TCS e-Serve Ltd

TCS E-SERVE LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS This part of the Directors' Report contains the views and analysis of the management regarding the Company and industry. These are in context of the environment and in relation to parameters such as the Indian economy, the global economy and forecast regarding the industry, based on reports from industry associations such as Nasscom. It is not the Company's policy to issue any forward looking statement I guidance and the Company and its management shall not be liable for any loss or damage that may arise as a result of any action taken based on the information contained herein. 1. INDUSTRY STRUCTURE, DEVELOPMENTS & OUTLOOK Global scenario According to Nasscom Strategic Review 2012, the world economy in 2011 remained sluggish entering a very difficult phase characterised by significant downside risks and fragility. The global economy is now expected to expand 2.5 per cent and 3.1 per cent in 2012 and 2013 respectively, versus the 3.6 per cent projected in June for both years. For the moment, the magnitude of the effects of these developments on global growth is uncertain. The major uncertainty concerns have been the interaction of the policy-driven slowing of growth in the middle income countries and the financial turmoil-driven slow down in Europe. In the face of the volatility in economic environment and currency, 2011 recorded steady growth for the technology and related services sector, with worldwide spending exceeding USD 1.7 trillion, a growth of 5.4 per cent over 2010. Software products, IT and BPO services continued to lead, accounting for over USD 1 trillion - 63 per cent of the total spend. IT- hardware spend, at USD 645 billion, accounted for the balance 38 per cent of the worldwide technology spend in 2011. 2011 saw renewed demand for overall global sourcing, which grew by 12 per cent over 2010, nearly twice the global technology spend growth. Growth in BPO was around 10 per cent, slightly lower than the IT offshoring rate of 13 per cent, despite the uncertainty in the Western nation economies, particularly the US and Europe, which disrupted and in some cases halted deal flow in the first half of the year. Global IT offshoring accounts for over 61 per cent of the total global sourcing market while BPO off-shoring accounts for 39 per cent. Region-wise spending Concerns of an economic recession in US and the debt crisis in Europe have had a slight effect on IT spending. However, EMEA and the Asia Pacific regions together grew at over 6 per cent in 2011, a growth of over 1.5 times than that of mature geographies. Vertical spending In 2011, while the BFSI and manufacturing segment remained the two largest verticals in terms of total share in spending, these sectors recorded a below average growth of 1.5 per cent and 2 per cent respectively. Going forward, technology services spending in the BFSI segment will be driven by the key imperatives of integration, optimisation and regulation. Emerging verticals like healthcare, communication and media, government were the key growth drivers for the IT segment during 2011. These verticals together garnered a growth of over 6 per cent in 2011 compared to a growth of around 2.4 per cent recorded by the traditional segments during the same period. BPO spends Worldwide spending in BPO services touched USD 153 billion in 2011, reflecting an increase of 4.3 per cent over the previous year. The economic crisis continued to impact BPO spend as customers focused on getting the highest ROI out of every BPO engagement through extensive due diligence and intense negotiations of contracts. BPO vendors have played a key role in helping their customers improve processes, increase revenues and improve profitability thus enabling them to position themselves as the business transformation partner for their customers. Traditionally, BPO service providers took over customers' operations and ran it for them, which is now evolving to include business process transformation for the customers and operations delivered through innovative business models. These services include platform BPO, business analytics and others. Global outlook While the growth in IT-BPO spend is expected to be gradual over the next two to three years, global sourcing spend is seen to outpace this growth. IT off shoring market is set to grow at a CAGR of about 8 per cent over 2011 to 2013, while BPO off shoring is expected to grow at a little over 7 per cent during the same period. India outlook: As per Nasscom Strategic Review 2012, direct employment within the IT-BPO sector is expected to grow by over 9 per cent to reach -2.8 million, with over 230,000 jobs being added in FY2012. IT services exports (including ER&D and software products) continues to be the largest employer within the industry with nearly 47 per cent share of total direct employment, BPO exports generate about 32 per cent of the total industry employment, and the remaining 22 per cent is accounted for by the domestic IT-BPO sector. The IT-BPO sector has become one of the key sectors for the Indian economy because of its economic impact. The sector is responsible for enabling employment to an additional 8.9 million people in various associated sectors -catering, security, transportation, housekeeping, etc. - many of whom belong to rural areas / small towns of India. Indian IT-BPO exports are expected to cross USD 69 billion during FY2012. This indicates a year-on-year growth of 16 per cent. This year has been marked by the return of discretionary spends. Even though the economic situation in the US and Europe continues to be a concern and customers are still being cautious, there has not been any panicked reactions and therefore IT budgets have remained strong. US and APAC led growth among geographies and BFSI and emerging verticals (Retail, Utilities, Healthcare and MPE) drove vertical growth. 2. COMPANY OVERVIEW Your Company, along with its subsidiary companies - TCS e-Serve International Limited and TCS e-Serve America Inc., is primarily engaged in the business of providing Business Process Services (BPO) for its customers in Banking, Financial Services and Insurance domain. The Company's operations include delivering core business processing services, analytics & insights (KPO) and support services for both data and voice processes. Your Company is an integral part of the Tata Consultancy Services' (TCS) strategy to build on its 'Full Services Offerings' that offer global customers an integrated portfolio of services ranging from IT services to BPO services. The Company provides its services from various processing facilities, backed by a robust and scalable infrastructure network tailored to meet clients' needs. A detailed Business Continuity Plan has also been put in place to ensure the services are provided to the customers without any disruptions. OPPORTUNITIES AND RISKS: Opportunities: Nasscom Strategic Review 2012 has estimated that the Indian IT-BPO exports are likely to cross USD 69 billion during the financial year 2011-12, indicating a year-on-year growth of 16 per cent. Your Company, backed by TCS' full service strategy, strong domain expertise, operational efficiency, inherent 'India based' cost advantage, experience in handling global clients and a dedicated workforce is well-placed to expand and diversify its service offerings as new opportunities come up. The Company is actively focused on initiatives to grow the opportunities pipeline with existing customers and win new customers. Key demand side strategies are: 1. Cross-sell BPO services to existing customers 2. Grow within the current BPO accounts 3. Acquire new customers Key supply side strategies are: 1. Transformation 2. Talent Acquisition and Talent Development 3. One Global Service Standard 4. Growth in Tier II BPO cities in India. Risks and Risk Mitigation: * Delivery concentration: Your Company primarily operates from multiple delivery centers located within India, thereby reducing the