i-flex annual report 2007 - 2008 - oracle cloud · the 2005-2006 annual report used the metaphor of...

i - f l ex annua l repor t 2007 - 2008

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The 2005-2006 Annual Report used the metaphor of fire to depict the energy and passion that drive our achievements

The 2006-2007 Annual Report, i-flexn, was based on our vision for exponential growth post our partnership with Oracle.

For excellence in design, production and communication, we won:

• Association of Business Communicators of India (ABCI) – Silver Award (2006-07)

• League of American Communications Professionals (LACP) – Silver Award (2006-07)

• League of American Communications Professionals (LACP) – Bronze Award (2007-08)

• Society of Technical Communication (STC), Australian Chapter – Merit Awards (2005-2006)

• League of American Communication Professionals (LACP), Magellan Awards – Honors Awards (2005-2006)

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Annual Report 2007_2008.indd C2 7/25/2008 11:47:07 AM

i - f l ex annua l repor t 2007 - 2008

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The Wheel 3

Leadership 4

Corporate Information 11

Directors’ Report 15

Corporate Governance Report 24

Financials

Indian GAAP

Unconsolidated 38

Consolidated 84

Annual General Meeting (AGM) Notice 120

Attendance Slip & Proxy From 127

Contents

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3i-fl ex annual report 2007-08

The wheel. A symbol of change and progress. Epitomized

in stone at the Konark temple in Orissa, India, the wheel signifies movement across

time and space. Continuity, as well as transformation. Simple, and yet far-reaching

in impact.

Change is present in everything we do at i-flex®. For years, our clients, who span the

length and breadth of the financial services industry, have experienced a revolution in

the way they work, thanks to our pioneering approach and award-winning solutions.

With Oracle as our partners, we too have been transformed into an enabler of growth

and success in others.

Our comprehensive range of solutions offers the best of scope, functional richness

and scalability. By focusing on client satisfaction, we’ve delivered on expectations

year after year. Our strong commitment to open systems and industry standards has

helped us spread our success to more financial institutions, in more countries across

the world.

Today, we stand on the verge of another reinvention. A time that will be a turning point

in our history. And the catalyst for greater things to come.

The wheels are in motion. Together, let’s lead the way.

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leadershipWith Oracle, we’re at the helm of change

that is driving the financial services industry.


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The wheel has inspired humanity for centuries; a symbol of

constant change and a simple machine that has transformed our

lives since times immemorial.

At i-flex, the wheel symbolizes the spirit of innovation that steers

customers to excellence and growth.

For us, leadership means innovation, creativity, passion,

commitment and performance excellence. For more than 15 years,

leadership has been an integral part of the i-flex story and we have

unremittingly strived to transform our customers into leaders in

their businesses. Today, as the wheel of time moves forward, we

look forward to further strengthening bonds with our customers and

helping them meet the challenges of the current turbulent times.

The financial services industry is changing quickly, creating new

opportunities and new challenges every day. Financial institutions

are facing a challenging environment of complex and evolving

regulation, a turbulent economic landscape, rising customer

expectations, increasing competition, and the need to constantly

innovate to achieve profitable growth. With established leadership

in the financial services industry and a portfolio of unmatched

products and services, i-flex’s mission of empowering customers in

their businesses remains unchanged.

Now, as part of the global Oracle family, we are No. 1 in banking*

and are helping to set new standards with our market-leading

solutions. Our transformation strategy is based on offerings that are

complete - in terms of functionality and technology; open - in terms

of standards and interoperability; and integrated, enabling a unified

automation environment that delivers business value.

With numerous milestones to inspire us and enormous

opportunities ahead, our journey has just begun. We rededicate

ourselves to build on this momentum and work with renewed vigor

to address the challenges faced by our customers and empower

them with competitive advantage.

Rajesh Hukku

Chairman

i-flex solutions limited

*Forrester Research’s June 2008 independent report “Global Banking Platform Deals 2007: Vendors”


V Shankar - Executive Vice-President,

PrimeSourcing, receiving the award from

D.H. Shankaramurthy - Minister for Higher Education,

Government of Karnataka.

Nandu Kulkarni, Senior Vice-President,

Retail and Internet Banking, receiving the

All India Electronics and Computer Software

Export Promotion Council (ECS) award from

A Raja, Minister for Communications and

Information Technology, Government of India.

Awards and accolades:

• Business Week (November, 2007) ranked i-flex solutions as one of “Asia’s Hot Growth Companies:

2007”. i-flex was ranked second highest in terms of market capitalization, third highest in terms

of sales and sixth highest in terms of profits.

• i-flex solutions was ranked 30 in the annual FinTech 100 list of financial industry technology

vendors by American Banker and Financial Insights (November, 2007).

• i-flex BPO won the “NASSCOM Excellence in Gender Inclusivity – Best Emerging Company”

award. This award was given away at the NASSCOM IT Women Leadership Summit 2007, held in

December last year.

• The All India Electronics and Computer Software Export Promotion Council (ECS) Award for

Excellence in Exports for the year 2006-07 was presented to i-flex in October, 2007.

• i-flex was recognized as a “Deal Leader” in global banking platforms by independent research

firm Forrester Research Inc., in the August 2007 report “Global Banking Platform Deals 2006:

Vendors”.

• Mantas was ranked number one in the Waters Ranking for Anti-Money Laundering (AML) Solutions

in July, 2007.

• Dataquest magazine rated i-flex BPO among the top 10 “dream employers” in the BPO sector

in November, 2007. This rating ranks companies on various parameters linked to employee

satisfaction.

• In November, 2007, i-flex successfully completed the SAS70 Review of Internal Controls for the

sixth consecutive year.

• FLEXCUBE® was recognized as a Leader in the Magic Quadrant for International Retail Core

Banking in February, 2008.

• FLEXCUBE Investor Services featured in “The ‘Next Generation’ Transfer Agency Review” by

Barrington Partners in February, 2008.




i-flex solutions financials at a glanceOur 10 years in the industry

1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Total Revenue 1,444.31 2,062.69 3,211.21 4,295.27 6,239.14 8,017.87 11,645.21 15,113.54 20,976.66 24,433.52

Total Expenses 909.53 1,312.30 2,016.85 2,991.95 4,277.53 5,703.26 8,693.82 12,176.60 16,837.90 19,835.94

EBT 534.78 750.39 1,194.36 1,303.32 1,961.61 2,314.61 2,951.39 2,936.94 4,138.75 4,597.57

Tax 30.44 57.66 94.15 150.33 252.73 526.75 627.06 560.42 415.96 441.69

EAT 504.34 692.73 1,100.21 1,152.99 1,708.88 1,787.86 2,324.33 2,376.53 3,722.80 4,155.89

EPS 6.02 8.27 13.14 13.77 20.41 21.35 27.75 28.38 44.45 49.62

Book Value 15.49 25.32 37.91 56.27 92.28 111.40 136.76 164.74 282.02 331.60

Notes: All EPS and Book Values are computed based on the current equity capital base of 83,747,441 shares

*As per Indian GAAP Unconsolidated Results

(All figures in Rs. millions except EPS & Book Value)As per Indian GAAP Consolidated Results

Operating revenue

1,390.18

1998-99*

5000.00

0

10000.00

15000.00

20000.00

25000.00

in Rs

. Milli

on

1,971.24

1999-00*

3,038.55

2000-01*

4,157.18

2001-02

6,141.21

2002-03

7,881.29

2003-04

11,385.93

2004-05

14,823.00

2005-06

20,609.38

2006-07

23,802.36

2007-08

Net income

504.33692.73

1,100.21 1,152.99

1,708.88 1,787.86

2,324.33 2,376.53

3,722.80

4,155.89

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00in

Rs. M

illion

01998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Earnings per share is computed on the equity capital base of 83,747,441 shares as on March 31, 2008

20.00

10.00

0

30.00

40.00

50.00

60.00

in Rs

.

Earnings per share

6.028.27

13.14 13.77

20.41 21.35

28.38

44.45

49.62

27.75

1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Book Value is computed on the equity capital base of 83,747,441 shares as on March 31, 2008

100.00

50.00

0

150.00

200.00

250.00

350.00

300.00

in Rs

.

Book value

15.49 25.32

56.27

111.40

164.74

331.60

282.02

136.76

92.28

37.91

1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

4,000

2,000

0

6,000

8,000

10,000

12,000

No. o

f emp

loyee

s

Number of employees including those in subsidiaries

7901,017

2,032 2,3272,974

4,747

6,858

9,068

11,006

1,590

1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Key performance indicators 2007-2008


40

20

0

60

80

100

140

120

Coun

try B

ase

...across countries

66

84

108

123128

55

74

93

112

133

1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

400

300

200

100

0

500

600

700

900

800

Custo

mer C

ount

Customer serviced...

206238

404

544

642

753814

281345

480

1998-99* 1999-00* 2000-01* 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Staff Cost66%

Travel Cost11%

Professional Fees9%

Application Software3%

Facility Costs6%

Other Expenses5%

Expense breakup

Products58%

KPO Services2%

Joint ventures0.4%

Services39.6%

Revenue breakup

USA 33%

Europe 34%

Asia Pacific 19%

India, Middle Eastand Africa 13%

Latin America and Caribbean 1%

Regionwise revenue Operating revenue

Services Revenue42%

Products Revenue58%




CORPORATE INFORMATIONi-flex solutions ltd

Vice-PresidentsA SrinivasanAbhik RayCafo BogaDon Ganguly Dilip KulkarniDinesh ShettyG NarasimhanGeorge ThomasGopinath GovindanGratian PerezJambu NatarajanK Laxminarayan Kapil GuptaM Ravikumar Mahesh RaoMeenakshy IyerMohan Bhatia Mustafa MoonimNaveen GroverNikos Goutsoulas P PrasannavadananPeter YorkePreeti DasR NarasimhanR RamamurthiRanjan Roy Ravi MahadevanRavi PanditS RamakrishnanShahab Alam Sridhar PadmanabhanSridhar RamachandranSunder AnnamrajuThomas MathewV SrinivasanVenkata SubramanianVijay AlexanderVikram GuptaVinayak Hampihallikar

Company SecretaryDeepak Ghaisas

Chief Financial OfficerMakarand Padalkar

Chief Accounting Officer Avadhut (Vinay) Ketkar

SolicitorsRamesh P Makhija & Co.

AuditorsS. R. Batliboi & Associates

Internal AuditorsMukund M. Chitale & Co.

BankersBank of IndiaCanara BankCentral Bank of LibyaCitibank N.A.HDFC Bank Ltd.Kotak Mahindra Bank Ltd.Lakshmi Vilas BankState Bank of Mauritius Ltd.Yes Bank Ltd.

Registrars & Transfer AgentsIntime Spectrum Registry Ltd.C 13, Pannalal Silk Mills CompoundL. B. S. Marg, Bhandup (W)Mumbai 400 078

Board of DirectorsCharles PhillipsDeepak Ghaisas (Vice Chairman)Derek WilliamsN R Kothandaraman (N R K Raman) (Managing Director and CEO)

R Ravisankar (Vice Chairman)Rajesh Hukku (Chairman)Sam BharuchaSergio Giacoletto RoggioTarjani VakilWilliam T Comfort, Jr.Y M Kale

Senior Management

Executive Vice-PresidentsJoseph JohnOlivier TrancartV Shankar

Senior Vice-PresidentsAnand PhanseAtul GuptaKishore KapoorManmath KulkarniNandu KulkarniS HariharanS SundararajanSajal MukherjeeVijay SharmaVivek Govilkar


Registered Office

i-flex solutions limitedUnit 10-11, SDF-1SEEPZ, Andheri (E)Mumbai 400 096, India

Offices

i-flex Center399, Subhash RoadVile Parle (E)Mumbai 400 057, India

i-flex Park,Off Western Express HighwayGoregaon (E)Mumbai 400 063, India

i-flex Annex, Nirlon CompoundOff. Western Express HighwayGoregaon (E)Mumbai 400 063, India

1st Floor, “C” Building,Shah Industrial Estate,Saki-Vihar Road,Andheri (E)Mumbai 400 072, India

i-flex ParkC/o Embassy Business ParkC.V. Raman NagarBangalore 560 093, India

i-flex Center#133 Kundalahalli RoadMahadevapuraBangalore 560 037, India

i-flex Center of Learning-ICL# 333, Doddenakundi Industrial AreaMahadevapura, WhitefieldBangalore 560 048, India

# 150, Diamond DistrictB Tower, Lower Ground FloorKodihalli, Airport RoadBangalore 560 008 , India

SJR I ParkGround & First Floor, Tower – 2EPIP Zone, Whitefield Road, WhitefieldBangalore 560 066, India

RMZ NXTCampus 1, Block B, 2nd & 3rd FloorEPIP Zone, WhitefieldBangalore 560 066, India

i-flex TechparkPlot No 152, EPIP ZoneK R Puram Hobli, WhitefieldBangalore 560 066, India

Pride Silicon Plaza2nd FloorSenapati Bapat RoadPune 411 053, India

i-flex CenterBlock 9A, Ambrosia IIBhavdhan Khurd, Tal. MulshiPune 411 021, India

i-flex HeightsLohia Jain IT ParkPaud Road, KothrudPune 411 029, India

Ambrosia Village Bhavdhan Khurd,Taluka MulshiPune 411 021, India

143/1, Uthamar Gandhi SalaiNungambakkamChennai 600 034, India

99, Venkatnarayana Road, T NagarChennai 600 017, India

Millennium House12, Trubnaya StreetMoscow 103045, Russia

205, Building 3,Dubai Internet CityDubai, United Arab Emirates (UAE)




Subsidiary Offices – India

Flexcel International Pvt. Ltd.Plot No 24 – 25, Street No 9Behind Hotel Tunga Paradise,MIDC, Andheri (E)Mumbai 400 093, India

i-flex Processing Services Limitedi-flex Center399, Subhash Road, Vile Parle (E)Mumbai 400 057, India

Subsidiary Offices – Asia Pacific

i-flex solutions pte ltd27, International Business Park# 02-01 iQUEST@IBP BuildingSingapore 609 924

Offices

Room 806, Central PlazaNo. 227 HuangPi Road NorthShanghai 200003, China

6, FL 17, Fukoku Seimei Building2-2-2 Uchisaiwaicho, Chiyoda-kuTokyo 1000011, Japan

#103-504, Garam Apt. Ilwon-dongKangnam-guSeoul 135239, South Korea

Room 4-1, 5F, No.51, Sec. 2Keelung Rd., Xinyi DistrictTaipei City 110, Taiwan (R.O.C.)

Level 10, Margaret StreetSydney, NSW 2000, Australia

Subsidiary Office - Asia Pacific

i-flex Consulting (Asia Pacific) pte ltd27, International Business Park# 04-01 iQUEST@IBP BuildingSingapore 609 924

Subsidiary Office - Europe

i-flex solutions b.v.World Trade Center, B-Tower, 12th FloorStrawinskylaan 12451077 XX Amsterdam, The Netherlands

Offices

Niederlassung DeutschlandMainzer LandstraBe 49a60329 Frankfurt am Main, Germany

121, Meridian PlaceOff Marsh Wall, South QuayLondon E14 9FE, UK

Level 2540 Bank Street, Canary WharfLondon E14 5NR, UK

Molyneux HouseBride StreetDublin 8, Ireland

Fitzwilliam HallFitzwilliam Place Dublin 2, Ireland

17 Square EdouardVII 75009 Paris, France

Subsidiary Office - i-flex solutions s.a.

6-8 Kifissias AvenueParadissos, MaroussiAthens 15125, Greece

Subsidiary Offices – North America

i-flex America inc. & i-flex solutions inc. & Reveleus399 Thornall Street, 6th FloorEdison, NJ 08837, USA

i-flex solutions inc. (formerly SuperSolutions inc.)10050 Crosstown Circle, Suite 600Eden Prairie, MN 55344, USA


Mantas inc.13650 Dulles Technology Drive, Suite 300Herndon, VA 20171, USA

Offices

i-flex solutions inc.60, State Street, Suite 700Boston, MA 02109, USA

i-flex solutions inc.5805 Blue Lagoon Drive, Suite 295Miami, Florida 33126, USA

i-flex solutions (Canada) Inc. (formerly Castek inc.)1 Yonge St., Suite 2300Toronto, Ontario M5E 1E5, Canada

Subsidiary Office – Mauritius

ISP Internet Mauritius Company10, Frere Felix de Valois StreetPort Louis, Mauritius

Offices

i-flex Processing Services Inc. 17682, Mitchell North, Suite 201Irvine, CA, 92614, USA

Equinox Global Services Ltd.DLF Infinity Tower A, 3rd FloorDLF Cyber City, Phase IIGurgaon 122 002, Haryana, India




Dear Members,

The Directors take great pleasure in presenting their report on the

business and operations of your Company along with the Annual Report

and audited financial statements for the Financial Year 2007-08.

Financial highlights

As per Indian GAAP Unconsolidated:

(All amounts in millions of Indian Rupees)

Year ended March 31, 2008


Revenue 17,929.72 15,523.44Income from operations before depreciation & amortization 4,551.97 4,027.53

Depreciation & amortization (603.10) (565.35)Provision for diminution in value of investment (120.00) –

Interest/other income (expenses) 486.53 348.30

Income before taxes 4,315.40 3,810.48Provision for tax (206.66) (263.74)Net income 4,108.74 3,546.74Balance brought forward 4,009.57 464.24Profit available for appropriation 8,118.31 4,010.98

Transfer to general reserve – –Proposed dividend – –Corporate dividend tax – 0.17Dividend paid on stock options exercised before AGM 2007 – 1.24

Balance carried forward 8,118.31 4,009.57

As per Indian GAAP Consolidated financial statements:




Revenue 23,802.36 20,609.38Income from operations before depreciation & amortization 4,672.30 4,424.50

Depreciation & amortization (705.88) (653.02)Interest/other income (expenses) 639.70 359.65

Income before taxes 4,606.12 4,131.13Provision for tax (441.68) (415.96)Net income for the year before minority interest, share of profit (loss) of associate 4,164.44 3,715.17

Minority interest (4.42) –Share of profit (loss) of associate (4.12) 7.63

Net income 4,155.90 3,722.80

Performance

On an unconsolidated basis, your Company’s revenue grew to

Rs. 17,929.72 million during the financial year 2007-08 from

Rs. 15,523.44 million last year, a growth of 16%. The Company’s

net income recorded 16% growth over the previous financial year and

increased to Rs. 4,108.74 million.

Revenue, on the basis of consolidated financials stood at Rs. 23,802.36

million this year, an increase of 15% from Rs. 20,609.38 million as

compared to the previous financial year. The Company’s net income

increased to Rs. 4,155.90 million this year, an increase of 12%.

A detailed analysis of the financials is given in the Management Discussion

and Analysis report that forms part of this Annual Report.

Dividend

Your Company has aggressive plans to capitalize on the market

opportunities and needs to invest substantially in the growth of the

business. Keeping this in view, the Board has decided not to declare a

dividend for the year ended 2007-08. The funds will be used to further

invest in the growth opportunities to enhance the leadership of your

Company.

Transfer to reserves

The Company does not propose to transfer any amount to the General

Reserve out of the amount available for appropriation. An amount of

Rs. 8,118.31 million is proposed to be retained in the Profit & Loss

Account.

Share capital

During the year, the Company allotted 395,529 equity shares of face

value of Rs. 5/- each to GE Capital Mauritius Equity Investment (GE) upon

exercise of the conversion option of equal number of warrants allotted to

GE in August 2005. The Company also allotted 63,332 equity shares of

face value of Rs. 5/- each to its employees/directors who exercised their

options under the Employee Stock Option Plan.

As a result, as on March 31, 2008, the paid up equity share capital of the

Company increased to Rs. 418,737,205 divided into 83,747,441 equity

shares of face value of Rs. 5/- each.

Change of name

Oracle Global (Mauritius) Limited, the promoter of the Company holds

80.58% of the paid up equity capital of your Company. Oracle is the

world’s largest enterprise software provider. Your Company is a world

leader in providing IT solutions to the financial services industry. With this

background, the Board has approved the proposal to change the name of

your Company from ‘i-flex solutions limited’ to “Oracle Financial Services

Software Limited”, subject to the regulatory and shareholders’ approvals.

The proposed name demonstrates the synergies of scale, resources,

expertise and efficiency across the two organizations and reflects the

importance that Oracle attaches to the financial services sector.

The approval of the shareholders for the change of name is being sought

at the Extra-ordinary General Meeting to be held on August 11, 2008.

Directors’ report Financial year 2007-08


Oracle’s holding in i-flex’s shares

As of March 31, 2008, Oracle held 67,481,698 equity shares (80.58%

of the equity capital of the Company).

Use of IPO proceeds

In June 2002, your Company completed its Initial Public Offer (IPO) in

India and listed its shares on the National Stock Exchange of India Ltd.

(NSE) and Bombay Stock Exchange Ltd. (BSE). The entire IPO proceeds

aggregating Rs. 1,781 million have been utilized as under:

Utilization of funds Rupees in millionIssue related expenses 103Bangalore Development Center 555Mumbai Development Center 1,018Setting up of Dubai Office 1Investment in subsidiary companies 104Total 1,781

Your Company had issued shares to Oracle Global (Mauritius) Limited on

a preferential basis on September 14, 2006. The proceeds aggregating

to Rs. 5,815 million have been utilized as under:

Utilization of funds Rupees in millionInvestment in i-flex America inc. in connection with the acquisition of Mantas inc.

5,679

Investment in i-flex America inc. in connection with the acquisition of the balance equity stake in Castek Inc. 136

Total 5,815

All the proceeds of the IPO of 2002 and the preferential issue of 2006

have been utilized for the purposes for which they were raised.

Infrastructure

During the year, your Company made significant additions to its

infrastructure to meet its growing business requirements. The Company

opened new offices in Bangalore and Mumbai, creating capacity

to accommodate 2,000 additional professionals. The Company’s

subsidiaries also added offices in New Jersey and London to

accommodate a larger workforce.

