ITC INFOTECH INDIA LIMITED

Transcription

1 REPORT OF THE DIRECTORS FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2005 Your Directors submit their report for the Financial Year ended 31st March, FINANCIAL RESULTS (Rs. in lakhs) Year Ended March 31, Total Revenue Total Expenditure Operating Profit (PBIDT) Depreciation Profit / (Loss) before Tax (538.08) Provision for Tax (112.66) (190.73) Profit / (Loss) after Tax (347.35) Profit / (Loss) brought forward ( ) ( ) Deferred tax asset Balance carried to Balance Sheet ( ) ( ) During the year under review, your Company s total revenue grew by 65% improving upon the previous year s revenue growth rate of 61% despite a higher base. Your Directors are pleased to report that the Company has posted its maiden net profit since commencement of IT business. BUSINESS REVIEW Despite the controversy surrounding the subject of outsourcing, the year 2004 marked a growing acceptance of the global delivery model in the worldwide trade in IT services. With ever increasing availability of international bandwidth and powerful workflow management software, it is now possible to disaggregate IT and other business processes, execute the sub-processes in multiple centres around the world and reassemble it, in near-real time, at another location. This is driving vendors and customers to redefine the levers of value creation in the industry. There is wide spread acceptance of the benefits of offshore outsourcing based on the significantly favourable economics of total transaction cost. Leveraging the evolving dynamics of offshore outsourcing, Indian IT vendors have successfully executed the offshore delivery model to achieve sustained growth in service exports over the last several years and have established India as the most preferred offshore destination for global sourcing of services. Application outsourcing is now mature, particularly in the US. The growing maturity of the Global Delivery Model has caused a shift from a cost-only focus to a cost-and-business-impact focus. Your Company has taken advantage of this opportunity and consolidated its market standing in Product Lifecycle Management and Customer Relationship Management software services, in which it has been recognised by industry analysts as a leading Tier 2 Indian vendor. During the year, the Company entered the SAP, Engineering Design and Infrastructure Management spaces and acquired several marquee customers. Consequently, the Company has been able to drive a robust growth in revenues. Your Company has grown to employ a one thousand strong team of software engineers and has obtained the BS7799 certification an endorsement of the quality of its information security management and business continuity systems. In a survey conducted jointly by Managing Offshore and NeoIT, your Company has been rated as one of the top 100 viable global offshore service providers. These recognitions stand testimony to your Company s growing market standing. The improved profitability in the year under review is primarily a result of larger scale, higher offshore volumes and better resource utilization. Though the pricing environment has been stable, margins of the smaller IT companies, like yours, continued to be under pressure due to the higher costs of customer acquisition, delivery processes and project management skills. The strength of the Rupee is also adversely impacting margins. In order to acquire deep knowledge in specific business domains in addition to competencies in identified technologies, your Company has repositioned its internal organization to bring focus on select business verticals, backed by induction of business veterans for domain specific expertise. These actions are expected to improve client penetration and pricing and drive offshore volumes to shore up profitability. Your Company believes that the Indian IT industry will remain on its growth trajectory. As global corporations upgrade their networks and deploy new business applications, the demand for system infrastructure service providers and application service providers is expected to witness significant growth. Large opportunities are available in the areas of Infrastructure Services, Testing Services and Business Intelligence Services. Given the size of these opportunities and the inherent advantages possessed by large Indian IT companies, Indian players will continue to form a significant part of the competitive landscape. Strong relationships, diversity of services, a global delivery footprint, effective management of scale and deep domain understanding would be the key differentiators in the highly competitive global outsourcing industry. Your Company will continue to focus on these challenges to attain a competitively superior market standing. STRATEGIC INVESTMENTS As stated in this Report last year, the Company had invested US$ 2.15 million in the equity share capital of ITC Infotech (USA), Inc. (I2A), a wholly owned subsidiary, in terms of the approval of the Reserve Bank of India to invest US$ 2.5 million in the equity capital of I2A. During the year under review, the Company invested the balance amount of US$ 0.35 million in the equity share capital of I2A by subscribing to 3,500 Common Shares without par value for cash at US$ 100 each. WHOLLY OWNED SUBSIDIARIES i) ITC INFOTECH LTD, UK During the year under review, ITC Infotech Ltd, UK, a wholly owned subsidiary, turned in a robust performance and registered a turnover of GBP million (Previous year GBP 7.75 million) and a net profit of GBP 1.10 million (Previous year GBP 0.33 million). The Company declared a dividend of GBP 1.00 per share for the financial year ended 31st March, ii) ITC INFOTECH (USA), INC During the year under review, ITC Infotech (USA), Inc. a wholly owned subsidiary, registered a turnover of US$ 4.92 million (Previous year US$ 3.87 million) and a net loss of US$ 0.49 million (Previous year US$ 0.36 million). The company achieved significant growth in revenues during the year and acquired certain high potential customers. JOINT VENTURE - CLI3L e-services Limited (CLI3L) CLI3L has rapidly expanded and consolidated its operations to turn in a strong business and financial performance during the year under review. The company now employs about 2200 agents and has a capacity of about 1400 seats. Revenues have multiplied almost three times to cross the Rs. 100 crores milestone. Post tax profit margins at 21 % are robust and compare well with the industry. These results reflect the growing customer confidence in the company s service delivery processes and the quality of its talent base and infrastructure. TALENT MANAGEMENT A competent talent pool is the key source of competitive advantage in the IT business. The Company has grown its talent base with the average headcount increasing by 31% in the year under review. Given the challenging talent market, the Company continues to reinforce its human resource management systems and processes with particular focus on training and development. Competency mapping and building knowledge leadership remain focus areas. OTHER INFORMATION The particulars of conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo in terms of section 217(1)(e) are given in Annexures A and B. The particulars of employees in terms of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, is given in Annexure C. The Directors Responsibility Statement as required in terms of Section 217(2AA) is given in Annexure D. DIRECTORS In accordance with the provisions of Section 256 of the Companies Act, 1956 and Article 143 of the Articles of Association of the Company, Mr. A.Singh and Mr. S.Verma will retire by rotation at the ensuing Annual General Meeting, and being eligible, offer themselves for re-election. AUDIT COMMITTEE The Audit Committee of the Company comprises Mr. B.B.Chatterjee (Chairman of the Committee), Mr. A. Nayak and Mr. K.Vaidyanath, all non executive Directors of your Company. The Managing Director, the Head of Finance, the Statutory Auditors and the Internal Auditors are Permanent Invitees to the Committee. The Company Secretary serves as the Secretary of the Committee. AUDITORS The Auditors, M/s. Price Waterhouse retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment. ACKNOWLEDGEMENTS Your Directors place on record their appreciation of the vital contribution made by employees at all levels. Their demonstrated competence, commitment and dedication have enabled achievement of this year s business and financial results. Registered Office Virginia House 37 J. L. Nehru Road Anup Singh Kolkata , India. Chairman 23

2 ANNEXURE A TO THE REPORT OF DIRECTORS FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2005 INFORMATION AS PER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1998 A. CONSERVATION OF ENERGY Since the Company is engaged in providing information technology solutions and services, it is not a major consumer of energy. B. TECHNOLOGY ABSORPTION I. RESEARCH AND DEVELOPMENT (R & D) : Not Applicable 1. Specific areas in which R& D carried out by the Company 2. Benefits derived as a result of the above R&D 3. Future plan of action 4. Expenditure on R & D for (a) Capital (b) Recurring (c) Total (d) Total R&D expenditure as a percentage of Total Turnover II. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION 1. Efforts in brief made towards technology absorption, adaptation and innovation. The Company operates in various state-of-the-art technology areas and has developed the necessary related skills. The Technology Services Group of the Company continuously scans the market for new technologies, designs, systems and processes and institutes appropriate systems to ensure effective absorption and deployment of such technologies within the organisation. 2. Benefit derived as a result of the above efforts Expansion of business in various new technology areas and productivity improvements through the use of contemporary software tools. Anup Singh Chairman ANNEXURE B TO THE REPORT OF DIRECTORS FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2005 INFORMATION AS PER THE COMPANIES (DISCLOSURE OF PARTICULARS (b) Total foreign exchange used and earned IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1998 The foreign exchange earnings (FOB realisation basis) of the Company FOREIGN EXCHANGE EARNINGS AND OUTGO during the year were Rs lakhs (previous year Rs (a) Activities related to exports; initiatives taken to increase exports, lakhs ) while the outgoings (on payment basis) were Rs lakhs development of new export markets for products and services; (previous year Rs lakhs). and export plans The Company has exported software and professional services to various countries. The Company aims to maximise its exports by maintaining constant contact with prospective customers, focussed business development and participation in international exhibitions to promote Anup Singh its services. Chairman ANNEXURE C TO THE REPORT OF DIRECTORS FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2005 Particulars of Employees under Section 217 (2A) of the Companies Act, 1956 and forming part of the Directors Report Name Age Designation/ Gross Remu- Net Remu- Qualifications Experience Date of Previous Employment/ Nature of Duties neration neration (Years) Joining Position Held Employed throughout the year and in receipt of remuneration aggregating Rs. 24,00,000/- or more AITHANI K. S. 46 V.P. - Strategic Relations M.Tech 22 1-Oct-00 ITC Infotech Ltd., U.K. Chief Executive Officer BABU V. V. R. 50 Sr. V.P. - SMG B.Sc, M.Sc(Tech), 28 1-Oct-00 ITC Ltd., M.Phil Divisional Head, India Operations (ISD) GANESH J. 45 V.P.