allsec ar08 1-16 · 2018-04-24 · HR and Training 9 Directors’ Report 12 Corporate Governance 17...

A L L S E C

T E C H N O L O G I E S

L I M I T E D

Annual Report

2007 - 08

Allsec at Manila

A N N U A L R E P O R T 1

ALLSEC TECHNOLOGIES LIMITEDCorporate Information

Board of Directors

Dr.Bala.V.Balachandran ChairmanMr.T.Anantha Narayanan DirectorMr.A.Sankarakrishnan DirectorMr.Shankar Narayanan Madhava Menon Investor NomineeMr.Mahesh Parasuraman Investor NomineeMr.A.Saravanan Director & PresidentMr.R.Jagadish Director & CEO

Management Team

Mr.R.Vaithiyanathan Senior Vice President – Operations & HRMr.K.Narasimha Nayak Chief Financial OfficerMr.Anand Krishnan Vice President – MarketingMr.Saravanan Thambusamy Vice President – TechnologyMr.C.Mahadevan Vice President – HR BPOMr.C.S.Bapaiah Vice President – HR

Company Secretary

Mr.K.S.Raghu

AuditorsS.R.Batliboi & AssociatesChartered AccountantsChennai

Bankers

• Canara Bank

• HDFC Bank

Registrars & Transfer Agents

KARVY Computershare Private LimitedPlot No. 17-24, Vittalrao NagarMadhapur, Hyderabad - 500 081

Registered Office

7H Century Plaza560-562 Anna SalaiTeynampetChennai 600 018.

Corporate Office

46B Velachery Main RoadVelachery, Chennai 600 042.

allsec ar08 1-16.p65 7/7/2008, 5:24 PM1

Corporate Information 1

Notice of Annual General Meeting 3

Financial Highlights and Graphs 5

HR and Training 9

Directors’ Report 12

Corporate Governance 17

Management Discussion & Analysis 23

Auditors’ Report 29

Standalone Financials 32

Consolidated Auditors’ Report 63

Consolidated Financials 64

Contents

allsec ar08 1-16.p65 7/7/2008, 5:24 PM2


ALLSEC TECHNOLOGIES LIMITED

Notice is hereby given that the 9th Annual General meetingof the Shareholders of ALLSEC TECHNOLOGIESLIMITED will be held at 10.00 A.M. on Thursday theJuly 31, 2008 at Narada Gana Sabha, Mini Hall, 314, TTKSalai, Alwarpet, Chennai 600018 to transact the followingbusiness :

Ordinary Business :

1. To consider and adopt the Balance Sheet as at 31stMarch 2008 and the Profit and Loss Account for theperiod ended 31st March 2008 along with theSchedules, the report of the Directors and Auditorsthereon.

2. To appoint a Director in the place of Mr.A.Saravananwho retires by rotation and being eligible, offers himselffor re-appointment.

3. To appoint a Director in the place of Mr.T.AnanthaNarayanan who retires by rotation and being eligible,offers himself for re-appointment.

4. To consider and if thought fit, to pass with or withoutmodification(s), the following resolution as OrdinaryResolution;

"RESOLVED THAT M/s. S. R. Batliboi & Associates,Chartered Accountants, the retiring auditors of theCompany, be and are hereby re-appointed as Auditors ofthe Company to hold office from the conclusion of thismeeting until the conclusion of the next Annual GeneralMeeting of the company on such remuneration as maybe decided by the Board of Directors plus reimbursementof actual travel and other out-of-pocket expenses."

Special Business

5. To consider and if thought fit to pass with or withoutmodification the following resolution as an OrdinaryResolution

“RESOLVED THAT Mr. Mahesh Parasuraman a Directorwho was appointed as an Additional Director and whoholds office as such upto the date of 9th Annual GeneralMeeting of the Company and in respect of whomNotice under section 257 of the Companies Act, 1956 hasbeen received from a member signifying the intention topropose Mr.Mahesh Parasuraman as a candidate for the

office of Director of the Company be and is herebyappointed as a Director of the Company not liable to retireby rotation”.

NOTES :

1. A MEMBER ENTITLED TO ATTEND AND VOTE ATTHE MEETING IS ENTITLED TO APPOINT A PROXYTO ATTEND AND VOTE INSTEAD OF HIMSELF ANDTHE PROXIES NEED NOT BE A MEMBER OF THECOMPANY. THE PROXIES IN ORDER TO BEEFFECTIVE MUST BE RECEIVED BY THECOMPANY NOT LATER THAN 48 HOURS BEFORETHE TIME FIXED FOR THE MEETING.

2. Explanatory Statement Pursuant to Section 173(2) ofthe Companies Act, 1956 is appended hereto.

3. The Register of Members of the Company andTransfer Books thereof will be closed from 29th July2008 to 31st July 2008 (both days inclusive).

4. The Securities and Exchange Board of India has madeit mandatory for all companies to use the bank accountdetails furnished by the depositories for payment ofdividend through Electronic Clearing Service (ECS)to investors wherever ECS facility is available. Hence,the members holding shares in dematerialised formare requested to intimate all changes pertaining to theirbank details, ECS mandates, power of attorney,change of address/name, etc., to their depositoryparticipant only and not to the Company's Registrarand Transfer Agent. Changes intimated to thedepository participant will help the Company and itsRegistrars to provide efficient and better services tothe Members.

5. The proxies appointed, should bring their attendanceslips sent herewith, dully filled in, for attending themeeting.

By Order of the Board

Chennai, R. Jagadish23rd June, 2008 Director & CEO

Registered Office :7H, Century Plaza, 560-562, Anna Salai,Teynampet, Chennai 600 018

Notice to the Shareholders

allsec ar08 1-16.p65 7/7/2008, 5:24 PM3



EXPLANATORY STATEMENT UNDER SECTION 173(2)OF THE COMPANIES ACT, 1956

For Item No.5

Mr. Mahesh Parasuraman nominated by First CarlyleVentures Mauritius, the Investor was appointed as anAdditional Director by the Board of Directors at theirmeeting held on 29th April 2008. In terms of theSubscription and Shareholders Agreement dated 23rdAugust 2006 executed with First Carlyle VenturesMauritius, the investor directors are not liable to retire byrotation. The Additional directors appointed shall holdoffice only up to the date of the next annual generalmeeting of the Company. The Company has received anotice under Section 257 of the Companies Act, 1956 froma member of his intention to propose the candidature ofMr. Mahesh Parasuraman as Director of the Companynot liable to retire by rotation.

Hence the proposed resolution. The Directors recommendthat the resolution be passed.

None of the Directors except Mr. Mahesh Parasuramanis concerned or interested in the resolution.

Information required as per the Listing Agreement

For Item No.2 & 3

The Profile of Directors retiring by rotation namelyMr.A.Saravanan and Mr.T.Anantha Narayanan is providedbelow :

Mr.A.Saravanan, 46, President, is a qualified CharteredAccountant. He has over 22 years of experience in financeand management across different industry segments,which he has effectively used whilst being the co-promoterof the Allsec group of companies. He headed the financialservices operations of the Allsec group of companies for14 years. He also headed marketing initiatives in areas ofinvestments, merchant banking, portfolio management,brokerages and debt syndication for the Allsec group ofcompanies. Prior to setting up the Allsec group ofcompanies with Mr.R.Jagadish, he worked for AshokLeyland Finance Limited as a Finance Executive,Overseas Sanmar Finance Limited as a Senior OfficerMarketing and Pioneer Leasing Limited as Vice President.In addition to being the President of Allsec, he is also aDirector of Allsectech Inc., Allsectech Manila Inc., whollyowned subsidiaries of Allsec Technologies Ltd., and AllsecAgencies Pvt. Ltd. As the President and Whole TimeDirector, he is responsible for business development,strategy and finance and he also directly oversees themarketing initiatives of the Company across allgeographies.

Mr.T.Anantha Narayanan aged 63 is a CharteredAccountant and Cost Accountant by qualification and

Annexure to Notice

was with Ashok Leyland group for over 25 years.He is on the Board of IndusInd Bank and a fewcompanies of the Ashok Leyland group while being theOmbudsman of Ashok Leyland Limited. He is anexpert in corporate planning and financial structuringand shall guide the company in corporate governancematters.

His other Directorships include Sundaram BNP ParibasAsset Management Co Ltd, Ashok Leyland ProjectServices Ltd, Ashley Holdings Ltd and Ashley InvestmentsLtd. He is also the Chairman of the Audit Committee inIndusInd Bank and Ashok Leyland Project Services Ltd.Mr.T.Anantha Narayanan does not hold any shares in theCompany.

For Item No 5

The Profile of Mr.Mahesh Parasuraman, Director isprovided below :

Mr. Mahesh Parasuraman is a graduate in Commercefrom Bangalore and is a qualified Chartered Accountant(CA) and Cost Accountant (CWA). Mahesh Parasuramanis a Vice President of The Carlyle Group focused on AsiaGrowth Capital opportunities based in Mumbai. Prior tojoining Carlyle, Mr. Mahesh Parasuraman was workingwith Ernst & Young Corporate Finance as an AssociateVice President focused on the IT Services and theBusiness Process Outsourcing space for four years. Hewas closely involved in most of the large M&Aengagements in the IT services sector such as theacquisition of Customer Asset by ICICI OneSource,FirstRing by ICICI OneSource, and Net-Kraft by AdeaSolutions. Prior to Ernst & Young, Mr. MaheshParasuraman worked with Arthur Andersen in their Taxand Business Advisory Group for over four years wherehe was involved extensively in U.K. and India corporatetaxes, cross border structuring, business re-structuring,joint venture partner search and India entry strategy.Mr.Mahesh Parasuraman is currently on the Boards ofNewgen Imaging Systems Pvt Ltd, Financial Software &Systems Pvt Ltd, Learning Mate Solutions Pvt Ltd, OutfieldKnowledge Works Pvt Ltd, Elitecore Technologies Ltd andRepco Home Finance Ltd. He is also a member of theAudit Committee of Elitecore Technologies Ltd.Mr.Mahesh Parasuraman does not hold any shares in theCompany.

By Order of the Board

Chennai, R.Jagadish23rd June, 2008 Director & CEO

Registered Office:

7H, Century Plaza, 560-562, Anna Salai,Teynampet, Chennai 600 018.

allsec ar08 1-16.p65 7/7/2008, 5:24 PM4


ALLSEC TECHNOLOGIES LIMITEDFinancial Highlights

(Rs. in Million)

15 Month Year Ended Year Ended Year Ended Year EndedPeriod Ended March 31, March 31, March 31, March 31,

March 31, 2004 2005 2006 2007 2008

A. Profit and Loss Account

Income from services 249.41 575.53 922.56 1132.79 990.16

Other income 0.20 0.11 10.76 38.56 50.10

Total income 249.61 575.64 933.32 1171.35 1040.26

Gross Profit/(Loss) before Interest,depreciation & Tax (EBITDA) (102.58) 159.34 277.96 364.00 (24.08)

Depreciation & Amortisation 48.36 40.80 61.31 79.42 83.90

Profit/(Loss) before interest & tax (150.95) 118.54 216.65 284.58 (107.98)

Interest 14.94 13.97 5.04 3.86 2.58

Profit/(Loss) before taxation (165.89) 104.57 211.61 280.72 (110.56)

Profit/(Loss) after taxation (164.98) 118.62 216.37 281.35 (135.50)

B. Balance Sheet

Net fixed assets 154.84 144.02 341.95 290.41 291.44

Investments 14.90 14.90 108.42 884.79 793.24

Net current Assets (25.73) 78.27 237.06 498.67 424.36

Total 144.02 237.19 687.43 1673.87 1509.04

Share Capital 176.78 88.25 120.87 152.38 152.38

Reserves & Surplus – 128.10 587.34 1542.75 1352.99

Less: Profit & Loss account

debit balance 145.72 27.10 – – –

Miscellaneous expenses 1.83 9.60 – – –(to the extent not written off)

Net worth 29.23 179.65 708.21 1695.13 1505.37

Loan funds 114.79 72.06 1.51 1.56 3.67

Deferred Tax (net) – (14.52) (22.29) (22.82) –

Total 144.02 237.19 687.43 1673.87 1509.04

C. EPS (in Rs) (37.9) 14.37 18.40 20.09 (8.89)

Diluted EPS (in Rs) (37.9) 14.12 18.15 19.93 (8.89)

Book Value per share (in Rs) 6.71 20.36 58.59 111.24 98.79

Return on Capital Employed (115%) 50% 32% 17% (7%)

(ROCE in %)

Return on Networth (564%) 66% 31% 17% (7%)

(RONW in %)

Fixed Assets Turnover 1.61 4.00 2.70 3.90 3.40

(No of times)

Working Capital Turnover (9.69) 7.35 3.89 2.27 2.33

(No of times)

EBITDA as a % of total income (41%) 28% 30% 31% (2%)

Net Profit/(Loss) as a % of total income (66%) 21% 23% 24% (13%)

allsec ar08 1-16.p65 7/7/2008, 5:24 PM5



Trends in P B T

(200.00) (150.00) (100.00) (50.00) - 50.00 100.00 150.00 200.00 250.00 300.00 350.00

15 Month E nded Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

P B T - INR Million

15 MonthE nded Mar-04

Mar-05 Mar-06 Mar-07 Mar-08

-

200.00

400.00

600.00

800.00

1,000.00

1,200.00

INR Million

INR Million

Trends in Revenue

allsec ar08 1-16.p65 7/7/2008, 5:24 PM6



Trends in P AT

(200.00)

(150.00)

(100.00)

(50.00)

-

50.00

100.00

150.00

200.00

250.00

300.00

350.00

15 Month E nded Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

PA

T in

INR

mill

ion

s

INR Million

T rends in E B IT DA

(200.00)

(100.00)

-

100.00

200.00

300.00

400.00

15 Month E ndedMar-04

Mar-05 Mar-06 Mar-07 Mar-08

EB

ITD

A in

INR

Mill

ion

s

E B IT DA - INR Million

allsec ar08 1-16.p65 7/7/2008, 5:24 PM7



allsec ar08 1-16.p65 7/7/2008, 5:24 PM8



HRHRHRHRHR and Training and Training and Training and Training and Training


allsec ar08 1-16.p65 7/7/2008, 5:24 PM9



Allsec Technologies Limited core strength is its highlymotivated 2,200 employees who drive for the success anddevelopment of the organization.

Allsec Technologies Ltd is one among the Best Employerin the BPO Industry. The HR practices at Allsec helps thecompany to attract the best talent into the company.

Structured domain and soft skill training for freshgraduates made many young graduates employable atAllsec Technologies and their growth in the society isexponential.

Our employees are not just engaged, we provide them theopportunity that nurtures their personality and professionalwell being. Any Allsecian will proudly say that “they worklike an American and live like an Indian”. This iconologicalwisdom in our employee generates growth anddevelopment to us.

Allsec Technologies Limited performance and aspirationsare pinned through the professional integrity and openculture. To be a global player the company reinvented thesalary pattern for Employees and offers compensation thatis best in the industry.

Lateral movement

As a part of growth opportunity to employees we groominternal talents to take up higher responsibilities by providingelevation through internal job posting. Assessment Centerleverage internally the right talent for the right place.

Preparatory English Programme (PEP)

During the fiscal 2008 an unique training viz PreparatoryEnglish Programme (PEP) was initiated by collaboratingwith Universities / colleges. This programme basicallyprovided strong hand holding in spoken and written Englishwhich opened the gate to many of them for easier entry ofemployment at BPO’s.

The Company has a structure and rigorous recruitmentprocess, thereby the company is able to get the right talentfor its operations.

Human Resource

Graduation Day

Year on year Graduation day provide an opportunity toidentify all employees who have successfully completed

their training and have gone online. Parents of therespective employees were invited on the occasion, andthis activity acted as a bridge between the parentsand organization to understand more about Allsec.On the occasion parents were taken on a facility tourwhich exhibited them the quality of workplace andgave them the pride on the facilities in which their wardsare engaged.

Allsec @ Corporate Olympiad

An Olympiad for the corporates was held on 16th Sep, 2007@ the Nehru Indoor Stadium. The idea behind this was toencourage companies to support employee’s pursuit of a moreactive and healthier lifestyle. 20 corporates took part to provideall the competitive spirit in the 15 disciplines. The bonus ofthe event came in the form of bonding and new relationshipseven though the whole exercise was one of the rivalry.

Allsec with five gold medals overall finished with the thirdplace in the medal tally. Tamil Mani won the Gold in Golfand Prabakar finished first in the event 400 mts in the mencategory. In the women category Pon Maduri andVanishree.V won gold medals in the 400 mts and 800 mtsfinals respectively. We were the winners in the women'sbasketball and men’s tug of war.

allsec ar08 1-16.p65 7/7/2008, 5:25 PM10



We bagged 7 silver medals in various events. S.R.Subathraand S.Leela were the runners up in Tennis- Doubles.S.Leela Devi won second place in Karting. M.Prabhakaranwon the second place in 25 m back stroke and 50 m backstroke in swimming. Chris Selvina was the first runner inthe Table Tennis Singles. Dennis won the silver medal inthe Javelin throw event and Glen Harris bagged two silvermedals in the events Triple jump and Long jump. The teamAllsec finished second in the 4X100 mts Relay.

We also won 12 bronze medals P. Raghuram won thebronze in Snooker and Dayanand won the third place inthe Men Badminton- Singles. Kumudhavalli / Suvarna werethe second runner up in Women Badminton- Doubles. M.Devanathan won the bronze in 25m Free style Swimmingand M.Prabhakaran finished third in 50m Free styleSwimming. Kabir Ahmed finished third in the 100 mts eventwhich is considered as the most glamorous event of track.Dhana bagged 3 bronze medals in the events 800 mts,Javelin throw and Shot put in women's category. Prabhakarwon the bronze medal in the event high jump. AllsecWomen's Team finished third in 4X100 mts relay and wasthe second runner up in the Volley ball tournament.

Openness and Trust

Allsec Technologies Limited strongly believes that opencommunication is instrumental in building bondage in theorganization and to meet that, many communicationchannels like creating HR partners in Operations, providingaccess to our intranet portal “Turf”, proactive in definingand redefining policies and procedures are few contributorsproven for our success.

“Beyond Calling” our in-house magazine

We while disseminated our growth plans and otherhappenings to the family members of Allsecians, we alsohave a plan of interacting with Allsecians family members

through publishing their talents in our monthly In-housemagazine “Beyond Calling”.

We encourage joy at work place by generating fun activitieslike regular team outings, cultural events, sports andgames to all our employees. As a result Team building isevident.

Employee engagement survey

The annual employee survey conducted this year facilitatedemployee engagement by giving employees a channel toshare their views and opinions on various aspects of theorganization culture. While the outcome of the surveyshowed the following strong areas it also gave us aninsight into our alignment to support employeedevelopment.

� Superior’s expertise

� Company know how

� Work atmosphere

� Task Objectives

� Communication

Best Employer among BPOs

Enticing as a best employer, Allsec Technologies Limitedranked 7th among the top 10 BPO employers as per theData Quest – IDC BPO E-SAT Survey 2007. Our HRpractices synchronize both operational achievements andsatisfied employee as a result the survey specific toEmployee Satisfaction and HR practices ranked 4th and9th respectively.

Activities above are evident that HR interventions at AllsecTechnologies Limited have dual focus benefiting to thesociety and organization. Our employees overwhelminglyparticipated to the noble cause of donating blood duringthe Blood Donation Camp organized by HR.

allsec ar08 1-16.p65 7/7/2008, 5:25 PM11



The Directors have pleasure in presenting to you the 9thAnnual Report of the company covering the financial yearended 31st March 2008.

FINANCIAL HIGHLIGHTS(Rs. in Million)

Year Year

Particulars Ended EndedMarch 31 March 31

2008 2007

Income from Services 990.16 1132.79

Other Income 50.09 38.56

Total Income 1040.25 1171.35

Gross Profit/(Loss) beforeinterest, depreciation & Tax(EBITDA) (24.08) 364.00

Depreciation & Amortisation 83.90 79.42

Profit /(Loss) before interest& tax (107.98) 284.58

Interest & Finance charges 2.58 3.86

Profit /(Loss) before taxation (110.56) 280.72

Profit /(Loss) after taxation (135.50) 281.35

Profit / (Loss) brought forward 202.56 65.36

Surplus/(Deficit) carried forward (12.80) 202.56to Balance Sheet

Dividend

Due to the loss incurred during the year the Board ofDirectors of your Company does not recommend anydividend for the Financial Year 2007-08.

Business Outlook

This past year poor performance resulting in cash losswas mainly due to three significant factors

1) The US recession, this resulted in our not replacingand backfilling two of our major customers whodiscontinued business for regulatory reasons andchange in their business climate.

2) The weakening of the US dollar

3) Higher employee cost

Capacity utilization was lower due to lower business andthis also resulted in the lack of profitability in the businesswhere the fixed cost component is significantly higher. Thisis a positive however for us in the years to come where thecompany can jump back to profitability on increasing thecapacity utilization.

The above may also be treated as an explanation to thestatement in Point no. (x) of the Annexure to the Auditors’Report dated 23rd June 2008.

Directors’ Report

Your company also added two significant delivery centers.One in Trichy which is a tier II city near Chennai which willsignificantly increase your company’s ability to attractquality manpower from the area and also a center in Manilawhich together with India can offer a great value to anyinternational customer and we see significant demand inthe market place for a combined delivery infrastructure.Both these additions were planned for strategic reasonsand we believe this will significantly strengthen thecompany’s capability to attract large new customers.

Your company is also actively pursuing customers in thedomestic segment. To facilitate this your company hascompleted necessary formalities and have signed theinteroperability agreement with the Government enablingit to offer international and domestic services using acommon infrastructure and this will be a huge strength forcompeting in large contracts in the Indian Market.

The company is pursuing growth through the Organic andinorganic routes this year also. A combination of Organicand Inorganic growth will help the company maintain itsearlier growth levels in the years to come.

Acquisition of Kingdom Builders Inc, Philippines

Kingdom Builders Inc., is a Company located at Philippinesengaged in Website Development, Strategic Teleservicesand Customer Care Quality Management and has gotclients in this vertical. This Company was acquired duringthe year and the name of the Company has been changedto Allsectech Manila Inc (ATM). Your Company also madefurther investments in ATM for its working capital andexpansion requirements.

Merger of B2K Corp Private Limited

The Hon’ble High Court of Madras vide its order dated17th August 2007 sanctioned the Scheme ofAmalgamation. Pursuant to the Order of the Hon’ble HighCourt of Madras and the consequent filing thereof withthe Registrar of Companies, Tamil Nadu at Chennai on27th August 2007 B2K Corp Private Limited has beenamalgamated with Allsec Technologies Limited.Consequent thereto, B2K has been dissolved without theprocess of winding up.

New facility at Trichy

Your Company has set up a Centre at Trichy. The seatingcapacity of the Trichy Centre is 200. The new facility willbring additional manpower and will meet the growingdemands of the existing customers and the prospectiveclient additions.

