CMC 2004 05

1

ContentsCorporate Information 2

Notice 3

Directors’ Report 6

Management Discussion and Analysis 14

Corporate Governance Report 19

Auditors’ Certificate on Corporate Governance 26

Company Secretary’s Responsibility Statement 27

Auditors’ Report 28

Balance Sheet 32

Profit & Loss Account 33

Cash Flow Statement 34

Schedules & Notes on Accounts 35

Balance Sheet Abstract 50

Details of Subsidiary Company 51

Auditors’ Report on the Consolidated Accounts 52

Consolidated Accounts 54

Proxy/Attendance Sheet 69

Payment of Dividend by Electronic Clearing Services 71

CMC LimitedTwenty ninth annual report 2004 - 2005

Annual General Meeting on Friday,

June 17, 2005 at 2.30 p.m. at Bhartiya

Vidya Bhavan Auditorium, BVB

Hyderabad Kendra

No. 5-9-1105, Basheerbagh-King Koti

Road, Hyderabad-500029This annual report can beaccessed at www.cmcltd.com

CMC-1.p65 5/19/2005, 11:57 AM1

CMC Limited

Twenty ninth annual report 2004 - 2005

2

CORPORATE INFORMATION

BOARD OF DIRECTORS

ChairmanMr S Ramadorai

Managing Director & CEOMr R Ramanan

Directors

Mr Ishaat Hussain

Dr KRS Murthy

Mr Surendra Singh

Mr C B Bhave

Mr Shardul Shroff

Company Secretary & Head - LegalMr Vivek Agarwal

Statutory AuditorsM/s S.B. Billimoria & Co.

Chartered Accountants

Secretarial AuditorsChandrasekaran Associates

Company Secretaries

Registered OfficeCMC Centre

Old Mumbai Highway

Gachibowli

Hyderabad-500019 (A.P.)

Corporate OfficePTI Building, 5th Floor

4, Sansad Marg

New Delhi-110001

Principal BankersCanara Bank

State Bank of Bikaner & Jaipur

ICICI Bank

Audit CommitteeDr KRS Murthy

Mr Surendra Singh

Mr C B Bhave

Share Transfer-cum-ShareholdersGrievance CommitteeMr Surendra Singh

Mr R Ramanan

Mr Shardul Shroff

Mr Vivek Agarwal

Remuneration CommitteeDr KRS Murthy

Mr S Ramadorai

Mr C B Bhave

Ethics and Compliance CommitteeMr Surendra Singh

Mr R Ramanan

Mr Shardul Shroff

Mr Vivek Agarwal

Registrars & Share Transfer AgentsM/s Karvy Computershare Private Limited

Karvy House, 46, Avenue 4, Street No 1

Banjara Hills, Hyderabad 500 034

Stock Exchanges where Company’sSecurities are listedThe Stock Exchange, Mumbai

National Stock Exchange of India Ltd.

The Calcutta Stock Exchange Ass. Ltd.

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NOTICE

Notice is hereby given that the 29th Annual General Meeting of the Members of CMC Limited will be held on Friday, June 17,

2005 at 2.30 P.M. at the Bhartiya Vidya Bhavan Auditorium, BVB Hyderabad Kendra No.5-9-1105 Basheerbagh-King Koti Road,

Hyderabad-500 029, A.P. to transact the following:

ORDINARY BUSINESS:

1. To receive, consider and adopt the audited Profit and Loss Account for the year ended 31st March, 2005 and the Balance

Sheet as at that date and the Reports of the Board of Directors and the Auditors thereon.

2. To declare a dividend.

3. To appoint a Director in place of Dr KRS Murthy, who retires by rotation and, being eligible, offers himself for re-appointment.

4. To appoint a Director in place of Mr Shardul Shroff, who retires by rotation and, being eligible, offers himself for re-

appointment.

5. To appoint Statutory Auditors and to fix their remuneration.

BY ORDER OF THE BOARD

For CMC LIMITED

Mumbai VIVEK AGARWAL

April 18, 2005 COMPANY SECRETARY & HEAD - LEGAL

Registered Office:

CMC Centre

Old Mumbai Highway, Gachibowli

Hyderabad-500 019

Notes:

1. A Member entitled to attend and vote is entitled to appoint a Proxy to attend and vote at the meeting instead of

himself and the Proxy need not be a Member of the Company. The Proxy Form must be deposited at the Registered

Office of the Company not later than 48 hours before the commencement of the meeting.

2. The relevant details of item nos. 3 & 4 above pursuant to Clause-49 of the listing agreement are annexed hereto.

3. Members who hold shares in dematerialised form are requested to bring their DP ID and Client ID numbers for easy

identification of attendance at the meeting.

4. For the convenience of the Members, attendance slip is enclosed elsewhere in the Annual Report. Members/Proxy Holders/

Authorised Representatives are requested to fill in and affix their signatures at the space provided therein and surrender

the same at the venue. Proxy/Authorised Representatives of a Member should state on the attendance slip as ‘Proxy’ or

‘Authorised Representative’ as the case may be.

5. The Register of Members and the Share Transfer Books of the Company will remain closed from Tuesday, June 14, 2005 to

Friday, June 17, 2005 (both days inclusive).

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6. The dividend as recommended by the Board of Directors, if declared at the Annual General Meeting, will be paid at par

after June 17, 2005 (i) to those shareholders whose names appear on the Company’s Register of Members after giving

effect to all valid share transfers in physical form lodged with the Company on or before June 13, 2005; (ii) in respect of

shares held in electronic form to those ‘deemed’ members whose names appear in the statements of beneficial ownership

furnished by National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd. (CDSL) as at the

end of business hours on June 13, 2005.

7. In accordance with SEBI’s directions vide their Circular No. DCC/FITT/Cir-3/2001 dated October 15, 2001, arrangements

have been made to credit your dividend amount directly to your bank account through the Electronic Clearing Service

(ECS).

In case you hold shares in physical form, please furnish your bank details in the ECS Mandate Form enclosed separately

together with a xerox copy of your cheque leaf and return to our Registrars, Karvy Computershare Private Limited on or

before June 13, 2005. The said details in respect of the shares held in electronic form should be sent to your respective

Depository Participant and not to the Registrar as the Registrar is obliged to use only the data provided by the Depository

while making payment of dividend.

8. Pursuant to provisions of Section 205A(5) of the Companies Act, 1956, dividends which remain unclaimed for a period of

7 years from the date of transfer of the same to the Company’s unpaid dividend account will be transferred to the Investor

Education and Protection Fund established by the Central Government. Shareholders who have not encashed their

dividend warrant(s) so far are requested to make their claim to the Registrar & Share Transfer Agents of the Company. The

Company has been periodically reminding the shareholders concerned to claim their dividend from the Company.

9. Pursuant to Section 109A of the Companies Act, 1956, shareholders are entitled to make nomination in respect of shares

held by them. Shareholders desirous of making nominations are requested to send their requests in Form No. 2B in

duplicate (which will be made available on request) to the Registrar & Share Transfer Agents of the Company.

10. As an austerity measure, copies of the Annual Report will not be distributed at the Annual General Meeting. Members are

requested to bring their copies to the meeting.

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DETAILS OF DIRECTORS RETIRING BY ROTATION AND SEEKING REAPPOINTMENT(In Pursuance of Clause 49 of the Listing Agreement)

Name

Date of Birth

Date of Appointment

Qualifications

Expertise in specific functional areas

Directorships inother Companies

Chairman/Member of Committeesof the Board of Companies ofwhich he is a Director

Dr KRS Murthy

22.03.1938

16.10.2001

Doctorate in Business Administrationfrom Harvard Business School, Masterin Mgmt. from Sloan School, MIT,Gold Medalist of Mysore University.

Business Management

National Stock Exchange-Public Representative

CMC LimitedAudit Committee - ChairmanRemuneration Committee - Chairman

Mr Shardul Shroff

01.10.1955

16.10.2001

B.Com. (Hons) from SydenhamCollege, Mumbai, LL.B. fromGovernment Law College, Mumbai,Advocate on Record, Supreme Court.

Legal, Project Finance, Mergers &Acquisitions, Insurance, CorporateFinance etc.

Infrastructure DevelopmentFinance Co. LimitedApollo Tyres LimitedNIIT LimitedBILT Limited

CMC LimitedShare Transfer cum ShareholdersGrievance Committee

Infrastructure DevelopmentFinance Corporation Ltd.Audit Committee

Apollo Tyres LimitedShare Grievance Committee

NIIT LimitedShare Grievance CommitteeAudit Committee

BY ORDER OF THE BOARD

For CMC LIMITED

Mumbai VIVEK AGARWAL

April 18, 2005 COMPANY SECRETARY & HEAD - LEGAL

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1. FINANCIAL RESULTS

(Rs. in Crores)

Particulars 2004-05 2003-04

Income from Sales and Services 775.67 747.07

Other Income 6.80 16.60

Total Income 782.47 763.67

Operating Expenses 736.14 685.65

Profit before Depreciation, Interest and Tax 46.33 78.02

Depreciation 9.16 8.75

Interest 4.22 3.56

Profit before Tax 32.95 65.71

Provision for Taxation (incl. deferred Income Tax) 9.89 17.72

Profit after Tax 23.06 47.99

Add: Profit brought forward from previous year 130.93 97.14

Amount available for appropriations 153.99 145.13

Appropriations

Proposed Dividend 6.82 8.33

Tax on Proposed Dividend 0.96 1.07

Transfer to General Reserve 2.31 4.80

Balance carried to Balance Sheet 143.90 130.93

153.99 145.13

1.1 OPERATING RESULTS

The operating revenue for the year at Rs. 775.67 crores registered an increase of 3.8% over the previous year,

primarily driven by 32.5% increase in international revenue from Rs. 135.38 crores to Rs. 179.32 crores. The

Company’s total revenue for the year at Rs. 782.47 crores registered an increase of 2.5% over the previous year.

DIRECTORS’ REPORT

TO THE MEMBERS OF CMC LIMITED

Your Directors have pleasure in presenting the Twenty-Ninth Annual Report and the Audited Statement of Accounts for

the year ended 31st March, 2005.

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The profit before tax at Rs. 32.95 crores registered a decrease of 49.9% over the previous year, primarily on

account of higher write offs and provisioning of bad and doubtful debts by Rs. 19.07 crores and lower other

income by Rs. 9.80 crores. The profit after tax stood at Rs. 23.06 crores registering a decrease of 51.9% over

the previous year.

2. DIVIDEND

Your Directors recommend payment of dividend at 45% of paid-up equity share capital for the year ended

March 31, 2005.

3. BUSINESS OPERATIONS

3.1 Customer Services (CS)

Customer Services Strategic Business Unit (SBU) undertakes activities of IT Infrastructure development and

management, network design, consultancy and management, storage management, security solutions,

business continuity/disaster recovery, third party maintenance and equipment supply and integration.

The CS SBU earned revenue of Rs. 506.70 crores during the year compared with Rs. 512.29 crores earned

during the previous year registering a decline of 1.1%. The CS SBU faced increased competition in the

domestic market resulting in pressure on pricing and margins. The CS SBU continued to be a dominant

provider of end-to-end IT solutions and services with strong pan India presence, as your Company executed

some of the largest IT infrastructure projects for banks and insurance companies during the year with over

1000 locations across length and breadth of the Country.

3.2 Systems Integration (SI)

The SI SBU undertakes the activities of solution deployment that includes software development, software

maintenance and support, turnkey project implementation and systems consultancy. The SI SBU earned revenue

of Rs 225.68 crores during the current year compared with Rs. 191.15 crores earned in the previous year,

registering an increase of 18.1%. The growth in the revenue of SI SBU was primarily driven by strong growth in

the international markets. Some of the key solutions and embedded systems offerings of SI SBU got increased

acceptance in the international markets. The SI SBU has become one of the leading embedded systems service

provider from India to some of the fortune 100 companies worldwide. In the domestic market the SI SBU

continues to be dominant player in general insurance sector, securities sector and e-Governance space.

2004-05

Total Revenue: Rs. 782.47 crores

ITES2.4%

SI28.8%

E&T3.6%

CS64.7%

Others0.5%

Total Revenue: Rs. 763.67 crores

2003-04

ITES4.4%

SI25.0%

E&T2.4%

CS67.1%

Others1.1%

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3.3 IT Enabled Services (ITES)

ITES SBU is a value added service provider providing OMR/ICR based forms processing services, document

management services, managed network services, Electronic Data Interchange (EDI) services, web design

and hosting services, facility management etc. The ITES SBU earned revenue of Rs 19.18 crores during the

current year compared with Rs. 33.85 crores earned in the previous year registering a decline of 43.4%. The

ITES SBU is facing increased competition from un-organised sector in domestic market. However the ITES

SBU has been able to leverage its experience and expertise in the international markets and position itself

for large projects overseas.

3.4 Education & Training (E&T)

E&T SBU of the Company offers courses on information technology including professional courses, vendor

certified courses, career development courses, through its own and franchisee centers. The E&T SBU turned

around during current year with revenue of Rs. 28.12 crores compared with Rs. 18.48 crores registering an

increase of 52.2%. The E&T has benefited from general upsurge in E&T market. In addition, the E&T SBU is

repositioning itself in corporate training segment and re-orientating its career courses.

3.5 International Operations:

Increased focus on international markets has been a part of the core strategy of your Company. The Company

increased its International revenue by 32.5% to Rs. 179.32 crores during current year. The international market

strategy of the Company revolves around leveraging TCS’s international presence and CMC’s products and

solutions. The increase in international revenue is primarily due to 219% increase in revenue from Embedded

Systems Services primarily from the customers in the USA and Europe and 46% growth from solutions

implementation primarily for the customers in Europe and Middle East & African Region. Your Company

suspended work for two international clients following their organizational restructuring. As an abundant

precaution your Company has provisioned for Rs. 16.00 crores for their dues.

4. SUBSIDIARY COMPANY

Your Company has one wholly owned subsidiary CMC Americas; Inc. in the United States of America. In

terms of approval granted by the Central Government under Section 212(8) of the Companies Act, 1956,

copies of the Balance Sheet, Profit & Loss Account and Report of the Auditors of the Subsidiary Company

have not been attached.

The Annual Accounts of the Subsidiary Company and related detailed information will be made available to

the Holding and Subsidiary Company Investors seeking such information at any point of time. The Annual

Accounts of the Subsidiary Company are also kept for inspection by any investors at the Registered Office of

your Company. However, pursuant to Accounting Standard 21 issued by the Institute of Chartered

Accountants of India, the Consolidated Financial Statements presented by the Company include the financial

information of its Subsidiary.

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5. FIXED DEPOSIT

During the year, the Company has not accepted any fixed deposits under Section 58A of the Companies Act,

1956.

6. LISTING

The equity shares of the Company are listed with Calcutta Stock Exchange, The Stock Exchange, Mumbai

and National Stock Exchange.

7. DIRECTORS

Dr KRS Murthy and Mr. Shardul Shroff are retiring from the Board by rotation at the ensuing Annual General

Meeting and, being eligible, offer themselves for re-election.

8. COMMUNITY DEVELOPMENT

The Company is committed to improve the quality of the underprivileged community. As a part of fulfilling its

social obligations, the Company generates active participation among the staff members so that emphasis

shifts from donation to volunteering on the part of its staff members. As part of this, staff members keenly

participated in different ways such as blood donation, educating the underprivileged children, conducting

Quiz on Science in the schools, imparting skills in tailoring, stitching, etc. to the underprivileged women, arranging

exhibition-cum-sale stall for selling the products manufactured by the National Blind Association, etc.

CMC staff members made generous financial contribution to the Tata Relief Fund to help the victims of the

recent national tragedy resulting from Tsunami. CMC volunteers also visited the Tsunami affected areas and

did physical help, distributed materials like clothes etc.

9. BUSINESS EXCELLENCE AND QUALITY INITIATIVES

Your Company continued its journey in the Tata Business Excellence Model (TBEM) by signing Brand Equity

and Business Promotion (BE-BP) Agreement with Tata Sons Limited during the current year. This agreement

entitles your Company to leverage the Tata brand and access to the group resources and expertise. Your

Company achieved CMM level 5 certification for its development center at Hyderabad during the year.

10. CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the report on Management

Discussion and Analysis, Corporate Governance as well as the Auditors’ Certificate regarding compliance of

conditions of Corporate Governance forms a part of the Annual Report.

11. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as required under the Companies (Disclosure of particulars in the Report of Board of Directors)

Rules, 1988 in respect of energy conservation, technology absorption and foreign exchange earnings and

outgo is given in Annexure-I to this Report.

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12. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors based on the

information and representations received from the operating management confirm that:

i) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed

with no material departures;

ii) The Directors had selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the

state of affairs of the Company as on 31st March, 2005 and of the profit of the Company for that

period;

iii) The Directors had taken proper and sufficient care to the best of their knowledge and ability for the

maintenance of adequate accounting records in accordance with the provisions of the Companies

Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and

other irregularities and

iv) The Directors had prepared the Annual Accounts on a ‘going concern’ basis.

13. AUDITORS

M/s S B Billimoria & Co., the Statutory Auditors of the Company, hold office until the ensuing Annual General

Meeting. The said Auditors have under Section 224(1) of the Companies Act, 1956, furnished the certificate

regarding their eligibility for re-appointment.

14. PARTICULARS OF STAFF

Information as required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars

of Employees) Rules, 1975, as amended, regarding particulars of employees drawing remuneration of Rs. 24

lacs per annum or Rs. 2 lacs per month, as the case may be, is set out in the Annexure – II to this report. The

Ministry of Company Affairs has recently amended the Companies (Particulars of Employees) Rules, 1975 to

the effect that the particulars of the employees of the companies engaged in Information Technology sector,

posted and working outside India, not being directors or their relatives, need not be included in the statement

but, such particulars shall be furnished to the Registrar of Companies. Accordingly, the statement included

in this report does not contain the particulars of employees who are posted and working outside India.