delivery concentration. * Macro-Economic Risks: Your Company's performance is sensitive to the global economic environment. For the foreseeable future, the Company expects to continue to derive most of its revenue from services provided to the BSFI clients. Given this concentration, the Company is exposed to current global economic conditions in the financial services industry. Factors such as economic environment, rise in protectionist sentiment, competition from other players / countries and regulatory changes may affect the demand for these services by current and potential clients. The Company is increasing the breadth and depth of service offerings and penetrating new customer accounts and markets to mitigate this risk. * Ability to hire and retain talent: Company's performance is largely dependent on the talent and efforts of its employees. To compete effectively in this expanding business, to manage its business effectively and to expand into new businesses depends on the Company's ability to attract talent and to retain and motivate its existing employees. The Company proposes to continue to invest in its people with robust and feature rich human resource practices that would help manage the problem of attrition. * Data protection: Security of information outsourced by Clients is one of the most challenging and crucial tasks facing BPO industry today. The risks associated with Information Security are real and the ramifications of security breaches are serious in terms of financial, reputation, franchise and regulatory impact especially for an organization like the Company which handles critical and sensitive customer data in the Banking, Financial Services and Insurance industry. Your Company has defined and implemented an Information Security Management System (ISMS) framework across the organization and is certified on ISO 27001: 2005 standards. The Company is also certified on Payment Card Industry Data Security Standards (PCIDSS) for some of the Company's processes to ensure secure processing of card related information. Your Company has also obtained a CMMI Level 5 certification and has also been successfully audited under the Statements of Standards for Attestation Engagements (SSAE) 16 and International Standard for Attestation Engagements(ISAE) 3402. Further, in order to comply with the Company's obligations under various laws including international laws, the Company complies with annual reporting / licensing requirements and also implements operating policies and procedures to protect, among other matters, the privacy and security of clients' information. * Technology, network and telecommunications risk: The Company is dependent upon infrastructure like electricity, telecommunication and internet facilities among others for providing its services. Any disruption of these could seriously impact the business of the Company. To mitigate this risk, the Company has detailed contingency plans in place to ensure smooth and uninterrupted conduct of its business. Your company is also BS 25999 certified. * Risks from operations: Risks from operations basically means risk of non- performance / loss resulting from inadequate or failed internal processes, people or systems, or from external events. The chance of human error or system failure is endemic to every business. In case of processing, these risks are higher due to the large value of the underlying transactions being processed and risk of resultant claims from clients for non- performance. Besides, there is a risk of person acting with malafide intent. Your Company has a robust Risk Management Framework, which is benchmarked to the Committee of Sponsoring Organizations of the Treadway Commission (COSO), Capability Maturity Model Integration (CMMI) Level 5, Customer Operations Performance Centre (COPC) (local and international), regulatory bodies such as Office of the Comptroller of the Currency (OCC), Financial Services Authority (FSA), Reserve Bank of India (RBI), etc., in place to identify, mitigate, monitor and report these risks. Further, risks can come from external events, which may result in expenses for maintaining continuity of business. These are mitigated through vulnerability assessments of these external risks to your Company's assets which ensure timely mitigation of these risks. In order to mitigate the risks of financial liability, contingency provisions have been created. The adequacy of this is reviewed from time to time based on management perception of the quantitative liability that may arise. * Financial risk: Financial risk represents risk on account of foreign exchange fluctuations, leverage and liquidity risks. Currently, the Company has foreign exchange surplus due to its export activities. It has procedures in place to actively manage its foreign exchange positions. The Company currently has minimal leverage and liquidity risk and has followed the strategy of funding all its expansions and infrastructure related expenditure through internal accruals, as well as, earning returns through investment of surplus funds. Your Company actively manages risks through a variety of governance / control mechanisms. * Legal & statutory liabilities risk: The Company has certain matters under dispute / litigation in regard to taxation and labour laws. The Company believes it is in a strong position in these matters and has taken adequate legal steps to safeguard its position. * Government policies: While the policies of the Government at state and national level have generally been supportive of the IT & ITES industry, any amendments which may have an adverse impact, will affect your Company's performance. These opportunities and risks have been identified based on the external environment viewed in conjunction with the Company's plan and are in no way exhaustive or in order or importance. The Company has put in place a risk management framework across the various units in the Company and a report thereon is placed before the Board of Directors at regular intervals. SEGMENT-WISE/PRODUCT-WISE PERFORMANCE: The Company has identified industry segments as its primary segment and geographic segments as its secondary segment (refer segment information in Note 27 of the Unconsolidated Financial Statements and Note 28 of the Consolidated Financial Statements). INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company has an internal control and internal audit system that is adequate and commensurate with the size and nature of its business. Adequate controls are established to ensure that assets of the Company are safeguarded and transactions executed in accordance with appropriate authorization and are properly recorded in the books of accounts. Internal Control guidelines have been formulated and circulated within the Company and are implemented in all transactions. The roles and responsibilities of people at various levels are well defined to ensure appropriate information flow and to facilitate effective monitoring. An authority-responsibility matrix has been separately articulated for the employees, management team, the Managing Director & CEO and the Board. The Company has appointed Ernst & Young Private Limited to oversee and carry out internal audit of the Company's activities. Their audit is based on a plan, which is reviewed in consultation with the statutory auditors and the Audit Committee. In line with international practice, the planning and conduct of internal audit is oriented towards the review of controls in the management of risks and opportunities in the Company's activities. The internal audit process is designed to review the adequacy of internal control checks in the system and covers all significant areas of the Company's operations. The Company monitors and reviews progress on the internal audit reports at the meetings of its Audit Committee and keeps the Board of Directors regularly informed about major observations. FINANCIAL PERFORMANCE - (UNCONSOLIDATED) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO UNCONSOLIDATED OPERATIONAL PERFORMANCE: Overview: The financial statements are prepared under the historical cost convention, on an accrual basis, and are in accordance with the requirements of the Companies Act, 1956 and comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the said Act. During the financial year ended March 31, 2012, the revised Schedule VI notified under the Companies Act, 1956, has become applicable to the Company for the preparation and presentation of its financial statements. Accordingly, the Company has adopted the new reporting and disclosure requirement mandated in the revised Schedule VI with one of the changes being on classification of assets and liabilities as long term and short term. Assets and liabilities with expected date of realization / settlement exceeding twelve months from the balance sheet date have been classified as long term assets / liabilities while those expected to be realized / settled within twelve months from balance sheet date have been classified as short term assets / liabilities. The financial statements have been prepared using 'Rupees in crores' as a denomination for reporting purpose. All Income and Expenditure, having a material bearing on the financial statements, are recognized on accrual basis. The management accepts responsibility for the integrity and the objectivity of these financial statements, as well as for various estimates and judgments used therein. Balance Sheet 1. SHARE CAPITAL March 31, 2012 March 31, 2011 Number (Rs. in Number (Rs. in (crores) crores) (crores) crores) Equity (paid-up) 1.24 12.40 1.24 12.40 The Company has at present, two classes of shares, viz., preference shares aggregating to Rs. 5 crores and Equity Shares aggregating to Rs. 20 crores. This constitutes the Authorised Share Capital of Rs. 25 crores. Of this, the issued and paid-up share capital is Rs. 12.40 crores, comprising 1.24 crores Equity Shares of Rs. 10 each, fully paid-up. Of the total share capital as at March 31, 2012, Tata Consultancy Services Limited, representing, 96.26% of the total, holds 11,936,313 shares of the issued and paid-up share capital. 2. RESERVES AND SURPLUS The Company's Reserves & Surplus as on March 31, 2012, stood at Rs.2,101.04 crores as against Rs. 1,760.11 crores in the previous year, an increase of Rs. 340.93 crores. This increase is on account of profits for the year after taxes and appropriations, as partially offset by movement in the hedging reserve. 3. LIABILITIES a) Long term liabilities Long term liabilities increased from Rs. 18.99 crores to Rs. 32.79 crores primarily on account of increase in the non current portion of the derivative liability as well as rent escalation liability. b) Trade payables Trade payables (Sundry creditors) represent the amount payable to vendors for the supply of services and goods. c) Other current liabilities Other current liabilities increased to Rs. 99.97 crores as at March 31, 2012, as against 14.76 crores as on March 31, 2011 owing primarily to increase in current portion of derivative liability. Unclaimed dividends of Rs. 1.03 crores (previous year: Rs. 0.83 crores) indicates dividend paid, but not encashed by shareholders, and are represented by earmarked balances in bank accounts separately maintained for an equivalent amount. 4. PROVISIONS a) Long term provisions Long term provisions are for gratuity liability and are based on independent actuarial valuations as at end of the financial year. b) Short term provisions Short term provision includes provision on employee benefits Rs. 21.65 crores (previous year: Rs. 25.33 crores), provision for current income taxes (net) Rs. 11.69 crores (previous year: Rs. 5.52 crores) and provision towards proposed dividend including dividend tax Rs. 43.23 crores (previous year: Rs. 43.23 crores). 5. FIXED ASSETS (Rs. in crores) As at As at Growth March 31,2012 March 31, 2011 Owned assets Improvement on Leasehold Premises 42.74 42.74 0% Office equipments 62.85 61.39 2.38% Computer equipments - Hardware 166.52 173.43 -3.98% Computer equipments - Software 36.39 33.76 7.79% Furniture and fixtures 34.37 34.51 -0.41% Electrical fittings 27.29 27.11 0.66% Vehicles 5.23 7.35 -28.84% Total Gross Block 375.39 380.29 -1.29% Less: Accumulated depreciation 312.92 295.35 5.95% Net Block 62.47 84.94 -26.45% Add: Capital work in progress 0.28 1.66 -83.13% Net Fixed Assets 62.75 86.60 -27.54% Depreciation charge for the year 41.06 47.72 -13.96% Depreciation as a% of revenue 2.60% 3.31% -21.45% Accumulated depreciation as a % of gross block 83.36% 77.66% 7.34% The addition to the gross block of assets (exclusive of assets disposed / retired) during the year was Rs. 20.82 crores, including Rs. 15.41 crores in respect of computer equipments. 6. DEFERRED TAX Deferred tax benefit of Rs. 1.87 crores has been made for the year ended March 31, 2012. The deferred tax asset balance as at March 31, 2012 is made of: (Rs. in crores) Particulars As at As at March 31, 2012 March 31,2011 Provision for doubtful receivables and advances 0.77 0.87 Depreciation on fixed assets 18.41 17.36 Provision for employee benefits 7.02 9.00 Rent escalation 7.72 5.98 Provision for contingencies 0.13 4.65 Interest u/s 143(1) not credited to statement of profit and loss 3.73 - Unrealized loss on derivatives recognized in statement of profit and loss 1.23 (0.72) Grand Total 39.01 37.14 7. LOANS AND ADVANCES a) Long term loans and advances Long term loans and advances increased from Rs. 348.63 crores to Rs.398.95 crores, primarily due to increase in tax receivables and inter- corporate deposits. b) Short term loans and advances Short term loans and advances include loans and advances to related parties, inter-corporate deposits, prepaid expenses and other various advances, and has decreased marginally to Rs. 294.14 crores as against Rs. 308.98 crores as at the end of the previous financial year. 8. TRADE RECEIVABLES Trade receivables (Sundry debtors) inclusive of unbilled revenues amounted to Rs. 291.16 crores (18.44% of revenue) as at March 31, 2012 as compared to Rs. 253.97 crores (17.62% of revenue) as at March 31, 2011. The Day Sales Outstanding (DSO) was 67 days, including unbilled revenues as at March 31, 2012 as against 64 days in the previous year. The increase in DSO is attributable to one-time delays in billing in the fourth quarter pending final confirmation on pricing negotiations as well as some delays in collection of dues. Controls have been reinforced to bring in greater efficiency. 9. CASH AND BANK BALANCES (Rs. in crores) Particulars March 31,2012 March 31.2011 Bank balances - current accounts 0.50 2.57 Bank balances - cash credit accounts - 0.77 Remittances in transit 8.71 - Total cash and bank balances 9.21 3.34 Fixed deposits with banks 762.90 475.55 Earmarked balances with banks 1.03 0.83 Total cash and cash equivalents 773.14 479.72 The bank balances include unclaimed dividend of Rs.1.03 crores in the unclaimed dividend account as at March 31, 2012 (previous year: Rs.0.83 crores). RESULTS OF OPERATIONS 10. TOTAL REVENUE Revenue from operations for the year ended March 31, 2012 is Rs. 1,578.44 crores as compared to Rs. 1,440.78 crores for the previous year ended March 31, 2011, growth of 9.55% over previous year. Share of export revenue to revenue from operations for the year ended March 31, 2012 has increased by 1%. 11. EXPENDITURE Staff and operating expenses increased by 14.87% to Rs. 922.93 crores for the year ended March 31, 2012 as compared to Rs. 803.43 crores for the year ended March 31, 2011. The detailed break-up of the expenditure is given below: Particulars Year ended Year ended March 31, 2012 March 31, 2011 Amount % to Amount % to (Rs. in Revenue (Rs. in Revenue crores) crores) Employee benefits expense 697.91 44.2% 588.22 40.8% Services rendered by business associates and others 15.91 1.0% 25.83 1.8% Rent 67.43 4.3% 50.58 3.5% Communication expenses 19.02 1.2% 18.69 1.3% Legal and professional fees 3.07 0.2% 1.84 0.1% Travelling and conveyance 31.23 2.0% 34.15 2.4% Others & miscellaneous expenses 88.36 5.6% 84.12 5.8% Total staff and operating expenses 922.93 58.5% 803.43 55.8% The increase in staff and operating expenses by about 2.7% of revenues is primarily attributable to the impact of salary / promotion actions, higher investments in head counts and mix as partially offset by certain savings initiatives. The Company provided Rs. 41.06 crores towards depreciation for the year ended March 31, 2012 as compared to Rs. 47.72 crores for the year ended March 31, 2011. It represents 2.60% and 3.31 % of the revenues for the respective years. 