Quality & Information Security

The vision of Quality and information security at Allsec isto institutionalize excellence in quality of service andsecurity of customer data by developing and deployingsimple, efficient and effective processes using the

allsec ar08 1-16.p65 7/7/2008, 5:25 PM12


ALLSEC TECHNOLOGIES LIMITEDDirectors’ Report

latest Quality models interlined with data security controlsprescribed by international standards such asISO 27001:2005. As part of its continuous improvementprogram, your Company is certified for ISO 27001(Information Security Management), ISO 9001:2000. Inaddition to such certifications your Company has alsoachieved SAS 70 Type II certification for your HR BPOservices to realize higher levels of maturity and beconsistent with business and market needs in HRoutsourcing.

Disclosure as per Securities and Exchange Board ofIndia (Employees Stock option Scheme and EmployeeStock Purchase Scheme) Guidelines, 1999

Employees Stock Option Schemes

The Compensation Committee of the Board authorizedthe grant of the following options to the eligible employeesin terms of the relevant Schemes. Upon exercise,the holders of each stock option are entitled to oneequity share.

Date of Grant ESOP Exercise ESOS Exercise2004 Price 2006 Price(per (per

option) option)May 6, 2004 286500 Rs.10/-

January 14, 2005 13500 Rs.10/-

January 31, 2005 33700 Rs.10/-

January 25, 2007 350000 Rs.289.75

Descriptions ESOS 2004 ESOS 2006

a. Options granted 333700 350000

b. The pricing formula Face Discount of 15%Value on prevailing

market price

c. Options vested 300000 121750

d. Options exercised 250600 NIL

e. The total number ofshares arising as aresult of exercise ofoptions 250600 NIL

f. Options Cancelled 33700 NIL

g. Options lapsed 29600 106500

h. Variation of termsof options N.A N.A

i. Money realized byexercise of options Rs.25,06,000 NIL

j. Total number ofoptions in force 19800 243500

k. Employee wise details of options granted to :

(i) Senior Managerial Personnel :

No. of No. ofoptions options

Name Designation granted grantedunder under

ESOS 2004 ESOS 2006

Mr.R.Vaithiyanathan Senior Vice 36,800 20000PresidentOperations &HR

Mr.C. Mahadevan Vice 12,800 20000PresidentHR BPO

Mr.K S Raghu Company N.A 5000Secretary

Mr.Rafael Vice President 19,800 20000A Martinez - Allsectech

Inc, SubsidiaryCompany

Mr.Anand Krishnan Vice President N.A NILMarketing

Mr.K.Narasimha Chief Financial N.A NILNayak Officer

Mr.Saravanan Vice President N.A NILThambusamy Technology

Mr.C.S.Bapaiah Vice President N.A NILHR

(ii) Any other employee who receives a grant in anyone year of option amounting to 5% or more ofoptions granted during the year. - Not Applicable.

(iii) Identified employees who were granted option,during any one year, equal to or exceeding 1% ofthe issued capital (excluding warrants andconversions) of the company at the time of grant. -Not Applicable

l. Diluted Earnings Per Share (EPS) pursuant to issue ofshares on exercise of option calculated in accordancewith Accounting Standard 20. Rs. (8.89).

In accordance with SEBI (Employee Stock Option Schemeand Employee Stock Purchase Scheme) Guidelines, 1999,had the Compensation cost for ESOS 2006 beenrecognized based on the fair value at the date of grant inaccordance with binomial method, the amounts of theCompany’s net profit and earnings per share would havebeen as follows :

allsec ar08 1-16.p65 7/7/2008, 5:25 PM13


ALLSEC TECHNOLOGIES LIMITEDDirectors’ Report

Particulars Profit /(Loss) Basic EPS Diluted EPSafter tax (Rs.) (Rs.)

(Rs in 000’s)

Year endedMarch 31, 2008

- Amounts asreported (135,504) (8.89) (8.89)

- Amounts as perpro-forma (148,550) (9.75) (9.75)

Year endedMarch 31, 2007

- Amounts asreported 281,349 20.09 19.93

- Amounts as perpro-forma 277,770 19.84 19.67

The fair value of options was estimated at the date ofgrant using the binomial method with the followingassumptions :

Particulars

Risk-free interest rate 7.5%

Expected life 1.5 years / 2.5 years

Expected volatility 50.9% / 52.9%

Expected dividend yield 1.47%

Share price on the date of grant Rs. 340.90

Expected forfeiture 10%

Responsibility Statement

Your Directors confirm the following :

(i) That in preparation of the annual accounts, theapplicable accounting standards had been followedalong with proper explanation relating to materialdepartures;

(ii) That the directors had selected such accountingpolicies and applied them consistently and madejudgments and estimates that are reasonable andprudent so as to give a true and fair view of the stateof affairs of the company at the end of the financialyear and of the profit or loss of the company for thatperiod;

(iii) That the directors had taken proper and sufficient carefor the maintenance of adequate accounting recordsin accordance with the provisions of the CompaniesAct, 1956 for safeguarding the assets of the companyand for preventing and detecting fraud and otherirregularities;

(iv) That the directors had prepared the annual accountson a going concern basis.

Subsidiaries

The company has three wholly owned subsidiaries namelyAllsectech Inc, USA,B2K Corp Inc, USA and AllsectechManila Inc(Formerly known as Kingdom Builders Inc),Philippines.

Your Company has been granted exemption for the yearended March 31, 2008 by the Ministry of Corporate Affairsfrom attaching to its Balance Sheet, the Annual Report ofits subsidiaries and therefore the accounts of AllsectechInc,USA, B2K Corp Inc, USA and Allsectech Manila Inc,Philippines are not attached. As per the terms of theexemption a Statement containing brief financial particularsof the subsidiary companies for the year ended March 31,2008 is included in the Annual Report. The ConsolidatedFinancial Statements of the Company and its Subsidiariesprepared in accordance with Accounting Standard AS-21form part of the Annual Report and Accounts.

The Annual Accounts of the said subsidiaries and therelated detailed information will be made available to theinvestors of the Company/Subsidiaries, seeking suchinformation at any point of time. The Annual Accountsof the Subsidiary Companies will also be kept forinspection by any investor at the Corporate Office of theCompany.

Deposits :

Your company has not accepted any deposit from the publicduring the period under review.

Conservation of energy, technology absorption,foreign exchange earnings and outgo

Your Company being in the Information TechnologyEnabled Services (ITES), the provisions relating toconservation of energy and technology absorptions are notapplicable. The details of the earnings and expenditure inforeign currency are given below :

Particulars INR Million

Earnings in Foreign Currency 890.74

Expenditure in Foreign Currency 123.31

Payment of Dividend in ForeignCurrency for the period 2006-07 27.85

Directors

Mr. T. Anantha Narayanan and Mr. A. Saravanan, Directorsretire at the ensuing Annual General Meeting and beingeligible offer themselves for re-appointment.

Mr. Vinod Ganjoor, Director and Mr. N. S. RaghuramAlternate Director to Mr. Vinod Ganjoor resigned from theBoard on 6th July, 07. Mr. Daniel D’Aniello, InvestorDirector & Mr. Mahesh Parasuraman Alternate Director toMr. Daniel D’ Aniello was appointed on 14th May 2007and they resigned from the Board on 26th March, 2008.

allsec ar08 1-16.p65 7/7/2008, 5:25 PM14


ALLSEC TECHNOLOGIES LIMITEDAnnexure to Directors’ Report

Subsequently Mr. Mahesh Parasuraman representingM/s. First Carlyle Ventures Mauritius, the Investor wasappointed as additional director on 29th April 2008. TheNotice under Section 257 of the Companies Act, 1956 hasbeen received from a member signifying his intention topropose Mr. Mahesh Parasuraman as a candidate for theoffice of Director and accordingly a resolution will be placedbefore the members at the forthcoming Annual GeneralMeeting.

Corporate Governance

A Report on Management Discussion & Analysis andCompliance of Corporate Governance under clause 49 ofthe listing agreement & Certificate from Auditors confirmingcompliance of conditions of Corporate Governance isenclosed.

Investor Services

Your company will constantly Endeavour to give the bestpossible services to the investors. Towards this end thefollowing are some of the initiatives taken by the Company :

Investor friendly Website of the Company(www.allsectech.com), which gives important financialdetails and other data frequently used by the investors.The Company also has a Shareholders/InvestorsGrievances Committee to address your grievances if anyand resolve them immediately.

The Company has provided an exclusive email id:[email protected] to the investors tofacilitate the redressal of the queries and complaints of theinvestors immediately.

Auditors

M/s. S.R.Batliboi & Associates, Chartered Accountantswere re-appointed as Auditors of the company atthe annual general meeting held on 27th July 2007.M/s. S.R.Batliboi & Associates retire at this annual generalmeeting and being eligible offers themselves for re-election.

Employees

Information as per Section 217 (2A) of the Companies Act,1956 read with the Companies (Particulars of Employees)Rules 1975, as amended regarding the employees, is givenin the Annexure to the Directors’ Report. However, as perthe provisions of Section 219 of the Companies Act, 1956,the Report and Accounts are being sent to all the membersof the Company, excluding the aforesaid information. Thesaid information would be filed with the Registrar ofCompanies and also would be available for inspection bythe members at the Registered Office of the Company.Any member interested in obtaining such particulars mayalso write to the Company Secretary at the Corporate Officeof the Company at 46B, Velachery Main Road, Velachery,Chennai 600042.

Acknowledgement

Your Directors wish to place on record their appreciationfor the excellent support and co-operation given bycustomers, shareholders, service providers andGovernment Agencies.

Your Directors also record their appreciation and gratitudeto Financial Institution and Bankers for their continuedsupport and timely assistance in meeting the Company’sresource requirements. Your Directors acknowledge thededicated services rendered by all the employees of thecompany.

For and on behalf of the Board of Directors

A. Saravanan R. JagadishDirector Director

Chennai23rd June 2008

allsec ar08 1-16.p65 7/7/2008, 5:25 PM15



CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER ANDCHIEF FINANCIAL OFFICER TO THE BOARD

We hereby certify that -

(a) We have reviewed financial statements and the cash flow statement for the year ended March 31, 2008 and that to thebest of our knowledge and belief :

i) these statements do not contain any materially untrue statement or omit any material fact or contain statementsthat might be misleading ;

ii) these statements together present a true and fair view of the Company's affairs and are in compliance with existingaccounting standards, applicable laws and regulations.

(b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year whichare fraudulent, illegal or violative of the Company’s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls and that we have evaluated the effectivenessof the internal control systems of the Company pertaining to Financial reporting and we have disclosed to the Auditorsand the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are awareand the steps we have taken or proposed to take to rectify these deficiencies.

(d) We have indicated wherever applicable to the Auditors and the Audit Committee :

(i) significant changes in internal control over Financial reporting during the year ;

(ii) all significant changes in accounting policies during the year, if any and that the same have been disclosed in thenotes to the financial statements and

(iii) Instances of significant fraud of which we have become aware and the involvement therein, if any, of the managementor an employee having a significant role in the Company’s internal control system.

Chennai R.Jagadish K.Narasimha Nayak23rd June 2008 Director and CEO Chief Financial Officer

allsec ar08 1-16.p65 7/7/2008, 5:25 PM16



(As required by Clause 49 of the Listing Agreementwith the Stock Exchanges)

A. Mandatory Requirements

1. Company’s Philosophy :

The Company lays great importance on investorservice, investor communication, highest level oftransparency, accountability and responsibility in itsoperations and all interactions with its shareholders,investors, lenders, employees and Government. YourDirectors are committed to adopt the best CorporateGovernance practices.

2. Board of Directors :

The Board comprises of a Non-executive Director asChairman, a Director & President and a Director & CEO

Corporate Governance

who are executive directors and 4 othernon-executive Directors.

The Board functions as a full Board or throughCommittees. The policy decisions and control vests withBoard and the operational issues are handled by theCommittees. Both the Board and Committees meet atregular intervals.

The Board has 3 Committees viz. Audit Committee,Compensation Committee and Shareholders/InvestorGrievance Committee.

During the year 2007-2008, Four Board Meetingswere held on 14-May-07, 23-Jul-07, 26-Oct-07 and 21-Jan-08.

Name Designation Category Attendance Other Board#

Board Last Directorships CommitteeMeeting AGM Memberships

Dr. Bala V Balachandran Chairman Independent, Non-executive 2 Yes 1 1

T.Anantha Narayanan Director Independent, Non-executive 4 Yes 5 2

A.Sankarakrishnan Director Independent, Non-executive 4 Yes 1 -

Vinod Ganjoor Director Non-executive - No - -

Shankar Narayanan Director Investor NomineeMadhava Menon Non-Executive 3 No 4 3

Daniel D’ Aniello Director Investor Nominee - No - -Non-Executive

N.S. Raghuram Alternate Director to Non- Executive 1 Yes - -Vinod Ganjoor

Mahesh Parasuraman Alternate Director to Investor Nominee 3 No 2 1Daniel D’Aniello Non-Executive

A. Saravanan Director & President Non-Independent - Executive 4 Yes - -

R. Jagadish Director & CEO Non-Independent - Executive 4 Yes - -

# Excluding Private Limited Companies, Foreign Companies, Section 25 Companies

Mr.Vinod Ganjoor, Director and Mr.N.S.RaghuramAlternate Director to Mr.Vinod Ganjoor resigned from theBoard on 6th July 07 and Mr.Daniel D’Aniello, Director &Mr.Mahesh Prasuraman Alternate Director to Mr.Daniel D’Aniello who have been appointed on 14th May 2007resigned from the Board on 26th March 2008. Mr.MaheshParasuraman has been appointed as an Additional Directoron 29th April 2008.

Code of Conduct for Directors and SeniorManagement

The Code of Conduct for the Directors and SeniorManagement of the Company is available on theCompany’s website; www.allsectech.com. All the Board

Members and the Senior Management Personnel haveconfirmed the Compliance with the Code.

3. Audit Committee :

The Audit Committee consists of Independent andNon-Independent directors. The Committeecurrently comprises of Mr.T.Anantha Narayanan,Mr.A.Sankarakrishnan and Mr.Shankar NarayananMadhava Menon. The composition of the Audit Committeecomplies with the requirements of Clause 49 of the listingagreement entered into with the Stock Exchanges.

During the year 4 Audit Committee meetings were held on14-May-07, 23-Jul-07, 26-Oct-07 and 21-Jan-08.

allsec ar08 17-31.p65 7/7/2008, 5:26 PM17


ALLSEC TECHNOLOGIES LIMITEDCorporate Governance

Name Category Status in the Committee Attendance

T.Anantha Narayanan Independent Director Chairman 4

A.Sankarakrishnan Independent Director Member 4

Shankar Narayanan Investor Nominee Director Member 3Madhava Menon

The objective of the Committee is to comply with therequirements of the clause 49 of the Listing Agreement tobe entered into with the Stock Exchanges and Section 292A of the Companies Act, 1956.

4. Compensation Committee :

The Compensation committee presently consists ofIndependent and Non-Independent directors. TheCommittee currently comprises Dr. Bala V Balachandran,Mr.A.Sankarakrishnan, Mr.T.Anantha Narayanan,Mr.Shankar Narayanan Madhava Menon andMr.A.Saravanan.

The objective of the Committee is

• To determine and recommend to the Board of Directorsthe remuneration package of the Managing Directorand the Whole-time Directors,

• To review and determine the remuneration package ofthe senior management,

• To approve in the event of loss or inadequate profits inany year the minimum remuneration payable tothe Managing Director and the Whole-time Directorswithin the limits and subject to the parametersas prescribed in Schedule XIII to the CompaniesAct, 1956,

• Grant of stock options under the Employees StockOption Scheme and perform other functionsof compensation committee as required/ recommendedby SEBI (Employees Stock Option Scheme andEmployees Stock Purchase Scheme) Guidelines,1999,

• To determine and amend the remuneration packageof the key management personnel of the company andto frame policies to attract, motivate and retainpersonnel and

• Other functions of a Remuneration Committee asrequired / recommended in the Listing Agreement.

The remuneration paid to the whole time directorsis approved by the Committee of Board andShareholders at the general meeting as required by theCompanies Act, 1956. The details of the remunerationpaid to the directors for the year ended 31st March 2008is given below :

Executive Directors (Rs. in Lakhs)

Name of Salary & Commission TotalDirector Allowances

A. Saravanan 57.60 Nil 57.60

R. Jagadish 57.60 Nil 57.60

Note : Further to the amount actually paid shown in tableabove, an amount of Rs. 57.60 lakhs each forMr.A.Saravanan and Mr.R.Jagadish aggregating Rs.115.20lakhs has been provided as wholetime directorsremuneration in the accounts on accrual basis, but the samehad not been paid during the year ended 31st March 2008.The Central Government has approved the remunerationpayable to the whole-time directors of the Company.

Non-Executive Directors(Rs. in Lakhs)

Name of Director Sitting Fees

Dr.Bala V. Balachandran 0.40

T.Anantha Narayanan 1.60

A.Sankarakrishnan 1.60

Vinod Ganjoor –

Shankar NarayananMadhava Menon –

Daniel D’ Aniello –

Raghuram N S – 0.20Alternate Director toVinod Ganjoor

Mahesh Parasuraman –

5. Shareholders/Investor Grievance Committee :

The composition of the Shareholders/Investor GrievanceCommittee complies with the requirements of Clause 49of the listing agreement entered into with the StockExchanges.

� The Shareholders/Investor Grievance Committeepresently consists of Mr.A.Sankarakrishnan,Mr.Shankar Narayanan Madhava Menon,Mr.A.Saravanan and Mr.R.Jagadish.

� This Committee deals with and approves the sharetransfers, transmission, etc., as required from time totime and all other matters relating to investor relationsand grievances.

allsec ar08 17-31.p65 7/7/2008, 5:26 PM18



� Mr.K.S.Raghu, Company Secretary is the ComplianceOfficer nominated for this purpose.

� The details of investor complaints during the year2007-08 are,

ComplaintsResolved Not solved to the Pendingreceived satisfaction of

shareholders

Nil Nil Nil Nil

6. General Body Meetings :

I. Location, time and date where last three AnnualGeneral Meetings were held are given below;

Financial Date Time VenueYear

2004-05 July 23, 11.00 A.M. Narada Gana Sabha, 2005 Mini Hall, 314,

TTK Salai, Alwarpet,Chennai 600 018

2005-06 July 10, 11.00 A.M. Narada Gana Sabha,2006 Mini Hall, 314,


2006-07 July 27, 10.00 A.M Narada Gana Sabha,2007 Mini Hall, 314,


II. Special Resolutions passed in the previous3 Annual General Meetings :

1. Special Resolutions passed in the AGM held on July23, 2005

• Resolution for appointment of Mr.R.Jagadish asWhole Time Director

• Resolution for appointment of Mr.A.Saravananas Whole Time Director

2. Special Resolutions passed in the AGM held on July10, 2006

• Resolution for payment of remuneration by wayof commission to Non-Executive Directors of theCompany

• Resolution for issue of ESOP to employees ofthe Company

• Resolution for issue of ESOP to employees ofthe Subsidiary Companies

3. No Special Resolution was passed in the AGM heldon 27th July, 2007

III. Extra-Ordinary General Meetings :

a) Location, time and date where last three Extra-Ordinary General Meetings were held are givenbelow;

Date Time Venue

21st August, 2006 11.00 am Narada Gana Sabha,Mini Hall, 314,TTK Salai, Alwarpet,Chennai 600 018

12th October, 11.00 am Narada Gana Sabha,2006 Mini Hall, 314,


21st February, 11.00 am 46 C, Velachery2008 Main Road,

Velachery,Chennai – 600 042

b) The following Special Resolutions were passed atthe Extra-Ordinary General Meetings (EGM);

i. At the EGM dated 21st August, 2006

� Resolution for amendment to Capital Clause ofArticles of Association.

� Resolution for issue of equity shares underSection 81 (1A) of the Companies Act, 1956 toFirst Carlyle Ventures Mauritius.

ii. At the EGM dated 12th October, 2006

� Resolution for amendment to Articles ofAssociation.

� Resolution for authorizing the increase in thelimits for investment by Foreign InstitutionalInvestors (FII) to 100%.

� Resolution for approval of the EmploymentAgreement with Mr.A.Saravanan, Whole timeDirector.

� Resolution for approval of the EmploymentAgreement with Mr.R.Jagadish, Whole timeDirector.

iii. At the EGM dated 21st February, 2008

� Resolution for payment of remuneration andre-appointment of Mr. A. Saravanan, Whole timeDirector.

� Resolution for payment of remuneration andre-appointment of Mr. R. Jagadish, Whole timeDirector.

allsec ar08 17-31.p65 7/7/2008, 5:26 PM19



No resolution has been passed last year through postalballot and no special resolution is proposed to beconducted through postal ballot.

7. DISCLOSURES

There have been no materially significant related partytransactions that may have potential conflict with theinterests of the company at large. The necessarydisclosures regarding the transactions are given in theNotes to accounts.

There have been no instances of non-compliance on anymatters relating to capital markets, nor have any penalty/strictures been imposed on the company by the stockexchange or SEBI or any statutory authority on suchmatters.

8. Means of Communications :

• The Quarterly results are being published in oneleading national (English) newspaper normallyFinancial Express/ Business Line and in onevernacular newspaper (Makkalkural). The Quarterlyresults are also displayed on the Company’swebsite- www.allsectech.com

• The Company’s website also displays AnnualReport, shareholding pattern, code of conduct andother shareholders information.

• The Management Discussion and Analysis Reportis also given as part of the Annual Report.

Market Information details for the year 2007-08

National Stock Exchange Bombay Stock Exchange

Month Price Index Price Index

High Low High Low High Low High Low

April 2007 310.00 268.00 3,924.55 3,617.00 345.00 268.15 13,658.11 12,481.86

May 2007 298.50 260.00 4,150.45 4,177.00 296.10 255.50 14,483.59 14,046.06

June 2007 290.00 234.00 4,324.10 4,255.25 288.80 225.00 14,590.82 14,424.71

July 2007 250.70 193.75 4,346.75 4,609.75 254.50 204.00 14,963.26 15,742.32

August 2007 218.05 162.00 4,532.90 4,226.35 217.05 168.50 15,344.02 14,592.11

September 2007 188.95 146.65 4,501.30 4,996.45 186.00 147.00 15,726.06 17,152.31

October 2007 169.00 115.00 5,249.30 5,107.30 151.00 125.50 13,976.79 19,735.21

November 2007 132.50 116.00 5,923.70 5,591.60 134.60 116.00 19,714.22 19,723.20

December 2007 164.80 121.10 6,167.75 5,919.80 161.90 123.00 20,259.45 19,716.57

January 2008 156.20 83.00 6,300.05 4,448.50 157.00 83.95 20,762.80 15,332.42

February 2008 106.80 75.70 5,281.20 4,836.55 107.70 83.10 17,860.10 16,725.68

March 2008 97.70 55.30 5,222.80 4,539.80 94.80 56.00 17,227.56 15,056.09

9. General Shareholders Information :

A. Annual General Meeting

Date and Time : 31st July 2008 at 10.00 A.M.

Venue : Naradagana Sabha, Mini Hall, 314, TTK Salai,Alwarpet, Chennai 600 018.

B. Financial Year

The Financial Year of the Company is April – March.The results for every quarter will be declared within thetime period prescribed under the Listing Agreement.

