i-flex annual report 2007 - 2008
Annual Report 2007_2008.indd C1
7/25/2008 11:47:05 AM
The 2005-2006 Annual Report used the metaphor of fire to depict the energy and passion that drive our achievements
The 2006-2007 Annual Report, i-flexn, was based on our vision for exponential growth post our partnership with Oracle.
For excellence in design, production and communication, we won:
• Association of Business Communicators of India (ABCI) – Silver Award (2006-07)
• League of American Communications Professionals (LACP) – Silver Award (2006-07)
• League of American Communications Professionals (LACP) – Bronze Award (2007-08)
• Society of Technical Communication (STC), Australian Chapter – Merit Awards (2005-2006)
• League of American Communication Professionals (LACP), Magellan Awards – Honors Awards (2005-2006)
Annual Report 2007_2008.indd C2
7/25/2008 11:47:07 AM
i-flex annual report 2007 - 2008
Annual Report 2007_2008_Final.indd C3
7/25/2008 9:58:36 AM
Contents
The Wheel
3
Leadership
4
Corporate Information
11
Directors’ Report
15
Corporate Governance Report
24
Financials
Indian GAAP
Unconsolidated
38
Consolidated
84
Annual General Meeting (AGM) Notice
120
Attendance Slip & Proxy From
127
Annual Report 2007_2008_Final.indd C4
7/25/2008 9:58:36 AM
The wheel.
A symbol of change and progress. Epitomized
in stone at the Konark temple in Orissa, India, the wheel signifies movement across
time and space. Continuity, as well as transformation. Simple, and yet far-reaching
in impact.
Change is present in everything we do at i-flex®. For years, our clients, who span the
length and breadth of the financial services industry, have experienced a revolution in
the way they work, thanks to our pioneering approach and award-winning solutions.
With Oracle as our partners, we too have been transformed into an enabler of growth
and success in others.
Our comprehensive range of solutions offers the best of scope, functional richness
and scalability. By focusing on client satisfaction, we’ve delivered on expectations
year after year. Our strong commitment to open systems and industry standards has
helped us spread our success to more financial institutions, in more countries across
the world.
Today, we stand on the verge of another reinvention. A time that will be a turning point
in our history. And the catalyst for greater things to come.
The wheels are in motion. Together, let’s lead the way.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 3
3
7/25/2008 9:58:36 AM
leadership
With Oracle, we’re at the helm of change
that is driving the financial services industry.
Annual Report 2007_2008_Final.indd 4
7/25/2008 9:58:36 AM
Annual Report 2007_2008_Final.indd 5
7/25/2008 9:58:37 AM
Annual Report 2007_2008_Final.indd 6
7/25/2008 9:58:38 AM
The wheel has inspired humanity for centuries; a symbol of
in the financial services industry and a portfolio of unmatched
constant change and a simple machine that has transformed our
products and services, i-flex’s mission of empowering customers in
lives since times immemorial.
their businesses remains unchanged.
At i-flex, the wheel symbolizes the spirit of innovation that steers
Now, as part of the global Oracle family, we are No. 1 in banking*
customers to excellence and growth.
and are helping to set new standards with our market-leading
solutions. Our transformation strategy is based on offerings that are
For us, leadership means innovation, creativity, passion,
commitment and performance excellence. For more than 15 years,
complete - in terms of functionality and technology; open - in terms
of standards and interoperability; and integrated, enabling a unified
leadership has been an integral part of the i-flex story and we have
automation environment that delivers business value.
unremittingly strived to transform our customers into leaders in
their businesses. Today, as the wheel of time moves forward, we
look forward to further strengthening bonds with our customers and
helping them meet the challenges of the current turbulent times.
With numerous milestones to inspire us and enormous
opportunities ahead, our journey has just begun. We rededicate
ourselves to build on this momentum and work with renewed vigor
The financial services industry is changing quickly, creating new
to address the challenges faced by our customers and empower
opportunities and new challenges every day. Financial institutions
them with competitive advantage.
are facing a challenging environment of complex and evolving
regulation, a turbulent economic landscape, rising customer
Rajesh Hukku
expectations, increasing competition, and the need to constantly
Chairman
innovate to achieve profitable growth. With established leadership
i-flex solutions limited
*Forrester Research’s June 2008 independent report “Global Banking Platform Deals 2007: Vendors”
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 7
7
7/25/2008 9:58:38 AM
Awards and accolades:
•
Business Week (November, 2007) ranked i-flex solutions as one of “Asia’s Hot Growth Companies:
2007”. i-flex was ranked second highest in terms of market capitalization, third highest in terms
of sales and sixth highest in terms of profits.
•
i-flex solutions was ranked 30 in the annual FinTech 100 list of financial industry technology
vendors by American Banker and Financial Insights (November, 2007).
•
i-flex BPO won the “NASSCOM Excellence in Gender Inclusivity – Best Emerging Company”
award. This award was given away at the NASSCOM IT Women Leadership Summit 2007, held in
December last year.
•
The All India Electronics and Computer Software Export Promotion Council (ECS) Award for
Excellence in Exports for the year 2006-07 was presented to i-flex in October, 2007.
•
i-flex was recognized as a “Deal Leader” in global banking platforms by independent research
firm Forrester Research Inc., in the August 2007 report “Global Banking Platform Deals 2006:
V Shankar - Executive Vice-President,
PrimeSourcing, receiving the award from
D.H. Shankaramurthy - Minister for Higher Education,
Government of Karnataka.
Vendors”.
•
Mantas was ranked number one in the Waters Ranking for Anti-Money Laundering (AML) Solutions
in July, 2007.
•
Dataquest magazine rated i-flex BPO among the top 10 “dream employers” in the BPO sector
in November, 2007. This rating ranks companies on various parameters linked to employee
satisfaction.
•
In November, 2007, i-flex successfully completed the SAS70 Review of Internal Controls for the
sixth consecutive year.
•
FLEXCUBE® was recognized as a Leader in the Magic Quadrant for International Retail Core
Banking in February, 2008.
•
Nandu Kulkarni, Senior Vice-President,
Retail and Internet Banking, receiving the
All India Electronics and Computer Software
Export Promotion Council (ECS) award from
A Raja, Minister for Communications and
Information Technology, Government of India.
FLEXCUBE Investor Services featured in “The ‘Next Generation’ Transfer Agency Review” by
Barrington Partners in February, 2008.
Annual Report 2007_2008_Final.indd 8
7/25/2008 9:58:38 AM
i-flex solutions financials at a glance
(All figures in Rs. millions except EPS & Book Value)
Our 10 years in the industry
As per Indian GAAP Consolidated Results
1998-99*
1999-00*
2000-01*
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Total Revenue
1,444.31
2,062.69
3,211.21
4,295.27
6,239.14
8,017.87
11,645.21
15,113.54
20,976.66
24,433.52
Total Expenses
909.53
1,312.30
2,016.85
2,991.95
4,277.53
5,703.26
8,693.82
12,176.60
16,837.90
19,835.94
EBT
534.78
750.39
1,194.36
1,303.32
1,961.61
2,314.61
2,951.39
2,936.94
4,138.75
4,597.57
Tax
30.44
57.66
94.15
150.33
252.73
526.75
627.06
560.42
415.96
441.69
EAT
504.34
692.73
1,100.21
1,152.99
1,708.88
1,787.86
2,324.33
2,376.53
3,722.80
4,155.89
EPS
Book Value
6.02
8.27
13.14
13.77
20.41
21.35
27.75
28.38
44.45
49.62
15.49
25.32
37.91
56.27
92.28
111.40
136.76
164.74
282.02
331.60
Notes: All EPS and Book Values are computed based on the current equity capital base of 83,747,441 shares
*As per Indian GAAP Unconsolidated Results
Key performance indicators 2007-2008
Operating revenue
Net income
23,802.36
25000.00
5,000.00
4,155.89
20,609.38
4,000.00
14,823.00
15000.00
in Rs. Million
in Rs. Million
20000.00
11,385.93
10000.00
7,881.29
3,722.80
3,000.00
2,324.33 2,376.53
2,000.00
1,708.88 1,787.86
6,141.21
5000.00
3,038.55
1,100.21 1,152.99
4,157.18
1,000.00
504.33
1,390.18 1,971.24
0
0
1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Earnings per share
692.73
1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Book value
350.00
60.00
49.62
50.00
331.60
300.00
282.02
44.45
250.00
30.00
20.00
200.00
164.74
150.00
21.35
136.76
111.40
92.28
100.00
13.14
10.00
28.38
27.75
20.41
in Rs.
in Rs.
40.00
6.02
13.77
56.27
8.27
50.00
15.49
0
0
1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Earnings per share is computed on the equity capital base of 83,747,441 shares as on March 31, 2008
25.32
37.91
1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Book Value is computed on the equity capital base of 83,747,441 shares as on March 31, 2008
Number of employees including those in subsidiaries
12,000
11,006
No. of employees
10,000
9,068
8,000
6,858
6,000
4,747
4,000
2,974
2,000
790
0
1,017
1,590
2,032
2,327
1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 9
9
7/25/2008 9:58:39 AM
Customer serviced...
...across countries
140
900
814
800
120
642
600
544
480
500
404
400
345
128
133
112
93
84
80
74
66
60
55
281
300
206
238
40
20
100
0
108
100
Country Base
Customer Count
700
200
123
753
1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
0
1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Latin America
and Caribbean 1%
India, Middle East
and Africa 13%
Services Revenue
42%
USA
33%
Asia Pacific 19%
Products Revenue
58%
Europe 34%
Operating revenue
Regionwise revenue
KPO Services Joint ventures
2%
0.4%
Facility Costs
6%
Application Software
3%
Other Expenses
5%
Professional Fees
9%
Products
58%
Services
39.6%
Staff Cost
66%
Travel Cost
11%
Revenue breakup
Annual Report 2007_2008_Final.indd 10
Expense breakup
7/25/2008 9:58:39 AM
CORPORATE INFORMATION
i-flex solutions ltd
Board of Directors
Charles Phillips
Deepak Ghaisas (Vice Chairman)
Derek Williams
N R Kothandaraman (N R K Raman)
(Managing Director and CEO)
R Ravisankar (Vice Chairman)
Rajesh Hukku (Chairman)
Sam Bharucha
Sergio Giacoletto Roggio
Tarjani Vakil
William T Comfort, Jr.
Y M Kale
Senior Management
Executive Vice-Presidents
Joseph John
Olivier Trancart
V Shankar
Senior Vice-Presidents
Anand Phanse
Atul Gupta
Kishore Kapoor
Manmath Kulkarni
Nandu Kulkarni
S Hariharan
S Sundararajan
Sajal Mukherjee
Vijay Sharma
Vivek Govilkar
Vice-Presidents
A Srinivasan
Abhik Ray
Cafo Boga
Don Ganguly
Dilip Kulkarni
Dinesh Shetty
G Narasimhan
George Thomas
Gopinath Govindan
Gratian Perez
Jambu Natarajan
K Laxminarayan
Kapil Gupta
M Ravikumar
Mahesh Rao
Meenakshy Iyer
Mohan Bhatia
Mustafa Moonim
Naveen Grover
Nikos Goutsoulas
P Prasannavadanan
Peter Yorke
Preeti Das
R Narasimhan
R Ramamurthi
Ranjan Roy
Ravi Mahadevan
Ravi Pandit
S Ramakrishnan
Shahab Alam
Sridhar Padmanabhan
Sridhar Ramachandran
Sunder Annamraju
Thomas Mathew
V Srinivasan
Venkata Subramanian
Vijay Alexander
Vikram Gupta
Vinayak Hampihallikar
Company Secretary
Deepak Ghaisas
Chief Financial Officer
Makarand Padalkar
Chief Accounting Officer
Avadhut (Vinay) Ketkar
Solicitors
Ramesh P Makhija & Co.
Auditors
S. R. Batliboi & Associates
Internal Auditors
Mukund M. Chitale & Co.
Bankers
Bank of India
Canara Bank
Central Bank of Libya
Citibank N.A.
HDFC Bank Ltd.
Kotak Mahindra Bank Ltd.
Lakshmi Vilas Bank
State Bank of Mauritius Ltd.
Yes Bank Ltd.
Registrars & Transfer Agents
Intime Spectrum Registry Ltd.
C 13, Pannalal Silk Mills Compound
L. B. S. Marg, Bhandup (W)
Mumbai 400 078
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 11
11
7/25/2008 9:58:39 AM
Registered Office
i-flex solutions limited
Unit 10-11, SDF-1
SEEPZ, Andheri (E)
Mumbai 400 096, India
Offices
i-flex Center
399, Subhash Road
Vile Parle (E)
Mumbai 400 057, India
i-flex Park,
Off Western Express Highway
Goregaon (E)
Mumbai 400 063, India
i-flex Annex, Nirlon Compound
Off. Western Express Highway
Goregaon (E)
Mumbai 400 063, India
SJR I Park
Ground & First Floor, Tower – 2
EPIP Zone, Whitefield Road, Whitefield
Bangalore 560 066, India
RMZ NXT
Campus 1, Block B, 2nd & 3rd Floor
EPIP Zone, Whitefield
Bangalore 560 066, India
i-flex Techpark
Plot No 152, EPIP Zone
K R Puram Hobli, Whitefield
Bangalore 560 066, India
Pride Silicon Plaza
2nd Floor
Senapati Bapat Road
Pune 411 053, India
i-flex Center
Block 9A, Ambrosia II
Bhavdhan Khurd, Tal. Mulshi
Pune 411 021, India
1st Floor, “C” Building,
Shah Industrial Estate,
Saki-Vihar Road,
Andheri (E)
Mumbai 400 072, India
i-flex Heights
Lohia Jain IT Park
Paud Road, Kothrud
Pune 411 029, India
i-flex Park
C/o Embassy Business Park
C.V. Raman Nagar
Bangalore 560 093, India
Ambrosia
Village Bhavdhan Khurd,
Taluka Mulshi
Pune 411 021, India
i-flex Center
#133 Kundalahalli Road
Mahadevapura
Bangalore 560 037, India
143/1, Uthamar Gandhi Salai
Nungambakkam
Chennai 600 034, India
i-flex Center of Learning-ICL
# 333, Doddenakundi Industrial Area
Mahadevapura, Whitefield
Bangalore 560 048, India
# 150, Diamond District
B Tower, Lower Ground Floor
Kodihalli, Airport Road
Bangalore 560 008 , India
Annual Report 2007_2008_Final.indd 12
99, Venkatnarayana Road,
T Nagar
Chennai 600 017, India
Millennium House
12, Trubnaya Street
Moscow 103045, Russia
205, Building 3,
Dubai Internet City
Dubai, United Arab Emirates (UAE)
7/25/2008 9:58:39 AM
Subsidiary Offices – India
Subsidiary Office - Europe
Flexcel International Pvt. Ltd.
Plot No 24 – 25, Street No 9
Behind Hotel Tunga Paradise,
MIDC, Andheri (E)
Mumbai 400 093, India
i-flex solutions b.v.
World Trade Center, B-Tower, 12th Floor
Strawinskylaan 1245
1077 XX Amsterdam, The Netherlands
Offices
i-flex Processing Services Limited
i-flex Center
399, Subhash Road, Vile Parle (E)
Mumbai 400 057, India
Subsidiary Offices – Asia Pacific
i-flex solutions pte ltd
27, International Business Park
# 02-01 iQUEST@IBP Building
Singapore 609 924
Niederlassung Deutschland
Mainzer LandstraBe 49a
60329 Frankfurt am Main, Germany
121, Meridian Place
Off Marsh Wall, South Quay
London E14 9FE, UK
Level 25
40 Bank Street, Canary Wharf
London E14 5NR, UK
Offices
Room 806, Central Plaza
No. 227 HuangPi Road North
Shanghai 200003, China
6, FL 17, Fukoku
Seimei Building
2-2-2 Uchisaiwaicho, Chiyoda-ku
Tokyo 1000011, Japan
#103-504, Garam Apt. Ilwon-dong
Kangnam-gu
Seoul 135239, South Korea
Molyneux House
Bride Street
Dublin 8, Ireland
Fitzwilliam Hall
Fitzwilliam Place
Dublin 2, Ireland
17 Square Edouard
VII 75009
Paris, France
Subsidiary Office - i-flex solutions s.a.
Room 4-1, 5F, No.51, Sec. 2
Keelung Rd., Xinyi District
Taipei City 110, Taiwan (R.O.C.)
6-8 Kifissias Avenue
Paradissos, Maroussi
Athens 15125, Greece
Level 10, Margaret Street
Sydney, NSW 2000, Australia
Subsidiary Offices – North America
Subsidiary Office - Asia Pacific
i-flex Consulting (Asia Pacific) pte ltd
27, International Business Park
# 04-01 iQUEST@IBP Building
Singapore 609 924
i-flex America inc. & i-flex solutions inc. & Reveleus
399 Thornall Street, 6th Floor
Edison, NJ 08837, USA
i-flex solutions inc. (formerly SuperSolutions inc.)
10050 Crosstown Circle, Suite 600
Eden Prairie, MN 55344, USA
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 13
13
7/25/2008 9:58:39 AM
Mantas inc.
13650 Dulles Technology Drive, Suite 300
Herndon, VA 20171, USA
Offices
i-flex solutions inc.
60, State Street, Suite 700
Boston, MA 02109, USA
i-flex solutions inc.
5805 Blue Lagoon Drive, Suite 295
Miami, Florida 33126, USA
i-flex solutions (Canada) Inc. (formerly Castek inc.)
1 Yonge St., Suite 2300
Toronto, Ontario M5E 1E5, Canada
Subsidiary Office – Mauritius
ISP Internet Mauritius Company
10, Frere Felix de Valois Street
Port Louis, Mauritius
Offices
i-flex Processing Services Inc.
17682, Mitchell North, Suite 201
Irvine, CA, 92614, USA
Equinox Global Services Ltd.
DLF Infinity Tower A, 3rd Floor
DLF Cyber City, Phase II
Gurgaon 122 002, Haryana, India
Annual Report 2007_2008_Final.indd 14
7/25/2008 9:58:40 AM
Directors’ report
Financial year 2007-08
Dear Members,
The Directors take great pleasure in presenting their report on the
business and operations of your Company along with the Annual Report
and audited financial statements for the Financial Year 2007-08.
Financial highlights
Rs. 15,523.44 million last year, a growth of 16%. The Company’s
net income recorded 16% growth over the previous financial year and
increased to Rs. 4,108.74 million.
Revenue, on the basis of consolidated financials stood at Rs. 23,802.36
million this year, an increase of 15% from Rs. 20,609.38 million as
compared to the previous financial year. The Company’s net income
increased to Rs. 4,155.90 million this year, an increase of 12%.
As per Indian GAAP Unconsolidated:
(All amounts in millions of Indian Rupees)
Year ended
Year ended
March 31, 2008 March 31, 2007
Revenue
Income from operations before
depreciation & amortization
Depreciation & amortization
Provision for diminution in
value of investment
Interest/other income
(expenses)
Income before taxes
Provision for tax
Net income
Balance brought forward
Profit available for
appropriation
Transfer to general reserve
Proposed dividend
Corporate dividend tax
Dividend paid on stock options
exercised before AGM 2007
Balance carried forward
17,929.72
15,523.44
4,551.97
(603.10)
4,027.53
(565.35)
(120.00)
–
486.53
4,315.40
(206.66)
4,108.74
4,009.57
348.30
3,810.48
(263.74)
3,546.74
464.24
8,118.31
–
–
–
4,010.98
–
–
0.17
–
8,118.31
1.24
4,009.57
As per Indian GAAP Consolidated financial statements:
(All amounts in millions of Indian Rupees)
Year ended
Year ended
March 31, 2008 March 31, 2007
Revenue
Income from operations before
depreciation & amortization
Depreciation & amortization
Interest/other income
(expenses)
Income before taxes
Provision for tax
Net income for the year before
minority interest, share of
profit (loss) of associate
Minority interest
Share of profit (loss) of
associate
Net income
23,802.36
20,609.38
4,672.30
(705.88)
4,424.50
(653.02)
639.70
4,606.12
(441.68)
359.65
4,131.13
(415.96)
4,164.44
(4.42)
3,715.17
–
(4.12)
4,155.90
7.63
3,722.80
A detailed analysis of the financials is given in the Management Discussion
and Analysis report that forms part of this Annual Report.
Dividend
Your Company has aggressive plans to capitalize on the market
opportunities and needs to invest substantially in the growth of the
business. Keeping this in view, the Board has decided not to declare a
dividend for the year ended 2007-08. The funds will be used to further
invest in the growth opportunities to enhance the leadership of your
Company.
Transfer to reserves
The Company does not propose to transfer any amount to the General
Reserve out of the amount available for appropriation. An amount of
Rs. 8,118.31 million is proposed to be retained in the Profit & Loss
Account.
Share capital
During the year, the Company allotted 395,529 equity shares of face
value of Rs. 5/- each to GE Capital Mauritius Equity Investment (GE) upon
exercise of the conversion option of equal number of warrants allotted to
GE in August 2005. The Company also allotted 63,332 equity shares of
face value of Rs. 5/- each to its employees/directors who exercised their
options under the Employee Stock Option Plan.
As a result, as on March 31, 2008, the paid up equity share capital of the
Company increased to Rs. 418,737,205 divided into 83,747,441 equity
shares of face value of Rs. 5/- each.
Change of name
Oracle Global (Mauritius) Limited, the promoter of the Company holds
80.58% of the paid up equity capital of your Company. Oracle is the
world’s largest enterprise software provider. Your Company is a world
leader in providing IT solutions to the financial services industry. With this
background, the Board has approved the proposal to change the name of
your Company from ‘i-flex solutions limited’ to “Oracle Financial Services
Software Limited”, subject to the regulatory and shareholders’ approvals.
The proposed name demonstrates the synergies of scale, resources,
expertise and efficiency across the two organizations and reflects the
importance that Oracle attaches to the financial services sector.
Performance
On an unconsolidated basis, your Company’s revenue grew to
Rs. 17,929.72 million during the financial year 2007-08 from
The approval of the shareholders for the change of name is being sought
at the Extra-ordinary General Meeting to be held on August 11, 2008.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 15
15
7/25/2008 9:58:40 AM
Oracle’s holding in i-flex’s shares
Acquisitions
As of March 31, 2008, Oracle held 67,481,698 equity shares (80.58%
of the equity capital of the Company).
Use of IPO proceeds
In June 2002, your Company completed its Initial Public Offer (IPO) in
India and listed its shares on the National Stock Exchange of India Ltd.
(NSE) and Bombay Stock Exchange Ltd. (BSE). The entire IPO proceeds
aggregating Rs. 1,781 million have been utilized as under:
Acquisition of balance equity stake in
Flexcel International Private Limited
On March 31, 2008, Flexcel (a joint venture with HDFC Bank Limited
and its group companies and Lord Krishna Bank) became a wholly
owned subsidiary of i-flex solutions ltd effective March 31, 2008 with
the acquisition of the balance 60% shares of Flexcel from its co-venture
parties.
i-flex solutions s.a.
Utilization of funds
Issue related expenses
Bangalore Development Center
Mumbai Development Center
Setting up of Dubai Office
Investment in subsidiary companies
Total
Rupees in million
103
555
1,018
1
104
1,781
Your Company had issued shares to Oracle Global (Mauritius) Limited on
a preferential basis on September 14, 2006. The proceeds aggregating
to Rs. 5,815 million have been utilized as under:
Utilization of funds
Investment in i-flex America inc. in connection
with the acquisition of Mantas inc.
Investment in i-flex America inc. in connection
with the acquisition of the balance equity
stake in Castek Inc.
Total
Rupees in million
5,679
Castek Software Inc. (“Castek”)
136
5,815
All the proceeds of the IPO of 2002 and the preferential issue of 2006
have been utilized for the purposes for which they were raised.
Infrastructure
During the year, your Company made significant additions to its
infrastructure to meet its growing business requirements. The Company
opened new offices in Bangalore and Mumbai, creating capacity
to accommodate 2,000 additional professionals. The Company’s
subsidiaries also added offices in New Jersey and London to
accommodate a larger workforce.
The construction of the Company’s landmark building in Goregaon,
Mumbai right next to the Western Express Highway is complete. This
building is architecturally unique in Mumbai, having four floors for
parking and 10 floors for work space. It has a unique Dome shaped
reception with a water body around it. Your Company is in the process
of finalizing the lease for over a million square feet of contiguous office
space in Bangalore in a Special Economic Zone (SEZ).
Integration with Oracle Policies and Procedures
In order to derive synergies from Oracle’s global presence and resources
and fully comply with the governance norms that both i-flex and Oracle
are bound by, the Board has authorized the Company to adopt Oracle’s
policies and procedures within the applicable framework of local
regulations.
Annual Report 2007_2008_Final.indd 16
On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) acquired the banking
business from Athens Technology Center SA (“ATC”) for Rs. 670.05
million. The acquisition was structured by way of transfer of all contracts,
employees and fixed assets of the banking business from ATC to a newly
formed entity, i-flex solutions s.a., Greece with 90% shares owned by
i-flex b.v. Further, the Company has the right to acquire balance 10%
shares (based on earn out formulae) over 3 years in a tranche of 5%, 3%
and 2% after completion of 1, 2 and 3 years respectively from the date of
acquisition. As the consideration payable is dependent on future revenue
and profits, the same is considered to be a contingent consideration
and will be accounted when the liability arises. The Group consolidated
i-flex solutions s.a. from July 2, 2007 and recorded goodwill amounting
to Rs. 656.64 million.
On November 16, 2007, Castek became a wholly owned subsidiary of
i-flex America inc. with the acquisition of the balance 23.23% shares of
Castek from minority shareholders for a total consideration of Rs. 327.39
million. As part of the acquisition, certain employees owning shares
of Castek were paid additional consideration amounting to Rs. 90.81
million based on the number of shares held by them. The Group has
recorded additional consideration payment as employee compensation.
The Group recorded balance consideration as goodwill of Rs. 238.02
million considering Castek’s negative net worth and minority losses being
absorbed by the Group till the date of acquisition.
Global alliances
Your Company lays a great emphasis in building and expanding its
partner network with organizations which can promote, sell, implement
and support its offerings around the world. The partner network currently
comprises 33 resellers and 20 implementation partners. The expansion
of partners has been prominent in the East European region, especially in
Russia and the CIS countries.
Leading System Integration (SI) Partners play an active role in delivering
solutions to customers of your company. The SI Partners deliver projects
in the CIS, Latin America, Middle East, Japan and India.
The highlight of the engagement with partners this year has been the
enablement of partners to sell, implement and support our flagship
product FLEXCUBE, Reveleus, Mantas and Daybreak. There has been
almost a three-fold increase in the number of consultants with partner
organizations who have been trained and are qualified to implement
FLEXCUBE during the past year.
7/25/2008 9:58:40 AM
Subsidiaries
Your Company has subsidiaries in India, the USA, Singapore, the
Netherlands, Canada, Mauritius and Greece to handle operations as well
as to strengthen marketing and sales efforts in the respective markets
and to ensure deeper sales penetration in these regions.
During the financial year, i-flex solutions s.a., Greece became a majority
owned subsidiary of the Company through i-flex solutions b.v., the
Netherlands. The Company’s subsidiary i-flex America inc. has acquired
the remaining equity stake in its subsidiary company Castek Inc.,
Canada.
Pursuant to Section 212 of the Companies Act, 1956 (the Act), the
Company is required to attach to its Annual Report, the Balance Sheet,
Profit and Loss Account, Directors’ Report and the Report of the Auditors
(collectively referred to as ‘the accounts and reports’), of its subsidiaries
for the year ended March 31, 2008. Since the Company presents audited
consolidated financial statements under Indian GAAP in its Annual Report,
the Company had applied to the Central Government for an exemption
from attaching the accounts and reports of its subsidiaries to the Annual
Report. The approval of the Central Government in this regard has
been received vide letter no. 47/246/2008-CL-III dated June 24, 2008
exempting the Company from attaching the accounts and reports of
subsidiary companies under the provisions of Section 212 of the Act. As
such, the accounts and the reports of the subsidiary companies are not
attached to the Annual Report of the Company.
–
The All India Electronics and Computer Software Export Promotion
Council (ECS) award for Excellence in Exports for the year 2006-07.
This award was presented to i-flex in October 2007.
–
i-flex recognized as a “Deal Leader” in global banking platforms
by independent research firm Forrester Research Inc. in the
August 2007 report “Global Banking Platform Deals 2006:
Vendors”.
–
Mantas ranked number one in the Waters Ranking for Anti-Money
Laundering (AML) Solutions in July 2007.
–
Dataquest magazine rated i-flex BPO among the top 10 ‘dream
employers’ in the BPO sector in November 2007. This rating ranks
companies on various parameters linked to employee satisfaction.
–
In November 2007, i-flex successfully completed the SAS70 Review
of Internal Controls for the sixth consecutive year.
Litigation
The Company will make available the accounts and the reports of the
subsidiary companies upon request by any member/investor of the
Company or its subsidiaries. Further, the accounts and the reports of the
subsidiary companies will be kept open for inspection by any member at
the registered/corporate office of the Company and the registered office
of the subsidiaries during office hours of the Company/subsidiaries.
PortfolioScope, a company based in the United States of America, has
filed a lawsuit in a US District Court for the District of Massachusetts
alleging misappropriation of confidential and proprietary information
by the Company. The Company firmly believes that the allegations
are false, unwarranted and without merit and will vigorously oppose
the claims made by PortfolioScope. The Company had filed a motion
to dismiss PortfolioScope’s complaint and has instructed the legal
advisers to take all appropriate actions to protect the interests of the
Company and its customers. The motion to dismiss was granted in part.
Discovery concluded on the limited issue of whether PortfolioScope’s
claims were timely filed and is now going forward on the question of
whether or not the claims have any merit. The Court has set a trial date
for October 14, 2008.
Fixed deposits
Corporate governance
During the financial year 2007-08, the Company has not accepted any
fixed deposit within the meaning of Section 58A of the Companies Act,
1956 and as such, no amount of principal or interest was outstanding as
of the date of the Balance Sheet.
The Company has taken appropriate steps and measures to comply with
all the applicable provisions of Clause 49 of the listing agreement entered
with stock exchanges and Section 292A of the Companies Act, 1956.
Awards, honors and recognitions
Your Company has consistently received wide recognition for leadership
and achievements.
Your Company has constituted five committees consisting of Board
members, namely, Audit Committee, Compensation Committee, Transfer
Committee, ESOP Allotment Committee and Shareholders’ Grievances
Committee. A separate report on Corporate Governance, along with a
certificate of Statutory Auditors of the Company, is annexed herewith.
–
Business Week (November 2007) ranked i-flex solutions as one of
“Asia’s Hot Growth Companies: 2007”, i-flex was ranked second
highest in terms of market capitalization, third highest in terms of
sales and sixth highest in terms of profits.
A certificate from the Managing Director and Chief Financial Officer of the
Company confirming internal controls and checks pertaining to financial
statements for the year ended March 31, 2008 was placed before the
Board of Directors and the Board has noted the same.
–
i-flex solutions was ranked 30 in the annual FinTech 100 list of
financial industry technology vendors by American Banker and
Financial Insights (November 2007).
A list of the committees of the Board and names of their members is
given below. The scope of each of these committees and other related
information is detailed in the enclosed Corporate Governance Report.
–
i-flex BPO won the ‘NASSCOM Excellence in Gender Inclusivity – Best
Emerging Company’ award. This award was given away at
the ‘NASSCOM IT Women Leadership Summit 2007’ held in
December 2007.
Audit committee
Mr. Y M Kale (Chairman)
Mr. S P Bharucha
Mr. William T Comfort, Jr.
Ms. Tarjani Vakil
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 17
17
7/25/2008 9:58:40 AM
Compensation committee
Employee-wise details of options granted during the financial year ended
March 31, 2008 to:
Mr. William T Comfort, Jr. (Chairman)
Mr. Y M Kale
Mr. Charles Phillips
Number of Options
i. Director
Nil
ii. Any other employee who receives grant in any one
year of option amounting to 5% or more of option
granted during that year
Nil
iii. Identified employees who were granted option, during
any one year, equal to or exceeding 1% of the
issued capital (excluding outstanding warrants and
conversions) of the Company at the time of grant
Nil
iv. Diluted Earnings Per Share (EPS) pursuant to the
issue of shares on exercise of option calculated in
accordance with accounting standard 20 ‘Earnings
Per Share’ issued by the Institute of Chartered
Accountants of India
Rs. 49.17
Transfer committee
Ms. Tarjani Vakil (Chairperson)
Mr. Deepak Ghaisas
ESOP allotment committee
Ms. Tarjani Vakil (Chairperson)
Mr. Deepak Ghaisas
Shareholders’ grievances committee
Ms. Tarjani Vakil (Chairperson)
Mr. Deepak Ghaisas
Had compensation cost for the Company’s ESOP been determined based
on fair value at the grant dates, Company’s net income and earnings per
share would have been reduced to pro forma amounts indicated below:
Allotment of ESOP shares
March 31, 2008
The shareholders of the Company had approved the Employees Stock
Option Scheme (ESOP) of the Company in its Annual General Meeting of
2001. According to the said scheme, the Company has granted shares
to eligible employees/directors from time to time. The details are given
below.
Financial year
2001–02
2002–03
2003–04
2004–05
2005–06
2006–07
2007–08
Total
Pricing formula
Options vested at the end of the
financial year 2007–2008
Options exercised during
2007–2008
Total number of shares arising
as a result of exercise of options
during 2007–08
Options lapsed
2002–03
2003–04
2004–05
2005–06
2006–07
2007–08
Total
Variation of terms of options
Money realized by exercise of
options
Total number of options in force
Annual Report 2007_2008_Final.indd 18
Net income as reported
Less: Compensation expense
determined using fair value of
options
Pro forma net income
Basic income per share:
As reported
Pro forma
Diluted income per share:
As reported
Pro forma
Total number of Options granted
4,548,920
80,000
36,000
60,000
10,000
373,000
Nil
5,107,920
At the fair market value
as on the date of grant
148,453
63,332
63,332
129,520
112,500
82,200
87,600
46,600
35,900
494,320
None
Rs. 40,022,853
431,253
4,108,745
(54,918)
4,053,827
49.10
48.44
49.02
48.37
During the financial year 2007-2008, no fresh options were granted,
hence, the data related to weighted average exercise price of the options
and weighted average fair value of the options is not disclosed.
Human resources
Employees are our key assets and we have created a healthy and
productive work environment which encourages excellence. We
continuously invest in training staff in the latest technology trends and in
various sub-verticals within the financial services domain.
To meet business growth requirements, we have invested in increasing
the manpower strength in the product business by 32%, from 2,931 at
the end of March 2007 to 3,868 at the end of March 2008. Overall, on
a gross basis, we added 2,751 employees in our software and services
business in the financial year. Our strength in the KPO business stood at
875. Overall, our staff strength at the end of March 2008 was 11,006.
Directors’ responsibility statement
As required under Section 217(2AA) of the Companies Act, 1956, the
Directors hereby confirm that:
i.
In preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating
to material departures;
7/25/2008 9:58:40 AM
ii. The Directors have selected such accounting policies and applied
them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the
state of affairs of the Company at the end of the financial year and
of the profit of the Company for that period;
ii. During the internal control checks, the Company found that it had
inadvertently not paid stamp duty on a few share certificates at
the time of their issuance. The Company voluntarily informed the
Collector of Stamps of the same and paid the amount of stamp duty
including penalty thereof for the delayed period.
iii. The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Company
and for preventing and detecting fraud and other irregularities;
Conservation of energy, technology absorption and foreign
exchange earnings and outgo
iv. The Directors have prepared the annual accounts on a ‘going
concern’ basis.
The particulars as prescribed under Sub-Section (1)(e) of Section 217 of
the Companies Act, 1956 read with Companies (Disclosure of Particulars
in the Report of Board of Directors) Rules, 1988, the relevant data
pertaining to conservation of energy, technology absorption on foreign
exchange earnings and outgo are furnished hereunder:
Directors
Mr. Y M Kale, Ms. Tarjani Vakil and Mr. Charles Phillips, retire by
rotation at the ensuing Annual General Meeting and being eligible, offer
themselves for re-appointment. Mr. S P Bharucha holds office till the
conclusion of the ensuing Annual General Meeting and has not offered
himself for re-appointment. The Board places on record its appreciation
for the contributions made by Mr. Bharucha as a member of the Board
and Audit Committee.
Pursuant to Section 260 of the Companies Act, 1956,
Mr. Sergio Giacoletto Roggio was appointed as an Additional Director of
the Company on October 26, 2007. He holds office up to the date of the
ensuing Annual General Meeting. The Company has received a Notice in
writing from a Member pursuant to Section 257 of the Companies Act,
1956, proposing the candidature of Mr. Sergio Giacoletto Roggio for the
office of Director.
The Board recommends to the shareholders the resolutions for
re-appointment of Mr. Y M Kale, Ms. Tarjani Vakil and Mr. Charles Phillips
as Directors of the Company. The Board also recommends the appointment
of Mr. Sergio Giacoletto Roggio as a Director of the Company.
Brief resumes of the Directors proposed to be appointed/re-appointed,
nature of their expertise in specific functional areas and names
of companies in which they hold directorships and membership/
chairmanship of Board Committees, as stipulated under Clause 49 of the
Listing Agreement entered into with the stock exchanges are provided in
the Report on Corporate Governance forming part of the Annual Report.
Auditors
M/s S. R. Batliboi & Associates, Chartered Accountants, the present
Statutory Auditors of the Company, hold office till the ensuing Annual
General Meeting and have confirmed their eligibility and willingness to
accept office, if re-appointed.
a. Conservation of energy
The operations of the Company are not energy-intensive. The Company
however takes measures to reduce and optimize energy consumption by
using energy efficient computers, CFL bulbs and electronic ballast-based
lighting. Further offices have been designed to maximize the use of
ambient lighting while conserving the air conditioning. The expense on
power in relation to income is nominal and under control.
b. Technology absorption
Since businesses and technologies are changing constantly, research and
development activities are of paramount importance. Your Company lays
a great emphasis on knowledge management and has an institutionalized
process for absorption of new technologies. Your Company continues
its focus on quality up-gradation of software development process and
software product enhancements.
c. Foreign exchange earnings and outgo:
(All amounts in millions of Indian Rupees)
Foreign Exchange Earnings*
Foreign Exchange Outgo
(Including capital goods and other expenditure)
17,370.60
5,558.82
*Excluding reimbursement of traveling expenses and interest income
Prospects
The global financial services industry is a major user of technology
for transformation and growth. Your company has benefited from
the consolidation among banks and expansion of the operations to
new geographies in the past year. Rising customer expectations, a
sophisticated and demanding compliance regime and mounting costs
of operations are forcing financial institutions worldwide to strategically
review their IT assets and look for comprehensive modern solutions to
address their needs.
Auditors’ Report
With regard to the Auditors’ comment in the CARO report on delay in
payment of Fringe Benefit Tax (“FBT”) and Stamp Duty, the following are
our responses:
i.
During a review of FBT, the Company has been advised that the
expenses recovered from its customers which are not debited to its
Profit & Loss account are liable to FBT. Accordingly, the Company
has made a provision for FBT for the Financial Years 2005-06 and
2006-07 during the current financial year. The FBT payment is being
made.
Institutions are also launching new and innovative offerings, e.g.
internet-based banks, that effectively leverage technology to create
a differentiated proposition to customers. The cycle of replacing core
transaction systems is gaining further strength and customers are
looking for strategic partners who can fulfill a larger canvass of their
requirements. Further, financial institutions are investing in governance,
risk and compliance solutions based on regional regulatory mandates.
Your Company, together with Oracle, today offers the industry’s most
comprehensive solution footprint based on the latest technology that can
meet the requirements of financial institutions globally.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 19
19
7/25/2008 9:58:40 AM
Employee particulars
Information pursuant to Section 217(2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, 1975 and
under Section 217 (1)(e) of the said Act, read with the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988
to the extent applicable are set out in the Annexure hereto.
Acknowledgements
Your Directors take this opportunity to thank the Company’s customers,
shareholders, vendors and bankers for their continued support during
the year. Your Directors also wish to thank the Government of India and
its various agencies, Department of Electronics, the Software Technology
Parks – Bangalore, Mumbai, Chennai and Pune, the Santacruz Electronics
Export Processing Zone, the Customs and Excise department, Ministry of
Commerce, Ministry of Finance, Ministry of External Affairs, Department
of Telecommunication, the Reserve Bank of India, the State Governments
Annual Report 2007_2008_Final.indd 20
of Maharashtra, Karnataka, Haryana and Tamil Nadu and other local
Government Bodies for their support and look forward to their continued
support in the future.
Your Directors also place on record their appreciation for the excellent
contribution made by all employees of i-flex through their commitment,
competence, co-operation and diligence with a view to achieving
consistent growth for the Company.
For and on behalf of the Board,
Rajesh Hukku
Chairman
July 21, 2008
7/25/2008 9:58:40 AM
Statement of particulars of employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees)
Amendment Rules, 1975 and forming part of the Directors Report for the year ending March 31, 2008 Employed for whole of the year
Sr.
no.
Name
Designation & nature of duties
(as at March 31, 2008)
Qualification
Age
(Yrs.)
1
2
3
4
5
6
7
Agarwal Tapan $
Agashe Uday $
Alexander Vijay
Alva Jai Prakash
Arora Umesh
Bajaj Sanjay
Balachandran Laura
Senior Consultant
Senior Manager
Senior Manager
Senior Manager
Senior Consultant
Senior Manager
Senior Manager
36
38
48
55
35
41
43
June 15, 2001
March 4, 1996
February 1, 2000
May 17, 1993
August 20, 2001
June 8, 1998
November 15, 1996
13
13
22
31
12
19
18
1,967,693
332,555
3,692,252
2,838,685
2,546,313
3,184,005
3,213,077
MindTree Consulting
Tata Consultancy Services
ANZ Grindlays Bank Limited
Tandan Group
ICICI Bank
CS Limited
PSI Data Systems
8
9
10
11
Banaji Jamsheed
Bhambhani Sunil $
Bhangale Nityanand $
Bhatia Deepak Kumar $
Senior Manager
Senior Consultant
Senior Consultant
Senior Consultant
47
42
38
57
November 1, 2004
February 25, 2008
January 2, 1998
July 25, 2007
24
20
14
30
2,438,072
212,515
2,047,402
1,989,913
TCL Overseas Marketing Limited
Mastek Limited
Tata Consultancy Services
Polaris Software Lab Limited
12
Bhatia Mohan
Managing Principal, i-flex Consulting
45
March 8, 2001
20
3,687,108
Infosys Technologies Limited
13
14
15
16
Bhatt Amish B
Bhattacharjee Tanmoy $
Cheriyan Mona
Chhatpar Girish
Senior Manager
Senior Consultant
Senior Manager
Senior Consultant
BE
MCA
M Phil (History)
BA
BE, PGDM
BE (Electrical)
BSc (PCM), BE (Electrical &
Electronics)
BCom, MBA (Finance)
BSc
MBM
MSc (Maths), MSc
(Operations Research)
MSc, AICWA, PGDST (NCST),
FRM (GARP)
BE (Electronics), DMM
PGDM
BA, HSM
BE (Comp Engg), CISA
39
40
44
40
August 2, 2004
August 5, 2002
June 15, 1993
November 4, 1997
17
16
24
18
2,585,522
1,579,784
3,102,576
2,549,953
17
Dam Prantik $
Senior Manager
43
January 2, 2008
17
590,754
18
19
20
Damodaran Loganathan
Dandekar Rajeev M
Datta Arunabha
Senior Consultant
Senior Manager
Senior Consultant
46
44
54
March 21, 2005
March 12, 2007
March 1, 2007
26
21
30
2,674,678
3,112,975
2,755,839
21
22
23
24
25
26
27
28
29
Davis K K
Deodher Nitin Priyadarshi
Deshpande Sanjay V
Dhavale Vivek Vitthal
Dutta Basu
Gadre Shripad $
Gala Deepak $
Gayathri K H $
Ghaisas Deepak K $
49
42
46
35
54
38
33
41
50
May 19, 2004
August 16, 2004
May 17, 2005
August 4, 1993
April 2, 2001
January 22, 1996
January 27, 2000
July 1, 1991
July 7, 1993
25
20
24
14
26
15
11
19
27
3,546,955
2,770,957
3,739,118
2,816,743
3,769,702
405,886
465,444
1,249,694
15,219,796
30
31
32
33
Ghosh Sanjay Kumar
Gokhale Mahesh Vinayak $
Gopalakrishna Ravikiran $
Govilkar Vivek
BTech
BE (Electrical)
PGDM
MTech
36
36
33
52
September 1, 1994
October 27, 2003
August 18, 2003
April 12, 1994
14
13
10
27
3,535,768
201,763
215,455
5,630,757
–
Unisys Limited
ICICI Bank Limited
Tata Unisys Limited
34
35
Govindan Gopinath
Gupta Atul
PGDM
BTech, PGDM
43
47
December 19, 1994
April 1, 1994
20
26
3,893,076
5,609,782
Brooke Bond-Lipton
Citicorp Overseas Software Limited
36
37
38
39
Gupta Bimal
Gupta Das Buddhadeb
Gupta Gyanesh
Gupta Kapil
BE (Hon.)
