expenses KPO-Services
5%
Facility Costs
4%
Application software
43%
9% Services
Professional fees
13%
Travel cost 64% 55%
Staff Cost Products
Country Base
80 74
400 404 66
345 60 55
51
300
281
206 238 40
200
163
100 20
0 0
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07* 1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
8000 6,858
6000
5000 4,747
4000
2,974
3000
2,032 2,327
2000 1,590
1,017
1000 657 790
0
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
• i-flex goes public, listed on the Bombay Stock Exchange (BSE) and the National • i-flex’s North American development, support and demonstration center set
2002
2003
Stock Exchange (NSE), New Delhi. Scrip sees exponential growth in a span of five years up in New York • Reveleus Basel II solutions framework for enterprise risk
and becomes one of the newest and best performing stocks from the Indian software management, a complete set of analytics and metrics compliant with the Bank of
industry • Reveleus™ launched to address the business intelligence and analytics International Settlement (BIS) requirements, launched • Signed a global strategic
market • First software development center outside India launched in Singapore
• FLEXCUBE touches the 100th customer mark • FLEXCUBE ranked No.1 banking solution in IBS’ alliance with IBM to deliver and market core banking replacement solutions to medium and large size
Sales League Table; remains top of the IBS charts for the next five years • i-flex’s IT services division banks in markets worldwide
is branded PrimeSourcing • Signed agreement with HP as strategic alliance partner
i-flex annual report 2006-07 7
• Consumer lending systems provider, SuperSolutions Inc., USA, acquired as a 100 • i-flex assessed at CMMi Level 5; also, certified BS 7799 compliant. BS 7799 are
2004
2005
percent subsidiary • i-flex Technology Deployment and Management Services (TDMS) for security standards and policies addressing information security • 51 percent equity
IT infrastructure management services launched • Regulatory reporting solutions major, stake acquired in Castek® Software Inc., a Toronto-based provider of insurance
FRS, and i-flex solutions form an alliance to ease the burden of global regulatory reporting systems for the global Property & Casualty (P&C) insurance industry • IPR acquired
for banks • Acquires 33 percent stake in Paris-based Login SA, extending capabilities for CAPCO’s Operational Risk Tool Suite (ORTOS); tool renamed as Reveleus
into the treasury solutions arena • Equinox Corporation acquired to provide KPO (Knowledge Process Operational Risk • Citigroup’s 41 percent stake in i-flex acquired by Oracle
Outsourcing) services to mortgage institutions, auto financers and credit companies
• Oracle’s stake in i-flex increased to 55.1 percent • Mantas Inc., a • Oracle’s stake in i-flex stands at 81.02 percent (as of
2006
2007
leading solutions provider in the anti-money laundering space, acquired; March 31, 2007) • Rajesh Hukku named the leader of Oracle’s
the firm is now a fully owned subsidiary of i-flex • Market capitalization Financial Services Global Business Unit (FSGBU) • R Ravisankar
crosses USD 5 billion and Deepak Ghaisas join the leadership team of the FSGBU
• N R Kothandaraman (N R K Raman) dons the mantle of MD and
CEO of i-flex solutions
Dear Members, taxes and prior period item stood at Rs. 3,810.48 million during the year
against Rs. 2,895.11 million last year, translating into a growth of 32%.
The Directors take great pleasure in presenting their report on the The Company’s net income after taxes and prior period items increased
business and operations of your Company along with the Annual Report to Rs. 3,546.74 million this year from Rs. 2,407.99 million last year, a
and audited financial statements for the Financial Year 2006-07. growth of 47%.
Revenue 15,523.44 11,538.22 A detailed analysis of the financials is given in the Management’s
Income from operations before Discussion and Analysis report that forms part of this Annual Report.
depreciation & amortization 4,027.53 2,983.71
Depreciation & amortization 565.35 387.81
Interest/other income Dividend
(expenses) 348.30 299.21
Income before taxes 3,810.48 2,895.11 Your Company has aggressive growth plans to capitalize on its brand
Provision for tax 263.74 447.57 and market opportunities and, therefore, needs to invest substantially in
Net income after tax 3,546.74 2,447.54 the growth of the business. Keeping this in view and in order to enhance
Prior period item – 39.55 shareholder value by conserving funds for reinvestment and funding for
Net income 3,546.74 2,407.99 future acquisitions, the Board has decided not to declare a dividend in the
Balance brought forward 464.24 492.49 current year. The funds will be used to further invest in infrastructure and
Profit available for other growth opportunities to enhance the leadership of your Company
appropriation 4,010.98 2,900.48 in the market.
Transfer to general reserve – 2,000.00
Proposed dividend – 381.44
Corporate dividend tax 0.17 53.66 Transfer to reserves
Dividend paid on stock options
exercised before AGM 2006 1.24 1.14 The Company does not propose to transfer any amount to the General
Balance carried forward 4,009.57 464.24 Reserve out of the amount available for appropriation. An amount of
Rs. 4,009.57 million is proposed to be retained in the Profit & Loss
As per Indian GAAP Consolidated financial statements: Account.
Global alliances
Awards, honors and recognitions
Your Company lays great emphasis in building and expanding its partner
Your Company has consistently received wide recognition for leadership
network with organizations which can promote, sell, implement and
and achievements.
support its offerings around the world. During the year, your Company
Human resources
i. Director Nil
ii. Any other employee who receives grant in any one Employees are the key assets of the Company and the Company has
year of option amounting to 5% or more of option created a healthy and productive work environment which encourages
granted during that year Nil excellence. Your Company continuously invests in training staff in the
iii. Identified employees who were granted option, latest technology trends and in various sub-verticals within the financial
during any one year, equal to or exceeding 1% of services domain.
the issued capital (excluding outstanding warrants
and conversions) of the Company at the time of
grant Nil To deal with the major market opportunities, the Company has invested in
increasing the manpower strength in the product business by 45%, from
iv. Diluted Earnings Per Share (EPS) pursuant to the
issue of shares on exercise of option calculated in 2,018 at end of March 2006 to 2,931 at the end of March 2007. Overall,
accordance with accounting standard 20 ‘Earnings on a gross basis, it added 3,291 employees in the software and services
Per Share’ issued by the Institute of Chartered business in the financial year. The KPO business of the Company is in an
Accountants of India Rs. 43.60 investment mode and has grown significantly too. Your Company nearly
doubled the strength in this business line to 1,034 from 534 at the end
of March 2006.
Sr. Name Designation & nature of duties Qualification Age Date of joining Experience Remuneration Previous
no. (as at March 31, 2007) (Yrs) (Yrs.) received (Rs.) employer
7/27/2007 3:32:21 PM
Sr. Name Designation & nature of duties Qualification Age Date of joining Experience Remuneration Previous
no. (as at March 31, 2007) (Yrs) (Yrs.) received (Rs.) employer
41 Kulkarni Dilip R Chief Compliance Officer MFM 53 December 1, 1993 33 3,974,416 Citicorp Overseas Software Ltd.
42 Kulkarni Gurunath Senior Manager M.E. 43 June 4, 2001 19 2,657,721 Datamatics Limited
43 Kulkarni Mandar Digambar $ Senior Manager B.E. 36 August 4, 1993 14 2,806,991 –
44 Kulkarni Manmath Sr. Vice President & Chief Architect, M.Sc. 41 July 16, 1987 19 4,851,456 Citicorp Overseas Software Ltd.
Retail Banking Products
7/27/2007 3:32:21 PM
Sr. Name Designation & nature of duties Qualification Age Date of joining Experience Remuneration Previous
no. (as at March 31, 2007) (Yrs) (Yrs.) received (Rs.) employer
7/27/2007 3:32:22 PM
Sr. Name Designation & nature of duties Qualification Age Date of joining Experience Remuneration Previous
no. (as at March 31, 2007) (Yrs) (Yrs.) received (Rs.) employer
121 Sundararajan S Sr. Vice President, Customer Fulfillment M.Sc.(Maths) 43 October 23, 1990 21 5,303,118 Ashok Leyland
122 Suresh Kumar P Senior Manager M.Sc. (Hons), MMS 39 February 3, 1999 18 3,094,440 Stock Holding Corporation of India Ltd.
123 Suresha R Senior Manager M.Sc., CAIIB, CAMS, PMP 52 February 17, 2000 31 2,630,542 Canbank Investment Management
Services Ltd.
124 Thampi P Prasannavadanan Vice President, Customer Fulfillment, Africa and M.Sc., M.B.A., CAIIB 52 July 9, 1996 29 3,886,924 Federal Bank
Rajesh Hukku
Chairman
July 4, 2007
7/27/2007 3:32:22 PM
Corporate governance report
The detailed report on Corporate Governance for the financial year understands and respects its fiduciary role and responsibility to the
April 1, 2006 to March 31, 2007 as per the format prescribed by SEBI members and strives hard to meet their expectations.
under Clause 49 of the Listing Agreement is set out below:
2. Board of Directors
1. Company’s philosophy on code of governance
2.1 Composition and category
The Company believes in adopting and adhering to all the globally
The composition of the Board of the Company as of March 31, 2007,
recognized corporate governance practices and continuously
was as given below:
benchmarking itself against each such practice. The Company
Consequent to the induction of Mr. Deepak Ghaisas, Mr. R Ravisankar, Mr. N R Kothandaraman (N R K Raman) and Mr. Derek Williams on the Board of
the Company on May 1, 2007, the newly constituted Board of the Company is as under:
* As of May 1, 2007, Mr. Rajesh Hukku has ceased to be the Managing Director of the Company and continues as the Non-Executive Chairman of the Company.
** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. R Ravisankar as an Additional Director and Vice Chairman of the
Company.
*** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. Deepak Ghaisas as an Additional Director and Vice Chairman of the
Company.
**** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. N R Kothandaraman (N R K Raman) as an Additional Director and
Managing Director of the Company.
***** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. Derek Williams as an Additional Director of the Company.
2.2 Attendance of each Director at the Board Meetings and the The attendance of the Directors at the Board Meetings and the
last Annual General Meeting Annual General Meeting of the Company held during the financial year
2006-2007 was as given below:
The Company holds regular Board Meetings. The detailed agenda along
with the explanatory notes is circulated in advance. The Directors can
suggest inclusion of any item(s) in the agenda at the Board Meeting. Name of the Director Number Number of Board Last AGM
of Board Meetings attended Attended
The Independent Directors actively participate in the Board Meetings Meetings
and contribute significantly by expressing their opinions, views and attended
suggestions in the decision process. In person On phone/
video
During the Financial Year 2006-2007, 9 Board Meetings were held on conference
the following dates:
Mr. Rajesh Hukku 9 7 2 Yes
May 5, 2006, July 6, 2006, July 28, 2006, August 10, 2006, Mr. S P Bharucha 8 8 0 Yes
August 14, 2006, September 14, 2006, October 20, 2006, Mr. William T
Comfort, Jr. 8 3 5 Yes
November 9, 2006 and January 19, 2007. Mr. Y M Kale 9 9 0 Yes
Mr. Charles Phillips 9 3 6 Yes
Ms. Tarjani Vakil 9 9 0 Yes
Mr. William T Comfort, Jr. 399 Venture Partners Inc. Since donning the mantle of Chief Executive Officer – i-flex solutions, in
Citigroup Venture Capital Ltd. 1992, Mr. Hukku has architected the success story of the company-from
Court Square Capital Ltd. a player primarily in the emerging markets, to India’s first global software
product Company and the leading IT solutions provider to the financial
Mr. Y M Kale Ashok Leyland Ltd. (Alternate Director) services industry in the world today. In 2000, Rajesh was appointed
Ennore Foundries Ltd. (Alternate Director) Chairman and Managing Director of i-flex solutions. Under his leadership,
i-flex became the only organization in the Indian IT industry to place itself
Mr. Charles Phillips Oracle Corporation on the global map with a ‘Made in India’ brand.
Viacom Inc.
Morgan Stanley FLEXCUBE’s consistent ranking as the No.1 banking solution in the world
by IBS (International Banking Systems), UK, for five consecutive years,
Ms. Tarjani Vakil Asian Paints Ltd. bears a strong testimony to the company’s leadership stature in the
Alkyl Amines Chemicals Ltd. industry. In addition, i-flex has built a comprehensive portfolio of products
Aditya Birla Nuvo Ltd. and service offerings that include the highly acclaimed Reveleus™ suite
Mahindra Intertrade Ltd. for Basel II and Operational Risk, PrimeSourcing™, and i-flex Consulting™
D S P Merrill Lynch Trustee Co. Pvt. Ltd. that are geared towards the banking and financial services industry.
Idea Cellular Ltd.
Idea Mobile Communications Ltd. Transformation has been the leitmotif of Rajesh’s contribution to the Indian
IT industry. His relentless pursuit of creating the first product success on
2.4 Details of memberships of Board Committees the global center-stage has created a sharp distinction amidst a crowd
of traditional IT services providers. He also piloted i-flex to a thought
None of the Directors of the Company holds memberships of more leadership stature and mentored a host of small and medium companies
than ten committees nor is any Director a Chairperson of more than who aspired to create new products and emulate i-flex’s proven business
five Committees of the Boards of the Companies where he/she holds model.
directorship. For this purpose, “Committees” comprise of Audit
Committee, Compensation Committee and Shareholders’ Grievances For his role in scripting i-flex’s growth, Mr. Hukku was conferred the
Committee of a company. prestigious Ernst & Young ‘Entrepreneur of the Year Award 2002’ in the
Information Technology, Communications and Entertainment category.
The details of the memberships of the Company’s Directors in the He is also the recipient of the renowned International Stevie Award in
abovementioned committees of all the Companies of which they are the ‘Best Chairman’ category. More recently, he was recognized as one
members as on March 31, 2007 are given below: among the Outstanding 50 Asian Americans in Business by the Asian
American Business Development Center.
Name of the Audit Compensation Shareholders’
Director Committee Committee Grievances Rajesh received the Government of India’s most prestigious IT award - ‘The
Committee Dewang Mehta award for innovation in IT’ in 2003. He also received the
2004 Global Entrepolis Award, an honor bestowed on Asia’s emerging
Member Chair- Member Chair- Member Chair- technopreneurs. For his contribution to IT transformation in Chile, he was
person person person awarded the highest civilian honor bestowed on a foreign national - the
Mr. Rajesh ‘Order Bernardo O Higgins - Great Official’ by the Government of Chile
Hukku Nil Nil Nil Nil Nil Nil
in 2004.
Mr. S P
Bharucha 1 Nil Nil Nil Nil Nil
Rajesh has championed India Inc.’s expansion into new geographies
Mr. William T
Comfort, Jr. 1 Nil Nil 1 Nil Nil and service lines, and served on the NASSCOM (National Association of
Mr. Y M Kale Nil 1 1 Nil Nil Nil Software and Service Companies, India) Executive Committee. Recognized
Mr. Charles as a visionary entrepreneur, he has spoken at the World Economic Forum
Phillips 1 Nil 1 Nil Nil Nil
Ms. Tarjani
Vakil 3 3 1 Nil Nil 1
Mr. Hukku holds 676,524 equity shares of the face value of Rs. 5/- of Mr. Deepak Ghaisas
the Company as on date.
Mr. Ghaisas is Vice-Chairman, i-flex solutions, and a part of the
Mr. William T Comfort, Jr. leadership team of Oracle’s newly formed Financial Services Global
Business Unit (FSGBU). In his new role, he will provide the unit with
Mr. William T Comfort, Jr. has been Chairman of Citigroup Venture his in-depth knowledge, commitment, and experience. Mr. Ghaisas’s
Capital, the private equity arm of Citigroup specializing in leveraged expertise spans areas such as business management and management
buy-outs, since 1979. He is also a Citigroup representative on the accounting; techno-legal-commercial areas of information technology,
investment committee of Stirling Square Capital Partners. Mr. Comfort risk management, corporate governance, legal affairs, and contract
joined Citigroup in 1973 and has been the Executive Director of Citicorp negotiations. Mr. Ghaisas’s ability, which transformed and shaped
International Bank, Ltd. in London and Head of Corporate Finance at i-flex’s successful financial performance, will now guide the FSGBU to a
Citibank, N.A. high level of growth and recognition.
Mr. Comfort received his B.A. and LL.B. at the University of Oklahoma As Chief Executive Officer (India operations) and Chief Financial Officer
and an LL.M. at New York University Law School. He is a trustee of from 1997 to April, 2007, Mr. Ghaisas was credited for playing a
the New York University Law Center Foundation, the John A. Hartford large role in creating, selling, and driving the organization’s strategy.
Foundation, Inc., and was an adjunct professor at the Columbia Business As a spokesperson for the organization in its early years, Mr. Ghaisas
School. demonstrated a deep confidence in i-flex’s potential for the global
market, and provided the organization with a focus and clarity of direction
Mr. Comfort does not hold any equity shares of the Company as on
that it needed.
date.
Recently, Mr. Ghaisas was elected for the third time to the executive
2.6 Brief resume of new Directors proposed to be appointed at the council of NASSCOM. He is also the chairman of the IT Committee of
ensuing Annual General Meeting of the Company Confederation of Indian Industry (CII); and, a member of the Committee of
Mr. R Ravisankar the Indian Institute of Bankers - constituted for the purpose of drafting the
curriculum for Information System Audit course for bankers.
Mr. R Ravisankar is Vice-Chairman, i-flex® solutions, and a part of the
leadership team of Oracle’s newly formed Financial Services Global Another measure of his visionary strategy and evangelistic style is
Business Unit (FSGBU). showcased in his role as Vice-President of the Maharashtra Economic
Development Corporation (MEDC), a governing body which actively
Shanx, as he is popularly known, is a founding member of i-flex, and participates in the decision-making process for the economic development
has over 23 years of experience in management consulting, information of Maharashtra, India. He is also a member of the Internet Banking
technology and business management. He has led i-flex’s products Committee of the Reserve Bank of India - the body that formulated
and services business, technology and architecture, global sales and guidelines on Internet banking and security in India.
marketing and corporate development functions, including new lines of
business, over the past two decades. Mr. Ghaisas holds 456,269 equity shares of face value of Rs. 5/- of the
Company as on date.
Beginning his career at i-flex in 1993 (originally COSL/CITIL, where he
Mr. N R Kothandaraman (N R K Raman)
executed a number of assignments, primarily, for Citibank, since 1987)
he headed the IT Services business, conceptualizing, strategizing and Mr. Raman is the Managing Director and Chief Executive Officer,
winning customers, while helping the business grow rapidly over the i-flex solutions. As CEO, he is not only responsible for advancing i-flex’s
years. mission of being the leading IT solutions provider to the financial
In 1997, he took over as the Chief Executive Officer of the Company services industry worldwide, but is also the focal point for providing the
and was instrumental in transforming i-flex into a fast-growing, highly organization with focus and clarity of direction to employees. As global
successful products and services Company, winning customers around markets get more competitive, and growth of technology faster-paced,
the globe. As part of the Executive Management Office at i-flex solutions, the requirements to meet success and the risks are greater than before;
Shanx is credited with envisioning i-flex’s technology leadership, it is Mr. Raman’s responsibility to maintain and implement corporate
branding and alliances, overseas expansion and M&A strategies. He objectives as established by i-flex’s Board. In short, Mr. Raman functions
relocated to the USA in 2000 as Chief Executive Officer (International as the main link between Board members and the various levels of the
Operations and Technology), with the responsibility of managing i-flex’s organization.
products and services businesses, the subsidiaries abroad, and new
Mr. Raman has held various positions in i-flex since he joined the Company
business acquisitions in the USA. He later managed the business
in 1985. He most recently was Chief Operating Officer responsible for
development portfolio while continuing to execute his responsibilities as
the development strategy and global delivery of i-flex’s products and
CEO - i-flex solutions inc.
services divisions. He managed all aspects of operations, including
Mr. Raman holds 114,000 equity shares of face value of Rs. 5/- of the 5. Reviewing, with management, the quarterly financial statements
Company as on date. before submission to the Board for approval.