15. ACKNOWLEDGEMENTS

The Directors wish to convey their appreciation to business associates for their support and contribution

during the year. The Directors would also like to thank the employees, shareholders, customers, suppliers

and bankers for the continued support given by them to the Company and their confidence reposed in the

management.

For and on behalf of the Board

Mumbai S RAMADORAI

April 18, 2005 Chairman

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Annexure-I

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO

A. CONSERVATION OF ENERGY

Your Company is not an Industry as listed in Schedule to rule 2 of the Companies (Disclosure of particulars in the Report of Board ofDirectors) Rule, 1988.

B. TECHNOLOGY ABSORPTION

Efforts made in technology absorption - as per Form B given below:

FORM B

1. Research and Development (R&D)

a. Specific Areas in which Research and Development (R&D) is being carried out by the Company

� Developing biometric solutions for access control and personal identification for civilian application.

� Developing Point of Sales Systems using embedded technology

� Global Positioning System (GPS) based vehicle tracking systems solutions

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

� The ability to develop and engineer solutions to meet the complex IT needs of customers is dependent on the pro-activework being carried out in the above areas. This also helps the Company to develop and retain the talent pool, which is animportant element of its end-to-end turnkey solutions capability.

c. Future Plan of Action

� Your Company is in the process of exchanging technological advances and developments with its parent Company TataConsultancy Services Limited. Your Company constantly gives training to its staff to enable them to adapt newer technologiesand apply them to the problem domains.

d. Expenditure on R&D

(Rs. in crores)

Particulars 2004-05 2003-04

A Capital 0.23 0.68

B Recurring 9.89 10.86

C Total 10.12 11.54

D Total R&D Expenditure as a Percentage of Turnover 1.29 1.51

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2. Technology absorption, adaptation and innovation

a. Efforts made towards technology absorption, adaptation and innovation

� Your Company proactively develops technology for its business needs. It also uses available state-of-the-art technology inconceptualizing solutions. Technologies developed by the Company are used extensively for providing solutions to itscustomers.

� Projects are executed that span across technology groups such as use of Java & Web technologies for embedded systems,use of FPGA for Finger Print Identification.

b. Benefits derived as a result of the above efforts

� Upgradation of the Company’s product portfolio on new technologies.

� Social benefits arising out of the use of IT in core sectors and ‘IT-enabling’ the Country-especially in Law and Order.

c. Information regarding Imported Technology

Your Company has not imported any technology.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities Relating to Exports, initiatives to increase exports, Developments of new export markets for products andservices & export planAs a part of its core strategy, the Company is focusing on increasing exports of its services by leveraging wide marketing reach ofits parent company Tata Consultancy services Limited. The Company has established itself as a major supplier of EmbeddedSystem Services and software solution in key industry verticals and e-Governance space.

2. Total Foreign Exchange Earnings & OutgoingsThe foreign exchange earnings of the Company during the year were Rs. 123.24 Crores while the outgoings were Rs. 71.01 Crores.


Mumbai S RAMADORAI


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Annexure-II

STATEMENT PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT 1956 AND THE COMPANIES(PARTICULARS OF EMPLOYMENT) RULES, 1975.

Name Age Designation/ Remuneration Qualification Experience Date of Last(Yrs.) Nature of Duties (Rs.) (Yrs.) commence- employment

ment of held,employment Designation

(A) Personnel who are in receipt of remuneration aggregating not less than Rs. 24,00,000 per annum and employed throughoutthe year.

NIL

(B) Personnel who are in receipt of remuneration aggregating not less than Rs. 2,00,000 per month and employed for part of theyear

Jonnavithula Suryaprakash 41 Technical Head- 1,451,998 M Tech- 16 17.11.2004 CISCO - USAXIDC Digital System

Notes:

i. The above remuneration includes salaries, allowances, contribution to Provident Fund and perquisites valued in accordance with the IncomeTax Rules 1962.

ii. The company has contributed to the Gratuity Fund an appropriate amount based on actual valuation.


Mumbai S RAMADORAI


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MANAGEMENT DISCUSSION AND ANALYSIS

Overview

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally AcceptedAccounting Principles (GAAP) in India. There are no material departures from prescribed accounting standards in the adoption of theaccounting standards. The management of CMC Limited accepts responsibility for the integrity and objectivity of these financial statements,as well as for various estimates and judgements used therein. These estimates and judgements relating to the financial statements havebeen made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the form and substanceof transactions and the state of affairs and profits for the year.

Industry structure and development

As per the early estimates of NASSCOM, the Indian IT industry is estimated to have grown about 30% during 2004-05. Domestic IT spendsis estimated to have grown by about 25%, whereas exports have estimated to have grown by about 35% during 2004-05.

The domestic growth has been driven mainly by increased IT spends by Government, Banks, Financial Services & Insurance, Telecom,Manufacturing/Automotive and Retail. Indians have started outsourcing core area functions, such as finance, supply chain managementand procurement to MNCs using IT as a competitive differentiator for conducting business.

Software exports from India are clearly demonstrating increased offshore delivery model. Indian Vendors have started expanding theirservice offerings to include new service lines, such as, package software implementation, integration, R&D Engineering and networkmanagement.

Opportunity and Threats

Opportunity:

The Company is strong in providing IT infrastructure setup, support and management as well as in the system integration business in thedomestic market, namely in verticals like insurance and banking etc. It also has built up capabilities in back office data conversion and datacenter applications.

The Company is on the threshold of becoming a major provider of embedded systems services from India addressing varied requirementsof electronic, telecom, and other high technology industries.

The Company now has the extended reach and brand equity of the TATA group to market its products and services in unrepresentedgeographies and newer customer segments.

Services will continue to be a key business area and will be strengthened to improve price performance and market share. Appropriatebusiness alliance will be entered into to compliment internal efforts towards consolidation and growth.

Threats:

The competition from international IT players in the domestic solutions projects has intensified. Further in some of the areas being addressedby ITES SBU, there is increased competition from un-organised sector, who are able to provide stiff price competition leading to stress onmargins.

The Company has duality of relationship with its major suppliers. In specific instances the Company partners with the suppliers to offer themost competitive products at optimal prices to its customers and there are many instances where the company ends up competing withthem.

Financial Performance:

Revenues:

During the year under review, the Company earned total revenue of Rs.782.47 crores compared with Rs. 763.67 crores during the last yearregistering a growth 2.5%. The income from sales and services at Rs. 775.67 crores registered a growth of 3.8% compared with Rs. 747.07crores earned during the last year. Increase in revenue is mainly on account of International and Education & Training business. The share ofequipment business in total revenue during the current year declined marginally from 50.5% to 48.8%. The services revenue has increased

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by 7.24% from Rs. 370.24 crores to Rs. 397.05 crores resulting in increase of its share in total revenue from 49.5% to 51.2%. Other incomedeclined by 59% from Rs. 16.60 crores to Rs. 6.80 crores during the year.

The segment-wise breakdown of total revenue is given below:(Rs. Crores)

Segment 2004-05 2003-04

Domestic- Customer Services 476.86 476.32- Systems Integration 74.93 85.24- ITES 16.97 32.34- Education & Training 27.59 17.79

International 179.32 135.38Other Income 6.80 16.60Total 782.47 763.67

Expenditure:

During the year under review, the operating expenses at Rs.736.14 crores increased by 7.4% compared with Rs. 685.65 crores incurred in thecorresponding last year. These expenses, as a percentage of total revenue, registered an increase from 89.8% to 94.1%. The increase inoperating expenses is primarily attributable to higher provisioning of bad & doubtful debts at Rs. 21.55 crores in the year, including anamount of Rs. 16 crores provided against dues from two international clients, compared with Rs. 2.48 crores in the previous year.

Manpower cost has increased by 7.7% from Rs.131.72 crores to Rs. 141.86 crores during the year mainly on account of 6% increase inmanpower strength from 2985 to 3162, and the impact of normal increases in remuneration due to increments/promotions. The manpowercost as a percentage of revenue has increased from 17.2% to 18.1%. The manpower productivity measured as value addition to manpowerratio has declined from 2.83 to 2.81. Living expenses for employees deployed abroad has increased from Rs. 52.61 crores to Rs. 64.57 croresin line with increased international operations. Living expenses, as a percentage of international revenue, declined from 39% to 36%.

The interest cost increased by 18.5% to Rs. 4.22 crores during the year under review compared with Rs. 3.56 crores incurred in the previousyear mainly on account of increase in borrowings from Rs. 66.18 crores to Rs. 81.72 crores. Depreciation charge increased from Rs. 8.76crores to Rs. 9.16 crores primarily due to addition of assets worth Rs. 9.17 crores during the year. As a result, Profit Before Tax (PBT) hasdeclined by 49.9% from Rs. 65.70 crores to Rs. 32.95 crores during the year ended March 2005. PBT as a percentage of total revenue hasdecreased from 8.6% to 4.2%.

The provision for taxation (including deferred tax) declined to Rs. 9.89 crores during the year under review from Rs. 17.72 crores in theprevious year, resulting in a reduction of 44.0%, primarily due to lower profits. The effective tax rate has, however, increased to 30% from27% during the year, mainly on account of decline in export profits due to provision of Rs. 16 crores as doubtful debts from two internationalclients.

As a result, Profit After Tax (PAT) has decreased by 51.9% to Rs. 23.06 crores during year under review compared with Rs. 47.99 crores earnedduring the previous year. PAT as a percentage of total revenue has declined from 6.3% to 3.0%.

Financial Position

Fixed assets

The gross fixed assets as at 31st March, 2005 was Rs. 126.70 crores compared with Rs. 131.05 crores at the beginning of the year primarily dueto addition of Rs. 9.58 crores and adjustment/deduction of Rs. 13.93 crores during the year.

Working capital

Net current assets as at 31st March, 2005 increased to Rs. 198.20 crores compared to Rs. 168.02 crores at the beginning of the year mainly onaccount of increase in current assets from Rs. 446.65 crores to Rs. 523.99 crores and increase in current liabilities and provision fromRs. 278.63 crores to Rs. 325.80 crores during the year. Increase in current assets is attributable mainly to increase in inventory from Rs. 18.48crores to Rs. 32.00 crores and increase in sundry debtors (net of provisions) from Rs. 179.82 crores to Rs. 248.38 crores. However, unbilledrevenue decreased to Rs. 93.95 crores from Rs. 114.93 crores at the beginning of the year mainly due to focus on faster billing of accruedrevenues. As a result, the level of debtors in terms of number of days has increased from 86 days to 116 days. However, the unbilled revenuehas declined from 55 days to 44 days.

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Capital Structure

Net worth of the Company as at 31st March, 2005 was Rs. 175.55 crores compared with Rs. 160.64 crores at the beginning of the yearresulting in an increase of 9.3% during the year, mainly on account of retained profit after tax earned during the period.

Loan funds as at 31st March, 2005 were Rs. 81.72 crores, resulting in an increase of 23.48% during the year primarily due to increase inworking capital.

As a result the debt equity ratio has increased from 0.41:1 to 0.47:1 during the year.

Segment-wise Review:

Domestic Market :

Customer Services

The Customer Services SBU’s revenue of Rs. 476.86 crores remained flat during the current year. The share of CS SBU in total revenuedeclined from 62.4% to 60.9% during the year.

Systems Integration

The Systems Integration SBU earned revenue of Rs. 74.93 crores during the current year registering a decline of 12.1% over the previousyear. The share of SI SBU in total revenue declined from 11.2% to 9.6% during the year.

ITES

The ITES SBU earned revenue of Rs. 16.97 crores during the year registering a decline of 47.5% over previous year. The share of ITES SBU intotal revenue declined from 4.2% to 2.2% during the year.

Education & Training

The E&T SBU continues to show strong growth in revenue. It earned revenue of Rs. 27.59 crores during the year, registering an increase of55.1% over previous year. The share of E&T SBU in total revenue increased from 2.3% to 3.5% during the year.

International Market

The Company earned International revenues of Rs. 179.32 crores during the year registering an increase of 32.5% over the previous year.The share of international revenue in total revenue increased from 17.7% to 22.9%.

Future outlook

The Company believes that the domestic IT spends is likely to continue its current upward trend. The domestic IT spend is expectedto be driven by banks, financial institutions, telecom, oils and gas, power and government sectors. In addition mid and large sizecompanies feel the need of increased IT spends for process improvements and efficiency enhancement to face global competition. TheCompany has also experienced increased acceptance of its solutions and embedded systems offerings in the international market. TheCompany strategy revolves around leveraging its competencies/expertise and its strategic relationship with TCS to exploit these emergingmarket opportunities.

Risk and Concerns

A comprehensive and integrated risk management framework forms the basis of all the de-risking efforts of the Company. Formal reportingand control mechanisms ensure timely information availability and facilitate proactive risk management. These mechanisms are designedto cascade down to the level of the line managers so that risks at the transactional level are identified and steps are taken towards mitigationin a decentralised fashion.

The Board of Directors is responsible for monitoring risk levels on various parameters and the Managing Director ensures implementationof mitigation measures. The Audit Committee provides the overall direction on the risk management policies.

1. Business risks:

Excessive dependence on any single business segment increases risks and needs to be avoided. The Company has adopted prudentialnorms wherever required, to prevent undesirable concentration in any one vertical technology client or geographic area.

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Excessive exposure to a few large clients has the potential to impact profitability and to increase credit risk. However, large clients andhigh repeat business lead to higher revenue growth and lower marketing cost. Therefore, the Company needs to strike a balance. YourCompany actively seeks new business opportunities and clients to reduce client concentration levels.

A high geographical concentration of business could lead to volatility because of political and economic factors in target markets.However, individual markets have distinct characteristics – growth, IT spends, willingness to outsource, costs of penetration, and pricepoints. Cultural issues such as language, work culture and ethics, and acceptance of global talent also come into play. Due to thesebusiness considerations, the Company has decided not to impose any rigid limits on geographical concentration.

Proactively looking for business opportunities in new geographies and thereby increasing their contribution to total revenues helpsmanage this risk.

Vertical domains relate to the industries in which clients operate. Your Company has chosen to focus on selected vertical segmentswith a view to leverage accumulated domain expertise to deliver enhanced value to its clients.

Being a company exposed to rapid shifts in technology, an undue focus on any particular technology could adversely affect the riskprofile of the Company. Given the rapid pace of technological change, Your Company has chosen not to impose rigid concentrationlimits. Often, industry characteristics and market dynamics determine the choice of technology.

2. Financial risks

The debtor recovery cycle of the Company is long due to dominance of Government entities in its customer profile resulting in needto finance higher level of working capital. The Company is broad-basing its client profile in order to reduce debtor’s recovery cycle onone hand and to strengthen the collection efforts on the other hand. In the interim, the Company is confident to have adequatefunding to finance its working capital requirements.

3. Legal risks

Litigation regarding intellectual property rights, patents and copyrights is significantly high in the software industry. In addition, thereare other general corporate legal risks. The management has clearly charted out a review and documentation process for contracts.Legal compliance issues are an important factor in assessing all new business proposals.

4. Internal process risks

The key resource for the Company is its people. Our inability to attract and retain IT professional can have adverse impact on thebusiness of the Company.

Risk management processes at the operational level are a key requirement for reducing uncertainty in delivering high-quality softwaresolutions to clients within budgeted time and cost. Adoption of quality models such as the Software Engineering Institute’s CapabilityMaturity Model (SEI-CMM) has ensured that risks are identified and measures are taken to mitigate these at the project plan stageitself.

The company evaluates technological obsolescence and the associated risks on a continuing basis and makes investments accordingly.

Internal control systems and their adequacy

The Company has an adequate system of internal controls implemented by the management towards achieving efficiency in operations,optimum utilisation of resources and effective monitoring thereof and compliance with applicable laws. The system is continuously reinforcedwith analysis of data to strengthen it to meet the changing requirements.

The system comprises well defined organisation structure, pre-identified authority levels and documented policy guidelines and manualsfor delegation of authority.

A qualified and independent Audit Committee of the Board of Directors reviews the internal audit reports and the adequacy of internalcontrols.

Human Resources

The Company recognizes human resource as the backbone for its long-term success and has tried continuously to provide a challengingwork environment thereby adding value to their professional growth.

The Company’s key focus has been to change the mindset from ‘human resource utilization’ to ‘nurturing and leveraging talent’. Towardsthis, your Company has initiated the C-change initiative. C-change is the new internal change-for-betterment initiative meant to empowerevery employee to actively participate in making of a better Company.

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In support of its business objectives, during the financial year, your Company has added significantly to its talent pool in high technologyand niche areas like embedded systems, real time systems etc. thereby building capacity to deliver solutions/services in the medium andlong term. The compensation structure has also been further modified to include premium for niche technical skills and domain expertiseso as to attract and retain required talent.

The staff strength of the Company as on March 31, 2005 was 3162 as compared to 2985 as on March 31, 2004.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Company’s objectives, expectations or predictions may be forwardlooking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in thestatement. Important factors that could influence the Company’s operations include change in Government regulations, tax laws, economic& political developments within and outside the country and such other factors.

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CORPORATE GOVERNANCE REPORT

Company’s philosophy on Corporate Governance

As part of the Tata Group, CMC’s philosophy on Corporate Governance is founded upon a rich legacy of fair and transparent governancepractices. The Corporate Governance philosophy has been further strengthened with the adoption, three years ago, by the Company of theTata Business Excellence Model and Tata Code of Conduct and the adoption of the requirements under Clause 49 of the Listing Agreementwith the Stock Exchanges.

Board of Directors

(a) CompositionThe present Board consists of one executive Director and six non-executive Directors. Out of the non-executive Directors, four are IndependentDirectors and the other two represent the Promoters. The non-executive Directors with their diverse knowledge, experience and expertisebring in their independent judgment in the deliberations and decisions of the Board. Apart from the sitting fees paid for attending Board/Committee Meetings, the non-executive Directors did not have any material pecuniary relationship or transactions with the Companyduring the year 2004-05.

The Company has a non-executive Chairman and the number of Independent Directors is more than one-third of the total number ofDirectors. The number of non-executive Directors is more than 50% of the total number of Directors. The Company, therefore, meets withthe requirements relating to the composition of Board of Directors.