BSc
BE (Electronics)
MTech
48
44
40
44
August 10, 1992
February 11, 1998
December 19, 2005
March 21, 1991
25
20
18
17
3,424,383
3,336,339
2,451,369
5,278,350
TVS Suzuki Limited
Tata Steel Limited
Infosys Technologies Limited
Citicorp Overseas Software Limited
40
41
42
Gupta Manish $
Gupta Manish Chandra
Gupta Vikram
BE
BE, MBA
BE
36
38
44
August 1, 1997
March 7, 2005
April 1, 1996
9
15
21
576,015
2,801,681
5,321,149
–
Citicorp Overseas Softare Limited
T S B Bank
43
Guruprasad D
Senior Manager
Senior Consultant
Senior Manager
Senior Manager
Senior Consultant
Senior Consultant
Senior Consultant
Senior Manager
Vice Chairman and
Company Secretary
Senior Manager
Senior Consultant
Senior Consultant
Sr. Vice President, Human Resources
and Training
Vice President, Corporate HR
Sr. Vice President, Process & Quality
Management Group
Senior Manager
Senior Manager
Senior Consultant
Vice President and Chief Architect,
Universal Banking
Senior Consultant
Senior Consultant
Vice President, Private Wealth
Management
Senior Manager
BCom, ACA, Dip. Fin.
Management
BSc, CAIIB
BSc, BSc (Tech.), Grad CWA
MA (Sociology), BSc
(Physics), CAIIB
BCom, PGD, PM & IR
MSc
MSc, MBA
BE, PDGST
MSc, MBA
BE
BE
BS COMM
ACA, FCS, AICWA
Majesco Software Inc
Caltiger.com
Essars Limited
Data Management Services (Bahrain)
Limited
Accenture Services Private Limited
BE (Hon.) Electrical and
Electronoics
BSc
BE (Mechanical)
PGDM
MPM & PGDM
ME
37
August 3, 1992
15
3,916,328
–
Senior Consultant
Senior Consultant
Vice President, Customer Fulfillment
Senior Consultant
Sr. Vice President, Infrastructure
Services Group
Chairman
BE
Vice President, Reveleus Development MSc
Senior Consultant
BE (Computer Engg.), PGDM
38
46
40
59
53
May 2, 2001
January 8, 2007
May 20, 2002
October 16, 2000
October 3, 1988
14
21
21
33
30
702,986
289,976
4,653,028
3,577,432
5,339,947
Quidnunc Inc
Polaris Software Lab. Limited
Home Trade Limited
Infrasoft
Citicorp Overseas Software Limited
50
43
38
March 1, 1987
March 10, 1993
May 15, 2000
29
20
14
29,480
4,617,916
2,402,613
Senior Manager
Senior Consultant
Senior Consultant
Senior Consultant
Executive Vice President, Banking
Products
Senior Consultant
Senior Consultant
Senior Consultant
ACA Grad CWA
BE, MMS (Finance)
PGDM
MTech
BE
43
39
45
36
51
April 15, 2003
October 1, 1999
July 2, 2007
August 5, 1996
December 15, 1988
17
15
18
14
26
3,431,574
2,758,644
1,960,885
2,518,213
7,190,725
Citicorp Overseas Software Limited
Telco
Indbank Merchant Banking Services
Limited
American Express Bank Limited
CEAT Financial Services Limited
American Express Bank Limited
Kinetics Technology India Limited
Citicorp Overseas Software Limited
BS COMM
BE Computers, MMS
MBA
40
40
41
July 1, 1991
April 30, 2001
June 9, 2006
17
18
18
1,249,694
2,564,474
304,910
Wipro Infotech
Ruksun Software
Perishing Technology Group
Senior Consultant
BCom, CAIIB, LLB, MA
(Econ), AICWA
BE (E&C)
BCom, CAIIB, DCM
BE (Electrical Engg.)
MSc, (Computer Science)
BE (E&C)
MS (Computer Engg.)
ACA, LLB
BE (Electronics)
PGDM
50
February 18, 2002
30
2,441,861
Accel Software
43
44
43
34
46
37
41
37
42
June 1, 1992
April 13, 2005
August 30, 2004
February 4, 2008
April 21, 2004
May 2, 2007
June 3, 1991
July 11, 2006
November 3, 2003
19
25
21
13
23
14
17
15
17
3,682,248
2,898,766
2,966,397
202,093
4,449,002
2,149,103
4,193,463
2,682,227
1,450,543
L&T Computer Center
Equitorial Trust Bank, Nigeria
Unisys Corporation
3i Infotech
GTL Limited
Tech Process Solutions Limited
Citicorp Overseas Software Limited
HSBC - Global Technology Centre
HCL Comnet
$
44
45
46
47
48
Gururaja Rau Srinivas
Gyaneshwar Padmashali $
Hampihallikar Vinayak
Handigol Ravi
Hariharan S
49
50
51
Hukku Rajesh *
Iyer Meenakshy
Jain Madhukar K
52
53
54
55
56
Jairaj Thyagaraj
Jajodia Pawan
Jayaraman Bhaskar $
Jayasankar M
John Joseph
57
58
59
60
K Gayathri H $
Kale Anirudha
Kalyanasundaram
Ramachandran $
Kamath Ganesh V
61
62
63
64
65
66
67
68
69
Kamath Rajani
Kane Anand Shankar
Kanekar Amlesh Bhalchandra
Kannan Rengarajan $
Kapoor Madhukar Harbanslal
Katwala Saptarshi $
Ketkar Avadhut D
Kewalramani Deepak
Khandeparkar Hemant Gajanan $
Senior Manager
Senior Consultant
Senior Manager
Senior Consultant
Senior Manager
Senior Consultant
Chief Accounting Officer
Senior Consultant
Senior Consultant
Date of joining Experience
(Yrs.)
Remuneration
received (Rs.)
Previous
employer
Wipro Technologies
Avaya Inc, USA
American Express Bank Limited
DSL Software Limited
Ness Technologies Limited
iSmart Solutions Limited
–
ANZ Information Technology
Godrej and Boyce Mfg. Co. Limited
–
Wipro Infotech
Tata Unisys Limited
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 21
21
7/25/2008 9:58:40 AM
Statement of particulars of employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees)
Amendment Rules, 1975 and forming part of the Directors Report for the year ending March 31, 2008 Employed for whole of the year (Continued)
Sr.
no.
Name
Designation & nature of duties
(as at March 31, 2008)
Qualification
Age
(Yrs.)
70
71
72
Senior Consultant
Senior Manager
Managing Director & CEO
BE (Electronics)
BE, PGDIE (NITIE)
MSc
36
45
50
August 4, 1993
July 26, 1999
October 7, 1985
14
21
28
2,452,314
3,462,475
12,292,614
73
74
75
76
Khare Manisha Avinash
Kini Dinakar Kuntadi
N R Kothandaraman
(N R K Raman)
Kulkarni Manoj N
Kulkarni Dilip R
Kulkarni Gurunath
Kulkarni Manmath
BE
MFM
ME
MSc
41
54
44
42
February 6, 1995
December 1, 1993
June 4, 2001
July 16, 1987
19
34
20
20
3,417,429
5,010,962
3,052,408
5,238,587
L & T Limited
Citicorp Overseas Software Limited
Datamatics Limited
Citicorp Overseas Software Limited
77
Kulkarni Nandkumar
BTech, PGDM
55
October 13, 2000
26
4,937,994
Opus Software Private Limited
78
79
Kulkarni Vyasaraj R
Kumar M Ravi
BE
BSc
38
40
April 20, 2000
June 18, 1990
15
21
2,996,863
4,472,144
IT solutions Limited
Comstruct Software Private Limited
80
81
82
83
84
85
86
87
Kumar Sampath
Kumar Satish G
Kumar Satish M $
Laxminarayan K V
Madani Paresh Purshotam
Madhusoodhanan S
Mahadevan Padma
Mahadevan Ravi
February 12, 1996
June 27, 2001
April 10, 2003
November 23, 1998
April 7, 2003
March 3, 2004
August 25, 2003
July 1, 1998
19
19
8
36
16
23
29
20
3,459,856
2,779,686
221,744
3,714,187
2,741,545
2,402,739
2,716,215
3,675,045
Stock Holiding Corp. Of India Limited
Computer Associates India Limited.
Orbi Solutions Limited
Mastek Limited
Unisys World Trade (AEME)
State Bank of India
Polaris Software Lab Limited
LIC Hsg. Finance Limited
Mahadevan V
Makhija Rajesh
Malhotra Parveen Kumar
Mathew Thomas
MMS
BE (Electronics)
BE (Electrical & Electronics)
MCom, DCSSM
BCom, PGHSM
BSc (Zoology)
MA Economics
MSc, AICWA, PGDST (NCST),
FRM (GARP)
BSc (Mathematics), MCA
BE (Electronics)
MSc (Mathematics), PGDCA
MBA
40
47
36
53
39
43
53
43
88
89
90
91
42
38
44
52
October 11, 1996
October 1, 1992
December 20, 1999
August 2, 1989
18
18
21
28
3,024,140
3,696,419
2,544,861
4,236,320
First American Bank of Kenya Limited
Godrej and Boyce Limited
Mastek Limited
Citicorp Overseas Software Limited
92
93
94
95
96
97
98
99
Mathur Pallav $
Mehta Bharat
Merchant Farhad
Mohan Roopa
Mohan Sujatha
Mondal Pinaki
Muralidhar Mini S
Murthy Sunil Krishna
Senior Manager
Chief Compliance Officer
Senior Manager
Sr. Vice President and Chief Architect
for Retail & Internet Banking
Sr. Vice President, Retail & Internet
Banking
Senior Consultant
Vice President, TDMS & Facilities
Management
Senior Manager
Senior Manager
Senior Consultant
Senior Consultant
Senior Consultant
Senior Consultant
Senior Manager
Vice President, Solution Architecting
Group - PrimeSourcing
Senior Manager
Senior Consultant
Senior Consultant
Vice President, Knowledge
Management and Product
Management
Senior Consultant
Senior Manager
Senior Consultant
Senior Consultant
Senior Consultant
Senior Manager
Senior Manager
Senior Manager
38
35
37
46
39
40
46
45
December 1, 2000
January 15, 1997
August 1, 2002
July 31, 1995
January 2, 1998
November 15, 2001
February 2, 2004
August 12, 2005
14
15
16
23
18
17
20
20
649,401
3,352,953
2,580,906
2,507,519
2,586,377
2,967,479
2,950,238
2,776,245
Orbis Securities Private Limited
Seshan Subramanian & Associates
VFormTech
Datacons Private Limited
ANZ Grindlays Plc
Citibank N.A.
DSL Software
Juniper Networks, Inc
100
Murungacheri Ravikumar R
Senior Consultant
43
April 30, 2007
22
2,522,809
AXA Insurance (Gulf)
101
102
Muzumdar Kiriti Kanti
Narasimhan G
AICWA
BCom, LLB
BE
BSc
MCom, ICWAI - Inter
BTech, PGDM
MSc, PGDIM
BE (Mechanical), Master
of Science (Computer
Information Sciences)
Grad CWA (Cost and Works
Accountants)
BCom
CAIIB
40
45
December 4, 1997
March 11, 1993
18
20
2,480,525
4,557,110
Dow Jones Telerate Inc
State Bank Of India
103
Narasimhan R
104
105
106
Natarajan Kiran
Natarajan P V Jambu
Natarajan S
Senior Consultant
Vice President, SQA - Products and
Global Operations
Vice President, Project Management
Office
Senior Manager
Vice President, SQA - PrimeSourcing
Senior Manager
107
108
109
110
Nene Adwait Ashok
Ohrie Sheenam $
Padalkar Makarand S
Padia Sweta
Senior Consultant
Senior Manager
Chief Financial Officer
Senior Consultant
111
112
113
114
Padmanabhan Sridhar
Padmashali Gyaneshwar Kumar $
Pattamada Medapa Ayanna $
Pendse Sameer
Chief Information Officer
Senior Consultant
Senior Manager
Senior Consultant
115
116
117
118
119
120
121
122
123
124
125
Pereira Eugenia Marlene $
Perez Gratian
Pingaley Arun
Podila V V S Sai Sarma $
Ponnath Gopalan Sathyan
Potdar Rajendra
Pradhan Rahul Dattatraya $
Prasad Murali L
Prasad R Karthick
Radhakrishnan Rajesh P $
Rai Anil
Senior Consultant
Vice President, Corporate Accounts
Senior Manager
Senior Consultant
Senior Manager
Senior Manager
Senior Consultant
Senior Consultant
Senior Manager
Senior Consultant
Senior Manager
126
127
128
Rajan Sundar R
Rajpal Varun
Ramakrishna Saloni P
Senior Manager
Senior Manager
Senior Manager
129
130
Ramakrishnan Ganesh
Ramamurthi R
131
132
133
134
Rangarajan Prabakar
Ranjan Puneet
Rao Sanjeet Prakash
Rao Kishore
Senior Manager
Vice President, FC-COL, Universal
Banking
Senior Consultant
Senior Manager
Senior Manager
Senior Manager
135
Rao Mahesh
Annual Report 2007_2008_Final.indd 22
CEO, i-flex Processing
Services Limited
Date of joining Experience
(Yrs.)
Remuneration
received (Rs.)
Previous
employer
–
Logica Inc
Datamatics Consultant
MFM
46
September 1, 1993
23
5,099,090
Canara Bank
BE (Information Engg.), MBA
BE, MPIB
MBA
38
44
37
February 14, 2005
September 1, 1997
May 24, 1999
15
20
15
3,118,104
4,221,420
2,753,786
BE, PGDM
BE (ELEC)
MTech
MBA (Finance), BE
(Electronics and Commn.)
Master of Engineering (IISc)
BE (Hons) Mechanical Engg.
MBA (Finance), BSc (PCM)
BE (Computer Engg),
Executive MBA
BE
CAIIB
BCom (Hons), Grad CWA
BE
BE (Electronics)
BE
BE
BE, PGDM, CISA
BE (Hons.) Computer Science
Graduate
BE (Electronics &
Telecommunications)
BE (Electrical Engg.)
BE (Comp. Tech.)
BSc, MA, MBA (Finance),
CAIIB
BE, MMS
ACA
38
39
49
36
December 16, 2002
September 1, 1992
August 16, 1994
May 8, 2006
15
15
24
12
2,622,066
1,330,132
6,212,542
2,659,830
TREMA
National Bank of Oman, Oman
Stock Holding Corportaion of India
Limited
Deutsche Bank AG
–
Tata Unisys Limited
PeopleSoft India Private Limited
52
46
43
38
June 23, 1999
January 8, 2007
August 23, 2004
February 28, 2005
27
21
18
16
4,245,145
335,007
2,009,348
2,502,020
KPMG India Private Limited
Polaris Software Lab Limited
Providus Risk Management Solutions
Ness Technologies
35
52
41
32
42
38
41
39
36
37
50
July 5, 2004
April 5, 1993
July 30, 1997
March 20, 2006
July 17, 2002
August 3, 1992
October 22, 2001
March 2, 1998
September 1, 1994
August 3, 2004
May 3, 2002
11
31
19
13
19
16
18
15
15
14
27
231,379
4,349,908
3,342,740
223,237
3,221,423
3,696,778
2,184,160
2,582,305
3,328,041
1,856,603
4,063,357
–
University of North Texas, USA
ANZ Grindlays Bank
First Indian Corporation
Computer Associates
Citicorp Overseas Software Limited
–
Times Guaranty Financials Limited
People.com Consultants Inc, USA
HSBC
Deutsche Software Limited
36
40
50
June 2, 1993
August 1, 1994
April 26, 2000
15
16
25
3,244,470
3,529,081
2,755,219
–
Inchcape System
Vysya Bank
42
52
November 12, 1996
July 28, 1989
18
25
2,836,186
4,790,725
BAARNS Consulting
Citicorp Overseas Software Limited
MTech
BTech, MBA
BE (Mechanical)
BE (Electrical Engg.), MBA
(Finance)
ACA
36
41
36
50
September 11, 2006
April 27, 1998
September 1, 1994
April 25, 1994
12
16
14
28
2,568,231
3,426,394
3,701,553
3,101,881
Deutsche Bank AG
Apple Credit Corporation
–
Tata Unisys Limited
55
November 1, 2006
30
4,471,279
Infosys BPO Limited
7/25/2008 9:58:41 AM
Statement of particulars of employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees)
Amendment Rules, 1975 and forming part of the Directors Report for the year ending March 31, 2008 Employed for whole of the year (Continued)
Sr.
no.
Name
Designation & nature of duties
(as at March 31, 2008)
Qualification
Age
(Yrs.)
Date of joining Experience
(Yrs.)
Remuneration
received (Rs.)
Previous
employer
136
Rao Raghavendra Hulgeri
Senior Consultant
48
May 2, 2001
27
2,557,440
Netkraft Private Limited
137
138
139
140
141
142
143
144
145
146
147
148
149
150
Rao Srinivasan S
Rao Visweswara P N
Ravikumar V
Ravisankar R *
Ray Abhik
Reddy V Rajashekhar
S Subhashini
Sadarangani Harish Gopichand
Saini Ravinder Darshan $
Sampathkumar V
Savanur Nagaraj
Sethuramalingam P
Shankar H V
Shankar V
40
38
43
49
45
36
40
47
36
47
39
45
51
45
June 20, 2002
May 8, 2000
October 19, 1995
June 2, 1987
November 3, 1997
September 1, 1994
October 5, 1995
December 2, 2002
February 4, 2008
August 26, 1996
September 1, 1992
October 11, 2000
May 10, 2002
May 15, 1985
17
14
14
27
21
13
17
21
11
27
17
23
29
23
2,401,248
2,744,615
4,330,289
Nil
3,551,777
3,324,833
2,660,299
2,751,610
297,971
3,459,856
4,150,912
2,800,772
3,052,347
6,814,044
Temenos systems I Private Limited
IDBI Bank Limited
Bharat Overseas Bank Limited
Citicorp Overseas Software Limited
Tata Infotech Limited
–
Vijaya Bank
ICICI Infotech Limited
Bank of America
Canara Bank
Triveni Engineering Works Limited
Fuji Bank
KPMG Private Limited
Citicorp Overseas Software Limited
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
Shanker Lakshmanan
Sharma Reetu $
Sharma Vijay
Shelat Birad A $
Shenoy Ajay Chandrashekhar $
Sheshadri K B
Shetty D V
Shukla Surendra V
Singla Sanjay
Sinha Rakesh
Sivaramakrishnan G R
Sridhar R
Srihari B
Srinivasan Suresh
Srinivasan V
BE (Mechanical)
BE
BTech, PGDM
BE
BE
MSc, MBA
LLB
MSc
BTech
BA, CAIIB
MS (Software Systems)
BSc
MSc (Tech)
BCom, CA, PGDM
BSc
43
32
51
35
32
47
49
40
35
46
40
47
35
41
46
June 11, 1996
November 16, 2000
March 1, 1994
September 1, 1994
August 12, 2002
March 1, 1996
March 1, 1988
August 3, 1992
October 29, 2001
June 5, 2000
September 13, 1996
September 27, 2000
September 1, 1994
October 5, 1994
December 13, 1988
20
11
26
13
11
23
27
18
12
21
20
25
14
15
23
2,843,402
476,987
4,832,642
921,857
628,912
3,657,078
4,697,173
3,719,632
2,474,320
2,850,323
3,200,463
4,203,402
3,202,644
2,428,352
4,893,061
National Bank of Oman
Bombay Stock Exchange
Price Waterhouse Associates
–
–
Industrial Development Bank of India
Citicorp Overseas Software Limited
Tata Institute of Fundamental Research
US Interactive Inc
Bank of India
Experts Sofware Consultants Limited
National Bank of Dubai, Dubai, UAE
–
Bank of America
Citicorp Overseas Software Limited
166
167
168
169
Srivatsan V
Subramaniam Venkata
Subramanian Ganesh
Sundararajan S
ACA, PGDM
CAIIB
BSc, MCA
MSc (Maths)
39
49
40
44
February 19, 1999
November 20, 1992
September 11, 1993
October 23, 1990
14
25
17
22
3,213,010
4,890,551
2,795,622
5,976,995
ICICI Limited
Citicorp Overseas Software Limited
CMC Limited
Ashok Leyland
170
Suresh Kumar P
Senior Consultant
Senior Consultant
Senior Manager
Vice Chairman
Senior Consultant
Senior Manager
Senior Consultant
Senior Manager
Senior Consultant
Senior Manager
Senior Consultant
Senior Manager
Senior Manager
Executive Vice President &
Global Head, PrimeSourcing &
Insurance Solutions
Senior Manager
Senior Consultant
Sr. Vice President, i-flex Consulting
Senior Manager
Senior Consultant
Senior Consultant
Vice President, Administration
Senior Consultant
Senior Consultant
Senior Manager
Senior Manager
Senior Consultant
Senior Manager
Senior Consultant
Vice President, Corporate
Development and Chief of Staff
Senior Manager
CEO, Flexcel
Senior Manager
Sr. Vice President, Customer
Fulfillment
Senior Manager
BSc, CAIIB, PGDIM, CQA,
CISA
BCom
CA
MSc, MBA
BTech, PGDM
BTech (Electronics)
BTech (Hons)
BSc, MCA
BSc, DSM
CFA
BSc, CAIIB
BE (Electrical Engg.)
BSc, MA, ACWAI, CAIIB
BSc (Maths)
MSc, MBA
MSc (Hons), MMS
40
February 3, 1999
19
3,778,730
171
Suresha R
Senior Manager
MSc, CAIIB, CAMS, PMP
53
February 17, 2000
32
2,703,580
172
173
Thakre Prashant $
Thampi P. Prasannavadanan
BE
MSc, MBA, CAIIB
31
53
July 5, 1999
July 9, 1996
8
30
266,114
4,908,227
174
Tikalkar Ashok
Senior Consultant
Vice President, Customer
Fulfillment-Africa South Asia
and Middle East & FC-COL-Retail
Banking
Senior Consultant
Stock Holding Corportaion of India
Limited
Canbank Investment Management
Services Limited
–
Federal Bank
41
May 7, 2001
18
2,650,258
Gateway Infosys
175
176
177
178
179
180
Vadapandeshwara Rajaram N
Vaidyanathan Karthik
Vardhana Vishnu Nandamuri R
Vasudev G
Venkatachalam G
Venkateshwaran S
Senior Consultant
Senior Consultant
Senior Consultant
Consultant
Senior Manager
Senior Manager
35
34
44
35
36
38
December 29, 2003
April 1, 1997
March 28, 2005
December 29, 2000
September 1, 1994
January 8, 1999
13
11
17
16
14
14
2,469,133
2,440,787
2,675,329
3,900,922
2,988,228
2,904,398
Sun Microsystem, Inc
–
Panimalar Institute of Mgnt St
–
–
ICICI Limited
181
182
183
184
Venkatraman K R
Vishnubhotla Ramagopal
Vivekananthan S
Yorke Peter
37
41
36
42
September 27, 1999
April 12, 2005
June 1, 1994
March 1, 2007
13
17
13
20
3,191,875
2,688,810
3,291,296
2,942,465
Robert Bosch India Limited
CG Smith Software Private Limited
–
Symphony Services
185
Zacharia Tony $
Senior Manager
Senior Consultant
Senior Manager
Vice President, Marketing &
Communications
Senior Manager
BE (Electronics & Telecom),
PGDM
BE (Computer Science)
BE (Electrical)
PHD
DCSE, MCom
BTech (Chemical)
MSc (Hons.), BE (Hons.),
PGDM
BE (Mechanical)
BTech, PGDM
MCA
BA, Diploma in Journalism
BE
39
March 19, 2003
16
382,420
ANZ Information Technology
Notes:
1) Gross Remuneration comprises salary, allowances, monetary value of perquisites, commission to Directors and the Company’s contribution to Provident and superannuation funds, but
excludes provision for retiring gratuity for which separate figures are not available.
2) None of the employees mentioned above is a relative of any Director of the Company.
3) * Till April 30, 2007 Mr. Rajesh Hukku and Mr. R Ravisankar were deputed to USA as Chairman and CEO of i-flex solutions inc., respectively. Their Gross compensation comprising fixed
salary and variable performance based remuneration from i-flex solutions inc. for the financial year 2007-08 was USD 45,020 and USD 34,266 respectively. In addition, Mr. Hukku and
Mr. R Ravisankar served as Chairman and Managing Director and CEO, International Operations and Business Development for i-flex solutions ltd, for which they were paid a salary of
Rs. 29,480 and Rs. Nil, as in the table above.
4) The Ministry of Company Affairs has amended the Companies (Particulars of Employees) rules, 1975 to the effect that particulars of employees of companies engaged in the Information
Technology Sector posted and working outside India, not being directors or their relatives, drawing more than Rs. 2,400,000 per financial or Rs. 200,000 per month, as the case may be, need
not be included in the statement. Hence remuneration paid to such employees is not included in the above statement.
5) $ Stands for part of the year.
6) None of the employees own more than 2% of the outstanding shares of the Company as on March 31, 2008.
For and on behalf of the Board
Rajesh Hukku
Chairman
July 21, 2008
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 23
23
7/25/2008 9:58:41 AM
Corporate governance report
The detailed report on Corporate Governance for the financial year
April 1, 2007 to March 31, 2008 as per Clause 49 of the Listing
Agreement entered with Stock Exchanges is set out below:
understands and respects its fiduciary role and responsibility to the
shareholders and strives hard to meet their expectations.
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
recognized corporate governance practices and continuously
benchmarking itself against each such practice. The Company
The composition of the Board of Directors of the Company (the Board) as
on March 31, 2008, is given below:
Name
Designation
Category
Mr. Rajesh Hukku*
Mr. S P Bharucha
Mr. William T Comfort, Jr.
Mr. Deepak Ghaisas**
Mr. Y M Kale
Mr. Charles Phillips
Mr. N R Kothandaraman
(N R K Raman)**
Mr. R Ravisankar**
Mr. Sergio Giacoletto Roggio***
Ms. Tarjani Vakil
Mr. Derek H Williams** @
Chairman
Director
Director
Vice Chairman
Director
Director
Managing Director
Non-Executive, Non-Independent Director
Non-Executive, Independent Director
Non-Executive, Independent Director
Executive, Non-Independent Director
Non-Executive, Independent Director
Non-Executive, Non-Independent Director
Executive, Non-Independent Director
Vice Chairman
Director
Director
Director
Executive, Non-Independent Director
Non-Executive, Non-Independent Director
Non-Executive, Independent Director
Non-Executive, Non-Independent Director
*
**
Directorships Chairpersonship
Membership
in other of Committees# of Committees#
Companies
of Boards
of Boards
of other
of other
Companies
Companies
3
1
5
10
4
3
Nil
Nil
Nil
2
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1
6
6
1
6
35
Nil
Nil
Nil
3
Nil
Nil
Nil
1
3
Nil
Mr. Rajesh Hukku has ceased to be the Managing Director of the Company with effect from May 1, 2007 and continues as the Non-Executive Chairman of the
Company.
The Board of Directors of the Company, in its meeting held on May 1, 2007, appointed
i.
ii.
iii.
iv.
Mr. R Ravisankar as an Additional Director, Whole-time Director and Vice Chairman.
Mr. Deepak Ghaisas as an Additional Director, Whole-time Director and Vice Chairman.
Mr. N R K Raman as an Additional Director and Managing Director.
Mr. Derek Williams as an Additional Director.
The members of the Company at the Annual General Meeting held on August 24, 2007, have appointed:
1.
2.
3.
4.
Mr. R Ravisankar as a Whole-time Director.
Mr. Deepak Ghaisas as a Whole-time Director.
Mr. N R K Raman as the Managing Director.
Mr. Derek Williams as a Director.
*** The Board of Directors of the Company, in its meeting held on October 26, 2007, appointed Mr. Sergio Giacoletto Roggio as an Additional Director of the Company.
#
Only the Audit and Shareholders’ Grievances Committees are considered.
@
Includes 32 foreign companies.
2.2 Attendance of each Director at the Board Meetings and the
last Annual General Meeting
During the Financial Year 2007-2008, 9 Board Meetings were held on
the following dates:
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.
The independent Directors actively participate in the Board Meeting and
contribute significantly by expressing their opinions, views and suggestion
in the decision process.
April 30, 2007, May 1, 2007, July 4, 2007, July 30, 2007,
August 24, 2007, October 4, 2007, October 26, 2007,
December 3, 2007 and January 22, 2008.
Annual Report 2007_2008_Final.indd 24
7/25/2008 9:58:41 AM
The attendance of the Directors at the Board Meetings and the Annual
General Meeting held during the financial year 2007-2008 are given
below:
Name of the Director
Number
of Board
Meetings
attended
Number of Board
Meetings attended
Other directorships
Mr. N R K Raman
Equinox Global Services Ltd.
ISP Internet Mauritius Company
i-flex Processing Services Ltd.
i-flex solutions s.a.
i-flex solutions inc.
i-flex America inc.
Mr. R Ravisankar
Castek Inc.
Castek Software Inc.
i-flex solutions inc.
i-flex America inc.
i-flex Processing Services Ltd.
Mantas inc.
Mr. Sergio Giacoletto Roggio
CSR plc UK
Ms. Tarjani Vakil
Aditya Birla Nuvo Ltd.
Alkyl Amines Chemicals Ltd.
Asian Paints Ltd.
DSP Merrill Lynch Trustee Co. Pvt. Ltd.
Idea Cellular Ltd.
Mahindra Intertrade Ltd.
Mr. Derek H Williams
Beijing Oracle Software Systems Co
Limited
E-docs Asia-Pacific Pty Ltd.
Eontec Australia Pty Ltd.
Eontec Singapore Pte Ltd.
G-Log Pty Ltd.
G-Log Sdn Bhd Malaysia
JD Edwards Australia Pty Limited
JD Edwards WorldSolutions Co Pty
Limited
JD Edwards (Hong Kong) Ltd.
Oracle (Philippines) Corporation
Oracle Corporation (Thailand) Company
Limited
Oracle Corporation Australia Pty Limited
Oracle Corporation Japan
Oracle Corporation Malaysia Sdn. Bhd (fka
Oracle Systems Malaysia Sdn Bhd)
Oracle Corporation Singapore Pte Ltd.
Oracle Korea Ltd.
Oracle New Zealand Limited
Oracle Research and Development
Center (Beijing) Co Limited
Center (Shenzhen) Co Limited
Oracle Systems Hong Kong Limited
Oracle Vietnam Pte Ltd.
Oracle India Pvt. Ltd.
PeopleSoft (Beijing) Software Co Limited
PeopleSoft Australia Pty Limited
PeopleSoft Hong Kong Limited
PeopleSoft India Private Limited
PeopleSoft Worldwide (M) Sdn Bhd
PT Oracle Indonesia
Siebel Systems Australia Pty Limited
Siebel Systems Hong Kong Limited
Siebel Systems Malaysia Sdn Bhd
Siebel Systems Software (India) Private
Limited
SPL WorldGroup (Philippines) Inc
Vantive Singapore Pte Ltd.
Last AGM
Attended
In person On phone/
video
conference
Mr. Rajesh Hukku
Mr. S P Bharucha
Mr. William T
Comfort, Jr.
Mr. Deepak Ghaisas
Mr. Y M Kale
Mr. Charles Phillips
Mr. N R K Raman
Mr. R Ravisankar
Mr. Sergio Giacoletto
Roggio
Ms. Tarjani Vakil
Mr. Derek H Williams
Name of the Director
7
9
5
9
2
–
Yes
Yes
6
8
9
4
8
5
5
8
9
3
8
3
1
–
–
1
–
2
Yes
Yes
Yes
No
Yes
No
1
9
6
1
9
2
–
–
4
N.A.
Yes
Yes
2.3 Details of other directorships
Details of the directorships of the Directors in other companies as on
March 31, 2008 are given below:
Name of the Director
Other directorships
Mr. Rajesh Hukku
i-flex solutions inc.
i-flex America inc.
i-flex Processing Services Ltd.
Mr. S P Bharucha
Press Trust of India Ltd.
Mr. William T Comfort, Jr.
399 Venture Partners Inc.
Citigroup Venture Capital Ltd.
Court Square Capital Ltd.
Deutsche Annington (DAIG)
Nabors Industries
Mr. Deepak Ghaisas
Equinox Global Services Ltd.
Flexcel International Pvt. Ltd.
i-flex solutions pte. Ltd.
i-flex Consulting (Asia Pacific) Pte Ltd.
i-flex solutions inc.
i-flex America inc.
i-flex Processing Services Ltd.
ISP Internet Mauritius Company
Shopper’s Stop Ltd.
USV Ltd.
Mr. Y M Kale
Ashok Leyland Ltd. (Alternate Director)
Ennore Foundries Ltd. (Alternate Director)
Hinduja Life Insurance Company Limited
Hinduja General Insurance Company Limited
Mr. Charles Phillips
Morgan Stanley
Oracle Corporation
Viacom Inc.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 25
25
7/25/2008 9:58:41 AM
2.4 Details of memberships of Board Committees
None of the Directors of the Company hold memberships of more than ten
committees nor is any Director a Chairperson of more that five Committees
of the Boards of the companies where he/she holds directorship. For this
purpose, “Committees” comprise of Audit Committee and Shareholders’
Grievances Committee of a company.
The details of the memberships of the Directors in the above mentioned
committees of all the Companies of which they are members as on
March 31, 2008 are given below:
Name of the Director
Mr. Rajesh Hukku
Mr. S P Bharucha
Mr. William T Comfort, Jr.
Mr. Deepak Ghaisas
Mr. Y M Kale
Mr. Charles Phillips
Mr. N R K Raman
Mr. R Ravisankar
Mr. Sergio Giacoletto
Roggio
Ms. Tarjani Vakil
Mr. Derek H Williams
Audit
Committee
Shareholders’
Grievances
Committee
Member Chairperson Member Chairperson
Nil
Nil
Nil
Nil
1
Nil
Nil
Nil
1
Nil
Nil
Nil
Nil
2
1
Nil
Nil
1
Nil
Nil
1
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1
3
Nil
Nil
3
Nil
Nil
Nil
Nil
Nil
1
Nil
2.5 Brief resume of Directors who will be retiring by rotation at
the ensuing Annual General Meeting of the Company and, being
eligible, offer themselves for re-appointment
Mr. Y M Kale
Mr. Y M Kale born on November 4, 1947, was the President of the
Institute of Chartered Accountants of India in the year 1995-96 and is
also a Fellow member of the Institute of Chartered Accountants of England
and Wales. He has contributed to various governmental and regulatory
bodies such as committees of Securities and Exchange Board of India
including Committee of Offer Documents, Committee of Takeovers and
Committee on Accounting for Corporates and participated as a member
of the Group for Introduction of Concurrent Audit of Banks, organized
by the Reserve Bank of India and was also member of the National
Drugs and Pharmaceutical Development Council of Central Government.
Mr. Kale was also on the Board of the International Accounting Standards
Committee from 1995 to 1998 as India representative. He is also a
Director on the Board of various public companies.
Mr. Kale is a member of the Board of Directors of the Company since
June 25, 2001. He is the Chairman of the Audit Committee and is a
member of the Compensation Committee of the Company.
Mr. Kale holds 2,000 equity shares of face value of Rs. 5/- each of the
Company as on date.
EXIM Bank as a unique credit agency offering finance, information and
advisory services at all stages of the business cycle.
Ms. Vakil was actively involved in carrying extensive interaction with
multilateral agencies for initiation of an informal annual dialogue among
heads of Export Credit Agencies in Asia and Australia in 1996 and for
setting up Global Procurement Consultants Ltd. (a public-private sector
partnership) offering international procurement services.
Ms. Vakil has been a member consultant for carrying a study of the
feasibility for establishment of an Export Credit Guarantee facility for GCC
countries (1992), for establishment of Export-Import Bank of Malaysia
(1994) and other developing countries of Asia and Africa. She has
also been a consultant to International Trade Centre, Geneva (1996),
Mckinsey Inc. for setting up an Export Import Institution in Egypt and
MIGA (1999). Currently, she is a Director on the Boards of a few major
corporates in India.
Ms. Vakil has won several awards including Mahila Shiromani -1992,
CEO of the Year-1995, Woman of the Year-1996, etc. She was placed as
the highest ranking woman official in Banking in Asia and named among
the 50 most powerful women in the world in the 1996 Survey conducted
by KPMG Peat Marwick, USA.
Ms. Vakil is a member of the Board of the Directors of the Company since
May 26, 2004. She is a member of the Audit Committee and Chairperson
of Shareholders’ Grievances Committee, Transfer Committee and ESOP
Allotment Committee.
Ms. Vakil holds 3,700 equity shares of face value of Rs. 5/- each of the
Company as on date.
Mr. Charles Phillips
Mr. Charles Phillips, born on June 10, 1959, holds a BS in Computer
Science from the United States Air Force Academy, an MBA from Hampton
University and a JD from New York Law School and is a member of the
bar in Washington D.C. and Georgia.
Mr. Charles Phillips is President of Oracle Corporation and a member
of the Board of Directors. He is responsible for global field operations
including consulting, marketing, sales, alliances and channels and
customer programs, as well as corporate strategy. Prior to joining
Oracle, Mr. Phillips was a Managing Director with Morgan Stanley in its
technology group. Prior to his career on Wall Street, Mr. Phillips was a
Captain in the United States Marine Corps.
Mr. Phillips is on the boards of Viacom Corporation, Jazz at Lincoln Center
in New York City and New York Law School. Mr. Phillips also serves as a
director of Viacom Inc. and Morgan Stanley.
Mr. Phillips is a member of the Board of Directors of the Company
since November 24, 2005. He is also a member of the Compensation
Committee.
Mr. Charles Phillips is not holding any equity share of the Company as
on date.
Ms. Tarjani Vakil
Ms. Tarjani Vakil, born on October 30, 1936, has done her Masters in
Arts from University of Mumbai. In October 1996, she retired as the
Chairperson and Managing Director of Export – Import Bank of India
(“EXIM Bank”). Since inception in 1982 till 1996, EXIM Bank grew at an
average rate of 20% p.a. Ms. Vakil contributed to the development of
Annual Report 2007_2008_Final.indd 26
2.6 Brief resume of Director proposed to be appointed at the
ensuing Annual General Meeting of the Company
Mr. Sergio Giacoletto Roggio
Mr. Sergio Giacoletto Roggio, born on December 28, 1949, holds a
Master’s Degree in Computer Science from the University of Turin, Italy.
7/25/2008 9:58:42 AM
Mr. Sergio Giacoletto Roggio is the Executive Vice President of Oracle
Corporation, Europe, Middle East and Africa and serves as a member
of Oracle’s Executive Management Committee. Based in Geneva,
Mr. Sergio Giacoletto Roggio oversees a network of 106 offices in 54
countries, with the responsibility for managing all of Oracle’s operations,
growth and profitability throughout the Europe, Middle East and Africa
region.
3. To obtain outside legal or other professional advice.
4. To secure attendance of outsiders with relevant expertise, if it
considers necessary.
Mr. Sergio Giacoletto Roggio was appointed Executive Vice President in
June 2000 and in this role has established Oracle as the leading enterprise
software provider for businesses and governments throughout the region.
Additionally, Mr. Sergio Giacoletto Roggio pioneered a campaign to assist
the ten new European Union member states and subsequent candidate
countries gain technological advantage, through the establishment of a
dedicated Oracle regional management group focused on the European
Union enlargement region.
1. Oversight of the Company’s financial reporting process and the
disclosure of its financial information to ensure that the financial
statement is correct, sufficient and credible.
2. Recommending to the Board, the appointment, re-appointment and,
if required, the replacement or removal of the statutory auditor and
the fixation of audit fees.
3. Approval of payment to statutory auditors for any other services
rendered by the statutory auditors.
4. Reviewing, with the management, the annual financial statements
before submission to the Board for approval, with particular
reference to:
a. Matters required to be included in the Director’s Responsibility
Statement to be included in the Board’s report in terms of
Clause (2AA) of Section 217 of the Companies Act, 1956
b. Changes, if any, in accounting policies and practices and
reasons for the same
c. Major accounting entries involving estimates based on the
exercise of judgment by management
d. Significant adjustments made in the financial statements arising
out of audit findings
e. Compliance with listing and other legal requirements relating to
financial statements
f. Disclosure of any related party transactions
g. Qualifications in the draft audit report.
Prior to his appointment as Executive Vice President,
Mr. Sergio Giacoletto Roggio was Senior Vice President, Business
Solutions for Oracle Europe, Middle East and Africa with responsibility
for the Consulting and Applications businesses, as well as Strategic
Partners.
Mr. Sergio Giacoletto Roggio joined Oracle in 1997 from AT&T, where he
was President, Value Added Services. He previously spent 20 years with
Digital Equipment Corporation in various roles, including the responsibility
for the Europe, Middle East and Africa Services organization.
Mr. Sergio Giacoletto Roggio has served on multiple company boards
and IT industry associations and he is a member of the World Council
for Sustainable Business Development; is a member of the South African
Presidential International Advisory Council on Information Society and
Development; and has co-authored the book Information in the Enterprise:
It’s More than Technology (1992).
Mr. Sergio Giacoletto Roggio was appointed as an Additional Director on
the Board on October 26, 2007 and holds office upto the date of ensuing
Annual General Meeting of the Company.
The Company has received a Notice under Section 257 of the Companies
Act, 1956, from a member along with a deposit of Rs. 500/-, proposing
Mr. Sergio Giacoletto Roggio as a Director. Mr. Sergio Giacoletto Roggio
has given his consent to act as a Director of the Company, if appointed.
Mr. Sergio Giacoletto Roggio does not hold any equity share of the
Company as on date.
3. Audit committee
3.1 Primary objectives and powers of the audit committee
The primary objective of Audit Committee is to monitor and provide
effective supervision of the management’s financial reporting process
and to ensure accurate, timely and proper disclosures and transparency,
integrity and quality of financial reporting. The powers of the Audit
Committee include the following:
1. To investigate any activity within its terms of reference.
2. To seek information from any employee.
3.2 Broad terms of reference
The terms of reference of the Audit Committee are as follows:
5. Reviewing, with management, the quarterly financial statements
before submission to the Board for approval.
6. Reviewing, with management, the performance of statutory and
internal auditors and the adequacy of the internal control systems.
7. Reviewing the adequacy of the internal audit function including the
structure of the internal audit department, staffing and seniority of
the official heading the department, reporting structure coverage
and frequency of internal audit.
8. Discussion with internal auditors regarding any significant findings
and any follow-up required.
9. Reviewing the findings of any internal investigations by the internal
auditors into matters where there is suspected fraud or irregularity
or a failure of internal control systems of a material nature and
reporting the matter to the board.
10. Discussion with statutory auditors, before the audit commences,
about the nature and scope of the audit as well as post-audit
discussion to determine any area of concern.
11. To determine the reasons for any substantial defaults in the
payment to depositors, debenture holders, shareholders (in case of
non payment of declared dividends) and creditors.
12. To review the functioning of the Whistle Blower function.
13. Carrying out any other function as is mentioned in the terms of
reference of the Audit Committee.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 27
27
7/25/2008 9:58:42 AM
3.3 Composition of the committee
The composition of Audit Committee as on March 31, 2008 was as
follows:
Mr. Y M Kale
Mr. S P Bharucha
Mr. William T Comfort, Jr.
Ms. Tarjani Vakil
Chairman, Non-Executive,
Independent Director
Member, Non-Executive,
Independent Director
Member, Non-Executive,
Independent Director
Member, Non-Executive,
Independent Director
3.4 Meetings and attendance
During the Financial Year 2007-2008, four meetings of the Committee
were held on April 25, 2007, July 27, 2007, October 24, 2007 and
January 21, 2008.
The member’s attendance at the Committee Meetings was as given
below:
The Committee reviewed Internal Auditors’ reports and related reports
on actions taken, utilization of IPO proceeds, risk management policies,
compliance with the Clause 49 of the Listing Agreement, etc. from time
to time.
4. Compensation committee
4.1 Brief description of terms of reference
The scope of Compensation Committee is to determine the compensation
of the Executive Management Officers (EMOs). The EMOs in turn, decide
the compensation of key managerial personnel and other employees of
the Company. The Compensation Committee also approves, allocates and
administers the Employee Stock Option Plan 2002, reviews performance
appraisal criteria and sets norms for ESOP allocation.
4.2 The composition of compensation committee as on
March 31, 2008 is as follows:
Mr. William T Comfort, Jr.
Mr. Y M Kale
Name
Mr. Y M Kale
Mr. S P Bharucha
Mr. William T Comfort, Jr.
Ms. Tarjani Vakil
Number of meetings attended
In person
On phone
4
3
1
4
–
–
1
–
Mr. Charles Phillips
Chairman, Non-Executive,
Independent Director
Member, Non-Executive,
Independent Director
Member, Non-Executive,
Non-Independent Director
4.3 Meeting and attendance
The Committee met once during the year and the meeting was attended
by all the members.
The auditors of the Company were invited for the meetings.
4.4 Compensation policy
3.5 Audit committee’s recommendations:
The Committee reviewed the financial results of the Company prepared
in accordance with Indian GAAP (including consolidated results) as
at and for the periods ended June 30, 2007, September 30, 2007,
December 31, 2007 and March 31, 2008 and recommended the same
to the Board for adoption.