12. PROVISION FOR TAXATION Provision for income tax is made on an annual basis on the tax liability as computed, after taking credit for allowances and exemptions. Apart from the current tax, deferred tax asset or liability is recognized for timing differences between the profit as per financial statements and the profit offered for the income taxes. Deferred tax assets are recognized only if there is reasonable certainty that sufficient future taxable income will be available, against which they can be realized. The net deferred tax credited to the statement of profit and loss during the year was Rs. 1.87 crores (previous year: deferred tax charge of Rs. 10.90 crores). The Company has provided a net sum of Rs. 247.20 crores towards tax expense during the year compared to Rs. 187.42 crores during the previous year. The break-up of tax expense is as follows: (Rs. in crores) Particulars Year ended Year ended March 31, 2012 March 31, 2011 Current tax 249.07 176.52 Deferred tax (1.87) 10.90 Grand Total 247.20 187.42 The net tax charge increased to Rs. 247.20 crores from Rs. 187.42 crores during the financial year 2011-12 mainly due to impact of lower tax write- back during the current year. 13. NET PROFIT The net profit of the Company after tax was marginally lower at Rs. 522.04 crores as compared to Rs. 550.04 crores during the previous year primarily due to a higher tax charge owing to lower tax write-back. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT: As at March 31, 2012, the Company employed 14,785 employees. The Company considers human resources as its most critical assets and has various practices in place including incentive awards, career planning, training programs, etc. to ensure a healthy work environment. There were no material developments in human resources.

TCS E-SERVE LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL PERFORMANCE - (STANDALONE) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO STANDALONE OPERATIONAL PERFORMANCE: Overview: The financial statements are prepared under the historical cost convention, on an accrual basis, and are in accordance with the requirements of the Companies Act, 1956 and comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the said Act. All Income and Expenditure, having a material bearing on the Financial Statements, are recognized on accrual basis. The management accepts responsibility for the integrity and the objectivity of these financial statements, as well as for various estimates and judgments used therein. Balance Sheet 1. SHARE CAPITAL March 31,2011 March 31,2010 Equity (paid up) Number (lakh) Rs. (lakh) Number (lakh) Rs. (lakh) 124 1240 124 1240 The Company has at present, two class of shares, viz., preference shares aggregating to Rs. 500 lakh and equity shares aggregating to Rs. 2,000 lakh. This constitutes the Authorised Share Capital of Rs. 2,500 lakh. Of this, the Issued, Subscribed and Paid-up Share Capital is Rs. 1,240 lakh, comprising 124 lakh equity shares of Rs. 10 each, fully paid-up (and nil preference shares). Of the total share capital as at March 31, 2011, Tata Consultancy Services Limited, representing, 96.26% of the total, holds 11,936,313 shares of the Issued, Subscribed and Paid-up Share Capital. 2. RESERVES AND SURPLUS The Company's Reserves & Surplus as on March 31, 2011, stood at Rs. 176,011 lakh as against Rs. 127,136 lakh in the previous year, an increase of Rs. 48,875 lakh. This increase is on account of profits for the year after the taxes, appropriations and net of Hedging Reserve Account. 3. FIXED ASSETS (Rs. in lakh) As at As at March 31, March 31, 2011 2010 Gross Block Owned Assets Improvement on Leasehold Premises 5,904 4,053 Office equipments 7,765 7,042 Computer equipments - Hardware 20,357 16,173 Computer equipments - Software 3,757 2,699 Furniture and fixtures 4,095 3,848 Electrical fittings 4,487 3,414 Vehicles 735 968 Total Gross Block 47,100 38,197 Less: Accumulated depreciation 32,788 28,754 Net Block 14,312 9,443 Add: Advances for capital 606 5,889 Net Fixed Assets 14,918 15,332 Depreciation charge for the year/period 6,629 5,515 Depreciation as a % of operating revenue 3.89% 3.63% Accumulated depreciation as a % of gross block 69.61% 75.28% The Company has added Rs. 7,562 lakh to its gross block of assets, including an investment of Rs. 2,864 lakh in computer equipments towards expansion of the existing infrastructure base. 4. DEFERRED TAX Deferred tax charge of Rs. 1,090 lakh has been made for the year ended March 31, 2011. The deferred tax asset balance as at March 31, 2011 is made of: (Rs. in lakh) Particulars As at As at March 31, March 31, 2011 2010 Provision for doubtful receivables and advances 87 115 Depreciation 1,737 1,681 Employee benefits 899 1,044 Rent escalation 598 1,818 Provision for contingencies 465 146 Unrealized profit (72) - Grand Total 3,714 4,804 5. SUNDRY DEBTORS Sundry debtors inclusive of unbilled revenue amount to Rs. 25,391 lakh as at March 31, 2011 as compared to Rs. 30,150 lakh as at March 31, 2010. Debtors inclusive of unbilled revenue amounts for 17.60% of total revenue from transaction processing activities as at March 31, 2010 as compared to 22.07% for the previous year. 6. CASH AND BANK BALANCES (Rs. in lakh) Particulars March 31, March 31, 2011 2010 Bank balances -current accounts 340 247 Bank balances - cash credit accounts 77 - Total cash and bank balances 417 247 Fixed deposits with banks 64,960 37,514 Total cash and cash equivalents 65,377 37,761 Cash and cash equivalents as a % of total assets 33.7% 24.0% Cash and cash equivalents as a % of revenues 45.3% 27.6% The bank balance include unclaimed dividend of Rs. 83 lakh in the unclaimed dividend account as at March 31, 2011 ( Rs.71 lakh as at March 31, 2010). 7. LOANS AND ADVANCES Loans and advances comprise of secured and unsecured advances, security deposits, minimum alternate tax credit entitlement and advance payment of income-tax etc. Unsecured advances are advances recoverable in cash and kind or for the value to be received are primarily towards amount paid in advance for value and services to be received in. future. Advance payment of income tax and other taxes account for 77% of total loans and advance (previous year 71%). Further, Loans to subsidiaries account for 2% of total loans and advance (previous year 11%). 8. CURRENT LIABILITIES Sundry creditors represent the amount payable to vendors for the supply of services and goods. These figures stood at Rs. 7,259 lakh as at March 31, 2011 against Rs. 18,547 lakh as at March 31, 2010. Unclaimed dividends of Rs.83 lakh ( Rs. 71 lakh as at March 31, 2010) indicates dividend paid, but not encashed by shareholders, and are represented by bank balances in bank accounts separately maintained for an equivalent amount. 9. PROVISIONS Provision includes provision on employee benefits Rs. 2,784 lakh (Rs.3,870 lakh as at March 31, 2010), Provision for estimated gross tax liabilities excluding liability for deferred tax at Rs. 552 lakh (Rs.2,014 lakh as at March 31, 2010) and Provision towards Proposed Dividend including Dividend Tax Rs. 4,323 lakh 2,176 lakh as at March 31, 2010). Provision for Gratuity is made based on independent actuarial valuations as at end of the financial years. RESULTS OF OPERATIONS 1. INCOME Total operating revenue for the year ended March 31, 2011 is Rs. 144,242 lakh as compared to Rs. 136,581 lakh for the previous year ended March 31, 2010, growth of 5.61 % over previous year. Share of export revenue to Total Revenue for the year ended March 31, 2011 has increased by 1%. 