- Shared Services B.E Apr-02 Talisma Corp. Pvt. Ltd. PGDBM, CIO JANARDHANAN S. 47 V.P.- Technology Services B.sc 25 1-Oct-00 ITC Ltd. M.sc Head, ITC IT Service SREENIVASAN V. 42 V.P.- Operations B.E Oct-00 ITC Ltd. Head, Software Development Centre RAJASEKHAR V. V. 40 G.M., IT Services B.E Dec-00 ITC Ltd. M.B.A Mgr. IT Projects SIKKA U.S. 47 V.P. - Quality and Process B.Tech Apr-02 Goldstone Technologies PGDBM V.P.- Technologies SINHA A. 48 G.M. - Product Solution Delivery B.Tech 27 1-Oct-00 ITC Ltd. Mgr. CPC Group SINHA A. K. 53 V.P. - CRP / Operations B.Sc. Engg Oct-03 Infogain India Pvt. Ltd., PGDBM Noida, Managing Director TALWAR A. 46 V.P.- Talent Management B.Tech 21 9-Apr-01 Reliance Telecom Ltd., MBA Kolkata, V.P. - HRD Employed for a part of the the year and in receipt of remuneration aggregating Rs.2,00,000 /- or more per month DUBE K. 44 V.P. - Key Accounts B.Sc 23 2-Nov-04 G.E.Capital M.Sc, V.P. SUBBAIAH S. 46 Head CRM Solutions B.Sc Jan-05 Symphony Services M.Sc, V.P. - Head Global GUPTA S.K. 49 G.M. -Key Accounts B.Sc Oct-04 Vmokasha Technologies M.Tech, Exec. - V.P. Notes : 1. Gross remuneration comprises salary, allowances, medical reimbursements, leave travel assistance, Company s contribution to provident, pension and gratuity funds, monetary value of other perquisites computed on the basis of the Income Tax Act and Rules, leave encashment and performance bonus, where applicable. 2. Net remuneration comprises cash income less (a) income tax and surcharge deducted at source and (b) manager s own contribution to provident fund. 3. All appointment are/were contractual,other terms and conditions are as per Company s Rules. 4. None of the above employees is a relative of any Director of the Company. Anup Singh Chairman 24

3 ANNEXURE D TO THE REPORT OF DIRECTORS FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2005 INFORMATION AS REQUIRED IN TERMS OF SECTION 217(2AA) OF THE COMPANIES ACT, 1956 DIRECTORS RESPONSIBILITY STATEMENT The Board of Directors states : That in the preparation of the Annual Accounts for the year ended 31st March, 2005, the applicable accounting standards have been followed and there are no material departures. That the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2005 and of the Profit of the Company for that period ; That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities ; That the Directors have prepared the Annual Accounts for the year ended 31st March, 2005 on a going concern basis. Anup Singh Chairman REPORT OF THE AUDITORS TO THE MEMBERS OF ITC INFOTECH INDIA LIMITED 1. We have audited the attached Balance Sheet of ITC INFOTECH INDIA LIMITED, (the Company ) as at 31st March, 2005, the related Profit and Loss Account and Cash Flow Statement for the year ended on that date, annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor s Report) Order, 2003, as amended by the Companies (Auditor s Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of subsection (4A) of Section 227 of The Companies Act, 1956 of India (the Act ) and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: (a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act; (e) On the basis of written representations received from the directors, as on 31st March, 2005 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2005 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; (f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act and give a true and fair view in conformity 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 31st March, 2005; (ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. S. Gopalakrishnan Partner Membership No For and on behalf of Place : New Delhi Price Waterhouse Date : 12th May, 2005 Chartered Accountants ANNEXURE TO AUDITORS REPORT [Referred to in paragraph 3 of the Auditors Report of even date to the members of ITC INFOTECH INDIA LIMITED on the financial statements for the year ended 31st March, 2005] 1. (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. (b) The fixed assets are physically verified by the management according to a phased programme, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with such programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed. (c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year. 2. The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained under Section 301 of the Act. 3. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased are of special nature for which alternative sources do not exist for obtaining comparative quotations, there is an adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and for the sale of services. The activities of the Company did not involve purchase of inventory and sale of goods during the year. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither noticed nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system. 4. In our opinion and according to the information and explanations given to us, there are no contracts or arrangements referred to in section 301 of the Act, the particulars of which needs to be entered into the register maintained under that section. 5. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under. 6. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business. 7. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing the undisputed statutory dues including provident fund, income tax, sales tax, service tax, cess and other material statutory dues as applicable with the appropriate authorities in India. Investor education and protection fund, employees state insurance, wealth tax, customs duty and excise duty are not applicable to the Company for the current year. (b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of income tax, sales tax, service tax, customs duty and cess which 25