The Compensation Committee determines and recommends to the Board
the compensation payable to the directors. The limit for the commission
to be paid to the Board members and the remuneration payable to the
Managing Director of the Company are approved by the shareholders of
the Company. The annual compensation of the Non-Executive Directors
is approved by the Compensation Committee, within the parameters set
by the shareholders at the shareholders’ meetings.
The Committee recommended to the Board the re-appointment of
M/s S. R. Batliboi & Associates, Chartered Accountants, as statutory
auditors and Branch Auditors of the Company for the financial year
2008-2009.
The Committee also has the mandate to review and recommend
compensation payable to the Senior Executives of the Company. It also
sets norms for ESOP allocation.
The Committee also recommended the re-appointment of
M/s Mukund M. Chitale & Co., Chartered Accountants, as Internal
Auditors to conduct the internal audit for the financial year 2008-2009.
Annual Report 2007_2008_Final.indd 28
7/25/2008 9:58:42 AM
4.5 Details of remuneration paid to the Directors during the financial year 2007-08 are as follows:
Name of Director
ESOPs granted
under ESOP
Plan during the
year
Commission
paid
(Rs. ‘000)
Salary
(Rs. ‘000)
Contribution to
PF (Rs. ‘000)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
800
Nil
Nil
1,200
Nil
Nil
Nil
Nil
900
Nil
2,900
27
Nil
Nil
Nil
Nil
Nil
4,342
Nil
Nil
Nil
Nil
4,369
1
Nil
Nil
Nil
Nil
Nil
417
Nil
Nil
Nil
Nil
418
Mr. Rajesh Hukku*
Mr. S P Bharucha
Mr. William T Comfort, Jr.
Mr. Deepak Ghaisas**
Mr. Y M Kale
Mr. Charles Phillips
Mr. N R K Raman**
Mr. R Ravisankar*
Mr. Sergio Giacoletto Roggio
Ms. Tarjani Vakil
Mr. Derek H Williams
Total
Total Amount
paid
(Rs. ‘000)
28
800
Nil
Nil
1,200
Nil
4,759
Nil
Nil
900
Nil
7,687
*
Mr. Rajesh Hukku (Managing Director of the Company till April 30, 2007) has been paid remuneration aggregating Rs. 27,468 (including bonus of Rs. 21,354 which
was provided as on March 31, 2007) for the year ended March 31, 2008 (March 31, 2007- Rs. 41,313) from i-flex solutions inc., a wholly owned subsidiary of the
Company. Mr. R Ravisankar (Director from May 1, 2007) has been paid remuneration aggregating Rs. 16,629 (including bonus of Rs. 14,236 which was provided as
on March 31, 2007) for the year ended March 31, 2008 from i-flex solutions inc., a wholly owned subsidiary of the Company.
**
During the year ended March 31, 2008, Mr. Deepak Ghaisas (Director from May 1, 2007) and Mr. N R K Raman (Managing Director and Chief Executive Officer from
May 1, 2007) have been paid bonus of Rs. 15,220 and Rs. 7,266 respectively which was provided as on March 31, 2007.
Payments of above bonus have not been included in the managerial
remuneration considering this remuneration in capacity of an employee
before appointment as Director of the Company.
The Company accrues for gratuity benefit, compensated absences
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. The Company discloses such benefits on cash basis.
During the financial year 2007-08, Mr. N R K Raman, the Managing
Director of the Company was paid remuneration within the limits
envisaged in the Companies Act, 1956. Non-Executive, Independent
Directors of the Company were paid remuneration by way of commission
as approved by the Board of Directors/shareholders of the Company
subject however to the condition that the commission shall not exceed
1% of the net profits of the Company for all the Non-Executive Directors
in aggregate in one financial year.
There were no sitting fees and/or perquisites paid to the Directors during
the financial year 2007-2008 except as stated above.
The terms of Employee Stock Options granted and equity shares held by the Directors are given below:
Name of Director
Mr. Rajesh Hukku
Mr. S P Bharucha
Mr. William T Comfort, Jr.
Mr. Deepak Ghaisas
Mr. Y M Kale
Mr. Charles Phillips
Mr. N R K Raman
Mr. R Ravisankar
Mr. Sergio Giacoletto Roggio
Ms. Tarjani Vakil
Mr. Derek H Williams
SchemeOptions outstanding
as at
March 31, 2008
ESOP 2002
ESOP 2002
–
ESOP 2002
ESOP 2002
–
ESOP 2002
ESOP 2002
–
ESOP 2002
–
Nil
6,000
–
Nil
Nil
–
Nil
Nil
–
6,000
–
Options
exercised during
the year
Nil
2,000
–
Nil
2,000
–
Nil
Nil
–
Nil
–
Grant price (Rs.)
Expiry Date Equity shares held
as at
March 31, 2008
265.00
March 3, 2012
708.65
June 13, 2015
–
–
265.00
March 3, 2012
418.92 February 17, 2013
–
–
265.00
March 3, 2012
265.00
March 3, 2012
–
–
559.60 August 17, 2014
–
–
676,524
4,000
Nil
456,269
6,000
Nil
114,000
324,272
Nil
4,000
Nil
The above options were issued at Fair Market Value on the respective dates of grant. The options vest over a period of 5 years from the date of grant and
are subject to continued employment/directorship with the Company.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 29
29
7/25/2008 9:58:42 AM
5. Shareholders’ grievances committee
6. Transfer Committee
5.1 Composition of the Committee
The composition of Transfer Committee as on March 31, 2008 was as
follows:
The composition of Shareholders’ Grievances Committee as on
March 31, 2008 was as follows:
Ms. Tarjani Vakil
Mr. Deepak Ghaisas
Chairperson, Non-Executive,
Independent Director
Vice Chairman and Company
Secretary
Ms. Tarjani Vakil
Mr. Deepak Ghaisas
Chairperson, Non-Executive,
Independent Director
Vice Chairman and Company
Secretary
During the year, four meetings of the Committee were held on
June 21, 2007, September 27, 2007, December 31, 2007 and March
6, 2008 which were attended by both the members of the Committee.
5.2 Scope of shareholders’ grievances committee’s activities
The scope of the Shareholders’ Grievances Committee is to review and
address the grievances of the shareholders in respect of share transfers,
transmission, dematerialization and rematerialization of shares and other
share related activities.
During the year, four meetings of the Committee were held on
June 21, 2007, September 27, 2007, December 31, 2007 and March
6, 2008 which were attended by both the members of the Committee.
7. ESOP Allotment Committee
The composition of ESOP Allotment Committee as on March 31, 2008
was as follows:
Ms. Tarjani Vakil
Mr. Deepak Ghaisas
Chairperson, Non-Executive,
Independent Director
Vice Chairman and Company
Secretary
5.3 Company secretary
Name of Company Secretary
Address
Tel
Fax
During the year, one meeting of the Committee was held on March 28, 2008
which was attended by both the members of the Committee.
Mr. Deepak Ghaisas
i-flex solutions ltd
i-flex Center
399, Subhash Road
Vile Parle (East)
Mumbai 400 057
+91-22-6718 5000
+91-22-2831 5593
8. General body meetings
8.1 Location, date and time where last three Annual General
Meetings were held
5.4 Compliance officer
Financial Year Venue
Date
2006-2007
August 24, 2007 3.00 p.m.
From February 11, 2008, Mr. Hoshi D Bhagwagar, Deputy Company
Secretary has been appointed as the Compliance Officer of the
Company.
2005-2006
Name of Compliance Officer
Address
Tel
Fax
e-mail
Mr. Hoshi D. Bhagwagar
i-flex solutions ltd
i-flex Center
399, Subhash Road
Vile Parle (East)
Mumbai 400 057
+ 91-22-6718 5000
+ 91-22-2831 5593
hoshi.bhagwagar@iflexsolutions.com
5.5 Details of shareholders’ complaints received, resolved during
the year 2007-2008.
Nature of complaints
Non receipt of warrant
Non receipt of certificate
Non receipt of demat credit/rej.
SEBI/stock exchange/MCA
Legal
Others
Total
2004-2005
InterContinental The
Grand Mumbai
Sahar Airport Road
Andheri (East)
Mumbai 400 059
The Leela Kempinski
Sahar
Andheri (East)
Mumbai 400 059
Le Royal Meridian
Sahar Airport Road
Andheri (East)
Mumbai 400 059
Time
August 10, 2006 3.00 p.m.
August 12, 2005 3.00 p.m.
8.2 There were no matters requiring approval of the shareholders
through Postal Ballot in previous year.
8.3 No special resolution is proposed to be conducted through
postal ballot.
Opening Received Cleared Pending
balance
–
–
–
–
–
–
–
14
5
64
6
–
15
104
14
5
64
6
–
15
104
–
–
–
–
–
–
–
Number of pending share transfers as on March 31, 2008 – Nil.
Annual Report 2007_2008_Final.indd 30
7/25/2008 9:58:42 AM
8.4 The details of Special Resolutions passed in the AGM in the last three years are given below:
Financial Year Day, Date & Time
Venue
Gist of Special Resolution Passed
2006-2007
Friday,
August 24, 2007
At 3.00 p.m.
InterContinental The 1. Payment of commission to the Directors of the Company (excluding the Managing
Grand Mumbai,
Director and Whole-time Directors), not exceeding in the aggregate one percent per
Sahar Airport Road,
annum of the net profits of the Company which shall be calculated in accordance with
Andheri (East)
the provisions of Section 198, 349 and 350 of the Companies Act, 1956.
Mumbai – 400 059
2. Amendment to the ‘2002 Employees Stock Option Plan’ of the Company with regard
to providing that the eligible employees should bear or reimburse to the Company
fringe benefit tax including related surcharge, cess, duty or any other levy, to the
extent to which the Company is liable to pay the fringe benefit tax in relation to the
value of fringe benefits provided to the eligible employee.
2005-2006
Thursday,
August 10, 2006
At 3.00 p.m.
The Leela Kempinski 1. Keeping the Register of Members, Index of Members, copies of certificates and
Sahar,
documents required to be annexed thereto and such other documents under any
Andheri (East)
applicable provisions of the Companies Act 1956, at the offices of Intime Spectrum
Mumbai – 400 059
Registry Ltd, the Registrar and Share Transfer Agent of the Company, at C-13,
Pannalal Silk Mills Compound, L.B.S Marg, Bhandup (West), Mumbai – 400 078 or at
i-flex Center, 399 Subhash Road, Vile Parle (East), Mumbai – 400 057 or at i-flex Park,
Off Western Express Highway, Goregaon (East), Mumbai – 400 063, instead of at the
Registered Office of the Company.
2004-2005
Friday,
August 12, 2005
At 3.00 p.m.
Le Royal Meridian 1. To issue and allot upto 80,000 warrants or options to be converted into equal number
Sahar Airport Road
of equity shares of Rs. 5/- each fully paid within 18 months of date of issue of warrants
Andheri (East)
or options to IBM Global Services India Private Limited, each warrant or option entitling
Mumbai – 400 059
the holder thereof to apply for one equity share of Rs. 5/- each of the Company on
preferential basis.
2. To issue warrants or options up to 0.5% of the fully diluted equity of the Company to
be converted into equal number of equity shares of Rs. 5/- each within 18 months of
date of issue of warrants or options to GE Capital Mauritius Equity Investment, each
warrant or option entitling the holder thereof to apply for one equity share of Rs. 5/each of the Company on a preferential basis.
8.5 The details of Special Resolution passed in the EGM in the last three years is given below:
Financial Year Day, Date & Time
2005-06
Venue
Gist of Special Resolution Passed
Tuesday,
The Leela
1. To issue and allot 4,447,418 equity shares of the Company of face value Rs. 5/- each
September 12, 2006 Kempinski, Sahar,
on a preferential basis, for cash at a price of Rs. 1,307.50 per equity share to Oracle
At 3.30 p.m.
Andheri (East),
Global (Mauritius) Limited.
Mumbai – 400 059
There was no EGM held in the Financial Year 2004-05 and 2006-07.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 31
31
7/25/2008 9:58:42 AM
9. Disclosures
a. All the relevant information in respect of materially significant
related party transactions, i.e., transactions of the Company of
material nature with its promoters, directors or management or their
relatives, subsidiaries of the Company, etc. has been disclosed in
the respective financial statements presented in the Annual Report.
The Company did not undertake any transaction with any related
party having potential conflict with the interest of the Company at
large.
Electronic Data Information Filing and Retrieval System (EDIFAR)
on website - http://sebiedifar.nic.in.
10.5 Since January 2008, pursuant to new provisions contained in
the listing agreement entered with the stock exchanges, the
Company has uploaded the information relating to its financial
results, shareholding pattern and report on corporate governance
on website – http://corpfiling.co.in.
11. General shareholder information
b. The Company has complied with statutory compliances and
no penalty or stricture is imposed on the Company by the Stock
Exchanges or Securities and Exchange Board of India (SEBI) or any
other statutory authority on any matter related to the capital markets
during the last three years.
c. The Company has a Whistle Blower Policy which provides an
avenue for employees to raise concerns of any violations of Code of
Conduct, incorrect or misrepresentation of any financial statements
and reports, unethical behavior, etc. The policy provides adequate
safeguards to employees reporting such violations to the Company.
No employee has been denied access to the Audit Committee.
d. The Company is fully compliant with the applicable mandatory
requirements of Clause 49 of the listing agreements entered with
the Stock Exchanges. Although it is not mandatory, the Board of
the Company has constituted a Compensation Committee. Details
of the Committee have been provided under Section ‘Compensation
Committee’.
10. Means of communication
During the Financial Year 2007-08:
10.1 The quarterly, half yearly and annual results of the Company were
published in widely circulated English and Marathi newspapers,
such as The Economic Times and Maharashtra Times.
10.2 Company’s quarterly financial results, press releases and
transcripts of the conference calls are posted on the Company’s
website www.iflexsolutions.com
10.3 Detailed Management Discussion and Analysis Reports covering
Indian GAAP un-consolidated and consolidated financials have
been included in this Annual Report.
Annual General Meeting
Day and Date
Time
Venue
Friday, August 22, 2008
3.00 p.m.
The Leela
Kempinski
Sahar
Andheri (East)
Mumbai – 400 059
Financial Year
April 1 to March 31
Date of Book Closure
Monday,
August 18, 2008 to
Friday,
August 22, 2008 (both
days inclusive)
Listing on Stock Exchanges at
Bombay Stock Exchange
Ltd. (BSE); and
National Stock Exchange
of India Ltd. (NSE)
Stock Code
Bombay Stock Exchange Ltd (BSE)
532466
National Stock Exchange of India Ltd. (NSE) I-FLEX
Listing
The annual listing fees for the year 2008-09 have been paid to BSE and
NSE.
The Company has paid Custodial fees for the year 2008-09 to National
Securities Depository Limited and Central Depository Services (India)
Limited on the basis of number of beneficial accounts maintained by
them as on March 31, 2008.
10.4 The Company has also posted information relating to its financial
results and Distribution of shareholding on a quarterly basis on
Annual Report 2007_2008_Final.indd 32
7/25/2008 9:58:42 AM
12. Market price data
Monthly high/low of the shares of the Company from April 1, 2007 to June 30, 2008 are given below:
Month and Year
High (Rs.)
Low (Rs.)
BSE
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
2,545.00
2,540.00
2,630.00
2,630.00
2,200.00
2,054.95
1,975.00
1,649.00
1,655.00
1,664.00
1,155.00
1,080.00
1,425.00
1,545.00
1,475.00
2,046.65
2,150.00
2,190.00
2,166.00
1,769.90
1,810.00
1,522.00
1,225.00
1,401.00
900.00
981.00
892.00
931.00
1,205.05
1,155.00
Volume of Shares
430,253
319,752
756,479
250,803
299,705
160,527
275,337
234,466
188,183
314,112
274,072
165,662
717,890
1,302,816
923,873
High (Rs.)
2,542.00
2,540.00
2,628.00
2,635.00
2,240.00
2,087.00
1,974.00
1,609.85
1,650.00
1,679.90
1,177.00
1,100.00
1,484.50
1,545.00
1,474.00
Low (Rs.) Volume of Shares
NSE
2,015.00
2,126.55
2,182.60
2,162.00
1,815.00
1,801.00
1,520.00
1,240.55
1,395.05
889.00
956.60
895.00
930.10
1,100.00
1,151.15
1,297,119
1,149,346
2,437,272
936,443
1,017,753
695,609
1,011,571
792,797
746,550
1,154,292
681,282
539,149
1,856,212
3,662,481
2,414,228
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
June 2002 June 2003
June 2004
BSE
June 2005
June 2006
June 2007
June 2008
i-flex
Relative movement chart
The chart above gives the relative movement of the closing prices of the Company’s share and BSE Sensex relative to the closing prices. The period
covered is June 28, 2002 to June 30, 2008.
13. Registrar and transfer agent
Name
Intime Spectrum Registry Limited
Address
C-13, Pannalal Silk Mills Compound
L. B. S. Marg, Bhandup (West)
Mumbai 400 078
+91-22-2596 3838
+91-22-2596 2691
isrl@vsnl.com
203, Davar House, 197/199, D. N. Road, Fort
Mumbai 400 001
+91-22- 2269 4127
Tel
Fax
e-mail
Branch
Tel
14. Physical share certificate transfer system
The Registrar and Transfer Agent (“the Registrar”), on receipt of transfer
deed with respective share certificate(s), scrutinizes the same and
verifies signature(s) of transferor(s) on the transfer deed with specimen
signature(s) registered with the Company. A list of such transfers is
prepared and checked thoroughly and a transfer register is prepared.
The transfer register is placed before the Transfer Committee Meeting
for approval, which meets at regular intervals.
During the last financial year 20,150 equity shares were transferred in
physical mode.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 33
33
7/25/2008 9:58:42 AM
15. Distribution of shareholding as on March 31, 2008
Shares of nominal value of (Rs.)
UPTO 2,500
2,501 – 5,000
5,001 – 10,000
10,001 – 20,000
20,001 – 30,000
30,001 – 40,000
40,001 – 50,000
50,001 – 1,00,000
1,00,001 & ABOVE
Total
Number of Shareholders
21,334
451
411
358
161
133
70
169
152
23,239
%
91.80
1.94
1.77
1.54
0.69
0.57
0.30
0.73
0.66
100.00
Share amount (Rs.)
% to Equity
4,546,075
1,747,035
3,136,725
5,489,895
4,008,875
4,699,905
3,267,660
12,090,130
379,750,905
418,737,205
1.09
0.42
0.75
1.31
0.96
1.12
0.78
2.89
90.68
100.00
16. Shareholding per category as on March 31, 2008
Category Category of shareholders
Code
(A)
[1]
[a]
[b]
[c]
[d]
[e]
[2]
[a]
[b]
[c]
[d]
(B)
[1]
[a]
[b]
[c]
[d]
[e]
[f]
[g]
[h]
[2]
[a]
[b]
Shareholding of Promoter and Promoter Group
Indian
Individuals/Hindu Undivided Family
Central Government/State Government(s)
Bodies Corporate
Financial Institutions/Banks
Any other (specify)
Sub-Total (A)(1)
Foreign
Individuals (Non-Resident Individuals/Foreign Individuals)
Bodies Corporate
Institutions
Any other (specify)
Sub-Total (A)(2)
Total Shareholding of Promoter and Promoter Group (A)=(A)
(1)+(A)(2)
Public Shareholding
Institutions
Mutual Funds/UTI
Financial Institutions/Banks
Central Government/State Government(s)
Venture Capital Funds
Insurance Companies
Foreign Institutional Investors
Foreign Venture Capital Investors
Any other (specify)
Sub-Total (B)[1]
Non-institutions
Bodies Corporate
Individualsi. Individual shareholders holding nominal share capital upto
Rs. 1 Lakh.
ii. Individual shareholders holding nominal share capital in
excess of Rs. 1 Lakh.
Annual Report 2007_2008_Final.indd 34
Number of
shareholders
Total
Number of
number of shares held in
physical dematerialized
shares
form
Total
number of
shares
As a
percentage
of (A + B)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
2
–
76,200
–
–
76,200
–
67,405,498
–
–
67,405,498
–
67,481,698
–
–
67,481,698
–
80.58
–
–
80.58
2
76,200
67,405,498
67,481,698
80.58
58
2
–
–
1
10
–
–
71
–
–
–
–
–
–
–
–
–
1,556,107
48,990
–
–
36,103
189,382
–
–
1,830,582
1,556,107
48,990
–
–
36,103
189,382
–
–
1,830,582
1.86
0.06
–
–
0.04
0.23
–
–
2.19
578
–
554,215
554,215
0.66
21,344
694,325
5,539,255
6,233,580
7.44
87
548,000
2,534,340
3,082,340
3.68
7/25/2008 9:58:42 AM
Category Category of shareholders
Code
[c]
Number of
shareholders
Any other (specify)
Clearing Member
Foreign Company
Market Maker
Foreign Nationals
NRI (Repatriable)
NRI (Non-Repatriable)
Overseas Corporate Bodies
Directors
Trust
HUF
Sub-Total (B) [2]
Total Public Shareholding (B)= (B)(1) +(B)(2)
Total (A)+(B)
88
1
54
4
402
250
1
10
1
346
23,166
23,237
23,239
Total
Number of
number of shares held in
physical dematerialized
shares
form
–
–
–
–
–
124,800
–
–
–
–
1,367,125
1,367,125
1,443,325
27,623
395,529
12,025
79,000
322,219
1,606,369
800
1,585,065
380,064
31,532
13,068,036
14,898,618
82,304,116
Total
number of
shares
As a
percentage
of (A + B)
27,623
395,529
12,025
79,000
322,219
1,731,169
800
1,585,065
380,064
31,532
14,435,161
16,265,743
83,747,441
0.03
0.47
0.01
0.10
0.39
2.07
0.00
1.89
0.45
0.04
17.23
19.42
100.00
During the financial year 2007-08:
1. The Company issued and allotted 395,529 equity shares to GE
Capital Mauritius Equity Investment (GE) upon its exercise of
conversion option of warrants allotted to GE in August 2005.
2. The Company issued and allotted 63,332 equity shares to its
employees/directors who exercised their ESOPs during the year.
3. The Company has not issued any ADR/GDR.
17. Dematerialization of shares and liquidity
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.
As on March 31, 2008, 98.28% of the shares of the Company were in
electronic form.
18. Address for correspondence
Registered Office
Corporate Office
i-flex solutions ltd
i-flex solutions ltd
Unit 10-11,
i-flex Center
SDF-1, SEEPZ,
399, Subhash Road
Andheri (E)
Vile Parle (E)
Mumbai 400 096
Mumbai 400 057
India
India
Tel +91-22- 5676 2000
Tel +91-22- 6718 5000
Fax +91-22- 2829 2767
Fax +91-22- 2831 3393
e-mail: investors@iflexsolutions.com
As on March 31, 2008, the Company also had following other offices
in India.
i-flex solutions ltd
Unit 10-11, SDF-1
SEEPZ, Andheri (E)
Mumbai 400 096
Maharashtra, India
i-flex solutions ltd
399, Subhash Road
Vile Parle (E)
Mumbai 400 057
Maharashtra, India
i-flex solutions ltd
i-flex Techpark
Plot No 152
EPIP Zone, K R Puram
Hobli, Whitefield
Bangalore 560 066
Karnataka, India
i-flex solutions ltd
SJR I Park
Ground & First Floor, Tower – 2
EPIP Zone, Whitefield Road
Whitefield, Bangalore 560 066
Karnataka, India
i-flex solutions ltd
i-flex Park,
Off Western Express Highway
Goregaon (E)
Mumbai 400 063
Maharashtra, India
i-flex solutions ltd
RMZ NXT, Campus 1
Block B, 2nd & 3rd Floor
EPIP Zone, Whitefield
Bangalore 560 066
Karnataka, India
i-flex solutions ltd
i-flex Annex, Nirlon Compound
Off. Western Express Highway
Goregaon (E)
Mumbai 400 063
Maharashtra, India
i-flex solutions ltd
Pride Silicon Plaza
2nd Floor, Senapati Bapat Road
Pune 411 053
Maharashtra, India
i-flex solutions ltd
1st Floor, “C” Building,
Shah Industrial Estate,
Saki-Vihar Road,
Andheri (E)
Mumbai 400 072
Maharashtra, India
i-flex solutions ltd
i-flex Center
Block 9A, Ambrosia II
Bavdhan Khurd
Tal. Mulshi
Pune 411 021
Maharashtra, India
i-flex solutions ltd
i-flex park
C/o Embassy Business Park
C.V Raman Nagar
Bangalore 560 093
Karnataka, India
i-flex solutions ltd
i-flex Heights
Lohia Jain IT park
Paud Road
Kothrud
Pune 411 029
Maharashtra, India
i-flex solutions ltd
i-flex center
#133 Kundalahalli Road
Mahadevapura
Bangalore 560 037
Karnataka, India
i-flex solutions ltd
Ambrosia
Village Bhavdhan Khurd,
Taluka Mulshi
Pune 411 021
Maharashtra, India
i-flex solutions ltd
i-flex Center of Learning-ICL
# 333, Doddenakundi
Industrial Area
Mahadevapura, Whitefield
Bangalore 560 048
Karnataka, India
i-flex solutions ltd
143/1, Uthamar Gandhi Salai
Nungambakkam
Chennai 600 034
Tamil Nadu, India
i-flex solutions ltd
# 150, Diamond District
B Tower, Lower Ground Floor
Kodihalli, Airport Road
Bangalore 560 008
Karnataka, India
i-flex solutions ltd
99, Venkatnarayana Road
T Nagar
Chennai 600 017
Tamil Nadu, India
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 35
35
7/25/2008 9:58:42 AM
Annexure to Directors’ report
To
The Board of Directors
i-flex solutions ltd
Mumbai
This is to certify that:
(a) We have reviewed financial statements and the cash flow statement
of i-flex solutions ltd (“the Company”) for the financial year ended
March 31, 2008 and that to the best of our knowledge and belief:
(i) These statements do not contain any materially untrue
statement or omit any material fact or contain statements that
might be misleading;
(d) We have indicated to the auditors and the Audit Committee:
(i) Significant changes in internal control over financial reporting
during the financial year ended March 31, 2008, if any;
(ii) Significant changes in accounting policies during the financial
year ended March 31, 2008, if any; and that the same have
been disclosed in the notes to the financial statements; and
(ii) These statements together present a true and fair view of
the Company’s affairs and are in compliance with existing
accounting standards, applicable laws and regulations.
(iii) instances of significant fraud of which we have become aware
and the involvement therein, if any, of the management or an
employee having a significant role in the Company’s internal
control system over financial reporting.
(b) There are, to the best of our knowledge and belief, no transactions
entered into by the Company during the financial year ended
March 31, 2008 which are fraudulent, illegal or violative of the
Company’s Code of Conduct.
(e) We further declare that all Board members and Senior Management
Personnel have affirmed compliance with Codes of Conduct for the
financial year ended March 31, 2008.
(c) We accept responsibility for establishing and maintaining internal
controls for financial reporting and that we have evaluated the
effectiveness of the internal control systems of the Company
pertaining to financial reporting and we have disclosed to the
auditors and the Audit Committee, deficiencies in the design or
operation of such internal controls, if any, of which we are aware
and the steps we have taken or propose to take to rectify these
deficiencies.
Annual Report 2007_2008_Final.indd 36
For i-flex solutions ltd
N R K Raman
Managing Director and CEO
Makarand Padalkar
Chief Financial Officer
May 5, 2008
7/25/2008 9:58:42 AM
Auditors’ certificate
To
The Members of i-flex Solutions Limited
We have examined the compliance of conditions of corporate governance
by i-flex Solutions Limited (‘the Company’), for the year ended on March
31, 2008, as stipulated in clause 49 of the Listing Agreement of the said
Company with stock exchanges.
The compliance of conditions of corporate governance is the responsibility
of the management. Our examination was limited to procedures and
implementation thereof, adopted by the Company for ensuring the
compliance of the conditions of the Corporate Governance. It is neither
an audit nor an expression of opinion on the financial statements of the
Company.
In our opinion and to the best of our information and according to the
explanations given to us, we certify that the Company has complied
with the conditions of Corporate Governance as stipulated in the above
mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the
future viability of the Company nor the efficiency or effectiveness with
which the management has conducted the affairs of the Company.
For S. R. Batliboi & Associates
Chartered Accountants
per Sunil Bhumralkar
Partner
Membership No.: 35141
Mumbai, India
July 21, 2008
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 37
37
7/25/2008 9:58:42 AM
financials
i-flex solutions ltd
Financial statements for the year ended
March 31, 2008 prepared in accordance with
Indian Generally Accepted Accounting Principles
(Indian GAAP) (Unconsolidated).
Annual Report 2007_2008_Final.indd 38
7/25/2008 9:58:42 AM
Annual Report 2007_2008_Final.indd 39
7/25/2008 9:58:43 AM
Annual Report 2007_2008_Final.indd 40
7/25/2008 9:58:46 AM
Management’s discussion and analysis
of financial condition and results of operations
The following discussion is based on our audited unconsolidated financial
statements, which have been prepared in conformity with accounting
principles generally accepted in India and complying in all material
respects the notified Accounting Standards by Companies (Accounting
Standards) Rules, 2006 and the relevant provisions of the Companies
Act, 1956.
You should read the following discussion of our financial condition and
results of operations together with the detailed unconsolidated Indian
GAAP financial statements and the notes to those statements. Our fiscal
year ends on March 31 of each year.
Information technology in the financial services industry
Financial institutions today face many challenges in their quest to
offer innovative products and services to customers. The focus is on
transforming business models, identifying cost-saving opportunities and
offering targeted services and improved service levels to customers.
Financial institutions are therefore striving to gain competitive advantage
by reducing costs, enhancing reputation and creating greater institutional
resilience.
Governance, risk and compliance are emerging as strategic priorities
for financial institutions. The stringent regulatory environment is forcing
organizations to select platforms focused on enterprise-wide governance,
risk and compliance management. Institutions are more inclined to adopt
an integrated approach as opposed to a piecemeal solution involving
fragmented systems and one-off processes that compound compliance
costs.
In the core transaction processing area, banks are becoming more
receptive to the value proposition and the benefits of process
transformation. i-flex is helping banks streamline processes and leverage
their existing IT infrastructure to reach new efficiency levels.
Overview
Together with Oracle, i-flex offers best-of-breed functionality for financial
institutions that need to operate flexibly, competitively and respond quickly
to market dynamics in a fiercely challenging business environment. With
the experience of delivering value-based solutions to global financial
institutions, our offerings help financial institutions gain competitive
advantage through cost-effective solutions while, simultaneously,
adhering to the stringent demands of a dynamic regulatory environment.
Playing the role of a specialized IT partner to financial services institutions
worldwide, i-flex’s approach is comprehensive with a wide range of
products, custom solutions and consulting services.
Our solutions portfolio includes packaged applications, custom
application software development, deployment, maintenance and support
services, business and IT consulting services, technology deployment
and management services and knowledge process outsourcing in the
financial services domain.
value-added knowledge outsourcing). These segments are described in
greater detail below:
Products
The i-flex portfolio includes FLEXCUBE®, a complete banking product
suite for retail, consumer, corporate, investment and internet banking
and asset management and investor servicing. Since its launch in 1997,
more than 300 financial institutions in over 115 countries have chosen
FLEXCUBE.
FLEXCUBE enables banks to standardize, optimize and transform their
processes. The latest release, FLEXCUBE 10.0, helps financial institutions
respond faster to market dynamics and define and track processes,
while ensuring compliance. The suite is also equipped with SWIFT 2007
enhancements and supports SEPA payment processing. FLEXCUBE was
recognized as a leader in the Magic Quadrant for International Retail Core
Banking in February 2008 by Gartner.
FLEXCUBE® for Islamic Banking is a Shariah-compliant product and a
solution for both Islamic and conventional banks.
The FLEXCUBE® Private Banking Suite is a comprehensive solution
for private banking, giving wealth managers a unified view--and
analyses--of their customers’ wealth across asset classes, with the added
benefits of performance tracking and improved customer relationship
management.
FLEXCUBE® Investor Services helps fund management companies,
transfer agency service providers and fund distributors design innovative
products and offer efficient investor services to their customers. The
solution was featured by Barrington Partners in ‘The Next Generation’
Transfer Agency Review in February 2008.
FLEXCUBE® Lending Suite is an integrated customer-centric solution
that addresses every lending requirement from origination, to servicing to
collections. DaybreakTM, part of the FLEXCUBE Lending Suite, manages
multiple lending products through an enterprise-wide consumer lending
platform.
Analytics for financial services: i-flex’s analytics offering for financial
services comprises an integrated suite of award-winning solutions –
ReveleusTM and Mantas--that help financial institutions maximize
profitability, minimize risks and deliver enterprise-wide compliance.
The GRC framework brings together Reveleus’ unrivalled expertise in risk
and control, coupled with Mantas’ industry-leading behavior detection
technology--both deeply rooted in the financial services industry. This
combination helps financial institutions gauge the effectiveness of
governance policies, manage business risks and future-proof compliance
expenditure across various regulatory mandates.
As of March 31, 2008, the Group had cumulatively serviced over 800
customers in more than 130 countries through its portfolio of products
and services.
The Reveleus suite of analytical applications is focused on the areas
of risk management, customer insight and enterprise-wide financial
performance. The Reveleus’ Risk Analytics product addresses some of
the most complex global challenges facing the financial industry today,
including multi-jurisdictional Basel II compliance and operational risk
management.
We are organized by region and business segment. We have two
major business segments - the Products Business (comprising product
licensing, customization, implementation and support) and the Services
Business (providing customized software and consulting services).
We also have Knowledge Process Outsourcing Services (providing
Reveleus was well positioned in Gartner’s ‘Leaders Quadrant’ in its
‘Basel II Risk Management Application Software Magic Quadrant for 2005’
and ‘2006 Basel II Software Applications Magic Quadrant’. Reveleus
was also ‘Highly Commended’ for its Compliance Initiative Innovation in
The Banker Technology Awards for 2006. Reveleus was also rated as
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 41
41
7/25/2008 9:58:46 AM
the number one GRC Solution Provider in the 2008 Operational Risk &
Compliance ‘Compliance Software Rankings’.
institutions is process-driven and rests on the i-flex Process Framework
for Banking (iPFBTM).
Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior
Detection PlatformTM is the industry’s most comprehensive solution
for detecting risk, enhancing customer relationships and addressing
regulatory requirements in the anti-money laundering, trading and
broker compliance areas. Waters Magazine ranked Mantas as the Best
Anti-Money Laundering Solution for 2007, 2005 and 2004 and Best
Compliance Solution for 2003. The award was voted on by the subscribers
of Waters, a monthly magazine that covers information technology and
solutions in the financial services industry.
The ‘i-flex Process Framework for Banking’, is a banking process
repository created by drawing on i-flex’s domain expertise and best
practices. Organized by process areas and defined in a manner
understandable by the business, iPFB helps banks with process
transformation and a phased migration to an SOA environment.
Mantas, along with the Reveleus suite of products, offer customers a
single, unified platform for governance, risk and compliance. Some of
the specific challenges Mantas addresses are global AML compliance,
MiFID, the market abuse directive, customer risk and suitability and
account takeover and identity theft.
i-flex offers strategic business software and services for the global
Property and Casualty insurance market. The Insure3 suite provides
insurance carriers with a suite of core business processing systems
for insurance product and process configuration, policy processing,
customer billing, claims management and services.
Services
PrimeSourcingTM, i-flex’s global IT services division, provides
comprehensive customized IT solutions for banking, securities and
insurance. These high-quality IT solutions reflect the division’s domain
expertise in financial services with specialized practice lines for payments,
business intelligence, CRM, Oracle Technology & Applications and testing.
These IT solutions encompass the complete lifecycle of an IT application
asset--from conceptualization to deployment and maintenance.
The division also provides in-depth expertise across a range of
technologies such as Java, Microsoft, mainframe and open source.
It’s IT processes are certified as SEI-CMMi Level 5 and it leverages
well-established COBIT-compliant global infrastructure and development
centers, including a comprehensive pool of proprietary methodologies,
tools and best practices.
PrimeSourcing division of i-flex was appraised at CMMI V1.1 Level 5
during February 2005. As part of our continuous process improvement
endeavour, we are in the process of upgrading to the latest version of
CMMI namely V1.2.
i-flex TDMS (Technology Deployment and Management Services)
specializes in conceptualization, design, evaluation, implementation and
management of IT infrastructure for financial institutions. These services
are based on best practices such as ITIL (IT Infrastructure Library) and
COBIT (Control Objectives for Information and related Technology)
models, a globally accepted standard for IT management and control
framework and BS7799 (ISO17799).
The i-flex Consulting division offers an end-to-end consulting
partnership, providing comprehensive business and technology solutions
that enable financial services enterprises to improve process efficiencies;
optimize costs; meet risk and compliance requirements; define IT
Architecture; and, manage the transformation process. Consulting
services are offered in the areas of business transformation, risk and
compliance, program management, IT architecture, IT governance and
process improvement. i-flex’s solution approach for financial services
Annual Report 2007_2008_Final.indd 42
i-flex BPO completes the gamut of i-flex’s comprehensive offering for
the financial services industry. Part of i-flex Processing Services Limited
(iPSL), a 100 % owned subsidiary of i-flex solutions, i-flex BPO excels in
providing cost-effective and high-quality knowledge processing services
for the banking, capital markets, insurance and asset management
domains. i-flex also provides the ASP services for its products through its
100% owned subsidiary Flexcel International Private Limited (‘Flexcel’).
In addition to providing ASP services, Flexcel also provides value added
services to its customers such as training, testing, hosting, operations,
roll-outs, infrastructure building and support and application support.
i-flex BPO was selected in the Leaders Category for the ‘2007 Global
Outsourcing 100’ by The International Association of Outsourcing
Professionals (IAOP). The Global Outsourcing 100 defines the standard for
excellence in outsourcing service delivery. Earlier, the same organization
had recognized i-flex BPO as one of the ‘Top 50 Global Outsourcers &
Top 30 Global Offshore Vendors’. Dataquest magazine rated i-flex BPO
among the top 10 ‘dream employers’ in the BPO sector in 2007. i-flex
BPO also bagged the ‘Excellence in Gender Inclusivity - Best Emerging
Company’ award at the NASSCOM-India Today Woman Corporate
Awards for Excellence in Gender Inclusivity awards.
Corporate development
Oracle Global (Mauritius) Limited (“Oracle”) ownership interest in the
Company is 80.58 % as on March 31, 2008.
On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) formed
i-flex solutions s.a., Greece to acquire the banking business from Athens
Technology Center SA (‘ATC’).
On November 16, 2007, Castek Software Inc. (“Castek”) became a
wholly owned subsidiary of i-flex America inc. with acquisition of the
balance 23.21% shares of Castek from minority shareholders.
On January 2, 2008, SuperSolutions Corporation a wholly owned
subsidiary of i-flex America inc. was merged with i-flex solutions inc
which is also a wholly owned subsidiary of i-flex America inc.
On March 31 2008, Flexcel (joint venture with HDFC Bank Limited and
its group companies and Lord Krishna Bank) became wholly owned
subsidiary of i-flex solutions ltd with acquisition of balance 60% shares
of Flexcel from its co-venture parties.
Business metrics
Our total revenues in fiscal 2008 were Rs. 17,929.7 million, representing
an increase of 16% from Rs. 15,523.4 million in fiscal 2007. The net
income in fiscal 2008 was Rs. 4,108.7 million, against Rs. 3,546.7
million in fiscal 2007. Our net income margins were 23% in fiscal
years 2008 and 2007 respectively. We define net income margins for
a particular period as the ratio of net income to total revenues during
such period. We had 9,505 employees as on March 31, 2008 as against
7,631 at the end of the previous year in India.
7/25/2008 9:58:46 AM
Products business
(All amounts in millions of Indian Rupees)
Product revenues
Cost of product revenues
Sales and marketing expenses
General and administrative
expenses
Depreciation and amortization
Income from operations
Operating margin*
2008
Year ended
March 31
2007
11,035.6
(5,018.0)
(663.4)
8,909.5
(3,864.2)
(627.1)
(540.4)
(267.0)
4,546.8
41%
(444.8)
(255.1)
3,718.2
42%
*Operating margin is defined as income from operations from the Products Business
(excluding corporate expenses) as a percentage of total products revenue
Products revenue
Our products revenues represented 62% of the total revenues for fiscal
year ended 2008 and 57% for year ended 2007. Our products revenues
were Rs. 11,035.6 million during the fiscal year ended March 31, 2008;
an increase of 24% from Rs. 8,909.5 million during the fiscal year ended
March 31, 2007.
Products revenues comprise license fees, professional fees for
implementation & enhancement services and annual maintenance
contract (Post Contract Support - PCS) fees for our products.
License fee
Our standard licensing arrangements for products provide the user a
perpetual right to use the product for a pre-defined number of users
and sites upon the payment of a license fee. The license fee is a
function of a variety of quantitative and qualitative factors, including the
number of copies sold, the number of concurrent users supported, the
number and combination of the modules sold and the number of sites
and geographical locations supported. The licenses are non-exclusive,
personal, non-transferable and royalty free.
Implementation fee
Along with licensing of products to customers, customers can also
optionally avail services related to the implementation of products
at customer sites, integration with other customer systems and
enhancement of products to address the specific requirements of
customers. The customer is typically charged a service fee either on
a fixed-price basis or a time and materials basis. Implementation and
enhancement services comprise functional enhancements (if needed),
interface building, implementation planning, data conversion, training
and product walkthroughs and are provided to customers who enter
into licensing arrangements with us and have opted to seek the services
from us.
As the revenues from license fees and implementation and enhancement
services rendered by us depend on the number of new customers we add
and the milestones completion and timing of the implementation etc.,
these revenues typically vary from year to year. The annual maintenance
contracts generate steady revenues and would grow to the extent of new
customers coming under Post Contract Support. The percentages of our
revenues from these streams are as follows:
2008
License fees
Implementation and
customization fees
PCS arrangements
Total
Year Ended
March 31
2007
24%
30%
58%
18%
100%
52%
18%
100%
Cost of products revenue and operating expenses
The cost of our product revenues consists of costs attributable to the
implementation, enhancement, maintenance and continued development,
including research and development efforts, of our core product offerings
- the FLEXCUBE suite of products, Reveleus and other products. These
costs primarily consist of compensation expenses for all of our software
professionals working in the Products Business, project-related travel
expenses, professional fees paid to software services vendors and the
cost of application software for internal use.
Research and development costs are expensed as incurred. Software
development costs are also expensed as incurred until technological
feasibility is established. Software product development cost incurred
subsequent to the achievement of technological feasibility is not material
and is expensed as incurred.
Our operating expenses include selling and marketing expenses, general
and administrative expenses that consist of commissions payable to
our partners, product advertising, marketing expenses and allocated
overhead expenses associated with support and monitoring functions
such as human resources, facilities and infrastructure expenses, quality
assurance and financial control and depreciation and amortization.
Services business
(All amounts in millions of Indian Rupees)
Services revenues
Cost of services revenues
Sales and marketing expenses
General and administrative
expenses
Depreciation and amortization
Income from operations
Operating margin*
2008
Year ended
March 31
2007
6,894.1
(5,294.6)
(109.0)
6,613.9
(5,020.3)
(98.4)
(457.3)
(237.4)
795.8
12%
(424.0)
(236.1)
835.1
13%
Annual maintenance contracts fees
We also earn fees relating to the provision of annual maintenance
contracts after the implementation of a product and following the
expiration of the warranty period. Under these agreements, we provide
technical support, maintenance, problem solving and upgrades of the
licensed products. These support agreements are typically entered for a
period of 12 months.
*Operating margin is defined as income from operations from the Services Business
(excluding corporate expenses) as a percentage of total services revenue.
Services revenue
Our services revenues represented 38% of our total revenues for the
fiscal year ended March 31, 2008 and 43% for the fiscal year ended
March 31, 2007. Our services revenues were Rs. 6, 894.1 million in the
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 43
43
7/25/2008 9:58:46 AM
fiscal year ended March 31, 2008; an increase of 4% from Rs. 6,631.9
million in the fiscal year ended March 31, 2007.
The contracts relating to our Services Business are either time and
material contracts or fixed price contracts. The percentage of total
services revenues from time and material contracts was 86% in fiscal
2008 and 87% in fiscal 2007, with the remainder of our services
revenues attributable to fixed price contracts.
We provide our services through offshore centers located in India, onsite
teams operating at our customers’ premises and our development centers
located in other parts of the world. Offshore services revenues consists of
revenues from work conducted at our development centers in India and
for Indian customers at their locations. Onsite revenues consist of work
conducted at customer premises outside India and our development
centers outside India. The composition of our onsite and offshore
revenues is determined by the project lifecycle. Typically, the work
involving the design of new systems or relating to a system roll-out would
be conducted onsite, while the core software development, maintenance
and support activity may be conducted offshore. We received 61% and
62% of our services revenues from onsite work and 39% and 38% from
offshore work during the fiscal years 2008 and 2007 respectively.
as the percentage billed for our personnel in a particular period to
average number of staff that is considered billable in that same period.