(b) Attendence of each Director at the Board Meetings/Annual General MeetingDuring the year 2004-05, 5 meetings of the Board of Directors were held on April 26, July 17, October 11 in 2004 and on January 12 andMarch 21 in 2005.

The 28th Annual General Meeting of your Company was held on August 30, 2004.

None of the Directors of the Board serve as Members of more than 10 Committees nor are they Chairman of more than 5 Committees, asper the requirements of the Listing Agreement.

A detailed explanation in the form of a table is given below:

Name Category Board Attendance No. of outside No. of outsideMeetings at the Directorships* Committeeattended AGM held Positions held

during the on 30.08.2004 Indian Foreign Member Chairmanyear

Mr S Ramadorai Promoter 4 Yes 11 07 07 02(Chairman) Non-executiveMr R Ramanan Promoter 5 Yes 01 01 01 _

ExecutiveMr Ishaat Hussain Promoter 5 Yes 15 - 07 03

Non-executiveDr KRS Murthy Independent 4 Yes 01 _ - 02

Non-executiveMr Shardul Shroff Independent 2 No 04 _ 05 _

Non-executiveMr Surendra Singh Independent 3 Yes 06 _ 04 03

Non-executiveMr C B Bhave Independent 5 No 03 _ 04 -

Non-executive

*This does not include directorships in Private Limited Companies.

• Audit CommitteeThe Company complies with the provisions of Section 292A of the Companies Act, 1956, as well as per listing agreement pertaining to theAudit Committee and its functioning. The scope of the Committee includes:

• review of the Company’s financial reporting process, the financial statements and financial/risk management policies.• review of the adequacy of the internal control systems in the Company.• review of the internal audit report forwarded by the internal auditors.• discussions with the management and the external auditors, the audit plan for the financial year and a joint post-audit review of the same.• Review the Annual financial statements before submission to the Board.• Review of the Statutory and Internal Auditors Remuneration.

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During the year, 5 Audit Committee meetings were held on April 26, July 17, October 11 in 2004 and on January 12 and March 21 in 2005.The Audit Committee meetings are held both at Corporate Office and other locations and attended by the Chief Financial Officer,representatives of Internal Auditors and Statutory Auditors. The Company Secretary acts as the Secretary to the Audit Committee. TheChairman of the Audit Committee was also present at the last Annual General Meeting of the Company.

The Composition of the Audit Committee and number of meetings attended by the Members are given below:

Name of Member Composition of the Audit Committee Number of meetings attended

Dr KRS Murthy Chairman - Independent Director 4

Mr CB Bhave Independent Director 5

Mr Surendra Singh Independent Director 3

Pursuant to Clause-49(II) of the Listing Agreement, Mr CB Bhave is having requisite financial and accounting knowledge.

MANAGERIAL REMUNERATION

a. Remuneration CommitteeThe Company is having a Remuneration Committee consisting of non-executive Directors, with the Chairman being an IndependentDirector. The members of the Remuneration Committee are as follows:

- Dr KRS Murthy .. Chairman- Mr S Ramadorai- Mr CB Bhave

During the year, one meeting of the Remuneration Committee has been held on August 05, 2004 which was attended by all themembers.

The scope and function of the Remuneration Committee is to review and fix the remuneration payable to the executive Directors andother senior employees of the Company.

Mr R Ramanan is working as the Managing Director & Chief Executive Officer of the Company.

The Non-Executive Directors are entitled for sitting fee only for attending the Board/Committee Meetings.

b. Remuneration PolicyThe remuneration of the executive directors/ senior managers is decided by the remuneration committee based on criteria such asindustry benchmarks, the Company’s performance vis-à-vis the industry, performance track record of the executive director/appointee(s). The Company pays remuneration by way of salary, perquisites and allowances consisting of fixed and variable component.

A sitting fee of Rs 10,000 per meeting of the Board and Audit Committee and Rs. 5,000 per meeting of the Remuneration Committee,Share Transfer-cum-Shareholders Grievance Committee and other committees is paid for attendance at the meetings to the non-executive Directors.

c. Remuneration to Directors

• Non-Executive Directors

Name of Director Sitting Fee paid (Rs.)

Mr. S. Ramadorai 45,000Mr. Ishaat Hussain 50,000Dr. K. R. S. Murthy 85,000Mr. Surendra Singh 1,45,000Mr. C. B. Bhave 1,05,000Mr. S Shroff 75,000

• Executive Director

The salary and perquisites paid to Mr. Ramanan, Managing Director & CEO during the year 2004-05, Rs. 561360 and Rs. 222126 respectively.

Share Transfer-cum-Shareholders Grievance CommitteeThe Share Transfer cum Shareholders Grievance Committee is constituted to consider and approve various requests for transfer, sub-division,consolidation, renewal, exchange, issue of new Certificates in replacement of old ones and redressal of the grievances of the Shareholdersas may be received from time to time.

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The present composition of the Share Transfer cum Shareholders Grievance Committee is as under:

Mr Surendra Singh .. ChairmanMr R Ramanan .. MemberMr Shardul Shroff .. MemberMr Vivek Agarwal .. Member

The Committee has had 16 Meetings during the year ended March 31, 2005 on April 14, April 26, June 08, July 17, August 03, September 16,October 11, November 08, November 30, December 14, December 21 in 2004 and January 10, February 2, February 21, March 07 and March21 in 2005 and a total of 142 Meetings till March 31, 2005 have taken place since its constitution.

Mr Vivek Agarwal, Company Secretary & Head - Legal, is the Compliance Officer and can be contacted at:

CMC Limited Tel: 91-11-23736151PTI Building, 5th Floor Fax:91-11-237361594, Sansad Marg E-mail: [email protected]; [email protected] Delhi-110001

5527 investors’ complaints/queries were received during the year under review and 02 complaints/queries were pending as on March 31,2005.

COMMITTEE OF DIRECTORS

In addition to the above Committees, the Company has an Ethics and Compliance Committee for the following purpose:

– Set forth the policies relating to and oversee the implementation of the code of conduct for prevention of insider trading and code ofcorporate disclosure practices.

– Take on record the status reports prepared by the compliance officer dealing in securities by the specified persons on monthly basis.

– Decide penal action in respect of violation of the SEBI Regulations/code by any specified person.

During the year ended March 31, 2005, two meetings of Ethics & Compliance Committee were held on April 14, 2004 and May 17, 2004,respectively.

The Composition of the Ethics and Compliance Committee and number of meetings attended by the Members are given below:

Name of Member Composition of the Ethics Number of meetings attended& Compliance Committee

Mr Surendra Singh Chairman 02Mr R Ramanan Member -Mr Shardul Shroff Member 02Mr Vivek Agarwal Member 02Company Secretary & Head - Legal

GENERAL BODY MEETINGS

Location and time of General Meetings held in the last 3 years:

Year Type Date Venue Time

2002 AGM 29.08.2002 CMC Centre, Gachibowli 2.30 p.m.Old Mumbai Highway, Hyderabad

2003 AGM 31.07.2003 - do - 2.30 p.m.

2004 AGM 30.08.2004 Bhartiya Vidya Bhavan Auditorium, 2.30 p.m.BVB Hyderabad Kendra No. 5-9-1105,

Basheerbagh-King Koti Road, Hyderabad – 500 029, A.P.

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Whether Special Resolutions:

(a) Were put through postal ballot last year - NoDetails of voting pattern - N.A.Persons who conduct the postalballot exercise- - N.A.

(b) Are proposed to be conducted through - Nopostal ballot –

• Disclosures

i) During the year under review, there were no materially significant related party transactions with its promoters, directors, managementand subsidiaries that had a potential conflict with the interest of the Company at large.

ii) The Company has complied with all rules and regulations prescribed by the Stock Exchanges, Securities and Exchange Board of Indiaor any other Statutory Authority relating to the capital markets during the last three years. No penalties or strictures have been imposedby them on the Company.

• Means of Communication

Half-yearly report sent to each household : The results of the Company are published in theof shareholders newspapers.

Quarterly results and in which newspaper : Results are normally published in Business Standardnormally published in. and in Eenadu (Telugu – Hyderabad edition).

Any website where displayed. : Yes, the results are displayed on the Company’s website www.cmcltd.com

Whether it also displays official news releases : Yes

Whether the website displays the presentation : Yes, the Company holds an Analysts Meet after themade to the institutional investors and to quarterly, half yearly and Annual Accounts, have beenthe analysts. adopted by the Board of Directors, where information is disseminated and

analysed.

Whether Management Discussion and Analysis : Yes, Management Discussion and Analysis forms part ofis a part of Annual Report or not. Annual Report.

Compliance OfficerMr Vivek AgarwalCompany Secretary & Head - Legal.

Address:CMC Limited,PTI Building, 5th Floor4, Sansad MargNew Delhi-110 001Phone: +91-11-23736151-58 Ext 632 +91-11-23738075 (Direct)Fax : +91-11-23736159e-mail : [email protected] & [email protected]

General Shareholder InformationAnnual General Meeting:

Date and time : Friday, June 17, 2005 at 2.30 p.m.

Venue : Bhartiya Vidya Bhavan AuditoriumBasheerbaghHyderabad-500029

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Financial Calendar : 1st April to 31st March

Financial reporting for

a) Quarter ending June, 30, 2005 : July, 2005

b) Quarter ending Sept. 30, 2005 : October, 2005

c) Quarter ending Dec. 31, 2005 : January, 2006

d) Quarter ending March, 31 2006 : April/May, 2006

Date of Book Closure : Tuesday, June 14, 2005 to Friday, June 17, 2005(both days inclusive)

Dividend Payment Date: : The dividend warrants will be posted on and after June 17, 2005.

Listing:The Stock Exchanges on which the Company’s shares are listed:

The Stock Exchange, The Calcutta Stock The National Stock ExchangeMumbai, Phiroze Exchange Association Ltd. Association of India Ltd.Jeejeebhoy Towers 7, Lyons Range Exchange Plaza, 5th FloorDalal Street Kolkata-700001 Plot No.C/1, G BlockMumbai-400001 Bandra-Kurla Complex

Bandra (E), Mumbai-400051

The Company has already applied for delisting of its shares from Calcutta Stock Exchange Association Limited and its approval is awaited.

Listing FeesThere are no arrears on account of payment of listing fees to the Stock Exchanges.

Stock Code

The Stock Exchange, Mumbai : 517326The National Stock Exchange : CMC

• Market price information

The reported high and low closing prices during the year ended March 31, 2005 on the National Stock Exchange and the Stock Exchange,Mumbai, where your Company’s shares are frequently traded, are given below:

National Stock Exchange The Stock Exchange, MumbaiMonth High (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

April-04 569.80 483.20 569.00 490.50

May-04 520.00 374.95 520.00 385.00

June-04 497.70 423.05 495.00 419.45

July-04 597.00 438.00 596.25 375.00

Aug-04 710.00 500.00 708.90 587.00

Sept-04 736.00 657.00 735.00 661.00

Oct-04 751.90 621.10 750.00 640.10

Nov-04 755.00 676.00 750.00 644.00

Dec-04 740.00 700.10 742.00 701.00

Jan-05 752.00 602.00 755.00 615.00

Feb-05 688.85 647.15 687.00 640.30

Mar-05 689.95 581.00 690.00 620.55

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• Performance in Comparison to BSE SensexThe performance of the Company’s scrip on the BSE as compared to the Sensex is as under:

Month BSE Sensex CMC LIMITED

High Low High (Rs.) Low (Rs.)

April 2004 5979.25 5599.12 569.00 490.50May 2004 5772.64 4227.50 520.00 385.00June 2004 5012.52 4613.94 495.00 419.45July 2004 5200.85 4723.04 596.25 375.00August 2004 5269.22 5022.29 708.90 587.00September 2004 5638.79 5178.57 735.00 661.00October 2004 5803.82 5558.14 750.00 640.10November 2004 6248.43 5649.03 750.00 644.00December 2004 6617.15 6176.09 742.00 701.00January 2005 6696.31 6069.33 755.00 615.00February 2005 6721.08 6508.33 687.00 640.30March 2005 6954.86 6321.31 690.00 620.55

• Registrars & Share Transfer AgentsThe Company has changed its Registrars and Transfer Agents from M/s MCS Limited to M/s Karvy Computershare Private Limited witheffect from April 01, 2005. The members are requested to correspond with the Company’s Registrars & Share Transfer Agents – M/s KarvyComputershare Private Limited quoting their folio number at the following address:

M/s Karvy Computershare Private LimitedKarvy House, 46, Avenue 4, Street No. 1,Banjara Hills, Hyderabad 500 034Tel: 040- 23312454/23320251Fax: 040-23311968Email: [email protected]

• Share Transfer SystemShares lodged for transfer at the Registrar’s address are normally processed and approved by Share Transfer cum Shareholders GrievanceCommittee on a fortnight basis. All requests for dematerialisation of shares are processed and the confirmation is given to the Depositorieswithin 15 days. Grievances received from Members and other miscellaneous correspondence on change of address, mandates etc. areprocessed by the Registrars within 30 days.

• Distribution of shareholdingDistribution of shareholding as on March 31, 2005:

No. of shares No. of % of Total no. of % of holdingshareholders shareholders shares

1-500 52415 99.47 947199 6.25501-1000 154 0.29 118023 0.781001-2000 43 0.08 63210 0.422001-3000 16 0.03 40050 0.263001-4000 10 0.02 36023 0.244001-5000 4 0.01 19924 0.135001-10000 11 0.02 86846 0.5710001 & above 40 0.08 13838725 91.34Total 52693 100.00 15150000 100.00Physical Mode 82 0.16 14687 0.10Electronic Mode 52611 99.84 15135313 99.90

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• Shareholding patternShareholding pattern as on March 31, 2005:

Category No. of shares Percentage of issuedheld share capital

Tata Group of Companies 7785661 51.39Mutual Funds and UTI 2323033 15.33Banks 4124 0.02Financial Institutions/ Insurance Companies 1974731 13.03FIIs 1322188 8.74NRIs/Foreign Nationals 19358 0.13Bodies Corporates 448224 2.95Indian Public 1272681 8.41Total 15150000 100.00

• Dematerialisation of shares and liquidity99.90% of the equity shares have been dematerialised by about 99.84% of the total shareholders as on March 31, 2005. The Company’sshares can be traded only in dematerialised form as per SEBI notification. The Company has entered into Agreement with NSDL and CDSLwhereby shareholders have the option to dematerialise their shares with either of the depositories. Equity shares are actively traded in BSEand NSE.

• Outstandings GDRs/ADRs/Warrants or any convertible instruments, conversion date and likely impact on equityThe Company has not issued any GDRs/ADRs/Warrants or any convertible instruments.

Plant locationsYour Company is not a manufacturing unit and thus not having any Plant. However, our offices are located in almost all metropolitan citiesin India.

Address for correspondenceThe Company Secretary & Head-LegalCMC LimitedPTI Building, 5th Floor4, Sansad MargNew Delhi-110001Tel.: 91-11-23736151-58Fax : 91-11-23736159Email: [email protected]; [email protected]

• Electronic Clearing Service (ECS)The Company is availing of the ECS facility to distribute dividend to those Members who have opted for it, through the ECS facility inmetropolitan cities.

• Non-mandatory requirementsThe Company at present has not adopted the non-mandatory requirements in regard to maintenance of non-executive Chairman’s office,sending of half-yearly performance to the shareholders to their residence.

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AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE

TO THE MEMBERS OFCMC LIMITED

1. We have examined the compliance of conditions of Corporate Governance by CMC Limited, for the year ended on31 March, 2005, as stipulated in clause 49 of the Listing Agreement of the said Company with the stock exchanges.

2. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination hasbeen limited to a review of the procedures and implementations thereof, adopted by the Company for ensuring compliancewith the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statementsof the Company.

3. In our opinion and to the best of our information and according to the explanations given to us, and the representationsmade by the Directors and the management, we certify that the Company has complied with the conditions of CorporateGovernance as stipulated in Clause 49 of the above mentioned Listing Agreement.

4. As required by the Guidance Note issued by the Institute of Chartered Accountants of India, we have to state that whilethe Share Transfer cum Shareholders’ Grievance Committee has not maintained records to show the investor grievancespending for a period of one month against the Company, the Registrars of the Company have certified that as of 31March, 2005 there were two investor grievances that remained pending for more than 30 days.

5. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiencyor effectiveness with which the management has conducted the affairs of the Company.

For S.B. Billimoria & Co.Chartered Accountants

Mumbai Jitendra AgarwalApril 18, 2005 Partner

Membership No. 87104

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COMPANY SECRETARY’S RESPONSIBILITY STATEMENT

The Company Secretary confirms that the Company has:

i) maintained all the books of accounts and statutory registers required under the Companies Act, 1956 (“the Act”) and therules made thereunder;

ii) filed all the forms and returns and furnished all the necessary particulars to the Registrar of Companies and/or authoritiesas required by the Act;

iii) registered all the particulars relating to charges in favour of Banks with the Registrar of Companies;

iv) issued all notices required to be given for convening of Board Meetings, Committee Meetings and Annual General Meetingwithin the time limit prescribed by Law;

v) conducted the Board Meetings, Committee Meetings and Annual General Meeting as per the Act;

vi) complied with all the requirements relating to the Minutes of the proceedings of the Meetings of the Board of Directors,Committees and the Shareholders;

vii) made the disclosures required under the Act including those required in pursuance of the disclosures made by theDirectors;

viii) obtained necessary approvals of the Directors, Shareholders and other Authorities as per the requirements;

ix) effected share transfers and despatched the certificates within the statutory time limits;

x) not exceeded its borrowing powers;

xi) paid dividend amounts to the shareholders within the time limit prescribed;

xii) complied with the requirements of the Listing Agreement entered into with the Stock Exchanges.

The Company has also complied with other statutory requirements under the Companies Act, 1956 and other related Statutes.