6. Reviewing, with management, the performance of statutory and
Mr. Derek Williams internal auditors and the adequacy of the internal control systems.
7. Reviewing the adequacy of the internal audit function including the
Derek Williams is the Chairman and Executive Vice-President of Oracle structure of the internal audit department, staffing and seniority of
Corporation, Asia Pacific and Japan. Mr. Williams has been at the helm the official heading the department, reporting structure coverage
of Oracle’s Asia Pacific and Japan operations since it was established and frequency of internal audit.
in 1991. 8. Discussion with internal auditors regarding any significant findings
and any follow-up required.
He also played a pivotal role in building a strong presence throughout
9. Reviewing the findings of any internal investigations by the internal
Asia by adopting a strategy of partnering closely with local companies
auditors into matters where there is suspected fraud or irregularity
and providing software and support for companies of all sizes. Among his
or a failure of internal control systems of a material nature and
key accomplishments is the development of Oracle’s presence in China
reporting the matter to the Board.
and India.
10. Discussion with statutory auditors, before the audit commences,
Mr. Derek Williams does not hold any equity shares of the Company as about the nature and scope of the audit as well as post-audit
on date. discussion to determine any area of concern.
11. To determine the reasons for any substantial defaults in the payment
to depositors, debenture holders, members (in case of non payment
3. Audit committee of declared dividends) and creditors.
3.1 Primary objectives and powers of the audit committee 12. To review the functioning of the Whistle Blower function.
13. Carrying out any other function as is mentioned in the terms of
The primary objective of Audit Committee is to monitor and provide reference of the Audit Committee.
effective supervision of the management’s financial reporting process
and to ensure accurate, timely and proper disclosures and transparency,
3.3 Composition of the committee
integrity and quality of financial reporting. The powers of the Audit
Committee include the following: The Composition of Audit Committee as on March 31, 2007 was as
follows:
1. To investigate any activity within its terms of reference.
2. To seek information from any employee. Mr. Y M Kale Chairman, Non-Executive,
3. To obtain outside legal or other professional advice. Independent Director
4. To secure attendance of outsiders with relevant expertise, if it Mr. S P Bharucha Member, Non-Executive,
considers necessary. Independent Director
Mr. William T Comfort, Jr. Member, Non-Executive,
Independent Director
3.2 Broad terms of reference Ms. Tarjani Vakil Member, Non-Executive,
The terms of reference of the Audit Committee are as follows: Independent Director
1. Oversight of the Company’s financial reporting process and the 3.4 Meetings and attendance
disclosure of its financial information to ensure that the financial
statement is correct, sufficient and credible. During the Financial Year 2006-2007, six meetings of the Committee
2. Recommending to the Board, the appointment, re-appointment and, were held on April 25, 2006, May 4, 2006, July 26, 2006,
if required, the replacement or removal of the statutory auditor and August 10, 2006, October 18, 2006 and January 19, 2007.
the fixation of audit fees.
4.5 Details of remuneration paid to the Directors during the financial year 2006-07 are as follows:
* Mr. Rajesh Hukku is deputed to i-flex solutions inc., USA. His gross compensation comprising of fixed salary and variable performance based remuneration from
i-flex solutions inc. for the financial year 2006-07 was USD 952,800. In addition, Mr. Hukku was paid a salary as mentioned in the table above for his services as the
Managing Director of the Company.
There were no sitting fees and/or perquisites applicable and paid to the Directors during the financial year 2006-2007 except as stated above.
Name of Director Scheme # of offered shares Offered shares Grant price (Rs.) Expiry Date
outstanding exercised during
as at the year
March 31, 2007
Mr. Rajesh Hukku ESPS 1998 Nil 132,724 25.00 December 31, 2008
Mr. Rajesh Hukku ESPS 2000 Nil 134,400 112.50 December 31, 2010
The above shares were offered at Fair Market Value on the dates of grant. The Director becomes entitled to purchase the shares in a phased manner over
a period of 5 years from the date of grant based on continued Directorship/employment with the Company.
The terms of Employee Stock Options granted to the Directors are given During the year the Committee held four meetings on April 20, 2006,
below. August 10, 2006, October 12, 2006 and February 28, 2007 which were
attended by both the members of the Committee.
Name of Director # of options Options Grant Expiry Date
outstanding exercised price 5.3 Company secretary
as on during (Rs.)
March 31, 2007 the year
Name of Company Secretary Mr. Deepak Ghaisas
Mr. Rajesh Hukku Nil 409,400 265.00 March 3, 2012 Address i-flex solutions ltd
Mr. S P Bharucha 8,000 2,000 708.65 June 13, 2015 i-flex Center
Mr. Y M Kale 2,000 4,000 418.92 February 17, 2013 399, Subhash Road
Ms. Tarjani Vakil 6,000 2,000 559.60 August 17, 2014 Vile Parle (East)
Mumbai 400 057
The above options were issued at Fair Market Value on the dates of grant. Tel +91-22-6718 5000
The options vest over a period of 5 years from the date of grant and are Fax +91-22-2832 3374
subject to continued Directorship/employment with the Company.
5.4 Compliance officer
During the financial year 2006-07, the Executive Director of the
Company was paid a compensation within the limits envisaged in the Name of Compliance Officer Mr. Avadhut (Vinay) Ketkar
Companies Act, 1956. Non-Executive, Independent Directors of the Address i-flex solutions ltd
Company were paid remuneration by way of commission as approved by i-flex Center
the Board of Directors/members of the Company subject however to the 399, Subhash Road
condition that the commission should not exceed 1% of the net profits Vile Parle (East)
of the Company for all the Non-Executive Directors in aggregate in one Mumbai 400 057
financial year. Tel + 91-22-6718 5000
Fax + 91-22-2832 3374
e-mail vinay.ketkar@iflexsolutions.com
5. Shareholders’ grievances committee
5.1 Composition of the Committee 5.5 Details of shareholders’ complaints received, resolved
during the year 2006-2007 and pending share transfers as on
The composition of Shareholders’ Grievances Committee as on
March 31, 2007.
March 31, 2007 was as follows:
Nature of complaints Opening Received Cleared Pending
Chairperson, Non-Executive, balance
Ms. Tarjani Vakil Independent Director
CEO – India Operations, CFO and Non receipt of warrant 1 23 24 0
Mr. Deepak Ghaisas* Company Secretary
Non receipt of certificate 0 6 6 0
*On May 1, 2007, Mr. Ghaisas was appointed as Vice Chairman of the Board of Non receipt of demat credit/rej. 0 56 56 0
Directors of the Company. Sebi/stock exchange/MCA 0 14 14 0
Legal 0 1 1 0
5.2 Scope of shareholders’ grievances committee’s activities Others 0 4 4 0
The scope of the Shareholders’ Grievances Committee is to review and Number of pending share transfers as on March 31, 2007 – One.
address the grievances of the members in respect of share transfers,
transmission, dematerialization and rematerialization of shares and other
share related activities.
6.2 There were no matters requiring approval of the members 8.4 Detailed Management Discussion and Analysis Reports covering
through Postal Ballot in any of the previous three Annual General Indian GAAP and US GAAP financials have been included in this
Meetings of the Company. Annual Report.
8.5 The Company has also posted information relating to its financial
7. Disclosures results and Distribution of shareholding on a quarterly basis on
a. All the relevant information in respect of materially significant Electronic Data Information Filing and Retrieval System (EDIFAR)
related party transactions, i.e., transactions of the Company of http://sebiedifar.nic.in.
material nature with its promoters, directors or management or their
relatives, subsidiaries of the Company, etc. has been disclosed in
9. General shareholder information
the respective financial statements presented in the Annual Report.
The Company did not undertake any transaction with any related Annual General Meeting
party having potential conflict with the interest of the Company at Date August 24, 2007
large. Time 3.00 p.m.
Venue InterContinental
b. The Company has complied with statutory compliances and The Grand Mumbai,
no penalty or stricture is imposed on the Company by the Stock Sahar Airport Road,
Exchanges or Securities and Exchange Board of India (SEBI) or any Mumbai 400 059
other statutory authority on any matter related to the capital markets
during the last three years. Financial Year April 1 to March 31
c. The Company has a Whistle Blower Policy which provides an Date of Book Closure August 20, 2007 to
avenue for employees to raise concerns of any violations of Code of August 24, 2007
(both days inclusive)
Conduct, incorrect or misrepresentation of any financial statements
and reports, unethical behavior, etc. The policy provides adequate Listing on Stock Exchanges at Bombay Stock Exchange
safeguards to employees reporting such violations to the Company. Limited (BSE); and
No employee has been denied access to the Audit Committee. National Stock
Exchange of India Ltd.
d. The Board has laid down Codes of Conduct for the Board of (NSE)
Directors and Senior Management Personnel of the Company.
These Codes have been posted on the Company’s website Stock Code
www.iflexsolutions.com. Bombay Stock Exchange Ltd (BSE) 532466
National Stock Exchange of India Ltd. (NSE) I-FLEX
Month and Year High (Rs.) Low (Rs.) Volume of Shares High (Rs.) Low (Rs.) Volume of Shares
BSE NSE
#4& JnFY
Shares of nominal value of (Rs.) Number of Shareholders % Share amount (Rs.) % to Equity
1. The Company issued and allotted 2,552,795 equity shares to its Directors/employees who exercised their ESOPs during the year.
2. The Company also issued and allotted 4,447,418 equity shares on a preferential basis to Oracle Global (Mauritius) Limited, the Promoter of the
Company.
3. The Company has not issued any ADR/GDR.
15. Dematerialization of shares and liquidity As on March 31, 2007, the Company also had following branch offices in
the states of Maharashtra, Karnataka and Tamil Nadu.
The shares of the Company are under compulsory demat mode. Under
the Depository System, the International Securities Identification Number
(ISIN) allotted to the Company’s shares is INE881D01027. i-flex Park i-flex Center of Learning
Nirlon Compound Plot No. 13, Doddanekundi
Western Express Highway Industrial Area, Phase II
As on March 31, 2007, 97.69% of the shares of the Company were in Goregaon (East) Whitefield Road
demat mode. Mumbai 400 059 Mahadevapura Post
India Bangalore 560 048
India
16. Address for correspondence
i-flex Annexe Pride Silicon Plaza, 2nd Floor
Registered Office Corporate office Nirlon Compound Next to Chatushringi
Western Express Highway Senapati Bapat Road
i-flex solutions ltd i-flex solutions ltd Goregaon (East) Pune 411 053
Mumbai 400 063 India
Unit 10-11, i-flex Center India
SDF-1, SEEPZ, 399, Subhash Road
Andheri (East) Vile Parle (East) Corporate Centre A i-flex Center
Mumbai 400 096 Mumbai 400 057 Andheri Kurla Road Block 9A, Ambrosia II
India India Andheri (East) Bavdhan Khurd
Tel +91-22- 5676 2000 Tel +91-22- 6718 5000 Mumbai 400 059 Taluka Mulshi
Fax +91-22- 2829 2767 Fax +91-22- 2832 3374 India Pune 411 021
e-mail: investors@iflexsolutions.com India
i-flex Center
# 333, Kundalahalli Road
Brookefields
Bangalore 560 037
India
To
The Board of Directors
i-flex solutions limited
Mumbai
This is to certify that: (i) Significant changes in internal controls during the period, if
any;
(a) We have reviewed financial statements and the cash flow statement
of i-flex solutions ltd (“the Company”) for the quarter and year ended (ii) Significant changes in accounting policies during the period, if
March 31, 2007 and that to the best of our knowledge and belief: any; and that the same have been disclosed in the notes to the
financial statements; and
(i) These statements do not contain any materially untrue
statement or omit any material fact or contain statements that (iii) instances of significant fraud of which we have become aware
might be misleading; of and the involvement therein, if any, of the management or
an employee having a significant role in the Company’s internal
(ii) These statements together present a true and fair view of control system.
the Company’s affairs and are in compliance with existing
accounting standards, applicable laws and regulations. (e) We further declare that all Board members and Senior Management
Personnel have affirmed compliance with Codes of Conduct for the
(b) There are, to the best of our knowledge and belief, no transactions year ended March 31, 2007.
entered into by the Company during the period which are fraudulent,
illegal or violative of the Company’s code of conduct. For i-flex solutions limited
The following discussion is based on our audited unconsolidated financial We are organized by region and business segment. We have two
statements, which have been prepared in accordance with Accounting major business segments - the Products Business (comprising product
Standards referred to in Section 211 (3C) of the Companies Act 1956. licensing, customization, implementation and support) and the Services
Business (providing customized software and consulting services). We
You should read the following discussion of our financial condition and have also recently launched Knowledge Process Outsourcing Services
results of operations together with the detailed unconsolidated Indian (value-added knowledge outsourcing). These segments are described in
GAAP financial statements and the notes to those statements. Our fiscal greater detail below:
year ends on March 31 of each year.
Products
Information technology in the financial services industry
The i-flex portfolio includes FLEXCUBE®, a complete banking product
The financial services industry is undergoing transformation, both in how suite for retail, consumer, corporate, investment and internet banking,
it addresses its customers, and in how it runs its operations. The entry of and asset management and investor servicing. Since its launch in 1997,
non-traditional players, global mergers and acquisitions, ever increasing more than 300 financial institutions in over 105 countries have chosen
demands from customers to deliver a ubiquitous and next generation FLEXCUBE. The product suite has been ranked the world’s No. 1 selling
customer experience, a demanding regulatory environment, and the core banking solution for five consecutive years--2002, 2003, 2004,
emergence of new customer interaction channels have contributed to 2005 and 2006--by the UK-based International Banking Systems (IBS).
this shift.
The product suite’s portfolio was further enriched last year by adding
Governance, risk and compliance has emerged as a strategic priority products targeted at Islamic Banking. With the new FLEXCUBE SWIFTNet
for financial institutions. The post 9/11 environment has seen financial Services Integrator suite, banks are able to leverage the SWIFTNet
institutions grappling with the challenges of increasing regulatory (SWIFT’s IP-based messaging solution) environment for increased
complexity and also an emerging convergence of the areas of governance business value. Increased delivery capacity, and improved functionality
driven by regulations such as Sarbanes-Oxley, risk management through our association with Oracle made this the best ever year for
with regulations in Basel II, and compliance driven by regulations as FLEXCUBE.
anti-money laundering, the Patriot Act, data privacy, etc.
The ReveleusTM suite of analytical applications for the financial services
In the core transaction processing area, increasing number of financial industry is focused in the areas of risk management, customer insight,
institutions are getting more and more receptive to the value proposition and enterprise-wide financial performance. Reveleus Risk Analytics
and the benefits of core banking transformation, and the Company is solves the most complex global challenges facing the financial industry
taking concrete steps in that direction. today, including multi-jurisdictional Basel II compliance and operational
risk management. Reveleus was ‘Highly Commended’ for its Compliance
Information Technology (IT) plays a major role in such a scenario – acting as Initiative Innovation in The Banker Technology Awards for 2006.
an enabler of a new customer-centric outlook, and a means to improving
operational efficiency, while driving compliance to new regulatory norms, Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior
reducing costs and achieving competitive differentiation. Detection PlatformTM is the industry’s most comprehensive solution
for detecting risk, enhancing customer relationships, and addressing
In conjunction with Oracle Global (Mauritius) Limited (“Oracle”), i-flex has regulatory requirements in the anti-money laundering, trading and broker
a very clearly articulated value proposition and strategy, which is centered compliance areas. Mantas, along with Reveleus, offer a single, unified
around the business priorities and challenges of financial institutions in platform for governance, risk and compliance. Waters Magazine ranked
the market today. Our approach is centered on addressing the 4Cs that Mantas for Best Anti-Money Laundering solution for 2004, 2005 and
are affecting financial institutions today: Competitive differentiation, Cost 2007 and Best Compliance solution for 2003.
reduction, Customer intimacy and Compliance and risk management.
i-flex has organized its entire range of offerings and value propositions to DaybreakTM is a comprehensive consumer lending system that automates
align with these priorities. all aspects of financing from origination, to servicing and collections for
installment loans; consumer leases, revolving products and home equity
lines of credit. It empowers financial services organizations to improve
Overview
productivity, enhance customer service and manage risks.
i-flex® solutions is in the business of providing comprehensive IT
solutions to the financial services industry worldwide. Playing the role of Together with Castek® Software Inc., a majority-owned subsidiary, i-flex
a specialized IT partner to financial services institutions worldwide, our offers strategic business software and services for the global Property
approach is balanced with a wide range of products, custom solutions and Casualty insurance market. Castek provides insurance carriers
and consulting services. with a suite of core business processing systems for insurance product
and process configuration, policy processing, customer billing, claims
Our solutions portfolio includes packaged applications, custom application management and services.
software development, deployment, maintenance and support services,
business and IT consulting services, technology deployment and Our solution portfolio rests on SOA, enabling interoperability, extensibility
management services and the knowledge process outsourcing in the and standardization. Encompassing cash management, trade, treasury,
financial services domain. payments, lending deposits, private wealth management, asset
management, among others, it helps financial institutions become
As of March 31, 2007, the Group cumulatively serviced 750 customers ‘model enterprises’, reduces costs, improves efficiency, and increases
in 125 countries through its portfolio of products and services. their addressable market and asset size.
The i-flex ConsultingTM division offers an end-to-end consulting Products revenue 8,909.5 6,540.6
partnership, providing comprehensive business and technology solutions Cost of products revenue (3,864.2) (2,550.0)
that enable financial services enterprises to improve process efficiencies; Sales and marketing expenses (553.7) (591.7)
optimize costs; meet risk and compliance requirements; define IT General and administrative
architecture; and, manage the transformation process. Consulting expenses (518.2) (281.9)
services are offered in the areas of business transformation, risk and Depreciation and amortization (255.1) (141.6)
compliance, program management, IT architecture, IT governance and Income from operations 3,718.3 2,975.4
process improvement. i-flex’s solution approach for financial services Operating margin* 42% 45%
institutions is process-driven and rests on the i-flex Process Framework
for Banking (iPFBTM), a tool for transforming banking operations. It is a Products revenue
process repository created by drawing on i-flex’s domain expertise and
Our products revenue represented 57% of the total revenues for
best practices.
both fiscal years ended 2007 and 2006. Our products revenue were
i-flex’s Technology Deployment & Management Services (TDMS) Rs. 8,909.5 million during the fiscal year ended March 31, 2007; an
division specializes in conceptualizing, designing, deploying and increase of 36% from Rs. 6,540.6 million during the fiscal year ended
managing IT Infrastructure. The i-RIMS (i-flex Remote Infrastructure March 31, 2006.
Management Services) Center manages IT infrastructure remotely from Products revenue comprise license fees, professional fees for
India on a 24 x 7 basis through its on-site-offshore model. TDMS services implementation and enhancement services and annual maintenance
are based on best practices such as ITIL (IT Infrastructure Library), COBIT contract (Post Contract Support - PCS) fees for our products.