For the purpose of calculating the number of billable staff, we exclude the
personnel that are engaged in management, administration, marketing
support, initial training (six months for personnel without any prior
work experience and three months for personnel with over two years
experience) and personnel allocated to the approved internal investment
projects. Our onsite personnel deployment on projects is based on project
needs and therefore such personnel are fully utilized.
Cost of services revenue and operating expenses
The cost of revenues for services consists primarily of compensation
expenses for our software professionals; cost of application software
for internal use, travel expenses and professional fees paid to software
services vendors. We recognize these costs as incurred. Our operating
expenses include selling, general and administrative expenses and
allocated overhead expenses associated with support and monitoring
functions such as human resources, corporate marketing, information
management systems, quality assurance and financial control and
depreciation.
Our services revenues and profits are also affected by the rate at which
our software professionals are utilized. The utilization rate is calculated
Geographic breakup of revenues
Our overall revenues continue to be well diversified. The following table represents the percentage breakup of our revenues for Products and Services
business by region:
Products
Revenues
USA
Europe
Asia Pacific
Middle East, India and Africa
Latin America and Caribbean
Total
Year ended
March 31, 2008
Services
Total
Revenues
Revenues
11%
46%
19%
23%
1%
100%
47%
24%
22%
7%
0%
100%
Our operations and business depend on our relationships with a number
of large customers. Our Revenues from our top ten customers for fiscal
2008 were at 32% and 26% for fiscal year 2007, as a percentage of
our total revenues. The top-ten customers in our Services Business
contributed 42% of the total services revenues and the top ten customers
in the Products Business contributed 36% of the total products revenues
during fiscal 2008.
The percentage of total revenues during fiscal years 2008 and 2007 that
we derived from our largest customer, top five customers and top ten
customers is provided in the accompanying table. In the table, various
affiliates of Citigroup are classified as separate customers and the last
row sets forth the percentage of total revenues we earned from the
various affiliates of Citigroup with respect to our Products and Services
Business individually and with respect to our business taken as a whole.
Annual Report 2007_2008_Final.indd 44
Products
Revenues
24%
38%
20%
17%
1%
100%
Customer concentration
Top customer
Top 5 customers
Top 10 customers
Citigroup and its
affiliates
Year ended
March 31, 2007
Services
Total
Revenues
Revenues
17%
38%
20%
24%
1%
100%
58%
18%
18%
6%
0%
100%
35%
29%
19%
16%
1%
100%
Products
Revenue
2008 2007
Services Total Revenues
Revenue
2008 2007 2008 2007
7%
24%
36%
6%
24%
37%
10%
27%
42%
8%
24%
38%
8% 3%
22% 15%
32% 26%
13%
18%
36%
46%
22% 30%
Trade receivables
Trade receivables as of fiscal March 31, 2008 and 2007 were Rs. 9,033.1
and Rs. 10,419.4 million respectively. Our days sales outstanding (which
is the ratio of sundry debtors to total sales in a particular year multiplied
by 365) for fiscal 2008 and 2007 were approximately 184 and 245
respectively. The Company periodically reviews its account receivables
outstanding as well as the aging, quality of the account receivable,
7/25/2008 9:58:47 AM
customer relationship and history of the client. The following table
presents the age profile of our sundry debtors:
Period in days
2008
Year ended
March 31
2007
0–180
More than 180
Total
86%
14%
100%
68%
32%
100%
Foreign currency and treasury operations
A substantial portion of our revenues is generated in foreign currencies
while a majority of our expenses are incurred in Indian Rupees, with
the remaining expenses incurring in U.S. Dollars (USD) and European
currencies.
We follow a conservative philosophy of treasury operations and the
policy is to invest funds substantially in time deposits with well-known
and highly rated Indian and foreign banks. The Company has ensured
adequate controls over asset management, including cash management
operations, credit management and debt collection.
The Company also balances funds in USD accounts or INR deposits
based on the comparative exchange rates, interest rates and currency
requirements. The Company books forward covers from time to time, in
line with its treasury management philosophy.
On acceptance of the offer, the selected employee shall undertake to 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
thereto. The repayment of the loan by the Trust to the Company would
be dependent on employee repaying the amount to the Trust. In case
the employee resigns from employment, the rights relating to shares,
which are eligible for exercise, may be purchased by payment of the
exercise price whereas, the balance shares shall be forfeited in favour of
the Trust. The Trustees have the right of recourse against the employee
for any amounts that may remain unpaid on the shares accepted by the
employee. The shares that an employee is eligible to exercise during the
initial five-year period merely go to determine the amount and scheduling
of the loan to be repaid on exercise by the employee. The Trust shall
repay the loan obtained from the Company on receipt of payments from
employees against shares exercised or otherwise.
The Securities and Exchange Board of India (‘SEBI’) has issued the
Employee Stock Option Scheme and Stock Purchase Guidelines, 1999
(‘SEBI guidelines’), which are applicable to stock purchase schemes for
employees of all listed Companies. In accordance with these guidelines,
the excess of market price of the underlying equity shares on the date of
grant of the stock options over the exercise price of the options is to be
recognized in the books of account and amortized over the vesting period.
However, no compensation cost has been recorded as the scheme terms
are fixed and the exercise price equals the market price of the underlying
stock on the grant date.
A summary of the activity in the Company’s ESPS is as follows:
Year ended
Year ended
March 31, 2008 March 31, 2007
(Number of shares)
Income taxes
Currently, we partially benefit from the tax holidays the Government
of India provides to software products and IT services exporters from
specially designated software technology parks in India. As a result of
these incentives, our operations have been subject to relatively lower tax
liabilities in India. These tax incentives currently include a 10-year tax
holiday from Indian corporate income-taxes for the operations of seven
of our Indian facilities. As a result a substantial portion of our pre-tax
income has not been subject to tax in recent years.
The Finance Act, 2000, restricts the ten-year tax holiday available
from the fiscal year in which the undertaking begins to manufacture
or produce, or until fiscal 2010 (as extended in Finance Act, 2008),
whichever is earlier. Accordingly, facilities set up after fiscal 2000 will
enjoy the benefit of the tax holiday only until fiscal 2010. For seven of
our facilities, these benefits expire in stages through 2010. Income taxes
also include foreign taxes representing income taxes payable overseas
by us in various countries.
Opening balance of
unallocated shares
Shares forfeited during the year
Closing balance of
unallocated shares
Opening balance of
allocated shares
Shares exercised during
the year
Shares forfeited during the year
Closing balance of
allocated shares
Shares eligible for exercise
Shares not eligible for exercise
Total allocated shares
142,116
16,847
120,888
21,228
158,963
142,116
355,212
2,080,546
(117,264)
(16,847)
(1,704,106)
(21,228)
221,101
355,212
96,251
124,850
221,101
164,712
190,500
355,212
Employee Stock Purchase Scheme (‘ESPS’)
Employee Stock Option Plan (‘ESOP’)
The Company has adopted the ESPS administered through a Trust
(“the Trust”) to provide equity based incentives to key employees of the
Company. The Trust purchases shares of the Company from market
using the proceeds of loans obtained from the Company. Such shares
are offered by the Trust to employees at an exercise price, which
approximates the fair value on the date of the grant. The employees
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
for the benefit of the employee. The employee will be entitled to receive
dividends, bonus, etc., that may be declared by the Company from time
to time for the entire portion of shares held by the Trust on behalf of the
employees.
Pursuant to ESOP scheme approved by the shareholders of the Company
held on August 14, 2001, the Board of Directors, on March 4, 2002
approved the Employees Stock Option Scheme (‘the Scheme’) for issue
of 4,753,600 options to the employees and directors of the Company
and its subsidiaries. According to the Scheme, the Company has granted
4,548,920 options prior to the IPO and 559,000 options at various dates
after IPO. As per the scheme, each of 20% of the total options granted
will vest to the eligible employees and directors on completion of 12, 24,
36, 48 and 60 months and is subject to continued employment of the
employee or director with the company or its subsidiaries. Options have
exercise period of 10 years.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 45
45
7/25/2008 9:58:47 AM
A summary of the activity in the Company’s ESOP is as follows:
Shares arising
from options
Year ended
March 31, 2008
Weighted average
exercise price
Shares arising
from options
Year ended
March 31, 2007
Weighted average
exercise price
530,485
–
(63,332)
(35,900)
431,253
989
–
632
1,191
1,025
2,756,880
373,000
(2,552,795)
(46,600)
530,485
280
1,291
(270)
(826)
989
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of the year
The weighted average share price for the period over which stock options
was exercised was Rs. 1,890. The details of options unvested and options
vested and exercisable as on March 31, 2008 are as follows:
Range of
exercise
prices
Options unvested
Options vested
and exercisable
Shares Weighted Weighted
average
average
exercise remaining
price (Rs.) contractual
life (Years)
419-560 30,000
709-709
6,000
1,291-1,291 246,800
547
709
1,291
6.3
7.2
8.1
265-265
419-560
1,291-1,291
265
480
1,291
1,025
3.9
5.3
8.1
7.2
51,000
45,003
52,450
431,253
Analysis of our financial results
Comparison of fiscal 2008 with fiscal 2007
Revenues
Our total revenues in the fiscal year ended March 31, 2008, were
Rs. 17,929.7 million, an increase of 16% over our total revenues of
Rs. 15,523.4 million in the fiscal year ended March 31, 2007. The
increase in revenues was attributable to a 24% increase in the revenues
from Products Business and a 4% increase in the revenues from our
Services Business.
Products revenues
Our products revenues in the fiscal year ended March 31, 2008, were
Rs. 11,035.6 million, an increase of 24% over our products revenues
of Rs. 8,909.5 million in the fiscal year ended March 31, 2007 on the
strength of large customer wins in Europe and ASPAC. The revenues
from license fees comprised 24% of the revenues, implementation fees
comprised 58% and Annual Maintenance Contracts comprised 18% of
the revenues for the fiscal 2008.
Interest and other income
Our interest and other income in the fiscal year ended March 31, 2008,
was Rs. 486.5 million, an increase of 40% over our interest and other
income of Rs. 348.3 million in the fiscal year ended March 31, 2007.
The increase in interest income amounted to Rs. 54.5 million resulting
from additional funds placed with banks and hardening of interest rates
over fiscal 2007. Additionally the foreign exchange gain contributed
an increase of Rs. 81.4 million during the year mainly due to lower
appreciation of Rupee against the US Dollar as compared to fiscal 2007
and sharp depreciation of Rupee against Euro.
Cost of revenues and operating expenses
Cost of revenues
Our cost of revenues in the fiscal year ended March 31, 2008, was
Rs. 10,312.6 million, an increase of 16% over our cost of revenues
of Rs. 8,884.6 million in the fiscal year ended March 31, 2007. Our
cost of revenues as a percentage of total revenues was 58% in the
fiscal year ended March 31, 2008 compared to 57% in the fiscal year
ended March 31, 2007. We invest significantly both in our Products and
Services businesses to meet emerging market requirements and create
the foundation for the growth in future. In the financial year 2007-08,
we continued to invest enhancing the product suite and announced
FLEXCUBE 10.0, which helps financial institutions respond faster to market
dynamics and define and track processes, while ensuring compliance.
We also launched our Private Wealth Management solution – FLEXCUBE
Private Banking. We further strengthened our analytics offering for
financial services which comprises an integrated suite of award-winning
solutions – ReveleusTM and Mantas. In our Services business, we
invested in strengthening our competencies in the payments area. We
also invested in creating a strong offering in MiFID - the new regulatory
compliance area in capital markets in Europe.
Services revenues
Our cost of products revenues in the fiscal year ended March 31, 2008,
was Rs. 5,018.0 million, an increase of 30% over our cost of products
revenues of Rs. 3,864.2 million in the fiscal year ended March 31, 2007.
Our cost of products revenues as a percentage of products revenues was
45% in the fiscal year ended March 31, 2008, compared to 43% in the
fiscal year ended March 31, 2007. This increase, as stated above was
largely attributable to the higher investments in the product business.
Our services revenues represented 38% and 43% of our total revenues in
the fiscal year ended March 31, 2008 and 2007. Our services revenues
were Rs. 6,894.1 million in the fiscal year ended March 31, 2008,
an increase of 4% from Rs. 6,613.9 million in the fiscal year ended
March 31, 2007. Revenues from time and material contracts comprised
86% of the revenues and fixed price contracts comprised 14% for the
fiscal 2008.
Our cost of services revenues in the fiscal year ended March 31, 2008,
was Rs. 5,294.6 million, an increase of 5% over our cost of services
revenues of Rs. 5,020.3 million in the fiscal year ended March 31, 2007.
The cost of services revenues as a percentage of services revenues was
77% in the fiscal year ended March 31, 2008 compared to 76% in the
fiscal year ended March 31, 2007.
Annual Report 2007_2008_Final.indd 46
7/25/2008 9:58:47 AM
Sales and marketing expenses
Income from operations and net income
Our sales and marketing expenses in the fiscal year ended March 31, 2008,
were Rs. 772.4 million, an increase of 6% over our sales and marketing
expenses of Rs. 725.5 million in the fiscal year ended March 31, 2007.
Our sales and marketing expenses as a percentage of total revenues was
4% for the fiscal year ended March 31, 2008 and 5% in the fiscal year
ended March 31, 2007.
As a result of the foregoing factors, income from operations increased
by 14% to Rs. 3,948.9 million in fiscal 2008 from Rs. 3,462.2 million
in fiscal 2007 and net income increased by 16% to Rs. 4,108.7 million
in fiscal 2008 from Rs. 3,546.7 million in fiscal 2007. We define net
income margins for a particular period as the ratio of net income to total
revenues during such period.
Our sales and marketing expenses for our Products Business in the fiscal
year ended March 31, 2008, were Rs. 663.4 million, an increase of
6% over our sales and marketing expenses for our Products Business
of Rs. 627.1 million in the fiscal year ended March 31, 2007. Sales
and marketing expenses for our Products Business as a percentage of
products revenues was at 6% in the fiscal year ended March 31, 2008
compared to 7% in the fiscal year ended March 31, 2007.
Liquidity and capital resources
Our sales and marketing expenses for our Services Business in the fiscal
year ended March 31, 2008 were Rs. 109.0 million, an increase of 11%
over our sales and marketing expenses for our Services Business of
Rs. 98.4 million in the fiscal year ended March 31, 2007. Sales and
marketing expenses for our Services Business as a percentage of services
revenues increased from 1% in the fiscal year ended March 31, 2007 to
2% in the fiscal year ended March 31, 2008.
General and administrative expenses
Our general and administrative expenses in the fiscal year ended
March 31, 2008 were Rs. 2,292.8 million, an increase of 22% over
our general and administrative expenses of Rs. 1,885.8 million in the
fiscal year ended March 31, 2007. This increase is attributable to
expansion of our existing facilities and creation of new Development
Centers to meet the growth requirements. Our general and administrative
expenses as a percentage of total revenues was at 13% in the fiscal
year ended March 31, 2008 compared to 12% in the fiscal year ended
March 31, 2007.
General and administrative expenses for our Products Business in the
fiscal year ended March 31, 2008, were Rs. 540.3 million, an increase
of 21% over general and administrative expenses for our Products
Business of Rs. 444.8 million in the fiscal year ended March 31, 2007.
Our general and administrative expenses for our Products Business as a
percentage of products revenues were 5% both in the fiscal year ended
March 31, 2008 and March 31, 2007.
General and administrative expenses for our Services Business in the fiscal
year ended March 31, 2008, were Rs. 457.3 million, an increase of 8%
over our general and administrative expenses for our Services Business
of Rs. 424.0 million in the fiscal year ended March 31, 2007. Our general
and administrative expenses for our Services Business as a percentage
of services revenues was 7% in the fiscal year ended March 31, 2008,
compared to 6% in the fiscal year ended March 31, 2007.
Income taxes
Our provision for income taxes in the fiscal year ended March 31, 2008,
was Rs. 206.7 million a decrease of 22% over our provision for income
taxes of Rs. 263.7 million in the fiscal year ended March 31, 2007. Our
effective tax rate was 5% in the fiscal year ended March 31, 2008 as
compared to 7% in the fiscal year ended March 31, 2007. The decrease
in tax rate is attributable to the higher generation of revenues from units
availing tax holidays in India.
Our capital requirements relate primarily to financing the growth of our
business. We have historically financed the majority of our working capital,
capital expenditure and other requirements through our operating cash
flow. During fiscal 2008 and 2007 we generated cash from operations
Rs. 3,942.3 million and Rs. 805.6 million respectively.
i-flex is a zero debt company. We expect that our primary financing
requirements in the future will be capital expenditure and working
capital requirements in connection with the expansion of our business.
We believe that the cash generated from operations will be sufficient to
satisfy our currently foreseeable capital expenditure and working capital
requirements.
Human capital
We recruit graduates from leading engineering and management
institutions. We also hire functional experts from the banking industry.
We had a net addition of 1,874 employees during the fiscal year taking
our employee strength to 9,505 employees as on March 31, 2008. The
blend of functional knowledge and technical expertise, coupled with i-flex
training and experience make our employees unique.
We enjoy cordial relationships with our employees and endeavour to
give them an excellent, professionally rewarding and enriching work
environment. We operate an effective performance management system
with a focus on employee development. This measures key result
areas, competencies and training needs, ensuring all-round employee
development.
Risks and concerns
Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposures are due to the following:
–
foreign exchange rate fluctuations, principally relating to the
fluctuation of the U.S. Dollar to the Indian Rupee;
–
fluctuations in interest rates; and
–
fluctuations in the value of our investments.
As of March 31, 2008, we had Cash and Bank Balances of Rs. 6,400.9
million, out of which Rs. 5,513.1 million was in interest-bearing bank
deposits. Consequently, we face an exposure on account of fluctuation
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.
A substantial portion of our revenues is generated in foreign currencies,
while a majority of our expenses are incurred in Indian Rupees. Our
functional currency for Indian operations is the Indian Rupee. We
expect the majority of our revenues will continue to be generated in
foreign currencies for the foreseeable future and a significant portion
of our expenses, including personnel costs and capital and operating
expenditure, to continue to be incurred in Indian Rupees.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 47
47
7/25/2008 9:58:48 AM
In addition, we face normal business risks such as global competition
and country risks pertaining to countries that we operate in.
Integration of mergers and acquisitions
i-flex has acquired companies in the past, i.e., SuperSolutions Corporation,
USA, ISP Internet Mauritius Company, Mauritius, Castek Software Inc.,
Canada, Mantas inc., USA and i-flex Consulting (Asia Pacific) Pte Ltd.,
Singapore. During the year, we acquired i-flex solutions s.a. and the
balance stake in Castek Software Inc. and Flexcel.
These mergers and acquisitions involve inherent risks, including:
–
unforeseen contingent risks or latent liabilities relating to these
business that may only become apparent after the merger or
acquisition is finalized;
–
integration and management of the operations, sales and marketing,
personnel and systems;
The company, as part of its policies, ensures that the companies acquired
are successfully integrated into the mainstream business.
SWOT analysis
Strengths:
Outlook
The worldwide market for financial services is transforming at a rapid
pace. New asset classes such as private equity and hedge funds are
attracting investors and shifting the focus within capital markets.
The payments space, a major source of revenues and profit, is being
restructured, thus altering the fundamental dynamics of the banking
industry. Financial services institutions are also leveraging all available
technologies to offer services on a ‘self service’ approach leading to
business and technology innovation.
Emerging markets are becoming increasingly important sources of growth
for firms in mature economies. Global financial institutions will need
to excel in areas such as off shoring, taxation and financial reporting,
service and process innovation and in internal controls to sustain their
growth and profitability.
With a process-driven approach based on a Service-Oriented Architecture,
your company has the distinct advantage of offering banks the combined
benefits of interoperability, extensibility and standardization. Jointly with
Oracle, your company provides best-of-breed functionality for financial
institutions that need to operate flexibly, competitively and respond quickly
to market dynamics in a fiercely challenging business environment.
Encompassing retail, corporate and investment banking, funds, cash
management, trade, treasury, payments, lending, private wealth
management, asset management and business analytics, among others,
these solutions help financial institutions drive innovation and become
‘model enterprises’ of the future.
–
Comprehensive solutions portfolio.
–
World-class technology
–
Deep domain expertise
–
Extensive global client base
Acquisitions
–
Superior quality and cost-efficient delivery
a. i-flex solutions s.a.
–
High quality manpower resources
–
Strong R&D capability, well linked with business
On July 2, 2007, i-flex b.v. acquired 90% shares in banking business
from ATC. The acquisition was structured by way of transfer of all
contracts, employees and fixed assets of banking business from ATC to
a newly formed entity, i-flex solutions s.a., Greece.
Weaknesses:
–
Exposure to various economies
Opportunities:
b. Castek Software Inc.
In November 2007, i-flex America inc. entered into an agreement to
acquire remaining equity shares in Castek from minority shareholders.
The transaction was completed in April 2008.
–
India is a favoured outsourcing destination
–
Increasing momentum in purchasing core banking systems by large
and global financial institutions
c. Flexcel International Private Limited
–
Entry into hitherto untapped markets
–
Expanding solutions portfolio and entry into new market segments
– consumer finance, business analytics, Basel II, Anti-Money
Laundering, Private wealth management, Islamic banking, among
others
On March 31, 2008, Flexcel became a wholly owned subsidiary of
i-flex solutions ltd with acquisition of balance 60% shares of Flexcel from
i-flex’s co-venture parties.
–
Need for banks to improve performance and efficiency through
effective use of information technology solutions
Threats:
–
Increasing competition
–
Legislative and visa related restrictions
Annual Report 2007_2008_Final.indd 48
Internal control systems and their adequacy
The Company has in place adequate systems of internal control and
documented procedures covering all financial and operating functions.
These systems have been designed to provide reasonable assurance with
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.
The Company continuously strives to align all its processes and controls
with global best practices.
7/25/2008 9:58:48 AM
Reconciliation Statement of profit as per the Indian GAAP unconsolidated and
Indian GAAP consolidated
(All amounts in thousands of Indian Rupees)
Net income as per Indian GAAP unconsolidated profit and loss account
Add
Revenue of subsidiaries, net
i-flex solutions b.v.
i-flex solutions pte ltd – consolidated
i-flex America inc. – consolidated
ISP Internet Mauritius Company – consolidated
i-flex Processing Services Ltd.
Other income from subsidiaries, net
Less
Expenses of subsidiaries, net
i-flex solutions b.v.
i-flex solutions pte ltd – consolidated
i-flex America inc. – consolidated
ISP Internet Mauritius Company – consolidated
i-flex Processing Services Ltd.
Provision for diminution in value of investment
Profit after consolidating subsidiaries
Add
Proportionate Revenue of joint venture, net
Proportionate Other income from joint venture, net
Less
Proportionate Expenses of joint ventures, net
Profit on equity investment
Net income as per Indian GAAP consolidated profit and loss account
Year ended
March 31, 2008
Year ended
March 31, 2007
4,108,745
3,546,739
1,250,487
951,496
3,127,167
467,633
–
5,796,783
846,648
635,994
3,164,578
404,956
–
5,052,176
152,345
5,949,128
11,167
5,063,343
(864,966)
(793,806)
(3,791,658)
(573,934)
1,572
(73,664)
(533,459)
(428,689)
(3,369,984)
(564,314)
–
166,897
120,000
–
4,155,082
3,713,636
75,860
830
76,690
33,763
96
33,859
(71,757)
(71,757)
(32,321)
(32,321)
(4,128)
7,622
4,155,886
3,722,796
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 49
49
7/25/2008 9:58:48 AM
Auditors’ report
To
The Members of i-flex Solutions Limited
1. We have audited the attached balance sheet of i-flex Solutions
Limited (‘the Company’) as at March 31, 2008 and also the profit
and loss account and the cash flow statement for the year ended
on that date annexed thereto. These financial statements are the
responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our
audit.
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 misstatement. An
audit includes examining, on a test basis, evidence supporting the
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 statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
3. As required by the Companies (Auditors’ Report) Order, 2003 (as
amended) (‘the Order’) issued by the Central Government of India
in terms of sub-section (4A) of Section 227 of the Companies Act,
1956 (‘the Act’), we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above, we
report that:
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;
ii. In our opinion, proper books of account as required by law
have been kept by the Company so far as appears from our
examination of those books;
iii. The balance sheet, profit and loss account and cash flow
statement dealt with by this report are in agreement with the
books of account;
Annual Report 2007_2008_Final.indd 50
iv. In our opinion, the balance sheet, profit and loss account and
cash flow statement dealt with by this report comply with the
accounting standards referred to in sub-section (3C) of Section
211 of the Act.
v. On the basis of the written representations received from the
directors, as on March 31, 2008, and taken on record by
the Board of Directors, we report that none of the directors is
disqualified as on March 31, 2008 from being appointed as a
director in terms of clause (g) of sub-section (1) of Section 274
of the Act.
vi. In our opinion and to the best of our information and according
to the explanations given to us, the said accounts give the
information required by the Act, in the manner so required
and give a true and fair view in conformity with the accounting
principles generally accepted in India;
a) in the case of the balance sheet, of the state of affairs of
the Company as at March 31, 2008;
b) in the case of the profit and loss account, of the profit for
the year ended on that date; and
c) in the case of cash flow statement, of the cash flows for
the year ended on that date.
For S. R. Batliboi & Associates
Chartered Accountants
per Sunil Bhumralkar
Partner
Membership No.: 35141
Mumbai, India
May 5, 2008
7/25/2008 9:58:48 AM
Annexure referred to in paragraph 3 of our report of even date
Re: i-flex solutions ltd
(i)
(a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of
fixed assets.
(b) Fixed assets have been physically verified by the
management during the year and as informed, no material
discrepancies were identified on such verification.
(c) According to the information and explanation given to us,
there are no dues of income tax, sales-tax, wealth tax,
service tax, custom duty, excise duty and cess which have
not been deposited on account of any dispute.
(x)
The Company has no accumulated losses at the end of the
financial year and it has not incurred cash losses in the current
and immediately preceding financial year.
(xi)
The Company did not have any dues to any financial institution,
bank or debenture holder during the year.
(xii)
According to the information and explanations given to us and
based on the documents and records produced to us, the
Company has not granted loans and advances on the basis
of security by way of pledge of shares, debentures and other
securities.
(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
the Order are not applicable to the Company.
(xiv)
In our opinion, the Company is not dealing in or trading in shares,
securities, debentures and other investments. Accordingly, the
provisions of clause 4(xiv) of the Order are not applicable to the
Company.
(xv)
According to the information and explanations given to us, the
Company has not given any guarantee for loans taken by others
from bank or financial institutions.
(xvi)
The Company did not have any term loans outstanding during
the year.
(c) There was no substantial disposal of fixed assets during
the year.
(ii)
(iii)
Due to the nature of its business, clause (ii) of the Order,
relating to physical verification of inventory is not applicable to
the Company.
(a) As informed, the Company has not granted any loans,
secured or unsecured to companies, firms or other parties
covered in the register maintained under section 301 of
the Act.
(b) As informed, the Company has not taken any loans,
secured or unsecured from companies, firms or other
parties covered in the register maintained under section
301 of the Act.
(iv)
(v)
In our opinion and according to the information and explanations
given to us, there is an adequate internal control system
commensurate with the size of the Company and the nature of
its business, for the purchase of fixed assets and for the sale of
services. During the course of our audit, no major weakness has
been noticed in the internal control system in respect of these
areas. Due to the nature of its business the Company does not
purchase any inventory.
According to the information and explanations provided by the
management, we are of the opinion that there are no contracts
and arrangements that need to be entered into the register
maintained under Section 301 of the Act.
(vi)
The Company has not accepted any deposits from the public.
(vii)
In our opinion, the Company has an internal audit system
commensurate with the size and nature of its business.
(viii)
To the best of our knowledge and as explained, the Central
Government has not prescribed maintenance of cost records
under clause (d) of sub-section (1) of Section 209 of the Act for
the products of the Company.
(ix)
(a) The Company is generally regular in depositing with
appropriate authorities undisputed statutory dues including
provident fund, investor education and protection fund,
employees’ state insurance, income-tax, sales-tax,
wealth-tax, service tax, customs duty, cess and other
material statutory dues applicable to it though there have
been considerable delays in few cases of fringe benefit tax
and stamp duty payment. As explained to us, the Company
did not have any dues of excise duty.
(b) According to the information and explanations given to
us, undisputed dues in respect of provident fund, investor
education and protection fund, employees’ state insurance,
income-tax, wealth-tax, service tax, sales-tax, customs
duty, cess and other undisputed statutory dues which were
outstanding, at the year end, for a period of more than six
months from the date they became payable are as follows:
Name of the Nature of
statute
the dues
Amount Period to which Due Date
(Rs.) the amount
relates
Income Tax Fringe
15,393,104 April 2005 to Various
Act, 1961 benefit tax
March 2006 dates
9,102,918 April 2006 to Various
March 2007 dates
Date of
Payment
(xvii) According to the information and explanations given to us and
on an overall examination of the balance sheet of the Company,
we report that no funds raised on short-term basis have been
used for long-term investment.
(xviii) The Company has not made any preferential allotment of shares
to parties or companies covered in the register maintained
under Section 301 of the Act.
(xix)
The Company did not have any outstanding debentures during
the year.
(xx)
We have verified that the end use of money raised by public
issue is as disclosed in the notes to the financial statements.
(xxi)
Based upon the audit procedures performed for the purpose of
reporting the true and fair view of the financial statements and
as per the information and explanations given by management,
we report that no fraud on or by the Company has been noticed
or reported during the course of our audit.
For S. R. Batliboi & Associates
Chartered Accountants
per Sunil Bhumralkar
Partner
Membership No.: 35141
Mumbai, India
May 5, 2008
Not yet paid
Not yet paid
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 51
51
7/25/2008 9:58:48 AM
Balance sheet
as at March 31
(All amounts in thousands of Indian Rupees)
Schedules
Sources of funds
Shareholders' funds
Share capital
Share application money pending allotment
Reserves and surplus
Application of funds
Fixed assets
Cost
Less: Accumulated depreciation and amortization
Net book value
Capital work-in-progress and advances
1
2
2008
2007
418,737
265
27,707,489
28,126,491
416,443
401,679
23,166,636
23,984,758
4,030,206
2,226,083
1,804,123
1,310,154
3,114,277
3,232,748
1,739,532
1,493,216
1,270,678
2,763,894
3
Investments
4
7,234,149
6,092,200
Deferred tax assets
5
221,714
131,351
Current assets, loans and advances
Sundry debtors
Cash and bank balances
Other current assets
Loans and advances
6
9,033,141
6,400,880
976,894
5,858,496
22,269,411
10,419,437
5,007,470
987,275
4,866,857
21,281,039
Less: Current liabilities and provisions
Current liabilities
Provisions
7
4,279,726
433,334
4,713,060
5,930,401
353,325
6,283,726
17,556,351
14,997,313
28,126,491
23,984,758
Net current assets
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
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Annual Report 2007_2008_Final.indd 52
Tarjani Vakil
Director
7/25/2008 9:58:48 AM
Profit and loss account
for the year ended March 31
(All amounts in thousands of Indian Rupees, except per share data)
Schedules
2008
2007
Revenue
8
17,929,718
15,523,444
Cost of revenue
Gross profit
9
(10,312,571)
7,617,147
(8,884,576)
6,638,868
10
11
(772,427)
(2,292,755)
(603,095)
3,948,870
(120,000)
(725,502)
(1,885,836)
(565,351)
3,462,179
–
12
13
419,974
66,556
4,315,400
365,535
(17,232)
3,810,482
Provision for taxes
Current tax
MAT credit
Deferred tax
Fringe benefit tax [Refer Note 15 of Schedule 15]
Net income for the year
(543,981)
362,605
90,365
(115,644)
4,108,745
(251,032)
–
60,589
(73,300)
3,546,739
Profit and loss account, beginning of the year
Amount available for appropriation
4,009,569
8,118,314
464,241
4,010,980
Appropriations:
Dividend paid on stock options exercised
Tax on dividend paid on stock options exercised
Surplus carried to Balance Sheet
–
–
8,118,314
(1,237)
(174)
4,009,569
49.10
49.02
44.82
43.60
Operating expenses
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization
Income from operations
Provision for diminution in value of investment
Non-operating income (expenses)
Interest income
Other income (expenses), net
Income before provision for taxes
Earnings per share of Rs. 5/- each (in Rs.)
Basic
Diluted
14
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
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Tarjani Vakil
Director
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 53
53
7/25/2008 9:58:49 AM
Schedules annexed to and forming part of the accounts
as at March 31
(All amounts in thousands of Indian Rupees, except share data)
2008
2007
Authorized:
100,000,000 (March 31, 2007 – 100,000,000) equity shares of Rs. 5/- each
500,000
500,000
Issued, subscribed and fully paid up:
83,747,441 (March 31, 2007 – 83,288,580) equity shares of Rs. 5/- each
418,737
416,443
Schedule 1: Share capital
a. Of the above, 67,481,698 (March 31, 2007 – 67,481,698) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).
b. Of the above, 62,121,800 (March 31, 2007 – 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.
Schedule 2: Reserves and surplus
Securities premium
Balance, beginning of the year
Received during the year
Share issue expenses (Refer Note 14 of Schedule 15)
Balance, end of the year
General reserve
Balance, beginning of the year
Adjustment for employee benefits provision
Balance, end of the year
Profit and loss account
Annual Report 2007_2008_Final.indd 54
9,011,876
439,409
(7,301)
9,443,984
2,543,056
6,468,820
–
9,011,876
10,145,191
–
10,145,191
10,238,569
(93,378)
10,145,191
8,118,314
4,009,569
27,707,489
23,166,636
7/25/2008 9:58:49 AM
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 55
55
7/25/2008 9:58:49 AM
430,969
2,818,892
As at March 31, 2007
17,113
121,473
–
–
–
–
–
46,682
–
14,811
34,654
13,372
11,954
3,232,748
4,030,206
197,473
22,290
138,619
53,767
232,674
167,000
742,299
1,339,384
650,601
446,879
39,220
As at
31.03.2008
Note: Includes 10 (March 31, 2007 – 10) shares of Rs. 50/- each in Takshila Building No.9, Co-op Housing Society Limited, Mumbai.
918,931
–
–
–
–
–
2,289
488,959
179,063
169,967
69,974
8,679
Gross block
Additions
Sale/deletions
3,232,748
197,473
22,290
138,619
53,767
232,674
211,393
253,340
1,175,132
515,288
390,277
42,495
As at
01.04.2007
Total
Intangible assets:
Goodwill on acquisition
Customer contracts
Product IPR
PeopleSoft ERP
Tangible assets:
Land
Improvement to leasehold premises
Buildings (see note below)
Computer equipments
Electrical and office equipments
Furniture and fixtures
Leased vehicles
Particulars
Schedule 3: Fixed assets
565,351
603,095
44,836
–
27,723
10,753
–
66,108
30,998
213,391
120,886
79,063
9,337
10,760
116,544
–
–
–
–
–
46,682
–
14,716
34,636
13,369
7,141
Depreciation and amortization
For the year
Sale/deletions
Capital work-in-progress and advances
1,184,941
1,739,532
146,153
22,290
62,915
14,337
–
139,901
41,782
871,403
238,463
182,719
19,569
As at
01.04.2007
1,739,532
2,226,083
190,989
22,290
90,638
25,090
–
159,327
72,780
1,070,078
324,713
248,413
21,765
As at
31.03.2008
1,310,154
3,114,277
1,804,123
6,484
–
47,981
28,677
232,674
7,673
669,519
269,306
325,888
198,466
17,455
1,270,678
2,763,894
1,493,216
51,320
–
75,704
39,430
232,674
71,492
211,558
303,729
276,825
207,558
22,926
Net book value
As at
As at
31.03.2008
31.03.2007
As at
March 31, 2008
As at
March 31, 2007
45,000
(45,000)
–
45,000
(45,000)
–
–
–
–
20,680
(20,680)
–
6,593
6,593
131
131
33,123
33,123
46,104
(20,680)
25,424
–
–
–
i-flex solutions b.v.
140,000 (March 31, 2007 – 5,185) equity shares of EUR 100/- each, fully paid-up
776,308
25,119
i-flex solutions pte ltd
250,000 (March 31, 2007 – 250,000) equity shares of SGD 1/- each, fully paid up
6,626
6,626
3,452,256
2,979,316
2,839,487
2,839,487
192,115
(120,000)
72,115
192,115
–
192,115
13,000
500
9,086
9,190
7,234,149
6,092,200
42,209
42,689
7,191,940
42,313
42,133
6,049,887
Schedule 4: Investments
a. Long term investments (at cost)
i. Trade (unquoted)
EBZ Online Private Limited
242,240 (March 31, 2007 – 242,240) equity shares of Rs. 10/- each, fully paid-up
Less: Provision for diminution in value of investment
Flexcel International Private Limited [Refer Note 13 (a) of Schedule 15]
(March 31, 2007 – 2,068,000) equity shares of Rs. 10/- each, fully paid-up
Less: Provision for diminution in value of investment
Login SA
33,000 (March 31, 2007 – 33,000) equity shares of EUR 2/- each, fully paid up
ii. Non trade (unquoted)
National Savings Certificate – VIII issue
iii. Non trade (quoted)
6.75% Tax Free US-64 Bonds
331,225 (March 31, 2007 – 331,225) Bonds of Rs. 100/- each, fully paid-up
iv. In wholly owned subsidiaries (unquoted)
Flexcel International Private Limited [Refer Note 13 (a) of Schedule 15]
5,170,000 (March 31, 2007 – 2,068,000) equity shares of Rs. 10/- each, fully paid-up
Less: Provision for diminution in value of investment
i-flex America inc. [Refer Note 13 (b) of Schedule 15]
1 (March 31, 2007 – 1) equity share of USD 0.01 each, fully paid up
100 (March 31, 2007 –100) Series A Convertible Participating Preference shares of
USD 0.01 each, fully paid up
ISP Internet Mauritius Company [Refer Note 13 (c) of Schedule 15]
30,000 (March 31, 2007 – 30,000) equity shares of USD 1/- each, fully paid up
Less: Provision for diminution in value of investment
i-flex Processing Services Limited
1,300,000 (March 31, 2007 – 50,000) equity shares of Rs. 10/- each, fully paid up
b. Current investment (cost or fair value whichever is lower)
Non trade (quoted)
9% Dhanalakshmi Bank Bonds Series VI
10 (March 31, 2007 – 10) bonds of Rs. 1,000,000 each, fully paid up
Aggregate cost of quoted investments
Aggregate market value of quoted investments
Aggregate cost of unquoted investments
Annual Report 2007_2008_Final.indd 56
7/25/2008 9:58:49 AM
As at
March 31, 2008
As at
March 31, 2007
196,177
25,537
221,714
124,351
7,000
131,351
1,295,812
293,255
1,589,067
7,737,329
9,326,396
(293,255)
9,033,141
3,286,784
148,735
3,435,519
7,132,653
10,568,172
(148,735)
10,419,437
6,324,288
7,835,843
527
9,748
985
–
756,912
83,773
5,513,108
455,269
44,813
3,699,052
–
–
7,067
1,807
287,190
497,263
6,067
2,065
27,591
347
6,400,880
14,386
380
5,007,470
Balances with non-scheduled banks:
Citibank, Dubai current account
Citibank, Dubai deposit account
Citibank, Moscow current accounts
Central Bank, Libya current account
244
347
2,398
24,949
2,850
380
2,889
8,647
Maximum balance held during the year:
Citibank, Dubai current account
Citibank, Dubai deposit account
Citibank, Moscow current accounts
Central Bank, Libya current account
8,361
384
17,316
24,949
5,028
422
13,437
8,647
65,220
746
76,895
657,727
32,215
144,091
976,894
71,013
741
59,668
771,243
42,118
42,492
987,275
Schedule 5: Deferred tax asset
Difference between book and tax depreciation
Provision for doubtful debts
Schedule 6: Current assets, loans and advances
a. Sundry debtors (unsecured)
Debts outstanding for a period exceeding six months:
Considered good
Considered doubtful
Other debts - considered good
Less: Provision for doubtful debts
Amount due from subsidiaries [Refer Note 9 of Schedule 15]
b. Cash and bank balances
Cash in hand
Cheques on hand
Balances with scheduled banks:
Current accounts in foreign currency
Other current accounts
Deposit accounts
Deposit amount of
Unutilized IPO funds
Preferential issue
Margin money deposit
Unclaimed dividend accounts
Balances with non-scheduled banks:
Current accounts in foreign currency
Deposit account in foreign currency
c. Other current assets
Interest accrued on:
Bank deposits
Bonds
Loan to subsidiaries [Refer Note 9 of Schedule 15]
Unbilled revenue
Gross investment in lease
Contract work in progress
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 57
57
7/25/2008 9:58:49 AM
d. Loans and advances (unsecured, considered good)
Advances recoverable in cash or in kind or for value to be received:
Loan to subsidiaries [Refer Note 9 and Note 13 of Schedule 15]
Amount recoverable from subsidiaries [Refer Note 9 of Schedule 15]
Premises and other deposits
Prepaid expenses
Advance tax, net of provision for taxes
MAT credit entitlement
Forward contract receivable
Other advances
As at
March 31, 2008
As at
March 31, 2007
936,682
81,647
3,087,257
239,544
839,471
362,605
86,563
224,727
5,858,496
864,788
2,842
2,446,721
260,359
769,037
–
305,630
217,480
4,866,857
832,840
1,617,449
1,509,086
52,652
30,071
1,807
10,163
225,658
4,279,726
2,759,670
1,271,190
1,576,427
61,364
19,832
2,065
16,234
223,619
5,930,401
–
–
173,771
259,563
433,334
127,013
226,312
353,325
Year ended
March 31, 2008
Year ended
March 31, 2007
11,035,574
6,894,144
17,929,718
8,909,532
6,613,912
15,523,444
7,588,403
1,593,286
640,459
490,423
10,312,571
6,258,717
1,629,208
535,618
461,033
8,884,576
285,493
113,452
113,933
27,693
152,714
79,142
772,427
217,214
148,465
137,520
55,075
74,063
93,165
725,502
Schedule 7: Current liabilities and provisions
a. Current liabilities
Amount due to subsidiaries [Refer Note 9 of Schedule 15]
Accrued expenses
Deferred revenues
Accounts payable
Advances from customers
Investor Education and Protection Fund to be credited by unclaimed dividends*
Unearned finance income
Other current liabilities
Amounts due to Micro, Medium and Small Enterprises
(The identification of Micro, Medium and Small Enterprises are based on Management’s
knowledge of their status)
* There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.
b. Provisions
Provision for gratuity
Provision for compensated absence
Schedule 8: Revenue
Product licenses and related activities
IT solutions and consulting services
Schedule 9: Cost of revenue
Employee costs
Travel related expenses (net of recoveries)
Professional fees
Application software
Schedule 10: Selling and marketing expenses
Employee costs
Professional fees
Traveling expenses
Advertising expenses
Provision for doubtful debts
Other expenses
Annual Report 2007_2008_Final.indd 58
7/25/2008 9:58:49 AM
Year ended
March 31, 2008
Year ended
March 31, 2007
826,761
439,125
264,579
188,046
148,543
71,293
354,408
2,292,755
687,214
294,944
201,297
127,359
135,864
77,684
361,474
1,885,836
376,333
328,643
12,079
3,141
–
3,639
22,193
6,071
157
419,974
27,782
5,274
197
365,535
63,429
443
2,684
66,556
(17,963)
(4,554)
5,285
(17,232)
Schedule 11: General and administrative expenses
Employee costs
Rent
Professional fees
Power
Communication expenses
Traveling expenses
Other expenses
Schedule 12: Interest income
Interest on:
Bank deposits
(Includes tax deducted at source of Rs. 83,643 (March 31, 2007 – 74,589)
Income tax refund
Bonds
(Includes tax deducted at source of Rs. 204 (March 31, 2007 – 212)
Loan to subsidiaries
Lease assets
Loans to employees
Schedule 13: Other income (expenses)
Foreign exchange gain/(loss), net
Profit/(loss) on sale of fixed assets, net
Miscellaneous income
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
Add: Effect of dilutive stock options
Weighted average shares outstanding for diluted earnings per share
Schedule 15: Notes to accounts
1. Background and nature of operations
i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India
with limited liability on September 27, 1989. The Company is principally
engaged in the business of providing information technology solutions
and business process outsourcing services to the financial services
industry worldwide. i-flex has a suite of banking products, which caters
to the needs of corporate, retail, investment banking, treasury operations
and data warehousing.
i-flex is a subsidiary of Oracle with Oracle having 80.58% ownership
interest in the Company as at March 31, 2008.
The Company at its Board Meeting held on April 4, 2008 passed a
resolution to change its name to “Oracle Financial Services Limited”.
This change will be effective after all necessary regulatory filings and
approvals are obtained by the Company.
83,686,985
129,381
83,816,366
79,125,096
2,230,666
81,355,762
2. Summary of significant accounting policies
a. Basis of presentation
The financial statements are prepared under the historical cost
convention, on the accrual basis of accounting, in conformity with
accounting principles generally accepted in India and complying in all
material respects the notified Accounting Standards by Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956 (‘the Act’). The accounting policies applied by
the Company are consistent with those used in the previous years. The
financial statements are presented in the general format specified in
Schedule VI to the Act.