The construction of the Company’s landmark building in Goregaon,

Mumbai right next to the Western Express Highway is complete. This

building is architecturally unique in Mumbai, having four floors for

parking and 10 floors for work space. It has a unique Dome shaped

reception with a water body around it. Your Company is in the process

of finalizing the lease for over a million square feet of contiguous office

space in Bangalore in a Special Economic Zone (SEZ).

Integration with Oracle Policies and Procedures

In order to derive synergies from Oracle’s global presence and resources

and fully comply with the governance norms that both i-flex and Oracle

are bound by, the Board has authorized the Company to adopt Oracle’s

policies and procedures within the applicable framework of local

regulations.

Acquisitions

Acquisition of balance equity stake in

Flexcel International Private Limited

On March 31, 2008, Flexcel (a joint venture with HDFC Bank Limited

and its group companies and Lord Krishna Bank) became a wholly

owned subsidiary of i-flex solutions ltd effective March 31, 2008 with

the acquisition of the balance 60% shares of Flexcel from its co-venture

parties.

i-flex solutions s.a.

On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) acquired the banking

business from Athens Technology Center SA (“ATC”) for Rs. 670.05

million. The acquisition was structured by way of transfer of all contracts,

employees and fixed assets of the banking business from ATC to a newly

formed entity, i-flex solutions s.a., Greece with 90% shares owned by

i-flex b.v. Further, the Company has the right to acquire balance 10%

shares (based on earn out formulae) over 3 years in a tranche of 5%, 3%

and 2% after completion of 1, 2 and 3 years respectively from the date of

acquisition. As the consideration payable is dependent on future revenue

and profits, the same is considered to be a contingent consideration

and will be accounted when the liability arises. The Group consolidated

i-flex solutions s.a. from July 2, 2007 and recorded goodwill amounting

to Rs. 656.64 million.

Castek Software Inc. (“Castek”)

On November 16, 2007, Castek became a wholly owned subsidiary of

i-flex America inc. with the acquisition of the balance 23.23% shares of

Castek from minority shareholders for a total consideration of Rs. 327.39

million. As part of the acquisition, certain employees owning shares

of Castek were paid additional consideration amounting to Rs. 90.81

million based on the number of shares held by them. The Group has

recorded additional consideration payment as employee compensation.

The Group recorded balance consideration as goodwill of Rs. 238.02

million considering Castek’s negative net worth and minority losses being

absorbed by the Group till the date of acquisition.

Global alliances

Your Company lays a great emphasis in building and expanding its

partner network with organizations which can promote, sell, implement

and support its offerings around the world. The partner network currently

comprises 33 resellers and 20 implementation partners. The expansion

of partners has been prominent in the East European region, especially in

Russia and the CIS countries.

Leading System Integration (SI) Partners play an active role in delivering

solutions to customers of your company. The SI Partners deliver projects

in the CIS, Latin America, Middle East, Japan and India.

The highlight of the engagement with partners this year has been the

enablement of partners to sell, implement and support our flagship

product FLEXCUBE, Reveleus, Mantas and Daybreak. There has been

almost a three-fold increase in the number of consultants with partner

organizations who have been trained and are qualified to implement

FLEXCUBE during the past year.




Subsidiaries

Your Company has subsidiaries in India, the USA, Singapore, the

Netherlands, Canada, Mauritius and Greece to handle operations as well

as to strengthen marketing and sales efforts in the respective markets

and to ensure deeper sales penetration in these regions.

During the financial year, i-flex solutions s.a., Greece became a majority

owned subsidiary of the Company through i-flex solutions b.v., the

Netherlands. The Company’s subsidiary i-flex America inc. has acquired

the remaining equity stake in its subsidiary company Castek Inc.,

Canada.

Pursuant to Section 212 of the Companies Act, 1956 (the Act), the

Company is required to attach to its Annual Report, the Balance Sheet,

Profit and Loss Account, Directors’ Report and the Report of the Auditors

(collectively referred to as ‘the accounts and reports’), of its subsidiaries

for the year ended March 31, 2008. Since the Company presents audited

consolidated financial statements under Indian GAAP in its Annual Report,

the Company had applied to the Central Government for an exemption

from attaching the accounts and reports of its subsidiaries to the Annual

Report. The approval of the Central Government in this regard has

been received vide letter no. 47/246/2008-CL-III dated June 24, 2008

exempting the Company from attaching the accounts and reports of

subsidiary companies under the provisions of Section 212 of the Act. As

such, the accounts and the reports of the subsidiary companies are not

attached to the Annual Report of the Company.

The Company will make available the accounts and the reports of the

subsidiary companies upon request by any member/investor of the

Company or its subsidiaries. Further, the accounts and the reports of the

subsidiary companies will be kept open for inspection by any member at

the registered/corporate office of the Company and the registered office

of the subsidiaries during office hours of the Company/subsidiaries.

Fixed deposits

During the financial year 2007-08, the Company has not accepted any

fixed deposit within the meaning of Section 58A of the Companies Act,

1956 and as such, no amount of principal or interest was outstanding as

of the date of the Balance Sheet.

Awards, honors and recognitions

Your Company has consistently received wide recognition for leadership

and achievements.

– Business Week (November 2007) ranked i-flex solutions as one of

“Asia’s Hot Growth Companies: 2007”, i-flex was ranked second

highest in terms of market capitalization, third highest in terms of

sales and sixth highest in terms of profits.

– i-flex solutions was ranked 30 in the annual FinTech 100 list of

financial industry technology vendors by American Banker and

Financial Insights (November 2007).

– i-flex BPO won the ‘NASSCOM Excellence in Gender Inclusivity – Best

Emerging Company’ award. This award was given away at

the ‘NASSCOM IT Women Leadership Summit 2007’ held in

December 2007.

– The All India Electronics and Computer Software Export Promotion

Council (ECS) award for Excellence in Exports for the year 2006-07.

This award was presented to i-flex in October 2007.

– i-flex recognized as a “Deal Leader” in global banking platforms

by independent research firm Forrester Research Inc. in the

August 2007 report “Global Banking Platform Deals 2006:

Vendors”.

– Mantas ranked number one in the Waters Ranking for Anti-Money

Laundering (AML) Solutions in July 2007.

– Dataquest magazine rated i-flex BPO among the top 10 ‘dream

employers’ in the BPO sector in November 2007. This rating ranks

companies on various parameters linked to employee satisfaction.

– In November 2007, i-flex successfully completed the SAS70 Review

of Internal Controls for the sixth consecutive year.

Litigation

PortfolioScope, a company based in the United States of America, has

filed a lawsuit in a US District Court for the District of Massachusetts

alleging misappropriation of confidential and proprietary information

by the Company. The Company firmly believes that the allegations

are false, unwarranted and without merit and will vigorously oppose

the claims made by PortfolioScope. The Company had filed a motion

to dismiss PortfolioScope’s complaint and has instructed the legal

advisers to take all appropriate actions to protect the interests of the

Company and its customers. The motion to dismiss was granted in part.

Discovery concluded on the limited issue of whether PortfolioScope’s

claims were timely filed and is now going forward on the question of

whether or not the claims have any merit. The Court has set a trial date

for October 14, 2008.

Corporate governance

The Company has taken appropriate steps and measures to comply with

all the applicable provisions of Clause 49 of the listing agreement entered

with stock exchanges and Section 292A of the Companies Act, 1956.

Your Company has constituted five committees consisting of Board

members, namely, Audit Committee, Compensation Committee, Transfer

Committee, ESOP Allotment Committee and Shareholders’ Grievances

Committee. A separate report on Corporate Governance, along with a

certificate of Statutory Auditors of the Company, is annexed herewith.

A certificate from the Managing Director and Chief Financial Officer of the

Company confirming internal controls and checks pertaining to financial

statements for the year ended March 31, 2008 was placed before the

Board of Directors and the Board has noted the same.

A list of the committees of the Board and names of their members is

given below. The scope of each of these committees and other related

information is detailed in the enclosed Corporate Governance Report.

Audit committee

Mr. Y M Kale (Chairman)

Mr. S P Bharucha

Mr. William T Comfort, Jr.

Ms. Tarjani Vakil


Compensation committee

Mr. William T Comfort, Jr. (Chairman)

Mr. Y M Kale

Mr. Charles Phillips

Transfer committee

Ms. Tarjani Vakil (Chairperson)

Mr. Deepak Ghaisas

ESOP allotment committee


Mr. Deepak Ghaisas

Shareholders’ grievances committee


Mr. Deepak Ghaisas

Allotment of ESOP shares

The shareholders of the Company had approved the Employees Stock

Option Scheme (ESOP) of the Company in its Annual General Meeting of

2001. According to the said scheme, the Company has granted shares

to eligible employees/directors from time to time. The details are given

below.

Financial year Total number of Options granted

2001–02 4,548,9202002–03 80,0002003–04 36,0002004–05 60,0002005–06 10,0002006–07 373,0002007–08 NilTotal 5,107,920Pricing formula At the fair market value

as on the date of grant

Options vested at the end of the financial year 2007–2008 148,453

Options exercised during 2007–2008 63,332

Total number of shares arising as a result of exercise of options during 2007–08 63,332

Options lapsed 2002–03 129,5202003–04 112,5002004–05 82,2002005–06 87,6002006–07 46,6002007–08 35,900Total 494,320Variation of terms of options NoneMoney realized by exercise of options Rs. 40,022,853

Total number of options in force 431,253

Employee-wise details of options granted during the financial year ended

March 31, 2008 to:

Number of Options

i. Director Nil

ii. Any other employee who receives grant in any one year of option amounting to 5% or more of option granted during that year Nil

iii. Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant Nil

iv. Diluted Earnings Per Share (EPS) pursuant to the issue of shares on exercise of option calculated in accordance with accounting standard 20 ‘Earnings Per Share’ issued by the Institute of Chartered Accountants of India Rs. 49.17

Had compensation cost for the Company’s ESOP been determined based

on fair value at the grant dates, Company’s net income and earnings per

share would have been reduced to pro forma amounts indicated below:

March 31, 2008

Net income as reported 4,108,745Less: Compensation expense determined using fair value of options (54,918)

Pro forma net income 4,053,827Basic income per share:As reported 49.10Pro forma 48.44Diluted income per share:As reported 49.02Pro forma 48.37

During the financial year 2007-2008, no fresh options were granted,

hence, the data related to weighted average exercise price of the options

and weighted average fair value of the options is not disclosed.

Human resources

Employees are our key assets and we have created a healthy and

productive work environment which encourages excellence. We

continuously invest in training staff in the latest technology trends and in

various sub-verticals within the financial services domain.

To meet business growth requirements, we have invested in increasing

the manpower strength in the product business by 32%, from 2,931 at

the end of March 2007 to 3,868 at the end of March 2008. Overall, on

a gross basis, we added 2,751 employees in our software and services

business in the financial year. Our strength in the KPO business stood at

875. Overall, our staff strength at the end of March 2008 was 11,006.

Directors’ responsibility statement

As required under Section 217(2AA) of the Companies Act, 1956, the

Directors hereby confirm that:

i. In preparation of the annual accounts, the applicable accounting

standards have been followed along with proper explanation relating

to material departures;




ii. The Directors have selected such accounting policies and applied

them consistently and made judgments and estimates that are

reasonable and prudent so as to give a true and fair view of the

state of affairs of the Company at the end of the financial year and

of the profit of the Company for that period;

iii. 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;

iv. The Directors have prepared the annual accounts on a ‘going

concern’ basis.

Directors

Mr. Y M Kale, Ms. Tarjani Vakil and Mr. Charles Phillips, retire by

rotation at the ensuing Annual General Meeting and being eligible, offer

themselves for re-appointment. Mr. S P Bharucha holds office till the

conclusion of the ensuing Annual General Meeting and has not offered

himself for re-appointment. The Board places on record its appreciation

for the contributions made by Mr. Bharucha as a member of the Board

and Audit Committee.

Pursuant to Section 260 of the Companies Act, 1956,

Mr. Sergio Giacoletto Roggio was appointed as an Additional Director of

the Company on October 26, 2007. He holds office up to the date of the

ensuing Annual General Meeting. The Company has received a Notice in

writing from a Member pursuant to Section 257 of the Companies Act,

1956, proposing the candidature of Mr. Sergio Giacoletto Roggio for the

office of Director.

The Board recommends to the shareholders the resolutions for

re-appointment of Mr. Y M Kale, Ms. Tarjani Vakil and Mr. Charles Phillips

as Directors of the Company. The Board also recommends the appointment

of Mr. Sergio Giacoletto Roggio as a Director of the Company.

Brief resumes of the Directors proposed to be appointed/re-appointed,

nature of their expertise in specific functional areas and names

of companies in which they hold directorships and membership/

chairmanship of Board Committees, as stipulated under Clause 49 of the

Listing Agreement entered into with the stock exchanges are provided in

the Report on Corporate Governance forming part of the Annual Report.

Auditors

M/s S. R. Batliboi & Associates, Chartered Accountants, the present

Statutory Auditors of the Company, hold office till the ensuing Annual

General Meeting and have confirmed their eligibility and willingness to

accept office, if re-appointed.

Auditors’ Report

With regard to the Auditors’ comment in the CARO report on delay in

payment of Fringe Benefit Tax (“FBT”) and Stamp Duty, the following are

our responses:

i. During a review of FBT, the Company has been advised that the

expenses recovered from its customers which are not debited to its

Profit & Loss account are liable to FBT. Accordingly, the Company

has made a provision for FBT for the Financial Years 2005-06 and

2006-07 during the current financial year. The FBT payment is being

made.

ii. During the internal control checks, the Company found that it had

inadvertently not paid stamp duty on a few share certificates at

the time of their issuance. The Company voluntarily informed the

Collector of Stamps of the same and paid the amount of stamp duty

including penalty thereof for the delayed period.

Conservation of energy, technology absorption and foreign

exchange earnings and outgo

The particulars as prescribed under Sub-Section (1)(e) of Section 217 of

the Companies Act, 1956 read with Companies (Disclosure of Particulars

in the Report of Board of Directors) Rules, 1988, the relevant data

pertaining to conservation of energy, technology absorption on foreign

exchange earnings and outgo are furnished hereunder:

a. Conservation of energy

The operations of the Company are not energy-intensive. The Company

however takes measures to reduce and optimize energy consumption by

using energy efficient computers, CFL bulbs and electronic ballast-based

lighting. Further offices have been designed to maximize the use of

ambient lighting while conserving the air conditioning. The expense on

power in relation to income is nominal and under control.

b. Technology absorption

Since businesses and technologies are changing constantly, research and

development activities are of paramount importance. Your Company lays

a great emphasis on knowledge management and has an institutionalized

process for absorption of new technologies. Your Company continues

its focus on quality up-gradation of software development process and

software product enhancements.

c. Foreign exchange earnings and outgo:


Foreign Exchange Earnings* 17,370.60Foreign Exchange Outgo 5,558.82 (Including capital goods and other expenditure)

*Excluding reimbursement of traveling expenses and interest income

Prospects

The global financial services industry is a major user of technology

for transformation and growth. Your company has benefited from

the consolidation among banks and expansion of the operations to

new geographies in the past year. Rising customer expectations, a

sophisticated and demanding compliance regime and mounting costs

of operations are forcing financial institutions worldwide to strategically

review their IT assets and look for comprehensive modern solutions to

address their needs.

Institutions are also launching new and innovative offerings, e.g.

internet-based banks, that effectively leverage technology to create

a differentiated proposition to customers. The cycle of replacing core

transaction systems is gaining further strength and customers are

looking for strategic partners who can fulfill a larger canvass of their

requirements. Further, financial institutions are investing in governance,

risk and compliance solutions based on regional regulatory mandates.

Your Company, together with Oracle, today offers the industry’s most

comprehensive solution footprint based on the latest technology that can

meet the requirements of financial institutions globally.


Employee particulars

Information pursuant to Section 217(2A) of the Companies Act, 1956,

read with the Companies (Particulars of Employees) Rules, 1975 and

under Section 217 (1)(e) of the said Act, read with the Companies

(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988

to the extent applicable are set out in the Annexure hereto.

Acknowledgements

Your Directors take this opportunity to thank the Company’s customers,

shareholders, vendors and bankers for their continued support during

the year. Your Directors also wish to thank the Government of India and

its various agencies, Department of Electronics, the Software Technology

Parks – Bangalore, Mumbai, Chennai and Pune, the Santacruz Electronics

Export Processing Zone, the Customs and Excise department, Ministry of

Commerce, Ministry of Finance, Ministry of External Affairs, Department

of Telecommunication, the Reserve Bank of India, the State Governments

of Maharashtra, Karnataka, Haryana and Tamil Nadu and other local

Government Bodies for their support and look forward to their continued

support in the future.

Your Directors also place on record their appreciation for the excellent

contribution made by all employees of i-flex through their commitment,

competence, co-operation and diligence with a view to achieving

consistent growth for the Company.

For and on behalf of the Board,

Rajesh Hukku

Chairman

July 21, 2008




Sr.no.

Name Designation & nature of duties (as at March 31, 2008)

Qualification Age (Yrs.)

Date of joining Experience (Yrs.)

Remuneration received (Rs.)

Previous employer

1 Agarwal Tapan $ Senior Consultant BE 36 June 15, 2001 13 1,967,693 MindTree Consulting

2 Agashe Uday $ Senior Manager MCA 38 March 4, 1996 13 332,555 Tata Consultancy Services

3 Alexander Vijay Senior Manager M Phil (History) 48 February 1, 2000 22 3,692,252 ANZ Grindlays Bank Limited

4 Alva Jai Prakash Senior Manager BA 55 May 17, 1993 31 2,838,685 Tandan Group

5 Arora Umesh Senior Consultant BE, PGDM 35 August 20, 2001 12 2,546,313 ICICI Bank

6 Bajaj Sanjay Senior Manager BE (Electrical) 41 June 8, 1998 19 3,184,005 CS Limited

7 Balachandran Laura Senior Manager BSc (PCM), BE (Electrical & Electronics)

43 November 15, 1996 18 3,213,077 PSI Data Systems

8 Banaji Jamsheed Senior Manager BCom, MBA (Finance) 47 November 1, 2004 24 2,438,072 TCL Overseas Marketing Limited

9 Bhambhani Sunil $ Senior Consultant BSc 42 February 25, 2008 20 212,515 Mastek Limited

10 Bhangale Nityanand $ Senior Consultant MBM 38 January 2, 1998 14 2,047,402 Tata Consultancy Services

11 Bhatia Deepak Kumar $ Senior Consultant MSc (Maths), MSc (Operations Research)

57 July 25, 2007 30 1,989,913 Polaris Software Lab Limited

12 Bhatia Mohan Managing Principal, i-flex Consulting MSc, AICWA, PGDST (NCST), FRM (GARP)

45 March 8, 2001 20 3,687,108 Infosys Technologies Limited

13 Bhatt Amish B Senior Manager BE (Electronics), DMM 39 August 2, 2004 17 2,585,522 Majesco Software Inc

14 Bhattacharjee Tanmoy $ Senior Consultant PGDM 40 August 5, 2002 16 1,579,784 Caltiger.com

15 Cheriyan Mona Senior Manager BA, HSM 44 June 15, 1993 24 3,102,576 Essars Limited

16 Chhatpar Girish Senior Consultant BE (Comp Engg), CISA 40 November 4, 1997 18 2,549,953 Data Management Services (Bahrain) Limited

17 Dam Prantik $ Senior Manager BCom, ACA, Dip. Fin. Management

43 January 2, 2008 17 590,754 Accenture Services Private Limited

18 Damodaran Loganathan Senior Consultant BSc, CAIIB 46 March 21, 2005 26 2,674,678 Wipro Technologies

19 Dandekar Rajeev M Senior Manager BSc, BSc (Tech.), Grad CWA 44 March 12, 2007 21 3,112,975 Avaya Inc, USA

20 Datta Arunabha Senior Consultant MA (Sociology), BSc (Physics), CAIIB

54 March 1, 2007 30 2,755,839 American Express Bank Limited

21 Davis K K Senior Manager BCom, PGD, PM & IR 49 May 19, 2004 25 3,546,955 DSL Software Limited

22 Deodher Nitin Priyadarshi Senior Consultant MSc 42 August 16, 2004 20 2,770,957 Ness Technologies Limited

23 Deshpande Sanjay V Senior Manager MSc, MBA 46 May 17, 2005 24 3,739,118 iSmart Solutions Limited

24 Dhavale Vivek Vitthal Senior Manager BE, PDGST 35 August 4, 1993 14 2,816,743 –

25 Dutta Basu Senior Consultant MSc, MBA 54 April 2, 2001 26 3,769,702 ANZ Information Technology

26 Gadre Shripad $ Senior Consultant BE 38 January 22, 1996 15 405,886 Godrej and Boyce Mfg. Co. Limited

27 Gala Deepak $ Senior Consultant BE 33 January 27, 2000 11 465,444 –

28 Gayathri K H $ Senior Manager BS COMM 41 July 1, 1991 19 1,249,694 Wipro Infotech

29 Ghaisas Deepak K $ Vice Chairman and Company Secretary

ACA, FCS, AICWA 50 July 7, 1993 27 15,219,796 Tata Unisys Limited

30 Ghosh Sanjay Kumar Senior Manager BTech 36 September 1, 1994 14 3,535,768 –

31 Gokhale Mahesh Vinayak $ Senior Consultant BE (Electrical) 36 October 27, 2003 13 201,763 Unisys Limited

32 Gopalakrishna Ravikiran $ Senior Consultant PGDM 33 August 18, 2003 10 215,455 ICICI Bank Limited

33 Govilkar Vivek Sr. Vice President, Human Resources and Training

MTech 52 April 12, 1994 27 5,630,757 Tata Unisys Limited

34 Govindan Gopinath Vice President, Corporate HR PGDM 43 December 19, 1994 20 3,893,076 Brooke Bond-Lipton

35 Gupta Atul Sr. Vice President, Process & Quality Management Group

BTech, PGDM 47 April 1, 1994 26 5,609,782 Citicorp Overseas Software Limited

36 Gupta Bimal Senior Manager BE (Hon.) 48 August 10, 1992 25 3,424,383 TVS Suzuki Limited

37 Gupta Das Buddhadeb Senior Manager BSc 44 February 11, 1998 20 3,336,339 Tata Steel Limited

38 Gupta Gyanesh Senior Consultant BE (Electronics) 40 December 19, 2005 18 2,451,369 Infosys Technologies Limited

39 Gupta Kapil Vice President and Chief Architect, Universal Banking

MTech 44 March 21, 1991 17 5,278,350 Citicorp Overseas Software Limited

40 Gupta Manish $ Senior Consultant BE 36 August 1, 1997 9 576,015 –

41 Gupta Manish Chandra Senior Consultant BE, MBA 38 March 7, 2005 15 2,801,681 Citicorp Overseas Softare Limited

42 Gupta Vikram Vice President, Private Wealth Management

BE 44 April 1, 1996 21 5,321,149 T S B Bank

43 Guruprasad D Senior Manager BE (Hon.) Electrical and Electronoics

37 August 3, 1992 15 3,916,328 –

44 Gururaja Rau Srinivas $ Senior Consultant BSc 38 May 2, 2001 14 702,986 Quidnunc Inc

45 Gyaneshwar Padmashali $ Senior Consultant BE (Mechanical) 46 January 8, 2007 21 289,976 Polaris Software Lab. Limited

46 Hampihallikar Vinayak Vice President, Customer Fulfillment PGDM 40 May 20, 2002 21 4,653,028 Home Trade Limited

47 Handigol Ravi Senior Consultant MPM & PGDM 59 October 16, 2000 33 3,577,432 Infrasoft

48 Hariharan S Sr. Vice President, Infrastructure Services Group

ME 53 October 3, 1988 30 5,339,947 Citicorp Overseas Software Limited

49 Hukku Rajesh * Chairman BE 50 March 1, 1987 29 29,480 Citicorp Overseas Software Limited

50 Iyer Meenakshy Vice President, Reveleus Development MSc 43 March 10, 1993 20 4,617,916 Telco

51 Jain Madhukar K Senior Consultant BE (Computer Engg.), PGDM 38 May 15, 2000 14 2,402,613 Indbank Merchant Banking Services Limited