(Control Objectives for Information and related Technology) model, a
globally accepted standard for IT management and control framework,
License fee
and BS7799 (ISO17799).
Our standard licensing arrangement for our products provides the user
i-flex Processing Services is a 100% owned subsidiary of i-flex solutions, a perpetual right to use the product for a pre-defined number of users
with consultants experienced in various functions in the asset and sites upon payment of a license fee. The license fee is a function
management space, financial modeling and valuation KPO. The services of a variety of quantitative and qualitative factors, including the number
provided encompass IT software, consulting, KPO and infrastructure. of copies sold, the number of concurrent users supported, the number
Equinox Corporation, a wholly owned subsidiary of i-flex, excels in and combination of the modules sold, and the number of sites and
providing cost-effective and high-quality knowledge process outsourcing geographical locations supported. The licenses are non-exclusive,
services (KPO) to the financial services industry. Equinox was selected personal, non-transferable and royalty free.
in the Leaders Category for the ‘2007 Global Outsourcing 100’ by The
International Association of Outsourcing Professionals (IAOP). The Global Implementation fee
Outsourcing 100 defines the standard for excellence in outsourcing
service delivery. It was also recognized among the ‘Top 50 Global After products are licensed to these customers, we provide services
Outsourcers & Top 30 Global Offshore Vendors’ by the International related to the implementation of these products at customer sites,
Association of Outsourcing Professionals (IAOP). integration with other customer systems, and enhancement of products
to address specific requirements of customers. The customer is typically
charged a service fee either on a fixed-price basis or a time and
Corporate development materials basis. Implementation and enhancement services comprise
During the year, Oracle purchased equity shares of i-flex solutions ltd functional enhancements, interface building, implementation planning,
(“i-flex” or the “Company”) from OrbiTech Ltd., the then major shareholder data conversion, training and product walkthroughs, and are provided to
of the Company and through an open offer and, also from the stock customers who enter into licensing arrangements with us.
market, taking its shareholding to 81.02% as on March 31, 2007.
Customer concentration receivable, customer relationship and history of the client. The following
table presents the age profile of our sundry debtors:
Our operations and business depend on our relationships with a number
of large customers. Revenues from the top-ten customers for fiscal 2007
and 2006 were 26% and 22%, respectively, as a percentage of the total Year ended
March 31
revenues. The top-ten customers in the services business contributed
to 38% of the total services revenue, while the top-ten customers in Period in days 2007 2006
the products business contributed to 37% of the total products revenue
during fiscal 2007. 0-180 68% 70%
More than 180 32% 30%
The percentage of total revenues during the fiscal years 2007 and 2006 Total 100% 100%
that we derived from our largest customer, largest-five customers and
largest-ten customers is provided in the accompanying table. In the
Foreign currency and treasury operations
table, various affiliates of Citigroup are classified as separate customers,
and the last row sets forth the percentage of total revenues we earned A substantial portion of our revenues is generated in foreign currencies
from the various affiliates from Citigroup with respect to our products and while a majority of our expenses are incurred in Indian Rupees, with the
services business individually, and with respect to our business taken as remaining expenses incurred in US Dollars and European currencies.
a whole.
We follow a conservative philosophy of treasury operations, and the policy
is to invest funds substantially in time deposits with well-known, sound
Products Services Total Revenues
Revenue Revenue Indian and foreign banks. The Company has ensured adequate controls
2007 2006 2007 2006 2007 2006 over asset management, including cash management operations, credit
management, and debt collection operations.
Top customer 6% 8% 8% 9% 3% 4%
Top 5 customer 24% 22% 24% 26% 15% 15% The Company also balances funds in USD accounts or INR deposits
Top 10 customer 37% 32% 38% 40% 26% 24% based on the comparative interest rates and currency requirements. The
Citigroup and its Company books forward covers from time to time, in line with its treasury
affiliates 18% 16% 46% 0% 30% 10% management philosophy.
Range of Shares Weighted Weighted Our cost of revenue in the fiscal year ended March 31, 2007, was
exercise average average Rs. 8,884.5 million, an increase of 36% over cost of revenue of
prices exercise remaining Rs. 6,515.3 million in the fiscal year ended March 31, 2006. Our cost
price (Rs) contractual
life (Years) of revenue as a percentage of total revenue was 57% in the fiscal
year ended March 31, 2007 and fiscal year ended March 31, 2006.
We invest significantly both in our products and services businesses to
Options unvested 419-560 62,000 520 6.9
meet emerging market requirements, and create the foundation for the
709-709 8,000 709 8.2
1,291-1,291 347,500 1,291 9.1 growth in future. In the financial year 2006-07, we invested in enhancing
Options vested the product suite to new requirements from countries in Europe, Asia,
and exercisable 265-265 77,982 265 4.9 USA and Latin America. We also enhanced our offerings in the risk and
419-560 35,003 505 6.8 compliance area.
530,485 989 8.1
Our cost of products revenue in the fiscal year ended March 31, 2007,
The weighted average share price for stock options granted during the was Rs. 3,864.2 million, an increase of 52% over cost of products
year, on the date of grant was Rs. 1,291 and the estimated weighted revenue of Rs. 2,550 million in the fiscal year ended March 31, 2006.
average fair value of options granted during the year is Rs. 596. Our cost of products revenue as a percentage of products revenue was
43% in the fiscal year ended March 31, 2007, compared to 39% in the
fiscal year ended March 31, 2006. This increase, as stated above was
Analysis of our financial results largely attributable to the higher investments in the product business.
Comparison of fiscal 2007 with fiscal 2006
Our cost of services revenue in the fiscal year ended March 31, 2007,
Revenues was Rs. 5,020.3 million, an increase of 27% over cost of services
revenue of Rs. 3,965.3 million in the fiscal year ended March 31, 2006.
Our total revenues in the fiscal year ended March 31, 2007, were
Our cost of services revenue as a percentage of services revenue was
Rs. 15,523.4 million, an increase of 35% over total revenue of
76% in the fiscal year ended March 31, 2007, compared to 79% in the
Rs. 11,538.2 million in the fiscal year ended March 31, 2006. The
fiscal year ended March 31, 2006. The primary reason for the increase
increase in revenue was attributable to a 36% increase in the revenue
in costs during this year as stated above was higher employee costs
from the products business and a 32% increase in the revenue from the
needed for investments in creating new competencies.
services business.
General and administrative expenses for our services business in the Risks and concerns
fiscal year ended March 31, 2007, were Rs. 424.7 million, an increase
of 23% over our general and administrative expenses for our Services Quantitative and qualitative disclosures about risk
business of Rs. 345.1 million in the fiscal year ended March 31, 2006. Our primary risk exposures are due to the following:
This increase is due to new development centers becoming operational
for the services business. Our general and administrative expenses for – foreign exchange rate fluctuations, principally relating to the
our services business as a percentage of services revenue was 6% in fluctuation of the US Dollar to the Indian Rupee;
the fiscal year ended March 31, 2007, compared to 7% in the fiscal year
ended March 31, 2006. – fluctuations in interest rates; and
– Compliance, Risk and Governance is on the top of the investment Internal control systems and their adequacy
agenda for financial institutions
The Company has in place adequate systems of internal control and
– Expanding solutions portfolio and entry into new market segments documented procedures covering all financial and operating functions.
such as consumer finance, business analytics, Basel II, anti-money These systems have been designed to provide reasonable assurance with
laundering regard to maintaining proper accounting controls, monitoring economy
and efficiency of operations, protecting assets from unauthorized use or
losses and ensuring reliability of financial and operational information.
Threats:
The Company continuously strives to align all its processes and controls
– Increasing competition with global best practices.
Net income as per Indian GAAP unconsolidated profit and loss account 3,546,739 2,407,986
Add
Revenue of subsidiaries, net
i-flex solutions b.v. 846,648 444,049
i-flex solutions pte ltd – consolidated 635,994 406,082
i-flex America inc. – consolidated 3,164,578 2,181,974
ISP Internet Mauritius Company – consolidated 404,956 234,670
5,052,176 3,266,775
Net income as per Indian GAAP consolidated profit and loss account 3,722,796 2,376,525
To
The Members of i-flex Solutions Limited
1. We have audited the attached balance sheet of i-flex Solutions iv) In our opinion, the balance sheet, profit and loss account and
Limited (‘the Company’) as at March 31, 2007 and also the profit cash flow statement dealt with by this report comply with
and loss account and the cash flow statement for the year ended the accounting standards referred to in sub-section (3C) of
on that date annexed thereto. These financial statements are the Section 211 of the Act.
responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our v) On the basis of the written representations received from the
audit. directors, as on March 31, 2007, and taken on record by
the Board of Directors, we report that none of the directors is
2. We conducted our audit in accordance with auditing standards disqualified as on March 31, 2007 from being appointed as a
generally accepted in India. Those standards require that we plan director in terms of clause (g) of sub-section (1) of Section 274
and perform the audit to obtain reasonable assurance about whether of the Act.
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the vi) In our opinion and to the best of our information and according
amounts and disclosures in the financial statements. An audit also to the explanations given to us, the said accounts give the
includes assessing the accounting principles used and significant information required by the Act, in the manner so required
estimates made by management, as well as evaluating the overall and give a true and fair view in conformity with the accounting
financial statement presentation. We believe that our audit provides principles generally accepted in India;
a reasonable basis for our opinion.
a) in the case of the balance sheet, of the state of affairs of
3. As required by the Companies (Auditors’ Report) Order, 2003 (as the Company as at March 31, 2007;
amended) (‘the Order’) issued by the Central Government of India
b) in the case of the profit and loss account, of the profit for
in terms of sub-section (4A) of Section 227 of the Companies Act,
the year ended on that date; and
1956 (‘the Act’), we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order. c) in the case of cash flow statement, of the cash flows for
the year ended on that date.
4. Further to our comments in the Annexure referred to above, we
report that: For S. R. Batliboi & Associates
Chartered Accountants
i) We have obtained all the information and explanations, which
to the best of our knowledge and belief were necessary for the
purposes of our audit;
per Sunil Bhumralkar
ii) In our opinion, proper books of account as required by law Partner
have been kept by the Company so far as appears from our Membership No.: 35141
examination of those books;
iii) The balance sheet, profit and loss account and cash flow Mumbai, India
statement dealt with by this report are in agreement with the May 1, 2007
books of account;
(i) (a) The Company has maintained proper records showing full (c) According to the information and explanation given to us,
particulars, including quantitative details and situation of there are no dues of income tax, sales-tax, wealth tax,
fixed assets. service tax, custom duty, excise duty and cess which have
not been deposited on account of any dispute.
(b) Fixed assets have been physically verified by the
management during the year and as informed, no material (x) The Company has no accumulated losses at the end of the
discrepancies were identified on such verification. financial year and it has not incurred cash losses in the current
and immediately preceding financial year.
(c) There was no substantial disposal of fixed assets during
the year. (xi) The Company did not have any dues to any financial institution,
bank or debenture holder during the year.
(ii) Due to the nature of its business, clause (ii) of the Order,
relating to physical verification of inventory is not applicable to (xii) According to the information and explanations given to us and
the Company. based on the documents and records produced to us, the
Company has not granted loans and advances on the basis
(iii) (a) As informed, the Company has not granted any loans, of security by way of pledge of shares, debentures and other
secured or unsecured to companies, firms or other parties securities.
covered in the register maintained under section 301 of
the Act. (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
(b) As informed, the Company has not taken any loans, secured the Order are not applicable to the Company.
or unsecured from companies, firms or other parties covered
in the register maintained under section 301 of the Act. (xiv) In our opinion, the Company is not dealing in or trading in shares,
securities, debentures and other investments. Accordingly, the
(iv) In our opinion and according to the information and explanations provisions of clause 4(xiv) of the Order are not applicable to the
given to us, there is an adequate internal control system Company.
commensurate with the size of the Company and the nature of
its business, for the purchase of fixed assets and for the sale of (xv) According to the information and explanations given to us, the
services. During the course of our audit, no major weakness has Company has not given any guarantee for loans taken by others
been noticed in the internal control system in respect of these from bank or financial institutions.
areas. Due to the nature of its business the Company does not
purchase any inventory. (xvi) The Company did not have any term loans outstanding during
the year.
(v) According to the information and explanations provided by the
management, we are of the opinion that there are no contracts (xvii) According to the information and explanations given to us and
and arrangements that need to be entered into the register on an overall examination of the balance sheet of the Company,
maintained under Section 301 of the Act. we report that no funds raised on short-term basis have been
used for long-term investment.
(vi) The Company has not accepted any deposits from the public.
(xviii) The Company has not made any preferential allotment of shares
(vii) In our opinion, the Company has an internal audit system to parties or companies covered in the register maintained
commensurate with the size and nature of its business. under Section 301 of the Act.
(viii) To the best of our knowledge and as explained, the Central (xix) The Company did not have any outstanding debentures during
Government has not prescribed maintenance of cost records the year.
under clause (d) of sub-section (1) of Section 209 of the Act for
the products of the Company. (xx) We have verified that the end use of money raised by public
issues is as disclosed in the notes to the financial statements.
(ix) (a) The Company is generally regular in depositing with
appropriate authorities undisputed statutory dues including (xxi) Based upon the audit procedures performed for the purpose of
provident fund, investor education and protection fund, or reporting the true and fair view of the financial statements and
employees’ state insurance, income-tax, sales-tax, wealth- as per the information and explanations given by management,
tax, service tax, customs duty, excise duty, cess and other we report that no fraud on or by the Company has been noticed
material statutory dues applicable to it. or reported during the course of our audit.
For S. R. Batliboi & Associates
(b) According to the information and explanations given to us,
Chartered Accountants
no undisputed amounts payable in respect of provident
fund, investor education and protection fund, employees’
state insurance, income-tax, wealth-tax, service tax, sales-
tax, customs duty, excise duty, cess and other undisputed per Sunil Bhumralkar
statutory dues were outstanding, at the year end, for a Partner
period of more than six months from the date they became Membership No.: 35141
payable.
Mumbai, India
May 1, 2007
i-flex annual report 2006-07 45
Application of funds
Fixed assets 3
Cost 3,232,748 2,818,892
Less: Accumulated depreciation and amortization 1,739,532 1,184,941
Net book value 1,493,216 1,633,951
Capital work-in-progress and advances 1,270,678 581,356
2,763,894 2,215,307
23,984,758 13,637,617
Notes to accounts 15
The schedules referred to above and notes to accounts form an integral part of the balance sheet.
As per our report of even date For and on behalf of the Board of Directors
(All amounts in thousands of Indian Rupees, except share and per share data)
Operating expenses
Selling and marketing expenses 10 (651,438) (602,267)
General and administrative expenses 11 (1,959,900) (1,436,919)
Depreciation and amortization (565,351) (387,812)
Income from operations 3,462,179 2,595,893
Appropriations:
Proposed dividend – (381,442)
Tax on Proposed dividend – (53,497)
Dividend paid on stock options exercised (1,237) (1,140)
Tax on dividend paid on stock options exercised (174) (160)
Transfer to general reserve – (2,000,000)
Surplus carried to Balance Sheet 4,009,569 464,241
Notes to accounts 15
The schedules referred to above and notes to accounts form an integral part of the profit and loss account.
As per our report of even date For and on behalf of the Board of Directors
(All amounts in thousands of Indian Rupees, except share and per share data)
2007 2006
Authorized:
100,000,000 (March 31, 2006 – 100,000,000) equity shares of Rs. 5/- each 500,000 500,000
a. Of the above, 67,481,698 (March 31, 2006 – 36,422,788) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).
The Company became subsidiary of Oracle on April 14, 2006.
b. Of the above, 62,121,800 (March 31, 2006 – 62,121,800) equity shares of Rs. 5/- each had been issued as fully paid up bonus shares by
capitalizing the securities premium account.
c. Refer Note 6 (b) of Schedule 15 for options granted for unissued equity shares.
Securities premium
Balance, beginning of the year 2,543,056 2,146,426
Received during the year 6,468,820 396,630
Balance, end of the year 9,011,876 2,543,056
General reserve
Balance, beginning of the year 10,238,569 8,238,569
Transferred from profit and loss account – 2,000,000
Adjustment for employee benefits provision (Refer Note 2 (h) of Schedule 15) (93,378) –
Balance, end of the year 10,145,191 10,238,569
23,166,636 13,245,866
Intangible assets
Goodwill on acquisition 197,473 – – 197,473 89,261 56,892 – 146,153 51,320 108,212
Customer contracts 22,290 – – 22,290 22,167 123 – 22,290 – 123
Product IPR 138,619 – – 138,619 35,191 27,724 – 62,915 75,704 103,428
PeopleSoft ERP 53,767 – – 53,767 3,584 10,753 – 14,337 39,430 50,183
Total 2,818,892 430,969 17,113 3,232,748 1,184,941 565,351 10,760 1,739,532 1,493,216 1,633,951
As at March 31, 2006 2,127,784 705,906 14,798 2,818,892 806,255 387,812 9,126 1,184,941
Note: Includes 10 (March 31, 2006 – 10) shares of Rs. 50/- each in Takshila Building No.9, Co-op Housing Society Limited, Mumbai.
7/27/2007 3:32:29 PM
As at As at
March 31, 2007 March 31, 2006
Schedule 4: Investments
i. Trade (unquoted)
EBZ Online Private Limited
242,240 (March 31, 2006 – 242,240) equity shares of Rs. 10/- each, fully paid-up 45,000 45,000
Less: Provision for diminution in value of investment (45,000) (45,000)
– –
Login SA
33,000 (March 31, 2006 – 33,000) equity shares of EUR 2/- each, fully paid up 6,593 6,593
6,092,200 413,536
Note: As at March 31, 2006, 9% Dhanalakshmi Bank Bonds Series VI was not listed and was classified as unquoted investment.
Amount due from subsidiaries [Refer Note 9 of Schedule 15] 7,835,843 5,933,317
a. Current liabilities
Amount due to subsidiaries [Refer Note 9 of Schedule 15] 2,759,670 1,990,501
Accrued expenses 1,271,190 1,043,422
Deferred revenues 1,576,427 969,921
Accounts payable 61,364 72,097
Advances from customers 19,832 21,553
Advance against warrants – 40,441
Investor Education and Protection Fund to be credited by unclaimed dividends* 2,065 2,027
Unearned finance income 16,234 –
Other current liabilities 223,619 186,129
5,930,401 4,326,091
* There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.
b. Provisions
Proposed dividend – 381,442
Tax on proposed dividend – 53,497
Provision for gratuity [Refer Note 2 (h) and 7 of Schedule 15] 127,013 79,991
Provision for compensated absence [Refer Note 2 (h) of Schedule 15] 226,312 54,139
353,325 569,069
Schedule 8: Revenue
Interest on:
Bank deposits 328,643 268,723
[includes tax deducted at source of Rs. 74,589 (March 31, 2006 – Rs. 70,739)]
Bonds 3,639 4,330
[includes tax deducted at source of Rs. 212 (March 31, 2006 – Rs. 572)]
Loans to employees 197 230
Loan to subsidiaries 27,782 21,177
Lease assets 5,274 –
365,535 294,460
Schedule 14: Reconciliation of basic and diluted equity shares used in computing earnings per share
Number of shares
Weighted average shares outstanding for basic earnings per share 79,125,096 75,562,947
Add: Effect of dilutive stock options 2,230,666 2,046,096
Weighted average shares outstanding for diluted earnings per share 81,355,762 77,609,043
Schedule 15: Notes to accounts principles generally accepted in India and complying in all material
respects with the mandatory accounting standards issued by the Institute
1. Background and nature of operations
of Chartered Accountants of India and referred to in Section 211(3C) of
i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India the Companies Act, 1956 (‘the Act’). The accounting policies applied by
with limited liability on September 27, 1989. The Company is principally the Company are consistent with those used in the previous years except
engaged in the business of providing information technology solutions for early adoption of Accounting Standard 15 (Revised), ‘Employees
and business process outsourcing services to the financial services benefits’ issued by the Institute of Chartered Accountants of India. The
industry worldwide. i-flex has a suite of banking products, which caters financial statements are presented in the general format specified in
to the needs of corporate, retail, investment banking, treasury operations Schedule VI to the Act.
and data warehousing.