4 have not been deposited on account of any dispute. Wealth tax and excise duty are not applicable to the Company for the current year. 8. Although the Company has been registered for more than five years, it has engaged in the business of information technology with effect from 1st October, The accumulated losses of the Company as at 31st March, 2005 are more than fifty percent of its net worth and the Company has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year. 9. The Company has neither taken any loans from a financial institution or bank or issued any debentures during the year nor were there any such amounts due for repayment as at the balance sheet date. 10. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 11. In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year. 12. In our opinion, and according to the information and explanations given to us, on an overall basis, the unsecured loans in the nature of term loans taken from the holding company, have been applied for the purposes for which they were obtained. 13. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment. 14. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. 15. The Company has not raised any money by public issues during the year. 16. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, no instance of fraud on or by the Company has been noticed or reported during the year and we have also not been informed of any such case by the management. 17. The other clauses (ii)(a), (ii)(b), (ii)(c), (iii)(b), (iii)(c), (iii)(d), (iii)(f), (iii)(g), (v)(b), (viii), (xiii), (xiv) and (xix) of paragraph 4 of the Companies (Auditor s Report) Order 2003 as amended by the Companies (Auditor s Report) (Amendment) Order, 2004, are not applicable in the case of the Company for the current year, since in our opinion there is no matter which arises to be reported in the aforesaid order. S. Gopalakrishnan Partner Membership Number For and on behalf of Place : New Delhi Price Waterhouse Date : 12th May, 2005 Chartered Accountants BALANCE SHEET AS AT 31ST MARCH, 2005 Schedule I. SOURCES OF FUNDS : 1. Shareholders Funds Capital 1 252,000, ,000, Loan Funds Unsecured Loans 2 1,114,900, ,500,000 Total 1,366,900,000 1,190,500,000 II. APPLICATION OF FUNDS : 1. Fixed Assets 3 (a) Gross Block 406,067, ,551,610 (b) Less: Depreciation 176,500, ,545,431 (c) Net Block 229,566, ,006,179 (d) Capital Work-in-Progress 1,599, ,566, ,605, Investments 4 449,519, ,434, Deferred Tax - Net 5 53,438,843 42,172, Current Assets, Loans and Advances (a) Sundry Debtors 6 428,516, ,226,054 (b) Cash and Bank Balances 7 71,454,775 18,651,034 (c) Other Current Assets 8 19,372,576 7,382,564 (d) Loans and Advances 9 54,080,623 56,645, ,424, ,905,369 Less: 5. Current Liabilities and Provisions (a) Liabilities ,105,083 94,368,213 (b) Provisions 11 26,417,535 20,114, ,522, ,482,833 Net Current Assets 401,901, ,422, Profit and Loss Account ,473, ,864,638 Total 1,366,900,000 1,190,500,000 Notes to the Accounts 18 Segment Reporting 19 Related Party Disclosures 20 Significant Accounting Policies 21 The Schedules referred to above form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our Report of even date. S. Gopalakrishnan, Partner For and on behalf of Price Waterhouse Chartered Accountants S. Verma Managing Director Place : New Delhi B. B. Chatterjee Director Date : 12th May, 2005 S. V. Shah Company Secretary 26

5 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2005 Schedule For the year ended For the year ended I. INCOME Sales and Services 13 1,230,795, ,304,721 Other Income 14 72,047,788 40,649,330 1,302,843, ,954,051 II. EXPENDITURE Personnel Expenses ,653, ,327,574 Operating and Administrative Expenses ,077, ,790,141 Depreciation and Amortisation 61,987,860 58,644,187 1,293,718, ,761,902 III. PROFIT / (LOSS) BEFORE TAXATION 9,124,585 (53,807,851) Provision for Taxation 17 (11,266,145) (19,073,353) IV. Profit / (Loss) after Taxation, Carried forward 20,390,730 (34,734,498) Earnings Per Share (Face value Rs. 10 each) 18 (x) 0.81 (1.83) (Basic and Diluted) Notes to the Accounts 18 Segment Reporting 19 Related Party Disclosures 20 Significant Accounting Policies 21 The Schedules referred to above form an integral part of the Profit and Loss Account. This is the Profit and Loss Account referred to in our Report of even date. S. Gopalakrishnan, Partner For and on behalf of Price Waterhouse Chartered Accountants S. Verma Managing Director Place : New Delhi B. B. Chatterjee Director Date : 12th May, 2005 S. V. Shah Company Secretary SCHEDULES TO THE ACCOUNTS 1. CAPITAL Authorised: 26,000,000 Equity Shares of Rs. 10 each 260,000, ,000,000 Issued, subscribed and paid-up: 25,200,000 Equity Shares of Rs. 10 each 252,000, ,000,000 (All Equity Shares are held by the Holding Company, ITC Limited) 252,000, ,000, UNSECURED LOANS Other than Short Term From Other than Banks 1,114,900, ,500,000 (Interest-free Loan from the Holding Company, ITC Limited) 1,114,900, ,500, FIXED ASSETS GROSS BLOCK DEPRECIATION AND AMORTISATION NET BLOCK Additions With- For the On Description 1st April, drawals 31st March, 1st April, year Withdrawals 31st March, 31st March, 31st March, Leasehold Improvements 27,769, ,537 28,369,934 3,737,363 3,118,719 6,856,082 21,513,852 24,032,034 Plant and Machinery 158,939,301 12,093,052 50, ,981,507 85,289,557 34,611,881 32, ,868,917 51,112,590 73,649,744 Capitalised Software 176,561,596 1,440, ,001,596 15,145,532 19,772,382 34,917, ,083, ,416,064 Furniture and Fixtures 25,281,316 3,432,990 28,714,306 10,372,979 4,484,878 14,857,857 13,856,449 14,908, ,551,610 17,566,579 50, ,067, ,545,431 61,987,860 32, ,500, ,566, ,006,179 Capital Work-in-Progress 1,599,122 1,599,122 1,599,122 Total 390,150,732 17,566,579 1,649, ,067, ,545,431 61,987,860 32, ,500, ,566, ,605,301 Previous Year 161,729, ,355,278 3,934, ,150,732 57,290,967 58,644,187 1,389, ,545, ,605,301 Note : The capitalised softwares have useful lives ranging between 3 to 5 years. Amortisation is based on the straight line method in respect of software for internal use and on man hours deployed for revenue generating activities. 