C. Date of Book Closure

29th July 2008 to 31st July 2008 (Both days inclusive)

D. Listing on Stock Exchanges

The shares of the Company are listed on National StockExchange of India Ltd and Bombay Stock ExchangeLimited.

E. Stock Code / Symbol

NSE – Allsec

BSE – 532633

F. Market Price Data – High / Low during each month inthe last Financial Year & Performance in comparisonto NSE/ BSE index etc

allsec ar08 17-31.p65 7/7/2008, 5:26 PM20



G. Registrars and Transfer Agents

KARVY Computershare Private LimitedUnit : AllsecPlot No.17-24, Vittalrao NagarMadhapur, Hyderabad - 500 081Tel : +91 40 23420815 ; Fax: +91 40 23420814E-mail: [email protected]: www.karvy.com

H. Share Transfer System

KARVY Computershare Private Limited is theRegistrars and Share Transfer Agents of the Company.The shares lodged for physical transfer /transmission/transposition, if any would be registered within theprescribed time limit, if the document are complete inall respects. The shares in the dematerialised form areadmitted for trading with National Securities DepositoryLimited (NSDL) and Central Depository Services (India)Limited (CDSL).

I. Category wise distribution of equity shares as ofMarch 31, 2008 ;

CategoryNo. of PercentageShares of Holding

Promoter Holding :Indian Promoters 4,115,020 27.00Person Acting in Concert NIL NILNon Promoter Holding :Institutional Investors 872,913 5.73Foreign Institutional Investors 1,721,534 11.30Foreign Venture Capital 4,845,175 31.80Foreign Corporate Bodies 684,362 4.49Others :Private Corporate Bodies 393,043 2.58Indian Public 2,265,527 14.87NRIs 320,452 2.10Others 20,300 0.13

Total 15,238,326 100.00

J. Dematerialization of shares and liquidity

As on March 31, 2008, about 95.51%of the shares wereheld in dematerialized form.

K. Address for Investor Correspondence

For any assistance regarding dematerialization ofshares, share transfers, transmissions, change ofaddress or any other query relating to shares, pleasewrite to;

KARVY Computershare Private Limited

Unit : AllsecPlot No.17 - 24, Vittalrao NagarMadhapur, Hyderabad - 500 081Tel : +91 40 23420815E-mail: [email protected]: www.karvy.com

For General Correspondence:Company SecretaryAllsec Technologies Limited,46-B, Velachery Main Road,Velachery,Chennai 600 042Tel: +91 44 2244 7070Fax: +91 44 2244 7077e-mail : [email protected] site: www.allsectech.com

B Non-Mandatory Requirements

Remuneration Committee/CompensationCommittee :

The Board has set up a Compensation Committee/Remuneration Committee with 4 Non-executive and1 executive director as members of the committee.

DECLARATION

The Board of Directors of the Company has adopted the “Code of Conduct” for the Directors and Senior Management of theCompany.

All the Board Members and the Senior Management Personnel have affirmed their Compliance with the Code for the year2007-08.

R.JagadishDirector & CEO

Place: ChennaiDate : 23rd June 2008

allsec ar08 17-31.p65 7/7/2008, 5:26 PM21



AUDITORS’ CERTIFICATE

ToThe Members of Allsec Technologies Limited

We have examined the compliance of conditions of corporate governance by Allsec Technologies Limited, for the yearended March 31, 2008, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchange(s).

The compliance of conditions of corporate governance is the responsibility of the management. Our examination waslimited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditionsof 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 Companyhas 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 oreffectiveness with which the management has conducted the affairs of the Company.

FOR S. R. BATLIBOI & ASSOCIATES

Chartered Accountants

per S Balasubrahmanyam

Partner

Membership No.: 053315

Place: ChennaiDate: 23rd June 2008

allsec ar08 17-31.p65 7/7/2008, 5:26 PM22



INDIAN IT/ITES INDUSTRY CLIMATE

The financial year 2007-08 was a test of resilience for theIndian Information Technology - Business ProcessOutsourcing (IT-BPO) sector. The sector had to counter aslowing economy and a financial sector crisis in the US,and sharp appreciation of the rupee against the US dollar,in addition to the already existing supply-side constraints -and yet it maintained its double-digit revenue growth.Driving the sector’s strong performance was morediversified geographic market exposure and continuedexpansion of the service portfolio, leading steady growthin scale by Indian-origin service providers as well asMultinational Corporations having operations in India. Theoverall revenues for the Indian IT-BPO sector wereexpected to grow by over 33 percent, touching US$ 64billion by the end of the fiscal year (FY2008).

Worldwide technology products and related services sectorspends are estimated to have grown at 7.3 percent to nearlyreach US$ 1.7 trillion in 2007. IT-BPO services, growing atan above-sector-average rate of nearly 8 percent, remainedthe largest category. Outsourcing continued to be theprimary growth driver, with increasing traction in Europeand Asia Pacific offsetting a marginal decline in theAmericas.

Exports: Contributing 64 percent to the overall revenueaggregate, exports remain the mainstay of the Indian IT-BPO growth story. Software and services exports,accounting for over 98 per cent of the total exports, areexpected to cross USD 40 billion and directly employ nearly1.6 million professionals, in FY2008 - a commendableachievement over just about two decades.

BPO services, accounting for over 1/4th of the exportaggregate, is the fastest growing segment across softwareand services exports driven by scale as well as scope.Export revenues for this segment are expected to crossUSD 10.9 billion, a growth of 30 per cent in FY2008.

Domestic : Technology adoption in the domestic marketalso reported steady gains. This segment is expected tocross USD 23 billion in FY2008, reporting healthy growthacross all key segments. Domestic IT services spends areestimated to grow at about 43 per cent in FY2008, and areshowing strong signs of increasing sophistication asenterprise IT infrastructure and applications, networkingand communication become key priorities for India Inc.Domestic BPO market size was estimated at about US$1.8Billion in FY 2008 and is estimated to grow to US $6 Billionby 2012 at a CAGR of 35%.

Outlook : Strategic Review Report 2008 of ITES Industryby Nasscom indicates a positive outlook for Indian IT-BPOexports as well as the domestic market, going forward. Atcurrent levels of growth, the Report stated that the sectorwould employ around 2.5-3 million professionals, accountfor direct investment of about US$ 10-15 billion, andcontribute 7-8 percent of the national GDP. India is set to

Management Discussion & Analysis

become the "nerve-centre" for global sourcing with overtwo-third of Fortune 500 and a majority of the Global 2000firms leveraging global service delivery, now sourcing fromIndia. The report states that positive market indicators anda strong track record strongly support the optimism of theindustry in achieving its aspired target of US$ 73-75 billionin overall software and services revenues by FY2010.

While many of the challenges faced by the sector persist,and are likely to remain over the foreseeable future, IndianIT-BPO's demonstrated ability and its strong growthtrajectory reinforces the conviction in its fundamentallystrong and sustainable value proposition. Strongfundamentals of a large talent pool, sustained costcompetitiveness and an enabling business environmenthave helped establish India as the preferred sourcingdestination. Despite attempts by other countries, toreplicate the factors and policies that have contributed toIndia’s success - superior execution has ensured that Indiaremains the distinct leader in the global sourcing arena.

OPPORTUNITIES & THREATS

OPPORTUNITIES

� Vertical Specialisation

Our strategy has been focused towards the growth inspecific business verticals and this has helped us tosharpen our training & processes for specific domainsenabling us to achieve domain specialization resulting indelivering quality solutions to each of our customers. Wefurther expanded our vertical specialization with theacquisition of 100% equity in a Manila based ITEScompany-Kingdom Builders Inc (subsequently renamed asAllsectech Manila Inc) during the year. Our verticals ofspecialization stand extended to Life cycle customermanagement, tele-marketing, collections, Qualityassurance, Payroll management, technical support andWeb development support.

� Expansion of client base

The focus on winning fresh clients across geographieswhere we can serve on the strength of our corecompetencies in the field of tele-marketing, customersupport and collections is an ongoing process. This efforthas got a major fillip with the addition to our marketing andbusiness development functions by capitalizing thesynergies achieved through our acquisitions.

We maintain our focus on long-term client relationships.We believe that there are significant opportunities foradditional growth from our existing client base and we arein the process of developing these relationships byincreasing the avenues for our service offerings. Thisstrategy helps us to strengthen our existing ties with theclients and to broaden our client base with the expertiseattained in these domains where we enjoy corecompetence.

allsec ar08 17-31.p65 7/7/2008, 5:26 PM23


ALLSEC TECHNOLOGIES LIMITEDManagement Discussion & Analysis

Working together with a select list of anchor clients on acontinuous basis allows us to focus on quality and achievesavings by improving our learning curve thereby meetingand exceeding client expectations. The goodwill we enjoywith our existing clients enables us to get fresh referralswhich provide us the opportunity to win new clients.

The non voice services offered by us in the areas of Qualityassurance and payroll processing offer significantopportunities and the company plans to take advantage ofthis by offering these services to clients in all geographies.

� Quality certifications

As part of its continuous improvement program, theCompany has maintained its quality and informationsecurity certifications ie: ISO 27001 2005 and ISO9001:2000, and during the year also achieved SAS 70 TypeII certification for HR BPO services. Further, to keep pacewith the organizational growth and deliver value propositionto customers, the company has initiated an enterprise widequality management drive through Six Sigma training forsenior and middle management level staff.

The Business Process Improvement we constantly attempt,our track record on the quality assurance services wedeliver and the quality standards and global certificationsthat we have implemented would definitely be an attractivevalue proposition to global corporations to consider us asbusiness partners and outsource larger responsibilities andjobs higher up the value chain.

� Capacity utilization

The 200 seat facility at Trichy and the new centre at Manila(under our subsidiary-Allsectech Manila Inc) having 700seats have become operational during the year and haveincreased our capacity. Over the years Allsec hasconcentrated on capacity expansion by setting up the 1000-seat facility in Chennai which became fully operational infiscal 2006 in addition to the initial 700 seats. Further, afterthe acquisition of B2K Corp Pvt Ltd (now merged withAllsec) an additional 600 seats became available atBangalore. The additional business expected from ourclients would be serviced from our 4 delivery locations atChennai, Bangalore, Trichy and Manila and our businessdevelopment efforts should help us reach optimum capacityutilization. Ongoing HR drives profile, screen and recruitmanpower as required to cater to ongoing business needs

� Inorganic growth opportunities

With the participation in the equity shareholding by theinternational venture capital fund, First Carlyle VenturesMauritius (FCVM) during fiscal 2007, the global visibility ofAllsec has further improved. Along with organic growth,Allsec has been evaluating financially viable targets infurthering the vertical specialization currently enjoyed bythe Company. The Company from time to time identifiespotential acquisition targets and has been evaluating their

compatibility and viability to integrate their businesses withthat of Allsec. By concentrating on acquisitions acrossdifferent time zones, and transitioning such processes toIndia, we can optimize the capacity utilization in India inaddition to expanding businesses across those newgeographies. These acquisitions when they materializewould definitely provide a fillip to the growth of Allsec.

THREATS

ATTRITION:

The Business Process Outsourcing (BPO) industry in thecountry which is experiencing high growth rates is alsofacing the challenge of finding quality human resourcesgiven the current attrition rate.

The attrition rates vary between 40% and 60% in theindustry, while the outsourcing industry is expected to facea shortage of half million professionals by 2012. Thus, highattrition rates coupled with dearth of quality man powercontinues to hinder the high growth trajectory and acts asa major hurdle in making India the most preferreddestination for all outsourcing solutions.

Allsec has an attrition rate of approximately 35% and islooking beyond the traditional areas of recruitment to meetthe attrition challenge and the increased demand formanpower. In order to ensure a consistent flow of trainedmanpower, Allsec is working with the government tointroduce courses at school and college level, which are inline with the requirements of the ITES-BPO industry. Thechallenge for the industry is not in availability butemployability of graduates who come out of the existingeducational stream. To address this, Allsec has beentraining candidates in the basic skill sets that are requiredto make them employable. A broad based system is inplace to identify, train and deploy employable candidates.Further, efforts are also taken in the direction of training,employee referral scheme, employee satisfaction surveysand other creative activities to tackle the threat posed byattrition.

RISKS AND CONCERNS

BUSINESS RISKS

The market for BPO services is highly competitive, and weexpect competition to intensify and increase from a numberof sources. We believe that the principal competitive factorsin our markets are price, service quality, sales andmarketing skills, the ability to develop customized solutionsand technological and industry expertise. We facesignificant competition from several entities located in Indiaand overseas, including captive outsourcing units. Severalother countries including China offer cost effectiveoutsourcing solutions, and we may not be able to competewith them for several reasons. In addition, security concernsregarding data being sourced out for processing has beenraising concerns on a global level apart from ethical and

allsec ar08 17-31.p65 7/7/2008, 5:26 PM24



moral issues involved in outsourcing. This threat is inaddition to the opposition staged by the local populationthat outsourcing causes unemployment in the homecountries.

FINANCIAL RISKS

GEOGRAPHICAL CONCENTRATION OF CLIENTS

Our revenues are highly dependent on clients located inthe United States or from Indian subsidiaries of UScompanies. Due to the economic slowdown in the UnitedStates, our clients may reduce or postpone theiroutsourcing significantly, which may in turn lower thedemand for our services and negatively affect our revenuesand profitability.

EXCHANGE FLUCTUATION

Managing an equilibrium state in the light of the unfavorablemovements in exchange rates involved in earnings andexpenditure in foreign currency continues to be one of thechallenges when exposed to global markets. We arecurrently adopting hedging strategies on a selective basisand in addition use bank balances in foreign currency tomeet our foreign currency liabilities. These measures wouldassist in reducing the impact of unfavorable movements inexchange rates. However, our results of operation will beaffected if the rupee continues to appreciate in future.

COST ARBITRAGE

Our most significant costs are the salaries and relatedbenefits of our operations staff and other employees. Wagecosts in India have historically been significantly lower thanwage costs in the United States and other developedcountries, which has been one of our competitiveadvantages. However, wages in India are increasing at afaster rate compared to the developed countries, whichmay reduce our competitive advantage in relation to pricing.We may need to increase the levels of employeecompensation more rapidly than in the past to remaincompetitive and to attract necessary employees. Wageincreases in the long-term may reduce our profit margins.

INDIAN TAXATION RISK

Taxes and other levies imposed by the Government of Indiaand/or the States of India that we operate in, may affectthe BPO industry include (i) customs duties; (ii) Servicetax; (iii) income tax; (iv) value added tax.

Certain changes introduced over the years had their impacton the ITES industry, such as levy of service tax on propertyrentals, introduction of levy of fringe benefit tax on ESOP,inclusion of profits eligible for 10A deduction for computingMinimum Alternate Tax etc. which have a dampening effecton the Industry. However, a welcome relief introduced inthe current year is the extension of Sec 10A benefit ondeduction of export profits for IT/ITES units by one year till31 March 2010.

LEGAL AND CONTRACTUAL RISKS

Our business is subject to a variety of country specificregulations. Particularly, we must comply with a numberof laws in the United States in relation to debt collectionand telephone and email based solicitation.

The requirements of many of these regulations are complexand the failure to comply could result in enforcement orprivate actions which can potentially affect our reputationand in turn adversely affect our business. In addition, theselaws are subject to change and new laws affecting ourbusiness may be enacted, which could significantly affectthe demand for, and our ability to provide, certain serviceofferings and significantly increase the cost of regulatorycompliance.

INFRASTRUCTURE RISKS

The Company has invested substantially in the state ofthe art infrastructure and equipment in its centers to providea world-class service to its customers. Service to our clientsalso depend on the uninterrupted functioning of theseequipment, power and stability of telecom network. Anyobsolescence in the infrastructure and equipment leadingto in-compatibility with client's systems or any disruption inthe essential services may affect the business of thecompany.

HUMAN RESOURCES RISK

There have been cases of companies losing BPO ordersfor not being able to demonstrate a competent team thatcan manage a large workforce. High level of attrition furthercomplicates the problem. At least 50% of the workforcechange jobs every year. There is a gap between the supplyand demand of work force. Further, the available manpower is not employable in terms of the skill sets requiredfor the industry. Thus the shortage of supply in qualitymanpower both at the managerial level and at the agentlevel may significantly affect the functioning of theCompany.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Allsec is currently providing voice and data services to itsInternational and Domestic clients in the InformationTechnology Enabled Services (ITES) sector.

The major market of Allsec is concentrated in the US andexports constituted 95% of the revenues over the last fewyears. However, in current year due to the increased focuson domestic outsourcing work and also due to the slowdown in the US and the rise of domestic MNCs, theproportion of domestic revenues has significantly increasedas shown below

(Rs. in Million)

For the year ended Exports % age Domestic % age Totalincome

March 31, 2008 852.68 86 137.48 14 990.16

March 31, 2007 1,093.56 96 39.22 4 1,132.78

allsec ar08 17-31.p65 7/7/2008, 5:26 PM25



INTERNAL CONTROL SYSTEMS AND THEIRADEQUACY :

The Company has a well-defined and documented internalcontrol system that is adequate and commensurate withthe size and nature of its business. Adequate checks andbalances and control systems are established to ensurethat assets of the company are safeguarded andtransactions are executed under proper authorization andare properly recorded in the books of account. There existsa proper definition of roles and responsibilities across theorganization to ensure information flow and effectivemonitoring. The Company has an independent InternalAudit carried out by a firm of chartered accountants. TheCompany has an Audit Committee consisting of 3 directorswhich has a majority of independent directors. Thiscommittee reviews the internal audit reports, statutory auditreports, the quarterly and annual financial statements anddiscusses all significant audit observations and follow upactions arising from them. It further monitors the riskexposures of the company. The committee also reviewsand recommends to the Board the terms of appointmentof the statutory auditors and internal auditors.

DISCUSSION ON FINANCIAL AND OPERATIONALPERFORMANCE :

The following discussion is based on our auditedunconsolidated financial statements which have beenprepared to comply in all material respects with the notifiedaccounting standards by Companies Accounting StandardsRules, 2006 and the relevant provisions of the CompaniesAct, 1956. The financial statements have been preparedunder the historical cost convention on an accrual basis.The accounting policies have been consistently appliedby the Company except for the change in accounting policyto ensure compliance with law for the time being in force.

PERFORMANCE(Rs. in Millions)

Year Ended Year EndedMarch 31, March 31,

2008 2007

IncomeIncome - Operations 990.16 1132.79Income - Others 50.10 38.56Income - Total 1040.26 1171.35

Operating Costs 966.52 714.57Operating Profit 73.74 456.77Establishment Expenses 97.82 92.77EBITDA (24.08) 364.00Finance Charges &Non Cash Expenses 86.48 83.28Profit/(loss) before Taxes (110.56) 280.72Taxes 24.94 (0.63)

Profit/(loss) after Taxes (135.50) 281.35

BALANCE SHEET

1. Share Capital

The Equity Capital of the Company as on March 31, 2008stands at Rs 152.38 million and has remained constantcompared to the previous year end.

2. Stock Options

Amount of reserve on account of stock option compensation(ESOP) has increased to Rs 10.78 million at current yearend from Rs 3.02 million previous year end. Details ofESOP plans are

Employee Stock Option Plan (ESOP) 2004 :

The Shareholders at the Extra Ordinary General Meetingheld on May 6, 2004 have approved an Employee StockOption Plan, which provides for an issue of 550,000 optionsto the employees. Consequently, the compensationcommittee on July 1, 2004 has granted 286,500 options,on January 14, 2005 - 13,500 options and on January 31,2005 - 33,700 options to its employees at an exercise priceof Rs 10 per share.

Out of the 333,700 options granted, 19800 options areoutstanding as at March 31, 2008 and 63,300 options havebeen cancelled/lapsed as on March 31, 2008.

Employee Stock Option Scheme (ESOS), 2006 :

The shareholders at the Annual General Meeting heldon July 10, 2006, have approved an Employee StockOption Scheme 2006 which provides for an issue of600,000 options to the employees. Consequently,the compensation committee had granted the 350,000options on January 25, 2007 at an exercise price ofRs 289.75 per share. Out of the 350,000 options granted,106,500 options have been cancelled/lapsed as onMarch 31, 2008.

3. Reserves and Surplus

Share warrants were issued to First Carlyle VenturesMauritius (FCVM) and to the Promoters of the Companyduring the previous year. The holders of these warrant havenot exercised this option within the prescribed date andconsequently, such warrants stand lapsed. Accordingly,the initial application money of Rs. 25 million received onsuch warrants stands forfeited to the company as per theterms of issue and has been transferred tocapital reserve.

The Company's Reserves and Surplus as on March 31,2008 stood at Rs 1,342.21 million represented by capitalreserve Rs 25 million, share premium on the equity sharesamounting to Rs 1,202 million, Rs 128 million representingGeneral Reserve, and Rs 12.8 million representing debitbalance in the profit and loss account.

allsec ar08 17-31.p65 7/7/2008, 5:26 PM26



9. Loans & Advances

The composition of the year end loans and advances wasas follows :

(Rs in Million)

As at As at Increase/March 31, March 31, (Decrease)Details

2008 2007 overprevious year

Advancesrecoverable 0.88 0.83 0.05Balances withexciseauthorities 32.05 13.28 18.77Loan toSubsidiary 6.41 30.98 (24.57)Prepaidexpenses 7.29 4.37 2.92Deposits 58.89 26.70 32.19Taxesreceivable 21.31 6.40 14.91

Balances with excise authorities represent credit for servicetax on input services availed. Balance of loan to subsidiaryRs 6.4 million represents balance in loan given by erstwhileB2K Corp Pvt Ltd to B2K Inc USA. Taxes receivableincludes MAT credit entitlement of Rs 4.4 million apart fromadvance tax and tax deducted at source.

Increase in deposits primarily reflects the security depositsfor utilities and office premises, paid at Bangalore whichwas added due to the merger of erstwhile B2K Corp Pvt.Ltd. with the Company.

10. Current Liabilities

Sundry Creditors, representing the balance payable tosuppliers of goods and services stood at Rs 133.5 millionas at March 31, 2008 as against Rs 219.42 million as atMarch 31, 2007. The reduction in liabilities is mainly dueto nil liability on account of dividend proposed andcorresponding dividend tax in current year.

(Rs in Million)



To suppliersof goods andservices 68.48 85.26 (16.78)Other payables 43.89 34.11 9.78

Employeerelatedliabilities 21.12 10.88 10.24

Proposeddividend Nil 76.19 (76.19)

Tax ondividend Nil 12.95 (12.95)


4. Secured Loans

Secured loan balance represents balance payable towardshire purchase loans.

5. Fixed Assets

An amount of Rs 65 million has been invested in fixedassets during the year which primarily includes investmentsin Call center equipment - Rs 22.98 million, computers andsoftware - Rs 9.9 million, lease hold equipment - Rs 12.89million and office equipment, furniture and vehiclesamounting to Rs 19.5 million.

After providing for depreciation of Rs 83.9 million for theyear, the net block of fixed assets stood at Rs 291.4 millionas on March 31, 2008. Balance of net fixed assets was Rs290.4 million as at March 31, 2007.