The significant accounting policies adopted by the Company, in respect
i-flex is a subsidiary of Oracle with Oracle having 81.02% ownership of the financial statements are set out as below:
interest in the Company as at March 31, 2007.
b. Use of estimates
2. Summary of significant accounting policies
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
a. Basis of presentation
estimates and assumptions that affect the reported amounts of assets
The financial statements are prepared under the historical cost convention, and liabilities and disclosure of contingent liabilities at the date of the
on the accrual basis of accounting, in conformity with accounting financial statements and the results of operations during the reporting
Gratuity liability is a defined benefit obligation and is recorded based l. Share-based compensation/payments
on actuarial valuation made at the end of the year. The gratuity liability
and net periodic gratuity cost is actuarially determined after considering The Company uses the intrinsic value method of accounting for its
discount rates, expected long term return on plan assets and increase in employee share-based compensation plan and other share-based
compensation levels. All actuarial gain/loss are immediately recorded to arrangements. Under this method compensation expense is recorded
the profit and loss account and are not deferred. The Company makes over the vesting period of the option, if the fair market value of the
contributions to a fund administered and managed by the Life Insurance underlying stock exceeds the exercised price at the measurement date,
Corporation of India (LIC) to fund the gratuity liability. Under this scheme, which typically is the grant date.
the obligation to pay gratuity remains with the Company, although LIC
administers the scheme.
m. Provision and contingencies
Short term compensated absences are provided for based on estimates.
A provision is recognized when an enterprise has a present obligation as
Long term compensated absences are provided for based on actuarial
valuation. a result of past event and it is probable that an outflow of resources will
be required to settle the obligation, in respect of which a reliable estimate
Effective April 1, 2006 the Company has early adopted Accounting can be made. Provisions are not discounted to its present value and
Standard (AS) 15 (Revised), ‘Employee benefits’ issued by the Institute of are determined based on management estimate required to settle the
Chartered Accountants of India. Accordingly, the Company has recorded obligation at the balance sheet date. These are reviewed at each balance
charge for compensated absence of Rs. 96,328 for the year ended sheet date and adjusted to reflect the current management estimates.
March 31, 2007. Further in accordance with the transitional provision
of AS 15 (Revised), the compensated absence pertaining to years prior
3. Commitments and contingent liabilities
to April 1, 2006 amounting to Rs. 93,378 has been adjusted against
General reserve.
a. Capital commitments
i. Operating leases Contracts remaining to be executed on capital account and not provided
for (net of advances) aggregates to Rs. 1,875,264 (includes capital
Leases of assets under which all the risks and rewards of ownership are
commitment through issuance of letter of intents of Rs. 998,819) as at
effectively retained by the lessor are classified as operating leases. Lease
payments under operating leases are recognized as an expense on a March 31, 2007 (March 31, 2006 – Rs. 801,100).
straight-line basis over the lease term.
b. Contingent liabilities
j. Income-tax Financial bank guarantees given to banks on behalf of
Tax expense comprises of current, deferred and fringe benefit tax. subsidiaries, aggregates to Rs. 39,384 as at March 31, 2007
Current income tax and fringe benefit tax is measured at the amount (March 31, 2006 – Rs. 63,028).
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes are recognized for the c. Loan to Equinox Global Services Private Limited (‘Equinox’)
future tax consequences attributable to timing differences between the
financial statement determination of income and their recognition for tax Loan given to Equinox has conversion option in equity shares of Equinox.
purposes. The effect on deferred tax assets and liabilities of a change in In case of conversion, interest of 8% would not be payable by Equinox.
tax rates is recognized in income using the tax rates and tax laws that The Company intends to exercise the option of conversion and hence no
have been enacted or substantively enacted by the balance sheet date. interest has been accrued on the loan.
March 31, 2007 March 31, 2006 a) Employee Stock Purchase Scheme (‘ESPS’)
Not later than one year 162,537 179,861 The Company has adopted the ESPS administered through a Trust
Later than one year but not (“the Trust”) to provide equity-based incentives to key employees of the
later than five years 272,838 295,149 Company. The Trust purchases shares of the Company from market
Later than five years 10,572 55,183 using the proceeds of loans obtained from the Company. Such shares
445,947 530,193 are offered by the Trust to employees at an exercise price, which
approximates the fair value on the date of the grant. The employees
b. Where Company is lessor can purchase the shares in a phased manner over a period of five years
based on continued employment, until which, the Trust holds the shares
The Company has given IT equipments under finance lease for a period for the benefit of the employee. The employee will be entitled to receive
of five years. Present value of minimum lease payments receivable under dividends, bonus, etc., that may be declared by the Company from time
this finance lease as at March 31, 2007 are as follows: to time for the entire portion of shares held by the Trust on behalf of the
employees.
As at March 31, 2007
On the acceptance of the offer, the selected employee shall undertake to
Not later than one year 13,422 pay within ten years from the date of acceptance of the offer the cost of
Later than one year but not later the shares incurred by the Trust including repayment of the loan relatable
than five years 23,221 thereto. The repayment of the loan by the Trust to the Company would
Total minimum payments
receivable 36,643
The details of options unvested and options vested and exercisable as on March 31, 2007 are as follows:
The weighted average share price for stock options granted during the year, on the date of grant was Rs. 1,291 and the estimated weighted average fair
value of options granted during the year is Rs. 596.
March 31, 2007 March 31, 2006 Fair value of plan assets at beginning of the year 1,818
Expected return on plan assets 136
Actuarial gains 10
Net income as reported 3,546,739 2,407,986
Contribution by employer 12,859
Add: Compensation expense Benefits paid (10,126)
included in reported income – –
Fair value of plan assets at end of the year 4,697
Less: Compensation expense
determined using fair value
of options (115,596) (70,728) The assumptions used in accounting for the gratuity plan are set out as
Proforma net income 3,431,143 2,337,258 below:
Basic earnings per share
As reported 44.82 31.87 Discount rate 8.00%
Proforma 43.36 30.93 Expected return on plan assets 7.50%
Diluted earnings per share Withdrawal rates
As reported 43.60 31.03 Age (Yrs) Rates
Proforma 42.20 30.13 21-30 25%
31-34 20%
35-44 15%
7. Employee benefit obligation 45-50 1%
51-59 1%
Defined contribution plans
During year ended March 31, 2007, the Company contributed following The estimates of future salary increase, considered in actuarial valuation,
amounts to defined contributions plans: take account of inflation, seniority, promotions and other relevant factors
such as supply and demand in the employment market.
Provident fund 133,753 The Company evaluates these assumptions annually based on its
Superannuation fund 43,676 long-term plans of growth and industry standards. The discount rates are
177,429 based on current market yields on government bonds consistent with the
currency and estimated term of the post employment benefits obligations.
Defined benefit plan – gratuity Plan assets are administered by the LIC and invested in lower risk assets,
The amounts recognized in the balance sheet are as follows: primarily debt securities. The Company’s contribution to the fund for the
year ended March 31, 2008 is expected to be Rs. 20,000. The expected
benefit payments from the fund as of March 31, 2007 are below:
Present value of funded obligations 131,397
Fair value of plan assets (4,697)
Net liability 126,700 Year ending March 31
Amounts in balance sheet
Liability 126,700 2008 23,307
Asset – 2009 24,155
Net liability 126,700 2010 29,167
2011 34,369
The amounts recognized in the profit and loss account for the year ended 2012 40,461
March 31, 2007 are as follows: 2013-2016 162,295
313,754
Current service cost 21,408 The Company has adopted AS 15 (Revised) from April 1, 2006 and this
Interest cost 5,830 being the first year of adoption of AS 15 (Revised) the Company has
Expected return on plan assets (136) not given disclosure for the following for previous four annual financial
Recognized net actuarial loss 31,049 years:
Total included in ‘employee benefit expense’ 58,151
Actual return on plan assets 146 1. the present value of the defined benefit obligation, the fair value of
the plan assets and the surplus or deficit in the plan; and
2. the experience adjustments arising on plan liabilities and plan
assets.
Year ended
March 31, 2007
Particulars Products Services Corporate Total
Other information
Capital expenditure by segment 226,932 153,112 50,925 430,969
Segment assets 8,051,748 8,202,353 14,014,383 30,268,484
Segment liabilities 3,547,580 2,481,813 254,333 6,283,726
Shareholders’ funds – – 23,984,758 23,984,758
Year ended
March 31, 2006
Particulars Products Services Corporate Total
Other information
Capital expenditure by segment 303,208 316,908 85,790 705,906
Segment assets 5,174,648 5,656,021 7,702,108 18,532,777
Segment liabilities 1,436,437 463,504 2,995,219 4,895,160
Shareholders’ funds – – 13,637,617 13,637,617
Geographical segments
The following table shows the distribution of the Company’s sales by geographical market:
Principal shareholder and its affiliates (“Oracle”) Oracle Global (Mauritius) Limited
(from November 18, 2005) Oracle (India) Private Limited
Oracle USA, Inc.
Oracle Corporation (Thailand) Co Limited
Associates Login SA
Other entities where company has significant influence i-flex Employee Stock Purchase Scheme Trust
Revenue
Citigroup – 530,789 – –
Oracle 37,777 – 5,007 348
Subsidiaries
i-flex solutions b.v. 3,404,183 2,219,173 2,139,752 1,364,101
i-flex solutions inc. 4,683,722 4,104,936 3,997,048 3,743,513
i-flex solutions pte ltd 2,479,979 1,681,017 1,559,613 775,756
Equinox Global Services Pvt. Ltd. 22,597 – 26,558 6,786
ISP Internet Mauritius Company – 6,978 – –
SuperSolutions Corporation 72,947 42,863 112,872 43,161
Castek Software Inc. 19,298 – – –
Joint venture
Flexcel International Private Limited 45,085 7,878 46,272 6,119
Interest on loan
Subsidiaries
i-flex America inc. 26,264 19,688 56,332 31,630
ISP Internet Mauritius Company 1,518 1,489 3,336 1,898
Unbilled revenue
Subsidiaries
i-flex solutions b.v. – – 117,291 23,358
i-flex solutions inc. – – 267,767 114,640
i-flex solutions pte ltd – – 199,746 29,060
Equinox Global Services Pvt. Ltd. – – 2,603 –
Castek Software Inc. – – 19,205 –
Loan outstanding
Subsidiaries
i-flex America inc. – – 433,600 446,100
Equinox Global Services Pvt. Ltd. 140,000 – 390,000 250,000
ISP Internet Mauritius Company – – 41,188 42,375
Other advances
Subsidiaries
i-flex Processing Services Limited 2,399 – 2,399 –
Equinox Global Services Pvt. Ltd. 30,000 – – 30,000
Rental deposit
Key managerial personnel 125 – 325 200
Advance rent
Key managerial personnel – – 56 114
Rent
Key managerial personnel 128 166 – –
Remuneration
Key managerial personnel 71,995 77,753 – –
Reimbursement of expenses
Subsidiaries
i-flex solutions b.v. 537,907 313,292 (277,490) (238,266)
i-flex solutions inc. 1,996,997 1,347,628 (2,173,480) (1,570,784)
i-flex solutions pte ltd 839,642 566,778 (219,532) (118,885)
i-flex America inc. 12,999 – 12,999 –
Cost of revenue
SuperSolutions Corporation 39,627 – (39,627) –
Purchase of software
Oracle 230,617 123,351 – –
Other expenses
Oracle 1,411 1,106 – –
Citigroup – 633 – –
Professional fees
Oracle – 846 – –
Joint venture
Flexcel International Private Limited 30,508 6,850 – –
Deferred revenue
Oracle – – (4,245) –
Subsidiaries
i-flex solutions b.v. – – (455,084) (148,397)
i-flex solutions inc. – – (295,093) (241,725)
i-flex solutions pte ltd – – (191,543) (57,793)
Joint venture
Flexcel International Private Limited – – (1,163) (653)
Lease fees
Key managerial personnel 3,462 962 – –
Other transactions
Dividend paid
Citigroup – 161,180 – –
Oracle 200,742 – – –
ESPS Trust 9,670 14,634 – –
Key managerial personnel 8,265 7,914 – –
Capital contribution
i-flex America inc. 5,678,974 – – –
i-flex Processing Services Limited 500 – – –
1. Balances as on March 31, 2007 and 2006 with promoters and affiliates have not been disclosed as they cease to be related party. Previous year
transactions with Citigroup have been disclosed till November 17, 2005.
2. Includes salary, bonus and perquisites.
3. Loan given to subsidiaries represents loan to i-flex America inc. amounting to Rs. 433,360 (interest LIBOR + 50 basis points) as at March 31, 2007
(March 31, 2006 – 446,100), ISP Internet Mauritius Company amounting to Rs. 41,188 (interest LIBOR + 50 basis points) as at March 31, 2007
(March 31, 2006 – 42,375).
a. Aggregate expenses
Following are the aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI to the Act:
b. Managerial remuneration
Salary and incentives 330 330
Contribution to provident and other funds 24 24
Commission to non whole time directors 2,920 7,805
3,274 8,159
In addition to the above, the Managing Director of the Company has also been paid remuneration aggregating Rs. 41,313 (including bonus
of Rs. 15,884 which was provided as on March 31, 2006) for the year ended March 31, 2007 (March 31, 2006 – Rs. 44,881) from
i-flex solutions inc., a wholly owned subsidiary of the Company.
The Company accrues for gratuity benefit and bonus for all employees as a whole. It is not possible to ascertain the provision for individual
director and hence the same has not been disclosed above.
Computation of net profit for calculating commission payable to non-whole time directors in accordance with Section 198 of the Act .
Net income after tax and prior period item 3,546,739 2,407,986
Add
Managerial remuneration 354 354
Commission to non-wholetime Directors 2,920 7,805
Depreciation and amortization as per books of accounts 565,351 387,812
Donation 6,202 9,824
Provision for income taxes 263,743 447,566
4,385,309 3,261,347
Less
Profit on sale of investment – 743
Profit on sale of fixed assets, net – 314
Depreciation and amortization as per Section 350 of the Act (Note 1 below) 565,351 387,812
Net profit on which commission is payable 3,819,958 2,872,478
Note 1: The Company depreciates fixed assets based on estimated useful lives of the assets. The rates of depreciation used by the Company are higher than the
minimum rates prescribed by Schedule XIV of the Act.
c. Payments to auditors
Statutory audits 5,107 4,377
Tax audit 561 561
Special reports 2,133 1,796
Certifications 392 563
Reimbursement of out-of-pocket expenses 750 580
8,943 7,877
As at As at
March 31, 2007 March 31, 2006
b. Allotment of options to GE
Proceeds from issue of options to GE 401,679 40,441
Less: Utilization of funds for operations (40,441) –
Unutilized funds 361,238 40,441
13. During the year, the Company received income tax assessment order for financial year ended March 31, 2004. As per the order, the Company
has been allowed income tax relief in respect of foreign taxes to the extent of non 10A income earned by the Company from respective foreign
jurisdiction. Accordingly, the Company has recorded tax credit of Rs. 86,130 pertaining to periods till March 31, 2006.
Prior year amounts have been reclassified, where necessary to confirm with current years presentation.
As per our report of even date For and on behalf of the Board of Directors
2007 2006
2007 2006
As per our report of even date For and on behalf of the Board of Directors
I. Registration details
Registration number 5 3 6 6 6 State Code 1 1
Accumulated losses
N I L
Product description
S O F T W A R E D E V E L O P M E N T S E R V I C E S
S O F T W A R E P R O J E C T A S S I G N M E N T S
S O F T W A R E P R O D U C T M A N A G E M E N T
The Financial Year of the Subsidiary March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Company ended on
Holding Company i-flex solutions ltd i-flex solutions ltd i-flex solutions pte ltd i-flex solutions ltd i-flex America inc. i-flex America inc. i-flex America inc.
Holding Company’s interest 100% 100% 100% 100% 100% held by 100% held by 76.79% held by
i-flex America inc. i-flex America inc. i-flex America inc.
Shares held by the Holding 5,185 equity shares 250,000 shares of 16,185,170 shares of 1 Equity shares of Nil Nil 528,138,676
Company in the Subsidiary of EUR 100 each, SGD 1 each SGD 1 each USD 0.01 each common shares of
fully paid-up fully paid-up fully paid-up fully paid-up CAD 0.0032583 per
share
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is not dealt with in the accounts of the Holding Company
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is dealt with or provided for in the accounts of the Holding Company
7/27/2007 3:32:34 PM
Statement pursuant to Section 212 of the Companies Act, 1956 (continued)
relating to subsidiary companies
The Financial Year of the Subsidiary March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Company ended on
Holding Company Castek Software Inc. Castek Software Inc. Castek Inc. Castek Inc. i-flex America inc. Mantas Inc. Mantas Inc.
Holding Company’s interest 100% held by 100% held by 100% held by 100% held by 100% held by 100% held by 100% held by
Castek Software Inc. Castek Software Inc. Castek Inc. Castek Inc. i-flex America inc. Mantas Inc. Mantas Inc.