2. EXPENDITURE Total staff and operating expenses decreased marginally by 0.2% to Rs.80,506 lakh for the year ended March 31, 2011 as compared to Rs. 80,642 lakh for the year ended March 31, 2010. The detailed break-up of the expenditure is given below: Year ended Year ended March 31, 2011 March 31, 2010 Particulars Amount % to Amount % to (Rs. lakh) Revenue (Rs. lakh) Revenue Payment to employees 58,987 40.9% 55,231 40.4% Services rendered by business associates and others 2,583 1.8% 3,382 2.5% Advertisement 7 0.0% 15 0.0% Rent 5,058 3.5% 6,249 4.6% Communication expenses 1,869 1.3% 2,303 1.7% Legal and professional fees 184 0.1% 709 0.5% Travelling and conveyance 3,552 2.5% 2,882 2.1% Other & Miscellaneous expenses 8,266 5.7% 9,871 7.2% Total Staff and Operating Expenses 80,506 80,642 The Company provided Rs. 4,772 lakh towards depreciation for the year ended March 31, 2011 as compared to Rs. 4,506 lakh for the year ended March 31, 2010. It represents 3.31 % and 3.30% of the total revenues for the respective years. 3. PROVISION FOR TAXATION Provision for income tax is made on an annual basis on the tax liability as computed, after taking credit for allowances and exemptions. Apart from the current tax, deferred tax asset or liability is recognized for timing differences between the profit as per financial statements and the profit offered for the income taxes. Deferred tax assets are recognized only if there is reasonable certainty that sufficient future taxable income will be available, against which they can be realized. The net deferred tax charged to the Profit and Loss account during the year was Rs. 1,090 lakh (previous year Rs.4,198 lakh credited). The Company has provided a net sum of Rs. 17,652 lakh towards provision for taxation during the year compared to credit of Rs. 2,513 lakh during the previous year. The break-up of provision for taxes is as follows: (Rs. in lakh) Year ended Year ended Particulars March 31, March 31, 2011 2010 Current Tax 17,652 7,689 Deferred Tax 1,090 (4,198) Fringe benefit tax - (455) MAT credit entitlement - (5,176) 4. NET PROFIT The net profit of the Company after tax amounted to Rs. 55,004 lakh as compared to Rs. 61,407 lakh for the previous year, a decrease of 10.42%. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT: As of March 31, 2011, the Company employed 13,943 employees (full time equivalent). The Company considers human resources as its most critical assets and has various practices in place including incentive awards, career planning, training programs, etc. in place to ensure a healthy work environment. There were no major material developments in Human Resources.

TCS E-SERVE LIMITED ANNUAL REPORT 2009-2010 MANAGEMENT DISCUSSION AND ANALYSIS This part of the Directors' Report contains the views and analysis of the management regarding the company and industry. These are in context of the environment and in relation to parameters such as the Indian economy, the global economy and forecast regarding the industry, which are available from industry associations such as Nasscom, CI I, etc. Wherever structured information is not available, appropriate estimates have been used. This report may contain forward-looking statements based on certain assumptions and expectation of future events. The Company and its management shall not be liable for any loss or damage that may arise as a result of any action taken based on the information contained herein. A. INDUSTRY STRUCTURE, DEVELOPMENTS & OUTLOOK A.I. Global scenario: The IT-BPO Industry growth marginally declined in 2009 owing to global economic slowdown. According to Nasscom Strategic Review 2010, worldwide technology products and services (including hardware) spend is estimated to reach USD 1.5 trillion in 2009, declining by almost 3 percent. Hardware spending declined by 8 percent as companies curtailed their spending on infrastructure upgrades and delayed implementing large projects. IT-BPO services remained almost flat in the period. As BPO forms integral part of the global delivery chain, has been relatively less impacted by the economic uncertainty. Worldwide BPO spending grew by approximately 2 percent, while the growth continues to be above the line, it is much less as compared to previous years. BFSI and manufacturing sectors spending declined, while government and healthcare verticals continued to grow. Global BPO Spending: The global sourcing market size grew by 3 per cent in 2009, reaching USD 92-96 billion, highlighting the difficult market conditions. Growth in BPO was around 5.5 per cent, marginally higher than IT offshoring rate of 3.7 percent. Global Sourcing Market size: 2009 Growth in Worldwide Growth in Global Global Sourcing as Spend Sourcing a Percentage of Total Spend Application 5.4 7.9 12.2 Management Custom Application -5.7 -2 43 Development IT Consulting -4.9 -3.6 11.1 1.4 2.1 IS Outsourcing 6.1 System Integration 2.5 -1.5 Bpo 2 3 32.1 A.2. India Outlook: The India IT-BPO industry displayed resilience in the face of a global economic slowdown. According to NASSCOM's Strategic review 2010, the industry is expected to reach USD 73.1 billion and growth of 5.4 percent over 2008. India remains an integral part of the global sourcing strategy accounting for approximately 51 percent of the addressable offshore IT-BPO market. It is estimated that India-based resources account for about 60-70 percent of the offshore delivery capacities available across the leading multinational IT-BPO players. IT-BPO services offerings have evolved from being application maintenance and development to emerge as full service player providing testing services, infrastructure services, consulting and system integration. Cloud computing took center stage offering customer best in-class process management at reduced capital expenditure levels. Platform BPO witnessed increased acceptance, as Indian BPO providers increasingly focused on transforming client business. The BPO industry grew by 8 percent in FY2010 to USD 14.7 billion, highest demand was for F&A services across verticals such as BFSI, utilities and healthcare, and activities such as accounts payable and receivables, general accounting, and finance/control/risk management. Direct employment in the IT-BPO sector grew by 4 per cent reaching ~2.3 million and indirectly employing ~8 million people. Domestic IT-BPO market grew by 8.5 per cent, driven by increased government spending, enhanced connectivity, adoption of global practices, customized service offerings and new delivery models e.g. SaaS. Domestic BPO market grew by 22 per cent, driven by large deals in telecom and BFSI space. Future trends as per NASSCOM study: Growth and Adoption Trends: - Revival of offshoring - double digit growth in major markets - Adoption in US,followed by APAC and Europe - Increased adoption in BFSI, healthcare and retail sectors - Increased delivery of higher value services BPOservices such as analytics, data modeling, and research, in addition to RIMand ADM - Global technology-related spending expected to pick-up across all geographies in 2010, BPO spending expected to grow up by 7 per cent. Offshore Location Trends: - Clients will start looking at leading offshore locations such as India Philippines, and emerging ones in Africa, Central and South America - Spikes in wage inflation and attrition expected in major locations - Higher offshoring levels within IT and BPO over next 3-4 years, offshoring of BPO - Captives to redefine value proposition, number of new captive set up lower than previous years Suppliers: - M&A to gather momentum in 2010 ascompanies look at complement capabilities (across functions, verticals and geographies) - Pureplay BPOs to make investments and acquisitions to develop IT capabilities Expansion opportunities across new geographies, verticals, and customer segments: - Asia will bypass Europe asthe second largest target market, led by India and