52 Jairaj Thyagaraj Senior Manager ACA Grad CWA 43 April 15, 2003 17 3,431,574 American Express Bank Limited

53 Jajodia Pawan Senior Consultant BE, MMS (Finance) 39 October 1, 1999 15 2,758,644 CEAT Financial Services Limited

54 Jayaraman Bhaskar $ Senior Consultant PGDM 45 July 2, 2007 18 1,960,885 American Express Bank Limited

55 Jayasankar M Senior Consultant MTech 36 August 5, 1996 14 2,518,213 Kinetics Technology India Limited

56 John Joseph Executive Vice President, Banking Products

BE 51 December 15, 1988 26 7,190,725 Citicorp Overseas Software Limited

57 K Gayathri H $ Senior Consultant BS COMM 40 July 1, 1991 17 1,249,694 Wipro Infotech

58 Kale Anirudha Senior Consultant BE Computers, MMS 40 April 30, 2001 18 2,564,474 Ruksun Software

59 Kalyanasundaram Ramachandran $

Senior Consultant MBA 41 June 9, 2006 18 304,910 Perishing Technology Group

60 Kamath Ganesh V Senior Consultant BCom, CAIIB, LLB, MA (Econ), AICWA

50 February 18, 2002 30 2,441,861 Accel Software

61 Kamath Rajani Senior Manager BE (E&C) 43 June 1, 1992 19 3,682,248 L&T Computer Center

62 Kane Anand Shankar Senior Consultant BCom, CAIIB, DCM 44 April 13, 2005 25 2,898,766 Equitorial Trust Bank, Nigeria

63 Kanekar Amlesh Bhalchandra Senior Manager BE (Electrical Engg.) 43 August 30, 2004 21 2,966,397 Unisys Corporation

64 Kannan Rengarajan $ Senior Consultant MSc, (Computer Science) 34 February 4, 2008 13 202,093 3i Infotech

65 Kapoor Madhukar Harbanslal Senior Manager BE (E&C) 46 April 21, 2004 23 4,449,002 GTL Limited

66 Katwala Saptarshi $ Senior Consultant MS (Computer Engg.) 37 May 2, 2007 14 2,149,103 Tech Process Solutions Limited

67 Ketkar Avadhut D Chief Accounting Officer ACA, LLB 41 June 3, 1991 17 4,193,463 Citicorp Overseas Software Limited

68 Kewalramani Deepak Senior Consultant BE (Electronics) 37 July 11, 2006 15 2,682,227 HSBC - Global Technology Centre

69 Khandeparkar Hemant Gajanan $ Senior Consultant PGDM 42 November 3, 2003 17 1,450,543 HCL Comnet

Statement of particulars of employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 1975 and forming part of the Directors Report for the year ending March 31, 2008 Employed for whole of the year


Sr.no.





Previous employer

70 Khare Manisha Avinash Senior Consultant BE (Electronics) 36 August 4, 1993 14 2,452,314 –

71 Kini Dinakar Kuntadi Senior Manager BE, PGDIE (NITIE) 45 July 26, 1999 21 3,462,475 Logica Inc

72 N R Kothandaraman (N R K Raman)

Managing Director & CEO MSc 50 October 7, 1985 28 12,292,614 Datamatics Consultant

73 Kulkarni Manoj N Senior Manager BE 41 February 6, 1995 19 3,417,429 L & T Limited

74 Kulkarni Dilip R Chief Compliance Officer MFM 54 December 1, 1993 34 5,010,962 Citicorp Overseas Software Limited

75 Kulkarni Gurunath Senior Manager ME 44 June 4, 2001 20 3,052,408 Datamatics Limited

76 Kulkarni Manmath Sr. Vice President and Chief Architect for Retail & Internet Banking

MSc 42 July 16, 1987 20 5,238,587 Citicorp Overseas Software Limited

77 Kulkarni Nandkumar Sr. Vice President, Retail & Internet Banking

BTech, PGDM 55 October 13, 2000 26 4,937,994 Opus Software Private Limited

78 Kulkarni Vyasaraj R Senior Consultant BE 38 April 20, 2000 15 2,996,863 IT solutions Limited

79 Kumar M Ravi Vice President, TDMS & Facilities Management

BSc 40 June 18, 1990 21 4,472,144 Comstruct Software Private Limited

80 Kumar Sampath Senior Manager MMS 40 February 12, 1996 19 3,459,856 Stock Holiding Corp. Of India Limited

81 Kumar Satish G Senior Manager BE (Electronics) 47 June 27, 2001 19 2,779,686 Computer Associates India Limited.

82 Kumar Satish M $ Senior Consultant BE (Electrical & Electronics) 36 April 10, 2003 8 221,744 Orbi Solutions Limited

83 Laxminarayan K V Senior Consultant MCom, DCSSM 53 November 23, 1998 36 3,714,187 Mastek Limited

84 Madani Paresh Purshotam Senior Consultant BCom, PGHSM 39 April 7, 2003 16 2,741,545 Unisys World Trade (AEME)

85 Madhusoodhanan S Senior Consultant BSc (Zoology) 43 March 3, 2004 23 2,402,739 State Bank of India

86 Mahadevan Padma Senior Manager MA Economics 53 August 25, 2003 29 2,716,215 Polaris Software Lab Limited

87 Mahadevan Ravi Vice President, Solution Architecting Group - PrimeSourcing

MSc, AICWA, PGDST (NCST), FRM (GARP)

43 July 1, 1998 20 3,675,045 LIC Hsg. Finance Limited

88 Mahadevan V Senior Manager BSc (Mathematics), MCA 42 October 11, 1996 18 3,024,140 First American Bank of Kenya Limited

89 Makhija Rajesh Senior Consultant BE (Electronics) 38 October 1, 1992 18 3,696,419 Godrej and Boyce Limited

90 Malhotra Parveen Kumar Senior Consultant MSc (Mathematics), PGDCA 44 December 20, 1999 21 2,544,861 Mastek Limited

91 Mathew Thomas Vice President, Knowledge Management and Product Management

MBA 52 August 2, 1989 28 4,236,320 Citicorp Overseas Software Limited

92 Mathur Pallav $ Senior Consultant AICWA 38 December 1, 2000 14 649,401 Orbis Securities Private Limited

93 Mehta Bharat Senior Manager BCom, LLB 35 January 15, 1997 15 3,352,953 Seshan Subramanian & Associates

94 Merchant Farhad Senior Consultant BE 37 August 1, 2002 16 2,580,906 VFormTech

95 Mohan Roopa Senior Consultant BSc 46 July 31, 1995 23 2,507,519 Datacons Private Limited

96 Mohan Sujatha Senior Consultant MCom, ICWAI - Inter 39 January 2, 1998 18 2,586,377 ANZ Grindlays Plc

97 Mondal Pinaki Senior Manager BTech, PGDM 40 November 15, 2001 17 2,967,479 Citibank N.A.

98 Muralidhar Mini S Senior Manager MSc, PGDIM 46 February 2, 2004 20 2,950,238 DSL Software

99 Murthy Sunil Krishna Senior Manager BE (Mechanical), Master of Science (Computer Information Sciences)

45 August 12, 2005 20 2,776,245 Juniper Networks, Inc

100 Murungacheri Ravikumar R Senior Consultant Grad CWA (Cost and Works Accountants)

43 April 30, 2007 22 2,522,809 AXA Insurance (Gulf)

101 Muzumdar Kiriti Kanti Senior Consultant BCom 40 December 4, 1997 18 2,480,525 Dow Jones Telerate Inc

102 Narasimhan G Vice President, SQA - Products and Global Operations

CAIIB 45 March 11, 1993 20 4,557,110 State Bank Of India

103 Narasimhan R Vice President, Project Management Office

MFM 46 September 1, 1993 23 5,099,090 Canara Bank

104 Natarajan Kiran Senior Manager BE (Information Engg.), MBA 38 February 14, 2005 15 3,118,104 TREMA

105 Natarajan P V Jambu Vice President, SQA - PrimeSourcing BE, MPIB 44 September 1, 1997 20 4,221,420 National Bank of Oman, Oman

106 Natarajan S Senior Manager MBA 37 May 24, 1999 15 2,753,786 Stock Holding Corportaion of India Limited

107 Nene Adwait Ashok Senior Consultant BE, PGDM 38 December 16, 2002 15 2,622,066 Deutsche Bank AG

108 Ohrie Sheenam $ Senior Manager BE (ELEC) 39 September 1, 1992 15 1,330,132 –

109 Padalkar Makarand S Chief Financial Officer MTech 49 August 16, 1994 24 6,212,542 Tata Unisys Limited

110 Padia Sweta Senior Consultant MBA (Finance), BE (Electronics and Commn.)

36 May 8, 2006 12 2,659,830 PeopleSoft India Private Limited

111 Padmanabhan Sridhar Chief Information Officer Master of Engineering (IISc) 52 June 23, 1999 27 4,245,145 KPMG India Private Limited

112 Padmashali Gyaneshwar Kumar $ Senior Consultant BE (Hons) Mechanical Engg. 46 January 8, 2007 21 335,007 Polaris Software Lab Limited

113 Pattamada Medapa Ayanna $ Senior Manager MBA (Finance), BSc (PCM) 43 August 23, 2004 18 2,009,348 Providus Risk Management Solutions

114 Pendse Sameer Senior Consultant BE (Computer Engg), Executive MBA

38 February 28, 2005 16 2,502,020 Ness Technologies

115 Pereira Eugenia Marlene $ Senior Consultant BE 35 July 5, 2004 11 231,379 –

116 Perez Gratian Vice President, Corporate Accounts CAIIB 52 April 5, 1993 31 4,349,908 University of North Texas, USA

117 Pingaley Arun Senior Manager BCom (Hons), Grad CWA 41 July 30, 1997 19 3,342,740 ANZ Grindlays Bank

118 Podila V V S Sai Sarma $ Senior Consultant BE 32 March 20, 2006 13 223,237 First Indian Corporation

119 Ponnath Gopalan Sathyan Senior Manager BE (Electronics) 42 July 17, 2002 19 3,221,423 Computer Associates

120 Potdar Rajendra Senior Manager BE 38 August 3, 1992 16 3,696,778 Citicorp Overseas Software Limited

121 Pradhan Rahul Dattatraya $ Senior Consultant BE 41 October 22, 2001 18 2,184,160 –

122 Prasad Murali L Senior Consultant BE, PGDM, CISA 39 March 2, 1998 15 2,582,305 Times Guaranty Financials Limited

123 Prasad R Karthick Senior Manager BE (Hons.) Computer Science 36 September 1, 1994 15 3,328,041 People.com Consultants Inc, USA

124 Radhakrishnan Rajesh P $ Senior Consultant Graduate 37 August 3, 2004 14 1,856,603 HSBC

125 Rai Anil Senior Manager BE (Electronics & Telecommunications)

50 May 3, 2002 27 4,063,357 Deutsche Software Limited

126 Rajan Sundar R Senior Manager BE (Electrical Engg.) 36 June 2, 1993 15 3,244,470 –

127 Rajpal Varun Senior Manager BE (Comp. Tech.) 40 August 1, 1994 16 3,529,081 Inchcape System

128 Ramakrishna Saloni P Senior Manager BSc, MA, MBA (Finance), CAIIB

50 April 26, 2000 25 2,755,219 Vysya Bank

129 Ramakrishnan Ganesh Senior Manager BE, MMS 42 November 12, 1996 18 2,836,186 BAARNS Consulting

130 Ramamurthi R Vice President, FC-COL, Universal Banking

ACA 52 July 28, 1989 25 4,790,725 Citicorp Overseas Software Limited

131 Rangarajan Prabakar Senior Consultant MTech 36 September 11, 2006 12 2,568,231 Deutsche Bank AG

132 Ranjan Puneet Senior Manager BTech, MBA 41 April 27, 1998 16 3,426,394 Apple Credit Corporation

133 Rao Sanjeet Prakash Senior Manager BE (Mechanical) 36 September 1, 1994 14 3,701,553 –

134 Rao Kishore Senior Manager BE (Electrical Engg.), MBA (Finance)

50 April 25, 1994 28 3,101,881 Tata Unisys Limited

135 Rao Mahesh CEO, i-flex Processing Services Limited

ACA 55 November 1, 2006 30 4,471,279 Infosys BPO Limited

Statement of particulars of employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 1975 and forming part of the Directors Report for the year ending March 31, 2008 Employed for whole of the year (Continued)




Sr.no.





Previous employer

136 Rao Raghavendra Hulgeri Senior Consultant BSc, CAIIB, PGDIM, CQA, CISA

48 May 2, 2001 27 2,557,440 Netkraft Private Limited

137 Rao Srinivasan S Senior Consultant BCom 40 June 20, 2002 17 2,401,248 Temenos systems I Private Limited

138 Rao Visweswara P N Senior Consultant CA 38 May 8, 2000 14 2,744,615 IDBI Bank Limited

139 Ravikumar V Senior Manager MSc, MBA 43 October 19, 1995 14 4,330,289 Bharat Overseas Bank Limited

140 Ravisankar R * Vice Chairman BTech, PGDM 49 June 2, 1987 27 Nil Citicorp Overseas Software Limited

141 Ray Abhik Senior Consultant BTech (Electronics) 45 November 3, 1997 21 3,551,777 Tata Infotech Limited

142 Reddy V Rajashekhar Senior Manager BTech (Hons) 36 September 1, 1994 13 3,324,833 –

143 S Subhashini Senior Consultant BSc, MCA 40 October 5, 1995 17 2,660,299 Vijaya Bank

144 Sadarangani Harish Gopichand Senior Manager BSc, DSM 47 December 2, 2002 21 2,751,610 ICICI Infotech Limited

145 Saini Ravinder Darshan $ Senior Consultant CFA 36 February 4, 2008 11 297,971 Bank of America

146 Sampathkumar V Senior Manager BSc, CAIIB 47 August 26, 1996 27 3,459,856 Canara Bank

147 Savanur Nagaraj Senior Consultant BE (Electrical Engg.) 39 September 1, 1992 17 4,150,912 Triveni Engineering Works Limited

148 Sethuramalingam P Senior Manager BSc, MA, ACWAI, CAIIB 45 October 11, 2000 23 2,800,772 Fuji Bank

149 Shankar H V Senior Manager BSc (Maths) 51 May 10, 2002 29 3,052,347 KPMG Private Limited

150 Shankar V Executive Vice President & Global Head, PrimeSourcing & Insurance Solutions

MSc, MBA 45 May 15, 1985 23 6,814,044 Citicorp Overseas Software Limited

151 Shanker Lakshmanan Senior Manager BE (Mechanical) 43 June 11, 1996 20 2,843,402 National Bank of Oman

152 Sharma Reetu $ Senior Consultant BE 32 November 16, 2000 11 476,987 Bombay Stock Exchange

153 Sharma Vijay Sr. Vice President, i-flex Consulting BTech, PGDM 51 March 1, 1994 26 4,832,642 Price Waterhouse Associates

154 Shelat Birad A $ Senior Manager BE 35 September 1, 1994 13 921,857 –

155 Shenoy Ajay Chandrashekhar $ Senior Consultant BE 32 August 12, 2002 11 628,912 –

156 Sheshadri K B Senior Consultant MSc, MBA 47 March 1, 1996 23 3,657,078 Industrial Development Bank of India

157 Shetty D V Vice President, Administration LLB 49 March 1, 1988 27 4,697,173 Citicorp Overseas Software Limited

158 Shukla Surendra V Senior Consultant MSc 40 August 3, 1992 18 3,719,632 Tata Institute of Fundamental Research

159 Singla Sanjay Senior Consultant BTech 35 October 29, 2001 12 2,474,320 US Interactive Inc

160 Sinha Rakesh Senior Manager BA, CAIIB 46 June 5, 2000 21 2,850,323 Bank of India

161 Sivaramakrishnan G R Senior Manager MS (Software Systems) 40 September 13, 1996 20 3,200,463 Experts Sofware Consultants Limited

162 Sridhar R Senior Consultant BSc 47 September 27, 2000 25 4,203,402 National Bank of Dubai, Dubai, UAE

163 Srihari B Senior Manager MSc (Tech) 35 September 1, 1994 14 3,202,644 –

164 Srinivasan Suresh Senior Consultant BCom, CA, PGDM 41 October 5, 1994 15 2,428,352 Bank of America

165 Srinivasan V Vice President, Corporate Development and Chief of Staff

BSc 46 December 13, 1988 23 4,893,061 Citicorp Overseas Software Limited

166 Srivatsan V Senior Manager ACA, PGDM 39 February 19, 1999 14 3,213,010 ICICI Limited

167 Subramaniam Venkata CEO, Flexcel CAIIB 49 November 20, 1992 25 4,890,551 Citicorp Overseas Software Limited

168 Subramanian Ganesh Senior Manager BSc, MCA 40 September 11, 1993 17 2,795,622 CMC Limited

169 Sundararajan S Sr. Vice President, Customer Fulfillment

MSc (Maths) 44 October 23, 1990 22 5,976,995 Ashok Leyland

170 Suresh Kumar P Senior Manager MSc (Hons), MMS 40 February 3, 1999 19 3,778,730 Stock Holding Corportaion of India Limited

171 Suresha R Senior Manager MSc, CAIIB, CAMS, PMP 53 February 17, 2000 32 2,703,580 Canbank Investment Management Services Limited

172 Thakre Prashant $ Senior Consultant BE 31 July 5, 1999 8 266,114 –

173 Thampi P. Prasannavadanan Vice President, Customer Fulfillment-Africa South Asia and Middle East & FC-COL-Retail Banking

MSc, MBA, CAIIB 53 July 9, 1996 30 4,908,227 Federal Bank

174 Tikalkar Ashok Senior Consultant BE (Electronics & Telecom), PGDM

41 May 7, 2001 18 2,650,258 Gateway Infosys

175 Vadapandeshwara Rajaram N Senior Consultant BE (Computer Science) 35 December 29, 2003 13 2,469,133 Sun Microsystem, Inc

176 Vaidyanathan Karthik Senior Consultant BE (Electrical) 34 April 1, 1997 11 2,440,787 –

177 Vardhana Vishnu Nandamuri R Senior Consultant PHD 44 March 28, 2005 17 2,675,329 Panimalar Institute of Mgnt St

178 Vasudev G Consultant DCSE, MCom 35 December 29, 2000 16 3,900,922 –

179 Venkatachalam G Senior Manager BTech (Chemical) 36 September 1, 1994 14 2,988,228 –

180 Venkateshwaran S Senior Manager MSc (Hons.), BE (Hons.), PGDM

38 January 8, 1999 14 2,904,398 ICICI Limited

181 Venkatraman K R Senior Manager BE (Mechanical) 37 September 27, 1999 13 3,191,875 Robert Bosch India Limited

182 Vishnubhotla Ramagopal Senior Consultant BTech, PGDM 41 April 12, 2005 17 2,688,810 CG Smith Software Private Limited

183 Vivekananthan S Senior Manager MCA 36 June 1, 1994 13 3,291,296 –

184 Yorke Peter Vice President, Marketing & Communications

BA, Diploma in Journalism 42 March 1, 2007 20 2,942,465 Symphony Services

185 Zacharia Tony $ Senior Manager BE 39 March 19, 2003 16 382,420 ANZ Information Technology

Notes:1) Gross Remuneration comprises salary, allowances, monetary value of perquisites, commission to Directors and the Company’s contribution to Provident and superannuation funds, but

excludes provision for retiring gratuity for which separate figures are not available.2) None of the employees mentioned above is a relative of any Director of the Company.3) * Till April 30, 2007 Mr. Rajesh Hukku and Mr. R Ravisankar were deputed to USA as Chairman and CEO of i-flex solutions inc., respectively. Their Gross compensation comprising fixed

salary and variable performance based remuneration from i-flex solutions inc. for the financial year 2007-08 was USD 45,020 and USD 34,266 respectively. In addition, Mr. Hukku and Mr. R Ravisankar served as Chairman and Managing Director and CEO, International Operations and Business Development for i-flex solutions ltd, for which they were paid a salary of Rs. 29,480 and Rs. Nil, as in the table above.