Shares held by the Holding Company in the 100 common shares at 2,000 common shares 2,000 common shares 950 common shares 1 share of USD 0.01 par
Subsidiary CAD 1.00 per share at average price of at average price of at average price of value common stock at
USD 682.19 per share USD 682.19 per share USD 245.37 per share USD 1.00 Nil Nil
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is not dealt with in the accounts of the Holding Company
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is dealt with or provided for in the accounts of the Holding Company
7/27/2007 3:32:34 PM
Statement pursuant to Section 212 of the Companies Act, 1956 (continued)
relating to subsidiary companies
The Financial Year of the Subsidiary March 31, 2007 March 31, 2007 March 13, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Company ended on
Holding Company ISP Internet ISP Internet i-flex solutions ltd
Mantas Inc. Sotas Inc. Sotas Inc. i-flex solutions ltd Mauritius Company Mauritius Company
Holding Company’s interest 100% 100% held by ISP 99.82 % held by ISP 100% held by
100% held by 100% held by 100% held by Internet Mauritius Internet i-flex solutions ltd
Mantas Inc. Sotas Inc. Sotas Inc. Company Mauritius Company
Shares held by the Holding Company in the 25200 Series A ordinary 20,000 common 5,808,660 equity shares 50,000 Equity shares
Subsidiary shares of No Par value stock of of Rs. 10/- each fully of Rs. 10/- each fully
4800 Series B ordinary USD 0.01 each paid-up paid-up
Nil Nil Nil shares of No Par value
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is not dealt with in the accounts of the Holding Company
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is dealt with or provided for in the accounts of the Holding Company
7/27/2007 3:32:35 PM
Statement pursuant to exemption received under Section 212(8) of the Companies Act, 1956
relating to subsidiary companies
i-flex solutions b.v. EUR 57.82 30,009 209,771 2,972,469 2,732,689 – 3,813,345 323,498 (101,474) 222,024 – Amsterdam
i-flex solutions pte ltd USD 43.36 5,920 428,130 2,959,932 2,525,882 – 2,895,389 239,521 (145,787) 93,734 – Singapore
i-flex America inc. USD 43.36 5,572,577 (526,913) 8,869,560 3,823,896 – 7,666,725 (431,469) (2,227) (433,696) – USA
ISP Internet Mauritius Company USD 43.36 139,372 (383,206) 353,624 597,458 – 428,344 (166,568) (1,291) (167,859) – Mauritius
i-flex Processing Services Limited INR 1.00 500 (2,850) 632 2,982 – – (2,292) (11) (2,303) – India
Mumbai, India
May 1, 2007
Since the Company presents audited consolidated financial statements under Indian GAAP and US GAAP in its Annual Report,
the Company had applied to the Central Government of India for an exemption from attaching the Directors’ Report, Balance
Sheet and Profit and Loss Account of its subsidiaries to the Annual Report. The Central Government has vide its letter no.
47/229/2007-CL-III dated July 6, 2007 granted the exemption for the year ended March 31, 2007. Accordingly, the financial
statements of the subsidiaries of the Company are not attached to the Annual Report of the Company.
7/27/2007 3:32:35 PM
Annual Report 2006-2007_B & W.indd 74 7/27/2007 3:32:35 PM
Creating Value
To the Board of Directors of of Interests in Joint Ventures issued by the Institute of Chartered
i-flex Solutions Limited: Accountants of India.
1. We have audited the attached consolidated balance sheet of 4. In our opinion and to the best of our information and according to
i-flex Solutions Limited, its subsidiaries, associate company and joint the explanations given to us, the consolidated financial statements
venture (together referred to as ‘the Group’ as described in Note 1 of give a true and fair view in conformity with the accounting principles
schedule 15 to the financial statements) as at March 31, 2007 and generally accepted in India:
also the consolidated profit and loss account and the consolidated
cash flow statement for the year ended on that date annexed (a) in the case of the consolidated balance sheet, of the state of
thereto. These financial statements are the responsibility of the affairs of the Group as at March 31, 2007;
Group’s management and have been prepared by the management
(b) in the case of the consolidated profit and loss account, of the
on the basis of separate financial statements and other financial
profit of the Group for the year then ended; and
information regarding components. Our responsibility is to express
an opinion on these financial statements based on our audit. (c) in the case of the consolidated cash flow statement, of the cash
flows of the Group for the year then ended.
2. We conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. An For S. R. Batliboi & Associates
audit includes, examining on a test basis, evidence supporting the Chartered Accountants
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audit provides
a reasonable basis for our opinion. per Sunil Bhumralkar
Partner
3. We report that the consolidated financial statements have been Membership No.: 35141
prepared by the Group’s management in accordance with the
requirements of Accounting Standard (AS) 21, Consolidated Financial Mumbai, India
Statements, AS 23, Accounting for Investments in Associates in July 2, 2007
Consolidated Financial Statements and AS 27, Financial Reporting
Sources of funds
Shareholders’ funds
Share capital 1 416,443 381,442
Share application money pending allotment 401,679 10,309
Reserves and surplus 2 23,202,085 13,415,421
Deferred tax liability 3 1,745 1,649
24,021,952 13,808,821
Application of funds
Fixed Assets 4
Cost 9,626,043 3,966,811
Less: Accumulated depreciation, amortization and impairment 2,030,937 1,389,133
Net book value 7,595,106 2,577,678
Capital work-in-progress and advances 1,346,108 581,356
8,941,214 3,159,034
24,021,952 13,808,821
Notes to accounts 15
The schedules referred to above and notes to accounts form an integral part of the consolidated balance sheet.
As per our report of even date For and on behalf of the Board of Directors
(All amounts in thousands of Indian Rupees, except share and per share data)
Operating expenses
Selling and marketing expenses 10 (2,656,196) (2,008,958)
General and administrative expenses 11 (2,462,635) (1,757,806)
Depreciation and amortization (653,023) (460,368)
Provision for impairment of goodwill – (57,958)
Income from operations 3,771,478 2,743,814
Non-operating income
Interest income 12 376,907 294,552
Other expenses, net 13 (17,253) (9,907)
Income before provision for taxes and prior period items 4,131,132 3,028,459
Notes to accounts 15
The schedules referred to above and notes to accounts form an integral part of the consolidated profit and loss account.
As per our report of even date For and on behalf of the Board of Directors
(All amounts in thousands of Indian Rupees, except share and per share data)
As at As at
March 31, 2007 March 31, 2006
Authorized:
100,000,000 (March 31, 2006 – 100,000,000) equity shares of Rs. 5/- each 500,000 500,000
a. Of the above, 67,481,698 (March 31, 2006 – 36,422,788) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).
The Company became subsidiary of Oracle on April 14, 2006.
b. Of the above, 62,121,800 (March 31, 2006 – 62,121,800) equity shares of Rs. 5/- each had been issued as fully paid up bonus shares by
capitalizing the securities premium account.
c. Refer Note 6(b) of Schedule 15 for the options granted for unissued equity shares.
Securities premium
Balance, beginning of the year 2,543,366 2,146,736
Received during the year 6,468,821 396,630
Balance, end of the year 9,012,187 2,543,366
General reserve
Balance, beginning of year 10,238,569 8,238,569
Transferred from profit and loss account – 2,000,000
Adjustment for employee benefits provision [Refer note 2 (h) of Schedule 15] (93,378) –
Balance, end of the year 10,145,191 10,238,569
Particulars Gross block Depreciation, amortization and impairment Net book value
As at Additions Sale/ Translation As at As at For the Sale/ Translation Impairment As at As at As at
April 1, 2006 deletions loss March 31, 2007 April 1, 2006 year deletions loss March 31, 2007 March 31, 2007 March 31, 2006
Intangible assets:
Goodwill on consolidation
(Refer note 8 of Schedule 15) 819,203 5,448,337 – 304,736 5,962,804 57,958 – – – – 57,958 5,904,846 761,245
Goodwill on acquisition 197,473 – – – 197,473 89,261 56,892 – – – 146,153 51,320 108,212
Customer contracts 22,290 – – – 22,290 22,167 123 – – – 22,290 – 123
Product IPR 138,619 – – – 138,619 35,191 27,724 – – – 62,915 75,704 103,428
PeopleSoft ERP 53,767 – – – 53,767 3,584 10,753 – – – 14,337 39,430 50,183
Total 3,966,811 5,985,119 18,740 307,147 9,626,043 1,389,133 653,023 10,838 381 – 2,030,937 7,595,106 2,577,678
As at March 31, 2006 3,095,872 886,251 15,312 – 3,966,811 880,253 460,368 9,446 – 57,958 1,389,133
Note: Includes 10 (March 31, 2006 – 10) shares of Rs. 50/- each in Takshila Building No.9, Co-op Housing Society Ltd., Mumbai.
7/27/2007 3:32:36 PM
As at As at
March 31, 2007 March 31, 2006
Schedule 5: Investments
i. Trade (unquoted)
EBZ Online Private Limited
242,240 (March 31, 2006 – 242,240) equity shares of Rs. 10/- each, fully paid-up 45,000 45,000
Less: Provision for diminution in value of investment (45,000) (45,000)
– –
Login SA
33,000 (March 31, 2006 – 33,000) equity shares of EUR 2/- each, fully paid up 9,101 5,773
Add: Share of profit of associate company 7,622 3,328
16,723 9,101
ii. Non trade (unquoted)
National Savings Certificate – VIII issue 131 131
Note: As at March 31, 2006, 9% Dhanalakshmi Bank Bond Series VI was not listed and was classified as unquoted investment.
a. Current liabilities
Accrued expenses 1,872,843 1,540,006
Deferred revenues 2,079,018 1,183,257
Accounts payable 315,596 147,070
Advances from customers 19,832 134,772
Advance against warrants – 40,441
Investor Education and Protection Fund to be credited by unclaimed dividends* 2,065 2,027
Unearned finance income 16,234 –
Other current liabilities 604,930 261,211
4,910,518 3,308,784
*There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.
b. Provisions
Proposed dividend – 381,442
Tax on Proposed dividend – 53,497
Provision for gratuity [Refer Note 2 (h) of Schedule 15] 129,487 81,346
Provision for compensated absence [Refer Note 2 (h) of Schedule 15] 291,665 94,982
Provision for taxation, net of advance tax – 68,647
421,152 679,914
Schedule 8: Revenue
Interest on
Bank deposits 367,409 289,992
[includes tax deducted at source of Rs. 74,589 (March 31, 2006 – Rs. 70,739)]
Bonds 3,639 4,330
[includes tax deducted at source of Rs. 212 (March 31, 2006 – Rs. 572)]
Loans to employees 585 230
Lease assets 5,274 –
376,907 294,552
Schedule 14: Reconciliation of basic and diluted shares used in computing earnings
per share
No of shares
Weighted average shares outstanding for basic earnings per share 79,125,096 75,562,947
Add: Effect of dilutive stock options 2,230,666 2,046,096
Weighted average shares outstanding for diluted earnings per share 81,355,762 77,609,043
i-flex is a subsidiary of Oracle with Oracle having 81.02% ownership interest as at March 31, 2007.
Direct holding
i-flex solutions b.v. The Netherlands 100% Subsidiary
i-flex solutions pte ltd Singapore 100% Subsidiary
i-flex America inc. United States of America 100% Subsidiary
ISP Internet Mauritius Company Republic of Mauritius 100% Subsidiary
i-flex Processing Services Limited India 100% Subsidiary
Flexcel International Private Limited India 40% Joint Venture
Login SA France 33% Associate
Subsidiaries of i-flex America inc.
SuperSolutions Corporation United States of America 100% Subsidiary
i-flex solutions inc. United States of America 100% Subsidiary
Castek Software Inc. Canada 76.77% Subsidiary
Mantas Inc. United States of America 100% Subsidiary
Subsidiaries of Mantas Inc.
Mantas Ltd. United Kingdom 100% Subsidiary
Sotas Inc. United States of America 100% Subsidiary
Mantas Singapore Pte Ltd Singapore 100% Subsidiary
Mantas (India) Private Limited India 100% Subsidiary
Sotas Ltd. United Kingdom 100% Subsidiary
Subsidiaries of Castek Software Inc.
Castek Hungarian Holdings Inc. Canada 100% Subsidiary
Castek Inc. United States of America 100% Subsidiary
Castek Software Factory Ltd. United States of America 100% Subsidiary
Castek RBG Inc. United States of America 100% Subsidiary
Subsidiaries of ISP Internet Mauritius Company
Equinox Corporation United States of America 100% Subsidiary
Equinox Global Services Pvt. Ltd. India 99.83% Subsidiary
Subsidiaries of i-flex solutions pte ltd
i-flex Consulting (Asia Pacific) pte ltd Singapore 100% Subsidiary
2. Summary of significant accounting policies and AS 27, ‘Financial Reporting of Interest in Joint Venture’, issued
by the Institute of Chartered Accountants of India (ICAI). The financial
a. Basis of presentation and consolidation
statements of the Company and its subsidiaries are consolidated on
The consolidated financial statements includes the accounts of i-flex, its a line to line basis by adding together like items of assets, liabilities,
subsidiaries, associate company and joint venture company (hereinafter income and expenses. Any excess of the cost to the parent company
collectively referred as the “Group”) and are prepared in accordance with of its investment in a subsidiary and the parent company’s portion of
accounting principles generally accepted in India under the historical cost equity of subsidiary at the date, at which investment in the subsidiary is
convention on the accrual basis. The financial statements are presented made, is described as goodwill and recognized separately as an asset
in the general format specified in Schedule VI to the Companies Act 1956 in the consolidated financial statements. In respect of the joint venture
(‘the Act’). However, as these financial statements are not statutory company, the Group applies the proportionate consolidation method. All
financial statements, full compliance with the Act are not required significant inter-company transactions and balances between the entities
and hence these financial statements do not reflect all the disclosure included in the consolidated financial statements have been eliminated.
requirements of the Act. Investment in associate company is accounted under equity method in
consolidated financial statements.
The consolidated financial statements are prepared in accordance
with the principles and procedures required for the preparation and The accounting policies have been consistently applied by the Group and
presentation of consolidated financial statements as laid down under are consistent with those used in the previous years except for early
AS 21, ‘Consolidated Financials Statements’, AS 23, ‘Accounting adoption of Accounting Standard (AS) 15 (Revised), ‘Employee benefits’
for Investments in Associates in Consolidated Financial Statements’ issued by the ICAI. The significant accounting policies adopted by the
– Product maintenance revenue is recognized, over the period of the Effective April 1, 2006 the Group has early adopted Accounting Standard
maintenance contract. (AS) 15 (Revised), ‘Employee benefits’ issued by the Institute of Chartered
Accountants of India. Accordingly, the Group has recorded charge for
IT solutions and consulting services: compensated absence of Rs. 138,345 for year ended March 31, 2007.
Further in accordance with the transitional provision of AS 15 (Revised),
Revenue from IT solutions and consulting services are recognized as the compensated absence pertaining to years prior to April 1, 2006
services are provided when arrangements are on a time and material amounting to Rs. 93,378 has been adjusted against general reserve.
basis. Revenue from fixed price contracts are recognized using the
proportionate completion method to the extent of achievement of customer
certified milestones. Proportionate completion is measured based upon i. Operating leases
the efforts incurred to date in relation to the total estimated efforts to Leases of assets under which all the risks and rewards of ownership are
complete the contract. If the proportionate completion efforts are higher effectively retained by the lessor are classified as operating leases. Lease
than the related contractual milestone requiring customer acceptance, payments under operating leases are recognized as an expense on a
revenue is recognized only to the extent customer acceptance has been straight-line basis over the lease term.
received.
The Group monitors estimates of total contract revenue and cost on a j. Income-tax
routine basis throughout the delivery period. The cumulative impact of Tax expense comprises of current, deferred and fringe benefit tax.
any change in estimates of the contract revenue or costs is reflected Current income tax and fringe benefit tax is measured at the amount
in the period in which the changes become known. In the event that expected to be paid to the tax authorities in accordance with the Indian
a loss is anticipated on a particular contract, provision is made for the Income Tax Act. Deferred income taxes are recognized for the future tax
estimated loss. consequences attributable to timing differences between the financial
statement determination of income and their recognition for tax purposes.
Revenue in excess of billings is classified as unbilled revenue while billing
The effect on deferred tax assets and liabilities of a change in tax rates
in excess of earnings is classified as deferred revenue. Contractually
is recognized in income using the tax rates and tax laws that have been
recoverable expenses are deferred while other costs are expensed of in
enacted or substantively enacted by the balance sheet date. Deferred tax
the year in which it is incurred.
assets are recognized and carried forward only to the extent that there is a
Reimbursable expenses for projects are invoiced separately to customers reasonable certainty that sufficient future taxable income will be available
and although reflected as sundry debtors to the extent outstanding as at against which such deferred tax assets can be realized. In situations
period-end, are not included as revenue or expense. where there are carry forward losses, deferred tax asset is recognized
only if there is virtual certainty supported by convincing evidence that
future taxable income will be available against which deferred tax asset
g. Research and development expenses for software products can be realized. Unrecognized deferred tax assets of earlier years are
Research and development costs are expensed as incurred. Software re-assessed and recognized to the extent that it has become reasonably
product development costs are expensed as incurred until technological certain or virtually certain that future taxable income will be available
feasibility is established. Software product development costs incurred against which deferred tax assets can be realized. Deferred tax asset is
subsequent to the achievement of technological feasibility are not recognized only on those timing differences, which reverses in post tax
material and are expensed as incurred. free period, as company enjoys exemption under Section 10A of Income
Tax Act, 1961.
h. Employee benefits Tax expense relating to overseas operations is determined in accordance
The Group’s employee benefits primarily cover provident fund, with tax laws applicable in countries where such operations are domiciled.
superannuation, gratuity and compensated absences. Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance taxes paid and income tax
Provident fund and superannuation fund are defined contribution schemes provisions arising in the same tax jurisdiction and enterprise.
and the Group has no further obligation beyond the contributions made to
the fund. Contributions are charged to profit and loss account in the year k. Earnings per share
in which they accrue.
The earnings considered in ascertaining the Group’s earnings per
Gratuity liability is defined benefit obligation and recorded based on share comprise the net profit after tax. The number of shares used in
actuarial valuation made at the end of the year. The gratuity liability computing basic earnings per share is the weighted average number
and net periodic gratuity cost is actuarially determined after considering of shares outstanding during the year. The number of shares used in
discount rates, expected long term return on plan assets and increases computing diluted earnings per share comprises the weighted average
in compensation levels. All actuarial gain/loss are immediately recorded number of shares considered for deriving basic earnings per share, and
to the profit and loss account and are not deferred. The Company makes also the weighted average number of shares, if any which would have
contributions to a fund administered and managed by the Life Insurance been issued on the conversion of all dilutive potential equity shares. The
Corporation of India (LIC) to fund the gratuity liability. Under this scheme, number of shares and potentially dilutive equity shares are adjusted for
the obligation to pay gratuity remains with the Company, although LIC the bonus shares and sub-division of shares.
administers the scheme.