China. On the back of the greater adoption of technology and outsourcing by enterprises, BRIC market, Japan and Continental Europe will offer increased opportunities for collaboration and sourcing. - Verticals in developed countries which have previously not globally sourced services areexpected to do soin the near future - public sector, healthcare, media and utilities. - Emergence of new service offerings and business models e.g.SaaS, Cloud Computing will allow players to serve smaller enterprises in an unconventional but profitable manner. B. COMPANY OVERVIEW: Your Company is one of the pioneers in the ITES-BPO industry in India. It is in the business of providing business process management services in the banking and financial services (BFSI) vertical (ie industry vertical) to help its customers achieve their business objectives by providing innovative, best-in-class services. Your Company is an integral part of the Tata Consultancy Services' (TCS) strategy to build on its 'Full Services Offering' that offer global customers an integrated portfolio of services ranging from IT services to BPO services. Company provides a broad range of services that cater to the process management requirements for delivery of wide range of financial products and enterprise support functions, which include:- * Financial Information Processing (data processing): * Customer Contact (voice based) * Functional Testing Services The Company's main processing facilities are located across various cities in India including Mumbai, Chennai, Bangalore, Gurgaon and Kolkata. Company's service offerings are backed by a robust and scalable infrastructure network tailored to meet clients' needs. The Company has also put in place a detailed Business Continuity Plan, which can be activated at short notice in'case of disruptions on account of natural or manmade causes. C. OPPORTUNITIES AND RISKS: Opportunities: * New Business Opportunities: TCS's strategy of providing integrated services presents a compelling opportunity for your Company to leverage its product and services offerings in the BFSI vertical. The BFSI industry across the world has always leveraged technology and business process outsourcing effectively for addressing business challenges across different areas such as process improvement, reengineering, technology enablement and new service delivery methods. While Citi continues to be the Company's anchor account, leveraging on TCS' strengths in the BFS sector has enabled the Company to access various new accounts / processes to build on its competencies while at the same time servicing Citi with the same level of efficiency and focus as in the past. * Participate in market growth: As per NASSCOM's Strategic Review for 2010, ITES-BPO industry is a fastest growing segment of the IT-BPO industry and exports from this sector are estimated to reach USD 12.4 billion in FY 2010, growing at 6 per cent. Domestic ITES-BPO has continued its strong performances over the past few years, growing by 22 per cent last year to reach INR 108 billion, driven largely by deals in telecom and BFSI. Your Company, backed by TCS' full service strategy, strong domain expertise, operational efficiency, inherent 'India based' cost advantage, experience in handling global clients and a dedicated workforce is well- placed to expand and diversify its service offerings as new opportunities come up. The Company has developed processing and call-center capabilities in handling various financial products across the life cycle for multiple geographies. With increased reach post acquisition by TCS, the Company is moving up the value chain and expanding on its service offerings by adding new clients. The Company's principal goal is to expand its customer base in core target markets of financial services and additionally continue to pursue opportunities to expand service offerings to existing and new customers. Risks and Risk Mitigation: * Client Concentration: While currently there is client concentration with Citi being the major client, the Company possesses significant domain expertise to be able to leverage its capabilities in the BFS sector. Additionally, the minimum revenue guarantee provided by Citi as a part of the divestiture, derisks revenues to a large extent over the 9.5 years of contract. * Macro-Economic Risks: Your Company's performance is sensitive to the global economic environment. For the foreseeable future, the Company expects to continue to derive most of our revenue from services provided to the BSFI clients. Given this concentration, the Company is exposed to current global economic conditions in the financial services industry. Factors such as prolonged poor economic environment, rise in protectionist sentiment, competition from other players/countries and regulatory changes in the banking industry may affect the demand for these services by current and potential clients, which could have adverse effect on Company's business. With the acquisition of the Company by TCS, the Company is increasing the breadth and depth of service offerings and penetrating new customer accounts and markets to mitigate this risk. Currency Risks: Your Company conducts business in multiple geographies and is exposed to foreign currency risk from changes in the value of underlying revenues, expenses, assets and liabilities. Your Company actively manages these risks through a variety of control procedures involving senior management. Ability to hire and retain talent: Company's performance is largely dependent on the talents and efforts of its employees. To compete effectively in this expanding business, to manage its business effectively and to expand into new businesses depends on the Company's ability to attract new employees and to retain and motivate its existing employees. The Company proposes to continue to invest in its people with robust and feature rich human resource practices that would help manage the problem of attrition. * Data Protection: Security of information outsourced by Clients is one of the most challenging and crucial tasks facing BPO industry today. Client information is at threat from a variety of sources that did not exist a few years ago. The risks associated with Information Security are real and the ramifications of security breaches are serious in terms of financial, reputation, franchise and regulatory impact especially for an organization like ours which handles critical and sensitive customer data in the Banking, Financial Services and Insurance industry. Your Company has defined and implemented an Information Security Management System (ISMS) framework across the organization and is certified on ISO 27001:2005 standards. Recently the Company is also certified on Payment Card Industry Data Security Standards (PCIDSS) for some of our processes to ensure secure processing of card related information. Further, in order to comply with the Company's obligations under various laws including international laws, the Company complies with annual reporting or licensing requirements or to implement operating policies and procedures to protect, among other matters, the privacy and security of our clients' information. * Pressure on billing rates: Billing rates may remain under continued pressure in face of global meltdown and increased competition. Also other countries such as Brazil, Mexico, South Africa, Australia, Ireland, Philippines, China, Malaysia and other countries are making rapid strides as alternative locations for ITES/BPO activities. * Mismatches in investment expenses / Process Obsolescence risk: The Company makes investments up-front in new premises, new telecommunications infrastructure, new hires, training, etc. These investments are in line with the expected growth of the Company. If the planned growth does not fructify, or if the investments made in people and training becomes obsolete due to new technologies, or due to discontinuance of contract by the client, the Company's investments could become non-productive. This risk is