6. Investments

Total Investments amounting to Rs 793.2 million includeRs 382.13 million in the 100% subsidiary Allsectech Inc(which includes additional investment during the currentyear amounting to USD 8 million) and Rs 100.15 million inthe 100% subsidiary Allsectech Manila Inc (formerlyKingdom Builders Inc.,) acquired during the year. Thebalance in mutual fund as at the year end was Rs 310.96million.

7. Sundry Debtors

Sundry Debtors increased to Rs 328.4 million as at March31, 2008 as against Rs 264.26 million as at March 31,2007. These debtors are considered good and realizableexcept $ 200K or Rs 80 million for which a provision hasbeen created in respect of receivables from a client againstwhom the Company has filed a suit for recovery of amountsdue. The sundry debtors in terms of days of sales increasedto 121 days as at March 31, 2008 as against 85 days as atMarch 31, 2007.

8. Cash and Bank Balances

Cash and Bank balances reduced to Rs 94.16 millionas at March 31, 2008 as against Rs 369.34 million as atMarch 31, 2007. This represents year-end cash and bankbalances available in current and deposit accounts.

(Rs in Million)



Cash andCurrentaccounts 52.12 243.44 (191.32)

Depositaccounts 41.94 125.90 (83.96)

allsec ar08 17-31.p65 7/7/2008, 5:26 PM27



PROFIT AND LOSS ACCOUNT

1. Income from services

The table below provides the details of income and itscomposition :

(Rs in Million)

Year Ended Year Ended Increase/

IncomeMarch 31, March 31, (Decrease)


Exports 852.68 1,093.57 (240.89)

Domestic 137.48 39.22 98.26

Total 990.16 1,132.79 (142.63)

The reduction in export revenue was primarily due to(i) loss of 2 of our major clients in the US due to economicslowdown and changes in regulations affecting theirbusiness and (ii) impact of weakening of the US dollar whichreduced the amount of billing when converted to Rupeesin the financials. This reduction was partially off set by clientwins and increase in business volumes of clients wonduring the previous year.

The increase in domestic revenue both in absolute termsand as a percentage of total revenue is due to significantadditions to the client list and the success of efforts inactively pursuing customers in the domestic segment.

2. Other Income

During the current year, other income increased to Rs 50.09million compared to Rs 38.56 million in the previous year.This increase is mainly due to income earned on deploymentof surplus funds in mutual funds and bank fixed deposits.

3. Expenditure

The increase in employee costs and administrationoverheads were the main causes of increase in expensesduring the year compared to previous year.

(Rs in Million)

Details Year ended Year ended Increase/March 31, March 31, (Decrease)


Connectivitycost (Note a) 106.55 132.70 (26.15)

Employeecosts andbenefits(Note b) 709.79 489.93 219.86

General andadministrationexpenses(Note c) 203.28 126.20 77.08


(Rs in Million)

Details Year ended Year ended Increase/March 31, March 31, (Decrease)


Sellingexpenses(Note d) 44.69 59.15 (14.46)

Financecharges 2.58 3.85 (1.27)

Depreciation 83.90 79.42 4.48

Note a : The reduction in cost of connectivity is due toreduction in the tariffs both fixed and variable charges andlower usage in the current year.

Note b : Increase in employee costs was because of(i) higher number of employees on an average during theyear mainly due to impact of amalgamation of B2K Corpand (ii) partly on account of rise in average pay levels ofexisting staff.

Note c : The increase in general and admin expenses ismainly due to rent and electricity expenses relating to theinclusion of cost of Bangalore unit pursuant to the mergerof B2K Corp during the year and new facility at Trichyincurred for part of the year. Further increase is due toannual maintenance contracts for the expanded capacityof equipment.

Note d : Reduction in selling expenses is mainly on accountof decrease in selling commission as a result of reductionin export revenues.

4. Provision for Tax

Provision for tax includes current tax, deferred taxes, fringebenefit tax apart from MAT credit entitlement. Since Allsecenjoys deduction under section 10A of the Income taxAct, 1961 on its export income, current tax is paid on itsbook profits (excluding profits eligible for deduction undersection 10A) under the provisions of MAT. Howeverduring this financial year there was no current taxesprovision or MAT entitlement credit as there was no MATpayable on account of there being a loss as per MATprovisions. During the current year, company haschosen to derecognise the deferred tax asset createdin previous financial years and charged it off to revenue(Rs 22.8 million) resulting in overall higher deferred taximpact during the current year (last year Rs 0.53 millioncredit). Fringe benefit tax provision was also marginallyhigher at Rs 2.1 million in current year (last year Rs 1.6million).

allsec ar08 17-31.p65 7/7/2008, 5:26 PM28


ALLSEC TECHNOLOGIES LIMITEDAuditors’ Report

To The Members of Allsec Technologies Limited

1. We have audited the attached Balance Sheet of AllsecTechnologies Limited (‘the Company’) as at March 31,2008 and also the Profit and Loss Account and theCash Flow Statement for the year ended on that dateannexed thereto. These financial statements are theresponsibility of the Company’s management. Ourresponsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidencesupporting the amounts and disclosures in the financialstatements. An audit also includes assessing theaccounting principles used and significant estimatesmade by management, as well as evaluating the overallfinancial statement presentation. We believe that ouraudit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order,2003 (as amended) issued by the Central Governmentof India in terms of sub-section (4A) of Section 227 ofthe Companies Act, 1956, we enclose in the Annexurea statement on the matters specified in paragraphs 4and 5 of the said Order.

4. Further to our comments in the Annexure referred toabove, we report that :

i. We have obtained all the information andexplanations, which to the best of our knowledgeand belief were necessary for the purposes of ouraudit;

ii. In our opinion, proper books of account as requiredby law have been kept by the Company so far asappears from our examination of those books;

iii. The balance sheet, profit and loss account and cashflow statement dealt with by this report are inagreement with the books of account;

iv. In our opinion, the balance sheet, profit and lossaccount and cash flow statement dealt with by thisreport comply with the accounting standardsreferred to in sub-section (3C) of section 211 of theCompanies Act, 1956;

v. On the basis of the written representations receivedfrom the directors, as on March 31, 2008, and takenon record by the Board of Directors, we report thatnone of the directors is disqualified as on March31, 2008 from being appointed as a director in termsof clause (g) of sub-section (1) of section 274 of theCompanies Act, 1956;

vi. In our opinion and to the best of our informationand according to the explanations given to us, thesaid accounts give the information required by theCompanies Act, 1956, in the manner so requiredand give a true and fair view in conformity with theaccounting principles generally accepted in India;

(i) in the case of the balance sheet, of the state ofaffairs of the Company as at March 31, 2008;

(ii) in the case of the profit and loss account, ofthe loss for the year ended on that date; and

(iii) in the case of cash flow statement, of the cashflows for the year ended on that date.

For S. R. BATLIBOI & ASSOCIATESChartered Accountants

per S BalasubrahmanyamPartner

Membership No: 053315Chennai23rd June 2008

allsec ar08 17-31.p65 7/7/2008, 5:26 PM29


ALLSEC TECHNOLOGIES LIMITEDAnnexure to Auditors’ Report

Annexure referred to in paragraph 3 of our reportof even date

Re: Allsec Technologies Limited (“the Company”)

(i) (a) The Company has maintained proper recordsshowing full particulars, including quantitativedetails and situation of fixed assets.

(b) The Company has a phased program of physicalverification of fixed assets, which, in our opinionis reasonable having regard to the size of theCompany and the nature of its assets. Inaccordance with the program, the Company hasverified certain assets during the year. Asinformed, no material discrepancies were noticedon such verification.

(c) There was no disposal of a substantial part offixed assets during the year.

(ii) (a) Having regard to the nature of the Company’sbusiness, clause 4(ii) of the Companies (Auditor’sReport) Order, 2003 (as amended) is notapplicable to the Company.

(iii) (a) The Company has granted loans to its subsidiary,B2K Corp Inc., which is included in the registermaintained under Section 301 of the CompaniesAct, 1956. The maximum amount involved duringthe year was Rs. 7.1 million and the year endbalance of loans granted was Rs. 6.4 million.

(b) In our opinion and according to the informationand explanations given to us, the terms andconditions for such loans are not prima facieprejudicial to the interest of the Company.

(c) The loans granted are repayable on demand. Asinformed, the Company has not demandedrepayment of any such loan during the year, thus,there has been no default on the part of B2K CorpInc. The loans given are interest free.

(d) As informed, the Company has not taken anyloans, secured or unsecured from companies,firms or other parties covered in the registermaintained under section 301 of the Act.

(iv) In our opinion and according to the information andexplanations given to us, there is an adequate internalcontrol system commensurate with the size of theCompany and the nature of its business, for thepurchase of fixed assets and for the sale of services.During the course of our audit, no major weaknesshas been noticed in the internal control system inrespect of these areas.

(v) (a) According to the information and explanationsprovided by Management, we are of the opinionthat the particulars of contracts or arrangementsreferred to in section 301 of the Act that need to

be entered into the register maintained undersection 301 have been so entered.

(i) (b) In respect of transactions made in pursuance ofsuch contracts or arrangements exceeding valueof Rupees five lakhs entered into during thefinancial year, because of the unique andspecialized nature of the items involved andabsence of any comparable market prices, weare unable to comment whether the transactionswere made at prevailing market prices at therelevant time.

(vi) The Company has not accepted any deposits fromthe public.

(vii) In our opinion, the Company has an internal auditsystem commensurate with the size and nature of itsbusiness.

(viii) To the best of our knowledge and according to theinformation and explanation given to us, the CentralGovernment has not prescribed maintenance of costrecords under clause (d) of sub-section (1) of section209 of the Act, for the products / services of theCompany.

(ix) (a) The Company is regular in depositing withappropriate authorities undisputed statutory duesincluding provident fund, investor education andprotection fund, employees’ state insurance,income-tax, wealth-tax, sales tax, service tax,customs duty, cess and other material statutorydues applicable to it. Statutory dues in respect ofexcise duty are not applicable to the Company.

(b) According to the information and explanations givento us, no undisputed amounts payable in respect ofprovident fund, investor education and protectionfund, employees’ state insurance, income-tax,wealth-tax, service tax, customs duty, cess andother undisputed statutory dues were outstanding,at the year end, for a period of more than six monthsfrom the date they became payable.

(c) According to the records of the Company, thedues outstanding of income-tax, sales-tax,wealth-tax, service tax, customs duty, excise dutyand cess on account of any dispute, are asfollows.

Name Nature Amount Period to Forum whereof the of dues (Rs) which the dispute isstatute amount pending

relates

Income Income – 2004-05 CommissionerTax Act, Tax* of Income Tax

1961 (Appeals)

* The order passed by the assessing officer does notimpact the tax payable by the Company but has impacton the unabsorbed loss and unabsorbed depreciationthat can be carried forward.

allsec ar08 17-31.p65 7/7/2008, 5:26 PM30


ALLSEC TECHNOLOGIES LIMITEDAnnexure to Auditors’ Report

(x) The Company’s accumulated losses at the end ofthe financial year are less than fifty per cent of itsnet worth and it has incurred cash losses in thecurrent year. In the immediately preceding financialyear the Company has not incurred cash losses.

(xi) The Company has no dues to banks, financialinstitutions or debenture holders.

(xii) According to the information and explanations givento us and based on the documents and recordsproduced to us, the Company has not granted loansand advances on the basis of security by way ofpledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi / mutualbenefit fund / society. Therefore, the provisions ofclause 4(xiii) of the Companies (Auditor’s Report)Order, 2003 (as amended) are not applicable to theCompany.

(xiv) The Company is not dealing in or trading in shares,securities, debentures and other investments.Accordingly, the provisions of clause 4(xiv) of theCompanies (Auditor’s Report) Order, 2003 (asamended) are not applicable to the Company.

(xv) According to the information and explanations givento us, the Company has not given any guarantee forloans taken by others from banks or financialinstitutions.

(xvi) Based on information and explanations given to usby Management, term loans were applied for thepurpose for which the loans were obtained.

(xvii) According to the information and explanations givento us and on an overall examination of the balancesheet of the Company, we report that no funds raisedon short-term basis have been used for long-terminvestment.

(xviii) The Company has not made preferential allotmentof shares to parties and companies covered in theregister maintained under section 301 of the Act.

(xix) The Company did not have any outstandingdebentures during the year.

(xx) The Company has not raised any money by publicissues and accordingly, the provisions of clause 4(xx)of Companies (Auditor’s Report) Order, 2003 (asamended) are not applicable to the Company.

(xxi) Based upon the audit procedures performed for thepurpose of reporting the true and fair view of thefinancial statements and as per the information andexplanations given by Management, we report thatno fraud on or by the Company has been noticed orreported during the course of our audit.

FOR S.R. BATLIBOI & ASSOCIATESChartered Accountants

per S BalasubrahmanyamPartner

Membership No. 053315Chennai23rd June 2008

allsec ar08 17-31.p65 7/7/2008, 5:26 PM31



As at As atPARTICULARS Schedule March 31, 2008 March 31, 2007

SOURCES OF FUNDSShareholders’ fundsShare capital 1 152,383 152,383Share warrants (Refer note 20.4) – 25,074Stock options outstanding 2 10,777 3,024Reserves and surplus 3 1,342,213 1,514,649

1,505,373 1,695,130

Loan fundsSecured loans 4 3,669 1,557

1,509,042 1,696,687APPLICATION OF FUNDS

Fixed assets

Gross block 5 678,329 541,217Less : Accumulated depreciation 386,994 254,473Net block 291,335 286,744Add: Capital work-in-progress [including capital advances] 106 3,662

291,441 290,406

Investments 6 793,240 884,792

Deferred tax asset 7 – 22,821

Current assets, loans and advances

Sundry debtors 8 328,402 264,259Cash and bank balances 9 94,160 369,345Other current assets 10 8,478 1,965Loans and advances 11 126,833 82,523

557,873 718,092Less : Current liabilities and provisions

Current Liabilities 12 112,384 119,405Provisions 13 21,128 100,019

133,512 219,424

Net current assets 424,361 498,668

Miscellaneous expenditure 14 – –(To the extent not written off or adjusted)

1,509,042 1,696,687

Notes to Accounts 20

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 S.R. BATLIBOI & ASSOCIATES For and on behalf of the Board of DirectorsChartered Accountants

Per S Balasubrahmanyam A Saravanan R Jagadish K S RaghuPartner Director Director Company SecretaryMembership No: 053315

Place : ChennaiDate : 23rd June 2008

Balance Sheet(All amounts are in thousands of Indian Rupees, unless otherwise stated)

allsec ar08 32-41.p65 7/7/2008, 5:27 PM32



Year Ended Year EndedPARTICULARS Schedule March 31, 2008 March 31, 2007

IncomeIncome from services 990,161 1,132,788[Tax deducted at source - Rs. 9,774, previous year - Rs. 2,657]Other income 15 50,097 38,558

1,040,258 1,171,346ExpenditureConnectivity costs 106,554 132,070Employee costs and benefits 16 709,804 489,927General and administration expenses 17 203,282 126,195Selling expenses 18 44,698 59,152Finance charges 19 2,581 3,858Depreciation 5 83,903 79,422

1,150,822 890,624

Profit / (Loss) before tax (110,564) 280,722

Provision for taxation- Current tax – 2,679- MAT credit entitlement – (4,379)- Deferred tax 22,821 (530)- Fringe benefit tax 2,119 1,603

Profit / (Loss) after tax (135,504) 281,349Balance brought forward from previous year 202,568 65,360Amounts adjusted on amalgamation of B2K Corp Private Limited(Also refer Note 20.3)Loss after tax for the financial years 2005-06 and 2006-07 (79,865) –

Profit available for appropriation (12,801) 346,709

Appropriations:Proposed dividend – 76,192Tax on dividend – 12,949Transfer to General Reserve – 55,000

Profit carried to Balance Sheet (12,801) 202,568

Earnings per Share 20.17Net profit / (loss) available to equity shareholders (135,504) 281,349Weighted average number of equity shares used in computing basic earnings per share 15,238,326 14,003,010Basic earnings per share (equity shares, par value Rs 10/- each) (Rs.) (8.89) 20.09Weighted average number of equity shares used in computing diluted earnings per share 15,238,326 14,119,605Diluted earnings per share (equity shares, par value Rs 10/- each) (Rs.) (8.89) 19.93


The schedules referred to above and notes to accounts form an integral part of the profit and loss account.





Profit and Loss Account(All amounts are in thousands of Indian Rupees, unless otherwise stated)

allsec ar08 32-41.p65 7/7/2008, 5:27 PM33



Year Ended Year EndedPARTICULARS March 31, 2008 March 31, 2007

A. Cash flow from operating activities:Net profit / (loss) before tax (110,564) 280,722Adjustments for:Depreciation 83,903 79,422Interest expense 326 110Interest income (2,874) (6,058)Dividend income (35,776) (31,302)Loss on sale of assets 510 751Provision for doubtful debts 8,004 -(Profit) on sale of investments (232) (120)Liabilities no longer required written back (1,601) -Unrealised foreign exchange (gain) /loss, net (8,647) 6,519Amortisation of employee stock compensation cost 7,752 2,128

Operating profit / (loss) before working capital changes (59,199) 332,172

Adjustments for changes in working capital: - (Increase) in sundry debtors (42,965) (71,216) - (Increase) in loans and advances and other current assets (35,857) (17,522) - Increase / (Decrease) in current liabilities and provisions (11,921) 33,480

Cash generated from operations (149,942) 276,914 - Taxes (paid), net (5,462) (2,052)

Net cash from / (used in) operating activities (155,404) 274,862

B. Cash flow from investing activities:Capital expenditure (Refer note 1) (58,695) (30,575)Proceeds from sale of fixed assets 1,682 1,111Purchase of investments - mutual funds (1,933,016) (3,239,348)Proceeds from sale of investments - mutual funds 2,345,383 2,516,374Investment in subsidiary (445,803) (53,277)Loans advanced to subsidiary - (12,860)Deposits (made) / received during the year 100,000 (100,000)Interest received 2,630 4,235Dividend Received 35,776 31,302

Net cash from / (used in) investing activities 47,957 (883,038)

Cash Flow Statement(All amounts are in thousands of Indian Rupees, unless otherwise stated)

allsec ar08 32-41.p65 7/7/2008, 5:27 PM34




C. Cash flow from financing activities:Proceeds from issue of equity share capital/ share warrants - 812,011Share issue expenses (200) (19,427)Proceeds from long term borrowings 3,060 1,175Repayment of long term borrowings (948) (1,134)Interest paid (326) (110)Dividend paid (76,192) (60,434)Dividend tax paid (12,949) (8,476)

Net cash from / (used in) financing activities (87,555) 723,605

Net increase in cash and cash equivalents (195,002) 115,429Opening cash and cash equivalents 273,290 157,861Add: Adjustments on amalgamation of B2K 15,418 -

Closing cash and cash equivalents* 93,706 273,290

*Includes restricted cash balances 80 29

Reconciliation of cash and cash equivalents with cash and bank balance as per Schedule 9:

As at As atMarch 31, 2008 March 31, 2007

Cash and bank balances, per Schedule 9 94,160 369,345

Less: Term deposits - (100,000)

Loss / (Gain) on restatement of balances in foreign currency accounts. (454) 3,945

Cash and cash equivalents as per cash flow statement 93,706 273,290

Notes:1. Increase in capital expenditure include payments for items in capital work in progress and advances for purchase of

fixed assets. Adjustments for increase / decrease in current liabilities related to acquisition of fixed assets to the extentidentified have been made.

2. The accompanying notes are an integral part of this statement.





Cash Flow Statement(All amounts are in thousands of Indian Rupees, unless otherwise stated)

allsec ar08 32-41.p65 7/7/2008, 5:27 PM35



As at As atPARTICULARS March 31, 2008 March 31, 2007

1 Share capitalAuthorised20,000,000 [Previous year - 20,000,000] Equity shares of Rs. 10/- each 200,000 200,000

1,350,000 [Previous year - 1,350,000] Convertible Preference Shares of Rs. 100/- each 135,000 135,000

Issued, subscribed and paid-up*15,238,326 [Previous year - 15,238,326] Equity Shares of Rs. 10/- each 152,383 152,383

152,383 152,383* Includes:

a) Nil (previous year 3,021,685 equity shares of Rs. 10/- each, issued under preferential allotment)

b) Nil (previous year - 129,900 shares of Rs. 10/- each, issued under the Company’s Employee StockOption Plan, 2004).

For stock options outstanding Refer Note 20.5

2 Stock Options OutstandingBalance, beginning of year 16,984 7,253Add: Additions during the year - 16,326Less: Deletions / adjusted during the year 3,657 6,595Balance, end of year 13,327 16,984Less: Deferred employee stock compensationBalance, beginning of year 13,960 1,435Add: Additions during the year - 16,326Less: Amortized / adjusted during the year 11,410 3,801Balance, end of year 2,550 13,960

10,777 3,0243. Reserves and Surplus

Capital ReserveBalance, beginning of year - -Add: Share warrants transferred (Refer Note 20.4) 25,074 -Balance, end of year 25,074 -

Securities PremiumBalance, beginning of year 1,202,081 461,164Add: Received during the year# - 760,344Less: Adjusted against share issue expenses 200 19,427Balance, end of year 1,201,881 1,202,081

General ReserveBalance, beginning of year 110,000 55,000Amounts adjusted on amalgamation of B2K Corp Private Limited 19,863 -(Refer Note 20.3)Less: Adjustment for employee benefits provision (net of tax Rs. Nil) (1,804) -(Refer Note 20.2(c))Add: Transferred from Profit and Loss Account - 55,000Balance, end of year 128,059 110,000Profit and Loss Account (12,801) 202,568

1,342,213 1,514,649# Includes

a) Nil (previous year - Rs. 755,421 received on issue of 3,021,685 equity shares of Rs. 10/- each issued underpreferential allotment during the year at a premium of Rs. 250/- per share)

b) Nil (previous year Rs. 4,923 received towards the Company’s Employee Stock Option Plan, 2004).

Schedules(All amounts are in thousands of Indian Rupees, unless otherwise stated)

allsec ar08 32-41.p65 7/7/2008, 5:27 PM36



4 Secured loansHire purchase loans from banks (Refer note 20.6) 3,669 1,557(includes amounts repayable withinone year Rs. 826, previous year Rs. 538)

3,669 1,557

Schedule 5 on Fixed Assets is set out on the following page

6 Investments

Long term (at cost) - Unquoted, Non-trade

Allsectech Inc, USA- Common stock 100 (previous year - 100) 382,131 36,473

B2K Corp Private Limited (Refer Note 20.3)- Nil (previous year - 404,722) equity shares of Rs. 10/- each - 405- Nil (previous year - 167,074) 10% optionally convertible cumulative - 124,820redeemable preference shares, face value of Rs. 1,000/- each

B2K Corp Inc- Common stock 100 (previous year - Nil) 5 -

Allsectech Manila Inc., Philippines- Common stock 100 (previous year - Nil) 100,145 -(Aggregate Value of non-quoted investments Rs. 482,281, previous year Rs. 161,698)Current investments (at lower of cost or market value) *Mutual Fund Units #Quoted, fully paid up at cost 310,959 723,094(Net Asset Value Rs.310,959, previous year Rs. 723,129)

793,240 884,792# Also refer note 20.9 for details of investments in mutual funds.