A provision is recognized when an enterprise has a present obligation as Not later than one year 337,542 275,051
a result of past event and it is probable that an outflow of resources will Later than one year but not
be required to settle the obligation, in respect of which a reliable estimate later than five years 633,324 537,641
can be made. Provisions are not discounted to its present value and Later than five years 17,631 82,603
are determined based on management estimate required to settle the 988,497 895,295
obligation at the balance sheet date. These are reviewed at each balance
sheet date and adjusted to reflect the current management estimates. b. Where Company is lessor
The Company has given IT equipments under finance lease for a period
3. Commitments and contingent liabilities
of five years. Present value of minimum lease payments receivable under
a. Capital commitments this finance lease as at March 31, 2007 are as follows:
Contracts remaining to be executed on capital account and not provided
for (net of advances) aggregates to Rs. 1,955,320 (includes capital As at
March 31, 2007
commitment through issuance of letter of intents of Rs. 998,819) as at
March 31, 2007 (March 31, 2006 – Rs. 801,100). Not later than one year 13,422
Later than one year but not later than five years 23,221
b. Contingent Liabilities Total minimum payments receivable 36,643
Financial bank guarantees given to banks aggregates to Rs. 39,384 as at
March 31, 2007 (March 31, 2006 – Rs. 11,111) 5. Derivatives
The Group enters into forward foreign exchange contracts and option
4. Leases contracts where the counter party is a bank. The Group purchases
forward foreign exchange contracts and option contracts to mitigate
a. Where Company is lessee
the risks of change in foreign exchange rate on receivable and payables
Finance lease denominated in certain foreign currencies. The Group considers the
risk of non-performance by the counter party as immaterial. As at
The Group takes vehicles, furniture and fixture and computer equipments March 31, 2007 and 2006 the Group has following outstanding derivative
under finance lease of upto five years. Future minimum lease payments instruments:
under finance lease as at March 31, 2007 and 2006 are as follows:
March 31, 2007 March 31, 2006
As at
March 31, 2007 Forward contracts – Sell
Principal Interest Total in USD 123,000 115,000
Not later than one year 10,842 1,687 12,529 in EUR 3,500 6,250
Later than one year but not later Option contracts – Sell
than five years 15,537 1,601 17,138 in USD 16,500 18,000
Total minimum payments 26,379 3,288 29,667
As at
March 31, 2006
Not later than one year 10,371 2,064 12,435
Later than one year but not later
than five years 19,653 1,932 21,585
Total minimum payments 30,024 3,996 34,020
On the acceptance of the offer, the selected employee shall undertake to b. Employee Stock Option Plan (‘ESOP’)
pay within ten years from the date of acceptance of the offer the cost of
the shares incurred by the Trust including repayment of the loan relatable Pursuant to ESOP scheme approved by the shareholders of the Company
thereto. The repayment of the loan by the Trust to the Company would held on August 14, 2001, the Board of Directors, on March 4, 2002
be dependent on employee repaying the amount to the Trust. In case approved the Employees Stock Option Scheme (‘the Scheme’) for issue
the employee resigns from employment, the rights relating to shares, of 4,753,600 options to the employees and directors of the Company
which are eligible for exercise, may be purchased by payment of the and its subsidiaries. According to the Scheme, the Company has granted
exercise price whereas, the balance shares shall be forfeited in favour of 4,598,920 options prior to the IPO and 559,000 options at various dates
the Trust. The Trustees have the right of recourse against the employee after IPO. As per the scheme, each of 20% of the total options granted
for any amounts that may remain unpaid on the shares accepted by the will vest to the eligible employees and directors on completion of 12, 24,
employee. The shares that an employee is eligible to exercise during the 36, 48 and 60 months and is subject to continued employment of the
initial five-year period merely go to determine the amount and scheduling employee or director with the company or its subsidiaries. Options have
exercise period of 10 years.
The details of options unvested and options vested and exercisable as on March 31, 2007 are as follows:
The weighted average share price for stock options granted during the 7. Employee benefits
year, on the date of grant was Rs. 1,291 and the estimated weighted
average fair value of options granted during the year is Rs. 596. Defined contribution plans
The fair value of options granted during the period under the ESOP was During the year ended March 31, 2007, the Group contributed following
estimated on the date of the grant using the Black-Scholes model with amounts to defined contributions plans:
the following assumptions:
Provident fund 133,753
Dividend yield 0.39% Superannuation fund 43,676
Expected volatility 37% 177,429
Risk-free rate of interest 6%
Expected life 6.5 years Defined benefit plan-gratuity
Had compensation cost been determined in a manner consistent with the The amounts recognized in the balance sheet are as follows:
fair value approach, the Group’s net income and earnings per share as
reported would have changed to the amounts indicated below: Present value of funded obligations 131,397
Fair value of plan assets (4,697)
March 31, 2007 March 31, 2006 Present value of unfunded obligations 2,787
Unrecognized past service cost –
Net income as reported 3,722,796 2,376,525 Net liability 129,487
Add: Compensation expense
included in reported income – – Amounts in balance sheet:
Less: Compensation expense Liability 129,487
determined using fair value Asset –
of options (115,596) (70,728) Net liability 129,487
Proforma net income 3,607,200 2,305,797
Basic earnings per share The amounts recognized in the profit and loss account are as follows:
As reported 47.05 31.45
Proforma 45.59 30.51 Current service cost 22,147
Diluted earnings per share Interest cost 5,928
As reported 45.76 30.62 Expected return on plan assets (136)
Proforma 44.37 29.72 Recognized net actuarial loss 31,644
Total, included in ‘employee benefit expense’ 59,583
Actual return on plan assets 146
Year ended
March 31, 2007
Particulars Products Services KPO- Joint Corporate Eliminations Total
Services ventures
Revenue
External revenue 11,193,090 8,919,800 444,775 51,717 – – 20,609,382
Inter-segment revenue 17,953 – – – – (17,953) –
Total revenue 11,211,043 8,919,800 444,775 51,717 – (17,953) 20,609,382
Cost of revenue (4,350,515) (6,391,068) (298,432) (26,035) – – (11,066,050)
Gross profit 6,860,528 2,528,732 146,343 25,682 – (17,953) 9,543,332
Selling and marketing expenses (2,172,446) (371,270) (111,339) (1,141) – – (2,656,196)
General and administrative expenses (866,690) (424,709) (126,313) 631 (1,045,554) – (2,462,635)
Depreciation and amortization (307,078) (241,485) (24,624) (5,685) (74,151) – (653,023)
Inter segment expense – – – (17,953) – 17,953 –
Income (loss) from operations 3,514,314 1,491,268 (115,933) 1,534 (1,119,705) – 3,771,478
Other information
Capital expenditure by segment 5,686,716 191,662 13,100 7,857 85,784 – 5,985,119
Segment assets 12,999,204 5,732,294 336,175 36,378 10,249,571 – 29,353,622
Segment liabilities 3,118,195 930,957 115,417 8,129 1,160,717 – 5,333,415
Shareholders‘ funds – – – – 24,020,207 – 24,020,207
Other information
Capital expenditure by segment 304,199 316,215 78,695 5,963 181,179 – 886,251
Segment assets 4,634,950 4,036,178 385,410 14,236 8,726,745 – 17,797,519
Segment liabilities 1,580,865 498,704 76,303 7,723 1,826,752 – 3,990,347
Shareholders’ funds – – – – 13,807,172 – 13,807,172
Geographical segments
The following table shows the distribution of the group’s consolidated sales by geographical market:
Oracle
Revenue 252,984 26,313 223,032 28,066
Purchase of Software 238,561 123,351 – –
Professional fees 1,197 846 – –
Other expenses 6,095 1,106 (2,917) (7,394)
Reimbursement of Expenses – 722 – –
Referral fees – 7,353 – –
Deferred revenue – – (160,688) (5,998)
Dividend paid 200,742 – – –
Citigroup (Note 1)
Revenue – 2,649,667 – –
Reimbursement of Expenses – 27,116 – –
Bank charges – 2,415 – –
Dividend paid – 161,180 – –
Interest on bank deposits – 6,860 – –
12. During the year, the Company received income tax assessment order for financial year ended March 31, 2004. As per the order, the Company
has been allowed income tax relief in respect of foreign taxes to the extent of non 10A income earned by the Company from respective foreign
jurisdiction. Accordingly, the Company has recorded tax credit of Rs. 86,130 pertaining to periods till March 31, 2006.
As per our report of even date For and on behalf of the Board of Directors
2007 2006
Adjustments to reconcile income before provision for taxes to cash provided by operating
activities:
Depreciation and amortization 653,023 460,368
Deferred compensation expense 33,451 –
Loss (Profit) on sale of fixed assets, net 4,554 (314)
Reversal of provision for diminution in value of investments, net – (5,528)
Loss on sale of investments – 4,785
Advances written off 8,351 22,800
Marked to market of current investment 810 –
Interest income (376,907) (294,552)
Effect of exchange difference on cash and bank balances 10,102 (34,347)
Finance charge on leased assets 5,284 2,665
Provision for impairment of goodwill – 57,958
Provision for doubtful debts, net 87,611 52,535
4,557,411 3,294,829
Changes in assets and liabilities, net of effect of acquisition
Increase in sundry debtors and unbilled revenue (2,645,095) (1,691,184)
Increase in loans and advances (1,690,241) (705,842)
Increase in current liabilities and provisions 1,190,875 1,133,689
Cash from operating activities 1,412,950 2,031,492
Payment of domestic and foreign taxes (1,083,505) (952,397)
Net cash provided by operating activities 329,445 1,079,095
2007 2006
Less:
Bank deposits having maturity of more than 90 days (3,824,624) (4,780,235)
Margin money deposit (19,292) (1,883)
Unclaimed dividend accounts (2,065) (2,027)
Cash and cash equivalents at end of the year 3,351,773 2,085,290
As per our report of even date For and on behalf of the Board of Directors
The following discussion is based on our audited consolidated financial Our solutions portfolio includes packaged applications, custom application
statements, which have been prepared in accordance with US GAAP. software development, deployment, maintenance and support services,
business and IT consulting services, technology deployment and
The financial statements are consolidated for i-flex (“the Group”) that management services and the knowledge process outsourcing in the
includes i-flex solutions ltd and its subsidiaries, i.e., i-flex solutions pte ltd., financial services domain.
i-flex America inc., i-flex solutions inc., SuperSolutions Corporation,
Castek Software Inc., Mantas Inc., i-flex Consulting (Asia Pacific) pte ltd., As of March 31, 2007, the Group cumulatively serviced 753 customers
i-flex Processing Services Limited and ISP Internet Mauritius Company. in 128 countries through its portfolio of products and services.
Investments in joint venture company, Flexcel International Private Limited,
and in associate company, Login SA, have been accounted for using We are organized by region and business segment. We have two
the equity method, since we exert significant influence over their major business segments - the Products Business (comprising product
operations. licensing, customization, implementation and support) and the Services
Business (providing customized software and consulting services). We
You should read the following discussion of our financial conditions and have also recently launched Knowledge Process Outsourcing Services
results of operations together with the detailed consolidated US GAAP (value-added knowledge outsourcing). These segments are described in
financial statements and the appended notes to those statements. Our greater detail below:
fiscal year ends on March 31 of each year.
Products
Information technology in the financial services industry The i-flex portfolio includes FLEXCUBE®, a complete banking product
The financial services industry is undergoing transformation, both in how suite for retail, consumer, corporate, investment and internet banking,
it addresses its customers, and in how it runs its operations. The entry of and asset management and investor servicing. Since its launch in 1997,
non-traditional players, global mergers and acquisitions, ever increasing more than 315 financial institutions in over 105 countries have chosen
demands from customers to deliver a ubiquitous and next generation FLEXCUBE. The product suite has been ranked the world’s No. 1 selling
customer experience, a demanding regulatory environment, and the core banking solution for five consecutive years--2002, 2003, 2004
emergence of new customer interaction channels have contributed to 2005 and 2006--by the UK-based International Banking Systems (IBS).
this shift.
The product suite’s portfolio was further enriched last year by adding
Governance, risk and compliance has emerged as a strategic priority products targeted at Islamic Banking. With the new FLEXCUBE SWIFTNet
for financial institutions. The post 9/11 environment has seen financial Services Integrator suite, banks are able to leverage the SWIFTNet
institutions grappling with the challenges of increasing regulatory (SWIFT’s IP-based messaging solution) environment for increased
complexity and also an emerging convergence of the areas of governance business value. Increased delivery capacity, and improved functionality
driven by regulations such as Sarbanes-Oxley, risk management through our association with Oracle made this the best ever year for
with regulations in Basel II, and compliance driven by regulations as FLEXCUBE.
anti-money laundering, the Patriot Act, data privacy, etc.
The ReveleusTM suite of analytical applications for the financial services
In the core transaction processing area, increasing number of financial industry is focused in the areas of risk management, customer insight,
institutions are getting more and more receptive to the value proposition and enterprise-wide financial performance. Reveleus’ Risk Analytics
and benefits of core banking transformation, and are taking concrete solves the most complex global challenges facing the financial industry
steps in that direction. today, including multi-jurisdictional Basel II compliance and operational
risk management. Reveleus was ‘Highly Commended’ for its Compliance
Information Technology (IT) plays a major role in such a scenario – acting as Initiative Innovation in The Banker Technology Awards for 2006.
an enabler of a new customer-centric outlook, and a means to improving
operational efficiency, while driving compliance to new regulatory norms, Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior
reducing costs and achieving competitive differentiation. Detection PlatformTM is the industry’s most comprehensive solution
for detecting risk, enhancing customer relationships, and addressing
In conjunction with the Oracle, i-flex has a very clearly articulated value regulatory requirements in the anti-money laundering, trading and broker
proposition and strategy, which is centered around the business priorities compliance areas. Mantas, along with Reveleus, offers a single, unified
and challenges of financial institutions in the market today. Our approach platform for governance, risk and compliance. Waters Magazine ranked
is centered on addressing the 4Cs that are affecting financial institutions Mantas for Best Anti-Money Laundering Solution for 2004, 2005 and
today: Competitive differentiation, Cost reduction, Customer intimacy and 2007 and Best Compliance Solution for 2003.
Compliance and risk management. i-flex has organized the entire range
of offerings and value propositions to align with these priorities. DaybreakTM is a comprehensive consumer lending system that automates
all aspects of financing from origination, to servicing and collections for
installment loans; consumer leases, revolving products and home equity
Overview lines of credit. It empowers financial services organizations to improve
i-flex® solutions is in the business of providing comprehensive IT productivity, enhance customer service and manage risks.
solutions to the financial services industry worldwide. Playing the role of
Together with Castek® Software Inc., a majority-owned subsidiary, i-flex
a specialized IT partner to financial services institutions worldwide, our
offers strategic business software and services for the global Property
approach is balanced with a wide range of products, custom solutions
and Casualty insurance market. Castek provides insurance carriers
and consulting services.
with a suite of core business processing systems for insurance product
i-flex Processing Services is a 100% owned subsidiary of i-flex solutions, As of March 31, 2007, our products included the FLEXCUBE suite,
with consultants experienced in various functions in the asset Reveleus, Daybreak Lending Suite and Mantas Behavior Detection
management space, financial modeling and valuation KPO. The services Platform. Our products revenue represented 54% and 51% of our
provided encompass IT software, consulting, KPO and infrastructure. total revenues for fiscal years ended 2007 and 2006, respectively. Our
Equinox Corporation, a wholly owned subsidiary of i-flex, excels in products revenue were Rs. 10,966.2 million during the fiscal year ended
providing cost-effective and high-quality knowledge process outsourcing March 31, 2007, an increase of 45% from Rs. 7,570.9 million during the
services (KPO) to the financial services industry. Equinox was selected fiscal year ended March 31, 2006. In the Fiscal 2007, the license fees
in the Leaders Category for the ‘2007 Global Outsourcing 100’ by The recognition has been lower based on milestones and project completion
International Association of Outsourcing Professionals (IAOP). The Global as compared to Fiscal 2006 from 35% to 25%. Further, the amortization
Outsourcing 100 defines the standard for excellence in outsourcing cost (Rs. 185 million) because of the acquisitions in Fiscal 2007 have
service delivery. It was also recognized among the ‘Top 50 Global contributed to registered losses, this has contributed to the reduction in
Services revenue 444.8 234.7 The percentage of total revenues during fiscal years 2007 and 2006
Cost of services revenue (298.4) (153.8) that we derived from our largest customer, largest five customers and
Sales and marketing expenses (111.3) (67.3) largest ten customers is provided in the accompanying table. In the
General and administrative table, various affiliates of Citigroup are classified as separate customers,
expenses (126.3) (159.9) and the last row sets forth the percentage of total revenues we earned
Depreciation and amortization (31.0) (38.1) from the various affiliates of Citigroup with respect to our products and
Income from operations (122.3) (184.4)
services business individually and with respect to our business taken as
Operating margin* (28%) (79%)
a whole.
*Operating margin is defined as income from operations from the
Knowledge Process Outsourcing (KPO) services business (excluding Products Services Total
corporate expenses) as a percentage of total services revenue Revenue Revenue
2007 2006 2007 2006 2007 2006
Knowledge Process Outsourcing (KPO) services revenue Top customer 5% 6% 5% 6% 3% 3%
Our KPO services revenue represented 2.2% and 1.6% of our total Top 5 customers 20% 22% 18% 20% 12% 13%
revenues for the fiscal year ended March 31, 2007 and 2006. Our Top 10 customers 33% 33% 30% 33% 22% 22%
KPO services revenue were Rs. 444.8 million in the fiscal year ended Citigroup and its affiliates 16% 18% 44% 55% 29% 36%
March 31, 2007, an increase of 90% from Rs. 234.7 million in the
fiscal year ended March 31, 2006. This business line is currently in Trade receivables
investment phase, and in spite of these investments, due to aggressive
cost management, we were able to reduce the losses in the business Trade receivables as of fiscal March 31, 2007 and 2006 were Rs. 8,644.4
from 79% to 28%. and Rs. 5,655.4 million respectively. Our days sales outstanding (which
Our cost of services revenue in the fiscal year ended March 31, 2007
Products revenue was Rs. 6,485.9 million, an increase of 29% over our cost of services
Our products revenue in the fiscal year ended March 31, 2007 were revenue of Rs. 5,014.1 million in the fiscal year ended March 31, 2006.
Rs. 10,966.2 million, an increase of 45% over our products revenue The cost of services revenue as a percentage of services revenue was
of Rs. 7,570.9 million in the fiscal year ended March 31, 2006 on the 72% in the fiscal year ended March 31, 2007, compared to 71% in the
strength of strong and large customer wins. The revenues from license fiscal year ended March 31, 2006.
fees comprised 25% of the revenues, implementation fees comprised
58% and Annual Maintenance Contracts comprised 17% of the revenues Sales and marketing expenses
for the fiscal 2006.
Our sales and marketing expenses in the fiscal year ended March 31, 2007
were Rs. 2,701 million, an increase of 31% over our sales and marketing
Services revenue expenses of Rs. 2,066.9 million in the fiscal year ended March 31, 2006.
Our services revenue in the fiscal year ended March 31, 2007 were Our sales and marketing expenses as a percentage of total revenues
Rs. 8,970.1 million, an increase of 28% over our services revenue of was at 13% for the fiscal year ended March 31, 2007 compared to
Rs. 7,029.7 million in the fiscal year ended March 31, 2006. Revenues 14% for the fiscal year ended March 31, 2006. The decrease in sales
from time and material contracts comprised 89% of the revenues and and marketing expenses was principally due to operational synergies in
fixed price contracts comprised 11% for the fiscal 2007. international marketing efforts and reduction in referral fees this year.
Our sales and marketing expenses for our products business in the fiscal
Knowledge Process Outsourcing (KPO) revenue year ended March 31, 2007 were Rs. 2,210.3 million, an increase of
Our revenues from KPO Services in the fiscal year ended March 31, 2007 32% over our sales and marketing expenses for our products business
were Rs. 444.8 million, an increase of 90% over our revenues from KPO of Rs. 1,672 million in the fiscal year ended March 31, 2006. Sales
Services of Rs. 234.7 million in the fiscal year ended March 31, 2006. and marketing expenses for our products business as a percentage of
products revenue was 20% in the fiscal year ended March 31, 2007,
compared to 22% in the fiscal year ended March 31, 2006. The decrease
Interest and other income in sales and marketing expenses was largely due to reduction in referral
Our interest and other income in the fiscal year ended March 31, 2007 fees this year.
was Rs. 348.6 million, an increase of 14% over our interest and other
Our sales and marketing expenses for our services business in the fiscal
income of Rs. 305.7 million in the fiscal year ended March 31, 2006.
year ended March 31, 2007 were Rs. 379.3 million, an increase of 16%
The increase was mainly due to increase in interest from Bank Deposits
over our sales and marketing expenses for our services business of
of Rs. 77.2 million as compared to fiscal 2006, due to rise in interest
Rs. 327.6 million in the fiscal year ended March 31, 2006. Sales and
rates. This increase has been off set by foreign exchange loss amounting
marketing expenses for our services business as a percentage of services
to Rs. 30.3 million during the year mainly due to appreciation of 2.8%
revenue was 4% in the fiscal year ended March 31, 2007, compared to
in Dollar/Rupee.