4. INVESTMENTS Long Term Other than Trade Unquoted (at Cost) Subsidiary Companies ITC Infotech Limited, U.K. 685,815 Equity Shares of GBP 1 each, fully paid-up 68,685,837 68,685,837 ITC Infotech (USA), Inc. 47,000 ( ,500) Common Shares without par value 230,833, ,749,000 (3,500 Shares subscribed during the year) Others CLI3L e-services Limited 14,999,999 Equity Shares of Rs. 10 each, fully paid up 149,999, ,999, ,519, ,434, DEFERRED TAX - NET Deferred Tax Assets On employees separation and retirement 9,666,836 7,216,120 On provision for doubtful debts / advances 454, ,401 On unabsorbed depreciation 48,735,838 40,270,800 58,857,272 47,701,321 Deferred Tax Liabilities On fiscal allowances on fixed assets 5,418,429 5,528,623 5,418,429 5,528,623 53,438,843 42,172,698 27

6 6. SUNDRY DEBTORS Over six months old Good and Unsecured - From Others 22,008,188 8,716,356 Doubtful and Unsecured - From Others 1,242, ,633 Other Debts Good and Unsecured - From Holding Company 211,967 38,832,835 - From Subsidiaries 114,726,124 10,759,389 - From Others * 291,569, ,917, ,758, ,823,687 Less: Provision for Doubtful Debts 1,242, , ,516, ,226,054 * Includes Unbilled Revenue Rs. 7,080,380 ( Rs. 38,391,031) 7. CASH AND BANK BALANCES Cash and Cheques on Hand 3,850,761 11,272,252 Balances with Scheduled Banks On Current Accounts 67,204,014 6,978,782 On Deposit Accounts 400, ,000 71,454,775 18,651, OTHER CURRENT ASSETS Good and Unsecured Deposits with Government, Public Bodies and Others 8,063,840 7,376,714 Interest accrued on Loans, Advances, etc. 16,106 5,850 Dividend Receivable 11,292,630 19,372,576 7,382, LOANS AND ADVANCES Good and Unsecured Loans to Employees 31,287,883 30,094,480 Advances recoverable in cash or in kind or for value to be received 21,874,969 22,550,012 Advance Tax (Net of Provision for Income Tax) 917,771 4,001,225 54,080,623 56,645, LIABILITIES Sundry Creditors - Dues to small scale industrial undertakings - Dues to other than small scale industrial undertakings * 113,433,719 88,261,558 Advance from Customers 5,579,375 Unearned Revenue 19,674,536 Other Liabilities 6,417,453 6,106, ,105,083 94,368,213 * Includes Dues to Subsidiary Companies Rs. Nil; ( Rs. 2,008,396) 11. PROVISIONS Provision for Pension 16,547,370 14,899,151 Provision for Leave Encashment 9,870,165 5,215,469 26,417,535 20,114, PROFIT AND LOSS ACCOUNT Loss brought forward 252,864, ,229,485 Less: Deferred tax asset on initial adoption 23,099, ,864, ,130,140 Add: (Profit)/ Loss carried forward from Profit and Loss Account (20,390,730) 34,734, ,473, ,864, SALES AND SERVICES Exports 1,062,241, ,413,523 Domestic 168,553, ,891,198 1,230,795, ,304, OTHER INCOME Interest on Loans, Deposits, etc. - Gross 977, ,325 (Tax Deducted at Source Rs. 2,501) ( Rs. Nil) Gain / (Loss) on Exchange - Net 11,213,313 3,967,536 Income from Long Term Investment - Subsidiary 57,205,887 22,735,515 (Tax Deducted at Source Rs. Nil) ( Rs. Nil) Profit on Sale of Fixed Assets (4,212) 158,364 Liabilities no longer required written back 342, ,808 Miscellaneous Income 2,312,841 12,601,782 72,047,788 40,649,330 For the year ended For the year ended 15. PERSONNEL EXPENSES Salaries and Bonus 474,676, ,755,121 Contribution to Provident and Other Funds 27,562,194 40,339,868 Staff Welfare Expenses 23,196,160 16,716,244 Reimbursement of Contractual Remuneration 8,218,566 4,516, ,653, ,327, OPERATING AND ADMINISTRATIVE EXPENSES Rent 27,406,410 22,049,732 Rates and Taxes 5,714,159 1,544,453 Insurance 5,720,985 3,793,300 Travelling and Conveyance 319,961, ,401,115 Communication 23,145,442 24,030,304 Power and Fuel 12,580,045 12,080,824 Outsourcing Charges 161,515,963 69,973,123 (including Payment to Subsidiary Companies Rs. 148,922,931) ( Rs. 69,325,123) Software and Related Expenses 50,577,969 11,566,776 Business Development Expenses 4,666,939 2,623,932 Repairs and Maintenance - Buildings 5,453,855 4,667,310 - Machinery 3,438,608 4,068,578 - Others 6,903,391 3,476,654 Legal, Professional and Consultancy Expenses 31,939,841 26,925,254 Doubtful and Bad Debts 644, ,025 Fixed Assets Discarded (Net) 14,113 Auditors Remuneration and Expenses 997, ,887 Training and Development 17,678,687 12,206,049 Miscellaneous Expenses 19,717,064 14,098, ,077, ,790, PROVISION FOR TAXATION Current Tax Deferred Tax (11,266,145) (19,073,353) (11,266,145) (19,073,353) 18. NOTES TO THE ACCOUNTS (i). Nature of Operations ITC Infotech India Limited ( the Company ) is a wholly owned subsidiary of ITC Limited ( the Holding Company ) providing information technology solutions and software development services. (ii). Commitments and Contingencies (a) Estimated amount of contracts remaining to be executed on capital account, net of advances is Rs. 987,631 (2004 Rs. 1,248,807). (b) Proposed investment in a wholly owned subsidiary outside India is Rs. Nil (2004 Rs. 15,299,375). (c) Counter guarantees outstanding Rs. 400,000 (2004 Rs. 400,000). (iii). The Company has not recognised