mitigated by planning for new business and also by continuously looking at processes and infrastructure to ensure the same are ahead of the obsolescence curve. Further the Company encourages cross training of employees to ensure redeployment in case a product/process is discontinued. * Technology, network and telecommunications risk: The Company is dependent upon infrastructure like electricity, telecommunication and internet facilities among others for providing its services. Any disruption of these could seriously impact the business of the Company. To mitigate this risk, the Company has detailed contingency plans in place to ensure smooth and uninterrupted conduct of its business. * Risks from operations: Risks from operations basically means risk of non- performance / loss resulting from inadequate or failed internal processes, people or systems, or from external events. The chance of human error or system failure is endemic to every business. In case of processing, these risks are higher due to the large value of the underlying transactions being processed and risk of resultant claims from clients for non- performance. Besides, there is a risk of person acting malafide. Your Company has procedures in place to identify, control, measure and report these risks. Further, risks can come from external events, which may result in expenses for maintaining continuity of business. In order to mitigate the risks of financial liability, contingency provisions have been created. The adequacy of these are reviewed from time to time based on management perception of the quantitative liability that may arise. * Financial Risk: Financial Risk represents risk facing a company on account of foreign exchange fluctuations, leverage and liquidity risks. Currently the Company has foreign exchange surplus due to its export activities. It has procedures in place to actively manage its foreign exchange positions. The Company currently has minimal leverage and liquidity risk. The Company has followed the strategy of funding all its expansions and infrastructure related expenditure through internal accruals, as well as, earning returns through investment of surplus funds. Legal & Statutory Liabilities Risk: The Company has certain matters under dispute / litigation in regard to taxation, labour laws and lease related issues which are appropriately accounted / disclosed in the financial statements. The Company believes it is in a strong position in these matters and has taken adequate legal steps to safeguard its position. * Risk due to manmade or natural disasters: The physical facilities, infrastructure and employees of the Company are insured to cover any loss that may arise on account of insurable risks. As is well known, some events such as riots, war, etc., are not generally covered by insurance companies and the assets of the Company are exposed to that extent. Government policies: Policies of the Government at state and country level are generally supportive of the IT & ITES industry. These include tax incentives, relaxation of regulatory restrictions in respect of labour and other laws, liberalized import and export duties. There is a need for long term view on various fiscal laws / incentives to provide a stable tax regime. The 10-year income tax holiday enjoyed by yourCompanyexpired at the conclusion of Financial Year March 31,2010. Consequently, future income streams from the existing STPI units will not be eligible for Income Tax concessions from the current financial year. These opportunities and risks have been identified based on the external environment viewed in conjunction with the Company's plan and are in no way exhaustive or in order or importance. The Company has put in place a risk management framework across the various units in the Company and a report thereon is placed before the Board of Directors at regular intervals. Further, in order to comply with the Company's obligations under various applicable laws including international laws, the Company has proper systems in place to ensure compliance with the same including annual reporting or licensing requirements or implementation of operating policies and procedures as mandated by applicable laws. D. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE: The Company has identified industry segments as its primary segment and geographic segments as its secondary segment (refer segment information in Note No. 8 of Schedule 'O' of the Standalone Accounts and Note No. 9 of Schedule '0' of the Consolidated Accounts). E. INDUSTRY OUTLOOK: The beginning of this year marks the slow, but steady end of the worst recession in the past 60 years. Improving economic conditions signifying return of consumer confidence and renewal of business growth is expected to drive IT/BPO spending going forward. The BPO spending in 2010 is expected to increasingly driven by F&A segment and procurement followed by HR outsourcing. Providers will increase their focus on developing platform BPO solutions across verticals and services. Although India has a major share of the offshoring market, there is headroom for growth as current offshoring market is still a small part of the global outsourcing industry. Opportunities exist in core vertical and geographic segments of BFSI and geographies such as USA, Europe and Asia Pacific. Several challenges would need to be addressed in order to achieve the growth forecasted. Cost associated with wage inflation and increased attrition would need to be managed. India's ample supply of talent needs to be harnessed and trained so as to be employable. Alternate delivery locations beyond tier-I and tier-II cities needs to be developed. Concerns around security - both physical and data security need to be addressed effectively. Risks associated with currency fluctuations, rise of protectionist sentiments, discontinuance of fiscal incentives and changes to government policies would need to be taken into account and addressed effectively. It would be necessary for all stakeholders to address these issues to capture the opportunities and mitigate the risks. F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company has an internal control and internal audit system that is adequate and commensurate with the size and nature of its business. Adequate controls are established to ensure that assets of the Company are safeguarded and transactions are executed in accordance with Management's authorization and are appropriately recorded in the books of account. Internal Control guidelines have been formulated and circulated within the Company and are implemented in all transactions. The roles and responsibilities of people at various levels are well defined to ensure appropriate information flow and to facilitate effective monitoring. An authority-responsibility matrix has been separately articulated for the employees, management team, Board, Chairman and the Managing Director and CEO. The Company monitors progress on the internal control audit reports and reviews progress in the meetings of its Audit Committee and keeps the Board of Directors informed of its major observations from time to time. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: Overview: The financial statements are prepared under the historical cost convention, on an accrual basis, and are in accordance with the requirements of the Companies Act, 1956 and comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the said Act. All Income and Expenditure, having a material bearing on the Financial Statements, are recognized on accrual basis. The management accepts responsibility for the integrity and the objectivity of these financial statements, as well as for various estimates and judgments used therein. Balance Sheet 1. SHARE CAPITAL As at March 31,2010 As at March 31,2009 Equity (paid up) Number(lakh) Rs.(lakh) Number(lakh) Rs.