4) The Ministry of Company Affairs has amended the Companies (Particulars of Employees) rules, 1975 to the effect that particulars of employees of companies engaged in the Information Technology Sector posted and working outside India, not being directors or their relatives, drawing more than Rs. 2,400,000 per financial or Rs. 200,000 per month, as the case may be, need not be included in the statement. Hence remuneration paid to such employees is not included in the above statement.

5) $ Stands for part of the year.6) None of the employees own more than 2% of the outstanding shares of the Company as on March 31, 2008.

For and on behalf of the Board

Rajesh HukkuChairman

July 21, 2008

Statement of particulars of employees pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 1975 and forming part of the Directors Report for the year ending March 31, 2008 Employed for whole of the year (Continued)


The detailed report on Corporate Governance for the financial year

April 1, 2007 to March 31, 2008 as per Clause 49 of the Listing

Agreement entered with Stock Exchanges is set out below:

1. Company’s philosophy on code of governance

The Company believes in adopting and adhering to all the globally

recognized corporate governance practices and continuously

benchmarking itself against each such practice. The Company

understands and respects its fiduciary role and responsibility to the

shareholders and strives hard to meet their expectations.

2. Board of Directors

2.1 Composition and category

The composition of the Board of Directors of the Company (the Board) as

on March 31, 2008, is given below:

Corporate governance report

Name Designation Category Directorships in other

Companies

Chairpersonship of Committees#

of Boards of other

Companies

Membership of Committees#

of Boards of other

Companies

Mr. Rajesh Hukku* Chairman Non-Executive, Non-Independent Director 3 Nil NilMr. S P Bharucha Director Non-Executive, Independent Director 1 Nil NilMr. William T Comfort, Jr. Director Non-Executive, Independent Director 5 Nil NilMr. Deepak Ghaisas** Vice Chairman Executive, Non-Independent Director 10 2 NilMr. Y M Kale Director Non-Executive, Independent Director 4 Nil NilMr. Charles Phillips Director Non-Executive, Non-Independent Director 3 Nil 1Mr. N R Kothandaraman (N R K Raman)**

Managing Director Executive, Non-Independent Director6 Nil Nil

Mr. R Ravisankar** Vice Chairman Executive, Non-Independent Director 6 Nil NilMr. Sergio Giacoletto Roggio*** Director Non-Executive, Non-Independent Director 1 Nil 1Ms. Tarjani Vakil Director Non-Executive, Independent Director 6 3 3Mr. Derek H Williams** @ Director Non-Executive, Non-Independent Director 35 Nil Nil

* Mr. Rajesh Hukku has ceased to be the Managing Director of the Company with effect from May 1, 2007 and continues as the Non-Executive Chairman of the

Company.

** The Board of Directors of the Company, in its meeting held on May 1, 2007, appointed

i. Mr. R Ravisankar as an Additional Director, Whole-time Director and Vice Chairman.

ii. Mr. Deepak Ghaisas as an Additional Director, Whole-time Director and Vice Chairman.

iii. Mr. N R K Raman as an Additional Director and Managing Director.

iv. Mr. Derek Williams as an Additional Director.

The members of the Company at the Annual General Meeting held on August 24, 2007, have appointed:

1. Mr. R Ravisankar as a Whole-time Director.

2. Mr. Deepak Ghaisas as a Whole-time Director.

3. Mr. N R K Raman as the Managing Director.

4. Mr. Derek Williams as a Director.

*** The Board of Directors of the Company, in its meeting held on October 26, 2007, appointed Mr. Sergio Giacoletto Roggio as an Additional Director of the Company. # Only the Audit and Shareholders’ Grievances Committees are considered.@ Includes 32 foreign companies.

2.2 Attendance of each Director at the Board Meetings and the

last Annual General Meeting

The Company holds regular Board Meetings. The detailed agenda along

with the explanatory notes is circulated in advance. The Directors can

suggest inclusion of any item(s) in the agenda at the Board Meeting.

The independent Directors actively participate in the Board Meeting and

contribute significantly by expressing their opinions, views and suggestion

in the decision process.

During the Financial Year 2007-2008, 9 Board Meetings were held on

the following dates:

April 30, 2007, May 1, 2007, July 4, 2007, July 30, 2007,

August 24, 2007, October 4, 2007, October 26, 2007,

December 3, 2007 and January 22, 2008.




The attendance of the Directors at the Board Meetings and the Annual

General Meeting held during the financial year 2007-2008 are given

below:

Name of the Director Number of Board

Meetings attended

Number of Board Meetings attended

Last AGM Attended

In person On phone/video

conference

Mr. Rajesh Hukku 7 5 2 YesMr. S P Bharucha 9 9 – YesMr. William T Comfort, Jr. 6 5 1 Yes

Mr. Deepak Ghaisas 8 8 – YesMr. Y M Kale 9 9 – YesMr. Charles Phillips 4 3 1 NoMr. N R K Raman 8 8 – YesMr. R Ravisankar 5 3 2 NoMr. Sergio Giacoletto Roggio 1 1 – N.A.

Ms. Tarjani Vakil 9 9 – YesMr. Derek H Williams 6 2 4 Yes

2.3 Details of other directorships

Details of the directorships of the Directors in other companies as on

March 31, 2008 are given below:

Name of the Director Other directorships

Mr. Rajesh Hukku i-flex solutions inc.i-flex America inc. i-flex Processing Services Ltd.

Mr. S P Bharucha Press Trust of India Ltd.

Mr. William T Comfort, Jr. 399 Venture Partners Inc.Citigroup Venture Capital Ltd.Court Square Capital Ltd.Deutsche Annington (DAIG)Nabors Industries

Mr. Deepak Ghaisas Equinox Global Services Ltd.Flexcel International Pvt. Ltd.i-flex solutions pte. Ltd.i-flex Consulting (Asia Pacific) Pte Ltd.i-flex solutions inc.i-flex America inc.i-flex Processing Services Ltd.ISP Internet Mauritius CompanyShopper’s Stop Ltd.USV Ltd.

Mr. Y M Kale Ashok Leyland Ltd. (Alternate Director)Ennore Foundries Ltd. (Alternate Director)Hinduja Life Insurance Company LimitedHinduja General Insurance Company Limited

Mr. Charles Phillips Morgan Stanley Oracle CorporationViacom Inc.

Name of the Director Other directorships

Mr. N R K Raman Equinox Global Services Ltd.ISP Internet Mauritius Companyi-flex Processing Services Ltd.i-flex solutions s.a.i-flex solutions inc.i-flex America inc.

Mr. R Ravisankar Castek Inc.Castek Software Inc.i-flex solutions inc.i-flex America inc.i-flex Processing Services Ltd.Mantas inc.

Mr. Sergio Giacoletto Roggio CSR plc UK

Ms. Tarjani Vakil Aditya Birla Nuvo Ltd.Alkyl Amines Chemicals Ltd.Asian Paints Ltd.DSP Merrill Lynch Trustee Co. Pvt. Ltd.Idea Cellular Ltd.Mahindra Intertrade Ltd.

Mr. Derek H WilliamsBeijing Oracle Software Systems Co Limited

E-docs Asia-Pacific Pty Ltd. Eontec Australia Pty Ltd. Eontec Singapore Pte Ltd. G-Log Pty Ltd. G-Log Sdn Bhd Malaysia JD Edwards Australia Pty Limited JD Edwards WorldSolutions Co Pty Limited

JD Edwards (Hong Kong) Ltd.Oracle (Philippines) Corporation Oracle Corporation (Thailand) Company Limited

Oracle Corporation Australia Pty Limited Oracle Corporation Japan Oracle Corporation Malaysia Sdn. Bhd (fka Oracle Systems Malaysia Sdn Bhd)

Oracle Corporation Singapore Pte Ltd. Oracle Korea Ltd. Oracle New Zealand Limited Oracle Research and Development Center (Beijing) Co Limited Center (Shenzhen) Co Limited Oracle Systems Hong Kong Limited Oracle Vietnam Pte Ltd. Oracle India Pvt. Ltd. PeopleSoft (Beijing) Software Co Limited PeopleSoft Australia Pty Limited PeopleSoft Hong Kong Limited PeopleSoft India Private Limited PeopleSoft Worldwide (M) Sdn Bhd PT Oracle Indonesia Siebel Systems Australia Pty Limited Siebel Systems Hong Kong Limited Siebel Systems Malaysia Sdn Bhd Siebel Systems Software (India) Private Limited

SPL WorldGroup (Philippines) Inc Vantive Singapore Pte Ltd.


2.4 Details of memberships of Board Committees

None of the Directors of the Company hold memberships of more than ten

committees nor is any Director a Chairperson of more that five Committees

of the Boards of the companies where he/she holds directorship. For this

purpose, “Committees” comprise of Audit Committee and Shareholders’

Grievances Committee of a company.

The details of the memberships of the Directors in the above mentioned

committees of all the Companies of which they are members as on

March 31, 2008 are given below:

Name of the Director Audit Committee

Shareholders’ Grievances Committee

Member Chairperson Member ChairpersonMr. Rajesh Hukku Nil Nil Nil NilMr. S P Bharucha 1 Nil Nil NilMr. William T Comfort, Jr. 1 Nil Nil NilMr. Deepak Ghaisas Nil 2 1 NilMr. Y M Kale Nil 1 Nil NilMr. Charles Phillips 1 Nil Nil NilMr. N R K Raman Nil Nil Nil NilMr. R Ravisankar Nil Nil Nil NilMr. Sergio Giacoletto Roggio 1 Nil Nil Nil

Ms. Tarjani Vakil 3 3 Nil 1Mr. Derek H Williams Nil Nil Nil Nil

2.5 Brief resume of Directors who will be retiring by rotation at

the ensuing Annual General Meeting of the Company and, being

eligible, offer themselves for re-appointment

Mr. Y M Kale

Mr. Y M Kale born on November 4, 1947, was the President of the

Institute of Chartered Accountants of India in the year 1995-96 and is

also a Fellow member of the Institute of Chartered Accountants of England

and Wales. He has contributed to various governmental and regulatory

bodies such as committees of Securities and Exchange Board of India

including Committee of Offer Documents, Committee of Takeovers and

Committee on Accounting for Corporates and participated as a member

of the Group for Introduction of Concurrent Audit of Banks, organized

by the Reserve Bank of India and was also member of the National

Drugs and Pharmaceutical Development Council of Central Government.

Mr. Kale was also on the Board of the International Accounting Standards

Committee from 1995 to 1998 as India representative. He is also a

Director on the Board of various public companies.

Mr. Kale is a member of the Board of Directors of the Company since

June 25, 2001. He is the Chairman of the Audit Committee and is a

member of the Compensation Committee of the Company.

Mr. Kale holds 2,000 equity shares of face value of Rs. 5/- each of the

Company as on date.

Ms. Tarjani Vakil

Ms. Tarjani Vakil, born on October 30, 1936, has done her Masters in

Arts from University of Mumbai. In October 1996, she retired as the

Chairperson and Managing Director of Export – Import Bank of India

(“EXIM Bank”). Since inception in 1982 till 1996, EXIM Bank grew at an

average rate of 20% p.a. Ms. Vakil contributed to the development of

EXIM Bank as a unique credit agency offering finance, information and

advisory services at all stages of the business cycle.

Ms. Vakil was actively involved in carrying extensive interaction with

multilateral agencies for initiation of an informal annual dialogue among

heads of Export Credit Agencies in Asia and Australia in 1996 and for

setting up Global Procurement Consultants Ltd. (a public-private sector

partnership) offering international procurement services.

Ms. Vakil has been a member consultant for carrying a study of the

feasibility for establishment of an Export Credit Guarantee facility for GCC

countries (1992), for establishment of Export-Import Bank of Malaysia

(1994) and other developing countries of Asia and Africa. She has

also been a consultant to International Trade Centre, Geneva (1996),

Mckinsey Inc. for setting up an Export Import Institution in Egypt and

MIGA (1999). Currently, she is a Director on the Boards of a few major

corporates in India.

Ms. Vakil has won several awards including Mahila Shiromani -1992,

CEO of the Year-1995, Woman of the Year-1996, etc. She was placed as

the highest ranking woman official in Banking in Asia and named among

the 50 most powerful women in the world in the 1996 Survey conducted

by KPMG Peat Marwick, USA.

Ms. Vakil is a member of the Board of the Directors of the Company since

May 26, 2004. She is a member of the Audit Committee and Chairperson

of Shareholders’ Grievances Committee, Transfer Committee and ESOP

Allotment Committee.

Ms. Vakil holds 3,700 equity shares of face value of Rs. 5/- each of the

Company as on date.


Mr. Charles Phillips, born on June 10, 1959, holds a BS in Computer

Science from the United States Air Force Academy, an MBA from Hampton

University and a JD from New York Law School and is a member of the

bar in Washington D.C. and Georgia.

Mr. Charles Phillips is President of Oracle Corporation and a member

of the Board of Directors. He is responsible for global field operations

including consulting, marketing, sales, alliances and channels and

customer programs, as well as corporate strategy. Prior to joining

Oracle, Mr. Phillips was a Managing Director with Morgan Stanley in its

technology group. Prior to his career on Wall Street, Mr. Phillips was a

Captain in the United States Marine Corps.

Mr. Phillips is on the boards of Viacom Corporation, Jazz at Lincoln Center

in New York City and New York Law School. Mr. Phillips also serves as a

director of Viacom Inc. and Morgan Stanley.

Mr. Phillips is a member of the Board of Directors of the Company

since November 24, 2005. He is also a member of the Compensation

Committee.

Mr. Charles Phillips is not holding any equity share of the Company as

on date.

2.6 Brief resume of Director proposed to be appointed at the

ensuing Annual General Meeting of the Company

Mr. Sergio Giacoletto Roggio

Mr. Sergio Giacoletto Roggio, born on December 28, 1949, holds a

Master’s Degree in Computer Science from the University of Turin, Italy.




Mr. Sergio Giacoletto Roggio is the Executive Vice President of Oracle

Corporation, Europe, Middle East and Africa and serves as a member

of Oracle’s Executive Management Committee. Based in Geneva,

Mr. Sergio Giacoletto Roggio oversees a network of 106 offices in 54

countries, with the responsibility for managing all of Oracle’s operations,

growth and profitability throughout the Europe, Middle East and Africa

region.

Mr. Sergio Giacoletto Roggio was appointed Executive Vice President in

June 2000 and in this role has established Oracle as the leading enterprise

software provider for businesses and governments throughout the region.

Additionally, Mr. Sergio Giacoletto Roggio pioneered a campaign to assist

the ten new European Union member states and subsequent candidate

countries gain technological advantage, through the establishment of a

dedicated Oracle regional management group focused on the European

Union enlargement region.

Prior to his appointment as Executive Vice President,

Mr. Sergio Giacoletto Roggio was Senior Vice President, Business

Solutions for Oracle Europe, Middle East and Africa with responsibility

for the Consulting and Applications businesses, as well as Strategic

Partners.

Mr. Sergio Giacoletto Roggio joined Oracle in 1997 from AT&T, where he

was President, Value Added Services. He previously spent 20 years with

Digital Equipment Corporation in various roles, including the responsibility

for the Europe, Middle East and Africa Services organization.

Mr. Sergio Giacoletto Roggio has served on multiple company boards

and IT industry associations and he is a member of the World Council

for Sustainable Business Development; is a member of the South African

Presidential International Advisory Council on Information Society and

Development; and has co-authored the book Information in the Enterprise:

It’s More than Technology (1992).

Mr. Sergio Giacoletto Roggio was appointed as an Additional Director on

the Board on October 26, 2007 and holds office upto the date of ensuing

Annual General Meeting of the Company.

The Company has received a Notice under Section 257 of the Companies

Act, 1956, from a member along with a deposit of Rs. 500/-, proposing

Mr. Sergio Giacoletto Roggio as a Director. Mr. Sergio Giacoletto Roggio

has given his consent to act as a Director of the Company, if appointed.

Mr. Sergio Giacoletto Roggio does not hold any equity share of the

Company as on date.

3. Audit committee

3.1 Primary objectives and powers of the audit committee

The primary objective of Audit Committee is to monitor and provide

effective supervision of the management’s financial reporting process

and to ensure accurate, timely and proper disclosures and transparency,

integrity and quality of financial reporting. The powers of the Audit

Committee include the following:

1. To investigate any activity within its terms of reference.

2. To seek information from any employee.

3. To obtain outside legal or other professional advice.

4. To secure attendance of outsiders with relevant expertise, if it

considers necessary.

3.2 Broad terms of reference

The terms of reference of the Audit Committee are as follows:

1. Oversight of the Company’s financial reporting process and the

disclosure of its financial information to ensure that the financial

statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-appointment and,

if required, the replacement or removal of the statutory auditor and

the fixation of audit fees.

3. Approval of payment to statutory auditors for any other services

rendered by the statutory auditors.

4. Reviewing, with the management, the annual financial statements

before submission to the Board for approval, with particular

reference to:

a. Matters required to be included in the Director’s Responsibility

Statement to be included in the Board’s report in terms of

Clause (2AA) of Section 217 of the Companies Act, 1956

b. Changes, if any, in accounting policies and practices and

reasons for the same

c. Major accounting entries involving estimates based on the

exercise of judgment by management

d. Significant adjustments made in the financial statements arising

out of audit findings

e. Compliance with listing and other legal requirements relating to

financial statements

f. Disclosure of any related party transactions

g. Qualifications in the draft audit report.

5. Reviewing, with management, the quarterly financial statements

before submission to the Board for approval.

6. Reviewing, with management, the performance of statutory and

internal auditors and the adequacy of the internal control systems.

7. Reviewing the adequacy of the internal audit function including the

structure of the internal audit department, staffing and seniority of

the official heading the department, reporting structure coverage

and frequency of internal audit.

8. Discussion with internal auditors regarding any significant findings

and any follow-up required.

9. Reviewing the findings of any internal investigations by the internal

auditors into matters where there is suspected fraud or irregularity

or a failure of internal control systems of a material nature and

reporting the matter to the board.

10. Discussion with statutory auditors, before the audit commences,

about the nature and scope of the audit as well as post-audit

discussion to determine any area of concern.

11. To determine the reasons for any substantial defaults in the

payment to depositors, debenture holders, shareholders (in case of

non payment of declared dividends) and creditors.

12. To review the functioning of the Whistle Blower function.

13. Carrying out any other function as is mentioned in the terms of

reference of the Audit Committee.


3.3 Composition of the committee

The composition of Audit Committee as on March 31, 2008 was as

follows:

Mr. Y M Kale Chairman, Non-Executive, Independent Director

Mr. S P Bharucha Member, Non-Executive, Independent Director

Mr. William T Comfort, Jr. Member, Non-Executive, Independent Director

Ms. Tarjani Vakil Member, Non-Executive, Independent Director

3.4 Meetings and attendance

During the Financial Year 2007-2008, four meetings of the Committee

were held on April 25, 2007, July 27, 2007, October 24, 2007 and

January 21, 2008.

The member’s attendance at the Committee Meetings was as given

below:

Name Number of meetings attended In person On phone

Mr. Y M Kale 4 –Mr. S P Bharucha 3 –Mr. William T Comfort, Jr. 1 1Ms. Tarjani Vakil 4 –

The auditors of the Company were invited for the meetings.

3.5 Audit committee’s recommendations:

The Committee reviewed the financial results of the Company prepared

in accordance with Indian GAAP (including consolidated results) as

at and for the periods ended June 30, 2007, September 30, 2007,

December 31, 2007 and March 31, 2008 and recommended the same

to the Board for adoption.

The Committee recommended to the Board the re-appointment of

M/s S. R. Batliboi & Associates, Chartered Accountants, as statutory

auditors and Branch Auditors of the Company for the financial year

2008-2009.

The Committee also recommended the re-appointment of

M/s Mukund M. Chitale & Co., Chartered Accountants, as Internal

Auditors to conduct the internal audit for the financial year 2008-2009.

The Committee reviewed Internal Auditors’ reports and related reports

on actions taken, utilization of IPO proceeds, risk management policies,

compliance with the Clause 49 of the Listing Agreement, etc. from time

to time.

4. Compensation committee

4.1 Brief description of terms of reference

The scope of Compensation Committee is to determine the compensation

of the Executive Management Officers (EMOs). The EMOs in turn, decide

the compensation of key managerial personnel and other employees of

the Company. The Compensation Committee also approves, allocates and

administers the Employee Stock Option Plan 2002, reviews performance

appraisal criteria and sets norms for ESOP allocation.

4.2 The composition of compensation committee as on

March 31, 2008 is as follows:

Mr. William T Comfort, Jr. Chairman, Non-Executive, Independent Director

Mr. Y M Kale Member, Non-Executive, Independent Director

Mr. Charles Phillips Member, Non-Executive, Non-Independent Director

4.3 Meeting and attendance

The Committee met once during the year and the meeting was attended

by all the members.

4.4 Compensation policy

The Compensation Committee determines and recommends to the Board

the compensation payable to the directors. The limit for the commission

to be paid to the Board members and the remuneration payable to the

Managing Director of the Company are approved by the shareholders of

the Company. The annual compensation of the Non-Executive Directors

is approved by the Compensation Committee, within the parameters set

by the shareholders at the shareholders’ meetings.

The Committee also has the mandate to review and recommend

compensation payable to the Senior Executives of the Company. It also

sets norms for ESOP allocation.