The significant accounting policies adopted by the Company, in respect
of the financial statements are set out as below:
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 59
59
7/25/2008 9:58:49 AM
b. Use of estimates
d. Investments
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon management’s best
knowledge of current events and actions, actual results could differ from
these estimates.
Investments that are readily realizable and intended to be held for
not more than a year are classified as current investments. All other
investments are classified as long-term investments. Trade investments
refer to the investments made with the aim of enhancing the Company’s
business interests in providing information technology solutions to the
financial services industry worldwide. Long term investments are stated
at cost less provision for diminution on account of other than temporary
decline in the value of the investment.
c. Fixed assets, depreciation and amortization
Current investments are stated at lower of cost and fair value determined
on an individual investment basis.
Fixed assets including assets under finance lease arrangements are
stated at cost less accumulated depreciation. The Company capitalizes
all direct costs relating to the acquisition and installation of fixed assets.
Advances paid towards the acquisition of fixed assets outstanding at each
balance sheet date and the cost of fixed assets not ready to use before
such date are disclosed under ‘Capital work-in-progress and advances’.
Customer contracts and product IPRs are capitalized based on a fair
value. The Company records the difference between consideration paid
to acquire these contracts and the fair value of assets and liabilities
acquired as goodwill.
The Company purchases certain specific-use application software, which
is in ready to use condition, for internal use. It is estimated that such
software has a relatively short useful life, usually less than one year.
The Company, therefore, charges to income the cost of acquiring such
software.
Depreciation and amortization are computed using straight-line method,
at the rates specified in Schedule XIV to the Act or based on the
estimated useful life of assets, whichever is higher. The estimated useful
life considered for depreciation of fixed assets are as follows:
Asset description
Tangible assets
Improvement of leasehold
premises
Buildings
Computer equipments
Electrical and office equipments
Furniture and fixtures
Leased vehicles
Intangible assets
Goodwill on acquisition
Customer contract
Product IPR
PeopleSoft ERP
Asset life (in years)
Lesser of estimated useful life
(7 years) or lease term
20
3
2–7
2–7
Lesser of estimated useful life
(3 – 5 years) or lease term
3–5
5
5
5
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external factors.
An impairment loss is recognized wherever the carrying amount of an
asset exceeds its recoverable amount. The recoverable amount is the
greater of the assets net selling price and value in use. In assessing
value in use, the estimated future cash flows are discounted to their
present value at the weighted average cost of capital. After impairment,
depreciation is provided on the revised carrying amount of the asset over
its remaining useful life.
Annual Report 2007_2008_Final.indd 60
e. Foreign currency transactions
Foreign currency transactions during the year are recorded at the
exchange rates prevailing on the date of the transaction. Foreign
currency denominated monetary items are translated into Rupees
at the closing rates of exchange prevailing at the date of the balance
sheet. Non-monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using the exchange
rate at the date of the transaction. Exchange differences arising on the
settlement of monetary items or on reporting company’s monetary items
at rates different from those at which they were initially recorded or
reported in previous financial statements are recognized as income or
expenses in the year in which they arise.
In respect of forward exchange contracts entered into by the Company
to hedge the foreign currency risk, the premium or discount arising at
the inception of forward exchange contracts is amortized as expense
or income over the life of the contract. Exchange differences on such
contracts are recognized in the statement of profit and loss in the
year in which the exchange rates change. Any profit or loss arising on
cancellation or renewal of forward exchange contract is recognized as
income or expense for the year. The Company uses foreign currency
option contracts to hedge its exposure to movement in foreign exchange
rates. Any profit or loss arising on settlement or expiry of option contracts
is recognized as income or expense for the year.
f. Revenue recognition
Revenue is recognized as follows:
Product licenses and related revenue
–
License fees are recognized, on delivery and subsequent milestone
schedule as per the terms of the contract with the end user.
–
Implementation/Enhancement services are recognized as services
are provided, when arrangements are on a time and material
basis. Revenue for fixed price contracts are recognized using the
proportionate completion method to the extent of achievement of
customer certified milestones.
–
Product maintenance revenue is recognized, over the period of the
maintenance contract.
IT solutions and consulting services
Revenue from IT solutions and consulting services are recognized as
services are provided, when arrangements are on a time and material
7/25/2008 9:58:49 AM
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
the efforts incurred to date in relation to the total estimated efforts to
complete the contract. If the proportionate completion efforts are higher
than the related contractual milestone requiring customer acceptance,
revenue is recognized only to the extent customer acceptance has been
received.
The Company monitors estimates of total contract revenue and cost on
a routine basis throughout the delivery period. The cumulative impact
of any change in estimates of the contract revenue or costs is reflected
in the period in which the changes become known. In the event that a
loss is anticipated on a particular contract, provision is made for the
estimated loss.
Revenue in excess of billings is classified as unbilled revenue while billing
in excess of earnings is classified as deferred revenue. Contractually
recoverable expenses are deferred while other costs are expensed off in
the year in which it is incurred.
Reimbursable expenses for projects are invoiced separately to customers
and although reflected as sundry debtors to the extent outstanding as at
year end, are not included as revenue or expense.
Interest income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
g. Research and development expenses for software products
Research and development costs are expensed as incurred. Software
product development costs are expensed as incurred until technological
feasibility is established. Software product development costs incurred
subsequent to the achievement of technological feasibility are not
material and are expensed as incurred.
h. Employee benefits
The Company’s employee benefits primarily cover provident fund,
superannuation, gratuity and compensated absences.
Provident fund and Superannuation fund are defined contribution schemes
and the Company has no further obligation beyond the contributions
made to the fund. Contributions are charged to profit and loss account in
the year in which they accrue.
Gratuity liability is a defined benefit obligation and is recorded based on
actuarial valuation on projected unit credit method made at the end of
the year. The gratuity liability and net periodic gratuity cost is actuarially
determined after considering discount rates, expected long term return
on plan assets and increase in compensation levels. All actuarial gain/
loss are immediately recorded to the profit and loss account and are
not deferred. The Company makes contributions to a fund administered
and managed by the Life Insurance Corporation of India (LIC) to fund the
gratuity liability. Under this scheme, the obligation to pay gratuity remains
with the Company, although LIC administers the scheme.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation. The actuarial valuation is done as per projected unit credit
method.
i. Leases
a. Where the Company is the lessee
Lease of assets under which substantially all the risks and benefits
incidental to ownership are transferred to the Company are classified
as finance leases. These assets are capitalized at the lower of the fair
value and present value of the minimum lease payments at the inception
of the lease term and disclosed as leased assets. Lease payments are
apportioned between the finance charges and reduction of the lease
liability based on the implicit rate of return. Finance charges are charged
directly against income. Lease management fees, legal charges and
other initial direct costs are capitalized
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases. Lease
payments under operating leases are recognized as an expense on a
straight-line basis over the lease term.
b. Where the Company is the lessor
Assets given under a finance lease are recognized as a receivable at
an amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognized as revenue
j. Income-tax
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the Indian
Income Tax Act. Deferred income taxes are recognized for the future tax
consequences attributable to timing differences between the financial
statement determination of income and their recognition for tax purposes.
Deferred tax is measured based on the tax rates and the tax laws enacted
or substantively enacted at the balance sheet date. Deferred tax assets
are recognized and carried forward only to the extent that there is a
reasonable certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. Unrecognized
deferred tax assets of earlier years are re-assessed and recognized to the
extent that it has become reasonably certain that future taxable income
will be available against which deferred tax assets can be realized.
Deferred tax asset is recognized only on those timing differences, which
reverses in post tax free period, as Company enjoys exemption under
Section 10A of Income Tax Act, 1961.
Minimum Alternative tax (MAT) credit is recognized as an asset only when
and to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period. In the year in which the
MAT credit becomes eligible to be recognized as an asset in accordance
with the recommendations contained in guidance note issued by the
Institute of Chartered Accountants of India, the said asset is created by
way of a credit to the profit and loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each balance sheet date
and writes down the carrying amount of MAT Credit Entitlement to the
extent there is no longer convincing evidence to the effect that Company
will pay normal Income Tax during the specified period.
k. Earnings per share
The earnings considered in ascertaining the Company’s earnings per
share comprise the net profit after tax. The number of shares used in
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 61
61
7/25/2008 9:58:49 AM
computing basic earnings per share is the weighted average number
of shares outstanding during the year. The number of shares used in
computing diluted earnings per share comprises the weighted average
number of shares considered for deriving basic earnings per share and
also the weighted average number of shares, if any which would have
been issued on the conversion of all dilutive potential equity shares. The
number of shares and potentially dilutive equity shares are adjusted for
the bonus shares and sub-division of shares.
4. Leases
a. Where Company is lessee
Finance lease
The Company takes vehicles under finance lease of upto five years. Future
minimum lease payments under finance lease as at March 31, 2008 and
2007 are as follows:
l. Share-based compensation/payments
The Company uses the intrinsic value method of accounting for its
employee share based compensation plan and other share based
arrangements. Under this method compensation expense is recorded
over the vesting period of the option, if the fair market value of the
underlying stock exceeds the exercised price at the measurement date,
which typically is the grant date.
m. Provision and contingencies
A provision is recognized when an enterprise has a present obligation as
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
can be made. Provisions are not discounted to its present value and
are determined based on management estimate required to settle the
obligation at the balance sheet date. These are reviewed at each balance
sheet date and adjusted to reflect the current management estimates.
n. Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and in hand and short-term investments with an original maturity of three
months or less.
Principal
Not later than one
year
Later than one year
but not later than
five years
Total minimum
payments
As at
March 31, 2008
Interest
Total
7,850
1,233
9,083
10,862
1,139
12,001
18,712
2,372
21,084
As at
March 31, 2007
Not later than one
year
Later than one year
but not later than
five years
Total minimum
payments
Principal
Interest
Total
9,161
1,558
10,719
15,399
1,598
16,997
24,560
3,156
27,716
Operating lease
3. Commitments and contingent liabilities
a. Capital commitments
Contracts remaining to be executed on capital account and not provided
for (net of advances) aggregates to Rs. 1,654,626 (includes capital
commitment through issuance of letter of intents of Rs. 260,505) as at
March 31, 2008 (March 31, 2007 – Rs. 1,875,264).
b. Contingent liabilities
Financial bank guarantees given to banks on behalf of
subsidiaries, aggregates to Rs. 8,052 as at March 31, 2008
(March 31, 2007 – Rs. 39,384).
c. Loan to Equinox Global Services Ltd. (‘Equinox’)
Loan given to Equinox had a conversion option in equity shares of Equinox
which was exercisable till March 31, 2008. The conversion option has
been extended till May 31, 2009. In case of conversion, interest at 8%
would not be payable by Equinox and hence no interest has been accrued
on the loan. The conversion option can be further extended, as per the
mutually agreed terms.
The Company has taken certain office premises and residential premises
for employees under operating lease, which expire at various dates through
year 2013. Gross rental expenses for the year ended March 31, 2008
aggregated to Rs. 443,103 (March 31, 2007 – Rs. 288,521). The
minimum rental payments to be made in future in respect of these leases
are as follows:
March 31, 2008 March 31, 2007
Not later than one year
Later than one year but not
later than five years
Later than five years
162,537
878,660
440,361
1,717,265
272,838
10,572
445,947
b. Where Company is lessor
The Company has given IT equipments under finance lease for a period
of five years. Present value of minimum lease payments receivable under
this finance lease as at March 31, 2008 and 2007 are as follows:
March 31, 2008 March 31, 2007
Not later than one year
Later than one year but not
later than five years
Annual Report 2007_2008_Final.indd 62
398,244
9,894
13,422
11,786
21,680
23,221
36,643
7/25/2008 9:58:50 AM
5. Derivatives
(Amount in ‘000 foreign currency)
The Company enters into forward foreign exchange contracts and option
contracts where the counterparty is a bank. The Company purchases
forward foreign exchange contracts and option contracts to mitigate the
risks of change in foreign exchange rate on receivables and payables
denominated in certain foreign currencies. The Company considers
the risk of non-performance by the counterparty as non-material. As
at March 31, 2008 and 2007 the Company has following outstanding
derivative instruments:
March 31, 2008 March 31, 2007
Particulars
Forward contracts – Sell
In USD
In EUR
Option contracts – Sell
In USD
112,000
4,000
123,000
3,500
–
16,500
The Company has following foreign currency exposures which are not hedged as at March 31, 2008 and 2007.
Particulars
Receivables
Payables
March 31, 2008
Net
Receivables
Payables
March 31, 2007
Net
67,086
15,904
15,087
14,895
2,194
2,508
2,788
83,556
839
11
6
–
–
12,066
2,489
5,034
9,001
–
–
–
261,627
–
2,668
91
251
88
55,020
13,415
10,053
5,894
2,194
2,508
2,788
(178,071)
839
(2,657)
(85)
(251)
(88)
78,511
14,655
9,293
4,848
1,052
836
5,435
272,631
–
–
–
–
–
58,338
4,175
3,561
4,622
–
–
–
248,099
–
–
97
212
–
20,173
10,480
5,732
226
1,052
836
5,435
24,532
–
–
(97)
(212)
–
In USD
In EUR
In GBP
In SGD
In AED
In CAD
In MYR
In JPY
In AUD
In ZAR
In CHF
In RUB
In SEK
6. Share-based compensation/payments
a) Employee Stock Purchase Scheme (‘ESPS’)
The Company has adopted the ESPS administered through a Trust
(“the Trust”) to provide equity based incentives to key employees of the
Company. The Trust purchases shares of the Company from market
using the proceeds of loans obtained from the Company. Such shares
are offered by the Trust to employees at an exercise price, which
approximates the fair value on the date of the grant. The employees
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
for the benefit of the employee. The employee will be entitled to receive
dividends, bonus, etc., that may be declared by the Company from time
to time for the entire portion of shares held by the Trust on behalf of the
employees.
On the acceptance of the offer, the selected employee shall undertake to
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
thereto. The repayment of the loan by the Trust to the Company would
be dependent on employee repaying the amount to the Trust. In case
the employee resigns from employment, the rights relating to shares,
which are eligible for exercise, may be purchased by payment of the
exercise price whereas, the balance shares shall be forfeited in favour of
the Trust. The Trustees have the right of recourse against the employee
for any amounts that may remain unpaid on the shares accepted by the
employee. The shares that an employee is eligible to exercise during the
initial five-year period merely go to determine the amount and scheduling
of the loan to be repaid on exercise by the employee. The Trust shall
repay the loan obtained from the Company on receipt of payments from
employees against shares exercised or otherwise.
The Securities and Exchange Board of India (‘SEBI’) has issued the
Employee Stock Option Scheme and Stock Purchase Guidelines, 1999
(‘SEBI guidelines’), which are applicable to stock purchase schemes for
employees of all listed Companies. In accordance with these guidelines,
the excess of market price of the underlying equity shares on the date of
grant of the stock options over the exercise price of the options is to be
recognized in the books of account and amortized over the vesting period.
However, no compensation cost has been recorded as the scheme terms
are fixed and the exercise price equals the market price of the underlying
stock on the grant date.
A summary of the activity in the Company’s ESPS is as follows:
Year ended
Year ended
March 31, 2008 March 31, 2007
Number of shares
Opening balance of
unallocated shares
Shares forfeited during the
year
Closing balance of unallocated
shares
Opening balance of allocated
shares
Shares exercised during the
year
Shares forfeited during the
year
Closing balance of allocated
shares
Shares eligible for exercise
Shares not eligible for exercise
Total allocated shares
142,116
120,888
16,847
21,228
158,963
142,116
355,212
2,080,546
(117,264)
(1,704,106)
(16,847)
(21,228)
221,101
96,251
124,850
221,101
355,212
164,712
190,500
355,212
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 63
63
7/25/2008 9:58:50 AM
b) Employee Stock Option Plan (‘ESOP’)
Pursuant to ESOP scheme approved by the shareholders of the Company
held on August 14, 2001, the Board of Directors, on March 4, 2002
approved the Employees Stock Option Scheme (‘the Scheme’) for issue
of 4,753,600 options to the employees and directors of the Company
and its subsidiaries. According to the Scheme, the Company has granted
4,548,920 options prior to the IPO and 559,000 options at various dates
after IPO. As per the scheme, each of 20% of the total options granted
will vest to the eligible employees and directors on completion of 12, 24,
36, 48 and 60 months and is subject to continued employment of the
employee or director with the company or its subsidiaries. Options have
exercise period of 10 years.
A summary of the activity in the Company’s ESOP is as follows:
Shares arising
from options
Year ended
March 31, 2008
Weighted average
exercise price
Shares arising
from options
Year ended
March 31, 2007
Weighted average
exercise price
530,485
–
(63,332)
(35,900)
431,253
989
–
632
1,191
1,025
2,756,880
373,000
(2,552,795)
(46,600)
530,485
280
1,291
(270)
(826)
989
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of the year
The weighted average share price for the year over which stock options
were exercised was Rs. 1,890.
Had compensation cost been determined in a manner consistent with the
fair value approach, the Company’s net income and earnings per share
as reported would have changed to the amounts indicated below:
The details of options unvested and options vested and exercisable as on
March 31, 2008 are as follows:
Range of
exercise
prices
Options unvested
Options vested
and exercisable
Shares Weighted Weighted
average
average
exercise remaining
price contractual
(Rs.) life (Years)
419-560 30,000
709-709
6,000
1,291-1,291 246,800
547
709
1,291
6.3
7.2
8.1
265-265
419-560
1,291-1,291
265
480
1,291
1,025
3.9
5.3
8.1
7.2
51,000
45,003
52,450
431,253
The details of options unvested and options vested and exercisable as on
March 31, 2007 were as follows:
Range of
exercise
prices
Options unvested
Shares Weighted
average
exercise
price
(Rs.)
419-560 62,000
709-709
8,000
1,291-1,291 347,500
Options vested
and exercisable
Annual Report 2007_2008_Final.indd 64
265-265
419-560
77,982
35,003
530,485
Weighted
average
remaining
contractual
life (Years)
520
709
1,291
6.9
8.2
9.1
265
505
989
4.9
6.8
8.1
Net income as reported
Add: Compensation expense
included in reported income
Less: Compensation expense
determined using fair value
of options
Proforma net income
Basic earnings per share
As reported
Proforma
Diluted earnings per share
As reported
Proforma
Year ended
March 31, 2008
Year ended
March 31, 2007
4,108,745
3,546,739
–
–
(54,918)
4,053,827
(115,596)
3,431,143
49.10
48.44
44.82
43.36
49.02
48.37
43.60
42.20
7. Employee benefit obligation
Defined contribution plans
During year ended March 31, 2008 and 2007, the Company contributed
following amounts to defined contributions plans:
Year ended
Year ended
March 31, 2008 March 31, 2007
Particulars
Provident fund
Superannuation fund
157,065
52,167
209,232
133,753
43,676
177,429
7/25/2008 9:58:50 AM
Defined benefit plan – gratuity
Changes in the fair value of plan assets representing reconciliation of
opening and closing balances thereof are as follows:
The amounts recognized in the balance sheet are as follows:
Year ended
Year ended
March 31, 2008 March 31, 2007
Particulars
Present value of funded
obligations
Fair value of plan assets
Net liability
Amounts in balance sheet:
Liability
Asset
Net liability
173,999
131,397
(228)
173,771
(4,697)
126,700
173,771
–
173,771
126,700
–
126,700
The amounts recognized in the profit and loss account for the year ended
March 31, 2008 and 2007 are as follows:
Year ended
Year ended
March 31, 2008 March 31, 2007
Particulars
Fair value of plan assets at
beginning of the year
Expected return on plan assets
Actuarial gain (loss)
Contribution by employer
Benefits paid
Fair value of plan assets at end
of the year
4,697
1,818
228
(470)
15,010
(19,237)
136
10
12,859
(10,126)
228
4,697
Plan assets are administered by LIC and 100% of the plan assets are
invested in lower risk assets, primarily in debt securities.
The assumptions used in accounting for the gratuity plan are set out as
below:
Year ended
Year ended
March 31, 2008 March 31, 2007
March 31, 2008
March 31, 2008
Particulars
Current service cost
Interest cost
Expected return on plan
assets
Recognized net actuarial
(gain) loss
Total included in ‘employee
benefit expense’
Actual return on plan assets
28,825
9,579
21,408
5,830
(228)
(136)
23,905
31,049
62,081
(241)
58,151
146
Changes in present value of defined benefit obligation representing
reconciliation of opening and closing balances thereof are as follows:
Year ended
Year ended
March 31, 2008 March 31, 2007
Particulars
Defined benefit obligation at
beginning of the year
Current service cost
Interest cost
Benefits paid
Actuarial (gain) loss
Defined benefit obligation at
end of the year
131,397
83,226
28,825
9,579
(19,237)
23,435
21,408
5,830
(10,126)
31,059
173,999
131,397
Discount rate
Expected return on plan
assets
Withdrawal rates
Age (Yrs.)
21–30
31–34
35–44
45–59
7.70%
8.00%
7.50%
7.50%
Rates
25%
20%
15%
1%
Age (Yrs.)
21–30
31–34
35–44
45–59
Rates
25%
20%
15%
1%
The estimates of future salary increase, considered in actuarial valuation,
take account of inflation, seniority, promotions and other relevant factors
such as supply and demand in the employment market.
The Company evaluates these assumptions annually based on its
long-term plans of growth and industry standards. The discount rates are
based on current market yields on government bonds consistent with the
currency and estimated term of the post employment benefits obligations.
Plan assets are administered by the LIC and invested in lower risk assets,
primarily debt securities. The Company’s contribution to the fund for the
year ended March 31, 2009 is expected to be Rs. 30,000. The expected
benefit payments from the fund as of March 31, 2008 are below:
Year ending March 31
2009
2010
2011
2012
2013
2014–2017
Amount
27,818
33,406
38,762
45,775
53,327
209,571
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 65
65
7/25/2008 9:58:50 AM
Since the Company has adopted AS 15 (Revised) from April 1, 2006
and thereby has not given disclosure for the following for previous three
annual financial years:
a. The present value of the defined benefit obligation, the fair value of the
plan assets and the surplus or deficit in the plan; and
b. The experience adjustments arising on plan liabilities and plan
assets.
8. Segment information
Business segments are defined as a distinguishable component of an
enterprise that is engaged in providing a group of related products or
services and that is subject to differing risks and returns and about which
separate financial information is available. This information is reviewed
and evaluated regularly by the management in deciding how to allocate
resources and in assessing the performance.
The Company is organized geographically and by business segment. For
management purposes the Company is primarily organized on a
worldwide basis into two business segments:
a) Product licenses and related activities (‘Products’) and
b) IT solutions and consulting services (‘Services’).
The business segments are the basis on which the Company reports
its primary segment information to management. Product licenses and
related activities segment deals with banking software products like the
FLEXCUBE suite of products, Reveleus and MicroBanker which cater to
needs of corporate, retail and investment banking as well as treasury
operations and data warehousing requirements. The related activities
include enhancements, implementation and maintenance activities.
IT solutions and consulting services comprise of bespoke software
development, provision of computer software solutions and related
consulting services arising from such activities. This segment is further
sub-divided in the following sub-segments i.e. Business intelligence,
Customer relationship management, Brokerage, e-commerce, Internet
services and IT and Business consulting.
The Company does not track assets and liabilities geographically.
Particulars
Revenue
Cost of revenue
Gross profit
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization
Income from operations
Provision for diminution in value of
investment
Interest income
Other income, net
Income before provision for taxes
Provision for taxes
Net income
Other information
Capital expenditure by segment
Segment assets
Segment liabilities
Shareholders' funds
Annual Report 2007_2008_Final.indd 66
Products
Services
Corporate
Year ended
March 31, 2008
Total
11,035,574
(5,018,021)
6,017,553
(663,425)
(540,344)
(267,005)
4,546,779
6,894,144
(5,294,550)
1,599,594
(109,002)
(457,310)
(237,521)
795,761
–
–
–
–
(1,295,101)
(98,569)
(1,393,670)
17,929,718
(10,312,571)
7,617,147
(772,427)
(2,292,755)
(603,095)
3,948,870
(120,000)
419,974
66,556
4,315,400
(206,655)
4,108,745
104,918
8,147,551
2,922,572
–
728,940
6,631,903
1,464,146
–
85,073
18,060,097
326,342
28,126,491
918,931
32,839,551
4,713,060
28,126,491
7/25/2008 9:58:50 AM
Particulars
Revenue
Cost of revenue
Gross profit
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization
Income from operations
Interest income
Other expense, net
Income before provision for taxes
Provision for taxes
Net income
Other information
Capital expenditure by segment
Segment assets
Segment liabilities
Shareholders' funds
Year ended
March 31, 2007
Total
Products
Services
Corporate
8,909,532
(3,864,229)
5,045,303
(627,123)
(444,829)
(255,130)
3,718,221
6,613,912
(5,020,347)
1,593,565
(98,379)
(424,040)
(236,065)
835,081
–
–
–
–
(1,016,967)
(74,156)
(1,091,123)
15,523,444
(8,884,576)
6,638,868
(725,502)
(1,885,836)
(565,351)
3,462,179
365,535
(17,232)
3,810,482
(263,743)
3,546,739
226,932
8,051,748
3,547,580
–
153,112
8,202,353
2,481,813
–
50,925
14,014,383
254,333
23,984,758
430,969
30,268,484
6,283,726
23,984,758
Segment revenue and expense:
Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services.
The expenses which are not directly attributable to a business segment are shown as corporate expenses.
Segment assets and liabilities:
Segment assets include all operating assets used by a segment and consist principally of debtors, deposits for premises and fixed assets, net of
allowances. Segment liabilities primarily includes deferred revenues, finance lease obligation, advance from customer, accrued employee cost and other
current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and
liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between
the segments are shown as part of corporate assets and liabilities.
Geographical segments
The following table shows the distribution of the Company’s sales by geographical market:
Regions
United States of America
Europe
Asia Pacific
Middle East, India and Africa
Latin America and Caribbean
Year ended
March 31, 2008
Amount
4,349,898
6,808,422
3,552,274
3,054,457
164,667
17,929,718
%
24%
38%
20%
17%
1%
100%
Year ended
March 31, 2007
Amount
5,333,405
4,541,764
3,002,966
2,505,454
139,855
15,523,444
%
34%
30%
19%
16%
1%
100%
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 67
67
7/25/2008 9:58:50 AM
9. Names of related parties and description of relationship:
Relationship
Principal shareholder and it’s affiliates ("Oracle")
Names of related parties
Oracle Global (Mauritius) Limited
Oracle (India) Private Limited
Oracle USA, Inc.
Oracle Corporation (Thailand) Co Limited
Subsidiaries
i-flex solutions b.v.
i-flex solutions pte ltd
i-flex solutions inc.
i-flex America inc.
SuperSolutions Corporation (Effective January 8, 2008 merged with
i-flex America inc.)
Castek Software Inc. and its subsidiaries
Mantas Inc and its subsidiaries
ISP Internet Mauritius Company
i-flex Processing Services Inc. (Equinox Corporation till
September 12, 2007)
Equinox Global Services Ltd.
i-flex Processing Services Limited
i-flex Consulting (Asia Pacific) Pte Ltd.
i-flex solutions s.a.
Flexcel International Private Limited [Refer Note 13(a) of Schedule 15]
Joint ventures
Flexcel International Private Limited [Refer Note 13(a) of Schedule 15]
Associates
Login SA
Other entities where company has significant influence
i-flex Employee Stock Purchase Scheme Trust
Key Managerial Personnel (‘KMP’)
Rajesh Hukku – Chairman and Non Executive Director
R Ravisankar – Vice Chairman
Deepak Ghaisas – Vice Chairman and Company Secretary
N R Kothandaraman (N R K Raman) – Managing Director and Chief
Executive Officer
Makarand Padalkar – Chief Financial Officer
Avadhut (Vinay) Ketkar – Chief Accounting Officer (w.e.f. April 1, 2007)
Dilip Kulkarni – Chief Compliance Officer (w.e.f. April 1, 2007)
Joseph John – Executive Vice President, Universal Banking Products
V Shankar – Executive Vice President and Global Head, PrimeSourcing &
Insurance Solutions
Olivier Trancart– Executive Vice President, Global Sales and CEO
i-flex solutions b.v.
Atul Gupta– Sr. Vice President, Process and Quality Management Group
Vijay Sharma– Sr. Vice President, i-flex Consulting
S Hariharan – Sr. Vice President, Infrastructure Services Group
Vivek Govilkar – Sr. Vice President, Human Resources and Training
V Srinivasan – Vice President, Corporate Development and Chief of Staff
(w.e.f. April 1, 2007)
Manmath Kulkarni – Sr. Vice President and Chief Architect for Retail and
Internet Banking (w.e.f. April 1, 2007)
S Sundararajan – Sr. Vice President, Customer Fulfillment
(w.e.f. April 1, 2007)
Annual Report 2007_2008_Final.indd 68
7/25/2008 9:58:50 AM
Transactions and balances outstanding with these parties are described below:
Transactions
Year ended
Year ended
March 31, 2008 March 31, 2007
Revenue
Oracle
Subsidiaries
i-flex solutions b.v.
i-flex solutions inc.
i-flex solutions pte ltd
i-flex Consulting (Asia Pacific) Pte Ltd.
i-flex Processing Services Inc.
Equinox Global Services Ltd.
SuperSolutions Corporation
Mantas inc.
Castek Software Inc.
i-flex solutions s.a.
Flexcel International Private Limited
Joint venture
Flexcel International Private Limited
Amount receivable (payable)
Year ended
Year ended
March 31, 2008 March 31, 2007
8,285
37,777
6,809
5,007
4,346,018
4,101,909
3,264,769
590
4,788
–
–
42,888
6,635
370,732
–
3,404,183
4,683,722
2,479,979
–
–
22,597
72,947
–
19,298
–
–
1,715,650
2,415,349
1,707,982
627
17,663
1,428
–
7,441
17,664
425,682
14,802
2,139,752
3,997,048
1,559,613
–
–
26,558
112,872
–
–
–
–
19,527
45,085
–
46,272
20,855
1,338
26,264
1,518
72,498
4,397
56,332
3,336
–
–
–
–
–
–
–
–
–
–
–
–
93,833
215,402
184,101
–
7,669
2,880
117,291
267,767
199,746
2,603
19,205
–
12,724
–
12,724
–
Loan outstanding [Refer Note 2]
Subsidiaries
i-flex America inc.
Equinox Global Services Ltd.
ISP Internet Mauritius Company
(34,800)
110,000
(3,306)
–
140,000
–
398,800
500,000
37,882
433,600
390,000
41,188
Provision for diminution in investment
Subsidiary
ISP Internet Mauritius Company
120,000
–
120,000
–
–
4,925
–
–
Rental deposit
Key managerial personnel
(225)
125
100
325
Advance rent
Key managerial personnel
(13)
–
43
56
Rent
Key managerial personnel
90
128
–
–
113,471
71,995
–
–
964,119
2,100,529
1,239,695
–
–
–
537,907
1,996,997
839,642
12,999
1,144
1,169
(144,157)
(383,993)
(297,449)
12,886
–
–
(277,490)
(2,173,480)
(219,532)
12,999
(63,709)
1,169
Interest on loan
Subsidiaries
i-flex America inc.
ISP Internet Mauritius Company
Unbilled revenue
Subsidiaries
i-flex solutions b.v.
i-flex solutions inc.
i-flex solutions pte ltd
Equinox Global Services Ltd.
Castek Software Inc.
i-flex solutions s.a.
Advance from Customers
Oracle
Loan to trust and employees
Repayment of loan by ESPS Trust
Remuneration [Refer Note 1]
Key managerial personnel
Reimbursement of expenses
Subsidiaries
i-flex solutions b.v.
i-flex solutions inc.
i-flex solutions pte ltd
i-flex America inc.
SuperSolutions Corporation
ISP Internet Mauritius Company
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 69
69
7/25/2008 9:58:50 AM
Transactions
Year ended
Year ended
March 31, 2008 March 31, 2007
i-flex Processing Services Ltd.
Flexcel International Private Limited
Joint venture
Flexcel International Private Limited
Amount receivable (payable)
Year ended
Year ended
March 31, 2008 March 31, 2007
42,970
–
2,399
–
45,369
36,278
2,399
–
24,309
10,225
–
11,969
211,462
230,617
–
–
–
39,627
–
(39,627)
Cost of sales
Subsidiaries
i-flex solutions inc.
Mantas inc.
38,098
7,581
–
–
(12,546)
(7,581)
–
–
Provision for doubtful debts
Subsidiaries
i-flex solutions b.v.
i-flex solutions inc.
i-flex solutions pte ltd
16,743
56,023
6,308
9,854
15,529
27,298
26,302
75,886
30,614
10,250
28,320
26,427
2,050
1,411
–
–
289
–
–
–
(11,411)
–
32,592
30,508
–
–
25,098
–
(3,310)
–
–
–
(2,703)
(4,245)
–
–
–
–
–
–
–
–
(371,947)
(277,494)
(281,383)
(60,214)
(175)
(455,084)
(295,093)
(191,543)
–
–
–
(2,720)
–
Lease rent
Key managerial personnel
1,942
3,462
–
–
Other transactions
Dividend paid
Oracle
ESPS Trust
Key managerial personnel
–
–
–
200,742
9,670
8,265
–
–
–
–
–
–
472,940
12,500
751,189
25,424
5,678,974
500
–
–
–
–
–
–
–
–
–
–
Application software
Oracle
Subsidiaries
SuperSolutions Corporation
Other expenses
Oracle
Joint venture
Flexcel International Private Limited
Professional fees
Subsidiary
Flexcel International Private Limited
Joint venture
Flexcel International Private Limited
Associates
Login SA
Deferred revenue
Oracle
Subsidiaries
i-flex solutions b.v.
i-flex solutions inc.
i-flex solutions pte ltd
i-flex solutions s.a.
Mantas inc.
Joint venture
Flexcel International Private Limited
Investments during the year
i-flex America inc.
i-flex Processing Services Limited
i-flex solutions b.v.
Flexcel International Private Limited
1. Includes salary, bonus and perquisites.
2. Loan given to subsidiaries represents loan to i-flex America inc. amounting to Rs. 398,800 (interest LIBOR + 50 basis points) as at March 31, 2008
(March 31, 2007 – 433,360) and ISP Internet Mauritius Company amounting to Rs. 37,882 (interest LIBOR + 50 basis points) as at March 31, 2008
(March 31, 2007 – 41,188).
Maximum balance outstanding during the year were as follows:
i-flex America inc.
ISP Internet Mauritius Company
Equinox Global Services Ltd.
Annual Report 2007_2008_Final.indd 70
March 2008
March 2007
433,360
41,188
500,000
465,300
44,199
390,000
7/25/2008 9:58:50 AM
Year ended
March 31, 2008
Year ended
March 31, 2007
10. Supplementary information
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:
Salaries and bonus
Staff welfare expenses
Contribution to provident and other funds
Travel related expenses (net of recoveries)
Professional fees
Application software
Communication expenses
Rent
Advertising expenses
Power
Insurance
Repairs and maintenance:
Leasehold premises
Computer equipments
Others
Rates and taxes
Finance charge on leased assets
Provision for doubtful debts, net
Bad debts
Other expenses
b. Managerial remuneration (on accrual basis)
Salary and incentives
Contribution to provident and other funds
Commission to non whole time directors
8,131,233
284,257
285,167
1,778,512
1,018,490
543,139
159,382
451,554
41,705
192,256
51,297
6,720,213
202,515
240,418
1,844,414
885,379
506,138
142,490
302,262
124,939
130,131
58,301
24,426
23,444
40,624
18,941
2,064
152,714
13,392
165,156
13,377,753
11,995
24,562
26,627
24,847
1,766
74,063
–
174,854
11,495,914
4,369
418
2,900
7,687
330
24
2,920
3,274
Mr. Rajesh Hukku (Managing Director of the Company till April 30, 2007) has been paid remuneration aggregating Rs. 27,468 (including bonus of
Rs. 21,354 which was provided as on March 31, 2007) for the year ended March 31, 2008 (March 31, 2007– Rs. 41,313) from i-flex solutions inc.,
a wholly owned subsidiary of the Company. Mr. R Ravisankar (Director from May 1, 2007) has been paid remuneration aggregating Rs. 16,629
(including bonus of Rs. 14,236 which was provided as on March 31, 2007) for the year ended March 31, 2008 from i-flex solutions inc., a wholly
owned subsidiary of the Company. During the year ended March 31, 2008, Mr. Deepak Ghaisas (Director from May 1, 2007) and Mr. N R K Raman
(Managing Director and Chief Executive Officer from May 1, 2007) have been paid bonus of Rs. 15,220 and Rs. 7,266 respectively which was
provided as on March 31, 2007. These bonus amounts have not been included in the managerial remuneration above since these payments are
made in capacity of an employee and relate to compensation before them becoming Directors of the Company.
The Company accrues for gratuity benefit, compensated absences 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.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 71
71
7/25/2008 9:58:51 AM
Year ended
March 31, 2008
Year ended
March 31, 2007
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
Add:
Managerial remuneration
Commission to non-wholetime Directors
Depreciation and amortization as per books of accounts
Donation
Provision for income taxes
Less:
Profit on sale of fixed assets, net
Depreciation and amortization as per Section 350 of the Act (Note below)
Net profit on which commission is payable
Commission payable to non-wholetime Director:
Maximum allowed as per Companies Act, 1956 (1 percent)
Maximum approved by the shareholders (1 percent)
Commission approved by the Board of Directors
4,108,745
3,546,739
4,787
2,900
603,095
7,287
206,655
4,933,469
354
2,920
565,351
6,202
263,743
4,385,309
443
603,095
4,329,931
–
565,351
3,819,958
43,299
43,299
2,900
38,200
38,200
2,920
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 (including quarterly audits)
Tax audit
Special reports
Certifications
Out-of-pocket expenses
d. Earnings in foreign currency (on accrual basis)
Product licenses and related revenue
IT solutions and consulting services
Interest income
e. Expenditure in foreign currency (on accrual basis)
Salaries and bonus
Traveling, net of recovery
Professional fees
Application software
Foreign taxes
Advertising
Seminar expenses
Others
f.
Value of imports on CIF basis - capital goods
Annual Report 2007_2008_Final.indd 72
5,618
674
1,348
337
787
8,764
5,107
561
2,133
392
750
8,943
10,537,249
6,810,326
23,027
17,370,602
8,382,073
6,567,372
2,222
14,951,667
3,461,186
1,276,979
588,682
76,805
58,489
17,519
1,126
78,038
5,558,824
2,751,932
1,005,574
519,581
107,653
64,307
34,874
26,507
130,040
4,640,468
226,043
143,047
7/25/2008 9:58:51 AM
Year ended
March 31, 2008
Year ended
March 31, 2007
g. Remittance in foreign currencies for dividend
The Company has not remitted any amount in foreign currencies on account of dividends during the year to non-resident shareholders. The
particulars of dividends declared and paid to non-resident shareholders are as under:
Year of dividend payment
2007–08
2006–07
Year to which it relates
2006–07
2005–06
Number of non-resident shareholders
507
734
Number of equity shares held
71,156,872
56,128,427
Amount of dividend
–
280,642
As at
March 31, 2008
As at
March 31, 2007
1,780,800
(103,074)
1,677,726
1,780,800
(103,074)
1,677,726
(554,753)
(1,017,600)
(554,753)
(730,410)
(24,380)
(6,626)
(73,064)
(1,303)
–
(24,380)
(6,626)
(73,064)
(1,303)
287,190
5,814,999
(5,814,999)
–
5,814,999
(5,678,974)
136,025
401,679
(401,679)
–
401,679
(40,441)
361,238
11. Utilization of IPO Funds
Proceeds from issue of shares
Less: Issue expenses
Net IPO Proceeds
Less: Utilization of funds
Bangalore Development Centre
Mumbai Development Centre
Investment in/loans to subsidiary companies
i-flex solutions b.v.
i-flex solutions pte.
i-flex solutions inc.
Setting up Dubai marketing office
Unutilized IPO funds
12. Utilization of preferential allotment money
a. Allotment of shares to Oracle
Proceeds from issue of shares to Oracle
Less: Utilization of funds for investment in i-flex America inc.
Unutilized funds
b. Allotment of options to GE
Proceeds from issue of options to GE
Less: Utilization of funds for operations
Unutilized funds
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 73
73
7/25/2008 9:58:51 AM
13. Investments in wholly owned subsidiaries
a. Flexcel International Private Limited, (Flexcel); an erstwhile 40:40:20 joint venture between i-flex, HDFC Bank Limited and its group companies
and Lord Krishna Bank (since merged with Centurion Bank of Punjab) provides the capability of FLEXCUBE through an Application Service Provider
(‘ASP’) model to various banks and financial institutions in India. On March 31, 2008 i-flex has acquired the balance 60% stake for a total
consideration of Rs. 25,424 whereby Flexcel International Private Limited has become a 100% subsidiary of i-flex.
As per the audited financial statements of Flexcel, it has made a loss of Rs. 3,636 for the year ended March 31, 2008 and has accumulated
losses of Rs. 12,820 as at the balance sheet date. i-flex had already provided for diminution in value of investments in Flexcel of Rs. 20,680 in the
financial year ended March 31, 2005. Considering improvement in the financial position of Flexcel, the management is of the view that no additional
provision for diminution in the value of investments in Flexcel is required.
b. As at March 31, 2008, the Company has total investment of Rs. 6,291,743 in its US based wholly owned subsidiary, i-flex America inc. (‘IAI’).
The Company has further outstanding loan given amounting to Rs. 398,800. IAI is holding Company in the US for i-flex US operations and various
acquired Companies. Of the above investment, IAI had invested Rs. 5,806,963 in acquisition of Mantas inc. (‘Mantas’) in October, 2006. Since the
date of acquisition Mantas has been incurring losses. The Company believes that these losses are initial start-up losses. The Company believes
that with integration of Mantas products with i-flex suite of products and synergies achieved due to sharing of operations Mantas would achieve
significant increase in future revenues and cost savings. Based on the future projection, the Company has estimated future cash flows from Mantas
and concluded that fair value of the business is higher than current book value. Management believes that it would be able to achieve the future
projection and hence considers that there is no diminution in value of investment in Mantas and accordingly in IAI.
c. As at March 31, 2008, the Company has total investment of Rs. 192,115 in ISP
under the laws of the Republic of Mauritius. ISP holds all the shares in Equinox
of Delaware (‘Equinox US’) and majority shares in Equinox Global Services Ltd.,
India’). Besides the strategic investments in ISP, i-flex also has granted a loan
Internet Mauritius Company (‘ISP’), a corporation organized
Corporation, a company incorporated under the state laws
a corporation organized under the laws of India (‘Equinox
of Rs. 37,882 to ISP and Rs. 500,000 to Equinox India.
On consolidated basis along with its subsidiaries, ISP has incurred a loss of Rs. 129,005 for the year ended March 31, 2008 and an accumulated
loss of Rs. 678,809 as at the balance sheet date. Considering the uncertainty about the future profitability of ISP, the Company has made a
provision of Rs. 120,000 during the year ended March 31, 2008 towards diminution in the value of its investments in ISP.
14. During the current year, the Company has utilized the securities premium account for payment of stamp duty of Rs. 7,301 on allotment of equity
shares. This includes Rs. 6,863 related to previous years. General and administrative expenses includes an amount of Rs. 2,584 towards penalty
charges for making delayed payment of stamp duty.
15. Fringe benefit tax is recorded net of recovery amount of Rs. 17,888 on account of stock option exercised during the year ended March 31, 2008.
During the current year company has taken an additional Fringe benefit tax charge of Rs. 24,496 pertaining to previous years.