For CMC LIMITED

Mumbai Vivek AgarwalApril 18, 2005 Company Secretary & Head - Legal

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AUDITORS’ REPORT

TO THE MEMBERS OFCMC LIMITED

1. We have audited the attached Balance Sheet of CMC Limited, as at 31 March, 2005, the Profit and Loss Account and theCash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statementsare the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. These Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made byManagement, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specifiedin paragraphs 4 & 5 of the said Order.

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

a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessaryfor the purposes of our audit;

b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears fromour examination of those books;

c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement withthe books of account;

d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report complywith the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) In our opinion and to the best of our information and according to the explanations given to us, the said accountsgive the information required by the Companies Act, 1956, in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March, 2005;

ii. in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

5. On the basis of written representations received from the directors, as on 31 March, 2005, and taken on record by theBoard of Directors, we report that none of the directors is disqualified as on 31 March, 2005, from being appointed as adirector in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

For S.B. Billimoria & Co.Chartered Accountants

Mumbai Jitendra Agarwal18 April, 2005 Partner

(Membership No. 87104 )

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ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph 3 of our report of even date)

1. The nature of the Company’s business / activities during the year is such that clauses i(c), iii(b), iii(c), iii(d), iii(f ), iii(g), v(b),xii, xiii, xiv, xv, xix, xx are not applicable to the Company.

2. a. The Company has maintained proper records showing full particulars, including quantitative details and situation offixed assets.

b. The Company has a programme of physically verifying its fixed assets in a phased manner designed to cover allassets over a period of two years, which in our opinion is reasonable having regard to the size of the Company andthe nature of its business. In accordance with this programme, the Management had carried out a physical verificationof fixed assets at some locations during the year and necessary adjustments were made for discrepancies arising outof such verification.

3. a. As explained to us, inventory in the Company’s possession has been verified by the Management during the year atreasonable intervals. For materials lying with third parties or at customers’ sites aggregating to Rs. (000s) 164,954, inthe absence of confirmations from such parties, we have relied on certification from the respective Project Managers.

b. In our opinion the procedures of physical verification of inventory followed by the Management are reasonable andadequate in relation to the size of the Company and the nature of its business.

c. In our opinion, the Company has maintained proper inventory records. The discrepancies noticed between the physicalstocks and book records were not material and the same have been properly dealt with in the books of account.

4. The Company has not granted or taken any loans, secured or unsecured, to or from companies, firms or other partieslisted in the register maintained under Section 301 of the Companies Act, 1956.

5. In our opinion and according to the information and explanations given to us, there are adequate internal control systemscommensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assetsand for the sale of goods and services.

6. Based on the examination of the books of account and related records and according to the information and explanationsprovided to us, there are no contracts or arrangements with companies, firms or other parties which need to be listed inthe register maintained under Section 301 of the Companies Act, 1956.

7. The Company has not accepted any deposits from the public during the year.

8. In our opinion the Company has an adequate internal audit system commensurate with the size of the Company andnature of its business.

9. According to the information and explanations given to us, the Central Government has not prescribed the maintenanceof cost records under Section 209 (1)(d) of the Companies Act, 1956 for any of the products of the Company.

10. According to the records of the Company examined by us:

a. the Company has generally deposited its statutory dues including Provident Fund, Investor Education and ProtectionFund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty and Cess within theprescribed time with the appropriate authorities during the year.

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There are no undisputed amounts payable in respect of Income Tax, Wealth Tax, Service Tax, Sales Tax, Customs Dutyand Cess which have remained outstanding as at 31 March 2005 for a period of more than six months from the datethey became payable. The Company’s operations do not give rise to any Excise Duty.

b. and as set out in note 23 of Schedule 16, dues of Sales Tax, Works Contract Tax and Service Tax aggregating toRs. (000s) 17,462 have not been deposited on account of various disputes as set out in the Attachment. We havebeen further informed that there are no dues in respect of Income Tax, Wealth Tax, Customs Duty and Cess whichhave not been deposited on account of any dispute. The Company’s operations do not give rise to any Excise Duty.

11. The Company does not have any accumulated losses and has not incurred any cash losses during the current andimmediately preceding financial year.

12. Based on the examination of the books of account and related records and according to the information and explanationsprovided to us, the Company has not defaulted in repayment of dues to the banks. The Company has not taken any loansfrom financial institutions nor has it issued any debentures.

13. According to the information and explanations given to us and the records of the Company examined by us, the Companyhas not obtained any term loans during the year.

14. According to the information and explanations given to us, and on an overall examination of the balance sheet of theCompany, funds raised on short-term basis have prima facie, not been utilised for long term investment.

15. The Company has not made any fresh allotment of equity shares during the year.

16. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reportedduring the year.

For S.B. BILLIMORIA & CO.Chartered Accountants

Mumbai Jitendra Agarwal18 April, 2005 Partner

(Membership No. 87104)

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ATTACHMENT(Referred to in paragraph 10 b. of Annexure to the Auditors’ Report)

Information pursuant to clause 4(ix)(b) of Companies (Auditor’s Report) Order, 2003 as amended by Companies (Auditor’sReport) (Amendment) Order, 2004 in respect of dues disputed, not deposited with various authorities.

Nature of Dues Amount Financial Forum where(Rs./000s) Year/Period the dispute is pending

Sales taxA. West Bengal

i. Tax on addition to taxable turnover 4,570 1996-97 Assistant Commissionerii. Tax demand on disallowance of credit for tax deducted at

source (TDS), concessional sales tax forms and set off 1,904 1997-98 to Assistant Commissionerof amount of tax paid to sub-contractors 2001-02

6,474B. Bihar

i. Tax demand and penalty imposed on enhancement of 3,919 1990-91, Commercialturnover during assessment and delay in filing of return. 1991-92 to Taxes Tribunal

1992-933,919

C. Madhya Pradeshi. Tax demand and penalty imposed on enhancement of turnover. 438 1987-88 High Courtii. Tax demand and penalty imposed on enhancement of turnover. 662 1990-91 & Assistant Commissioner

1991-921,100

D. Orissai. Tax demand on disallowance of claim of service charges & of 384 1994-95, Assistant Commissioner

sales tax deducted at source. 2001-2002 &2002-03

ii. Tax demand on disallowance of claim of service & labour charges. 809 1995-96, Sales Tax Tribunal1999-2000 &

2000-011,193

E. Uttar Pradeshi. Tax demand on inter state sales deemed as intra state sales. 364 1994-95 Sales Tax Tribunalii. Tax demand on disallowance of non taxable turnover. 38 1996-97 DC – Appealsiii. Tax demand on disallowance of credit for tax deducted at 287 2002-03 Assessing Authority

source (TDS) and tax deposited through challans.689

F. Central Sales /Tamil Nadu Generali. Tax demand on notional profit on cost of maintenance spares 107 1994-95 & Commercial Tax Officer

and on disallowance of concessional sales tax forms. 1998-99ii. Tax demand on disallowance of tax exemption on second sales. 64 1995-96 Commercial Tax Officer

171G. Kerala

Tax demand for dispute on tax rate 49 1996-97 Assistant Commissioner

Works Contract TaxA. Delhi

i. Tax demand on disallowance of input credit. 52 1999-00 Assessing Authorityii. Tax demand on recomputation of gross turnover on the basis

of tax deducted at source certificates furnished. 3,655 2002-03 Assessing Authority

Total 3,707

Service TaxA. Andhra Pradesh

Tax demand Election Identity Card Projects. 160 2002-03 Assistant Commissioner

Total 160

Grand Total 17,462

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BALANCE SHEET AS AT MARCH 31, 2005

Schedule As at As atRef. 31.3.05 31.3.04

Rs./000s Rs./000s

SOURCES OF FUNDS

1. Shareholders’ Funds(a) Share Capital 1 151,500 151,500(b) Reserves & Surplus 2 1,604,020 1,454,899

1,755,520 1,606,399

2. Loan Funds(a) Secured Loans 3 167,199 174,239(b) Unsecured Loans 4 650,000 487,599

817,199 661,838

3. Deferred Tax Liabilities (See Note 16) 61,454 68,045

2,634,173 2,336,282

APPLICATION OF FUNDS

4. Fixed Assets 5(a) Gross Block 1,266,965 1,310,466(b) Less:Depreciation 696,550 736,186

(c) Net Block 570,415 574,280

5. Investments 6 81,801 81,801

6. Current Assets, Loans & Advances(a) Inventories 7 320,034 184,847(b) Sundry debtors 8 2,483,831 1,798,241(c) Unbilled revenues 939,491 1,149,277(d) Cash and bank balances 9 131,178 177,367(e) Loans and advances 10 1,365,409 1,156,802

5,239,943 4,466,534

7. Less : Current Liabilities and Provisions 11 3,257,986 2,786,333

8. Net Current Assets 1,981,957 1,680,201

2,634,173 2,336,282

Notes forming part of the accounts 16

As per our report attached For and on behalf of the Board

For S B Billimoria & Co S Ramadorai R Ramanan Dr K R S MurthyChartered Accountants Chairman Managing Director Director

& CEO

Jitendra Agarwal I Hussain S Singh S ShroffPartner Director Director DirectorMembership No. 87104

J K Gupta Vivek AgarwalChief Financial Officer Company Secretary & Head-Legal

Mumbai Mumbai18 April, 2005 18 April, 2005

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005

Schedule Year ended Year endedRef. 31.3.05 31.3.04

Rs./000s Rs./000s

INCOME1. Sales and Services 12 7,756,738 7,470,7402. Other Income 13 67,985 165,983

7,824,723 7,636,723EXPENDITURE3. Operating and other expenses 14 7,361,455 6,856,4724. Depreciation 91,569 87,5515. Interest (Net) 15 42,178 35,597

7,495,202 6,979,620

Profit Before Tax 329,521 657,1036. Provision for taxes

– Current income tax 105,514 191,504– Deferred income tax (6,591) (14,269)

Profit After Tax 230,598 479,8687. Balance brought forward

from previous year 1,309,269 971,389

Amount available for appropriations 1,539,867 1,451,2578. Appropriations

(a) General Reserve 23,060 47,987(b) Proposed Dividend 68,175 83,325(c) Tax on Proposed Dividend 9,562 10,676

(d) Balance carried to Balance Sheet 1,439,070 1,309,269

Basic and diluted Earnings Per Share (Rupees) (See note 21) 15.22 31.67




& CEO




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CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2005Year ended Year ended

31.3.05 31.3.04

Rs./000s Rs./000s Rs./000sA. CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax* 329,521 657,103Adjustments for :

Depreciation 91,569 87,551Interest paid 45,560 38,910(Profit) /Loss on sale of fixed assets (11,549) 3Bad debts/advances written off (net) 55,491 16,691Unclaimed balances/provisions written back (29,873) (101,372)Provision for doubtful debts 160,000 8,084Unrealised Foreign exchange loss (gain) 8,483 (78)Fixed assets written off 2,875 457Transfer from capital reserve (3,740) (3,800)

318,816

Operating profit before working capital changes 648,337 703,549Adjustments for :

Trade and other receivables (735,977) (320,532)Inventories (135,187) (10,969)Trade payables and other liabilities 440,608 (195,884)

Cash generated from operations 217,781 176,164Direct taxes paid/deducted at source (178,124) (153,485)

NET CASH FROM/(USED) IN OPERATING ACTIVITIES (A) 39,657 22,679

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets (91,271) (85,409)Sale of fixed assets 12,241 4,057

NET CASH FROM/(USED) IN INVESTING ACTIVITIES (B) (79,030) (81,352)

C. CASH FLOW FROM FINANCING ACTIVITIESInterest paid (68,319) (38,910)Proceeds/(Payment) of short term borrowings 155,361 148,496Proceeds/(Payment) of long term borrowings — —Dividend paid (including dividend tax) (93,869) (68,202)

NET CASH FROM FINANCING ACTIVITIES (C) (6,827) 41,384

NET INCREASE/(DECREASE) INCASH AND CASH EQUIVALENTS (A+B+C) (46,200) (17,289)

CASH AND CASH EQUIVALENTS AS ON 1 APRIL, 2004 [Excluding unrealised exchange difference of Rs. (‘000s) 941] 176,426 193,715

CASH AND CASH EQUIVALENTS AS ON 31 MARCH, 2005[Excluding unrealised exchange difference of Rs. (‘000s) 952] 130,226 176,426

* includes project grants from Government of Rs. (‘000s) 5,690 (Previous year Rs. (‘000s) 13,795)



& CEOJitendra Agarwal I Hussain S Singh S ShroffPartner Director Director DirectorMembership No. 87104



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SCHEDULES FORMING PART OF THE ACCOUNTS

As at As at31.3.05 31.3.04

Rs./000s Rs./000s

Schedule 1 : SHARE CAPITAL

Authorised35,000,000 (Previous year 35,000,000) equity sharesof Rs. 10 each. 350,000 350,000

Issued, Subscribed and Paid up15,150,000 (Previous year 15,150,000) equity sharesof Rs. 10 each fully paid up 151,500 151,500

Of the above:7,744,961 (Previous year 7,744,961) equity shares are heldby Tata Consultancy Services Limited, the holding company.

(See note 1)

Schedule 2 : RESERVES & SURPLUS

(a) Capital Reserve(Grants from Govt of India)

(i) Opening balance 8,261 12,061(ii) Less:Transferred to Profit and Loss Account 3,740 3,800

(iii) Closing balance 4,521 8,261

(b) General Reserve(i) Opening balance 137,369 89,382(ii) Add:Transferred from Profit and Loss account 23,060 47,987


(c) Profit and Loss account 1,439,070 1,309,269

1,604,020 1,454,899

Schedule 3 : SECURED LOANS

From banksCash credit accounts 167,199 174,239

Note:Cash credits from banks are secured by hypothecation of inventories, debtors and other current assets.

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As at As at31.3.05 31.3.04

Rs./000s Rs./000s

Schedule 4 : UNSECURED LOANS

a. Short Term Loans(i) From banks 350,000 100,000(ii) From others — 100,000(iii) Commercial paper 300,000 200,000

Sub-Total 650,000 400,000

b. Other Loans(i) From Government of India — 67,400(ii) Interest accrued and due — 20,199

Sub-Total — 87,599

Total 650,000 487,599

Note:1. Loans repayable within one year Rs.(000s) 650,000 [Previous year Rs.(000s) 467,400]2. Loans from Government of India include interest free loans of Rs. Nil (Previous year Rs.(000s) 54,900)3. Maximum amount outstanding on commercial paper during the year Rs.(000s) 300,000 (Previous year Rs.(000s) 200,000)

Schedule 5 : FIXED ASSETS (See note 6)Rs./000s

GROSS BLOCK DEPRECIATION NET BLOCK

Particulars As at Additions Deductions/ As at As at For the Deductions/ As at As at As at1.4.04 Adjustments 31.3.05 1.4.04 year Adjustments 31.3.05 31.3.05 31.3.04

(a) Land(i) Leasehold 59,197 — — 59,197 7,376 757 — 8,133 51,064 51,821(ii) Freehold 1,796 — — 1,796 — — — — 1,796 1,796

(b) Buildings(i) Leasehold 13,405 2,603 — 16,008 4,187 4,389 — 8,576 7,432 9,218(ii) Freehold 326,941 118 295 326,764 57,828 5,331 133 63,026 263,738 269,113

(c) Plant & Machinery(i) Computers 592,722 66,729 126,416 533,035 451,097 64,303 124,503 390,897 142,138 141,625(ii) Office and

other equipment 43,494 2,889 1,916 44,467 24,636 2,142 1,249 25,529 18,938 18,858(iii) Others 162,853 10,109 4,288 168,674 141,730 8,228 4,096 145,862 22,812 21,123

(d) Furniture & Fittings 85,084 8,648 1,779 91,953 47,906 5,996 1,148 52,754 39,199 37,178

(e) Vehicles 4,236 560 78 4,718 1,426 423 76 1,773 2,945 2,810

TOTAL 1,289,728 91,656 134,772 1,246,612 736,186 91,569 131,205 696,550 550,062 553,542

(f) Capitalwork-in-progress 20,738 4,126 4,511 20,353 — — — — 20,353 20,738

GRAND TOTAL 1,310,466 95,782 139,283 1,266,965 736,186 91,569 131,205 696,550 570,415 574,280

Previous year 1,254,648 87,023 31,205 1,310,466 673,709 87,551 25,074 736,186 574,280 580,939

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As at As at31.3.05 31.3.04

Rs./000s Rs./000s

Schedule 6 : INVESTMENTS (At cost)

Long-term, trade investments (unquoted)

160,001,000 (Previous year 160,001,000)non-assessable shares of USD 0.01 each, fully paid upin CMC Americas Inc., USA(formerly known as Baton Rouge International Inc.),a wholly owned subsidiary. 81,801 81,801

Schedule 7 : INVENTORIES

(a) Finished goods - equipment for resale 273,139 134,418(b) Components/spares for maintenance and resale 40,031 44,143(c) Education and training material 5,917 5,821(d) Work-in-progress 947 465

320,034 184,847

Note: Finished goods include goods in transit Rs. (000s) 4,249 (Previous year Rs.(000s) 18,917)

Schedule 8 : SUNDRY DEBTORS

a. Over six months old (unsecured):Considered good 521,953 254,462Considered doubtful 179,049 26,833

701,002 281,295b. Others (unsecured):

Considered good 1,946,117 1,539,484

2,647,119 1,820,779Less: Provision for doubtful debts 179,049 26,833

2,468,070 1,793,946

c. Future lease installments receivable (unsecured) (See note 17) 53,209 4,609Less: Unearned finance and service charges 37,448 314

15,761 4,295

2,483,831 1,798,241

Notes:1. (i) Debtors include amounts due from a subsidiary company 134,582 72,963

(ii) Maximum balance outstanding during the year 186,235 172,407

2. (i) Debtors include amounts due from the holding company 88,079 93,140(ii) Maximum balance outstanding during the year 95,248 108,400

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As at As at31.3.05 31.3.04

Rs./000s Rs./000s

Schedule 9 : CASH AND BANK BALANCES

(a) Cash on hand [including stamps on hand 1,877 2,442Rs.(000s) 27 (Previous year Rs. (000s)64)]

(b) Cheques/demand drafts on hand 48,905 75,367(c) Balance with scheduled banks in:

(i) Current accounts 31,190 44,066(ii) Cash credit accounts 38,411 36,484(iii) Deposit accounts* 10,795 19,008

131,178 177,367

*includes Rs. (000s) 6,295 on account of fixed deposits pledged withcustomers as security (Previous year Rs.(000s) 6,195)

Schedule 10 : LOANS AND ADVANCES

(a) Advances recoverable in cash or in kind orfor value to be received* 276,191 245,708

(b) Advance income tax and tax deducted at source 1,098,606 920,482

1,374,797 1,166,190(c) Less: Advances considered doubtful 9,388 9,388

1,365,409 1,156,802(d) Of the above, amounts :

(i) Fully secured 68,514 42,963(ii) Unsecured, considered good 1,296,895 1,113,839(iii) Considered doubtful 9,388 9,388

1,374,797 1,166,190Notes:1. Amounts due from directors — —2. Maximum amounts due from directors during the year 345 463. * includes deposits with Customs, Octroi, Electricity Boards etc. 10,525 10,334

Schedule 11 : CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES(a) Sundry Creditors (See note 15) 1,394,410 1,065,087(b) Customers’ security deposits and credit balances

and advance against supplies and services to be rendered 226,036 267,602(c) Investor Education and Protection Fund shall be credited

by the following amounts comprising unpaid dividend 850 505(d) Unearned revenue 418,348 273,133(e) Other liabilities 34,846 58,338(f ) Interest accrued but not due 141 2,701

2,074,631 1,667,366PROVISIONS(a) Provision for taxation 1,028,159 935,935(b) Proposed dividend 68,175 83,325(c) Provision for leave encashment 87,021 99,707

1,183,355 1,118,967

3,257,986 2,786,333

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Year ended Year ended31.3.05 31.3.04

Rs./000s Rs./000s

Schedule 12 : SALES AND SERVICES

(a) Sale of purchased equipment 3,786,192 3,774,665(b) Services

(i) Software services 2,274,076 1,954,457(ii) Maintenance services 817,840 886,642(iii) Other services 604,917 669,642

(c) Education and training 264,908 177,861(d) Lease rentals 8,805 7,473

7,756,738 7,470,740

Note: Lease rentals include income Rs.(000s) 1,564 (Previous year Rs.(000s) 1,399) under finance leases.