7 Deferred tax assetDepreciation - 22,821

- 22,8218 Sundry debtors (unsecured)

Debts outstanding for a period exceeding six months- Considered good 165,676 1,633- Considered doubtful 8,004 -Others, considered good 162,726 262,626

336,406 264,259Less: Provision for doubtful debts (8,004) -

328,402 264,2599 Cash and bank balances

Cash on hand 91 43Balance with scheduled banks * - in current accounts 52,028 243,343 - in deposit accounts 41,940 125,904 - in unpaid dividend accounts 80 29Balance with non-scheduled banks - in current accounts with HSBC Plc** 21 26

94,160 369,345

** Maximum balance during the year was Rs. 26 (Previous Year: Rs. 27)* Includes unutilized proceeds received from preferential issue Rs. 307,088 (Previous Year Rs. 789,237)



allsec ar08 32-41.p65 7/7/2008, 5:27 PM37


ALLSEC TECHNOLOGIES LIMITEDSchedules(All amounts are in thousands of Indian Rupees, unless otherwise stated)

Gross

Block

Depre

ciatio

nNe

t Bloc

k

As at

Asset

sAd

dition

sDe

letion

sAs

atAs

atDe

precia

tion

For th

eDe

letion

sAs

atAs

atAs

atAp

ril 1, 2

007tra

nsferr

ed on

for th

e year

for th

e year

March

31, 20

08Ap

ril 1,

2007

transf

erred

onyea

r fo

r the y

earMa

rch 31

, 2008

March

31, 20

08Ma

rch 31

, 2007

amalg

amatio

n #am

algam

ation #

Tang

ible A

ssets

Plant

and m

achin

ery

-Co

mpute

rs an

d serv

ers 85

,644

-6,4

63 19

0 91

,917

38,94

1–

13,47

6 14

9 52

,268

39,64

946

,703

-Ca

ll cen

tre eq

uipme

nt22

7,738

52,69

222

,988

- 30

3,418

113,6

05 34

,864

39,99

9-

188,4

6811

4,950

114,1

33

-Of

fice e

quipm

ent

38,69

2 9,

671

9,37

4 39

57,69

8 6,

075

5,03

32,4

05 3

13,51

044

,188

32,61

7

Furni

ture a

nd fix

tures

34,66

0 10

,759

5,338

- 50

,757

11,90

58,2

22 3,

228

-23

,355

27,40

222

,755

Lease

hold im

provem

ents

92,34

6-

12,88

9 -

105,2

35 43

,962

- 16

,236

-60

,198

45,03

748

,384

Veh

icles*

6,93

8 -

4,80

0 2,

572

9,16

6 1,

039

- 86

8 45

7 1,

450

7,716

5,899

Intan

gible

Asse

ts

Softw

are 55

,199

1,46

33,4

76 -

60,13

8 38

,946

1,10

8 7,

691

- 47

,745

12,39

316

,253

Total

541,2

17 74

,585

65,32

8 2,

801

678,3

29 25

4,473

49,22

7 83

,903

609

386,9

9429

1,335

286,7

44

Previo

us Y

ear

516,4

3827

,745

2,966

541,2

17 17

6,156

79,42

21,1

0525

4,473

286,7

44

Add

ition

s to

fixe

d as

sets

incl

ude

exch

ange

loss

cap

italiz

ed a

mou

ntin

g to

Nil

(pre

viou

s ye

ar R

s.12

0)

* V

ehic

les

incl

ude

asse

ts a

cqui

red

unde

r fin

anci

al le

ase

- G

ross

blo

ck -

Rs.

4,3

71 (

prev

ious

yea

r -

Rs.

3,5

98);

Net

blo

ck -

Rs.

4,0

84 (

prev

ious

yea

r -

Rs.

3,2

71)

# In

clud

es a

dditi

ons

and

dele

tions

dur

ing

2005

-06

and

2006

-07.

Als

o R

efer

Not

e 20

.3.

Descr

iption

of As

sets

5F

ixed

Ass

ets

allsec ar08 32-41.p65 7/7/2008, 5:27 PM38




10 Other current assets

Unbilled revenues 6,322 444Interest accrued but not due 2,156 1,521

8,478 1,965

11 Loans and advances (unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received 880 828Balance with Excise authorities 32,051 13,281Loan to subsidiary 6,411 30,975[including accrued interest Nil (previous year - Rs. 990]Prepaid expenses 7,291 4,370Deposits 58,890 26,701MAT Credit Entitlement 4,379 4,379Advance income tax and tax deducted at source, net 16,931 1,989

126,833 82,523

Included in loans and advances is:Dues from companies under the same management

B2K Corp Private Limited (Refer Note 20.3) - 30,975[Maximum amount outstanding during the year Rs. 30,975(previous year - Rs. 33,871)]

12 Current liabilitiesSundry creditors- Due to micro, small and medium scale undertakings - -- Others 68,487 85,258Foreign currency payable 11 -Unpaid dividend 80 29Other liabilities 43,444 34,118Book overdraft 362 -

112,384 119,405

13 ProvisionsEmployee bonus 7,996 6,345

Leave encashment 7,976 2,415

Provident fund - 290

Gratuity 5,156 1,828

Proposed dividend - 76,192

Tax on dividend - 12,949

21,128 100,019


allsec ar08 32-41.p65 7/7/2008, 5:27 PM39





14 Miscellaneous expenditure

Deferred revenue expenditureBalance, beginning of yearShare issue expenses – –

– –Add: Additions during the yearShare issue expenses 200 19,427

200 19,427

Less: Amortised during the yearShare issue expenses adjusted against securities premium 200 19,427

200 19,427

Balance, end of year - -

Year Ended Year EndedMarch 31, 2008 March 31, 2007

15 Other incomeInterest- Bank deposits (Tax deducted at source Rs. 744, previous year - Rs.987) 2,874 4,821- Others (Tax deducted at source Nil, previous year - Rs. 260) 12,034 1,237Dividend income from mutual funds 35,776 31,302Profit on sale non trade investments 232 120Liabilities no longer required written back 1,601 -Foreign exchange gains / (loss), net (7,466) (1,511)Miscellaneous income 5,046 2,589

50,097 38,558

16 Employee costs and benefitsSalaries, wages and allowances 574,674 402,462

Contributions to provident and other funds 24,748 17,198


Employee stock compensation cost* 7,752 2,128

Staff welfare 81,638 53,261

Recruitment and training 16,996 12,060

709,804 489,927

* Includes Rs.1,980 (previous year Rs.1,673) of reversal of cost earlier accounted on lapsed options.

allsec ar08 32-41.p65 7/7/2008, 5:27 PM40





17 General and Administration expensesElectricity 39,876 22,024Rent and amenities 59,533 32,748Rates and taxes 1,271 709Repairs and maintenance - Plant and machinery 24,815 25,664 - Others 23,542 12,357Insurance 2,399 1,018Professional and consultancy charges 13,986 8,407Travel and conveyance 16,608 10,366Telephone 2,831 2,171Provision for doubtful debts 8,004 -Loss on sale of fixed assets 510 751Miscellaneous expenses 9,907 9,980

203,282 126,195

18 Selling expensesSelling commission 40,878 54,109Other selling expenses 3,820 5,043

44,698 59,152

19 Finance chargesInterest- others 326 110Bank charges 2,255 3,748

2,581 3,858

allsec ar08 32-41.p65 7/7/2008, 5:27 PM41



20 NOTES TO ACCOUNTS

20.1 Background

Allsec Technologies Limited ('Allsec' or the 'Company') was incorporated on August 24, 1998 as a limited companyunder the Companies Act, 1956 and is listed on the National Stock Exchange of India Limited (‘NSE’) and BombayStock Exchange Limited (‘BSE’). The Company is engaged in the business of providing IT enabled services. Theservices provided by the Company include data verification, processing of orders received through telephone calls,telemarketing, monitoring quality of calls of other call centers, customer service, HR and payroll processing. As atyear end, the Company has three subsidiaries, Allsectech Inc., USA, Allsectech Manila Inc., Philippines and B2KCorp Inc., USA.

• Acquisition of Allsectech Manila Inc (formerly Kingdom Builders Inc., Philippines (‘KBI’)

During the year, the Company had entered into a Share Purchase Agreement ('SPA') dated October 3, 2007 withthe erstwhile shareholders of Kingdom Builders Inc, Manila, Philippines (‘KBI’). KBI was engaged in the businessof web site development including web development, web design, search engine optimization, strategicteleservices and customer care quality management. Under the terms of the SPA, the Company shall acquirethe entire outstanding equity capital of KBI for a consideration to be determined in accordance with the terms ofthe SPA. On October 4, 2007, the Company paid an initial consideration of Rs. 29,711 (USD 750,000) towards100% of the equity capital, with a balance contingent consideration of upto USD 750,000 payable after one yearconditional on achievement of certain specified parameters to the erstwhile shareholders of KBI, as determinedin accordance with the terms of the SPA.

Subsequent to the acquisition, the Company has invested additional amount aggregating to Rs. 70,394 assubscription towards the equity capital of KBI. KBI has changed its name to Allsectech Manila Inc with effect fromJanuary 2008.

• Amalgamation of B2K Corp Private Limited (‘B2K’) with the Company

During the year, the Company had entered into a Scheme of amalgamation (‘Scheme’) with its wholly ownedsubsidiary B2K. The Scheme was filed with and approved by the Hon’ble High Court of Judicature at Madras(‘High Court’) on August 23, 2007. The Scheme has accordingly been given effect to in these accounts, thedetails of which have been set out in note 20.3 below.

20.2 Statement of significant accounting policies

(a) Basis of preparation

The financial statements have been prepared to comply in all material respects with the Notified AccountingStandards by Companies Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act,1956 (‘the Act’). The financial statements have been prepared under the historical cost convention on an accrualbasis. The accounting policies have been consistently applied by the Company and except for the change inaccounting policy discussed more fully below, are consistent with those used in the previous year.

(b) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent liabilities at the date of the financial statements and the results of operations during thereporting period end. Although these estimates are based upon management’s best knowledge of currentevents and actions, actual results could differ from these estimates.

(c) Change in Accounting Policy

Adoption of Accounting Standard AS15 Employee Benefits

Till March 31, 2007, the Company was providing for gratuity and compensated absences based on actuarialvaluation as per certificate from actuary. In the current year, the Company has adopted Accounting Standard - 15(Revised) which is mandatory for accounting periods commencing December 7, 2006. Accordingly, the Companyhas provided for gratuity and leave encashment based on actuarial valuation done as per projected unit creditmethod. Further in accordance with the transitional provision in the revised accounting standard, in respect ofleave encashment Rs.1,804 (net of tax Rs. Nil) has been adjusted to the General Reserve.


allsec ar08 42-47.p65 7/7/2008, 5:27 PM42



(d) Fixed assets

Fixed assets are stated at cost less accumulated depreciation and impairment losses where applicable. Costincludes purchase price and all direct / indirect costs incurred to bring the asset to its working condition for itsintended use.

(e) Depreciation

Depreciation is provided using the straight line method in the manner specified in Schedule XIV to the Act, at therates prescribed therein or at the rates based on Management's estimate of the useful lives of such assets,whichever is higher, as follows:

ASSET DESCRIPTION PERCENTAGE

Plant and machinery 4.75 - 16.21

Furniture and fixtures 6.33

Vehicles 9.50

Intangible Assets – Software 25.00

Leasehold improvements are amortised over the estimated useful lives or the remaining primary lease period,whichever is less. Assets individually costing Rs. 5 or less are fully depreciated in the year of purchase.

Pursuant to the amalgamation of the erstwhile B2K with the Company, the estimated useful lives of assets ofB2K were revised with effect from April 1, 2007 to synchronize with the effective useful lives of similar assets ofthe Company. This revision has resulted in a reduction in depreciation charge for the year by Rs 9,511. As aresult of this change, loss before tax is lower by Rs. 9,511 and the net book value of fixed assets is higher by anequivalent amount.

(f) Impairment

i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication ofimpairment based on internal / external factors. An impairment loss is recognized wherever the carryingamount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's netselling price and its value in use. In assessing value in use, the estimated future cash flows are discountedto their present value at the weighted average cost of capital.

ii. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaininguseful life.

iii. A previously recognized impairment loss is increased or reversed depending on changes in circumstances.However, the carrying value after reversal is not increased beyond the carrying value that would haveprevailed by charging usual depreciation if there was no impairment.

(g) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as currentinvestments. All other investments are classified as long-term investments. Current investments are carried atlower of cost and fair value determined on an individual investment basis. Long-term investments are carried atcost. Provision for diminution in value is made to recognise a decline other than temporary in the value of longterm investments.

(h) Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental toownership of the leased asset, are capitalized at the lower of the fair value and present value of the minimumlease payments at the inception of the lease term and disclosed as leased assets. Lease payments areapportioned between the finance charges and reduction of the lease liability based on the implicit rate of return.Finance charges are charged against income.

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leaseditem, are classified as operating leases. Operating lease payments are recognized as an expense in the Profitand Loss account on a straight-line basis over the lease term.

allsec ar08 42-47.p65 7/7/2008, 5:27 PM43



(i) Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event and it is probablethat an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate canbe made. Provisions are not discounted to its present value and are determined based on Managementestimate of amounts required to settle the obligation at the balance sheet date. These are reviewed at eachbalance sheet date and adjusted to reflect the current Management estimates.

(j) Deferred revenue expenditureShare issue expenses are adjusted against the securities premium received, in accordance with Section 78 ofthe Act.

(k) Revenue recognition

Income from services

Income from IT enabled services is derived from both time based and unit priced contracts. Revenue is recognizedas the related services are performed in accordance with the specific terms of the contract with the customer.

Unbilled revenue represents accrual of income relating to services provided but not billed as at the year end.

Dividend income

Dividend income is recognised when the right to receive payment is established by the balance sheet date.

Interest

Interest income is recognised on a time proportion basis taking into account the amount outstanding and therate applicable.

(l) Retirement benefits

Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions arecharged to the Profit and Loss Account of the year when the contributions to the respective fund are due.

Gratuity liability under the Payment of Gratuity Act, 1972 is a defined benefit obligation and is provided for on thebasis of actuarial valuation on projected unit credit method made at the end of each financial year.

Short term compensated absences are provided for based on estimates. Long term compensated absences areprovided for based on actuarial valuation on projected unit credit method made at the end of each financial year.

Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

(m) Taxation

Tax expense comprises current, deferred and fringe benefit tax. Provision for current income tax and fringebenefit tax is made on the assessable income at the tax rate applicable to the relevant assessment year.Deferred income taxes are recognized for the future tax consequences attributable to timing differences betweenthe 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 recognised in the income statementusing the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient futuretaxable income will be available against which such deferred tax assets can be realised. If the company hasunabsorbed depreciation or carry forward tax losses, deferred tax assets are recognised only if there is virtualcertainty supported by convincing evidence that such deferred tax assets can be realised against futuretaxable profits.

At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognisesunrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as thecase may be that sufficient future taxable income will be available against which such deferred tax assets canbe realised.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The company writes downthe carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain,as the case may be, that sufficient future taxable income will be available against which deferred tax asset canbe realised. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain,as the case may be, that sufficient future taxable income will be available.

allsec ar08 42-47.p65 7/7/2008, 5:27 PM44



Minimum Alternative Tax (‘MAT’) credit is recognised as an asset only when and to the extent there is convincingevidence that the Company will pay normal income tax during the specified period. In the year in which theMinimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with therecommendations contained in Guidance Note issued by the Institute of Chartered Accountants of India, thesaid asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. TheCompany reviews the same at each balance sheet date and writes down the carrying amount of MAT CreditEntitlement to the extent there is no longer convincing evidence to the effect that Company will pay normalIncome Tax during the specified period.

(n) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investmentswith an original maturity of three months or less.

(o) Foreign currency transactions

Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on the date oftransaction. At the year-end, monetary items are converted into rupee equivalents at the year-end exchangerates. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency arereported using the exchange rate at the date of the transaction.

All exchange differences arising on settlement / conversion of foreign currency transactions are included in theprofit and loss account.

In relation to the forward contracts entered into to hedge the foreign currency risk of the underlying monetaryassets / liabilities, the exchange difference is calculated as the difference between the foreign currency amountof the contract translated at the exchange rate at the reporting date, or the settlement date where the transactionis settled during the reporting period, and the corresponding foreign currency amount translated at the later ofthe date of inception of the forward exchange contract and the last reporting date. Such exchange differencesare recognised in the profit and loss account in the reporting period in which the exchange rates change. Thepremium or discount on all such contracts arising at the inception of each contract is amortised as income orexpense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contractsis recognized as income or as expense for the period.

(p) Earnings Per Share ("EPS")

The earnings considered in ascertaining the Company's earnings per share comprise the net profit after tax. Thenumber of shares used in computing basic earnings per share is the weighted average number of sharesoutstanding during the year. The number of shares used in computing diluted earnings per share comprises theweighted average number of shares considered for deriving basic earnings per share and also the weightedaverage number of shares, if any, which would have been issued on the conversion of all dilutive potentialequity shares.

(q) Deferred employee stock compensation expenses

Measurement and disclosure of the employee share-based payment plans is done in accordance with theGuidance Note on Accounting for Employee Share-based Payments, issued by the Institute of CharteredAccountants of India. The Company measures compensation cost relating to employee stock options using theintrinsic value method. Deferred employee stock compensation expense is amortized over the vesting period ofthe option on a straight line basis.

20.3 Amalgamation of B2K with the Company

(i) B2K was engaged in the business of inbound and outbound voice, email and chat support services andinformation technology services.

(ii) The Company had entered into a Scheme of amalgamation (‘Scheme’) with its whollyowned subsidiary B2K forthe amalgamation of B2K with the Company effective April 1, 2005 (‘Appointed Date’). The Scheme was approvedby the Hon’ble High Court of Judicature at Madras (‘High Court’) on August 23, 2007. Pursuant to order of the HighCourt and consequent filing thereof with the Registrar of Companies, Tamil Nadu at Chennai, on August 27, 2007,B2K has been amalgamated with the Company and stands dissolved without being wound up.

(iii) The amalgamation has been accounted for under the “pooling of interests” method as prescribed by AccountingStandard 14 – “Accounting for Amalgamations” issued by the Institute of Chartered Accountants of India in thefollowing manner.

allsec ar08 42-47.p65 7/7/2008, 5:27 PM45



(a) All the assets and liabilities of B2K as of April 1, 2005, were transferred to and vested in the Company at thecarrying values as appearing in the books of account, the summary of which is as below:

PARTICULARS Amount

Fixed assets

Gross block 45,312

Less : Accumulated depreciation 12,296

Net block 33,016

Capital work-in-progress [including capital advances] 1,767

Investments 17,486

Current assets, loans and advances 104,020

Less: Current liabilities and provisions 11,203

Net current assets 92,817

Net assets transferred 145,086

(b) The debit balance in the Profit and Loss Account of B2K of Rs 26,033 as at April 1, 2005 has been adjustedin the general reserves of the Company.

(c) The difference between the amount recorded as the book value of the shares held by Allsec and the amountof share capital of B2K as at April 1, 2005 of Rs 45,896 has been credited to the general reserves of theCompany.

(iv) As Per the Scheme, during the period between the Appointed Date and the Effective Date, B2K shall be deemedto have carried on the existing business in “trust” on behalf of the Company. Further, all profits or incomesearned and expenses incurred by B2K during such period, shall for all purposes, be deemed to be profits orincomes or expenditure or losses of the Company. Accordingly, the net losses after tax incurred by B2K duringthe period from April 1, 2005 to March 31, 2007 of Rs 79,865 has been incorporated in the financial statementsof the Company by way of an adjustment to the opening balance of the Profit and Loss Account.

(v) The title deeds for leasehold improvements, licenses, agreements, loan documents, etc. of B2K have beentransferred in the name of the Company.

20.4 Share warrants

During the previous year, the Company had issued 803,640 warrants to the promoters of the Company and 160,728warrants to First Carlyle Ventures, Mauritius (‘FCVM’) on a preferential basis, in accordance with the terms andconditions as set out in the Subscription and Shareholders’ Agreement (‘SSA’) dated August 23, 2006 by andbetween the Company, its promoters and FCVM. Each warrant was convertible into one equity share of the Companyat a conversion / exercise price of Rs. 260/- per resultant equity share, at any time before the expiry of 18 monthsfrom the date of allotment of the warrant.

The holders of the warrant have not exercised this option within the prescribed date and consequently, suchwarrants stand lapsed. Accordingly, the initial application money of Rs. 25,074 received on such warrants standsforfeited to the company as per the terms of issue and has been transferred to capital reserve.

20.5 Stock option plans

The Company has two stock option plans that provide for the granting of stock options to employees includingDirectors of the Company (not being promoter Directors and Executive Directors, holding more than 10% of theequity shares of the Company). The option plans are summarized below:

Employee Stock Option Plan (ESOP), 2004

The shareholders at the Extra Ordinary General Meeting held on May 6, 2004, approved an Employee Stock OptionPlan (ESOP) which provides for the grant of 550,000 options to employees. Consequently, the compensationcommittee had granted the following options on various dates at an exercise price of Rs.10/- per share:

allsec ar08 42-47.p65 7/7/2008, 5:27 PM46



DATE OF GRANT NUMBER OF OPTIONS GRANTED

July 1, 2004 286,500 optionsJanuary 14, 2005 13,500 optionsJanuary 31, 2005 33,700 options

The remaining options of 216,300 have not been issued as at the date of the balance sheet and the Company doesnot propose to issue the same.

The Company has adopted the (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999 issued by Securities and Exchange Board of India, and has recorded a compensation expense using the fairvalue method as set out in those guidelines. The summary of the movement in options is given below:

PARTICULARSAs at As at

March 31, 2008 March 31, 2007Options outstanding, beginning of year 19,800 168,400Options granted during the year – –Options exercised during the year – 129,900Options lapsed during the year – 18,700Options outstanding, end of year 19,800 19,800Options outstanding at the year end comprise :- Options eligible for exercise at year end 19,800 19,800- Options not eligible for exercise at year end – –Weighted average share price at the date of exercise (Rs.) – 209.68Weighted average remaining contract life of options 1 year and 2 years and

4 months 4 monthsVesting period of options- 50% of the options – one year from the date of grant- 50% of the options – two years from the date of grant

Employee Stock Option Scheme (ESOS), 2006

The shareholders at the Annual General Meeting held on July 10, 2006, have approved an Employee StockOption Scheme 2006 (ESOS 2006) which provides for an issue of 600,000 options to the employees. Consequently,the compensation committee had granted the 350,000 options on January 25, 2007 at an exercise price ofRs. 289.75 per share.