(lakh) 124 1,240 124 1,240 The Company has at present, two class of shares, viz., Preference Shares aggregating to Rs. 500 lakh and Equity Shares aggregating to Rs. 2,000 lakh. This constitutes the Authorised Share Capital of Rs. 2,500 lakh. Of this, the Issued and Paid-up Share Capital is Rs. 1,240 lakh, comprising 124 lakh Equity Shares of Rs. 10 each, fully paid-up (and nil Preference Shares). Of the total share capital as at March 31,2010, Tata Consultancy Services Limited, representing, 96.26% of the total, holds 11,936,313 shares Issued and Paid-up Share Capital. 2. RESERVES AND SURPLUS: The Company's Reserves & Surplus as on March 31, 2010, stood at Rs. 127,136 lakh as against Rs. 60,875 lakh in the previous year, an increase of Rs.66,261 lakh. This increase is on account of profits for the year after the taxes, appropriations and net of Hedging Reserve Account. 3. FIXED ASSETS (Currency: Indian Rupees in lakh) As at As at March 31,2010 March 31,2009 Gross Block Owned Assets Improvement on Leasehold Premises 3,181 3,173 Office equipment 6,139 6,068 Computer equipment - Hardware 14,620 14,537 Computer equipment - Software 2,531 2,031 Furniture and fixtures 3,585 3,536 Electrical fittings 2,350 2,268 Vehicles 968 810 Total Gross Block 33,374 32,423 Less: Accumulated depreciation 27,392 24,752 Net Block 5,982 7,671 Add: Capital Work in Progress 4,886 149 Net Fixed Assets 10,868 7,820 Depreciation charge for the year/period 4,506 4,222 Depreciation as a % of total revenue 3.70% 3.47% Accumulated depreciation as a % of gross block 82.08% 76.34% The Company has added Rs. 2,964 lakh to its gross block of assets, including an investment of Rs. 2,252 lakh in computer equipment towards expansion of the existing infrastructure base. 4. DEFERRED TAX: Deferred tax benefit of Rs. 4,198 lakh has been made for the year ended March 31, 2010. The deferred tax asset balance as at March 31, 2010 is made of: (Currency: Indian Rupees in lakh) Particulars As at March 31,2010 Provision for doubtful receivables 115 and doubtful advances Depreciation on fixed assets 1,682 Provision for Employee Benefits 1,044 Rent escalation 1,818 Provision for contingencies 145 Grand Total 4,804 5. SUNDRY DEBTORS: Sundry debtors amount to Rs. 29,816 lakh including Unbilled Revenue of Rs.12,525 lakh as at March 31, 2010 as compared to Rs. 21,713 lakh including Unbilled Revenue of Rs. 7,825 lakh as at March 31, 2009. Debtors account for 22.40 % of total revenue from transaction processing activities as at March 31,2010 as compared to 18.98% for the previous year. Focused efforts are in place to monitor and achieve improvements in this area. 6. CASH AND BANK BALANCES: (Currency: Indian Rupees in lakh) As at March As at March 31, 2010 31, 2009 Cash and Bank balances 247 686 Fixed deposits with Banks 37,514 16,311 Total Cash and Bank 37,761 16,997 Cash and Bank as a % of total assets 24.1% 19.0% Cash and Bank as a % of revenues 27.8% 14.0% The Bank balance include unclaimed dividend of Rs. 71 lakh in the unclaimed dividend account as at March 31, 2010 (Rs. 77 lakh as at March 31,2009). 7. LOANS AND ADVANCES: Loans and advances comprise secured and unsecured advances, security deposits, minimum alternate tax credit entitlement and advance payment of income-tax and other taxes like wealth-tax, interest-tax etc. Unsecured advances are advances recoverable in cash and kind or for the value to be received are primarily towards amount paid in advance for value and services to be received in future. Advance payment of income tax and other taxes account for 71% of total loans and advance (previous year 67%). Further, Loans to subsidiaries account for 11% of total loans and advance (previous year 19%). 8. CURRENT LIABILITIES: Sundry creditors represent the amount payable to vendors for the supply of services and goods. These figures stood at Rs. 18,212 lakh as at March 31, 2010 against Rs. 15,698 lakh as at March 31, 2009. Unclaimed dividends of Rs. 71 lakh indicates dividend paid, but not encashed by shareholders, and are represented by bank balances in bank accounts separately maintained for an equivalent amount. 9. PROVISIONS: Provision for taxes represents estimated gross tax liabilities excluding liability for deferred tax stood at Rs. 2,014 lakh as at March 31, 2010 (as at March 31, 2009 Rs. 6,647 lakh). Provision for Gratuity is made based on independent actuarial valuation as at March 31, 2010. Total revenue for the year ended March 31, 2010 is Rs. 135,941 lakh as compared to Rs. 121,766 lakh for the previous year ended March 31,2009, growth of 11.64% over previous year. Share of export revenue to Total Revenue for the year ended March 31,2010 has increased by 4%. 2. EXPENDITURE: Total staff and operating expenses were lower by 25.26% at Rs.80,291 lakh for the year ended March 31,2010 as compared to Rs. 107,420 lakh for the year ended March 31,2009. This was largely on account of exchange loss due to cancellation of forward/option contracts in the previous year and control over spending. The detailed break-up of the expenditure is given below: (Currency: Indian Rupees in lakh) Year ended Year ended Particulars March 31,2010 March 31,2009 Amount %to Amount %to Revenue Revenue Payment to employees 54,862 40.4% 53,445 43.9% Services rendered by 3,401 2.5% 2,831 2.3% business associates and others Advertisement 15 0.0% 17 0.0% Rent 6,249 4.6% 6,231 5.1% Link charges 2,303 1.7% 2,171 1.8% Legal and professional fees 709 0.5% 1,468 1.2% Travelling and conveyance 2,882 2.1% 3,227 2.7% Exchange Loss - 0.0% 24,627 20.2% Others & Miscellaneous 9,870 7.3% 13,403 11.0% expenses Total Staff and 80,291 107,420 Operating Expenses The Company provided Rs. 4,506 lakh towards depreciation for the year ended March 31,2010 as compared to Rs. 4,222 lakh for the year ended March 31, 2009. It represents 3.31% and 3.47% of the total revenues for the respective years. 3. PROVISION FOR TAXATION: Provision for income tax is made on an annual basis on the tax liability as computed, after taking credit for allowances and exemptions. Apart from the current tax, deferred tax asset or liability is recognized for timing differences between the profit as per financial statements and the profit offered for the income taxes. Deferred tax assets are recognized only if there is reasonable certainty that sufficient future taxable income will be available, against which they can be realized. The net deferred tax credited to the Profit and Loss account during the year was Rs. 4,198 lakh (previous year Rs. 1,857 lakh debited). The Company has recognized a net credit of Rs. 2,140 lakh during the year towards provision for taxation net off write backs in respect of prior years and deferred tax benefit compared to Rs. 7,503 lakh (debit) during the previous year. The break-up of provision for taxes is as follows: (Currency: Indian Rupees in lakh) Year ended Year ended Particuiars March 31,2010 March 31,2009 Current Tax 7,689 4,956 Deferred Tax (4,198) 1,857 Fringe benefit tax (455) 690 MAT credit entitlement (5,176) - 4. NET PROFIT: Profit after tax amounted to Rs. 61,407 lakh, which was significantly higher as compared to Rs. 10,687 lakh for the previous year, even after taking into account the one-time impact of foreign exchange losses to the extent of Rs. 246 crore incurred in previous year. The higher profitability during the current year, on the operational front, was attributable to growth in revenue (12%), efficiencies achieved through stricter cost controls, further leveraging the existing base, as well as positive tax charge owing to the taxation for the current year being on MAT basis, write back of certain prior year provisions as well as creation of deferred tax assets attributable to STPI operations at the conclusion of the tax holiday period. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT: As of 31st March, 2010, the Company employed 13,342 employees (full time equivalent). The Company considers human resources as its most critical assets and has various practices in place including incentive awards, career planning, training programs, etc. in place to ensure a healthy work environment. There were no major material developments in Human Resources.