Zenith Infotech Ltd Directors Report

To the Members,

Your Directors have pleasure in presenting their 17th Annual Report and the audited Accounts for the financial year ended 30^th September, 2013.

FINANCIAL HIGHLIGHTS

(Rs.in lakhs)

	2012-13	2011-12
Profit/ (Loss) before Depreciation & Taxation & Exceptional Items	(7044.77)	(4681.38)
Less : Depreciation	1271.76	1269.24
Profit / (Loss) before Taxation & Exceptional Items	(8316.53)	(5950.62)
Less : Exceptional Items (FCCB Interest)	1896.27	NIL
Profit / (Loss) before Tax	(10,212.80)	(5950.62)
Less : Provision for Taxation	NIL	NIL
Profit/ (Loss) after taxation available for appropriation	(10212.80)	(5950.62)
Profit/(Loss) brought forward from the previous year	NIL	NIL
Amount available for appropriations :	(10212.80)	(5950.62)
Appropriations
Proposed Dividend	NIL	NIL
Tax on Proposed Dividend	NIL	NIL
Transfer to General Reserves	336.04	5950.62
Balance Profit / (Loss) carried to the Balance Sheet	(9876.76)	NIL

COMPANYS ACTIVITIES

The Company suffered a sharp drop in its business during the financial year 2012 - 2013, on account of a weak US economy as well as the reputational and financial damage the Company has suffered on account of its ongoing litigation. The Companys turnover was at Rs. 8597.43 Lakhs as against Rs. 10661.51 Lakhs in the previous year. Your Companys operations, during the year under report, yielded a loss of Rs. 10212.80 Lakhs.

DIVIDEND

Your Directors do not recommend payment of any Dividend in view of the loss made during the financial year ended 30^th September, 2013.

REVIEW OF OPERATIONS

a) During the year, the Earnings before Interest, Depreciation and Taxes (EBIDTA) of the Company was negative at Rs. 8791.88 Lakhs as against Rs. 4504.08 Lakhs during the previous year.

b) Exports of the companys electronic equipment and software were Rs. 8547.15 Lakhs as against Rs. 10588.05 Lakhs during the previous year.

PROSPECTS AND OUTLOOK

• Your Directors are fully seized of the fact that the need of the hour is to enhance the Revenue and Profit to higher levels and to achieve this end, efforts have been initiated by adding on value of products, customers and markets.

• Vigorous marketing efforts and ceaseless cost reduction activities continue with more thrust and vigor to accomplish these goals.

• The efforts are being intensified to sustain leadership position by constantly upgrading the products to match advancing technology trends, maintaining the superiority in quality, and continuing the unblemished timely service support;

• Your Directors are hopeful that all the above, coupled with continuous monitoring of inventory, receivables and overheads, would result in healthier results during the current and coming years.

SHIFTING OF THE REGISTERED OFFICE

The Registered Office of the Company was shifted, pursuant to the resolution passed by the Board of Directors on 10th January, 2014, from B-52, Electronic Sadan - 1, MIDC, TTC Area, Mahape, Navi Mumbai 400 710 to Gala No.9, Ground Floor, Building No. 2, Sector 2, Millennium Business Park, MIDC, Mahape, Navi Mumbai 400 710 with effect from 10th January, 2014.

SUBSIDIARY COMPANIES

The Board of Directors had passed a resolution in its meeting held on 14^th February, 2014, pursuant to General Circulars No. 2 & 3/2011 dated 08.02.2011 and 21.02.2011, giving consent, inter alia, for not attaching the audited Accounts of its subsidiary companies The audited Statements of Accounts of the Companys Subsidiary Companies in Singapore, Malaysia, USA and the UAE in respect of the financial year ended 31^s1 March, 2013 have therefore not been attached, pursuant to Section 212(8) of the Indian Companies Act, 1956. The list of subsidiaries included in the Consolidated Financial Statements and the Companys holding therein is appended hereto as Annexure C and forms part of this Report.

FIXED DEPOSITS

During the year, the Company has not accepted any fixed deposits under Sections 58A and 58AA of the Companies Act, 1956.

COMPULSORY DEMATERIALISATION OF COMPANYS SHARES

The Companys Securities were compulsorily dematerialized with effect from 28^th February, 2001 and continue to be traded in the electronic form as per the relevant SEBI guidelines.

LISTING OF SHARES ON THE STOCK EXCHANGES

The Companys Securities continue to be listed on the Bombay Stock Exchange Limited (BSE), Mumbai and the National Stock Exchange of India Limited (NSE), Mumbai. The Company has paid the requisite Annual Listing Fees for the year 2013-14, to the above Exchanges.

DIRECTORS

Mr. Vipin Shah resigned as a Director on 11th September, 2013. The Board has placed on record its appreciation of the valuable contribution and advice rendered by Mr. Vipin Shah during his tenure.

Mr. Raj Kumar Saraf retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offers himself for re-appointment.

BUSINESS EXCELLENCE AND QUALITY INITIATIVES

Your Company continues its process in the Zenith Business Excellence Model known as ZBEM and the Company has gone through external assessment process with good results. A number of initiatives were launched in order to strengthen business processes.

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors confirm:

(1) that in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

(2) that 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 ended 30th September, 2013 and of the profit of the Company for that year;

(3) that the Directors have taken proper and sufficient care for the maintenance of adequate records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(4) that the Directors have prepared the annual accounts on a going concern basis.

FOREIGN CURRENCY CONVERTIBLE BONDS

The Company has issued Foreign Currency Convertible Bonds (FCCBs) of the value of US$ 83 million. FCCBs of the value of US$ 6.080 Million were converted into 8,93,879 Equity Shares of Rs. 10/- each, till date and these shares were duly listed on BSE and NSE in due time. FCCBs of the value of US $ 76.92 million out of US$ 83 million are outstanding as on 30^th September, 2013. The Companys issued, subscribed and paid-up capital is Rs. 12,68,13,790/-divided into 1,26,81,379 Equity Shares of Rs. 10/- each, fully paid-up as on 30.09.2013. The matter is currently under litigation in the Bombay High Court.