The Company has adopted the (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999 issued by Securities and Exchange Board of India, and has recorded a compensation expense using theintrinsic value method as set out in those guidelines. The summary of the movements in options is given below:

PARTICULARSAs at As at

March 31, 2008 March 31, 2007Options outstanding, beginning of year 350,000 –Options granted during the year – 350,000Options exercised during the year – –Options lapsed during the year 106,500 –Options outstanding, end of year 243,500 350,000Options outstanding at the year end comprise :- Options eligible for exercise at year end 121,750 –- Options not eligible for exercise at year end 121,750 350,000Weighted average remaining contract life of options 3 years and 4 years and

10 months 10 monthsVesting period of options- 50% of the options – one year from the date of grant- 50% of the options – two years from the date of grant

allsec ar08 42-47.p65 7/7/2008, 5:27 PM47



Pro-forma Disclosures for ESOS 2006

In accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999, had the compensation cost for ESOS 2006 been recognized based on the fair value at the date of grant inaccordance with binomial method, the amounts of the Company's net profit and earnings per share would havebeen as follows:

PARTICULARS PROFIT / (LOSS) BASIC EPS (Rs.) DILUTED EPS (Rs.)AFTER TAX

Year Ended March 31, 2008

- Amounts as reported (135,504) (8.89) (8.89)

- Amounts as per pro-forma (148,550) (9.75) (9.75)

Year Ended March 31, 2007

- Amounts as reported 281,349 20.09 19.93

- Amounts as per pro-forma 277,770 19.84 19.67

The fair value of options was estimated at the date of grant using the binomial method with the followingassumptions:

PARTICULARS Year EndedMarch 31, 2008







20.6 Secured loans

Hire purchase loans are secured by hypothecation of the respective assets acquired.

20.7 There is no overdue amount payable to Micro, Small and Medium Enterprises as defined under The Micro, Smalland Medium Enterprises Development Act, 2006. Further, the Company has not paid any interest to any Micro,Small and Medium Enterprises during the current year.

20.8 On account of the nature of the business of the Company, supplementary information for the profit and loss accountas required to be disclosed under clause 3 (i) to (iii) except 3 (ii) (c) and clause 4 (c) of Part II to Schedule VI of theAct are not applicable and hence no disclosures have been made in this regard.

20.9 Details of current investments

Current investments in mutual funds at the year end comprise:

March 31, 2008

Name of Mutual fund No. of units Amount

DWS Money Plus Fund - Institutional Plan 12,246,540 122,549

HDFC Cash Management Fund 2,815,850 28,247

ICICI Prudential - Flexible Income Plan 9,544,111 100,915

Tata Floater Fund 2,162,527 21,702

UTI - Liquid Plus Fund Institutional Plan 37,538 37,546

Total 310,959


allsec ar08 42-47.p65 7/7/2008, 5:27 PM48



March 31, 2007

Name of Mutual fund No. of units Amount

Franklin TITMA fund 155,528 155,567

Birla Cash Plus 10,223,928 102,439

Reliance Interval Fund 10,196,368 102,075

ICICI Prudential 10,000,000 100,000

Kotak Liquid fund 6,331,088 77,417

Prudential ICICI Super plan 5,280,526 52,964

HDFC Call Plan 4,977,102 51,894

Standard Chartered Liquidity Manager Fund 5,094,746 50,953

UTI Money Market fund 1,654,340 29,785

Total 723,094

The following investments were purchased and sold during the year:

Purchased Sold

Name of Mutual fund No. of units Amount No. of units Amount

Prudential ICICI Super 5,672,560 56,726 5,672,560 56,726

HDFC CMF - Savings Plus Plan 15,152,270 152,000 15,152,270 152,000

Tata Floater Fund 2,989,358 30,000 2,989,358 30,000

DWS - Money Plus Fund 5,695,330 57,000 5,695,330 57,000

UTI Liquid Plus Fund 62,987 63,000 62,987 63,000

HDFC Cash Management Fund 4,994,018 52,587 4,994,018 52,587

UTI Liquid Cash Plus 127,898 130,385 127,898 130,385

Standard Chartered Liquidity Manager 39,522 39,530 39,522 39,530

Kotak Flexi Debt Scheme 8,028,245 80,532 8,028,245 80,532

HSBC Cash Fund IP 11,995,164 120,019 11,995,164 120,019

HSBC Liquid Plus 11,653,277 116,680 11,653,277 116,680

Tata Floating Rate Short Term 4,998,051 50,008 4,998,051 50,008

DWS - Instant Cash Plus Fund 14,972,928 150,021 14,972,928 150,021

Sundaram BNP Liquid Plus 15,291,488 153,213 15,291,488 153,445

Sundaram BNP Money Fund 14,861,196 150,028 14,861,196 150,028

Prudential ICICI Super - II 13,008,249 130,089 13,008,249 130,089

HDFC Cash Management Fund - II 6,883,186 73,212 6,883,186 73,212

Kotak FMP 20,553,213 205,532 20,553,213 205,532

UTI Liquid Cash Plan 98,109 100,017 98,109 100,017

Total 1,910,579 1,910,811

Investments purchased, as shown above, includes the number of units and amounts credited towards re-investmentof dividends received.

allsec ar08 49-59.p65 7/7/2008, 5:28 PM49



20.10 Segment reportingThe Company’s operations predominantly relate to IT enabled services and accordingly this is the only primaryreportable segment. The Company has considered geographical segment as the secondary segment, based onthe location of the customers invoiced.

Information about secondary segments March 31, 2008 March 31, 2007Revenue from servicesUnited States of America 878,940 1,093,567Others 111,221 39,221Total 990,161 1,132,788

Fixed assets used in the Company’s business have not been identified to any of the reportable segments, as thefixed assets and services are used interchangeably between segments. The Company believes that it is currentlynot practicable to provide segment disclosures relating to assets and capital expenditure since a meaningfulsegregation of the available data is onerous.

20.11 Related party transactions

1. Names of related parties

Relationship Name of the partySubsidiaries Allsectech Inc., USA

B2K Corp Private Limited (Also refer Note No. 20.3)B2K Corp Inc., USA (with effect from January 25, 2006)Allsectech Manila Inc., Philippines (with effect from February 14, 2008)

Key management personnel Whole time directors :A. SaravananR. Jagadish

2. Transactions with related parties:

Subsidiaries Key Management PersonnelPARTICULARS

March 31, 2008 March 31, 2007 March 31, 2008 March 31, 2007

Selling commission - expenses-- Allsectech Inc. 37,541 48,900 - -

Service income - billed to-- Allsectech Inc. 51,548 85,881 - --- B2K Corp Inc 1,639 -

Advances made / (collected)-- B2K Corp Private Limited - 12,833 - --- B2K Corp Inc (652) - - -

Interest on advances made-- B2K Corp Private Limited - 895 - -

Investment in subsidiary-- B2K Corp Private Limited - 31,707 - --- Allsectech Inc 345,658 21,570 - --- Allsectech Manila Inc. 100,145 - - -

Remuneration - Wholetime Directors’-- Salaries - - 23,040 17,400-- Commission - - - 7,500

Dividend paid to WholetimeDirectors - (cash basis) 20,450 20,450

The Company has extended guarantees aggregating to USD 325,000 (previous year - USD 235,000) on behalf ofits subsidiary Allsectech Inc., USA.

allsec ar08 49-59.p65 7/7/2008, 5:28 PM50



3. Balances with related parties :

Subsidiaries Key Management Personnel

PARTICULARSMarch 31, 2008 March 31, 2007 March 31, 2008 March 31, 2007

Trade Receivable

– Allsectech Inc. 37,172 37,905 – –

– B2K Corp Inc. 1,666 – – –

Commission Payable

– Allsectech Inc. 25,727 39,286 – –

Loans and Advances

– B2K Corp Private Limited – 30,975 – –

– B2K Corp Inc. 6,411 – – –

Investment in subsidiary

– Allsectech Inc. 382,131 36,473 – –

– Allsectech Manila Inc. 100,145 – – –

– B2K Corp Private Limited – 125,225 – –

– B2K Corp Inc. 5 – – –

Remuneration payable 11,520 –

Commission payable – – – 7,500

20.12 Lease commitments

Finance leases

PARTICULARS As at As atMarch 31, 2008 March 31, 2007

Not later than one year

Minimum lease payments 1,209 652

Less: Finance Charges 383 114

Present value 826 538

Later than one year but not later than five years

Minimum lease payments 3,400 1,197


Present value 2,843 1,019

Later than five years

Minimum lease payments Nil Nil

Less: Finance Charges Nil Nil

Present value Nil Nil


allsec ar08 49-59.p65 7/7/2008, 5:28 PM51



Operating leases

Office premises in India are obtained under operating lease. Lease rentals incurred during the yearRs. 59,533 (previous year Rs. 32,748) have been charged as an expense in the profit and loss account. The future lease rentals payable are as follows:

PARTICULARS As at As atMarch 31, 2008 March 31, 2007

Upto 1 year 66,996 33,752

1 to 5 years 177,470 143,960

Beyond 5 years 41,217 66,600

TOTAL 285,683 244,312

20.13 Gratuity benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more ofservice gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. Thescheme is funded with an insurance company in the form of a qualifying insurance policy for employees located atChennai.

The following tables summarise the components of net benefit expense recognised in the profit and loss accountand the funded status and amounts recognised in the balance sheet for the respective plans.

Profit and Loss account

PARTICULARS Amount

Current service cost 3,252

Interest cost on benefit obligation 496

Expected return on plan assets (383)

Net actuarial loss recognized in the year 631

Past service cost –

Net employee benefit expense (Gratuity) 3,996

Balance sheet

Details of provision for gratuity

PARTICULARS Amount

Defined benefit obligation (10,801)

Fair value of plan assets 5,645

Less: Un recognised past service cost –

Plan asset / (liability) (5,156)

Changes in the present value of the defined benefit obligation are as follows:

PARTICULARS Amount

Opening defined benefit obligation 6,971

Interest cost 496


Benefits paid (1,086)

Actuarial (gains) / losses on obligation 1,168

Closing defined benefit obligation 10,801


allsec ar08 49-59.p65 7/7/2008, 5:28 PM52



Changes in the fair value of plan assets are as follows:

PARTICULARS Amount

Opening fair value of plan assets 4,653

Expected return 383

Contributions by employer 1,158


Actuarial gains / (losses) 537

Closing fair value of plan assets 5,645

Assumptions

PARTICULARS Percentage

Discount rate 8%

Expected return on plan assets 8%

As this is the first year of adoption of AS 15 - (R) by the Company, previous year comparative information has notbeen furnished.

20.14 Payment to directors

PARTICULARS Year Ended Year EndedMarch 31, 2008 March 31, 2007

Salaries 23,040 17,400

Commission to Wholetime directors – 7,500

Computation of Net Profit in accordance with section 349 of the Act for calculation of commission payableto directors:

PARTICULARS Year EndedMarch 31, 2007

Profit as per Profit and Loss Account 281,349

Add:

Directors' remuneration 24,900

Directors' sitting fee 440

Depreciation as per Profit and Loss account 79,422

Less:

Depreciation allowable under Section 350 of the Act 79,422

Net profit as per Section 349 of the Act 306,689

Remuneration (including commission) to Managing and Wholetime 30,669directors at 10% of the net profits as calculated above

The managerial remuneration for the current year is higher than the maximum remuneration payable as per theprovisions of Section 198 read with Schedule XIII to the Companies Act, 1956. The Company had applied to theCentral Government for an approval of the remuneration during the year and has received the same subsequentto the year end.


allsec ar08 49-59.p65 7/7/2008, 5:28 PM53



20.15 Auditors’ remuneration


Audit fees* 1,750 1,550

Other matters* 300 245

Out of pocket expenses 76 50

* Amounts exclude service tax and cess.

20.16 Contingencies and commitments


Commitments

Capital contracts yet to be executed 772 14,855

Contingent liabilities

(a) Claims against the company not acknowledged as debts* 10,887 –

(b) Service tax matters** 1,770 –

* Represents demand received from the Tamil Nadu Electricity Board in January 2008 relating to reclassificationdisputes on the tariff category applicable to the Company in two of its delivery centers with retrospectiveeffect from 2005. The Company has obtained an interim stay order from the Hon’ble High Court of Madrasagainst this claim. The Company considers the claim to be erroneous and as not payable under the specifiedtariff category applicable to ITES units.

** The Company has received a show cause notice from the service tax authorities questioning interalia theavailment of cenvat credit on certain input services and the non-payment of service tax on certain import ofservices. The Company has filed the response to the show cause notice and based on the managementevaluation of the likelihood of such claims, disclosed the amounts involved towards possible exposuresabove.

20.17 Earning per share


Weighted average number of basic equity sharesoutstanding during the year 15,238,326 14,003,010

Add: Dilutive potential equity shares – 116,595

Number of weighted average equity shares forcalculation of diluted EPS 15,238,326 14,119,605

20.18 Expenditure in foreign currency (on accrual basis)


Connectivity Cost 67,995 79,736

Selling commission 40,878 54,109

Foreign travel 2,619 2,099

Maintenance charges 9,068 11,593

Legal and professional charges 2,451 1,476

Membership fee 302 -


allsec ar08 49-59.p65 7/7/2008, 5:28 PM54



20.19 CIF value of imports


Capital goods 6,474 16,599

20.20 Earnings in foreign exchange (on accrual basis)


Service income 878,940 1,093,567

Interest income 12,034 –

20.21 Dividend remitted in foreign exchange


Period to which it relates 2006-07 2005-06

Number of non-resident shareholders 3 2

Number of equity shares held on which dividend was due 5,569,537 2,836,679

Amount remitted USD 685,904 USD 301,756

20.22 Foreign currency exposures

The Company had used derivative financial instruments in the form of forward exchange contracts to hedge its risksassociated with foreign currency fluctuations during the year. Accounting policy for forward exchange contracts isgiven in note 20.2 (o) above. There are no open forward contracts at year end.

The details of foreign currency balances which are not hedged as at the balance sheet date are as below:

March 31, 2008 March 31, 2007

PARTICULARS Foreign Amount in Amount in Amount in Amount inCurrency Foreign Indian Foreign Indian

Currency Rupees Currency Rupees

Receivables USD 8,269 330,910 5,950 258,744

Payables USD 1,057 42,309 1,434 62,379

AUD - - 9 329

Bank balances USD 1,027 41,112 5,480 238,315

GBP 35 2,802 0.3 26

Investments USD 11,339 482,281 810 36,473

allsec ar08 49-59.p65 7/7/2008, 5:28 PM55



20.23 Previous year comparatives

As discussed in Note No 20.3 in view of the amalgamation of the Company with B2K Corp Private Limited witheffect from April 1, 2005, the figures for the year ended March 31, 2008 are not strictly comparable with that of theprevious year. Further, previous year figures have been reclassified / regrouped wherever necessary to conformto the current year's classification.

For S.R.Batliboi & Associates For and on behalf of the Board of DirectorsChartered Accountants

per S Balasubrahmanyam A Saravanan R Jagadish K S RaghuPartner Director Director Company SecretaryMembership No: 053315



allsec ar08 49-59.p65 7/7/2008, 5:28 PM56



Statement Pursuant to Part IV of Schedule VI to the Companies Act, 1956Balance Sheet Abstract and Company’s General Business Profile

I Registration Details

Registration No. 4 1 0 3 3 State Code 1 8

Balance Sheet Date 3 1 0 3 2 0 0 8

II Capital Raised During the period (Amount in Rs. Thousand)

Public Issue N I L Right Issue N I L

Bonus Issue N I L Private Placement N I L

III Positing to Moilisation and Deployment of Funds (Amount in Rs. Thousand)

Total Liabilities 1 5 0 9 0 4 2 Total Assets 1 5 0 9 0 4 2

Source of Funds

Paid up Capital 1 5 2 3 8 3 Reserves & Surplus 1 3 5 2 9 9 0

Secured Loan 3 6 6 9 Unsecured Loan -

Application of Funds

Net Fixed Assets 2 9 1 4 4 1 Investments 7 9 3 2 4 0

Net Current Assets 4 2 4 3 6 1 Deferred Tax Assets/ (Liabilities) -

Accumulated Losses - Miscellaneous Expenditure -

IV Performance of the Company (Amount in Rs. Thousand)

Turnover (Sales and Other Income) 1 0 4 0 2 5 8 Total Expenditure 1 1 5 0 8 2 2

Profit/(Loss) Before Tax (-) 1 1 0 5 6 4 Profit/(Loss) After Tax (-) 1 3 5 5 0 4

Earning per share-basic Rs. (-) 8 . 8 9 Dividend Rate % -

Earning per share-Diluted Rs. (-) 8 . 8 9

V Generic names of principal products/services of the Company (As per monetary Terms)

Item Code No. (ITC Code) 892.3 - Data Processing Services

Product Description Call Centre Management


A Saravanan R Jagadish K S RaghuDirector Director Company Secretary


allsec ar08 49-59.p65 7/7/2008, 5:28 PM57



STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES

1. Name of the Subsidiary Company Allsectech Inc., B2K Corp Inc., Allsectech Manila Inc.,

2. Financial Year of the Subsidiary ended on 31st March 2008 31st March 2008 31st March 2008

3. Extent of interest in Subsidiary Company 100 % 100 % 100%

4. Net aggregate amount of the Profit/ (Loss)of the Subsidiary Company so far as itconcerns the members of the Company

a) Dealt with in the Company’s Accounts

I) For the Financial Year of theSubsidiary.

II) For the previous financial yearsof the Subsidiary since it becamethe Subsidiary of the Company.

b) Not Dealt with in the Company’sAccounts

I) For the Financial Year of theSubsidiary.

II) For the previous financial yearsof the Subsidiary since it becamethe Subsidiary of the Company.

5. Change in the interest of the Companybetween the end of the financial year of theSubsidiary Companies and the Company’sFinancial Year ended 31st March 2008.

6. Material changes between the end of theFinancial Year of the Subsidiary Companyand the Company’s Financial year ended31st March 2008

a. Fixed Assets

b. Investments

c. Money lent

d. Money borrowed other than those formeeting Current Liabilities


A Saravanan R Jagadish K.S.RaghuDirector Director Company Secretary


Statement Pursuant to Section 212of the Companies Act 1956(All amounts are in thousands of Indian Rupees, unless otherwise stated)

N.A. N.A. N.A.

N.A. N.A. N.A.

Nil Nil Nil

Nil Nil Nil

(59925) 647 (666)

(902) 8301 –

allsec ar08 49-59.p65 7/7/2008, 5:28 PM58


ALLSEC TECHNOLOGIES LIMITEDStatement Pursuant to Section 212of the Companies Act 1956(All amounts are in thousands of Indian Rupees, unless otherwise stated)

Information of Subsidiary Companies for the year ended March 31, 2008 disclosed as per the terms of exemptionunder Section 212(8) of the Companies Act, 1956 granted by the Central Government

SI. No. Particulars Allsectech Inc., B2K Corp Inc., Allsectech Manila Inc.,

Currency USD Rs. USD Rs. Php Rs.

Period 01-Apr-2007 to 31-Mar-2008 01-Apr-2007 to 31-Mar-2008 15-Feb-08 to 31-Mar-2008

(a) Capital 8,810,000 352,135,700 100 3,997 79,373,323 75,988,845

(b) Reserves (789,923) (31,573,222) (158,796) (6,347,076) (4,615,509) (4,418,704)

(c) Total Assets 9,008,261 360,060,192 50,793 2,030,196 83,049,913 79,508,665

(d) Total Liabilities 9,008,261 360,060,192 50,793 2,030,196 83,049,913 79,508,665(e) Investment – – – – – –

(Except in case ofinvestment inSubsidiaries)

(f) Turnover 1,939,929 77,538,962 104,053 4,158,998 7,144,065 6,839,442

(g) Profit Before Taxation (791,373) (31,631,179) 2,202 88,014 (1,587,811) (1,520,107)

(h) Provision for Taxation (4,715) (188,459) – – 909,292 870,520

(i) Profit After Taxation (796,088) (31,819,638) 2,202 88,014 (678,519) (649,587)

(j) Proposed Dividend – – – – – –

* Exchange Rate (INR) for USD - 39.97 and Php - 0.95736

allsec ar08 49-59.p65 7/7/2008, 5:28 PM59



Consolidated FConsolidated FConsolidated FConsolidated FConsolidated Financial Statementsinancial Statementsinancial Statementsinancial Statementsinancial Statementsfor the year ended for the year ended for the year ended for the year ended for the year ended March 31, 2008March 31, 2008March 31, 2008March 31, 2008March 31, 2008

allsec ar08 61-73.p65 7/7/2008, 5:30 PM61



allsec ar08 61-73.p65 7/7/2008, 5:30 PM62



1. We have audited the attached consolidated balancesheet of Allsec Technologies Limited ('the Company'),as at March 31, 2008, and its subsidiaries AllsectechInc, Allsectech Manila Inc., and B2K Corp Inc (theSubsidiaries) and also the related consolidated profitand loss account and the consolidated cash flowstatement for the year ended on that date annexedthereto. These financial statements are theresponsibility of the Company's management and havebeen prepared by Management on the basis ofseparate financial statements and other financialinformation regarding components. Our responsibilityis to express an opinion on these financial statementsbased on our audit.

2. We conducted our audit in accordance with theauditing standards generally accepted in India. ThoseStandards require that we plan and perform the auditto obtain reasonable assurance about whether thefinancial statements are free of material misstatement.An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financialstatements. An audit also includes assessing theaccounting principles used and significant estimatesmade by management, as well as evaluating theoverall financial statement presentation. We believethat our audit provides a reasonable basis for ouropinion.

3. We did not audit the financial statements of theSubsidiaries, whose financial statements reflect totalassets of Rs 442 million as at March 31, 2008, totalrevenues of Rs 80 million and net cash flowsamounting to Rs 328 million for the year then ended.The financial statements and other financialinformation have been audited by other auditors whosereports have been furnished to us, and our opinion isbased solely on the report / certification of otherauditors.

Auditors’ Reporton Consolidated Financial Statements

The Board of Directors

Allsec Technologies Limited

4. We report that the consolidated financial statementshave been prepared by Management in accordancewith the requirements of Accounting Standards (AS)21 - 'Consolidated financial statements', prescribedby the Companies (Accounting Standards) Rules,2006.

5. Based on our audit and on consideration of reports /certifications of other auditors on separate financialstatements and on the other financial information ofthe components, and to the best of our informationand according to the explanations given to us, we areof the opinion that the attached consolidated financialstatements give a true and fair view in conformity withthe accounting principles generally accepted in India:

(a) in the case of the consolidated balance sheet, ofthe state of affairs of Allsec Technologies Limitedand its Subsidiaries, as at March 31, 2008;

(b) in the case of the consolidated profit and lossaccount, of the consolidated loss of AllsecTechnologies Limited and its Subsidiaries, for theyear ended on that date; and

(c) in the case of the consolidated cash flow statement,of the consolidated cash flows of AllsecTechnologies Limited and its Subsidiaries, for theyear ended on that date.