16. Prior year amounts have been reclassified, where necessary to confirm with current year’s presentation.
As per our report of even date
For and on behalf of the Board of Directors
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Annual Report 2007_2008_Final.indd 74
Tarjani Vakil
Director
7/25/2008 9:58:51 AM
Statement of cash flow
for the year ended March 31
(All amounts in thousands of Indian Rupees)
2008
2007
4,315,400
3,810,482
603,095
(443)
104
(419,974)
28,777
2,064
120,000
152,714
13,392
4,815,129
565,351
4,554
810
(365,535)
(4,301)
1,766
–
74,063
–
4,087,190
Changes in assets and liabilities, net of effect of acquisition
Decrease (increase) in sundry debtors and unbilled revenue
Decrease (increase) in loans and advances
(Increase) decrease in current liabilities and provisions
Cash from operating activities
Payment of domestic and foreign taxes
Net cash provided by operating activities
1,333,706
51,232
(1,527,665)
4,672,402
(730,059)
3,942,343
(3,664,637)
(563,206)
1,764,376
1,623,723
(818,170)
805,553
Cash flows from investing activities
Additions to fixed assets including capital work-in-progress
Net investment in lease
Investment in subsidiary companies
Deposit for office premises
Proceeds from sale of fixed assets
Bank fixed deposits having maturity of more than 90 days matured
Bank fixed deposits having maturity of more than 90 days booked
Proceeds from maturity of investments
Interest received
Net cash used in investing activities
(980,548)
9,902
(1,262,053)
(640,536)
559
6,866,148
(8,472,217)
–
402,465
(4,076,280)
(1,120,053)
(20,610)
(5,679,474)
(1,225,252)
11,608
7,679,391
(6,723,628)
20,000
314,787
(6,743,231)
Cash flows from operating activities
Income before provision for taxes
Adjustments to reconcile income before provision for taxes to cash
(used in) provided by operating activities:
Depreciation and amortization
Profit on sale of fixed assets, net
Marked to market of current investment
Interest income
Effect of exchange difference on cash and bank balances
Finance charge on leased assets
Provision for diminution in value of investment
Provision for doubtful debts, net
Bad debts
Cash flows from financing activities
Issue of shares against Employee Stock Option scheme and options
to IBM
Issue of shares to Oracle Global Mauritius Limited
Share application money from GE
Advance against equity shares to be issued under ESOP scheme
Share issue expenses
Repayment of loan by Employee Stock Purchase Scheme (‘ESPS’)
Trust
Loan to subsidiaries
Payment of dividend and tax thereon
Payment of lease obligations
Net cash (used in) provided by financing activities
40,024
–
–
265
(7,301)
678,514
5,814,999
361,238
–
–
–
(71,894)
–
(11,779)
(50,685)
4,925
(96,313)
(436,350)
(10,322)
6,316,691
Effect of exchange difference on cash and bank balances
(28,777)
4,301
(213,399)
1,179,050
965,651
383,314
795,736
1,179,050
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Note 1)
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 75
75
7/25/2008 9:58:51 AM
Statement of cash flow (continued)
for the year ended March 31
(All amounts in thousands of Indian Rupees)
Note 1: Component of cash and cash equivalent
Cash and bank balances [Refer Schedule 6 (b)]
Less:
Bank deposits having maturity of more than 90 days
Margin money deposit
Unclaimed dividend accounts
Cash and cash equivalents at the end of the year
2008
2007
6,400,880
5,007,470
(5,426,355)
(7,067)
(1,807)
965,651
(3,820,288)
(6,067)
(2,065)
1,179,050
As per our report of even date
For and on behalf of the Board of Directors
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Annual Report 2007_2008_Final.indd 76
Tarjani Vakil
Director
7/25/2008 9:58:51 AM
Balance sheet abstract and company’s general business profile
I.
Registration details
Registration number
Balance Sheet date
5
3
6
6
6
3 1 0 3
Date
Month
2
0 0
Year
8
State Code
1
1
II. Capital raised during the year (amount in Rs. thousands)
Public issue
N
Bonus issue
N
I
L
I
L
III. Position of mobilization and deployment of funds (amount in Rs. thousands)
Total liabilities
3 2 8 3 9 5 5
Sources of funds
Paid-up capital
4 1 8 7 3
Secured loans
N I
Application of funds
Net fixed assets
3 1 1 4 2 7
1
7
Net current assets
5 5 6 3 5
Rights issue
N I
Private placement
N I
L
L
7
Total assets
8 3 9 5 5
Reserves and surplus
7 7 0 7 4 8
Unsecured loans
N I
Investments
7 2 3 4 1 4
1
Miscellaneous expenditure
N I L
1
3
7
2
L
2
1
9
L
9
Accumulated losses
N I L
IV. Performance of company (amount in Rs. thousands)
Total income
4 1 6 2 4 8
Profit/loss before tax
4 3 1 5 4 0 0
1
8
+/–
+
1
+/–
+
4
4
Total expenditure
1 0 0 8 4
Profit/loss after tax
1 0 8 7 4
8
5
(Please tick appropriate box + for profit, – for loss)
Earning per share in Rs. Basic
4 9 . 1 0
Dividend rate %
N I L
Earning per share in
Rs. Diluted
4 9 . 0 2
V. Generic names of three principal products/services of company
(as per monetary terms)
Item Code number
(ITC code)
N
.
A
.
L
E
U
O
C
C
P M E N
T
A S
T
M A
Product description
S
S
S
O
O
O
F
F
F
T W A
T W A
T W A
R
R
R
E
E
E
D
P
P
E
R
R
V
O
O
E
J
D
T
S
N
I
A
S
G
G
E R
N M
E M
V
E
E
I
N
N
C
T
T
E
S
S
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 77
77
7/25/2008 9:58:51 AM
Annual Report 2007_2008_Final.indd 78
7/25/2008 9:58:52 AM
i-flex solutions b.v.
90%
i-flex solutions ltd
100%
5,185 equity shares of
54,000 shares of
EUR 100/- each, fully paid-up EUR 100/- each, fully paid up
March 31, 2008
March 31, 2008
i-flex solutions s.a.
250,000 shares of
SGD 1/- each fully paid-up
i-flex solutions ltd
100%
March 31, 2008
i-flex solutions pte ltd
228,594
b. for the previous financial years of
the subsidiary since it became a
subsidiary
1,072
21,167
412,339
325,702
(638,244)
(140,129)
–
–
a. for the financial year ended on
March 31, 2008
b. for the previous financial years of
the subsidiary since it became a
subsidiary
–
–
–
–
–
–
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
452,331
a. for the financial year ended on
March 31, 2008
i-flex solutions ltd
100%
March 31, 2008
–
–
(62,935)
(21,642)
–
–
(159,119)
(80,478)
i-flex America inc.
100% held by
i-flex America inc.
Nil
December 31, 20071
SuperSolutions Corporation1
(All amounts in thousands of Indian Rupees)
i-flex America inc.
16,185,170 shares of
1 Equity shares of
SGD 1/- each fully paid-up USD 0.01/- each fully paid-up
i-flex solutions pte ltd
100%
March 31, 2008
i-flex Consulting (Asia Pacific)
Pte Ltd.
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
Shares held by the Holding
Company in the Subsidiary
The Financial Year of the Subsidiary
Company ended on
Holding Company
Holding Company’s interest
i-flex solutions b.v.
Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 79
79
7/25/2008 9:58:52 AM
i-flex America inc.
100% held by
i-flex America Inc.
528,138,676 common
shares of
CAD 0.0032583 per share
i-flex America inc.
100% held by America Inc.
Nil
March 31, 2008
March 31, 2008
i-flex solutions (Canada) inc2
Castek Software Inc.
100% held by Castek
Software Inc.
100 common shares at
CAD 1.00 per share
December 21, 2007
Castek Hungarian
Holdings Inc.3
Castek Software Inc.
100% held by
Castek Software Inc.
2,000 common shares at
average price of
USD 682.19 per share
March 31, 2008
Castek Inc.
(152,797)
b. for the previous financial years of
the subsidiary since it became a
subsidiary
(517,970)
(254,706)
1.24
(1)
(9,443)
(2,382)
–
–
a. for the financial year ended on
March 31, 2008
b. for the previous financial years of
the subsidiary since it became a
subsidiary
–
–
–
–
–
–
–
–
(62,044)
(459)
Castek Software Inc.
100% held by
Castek Software Inc.
2,000 common shares at
average price of
USD 682.19 per share
March 31, 2008
–
–
(223,033)
(27,840)
Castek Software Inc.
100% held by
Castek Software Inc.
950 common shares at
average price of
USD 245.37 per share
March 31, 2008
Castek RBG Inc.
(All amounts in thousands of Indian Rupees)
Castek Software Factory Ltd.
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
(307,940)
a. for the financial year ended on
March 31, 2008
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
Shares held by the Holding
Company in the Subsidiary
The Financial Year of the Subsidiary
Company ended on
Holding Company
Holding Company’s interest
i-flex solutions inc.
Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies (continued)
Annual Report 2007_2008_Final.indd 80
7/25/2008 9:58:52 AM
Mantas inc.
100% held by Mantas inc.
i-flex America inc.
100% held by
i-flex America Inc.
1 share of USD 0.01 par
value common stock at
USD 1.00
Nil
March 31, 2008
March 31, 2008
Mantas Ltd
Nil
Mantas inc.
100% held by Mantas inc.
March 31, 2008
Sotas inc.
Nil
Mantas inc.
100% held by Mantas inc.
March 31, 2008
Mantas Singapore Pte Ltd
(116,115)
b. for the previous financial years of
the subsidiary since it became a
subsidiary
(83,339)
(121,233)
(115)
(1,107)
(300)
(306)
–
–
a. for the financial year ended on
March 31, 2008
b. for the previous financial years of
the subsidiary since it became a
subsidiary
–
–
–
–
–
–
March 31, 2008
–
–
(377)
(1,273)
Nil
–
–
(26,175)
(1,717)
“25200 Series A ordinary
shares of No Par value
4800 Series B ordinary
shares of No Par value”
i-flex solutions ltd
100%
March 31, 2008
ISP Internet Mauritius
Company
(All amounts in thousands of Indian Rupees)
Mantas (India) Pvt. Ltd.
Mantas inc.
100% held by Mantas inc.
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
(269,277)
a. for the financial year ended on
March 31, 2008
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
Shares held by the Holding
Company in the Subsidiary
The Financial Year of the Subsidiary
Company ended on
Holding Company
Holding Company’s interest
Mantas inc
Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies (continued)
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 81
81
7/25/2008 9:58:52 AM
March 31, 2008
ISP Internet Mauritius Company
99.83 % held by ISP Internet Mauritius
Company
5,808,660 equity shares of
Rs. 10/- each fully paid-up
March 31, 2008
ISP Internet Mauritius Company
100% held by ISP Internet Mauritius
Company
20,000 common stock of
USD 0.01/- each
(312,149)
b. for the previous financial years of
the subsidiary since it became a
subsidiary
(181,598)
(58,097)
–
b. for the previous financial years of
the subsidiary since it became a
subsidiary
Notes:
1
SuperSolutions Corporation (merged with i-flex solutions inc. effective January 2, 2008). Hence the financials are as of December 31, 2007.
2
Formerly “Castek Software Inc”
3
Dissolved on December 21, 2007. Hence the financials are as of December 21, 2007.
4
Formerly known as “Equinox Corporation”
5
Sotas Ltd. was dissolved on March 13, 2007.
6
Exchange rates taken into consideration for conversion are as of March 31, 2008.
–
a. for the financial year ended on
March 31, 2008
–
–
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
(61,371)
a. for the financial year ended on
March 31, 2008
–
–
(2,849)
1,111
i-flex solutions ltd
100% held by
i-flex solutions ltd
50,000 Equity shares of
Rs. 10/- each fully paid-up
March 31, 2008
i-flex Processing Services Ltd
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
Shares held by the Holding
Company in the Subsidiary
The Financial Year of the Subsidiary
Company ended on
Holding Company
Holding Company’s interest
Equinox Global Services Limited
i-flex Processing Services Inc.4
Statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiary companies (continued)
–
–
(8,410)
(3,635)
i-flex solutions ltd
100% held by
i-flex solutions ltd
51,70,000 Equity Shares of
Rs. 10/- each, fully paid up
March 31, 2008
Flexcel International
Private Limited
(All amounts in thousands of Indian Rupees)
Annual Report 2007_2008_Final.indd 82
7/25/2008 9:58:52 AM
EUR
USD
USD
USD
USD
USD
CAD
CAD
USD
USD
USD
USD
GBP
USD
USD
INR
USD
i-flex solutions pte ltd
i-flex Consulting (Asia Pacific)
Pte Ltd.
i-flex America inc.
SuperSolutions Corporation1
i-flex solutions inc.
i-flex solutions (Canada) Inc.2
Castek Hungarian Holdings Inc.3
Castek Inc.
Castek Software Factory Ltd.
Castek RBG Inc.
Mantas inc.
Mantas Ltd
Sotas Inc.
Mantas Singapore Pte Ltd
Mantas (India) Pvt. Ltd.
ISP Internet Mauritius Company
EUR
Reporting
currency
i-flex solutions s.a.
i-flex solutions b.v.
Name of the
subsidiary Company
39.88
1.00
39.88
39.88
79.49
39.88
39.88
39.88
39.88
39.04
39.04
39.88
39.88
39.88
39.88
39.88
63.00
63.00
Exchange
rate 6
128,186
–
–
–
–
4,905,917
38
54,412
54,412
0.04
839,679
586,944
540,505
5,510,000
645,465
5,445
3,780
882,000
Share
Capital
(27,892)
(1,650)
(606)
(1,222)
(204,572)
(385,392)
(250,873)
(62,503)
(11,825)
0.23
(772,676)
(460,737)
(239,597)
(84,577)
(778,373)
738,041
22,239
680,925
Reserves
145,610
6,177
190
–
9,237
4,865,798
–
3,948
63,748
0.27
537,660
3,785,451
710,394
6,119,470
17,389
3,696,932
648,660
3,899,445
Total
assets
45,316
7,827
796
1,222
213,809
345,273
250,835
12,039
21,161
–
470,657
3,659,244
409,486
694,048
150,298
2,953,446
622,641
2,336,520
Total
liabilities
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Investment
other than
Investment in
Subsidiary
–
–
–
–
–
969,469
–
–
–
–
132,132
6,220,040
350,968
–
54,585
4,166,348
691,645
5,812,026
Turnover
(1,717)
(1,273)
(306)
–
(121,233)
(269,768)
(27,840)
(429)
(2,304)
(1)
(254,706)
(307,329)
(80,478)
(21,642)
(137,385)
404,078
21,167
604,229
–
–
–
(1,107)
–
491
–
(30)
(78)
–
–
(611)
–
–
(2,744)
(78,376)
–
(151,899)
Profit/(Loss) Provision for
before taxation
taxation
Statement pursuant to exemption received under Section 212(8) of the Companies Act, 1956
relating to subsidiary companies
(1,717)
(1,273)
(306)
(1,107)
(121,233)
(269,277)
(27,840)
(459)
(2,382)
(1)
(254,706)
(307,940)
(80,478)
(21,642)
(140,129)
325,702
21,167
452,331
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Proposed
Dividend
Republic of
Mauritius
India
Singapore
USA
UK
USA
USA
USA
USA
Canada
Canada
USA
USA
USA
Singapore
Singapore
Greece
The
Netherlands
Country of
Incorporation
(All amounts in thousands of Indian Rupees)
Profit after
Taxation
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 83
83
7/25/2008 9:58:52 AM
INR
INR
INR
Equinox Global Services Limited
i-flex Processing Services Ltd
Flexcel International Private Limited
1.00
1.00
1.00
39.88
Exchange
rate 6
51,700
13,000
58,194
–
Share
Capital
(12,045)
(1,738)
(239,695)
(373,520)
Reserves
167,658
98,474
384,906
58,227
Total
assets
128,003
87,212
566,407
431,747
Total
liabilities
Tarjani Vakil
Director
Deepak Ghaisas
Director & Company Secretary
–
–
–
–
Investment
other than
Investment in
Subsidiary
243,944
93,873
359,510
459,096
Turnover
(3,413)
2,640
(55,941)
(61,371)
(222)
(1,529)
(2,156)
–
Profit/(Loss) Provision for
before taxation
taxation
(3,635)
1,111
(58,097)
(61,371)
–
–
–
–
Proposed
Dividend
India
India
India
USA
Country of
Incorporation
(All amounts in thousands of Indian Rupees)
Profit after
Taxation
The Company will make available the accounts and reports of the subsidiary companies upon request by any member/investor of the Company or its subsidiary companies. The accounts and reports of the subsidiary companies will be kept open for inspection by any
member at the registered/corporate office of the Company and the registered office of the subsidiaries during office hours of the Company/subsidiaries.
Since the Company presents audited consolidated financial statements under Indian GAAP in its Annual Report, the Company had applied to the Central Government for an exemption from attaching the accounts and reports of its subsidiaries in the Annual Report. The
approval of the Central Government in this regard has been received vide letter no. 47/246/2008-CL-III dated June 24, 2008 exempting the Company from attaching the accounts and reports of subsidiary companies under the provisions of Section 212 of the Companies
Act, 1956. As such, the accounts and reports of the subsidiary companies are not attached to the Annual Report of the Company.
Mumbai, India
May 5, 2008
Y M Kale
Director
N R K Raman
Managing Director
& Chief Executive Officer
For and on behalf of the Board of Directors
Notes:
1
SuperSolutions Corporation (merged with i-flex solutions inc. effective January 2, 2008). Hence the financials are as of December 31, 2007.
2
Formerly “Castek Software Inc”
3
Dissolved on December 21, 2007. Hence the financials are as of December 21, 2007.
4
Formerly known as “Equinox Corporation”
5
Sotas Ltd. was dissolved on March 13, 2007.
6
Exchange rates taken into consideration for conversion are as of March 31, 2008.
USD
Reporting
currency
i-flex Processing Services Inc4
Name of the
subsidiary Company
Statement pursuant to exemption received under Section 212(8) of the Companies Act, 1956
relating to subsidiary companies (continued)
financials
i-flex solutions ltd
Financial statements for the year ended
March 31, 2008 prepared in accordance with
Indian Generally Accepted Accounting Principles
(Indian GAAP) (Consolidated).
Annual Report 2007_2008_Final.indd 84
7/25/2008 9:58:52 AM
Annual Report 2007_2008_Final.indd 85
7/25/2008 9:58:53 AM
Annual Report 2007_2008_Final.indd 86
7/25/2008 9:58:54 AM
Management’s discussion and analysis
of financial condition and results of operations
The following discussion is based on our audited consolidated financial
statements, which have been prepared in conformity with accounting
principles generally accepted in India and complying in all material
respects the notified Accounting Standards by Companies (Accounting
Standards) Rules, 2006 and the relevant provisions of the Companies
Act, 1956.
The financial statements are consolidated for i-flex (“the Group”)
that includes i-flex solutions ltd and its subsidiaries, i-flex solutions
b.v., i-flex solutions pte ltd, i-flex America inc., i-flex solutions inc.,
Castek Software Inc., Mantas inc., i-flex Consulting (Asia Pacific) Pte Ltd.,
i-flex solutions s.a., i-flex Processing Services Ltd., ISP Internet Mauritius
Company, i-flex Processing Services Inc., Equinox Corporation, Equinox
Global Services Ltd. and Flexcel International Private Limited Investment
in associate company, Login SA, has been accounted for using the equity
method, since we exert significant influence over their operations.
You should read the following discussion of our financial condition and
results of operations together with the detailed consolidated Indian GAAP
financial statements and the notes to those statements. Our fiscal year
ends on March 31 of each year.
Information technology in the financial services industry
Financial institutions today face many challenges in their quest to
offer innovative products and services to customers. The focus is on
transforming business models, identifying cost-saving opportunities and
offering targeted services and improved service levels to customers.
Financial institutions are therefore striving to gain competitive advantage
by reducing costs, enhancing reputation and creating greater institutional
resilience.
Governance, risk and compliance are emerging as strategic priorities
for financial institutions. The stringent regulatory environment is forcing
organizations to select platforms focused on enterprise-wide governance,
risk and compliance management. Institutions are more inclined to adopt
an integrated approach as opposed to a piecemeal solution involving
fragmented systems and one-off processes that compound compliance
costs.
In the core transaction processing area, banks are becoming more
receptive to the value proposition and the benefits of process
transformation. i-flex is helping banks streamline processes and leverage
their existing IT infrastructure to reach new efficiency levels.
Overview
Together with Oracle, i-flex offers best-of-breed functionality for financial
institutions that need to operate flexibly, competitively and respond quickly
to market dynamics in a fiercely challenging business environment. With
the experience of delivering value-based solutions to global financial
institutions, our offerings help financial institutions gain competitive
advantage through cost-effective solutions while, simultaneously,
adhering to the stringent demands of a dynamic regulatory environment.
Playing the role of a specialized IT partner to financial services institutions
worldwide, i-flex’s approach is comprehensive with a wide range of
products, custom solutions and consulting services.
Our solutions portfolio includes packaged applications, custom application
software development, deployment, maintenance and support services,
business and IT consulting services, technology deployment and
management services and the knowledge process outsourcing in the
financial services domain.
As of March 31, 2008, the Group had cumulatively serviced over 800
customers in more than 130 countries through its portfolio of products
and services.
We are organized by region and business segment. We have two
major business segments - the Products Business (comprising product
licensing, customization, implementation and support) and the Services
Business (providing customized software and consulting services).
We also have Knowledge Process Outsourcing Services (providing
value-added knowledge outsourcing). These segments are described in
greater detail below:
Products
The i-flex portfolio includes FLEXCUBE®, a complete banking product
suite for retail, consumer, corporate, investment and internet banking
and asset management and investor servicing. Since its launch in 1997,
more than 300 financial institutions in over 115 countries have chosen
FLEXCUBE.
FLEXCUBE enables banks to standardize, optimize and transform their
processes. The latest release, FLEXCUBE 10.0, helps financial institutions
respond faster to market dynamics and define and track processes,
while ensuring compliance. The suite is also equipped with SWIFT 2007
enhancements and supports SEPA payment processing. FLEXCUBE was
recognized as a leader in the Magic Quadrant for International Retail Core
Banking in February 2008 by Gartner.
FLEXCUBE® for Islamic Banking is a Sharia-compliant product and a
solution for both Islamic and conventional banks.
The FLEXCUBE® Private Banking Suite is a comprehensive solution
for private banking, giving wealth managers a unified view--and
analyses--of their customers’ wealth across asset classes with the added
benefits of performance tracking and improved customer relationship
management.
FLEXCUBE® Investor Services helps fund management companies,
transfer agency service providers and fund distributors design innovative
products and offer efficient investor services to their customers. The
solution was featured by Barrington Partners in ‘The Next Generation’
Transfer Agency Review in February 2008.
FLEXCUBE® Lending Suite is an integrated customer-centric solution
that addresses every lending requirement from origination, to servicing to
collections. DaybreakTM, part of the FLEXCUBE Lending Suite, manages
multiple lending products through an enterprise-wide consumer lending
platform.
Analytics for financial services: i-flex’s analytics offering for
financial services comprises an integrated suite of award-winning
solutions – ReveleusTM and Mantas--that help financial institutions
maximize profitability, minimize risks and deliver enterprise-wide
compliance.
The GRC framework brings together Reveleus’ unrivalled expertise in risk
and control, coupled with Mantas’ industry-leading behavior detection
technology--both deeply rooted in the financial services industry. This
combination helps financial institutions gauge the effectiveness of
governance policies, manage business risks and future-proof compliance
expenditure across various regulatory mandates.
The Reveleus suite of analytical applications is focused on the areas
of risk management, customer insight and enterprise-wide financial
performance. The Reveleus’ Risk Analytics product addresses some of
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 87
87
7/25/2008 9:58:54 AM
the most complex global challenges facing the financial industry today,
including multi-jurisdictional Basel II compliance and operational risk
management.
Reveleus was well positioned in Gartner’s ‘Leaders Quadrant’ in its
‘Basel II Risk Management Application Software Magic Quadrant for 2005’
and ‘2006 Basel II Software Applications Magic Quadrant’. Reveleus
was also ‘Highly Commended’ for its Compliance Initiative Innovation in
The Banker Technology Awards for 2006. Reveleus was also rated as
the number one GRC Solution Provider in the 2008 Operational Risk &
Compliance “Compliance Software Rankings”.
Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior
Detection Platform™ is the industry’s most comprehensive solution
for detecting risk, enhancing customer relationships and addressing
regulatory requirements in the anti-money laundering, trading and
broker compliance areas. Waters Magazine ranked Mantas as the Best
Anti-Money Laundering Solution for 2007, 2005 and 2004 and Best
Compliance Solution for 2003. The award was voted on by the subscribers
of Waters, a monthly magazine that covers information technology and
solutions in the financial services industry.
Mantas, along with the Reveleus suite of products, offers customers a
single, unified platform for governance, risk and compliance. Some of
the specific challenges Mantas addresses are global AML compliance,
MiFID, the market abuse directive, customer risk and suitability and
account takeover and identity theft.
i-flex offers strategic business software and services for the global
Property and Casualty insurance market. The Insure3 suite provides
insurance carriers with a suite of core business processing systems
for insurance product and process configuration, policy processing,
customer billing, claims management and services.
Services
PrimeSourcingTM, i-flex’s global IT services division, provides
comprehensive customized IT solutions for banking, securities and
insurance. These high-quality IT solutions reflect the division’s domain
expertise in financial services with specialized practice lines for payments,
business intelligence, CRM, Oracle Technology & Applications and testing.
These IT solutions encompass the complete lifecycle of an IT application
asset--from conceptualization to deployment and maintenance.
The division also provides in-depth expertise across a range of
technologies such as Java, Microsoft, mainframe and open source.
It’s IT processes are certified as SEI-CMMi Level 5 and it leverages
well-established COBIT-compliant global infrastructure and development
centers, including a comprehensive pool of proprietary methodologies,
tools and best practices.
PrimeSourcing division of i-flex was appraised at CMMI V1.1 Level 5
during February 2005. As part of our continuous process improvement
endeavour, we are in the process of upgrading to the latest version of
CMMI namely V1.2.
i-flex TDMS (Technology Deployment and Management Services)
specializes in conceptualization, design, evaluation, implementation and
management of IT infrastructure for financial institutions. These services
are based on best practices such as ITIL (IT Infrastructure Library) and
COBIT (Control Objectives for Information and related Technology)
models, a globally accepted standard for IT management and control
framework and BS7799 (ISO17799).
Annual Report 2007_2008_Final.indd 88
The i-flex Consulting division offers an end-to-end consulting
partnership, providing comprehensive business and technology solutions
that enable financial services enterprises to improve process efficiencies;
optimize costs; meet risk and compliance requirements; define IT
Architecture; and, manage the transformation process. Consulting
services are offered in the areas of business transformation, risk and
compliance, program management, IT architecture, IT governance and
process improvement. i-flex’s solution approach for financial services
institutions is process-driven and rests on the i-flex Process Framework
for Banking (iPFBTM).
The ‘i-flex Process Framework for Banking’, is a banking process
repository created by drawing on i-flex’s domain expertise and best
practices. Organized by process areas and defined in a manner
understandable by the business, iPFB helps banks with process
transformation and a phased migration to an SOA environment.
i-flex BPO completes the gamut of i-flex’s comprehensive offering for
the financial services industry. Part of i-flex Processing Services Limited
(iPSL), a 100 % owned subsidiary of i-flex solutions, i-flex BPO excels in
providing cost-effective and high-quality knowledge processing services
for the banking, capital markets, insurance and asset management
domains. i-flex also provides the ASP services for its products through its
100% owned subsidiary. In addition to providing ASP services, FLEXCEL
also provides value added services to its customers such as training,
testing, hosting, operations, roll-outs, infrastructure building and support
and application support.
i-flex BPO was selected in the Leaders Category for the ‘2007 Global
Outsourcing 100’ by The International Association of Outsourcing
Professionals (IAOP). The Global Outsourcing 100 defines the standard for
excellence in outsourcing service delivery. Earlier, the same organization
had recognized i-flex BPO as one of the ‘Top 50 Global Outsourcers &
Top 30 Global Offshore Vendors’. Dataquest magazine rated i-flex BPO
among the top 10 ‘dream employers’ in the BPO sector in 2007. i-flex
BPO also bagged the ‘Excellence in Gender Inclusivity - Best Emerging
Company’ award at the NASSCOM-India Today Woman Corporate
Awards for Excellence in Gender Inclusivity awards.
Corporate development
Oracle Global (Mauritius) Limited (“Oracle”) ownership interest in the
Company is 80.58 % as on March 31, 2008.
On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) formed
i-flex solutions s.a., Greece to acquire the banking business from Athens
Technology Center SA (“ATC”).
On November 16, 2007, Castek Software Inc. (“Castek”) became a
wholly owned subsidiary of i-flex America inc. with acquisition of the
balance 23.21% shares of Castek from minority shareholders.
On January 2, 2008, SuperSolutions Corporation a wholly owned
subsidiary of i-flex America inc. was merged with i-flex solutions inc
which is also a wholly owned subsidiary of i-flex America inc.
On March 31 2008, Flexcel International Private Limited (“Flexcel”),
(joint venture with HDFC Bank Limited and its group companies and Lord
Krishna Bank) became wholly owned subsidiary of i-flex solutions ltd
with acquisition of balance 60% shares of Flexcel from its co-venture
parties.
7/25/2008 9:58:54 AM
Business metrics
Our total revenues in fiscal 2008 were Rs. 23,802.4 million, representing
an increase of 15% from Rs. 20,609.4 million in fiscal 2007. The net
income in fiscal 2008 was Rs. 4,155.9 million, as against Rs. 3,722.8
million in fiscal 2007. Our net income margins are 17% and 18% for the
fiscal years 2008 and 2007 respectively. We define net income margins
for a particular period as the ratio of net income to total revenues during
such period. We had 11,006 employees as on March 31, 2008 against
9,068 at the end of the previous year.
Products business
(All amounts in millions of Indian Rupees)
Product revenues
Cost of product revenues
Sales and marketing expenses
General and administrative
expenses
Depreciation and amortization
Inter –Segment Expense
Income from operations
Operating margin*
2008
Year ended
March 31
2007
13,879.8
(5,986.7)
(2,230.9)
11,211.0
(4,350.5)
(1,961.4)
(979.9)
(328.1)
(11.3)
4,342.9
31%
(820.4)
(307.1)
–
3,771.7
34%
customers. The customer is typically charged a service fee either on
a fixed price basis or a time and material basis. Implementation and
enhancement services comprise functional enhancements (if needed),
interface building, implementation planning, data conversion, training
and product walkthroughs and are provided to customers who enter
into licensing arrangements with us and have opted to seek the services
from us.
Annual maintenance contracts fees
We also earn fees relating to the provision of annual maintenance
contracts after the implementation of a product and following the
expiration of the warranty period. Under these agreements, we provide
technical support, maintenance, problem solving and upgrades of the
licensed products. These support agreements are typically entered for a
period of 12 months.
As the revenues from license fees and implementation and enhancement
services rendered by us depend on the number of new customers we add
and the milestones completion and timing of the implementation, etc.,
these revenues typically vary from year to year. The annual maintenance
contracts generate steady revenues and would grow to the extent of new
customers coming under Post Contract Support.
The percentages of our revenue from these streams are as follows:
Fiscal Year Ended
March 31
2008
2007
*Operating margin is defined as income from operations from the Products
Business (excluding corporate expenses) as a percentage of total products
revenue.
Products revenue
As of March 31, 2008, our product revenues were Rs. 13,879.8 million
during the fiscal year ended March 31, 2008, an increase of 24% from
Rs. 11,211.0 million during the fiscal year ended March 31, 2007. Our
product revenues represented 58% and 54% of our total revenues for
fiscal years ended 2008 and 2007, respectively.
Our product revenues comprise license fees, professional fees for
implementation and enhancement services and annual maintenance
contract (post contract support – ‘PCS’) fees for our products.
License fee
Our standard licensing arrangements for products provide the user a
perpetual right to use the product for a pre-defined number of users
and sites upon the payment of a license fee. The license fee is a
function of a variety of quantitative and qualitative factors including the
number of copies sold, the number of concurrent users supported, the
number and combination of the modules sold and the number of sites
and geographical locations supported. The licenses are non-exclusive,
personal, non-transferable and royalty free.
Implementation fee
Along with licensing of products to customers, customers can also
optionally avail services related to the implementation of products
at customer sites, integration with other customer systems and
enhancement of products to address the specific requirements of
License fees
Implementation and
customization fees
PCS arrangements
Total
23%
29%
59%
18%
100%
54%
17%
100%
Cost of products revenue and operating expenses
The cost of our product revenues consists of costs attributable to the
implementation, enhancement, maintenance and continued development,
including research and development efforts, of our core product offerings
- the FLEXCUBE suite of products, Reveleus and other products. These
costs primarily consist of compensation expenses for all of our software
professionals working in the Products Business, project-related travel
expenses, professional fees paid to software services vendors and the
cost of application software for internal use.
Research and development costs are expensed as incurred. Software
development costs are expensed as incurred until technological feasibility
is established. Software product development cost incurred subsequent
to the achievement of technological feasibility is not material and is
expensed as incurred.
Our operating expenses include selling and marketing expenses, general
and administrative expenses that consist of commissions payable to
our partners, product advertising, marketing expenses and allocated
overhead expenses associated with support and monitoring functions
such as human resources, facilities and infrastructure expenses, quality
assurance and financial control and depreciation and amortization.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 89
89
7/25/2008 9:58:55 AM
Services business
(All amounts in millions of Indian Rupees)
Services revenues
Cost of services revenues
Sales and marketing expenses
General and administrative
expenses
Depreciation and amortization
Inter-Segment Expense
Income from operations
Operating margin*
2008
Year ended
March 31
2007
9,379.1
(6606.9)
(337.6)
8,919.8
(6,391.1)
(320.4)
(584.0)
(244.6)
(93.9)
1,512.1
16%
(458.9)
(241.5)
–
1,508.0
17%
*Operating margin is defined as income from operations from the Services Business
(excluding corporate expenses) as a percentage of total services revenue.
project needs and therefore such personnel are fully utilized. Utilization
rates for our Services Business were 71% for both fiscal 2008 and 2007
respectively.
Cost of services revenue and operating expenses
The cost of revenues for services consists primarily of compensation
expenses for our software professionals, cost of application software
for internal use, travel expenses and professional fees paid to software
services vendors. We recognize these costs as incurred. Our operating
expenses include selling, general and administrative expenses and
allocated overhead expenses associated with support and monitoring
functions such as human resources, corporate marketing, information
management systems, quality assurance and financial control and
depreciation.
Knowledge Process Outsourcing (KPO) Services Business
Services revenue
Our services revenues represented 39% and 43% of our total revenues for
the fiscal year ended March 31, 2008 and 2007. Our services revenues
were Rs. 9,379.1 million in the fiscal year ended March 31, 2008,
an increase of 5% from Rs. 8,919.8 million in the fiscal year ended
March 31, 2007.
The contracts relating to our Services Business are either time and
material contracts or fixed price contracts. The percentage of total
services revenues from time and material contracts was 86% in fiscal
2008 and 88% in fiscal 2007, with the remainder of our services
revenues attributable to fixed price contracts.
We provide our services through offshore centers located in India, onsite
teams operating at our customers’ premises and our development
centers located in other parts of the world. Offshore services revenues
consists of revenue from work conducted at our development centers
in India and for Indian customers at their locations. Onsite revenues
consist of work conducted at customer premises outside India and our
development centers outside India. The composition of our onsite and
offshore revenue is determined by the project lifecycle. Typically, the work
involving the design of new systems or relating to a system roll-out would
be conducted onsite, while the core software development, maintenance
and support activity may be conducted offshore. We received 64% and
69% of our services revenue from on-site work and 36% and 31% from
off-shore work during the fiscal years 2008 and 2007 respectively.
Our services revenues and profits are also affected by the rate at which
our software professionals are utilized. The utilization rate is calculated
as the percentage billed for our personnel in a particular period to
average number of staff that is considered billable in that same period.
For the purpose of calculating the number of billable staff, we exclude the
personnel that are engaged in management, administration, marketing
support, initial training (six months for personnel without any prior
work experience and three months for personnel with over two years
experience) and personnel allocated to the approved internal investment
projects. Our onsite personnel deployment on projects is based on
Annual Report 2007_2008_Final.indd 90
(All amounts in millions of Indian Rupees)
Services revenues
Cost of services revenues
Sales and marketing expenses
General and administrative
expenses
Depreciation and amortization
Inter-Segment Expense
Income from operations
Operating margin*
2008
Year ended
March 31
2007
569.3
(394.5)
(125.4)
444.8
(298.4)
(112.6)
(117.4)
(27.1)
(7.8)
(102.9)
(18%)
(125.1)
(24.6)
–
(115.9)
(26%)
*Operating margin is defined as income from operations from the Knowledge
Process Outsourcing (KPO) Services Business (excluding corporate expenses)
as a percentage of total services revenue
Knowledge Process Outsourcing (KPO) Services Revenues
Our KPO services revenues represented 2% of our total revenues for the
fiscal year ended March 31, 2008 and 2007. Our KPO services revenues
were Rs. 569.3 million in the fiscal year ended March 31, 2008, an
increase of 28% from Rs. 444.8 million in the fiscal year ended
March 31, 2007. This business line is currently in investment phase.
In the financial year, we had to face the down turn specifically in the
mortgage processing services from United States and in spite of these
factors, we were able to reduce the losses in the business from 26% to
18%.
Cost of Knowledge Process Outsourcing (KPO) Services Revenues
and Operating Expenses
The cost of revenues for KPO Services consists primarily of compensation
expenses for our professionals, travel expenses and professional fees
paid to vendors. We recognize these costs as incurred. Our operating
expenses include selling, general and administrative expenses and
allocated overhead expenses.
7/25/2008 9:58:55 AM
Geographic breakup of revenues
Our overall revenues continue to be well diversified. The following table represents the percentage breakup of our revenues for our Products and Services
Business by region:
Year ended
March 31, 2008
Services
Total
Revenues
Revenues
Products
Revenues
USA
Middle East, India and Africa
Asia Pacific
Europe
Latin America and Caribbean
Total
17%
19%
19%
44%
1%
100%
56%
5%
19%
20%
0%
100%
33%
13%
19%
34%
1%
100%
Products
Revenues
Year ended
March 31, 2007
Services
Total
Revenues
Revenues
21%
20%
19%
39%
1%
100%
62%
8%
16%
14%
0%
100%
40%
14%
18%
27%
1%
100%
Customer concentration
Foreign currency and treasury operations
Our operations and business depend on our relationships with a number
of large customers. Our revenues from our top ten customers for fiscal
2008 were at 33% and for fiscal year 2007 were at 23% of our total
revenues. The top ten customers in our Services Business contributed
48% of the total services revenues and the top ten customers in our
Products Business, contributed 34% of the total products revenues
during fiscal 2008.
A substantial portion of our revenues is generated in foreign currencies
while a majority of our expenses are incurred in Indian Rupees with
the remaining expenses incurring in U.S. Dollars (USD) and European
currencies.
The percentage of total revenues during fiscal years 2008 and 2007 that
we derived from our largest customer, top five customers and top ten
customers is provided in the accompanying table. In the table, various
affiliates of Citigroup are classified as separate customers and the last
row sets forth the percentage of total revenues we earned from the
various affiliates of Citigroup with respect to our Products and Services
Business individually and with respect to our business taken as a whole.
Top customer
Top 5 customers
Top 10 customers
Citigroup and its
affiliates
Products
Revenue
2008 2007
Services Total Revenues
Revenue
2008 2007 2008 2007
8%
23%
34%
6%
22%
35%
13%
34%
48%
5%
19%
30%
7% 3%
24% 13%
33% 23%
11%
15%
36%
44%
21% 28%
Trade receivables
Trade receivables as of fiscal March 31, 2008 and 2007 were Rs. 8,454.0
and Rs. 7,494.4 million respectively. Our days sales outstanding (which
is the ratio of sundry debtors to total sales in a particular year multiplied
by 365) for fiscal 2008 and 2007 were approximately 119 and 120
respectively. The Group periodically reviews its account receivables
outstanding as well as the aging, quality of the account receivables,
customer relationship and history of the client. The following table
presents the age profile of our debtors:
Period in days
2008
Year ended
March 31
2007
0–180
More than 180
Total
87%
13%
100%
87%
13%
100%
We follow a conservative philosophy of treasury operations and the
policy is to invest funds substantially in time deposits with well-known
and highly rated Indian and foreign banks. The Company has ensured
adequate controls over asset management including cash management
operations, credit management and debt collection.
The Group also balances funds in USD accounts or INR deposits
based on the comparative exchange rates, interest rates and currency
requirements. The Group books forward covers from time to time in line
with its treasury management philosophy.
Income taxes
Currently, we partially benefit from the tax holidays the Government
of India provides to software products and IT services exporters from
specially designated software technology parks in India. As a result of
these incentives, our operations have been subject to relatively lower tax
liabilities in India. These tax incentives currently include a 10-year tax
holiday from Indian corporate income-taxes for the operation of seven
of our Indian facilities. As a result a substantial portion of our pre-tax
income has not been subject to tax in recent years.
The Finance Act, 2000 restricts the ten-year tax holiday available from the
fiscal year in which the undertaking begins to manufacture or produce or
until fiscal 2010(as extended in Finance Act, 2008), whichever is earlier.
Accordingly, facilities set up after fiscal 2000 will enjoy the benefit of the
tax holiday only until fiscal 2010. For seven of our facilities, these benefits
expire in stages through 2010. Income taxes also include foreign taxes
representing income taxes payable overseas by us in various countries.
Employee Stock Purchase Scheme (‘ESPS’)
The Company has adopted the ESPS administered through a Trust
(“the Trust”) to provide equity based incentives to key employees of the
Company. The Trust purchases shares of the Company from market
using the proceeds of loans obtained from the Company. Such shares
are offered by the Trust to employees at an exercise price, which
approximates the fair value on the date of the grant. The employees
can purchase the shares in a phased manner over a period of five years
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 91
91
7/25/2008 9:58:55 AM
based on continued employment, until which, the Trust holds the shares
for the benefit of the employee. The employee will be entitled to receive
dividends, bonus, etc., that may be declared by the Company from time
to time for the entire portion of shares held by the Trust on behalf of the
employees.
A summary of the activity in the Company’s ESPS is as follows:
Year ended
Year ended
March 31, 2008 March 31, 2007
(Number of shares)
Opening balance of
unallocated shares
Shares forfeited during the year
Closing balance of
unallocated shares
On acceptance of the offer, the selected employee shall undertake to 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
thereto. The repayment of the loan by the Trust to the Company would
be dependent on employee repaying the amount to the Trust. In case
the employee resigns from employment, the rights relating to shares,
which are eligible for exercise, may be purchased by payment of the
exercise price whereas, the balance shares shall be forfeited in favour of
the Trust. The Trustees have the right of recourse against the employee
for any amounts that may remain unpaid on the shares accepted by the
employee. The shares that an employee is eligible to exercise during the
initial five-year period merely go to determine the amount and scheduling
of the loan to be repaid on exercise by the employee. The Trust shall
repay the loan obtained from the Company on receipt of payments from
employees against shares exercised or otherwise.
The Securities and Exchange Board of India (‘SEBI’) has issued the
Employee Stock Option Scheme and Stock Purchase Guidelines, 1999
(‘SEBI guidelines’), which are applicable to stock purchase schemes for
employees of all listed Companies. In accordance with these guidelines,
the excess of market price of the underlying equity shares on the date of
grant of the stock options over the exercise price of the options is to be
recognized in the books of account and amortized over the vesting period.
However, no compensation cost has been recorded as the scheme terms
are fixed and the exercise price equals the market price of the underlying
stock on the grant date.
Opening balance of
allocated shares
Shares exercised during
the year
Shares forfeited during the year
Closing balance of
allocated shares
Shares eligible for exercise
Shares not eligible for exercise
Total allocated shares
142,116
16,847
120,888
21,228
158,963
142,116
355,212
2,080,546
(117,264)
(16,847)
(1,704,106)
(21,228)
221,101
355,212
96,251
124,850
221,101
164,712
190,500
355,212
Employee Stock Option Plan (‘ESOP’)
Pursuant to ESOP scheme approved by the shareholders of the Company
held on August 14, 2001, the Board of Directors, on March 4, 2002
approved the Employees Stock Option Scheme (‘the Scheme’) for issue
of 4,753,600 options to the employees and directors of the Company
and its subsidiaries. According to the Scheme, the Company has granted
4,548,920 options prior to the IPO and 559,000 options at various dates
after IPO. As per the scheme, each of 20% of the total options granted
will vest to the eligible employees and directors on completion of 12, 24,
36, 48 and 60 months and is subject to continued employment of the
employee or director with the company or its subsidiaries. Options have
exercise period of 10 years.
A summary of the activity in the Company’s ESOP is as follows:
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of the year
Annual Report 2007_2008_Final.indd 92
Shares arising
from options
Year ended
March 31, 2008
Weighted average
exercise price
Shares arising
from options
Year ended
March 31, 2007
Weighted average
exercise price
530,485
–
(63,332)
(35,900)
431,253
989
–
632
1,191
1,025
2,756,880
373,000
(2,552,795)
(46,600)
530,485
280
1,291
(270)
(826)
989
7/25/2008 9:58:56 AM
The weighted average share price for the period over which stock options
was exercised was Rs. 1,890.
The details of options unvested and options vested and exercisable as on
March 31, 2008 are as follows:
Range of
exercise
prices
Options unvested
Options vested
and exercisable
Shares Weighted Weighted
average
average
exercise remaining
price (Rs.) contractual
life (Years)
419-560 30,000
709-709
6,000
1,291-1,291 246,800
547
709
1,291
6.3
7.2
8.1
265-265
419-560
1,291-1,291
265
480
1,291
1,025
3.9
5.3
8.1
7.2
51,000
45,003
52,450
431,253
Knowledge Process Outsourcing (KPO) Revenue
Our revenues from KPO Services in the fiscal year ended March 31, 2008
were Rs. 569.3 million, an increase of 28% over our revenues from KPO
Services of Rs. 444.8 million in the fiscal year ended March 31, 2007.
Interest and other income
Our interest and other income in the fiscal year ended March 31, 2008
was Rs. 639.7 million, an increase of 78% over our interest and other
income of Rs. 359.7 million in the fiscal year ended March 31, 2007.