5% in the fiscal year ended March 31, 2006.
Income taxes Our primary market risk exposures are due to the following:
Our provision for income taxes in the fiscal year ended March 31, 2007 – foreign exchange rate fluctuations,.
was Rs. 342.5 million, a decrease of 34% over our provision for income
taxes of Rs. 515.2 million in the fiscal year ended March 31, 2006. Our – fluctuations in interest rates; and
effective tax rate was 11% in the fiscal year ended March 31, 2006
compared to 19% in the fiscal year ended March 31, 2006. The decrease – fluctuations in the value of our investments.
in tax rate is attributable to the higher generation of revenue from units As of March 31, 2007, we had Cash and Bank Balances of Rs. 7,182.2
availing tax holidays in India. million out of which Rs. 3,824.6 million was in interest–bearing bank
deposits. Consequently, we face an exposure on account of fluctuation
Income from operations and net income in interest rates. These funds were invested in bank deposits of longer
maturity (more than 90 days) to earn a higher rate of interest income.
As a result of the foregoing factors, income from operations increased
by 15% to Rs. 2,752.8 million in fiscal 2007 from Rs. 2,392.5 million A substantial portion of our revenues is generated in foreign currencies
in fiscal 2006, and net income increased by 26% to Rs. 2,768.1 million while a majority of our expenses are incurred in Indian Rupees and the
in fiscal 2007 from Rs. 2,190.4 million in fiscal 2006. In the current balance in US Dollars and European currencies. Our functional currency
financial year, our recent acquisitions contributed negatively to the tune for Indian operations and consolidated financials is the Indian Rupee.
of almost Rs. 502 million to the net income, while adding Rs. 1,324 We expect the majority of our revenues will continue to be generated
million to the top line, thus effectively resulting in negative contribution in foreign currencies for the foreseeable future and a significant portion
to the margins by 3%. These acquisitions are in the investment phase of our expenses, including personnel costs and capital and operating
and add strategic value to our business and growth prospects. Our net expenditure, to continue to be incurred in Indian Rupees.
margins decreased to 14% from 15% in fiscal 2006. We define net
income margins for a particular period as the ratio of net income to total In addition, we face normal business risks such as global competition
revenues during such period. and country risks pertaining to countries that we operate in.
We have audited the accompanying consolidated balance sheets of evaluating the overall financial statement presentation. We believe that
i-flex Solutions Limited (“the Company”) as of March 31, 2006 and 2007, our audits provide a reasonable basis for our opinion.
and the related consolidated statements of income, shareholders’ equity
and cash flows for the years then ended. These financial statements are In our opinion, the financial statements referred to above present
the responsibility of the Company’s management. Our responsibility is to fairly, in all material respects, the consolidated financial position
express an opinion on these financial statements based on our audits. of i-flex Solutions Limited at March 31, 2006 and 2007, and the
consolidated results of its operations and its cash flows for the years
We conducted our audits in accordance with auditing standards generally then ended, in conformity with accounting principles generally accepted
accepted in the United States. Those standards require that we plan in the United States.
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were As discussed in Note 2 to the consolidated financial statements, the
not engaged to perform an audit of the Company’s internal control over Company adopted the provisions of Statement of Financial Accounting
financial reporting. Our audits included consideration of internal control Standards (“SFAS”) No. 123(R) (revised 2004), Share-Based Payment,
over financial reporting as a basis for designing audit procedures that are effective April 1, 2006 and, SFAS No. 158, Employer’s Accounting
appropriate in the circumstances, but not for the purpose of expressing for Defined Benefit Pension and Other Postretirement Plans, effective
an opinion on the effectiveness of the Company’s internal control over March 31, 2007.
financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts
S. R. Batliboi & Associates
and disclosures in the financial statements, assessing the accounting
Mumbai, India
principles used and significant estimates made by management and
July 2, 2007
Assets
Current assets
Cash and cash equivalents 2,082,098 3,338,320 77,455
Bank deposits 4,780,235 3,824,624 88,738
Accounts receivable, net of allowance of Rs. 99,439 and
Rs. 182,208 (USD 4,228), respectively 5,223,217 7,279,653 168,901
Accounts receivable – related parties 34,185 223,032 5,175
Unbilled revenue 398,023 1,141,738 26,491
Marketable securities 10,000 9,190 213
Prepaid income taxes 400,952 926,921 21,506
Rental deposit 38,045 819,306 19,010
Prepaid expenses 149,241 362,678 8,415
Deferred tax assets – 10,132 235
Other current assets 358,743 749,748 17,396
Total current assets 13,474,739 18,685,342 433,535
Commitments
Shareholders’ equity
Equity shares, Rs. 5 par value, authorized: 100,000,000 shares
Issued and outstanding: 76,288,367 and 83,288,580 shares,
respectively 381,442 416,443 9,662
Equity shares subscribed: 38,900 and 395,529 shares, respectively 10,309 401,679 9,320
Additional paid-in-capital 3,070,283 9,780,388 226,923
Deferred share-based compensation – Employees Share Purchase
Scheme (“ESPS”) trust (580,663) (13,472) (459,900)
Accumulated other comprehensive loss (74,920) (465,273) (10,795)
Retained earnings 10,695,295 13,027,001 302,251
Total shareholders’ equity 13,622,509 22,579,575 523,889
Total liabilities and shareholders’ equity 17,869,889 29,265,403 679,012
Revenue
Third parties 12,116,411 20,154,888 467,632
Related parties 2,718,835 226,182 5,247
14,835,246 20,381,070 472,879
Cost of revenue (excluding depreciation and amortization) (a) (8,146,671) (11,639,948) (270,069)
Gross profit 6,688,575 8,741,122 202,810
Operating expenses
Selling and marketing expenses (a) (2,066,853) (2,700,960) (62,667)
General and administrative expenses (a) (1,669,277) (2,454,566) (56,951)
Depreciation and amortization (501,947) (832,782) (19,322)
Impairment of goodwill (57,958) – –
Operating income 2,392,540 2,752,814 63,870
Net (decrease) increase in cash and cash equivalents (278,462) 1,422,653 33,008
Effect of exchange rate changes on cash and cash equivalents (11,486) (166,431) (3,862)
Cash and cash equivalents at the beginning of the year 2,372,046 2,082,098 48,309
Cash and cash equivalents at the end of the year 2,082,098 3,338,320 77,455
Balance at April 1, 2005 74,879,650 374,398 6,546 2,516,636 (478,208) (54,700) 8,933,133 11,297,805
Balance at March 31, 2006 76,288,367 381,442 10,309 3,070,283 (459,900) (74,920) 10,695,295 13,622,509
Balance at March 31, 2007 83,288,580 416,443 401,679 9,780,388 (580,663) (465,273) 13,027,001 22,579,575
Balance at March 31, 2007 83,288,580 9,662 9,320 226,923 (13,472) (10,795) 302,251 523,889
7/27/2007 3:32:43 PM
Notes to consolidated financial statements
for the year ended March 31, 2006 and 2007
i-flex is a subsidiary of Oracle Global Mauritius Limited (‘Oracle’) with Foreign currency denominated assets and liabilities are translated into
Oracle having an 81.02% ownership interest in the Company as at the functional currency at exchange rates in effect at balance sheet
March 31, 2007. date. Foreign currency transaction gains and losses are recorded in the
consolidated statements of income within other income.
2. Summary of significant accounting policies
2.4. Revenue recognition
2.1. Basis of preparation
The Group derives revenue from software licensing and related services
The accompanying consolidated financial statements include the and IT solutions and consulting services.
accounts of i-flex and its subsidiaries (hereinafter collectively referred
to as the “Group”) and are prepared in accordance with United States
Software licensing and related services
generally accepted accounting principles (“US GAAP”). All inter-company
balances and transactions have been eliminated upon consolidation. An The Group enters into agreements to generally convey a perpetual
acquired business is included in the Group’s consolidated statements of license to its customers and also provides implementation services and
income with effect from the date of the acquisition. customization services as required. Customers also have the option
to enter into a maintenance arrangement (Post Contract Support or
The Company uses the Indian Rupee (“Rs.”) as its reporting currency. “PCS”), which is generally an annual contract, and commences when the
For the convenience of readers, the consolidated financial statements implementation is complete and the warranty period has ended.
for the year ended March 31, 2007 have been translated into United
States Dollars (“USD”) at the noon buying rate in New York City on License revenue for perpetual licenses are recognized upon delivery,
March 31, 2007 for cable transfers in Indian Rupees, as certified when services that are required to be performed under the terms of
for customs purposes by the Federal Reserve Bank of New York of the arrangement with the customer are not considered essential to
1 USD = Rs. 43.10. The convenience translation should not be construed the functionality of the software and when persuasive evidence of
as a representation that the Indian Rupee amounts or the USD amounts an arrangement exists, delivery has occurred, the license fee is fixed
referred to in these consolidated financial statements have been, could and determinable and the collection of the fee is probable. License
have been, or could in the future be, converted into USD or Rs., as the revenue from arrangements, which contain extended payment terms
case may be, at this or at any other rate of exchange, or at all. is not considered to be fixed and determinable at the inception of the
arrangement and, accordingly, revenue is recognized as payments
The Group also separately presents its consolidated financial statements from customers become due, assuming all other conditions for revenue
for the same periods prepared in accordance with India generally accepted recognition have been satisfied.
accounting principles (“Indian GAAP”). Significant differences between
the Indian GAAP and US GAAP relate to the deferral of revenue pertaining In limited situations, the Group enters into time-based or term licenses
to post-contract support, accounting for share-based payments, for a specified period and the license fee and PCS revenue is recognized
accounting of employee benefit plans, accounting for acquisitions, foreign ratably over the period of the arrangement.
forward exchange contracts, option contracts, embedded derivatives and
amortization of intangibles. Services are not considered essential to the functionality of the software
when such services primarily consist of minor functional enhancements,
simple interfaces, implementation planning, data conversion, training
2.2. Use of estimates
and product walkthrough and the realisability of the license fees is not
The preparation of financial statements in accordance with US GAAP dependent on such services. When vendor specific objective evidence
requires management to make estimates and assumptions that affect (“VSOE”) of the fair value of the services, based on historical evidence
the amounts reported in the consolidated financial statements and of sales of similar services exists, revenue related to implementation
accompanying notes. The Company bases its estimates and judgments services are recognized as services are provided when arrangements
on historical experience and on various other assumptions that it believes are on a time and material basis. In the case of fixed price arrangements,
are reasonable under the circumstances. The amount of assets and subject to VSOE being established, revenue related to implementation
liabilities reported on the Company’s balance sheets and the amounts services is recognized using the proportional performance method of
of revenue and expenses reported for each of its years presented are accounting. Performance is measured based upon the efforts incurred
affected by estimates and assumptions, which are used for, but not to date in relation to the total estimated efforts to complete the contract.
limited to, the accounting for revenue recognition, allowance for doubtful If the realisability of the services fees are dependent on acceptance
accounts, income taxes, determining impairment on long-lived assets, conditions, revenue is recognized only when such acceptance conditions
intangibles and goodwill, share-based compensation and accounting for have been met.
defined benefit plans. Actual results could differ from those estimates.
March 31
2006 2007 2007
Rs. Rs. USD
Depreciation and amortization expense, including amortization of assets recorded under capital leases, amounted to Rs. 371,197 and Rs. 560,315
(USD 13,000) for the year ended March 31, 2006 and 2007, respectively.
Assets held under capital leases included above are as follows: Investments in Equity Investees
The Group has a 40% investment in Flexcel International Private Limited
March 31 (“Flexcel”), a joint venture between HDFC Bank Limited and its affiliates,
2006 2007 2007 Lord Krishna Bank Limited and its affiliates and the Company. Flexcel
Rs. Rs. Rs. provides the Group’s products through an Application Service Provider
(“ASP”) model to various banks and financial institutions in India.
Computer equipment 7,367 7,161 166 Further, i-flex has a 33% equity stake in Login SA, a France based
Furniture and fixtures 3,420 3,324 77
treasury software specialists firm. Login SA is a front and mid office
Vehicles 37,765 42,495 986
treasury solution provider with its product, Login Acumen. The Group
48,552 52,980 1,229
Accumulated has accounted for this investment using the equity method of accounting
amortization (20,648) (28,995) (673) and recorded its share of profits of its equity investees of Rs. 4,713 and
27,904 23,985 556 Rs. 9,161 (USD 213) for the year ended March 31, 2006 and 2007,
respectively, in the consolidated statements of income.
6. Investments
Other investments
Marketable securities
March 31
The fair values of the available for sale securities are as follows:
2006 2007 2007
Rs. Rs. USD
March 31
2006 2007 2007 UTI US-64 – 6.75% Tax free
Rs. Rs. USD Bonds 33,123 33,123 769
National Saving
Opening carrying value – 10,000 232 Certificates - VIII issue 131 131 3
Add: Investment during the year 10,000 – – 33,254 33,254 772
Less: Unrealized loss during
the year – (810) (19) The Group holds 331,225 US-64 6.75 % Tax-free bonds. These bonds
Carrying value of the are redeemable at par on June 1, 2008. The fair value of these bonds as
investment 10,000 9,190 213 on March 31, 2007 was Rs. 32,944 (USD 764).
The above investment is in debt securities of 9% Dhanalakshmi Bank The Company also has a 19.5% ownership interest in EBZ online
Bond Series VI (allotted on March 30, 2006) and are non-convertible private limited (‘EBZ’). Management is of the view that the fair value
and redeemable at par at the end of 7 years 3 months from the date of of its investment in EBZ has declined permanently and hence, as of
allotment. March 31, 2005 management had made a provision of Rs. 45,000
(USD 1,044) towards the diminution in the value of its investment
in EBZ.
Year ended
Year ended March 31
March 31
Jurisdiction 2006 2007 2007
2006 2007 2007
Rs. Rs. USD
Rs. Rs. USD
India 2,552,652 3,016,496 69,988
Current taxes
United States (110,597) (428,726) (9,947)
Domestic taxes (406,589) (182,725) (4,240)
Singapore 171,816 295,885 6,865
Foreign taxes (178,117) (230,371) (5,345)
The Netherlands 154,664 218,317 5,065
(584,706) (413,096) (9,585)
United Kingdom − 86,918 2,017
Deferred taxes
Others (70,291) (87,524) (2,031)
Domestic taxes 69,554 70,625 1,639
2,698,244 3,101,366 71,957
Foreign taxes − − −
69,554 70,625 1,639
(515,152) (342,471) (7,946)
The Group’s Indian operations are eligible to claim income-tax exemption with respect to profits earned from export revenue from an operating unit
registered under the Software Technology Parks of India. The benefit is available from the date of commencement of operations to March 31, 2009,
subject to a maximum of 10 years. The Company had seven such locations for the years ended March 31, 2006 and 2007. The benefits expire in stages
from April 1, 2006 to March 31, 2009.
The additional income tax expense at the statutory rate in India, if the tax exemption was not available, would have been approximately Rs. 665,944
and Rs. 1,217,074 (USD 28,238) for the years ended March 31, 2006 and 2007, respectively. The impact of such additional tax on basic and diluted
earnings per share would have been a reduction of earnings per share by Rs. 8.86 and Rs. 8.59, respectively, for the year ended March 31, 2006 and
Rs. 15.45 and Rs. 15.04, respectively, for the year ended March 31, 2007.
The following is a reconciliation of the Indian statutory income tax rate with the effective tax rate:
Year ended
March 31
2006 2007 2007
Rs. Rs. USD
March 31
2006 2007 2007
Rs. Rs. USD
March 31
2006 2007 2007
Rs. Rs. USD
Current
Deferred tax assets − 10,132 235
Deferred tax liabilities − − −
Net current deferred tax assets − 10,132 235
Non current
Deferred tax assets 256,296 854,373 19,822
Less: valuation allowance (185,534) (723,022) (16,775)
70,762 131,351 3,047
Deferred tax liabilities (1,649) (1,745) (40)
Net non current deferred tax assets 69,113 129,606 3,007
As at March 31, 2007, the Group had net operating loss carry forwards predicted with certainty, management currently believes that the final
aggregating to Rs. 2,599,388 (USD 59,949) in the US which expires outcome of such matters, in the aggregate, will not have a material
between 2024 and 2027, Rs. 206,778 (USD 4,769) in Canada which adverse effect on the financial position, results of operations or cash
expires in 2015, Rs. 58,629 (USD 1,352) in Japan which expires between flows of the Group.
2012 and 2013 and Rs. 17,589 (USD 406) in Germany which is can be
allowed to carry forward indefinitely. The Group has recorded a valuation Deferred income taxes on undistributed earnings of foreign subsidiaries
allowance, for the deferred tax asset related to net operating loss carry have not been provided as such earnings are deemed to be permanently
forwards, the loss on sale of investment and share of losses in equity reinvested.
investee. The loss on sale of investment and share of losses in equity
investee would be deductible for tax only when the investments are sold 8. Deferred revenue
and if the Group has offsetting capital gains. The change in valuation
allowance was primarily on account of recording a valuation allowance Deferred revenue comprises of:
for net operating losses with no current benefits.
March 31
In determining the tax provisions, the Group also provides for tax 2006 2007 2007
exposures based on the Group’s assessment of regulatory reviews. Such Rs. Rs. USD
accruals, which are recorded in income taxes payable, are management’s
estimates based on information currently available and, accordingly, Advance billings 1,238,071 2,435,467 56,507
are subject to revision if new information becomes available. The final Unexpired post
outcome is dependent upon the judgment of regulatory reviewers. contract support 593,945 923,580 21,429
Advances from
The Group is involved in income tax assessment proceedings in various customers 134,772 27,240 632
jurisdictions. While the resolution of these assessments cannot be 1,966,788 3,386,287 78,568
Year ended
March 31
2006 2007 2007
Rs. Rs. USD
The underfunded status of the plan of Rs. 55,253 and Rs. 118,184 The assumptions used in accounting for the gratuity plan are set out as
(USD 2,742) at March 31, 2006 and 2007, respectively, is recorded as below:
a long-term liability.
March 31
Year ended 2006 2007
March 31
2006 2007 2007 Discount rate 8.00% 9.40%
Rs. Rs. USD Expected return on plan assets 7.50% 7.50%
Rate of compensation increase 5.00% 8.00%
Net periodic gratuity cost
Service cost 15,785 20,415 474 The Group evaluates these assumptions annually based on its long-term
Interest cost 4,722 5,974 139 plans of growth and industry standards. The discount rates are based
Expected return on plan
assets (1,518) 82 2 on current market yields on high quality corporate bonds. Plan assets
Amortization 1,773 1,377 32 are administered by the LIC and invested in lower risk assets, primarily
Net periodic gratuity cost for debt securities. The Group’s contribution to the fund for the year ended
the year 20,762 27,848 647
The aggregate intrinsic value is calculated as the difference between the 2009 50% 2.50 times
exercise price of the underlying options and the closing share price of 2010 30% 2.75 times
Rs. 2,081.65 of the Company’s share on March 30, 2007 (last trading 2011 20% 3.00 times
day prior to March 31, 2007).