deferred tax assets amounting to Rs. 63,342,430 (2004 Rs. 62,100,422) in respect of accumulated losses as at 31st March, 2005 estimated at Rs. 173,102,221 (2004 Rs. 173,102,221), as a matter of prudence. (iv). No provision for diminution in the value of the investment in ITC Infotech (USA) Inc. ( I2A ), is considered necessary, as in the opinion of management such diminution is of a temporary nature due to the downturn in the global IT market. I2A has achieved significant growth in revenues during the year and acquired certain key customers with good potential for future earnings. (v). The Company s significant leasing arrangements are in respect of operating leases for premises (residential, office etc). These leasing arrangements, which are not non-cancellable, range between 11 months and 9 years generally, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are charged as Rent under Schedule 15 to the Accounts. (vi). Exchange difference in respect of forward exchange contracts to be recognised in the Profit and Loss Account in the subsequent accounting period amounts to Rs. 424,755 (credit) [2004 Rs. 327,232 (credit)]. (vii). Interest in Joint Venture The Company s interest, as a venturer, in jointly controlled entity (Incorporated Joint Venture) is: Name Country of Ownership interest Ownership interest Incorporation as at as at CLI3L e-services Limited India 50% minus 1 share 50% minus 1 share The Company holds 14,999,999 equity shares out of the total issued and paid up equity shares of 30,000,000 shares of Rs. 10 each in the above Joint Venture. The Company s interest in the Joint Venture is reported as Long Term Investment (Schedule 4) and stated at cost. However, the Company s share of each of the assets, liabilities, income and expenses, etc. (each without elimination of 28

7 the effect of transactions between the Company and the joint venture) related to its interest in the Joint Venture are: (a) Assets and Liabilities I. Assets 1. Fixed Assets (Net) 148,161, ,018, Investments 46,441,585 11,675, Current Assets, Loans and Advances a) Sundry Debtors 100,145,337 53,700,732 b) Cash and Bank Balances 1,812,515 1,826,460 c) Other Current Assets 21,829,390 17,180,231 d) Loans and Advances 1,688, , ,078, ,844,308 II. Liabilities 1. Secured Loans 4,419,819 17,000, Current Liabilities and Provisions a) Liabilities 47,666,286 38,390,673 b) Provisions 3,638,109 2,044,587 55,724,214 57,435,260 III. Net Assets 264,354, ,409,048 (b) Income and Expenses For the year ended For the period from 31st March, th January 2003 to 31st March 2004 I. Income 1. Sale of Services 516,032, ,093, Other Income 3,201,097 2,214, ,233, ,308,177 II. Expenses 1. Personnel Expenses 195,072,610 62,383, Operating and Administration Expenses 177,519,060 91,687, Depreciation 36,955,797 17,678, Interest 691,060 1, Preliminary Expenditure written of 67, Provision for Taxation 49,000 80, ,287, ,899,131 III. Profit After Tax 108,945,708 5,409,046 (c) Others 1. Contingent Liabilities 2. Capital Commitments 1,230,456 8,372,714 (viii).retirement benefits in respect of pension, gratuity, etc. are provided for based on actuarial valuations as at the Balance Sheet date. (ix). Quantitative details The Company is engaged in providing information technology solutions and software development services. The purchase, production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and the information as required under Paragraphs 3 and 4C of Part II of Schedule VI of the Companies Act, For the year ended For the year ended Rs. Rs. (x). Earnings per share Earnings per share has been computed as under: (a) Profit / (Loss) after Taxation 20,390,730 (34,734,498) (b) Weighted average number of Equity Shares 25,200,000 18,953,425 (c) Earnings Per Share 0.81 (1.83) (Face value of Rs. 10 per share) (Basic and Diluted) (xi). Auditors Remuneration and Expenses (including service tax, where applicable) Audit Fees 661, ,000 Tax Audit Fees 110, ,000 Fees for Other services 82,650 10,800 Reimbursement of Expenses 143, , , ,887 (xii).value of Imports during the year (C.I.F. Basis) Capital Goods 3,170, ,334,655 3,170, ,334,655 (xiii).expenditure In Foreign Currency during the year (On Payment Basis) Travel 216,187, ,901,537 Professional, Consultancy and Account Management Fees 223,952,495 57,041,167 Marketing Fees 15,606,500 For the year ended For the year ended Software and Related Expenses 28,027,357 1,036,585 Others 877, , ,045, ,726,573 (xiv).earnings in foreign exchange during the year (F.O.B. Realisation Basis) Sale of services including reimbursement of expenses 782,427, ,140,252 Dividend 45,913,257 29,423, ,341, ,564,023 (xv).previous year s figures have been regrouped / rearranged wherever necessary. 19. SEGMENT REPORTING The Company operates in a single business segment - information technology, which is its primary segment. The geographical segments are secondary segments and have been identified accordingly as India and Rest of the World. In view of only one business segment, disclosure of information relating to primary segment is not applicable. Rs. Rs. SECONDARY SEGMENT INFORMATION (GEOGRAPHICAL SEGMENTS) : Segment Revenue India 168,553, ,891,198 Rest of the World 1,062,241, ,413,523 Total Revenue 1,230,795, ,304,721 Segment Assets * India 530,763, ,582,912 Rest of the World 720,828, ,361,361 Total Assets 1,251,592,096 1,005,944,273 Capital Expenditure * India 17,566, ,355,278 Rest of the World Total Capital Expenditure 17,566, ,355,278 * Fixed Assets and Capital Expenditure have been considered on the basis of physical location. 20. RELATED PARTY DISCLOSURES 1. HOLDING COMPANY : ITC Limited 2. ENTERPRISES WHERE CONTROL EXISTS : Wholly Owned Subsidiaries : ITC Infotech Limited, UK ITC Infotech (USA), Inc. 3. OTHER RELATED PARTIES WITH WHOM THE COMPANY HAD TRANSACTIONS, etc. : i). Fellow Subsidiary Companies : Fortune Park Hotels Limited (from 1st April, 2004) Srinivasa Resorts Limited (from 1st April, 2004) Landbase India Limited Surya Nepal Private Limited ITC Hotels Limited (upto 31st March, 2004) ii). Associates : International Travel House Limited iii). Joint Ventures : CLi3L e-services Limited iv).key Management Personnel : Non-Executive Directors Management Committee Members Mr. A. Singh - Chairman Mr. S. Verma - Managing Director Mr. A. Nayak Mr. A. K. Mukerji Mr. B. B. Chatterjee Mr. A. Talwar Mr. K. Vaidyanath Mr. K. S. Aithani Mr. S. Sivakumar Mr. U. S. Sikka Mr. V. Sreenivasan Mr. V. V. R. Babu 29