The increase in interest income amounted to Rs. 75.5 million resulting
from additional funds placed with banks and hardening of interest rates
over fiscal 2007. Additionally the foreign exchange gain contributed
an increase of Rs. 174 million during the year mainly due to lower
appreciation of Rupee against the US Dollar as compared to Fiscal 2007
and sharp depreciation of Rupee against Euro.
Cost of revenues and operating expenses
Cost of revenues
Analysis of our financial results
Comparison of fiscal 2008 with fiscal 2007
Revenues
Our total revenues in the fiscal year ended March 31, 2008 were
Rs. 23,802.4 million, an increase of 15% over our total revenues of
Rs. 20,609.4 million in the fiscal year ended March 31, 2007. The
increase in revenues was attributable to a 24% increase in the revenues
from our Products Business and 5% increase in the revenues from our
Services Business.
Our cost of revenues in the fiscal year ended March 31, 2008 was
Rs. 13,040.3 million, an increase of 18% over our cost of revenues
of Rs. 11,066.1 million in the fiscal year ended March 31, 2007. Our
cost of revenues as a percentage of total revenue was 55% in the fiscal
year ended March 31, 2008, compared to 54% in the fiscal year ended
March 31, 2007.
Services revenues
We invest significantly both in our Products and Services businesses to
meet emerging market requirements and create the foundation for the
growth in future. In the financial year 2007-08, we continued to invest
enhancing the product suite and announced FLEXCUBE 10.0, which
helps financial institutions respond faster to market dynamics and define
and track processes, while ensuring compliance. We also launched our
Private Wealth Management solution – FLEXCUBE Private Banking. We
further strengthened our analytics offering for financial services which
comprises an integrated suite of award-winning solutions – ReveleusTM
and Mantas. In our Services business, we invested in strengthening
our competencies in the payments area. We also invested in creating
a strong offering in MiFID - the new regulatory compliance area in
capital markets in Europe. During the year, i-flex BPO launched iGPM
(i-flex Global Processing Model) a new generation, platform-based loan
processing solution from i-flex BPO.
Our services revenues represented 39% and 43% of our total revenues for
the fiscal year ended March 31, 2008 and 2007. Our services revenues
were Rs. 9,379.1 million in the fiscal year ended March 31, 2008,
an increase of 5% from Rs. 8,919.8 million in the fiscal year ended
March 31, 2007. Revenues from time and material contracts comprised
86% of the revenues and fixed price contracts comprised 14% for the
fiscal 2008.
Our cost of products revenues in the fiscal year ended March 31, 2008
was Rs. 5,986.7 million, an increase of 38% over our cost of products
revenues of Rs. 4,350.5 million in the fiscal year ended March 31, 2007.
Our cost of products revenues as a percentage of products revenues was
43% in the fiscal year ended March 31, 2008, compared to 39% in the
fiscal year ended March 31, 2007. This increase, as stated above, was
largely attributable to the higher investments in the product business.
Products revenues
Our products revenues in the fiscal year ended March 31, 2008 were
Rs. 13,879.8 million, an increase of 24% over our products revenues
of Rs. 11,211.0 million in the fiscal year ended March 31, 2007 on the
strength of large customer wins in Europe and ASPAC. The revenues
from license fees comprised 23% of the revenues, implementation fees
comprised 59% and Annual Maintenance Contracts comprised 18% of
the revenues for the fiscal 2008.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 93
93
7/25/2008 9:58:56 AM
Our cost of services revenues in the fiscal year ended March 31, 2008
was Rs. 6,606.9 million, an increase of 3% over our cost of services
revenues of Rs. 6,391.1 million in the fiscal year ended March 31, 2007.
The cost of services revenues as a percentage of services revenues was
70% in the fiscal year ended March 31, 2008, compared to 72% in the
fiscal year ended March 31, 2007.
Sales and marketing expenses
Our sales and marketing expenses in the fiscal year ended March 31, 2008
were Rs. 2,697.5 million, an increase of 13% over our sales and marketing
expenses of Rs. 2,395.5 million in the fiscal year ended March 31, 2007.
Our sales and marketing expenses as a percentage of total revenues was
at 11% for the fiscal year ended March 31, 2008 compared to 12% for
the fiscal year ended March 31, 2007.
Our sales and marketing expenses for our Products Business in the fiscal
year ended March 31, 2008 were Rs. 2,230.9 million, an increase of
14% over our sales and marketing expenses for our Products Business
of Rs. 1,961.4 million in the fiscal year ended March 31, 2007. Sales
and marketing expenses for our Products Business as a percentage of
products revenues was 16% in the fiscal year ended March 31, 2008,
compared to 17% in the fiscal year ended March 31, 2007.
Our sales and marketing expenses for our Services Business in the fiscal
year ended March 31, 2008 were Rs. 337.6 million, an increase of 5%
over our sales and marketing expenses for our Services Business of
Rs. 320.4 million in the fiscal year ended March 31, 2007. Sales and
marketing expenses for our Services Business as a percentage of services
revenues remained at 4% for the fiscal year ended March 31, 2008 and
the fiscal year ended March 31, 2007.
General and administrative expenses
Our general and administrative expenses in the fiscal year ended
March 31, 2008 were Rs. 3,392.2 million, an increase of 25% over
our general and administrative expenses of Rs. 2,723.3 million in the
fiscal year ended March 31, 2007. This increase is attributable to
expansion of our existing facilities and creation of new development
centers to meet the growth requirements. Our general and administrative
expenses as a percentage of total revenues was 14% in the fiscal year
ended March 31, 2008, compared to 13% in the fiscal year ended
March 31, 2007.
General and administrative expenses for our Products Business in the
fiscal year ended March 31, 2008 were Rs. 979.9 million, an increase
of 19% over our general and administrative expenses for our Products
Business of Rs. 820.4 million in the fiscal year ended March 31, 2007.
Our general and administrative expenses for our Products Business as a
percentage of products revenues was 7% for both the fiscal years ended
March 31, 2008 and March 31, 2007.
General and administrative expenses for our Services Business in the fiscal
year ended March 31, 2008 were Rs. 584.0 million, an increase of 27%
over our general and administrative expenses for our Services Business
of Rs. 458.9 million in the fiscal year ended March 31, 2007. Our general
and administrative expenses for our Services Business as a percentage
of services revenues was 6% in the fiscal year ended March 31, 2008,
compared to 5% in the fiscal year ended March 31, 2007.
Annual Report 2007_2008_Final.indd 94
Income taxes
Our provision for income taxes in the fiscal year ended March 31, 2008
was Rs. 441.7 million, an increase of 6% over our provision for income
taxes of Rs. 416.0 million in the fiscal year ended March 31, 2007. Our
effective tax rate was 9.6% in the fiscal year ended March 31, 2008
compared to 10% in the fiscal year ended March 31, 2007.
Income from operations and net income
As a result of the foregoing factors, income from operations increased by
5% to Rs. 3,966.4 million in fiscal 2008 from Rs. 3,771.5 million in fiscal
2007 and net income increased by 12% to Rs. 4,155.9 million in fiscal
2008 from Rs. 3,722.8 million in fiscal 2007. Our net margins decreased
to 17% from 18% in fiscal 2007. We define net income margins for a
particular period as the ratio of net income to total revenues during such
period.
Liquidity and capital resources
Our capital requirement relate primarily to financing the growth of our
business. We have historically financed the majority of our working capital,
capital expenditure and other requirements through our operating cash
flow. During fiscal 2008 and 2007, we generated cash from operations
of Rs. 4,012.0 million and Rs. 1,645.9 million respectively.
i-flex is a zero debt company. We expect that our primary financing
requirements in the future will be capital expenditure and working
capital requirements in connection with the expansion of our business.
We believe that the cash generated from operations will be sufficient to
satisfy our currently foreseeable capital expenditure and working capital
requirements.
Human capital
We recruit graduates from leading engineering and management
institutions. We also hire functional experts from the banking industry.
We had a net addition of 1,938 employees during the fiscal year taking
our employee strength to 11,006 employees as on March 31, 2008. The
blend of functional knowledge and technical expertise, coupled with i-flex
training and experience make our employees unique.
We enjoy cordial relationships with our employees and endeavour to
give them an excellent, professionally rewarding and enriching work
environment. We operate an effective performance management system
with a focus on employee development. This measures key result
areas, competencies and training needs ensuring all-round employee
development.
Risks and concerns
Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposures are due to the following:
–
foreign exchange rate fluctuations,
–
fluctuations in interest rates; and
–
fluctuations in the value of our investments.
7/25/2008 9:58:56 AM
As of March 31, 2008, we had Cash and Bank Balances of Rs. 8,965.6
million out of which Rs. 5,539.8 million was in interest–bearing bank
deposits. Consequently, we face an exposure on account of fluctuation
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.
Opportunities:
A substantial portion of our revenues is generated in foreign currencies
while a majority of our expenses are incurred in Indian Rupees and the
balance in US Dollars and European currencies. Our functional currency
for Indian operations and consolidated financials is the Indian Rupee.
We expect the majority of our revenues will continue to be generated
in foreign currencies for the foreseeable future and a significant portion
of our expenses, including personnel costs and capital and operating
expenditure, to continue to be incurred in Indian Rupees.
In addition, we face normal business risks such as global competition
and country risks pertaining to countries that we operate in.
–
India is a favoured outsourcing destination
–
Increasing momentum in purchasing core banking systems by large
and global financial institutions
–
Entry into hitherto untapped markets
–
Expanding solutions portfolio and entry into new market segments
– consumer finance, business analytics, Basel II, Anti-Money
Laundering, Private Wealth Management, Islamic banking, among
others
–
Need for banks to improve performance and efficiency through
effective use of information technology solutions
Threats:
–
Increasing competition
–
Legislative and visa related restrictions
Integration of mergers and acquisitions
i-flex has acquired companies in the past, i.e., SuperSolutions Corporation,
USA, ISP Internet Mauritius Company, Mauritius, Castek Software Inc.,
Canada, Mantas inc., USA and i-flex Consulting (Asia Pacific) Pte Ltd.,
Singapore. During the year, we acquired i-flex solutions s.a. and the balance
stake in Castek Software Inc. and Flexcel International Private Limited.
These mergers and acquisitions involve inherent risks, including:
–
unforeseen contingent risks or latent liabilities relating to these
businesses that may only become apparent after the merger or
acquisition is finalized;
–
integration and management of the operations, sales and marketing,
personnel and systems;
The company as part of its policies ensures that the companies acquired
are successfully integrated into the mainstream business.
SWOT analysis
Strengths:
–
Comprehensive solutions portfolio.
–
World-class technology
–
Deep domain expertise
–
Extensive global client base
–
Superior quality and cost-efficient delivery
–
High quality manpower resources
–
Strong R&D capability, well linked with business
Outlook
The worldwide market for financial services is transforming at a rapid
pace. New asset classes such as private equity and hedge funds are
attracting investors and shifting the focus within capital markets.
The payments space, a major source of revenue and profit, is being
restructured, thus altering the fundamental dynamics of the banking
industry. Financial services institutions are also leveraging all available
technologies to offer services on a “self service” approach leading to
business and technology innovation.
Emerging markets are becoming increasingly important sources of growth
for firms in mature economies. Global financial institutions will need
to excel in areas such as off shoring, taxation and financial reporting,
service and process innovation and in internal controls to sustain their
growth and profitability
With a process-driven approach based on a Service-Oriented Architecture,
your company has the distinct advantage of offering banks the combined
benefits of interoperability, extensibility and standardization. Jointly with
Oracle, your company provides best-of-breed functionality for financial
institutions that need to operate flexibly, competitively and respond quickly
to market dynamics in a fiercely challenging business environment.
Encompassing retail, corporate and investment banking, funds, cash
management, trade, treasury, payments, lending, private wealth
management, asset management and business analytics, among others,
these solutions help financial institutions drive innovation and become
‘model enterprises’ of the future.
Acquisitions
a. i-flex solutions s.a.
Weaknesses:
–
Exposure to various economies
On July 2, 2007, i-flex b.v. acquired 90% shares in banking business
from ATC. The acquisition was structured by way of transfer of all
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 95
95
7/25/2008 9:58:56 AM
contracts, employees and fixed assets of banking business from ATC to
a newly formed entity, i-flex solutions s.a., Greece
b. Castek Software Inc.
In November 2007, i-flex America inc. entered into an agreement to
acquire remaining equity shares in Castek from minority shareholders.
The transaction was completed in April 2008.
c. Flexcel International Private Limited
Internal control systems and their adequacy
i-flex group has in place adequate systems of internal control and
documented procedures covering all financial and operating functions.
These systems have been designed to provide reasonable assurance with
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.
The group continuously strives to align all its processes and controls with
global best practices.
On March 31, 2008, Flexcel became a wholly owned subsidiary of
i-flex solutions ltd with acquisition of balance 60% shares of Flexcel from
i-flex’s co-venture parties.
Annual Report 2007_2008_Final.indd 96
7/25/2008 9:58:56 AM
Auditors’ report
To the Board of Directors of
i-flex Solutions Limited:
1. We have audited the attached consolidated balance sheet of
i-flex Solutions Limited, its subsidiaries, associate company and joint
venture (together referred to as ‘the Group’ as described in Note 1 of
schedule 15 to the financial statements) as at March 31, 2008 and
also the consolidated profit and loss account and the consolidated
cash flow statement for the year ended on that date annexed
thereto. These financial statements are the responsibility of the
Group’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
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
audit includes, examining on a test basis, evidence supporting the
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.
3. We report that the consolidated financial statements have been
prepared by the Group’s management in accordance with the
requirements of Accounting Standard (‘AS’) 21, Consolidated
Financial Statements, AS 23, Accounting for Investments in
Associates in Consolidated Financial Statements and AS 27,
Financial Reporting of Interests in Joint Ventures issued by the
Institute of Chartered Accountants of India.
4. In our opinion and to the best of our information and according to
the explanations given to us, the consolidated financial statements
give a true and fair view in conformity with the accounting principles
generally accepted in India:
(a) in the case of the consolidated balance sheet, of the state of
affairs of the Group as at March 31, 2008;
(b) in the case of the consolidated profit and loss account, of the
profit of the Group for the year then ended; and
(c) in the case of the consolidated cash flow statement, of the cash
flows of the Group for the year then ended.
For S. R. Batliboi & Associates
Chartered Accountants
per Sunil Bhumralkar
Partner
Membership No.: 35141
Mumbai, India
May 5, 2008
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 97
97
7/25/2008 9:58:56 AM
Consolidated balance sheet
as at March 31
(All amounts in thousands of Indian Rupees)
Schedules
Sources of funds
Shareholders’ funds
Share capital
Share application money pending allotment
Reserves and surplus
Deferred tax liability
Minority Interest
Application of funds
Fixed Assets
Cost
Less: Accumulated depreciation, amortization and impairment
Net book value
Capital work-in-progress and advances
1
2
3
2008
2007
418,737
265
27,351,571
4,677
6,273
27,781,523
416,443
401,679
23,202,085
1,745
–
24,021,952
11,088,250
2,575,047
8,513,203
1,313,536
9,826,739
9,626,043
2,030,937
7,595,106
1,346,108
8,941,214
4
Investments
5
54,935
59,167
Deferred tax asset
3
230,280
141,483
Current assets, loans and advances
Sundry debtors
Cash and bank balances
Other current assets
Loans and advances
6
8,453,962
8,965,620
1,137,091
5,241,646
23,798,319
7,494,396
7,197,754
1,194,592
4,325,016
20,211,758
Less: Current liabilities and provisions
Current liabilities
Provisions
7
5,601,777
526,973
6,128,750
4,910,518
421,152
5,331,670
17,669,569
14,880,088
27,781,523
24,021,952
Net current assets
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
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Annual Report 2007_2008_Final.indd 98
Tarjani Vakil
Director
7/25/2008 9:58:56 AM
Consolidated profit and loss
for the year ended March 31
(All amounts in thousands of Indian Rupees, except share and per share data)
Schedules
Revenue
Cost of revenue
Gross profit
Operating expenses
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization
Income from operations
Non-operating income (expenses)
Interest income
Other income (expenses), net
Income before provision for taxes
2008
2007
8
9
23,802,363
(13,040,290)
10,762,073
20,609,382
(11,066,050)
9,543,332
10
11
(2,697,519)
(3,392,247)
(705,888)
3,966,419
(2,395,495)
(2,723,336)
(653,023)
3,771,478
12
13
464,767
174,938
4,606,124
376,907
(17,253)
4,131,132
Provision for taxes
Current tax
MAT credit
Deferred tax
Fringe benefit tax (Refer Note 13 of Schedule 15)
Net income for the year before share of profit of associate company
and minority interest
Share of (loss) profit of associate company
Net income for the year before share of minority interest
Share of Minority interest
(774,424)
362,605
85,867
(115,733)
(413,192)
–
70,625
(73,391)
4,164,439
(4,128)
4,160,311
(4,425)
3,715,174
7,622
3,722,796
–
Net income for the year
4,155,886
3,722,796
Profit and loss account, beginning of the year
Amount available for appropriation
Appropriations:
Dividend paid on stock options exercised
Tax on dividend paid on stock options exercised
Surplus carried to Balance Sheet
4,352,335
8,508,221
630,950
4,353,746
–
–
8,508,221
(1,237)
(174)
4,352,335
49.66
49.58
47.05
45.76
Earnings per share of Rs. 5/- each (in Rs.)
Basic
Diluted
14
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
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Tarjani Vakil
Director
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 99
99
7/25/2008 9:58:56 AM
Schedules annexed to and forming part of the accounts
for the year ended March 31
(All amounts in thousands of Indian Rupees, except share and per share data)
As at
March 31, 2008
As at
March 31, 2007
Authorized:
100,000,000 (March 31, 2007 – 100,000,000) equity shares of Rs. 5/- each
500,000
500,000
Issued, subscribed and fully paid-up:
83,747,441 (March 31, 2007 – 83,288,580) equity shares of Rs. 5/- each
418,737
416,443
Schedule 1: Share capital
a. Of the above, 67,481,698 (March 31, 2007 – 67,481,698) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).
b. Of the above, 62,121,800 (March 31, 2007 – 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.
Schedule 2: Reserves and surplus
Securities premium
Balance, beginning of the year
Received during the year
Share issue expenses (Refer Note 12 of Schedule 15)
Balance, end of the year
General reserve
Balance, beginning of year
Adjustment for employee benefits provision
Balance, end of the year
Foreign currency translation reserve
Balance, beginning of year
Addition during the year on net investment in Non integral operations
Balance, end of the year
“Gain on dilution of equity investment in joint venture
(Refer Note 8-c of Schedule 15)”
Profit and loss account
9,012,187
439,409
(7,301)
9,444,295
2,543,366
6,468,821
–
9,012,187
10,145,191
–
10,145,191
10,238,569
(93,378)
10,145,191
(310,164)
(436,879)
(747,043)
–
(310,164)
(310,164)
907
2,536
8,508,221
27,351,571
4,352,335
23,202,085
196,177
8,566
25,537
230,280
124,351
10,132
7,000
141,483
(4,677)
(4,677)
225,603
(1,745)
(1,745)
139,738
Schedule 3: Deferred tax asset (liability)
Deferred tax asset
Difference between book and tax depreciation
Expenditure allowable on actual payment
Provision for doubtful debts
Deferred tax liability
Difference between book and tax depreciation
Annual Report 2007_2008_Final.indd 100
7/25/2008 9:58:56 AM
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 101
101
7/25/2008 9:58:56 AM
269,140
–
192,915
138,240
–
8,679
2,110,320
5,985,119
1,384,752
7,232
543,731
453,949
3,369
42,495
5,962,804
197,473
22,290
138,619
53,767
9,626,043
3,966,811
Intangible assets:
Goodwill on consolidation (Note 2)
Goodwill on acquisition
Customer contracts
Product IPR
PeopleSoft ERP
Total
As at March 31, 2007
18,740
166,320
–
–
–
–
–
30,547
–
11,954
15,326
–
44,604
–
63,889
–
307,147
481,793
473,924
–
–
–
–
758
387
–
3,595
–
–
–
3,129
–
Gross block
Sale/ Translation
deletions
loss
9,626,043
11,088,250
6,383,530
197,473
22,290
138,619
53,767
560,884
2,982
39,220
1,634,971
7,232
692,042
232,674
380,267
742,299
1,389,133
2,030,937
57,958
146,153
22,290
62,915
14,337
206,288
2,602
19,569
1,002,374
7,071
249,093
–
198,505
41,782
As at
As at
March 31, 2008 April 1, 2007
Note:
1. Includes 10 (March 31, 2007–10) shares of Rs. 50/- each in Takshila Building No.9, Co-op Housing Society Ltd., Mumbai.
2. Accumulated depreciation and amortization as at April 1, 2007 includes impairment of SuperSolutions inc. amounting to Rs. 57,958.
894,650
–
–
–
–
–
117,737
488,959
Additions
232,674
329,548
253,340
As at
April 1, 2007
Tangible assets:
Land
Improvement to leasehold premises
Buildings (Note 1)
Computer equipments
Owned
Leased
Electrical and office equipments
Furniture and fixtures
Owned
Leased
Leased Vehicles
Particulars
Schedule 4: Fixed assets
10,838
151,004
–
–
–
–
–
24,684
–
7,141
14,651
–
40,639
–
63,889
–
381
10,774
6,828
–
–
–
–
229
307
–
2,585
–
–
–
825
–
Capital work-in-progress and advances
653,023
705,888
–
44,836
–
27,723
10,753
94,418
547
9,337
269,386
161
126,455
–
91,274
30,998
2,030,937
2,575,047
51,130
190,989
22,290
90,638
25,090
275,793
2,842
21,765
1,254,524
7,232
334,909
–
225,065
72,780
Depreciation, amortization and impairment
For the
Sale/ Translation
As at
year
deletions
loss March 31, 2008
1,313,536
9,826,739
8,513,203
6,332,400
6,484
–
47,981
28,677
285,091
140
17,455
380,447
–
357,133
232,674
155,202
669,519
1,346,108
8,941,214
7,595,106
5,904,846
51,320
–
75,704
39,430
247,661
767
22,926
382,378
161
294,638
232,674
131,043
211,558
Net book value
As at
As at
March 31, 2008 March 31, 2007
As at
March 31, 2008
As at
March 31, 2007
45,000
(45,000)
–
45,000
(45,000)
–
16,723
(4,128)
12,595
9,101
7,622
16,723
131
131
33,123
33,123
9,086
54,935
9,190
59,167
42,209
42,689
12,726
42,313
42,133
16,854
1,068,579
349,689
1,418,268
7,385,383
8,803,651
(349,689)
8,453,962
939,161
182,208
1,121,369
6,555,235
7,676,604
(182,208)
7,494,396
2,172
9,748
2,133
50,111
756,915
127,634
5,539,750
455,269
84,079
3,715,847
–
–
122,377
1,807
287,190
497,263
19,292
2,065
2,005,270
399,947
8,965,620
1,751,989
332,516
7,197,754
Schedule 5: Investments
a. Long term investments (at cost)
i.
Trade (unquoted)
EBZ Online Private Limited
242,240 (March 31, 2007 – 242,240) equity shares of Rs. 10/- each, fully paid-up
Less: Provision for diminution in value of investment
Login SA
33,000 (March 31, 2007 – 33,000) equity shares of EUR 2/- each, fully paid up
Add: Share of (loss)/profit of associate company
ii. Non trade (unquoted)
National Savings Certificate – VIII issue
iii. Non trade (quoted)
6.75% Tax Free US-64 Bonds
331,225 (March 31, 2007 – 331,225) Bonds of Rs. 100/- each, fully paid-up
b. Current Investment (cost or fair value, whichever is lower)
Non trade (quoted)
9% Dhanalakshmi Bank Bond Series VI
10 (March 31, 2007 – 10) Bonds of Rs. 1,000,000 each, fully paid up
Aggregate cost of quoted investments
Aggregate market value of quoted investments
Aggregate cost of unquoted investments
Schedule 6: Current assets, loan and advances
a. Sundry debtors (unsecured)
Debts outstanding for a period exceeding six months:
Considered good
Considered doubtful
Other debts - considered good
Less: Provision for doubtful debts
b. Cash and bank balances
Cash in hand
Cheques on hand
Balances with scheduled banks:
Current accounts in foreign currency
Other current accounts
Deposit accounts
Deposit amount of
Unutilized IPO funds
Preferential issue
Margin money deposit/Escrow account
Unclaimed dividend accounts
Balances with non-scheduled banks:
Current accounts in foreign currency
Deposit account in foreign currency
Annual Report 2007_2008_Final.indd 102
7/25/2008 9:58:56 AM
c. Other current assets
Interest accrued on:
Bank deposits
Bonds
Unbilled revenue
Gross investment in lease
Contract work in progress
d. Loans and advances (unsecured, considered good)
Advances recoverable in cash or in kind or for value to be received:
Premises and other deposits
Prepaid expenses
Advance tax, net of provision for taxes
MAT credit entitlement
Forward contract receivable
Other advances
As at
March 31, 2008
As at
March 31, 2007
71,298
746
888,741
32,215
144,091
1,137,091
71,013
741
1,038,228
42,118
42,492
1,194,592
3,170,427
319,874
1,018,471
362,605
86,563
283,706
5,241,646
2,517,095
363,051
929,639
–
305,630
209,601
4,325,016
2,354,961
2,068,997
370,945
32,162
1,807
10,163
762,742
5,601,777
1,872,843
2,079,018
315,596
19,832
2,065
16,234
604,930
4,910,518
Schedule 7: Current liabilities and provisions
a. Current liabilities
Accrued expenses
Deferred revenues
Accounts payable
Advances from customers
Investor Education and Protection Fund to be credited by unclaimed dividends*
Unearned finance income
Other current liabilities
*There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.
b. Provisions
Provision for gratuity
Provision for compensated absence
Provision for taxation, net of advance tax
176,506
332,976
17,491
526,973
129,487
291,665
–
421,152
Year ended
March 31, 2008
Year ended
March 31, 2007
13,871,996
9,846,694
83,673
23,802,363
11,193,090
9,364,575
51,717
20,609,382
9,659,411
1,720,956
1,081,675
578,248
13,040,290
7,993,454
1,718,746
767,239
586,611
11,066,050
Schedule 8: Revenue
Product licenses and related activities
IT solutions and consulting services
Share of sales of joint venture company
Schedule 9: Cost of revenue
Employee costs
Travel related expenses (net of recoveries)
Professional fees
Application software
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 103
103
7/25/2008 9:58:57 AM
Year ended
March 31, 2008
Year ended
March 31, 2007
1,450,595
268,476
345,630
87,862
63,646
84,667
174,775
221,868
2,697,519
1,228,129
365,899
329,042
150,368
43,212
57,424
87,611
133,810
2,395,495
1,407,137
362,348
599,981
202,240
195,599
97,456
527,486
3,392,247
1,156,421
250,610
414,154
196,609
133,066
100,422
472,054
2,723,336
442,897
367,409
3,141
3,639
12,079
6,071
579
464,767
–
5,274
585
376,907
174,072
(7,820)
8,686
174,938
(22,623)
(4,554)
9,924
(17,253)
Schedule 10: Selling and marketing expenses
Employee costs
Professional fees
Traveling expenses
Advertising expenses
Rent
Communication expenses
Provision for doubtful debts
Other expenses
Schedule 11: General and administrative expenses
Employee costs
Professional fees
Rent
Communication expenses
Power
Traveling expenses
Other expenses
Schedule 12: Interest income
Interest on:
Bank deposits
[includes tax deducted at source of Rs. 83,643 (March 31, 2007 – Rs. 74,589)]
Bonds
[includes tax deducted at source of Rs. 204 (March 31, 2007 – Rs. 212)]
Income tax refund
Lease assets
Loans to employees
Schedule 13: Other income (expenses)
Foreign exchange gain (loss), net
Loss on sale of fixed assets, net
Miscellaneous income
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
Add: Effect of dilutive stock options
Weighted average shares outstanding for diluted earnings per share
Annual Report 2007_2008_Final.indd 104
83,686,985
129,381
83,816,366
79,125,096
2,230,666
81,355,762
7/25/2008 9:58:57 AM
Schedule 15: Notes to accounts
1. Background and nature of operations
i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India with limited liability on September 27, 1989. The Company along with its
subsidiaries, joint venture and associates is principally engaged in the business of providing information technology solutions and business process
outsourcing services to the financial services industry worldwide. i-flex has a suite of banking products, which caters to the needs of corporate, retail,
investment banking, treasury operations and data warehousing.
i-flex is a subsidiary of Oracle with Oracle having 80.58% ownership interest in the Company as at March 31, 2008.
The Company at its Board Meeting held on April 4, 2008 passed a resolution to change its name to “Oracle Financial Services Limited”. This change will
be effective after all necessary regulatory filings and approvals are obtained by the Company.
The Company has following subsidiaries, joint venture (Refer Note 8-c) and associates (hereinafter collectively referred as the “Group”):
Companies
Direct holding
i-flex solutions b.v.
i-flex solutions pte ltd
i-flex America inc.
ISP Internet Mauritius Company
i-flex Processing Services Limited
Flexcel International Private Limited (Refer Note 8-c)
Login SA
Subsidiaries of i-flex America inc.
i-flex solutions inc.
SuperSolutions Corporation (merged with
i-flex solutions inc. effective January 2, 2008)
Castek Software Inc.
Mantas inc.
Subsidiaries of Mantas inc.
Mantas Limited
Sotas Inc.
Mantas Singapore Pte Ltd
Mantas (India) Pvt. Ltd.
Sotas Limited
Subsidiaries of Castek Software Inc.
Castek Hungarian Holdings Inc.
Castek Inc.
Castek Software Factory Ltd.
Castek RBG Inc.
Subsidiary of i-flex solutions b.v.
i-flex solutions s.a.
Subsidiary of i-flex solutions pte limited
i-flex Consulting (Asia Pacific) Pte Ltd.
Subsidiaries of ISP Internet Mauritius Company
i-flex Processing Services Inc.
Equinox Global Services Ltd.
2. Summary of significant accounting policies
a. Basis of presentation and consolidation
The consolidated financial statements includes the accounts of i-flex,
its subsidiaries, joint venture and associate company and are prepared
in accordance with accounting principles generally accepted in India
under the historical cost convention on the accrual basis of accounting,
in conformity with accounting principles generally accepted in India and
complying in all material respects the notified Accounting Standards
by Companies (Accounting Standards) Rules, 2006 and the relevant
provisions of the Companies Act, 1956 (‘the Act’). The accounting
policies applied by the Group are consistent with those used in the
previous years. The financial statements are presented in the general
format specified in Schedule VI to the Act. However, as these financial
statements are not statutory financial statements, full compliance with
Country of Incorporation
Voting Interest
The Netherlands
Singapore
United States of America
Republic of Mauritius
India
India
France
100%
100%
100%
100%
100%
100%
33%
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate
United States of America
100%
Subsidiary
United States of America
Canada
United States of America
100%
100%
100%
Subsidiary
Subsidiary
Subsidiary
United Kingdom
United States of America
Singapore
India
United Kingdom
100%
100%
100%
100%
100%
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Canada
United States of America
United States of America
United States of America
100%
100%
100%
100%
Subsidiary
Subsidiary
Subsidiary
Subsidiary
90%
Subsidiary
100%
Subsidiary
100%
99.83%
Subsidiary
Subsidiary
Greece
Singapore
United States of America
India
Relationship
the Act are not required and hence these financial statements do not
reflect all the disclosure requirements of the Act.
The consolidated financial statements are prepared in accordance
with the principles and procedures required for the preparation and
presentation of consolidated financial statements as laid down under
AS 21, ‘Consolidated Financials Statements’, AS 23, ‘Accounting for
Investments in Associates in Consolidated Financial Statements’ and AS
27, ‘Financial Reporting of Interest in Joint Venture’, issued by the Institute
of Chartered Accountants of India (ICAI). The financial statements of the
Company and its subsidiaries are consolidated on a line to line basis by
adding together like items of assets, liabilities, income and expenses.
Any excess of the cost to the parent company of its investment in a
subsidiary and the parent company’s portion of equity of subsidiary at
the date, at which investment in the subsidiary is made, is described
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 105
105
7/25/2008 9:58:57 AM
as goodwill and recognized separately as an asset in the consolidated
financial statements. All significant inter-company transactions and
balances between the entities included in the consolidated financial
statements have been eliminated. Investment in associate company is
accounted under equity method in consolidated financial statements.
The accounting policies have been consistently applied by the Group
and are consistent with those used in the previous years. The significant
accounting policies adopted by the Group, in respect of the consolidated
financial statements are set out below.
Goodwill arising on consolidation is evaluated for impairment annually.
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external factors.
An impairment loss is recognized wherever the carrying amount of an
asset exceeds its recoverable amount. The recoverable amount is the
greater of the assets net selling price and value in use. In assessing
value in use, the estimated future cash flows are discounted to their
present value at the weighted average cost of capital. After impairment,
depreciation is provided on a revised carrying amount of assets over its
remaining useful life.
b. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon management’s best
knowledge of current events and actions, actual results could differ from
these estimates.
c. Fixed assets, depreciation and amortization
Fixed assets including assets under finance lease arrangements are
stated at cost less accumulated depreciation. The Group capitalizes all
direct costs relating to the acquisition and installation of fixed assets.
Advances paid towards the acquisition of fixed assets outstanding at each
balance sheet date and the cost of fixed assets not ready to use before
such date are disclosed under ‘Capital work-in-progress and advances’.
Customer contracts and product Intellectual property rights (IPRs) are
capitalized based on a fair value. The Group records the difference
between considerations paid to acquire these contracts and the fair value
of assets and liabilities acquired as goodwill.
The Group purchases certain specific use application software, which is in
ready to use condition, for internal use. It is estimated that such software
has a relatively short useful life, usually less than one year. The Group,
therefore, charges to income the cost of acquiring such software.
The Company computes, depreciation and amortization using straight-line
method, at the rates specified in Schedule XIV to the Act or based on
the estimated useful life of assets, whichever is higher. All other entities
in the group including joint venture company and associate compute
depreciation and amortization using straight line method based on
estimated useful life of the assets. The estimated useful life considered
for depreciation of fixed assets is as follows:
Asset description
Tangible assets
Improvement of leasehold
premises
Buildings
Computer equipments
Electrical and office equipments
Furniture and fixtures
Leased assets
Intangible assets
Goodwill on acquisition
Customer contract
Product IPR
PeopleSoft ERP
Annual Report 2007_2008_Final.indd 106
Asset life (in years)
Lesser of estimated useful life
(7 years) or lease term
20
3
2–7
2–7
Lesser of estimated useful life
(3 – 5 years) or lease term
3–5
5
5
5
d. Investments
Investments that are readily realizable and intended to be held for
not more than a year are classified as current investments. All other
investments are classified as long-term investments. Trade investments
refer to the investments made with the aim of enhancing the Group’s
business interests in providing information technology solutions to the
financial services industry world wide. Long term investments are stated
at cost less provision for diminution on account of other than temporary
decline in the value of the investment.
Current investments are stated at lower of cost and fair value determined
on an individual investment basis.
e. Foreign currency transactions
Foreign currency transactions during the year are recorded at the
exchange rates prevailing on the date of the transaction. Foreign currency
denominated monetary items are translated into reporting currency
at the closing rates of exchange prevailing at the date of the balance
sheet. Non-monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using the exchange
rate at the date of the transaction. Exchange differences arising on
the settlement of monetary items or on reporting company’s monetary
items at rates different from those at which they were initially recorded
or reported in previous financial statement, are recognized as income
or as expenses in the year in which they arise except those arising from
investments in non-integral operations.
In respect of forward exchange contracts entered into by the Company
to hedge the foreign currency risk, the premium or discount arising at
the inception of forward exchange contracts is amortized as expense
or income over the life of the contract. Exchange differences on such
contracts are recognized in the statement of profit and loss in the
year in which the exchange rates change. Any profit or loss arising on
cancellation or renewal of forward exchange contract is recognized as
income or as expense for the year. The Company uses foreign currency
option contracts to hedge its exposure to movement in foreign exchange
rates. Any profit or loss arising on settlement or expiry of option contracts
is recognized as income or expense for the year.
Foreign operations of the group are classified under integral and non
integral foreign operations. The financial statements of integral foreign
operations are translated as if the transactions of foreign operations have
been those of the Company itself. In translating the financial statements of
non-integral foreign operations for incorporation in financial statements,
the assets and liabilities, both monetary and non-monetary, of the
non-integral foreign operations are translated at closing rate, income and
expense items of the non-integral foreign operations are translated at
the average exchange rate; all the resulting exchange differences are
accumulated in foreign currency translation reserve until the disposal of
the net investment. On the disposal of a non-integral foreign operation,
7/25/2008 9:58:57 AM
the cumulative amount of the exchange differences which have deferred
and which relate to that operation are recognized as income or a expenses
in the same period in which the gain or loss on disposal is recognized.
h. Employee benefits
f. Revenue recognition
Provident fund and superannuation fund are defined contribution schemes
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
in which they accrue.
Revenue is recognized as follows:
Product licenses and related revenue:
–
License fees are recognized, on delivery and subsequent milestone
schedule as per the terms of the contract with the end user.
–
Implementation/Enhancement services are recognized, as services
are provided when arrangements are on a time and material
basis. Revenue for fixed price contracts are recognized using the
proportionate completion method to the extent of achievement of
customer certified milestones.
–
Product maintenance revenue is recognized, over the period of the
maintenance contract.
IT solutions and consulting services:
Revenue from IT solutions and consulting services are recognized as
services and are provided when the arrangements are on a time and
material 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 the efforts incurred to date in relation to the total estimated
efforts to complete the contract. If the proportionate completion efforts
are higher than the related contractual milestone requiring customer
acceptance, revenue is recognized only to the extent customer
acceptance has been received.
The Group monitors estimates of total contract revenue and cost on a
routine basis throughout the delivery period. The cumulative impact of
any change in estimates of the contract revenue or costs is reflected
in the period in which the changes become known. In the event that
a loss is anticipated on a particular contract, provision is made for the
estimated loss.
Revenue in excess of billings is classified as unbilled revenue while billing
in excess of earnings is classified as deferred revenue. Contractually
recoverable expenses are deferred while other costs are expensed off in
the year in which it is incurred.
The Group’s employee benefits primarily cover provident fund,
superannuation, gratuity and compensated absences.
Gratuity liability is defined benefit obligation and recorded based on
actuarial valuation done on projected unit credit method made at the end
of the year. The gratuity liability and net periodic gratuity cost is actuarially
determined after considering discount rates, expected long term return
on plan assets and increases in compensation levels. All actuarial gains/
losses are immediately recorded to the profit and loss account and are
not deferred. The Company makes contributions to a fund administered
and managed by the Life Insurance Corporation of India (LIC) to fund the
gratuity liability. Under this scheme, the obligation to pay gratuity remains
with the Company, although LIC administers the scheme.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation. The actuarial valuation is done as per projected unit credit
method.
i. Leases
a. Where the Company is the lessee
Lease of assets under which substantially all the risks and benefits
incidental to ownership are transferred to the Company are classified
as finance leases. These assets are capitalized at the lower of the fair
value and present value of the minimum lease payments at the inception
of the lease term and disclosed as leased assets. Lease payments are
apportioned between the finance charges and reduction of the lease
liability based on the implicit rate of return. Finance charges are charged
directly against income. Lease management fees, legal charges and
other initial direct costs are capitalized
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases. Lease
payments under operating leases are recognized as an expense on a
straight-line basis over the lease term.
b. Where the Company is the lessor
Interest income
Assets given under a finance lease are recognized as a receivable at
an amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognized as revenue.
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable
j. Income-tax
Reimbursable expenses for projects are invoiced separately to customers
and although reflected as sundry debtors to the extent outstanding as at
year-end, are not included as revenue or expense.
g. Research and development expenses for software products
Research and development costs are expensed as incurred. Software
product development costs are expensed as incurred until technological
feasibility is established. Software product development costs incurred
subsequent to the achievement of technological feasibility are not
material and are expensed as incurred.
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax for the Company is measured
at the amount expected to be paid to the tax authorities in accordance
with the Indian Income Tax Act. Deferred income taxes are recognized for
the future tax consequences attributable to timing differences between
the financial statement determination of income and their recognition
for tax purposes. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in profit and loss account using the tax
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 107
107
7/25/2008 9:58:57 AM
rates and tax laws that have been enacted or substantively enacted by
the balance sheet date. Deferred tax assets and deferred tax liabilities
across various countries of operation are not set off against each other
as the company does not have a legal right to do so. Deferred tax assets
are recognized and carried forward only to the extent that there is a
reasonable certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. In situations
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
can be realized. Unrecognized deferred tax assets of earlier years are
re-assessed and recognized to the extent that it has become reasonably
certain or virtually certain that future taxable income will be available
against which deferred tax assets can be realized. Deferred tax asset is
recognized only on those timing differences, which reverses in post tax
free period, as Company enjoys exemption under Section 10A of Income
Tax Act, 1961.
Minimum Alternative Tax (MAT) credit is recognized as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which the MAT credit becomes eligible to be recognized as an asset
in accordance with the recommendations contained in guidance Note
issued by the ICAI, the said asset is created by way of a credit to the
profit and loss account and shown as MAT Credit Entitlement. The
Company reviews the same at each balance sheet date and writes down
the carrying amount of MAT Credit Entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
Income Tax during the specified period.
Tax expense relating to overseas operations is determined in accordance
with tax laws applicable in countries where such operations are domiciled.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance taxes paid and income tax
provisions arising in the same tax jurisdiction and enterprise.
k. Earnings per share
The earnings considered in ascertaining the Group’s earnings per
share comprise the net profit after tax. The number of shares used in
computing basic earnings per share is the weighted average number
of shares outstanding during the year. The number of shares used in
computing diluted earnings per share comprises the weighted average
number of shares considered for deriving basic earnings per share and
also the weighted average number of shares, if any which would have
been issued on the conversion of all dilutive potential equity shares. The
number of shares and potentially dilutive equity shares are adjusted for
the bonus shares and sub-division of shares.
can be made. Provisions are not discounted to its present value and
are determined based on management estimate required to settle the
obligation at the balance sheet date. These are reviewed at each balance
sheet date and adjusted to reflect the current management estimates.
n. Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and in hand and short terms investments with an original maturity of
three months or less.
3. Commitments and contingent liabilities
a. Capital commitments
Contracts remaining to be executed on capital account and not provided
for (net of advances) aggregates to Rs. 1,656,835 (includes capital
commitment through issuance of letter of intents of Rs. 260,505) as at
March 31, 2008 (March 31, 2007 – Rs. 1,955,320).
b. Contingent Liabilities
Financial bank guarantees given to banks aggregates to Rs. 8,701 as at
March 31, 2008 (March 31, 2007 – Rs. 39,384).
4. Leases
a. Where Company is lessee
Finance lease
The Group takes vehicles, furniture and fixture and computer equipments
under finance lease of upto five years. Future minimum lease payments
under finance lease as at March 31, 2008 and 2007 are as follows:
Not later than one year
Later than one year but not later
than five years
Total minimum payments
Not later than one year
Later than one year but not later
than five years
Total minimum payments
Principal
7,850
As at
March 31, 2008
Interest
Total
1,233
9,083
10,862
18,712
1,139
2,372
12,001
21,084
10,842
As at
March 31, 2007
1,687 12,529
15,537
26,379
1,601
3,288
17,138
29,667
Operating lease
l. Share-based compensation/payments
The Group uses the intrinsic value method of accounting for its employee
share based compensation plan and other share based arrangements.
Under this method compensation expense is recorded over the vesting
period of the option, if the fair value of the underlying stock exceeds the
exercised price at the measurement date, which typically is the grant
date.
The Group has taken certain office premises and residential premises for
employees under operating lease, which expire at various dates through
year 2018. Gross rental expenses for the year ended March 31, 2008
aggregated to Rs. 643,291 (March 31, 2007 – Rs. 425,610). The
minimum rental payments to be made in future in respect of these leases
are as follows:
March 31, 2008 March 31, 2007
m. Provision and contingencies
A provision is recognized when an enterprise has a present obligation as
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
Annual Report 2007_2008_Final.indd 108
Not later than one year
Later than one year but not
later than five years
Later than five years
620,512
337,542
1,348,630
759,346
2,728,488
633,324
17,631
988,497
7/25/2008 9:58:57 AM
b. Where Company is lessor
The Company has given IT equipments under finance lease for a period
of five years. Present value of minimum lease payments receivable under
this finance lease as at March 31, 2008 and 2007 are as follows:
March 31, 2008 March 31, 2007
Not later than one year
Later than one year but not
later than five years
9,894
11,786
21,680
forward foreign exchange contracts and option contracts to mitigate the
risks of change in foreign exchange rate on receivable and payables
denominated in certain foreign currencies. The Company considers
the risk of non-performance by the counterparty as immaterial. As at
March 31, 2008 and 2007 the Company has following outstanding
derivative instruments:
13,422
23,221
36,643
5. Derivatives
The Company enters into forward foreign exchange contracts and option
contracts where the counterparty is a bank. The Company purchases
(Amount in ‘000 foreign currency)
March 31, 2008 March 31, 2007
Forward contracts – Sell
In USD
In EUR
Option contracts – Sell
In USD
112,000
4,000
123,000
3,500
–
16,500
The Company has following foreign currency exposures which are not hedged as at March 31, 2008 and 2007.