Schedule 13 : OTHER INCOME

(a) Project Grants from Government 5,690 13,795(b) Gain on foreign exchange fluctuations (Net of loss) — 4,010(c) Profit on sale of fixed assets (Net of loss) 11,549 —(d) Transfer from capital reserve. (See note 2d) 3,740 3,800(e) Unclaimed balances/provisions written back 29,873 101,372(f ) Interest on refund of taxes — 14,144(g) Miscellaneous income 17,133 28,862

67,985 165,983

Schedule 14 : OPERATING AND OTHER EXPENSES

1. Equipment Purchased for Resale 3,664,092 3,688,587

2. Payments to and Provisions for Employees(a) Salaries, allowances and incentives 1,242,242 1,124,084(b) Contribution to provident and other funds 91,713 94,069(c) Staff welfare expenses 84,632 99,079

Sub-Total 1,418,587 1,317,232

3. Operating and Administration Expenses(a) Components/spares for maintenance and resale 173,277 217,688(b) Sub-contracted/outsourced services 433,997 394,616(c) Purchased software 34,481 19,832(d) Freight, handling and packing expenses 21,123 18,468(e) Rental of P&T lines and leased equipment 10,820 9,445(f ) Rent and hire charges 50,354 48,314(g) Rates and taxes 20,371 14,308(h) Repairs and maintenance:

(i) Building 16,991 11,760(ii) Plant and machinery 11,075 9,056(iii) Other 24,204 21,647

(i) Electricity charges 51,733 49,068(j) Insurance 5,223 6,922

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(k) Travelling and conveyance 197,404 187,266

(l) Printing, stationery and computer consumables 33,433 34,153

(m) Postage, telephone and courier 52,699 51,540

(n) Advertisement, publicity and business promotion 13,633 12,262

(o) Directors’ sitting fees 550 325

(p) Professional and legal fees 18,159 13,786

(q) Education and training :

(i) Payments to franchisees 90,521 69,889

(ii) Other expenses 59,441 38,432

(r) Living expenses – overseas contracts 645,718 526,083

(s) Bad debts/advances written off[Net of bad debts recovered Rs.(000s) 5,174(Previous year Rs.(000s) 1,063)] 55,491 16,691

(t) Provision for doubtful debts 160,000 8,084

(u) Fixed assets written off (Net) 2,875 457

(v) Loss on sale of fixed assets (Net of gain) — 3

(w) Loss on foreign exchange fluctuations (Net of gain) 12,474 —

(x) Other expenses (See note 18) 82,729 70,558

Sub-Total 2,278,776 1,850,653

Total 7,361,455 6,856,472


Rs./000s Rs./000s

Schedule 14 : OPERATING AND OTHER EXPENSES (Contd.)

Schedule 15 : INTEREST

1. Interest expense

(a) On fixed loans

(i) Government of India loans 89 1,625

(ii) Other term loans 28,206 18,267

(b) Cash credit accounts with banks 16,781 18,025

(c) Others 484 993

45,560 38,9102. Less: Interest earned

(a) Loans and advances 513 551

(b) Fixed deposits with banks [Tax deducted at sourceRs. (000s) 185 (Previous year Rs.(000s) 122)] 883 682

(c) Others [Tax deducted at source Rs. (000s) 440(Previous year Rs. (000s) 321)] 1,986 2,080

3,382 3,313

42,178 35,597

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Schedule 16 : NOTES FORMING PART OF THE ACCOUNTS

1. Background

CMC Limited (“the Company”) is engaged in the design, development and implementation of software technologies and applications,providing professional services in India and overseas, and procurement, installation, commissioning, warranty and maintenance ofimported/ indigenous computer and networking systems, and in education and training.

The Company was a Government of India (GoI) enterprise up to 15 October, 2001. Under the disinvestment process, GoI sold 7,726,500shares representing 51 percent of the share capital to Tata Sons Limited, on 16 October, 2001. The GoI further sold its entire remainingshares representing 26.25 percent of the share capital, in March 2004 by an open offer to the public.

On 29 March, 2004, as per specific approval granted by SEBI, Tata Sons Limited transferred its entire shareholding in the Company toTata Consultancy Services Limited (a subsidiary of Tata Sons Limited). As a result, the Company has become a subsidiary of TataConsultancy Services Limited.

2. Significant Accounting Policies

a. Basis of accountingThe financial statements have been prepared under the historical cost convention and comply with the Accounting Standardsprescribed by the Institute of Chartered Accountants of India and referred to in Section 211(3)(c) of the Companies Act, 1956.

b. Fixed assets and depreciation

i. All fixed assets are stated at cost. Cost includes purchase price and all other attributable costs of bringing the assets toworking condition for intended use.

ii. Fixed assets acquired out of grants, the ownership of which rests with the grantor, are capitalised at cost.

iii. Depreciation on all assets is charged proportionately from the date of acquisition/installation on straight line basis at ratesprescribed in Schedule XIV of the Companies Act, 1956 except in respect of:

• Leasehold assets that are amortised over the period of lease.• Computers, Plant and Machinery - (other items), that are depreciated over six financial years.

c. Revenue Recognition

i. Revenue relating to equipment supplied is recognised on delivery to the customer and acknowledgement thereof, inaccordance with the terms of the individual contracts.

ii. Revenue from software development on fixed price contracts is recognised according to the milestone achieved as speci-fied in the contract, and is adjusted on the “proportionate completion” method based on the work completed.

iii. On time and material contracts, revenue is recognised based on time spent as per the terms of the specific contracts.

iv. Revenue from warranty and annual maintenance contracts is recognised over the life of the contracts. Maintenance revenueon expired contracts on which services have continued to be rendered is recognised on renewal of contract or on receipt ofpayment.

v. Revenue from “Education and Training” is recognised on accrual basis over the course term.

vi. Dividend income is recognised when the Company’s right to receive dividend is established.

d. Grants

i. Grants received for capital expenditure incurred are included in “Capital Reserve”. Fixed assets received free of cost areconsidered as a grant and are capitalised at notional value with a corresponding credit to the Capital Reserve account.

An amount equivalent to the depreciation charge on such assets is appropriated from capital reserve and recognised asrevenue in the Profit and Loss Account.

ii. Grants received for execution of projects is recognised as revenue to the extent utilized.

iii. Unutilised grants are shown under other liabilities.

e. Inventories

Inventories include finished goods, stores and spares, work-in progress and education and training material.

i. Inventories of finished goods mainly comprising equipment for resale are valued at the lower of cost (net of provision forobsolescence) or net realisable value.

ii. Inventories of stores and spares are valued at cost, net of provision for diminution in the value. Cost is determined on weightedaverage cost basis.

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iii. Inventories of “Education and Training material” are valued at the lower of cost and net realisable value. Cost is determinedon the “First In first Out” basis.

iv. Work-in-progress comprises cost of infrastructural facilities in the process of installation at customers’ sites. These are valuedat cost paid/payable to sub-contractors.

f. Research and Development Expenses

Research and development costs of revenue nature are charged to the Profit and Loss account when incurred. Expenditure ofcapital nature is capitalised and depreciated.

g. Foreign exchange transactions

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Monetary itemsdenominated in foreign currency and outstanding at the Balance Sheet date are translated at the exchange rate ruling on thatdate. Exchange differences on foreign exchange transactions other than those relating to fixed assets are recognised in the profitand loss account. Any gain/loss on exchange fluctuation on the date of payment of expenditure incurred for acquisition of fixedassets is treated as an adjustment to the carrying cost of such fixed assets. In case of forward contracts for foreign exchange, thedifference between the forward rate and the exchange rate at the date of the transaction are recognised over the life of thecontract.

h. Investments

Long-term investments are stated at cost, less any permanent diminution in value, if any.

i. Leases

Assets given under finance leases are recognised as receivables at an amount equal to the net investment in the lease and thefinance income is based on a constant rate of return on the outstanding net investment.

j. Retirement benefits

i. The Company’s contribution to the Employees’ Provident Fund is deposited in a trust formed by the Company under theEmployees’ Provident Fund and Miscellaneous Provisions Act, 1952 which is recognised by the Income-tax authorities. Suchcontributions are charged to the profit and loss account each year.

ii. Gratuity to employees is based on the Group Gratuity Scheme of the Life Insurance Corporation of India. Contributionsmade to the Scheme are expensed in the year.

iii. The balance of unavailed leave due to employees has been provided on the basis of actuarial valuation.

k. Provision for taxation

Income tax comprises of current tax and deferred tax. Deferred tax assets and liabilities are recognised for the future taxconsequences of timing differences, subject to the consideration of prudence. Deferred tax assets and liabilities are measuredusing the tax rates enacted or substantively enacted by the Balance Sheet date.

l. Earnings per Share

The earnings considered in ascertaining the Company’s’ EPS comprises the net profit after tax. The number of shares used incomputing Basic EPS is the weighted average number of shares outstanding during the year.

3. Segment Information

i. Business segments

Based on similarity of activities, risks and reward structure, organisation structure and internal reporting systems, the Companyhas structured its operations into the following segments:

Customer Services (CS): Hardware supplies and maintenance, facilities management and provision of infrastructure facilities.

Systems Integration (SI): Systems study and consultancy, software design, development and implementation, software mainte-nance and supply of computer hardware in accordance with customers’ requirements.

IT Enabled Services (ITES) - (Formerly Indonet): Value added services, data network, data center services, web design andhosting etc.

Education and Training (E&T): IT education and training service through its own centers and through franchisees.

Segment revenue and expenses include amounts, which are directly identifiable to the segment and allocable on a reasonablebasis. Segment assets include all operating assets used by the segment and consist primarily of debtors, inventory and fixedassets. Segment liabilities include all operating liabilities and consist primarily of creditors, advances/deposits from customersand statutory liabilities.

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43

ii. Geographic segments

The Company also provides services overseas, primarily in the United States of America , United Kingdom and Middle East &Africa Region.

4. Research and Development Expenses

Expenditure includes “Research and Development” expenditure aggregating to Rs. (000s) 98,878 (Previous year Rs. (000s) 108,616).Amounts aggregating to Rs. (000s) 2,267 (Previous year Rs. (000s) 6,784) have been capitalised.

5. Contingent liabilities and commitments

At at As at31.03.05 31.03.04

Rs./000s Rs./000sa. Claims against the company not acknowledged as debts

� Liability on income tax 16,337 —� Under litigation 29,011 97,346� ESI Demand 280 280� Disputed demands raised by Sales tax authorities for

which the Company has gone on appeal against the department* 17,083 34,568b. Unexpired Letters of Credit 622,643 454,733c. Guarantees issued by bankers against Company’s counter guarantee 1,194,973 1,098,735d. Others 20,523 1,390e. Sales tax on leased assets 3,749 3,726f. Estimated amount of contracts remaining to be executed on capital

account (net of advances) and not provided for 21,080 69,487

* No provision is considered necessary since the Company expects favourable decisions.

6. Fixed Assets

Gross Block as at 31 March, 2005 includes:

a. Assets acquired from Grants and aggregating to Rs. (000s) 41,865 (Previous year Rs. (000s) 41,865) being the property of Governmentof India. The depreciation for the year on such assets is Rs. (000s) 3,740 (Previous year Rs. (000s) 3,800) and the accumulateddepreciation at the year end is Rs. (000s) 37,416 (Previous year Rs. (000s) 33,676).

b. Assets aggregating to Rs. (000s) 7,210 (Previous year Rs. (000s) 7,210) received free of cost. The depreciation for the year on suchassets is Rs. Nil (Previous year Rs. Nil) and the accumulated depreciation thereon is Rs. (000s) 7,138 (Previous year Rs. (000s) 7,138).

c. Plant and machinery given on lease aggregating to Rs. (000s) 31,867 (Previous year Rs. (000s) 23,147). The depreciation for theyear is Rs. (000s) 5,159 (Previous year Rs. (000s) 3,720), the accumulated depreciation thereon being Rs. (000s) 22,112 (Previousyear Rs. (000s) 16,953).

7. Investments

CMC Americas Inc. the Company’s wholly owned subsidiary, had accumulated losses aggregating to Rs. (000s) 45,320 (Previous yearRs. (000s) 61,847) as at 31 March, 2005 resulting in a diminution in its net worth.

Keeping in view the improved performance of the subsidiary and the long term involvement of the Company in the subsidiary, nodiminution in the value of the investment is considered necessary by the Management.


Rs./000s Rs./000s8. Earnings in foreign currency

a. Export (Services) 932,650 766,705

b. Export (Hardware) 287,934 –

c. Technical consultancy services & others 11,786 720

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CMC Limited


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9. Expenditure in Foreign Currency Year ended Year ended31.03.05 31.03.04

a. Living allowance 304,924 288,702b. Travel 16,742 16,602c. Material cost 277,642 –d. Overseas branch expenses and Others 110,820 23,763

10. Remittances in foreign currencies for dividends

The particulars of dividend paid to non-resident shareholders during the year :

Units Year ended Year ended31.03.05 31.03.04

No. of non-resident shareholders Nos. 24 29No. of shares held by them Nos. 10,150 12,400Gross amount of dividend Rs. /000s 56 50Year to which dividends relate 2003-04 2002-03

11. Value of imports (calculated on CIF basis)a. Equipment 903,074 822,552b. Stores and spares 19,322 17,506c. Capital equipment 66,701 20,449

12. Goods in Transit exclude customs duty pending clearance Rs. (000s) 123 (Previous year Rs. (000s) 1,266).

13. Managerial Remuneration

a. Managerial Remuneration for Directors’(excluding provision for encashable leave and gratuityas separate figures for Whole-time Directors is not available). 783 1,989

b. The above is inclusive of:• Estimated expenditure on perquisites [includes Rs. (000s) Nil

(Previous year Rs. (000s) 693) paid toward retirement benefits] 222 1,016• Contribution to Provident and Superannuation Fund 55 95

c. Directors sitting fees 550 325

14. Information in regard to Purchases, Sales, Opening and Closing StocksComputer equipment and Peripherals


Nos. Rs./000s Nos. Rs./000sOpening stock 7,741 115,501 11,008 90,430Purchases 239,485 3,817,480 214,680 3,713,658Sales 233,647 3,786,192 217,947 3,774,665Closing stock* 13,579 268,890 7,741 115,501

* does not include goods in transit Rs. (000s) 4,249 (Previous year Rs. (000s) 18,917).

The quantitative details relate to quantities of main sub-systems whereas amounts include revenues relating to components as well,for which amounts can not be segregated.