8 4. DISCLOSURE OF TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES AND THE STATUS OF OUTSTANDING BALANCES AS ON 31ST MARCH Holding Company Subsidiaries Fellow Subsidiaries Associates Joint Ventures Key Management Personnel Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Sale of Services 139,466, ,406, ,676, ,367, ,967 18,080,623 16,756,400 Purchase of Goods / Services 2,997, , ,922,931 69,325,123 22,413 2,400,111 81,631,289 74,027,638 Sale of Fixed Assets 22,189,029 13,873 Rent paid 2,530,323 2,530,323 20,000 Remuneration to Key Managerial Personnel 17,185,130 13,079,324 Reimbursement of Contractual Remuneration 14,478,732 4,516,341 Remuneration of managers on deputation recovered 6,832,237 6,123,727 Dividend income 57,205,886 22,735,515 Expenses recovered 10,548,494 5,041,030 25,094,010 4,109, ,044 20,390,073 Expenses reimbursed 20,828,404 16,346,814 98,403,800 32,326,531 17, ,376 Loans given 200, ,000 Receipt towards Loan Repayment 142, ,607 Loans received 619,200, ,000,000 Loan repaid 442,800, ,500,000 Advances received 4,000,000 Advances refunded 603,933 33,286,629 Receipt towards refund of Advances 4,943,000 16,700,000 Balances as on 31st March, i) Debtors / Receivables 211,966 51,246, ,726,124 74,689,863 3,923,825 2,356,855 ii) Loans Taken 1,114,900, ,500,000 iii) Loans Given 2,741,975 3,299,573 iv) Creditors / Payables 12,382,987 66,250,480 17, ,462 10,494,648 7,287,853 22, , SIGNIFICANT ACCOUNTING POLICIES IT IS CORPORATE POLICY Convention To prepare financial statements in accordance with applicable Accounting Standards in India. A summary of important accounting policies, which have been applied consistently, is set out below. The financial statements have also been prepared in accordance with relevant presentational requirements of the Companies Act, Basis of Accounting To prepare financial statements in accordance with the historical cost convention. Revenue Recognition To recognise revenues from services performed on a time and material basis, as and when the services are performed. To recognise revenues from services performed on time bound fixed-price engagements using the percentage of completion method of accounting, if work completed can be reasonably estimated. The cumulative impact of any revision in estimates of the percentage of work completed is reflected in the period in which the change becomes known. Provisions for estimated losses on such engagements are made during the period in which a loss becomes probable and can be reasonably estimated. To recognise revenue from trading in software packages / licenses upon delivery to customer. To treat amounts received or billed in advance of services performed as unearned revenue. Unbilled revenue, included in debtors, represents amounts recognised based on services performed in advance of billing in accordance with contract terms. Fixed Assets To state fixed assets at actual cost less accumulated depreciation. The actual cost capitalized includes material cost, freight, installation cost, duties and taxes, finance charges and other incidental expenses incurred during the construction / installation stage. To capitalize software where it is expected to provide future enduring economic benefits. Capitalization costs include license fees and costs of implementation / system integration services. The costs are capitalized in the year in which the relevant software is implemented for use. Capital Work in Progress To treat cost of assets not put to use before the year-end as capital work in progress. Depreciation To calculate depreciation on fixed assets on the straight-line method over their estimated useful lives at the rates, which are not less than those prescribed under Schedule XIV of the Companies Act, The cost of and the accumulated depreciation for fixed assets sold, retired or otherwise disposed off are removed from the stated values and the resulting gains and / or losses are included in the profit and loss account. The estimated useful lives of fixed assets are as follows: Buildings 25 years Plant and Machinery - Computers / Computer Accessories 3 years Other Equipment 5 years Furniture & Fixtures 5 years Motor Vehicles 5 years Leasehold improvements Shorter of lease period or estimated useful lives Capitalised software costs are amortised over a period of five years or over the estimated useful lives, as is appropriate. Investments To state long-term investments, including in Joint Ventures, at cost. Where applicable, provision is made where there is a permanent diminution in the value of long-term investments. Proposed Dividend To provide for Dividends as proposed by the Directors in the books of accounts, pending approval at the Annual General Meeting. Research and Development To charge off all revenue expenditure incurred on research and development in the year it is incurred. Assets purchased for research and development activities are included in fixed