4.5 Details of remuneration paid to the Directors during the financial year 2007-08 are as follows:

Name of Director ESOPs granted under ESOP

Plan during the year

Commission paid

(Rs. ‘000)

Salary(Rs. ‘000)

Contribution to PF (Rs. ‘000)

Total Amount paid

(Rs. ‘000)

Mr. Rajesh Hukku* Nil Nil 27 1 28Mr. S P Bharucha Nil 800 Nil Nil 800Mr. William T Comfort, Jr. Nil Nil Nil Nil NilMr. Deepak Ghaisas** Nil Nil Nil Nil NilMr. Y M Kale Nil 1,200 Nil Nil 1,200Mr. Charles Phillips Nil Nil Nil Nil NilMr. N R K Raman** Nil Nil 4,342 417 4,759Mr. R Ravisankar* Nil Nil Nil Nil NilMr. Sergio Giacoletto Roggio Nil Nil Nil Nil NilMs. Tarjani Vakil Nil 900 Nil Nil 900Mr. Derek H Williams Nil Nil Nil Nil NilTotal Nil 2,900 4,369 418 7,687

* Mr. Rajesh Hukku (Managing Director of the Company till April 30, 2007) has been paid remuneration aggregating Rs. 27,468 (including bonus of Rs. 21,354 which

was provided as on March 31, 2007) for the year ended March 31, 2008 (March 31, 2007- Rs. 41,313) from i-flex solutions inc., a wholly owned subsidiary of the

Company. Mr. R Ravisankar (Director from May 1, 2007) has been paid remuneration aggregating Rs. 16,629 (including bonus of Rs. 14,236 which was provided as

on March 31, 2007) for the year ended March 31, 2008 from i-flex solutions inc., a wholly owned subsidiary of the Company.

** During the year ended March 31, 2008, Mr. Deepak Ghaisas (Director from May 1, 2007) and Mr. N R K Raman (Managing Director and Chief Executive Officer from

May 1, 2007) have been paid bonus of Rs. 15,220 and Rs. 7,266 respectively which was provided as on March 31, 2007.

Payments of above bonus have not been included in the managerial

remuneration considering this remuneration in capacity of an employee

before appointment as Director of the Company.

The Company accrues for gratuity benefit, compensated absences

and bonus for all employees as a whole. It is not possible to ascertain

the provision for individual director and hence the same has not been

disclosed above. The Company discloses such benefits on cash basis.

During the financial year 2007-08, Mr. N R K Raman, the Managing

Director of the Company was paid remuneration within the limits

envisaged in the Companies Act, 1956. Non-Executive, Independent

Directors of the Company were paid remuneration by way of commission

as approved by the Board of Directors/shareholders of the Company

subject however to the condition that the commission shall not exceed

1% of the net profits of the Company for all the Non-Executive Directors

in aggregate in one financial year.

There were no sitting fees and/or perquisites paid to the Directors during

the financial year 2007-2008 except as stated above.

The terms of Employee Stock Options granted and equity shares held by the Directors are given below:

Name of Director SchemeOptions outstanding as at

March 31, 2008

Optionsexercised during

the year

Grant price (Rs.) Expiry Date Equity shares held as at

March 31, 2008

Mr. Rajesh Hukku ESOP 2002 Nil Nil 265.00 March 3, 2012 676,524Mr. S P Bharucha ESOP 2002 6,000 2,000 708.65 June 13, 2015 4,000Mr. William T Comfort, Jr. – – – – – NilMr. Deepak Ghaisas ESOP 2002 Nil Nil 265.00 March 3, 2012 456,269Mr. Y M Kale ESOP 2002 Nil 2,000 418.92 February 17, 2013 6,000Mr. Charles Phillips – – – – – NilMr. N R K Raman ESOP 2002 Nil Nil 265.00 March 3, 2012 114,000Mr. R Ravisankar ESOP 2002 Nil Nil 265.00 March 3, 2012 324,272Mr. Sergio Giacoletto Roggio – – – – – NilMs. Tarjani Vakil ESOP 2002 6,000 Nil 559.60 August 17, 2014 4,000Mr. Derek H Williams – – – – – Nil

The above options were issued at Fair Market Value on the respective dates of grant. The options vest over a period of 5 years from the date of grant and

are subject to continued employment/directorship with the Company.


5. Shareholders’ grievances committee

5.1 Composition of the Committee

The composition of Shareholders’ Grievances Committee as on

March 31, 2008 was as follows:

Ms. Tarjani Vakil Chairperson, Non-Executive, Independent Director

Mr. Deepak Ghaisas Vice Chairman and Company Secretary

5.2 Scope of shareholders’ grievances committee’s activities

The scope of the Shareholders’ Grievances Committee is to review and

address the grievances of the shareholders in respect of share transfers,

transmission, dematerialization and rematerialization of shares and other

share related activities.

During the year, four meetings of the Committee were held on

June 21, 2007, September 27, 2007, December 31, 2007 and March

6, 2008 which were attended by both the members of the Committee.

5.3 Company secretary

Name of Company Secretary Mr. Deepak GhaisasAddress i-flex solutions ltd

i-flex Center399, Subhash RoadVile Parle (East)Mumbai 400 057

Tel +91-22-6718 5000Fax +91-22-2831 5593

5.4 Compliance officer

From February 11, 2008, Mr. Hoshi D Bhagwagar, Deputy Company

Secretary has been appointed as the Compliance Officer of the

Company.

Name of Compliance Officer Mr. Hoshi D. BhagwagarAddress i-flex solutions ltd

i-flex Center399, Subhash RoadVile Parle (East)Mumbai 400 057

Tel + 91-22-6718 5000Fax + 91-22-2831 5593e-mail [email protected]

5.5 Details of shareholders’ complaints received, resolved during

the year 2007-2008.

Nature of complaints Opening balance

Received Cleared Pending

Non receipt of warrant – 14 14 –Non receipt of certificate – 5 5 –Non receipt of demat credit/rej. – 64 64 –SEBI/stock exchange/MCA – 6 6 –Legal – – – –Others – 15 15 –Total – 104 104 –

Number of pending share transfers as on March 31, 2008 – Nil.

6. Transfer Committee

The composition of Transfer Committee as on March 31, 2008 was as

follows:



During the year, four meetings of the Committee were held on

June 21, 2007, September 27, 2007, December 31, 2007 and March

6, 2008 which were attended by both the members of the Committee.

7. ESOP Allotment Committee

The composition of ESOP Allotment Committee as on March 31, 2008

was as follows:



During the year, one meeting of the Committee was held on March 28, 2008

which was attended by both the members of the Committee.

8. General body meetings

8.1 Location, date and time where last three Annual General

Meetings were held

Financial Year Venue Date Time

2006-2007 InterContinental The Grand Mumbai Sahar Airport Road Andheri (East) Mumbai 400 059

August 24, 2007 3.00 p.m.

2005-2006 The Leela KempinskiSahar Andheri (East)Mumbai 400 059

August 10, 2006 3.00 p.m.

2004-2005 Le Royal Meridian Sahar Airport RoadAndheri (East)Mumbai 400 059

August 12, 2005 3.00 p.m.

8.2 There were no matters requiring approval of the shareholders

through Postal Ballot in previous year.

8.3 No special resolution is proposed to be conducted through

postal ballot.




8.4 The details of Special Resolutions passed in the AGM in the last three years are given below:

Financial Year Day, Date & Time Venue Gist of Special Resolution Passed

2006-2007 Friday,August 24, 2007At 3.00 p.m.

InterContinental The Grand Mumbai, Sahar Airport Road, Andheri (East) Mumbai – 400 059

1. Payment of commission to the Directors of the Company (excluding the Managing Director and Whole-time Directors), not exceeding in the aggregate one percent per annum of the net profits of the Company which shall be calculated in accordance with the provisions of Section 198, 349 and 350 of the Companies Act, 1956.

2. Amendment to the ‘2002 Employees Stock Option Plan’ of the Company with regard to providing that the eligible employees should bear or reimburse to the Company fringe benefit tax including related surcharge, cess, duty or any other levy, to the extent to which the Company is liable to pay the fringe benefit tax in relation to the value of fringe benefits provided to the eligible employee.

2005-2006 Thursday,August 10, 2006At 3.00 p.m.

The Leela Kempinski Sahar, Andheri (East)Mumbai – 400 059

1. Keeping the Register of Members, Index of Members, copies of certificates and documents required to be annexed thereto and such other documents under any applicable provisions of the Companies Act 1956, at the offices of Intime Spectrum Registry Ltd, the Registrar and Share Transfer Agent of the Company, at C-13, Pannalal Silk Mills Compound, L.B.S Marg, Bhandup (West), Mumbai – 400 078 or at i-flex Center, 399 Subhash Road, Vile Parle (East), Mumbai – 400 057 or at i-flex Park, Off Western Express Highway, Goregaon (East), Mumbai – 400 063, instead of at the Registered Office of the Company.

2004-2005 Friday, August 12, 2005At 3.00 p.m.

Le Royal Meridian Sahar Airport Road Andheri (East) Mumbai – 400 059

1. To issue and allot upto 80,000 warrants or options to be converted into equal number of equity shares of Rs. 5/- each fully paid within 18 months of date of issue of warrants or options to IBM Global Services India Private Limited, each warrant or option entitling the holder thereof to apply for one equity share of Rs. 5/- each of the Company on preferential basis.

2. To issue warrants or options up to 0.5% of the fully diluted equity of the Company to be converted into equal number of equity shares of Rs. 5/- each within 18 months of date of issue of warrants or options to GE Capital Mauritius Equity Investment, each warrant or option entitling the holder thereof to apply for one equity share of Rs. 5/- each of the Company on a preferential basis.

8.5 The details of Special Resolution passed in the EGM in the last three years is given below:

Financial Year Day, Date & Time Venue Gist of Special Resolution Passed

2005-06 Tuesday,September 12, 2006At 3.30 p.m.

The Leela Kempinski, Sahar, Andheri (East), Mumbai – 400 059

1. To issue and allot 4,447,418 equity shares of the Company of face value Rs. 5/- each on a preferential basis, for cash at a price of Rs. 1,307.50 per equity share to Oracle Global (Mauritius) Limited.

There was no EGM held in the Financial Year 2004-05 and 2006-07.


9. Disclosures

a. All the relevant information in respect of materially significant

related party transactions, i.e., transactions of the Company of

material nature with its promoters, directors or management or their

relatives, subsidiaries of the Company, etc. has been disclosed in

the respective financial statements presented in the Annual Report.

The Company did not undertake any transaction with any related

party having potential conflict with the interest of the Company at

large.

b. The Company has complied with statutory compliances and

no penalty or stricture is imposed on the Company by the Stock

Exchanges or Securities and Exchange Board of India (SEBI) or any

other statutory authority on any matter related to the capital markets

during the last three years.

c. The Company has a Whistle Blower Policy which provides an

avenue for employees to raise concerns of any violations of Code of

Conduct, incorrect or misrepresentation of any financial statements

and reports, unethical behavior, etc. The policy provides adequate

safeguards to employees reporting such violations to the Company.

No employee has been denied access to the Audit Committee.

d. The Company is fully compliant with the applicable mandatory

requirements of Clause 49 of the listing agreements entered with

the Stock Exchanges. Although it is not mandatory, the Board of

the Company has constituted a Compensation Committee. Details

of the Committee have been provided under Section ‘Compensation

Committee’.

10. Means of communication

During the Financial Year 2007-08:

10.1 The quarterly, half yearly and annual results of the Company were

published in widely circulated English and Marathi newspapers,

such as The Economic Times and Maharashtra Times.

10.2 Company’s quarterly financial results, press releases and

transcripts of the conference calls are posted on the Company’s

website www.iflexsolutions.com

10.3 Detailed Management Discussion and Analysis Reports covering

Indian GAAP un-consolidated and consolidated financials have

been included in this Annual Report.

10.4 The Company has also posted information relating to its financial

results and Distribution of shareholding on a quarterly basis on

Electronic Data Information Filing and Retrieval System (EDIFAR)

on website - http://sebiedifar.nic.in.

10.5 Since January 2008, pursuant to new provisions contained in

the listing agreement entered with the stock exchanges, the

Company has uploaded the information relating to its financial

results, shareholding pattern and report on corporate governance

on website – http://corpfiling.co.in.

11. General shareholder information

Annual General Meeting Day and Date Friday, August 22, 2008Time 3.00 p.m.Venue The Leela

Kempinski SaharAndheri (East)Mumbai – 400 059

Financial Year April 1 to March 31

Date of Book Closure Monday, August 18, 2008 to Friday, August 22, 2008 (both days inclusive)

Listing on Stock Exchanges at Bombay Stock Exchange Ltd. (BSE); and

National Stock Exchange of India Ltd. (NSE)

Stock CodeBombay Stock Exchange Ltd (BSE) 532466National Stock Exchange of India Ltd. (NSE) I-FLEX

Listing

The annual listing fees for the year 2008-09 have been paid to BSE and

NSE.

The Company has paid Custodial fees for the year 2008-09 to National

Securities Depository Limited and Central Depository Services (India)

Limited on the basis of number of beneficial accounts maintained by

them as on March 31, 2008.




Relative movement chart

The chart above gives the relative movement of the closing prices of the Company’s share and BSE Sensex relative to the closing prices. The period

covered is June 28, 2002 to June 30, 2008.

13. Registrar and transfer agent

Name Intime Spectrum Registry Limited

Address C-13, Pannalal Silk Mills CompoundL. B. S. Marg, Bhandup (West)Mumbai 400 078

Tel +91-22-2596 3838Fax +91-22-2596 2691e-mail [email protected] 203, Davar House, 197/199, D. N. Road, Fort

Mumbai 400 001Tel +91-22- 2269 4127

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

i-flexBSE

June 2008June 2007June 2006June 2005June 2004June 2003June 2002

12. Market price data

Monthly high/low of the shares of the Company from April 1, 2007 to June 30, 2008 are given below:

Month and Year High (Rs.) Low (Rs.) Volume of Shares High (Rs.) Low (Rs.) Volume of SharesBSE NSE

April 2007 2,545.00 2,046.65 430,253 2,542.00 2,015.00 1,297,119May 2007 2,540.00 2,150.00 319,752 2,540.00 2,126.55 1,149,346June 2007 2,630.00 2,190.00 756,479 2,628.00 2,182.60 2,437,272July 2007 2,630.00 2,166.00 250,803 2,635.00 2,162.00 936,443August 2007 2,200.00 1,769.90 299,705 2,240.00 1,815.00 1,017,753September 2007 2,054.95 1,810.00 160,527 2,087.00 1,801.00 695,609October 2007 1,975.00 1,522.00 275,337 1,974.00 1,520.00 1,011,571November 2007 1,649.00 1,225.00 234,466 1,609.85 1,240.55 792,797December 2007 1,655.00 1,401.00 188,183 1,650.00 1,395.05 746,550January 2008 1,664.00 900.00 314,112 1,679.90 889.00 1,154,292February 2008 1,155.00 981.00 274,072 1,177.00 956.60 681,282March 2008 1,080.00 892.00 165,662 1,100.00 895.00 539,149April 2008 1,425.00 931.00 717,890 1,484.50 930.10 1,856,212May 2008 1,545.00 1,205.05 1,302,816 1,545.00 1,100.00 3,662,481June 2008 1,475.00 1,155.00 923,873 1,474.00 1,151.15 2,414,228

14. Physical share certificate transfer system

The Registrar and Transfer Agent (“the Registrar”), on receipt of transfer

deed with respective share certificate(s), scrutinizes the same and

verifies signature(s) of transferor(s) on the transfer deed with specimen

signature(s) registered with the Company. A list of such transfers is

prepared and checked thoroughly and a transfer register is prepared.

The transfer register is placed before the Transfer Committee Meeting

for approval, which meets at regular intervals.

During the last financial year 20,150 equity shares were transferred in

physical mode.


15. Distribution of shareholding as on March 31, 2008

Shares of nominal value of (Rs.) Number of Shareholders % Share amount (Rs.) % to Equity

UPTO 2,500 21,334 91.80 4,546,075 1.092,501 – 5,000 451 1.94 1,747,035 0.425,001 – 10,000 411 1.77 3,136,725 0.7510,001 – 20,000 358 1.54 5,489,895 1.3120,001 – 30,000 161 0.69 4,008,875 0.9630,001 – 40,000 133 0.57 4,699,905 1.1240,001 – 50,000 70 0.30 3,267,660 0.7850,001 – 1,00,000 169 0.73 12,090,130 2.891,00,001 & ABOVE 152 0.66 379,750,905 90.68Total 23,239 100.00 418,737,205 100.00

16. Shareholding per category as on March 31, 2008

Category Code

Category of shareholders Number of shareholders

Total number of

physical shares

Number of shares held in dematerialized

form

Total number of

shares

As a percentage

of (A + B)

(A) Shareholding of Promoter and Promoter Group [1] Indian – – – – –[a] Individuals/Hindu Undivided Family – – – – –[b] Central Government/State Government(s) – – – – –[c] Bodies Corporate – – – – –[d] Financial Institutions/Banks – – – – –[e] Any other (specify) – – – – – Sub-Total (A)(1) – – – – –[2] Foreign [a] Individuals (Non-Resident Individuals/Foreign Individuals) – – – – –[b] Bodies Corporate 2 76,200 67,405,498 67,481,698 80.58[c] Institutions – – – – –[d] Any other (specify) – – – – –

Sub-Total (A)(2) 2 76,200 67,405,498 67,481,698 80.58Total Shareholding of Promoter and Promoter Group (A)=(A)(1)+(A)(2) 2 76,200 67,405,498 67,481,698 80.58

(B) Public Shareholding [1] Institutions [a] Mutual Funds/UTI 58 – 1,556,107 1,556,107 1.86[b] Financial Institutions/Banks 2 – 48,990 48,990 0.06[c] Central Government/State Government(s) – – – – –[d] Venture Capital Funds – – – – –[e] Insurance Companies 1 – 36,103 36,103 0.04[f] Foreign Institutional Investors 10 – 189,382 189,382 0.23[g] Foreign Venture Capital Investors – – – – –[h] Any other (specify) – – – – – Sub-Total (B)[1] 71 – 1,830,582 1,830,582 2.19[2] Non-institutions

[a] Bodies Corporate 578 – 554,215 554,215 0.66

[b] Individuals-i. Individual shareholders holding nominal share capital upto

Rs. 1 Lakh. 21,344 694,325 5,539,255 6,233,580 7.44

ii. Individual shareholders holding nominal share capital in excess of Rs. 1 Lakh. 87 548,000 2,534,340 3,082,340 3.68




Category Code

Category of shareholders Number of shareholders

Total number of

physical shares

Number of shares held in dematerialized

form

Total number of

shares

As a percentage

of (A + B)

[c] Any other (specify) Clearing Member 88 – 27,623 27,623 0.03 Foreign Company 1 – 395,529 395,529 0.47 Market Maker 54 – 12,025 12,025 0.01 Foreign Nationals 4 – 79,000 79,000 0.10 NRI (Repatriable) 402 – 322,219 322,219 0.39 NRI (Non-Repatriable) 250 124,800 1,606,369 1,731,169 2.07 Overseas Corporate Bodies 1 – 800 800 0.00 Directors 10 – 1,585,065 1,585,065 1.89 Trust 1 – 380,064 380,064 0.45 HUF 346 – 31,532 31,532 0.04 Sub-Total (B) [2] 23,166 1,367,125 13,068,036 14,435,161 17.23 Total Public Shareholding (B)= (B)(1) +(B)(2) 23,237 1,367,125 14,898,618 16,265,743 19.42

Total (A)+(B) 23,239 1,443,325 82,304,116 83,747,441 100.00

During the financial year 2007-08:

1. The Company issued and allotted 395,529 equity shares to GE

Capital Mauritius Equity Investment (GE) upon its exercise of

conversion option of warrants allotted to GE in August 2005.

2. The Company issued and allotted 63,332 equity shares to its

employees/directors who exercised their ESOPs during the year.

3. The Company has not issued any ADR/GDR.

17. Dematerialization of shares and liquidity

The shares of the Company are under compulsory demat mode. Under

the Depository System, the International Securities Identification Number

(ISIN) allotted to the Company’s shares is INE881D01027.

As on March 31, 2008, 98.28% of the shares of the Company were in

electronic form.