For S.R. BATLIBOI & ASSOCIATESChartered Accountants

per S BalasubrahmanyamChennai, Partner23rd June 2008 Membership No.: 053315

allsec ar08 61-73.p65 7/7/2008, 5:30 PM63


ALLSEC TECHNOLOGIES LIMITEDConsolidated Balance Sheet(All amounts are in thousands of Indian Rupees, unless otherwise stated)

As at As atPARTICULARS Schedule March 31, 2008 March 31, 2007

SOURCES OF FUNDS

Shareholders’ fundsShare capital 1 152,383 152,383Share warrants (Refer Note 21.5) – 25,074Stock options outstanding 2 10,777 3,024Reserves and surplus 3 1,272,994 1,471,366

1,436,154 1,651,847

Loan FundsSecured loans 4 3,669 1,557

1,439,823 1,653,404

APPLICATION OF FUNDS

Fixed assetsGross block 5 719,681 626,894Less : Accumulated depreciation 402,741 311,817

Net block 316,940 315,077

Add: Capital work-in-progress [including capital advances] 23,181 8,162340,121 323,239

Goodwill 6 26,728 24,620Investments 7 310,959 723,094Deferred tax asset 8 – 22,821Current assets, loans and advancesSundry debtors 9 303,171 275,061Cash and bank balances 10 436,641 387,676Other current assets 11 10,245 1,965Loans and advances 12 129,013 91,056

879,070 755,758Less : Current liabilities and provisionsCurrent liabilities 13 95,927 94,829Provisions 14 21,128 101,320

117,055 196,149Net current assets 762,015 559,609Miscellaneous expenditure 15 – 21(To the extent not written off or adjusted)

1,439,823 1,653,404


The schedules referred to above and notes to accounts form an integral part of the Balance Sheet.





allsec ar08 61-73.p65 7/7/2008, 5:30 PM64



Year ended Year endedPARTICULARS Schedule March 31, 2008 March 31, 2007

IncomeIncome from services 979,411 1,275,240(Tax deducted at source - Rs. 9,774, previous year - Rs. 2,657)Other income 16 32,060 37,866

1,011,471 1,313,106

ExpenditureConnectivity and other costs 106,883 139,217Employee costs and benefits 17 746,610 571,383General and administration expenses 18 232,147 224,344Selling expenses 19 7,497 15,317Finance charges 20 2,651 4,402Deferred revenue expenses written off 15 21 5Depreciation 5 86,177 104,351Amortisation of Goodwill 6 685 6,446

1,182,671 1,065,465

Profit / (Loss) before tax (171,200) 247,641

Provision for taxation- Current tax 190 3,422- MAT credit entitlement – (4,379)- Deferred tax 22,821 (530)- Fringe benefit tax 2,119 1,775

Profit / (Loss) after tax (196,330) 247,353Balance brought forward from previous year 159,285 56,073Amounts adjusted on amalgamatin of B2K Corp Private Limited(Also refer Note 21.4)Loss after tax for the financial year 2005 - 06 and 2006 - 07 (44,482) –

Profit available for appropriation (81,527) 303,426

Appropriations:Proposed dividend – 76,192Tax on dividend – 12,949Transfer to General Reserve – 55,000

Profit carried to Balance Sheet (81,527) 159,285

Earnings per share 21.14Net profit / (loss) available to equity shareholders (196,330) 247,353Weighted average number of equity shares used in computing basic earnings per share 15,238,326 14,003,010Basic earnings per share (equity shares, par value Rs.10/- each) (Rs.) (12.88) 17.66Weighted average number of equity shares used in computing diluted earnings per share 15,238,326 14,119,605Diluted earnings per share (equity shares, par value Rs.10/- each) (Rs.) (12.88) 17.52Notes to Accounts 21

The schedules referred to above and notes to accounts form an integral part of the Profit and Loss Account.

Consolidated Profit and Loss Account(All amounts are in thousands of Indian Rupees, unless otherwise stated)





allsec ar08 61-73.p65 7/7/2008, 5:30 PM65


ALLSEC TECHNOLOGIES LIMITEDConsolidated Cash Flow Statement(All amounts are in thousands of Indian Rupees, unless otherwise stated)

Year ended Year endedPARTICULARS March 31, 2008 March 31, 2007

A. Cash flow from operating activities:

Net profit / (loss) before tax (171,200) 247,641

Adjustments for:

Depreciation 86,168 110,797

Amortisation of goodwill 685 5

Interest expense 326 450

Interest income (2,901) (5,556)

Dividend income (35,776) (31,302)

Loss on sale of assets 510 627

Provision for doubtful debts 8,004 –

(Profit) on sale of investments (232) (120)

Liabilities no longer required written back (1,601) –

Unrealised foreign exchange (gain) / loss, net (6,947) 6,520

Amortisation of employee stock compensation cost 7,752 2,128

Operating profit / (loss) before working capital changes (115,212) 331,190

Adjustments for changes in working capital :

- (Increase) in sundry debtors (22,966) (73,017)

- (Increase) in loans and advances and other current assets (37,126) (25,138)

- Increase / (Decrease) in current liabilities and provisions 5,610 (571)

Cash generated from / (used in) operations (169,694) 232,464

- Taxes (paid), net (5,646) (3,304)

Net cash from / (used in) Operating Activities (175,340) 229,160

B. Cash flow from investing activities:

Capital expenditure (Refer note 1) (72,356) (39,840)

Proceeds from sale of fixed assets 1,682 1,991

Purchase of investments - mutual funds (1,933,016) (3,239,348)

Proceeds from sale of investments - mutual funds 2,345,383 2,516,374

Investment in subsidiary (29,711) (31,708)

Deposits (made) / received during the year 100,000 (100,000)

Interest received 2,657 4,602

Dividend Received 35,776 31,302

Net cash from / (used in) investing activities 450,415 (856,627)

allsec ar08 61-73.p65 7/7/2008, 5:30 PM66


ALLSEC TECHNOLOGIES LIMITEDConsolidated Cash Flow Statement(All amounts are in thousands of Indian Rupees, unless otherwise stated)

Year ended Year endedPARTICULARS March 31, 2008 March 31, 2007

C. Cash flow from financing activities:

Proceeds from issue of equity share capital / share warrants (426) 812,012

Share issue expenses (200) (19,427)

Proceeds from long term borrowings (50,289) 1,175

Repayment of long term borrowings (1,552) (1,134)

Interest paid (326) (450)

Dividend paid (76,192) (60,434)

Dividend tax paid (12,949) (8,476)

Net cash from / (used in) financing activities (141,934) 723,266

Net Increase in cash and cash equivalents 133,141 95,799

Opening cash and cash equivalents 291,621 195,822

Cash and cash equivalents incorporated on acquisitionof controlling interest in a subsidiary 11,425 –

Closing cash and cash equivalents* 436,187 291,621

*Includes restricted cash balances 80 29

Reconciliation of cash and cash equivalents with cash andbank balance as per Schedule 10:

As at As atMarch 31, 2008 March 31, 2007

Cash and Bank balances, per Schedule 10 436,641 387,676

Less: Term deposits – (100,000)

Loss / (Gain) on restatement of balances in foreign currency accounts. (454) 3,945

Cash and cash equivalents as per cash flow statement 436,187 291,621

Notes :1. Increase in capital expenditure include payments for items in capital work in progress and advances for purchase of

fixed assets. Adjustments for increase / decrease in current liabilities related to acquisition of fixed assets to the extentidentified have been made.

2. The accompanying notes are an integral part of this statement.





allsec ar08 61-73.p65 7/7/2008, 5:30 PM67




1 Share capitalAuthorised20,000,000 [Previous year - 20,000,000] Equity shares of Rs.10/- each 200,000 200,0001,350,000 [Previous year - 1,350,000] Convertible Preference Shares

of Rs.100/- each 135,000 135,000

Issued, subscribed and paid-up*15,238,326 [Previous year - 15,238,326] Equity Shares of Rs.10/- each 152,383 152,383

152,383 152,383

* Includes:a) Nil (previous year 3,021,685 equity shares of Rs.10/- each, issued under preferential allotment)b) Nil (previous year - 129,900 shares of Rs.10/- each issued under the Company's Employee Stock Option Plan, 2004)For stock options outstanding Refer Note 21.6.

2 Stock options outstandingBalance, beginning of year 16,984 7,253Add: Additions during the year – 16,326Less: Deletions / adjusted during the year 3,657 6,595Balance, end of year 13,327 16,984

Less: Deferred employee stock compensationBalance, beginning of year 13,960 1,435Add: Additions during the year – 16,326Less: Amortized / adjusted during the year 11,410 3,801

Balance, end of year 2,550 13,960

10,777 3,0243 Reserves and Surplus

Capital ReserveBalance, beginning of year – _Add: Share warrants transferred (Refer Note 21.5) 25,074 –Balance, end of year 25,074 –

Securities PremiumBalance, beginning of year 1,202,081 461,164Add: Received during the year # – 760,344Less: Adjusted against share issue expenses 200 19,427Balance, end of year 1,201,881 1,202,081

General ReserveBalance, beginning of year 110,000 55,000Amounts adjusted on amalgamation of B2K Corp Private Limited 19,863 –(Also Refer Note 21.4)Goodwill on acquisition of B2K Corp adjusted due to amalgamation – –Less: Adjustment for employee benefits provision (net of tax Rs. Nil) (1,804) –(Refer Note 21.3(d))Add: Transferred from Profit and Loss Account – 55,000Balance, end of year 128,059 110,000

Profit and Loss Account (81,527) 159,285

Foreign currency translation reserve (Refer Note 21.3(p))Balance, beginning of year – –Add: Adjustment for the year (493) –Balance, end of year (493) –

1,272,994 1,471,366# Includes

a) Nil (previous year - Rs. 755,421 received on issue of 3,021,685 equity shares of Rs. 10/- each issued underpreferential allotment during the year at premium of Rs. 250/- per share)

b) Nil (previous year Rs. 4,923 received towards the Company’s Employee Stock Option Plan, 2004)

Consolidated Schedules(All amounts are in thousands of Indian Rupees, unless otherwise stated)

allsec ar08 61-73.p65 7/7/2008, 5:30 PM68


ALLSEC TECHNOLOGIES LIMITEDConsolidated Schedules(All amounts are in thousands of Indian Rupees, unless otherwise stated)

4 Secured loans

Hire purchase loans from banks (Refer Note 21.7) 3,669 1,557(includes amounts repayable within one year Rs. 826, previousyear Rs. 538)

3,669 1,557

Schedule 5 on Fixed Asset is set out on the following page.

6 Goodwill

Balance, beginning of year 24,620 48,445Add: Additions during the year (Also refer Note 21.2) 27,413 –

Less: Adjustments during the yearAmounts adjusted on amalgamation of B2K Corp Private Limited (24,620) –(Refer Note 21.4)Excess of net assets acquired over purchase consideration paid for the – (17,379)outstanding preference capitalAmortisation during the year (685) (6,446)

Balance, end of year 26,728 24,620

7 Investments

Current investments (at lower of cost or market value)*

In Mutual Fund Units #

Quoted, fully paid up at cost 310,959 723,094

(Net Asset Value Rs.310,959, previous year Rs. 723,129)

310,959 723,094# Also refer note 21.8 for details of investments in mutual funds.

8 Deferred tax asset

Depreciation – 22,821

– 22,8219 Sundry debtors (unsecured)

Debts outstanding for a period exceeding six months

– Considered good 165,676 1,633

– Considered doubtful 8,004 –

Others, considered good 137,495 273,428

311,175 275,061

Less: Provision for doubtful debts (8,004) –

303,171 275,061

10 Cash and bank balances

Cash on hand 93 58Balance with scheduled banks* - in current accounts 52,028 256,042 - in deposit accounts 41,940 128,176 - in unpaid dividend accounts 80 29Balance with other banks - in current accounts 19,106 3,371 - in deposit accounts 323,394 –

436,641 387,676

*Includes unutilised proceeds received from preferential issue Rs. 307,088 (previous year Rs. 789,237)


allsec ar08 61-73.p65 7/7/2008, 5:30 PM69



Add

ition

s to

fixe

d as

sets

incl

ude

exch

ange

loss

cap

italiz

ed a

mou

ntin

g to

Nil

(pre

viou

s ye

ar R

s.12

0)

* V

ehic

les

incl

ude

asse

ts a

cqui

red

unde

r fin

ance

leas

e -

Gro

ss b

lock

- R

s. 4

,371

(pr

evio

us y

ear

- R

s. 3

,598

); N

et b

lock

- R

s. 4

,084

(pr

evio

us y

ear

- R

s. 3

,271

)

# In

clud

es a

dditi

ons

and

dele

tions

dur

ing

2005

-06

and

2006

-07.

Als

o R

efer

Not

e 21

.4.

Add

ition

s an

d de

prec

iatio

n ch

arge

for

the

per

iod

incl

ude

fore

ign

curr

ency

tra

nsla

tion

adju

stm

ent

aris

ing

on c

onso

lidat

ion

of a

for

eign

sub

sidi

ary

aggr

egat

ing

Rs.

627

(pre

viou

s ye

ar -

Rs.

Nil)

and

Rs.

126

(pr

evio

us y

ear

- R

s.N

il) r

espe

ctiv

ely.

Dur

ing

the

curr

ent y

ear,

B2K

Cor

p P

rivat

e Li

mite

d (‘B

2K’)

was

am

alga

mat

ed w

ith th

e C

ompa

ny. T

he o

peni

ng g

ross

blo

ck o

f fix

ed a

sset

s in

clud

ed fi

xed

asse

ts o

f B2K

and

no

furt

her

adju

stm

ents

hav

e be

en m

ade

in th

e op

enin

g bl

ock

on a

ccou

nt o

f am

alga

mat

ion.

Descr

iption

of As

sets

5F

ixed

Ass

ets

Gross

Block

Depre

ciatio

nNe

t Bloc

k

As at

Asset

sAd

dition

sDe

letion

sAs

atAs

atDe

precia

tion

For th

eDe

letion

sAs

atAs

atAs

atAp

ril 1, 2

007tra

nsferr

ed on

for th

e year

for th

e year

March

31, 20

08Ap

ril 1, 2

007tra

nsferr

ed on

year

for th

e year

March

31, 20

08Ma

rch 31

, 2008

March

31, 20

07Ac

quisit

ion #

Acqu

isition

#

Tang

ible A

ssets

Plant

and m

achin

ery

-Co

mpute

rs an

d serv

ers11

7,378

12,69

18,3

91 19

013

8,270

63,56

73,4

82 15

,711

149

82,61

155

,659

53,81

1

-Ca

ll cen

tre eq

uipme

nt25

9,786

-22

,988

- 28

2,774

131,9

68 -

39,69

5-

171,6

6311

1,111

127,8

18

-Of

fice e

quipm

ent

48,36

4-

9,37

4 39

57,69

911

,102

-2,4

10 3

13,50

944

,190

37,26

2

Furni

ture a

nd fix

tures

45,42

05,1

318,8

31 -

59,38

2 20

,127

1,432

3,24

5-

24,80

434

,578

25,29

3

Lease

hold im

provem

ents

92,34

66,0

1612

,774

- 11

1,136

43,96

2 15

1 16

,232

-60

,345

50,79

148

,384

Veh

icles*

6,93

81,1

40 4,

776

2,57

2 10

,282

1,03

841

7 88

8 45

7 1,

886

8,396

5,900

Intan

gible

Asse

ts

Softw

are 56

,662

-3,4

76 -

60,13

8 40

,053

- 7,

870

- 47

,923

12,21

516

,609

Total

626,8

94 24

,978

70,61

0 2,

801

719,6

81 31

1,817

5,48

2 86

,051

609

402,7

4131

6,940

315,0

77

Previo

us Y

ear

598,5

6332

,736

4,405

626,8

94 20

9,253

104,3

511,7

8731

1,817

315,0

77

allsec ar08 61-73.p65 7/7/2008, 5:30 PM70



11 Other current assets

Unbilled revenues 8,089 444

Interest accrued but not due 2,156 1,521

10,245 1,965

12 Loans and advances (unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received 1,151 12,126

Balance with excise authorities 33,356 13,281

Loan to subsidiary – –

[including accrued interest of Rs. Nil (previous year - Rs. 990]

Prepaid expenses 9,852 4,476

Deposits 63,486 53,785

MAT Credit entitlement 4,379 4,379

Advance income tax and tax deducted at source, net 16,789 3,009

129,013 91,056

13 Current liabilities

Sundry creditors

- Due to micro, small and medium scale undertakings – –

- Others 49,527 58,744

Foreign currency payable 11 –

Unpaid dividend 80 29

Other liabilities 45,947 36,056

Book overdraft 362 –

95,927 94,829

14 Provisions

Employee bonus 7,996 6,716

Leave encashment 7,976 2,628

Provident fund – 290


Proposed dividend – 76,192

Tax on dividend – 12,949

21,128 101,320



allsec ar08 61-73.p65 7/7/2008, 5:30 PM71




15 Miscellaneous expenditure

Deferred revenue expenditure

Balance, beginning of year

Share issue expenses 21 26

21 26

Add: Additions during the yearShare issue expenses 200 19,427

200 19,427

Less: Amortised during the year 21 5

Share issue expenses adjusted against securities premium 200 19,427

221 19,432

Balance, end of year – 21

Year ended Year ended

March 31, 2008 March 31, 2007

16 Other income

Interest

- Bank deposits (Tax deducted at source Rs. 744, previous year - Rs.987) 12,230 5,473

- Others (Tax deducted at source Nil, previous year - Rs.260) 12,034 83

Dividend income from mutual funds 35,776 31,302

Profit on sale of non trade investments 232 120

Liabilities no longer required written back 1,601 –

Foreign exchange gains / (loss) , net (35,787) (1,706)

Miscellaneous income 5,974 2,594

32,060 37,866

17 Employee costs and benefits

Salaries, wages and allowances 610,902 476,761

Contributions to provident and other funds 25,207 19,518


Employee stock compensation cost* 7,752 2,128

Staff welfare 81,753 55,330

Recruitment and training 17,000 14,828

746,610 571,383

* Includes Rs. 1,980 (previous year Rs.1,673) of reversal ofcost earlier accounted on lapsed options.

allsec ar08 61-73.p65 7/7/2008, 5:30 PM72



18 General and administration expenses

Electricity 39,888 30,157

Rent and amenities 62,767 58,473

Rates and taxes 1,981 7,457

Repairs and maintenance

- Plant and machinery 24,768 25,719

- Others 23,703 17,869

Insurance 3,209 2,411

Professional and consultancy charges 31,299 29,223

Travel and conveyance 20,669 31,143

Telephone 4,244 3,296

Provision for doubtful debts 8,004 –

Loss on sale of fixed assets 510 627

Miscellaneous expenses 11,105 17,969

232,147 224,344

19 Selling expenses

Selling commission 3,386 9,593

Other selling expenses 4,111 5,724

7,497 15,317

20 Finance charges

Interest

- others 353 450

Bank charges 2,298 3,952

2,651 4,402


allsec ar08 61-73.p65 7/7/2008, 5:30 PM73



21 Notes to accounts

21.1 Background

Allsec Technologies Limited (‘Allsec’ or the ‘Company’) was incorporated on August 24, 1998 as a limited companyunder the Companies Act, 1956 and is listed on the National Stock Exchange of India Limited (‘NSE’) and BombayStock Exchange Limited (‘BSE’). The Company is engaged in the business of providing IT enabled services. Theservices provided by the Company include data verification, processing of orders received through telephonecalls, telemarketing, monitoring quality of calls of other call centers, customer services, HR and payroll processing.

The Company has three subsidiaries as at the year end. These are:

• Allsectech Inc., USA (‘Allsectech’) - A wholly owned subsidiary of the Company incorporated on September14, 2000 in the State of Delaware, USA. This subsidiary is engaged primarily in the business of providingmarketing support services to the Company.

• B2K Corp Inc., USA (‘B2K Inc’) - A wholly owned subsidiary of the Company engaged primarily in the businessof providing marketing support services to the Company.

• Allsectech Manila Inc ('ATM') (formerly Kingdom Builders Inc, Philippines) - A wholly owned subsidiary of theCompany engaged in the business of IT enabled services including web development, web design, searchengine optimization, strategic teleservices and customer care quality management. The Company had acquiredcontrolling interest in this Company on February 14, 2008.

Allsectech, B2K Inc, and ATM shall hereinafter, be collectively referred to as ‘the Subsidiaries’. Allsec, along withthe Subsidiaries, shall hereinafter, be collectively referred to as ‘the Group’.

During the year, the Company had entered into a Scheme of amalgamation (‘Scheme’) with its wholly ownedsubsidiary B2K Corp Private Limited. The Scheme was filed with and approved by the Hon'ble High Court ofJudicature at Madras (‘High Court’) on August 23, 2007. Consequently, B2K, which was earlier consolidated as asubsidiary ceases to be a subsidiary of the Company and its results have been incorporated in the standalonefinancial statements of the Company. The adjustments arising in the consolidated financial statements as a resultof the Scheme have been set out in note 21.4 below.

21.2 Acquisition of Allsectech Manila Inc (formerly Kingdom Builders Inc, Philippines (‘KBI’)

During the year, the Company had entered into a Share Purchase Agreement ('SPA') dated October 3, 2007 withthe erstwhile shareholders of Kingdom Builders Inc, Manila, Philippines ('KBI'). KBI was engaged in the businessof web site development including web development, web design, search engine optimization, strategic teleservicesand customer care quality management. Under the terms of the SPA, the Company shall acquire the entireoutstanding equity capital of KBI for a consideration to be determined in accordance with the terms of the SPA. OnOctober 4, 2007, the Company paid an initial consideration of Rs. 29,711 (USD 750,000) towards 100% of theequity capital, with a balance contingent consideration of upto USD 750,000 payable after one year conditional onachievement of certain specified parameters to the erstwhile shareholders of KBI, as determined in accordancewith the terms of the SPA.

Subsequent to the acquisition, the Company has invested additionally amount aggregating to Rs. 70,394 assubscription towards the equity capital of KBI. KBI has changed its name to Allsectech Manila Inc with effect fromJanuary 2008.


allsec ar08 74-87.p65 7/7/2008, 5:31 PM74



The excess of purchase consideration paid over the net assets of ATM as at February 14, 2008 (date of acquisitionof controlling interest) has been recognised as 'goodwill' in the consolidated financial statements. The goodwill hasbeen determined on the following basis:

Particulars Amount

Purchase consideration:Amounts already paid 29,711Estimated balance consideration payable -Total purchase consideration (A) 29,711

Tangible fixed assets 35,165Other assets 3,210Net current assets (36,077)Net assets (B) 2,298

Represented by: - Equity 6,068 - Accumulated losses (3,769)

Goodwill (A - B) 27,413

21.3 Statement of significant accounting policies:

(a) Principles of consolidation

i. The Consolidated Financial Statements (‘CFS’) of the Group have been prepared based on a line-by-lineconsolidation of the balance sheet as at March 31, 2008 and statement of profit and loss and cash flows of theGroup for the year ended March 31, 2008.

ii. The financial statements of the Subsidiaries considered for the purpose of consolidation are drawn for thesame reporting period as that of the Company i.e. year ended March 31, 2008.

iii. The CFS have been prepared using uniform accounting policies, except as stated otherwise, for similartransactions and are presented to the extent possible, in the same manner as the Company’s separate financialstatements.

iv. All material inter-company transactions and balances between the entities included in the CFS have beeneliminated on consolidation.