assets. Taxes on Income To provide and determine Current tax as the amount of tax payable in respect of taxable income for the period. To provide and recognise Deferred tax on timing differences between taxable income and accounting income subject to consideration of prudence. Not to recognise Deferred tax assets on unabsorbed depreciation and carry forward losses unless there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Foreign Currency Translation To account for transactions in foreign currency at the exchange rate prevailing on the date of transactions. Gains / losses arising out of fluctuations in the exchange rates are recognized in the Profit and Loss Account in the period in which they arise except in respect of Fixed Assets where exchange variance is adjusted in the carrying amount of the respective Fixed Assets. To account for differences between the forward exchange rates and the exchange rates at the date of transactions, as income or expense over the life of the contracts, except in respect of liabilities incurred for acquiring Fixed Assets, in which case such differences are adjusted in the carrying amount of the respective Fixed Assets. To account for profit / loss arising on cancellation or renewal of forward exchange contracts as income / expense for the period, except in case of forward exchange contracts relating to liabilities incurred for acquiring Fixed Assets, in which case such profit / loss are adjusted in the carrying amount of the respective Fixed Assets. To account for gains / losses on foreign exchange rate fluctuations relating to current assets and liabilities at the Balance Sheet date. Employee Benefits To make regular monthly contributions to various Provident Funds, Pension Funds and Gratuity Funds which are charged to revenue. To administer through duly constituted and approved independent trusts, various Funds in respect of Employee Benefit Schemes. Claims To disclose claims against the Company not acknowledged as debts after a careful evaluation of the facts and legal aspects of the matter involved. Segment Reporting To identify segments having regard to the dominant source and nature of risks and returns and the internal organisation and management structure. S. Gopalakrishnan Partner For and on behalf of S. Verma Managing Director Price Waterhouse B. B. Chatterjee Director Chartered Accountants S. V. Shah Company Secretary Place : New Delhi Date : 12th May,

9 CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2005 (Figures for the previous year have been rearranged to conform with the revised presentation) For the year ended For the year ended A. NET PROFIT / (LOSS) BEFORE TAX 9,124,585 (53,807,851) ADJUSTMENTS FOR : Depreciation 61,987,860 58,644,187 Income from Long Term Investments (57,205,887) (22,735,515) Fixed Assets - (Profit) / Loss on Sale / Write off (net) 18,325 (158,364) Interest etc. (977,397) (964,325) Liability no longer required written back (342,562) (221,808) 3,480,339 34,564,175 OPERATING PROFIT / (LOSS) BEFORE WORKING CAPITAL CHANGES 12,604,924 (19,243,676) ADJUSTMENTS FOR : Trade and Other Receivables (211,505,932) (74,642,919) Trade Payables 57,382,347 (154,123,585) 9,616,977 (65,025,942) CASH USED IN OPERATIONS (141,518,661) (84,269,618) Income Tax Paid (3,083,455) 726,738 NET CASH USED IN OPERATING ACTIVITIES (138,435,206) (83,542,880) B. CASH FLOW FROM INVESTING ACTIVITIES : Purchase of Fixed Assets (15,967,457) (232,355,278) Sale of Fixed Assets 10,257 2,703,135 Purchase of Long Term Investments (16,084,250) (165,356,500) Interest Received 967, ,457 Income from Long Term Investments Received 45,913,257 29,423,771 NET CASH USED IN INVESTING ACTIVITIES 14,838,947 (364,625,415) C. CASH FLOW FROM FINANCING ACTIVITIES : Proceeds from issue of Share Capital 150,000,000 Proceeds from Long Term Borrowings - Net 176,400, ,500,000 NET CASH FLOW USED IN FINANCING ACTIVITIES 176,400, ,500,000 NET INCREASE IN CASH AND CASH EQUIVALENTS 52,803,741 (11,668,295) OPENING CASH AND CASH EQUIVALENTS 18,651,034 30,319,329 CLOSING CASH AND CASH EQUIVALENTS 71,454,775 18,651,034 CASH AND CASH EQUIVALENTS COMPRISE : Cash and Bank Balances 71,411,029 18,695,102 Unrealised (Loss) / Gain on Foreign Currency Cash and Cash Equivalents 43,746 71,454,775 (44,068) 18,651,034 This is the Cash Flow Statement referred to in our Report of even date. S. Gopalakrishnan, Partner For and on behalf of Price Waterhouse Chartered Accountants S. Verma Managing Director Place : New Delhi B. B. Chatterjee Director Date : 12th May, 2005 S. V. Shah Company Secretary BALANCE SHEET ABSTRACT AND COMPANY S GENERAL BUSINESS PROFILE (As per Schedule VI, Part IV of the Companies Act, 1956) I. Registration Details IV. Performance of Company (Amount in Rs. Thousands) Registration No State Code 2 1 Turnover (Including other Income) Total Expenditure Balance Sheet Date Date Month Year Profit/Loss Before Tax Profit / Loss After Tax II. Capital raised during the year (Amount in Rs. Thousands) Public Issue Rights Issue (Please tick appropriate box + for Profit, for Loss) Bonus Issue Private Placement Earnings per Share in Rs. Dividend Rate (%) III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities Total Assets V. Generic Names of Principal Products / Services of Company (as per monetary Sources of Funds terms) Paid-up Capital Reserves & Surplus Item Code No. (ITC Code) * N. A. Secured Loans Unsecured Loans Product Description C O M P U T E R S O F T W A R E Application of Funds S E R V I C E S Net Fixed Assets Investments Net Current Assets Misc. Expenditure *No item code has been assigned to Computer Software Services under the Indian Trade Classification. Accumulated Losses Deferred Tax - Net