18. Address for correspondence

Registered Office Corporate Office

i-flex solutions ltd i-flex solutions ltdUnit 10-11, i-flex CenterSDF-1, SEEPZ, 399, Subhash RoadAndheri (E) Vile Parle (E) Mumbai 400 096 Mumbai 400 057India IndiaTel +91-22- 5676 2000 Tel +91-22- 6718 5000 Fax +91-22- 2829 2767 Fax +91-22- 2831 3393e-mail: [email protected]

As on March 31, 2008, the Company also had following other offices

in India.

i-flex solutions ltdUnit 10-11, SDF-1SEEPZ, Andheri (E)Mumbai 400 096Maharashtra, India

i-flex solutions ltd i-flex TechparkPlot No 152EPIP Zone, K R PuramHobli, WhitefieldBangalore 560 066Karnataka, India

i-flex solutions ltd399, Subhash RoadVile Parle (E)Mumbai 400 057Maharashtra, India

i-flex solutions ltdSJR I ParkGround & First Floor, Tower – 2EPIP Zone, Whitefield RoadWhitefield, Bangalore 560 066Karnataka, India

i-flex solutions ltdi-flex Park,Off Western Express HighwayGoregaon (E)Mumbai 400 063Maharashtra, India

i-flex solutions ltdRMZ NXT, Campus 1Block B, 2nd & 3rd FloorEPIP Zone, WhitefieldBangalore 560 066Karnataka, India

i-flex solutions ltdi-flex Annex, Nirlon CompoundOff. Western Express HighwayGoregaon (E)Mumbai 400 063Maharashtra, India

i-flex solutions ltdPride Silicon Plaza2nd Floor, Senapati Bapat RoadPune 411 053 Maharashtra, India

i-flex solutions ltd 1st Floor, “C” Building,Shah Industrial Estate,Saki-Vihar Road,Andheri (E)Mumbai 400 072Maharashtra, India

i-flex solutions ltdi-flex CenterBlock 9A, Ambrosia II Bavdhan KhurdTal. MulshiPune 411 021Maharashtra, India

i-flex solutions ltdi-flex parkC/o Embassy Business ParkC.V Raman NagarBangalore 560 093 Karnataka, India

i-flex solutions ltdi-flex HeightsLohia Jain IT parkPaud RoadKothrudPune 411 029Maharashtra, India

i-flex solutions ltdi-flex center#133 Kundalahalli RoadMahadevapuraBangalore 560 037 Karnataka, India

i-flex solutions ltdAmbrosia Village Bhavdhan Khurd,Taluka MulshiPune 411 021Maharashtra, India

i-flex solutions ltdi-flex Center of Learning-ICL# 333, Doddenakundi Industrial AreaMahadevapura, WhitefieldBangalore 560 048Karnataka, India

i-flex solutions ltd143/1, Uthamar Gandhi SalaiNungambakkamChennai 600 034 Tamil Nadu, India

i-flex solutions ltd# 150, Diamond DistrictB Tower, Lower Ground FloorKodihalli, Airport RoadBangalore 560 008 Karnataka, India

i-flex solutions ltd99, Venkatnarayana RoadT NagarChennai 600 017Tamil Nadu, India


Annexure to Directors’ report

To

The Board of Directors

i-flex solutions ltd

Mumbai

This is to certify that:

(a) We have reviewed financial statements and the cash flow statement

of i-flex solutions ltd (“the Company”) for the financial year ended

March 31, 2008 and that to the best of our knowledge and belief:

(i) These statements do not contain any materially untrue

statement or omit any material fact or contain statements that

might be misleading;

(ii) These statements together present a true and fair view of

the Company’s affairs and are in compliance with existing

accounting standards, applicable laws and regulations.

(b) There are, to the best of our knowledge and belief, no transactions

entered into by the Company during the financial year ended

March 31, 2008 which are fraudulent, illegal or violative of the

Company’s Code of Conduct.

(c) We accept responsibility for establishing and maintaining internal

controls for financial reporting and that we have evaluated the

effectiveness of the internal control systems of the Company

pertaining to financial reporting and we have disclosed to the

auditors and the Audit Committee, deficiencies in the design or

operation of such internal controls, if any, of which we are aware

and the steps we have taken or propose to take to rectify these

deficiencies.

(d) We have indicated to the auditors and the Audit Committee:

(i) Significant changes in internal control over financial reporting

during the financial year ended March 31, 2008, if any;

(ii) Significant changes in accounting policies during the financial

year ended March 31, 2008, if any; and that the same have

been disclosed in the notes to the financial statements; and

(iii) instances of significant fraud of which we have become aware

and the involvement therein, if any, of the management or an

employee having a significant role in the Company’s internal

control system over financial reporting.

(e) We further declare that all Board members and Senior Management

Personnel have affirmed compliance with Codes of Conduct for the

financial year ended March 31, 2008.

For i-flex solutions ltd

N R K Raman Makarand Padalkar

Managing Director and CEO Chief Financial Officer

May 5, 2008




To

The Members of i-flex Solutions Limited

We have examined the compliance of conditions of corporate governance

by i-flex Solutions Limited (‘the Company’), for the year ended on March

31, 2008, as stipulated in clause 49 of the Listing Agreement of the said

Company with stock exchanges.

The compliance of conditions of corporate governance is the responsibility

of the management. Our examination was limited to procedures and

implementation thereof, adopted by the Company for ensuring the

compliance of the conditions of the Corporate Governance. It is neither

an audit nor an expression of opinion on the financial statements of the

Company.

In our opinion and to the best of our information and according to the

explanations given to us, we certify that the Company has complied

with the conditions of Corporate Governance as stipulated in the above

mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the

future viability of the Company nor the efficiency or effectiveness with

which the management has conducted the affairs of the Company.

For S. R. Batliboi & Associates

Chartered Accountants

per Sunil Bhumralkar

Partner

Membership No.: 35141

Mumbai, India

July 21, 2008

Auditors’ certificate


i-fl ex solutions ltd

Financial statements for the year ended

March 31, 2008 prepared in accordance with

Indian Generally Accepted Accounting Principles

(Indian GAAP) (Unconsolidated).

financials




The following discussion is based on our audited unconsolidated financial

statements, which have been prepared in conformity with accounting

principles generally accepted in India and complying in all material

respects the notified Accounting Standards by Companies (Accounting

Standards) Rules, 2006 and the relevant provisions of the Companies

Act, 1956.

You should read the following discussion of our financial condition and

results of operations together with the detailed unconsolidated Indian

GAAP financial statements and the notes to those statements. Our fiscal

year ends on March 31 of each year.

Information technology in the financial services industry

Financial institutions today face many challenges in their quest to

offer innovative products and services to customers. The focus is on

transforming business models, identifying cost-saving opportunities and

offering targeted services and improved service levels to customers.

Financial institutions are therefore striving to gain competitive advantage

by reducing costs, enhancing reputation and creating greater institutional

resilience.

Governance, risk and compliance are emerging as strategic priorities

for financial institutions. The stringent regulatory environment is forcing

organizations to select platforms focused on enterprise-wide governance,

risk and compliance management. Institutions are more inclined to adopt

an integrated approach as opposed to a piecemeal solution involving

fragmented systems and one-off processes that compound compliance

costs.

In the core transaction processing area, banks are becoming more

receptive to the value proposition and the benefits of process

transformation. i-flex is helping banks streamline processes and leverage

their existing IT infrastructure to reach new efficiency levels.

Overview

Together with Oracle, i-flex offers best-of-breed functionality for financial

institutions that need to operate flexibly, competitively and respond quickly

to market dynamics in a fiercely challenging business environment. With

the experience of delivering value-based solutions to global financial

institutions, our offerings help financial institutions gain competitive

advantage through cost-effective solutions while, simultaneously,

adhering to the stringent demands of a dynamic regulatory environment.

Playing the role of a specialized IT partner to financial services institutions

worldwide, i-flex’s approach is comprehensive with a wide range of

products, custom solutions and consulting services.

Our solutions portfolio includes packaged applications, custom

application software development, deployment, maintenance and support

services, business and IT consulting services, technology deployment

and management services and knowledge process outsourcing in the

financial services domain.

As of March 31, 2008, the Group had cumulatively serviced over 800

customers in more than 130 countries through its portfolio of products

and services.

We are organized by region and business segment. We have two

major business segments - the Products Business (comprising product

licensing, customization, implementation and support) and the Services

Business (providing customized software and consulting services).

We also have Knowledge Process Outsourcing Services (providing

value-added knowledge outsourcing). These segments are described in

greater detail below:

Products

The i-flex portfolio includes FLEXCUBE®, a complete banking product

suite for retail, consumer, corporate, investment and internet banking

and asset management and investor servicing. Since its launch in 1997,

more than 300 financial institutions in over 115 countries have chosen

FLEXCUBE.

FLEXCUBE enables banks to standardize, optimize and transform their

processes. The latest release, FLEXCUBE 10.0, helps financial institutions

respond faster to market dynamics and define and track processes,

while ensuring compliance. The suite is also equipped with SWIFT 2007

enhancements and supports SEPA payment processing. FLEXCUBE was

recognized as a leader in the Magic Quadrant for International Retail Core

Banking in February 2008 by Gartner.

FLEXCUBE® for Islamic Banking is a Shariah-compliant product and a

solution for both Islamic and conventional banks.

The FLEXCUBE® Private Banking Suite is a comprehensive solution

for private banking, giving wealth managers a unified view--and

analyses--of their customers’ wealth across asset classes, with the added

benefits of performance tracking and improved customer relationship

management.

FLEXCUBE® Investor Services helps fund management companies,

transfer agency service providers and fund distributors design innovative

products and offer efficient investor services to their customers. The

solution was featured by Barrington Partners in ‘The Next Generation’

Transfer Agency Review in February 2008.

FLEXCUBE® Lending Suite is an integrated customer-centric solution

that addresses every lending requirement from origination, to servicing to

collections. DaybreakTM, part of the FLEXCUBE Lending Suite, manages

multiple lending products through an enterprise-wide consumer lending

platform.

Analytics for financial services: i-flex’s analytics offering for financial

services comprises an integrated suite of award-winning solutions –

ReveleusTM and Mantas--that help financial institutions maximize

profitability, minimize risks and deliver enterprise-wide compliance.

The GRC framework brings together Reveleus’ unrivalled expertise in risk

and control, coupled with Mantas’ industry-leading behavior detection

technology--both deeply rooted in the financial services industry. This

combination helps financial institutions gauge the effectiveness of

governance policies, manage business risks and future-proof compliance

expenditure across various regulatory mandates.

The Reveleus suite of analytical applications is focused on the areas

of risk management, customer insight and enterprise-wide financial

performance. The Reveleus’ Risk Analytics product addresses some of

the most complex global challenges facing the financial industry today,

including multi-jurisdictional Basel II compliance and operational risk

management.

Reveleus was well positioned in Gartner’s ‘Leaders Quadrant’ in its

‘Basel II Risk Management Application Software Magic Quadrant for 2005’

and ‘2006 Basel II Software Applications Magic Quadrant’. Reveleus

was also ‘Highly Commended’ for its Compliance Initiative Innovation in

The Banker Technology Awards for 2006. Reveleus was also rated as

Management’s discussion and analysis of financial condition and results of operations


the number one GRC Solution Provider in the 2008 Operational Risk &

Compliance ‘Compliance Software Rankings’.

Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior

Detection PlatformTM is the industry’s most comprehensive solution

for detecting risk, enhancing customer relationships and addressing

regulatory requirements in the anti-money laundering, trading and

broker compliance areas. Waters Magazine ranked Mantas as the Best

Anti-Money Laundering Solution for 2007, 2005 and 2004 and Best

Compliance Solution for 2003. The award was voted on by the subscribers

of Waters, a monthly magazine that covers information technology and

solutions in the financial services industry.

Mantas, along with the Reveleus suite of products, offer customers a

single, unified platform for governance, risk and compliance. Some of

the specific challenges Mantas addresses are global AML compliance,

MiFID, the market abuse directive, customer risk and suitability and

account takeover and identity theft.

i-flex offers strategic business software and services for the global

Property and Casualty insurance market. The Insure3 suite provides

insurance carriers with a suite of core business processing systems

for insurance product and process configuration, policy processing,

customer billing, claims management and services.

Services

PrimeSourcingTM, i-flex’s global IT services division, provides

comprehensive customized IT solutions for banking, securities and

insurance. These high-quality IT solutions reflect the division’s domain

expertise in financial services with specialized practice lines for payments,

business intelligence, CRM, Oracle Technology & Applications and testing.

These IT solutions encompass the complete lifecycle of an IT application

asset--from conceptualization to deployment and maintenance.

The division also provides in-depth expertise across a range of

technologies such as Java, Microsoft, mainframe and open source.

It’s IT processes are certified as SEI-CMMi Level 5 and it leverages

well-established COBIT-compliant global infrastructure and development

centers, including a comprehensive pool of proprietary methodologies,

tools and best practices.

PrimeSourcing division of i-flex was appraised at CMMI V1.1 Level 5

during February 2005. As part of our continuous process improvement

endeavour, we are in the process of upgrading to the latest version of

CMMI namely V1.2.

i-flex TDMS (Technology Deployment and Management Services) specializes in conceptualization, design, evaluation, implementation and

management of IT infrastructure for financial institutions. These services

are based on best practices such as ITIL (IT Infrastructure Library) and

COBIT (Control Objectives for Information and related Technology)

models, a globally accepted standard for IT management and control

framework and BS7799 (ISO17799).

The i-flex Consulting division offers an end-to-end consulting

partnership, providing comprehensive business and technology solutions

that enable financial services enterprises to improve process efficiencies;

optimize costs; meet risk and compliance requirements; define IT

Architecture; and, manage the transformation process. Consulting

services are offered in the areas of business transformation, risk and

compliance, program management, IT architecture, IT governance and

process improvement. i-flex’s solution approach for financial services

institutions is process-driven and rests on the i-flex Process Framework for Banking (iPFBTM).

The ‘i-flex Process Framework for Banking’, is a banking process

repository created by drawing on i-flex’s domain expertise and best

practices. Organized by process areas and defined in a manner

understandable by the business, iPFB helps banks with process

transformation and a phased migration to an SOA environment.

i-flex BPO completes the gamut of i-flex’s comprehensive offering for

the financial services industry. Part of i-flex Processing Services Limited

(iPSL), a 100 % owned subsidiary of i-flex solutions, i-flex BPO excels in

providing cost-effective and high-quality knowledge processing services

for the banking, capital markets, insurance and asset management

domains. i-flex also provides the ASP services for its products through its

100% owned subsidiary Flexcel International Private Limited (‘Flexcel’).

In addition to providing ASP services, Flexcel also provides value added

services to its customers such as training, testing, hosting, operations,

roll-outs, infrastructure building and support and application support.

i-flex BPO was selected in the Leaders Category for the ‘2007 Global

Outsourcing 100’ by The International Association of Outsourcing

Professionals (IAOP). The Global Outsourcing 100 defines the standard for

excellence in outsourcing service delivery. Earlier, the same organization

had recognized i-flex BPO as one of the ‘Top 50 Global Outsourcers &

Top 30 Global Offshore Vendors’. Dataquest magazine rated i-flex BPO

among the top 10 ‘dream employers’ in the BPO sector in 2007. i-flex

BPO also bagged the ‘Excellence in Gender Inclusivity - Best Emerging

Company’ award at the NASSCOM-India Today Woman Corporate

Awards for Excellence in Gender Inclusivity awards.

Corporate development

Oracle Global (Mauritius) Limited (“Oracle”) ownership interest in the

Company is 80.58 % as on March 31, 2008.

On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) formed

i-flex solutions s.a., Greece to acquire the banking business from Athens

Technology Center SA (‘ATC’).

On November 16, 2007, Castek Software Inc. (“Castek”) became a

wholly owned subsidiary of i-flex America inc. with acquisition of the

balance 23.21% shares of Castek from minority shareholders.

On January 2, 2008, SuperSolutions Corporation a wholly owned

subsidiary of i-flex America inc. was merged with i-flex solutions inc

which is also a wholly owned subsidiary of i-flex America inc.

On March 31 2008, Flexcel (joint venture with HDFC Bank Limited and

its group companies and Lord Krishna Bank) became wholly owned

subsidiary of i-flex solutions ltd with acquisition of balance 60% shares

of Flexcel from its co-venture parties.

Business metrics

Our total revenues in fiscal 2008 were Rs. 17,929.7 million, representing

an increase of 16% from Rs. 15,523.4 million in fiscal 2007. The net

income in fiscal 2008 was Rs. 4,108.7 million, against Rs. 3,546.7

million in fiscal 2007. Our net income margins were 23% in fiscal

years 2008 and 2007 respectively. We define net income margins for

a particular period as the ratio of net income to total revenues during

such period. We had 9,505 employees as on March 31, 2008 as against

7,631 at the end of the previous year in India.




Products business


Year ended March 31

2008 2007

Product revenues 11,035.6 8,909.5 Cost of product revenues (5,018.0) (3,864.2)Sales and marketing expenses (663.4) (627.1)General and administrative expenses (540.4) (444.8)

Depreciation and amortization (267.0) (255.1)Income from operations 4,546.8 3,718.2 Operating margin* 41% 42%

*Operating margin is defined as income from operations from the Products Business

(excluding corporate expenses) as a percentage of total products revenue

Products revenue

Our products revenues represented 62% of the total revenues for fiscal

year ended 2008 and 57% for year ended 2007. Our products revenues

were Rs. 11,035.6 million during the fiscal year ended March 31, 2008;

an increase of 24% from Rs. 8,909.5 million during the fiscal year ended

March 31, 2007.

Products revenues comprise license fees, professional fees for

implementation & enhancement services and annual maintenance

contract (Post Contract Support - PCS) fees for our products.

License fee

Our standard licensing arrangements for products provide the user a

perpetual right to use the product for a pre-defined number of users

and sites upon the payment of a license fee. The license fee is a

function of a variety of quantitative and qualitative factors, including the

number of copies sold, the number of concurrent users supported, the

number and combination of the modules sold and the number of sites

and geographical locations supported. The licenses are non-exclusive,

personal, non-transferable and royalty free.

Implementation fee

Along with licensing of products to customers, customers can also

optionally avail services related to the implementation of products

at customer sites, integration with other customer systems and

enhancement of products to address the specific requirements of

customers. The customer is typically charged a service fee either on

a fixed-price basis or a time and materials basis. Implementation and

enhancement services comprise functional enhancements (if needed),

interface building, implementation planning, data conversion, training

and product walkthroughs and are provided to customers who enter

into licensing arrangements with us and have opted to seek the services

from us.

Annual maintenance contracts fees

We also earn fees relating to the provision of annual maintenance

contracts after the implementation of a product and following the

expiration of the warranty period. Under these agreements, we provide

technical support, maintenance, problem solving and upgrades of the

licensed products. These support agreements are typically entered for a

period of 12 months.

As the revenues from license fees and implementation and enhancement

services rendered by us depend on the number of new customers we add

and the milestones completion and timing of the implementation etc.,

these revenues typically vary from year to year. The annual maintenance

contracts generate steady revenues and would grow to the extent of new

customers coming under Post Contract Support. The percentages of our

revenues from these streams are as follows:

Year Ended March 31

2008 2007

License fees 24% 30%Implementation and customization fees 58% 52%

PCS arrangements 18% 18%Total 100% 100%

Cost of products revenue and operating expenses

The cost of our product revenues consists of costs attributable to the

implementation, enhancement, maintenance and continued development,

including research and development efforts, of our core product offerings

- the FLEXCUBE suite of products, Reveleus and other products. These

costs primarily consist of compensation expenses for all of our software

professionals working in the Products Business, project-related travel

expenses, professional fees paid to software services vendors and the

cost of application software for internal use.

Research and development costs are expensed as incurred. Software

development costs are also expensed as incurred until technological

feasibility is established. Software product development cost incurred

subsequent to the achievement of technological feasibility is not material

and is expensed as incurred.

Our operating expenses include selling and marketing expenses, general

and administrative expenses that consist of commissions payable to

our partners, product advertising, marketing expenses and allocated

overhead expenses associated with support and monitoring functions

such as human resources, facilities and infrastructure expenses, quality

assurance and financial control and depreciation and amortization.

Services business


Year ended March 31

2008 2007

Services revenues 6,894.1 6,613.9Cost of services revenues (5,294.6) (5,020.3)Sales and marketing expenses (109.0) (98.4)General and administrative expenses (457.3) (424.0)

Depreciation and amortization (237.4) (236.1)Income from operations 795.8 835.1Operating margin* 12% 13%

*Operating margin is defined as income from operations from the Services Business

(excluding corporate expenses) as a percentage of total services revenue.

Services revenue

Our services revenues represented 38% of our total revenues for the

fiscal year ended March 31, 2008 and 43% for the fiscal year ended

March 31, 2007. Our services revenues were Rs. 6, 894.1 million in the


fiscal year ended March 31, 2008; an increase of 4% from Rs. 6,631.9

million in the fiscal year ended March 31, 2007.

The contracts relating to our Services Business are either time and

material contracts or fixed price contracts. The percentage of total

services revenues from time and material contracts was 86% in fiscal

2008 and 87% in fiscal 2007, with the remainder of our services

revenues attributable to fixed price contracts.

We provide our services through offshore centers located in India, onsite

teams operating at our customers’ premises and our development centers

located in other parts of the world. Offshore services revenues consists of

revenues from work conducted at our development centers in India and

for Indian customers at their locations. Onsite revenues consist of work

conducted at customer premises outside India and our development

centers outside India. The composition of our onsite and offshore

revenues is determined by the project lifecycle. Typically, the work

involving the design of new systems or relating to a system roll-out would

be conducted onsite, while the core software development, maintenance

and support activity may be conducted offshore. We received 61% and

62% of our services revenues from onsite work and 39% and 38% from

offshore work during the fiscal years 2008 and 2007 respectively.

Our services revenues and profits are also affected by the rate at which

our software professionals are utilized. The utilization rate is calculated

as the percentage billed for our personnel in a particular period to

average number of staff that is considered billable in that same period.

For the purpose of calculating the number of billable staff, we exclude the

personnel that are engaged in management, administration, marketing

support, initial training (six months for personnel without any prior

work experience and three months for personnel with over two years

experience) and personnel allocated to the approved internal investment

projects. Our onsite personnel deployment on projects is based on project

needs and therefore such personnel are fully utilized.

Cost of services revenue and operating expenses

The cost of revenues for services consists primarily of compensation

expenses for our software professionals; cost of application software

for internal use, travel expenses and professional fees paid to software

services vendors. We recognize these costs as incurred. Our operating

expenses include selling, general and administrative expenses and

allocated overhead expenses associated with support and monitoring

functions such as human resources, corporate marketing, information

management systems, quality assurance and financial control and

depreciation.

Geographic breakup of revenues

Our overall revenues continue to be well diversified. The following table represents the percentage breakup of our revenues for Products and Services

business by region:



Products Revenues

Services Revenues

Total Revenues

Products Revenues

Services Revenues

Total Revenues

USA 11% 47% 24% 17% 58% 35%Europe 46% 24% 38% 38% 18% 29%Asia Pacific 19% 22% 20% 20% 18% 19%Middle East, India and Africa 23% 7% 17% 24% 6% 16%Latin America and Caribbean 1% 0% 1% 1% 0% 1%Total 100% 100% 100% 100% 100% 100%

Customer concentration

Our operations and business depend on our relationships with a number

of large customers. Our Revenues from our top ten customers for fiscal

2008 were at 32% and 26% for fiscal year 2007, as a percentage of

our total revenues. The top-ten customers in our Services Business

contributed 42% of the total services revenues and the top ten customers

in the Products Business contributed 36% of the total products revenues

during fiscal 2008.