EX-PARTE OEDER PASSED BY SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) AND ORDER PASSED BY THE SECURITIES APPELLATE TRIBUNAL (SAT)

SEBI has on 25^lh March, 2013 passed an ex-parte Order, inter alia, directing the Board of Directors to furnish Bank Guarantee(s) for US $ 33.93 Million in respect of certain alleged non-disclosures and a sharp fall in the Companys Share Prices in the market. This Order was successfully challenged by the Company before the Securities Appellate Tribunal; by its Order dated 23^rd July, 2013, SAT has directed that all the matters be heard afresh by SEBI. SEBI has preferred an appeal against the SAT Order in the Honble Supreme Court of India.

REFERENCE MADE TO THE BOARD FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR)

The Company has made, on 22^nd July, 2013, a reference to the Board of Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies Act, 1985, on the basis the Companys Accounts for the 9 months period ended 30^th June, 2013 and registration of the said reference was declined both by the Registrar on 12th August, 2013; the appeal filed before the Secretary, BIFR was declined on 13th September, 2013. The Company has filed an appeal before the Chairman, BIFR; the appeal has been heard and the Order is awaited.

ORDER PASSED BY THE HONBLE HIGH COURT OF BOMBAY

The Honble High Court of Bombay passed an Order on 13^th December, 2013 directing the Company to be wound up and appointing the Official Liquidator as the Liquidator of the Company, but has stayed this direction till 16^th April, 2014; the said Order has directed the Administrator, inter alia, to sell the businesses of the Company in the first instance and later the assets of the Company by Public Auction to repay the monies due to the holders of the Foreign Currency Convertible Bonds. The Company has preferred an appeal in the Honble Bombay High Court against the said Order and the matter is pending.

CORPORATE GOVERNANCE

The Company has complied with the requirements of Corporate Governance as applicable to the Company, as per the amended Listing Agreements with the Stock Exchanges. The Report of Corporate Governance with the Auditors Report thereon is annexed hereto in accordance with Clause 49 of the Listing Agreement with the Stock Exchanges.

AUDITORS

M/s. C.L.Khanna & Company, Chartered Accountants, Mumbai, the Statutory Auditors of the Company, retires at ensuing Annual General Meeting and are eligible for reappointment.

EMPLOYEES & THE PARTICULARS UNDER SECTION 217(2A)

Relations between the management and its employees have been cordial. Your Directors place on record their appreciation of the efficient and loyal services rendered by the employees of the Company at all levels.

The Statement in respect of employees drawing a salary of Rs. 5 lakhs per month or more for part of the year or Rs. 60 Lakhs or more per annum as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is enclosed as Annexure A and forms part of this Report.

ENERGY, TECHNOLOGY ABSORPTION and FOREIGN EXCHANGE

The information required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo is appended hereto as Annexure B and forms part of this Report.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the support received from the Companys Bankers and Shareholders and look forward to their continued support and goodwill.

By Order or the Board

RAJKUMAR SARAF

CHAIRMAN

MUMBAI

14th FEBRUARY, 2014

ANNEXURE B TO THE DIRECTORS REPORT

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988.

A. Conservation of Energy :

Though the Companys manufacturing operations are not power intensive, regular and preventive maintenance of all equipment is undertaken by the Company.

B. Technology Absorption : Form B enclosed.

C. Foreign Exchange Earnings and Outgo :	Rs. In Lakhs
Total foreign exchange used and earned
(i) Expenditure in foreign currency	7657.66
(ii) Foreign Exchange earned	8547.15

FORM B

FORM OF DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION

1. Specific areas in which R&D carried out by the Company :

Being a product company in the area of systems technology, the Company needs to continuously invest in R & D to keep its current products Tiger Cloud and BDR competitive with market requirements.

2. Benefits derived as a result of the above R&D:

New product offerings which contribute to the revenue growth and profitability of the Company.

3. Future plan of action :

Continued development of new products and improvement in existing products.

TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION

1. Efforts, in brief, made towards technology absorption, adaptation and innovation:

Tie up with various overseas companies for Cloud Computing products.

2. Benefits derived as a result of the above efforts :

Greater variety and better quality product availability and enhanced quality of services.

3. Expenditure in R & D :	Rs. in Lacs
a. Capital	NIL
b. Recurring	NIL
c. Total	NIL
d. Total R&D expenditure as a percentage of total turnover	NIL%

4. Import of Technology :

No technology has been imported by way of foreign collaboration or otherwise for existing range of products and services of the Company.

By Order of the Board

RAJKUMAR SARAF

CHAIRMAN

MUMBAI

14^th FEBRUARY, 2014

ANNEXURE C TO THE DIRECTORS REPORT

The list of subsidiaries included in the Consolidated Financial Statements and the Companys holding therein is given below:

		% of Companys Holding
Name of the Subsidiary	Country of Incorporation	SHAREHOLDING (Directly & Through Subsidiaries)
1 ZENITH INFOTECH (S) PTE LTD.	SINGAPORE	98.85%
2 ZENITH INFOTECH SERVICES SDN BHD.	MALAYSIA	98.85%
3 ZENITH INFOTECH FZC	U.A.E.	99.75%
4 VU TELEPRESENCE FZC	U.A.E.	93.35%
5 VU TELEPRESENCE INC	U.S.A.	93.35%

By Order of the Board

RAJKUMAR SARAF

CHAIRMAN

MUMBAI

14^th FEBRUARY, 2014