15. Amounts due to Small Scale Industrial Undertakings (SSI)

As at the year end, the Company had dues aggregating to Rs. (000s) 1,330 (Previous year Rs. (000s) 19,359) payable to SSI of whichRs. (000s) 1,320 (Previous year Rs. (000s) 14,767) were outstanding for more than 30 days individually to the following SSI:

• CCS Infotech Limited• Numeric Power Systems Limited• Venus Plastics Limited• Uday Udyog• D B Devices Private Limited• Lampex Electronics Private Limited

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45

16. Taxes

a. Current income tax includes taxes deducted in foreign jurisdiction Rs. (‘000s) 11,962 (Previous year Rs. (‘000s) 16,334).b. Deferred tax assets and liabilities are being offset as they relate to taxes on income levied by the same governing taxation laws.c. Break up of deferred tax assets/liabilities and reconciliation of current year deferred tax charge:

(All amounts in Rs./000s)

Opening Charged/ Closing(Credited)

to P&L(i) Deferred Tax Liabilities:

Tax impact of difference between carrying amount offixed assets in the financial statements and the income tax return 105,088 (6,699) 98,389

(ii) Deferred Tax Assets:Tax impact of expenses charged in the financial statementsbut allowable as deductions in future years under income tax 37,043 (108) 36,935

Net Deferred Tax Liability (i-ii) 68,045 (6,591) 61,454

17. Lease Commitments

a. Operating LeaseThe Company has taken property on operating lease and has recognized rent of Rs.(‘000) 50,354 (Previous Year Rs. (‘000) 48,314)The total of future minimum lease payments under leases for the following periods:-

Particulars Year ended Year ended31.03.05 31.03.04

a. Not later than one year 35,999 37,475b. Later than one year but not later than five years 54,852 55,064c. Later than five years 17,911 23,237

b. Finance LeaseThe Company has purchased and given on lease computer equipment, peripherals and system software. The details are asfollows:-

Particulars As at As at31.03.05 31.03.04Rs./000s Rs./000s

a. Total gross investment 53,209 4,609b. Present value of Minimum Lease Payments receivable 15,761 4,295c. Total gross investment for the period 53,209 —

• Not later than one year 7,787 4,609• Later than one year but not later than five years 38,933 —• Later than five years 6,489 —

d. Present value of Minimum Lease Payments receivable 15,761 —• Not later than one year 407 4,295• Later than one year but not later than five years 10,076 —• Later than five years 5,278 —

e. Unearned Finance Income 37,448 314

18. Auditors’ Remuneration

Other expenses include Auditors’ remuneration as follows:Year ended Year ended

31.03.05 31.03.04(Rs./000s) (Rs./000s)

Statutory Audit 1,200 900Tax audit 400 250Other services 1,085 754Reimbursement of service tax 268 148Reimbursement of out-of-pocket expenses 373 179

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46

19. Pending RBI approval, certain anticipated losses from past international operations amounting to Rs. (000s) 8,089 (Previous yearRs. (000s) 8,089), which stands provided for, are not written off.

Sanction of Reserve Bank of India for expenditure incurred on overseas operations amounting to Rs. (000s) 3,436 (Previous yearRs. (000s) 3,287) during the year 1991-92 has not yet been received.

20. Related Party Disclosures

a. List of related partiesi. Company holding substantial interest in voting power of the Company

• Tata Sons Limited (the ultimate holding Company)• Tata Consultancy Services Limited (the holding Company)

ii. Fellow Subsidiaries• Tata Infotech Limited• Tata AIG General Insurance Company Limited• Tata AIG Life Insurance Company Limited• Tata Consultancy Services, Deutshland GmbH• TCE Consulting Engineers Limited• Tata Consultancy Services, Netherlands BV• Tata Consultancy Services, Sverige AB

iii. Subsidiary• CMC Americas, Inc. (formerly Baton Rouge International, Inc.)

iv. Key Management Personnel• Mr. R. Ramanan

b. Transactions /balances outstanding with Related Parties.(All amounts in Rs./ 000s)

Transactions/ Holding Subsidiary Fellow Key TotalOutstanding Company Company Subsidiary ManagementBalances Personnel

Purchase of goods /services 392,638 248,827 2,546 — 644,011(See note a)

(286,159) (234,068) (1,580) — (521,807)Sale of goods 309,557 — 9,260 — 318,817

(See note b)(166,869) — (13,890) — (180,759)

Service Income 839,350 573,737 208,409 — 1,621,496(See note c)

(646,504) (446,309) (1,230) — (1,094,043)Managerial Remuneration — — — 783 783

— — — (1,989) (1,989)Debtors/Unbilled revenues 285,903 134,582 108,894 — 529,379

outstandings at year end (See note d)(214,230) (80,799) (5,461) — (300,490)

Creditors / Advances at year end 16,160 — — — 16,160(17,650) — (307) — (17,957)

Loans/ advances at year end — — — — —

Other transactions * 42,597 — — — 42,597(34,697) — (1,162) — (35,859)

*Includes dividend paid to holding Companya. Of this amount Rs. /000s 2,189 pertains to Tata AIG General Insurance Company Limited.b. Of this amount Rs. / 000s 4,972 pertains to Tata AIG General Insurance Company Limited and Rs. / 000s 4,288 to Tata AIG Life

Insurance Company Limited.c. Of this amount Rs. / 000s 196,601 pertains to Tata Infotech Limited.d. Of this amount Rs. /000s 94,666 pertains to Tata Infotech Limited.Note: Amounts in brackets represent previous year’s figures.

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47

21. Earnings per shareUnits Year ended Year ended

31.03.05 31.03.04

Net profit attributable to shareholders Rs./000s 230,598 479,868Weighted average number of equity shares in issue Nos. 000s 15,150 15,150Basic earning per share of Rs.10 each Rs. 15.22 31.67

The Company does not have any outstanding dilutive potential equity shares.


a. Financial information about the primary business segments is given below: (All amounts in Rs./000s)

Customer System ITES Education TotalServices Integration and Training

i. SEGMENT REVENUE– Sales and Services 5,052,081 2,237,857 191,531 275,269 7,756,738

(5,085,733) (1,875,770) (328,289) (180,948) (7,470,740)– Other Income 14,873 18,915 239 5,938 39,965

(37,187) (35,703) (10,248) (3,860) (86,998)ii. SEGMENT RESULTS 325,175 319,650 10,260 34,263 689,348

(464,521) (411,859) (50,741) (-17,362) (909,759)iii. UNALLOCABLE EXPENSES 317,649

(net of unallocable income) (217,059)

iv. OPERATING PROFIT 371,699(692,700)

v. INTEREST EXPENSE (NET) 42,178(35,597)

vi. PROVISION FOR TAX- Current income tax 105,514

(191,504)- Deferred income tax -6,591

(-14,269)

vii. NET PROFIT 230,598(479,868)

viii. OTHER INFORMATIONSegment assets 2,741,223 1,029,846 151,864 81,856 4,004,789

(2,212,625) (937,465) (198,647) (58,287) (3,407,024)Unallocable assets 1,887,370

(1,715,591)

TOTAL ASSETS 5,892,159(5,122,615)

Segment liabilities 1,604,608 303,186 101,109 67,558 2,076,461(1,141,353) (285,355) (127,218) (77,051) (1,630,977)

Unallocable liabilities 2,060,178(1,885,239)

TOTAL LIABILITIES 4,136,639(3,516,216)

Capital Expenditure 12,774 45,593 6,354 12,447(15,575) (39,620) (3,113) (1,289)

Depreciation 19,736 42,931 5,323 8,673(22,940) (40,614) (4,955) (6,731)

Non-cash expenses other 39,401 184,234 11,838 503than depreciation (8,812) (10,293) (8,173) (1,607)

i. Unallocated assets include investments, advance tax and tax deducted at source.ii. Unallocated liabilities include secured/unsecured loans, deferred tax/current tax liabilities, proposed dividend and tax on proposed

dividend.

iii Amounts in brackets represent previous year’s figures.

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CMC Limited


48

23. Information pursuant to clause 4(ix)(b) of Companies (Auditor’s Report) Order, 2003 as amended by Companies(Auditor’s Report)(Amendment) Order, 2004 in respect of dues disputed, not deposited with various authorities.

Nature of Dues Amount Financial Forum where the(Rs./000s) Year/Period dispute is pending

SALES TAXA. West Bengal

i. Tax on addition to taxable turnover 4,570 1996-97 Assistant Commissionerii. Tax demand on disallowance of credit for tax 1,904 1997-98 to Assistant Commissioner

deducted at source (TDS), concessional sales tax 2001-02forms and set off of amount of tax paid tosub-contractors 6,474

B. Bihari. Tax demand and penalty imposed on enhancement 3,919 1990-91, Commercial Taxes Tribunal

of turnover during assessment and delay in filling of return. 1991-92 to1992-93

3,919

C. Madhya Pradeshi. Tax demand and penalty imposed on 438 1987-88 High Court

enhancement of turnoverii. Tax demand and penalty imposed on 662 1990-91 & Assistant Commissioner

enhancement of turnover 1991-921,100

D. Orissai. Tax demand on disallowance of claim of service 384 1994-95, Assistant Commissioner

charges & of sales tax deducted at source. 2001-2002 &2002-03

ii. Tax demand on disallowance of claim of service 809 1995-96, Sales Tax Tribunal& labour charges. 1999-2000 &

2000-011,193

E. Uttar Pradeshi. Tax demand on inter state sales deemed as intra state sales. 364 1994-95 Sales Tax Tribunalii. Tax demand on disallowance of non taxable turnover 38 1996-97 DC-Appealsiii Tax demand on disallowance of credit for tax deducted 287 2002-03 Assessing Authority

at source (TDS) and tax deposited through challans.689

b. Geographical Segment(All amounts in Rs./000s)

India United Stated United Others Totalof America Kingdom

SEGMENT REVENUE- Sales and Services 6,536,154 586,915 79,702 553,967 7,756,738

(6,699,454) (462,578) (108,484) (200,224) (7,470,740)- Other Income 39,965 — — — 39,965

(86,998) — — — (86,998)TOTAL ASSETS 5,345,081 139,593 37,247 370,238 5,892,159

(4,755,722) (92,948) (91,462) (182,483) (5,122,615)TOTAL LIABILITIES 4,021,503 11,225 10,203 93,708 4,136,639

(3,465,758) (5,989) (20,853) (23,616) (3,516,216)

Note: Amounts in brackets represent previous year’s figures.

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49


S Ramadorai R Ramanan Dr K R S MurthyChairman Managing Director Director

& CEO

I Hussain S Singh S ShroffDirector Director Director

J K Gupta Vivek AgarwalMumbai Chief Financial Officer Company Secretary & Head-Legal18 April, 2005

F. Central Sales/Tamil Nadu Generali. Tax demand on notional profit on cost of maintenance 107 1994-95 & Commercial Tax Officer

spares and on disallowance of concessional sales tax forms. 1998-99ii. Tax demand on disallowance of tax exemption on 64 1995-96 Commercial Tax Officer

second sales171

G. KeralaTax demand for dispute on tax rate 49 1996-97 Assistant Commissioner

Works Contract Tax

A. Delhii. Tax demand on disallowance of input credit. 52 1999-00 Assessing Authority

ii. Tax demand on recomputation of gross turnover 3,655 2002-03 Assessing Authorityon the basis of tax deducted at source certificates furnished.

Total 3,707

Service Tax

A. Andhra Pradesh

Tax demand Election Identity Card Projects. 160 2002-03 Assistant Commissioner

Total 160

Grand Total 17,462

24. Previous year’s figures have been presented for the purpose of comparison and have been regrouped where necessary.

(All amounts in Rs./000s)Nature of Dues Amount Financial Forum where the

(Rs./000s) Year/Period dispute is pending

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CMC Limited


50

I. Registration DetailsRegistration No. State Code

Balance Sheet DateDate Month Year

II. Capital raised during the year (Amount in Rs. ‘000)Public Issue Rights Issue

Bonus Issue Private Placement (includes Adv. against Equity)

III. Position of mobilisation and deployment of funds (Amount in Rs. ‘000)Total Liabilities Total Assets

Sources of Funds Paid-up Capital (including Advance against Equity) Reserves and Surplus

Secured Loans Unsecured Loans

Deferred Tax Liability

Application of FundsNet Fixed Assets Investments

Net Current Assets Miscellaneous Expenditure

Accumulated Loss

IV. Performance of the Company (Amount in Rs. ‘000)Turnover Total Expenditure

Profit/(Loss) Before Tax Profit/(Loss) after Tax

Earning Per Share in Rs. Dividend Rate (%)

V. Generic Names of three Principal Products/Services of the Company (as per monetary terms)Item Code No.(ITC Code)ProductDescription AUTOMATIC DATA PROCESSING MACHINES

N I L

2 6 3 4 1 7 3

1 9 7 0

3 1 0 3 0 5

0 1

N I L

1 5 1 5 0 0

1 6 7 1 9 9

6 1 4 5 4

5 7 0 4 1 5

1 9 8 1 9 5 7

N I L

7 8 2 4 7 2 3

3 2 9 5 2 1

1 5 . 2 2

N I L

2 6 3 4 1 7 3

N I L

1 6 0 4 0 2 0

6 5 0 0 0 0

8 1 8 0 1

N I L

7 4 9 5 2 0 2

2 3 0 5 9 8

4 5

8 4 . 7 1

+/-+

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VITO THE COMPANIES ACT, 1956

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE



& CEOI Hussain S Singh S ShroffDirector Director DirectorJ K Gupta Vivek Agarwal

Mumbai Chief Financial Officer Company Secretary & Head-Legal18 April, 2005

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51

STATEMENT PURSUANT TO EXEMPTION UNDER SECTION 212 (8) OF THECOMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANY

As on 31.3.2005

US $ INR

a. Capital 1,600,010 69,760,436

b. Reserves (534,989) (23,325,520)

c. Total Assets 6,686,731 291,541,472

d. Total Liabilities 5,621,710 245,106,556

e. Investments — —

Year Ended 31 March, 2005

US $ INR

f. Turnover 19,896,489 867,486,920

g. Profit/(Loss) before taxation 394,362 17,194,183

h. Provison for taxation 6,800 296,480

i. Profit/(Loss) after taxation 387,562 16,897,703

j. Proposed Dividend — —

Note : US $ have been converted to INR at the exchange rate prevailing on 31.03.2005 (1 US $ = INR 43.60)



& CEOI Hussain S Singh S ShroffDirector Director DirectorJ K Gupta Vivek Agarwal

Mumbai Chief Financial Officer Company Secretary & Head-Legal18 April, 2005

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CMC Limited

52


AUDITORS’ REPORT

TO THE BOARD OF DIRECTORSOF CMC LIMITED ON THE CONSOLIDATED FINANCIALSTATEMENTS OF CMC LIMITED AND ITS SUBSIDIARY

We have examined the attached Consolidated Balance Sheet of CMC Limited (“the Company”) and its subsidiary as at

31 March, 2005 and the consolidated Profit and Loss Account for the year then ended and the Cash Flow Statement for the

year ended on that date.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion

on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing

standards in India. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the

financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and

are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates

made by management, as well as evaluating the overall financial statements. We believe that our audit provides a reasonable

basis for our opinion.

We did not audit the financial statements of the Company’s subsidiary, whose financial statements reflect total assets of Rs.

(000s) 291,541 as at 31 March, 2005 and total revenues of Rs. (000s) 891,164 for the year then ended. These financial statements

have been audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the

amounts included in respect of the Company’s subsidiary, is based solely on the report of the other auditors.

We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements

of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India

and on the basis of the separate audited financial statements of the Company and its subsidiary included in the consolidated

financial statements.

On the basis of the information and explanations given to us and on the consideration of the separate audit reports on

individual audited financial statements of the Company and its subsidiary, we are of the opinion that:

a. the Consolidated Balance Sheet gives a true and fair view of the consolidated state of affairs of the Company and its

subsidiary as at 31 March, 2005; and

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53

b. the Consolidated Profit and Loss Account gives a true and fair view of the consolidated results of operations of the Company

and its subsidiary for the year ended on that date.

c. the Consolidated Cash Flow Statement gives a true and fair view of the consolidated cash flows of the Company and its

subsidiary for the year ended on that date.

For S.B. Billimoria & Co.

Chartered Accountants

Mumbai Jitendra Agarwal

18 April, 2005 Partner

Membership No: 87104

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CMC Limited

54


CONSOLIDATED BALANCE SHEET AS AT 31 MARCH, 2005


Rs./000s Rs./000s

Sources of Funds

1. Shareholders’ Funds(a) Share Capital 1 151,500 151,500(b) Reserves & Surplus 2 1,572,069 1,406,564

1,723,569 1,558,064

2. Loan Funds(a) Secured Loans 3 167,199 174,239(b) Unsecured Loans 4 650,000 487,599

817,199 661,838

3. Deferred Tax Liabilities (See note 12) 61,454 68,045

2,602,222 2,287,947Application of Funds

4. Fixed Assets 5(a) Gross Block 1,307,135 1,355,016(b) Less: Depreciation 736,512 779,483

(c) Net Block 570,623 575,533

5. Goodwill 3,412 3,412

6. Current assets, loans & advances(a) Inventories 6 320,034 184,847(b) Sundry debtors 7 2,522,878 1,862,398(c) Unbilled revenues 950,849 1,141,444(d) Cash and bank balances 8 232,826 255,191(e) Loans and advances 9 1,370,110 1,161,714

5,396,697 4,605,594

7. Less : Current Liabilities and Provisions 10 3,368,510 2,896,592

8. Net Current Assets 2,028,187 1,709,002

2,602,222 2,287,947Notes forming part of the accounts 15



& CEO




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55

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2005


Rs./000s Rs./000s

Income

1. Sales and services 11 8,074,165 7,851,497

2. Other Income 12 67,985 165,983

8,142,150 8,017,480

Expenditure

3. Operating and other expenses 13 7,660,947 7,262,274

4. Depreciation 92,165 92,520

5. Interest (Net) 14 41,850 33,520

7,794,962 7,388,314

PROFIT BEFORE TAX 347,188 629,166

6. PROVISION FOR TAXES (See note 11) 99,227 181,489

PROFIT AFTER TAX CARRIED FORWARD TO RESERVES AND SURPLUS 247,961 447,677

Basic and diluted Earnings Per Share (Rupees) (See note 16) 16.37 29.55




& CEO




CMC-Conso-52.p65 5/19/2005, 11:57 AM55

CMC Limited

56


CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31 MARCH, 2005


Rs./000s Rs./000s Rs./000sA. Cash flow from Operating Activities

Net profit before tax* 347,188 629,166Adjustments for :

Depreciation 92,165 92,520Interest paid 45,560 39,435(Profit)/Loss on sale of fixed assets (11,549) 3Bad debts/advances written off (net) 56,596 16,691Unclaimed balances/provisions written back (29,873) (101,372)Provision for doubtful debts 160,000 16,411Unrealised foreign exchange loss/(gain) 8,483 (78)Fixed assets written off 2,875 457Transfer from capital reserve (3,740) (3,800)

320,517

Operating profit before working capital changes 667,705 689,433Adjustments for :

Trade and other receivables (730,953) (141,790)Inventories (135,187) (10,969)Trade payables and other liabilities 440,570 (231,510)

Cash generated from operations 242,135 305,164Direct taxes paid (178,124) (129,213)

Net Cash from/(used) in Operating Activities (A) 64,011 175,951

B. Cash Flow from Investing ActivitiesPurchase of fixed assets (91,494) (85,409)Sale of fixed assets 12,913 4,057Foreign exchange translation adjustment (arising on consolidation) (979) (3,667)

Net Cash used in Investing Activities (B) (79,560) (85,019)

C. Cash Flow from Financing ActivitiesInterest paid (68,319) (39,435)Proceeds/(Payment) of short term borrowings 155,361 39,399Proceeds/(Payment) of long term borrowings — —Dividend paid (including dividend tax) (93,869) (68,202)

Net Cash from/(used) in Financing Activities (C) (6,827) (68,238)

Net Increase/(Decrease) in Cash and Cash Equivalents (A+B+C) (22,376) 22,694

Cash and cash equivalents as on 1 April, 2004 [Excludingunrealised exchange difference of Rs. (000s) 941] 254,250 231,556

Cash and cash equivalents as on 31 March, 2005[Excluding unrealised exchange difference of Rs. (000s) 952] 231,874 254,250

* includes project grants from Government of Rs. (‘000s) 5,690 (Previous year Rs. (‘000s) 13,795)



& CEOJitendra Agarwal I Hussain S Singh S ShroffPartner Director Director DirectorMembership No. 87104


Mumbai Mumbai

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As at As at31.3.05 31.3.04

Rs./000s Rs./000sSchedule 1 : SHARE CAPITAL

Authorised35,000,000 (Previous year 35,000,000) equity shares of Rs.10 each 350,000 350,000

Issued, Subscribed and Paid up15,150,000 (Previous year 15,150,000) equity shares of Rs.10 each fully paid up 151,500 151,500

Of the above:7,744,961 (Previous year 7,744,961) equity shares are held by Tata ConsultancyServices Limited, the holding company.