(b) Basis of preparation

The consolidated financial statements have been prepared to comply in all material respects with the Notifiedaccounting standard by Companies Accounting Standards Rules, 2006 and the relevant provisions of the CompaniesAct, 1956 ('the Act') to reflect the financial position and the results of operations of the Group. The consolidatedfinancial statements have been prepared under the historical cost convention and on an accrual basis. Further,the financial statements are presented in the general format specified in Schedule VI to the Act. However, as thesefinancial statements are not statutory financial statements, full compliance with the above Act are not required andso they may not reflect all the disclosure requirements of the Act. The accounting policies have been consistentlyapplied by the Group and except for the change in accounting policy discussed more fully below, are consistentwith those used in the previous year.

(c) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent liabilities at the date of the financial statements and the results of operations during thereporting period end. Although these estimates are based upon management's best knowledge of current eventsand actions, actual results could differ from these estimates.


allsec ar08 74-87.p65 7/7/2008, 5:31 PM75



(d) Change in Accounting Policy

Adoption of Accounting Standard AS15 Employee Benefits

Till March 31, 2007, the Company was providing for gratuity and compensated absences based on actuarialvaluation as per certificate from actuary. In the current year, the Company has adopted Accounting Standard 15(Revised) which is mandatory for accounting periods commencing December 7, 2006. Accordingly, the Companyhas provided for gratuity and leave encashment based on actuarial valuation done as per projected unit creditmethod. Further in accordance with the transitional provision in the revised accounting standard, in respect ofleave encashment Rs. 1,804 (net of tax Rs. Nil) has been adjusted to the General Reserve.

(e) Fixed Assets

Fixed assets are stated at cost less accumulated depreciation and impairment losses where applicable. Costincludes purchase price and all direct / indirect costs incurred to bring the asset to its working condition for itsintended use.

(f) Depreciation

Depreciation is provided using the straight line method in the manner specified in Schedule XIV to the Act, at therates prescribed therein or at the rates based on Management's estimate of the useful lives of such assets, whicheveris higher, as follows:

Asset Description Percentage

Plant and machinery 4.75 - 16.21

Furniture and fixtures 6.33

Vehicles 9.50

Intangible assets - Software 25.00

Leasehold improvements are amortised over the estimated useful lives or the remaining primary lease period,whichever is less. Assets individually costing Rs. 5 or less are fully depreciated in the year of purchase.

Goodwill is amortized using the straight-line method over a period of five years.

Pursuant to the amalgamation of the erstwhile B2K with the Company, the estimated useful lives of assets of B2Kwere revised with effect from April 1, 2007 to synchronize with the effective useful lives of similar assets of theCompany. This revision has resulted in a reduction in depreciation charge for the year by Rs 9,511. As a result ofthis change, loss before tax is lower by Rs 9,511 and the net book value of fixed assets is higher by an equivalentamount.

The assets of Allsectech aggregating to Rs. 11 million (2% of the total group assets) are depreciated using straightline method over its estimated useful life of three years for computers and accessories and five years for otherequipment.

The assets of ATM aggregating to Rs. 30.3 million (4% of the total group assets) are depreciated using the straightline method over its estimated useful life as follows:

Asset Description Useful Life

Computer and accessories 2 - 3 years

Furniture and fixtures 3 - 5 years

Vehicles 3 - 5 years

Leasehold improvements 5 years

No adjustments have been recognized for the difference arising on account of differing estimates of useful life forsimilar group of assets in the consolidated entities, since Management believes that such differing estimates areappropriate having regard to the pattern of usage of such assets in each of the entities.


allsec ar08 74-87.p65 7/7/2008, 5:31 PM76



(g) Impairmenti. 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 anasset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling priceand its value in use. In assessing value in use, the estimated future cash flows are discounted to theirpresent value at the weighted average cost of capital.

ii. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaininguseful life.

iii. A previously recognized impairment loss is increased or reversed depending on changes in circumstances.However, the carrying value after reversal is not increased beyond the carrying value that would have prevailedby charging usual depreciation if there was no impairment.

iv. The carrying amount of goodwill arising on consolidation is reviewed for impairment in accordance with therequirements of Accounting Standard 28 “Impairment of Assets” and impairment loss is recognized whereverthe carrying amount of an asset exceeds its recoverable amount.

(h) InvestmentsInvestments that are readily realisable and intended to be held for not more than a year are classified as currentinvestments. All other investments are classified as long-term investments. Current investments are carried atlower of cost and fair value determined on an individual investment basis. Long-term investments are carried atcost. Provision for diminution in value is made to recognise a decline other than temporary in the value of long terminvestments.

(i) LeasesFinance leases, which effectively transfer to the Group substantially all the risks and benefits incidental to ownershipof the leased asset, are capitalized at the lower of the fair value and present value of the minimum lease paymentsat the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between thefinance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are chargedagainst income.

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item,are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Lossaccount on a straight-line basis over the lease term.

(j) ProvisionsA provision is recognized when an enterprise has a present obligation as a result of past event and it is probablethat an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can bemade. Provisions are not discounted to its present value and are determined based on Management estimate ofamounts required to settle the obligation at the balance sheet date. These are reviewed at each balance sheetdate and adjusted to reflect the current Management estimates.

(k) Deferred revenue expenditureShare issue expenses are adjusted against the securities premium received, in accordance with Section 78 ofthe Act.

(l) Revenue recognitionIncome from services:

Income from IT enabled services is derived from both time based and unit priced contracts. Revenue is recognizedas the related services are performed in accordance with the specific terms of the contract with the customer.

Unbilled revenue represents accrual of income relating to services provided but not billed as at the year end.

Dividend income:

Dividend income is recognised when the right to receive payment is established by the balance sheet date.

Interest:

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rateapplicable.


allsec ar08 74-87.p65 7/7/2008, 5:31 PM77



(m) Retirement benefits

Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are chargedto the Profit and Loss Account of the year when the contributions to the respective fund are due.

Gratuity liability under the Payment of Gratuity Act, 1972 is a defined benefit obligation and is provided for on thebasis of actuarial valuation on projected unit credit method made at the end of each financial year.

Short term compensated absences are provided for based on estimates. Long term compensated absences areprovided for based on actuarial valuation on projected unit credit method made at the end of each financial year.

Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

(n) Taxation

Tax expense comprises current, deferred and fringe benefit tax. Provision for current income tax and fringe benefittax is made on the assessable income at the tax rate applicable to the relevant assessment year. Deferred incometaxes are recognized for the future tax consequences attributable to timing differences between the financialstatement determination of income and their recognition for tax purposes.

The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the income statementusing the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxableincome will be available against which such deferred tax assets can be realised. If the Company has unabsorbeddepreciation or carry forward tax losses, deferred tax assets are recognised only if there is virtual certainty supportedby convincing evidence that such deferred tax assets can be realised against future taxable profits.

At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecogniseddeferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be thatsufficient future taxable income will be available against which such deferred tax assets can be realised.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The company writes-downthe carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain,as the case may be, that sufficient future taxable income will be available against which deferred tax asset can berealised. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, asthe case may be, that sufficient future taxable income will be available

Minimum Alternative Tax ('MAT') credit is recognised as an asset only when and to the extent there is convincingevidence that the Company will pay normal income tax during the specified period. In the year in which the MinimumAlternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendationscontained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created byway of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews thesame at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extentthere is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specifiedperiod.

(o) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investmentswith an original maturity of three months or less.

(p) Foreign currency transactions

Transactions:

Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on the date oftransaction. At the year-end, monetary items are converted into rupee equivalents at the year-end exchange rates.Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reportedusing the exchange rate at the date of the transaction.

All exchange differences arising on settlement / conversion of foreign currency transactions are included in theprofit and loss account.


allsec ar08 74-87.p65 7/7/2008, 5:31 PM78



In relation to the forward contracts entered into to hedge the foreign currency risk of the underlying monetaryassets / liabilities, the exchange difference is calculated as the difference between the foreign currency amount ofthe contract translated at the exchange rate at the reporting date, or the settlement date where the transaction issettled during the reporting period, and the corresponding foreign currency amount translated at the later of thedate of inception of the forward exchange contract and the last reporting date. Such exchange differences arerecognised in the profit and loss account in the reporting period in which the exchange rates change. The premiumor discount on all such contracts arising at the inception of each contract is amortised as income or expense overthe life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognizedas income or as expense for the period.

Translations:

The financial statements of an integral foreign operation are translated as if the transactions of the foreign operationhave been those of the Group itself. The resulting difference on account of translations is recorded in the profit andloss account.

In translating the financial statements of a non-integral foreign operation for incorporation in financial statements,the assets and liabilities, both monetary and non-monetary, of the non-integral foreign operation are translated atthe closing rate; income and expense items of the non-integral foreign operation are translated at exchange ratesat the dates of the transactions; and all resulting exchange differences are accumulated in a foreign currencytranslation reserve until the disposal of the net investment.

(q) Earnings per share (“EPS”)

The earnings considered in ascertaining the Group's earnings per share comprise the net profit after tax. Thenumber of shares used in computing basic earnings per share is the weighted average number of shares outstandingduring the year. The number of shares used in computing diluted earnings per share comprises the weightedaverage number of shares considered for deriving basic earnings per share and also the weighted average numberof shares, if any, which would have been issued on the conversion of all dilutive potential equity shares.

(r) Deferred employee stock compensation expenses

Measurement and disclosure of the employee share-based payment plans is done in accordance with the GuidanceNote on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants ofIndia. The Group measures compensation cost relating to employee stock options using the intrinsic value method.Deferred employee stock compensation expense is amortized over the vesting period of the option on a straightline basis.

21.4 Amalgamation of B2K with the Company

i. B2K was engaged in the business of inbound and outbound voice, email and chat support services andinformation technology services.

ii. The Company had entered into a Scheme of amalgamation ('Scheme') with its wholly owned subsidiary B2Kfor the amalgamation of B2K with the Company effective April 1, 2005 ('Appointed Date'). The Scheme wasapproved by the Hon'ble High Court of Judicature at Madras ('High Court') on August 23, 2007. Pursuant toorder of the High Court and consequent filing thereof with the Registrar of Companies, Tamil Nadu at Chennai,on August 27, 2007, B2K has been amalgamated with the Company and stands dissolved without beingwound up.

iii. The amalgamation has been accounted for under the "pooling of interests" method as prescribed by AccountingStandard 14 - "Accounting for Amalgamations" issued by the Institute of Chartered Accountants of India inthe following manner:


allsec ar08 74-87.p65 7/7/2008, 5:31 PM79



a) All the assets and liabilities of B2K as of April 1, 2005, were transferred to and vested in the Companyat the carrying values as appearing in the books of account, the summary of which is as below:

Particulars Amount

Fixed assets (Net)

Gross block 45,312

Less : Accumulated depreciation 12,296

Net block 33,016

Capital work-in-progress [including capital advances] 1,767

Investments 17,486

Current assets, loans and advances 104,020

Less : Current liabilities and provisions 11,203

Net current assets 92,817

Net assets transferred 145,086

b) The debit balance in the Profit and Loss Account of B2K of Rs 26,033 as at April 1, 2005 has beenadjusted in the general reserves of the Company.

c) The difference between the amount recorded as the book value of the shares held by Allsec and theamount of share capital of B2K as at April 1, 2005 of Rs 45,896 has been credited to the generalreserves of the Company.

iv. As per the Scheme, during the period between the Appointed Date and the Effective Date, B2K shall bedeemed to have carried on the existing business in "trust" on behalf of the Company. Further, all profits orincomes earned and expenses incurred by B2K during such period, shall for all purposes, be deemed to beprofits or incomes or expenditure or losses of the Company. Accordingly, the net losses after tax incurred byB2K during the period from April 1, 2005 to March 31, 2007 of Rs 79,865 has been incorporated in thefinancial statements of the Company by way of an adjustment to the opening balance of the Profit and LossAccount.

v. The title deeds for leasehold improvements, licenses, agreements, loan documents, etc. of B2K have beentransferred in the name of the Company.

vi. Consequent to the amalgamation, the Group has derecognised the goodwill previously recognised on accountof the acquisition of B2K by adjusting the same against General Reserves and Profit and Loss Account, in amanner that is consistent with the accounting adjustments made in the standalone financial statements ofthe Company for the Scheme.

21.5 Share warrantsDuring the previous year, the Company had issued 803,640 warrants to the promoters of the Company and 160,728warrants to First Carlyle Ventures, Mauritius ('FCVM') on a preferential basis, in accordance with the terms andconditions as set out in the Subscription and Shareholders' Agreement ('SSA') dated August 23, 2006 by andbetween the Company, its promoters and FCVM. Each warrant was convertible into one equity share of theCompany at a conversion / exercise price of Rs. 260/- per resultant equity share, at any time before the expiry of18 months from the date of allotment of the warrant.

The holders of the warrant have not exercised this option within the prescribed date and consequently, suchwarrants stand lapsed. Accordingly, the initial application money of Rs. 25,074 received on such warrants standsforfeited to the company as per the terms of issue and has been transferred to capital reserve.

21.6 Stock option plansThe Group has two stock option plans that provide for the granting of stock options to employees including Directorsof the Company (not being promoter Directors and Executive Directors, holding more than 10% of the equityshares of the Company). The option plans are summarized below:


allsec ar08 74-87.p65 7/7/2008, 5:31 PM80



Employee Stock Option Plan (ESOP) 2004

The shareholders at the Extra Ordinary General Meeting held on May 6, 2004, approved an Employee StockOption Plan (ESOP) which provides for the grant of 550,000 options to employees. Consequently, the compensationcommittee had granted the following options on various dates at an exercise price of Rs.10 per share:

Date of grant Number of options granted

July 1, 2004 286,500 options

January 14, 2005 13,500 options

January 31, 2005 33,700 options

The remaining options of 216,300 have not been issued as at the date of the balance sheet and the Company doesnot propose to issue the same.

The Company has adopted the (Employee Stock Option Scheme and Employee Stock Purchase Scheme)Guidelines, 1999 issued by Securities and Exchange Board of India, and has recorded a compensation expenseusing the fair value method as set out in those guidelines. The summary of the movement in options is given below:

Particulars As at As atMarch 31, 2008 March 31, 2007

Options outstanding, beginning of year 19,800 168,400

Options granted during the year – –

Options exercised during the year – 129,900

Options lapsed during the year – 18,700

Options outstanding, end of year 19,800 19,800

Options outstanding at the year end comprise of :

- Options eligible for exercise at year end 19,800 19,800

- Options not eligible for exercise at year end – –

Weighted average share price at the date of exercise (Rs.) – 209.68Weighted average remaining contract life of options (in years) 1 year and 4 2 years and 4

months monthsVesting period of options

- 50% of the options – one year from the date of grant - 50% of the options – two years from the date of grant

Employee Stock Option Scheme (ESOS) 2006

The shareholders at the Annual General Meeting held on July 10, 2006 have approved an Employee Stock OptionScheme 2006 (ESOS 2006) which provides for an issue of 600,000 options to the employees. Consequently, thecompensation committee had granted the 350,000 options on January 25, 2007 at an exercise price of Rs. 289.75per share.

The Company has adopted the (Employee Stock Option Scheme and Employee Stock Purchase Scheme)Guidelines, 1999 issued by Securities and Exchange Board of India, and has recorded a compensation expenseusing the intrinsic value method as set out in those guidelines. The summary of the movements in options is givenbelow:


allsec ar08 74-87.p65 7/7/2008, 5:31 PM81




Options outstanding, beginning of year 350,000 –

Options granted during the year – 350,000

Options exercised during the year – –

Options lapsed during the year 106,500 –

Options outstanding, end of year 243,500 350,000

Options outstanding at the year end comprise of :

- Options eligible for exercise at year end 121,750 –

- Options not eligible for exercise at year end 121,750 350,000

Weighted average remaining contract life of options 3 years and 4 years and10 months 10 months

Vesting period of options

- 50% of the options – one year from the date of grant

- 50% of the options – two years from the date of grant

Pro-forma Disclosures for ESOS 2006

In accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999, had the compensation cost for ESOS 2006 been recognized based on the fair value at the date of grant inaccordance with binomial method, the amounts of the Company's net profit and earnings per share would havebeen as follows:

Particulars Profit / (Loss) Basic EPS Diluted EPSafter tax (Rs.) (Rs.)

Year ended March 31, 2008

- Amounts as reported (196,330) (12.88) (12.88)

- Amounts as per pro-forma (209,376) (13.74) (13.74)

Particulars Profit / (Loss) Basic EPS Diluted EPSafter tax (Rs.) (Rs.)

Year ended March 31, 2007

- Amounts as reported 247,354 17.66 17.52

- Amounts as per pro-forma 243,771 17.41 17.26

The fair value of options was estimated at the date of grant using the binomial method with the following assumptions:

Particulars








allsec ar08 74-87.p65 7/7/2008, 5:31 PM82



21.7 Secured Loans

Hire purchase loans are secured by hypothecation of the respective assets acquired

21.8 Details of current investments

Current investments in mutual funds at the year end comprise of:

March 31, 2008Name of Mutual fund

No. of units Amount

DWS Money Plus Fund - Institutional Plan 12,246,540 122,549

HDFC Cash Management Fund 2,815,850 28,247

ICICI Prudential - Flexible Income Plan 9,544,111 100,915

Tata Floater Fund 2,162,527 21,702

UTI - Liquid Plus Fund Institutional Plan 37,538 37,546

Total 310,959

March 31, 2007Name of Mutual fund

No. of units Amount

Franklin TITMA fund 155,528 155,567

Birla Cash Plus 10,223,928 102,439

Reliance Interval Fund 10,196,368 102,075

ICICI Prudential 10,000,000 100,000

Kotak Liquid fund 6,331,088 77,417

Prudential ICICI Super plan 5,280,526 52,964

HDFC Call Plan 4,977,102 51,894

Standard Chartered Liquidity Manager Fund 5,094,746 50,953

UTI Money Market fund 1,654,340 29,785

Total 723,094

21.9 Segment reporting

The Group's operations predominantly relate to IT enabled services and accordingly this is the only primary reportablesegment. The Group has considered geographical segment as the secondary segment, based on the location ofthe customers invoiced.

Information about secondary segments March 31, 2008 March 31, 2007

Revenue from services

United states of America 868,190 1,236,019

Others 111,221 39,221

Total 979,411 1,275,240

Fixed assets used in the Company’s business have not been identified to any of the reportable segments, as thefixed assets and services are used interchangeably between segments. The Company believes that it is currentlynot practicable to provide segment disclosures relating to assets and capital expenditure since a meaningful segregationof the available data is onerous.


allsec ar08 74-87.p65 7/7/2008, 5:31 PM83



21.10 Related party transactions

1. Names of related parties

Relationship Name of the party

Key management personnel Whole time directors:A. SaravananR. Jagadish

2. Transactions with related parties:

Particulars March 31, 2008 March 31, 2007

Directors’ remuneration

-- Salaries 23,040 17,400

-- Commission - 7,500

Dividend paid (cash basis) 20,450 20,450

3. Balances with related parties:

Particulars March 31, 2008 March 31, 2007

Salary payable 11,520 -

Commission payable - 7,500

21.11 Lease commitments

Finance leases:


Not later than one year

Minimum lease payments 1,209 652


Present value 826 538

Later than one year but not later than five years

Minimum lease payments 3,400 1,197


Present value 2,843 1,019

Later than five years

Minimum lease payments Nil Nil

Less: Finance Charges Nil Nil

Present value Nil Nil

Operating leases

Office premises are obtained under operating lease. Lease rentals incurred during the year Rs. 62,767 (previousyear Rs. 58,473) have been charged as an expense in the profit and loss account. The future lease rentals payableare as follows:


allsec ar08 74-87.p65 7/7/2008, 5:31 PM84




Upto 1 year 78,997 61,037

1 to 5 years 254,048 185,796

Beyond 5 years 41,217 66,600

Total 374,262 313,433

21.12 Gratuity benefit plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more ofservice gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. Thescheme is funded with an insurance company in the form of a qualifying insurance policy.

Profit and Loss account

Particulars Amount


Interest cost on benefit obligation 496

Expected return on plan assets (383)

Net actuarial loss recognized in the year 631

Past service cost -

Net employee benefit expense (Gratuity) 3,996

Balance sheetDetails of provision for gratuity

Particulars Amount

Defined benefit obligation (10,801)

Fair value of plan assets 5,645

Less: Un recognised past service cost -

Plan asset / (liability) (5,156)

Changes in the present value of the defined benefit obligation are as follows:

Particulars Amount

Opening defined benefit obligation 6,971Interest cost 496Current service cost 3,252Benefits paid (1,086)Actuarial (gains) / losses on obligation 1,168Closing defined benefit obligation 10,801

Changes in the fair value of plan assets are as follows:

Particulars AmountOpening fair value of plan assets 4,653

Expected return 383

Contributions by employer 1,158


Actuarial gains / (losses) 537

Closing fair value of plan assets 5,645


allsec ar08 74-87.p65 7/7/2008, 5:31 PM85



Assumptions

Particulars Percentage

Discount rate 8%

Expected return on plan assets 8%

21.13 Contingencies and commitments

Particulars Year ended Year ended

March 31, 2008 March 31, 2007

Commitments

Capital contracts yet to be executed 772 19,355


March 31, 2008 March 31, 2007

Contingent liabilities

(a) Claims against the Group not acknowledged as debts * 10,887 -

(b) Service tax matters ** 1,770 -

• Represents demand received from the Tamil Nadu Electricity Board in January 2008 relating to reclassificationdisputes on the tariff category applicable to the Group in two of its delivery centers with retrospective effectfrom 2005. The Group has obtained an interim stay order from the Hon'ble High Court of Madras against thisclaim. The Group considers the claim to be erroneous and as not payable under the specified tariff categoryapplicable to ITES units.

• The Group has received a show cause notice from the service tax authorities questioning interalia the availmentof cenvat credit on certain input services and the non-payment of service tax on certain import of services. TheGroup has filed the response to the show cause notice and based on the management evaluation of thelikelihood of such claims, disclosed the amounts involved towards possible exposures above.

21.14 Earning per share


March 31, 2008 March 31, 2007

Weighted average number of basic equity shares outstandingduring the year 15,238,326 14,003,010

Add: Dilutive potential equity shares - 116,595

Number of weighted average equity shares for calculation ofdiluted EPS 15,238,326 14,119,605


allsec ar08 74-87.p65 7/7/2008, 5:31 PM86



21.15 Previous year comparatives

Current year figures include the assets and liabilities as at March 31, 2008 and transactions of ATM for the periodfrom February 14, 2008 (date of acquisition of controlling interest) to March 31, 2008. Accordingly, figures of thecurrent year are not strictly comparable with those of the prior year.

Previous year figures have been reclassified / regrouped wherever necessary to conform to the current year'sclassification.


per S Balasubrahmanyam A Saravanan R Jagadish K S Raghu Partner Director Director Company SecretaryMembership No: 053315



allsec ar08 74-87.p65 7/7/2008, 5:31 PM87

Allsec at Trichy

NA

GA

RA

J &

CO

. PV

T. L

TD

.

allsec ar08 1-16 · 2018-04-24 · HR and Training 9 Directors’ Report 12 Corporate Governance 17...

Documents

Transcript of allsec ar08 1-16 · 2018-04-24 · HR and Training 9 Directors’ Report 12 Corporate Governance 17...