In accordance with SFAS No. 123(R) the Group recognises liabilities
The aggregate intrinsic value of options exercised during the years awards under share-based payment arrangements at fair value. At each
ended March 31, 2007 was Rs. 4,624,771 (USD 107,303). Total cash reporting date, the Group measures the amount of the liability under
received as a result of option exercises was approximately Rs. 688,823 these awards based on the above formula and such cost are recognized
(USD 15,982) for the year ended March 31, 2007. over the repurchase period. The accounting liability will be remeasured at
Principal Shareholder and its affiliates (“Oracle”) Oracle Global (Mauritius) Limited
(From November 18, 2005) Oracle (India) Private Limited
Oracle USA, Inc.
Oracle Corporation (Thailand) Co Ltd
Promoter Company and its affiliates (“Citigroup”) OrbiTech Limited
(Until November 17, 2005) Polaris Software Lab Limited
Citigroup Inc.
Citicorp Technology Holdings Inc., USA
Citibank branches
Citicorp Information Technology, Inc.
e-Serve International Limited
Joint Ventures Flexcel International Private Limited
Transactions and balances outstanding with these parties are described below:
Citigroup
Revenue 2,681,174 − − − − −
Interest income 6,860 − − − − −
Bank charges 2,415 − − − − −
Oracle
Revenue 27,035 176,253 4,089 28,066 223,032 5,175
Professional fees 846 1,197 28 − − −
Application software 123,351 238,561 5,535 − − −
Referral fees 7,353 − − − − −
Other expenses 1,106 6,095 141 (7,394) (2,917) (68)
Deferred revenue − − − (5,998) (211,247) ( 4,901)
Flexcel
Revenue 10,626 49,929 1,158 6,119 − −
Deferred revenue − − − (653) (3,662) (85)
Year ended
March 31, 2006
Products Services KPO Corporate Total
(All amounts in Indian Rupees)
Segment assets as at March 31, 2006 4,593,177 3,917,018 374,322 8,985,372 17,869,889
Segment liabilities as at March 31, 2006 1,461,707 499,811 75,766 2,210,096 4,247,380
Capital expenditure by segment 304,199 316,215 78,695 181,195 880,304
Segment assets as at March 31, 2007 12,954,812 5,644,892 396,457 10,269,242 29,265,403
Segment liabilities as at March 31, 2007 4,327,630 1,070,494 114,890 1,172,814 6,685,828
Capital expenditure by segment 5,737,762 191,662 13,100 83,344 6,025,868
Segment assets as at March 31, 2007 300,576 130,972 9,199 238,265 679,012
Segment liabilities as at March 31, 2007 100,409 24,837 2,666 27,211 155,123
Capital expenditure by segment 133,127 4,447 304 1,934 139,812
Year ended
March 31
2006 2007
Rs. % Rs. USD %
The Group does not track its profits, assets and liabilities by region. The under capital leases and operating leases consisted of the following at
Group derives more than 10% of its revenues from Citigroup as follows: March 31, 2007:
Product segment 1,365,472 1,763,665 40,920 2008 12,529 291 337,542 7,832
related 2009 8,739 202 225,978 5,243
Service segment 2010 5,060 117 181,186 4,204
related 4,028,743 4,135,440 95,950 2011 2,274 53 139,586 3,239
5,394,215 5,899,105 136,870 2012 1,065 24 86,574 2,009
Thereafter till 2013 17,631 409
Total minimum payments 29,667 687 988,497 22,936
16. Other income (expense), net Amount representing interest (3,288) (75)
Other income (expense), net comprises of the following: Present value of minimum
lease payment 26,379 612
Foreign exchange loss, net (16,838) (30,311) (703) Rental expenses for the years ended March 31, 2006 and 2007 was
Insurance claim 21,530 − − Rs. 249,429 and Rs. 423,448 (USD 9,825), respectively.
Profit on sale of investment 743 − −
Miscellaneous income 5,888 7,260 168
11,323 (23,051) (535) 18. Subsequent events
Acquisition
17. Commitments On April 20, 2007, i-flex solutions b.v., wholly owned subsidiary company
Capital Expenditure of i-flex, signed an investment agreement with Fourlis Holdings SA,
Athens Technology Centre (‘ATC’) and shareholders of ATC. Under the
As at March 31, 2006 and 2007, the Group had committed to spend terms of investment agreement, the Group alongwith Fourlis Holdings SA,
Rs. 801,100 and Rs. 1,955,320 (USD 45,367) (includes capital and shareholders of ATC has set up company called, i-flex solutions SA
commitments through the issuance of letters of intent of Rs. 998,819 (‘i-flex SA’) wherein the Group currently holds 35% ownership interest.
(USD 23,174)), respectively, under agreements to purchase property and The Group would acquire the remaining 65% of ownership interest in
equipment. i-flex SA over a period of 3 years in 4 tranches whereas i-flex SA would
acquire certain assets, employees and contracts from ATC. The Group
Leases would pay EUR 2 million to ATC, as a compensation for the termination
of existing business relationships, assignment of banking business
The Group has taken certain office premises, residential premises
contracts and for the acquisition of banking business clientele. In addition
and vehicles for employees under operating leases, which expire at
to this, the Group would pay EUR 9.7 million to Fourlis Holding SA and
various dates through year 2013. Future minimum lease payments
shareholders of ATC for the acquisition of a 55% stake in Joint Stock
Company. The Group is in the process of completing the acquisition
formalities.
NOTICE is hereby given that the Eighteenth Annual General Meeting of 10. To consider and, if thought fit, to pass, with or without modification(s),
i-flex solutions limited will be held at InterContinental The Grand Mumbai, as an Ordinary Resolution the following:
Sahar Airport Road, Mumbai 400 059 on Friday, August 24, 2007 at
3.00 p.m. to transact the following business: “RESOLVED THAT in accordance with the provisions of
Sections 198, 269, 309, 310 read with Schedule XIII and other
applicable provisions, if any, of the Companies Act, 1956 (including
Ordinary Business: any statutory modification(s) or re-enactment(s) thereof, for the
1. To receive, consider and adopt the Audited Balance Sheet as on time being in force) and subject to such sanctions and approvals
March 31, 2007, the Profit and Loss Account for the year ended on as may be necessary, approval of the Company be and is hereby
that date, and the Reports of the Board of Directors and the Auditors accorded to the appointment and terms of remuneration of
thereon. Mr. N R Kothandaraman (N R K Raman) as the Managing Director of
the Company for a period of five years with effect from May 1, 2007
2. To appoint a Director in place of Mr. Rajesh Hukku, who retires by to April 30, 2012 as set out below:
rotation and, being eligible, offers himself for re-appointment.
1. Gross Salary: In the scale of Rs. 55 Lakh p.a. to Rs. 62 Lakh
3. To appoint a Director in place of Mr. William T Comfort, Jr., who retires p.a. inclusive of perquisites as mentioned below.
by rotation and, being eligible, offers himself for re-appointment.
2. Performance linked Bonus: Payable quarterly or at other
4. To appoint Auditors of the Company and to fix their remuneration. intervals, as may be decided by the Compensation Committee
and the Board.
Special Business: 3. Perquisites and allowances:
5. To consider and, if thought fit, to pass, with or without modification(s),
a. Housing: Furnished/unfurnished residential accommodation
as an Ordinary Resolution the following:
or house rent allowance up to 10% of the salary in lieu
“RESOLVED THAT pursuant to the provisions of Section 228 and thereof. The expenditure incurred by the Company on gas,
other applicable provisions, if any, of the Companies Act, 1956, the electricity, water and furnishings, if any, shall be valued as
Board of Directors of the Company be and is hereby authorized to per Income Tax Rules, 1962.
appoint Branch Auditors to conduct the audit of branch office(s) of
b. Medical reimbursement/allowance: Reimbursement of
the Company whether existing or which may be opened hereafter,
actual expenses for self and family and/or allowance will
in India or abroad, in consultation with the Company’s Statutory
be paid as decided by the Board from time to time.
Auditors, any person(s) qualified to act as Branch Auditors within the
meaning of Section 228 of the Act and to fix their remuneration.” c. Leave travel concession/allowance: For self and family once
in a year, as decided by the Compensation Committee and
6. To consider and, if thought fit, to pass, with or without modification(s),
the Board from time to time.
as an Ordinary Resolution the following:
d. Club fees: Fees payable subject to a maximum of two
“RESOLVED THAT Mr. N R Kothandaraman (N R K Raman) be and
clubs.
is hereby appointed as a Director of the Company, liable to retire by
rotation.” e. Provision for driver/driver’s salary allowance: As per the
rules of the Company.
7. To consider and, if thought fit, to pass, with or without modification(s),
as an Ordinary Resolution the following: f. Personal accident insurance: As per the rules of the
Company.
“RESOLVED THAT Mr. Deepak Ghaisas be and is hereby appointed
as a Director of the Company, liable to retire by rotation.” 4. Other benefits:
8. To consider and, if thought fit, to pass, with or without modification(s), a. Earned/privilege leave: As per the rules of the Company.
as an Ordinary Resolution the following:
b. Company’s contribution to provident fund and
“RESOLVED THAT Mr. R Ravisankar be and is hereby appointed as a superannuation fund: As per the rules of the Company.
Director of the Company, liable to retire by rotation.”
c. Gratuity: As per the rules of the Company.
9. To consider and, if thought fit, to pass, with or without modification(s),
as an Ordinary Resolution the following: d. Encashment of leave: As per the rules of the Company.
“RESOLVED THAT Mr. Derek Williams be and is hereby appointed e. Company car and telephone: Use of the Company’s car
as a Director of the Company, liable to retire by rotation.” and telephone at the residence for official purposes, as per
the rules of the Company.
RESOLVED FURTHER THAT the above amendments shall also be i) Pursuant to Sections 205A and 205C of the Companies Act, 1956,
applicable to the Options already granted or to be granted under the any money transferred to the unpaid dividend account which
Plan to the present and future employees of the present and future remains unpaid or unclaimed for a period of 7 years from the date
subsidiary companies of the Company. of such transfer is now required to be transferred to the ‘Investor
Education and Protection Fund’ set up by the Central Government.
RESOLVED FURTHER THAT except as stated above all other terms Accordingly, the amount of unclaimed dividend for the financial
and conditions of ESOP Plan already approved by the members of year ended March 31, 2000 will be transferred to the ‘Investor
the Company shall remain unaltered.” Education and Protection Fund’ in due course. Once the amount
is so transferred, no claim shall lie against the aforesaid fund or
By Order of the Board
the Company in respect of such dividend amount thereafter. The
members are requested to send to the Company their claims, if any,
Deepak Ghaisas
for the dividend for financial year 1999-2000 onwards before the
Vice Chairman & Company Secretary
amount becomes due for transfer to the above fund.
Registered Office:
Unit 10-11, SDF 1, SEEPZ, ADDITIONAL INFORMATION PURSUANT TO CLAUSE 49-VI OF THE
Andheri (East), LISTING AGREEMENT
Mumbai 400 096
July 4, 2007 DETAILS OF DIRECTORS SEEKING APPOINTMENT/
RE-APPOINTMENT AT THE FORTHCOMING ANNUAL GENERAL
Notes: MEETING:
Mr. Ghaisas holds directorship and committee membership in the In 1997, he took over as the Chief Executive Officer of the Company
following Companies: and was instrumental in transforming i-flex into a fast-growing, highly
successful products and services Company, winning customers around
List of other Directorships held Membership in Chairmanship in the globe. As part of the Executive Management Office at i-flex solutions,
Committees Committees Shanx is credited with envisioning i-flex’s technology leadership,
of other of other branding and alliances, overseas expansion and M&A strategies. He
companies companies relocated to the USA in 2000 as Chief Executive Officer (International
Operations and Technology), with the responsibility of managing i-flex’s
Shoppers Stop Ltd. – Shoppers Stop Ltd.
- Audit Committee products and services businesses, the subsidiaries abroad, and new
USV Ltd. – USV Ltd. - Audit business acquisitions in the USA. He later managed the business
Committee development portfolio while continuing to execute his responsibilities as
i-flex Processing Services Ltd. – – CEO – i-flex solutions inc.
i-flex solutions pte ltd – –
i-flex Consulting(Asia Pacific) – – He enjoys teaching and exchanging ideas on banking and technology and
pte ltd. has presented i-flex’s global product software success story in various
i-flex solutions inc. – – industry forums like NASSCOM and CII. Leading media organizations
i-flex America inc. – – such as CNBC, NDTV, The Economic Times, The Times of India, Business
SuperSolutions Corporation – – Today, and a host of other publications, have also profiled Shanx.
Flexcel International Pvt. Ltd. – –
ISP Internet Mauritius – – Shanx holds 366,400 equity shares of face value of Rs. 5/- of the
Company Company as on date.
Equinox Global Services – –
Pvt. Ltd. Shanx holds directorship and committee membership in the following
Bombay Chamber of – – Companies:
Commerce and Industry
Mr. Williams holds directorship and committee membership in the following Companies:
Mr. Williams as a non-executive Director of the Company will not draw any remuneration from the Company except reimbursement of expenses incurred
for attending the meetings of the Company and expenses incidental thereto.
Explanatory Statement as required by Section 173 (2) of the The Compensation Committee of the Company has recommended,
Companies Act, 1956. subject to the approval of the members of the Company, the remuneration
payable to Mr. N R Kothandaraman (N R K Raman) as set out in the
The following Explanatory Statement sets out all the material facts
resolution no. 10 of the Notice which is within the limits prescribed
relating to the special business mentioned in the accompanying Notice
under Schedule XIII and other applicable provisions of the Companies
dated July 4, 2007.
Act, 1956.
Item no. 5 The Draft Agreement to be entered into between the Company and
Mr. N R Kothandaraman (N R K Raman) is available for inspection by the
The Company has branch offices in India and abroad and may also open members of the Company at its Registered Office between 2.00 p.m. to
new branches in future. It may be necessary to appoint branch auditors 4.00 p.m. on any working day of the Company.
for conducting the audit of the books of accounts of the Company at such
branches. This may be treated as an abstract of the Draft Agreement between
the Company and Mr. N R Kothandaraman (N R K Raman) pursuant to
The Board of Directors of the Company seeks approval of the members Section 302 of the Companies Act, 1956.
for authorising the Board to appoint Branch Auditors and to fix their
remuneration in consultation with the Statutory Auditors of the Except Mr. N R Kothandaraman (N R K Raman), no other Director is
Company. concerned or interested in the resolution at Item no. 10 of the Notice.
No Director is in any way concerned or interested in the resolution no. 5 Your Directors recommend the resolution at Item no. 10 of the Notice to
of the Notice. the members.
The Board commends the resolution no. 5 for the acceptance by the
members. Item nos. 11 & 12
The Board of Directors at its meeting held on May 1, 2007, has pursuant
Item nos. 6 to 9 to the provisions of the Act and subject to the approval of the members
of the Company appointed Mr. Deepak Ghaisas and Mr. R Ravisankar as
Mr. N R Kothandaraman (N R K Raman), Mr. Deepak Ghaisas, Whole-time Directors of the Company with effect from May 1, 2007.
Mr. R Ravisankar and Mr. Derek Williams were respectively appointed
as the Additional Directors of the Company at the Board Meeting held on As per the Draft Agreement(s) to be entered into between Mr. Ghaisas and
May 1, 2007. Pursuant to and in accordance with the provisions of the Mr. R Ravisankar and the Company, Mr. Ghaisas and Mr. R Ravisankar,
Section 260 of the Companies Act, 1956, and Article 109 of the Articles as Whole-time Directors of the Company will not draw any remuneration
of Association of the Company, these Directors hold office up to the date from the Company or be entitled to any perquisites as are mentioned in
of this Annual General Meeting and are eligible for appointment(s). Schedule XIII to the Act except reimbursement of expenses incurred while
carrying out their duties for the business of the Company.
The Company has received notices under Section 257 of the Act,
proposing their appointment as Directors of the Company, along with the The Draft Agreement(s) to be entered into between the Company
requisite deposit. and Mr. Deepak Ghaisas and Mr. R Ravisankar respectively are available
for inspection by the members of the Company at its Registered Office
The details regarding the above proposed appointees as the Directors between 2.00 p.m. to 4.00 p.m. on any working day of the Company.
and their detailed resumes have been given in the annexure attached
This may be treated as an abstract of the Draft Agreement(s) between
to this Notice.
the Company and Mr. Deepak Ghaisas and Mr. R Ravisankar respectively
In view of the expertise, knowledge and experience of these appointees, pursuant to Section 302 of the Companies Act, 1956.
their appointment as the Directors of the Company is recommended.
Except Mr. Deepak Ghaisas and Mr. R Ravisankar, no other Director is
Mr. N R Kothandaraman (N R K Raman), Mr. Deepak Ghaisas, concerned or interested in the resolutions at Item nos. 11 and 12 of the
Mr. R Ravisankar and Mr. Derek Williams will retire by rotation. Notice.
The resolution at Item no. 13 of the Notice seeks approval of the members A copy of the ESOP Plan duly modified is available for inspection at the
for authorizing the Board of Directors of the Company to decide the Registered Office of the Company between 2.00 p.m. to 4.00 p.m. on all
quantum and the manner of remuneration to the Non-Executive Directors working days of the Company.
of the Company for a period of five years with effect from April 1, 2007.
This resolution is in the interest of the Company and your Directors
Except Mr. S P Bharucha, Ms. Tarjani Vakil and Mr. Y M Kale no other recommend the resolution at item no. 14 of the Notice to the members.
Director of the Company is concerned or interested in the resolution at
Except Mr. Charles Phillips, Mr. Derek Williams and
Item no. 13 of the Notice.
Mr. William T Comfort Jr., Directors of the Company, who have not
been granted options under the ESOP Plan, all the other Directors of
Item no. 14 the Company have been granted options and may be deemed to be
concerned or interested in the resolution at item no. 14 of the Notice.
Fringe Benefit Tax (“FBT”) has been recently introduced on exercise of
Employee Stock Options (“ESOPs”) by an employee. The Finance Act,
2007 provides, inter alia, that when an employer allots or transfers, directly
or indirectly any shares or other specified security at a concessional rate By Order of the Board
to its employee, it will be treated as fringe benefit and taxed accordingly.
This amendment is effective from April 1, 2007.
The Finance Act, 2007, has also introduced Section 115 WKA in the Deepak Ghaisas
Income Tax Act, 1961, which allows modification of the ESOP schemes Vice Chairman and Company Secretary
to enable the employer to recover from the employee the FBT to the
extent to which the employer is liable to pay, in relation to the value of Registered Office:
fringe benefits provided to the employee. Unit 10-11, SDF 1, SEEPZ,
Andheri (East),
The Employees Stock Option Plan 2002 (“ESOP Plan”) of the Company Mumbai 400 096
was approved by the members of the Company at the Annual General
Meeting held on August 14, 2001. In view of the changes introduced in July 4, 2007
the Income Tax Act, 1961, as mentioned above, it is proposed to amend
Signature/s .................................................
ATTENDANCE SLIP
I hereby record my presence at the Eighteenth Annual General Meeting of the Company to be held on Friday,
August 24, 2007 at 3.00 p.m. at. InterContinental The Grand Mumbai, Sahar Airport Road, Mumbai 400 059.
Mr./Mrs./Miss. ..............................................................................................................................................................................
Note: Please fill in the attendance slip and hand it over at the ENTRANCE OF THE HALL