(See note 2)

Schedule 2 : RESERVES AND SURPLUS

(a) Capital Reserve(Grants from Government of India)(i) Opening balance 8,261 12,061(ii) Less: Transferred to Profit and Loss Account 3,740 3,800


(b) General Reserve(i) Opening balance 137,369 89,382(ii) Add: Transferred from Profit and Loss account 23,060 47,987


(c) Foreign currency translation reserve(arising on consolidation)(i) Opening balance 15,868 19,535(ii) Less: Adjustment for current year 979 3,667


(d) Profit and Loss account(i) Opening balance 1,245,066 939,377(ii) Add: Additions during the year 247,961 447,677

1,493,027 1,387,054

(iii) Less: Proposed dividend 68,175 83,325(iv) Less: Tax on Proposed dividend 9,562 10,676(v) Less: Transfer to General reserve 23,060 47,987

1,392,230 1,245,066

1,572,069 1,406,564

Schedule 3 : SECURED LOANS

From banksCash credit accounts 167,199 174,239

Note:Cash credits from banks are secured by hypothecation of inventories, debtors and other current assets.

SCHEDULES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

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Schedule 5 : FIXED ASSETS (See note 7)All amounts in Rs./000s

GROSS BLOCK DEPRECIATION NET BLOCK

Particulars As at Additions Deductions/ As at As at For the Deductions/ As at As at As at1.4.04 Adjustments 31.3.05 1.4.04 year Adjustments 31.3.05 31.3.05 31.3.04

(a) Land(i) Leasehold 59,197 — — 59,197 7,376 757 — 8,133 51,064 51,821(ii) Freehold 1,796 — — 1,796 — — — — 1,796 1,796

(b) Buildings(i) Leasehold 13,405 2,603 — 16,008 4,187 4,389 — 8,576 7,432 9,218(ii) Freehold 326,941 118 295 326,764 57,828 5,329 133 63,024 263,740 269,113

(c) Plant & Machinery(i) Computers 627,525 66,952 130,015 564,462 484,891 64,778 127,547 422,122 142,340 142,634(ii) Office and

other equipment 53,242 2,889 2,920 53,211 34,140 2,265 2,137 34,268 18,943 19,102(iii) Others 162,852 10,109 4,288 168,673 141,730 8,228 4,096 145,862 22,811 21,122

(d) Furniture & Fittings 85,084 8,648 1,779 91,953 47,905 5,996 1,147 52,754 39,199 37,179

(e) Vehicles 4,236 560 78 4,718 1,426 423 76 1,773 2,945 2,810

TOTAL 1,334,278 91,879 139,375 1,286,782 779,483 92,165 135,136 736,512 550,270 554,795

(f) Capitalwork-in-progress 20,738 4,126 4,511 20,353 — — — — 20,353 20,738

GRAND TOTAL 1,355,016 96,005 143,886 1,307,135 779,483 92,165 135,136 736,512 570,623 575,533

Previous year 1,299,198 87,023 31,207 1,355,016 712,037 92,520 25,074 779,483 575,533 587,161

As at As at31.3.05 31.3.04

Rs./000s Rs./000sSchedule 4 : UNSECURED LOANS

a. Short Term Loans(i) From banks 350,000 100,000(ii) From others — 100,000(iii) Commercial Paper 300,000 200,000

650,000 400,000b. Other Loans

(i) From Government of India — 67,400(ii) Interest accrued and due — 20,199(iii) Other term loans — —

650,000 487,599Note:1. Loans repayable within one year Rs.(000s) 650,000 (Previous year Rs.(000s) 467,400)2. Loans from Government of India include interest free loans of Rs.(000s) Nil

(Previous year Rs.(000s) 54,900)3. Maximum amount outstanding on commercial paper during the year Rs.(000s) 300,000

(Previous year Rs.(000s) 200,000)

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As at As at31.3.05 31.3.04

Rs./000s Rs./000s

Schedule 6 : INVENTORIES

(a) Finished goods - equipment for resale 273,139 134,418(b) Components/spares for maintenance and resale 40,031 44,143(c) Education and training material 5,917 5,821(d) Work-in-progress 947 465

320,034 184,847

Note: Finished goods include goods in transit Rs. (000s) 4,249[Previous year Rs.(000s) 18,917]

Schedule 7 : SUNDRY DEBTORS

a. Over six months old (unsecured):Considered good 516,167 253,168Considered doubtful 205,350 51,606

721,517 304,774b. Others (unsecured):

Considered good 1,990,950 1,604,935

2,712,467 1,909,709Less: Provision for doubtful debts 205,350 51,606

2,507,117 1,858,103

c. Future lease instalments receivable (unsecured) (See note 13b) 53,209 4,609Less: Unearned finance and service charges 37,448 314

15,761 4,295

2,522,878 1,862,398

Schedule 8 : CASH AND BANK BALANCES

(a) Cash on hand [including stamps on hand 1,877 2,442Rs.(000s) 27 (Previous year Rs. (000s) 64)]

(b) Cheques/demand drafts on hand 48,905 75,367

(c) Balance with scheduled banks in:(i) Current accounts 106,287 121,890(ii) Cash credit accounts 38,411 36,484(iii) Deposit accounts* 37,346 19,008

232,826 255,191

* includes Rs.(000s) 6,295 on account of fixeddeposits pledged with customers as security(Previous year Rs.(000s) 6,195)

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As at As at31.3.05 31.3.04

Rs./000s Rs./000sSchedule 9 : LOANS AND ADVANCES

(a) Advances recoverable in cash or in kind orfor value to be received 280,892 250,620

(b) Advance income tax and tax deducted at source 1,098,606 920,482

1,379,498 1,171,102(c) Less: Advances considered doubtful 9,388 9,388

1,370,110 1,161,714

Schedule 10 : CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES(a) Sundry Creditors 1,419,530 1,084,400(b) Customers’ security deposits and credit balances and advance

against supplies and services to be rendered 297,283 338,423(c) Investor Education and Protection Fund shall be credited by

the following amounts, namely:- Unpaid dividend 850 505

(d) Unearned revenue 422,302 277,945(e) Other liabilities 34,846 58,338(f ) Interest accrued but not due 141 2,701

2,174,952 1,762,312

PROVISIONS(a) Provision for taxation 1,028,159 935,935(b) Proposed dividend 68,175 83,325(c) Provision for leave encashment 97,224 115,020

1,193,558 1,134,280

3,368,510 2,896,592

Schedule 11 : SALES AND SERVICES

(a) Sale of purchased equipment 3,786,192 3,774,665(b) Services

(i) Software services 2,591,503 2,335,214(ii) Maintenance services 817,840 886,642(iii) Other services 604,917 669,642

(c) Education and training 264,908 177,861(d) Lease rentals 8,805 7,473

8,074,165 7,851,497

Note: Lease rentals include income Rs.(000s) 1,564(Previous year Rs.(000s) 1,399) under finance leases.

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Rs./000s Rs./000sSchedule 12 : OTHER INCOME

(a) Project Grants from Government 5,690 13,795(b) Gain on foreign exchange fluctuations (Net of loss) – 4,010(c) Profit on sale of fixed assets (Net of loss) 11,549 -(d) Transfer from capital reserve - capital grants 3,740 3,800(e) Unclaimed balances/provisions written back 29,873 101,372(f ) Interest on refund of taxes – 14,144(g) Miscellaneous Income 17,133 28,862

67,985 165,983

Schedule 13 : OPERATING AND OTHER EXPENSES

1. Equipment Purchased for Resale 3,664,092 3,688,587

2. Payments to and Provisions for Employees(a) Salaries, allowances and incentives 1,579,919 1,552,641(b) Contribution to provident and other funds 93,556 96,983(c) Staff welfare expenses 84,734 99,076

Sub-Total 1,758,209 1,748,700

3. Operating and Administration Expenses(a) Components/spares for maintenance and resale 173,277 217,688(b) Sub-contracted/outsourced services 535,200 474,998(c) Purchased software 42,973 22,419(d) Freight, handling and packing expenses 22,642 19,898(e) Rental of P&T lines and leased equipment 10,820 9,445(f ) Rent and hire charges 57,884 57,394(g) Rates and taxes 22,836 14,308(h) Repairs and maintenance:

(i) Building 16,991 11,760(ii) Plant and machinery 11,330 9,347(iii) Other 24,204 21,647

(i) Electricity charges 51,733 49,068(j) Insurance 54,508 66,636(k) Travelling and conveyance 216,428 204,194(l) Printing, stationery and computer consumables 35,209 36,316(m) Postage, telephone and courier 59,443 60,247(n) Advertisement, publicity and business promotion 15,255 13,257(o) Directors’ sitting fees 550 325(p) Professional and legal fees 27,096 24,676(q) Education and training :

(i) Payments to franchisees 90,521 69,889(ii) Other expenses 59,441 38,432

(r) Living Expenses - Overseas Contracts 387,018 292,015(s) Bad debts/advances written off (net)

[Net of bad debts recovered Rs.(000s) 5,174(Previous year Rs. (000s) 1,063)] 56,596 16,691

(t) Provision for doubtful debts 160,000 16,411(u) Fixed assets written off (Net) 2,875 457(v) Loss on foreign exchange fluctuations (Net of Gain) 12,475 —(w) Loss on sale of fixed assets (Net of Gain) — 3(x) Other expenses 91,341 77,466

Sub-Total 2,238,646 1,824,987

Total 7,660,947 7,262,274

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Rs./000s Rs./000sSchedule 14 : INTEREST

1. Interest expense(a) On fixed loans

(i) Government of India loans 89 1,625(ii) Other term loans 28,206 18,267

(b) On Cash credit accounts with banks 16,781 18,025(c) Others 484 1,518

45,560 39,4352. Less: Interest earned

(a) Loans and advances 513 551(b) Fixed deposits with banks [Tax deducted at source

Rs. (000s) 185 (Previous year Rs.(000s) 122)] 883 682(c) Others [Tax deducted at source Rs. (000s) 440 (Previous

year Rs. (000s) 321)] 2,314 4,682

3,710 5,915

41,850 33,520SCHEDULE 15

NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS

1. These accounts comprise a consolidation of the Balance Sheet, Profit and Loss Account and Cash Flow Statement of CMC Limited, acompany incorporated in India and its wholly owned subsidiary CMC Americas, Inc. (formerly known as Baton Rouge International,Inc.), which is incorporated in the United States of America.

2. Background

CMC Limited (the parent) is engaged in the design, development and implementation of software technologies and applications,providing professional services in India and overseas, and procurement, installation, commissioning, warranty and maintenance ofimported/ indigenous computer and networking systems, and in education and training.The Parent was a Government of India (GoI) enterprise up to 15 October, 2001. Under the disinvestment process, GoI sold 7,726,500shares representing 51 percent of the share capital to Tata Sons Limited, on 16 October, 2001. The Gol further sold its entire remainingbalance representing 26.25 percent of the share capital, in March 2004 by an open offer to the public.On 29 March, 2004, as per specific approval granted by SEBI, Tata Sons Limited transferred its entire shareholding in the Company toTata Consultancy Services Limited (a subsidiary of Tata Sons Limited). As a result, the Parent has become a subsidiary of Tata ConsultancyServices Limited.CMC Americas, Inc. (the Subsidiary) derives its revenue throughout the United States of America from two sources:a. Information technology services at customer sites for a contract fee.b. Auxillary services, such as maintenance contracts, systems upgrades, and training of customer personnel.

3. Significant Accounting Policies

a. Basis of accounting

The financial statements of the Parent have been prepared under the historical cost convention and comply with the AccountingStandards prescribed by the Institute of Chartered Accountants of India.

b. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Parent and its wholly owned subsidiary madeupto 31 March each year. All significant inter-company transactions and balances are eliminated on consolidation. Goodwillarising on consolidation represents the excess of the cost of acquisition over the book value of assets and liabilities at the date ofacquisition.

c. Fixed assets and depreciation

i. All fixed assets are stated at cost. Cost includes purchase price and all other costs attributable to bringing the assets toworking condition for intended use.

ii. Fixed assets acquired out of grants, the ownership of which rests with the grantor, are capitalised at cost.

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iii. Depreciation on all assets of the Parent is charged proportionately from the date of acquisition/installation on straight linebasis at rates prescribed in Schedule XIV of the Companies Act, 1956 except in respect of:� Leasehold assets that are amortised over the period of lease.� Computers, Plant and Machinery - (other items), that are depreciated over six financial years.

Depreciation on assets of the Subsidiary is charged based on the estimated useful life of the assets. Accordingly, depreciation ischarged as per the straight-line method over three financial years.

d. Revenue Recognition

i. Revenue relating to equipment supplied is recognised on delivery to the customer and acknowledgement thereof, inaccordance with the terms of the individual contracts.

ii. Revenue from software development on fixed price contracts is recognised according to the milestone achieved as specifiedin the contract, and is adjusted on the “proportionate completion” method based on the work completed.

iii. On time and material contracts, revenue is recognised based on time spent as per the terms of the specific contracts.iv. Revenue from warranty and annual maintenance contracts is recognised over the life of the contracts. Maintenance revenue

on expired contracts on which services have continued to be rendered is recognised on renewal of contract or on receipt ofpayment.

v. Revenue from “Education and Training” is recognised on accrual basis over the course term.

e. Grants

i. Grants received for capital expenditure incurred are included in “Capital Reserve”. Fixed assets received free of cost areconsidered as a grant and are capitalised at notional value with a corresponding credit to the Capital Reserve account.An amount equivalent to the depreciation charge on such assets is appropriated from capital reserve and recognised asrevenue in the Profit and Loss Account.

ii. Grants received for execution of projects is recognised as revenue to the extent utilized.iii. Unutilised grants are shown under other liabilities.

f. Inventories

Inventories include finished goods, stores and spares, work-in progress and education and training material.i. Inventories of finished goods mainly comprise of equipment for resale are valued at the lower of cost (net of provision for

obsolescence) or net realisable value.ii. Inventories of stores and spares are valued at cost, net of provision for diminution in the value. Cost is determined on weighted

average cost basis.iii. Inventories of “Education and Training material” are valued at the lower of cost and net realisable value. Cost is determined

on the “First In First Out” basis.iv. Work-in-progress comprises cost of infrastructural facilities in the process of installation at customers’ sites. These are valued

at cost paid/payable to sub-contractors.

g. Research and Development Expenses

Research and development costs of revenue nature are charged to the Profit and Loss account when incurred. Expenditure ofcapital nature is capitalised and depreciated.

h. Foreign exchange transactions

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Monetary itemsdenominated in foreign currency and outstanding at the Balance Sheet date are translated at the exchange rate ruling on thatdate. Exchange differences on foreign exchange transactions other than those relating to fixed assets are recognised in the profitand loss account. Any gain/loss on exchange fluctuation on the date of payment of expenditure incurred for acquisition of fixedassets is treated as an adjustment to the carrying cost of such fixed assets. In case of forward contracts for foreign exchange, thedifference between the forward rate and the exchange rate at the date of the transaction are recognised over the life of the contract.

In respect of the subsidiary, income and expenses are translated into the reporting currency at the average rate. All assets andliabilities are translated at the closing rate. The resulting exchange differences are transferred to foreign currency translation reserve.

i. Leases

Assets given under finance leases are recognised as receivables at an amount equal to the net investment in the lease and thefinance income is based on a constant rate of return on the outstanding net investment.

j. Retirement benefits

i. The Parent’s contribution to the Employees’ Provident Fund is deposited in a trust formed by the Company under theEmployees’ Provident Fund and Miscellaneous Provisions Act, 1952 which is recognised by the Income-Tax authorities. Suchcontributions are charged to the Profit and Loss Account each year.