The percentage of total revenues during fiscal years 2008 and 2007 that

we derived from our largest customer, top five customers and top ten

customers is provided in the accompanying table. In the table, various

affiliates of Citigroup are classified as separate customers and the last

row sets forth the percentage of total revenues we earned from the

various affiliates of Citigroup with respect to our Products and Services

Business individually and with respect to our business taken as a whole.

Products Revenue

Services Revenue

Total Revenues

2008 2007 2008 2007 2008 2007

Top customer 7% 6% 10% 8% 8% 3%Top 5 customers 24% 24% 27% 24% 22% 15%Top 10 customers 36% 37% 42% 38% 32% 26%Citigroup and its affiliates 13% 18% 36% 46% 22% 30%

Trade receivables

Trade receivables as of fiscal March 31, 2008 and 2007 were Rs. 9,033.1

and Rs. 10,419.4 million respectively. Our days sales outstanding (which

is the ratio of sundry debtors to total sales in a particular year multiplied

by 365) for fiscal 2008 and 2007 were approximately 184 and 245

respectively. The Company periodically reviews its account receivables

outstanding as well as the aging, quality of the account receivable,




customer relationship and history of the client. The following table

presents the age profile of our sundry debtors:

Year ended March 31

Period in days 2008 2007

0–180 86% 68%More than 180 14% 32%Total 100% 100%

Foreign currency and treasury operations

A substantial portion of our revenues is generated in foreign currencies

while a majority of our expenses are incurred in Indian Rupees, with

the remaining expenses incurring in U.S. Dollars (USD) and European

currencies.

We follow a conservative philosophy of treasury operations and the

policy is to invest funds substantially in time deposits with well-known

and highly rated Indian and foreign banks. The Company has ensured

adequate controls over asset management, including cash management

operations, credit management and debt collection.

The Company also balances funds in USD accounts or INR deposits

based on the comparative exchange rates, interest rates and currency

requirements. The Company books forward covers from time to time, in

line with its treasury management philosophy.

Income taxes

Currently, we partially benefit from the tax holidays the Government

of India provides to software products and IT services exporters from

specially designated software technology parks in India. As a result of

these incentives, our operations have been subject to relatively lower tax

liabilities in India. These tax incentives currently include a 10-year tax

holiday from Indian corporate income-taxes for the operations of seven

of our Indian facilities. As a result a substantial portion of our pre-tax

income has not been subject to tax in recent years.

The Finance Act, 2000, restricts the ten-year tax holiday available

from the fiscal year in which the undertaking begins to manufacture

or produce, or until fiscal 2010 (as extended in Finance Act, 2008),

whichever is earlier. Accordingly, facilities set up after fiscal 2000 will

enjoy the benefit of the tax holiday only until fiscal 2010. For seven of

our facilities, these benefits expire in stages through 2010. Income taxes

also include foreign taxes representing income taxes payable overseas

by us in various countries.

Employee Stock Purchase Scheme (‘ESPS’)

The Company has adopted the ESPS administered through a Trust

(“the Trust”) to provide equity based incentives to key employees of the

Company. The Trust purchases shares of the Company from market

using the proceeds of loans obtained from the Company. Such shares

are offered by the Trust to employees at an exercise price, which

approximates the fair value on the date of the grant. The employees

can purchase the shares in a phased manner over a period of five years

based on continued employment, until which, the Trust holds the shares

for the benefit of the employee. The employee will be entitled to receive

dividends, bonus, etc., that may be declared by the Company from time

to time for the entire portion of shares held by the Trust on behalf of the

employees.

On acceptance of the offer, the selected employee shall undertake to pay

within ten years from the date of acceptance of the offer the cost of the

shares incurred by the Trust including repayment of the loan relatable

thereto. The repayment of the loan by the Trust to the Company would

be dependent on employee repaying the amount to the Trust. In case

the employee resigns from employment, the rights relating to shares,

which are eligible for exercise, may be purchased by payment of the

exercise price whereas, the balance shares shall be forfeited in favour of

the Trust. The Trustees have the right of recourse against the employee

for any amounts that may remain unpaid on the shares accepted by the

employee. The shares that an employee is eligible to exercise during the

initial five-year period merely go to determine the amount and scheduling

of the loan to be repaid on exercise by the employee. The Trust shall

repay the loan obtained from the Company on receipt of payments from

employees against shares exercised or otherwise.

The Securities and Exchange Board of India (‘SEBI’) has issued the

Employee Stock Option Scheme and Stock Purchase Guidelines, 1999

(‘SEBI guidelines’), which are applicable to stock purchase schemes for

employees of all listed Companies. In accordance with these guidelines,

the excess of market price of the underlying equity shares on the date of

grant of the stock options over the exercise price of the options is to be

recognized in the books of account and amortized over the vesting period.

However, no compensation cost has been recorded as the scheme terms

are fixed and the exercise price equals the market price of the underlying

stock on the grant date.

A summary of the activity in the Company’s ESPS is as follows:



(Number of shares)

Opening balance of unallocated shares 142,116 120,888

Shares forfeited during the year 16,847 21,228Closing balance of unallocated shares 158,963 142,116

Opening balance of allocated shares 355,212 2,080,546

Shares exercised during the year (117,264) (1,704,106)

Shares forfeited during the year (16,847) (21,228)Closing balance of allocated shares 221,101 355,212

Shares eligible for exercise 96,251 164,712Shares not eligible for exercise 124,850 190,500Total allocated shares 221,101 355,212

Employee Stock Option Plan (‘ESOP’)

Pursuant to ESOP scheme approved by the shareholders of the Company

held on August 14, 2001, the Board of Directors, on March 4, 2002

approved the Employees Stock Option Scheme (‘the Scheme’) for issue

of 4,753,600 options to the employees and directors of the Company

and its subsidiaries. According to the Scheme, the Company has granted

4,548,920 options prior to the IPO and 559,000 options at various dates

after IPO. As per the scheme, each of 20% of the total options granted

will vest to the eligible employees and directors on completion of 12, 24,

36, 48 and 60 months and is subject to continued employment of the

employee or director with the company or its subsidiaries. Options have

exercise period of 10 years.


A summary of the activity in the Company’s ESOP is as follows:



Shares arising from options

Weighted average exercise price



Outstanding at beginning of year 530,485 989 2,756,880 280Granted – – 373,000 1,291Exercised (63,332) 632 (2,552,795) (270)Forfeited (35,900) 1,191 (46,600) (826)Outstanding at end of the year 431,253 1,025 530,485 989

Interest and other income

Our interest and other income in the fiscal year ended March 31, 2008,

was Rs. 486.5 million, an increase of 40% over our interest and other

income of Rs. 348.3 million in the fiscal year ended March 31, 2007.

The increase in interest income amounted to Rs. 54.5 million resulting

from additional funds placed with banks and hardening of interest rates

over fiscal 2007. Additionally the foreign exchange gain contributed

an increase of Rs. 81.4 million during the year mainly due to lower

appreciation of Rupee against the US Dollar as compared to fiscal 2007

and sharp depreciation of Rupee against Euro.

Cost of revenues and operating expenses

Cost of revenues

Our cost of revenues in the fiscal year ended March 31, 2008, was

Rs. 10,312.6 million, an increase of 16% over our cost of revenues

of Rs. 8,884.6 million in the fiscal year ended March 31, 2007. Our

cost of revenues as a percentage of total revenues was 58% in the

fiscal year ended March 31, 2008 compared to 57% in the fiscal year

ended March 31, 2007. We invest significantly both in our Products and

Services businesses to meet emerging market requirements and create

the foundation for the growth in future. In the financial year 2007-08,

we continued to invest enhancing the product suite and announced

FLEXCUBE 10.0, which helps financial institutions respond faster to market

dynamics and define and track processes, while ensuring compliance.

We also launched our Private Wealth Management solution – FLEXCUBE

Private Banking. We further strengthened our analytics offering for

financial services which comprises an integrated suite of award-winning

solutions – ReveleusTM and Mantas. In our Services business, we

invested in strengthening our competencies in the payments area. We

also invested in creating a strong offering in MiFID - the new regulatory

compliance area in capital markets in Europe.

Our cost of products revenues in the fiscal year ended March 31, 2008,

was Rs. 5,018.0 million, an increase of 30% over our cost of products

revenues of Rs. 3,864.2 million in the fiscal year ended March 31, 2007.

Our cost of products revenues as a percentage of products revenues was

45% in the fiscal year ended March 31, 2008, compared to 43% in the

fiscal year ended March 31, 2007. This increase, as stated above was

largely attributable to the higher investments in the product business.

Our cost of services revenues in the fiscal year ended March 31, 2008,

was Rs. 5,294.6 million, an increase of 5% over our cost of services


The cost of services revenues as a percentage of services revenues was

77% in the fiscal year ended March 31, 2008 compared to 76% in the

fiscal year ended March 31, 2007.

The weighted average share price for the period over which stock options

was exercised was Rs. 1,890. The details of options unvested and options

vested and exercisable as on March 31, 2008 are as follows:

Range of exercise

prices

Shares Weighted average exercise

price (Rs.)

Weighted average

remaining contractual life (Years)

Options unvested 419-560 30,000 547 6.3709-709 6,000 709 7.2

1,291-1,291 246,800 1,291 8.1Options vested and exercisable 265-265 51,000 265 3.9

419-560 45,003 480 5.31,291-1,291 52,450 1,291 8.1

431,253 1,025 7.2

Analysis of our financial results

Comparison of fiscal 2008 with fiscal 2007

Revenues

Our total revenues in the fiscal year ended March 31, 2008, were

Rs. 17,929.7 million, an increase of 16% over our total revenues of

Rs. 15,523.4 million in the fiscal year ended March 31, 2007. The

increase in revenues was attributable to a 24% increase in the revenues

from Products Business and a 4% increase in the revenues from our

Services Business.

Products revenues

Our products revenues in the fiscal year ended March 31, 2008, were

Rs. 11,035.6 million, an increase of 24% over our products revenues

of Rs. 8,909.5 million in the fiscal year ended March 31, 2007 on the

strength of large customer wins in Europe and ASPAC. The revenues

from license fees comprised 24% of the revenues, implementation fees

comprised 58% and Annual Maintenance Contracts comprised 18% of

the revenues for the fiscal 2008.

Services revenues

Our services revenues represented 38% and 43% of our total revenues in

the fiscal year ended March 31, 2008 and 2007. Our services revenues

were Rs. 6,894.1 million in the fiscal year ended March 31, 2008,

an increase of 4% from Rs. 6,613.9 million in the fiscal year ended

March 31, 2007. Revenues from time and material contracts comprised

86% of the revenues and fixed price contracts comprised 14% for the

fiscal 2008.




Sales and marketing expenses

Our sales and marketing expenses in the fiscal year ended March 31, 2008,

were Rs. 772.4 million, an increase of 6% over our sales and marketing

expenses of Rs. 725.5 million in the fiscal year ended March 31, 2007.

Our sales and marketing expenses as a percentage of total revenues was

4% for the fiscal year ended March 31, 2008 and 5% in the fiscal year

ended March 31, 2007.

Our sales and marketing expenses for our Products Business in the fiscal

year ended March 31, 2008, were Rs. 663.4 million, an increase of

6% over our sales and marketing expenses for our Products Business

of Rs. 627.1 million in the fiscal year ended March 31, 2007. Sales

and marketing expenses for our Products Business as a percentage of

products revenues was at 6% in the fiscal year ended March 31, 2008

compared to 7% in the fiscal year ended March 31, 2007.

Our sales and marketing expenses for our Services Business in the fiscal

year ended March 31, 2008 were Rs. 109.0 million, an increase of 11%

over our sales and marketing expenses for our Services Business of

Rs. 98.4 million in the fiscal year ended March 31, 2007. Sales and

marketing expenses for our Services Business as a percentage of services

revenues increased from 1% in the fiscal year ended March 31, 2007 to

2% in the fiscal year ended March 31, 2008.

General and administrative expenses

Our general and administrative expenses in the fiscal year ended

March 31, 2008 were Rs. 2,292.8 million, an increase of 22% over

our general and administrative expenses of Rs. 1,885.8 million in the

fiscal year ended March 31, 2007. This increase is attributable to

expansion of our existing facilities and creation of new Development

Centers to meet the growth requirements. Our general and administrative

expenses as a percentage of total revenues was at 13% in the fiscal

year ended March 31, 2008 compared to 12% in the fiscal year ended

March 31, 2007.

General and administrative expenses for our Products Business in the

fiscal year ended March 31, 2008, were Rs. 540.3 million, an increase

of 21% over general and administrative expenses for our Products

Business of Rs. 444.8 million in the fiscal year ended March 31, 2007.

Our general and administrative expenses for our Products Business as a

percentage of products revenues were 5% both in the fiscal year ended

March 31, 2008 and March 31, 2007.

General and administrative expenses for our Services Business in the fiscal

year ended March 31, 2008, were Rs. 457.3 million, an increase of 8%

over our general and administrative expenses for our Services Business

of Rs. 424.0 million in the fiscal year ended March 31, 2007. Our general

and administrative expenses for our Services Business as a percentage

of services revenues was 7% in the fiscal year ended March 31, 2008,


Income taxes

Our provision for income taxes in the fiscal year ended March 31, 2008,

was Rs. 206.7 million a decrease of 22% over our provision for income

taxes of Rs. 263.7 million in the fiscal year ended March 31, 2007. Our

effective tax rate was 5% in the fiscal year ended March 31, 2008 as

compared to 7% in the fiscal year ended March 31, 2007. The decrease

in tax rate is attributable to the higher generation of revenues from units

availing tax holidays in India.

Income from operations and net income

As a result of the foregoing factors, income from operations increased

by 14% to Rs. 3,948.9 million in fiscal 2008 from Rs. 3,462.2 million

in fiscal 2007 and net income increased by 16% to Rs. 4,108.7 million

in fiscal 2008 from Rs. 3,546.7 million in fiscal 2007. We define net

income margins for a particular period as the ratio of net income to total

revenues during such period.

Liquidity and capital resources

Our capital requirements relate primarily to financing the growth of our

business. We have historically financed the majority of our working capital,

capital expenditure and other requirements through our operating cash

flow. During fiscal 2008 and 2007 we generated cash from operations

Rs. 3,942.3 million and Rs. 805.6 million respectively.

i-flex is a zero debt company. We expect that our primary financing

requirements in the future will be capital expenditure and working

capital requirements in connection with the expansion of our business.

We believe that the cash generated from operations will be sufficient to

satisfy our currently foreseeable capital expenditure and working capital

requirements.

Human capital

We recruit graduates from leading engineering and management

institutions. We also hire functional experts from the banking industry.

We had a net addition of 1,874 employees during the fiscal year taking

our employee strength to 9,505 employees as on March 31, 2008. The

blend of functional knowledge and technical expertise, coupled with i-flex

training and experience make our employees unique.

We enjoy cordial relationships with our employees and endeavour to

give them an excellent, professionally rewarding and enriching work

environment. We operate an effective performance management system

with a focus on employee development. This measures key result

areas, competencies and training needs, ensuring all-round employee

development.

Risks and concerns

Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk exposures are due to the following:

– foreign exchange rate fluctuations, principally relating to the

fluctuation of the U.S. Dollar to the Indian Rupee;

– fluctuations in interest rates; and

– fluctuations in the value of our investments.

As of March 31, 2008, we had Cash and Bank Balances of Rs. 6,400.9

million, out of which Rs. 5,513.1 million was in interest-bearing bank

deposits. Consequently, we face an exposure on account of fluctuation

in interest rates. These funds were invested in bank deposits of longer

maturity (more than 90 days) to earn a higher rate of interest income.

A substantial portion of our revenues is generated in foreign currencies,

while a majority of our expenses are incurred in Indian Rupees. Our

functional currency for Indian operations is the Indian Rupee. We

expect the majority of our revenues will continue to be generated in

foreign currencies for the foreseeable future and a significant portion

of our expenses, including personnel costs and capital and operating

expenditure, to continue to be incurred in Indian Rupees.


In addition, we face normal business risks such as global competition

and country risks pertaining to countries that we operate in.

Integration of mergers and acquisitions

i-flex has acquired companies in the past, i.e., SuperSolutions Corporation,

USA, ISP Internet Mauritius Company, Mauritius, Castek Software Inc.,

Canada, Mantas inc., USA and i-flex Consulting (Asia Pacific) Pte Ltd.,

Singapore. During the year, we acquired i-flex solutions s.a. and the

balance stake in Castek Software Inc. and Flexcel.

These mergers and acquisitions involve inherent risks, including:

– unforeseen contingent risks or latent liabilities relating to these

business that may only become apparent after the merger or

acquisition is finalized;

– integration and management of the operations, sales and marketing,

personnel and systems;

The company, as part of its policies, ensures that the companies acquired

are successfully integrated into the mainstream business.

SWOT analysis

Strengths:

– Comprehensive solutions portfolio.

– World-class technology

– Deep domain expertise

– Extensive global client base

– Superior quality and cost-efficient delivery

– High quality manpower resources

– Strong R&D capability, well linked with business

Weaknesses:

– Exposure to various economies

Opportunities:

– India is a favoured outsourcing destination

– Increasing momentum in purchasing core banking systems by large

and global financial institutions

– Entry into hitherto untapped markets

– Expanding solutions portfolio and entry into new market segments

– consumer finance, business analytics, Basel II, Anti-Money

Laundering, Private wealth management, Islamic banking, among

others

– Need for banks to improve performance and efficiency through

effective use of information technology solutions

Threats:

– Increasing competition

– Legislative and visa related restrictions

Outlook

The worldwide market for financial services is transforming at a rapid

pace. New asset classes such as private equity and hedge funds are

attracting investors and shifting the focus within capital markets.

The payments space, a major source of revenues and profit, is being

restructured, thus altering the fundamental dynamics of the banking

industry. Financial services institutions are also leveraging all available

technologies to offer services on a ‘self service’ approach leading to

business and technology innovation.

Emerging markets are becoming increasingly important sources of growth

for firms in mature economies. Global financial institutions will need

to excel in areas such as off shoring, taxation and financial reporting,

service and process innovation and in internal controls to sustain their

growth and profitability.

With a process-driven approach based on a Service-Oriented Architecture,

your company has the distinct advantage of offering banks the combined

benefits of interoperability, extensibility and standardization. Jointly with

Oracle, your company provides best-of-breed functionality for financial


to market dynamics in a fiercely challenging business environment.

Encompassing retail, corporate and investment banking, funds, cash

management, trade, treasury, payments, lending, private wealth

management, asset management and business analytics, among others,

these solutions help financial institutions drive innovation and become

‘model enterprises’ of the future.

Acquisitions

a. i-flex solutions s.a.

On July 2, 2007, i-flex b.v. acquired 90% shares in banking business

from ATC. The acquisition was structured by way of transfer of all

contracts, employees and fixed assets of banking business from ATC to

a newly formed entity, i-flex solutions s.a., Greece.

b. Castek Software Inc.

In November 2007, i-flex America inc. entered into an agreement to

acquire remaining equity shares in Castek from minority shareholders.

The transaction was completed in April 2008.

c. Flexcel International Private Limited

On March 31, 2008, Flexcel became a wholly owned subsidiary of

i-flex solutions ltd with acquisition of balance 60% shares of Flexcel from

i-flex’s co-venture parties.

Internal control systems and their adequacy

The Company has in place adequate systems of internal control and

documented procedures covering all financial and operating functions.

These systems have been designed to provide reasonable assurance with

regard to maintaining proper accounting controls, monitoring economy

and efficiency of operations, protecting assets from unauthorized use or

losses and ensuring reliability of financial and operational information.

The Company continuously strives to align all its processes and controls

with global best practices.




Reconciliation Statement of profit as per the Indian GAAP unconsolidated andIndian GAAP consolidated

(All amounts in thousands of Indian Rupees)

Year endedMarch 31, 2008


Net income as per Indian GAAP unconsolidated profit and loss account 4,108,745 3,546,739

AddRevenue of subsidiaries, neti-flex solutions b.v. 1,250,487 846,648 i-flex solutions pte ltd – consolidated 951,496 635,994 i-flex America inc. – consolidated 3,127,167 3,164,578 ISP Internet Mauritius Company – consolidated 467,633 404,956 i-flex Processing Services Ltd. – –

5,796,783 5,052,176

Other income from subsidiaries, net 152,345 11,167 5,949,128 5,063,343

LessExpenses of subsidiaries, neti-flex solutions b.v. (864,966) (533,459)i-flex solutions pte ltd – consolidated (793,806) (428,689)i-flex America inc. – consolidated (3,791,658) (3,369,984)ISP Internet Mauritius Company – consolidated (573,934) (564,314)i-flex Processing Services Ltd. 1,572 –

(73,664) 166,897

Provision for diminution in value of investment 120,000 –

Profit after consolidating subsidiaries 4,155,082 3,713,636 Add Proportionate Revenue of joint venture, net 75,860 33,763 Proportionate Other income from joint venture, net 830 96

76,690 33,859 LessProportionate Expenses of joint ventures, net (71,757) (32,321)

(71,757) (32,321)

Profit on equity investment (4,128) 7,622

Net income as per Indian GAAP consolidated profit and loss account 4,155,886 3,722,796


Auditors’ report

To

The Members of i-flex Solutions Limited

1. We have audited the attached balance sheet of i-flex Solutions

Limited (‘the Company’) as at March 31, 2008 and also the profit

and loss account and the cash flow statement for the year ended

on that date annexed thereto. 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 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 (Auditors’ Report) Order, 2003 (as

amended) (‘the Order’) issued by the Central Government of India

in terms of sub-section (4A) of Section 227 of the Companies Act,

1956 (‘the Act’), we enclose 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 above, we

report that:

i. 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;

ii. 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;

iii. The balance sheet, profit and loss account and cash flow

statement dealt with by this report are in agreement with the

books of account;

iv. 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.

v. On the basis of the written representations received from the

directors, as on March 31, 2008, and taken on record by

the Board of Directors, we report that none of the directors is

disqualified as on March 31, 2008 from being appointed as a

director in terms of clause (g) of sub-section (1) of Section 274

of the Act.

vi. In our opinion and to the best of our information and according

to the explanations given to us, the said accounts give the

information required by the Act, in the manner so required

and give a true and fair view in conformity with the accounting

principles generally accepted in India;

a) in the case of the balance sheet, of the state of affairs of

the Company as at March 31, 2008;

b) in the case of the profit and loss account, of the profit for

the year ended on that date; and

c) in the case of cash flow statement, of the cash flows for

the year ended on that date.