Particulars
Receivables
Payables
March 31, 2008
Net
Receivables
Payables
March 31, 2007
Net
174,423
46,171
21,793
21,418
231,441
9,240
11
1,497
3,420
2,194
6
–
–
141,836
37,120
21,260
24,522
347,785
2,788
2,668
872
2,635
–
91
251
88
32,587
9,051
533
(3104)
(116,344)
6,452
(2,657)
625
785
2,194
(85)
(251)
(88)
103,130
35,614
14,601
14,699
446,547
13,658
–
–
836
1,217
1
–
–
128,980
34,695
14,586
9,446
293,569
5,435
–
–
–
–
–
212
–
(25,850)
919
15
5,253
152,978
8,223
–
–
836
1,217
1
(212)
–
In USD
In EUR
In GBP
In SGD
In JPY
In MYR
In ZAR
In AUD
In CAD
In AED
In CHF
In RUB
In SEK
6. Share-based compensation/payments
a. Employee Stock Purchase Scheme (‘ESPS’)
The Company has adopted the ESPS administered through a Trust
(“the Trust”) to provide equity based incentives to key employees of the
Company. The Trust purchases shares of the Company from market
using the proceeds of loans obtained from the Company. Such shares
are offered by the Trust to employees at an exercise price, which
approximates the fair value on the date of the grant. The employees
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
for the benefit of the employee. The employee will be entitled to receive
dividends, bonus, etc., that may be declared by the Company from time
to time for the entire portion of shares held by the Trust on behalf of the
employees.
On the acceptance of the offer, the selected employee shall undertake to
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
thereto. The repayment of the loan by the Trust to the Company would
be dependent on employee repaying the amount to the Trust. In case
the employee resigns from employment, the rights relating to shares,
which are eligible for exercise, may be purchased by payment of the
exercise price whereas, the balance shares shall be forfeited in favour of
the Trust. The Trustees have the right of recourse against the employee
for any amounts that may remain unpaid on the shares accepted by the
employee. The shares that an employee is eligible to exercise during the
initial five-year period merely go to determine the amount and scheduling
of the loan to be repaid on exercise by the employee. The Trust shall
repay the loan obtained from the Company on receipt of payments from
employees against shares exercised or otherwise.
The Securities and Exchange Board of India (‘SEBI’) has issued the
Employee Stock Option Scheme and Stock Purchase Guidelines, 1999
(‘SEBI guidelines’), which are applicable to stock purchase schemes for
employees of all listed Companies. In accordance with these guidelines,
the excess of market price of the underlying equity shares on the date of
grant of the stock options over the exercise price of the options is to be
recognized in the books of account and amortized over the vesting period.
However, no compensation cost has been recorded as the scheme terms
are fixed and the exercise price equals the market price of the underlying
stock on the grant date.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 109
109
7/25/2008 9:58:57 AM
A summary of the activity in the Company’s ESPS is as follows:
Year ended
Year ended
March 31, 2008 March 31, 2007
Number of shares
Opening balance of unallocated shares
Shares forfeited during the year
Closing balance of unallocated shares
142,116
16,847
158,963
120,888
21,228
142,116
Opening balance of allocated shares
Shares exercised during the year
Shares forfeited during the year
Closing balance of allocated shares
355,212
(117,264)
(16,847)
221,101
2,080,546
(1,704,106)
(21,228)
355,212
Shares eligible for exercise
Shares not eligible for exercise
Total allocated shares
96,251
124,850
221,101
164,712
190,500
355,212
b. Employee Stock Option Plan (‘ESOP’)
Pursuant to ESOP scheme approved by the shareholders of the Company held on August 14, 2001, the Board of Directors, on March 4, 2002 approved
the Employees Stock Option Scheme (‘the Scheme’) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries.
According to the Scheme, the Company has granted 4,548,920 options prior to the IPO and 559,000 options at various dates after IPO. As per the
scheme, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months and is
subject to continued employment of the employee or director with the company or its subsidiaries. Options have exercise period of 10 years.
A summary of the activity in the Company’s ESOP is as follows:
Year ended
March 31, 2008
Shares arising from
options
Year ended
March 31, 2008
Weighted average
exercise price
Year ended
March 31, 2007
Shares arising from
options
Year ended
March 31, 2007
Weighted average
exercise price
530,485
–
(63,332)
(35,900)
431,253
989
–
632
1,191
1,025
2,756,880
373,000
(2,552,795)
(46,600)
530,485
280
1,291
(270)
(826)
989
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of the year
The weighted average share price for the year over which stock options was exercised was Rs. 1,890.
The details of options unvested and options vested and exercisable as on
March 31, 2008 are as follows:
Range of
exercise
prices
Options unvested
Options vested
and exercisable
Annual Report 2007_2008_Final.indd 110
Shares Weighted Weighted
average
average
exercise remaining
price contractual
(Rs.) life (Years)
419-560 30,000
709-709
6,000
1,2911,291 246,800
265-265
419-560
1,2911,291
The details of options unvested and options vested and exercisable as on
March 31, 2007 were as follows:
Range of
exercise
prices
547
709
6.3
7.2
Options unvested
1,291
8.1
Options vested
and exercisable
51,000
45,003
265
480
3.9
5.3
52,450
431,253
1,291
1,025
8.1
7.2
Shares Weighted Weighted
average
average
exercise remaining
price contractual
(Rs.) life (Years)
419-560 62,000
709-709
8,000
1,291-1,291 347,500
265-265
419-560
77,982
35,003
530,485
520
709
1,291
6.9
8.2
9.1
265
505
989
4.9
6.8
8.1
7/25/2008 9:58:57 AM
Had compensation cost been determined in a manner consistent with the
fair value approach, the Company’s net income and earnings per share
as reported would have changed to the amounts indicated below:
The amounts recognized in the profit and loss account are as follows:
March 31, 2008 March 31, 2007
Particulars
March 31, 2008 March 31, 2007
Net income as reported
Add: Compensation expense
included in reported income
Less: Compensation expense
determined using fair value
of options
Proforma net income
Basic earnings per share
As reported
Proforma
Diluted earnings per share
As reported
Proforma
4,155,886
3,722,796
–
–
(54,918)
4,100,968
(115,596)
3,607,200
49.66
49.00
47.05
45.59
49.58
48.94
45.76
44.37
7. Employee benefits
Defined contribution plans
During the year ended March 31, 2008 and 2007, the Group contributed
following amounts to defined contributions plans:
March 31, 2008 March 31, 2007
Particulars
Provident fund
Superannuation fund
157,065
52,167
209,232
133,753
43,676
177,429
Defined benefit plan-gratuity
The amounts recognized in the balance sheet are as follows:
March 31, 2008 March 31, 2007
Particulars
Current service cost
Interest cost
Expected return on plan assets
Recognized net actuarial loss
Total, included in ‘employee
benefit expense’
Actual return on plan assets
30,512
9,802
(228)
21,943
22,147
5,928
(136)
31,644
62,029
(241)
59,583
146
Changes in present value of defined benefit obligation representing
reconciliation of opening and closing balances thereof are as follows:
March 31, 2008 March 31, 2007
Particulars
Defined benefit obligation at
beginning of the year
Current service cost
Interest cost
Benefits paid
Actuarial loss
Defined benefit obligation at end
of the year
134,184
30,512
9,802
(19,237)
21,473
84,581
22,147
5,928
(10,126)
31,654
176,734
134,184
Changes in the fair value of plan assets representing reconciliation of
opening and closing balances thereof are as follows:
March 31, 2008 March 31, 2007
Particulars
Fair value of plan assets at
beginning of the year
Expected return on plan assets
Actuarial (loss)/gain
Contributions by employer
Benefits paid
Fair value of plan assets at end
of the year
4,697
228
(470)
15,010
(19,237)
1,818
136
10
12,859
(10,126)
228
4,697
Present value of funded
obligations
Fair value of plan assets
Present value of unfunded
obligations
Unrecognized past service cost
Net liability
173,999
(228)
131,397
(4,697)
Plan assets are administered by LIC and 100% of the plan assets are
invested in lower risk assets, primarily in debt securities.
2,735
–
176,506
2,787
–
129,487
The assumptions used in accounting for the gratuity plan are set out as
below:
Amounts in balance sheet:
Liability
Asset
Net liability
176,506
–
176,506
129,487
–
129,487
March 31, 2008 March 31, 2007
Discount rate
Expected returns on plan assets
7.55% – 7.70%
7.50%
8.00%
7.50%
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 111
111
7/25/2008 9:58:57 AM
The estimates of future salary increase, considered in actuarial valuation,
take account of inflation, seniority, promotions and other relevant factors
such as supply and demand in the employment market.
The Group evaluates these assumptions annually based on its long-term
plans of growth and industry standards. The discount rates are based on
current market yields on government bonds consistent with the currency
and estimated term of the post employment benefits obligations. Plan
assets are administered by the LIC and invested in lower risk assets,
primarily debt securities. The Company contribution for the year ended
March 31, 2009 is expected to be Rs. 30,775. The expected benefit
payments as of March 31, 2008 are below
Year ending March 31
2009
2010
2011
2012
2013
2014–2017
Particulars
Bank balance
Fixed assets
Less: Minority interest
Net Assets
Goodwill
Purchase Consideration
12,958
1,755
(1,296)
13,417
656,635
670,052
b. Castek Software Inc. (“Castek”)
28,593
34,106
39,368
46,277
53,673
210,057
The Group has adopted AS 15 (Revised) from April 1, 2006 and thereby
has not given disclosure for the following for previous three annual
financial years:
a. the present value of the defined benefit obligation, the fair value of
the plan assets and the surplus or deficit in the plan; and
b. the experience adjustments arising on plan liabilities and plan
assets.
8. Acquisition of Companies
a. i-flex solutions s.a.
On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) acquired banking
business from Athens Technology Center SA (“ATC”) for Rs. 670,052
(including acquisition expenses amounting to Rs. 7,920). The acquisition
was structured by way of transfer of all contracts, employees and
fixed assets of banking business from ATC to a newly formed entity,
i-flex solutions s.a., Greece with 90% shares owned by i-flex b.v. Further
the company has right to acquire balance 10% shares (based on earn out
formulae) over 3 years in a tranche of 5%, 3% and 2% after completion
of 1, 2 and 3 years respectively from the date of acquisition. As the
consideration payable is dependent on future revenue and profits the
same is considered to be a contingent consideration and will be accounted
when the liability arises. The Group consolidated i-flex solutions s.a.
Annual Report 2007_2008_Final.indd 112
from July 2, 2007 and recorded goodwill on consolidated amounting
to Rs. 656,635 based on the assets and minority interest recorded as
below:
On November 16, 2007, Castek became wholly owned subsidiary of
i-flex America inc. with acquisition of the balance 23.23% shares of Castek
from minority shareholders for a total consideration of Rs. 327,394. As
part of the acquisition certain employees owning share of Castek where
paid additional consideration amounting to Rs. 90,809 based on the no.
of shares held by them. The Group has recorded additional consideration
payment as employee compensation.
The Group recorded balance consideration as goodwill of Rs. 238,015
considering Castek’s negative net worth and minority losses being
absorbed by the Group till the date of acquisition.
Out of above payment Rs. 107,334 is payable on April 7, 2008 and
included in Escrow account.
c. Flexcel International Private Limited (“Flexcel”)
On March 31 2008, Flexcel (joint venture with HDFC Bank Limited and
its group companies and Lord Krishna Bank) became wholly owned
subsidiary of i-flex solutions ltd with acquisition of balance 60% shares
of Flexcel from its co-venture parties. The Group paid total consideration
of Rs. 25,424 and recorded goodwill amounting to Rs. 1,629 net of
proportionate assets and liabilities acquired as below:
Particulars
Fixed assets
Current assets
Current liabilities
36,355
60,334
(72,894)
23,795
The Group adjusted above goodwill against gain on dilution recorded in
earlier year.
7/25/2008 9:58:57 AM
9. Segment information
Business segments are defined as components of an enterprise about
which separate financial information is available. This information is
reviewed and evaluated regularly by the management, in deciding how to
allocate resources and in assessing the performance.
The Group is organized geographically and by business segment. For
management purposes the Group is primarily organized on a worldwide
basis into three business segments:
a. Product licenses and related activities (‘Products’) and
b. IT solutions and consulting services (‘Services’)
c. Knowledge Processing Services (‘KPO-Services’)
The business segments are the basis on which the Group reports its
primary operational information to management. Product licenses and
related activities segment deals with banking software products like
the FLEXCUBE suite of products, Reveleus, MicroBanker, Daybreak and
anti-money laundering and compliance solutions which cater to needs of
Particulars
Revenue
External revenue
Inter-segment revenue
Total revenue
Cost of revenue
Gross profit
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization
Inter segment expense
Income (loss) from operations
corporate, retail and investment banking as well as treasury operations
and data warehousing requirements. The related activities include
enhancements, implementation and maintenance activities. Product
segment further comprises of casualty insurance carriers which include
insurance product and process configuration, policy administration,
customer management, billing and claims management.
IT solutions and consulting services comprise of bespoke software
development, provision of computer software solutions and related
consulting services arising from such activities. This segment is further
sub-divided in the following sub-segments i.e. Business intelligence,
Customer relationship management, Brokerage, e-commerce, Internet
services and IT and Business consulting.
KPO-Services comprises of knowledge process outsourcing services to
the mortgage banking industry.
The activities of the joint venture are disclosed as a separate segment.
(Refer note 8-c of Schedule 15)
Products
Services
KPOServices
Joint
ventures
Corporate
Year ended
March 31, 2008
Eliminations
Total
13,871,996
7,811
13,879,807
(5,986,685)
7,893,122
(2,230,936)
(979,916)
(328,086)
(11,320)
4,342,864
9,371,230
7,832
9,379,062
(6,606,863)
2,772,199
(337,630)
(583,987)
(244,600)
(93,873)
1,512,109
475,464
93,873
569,337
(394,487)
174,850
(125,432)
(117,378)
(27,100)
(7,832)
(102,892)
83,673
11,320
94,993
(52,255)
42,738
(3,521)
(8,361)
(7,531)
(7,811)
15,514
–
–
–
–
–
–
(1,702,605)
(98,571)
–
(1,801,176)
23,802,363
(120,836)
–
(120,836) 23,802,363
– (13,040,290)
(120,836) 10,762,073
–
(2,697,519)
(3,392,247)
–
(705,888)
120,836
–
–
3,966,419
Interest income
Other income, net
Income before provision for taxes
Provision for taxes
Net income for the year before share of
loss of associate company and minority
interest
Share of loss of associate company
Net income for the year before share of
minority interest
Share of Minority interest
Net income for the year
Other information
Capital expenditure by segment
Segment assets
Segment liabilities
Shareholders’ funds
464,767
174,938
4,606,124
(441,685)
4,164,439
(4,128)
4,160,311
(4,425)
4,155,886
1,090,753
13,795,127
3,422,631
–
825,999
6,222,022
1,049,677
–
7,997
321,872
98,230
–
–
–
–
–
185,571
13,571,252
1,569,162
27,770,573
–
–
–
–
2,110,320
33,910,273
6,139,700
27,770,573
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 113
113
7/25/2008 9:58:58 AM
Particulars
Revenue
External revenue
Inter-segment revenue
Total revenue
Cost of revenue
Gross profit
Selling and marketing expenses
General and administrative expenses
Depreciation and amortization
Inter segment expense
Income (loss) from operations
Products
Services
KPOServices
Joint
ventures
Corporate
Year ended
March 31, 2007
Eliminations
Total
11,193,090
17,953
11,211,043
(4,350,515)
6,860,528
(1,961,393)
(820,356)
(307,078)
–
3,771,701
8,919,800
–
8,919,800
(6,391,068)
2,528,732
(320,373)
(458,868)
(241,485)
–
1,508,006
444,775
–
444,775
(298,432)
146,343
(112,588)
(125,056)
(24,624)
–
(115,925)
51,717
–
–
–
–
–
–
(1,319,687)
(74,151)
–
(1,393,838)
– 20,609,382
(17,953)
–
(17,953) 20,609,382
– (11,066,050)
(17,953) 9,543,332
– (2,395,495)
– (2,723,336)
–
(653,023)
17,953
–
–
3,771,478
51,717
(26,035)
25,682
(1,141)
631
(5,685)
(17,953)
1,534
Interest income
Other expenses, net
Income before provision for taxes
Provision for taxes
Net income for the year before share of
profit of associate company
Share of profit of associate company
Net income
Other information
Capital expenditure by segment
Segment assets
Segment liabilities
Shareholders’ funds
376,907
(17,253)
4,131,132
(415,958)
3,715,174
7,622
3,722,796
5,686,716
12,999,204
3,118,195
–
191,662
5,732,294
930,957
–
13,100
336,175
115,417
–
7,857
36,378
8,129
–
85,784
10,249,571
1,160,717
24,020,207
–
–
–
–
5,985,119
29,353,622
5,333,415
24,020,207
Segment revenue and expense
Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services and
knowledge process outsourcing services. The expenses which are not directly attributable to a business segment are shown as corporate expenses.
Segment assets and liabilities
Segment assets include all operating assets used by a segment and consist principally of debtors, deposits for premises and fixed assets. Segment
liabilities primarily includes deferred revenues, finance lease obligation, advance from customer, accrued employee cost and other current liabilities.
While most such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly
by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are
shown as part of corporate assets and liabilities.
Geographical segments
The following table shows the distribution of the group’s consolidated sales by geographical market:
Regions
United States of America
Europe
Asia Pacific
Middle East, India and Africa
Latin America and Caribbean
Annual Report 2007_2008_Final.indd 114
Amount
Year Ended
March 31, 2008
%
Amount
Year Ended
March 31, 2007
%
7,840,933
8,110,823
4,513,093
3,172,847
164,667
23,802,363
33%
34%
19%
13%
1%
100%
8,145,729
5,699,472
3,639,511
2,984,815
139,855
20,609,382
39%
28%
18%
14%
1%
100%
7/25/2008 9:58:58 AM
10. Related party transactions
Names of Related Parties and description of relationship:
Relationship
Principal shareholder and it’s affiliates (“Oracle”)
Names of related parties
Oracle Global (Mauritius) Limited
Oracle (India) Private Limited
Oracle USA, inc.
Oracle Corporation (Thailand) Co Ltd
Joint Venture
Flexcel International Private Limited (Refer note 8-c of Schedule 15)
Key Managerial Personnel (‘KMP’)
Rajesh Hukku – Chairman and Non Executive Director
R Ravisankar – Vice Chairman
Deepak Ghaisas – Vice Chairman and Company Secretary
N R Kothandaraman (N R K Raman) – Managing Director and Chief
Executive Officer
Makarand Padalkar – Chief Financial Officer
Avadhut (Vinay) Ketkar – Chief Accounting Officer (w.e.f. April 1, 2007)
Dilip Kulkarni – Chief Compliance Officer (w.e.f. April 1, 2007)
Joseph John – Executive Vice President, Universal Banking Products
V Shankar – Executive Vice President and Global Head, PrimeSourcing &
Insurance Solutions
Olivier Trancart – Executive Vice President, Global Sales and CEO
i-flex solutions b.v.
Atul Gupta – Sr. Vice President, Process and Quality Management Group
Vijay Sharma – Sr. Vice President, i-flex Consulting
S Hariharan – Sr. Vice President, Infrastructure Services Group
Vivek Govilkar – Sr. Vice President, Human Resources and Training
V Senthil Kumar – Chief Marketing Officer, i-flex solutions b. v.
V Srinivasan – Vice President, Corporate Development and Chief of Staff
(w.e.f. April 1, 2007)
Manmath Kulkarni – Sr. Vice President and Chief Architect for Retail and
Internet Banking (w.e.f. April 1, 2007)
S Sundararajan – Sr. Vice President, Customer Fulfillment
(w.e.f. April 1, 2007)
Kishore Kapoor – CEO i-flex solutions pte ltd
Cafo Boga – COO – i-flex solutions inc.
Sajal Mukherjee – Sr. Vice President Americas – PrimeSourcing
Mahesh Rao – CEO – i-flex Processing Services Limited
(w.e.f. April 1, 2007)
Yung Wu – CEO Castek Software Inc.
S. Ramakrishnan – CEO – Reveleus
Anand Phanse – Sr. Vice President, North America Citigroup Relationship
(w.e.f. April 1, 2007)
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 115
115
7/25/2008 9:58:58 AM
Transactions and balances outstanding with these parties are described below:
Transactions
Year ended
Year ended
March 31, 2008 March 31, 2007
Oracle
Revenue
Purchase of Software
Professional fees
Other expenses
Deferred Revenue
Dividend paid
Flexcel International Private Limited
Revenue
Professional Fees
Other Expenses
Deferred Revenue
Key managerial personnel
Rent
Rental deposit
Remuneration (Note)
Lease Rent
Dividend paid
Advance rent
Amount receivable (payable)
Year ended
Year ended
March 31, 2008 March 31, 2007
369,899
265,772
–
2,387
–
–
252,984
238,561
1,197
6,095
–
200,742
290,863
–
–
(6,674)
(91,790)
–
223,032
–
–
(2,917)
(160,688)
–
11,716
19,555
24,309
–
27,051
18,305
10,225
–
–
–
–
–
27,763
–
7,181
(3,662)
90
(225)
250,317
1,942
–
(13)
128
125
235,336
3,462
8,441
–
–
100
–
–
–
43
–
325
–
–
–
56
Note: Includes salary, bonus and perquisites
11. Aggregate expenses
Salaries and bonus
Staff welfare expenses
Contribution to provident and other funds
Travel related expenses (net of recoveries)
Professional fees
Application software
Rent
Communication expenses
Advertising expenses
Power
Rates and taxes
Repairs and maintenance:
Leasehold premises
Computer equipments
Others
Insurance
Finance charge on leased assets
Bad debts
Advances written off
Provision for doubtful debts, net
Other expenses
Annual Report 2007_2008_Final.indd 116
Year ended
March 31, 2008
Year ended
March 31, 2007
11,876,188
347,610
293,345
2,164,042
1,712,499
633,941
663,627
286,907
169,517
205,137
45,579
9,877,743
266,086
234,175
2,148,210
1,383,748
641,250
457,366
254,033
220,812
138,783
26,342
34,677
39,132
48,298
54,504
4,164
15,465
–
174,775
360,649
19,130,056
15,420
40,518
28,365
60,156
5,284
–
8,351
87,611
290,628
16,184,881
7/25/2008 9:58:58 AM
12. During the current year, the Company has utilized the securities premium account for payment of stamp duty of Rs. 7,301 on allotment of equity
shares. This includes Rs. 6,863 related to previous years. General and administrative expenses includes an amount of Rs. 2,584 towards penalty
charges for making delayed payment of stamp duty.
13. Fringe benefit tax is recorded net of recovery amount of Rs. 17,888 on account of stock option exercised during the year ended March 31, 2008.
During the current year, the Company has taken an additional fringe benefit tax charge of Rs. 24,496 pertaining to previous years.
14. The Group’s goodwill carrying value of Rs. 6,383,530 as on March 31, 2008 relates to acquired subsidiaries Mantas Inc, i-flex solutions s.a.,
SuperSolutions Corporation, Castek Software Inc., ISP Mauritius and i-flex Consulting (Asia Pacific) Pte Ltd., respectively. The Group has evaluated
goodwill carrying value for impairment and has obtained valuation of each of the above subsidiaries from an independent external valuation expert
as on March 31, 2008. The Group believes that with integration of different products acquired from above subsidiaries with i-flex suites of products
and synergies achieved due to sharing of operations, these entities would achieve significant increase in future revenues and cost savings. Based on
the future projection, the Group has estimated future cash flows from each entity and concluded that fair value of the business of above subsidiaries
is higher than current book value. Management believes that it would be able to achieve the future projection and hence considers that there is no
provision for impairment of goodwill required except Rs. 57,958 which was provided in respect of SuperSolutions Corporation in the year ended
March 31, 2006.
15. Prior year comparatives
Prior year amounts have been reclassified, where necessary to conform with current year presentation.
As per our report of even date
For and on behalf of the Board of Directors
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Tarjani Vakil
Director
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 117
117
7/25/2008 9:58:58 AM
Consolidated statement of cash flow
for the year ended March 31
(All amounts in thousands of Indian Rupees)
2008
2007
4,606,124
4,131,132
705,888
–
7,820
–
104
(464,767)
(18,499)
4,164
15,465
174,775
5,031,074
653,023
33,451
4,554
8,351
810
(376,907)
10,102
5,284
–
87,611
4,557,411
Changes in assets and liabilities, net of effect of acquisition
Increase in sundry debtors and unbilled revenue
Increase in loans and advances
Increase in current liabilities and provisions
Cash from operating activities
Payment of domestic and foreign taxes
Net cash provided by operating activities
(735,610)
132,760
545,326
4,973,550
(961,498)
4,012,052
(2,564,646)
(422,597)
1,159,238
2,729,405
(1,083,505)
1,645,9001
Cash flows from investing activities
Additions to fixed assets including capital work in progress
Net Investment in lease
Acquisition of company, net of cash acquired
Deposits for Office Premises
Proceeds from sale of fixed assets
Bank fixed deposits having maturity of more than 90 days matured
Bank fixed deposits having maturity of more than 90 days booked
Proceeds from sale of investments
Interest received
Net cash used in investing activities
(1,167,043)
9,903
(921,955)
(653,332)
2,683
6,870,484
(8,671,617)
–
458,407
(4,072,470)
(1,242,105)
(20,610)
(5,520,840)
(1,258,128)
13,157
7,679,391
(6,741,189)
20,000
352,312
(6,718,012)
Cash flows from financing activities
Issue of shares against ESOP scheme and options to IBM
Share application money from GE
Share issue expenses
Issue of shares to Oracle Global Mauritius Limited
Advance against equity shares to be issued under ESOP Scheme
Repayment of loan by Employee Stock Purchase Scheme ('ESPS’) Trust
Payment of dividend and tax thereon
Payment of lease obligations
Net cash provided by (used in) financing activities
40,024
–
(7,301)
–
265
–
–
(19,340)
13,648
678,514
361,238
–
5,814,999
–
4,925
(436,350)
(16,302)
6,407,024
Effect of exchange difference on translation
(89,324)
(68,430)
(136,094)
3,351,773
3,215,679
1,266,483
2,085,290
3,351,773
Cash flows from operating activities
Income before provision for taxes
Adjustments to reconcile income before provision for taxes
to cash used in operating activities:
Depreciation and amortization
Deferred compensation expense
Loss on sale of fixed assets, net
Advances written off
Marked to market of current investment
Interest income
Effect of exchange difference on cash and bank balances
Finance charge on leased assets
Bad debts
Provision for doubtful debts, net
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Note 1)
Annual Report 2007_2008_Final.indd 118
7/25/2008 9:58:58 AM
Consolidated statement of cash flow (continued)
for the year ended March 31
(All amounts in thousands of Indian Rupees)
2008
2007
Note 1: Component of cash and cash equivalent
Cash and bank balances [Refer Schedule 6 (b)]
8,965,620
7,197,754
Less:
Bank deposits having maturity of more than 90 days
Margin money deposit/Escrow account
Unclaimed dividend accounts
Cash and cash equivalents at end of the year
(5,625,757)
(122,377)
(1,807)
3,215,679
(3,824,624)
(19,292)
(2,065)
3,351,773
As per our report of even date
For and on behalf of the Board of Directors
For S. R. Batliboi & Associates
Chartered Accountants
N R K Raman
Y M Kale
Managing Director
Director
& Chief Executive Officer
per Sunil Bhumralkar
Partner
Membership No.: 35141
Deepak Ghaisas
Director & Company
Secretary
Mumbai, India
May 5, 2008
Mumbai, India
May 5, 2008
Tarjani Vakil
Director
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 119
119
7/25/2008 9:58:58 AM
AGM Notice
Annual Report 2007_2008_Final.indd 120
7/25/2008 9:58:58 AM
Annual Report 2007_2008_Final.indd 121
7/25/2008 9:58:59 AM
Annual Report 2007_2008_Final.indd 122
7/25/2008 9:59:00 AM
Notice to members
NOTICE is hereby given that the Nineteenth Annual General Meeting of
i-flex solutions ltd will be held at The Leela Kempinski, Sahar, Andheri
(East), Mumbai 400 059 on Friday, August 22, 2008 at 3.00 p.m. to
transact the following business:
Ordinary Business:
1. To receive, consider and adopt the Audited Balance Sheet as on
March 31, 2008, the Profit and Loss Account for the year ended on
that date and the Reports of the Board of Directors and the Auditors
thereon.
2. To appoint a Director in place of Mr. Y M Kale, who retires by
rotation and, being eligible, offers himself for re-appointment.
3. To appoint a Director in place of Ms. Tarjani Vakil, who retires by
rotation and, being eligible, offers herself for re-appointment.
4. To appoint a Director in place of Mr. Charles Phillips, who retires by
rotation and, being eligible, offers himself for re-appointment.
Notes:
a) The information as required pursuant to Clause 49 of the listing
agreement along with an Explanatory Statement as required under
Section 173 (2) of the Companies Act, 1956 in respect of item nos.
6 and 7 mentioned in the above Notice are annexed hereto.
b) The Register of Members and the Share Transfer Books of the
Company will remain closed from Monday, August 18, 2008 to
Friday, August 22, 2008, both days inclusive, for the purpose of
Annual General Meeting.
c) A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO
APPOINT A PROXY OR PROXIES TO ATTEND AND VOTE INSTEAD
OF HIMSELF ON A POLL ONLY AND THAT A PROXY NEED NOT BE A
MEMBER.
d) The instrument appointing proxy should be deposited at the
Registered Office of the Company not less than 48 hours before the
commencement of the meeting.
5. To appoint Auditors of the Company and to fix their remuneration.
e) The members/proxies are requested to bring duly completed
Attendance Slips sent herewith for attending the meeting.
Special Business:
f)
6. To consider and, if thought fit, to pass, with or without modification(s),
as an Ordinary Resolution the following:
The documents referred to in the Notice and the Explanatory
Statement annexed hereto are available for inspection by the
members of the Company at the Registered Office of the Company
between 2.00 p.m. to 4.00 p.m. on any working day of the
Company.
“RESOLVED THAT pursuant to the provisions of Section 228 and
other applicable provisions, if any, of the Companies Act, 1956, the
Board of Directors of the Company be and is hereby authorized to
appoint Branch Auditors to conduct the audit of branch office(s) of
the Company whether existing or which may be opened hereafter,
in India or abroad, in consultation with the Company’s Statutory
Auditors, any person(s) qualified to act as Branch Auditors within the
meaning of Section 228 of the Companies Act, 1956 and to fix their
remuneration.”
g) The members who hold shares in physical form are requested to
notify promptly any change in their addresses to the Company’s
Registrar and Transfer Agents, Intime Spectrum Registry Ltd.
having its office at C-13, Pannalal Silk Mills Compound, L.B.S Marg,
Bhandup (West), Mumbai 400 078. The members who hold shares
in demat mode are requested to notify promptly any change in their
addresses to their Depository Participants.
7. To consider and, if thought fit, to pass, with or without modification(s),
as an Ordinary Resolution the following:
h) The members seeking any information with regard to accounts are
requested to write to the Company at its registered office at an early
date to enable the Management to keep the information ready.
“RESOLVED THAT Mr. Sergio Giacoletto Roggio, who was appointed
as an Additional Director of the Company and who holds office until
the date of the Annual General Meeting pursuant to Section 260 of
the Companies Act, 1956 and Article 109 of Articles of Association
of the Company and in respect of whom the Company has received
a notice from a member under Section 257 of the Companies Act,
1956, proposing his candidature, be and is hereby appointed as a
Director of the Company, liable to retire by rotation.”
By Order of the Board
Deepak Ghaisas
Vice Chairman & Company Secretary
i)
Pursuant to Sections 205A, 205C and other applicable provisions,
if any, of the Companies Act, 1956, any money transferred to the
unpaid dividend account which remains unpaid or unclaimed for a
period of 7 years from the date of such transfer is now required
to be transferred to the ‘Investor Education and Protection Fund’
set up by the Central Government. Accordingly, the amount of
unclaimed dividend for the financial year ended March 31, 2001
will be transferred to the ‘Investor Education and Protection Fund’
in due course. Once the amount is so transferred, no claim shall
lie against the aforesaid fund or the Company in respect of such
dividend amount thereafter. The members are requested to send to
the Company their claims, if any, for the dividend for financial year
2000-2001 onwards immediately.
Registered Office:
Unit 10-11, SDF 1, SEEPZ,
Andheri (East),
Mumbai 400 096
July 21, 2008
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 123
123
7/25/2008 9:59:00 AM
ADDITIONAL INFORMATION PURSUANT TO CLAUSE 49 OF THE
LISTING AGREEMENT WITH REGARD TO DIRECTORS SEEKING
APPOINTMENT/RE-APPOINTMENT AT THE NINETEENTH ANNUAL
GENERAL MEETING:
Mr. Y M Kale
Mr. Y M Kale born on November 4, 1947 was the President of the Institute
of Chartered Accountants of India in the year 1995-96 and is also a
Fellow member of the Institute of Chartered Accountants of England
and Wales. He has contributed to various governmental and regulatory
bodies such as committees of Securities and Exchange Board of India
including Committee of Offer Documents, Committee of Takeovers and
Committee on Accounting for Corporates and participated as a member
of the Group for Introduction of Concurrent Audit of Banks, organized
by the Reserve Bank of India and was also member of the National
Drugs and Pharmaceutical Development Council of Central Government.
Mr. Kale was also on the Board of the International Accounting Standards
Committee from 1995 to 1998 as India representative. He is also a
Director on the Board of various Public companies.
Mr. Kale is a member of the Board of Directors of the Company since
June 25, 2001. He is the Chairman of the Audit Committee and a
member of the Compensation Committee of the Company.
Mr. Kale holds 2,000 equity shares of face value of Rs. 5/- each of the
Company as on date.
Mr. Kale, a Non-Executive Independent Director of the Company, is
entitled to receive commission pursuant to provisions of Section 198 and
309 of the Companies Act, 1956.
Mr. Kale holds directorship and committee membership* in the following
Companies:
List of other
Directorships held
Ashok Leyland Ltd.
Ennore Foundries Ltd.
Hinduja Life Insurance
Company Limited
Hinduja General
Insurance Company
Limited
Membership in
Committees of other
companies
Chairmanship in
Committees of
other companies
–
–
–
–
–
–
–
–
Ms. Vakil has been a member consultant for carrying a study of the
feasibility for establishment of an Export Credit Guarantee facility for GCC
countries (1992), for establishment of Export-Import Bank of Malaysia
(1994) and other developing countries of Asia and Africa. She has
also been a consultant to International Trade Centre, Geneva (1996),
Mckinsey Inc. for setting up an Export Import Institution in Egypt and
MIGA (1999). Currently, she is a Director on the Boards of a few major
corporates in India.
Ms. Vakil has won several awards including Mahila Shiromani -1992,
CEO of the Year-1995, Woman of the Year-1996, etc. She was placed as
the highest ranking woman official in Banking in Asia and named among
the 50 most powerful women in the world in the 1996 Survey conducted
by KPMG Peat Marwick, USA.
Ms. Vakil is a member of the Board of Directors of the Company since
May 26, 2004. She is a member of the Audit Committee and Chairperson
of Shareholders’ Grievances Committee, Transfer Committee and ESOP
Allotment Committee.
Ms. Vakil holds 3,700 equity shares of face value of Rs. 5/- each of the
Company as on date.
Ms. Vakil as a Non-Executive Independent Director of the Company is
entitled to receive commission pursuant to provisions of Section 198 and
309 of the Companies Act, 1956.
Ms. Vakil holds directorships and committee memberships* in the
following Companies:
List of other Directorships
held
Membership in Chairpersonship
Committees of in Committees of
other companies other companies
Asian Paints Limited
Chairperson of
– Audit
Committee
Chairperson
of
– Audit Committee
Chairperson of
– Audit
Committee
Member of Audit
–
Committee
–
–
Mahindra Intertrade Limited
Aditya Birla Nuvo Limited
DSP Merrill Lynch Trustee Co.
Pvt. Ltd.
Alkyl Amines Chemical
Limited
Idea Cellular Limited
Member of Audit
Committee
–
*only the Audit and Shareholders’ Grievances Committees are considered.
*only the Audit and Shareholders’ Grievances Committees are considered.
Mr. Charles Phillips
Ms. Tarjani Vakil
Mr. Charles Phillips, born on June 10, 1959, holds a BS in Computer
Science from the United States Air Force Academy, an MBA from Hampton
University and a JD from New York Law School and is a member of the
bar in Washington D.C. and Georgia.
Ms. Tarjani Vakil, born on October 30, 1936, has done her Masters in
Arts from University of Mumbai. In October 1996, she retired as the
Chairperson and Managing Director of Export – Import Bank of India
(“EXIM Bank”). Since inception in 1982 till 1996, EXIM Bank grew at an
average rate of 20% p.a. Ms. Vakil contributed to the development of
EXIM Bank as a unique credit agency offering finance, information and
advisory services at all stages of the business cycle.
Ms. Vakil was actively involved in carrying extensive interaction with
multilateral agencies for initiation of an informal annual dialogue among
heads of Export Credit Agencies in Asia and Australia in 1996 and for
setting up Global Procurement Consultants Ltd. (a public-private sector
partnership) offering international procurement services.
Annual Report 2007_2008_Final.indd 124
Mr. Charles Phillips is President of Oracle Corporation and a member
of the Board of Directors. He is responsible for global field operations
including consulting, marketing, sales, alliances and channels and
customer programs, as well as corporate strategy. Prior to joining
Oracle, Mr. Phillips was a Managing Director with Morgan Stanley in its
technology group. Prior to his career on Wall Street, Mr. Phillips was a
Captain in the United States Marine Corps.
Mr. Phillips is on the boards of Viacom Corporation, Jazz at Lincoln Center
in New York City and New York Law School. Mr. Phillips also serves as a
director of Viacom Inc. and Morgan Stanley.
7/25/2008 9:59:00 AM
Mr. Phillips is a member of the Board of Directors of the Company
since November 24, 2005. He is also a member of the Compensation
Committee.
Mr. Charles Phillips is not holding any equity share of the Company as
on date.
Mr. Charles Phillips holds directorships and committee memberships* in
the following Companies:
List of other
Directorships held
Membership in
Committees of other
companies
Chairmanship in
Committees of
other companies
–
–
Member of Audit
Committee
–
–
–
Oracle Corporation
Viacom Inc.
Morgan Stanley
*only the Audit and Shareholders’ Grievances Committees are considered.
Mr. Sergio Giacoletto Roggio
Mr. Sergio Giacoletto Roggio, born on December 28, 1949 holds a
Master’s Degree in Computer Science from the University of Turin, Italy.
Mr. Sergio Giacoletto Roggio is the Executive Vice President of Oracle
Corporation, Europe, Middle East and Africa and serves as a member
of Oracle’s Executive Management Committee. Based in Geneva,
Mr. Sergio Giacoletto Roggio oversees a network of 106 offices in 54
countries, with the responsibility for managing all of Oracle’s operations,
growth and profitability throughout the Europe, Middle East and Africa
region.
Mr. Sergio Giacoletto Roggio was appointed Executive Vice President in
June 2000 and in this role has established Oracle as the leading enterprise
software provider for businesses and governments throughout the region.
Additionally, Mr. Sergio Giacoletto Roggio pioneered a campaign to assist
the ten new European Union member states and subsequent candidate
countries gain technological advantage, through the establishment of a
dedicated Oracle regional management group focused on the European
Union enlargement region.
Prior to his appointment as Executive Vice President,
Mr. Sergio Giacoletto Roggio was Senior Vice President, Business
Solutions for Oracle Europe, Middle East and Africa with responsibility
for the Consulting and Applications businesses, as well as Strategic
Partners.
Mr. Sergio Giacoletto Roggio joined Oracle in 1997 from AT&T, where he
was President, Value Added Services. He previously spent 20 years with
Digital Equipment Corporation in various roles, including the responsibility
for the Europe, Middle East and Africa Services organization.
Mr. Sergio Giacoletto Roggio has served on multiple company boards
and IT industry associations and he is a member of the World Council
for Sustainable Business Development; is a member of the South African
Presidential International Advisory Council on Information Society and
Development; and has co-authored the book Information in the Enterprise:
It’s More than Technology (1992).
Mr. Sergio Giacoletto Roggio does not hold any equity share of the
Company as on date.
Mr. Sergio Giacoletto Roggio holds directorship and committee
membership* in the following Companies:
List of other Directorships
held
CSR plc UK
Membership in Chairmanship in
Committees of Committees of
other companies other companies
–
–
*only the Audit and Shareholders’ Grievances Committees are considered.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 125
125
7/25/2008 9:59:00 AM
Annexure to notice
Explanatory Statement as required by Section 173 (2)
of the Companies Act, 1956
Company, he holds office up to the date of this Annual General Meeting
and is eligible for appointment.
The following Explanatory Statement sets out all the material facts
relating to the special business mentioned in the accompanying Notice
dated July 21, 2008.
Item no. 6
The Company has received a notice from a member, along with the
requisite deposit under Section 257 of the Companies Act, 1956,
proposing his candidature for appointment as Director of the Company.
The details regarding the above proposed appointee as the Director and
his detailed resume are given in the annexure attached to this Notice.
The Company has branch offices in India and abroad and may also open
new branches in future. It may be necessary to appoint branch auditors
for conducting the audit of the books of accounts of the Company at such
branches.
Mr. Sergio Giacoletto Roggio’s immense knowledge and experience will
add great value to the Company. Except Mr. Sergio Giacoletto Roggio,
none of the Directors of the Company is concerned or interested in the
resolution at item no. 7 of the Notice to the members.
The Board of Directors of the Company (“the Board”) seeks approval of
the members for authorising the Board to appoint Branch Auditors and
to fix their remuneration in consultation with the Statutory Auditors of the
Company.
Your Directors recommend the resolution at item no. 7 of the Notice.
By Order of the Board
No Director is in any way concerned or interested in the resolution at item
no. 6 of the Notice to the members.
Your Directors recommend the resolution at item no. 6 of the Notice.
Item no. 7
Mr. Sergio Giacoletto Roggio was appointed as an Additional Director of
the Company at the Board Meeting held on October 26, 2007. Pursuant
to and in accordance with the provisions of the Section 260 of the
Companies Act, 1956 and Article 109 of the Articles of Association of the
Deepak Ghaisas
Vice Chairman & Company Secretary
Registered Office:
Unit 10-11, SDF 1, SEEPZ,
Andheri (East),
Mumbai 400 096
July 21, 2008
All Company or product names are trademarks or registered trademarks of their respective owners
Annual Report 2007_2008_Final.indd 126
7/25/2008 9:59:00 AM
ATTENDANCE SLIP
i-flex solutions ltd
Registered Office: 10-11, SDF 1, SEEPZ,
Andheri (East), Mumbai 400 096
I hereby record my presence at the Nineteenth Annual General Meeting of the Company to be held on Friday, August 22, 2008 at
3.00 p.m. at The Leela Kempinski, Sahar, Andheri (East), Mumbai 400 059.
Full name of the Shareholder .........................................................................................................................................................
(in block letters)
Ledger Folio No. ................................................ DP.ID. ................................................ Client ID. ..............................................
Number of Shares held ..................................................................................................................................................................
Signature of Shareholder or proxy attending .....................................................................................................................................
Full name of Proxy ........................................................................................................................................................................
(in block letters)
Please give full name of the 1st Joint Holder.
Mr./Mrs./Ms. ..............................................................................................................................................................................
Note: Please fill in the attendance slip and hand it over at the ENTRANCE OF THE HALL
PROXY FORM
i-flex solutions ltd
Registered Office: 10-11, SDF 1, SEEPZ,
Andheri (East), Mumbai 400 096
I/We ...................................................................................................... of ........................................................................in the
district of ...................................................................................................... being a member/members of the above
named Company, hereby appoint ..............................................................................................................................
of ................................................. in district of .........................................................................................
or failing him/her ................................................................. of ...................................................................................... in the
district of ........................................................................... as my/our proxy to attend and vote for me/us and on my/our behalf at
the Nineteenth Annual General Meeting of the Company to be held on Friday, August 22, 2008 at 3.00 p.m. at The Leela Kempinski,
Sahar, Andheri (East), Mumbai 400 059 and at any adjournment thereof.
Signed this ................................................. day of ................................................. 2008.
Ledger Folio No. ............................................... DP.ID. ................................................ Client ID. .............................................
No. of Shares held ............................................................
Note:
1. The proxy need not be a member.
Please affix
Re. 1/revenue
stamp and
sign across
2. The proxy form duly signed across Re.1/- revenue stamp should reach the
Registered Office of the Company not less than 48 hours before the time fixed for the meeting.
i-flex annual report 2007-08
Annual Report 2007_2008_Final.indd 127
127
7/25/2008 9:59:00 AM
Annual Report 2007_2008_Final.indd 128
7/25/2008 9:59:00 AM
Annual Report 2007_2008_Final.indd 129
7/25/2008 9:59:00 AM
w w w. i f l e x s o l u t i o n s . c o m
Annual Report 2007_2008.indd 130
7/25/2008 11:47:26 AM