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ii. Gratuity to employees is based on the Group Gratuity Scheme of the Life Insurance Corporation of India. Contributionsmade to the Scheme are expensed in the year.

iii. The balance of unavailed leave due to employees has been provided on the basis of actuarial valuation.iv. The Subsidiary is the sponsor of a defined contribution 401 (K) Profit sharing Plan for its employees. Subsidiary contribution

to the plan for the year ended March 31, 2005 aggregating to Rs.(000s) 1,794 [Previous year Rs.(000s) 2,854]. The Subsidiaryalso sponsors a separate profit sharing plan for its employees. Benefits are paid upon retirement, total disability, death ortermination. The Subsidiary did not make a contribution for the year ended March 31, 2005.

k. Provision for taxation

Income tax comprises of current tax and deferred tax. Deferred tax assets and liabilities are recognised for the future taxconsequences of timing differences, subject to the consideration of prudence. Deferred tax assets and liabilities are measuredusing the tax rates enacted or substantively enacted by the Balance Sheet date.

l. Earnings per Share

The earnings considered in ascertaining EPS comprises the net profit after tax. The number of shares used in computing Basic EPSis the weighted average number of shares outstanding during the year.


i. Business segments

Based on similarity of activities, risks and reward structure, organisation structure and internal reporting systems, the Parent hasstructured its operations into the following segments:Customer Services (CS): Hardware supplies and maintenance, facilities management and provision of infrastructure facilities.Systems Integration (SI): Systems study and consultancy, software design, development and implementation, softwaremaintenance and supply of computer hardware in accordance with customers’ requirements. The operations of the Subsidiaryfall in this category.IT Enabled Services (ITES) - (Formerly Indonet): Value-added-services, data network, data center services, web design andhosting etc.Education and Training (E&T): IT education and training service through its own centers and through franchisees.Segment revenue and expenses include amounts, which are directly identifiable to the segment and allocable on a reasonablebasis. Segment assets include all operating assets used by the segment and consist primarily of debtors, inventory and fixedassets. Segment liabilities include all operating liabilities and consist primarily of creditors, advances/deposits from customersand statutory liabilities.

ii. Geographic segments

The Parent also provides services overseas, primarily in the United States of America, United Kingdom and Middle East and Africa Region.

5. Research and Development Expenses

Expenditure includes “Research and Development” expenditure for the Parent aggregating to Rs. (000s) 98,878 [Previous yearRs. (000s) 108,616]. Amounts aggregating to Rs. (000s) 2,267 [Previous year Rs. (000s) 6,784] have been capitalised.

6. Contingent liabilities and commitments

For the Parent:

As at As at31.3.05 31.3.04

Rs./000s Rs./000sa. Claims against the Company not acknowledged as debts

� Liability on income tax 16,337 —� Under litigation 29,011 97,346� ESI Demand 280 280� Disputed demands raised by Sales tax authorities for

which the Company has gone on appeal against the department * 17,083 34,568b. Unexpired Letters of Credit 622,643 454,733c. Guarantees issued by bankers against Company’s counter guarantee 1,194,973 1,098,735d. Others 20,523 1,390e. Sales tax on leased assets 3,749 3,726f. Estimated amount of contracts remaining to be executed on capital

account (net of advances) and not provided for 21,080 69,487

* No provision is considered necessary since the Company expects favourable decisions.

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7. Fixed Assets

Gross Block for the Parent as at 31 March, 2005 includes:

a. Assets acquired from Grants and aggregating to Rs. (000s) 41,865 [Previous year Rs. (000s) 41,865] being the property of Governmentof India. The depreciation for the year on such assets is Rs. (000s) 3,740 [Previous year Rs. (000s) 3,800] and the accumulateddepreciation at the year end was Rs. (000s) 37,416 [Previous year Rs. (000s) 33,676].

b. Assets aggregating to Rs. (000s) 7,210 [Previous year Rs. (000s) 7,210] received free of cost. The depreciation for the year on suchassets is Rs. Nil (Previous year Rs. Nil) and the accumulated depreciation thereon is Rs. (000s) 7,138 [Previous year Rs. (000s) 7,138].

c. Plant and machinery includes assets given on lease aggregating to Rs. (000s) 31,867 [Previous year Rs.(000s) 23,147]. Thedepreciation for the year is Rs. (000s) 5,159 [Previous year Rs. (000s) 3,720], the accumulated depreciation thereon being Rs. (000s)22,112 [Previous year Rs. (000s) 16,953].

8. Sundry DebtorsSundry debtors of the Subsidiary include Rs. (000s) 4,665 [Previous year Rs. (000s) Nil ] retained by a customer, which are expected to beremitted to the Subsidiary during 2006.

9. Current Liabilities

Customers’ security deposits and credit balances and advance against supplies and services to be rendered include a note payabledated 1 June, 1996, amounting to Rs. (000s) 50,140 (Previous year Rs.(000s) 49,841) due by the Subsidiary to an unrelated corporateentity. The note is due on demand and bears interest at 1% over the 1 year U.S. dollar LIBOR (total rate of 4.84% at March 31, 2005).

10. Self Insurance

Effective October 1, 2004, the subsidiary became self-insured for medical and prescription drug benefits. The subsidiary has accruedthe estimated liability for claims reported and processed, as well as claims incurred but not reported through March 31, 2005. It hasalso obtained reinsurance coverage for the policy year October 1, 2004 through September 30, 2005.

11. Provision for Income Tax

The provision for taxes on income is as follows:


Rs./000s Rs./000sCurrent taxes

Domestic taxes* 105,514 191,504Foreign taxes 304 4,254

Deferred taxesDomestic taxes (6,591) (14,269)Foreign taxes — —

Total 99,227 181,489

* includes taxes in foreign jurisdiction Rs. (000s) 11,962 (Previous year Rs. (000s) 16,334)

12. Deferred Tax

a. Deferred tax assets and liabilities are being offset as they relate to taxes on income levied by the same governing taxation laws.

b. Break up of deferred tax assets/liabilities and reconciliation of current year deferred tax charge for the Parent:(All amounts in Rs./000s)

Opening Charged/ Closing(Credited)

to P&L

i. Deferred Tax Liabilities:Tax impact of difference between carrying amount offixed assets in the financial statements and the income tax return 105,088 (6,699) 98,389

ii. Deferred Tax Assets:Tax impact of expenses charged in the financial statements butallowable as deductions in future years under income tax 37,043 (108) 36,935

Net Deferred Tax Liability (i-ii) 68,045 (6,591) 61,454

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13. Lease Commitments

a. Operating LeaseParent and subsidiary have taken property on operating lease and have recognized rent of Rs. (‘000) 57,884 (Previous YearRs. (‘000) 57,394). The total of future minimum lease payments under leases for the following periods:-

Particulars Year ended Year ended31.3.05 31.3.04

Rs./000s Rs./000s

a. Not later than one year 39,764 39,698

b Later than one year but not later than five years 56,804 55,064c. Later than five years 17,911 23,237

b. Finance LeaseThe Parent has purchased and given on lease computer equipment, peripherals and system software. The details are as follows:

As at As at31.3.05 31.3.04

Rs./000s Rs./000s

a. Total gross investment 53,209 4,609b. Present value of Minimum Lease Payments receivable 15,761 4,295c. Total gross investment for the period 53,209 —

� Not later than one year 7,787 4,609� Later than one year but not later than five years 38,933 —� Later than five years 6,489 —

d. Present value of Minimum Lease Payments receivable 15,761 —� Not later than one year 407 4,295� Later than one year but not later than five years 10,076 —� Later than five years 5,278 —

e. Unearned Finance Income 37,448 314

14. Pending RBI approval, certain anticipated losses for the Parent amounting to Rs. (000s) 8,089 (Previous year Rs. (000s) 8,089), whichstands provided for, are not written off.

Sanction of Reserve Bank of India for the Parent for expenditure incurred on overseas operations amounting to Rs. (000s) 3,436 (Previousyear Rs. (000s) 3,287) during the year 1991-92 has not yet been received.

15. Related Party Disclosures

a. List of related partiesi. Company holding substantial interest in voting power of the Parent/Subsidiary

� Tata Sons Limited (the ultimate holding Company)� Tata Consultancy Services Limited (the holding Company)

ii. Fellow Subsidiaries

Parent� Tata Infotech Limited� Tata AIG General Insurance Company Limited� Tata AIG Life Insurance Company Limited� Tata Consultancy Services, Deutshland GmbH� TCE Consulting Engineers Limited� Tata Consultancy Services, Netherlands BV� Tata America International Corporation� Tata Consultancy services, Sverige AB

iii. Key Management Personnel

ParentMr R. Ramanan

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b. Transactions/Balances outstanding with Related Parties: (All amounts in Rs./000s)

Transactions/ Holding Fellow Key TotalOutstanding Company Subsidiary ManagementBalances Personnel

Purchase of goods/services 392,638 60,863 — 453,501(See note a)

(286,159) (61,719) — (347,878)Sale of goods 309,557 9,260 — 318,817

(See note b)(166,869) (13,890) — (180,759)

Service Income 1,063,748 211,275 — 1,275,023(See note c)

(805,554) (1,230) — (806,784)Managerial Remuneration — — 783 783

— — (1,989) (1,989)Debtors/unbilled revenue as at year end 360,198 111,684 — 471,882

(See note d)(217,784) (5,461) — (223,245)

Creditors / advances as at year end 16,160 610 — 16,770(See note e)

(17,650) (5,378) — (23,028)Loans/ advances as at year end — — — —Other transactions * 42,597 — — 42,597

(34,697) (1,162) — (35,859)*Includes dividend paid to the holding Companya. Of this amount Rs. /000s 58,317 pertains to Tata America International Corporation.b. Of this amount Rs. / 000s 4,972 pertains to Tata AIG General Insurance Company Limited and Rs. / 000s 4,288 to Tata AIG Life

Insurance Company Limited.c. Of this amount Rs./ 000s 196,601 pertains to Tata Infotech Limited and Rs / 000s 2,867 to Tata America International Corporation.d. Of this amount Rs. /000s 94,666 pertains to Tata Infotech Limited.e. This amount pertains to Tata America International Corporation.

Note: Amounts in brackets represent previous year’s figures.

16. Earnings per shareUnits Year ended Year ended

31.03.05 31.03.04

Net profit attributable to shareholders Rs./000s 247,961 447,677Weighted average number of equity shares in issue Nos. 000s 15,150 15,150Basic earning per share of Rs. 10 each Rs. 16.37 29.55

The Company does not have any outstanding dilutive potential equity shares.

17. Segment Informationa. Financial information about the primary business segments is given below: (All amounts in Rs./000s)


i. SEGMENT REVENUE

— Sales and Service 5,052,081 2,555,284 191,531 275,269 8,074,165(5,085,733) (2,256,527) (328,289) (180,948) (7,851,497)

— Other Income 14,873 18,915 239 5,938 39,965(37,187) (35,703) (10,248) (3,860) (86,998)

ii. SEGMENT RESULTS 325,175 336,989 10,260 34,263 706,687(464,521) (381,845) (50,741) (-17,362) (879,745)

iii. UNALLOCABLE EXPENSES 317,649(net of unallocable income) (217,059)

iv. OPERATING PROFIT 389,038(662,686)

v. INTEREST EXPENSE (NET) 41,850(33,520)

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viii. OTHER INFORMATIONSegment assets 2,741,223 1,190,218 151,864 81,856 4,165,161

(2,212,625) (1,081,189) (198,647) (58,287) (3,550,748)Unallocable assets 1,805,571

(1,633,791)TOTAL ASSETS 5,970,732

(5,184,539)Segment liabilities 1,604,608 413,710 101,109 67,558 2,186,985

(1,141,353) (395,614) (127,218) (77,051) (1,741,236)Unallocable liabilities 2,060,178

(1,885,239)TOTAL LIABILITIES 4,247,163

(3,626,475)Capital Expenditure 12,774 45,816 6,354 12,447

(15,575) (39,620) (3,113) (1,289)Depreciation 19,736 43,530 5,323 8,673

(22,940) (45,583) (4,955) (6,731)Non-cash expenses other 39,401 185,338 11,838 503than depreciation (8,812) (19,490) (8,173) (1,607)

i. Unallocated assets include investments, advance tax and tax deducted at source.ii. Unallocated liabilities include secured/unsecured loans, deferred tax/current tax liabilities, proposed dividend and tax on proposed dividend.iii. Amounts in brackets represent previous year’s figures.

b. Geographical Segment(All amounts in Rs./000s)

India United States United Others Totalof America Kingdom

SEGMENT REVENUE— Sales and Services 6,536,154 904,342 79,702 553,967 8,074,165

(6,699,454) (843,335) (108,484) (200,224) (7,851,497)— Other Income 39,965 — — — 39,965

(86,998) — — — (86,998)TOTAL ASSETS 5,266,695 296,553 37,247 370,238 5,970,732

(4,677,335) (233,259) (91,462) (182,483) (5,184,539)TOTAL LIABILITIES 4,021,503 121,749 10,203 93,708 4,247,163

(3,465,758) (116,248) (20,853) (23,616) (3,626,475)Note : Amounts in brackets represent previous year’s figures.

18. Previous year’s figures have been presented for the purpose of comparison and have been regrouped where necessary.

vi. PROVISION FOR TAX— Current Income Tax 105,818

(195,758)

— Deferred Income Tax -6,591(-14,269)

vii. NET PROFIT 247,961(447,677)

(All amounts in Rs./000s)




& CEO

I Hussain S Singh S ShroffDirector Director Director

Mumbai J K Gupta Vivek Agarwal18 April, 2005 Chief Financial Officer Company Secretary & Head-Legal

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�

Affix RevenueStamp

of Re. 1

CMC Limited

Registered Office: CMC Centre, Old Mumbai Highway, Gachibowli, Hyderabad - 500019, A.P.

ATTENDANCE SLIP

Folio No.

I certify that I am a registered Shareholder/Proxy for registered Shareholder of the Company.

I hereby record my presence at the 29th Annual General Meeting of the Company at Bhartiya Vidya Bhavan Auditorium, BVB HyderabadKendra, No. 5-9–1105, Basheerbagh-King Koti Road, Hyderabad-500 029, A.P., on Friday, June 17, 2005 at 2.30 p.m.

Note:Please sign this attendance slip and hand it over at the attendance counter at the ENTRANCE OF THE MEETING HALL.

I/We..........................................................................................................................................................................................................................................................................

of................................................................................................................................................................................................................................................................................(Write full address)

......................................................................................................................................................being a Member(s) of CMC LIMITED, hereby appoint

................................................................................................................ of ........................................................................................................................(Write full address)

...................................................................................................................................................................................................................................................................................

or failing him/her...............................................................................of...............................................................................................................................................................

....................................................................................as my/our proxy to attend and vote for me/us and on my/our behalf at the 29th Annual GeneralMeeting to be held on Friday, June 17, 2005 at 2.30 p.m. and at any adjournment thereof.

AS WITNESS under my/our hands this day of , 2005

Folio No. .......................................................... DP/ID/No. .................................................................. Client ID No. .............................................................

Signature ......................................................... .............................

NOTES :1. The Proxy need NOT be a member.2. The Proxy Form must be deposited at the Registered Office not less than 48 hours before the scheduled time for holding the meeting.

DP IDClient ID

CMC Limited

Registered Office: CMC Centre, Old Mumbai Highway, Gachibowli, Hyderabad - 500019, A.P.

PROXY FORM

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Proxy+Form.p65 5/19/2005, 11:57 AM70

71

CMC Limited

April 18, 2005

The Shareholders ofCMC Limited

Re: Payment of Dividend by Electronic Clearing Services (ECS)

Dear Shareholder,

We are pleased to inform you that the Board of Directors at their meeting held on April 18, 2005 have recommended payment of dividendfor the year ended March 31, 2005 @ Rs.4.50 per equity share. This dividend will be paid after the same is declared at the 29

th Annual General

Meeting scheduled to be held on June 17, 2005.

In accordance with SEBI’s directions vide their Circular No. DCC/FITT/Cir-3/2001 dated October 15, 2001, arrangements have been made tocredit your dividend amount directly to your bank account through the Electronic Clearing Service (ECS).

We, therefore, request you to furnish your bank details in the ECS Mandate Form printed overleaf together with a xerox copy ofyour cheque leaf and return to our Registrars, Karvy Computershare Private Limited on or before June 13, 2005 in case you holdshares in physical form. The said details in respect of the shares held in electronic form should be sent to your respective DepositoryParticipant and not to the Registrar as the Registrar is obliged to use only the data provided by the Depository while makingpayment of dividend. Please mention the correct 9 digit MICR Code for giving the ECS credit to your account.

In case of receiving your request after the due date, the mandate will not be considered for this dividend. However, the same will be used forfuture dividend payments, unless the same is amended or revoked by you.

In the absence of adequate response from the shareholders of any particular centre(s), the Company reserves its right of paying the dividendby dividend warrants.

Thanking you,

Yours faithfully,

For CMC Limited

VIVEK AGARWALCompany Secretary & Head - Legal

�

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RE: PAYMENT OF DIVIDEND BY ELECTRONIC CLEARING SERVICES (ECS)

Shareholders authorization to receive dividend through Electronic Credit Service Mechanism

1. Name of the first/sole shareholder

2. Folio No./D.P. ID & Client ID Nos.

3. Name of the Bank in full

4. Branch, Address & Tel No.

5. 9-digit code number of the Bank and Branch

appearing on the MICR cheque

6. Account Number (as given on the cheque book)

7. Account type (Please tick)

(Please attach a photocopy of a cheque issued to you by your bank, for verification of the above particulars.)

I hereby declare that the particulars given above are correct and complete. If the transaction is delayed or not effected at all for any reasons(s),

beyond the control of the Company, I will not hold the Company responsible. I agree to discharge the responsibility expected of me as a

participant under the scheme.

Date :

Place : Signature

Encl: Copy of the cheque leaf

NOTES

1. In case you hold shares in physical form, please send the aforesaid form duly filled in and signed by all the shareholders to our Registrars

M/s Karvy Computershare Private Limited at their Office - Karvy, 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad - 500034.

2. In case you hold shares in D’mat form, please furnish the aforesaid details to your depository participant and not to the Registrars.

MANDATE FORM

Savings Bank Current Cash Credit

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CMC 2004 05

Economy & Finance

Transcript of CMC 2004 05