Partner


Mumbai, India

May 5, 2008




Annexure referred to in paragraph 3 of our report of even date Re: i-flex solutions ltd

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) Fixed assets have been physically verified by the management during the year and as informed, no material discrepancies were identified on such verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) Due to the nature of its business, clause (ii) of the Order, relating to physical verification of inventory is not applicable to the Company.

(iii) (a) As informed, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Act.

(b) As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Act.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system 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. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. Due to the nature of its business the Company does not purchase any inventory.

(v) According to the information and explanations provided by the management, we are of the opinion that there are no contracts and arrangements that need to be entered into the register maintained under Section 301 of the Act.

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

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) To the best of our knowledge and as explained, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for the products of the Company.

(ix) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, cess and other material statutory dues applicable to it though there have been considerable delays in few cases of fringe benefit tax and stamp duty payment. As explained to us, the Company did not have any dues of excise duty.

(b) According to the information and explanations given to us, undisputed dues in respect of provident fund, investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, cess and other undisputed statutory dues which were outstanding, at the year end, for a period of more than six months from the date they became payable are as follows:

(c) According to the information and explanation given to us, there are no dues of income tax, sales-tax, wealth tax, service tax, custom duty, excise duty and cess which have not been deposited on account of any dispute.

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) The Company did not have any dues to any financial institution, bank or debenture holder during the year.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The Company did not have any term loans outstanding during the year.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Act.

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

(xx) We have verified that the end use of money raised by public issue is as disclosed in the notes to the financial statements.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.




Partner


Mumbai, India

May 5, 2008

Name of the statute

Nature of the dues

Amount (Rs.)

Period to which the amount relates

Due Date Date of Payment

Income Tax Act, 1961

Fringe benefit tax

15,393,104 April 2005 to March 2006

Various dates

Not yet paid

9,102,918 April 2006 to March 2007

Various dates

Not yet paid



Schedules 2008 2007Sources of fundsShareholders' funds Share capital 1 418,737 416,443 Share application money pending allotment 265 401,679 Reserves and surplus 2 27,707,489 23,166,636

28,126,491 23,984,758

Application of fundsFixed assets 3Cost 4,030,206 3,232,748 Less: Accumulated depreciation and amortization 2,226,083 1,739,532 Net book value 1,804,123 1,493,216 Capital work-in-progress and advances 1,310,154 1,270,678

3,114,277 2,763,894 Investments 4 7,234,149 6,092,200

Deferred tax assets 5 221,714 131,351

Current assets, loans and advances 6 Sundry debtors 9,033,141 10,419,437 Cash and bank balances 6,400,880 5,007,470 Other current assets 976,894 987,275 Loans and advances 5,858,496 4,866,857

22,269,411 21,281,039 Less: Current liabilities and provisions 7Current liabilities 4,279,726 5,930,401 Provisions 433,334 353,325

4,713,060 6,283,726

Net current assets 17,556,351 14,997,313

28,126,491 23,984,758

Notes to accounts 15

The schedules referred to above and notes to accounts form an integral part of the balance sheet.

Balance sheet as at March 31

As per our report of even date For and on behalf of the Board of Directors



N R K Raman

Managing Director

& Chief Executive Officer

Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008




(All amounts in thousands of Indian Rupees, except per share data)

Schedules 2008 2007

Revenue 8 17,929,718 15,523,444

Cost of revenue 9 (10,312,571) (8,884,576)Gross profit 7,617,147 6,638,868

Operating expensesSelling and marketing expenses 10 (772,427) (725,502)General and administrative expenses 11 (2,292,755) (1,885,836)Depreciation and amortization (603,095) (565,351)Income from operations 3,948,870 3,462,179 Provision for diminution in value of investment (120,000) –Non-operating income (expenses)Interest income 12 419,974 365,535 Other income (expenses), net 13 66,556 (17,232)Income before provision for taxes 4,315,400 3,810,482

Provision for taxesCurrent tax (543,981) (251,032)MAT credit 362,605 –Deferred tax 90,365 60,589 Fringe benefit tax [Refer Note 15 of Schedule 15] (115,644) (73,300)Net income for the year 4,108,745 3,546,739

Profit and loss account, beginning of the year 4,009,569 464,241 Amount available for appropriation 8,118,314 4,010,980

Appropriations:Dividend paid on stock options exercised – (1,237)Tax on dividend paid on stock options exercised – (174)Surplus carried to Balance Sheet 8,118,314 4,009,569

Earnings per share of Rs. 5/- each (in Rs.) 14 Basic 49.10 44.82 Diluted 49.02 43.60


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

Profit and loss account for the year ended March 31




N R K Raman

Managing Director


Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008


(All amounts in thousands of Indian Rupees, except share data)

2008 2007

Schedule 1: Share capital

Authorized:100,000,000 (March 31, 2007 – 100,000,000) equity shares of Rs. 5/- each 500,000 500,000

Issued, subscribed and fully paid up:83,747,441 (March 31, 2007 – 83,288,580) equity shares of Rs. 5/- each 418,737 416,443

a. Of the above, 67,481,698 (March 31, 2007 – 67,481,698) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).b. Of the above, 62,121,800 (March 31, 2007 – 62,121,800) equity shares of Rs. 5/- each had been issued as fully paid up bonus shares by

capitalizing the securities premium account.c. Refer Note 6 (b) of Schedule 15 for options granted for unissued equity shares.

Schedule 2: Reserves and surplus

Securities premiumBalance, beginning of the year 9,011,876 2,543,056 Received during the year 439,409 6,468,820 Share issue expenses (Refer Note 14 of Schedule 15) (7,301) –Balance, end of the year 9,443,984 9,011,876

General reserveBalance, beginning of the year 10,145,191 10,238,569 Adjustment for employee benefits provision – (93,378)Balance, end of the year 10,145,191 10,145,191

Profit and loss account 8,118,314 4,009,569

27,707,489 23,166,636

Schedules annexed to and forming part of the accountsas at March 31




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As atMarch 31, 2008

As atMarch 31, 2007

Schedule 4: Investments

a. Long term investments (at cost)

i. Trade (unquoted)EBZ Online Private Limited 242,240 (March 31, 2007 – 242,240) equity shares of Rs. 10/- each, fully paid-up 45,000 45,000 Less: Provision for diminution in value of investment (45,000) (45,000)

– –

Flexcel International Private Limited [Refer Note 13 (a) of Schedule 15](March 31, 2007 – 2,068,000) equity shares of Rs. 10/- each, fully paid-up – 20,680 Less: Provision for diminution in value of investment – (20,680)

– –

Login SA 33,000 (March 31, 2007 – 33,000) equity shares of EUR 2/- each, fully paid up 6,593 6,593

ii. Non trade (unquoted)National Savings Certificate – VIII issue 131 131

iii. Non trade (quoted)6.75% Tax Free US-64 Bonds 331,225 (March 31, 2007 – 331,225) Bonds of Rs. 100/- each, fully paid-up 33,123 33,123

iv. In wholly owned subsidiaries (unquoted)Flexcel International Private Limited [Refer Note 13 (a) of Schedule 15]5,170,000 (March 31, 2007 – 2,068,000) equity shares of Rs. 10/- each, fully paid-up 46,104 –Less: Provision for diminution in value of investment (20,680) –

25,424 –i-flex solutions b.v. 140,000 (March 31, 2007 – 5,185) equity shares of EUR 100/- each, fully paid-up 776,308 25,119

i-flex solutions pte ltd250,000 (March 31, 2007 – 250,000) equity shares of SGD 1/- each, fully paid up 6,626 6,626

i-flex America inc. [Refer Note 13 (b) of Schedule 15]1 (March 31, 2007 – 1) equity share of USD 0.01 each, fully paid up 3,452,256 2,979,316 100 (March 31, 2007 –100) Series A Convertible Participating Preference shares of USD 0.01 each, fully paid up 2,839,487 2,839,487

ISP Internet Mauritius Company [Refer Note 13 (c) of Schedule 15]30,000 (March 31, 2007 – 30,000) equity shares of USD 1/- each, fully paid up 192,115 192,115 Less: Provision for diminution in value of investment (120,000) –

72,115 192,115 i-flex Processing Services Limited 1,300,000 (March 31, 2007 – 50,000) equity shares of Rs. 10/- each, fully paid up 13,000 500

b. Current investment (cost or fair value whichever is lower)

Non trade (quoted)

9% Dhanalakshmi Bank Bonds Series VI10 (March 31, 2007 – 10) bonds of Rs. 1,000,000 each, fully paid up 9,086 9,190

7,234,149 6,092,200

Aggregate cost of quoted investments 42,209 42,313 Aggregate market value of quoted investments 42,689 42,133 Aggregate cost of unquoted investments 7,191,940 6,049,887




As atMarch 31, 2008

As atMarch 31, 2007

Schedule 5: Deferred tax asset

Difference between book and tax depreciation 196,177 124,351 Provision for doubtful debts 25,537 7,000

221,714 131,351

Schedule 6: Current assets, loans and advances

a. Sundry debtors (unsecured)

Debts outstanding for a period exceeding six months:Considered good 1,295,812 3,286,784 Considered doubtful 293,255 148,735

1,589,067 3,435,519 Other debts - considered good 7,737,329 7,132,653

9,326,396 10,568,172 Less: Provision for doubtful debts (293,255) (148,735)

9,033,141 10,419,437

Amount due from subsidiaries [Refer Note 9 of Schedule 15] 6,324,288 7,835,843

b. Cash and bank balances

Cash in hand 527 985 Cheques on hand 9,748 –Balances with scheduled banks:

Current accounts in foreign currency 756,912 455,269 Other current accounts 83,773 44,813 Deposit accounts 5,513,108 3,699,052 Deposit amount ofUnutilized IPO funds – 287,190 Preferential issue – 497,263 Margin money deposit 7,067 6,067 Unclaimed dividend accounts 1,807 2,065

Balances with non-scheduled banks: Current accounts in foreign currency 27,591 14,386 Deposit account in foreign currency 347 380

6,400,880 5,007,470

Balances with non-scheduled banks:Citibank, Dubai current account 244 2,850 Citibank, Dubai deposit account 347 380 Citibank, Moscow current accounts 2,398 2,889 Central Bank, Libya current account 24,949 8,647

Maximum balance held during the year:Citibank, Dubai current account 8,361 5,028 Citibank, Dubai deposit account 384 422 Citibank, Moscow current accounts 17,316 13,437 Central Bank, Libya current account 24,949 8,647

c. Other current assets

Interest accrued on:Bank deposits 65,220 71,013 Bonds 746 741

Loan to subsidiaries [Refer Note 9 of Schedule 15] 76,895 59,668 Unbilled revenue 657,727 771,243 Gross investment in lease 32,215 42,118 Contract work in progress 144,091 42,492

976,894 987,275


As atMarch 31, 2008

As atMarch 31, 2007

d. Loans and advances (unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received:Loan to subsidiaries [Refer Note 9 and Note 13 of Schedule 15] 936,682 864,788 Amount recoverable from subsidiaries [Refer Note 9 of Schedule 15] 81,647 2,842 Premises and other deposits 3,087,257 2,446,721 Prepaid expenses 239,544 260,359 Advance tax, net of provision for taxes 839,471 769,037 MAT credit entitlement 362,605 –Forward contract receivable 86,563 305,630 Other advances 224,727 217,480

5,858,496 4,866,857

Schedule 7: Current liabilities and provisions

a. Current liabilities

Amount due to subsidiaries [Refer Note 9 of Schedule 15] 832,840 2,759,670 Accrued expenses 1,617,449 1,271,190 Deferred revenues 1,509,086 1,576,427 Accounts payable 52,652 61,364 Advances from customers 30,071 19,832 Investor Education and Protection Fund to be credited by unclaimed dividends* 1,807 2,065 Unearned finance income 10,163 16,234 Other current liabilities 225,658 223,619

4,279,726 5,930,401

Amounts due to Micro, Medium and Small Enterprises – – (The identification of Micro, Medium and Small Enterprises are based on Management’s knowledge of their status)

* There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.

b. Provisions

Provision for gratuity 173,771 127,013 Provision for compensated absence 259,563 226,312

433,334 353,325



Schedule 8: Revenue

Product licenses and related activities 11,035,574 8,909,532 IT solutions and consulting services 6,894,144 6,613,912

17,929,718 15,523,444

Schedule 9: Cost of revenue

Employee costs 7,588,403 6,258,717 Travel related expenses (net of recoveries) 1,593,286 1,629,208 Professional fees 640,459 535,618 Application software 490,423 461,033

10,312,571 8,884,576

Schedule 10: Selling and marketing expenses

Employee costs 285,493 217,214 Professional fees 113,452 148,465 Traveling expenses 113,933 137,520 Advertising expenses 27,693 55,075 Provision for doubtful debts 152,714 74,063 Other expenses 79,142 93,165

772,427 725,502






Schedule 11: General and administrative expenses

Employee costs 826,761 687,214 Rent 439,125 294,944 Professional fees 264,579 201,297 Power 188,046 127,359 Communication expenses 148,543 135,864 Traveling expenses 71,293 77,684 Other expenses 354,408 361,474

2,292,755 1,885,836

Schedule 12: Interest income

Interest on:Bank deposits 376,333 328,643

(Includes tax deducted at source of Rs. 83,643 (March 31, 2007 – 74,589)Income tax refund 12,079 –Bonds 3,141 3,639

(Includes tax deducted at source of Rs. 204 (March 31, 2007 – 212)Loan to subsidiaries 22,193 27,782 Lease assets 6,071 5,274 Loans to employees 157 197

419,974 365,535

Schedule 13: Other income (expenses)

Foreign exchange gain/(loss), net 63,429 (17,963)Profit/(loss) on sale of fixed assets, net 443 (4,554)Miscellaneous income 2,684 5,285

66,556 (17,232)

Schedule 14: Reconciliation of basic and diluted equity shares used in computing earnings per share

Number of shares

Weighted average shares outstanding for basic earnings per share 83,686,985 79,125,096 Add: Effect of dilutive stock options 129,381 2,230,666 Weighted average shares outstanding for diluted earnings per share 83,816,366 81,355,762

Schedule 15: Notes to accounts

1. Background and nature of operations

i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India

with limited liability on September 27, 1989. The Company is principally

engaged in the business of providing information technology solutions

and business process outsourcing services to the financial services

industry worldwide. i-flex has a suite of banking products, which caters

to the needs of corporate, retail, investment banking, treasury operations

and data warehousing.

i-flex is a subsidiary of Oracle with Oracle having 80.58% ownership

interest in the Company as at March 31, 2008.

The Company at its Board Meeting held on April 4, 2008 passed a

resolution to change its name to “Oracle Financial Services Limited”.

This change will be effective after all necessary regulatory filings and

approvals are obtained by the Company.

2. Summary of significant accounting policies

a. Basis of presentation

The financial statements are prepared under the historical cost

convention, on the accrual basis of accounting, in conformity with

accounting principles generally accepted in India and complying in all

material respects the notified Accounting Standards by Companies

(Accounting Standards) Rules, 2006 and the relevant provisions of the

Companies Act, 1956 (‘the Act’). The accounting policies applied by

the Company are consistent with those used in the previous years. The

financial statements are presented in the general format specified in

Schedule VI to the Act.

The significant accounting policies adopted by the Company, in respect

of the financial statements are set out as below:


b. Use of estimates

The preparation of financial statements in conformity with generally

accepted accounting principles requires management to make

estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent liabilities at the date of the

financial statements and the results of operations during the reporting

year end. Although these estimates are based upon management’s best

knowledge of current events and actions, actual results could differ from

these estimates.

c. Fixed assets, depreciation and amortization

Fixed assets including assets under finance lease arrangements are

stated at cost less accumulated depreciation. The Company capitalizes

all direct costs relating to the acquisition and installation of fixed assets.

Advances paid towards the acquisition of fixed assets outstanding at each

balance sheet date and the cost of fixed assets not ready to use before

such date are disclosed under ‘Capital work-in-progress and advances’.

Customer contracts and product IPRs are capitalized based on a fair

value. The Company records the difference between consideration paid

to acquire these contracts and the fair value of assets and liabilities

acquired as goodwill.

The Company purchases certain specific-use application software, which

is in ready to use condition, for internal use. It is estimated that such

software has a relatively short useful life, usually less than one year.

The Company, therefore, charges to income the cost of acquiring such

software.

Depreciation and amortization are computed using straight-line method,

at the rates specified in Schedule XIV to the Act or based on the

estimated useful life of assets, whichever is higher. The estimated useful

life considered for depreciation of fixed assets are as follows:

Asset description Asset life (in years)

Tangible assetsImprovement of leasehold premises

Lesser of estimated useful life(7 years) or lease term

Buildings 20Computer equipments 3Electrical and office equipments 2 – 7Furniture and fixtures 2 – 7Leased vehicles Lesser of estimated useful life

(3 – 5 years) or lease termIntangible assetsGoodwill on acquisition 3 – 5Customer contract 5Product IPR 5PeopleSoft ERP 5

The carrying amounts of assets are reviewed at each balance sheet date

if there is any indication of impairment based on internal/external factors.

An impairment loss is recognized wherever the carrying amount of an

asset exceeds its recoverable amount. The recoverable amount is the

greater of the assets net selling price and value in use. In assessing

value in use, the estimated future cash flows are discounted to their

present value at the weighted average cost of capital. After impairment,

depreciation is provided on the revised carrying amount of the asset over

its remaining useful life.

d. Investments

Investments that are readily realizable and intended to be held for

not more than a year are classified as current investments. All other

investments are classified as long-term investments. Trade investments

refer to the investments made with the aim of enhancing the Company’s

business interests in providing information technology solutions to the

financial services industry worldwide. Long term investments are stated

at cost less provision for diminution on account of other than temporary

decline in the value of the investment.

Current investments are stated at lower of cost and fair value determined

on an individual investment basis.

e. Foreign currency transactions

Foreign currency transactions during the year are recorded at the

exchange rates prevailing on the date of the transaction. Foreign

currency denominated monetary items are translated into Rupees

at the closing rates of exchange prevailing at the date of the balance

sheet. Non-monetary items, which are carried in terms of historical cost

denominated in a foreign currency, are reported using the exchange

rate at the date of the transaction. Exchange differences arising on the

settlement of monetary items or on reporting company’s monetary items

at rates different from those at which they were initially recorded or

reported in previous financial statements are recognized as income or

expenses in the year in which they arise.

In respect of forward exchange contracts entered into by the Company

to hedge the foreign currency risk, the premium or discount arising at

the inception of forward exchange contracts is amortized as expense

or income over the life of the contract. Exchange differences on such

contracts are recognized in the statement of profit and loss in the

year in which the exchange rates change. Any profit or loss arising on

cancellation or renewal of forward exchange contract is recognized as

income or expense for the year. The Company uses foreign currency

option contracts to hedge its exposure to movement in foreign exchange

rates. Any profit or loss arising on settlement or expiry of option contracts

is recognized as income or expense for the year.

f. Revenue recognition

Revenue is recognized as follows:

Product licenses and related revenue

– License fees are recognized, on delivery and subsequent milestone

schedule as per the terms of the contract with the end user.

– Implementation/Enhancement services are recognized as services

are provided, when arrangements are on a time and material

basis. Revenue for fixed price contracts are recognized using the

proportionate completion method to the extent of achievement of

customer certified milestones.

– Product maintenance revenue is recognized, over the period of the

maintenance contract.

IT solutions and consulting services

Revenue from IT solutions and consulting services are recognized as

services are provided, when arrangements are on a time and material




basis. Revenue from fixed price contracts are recognized using the

proportionate completion method to the extent of achievement of customer

certified milestones. Proportionate completion is measured based upon

the efforts incurred to date in relation to the total estimated efforts to

complete the contract. If the proportionate completion efforts are higher

than the related contractual milestone requiring customer acceptance,

revenue is recognized only to the extent customer acceptance has been

received.

The Company monitors estimates of total contract revenue and cost on

a routine basis throughout the delivery period. The cumulative impact

of any change in estimates of the contract revenue or costs is reflected

in the period in which the changes become known. In the event that a

loss is anticipated on a particular contract, provision is made for the

estimated loss.

Revenue in excess of billings is classified as unbilled revenue while billing

in excess of earnings is classified as deferred revenue. Contractually

recoverable expenses are deferred while other costs are expensed off in

the year in which it is incurred.

Reimbursable expenses for projects are invoiced separately to customers

and although reflected as sundry debtors to the extent outstanding as at

year end, are not included as revenue or expense.

Interest income

Interest income is recognized on a time proportion basis taking into

account the amount outstanding and the rate applicable.

g. Research and development expenses for software products


product development costs are expensed as incurred until technological

feasibility is established. Software product development costs incurred

subsequent to the achievement of technological feasibility are not

material and are expensed as incurred.

h. Employee benefits

The Company’s employee benefits primarily cover provident fund,

superannuation, gratuity and compensated absences.

Provident fund and Superannuation fund are defined contribution schemes

and the Company has no further obligation beyond the contributions

made to the fund. Contributions are charged to profit and loss account in

the year in which they accrue.

Gratuity liability is a defined benefit obligation and is recorded based on

actuarial valuation on projected unit credit method made at the end of

the year. The gratuity liability and net periodic gratuity cost is actuarially

determined after considering discount rates, expected long term return

on plan assets and increase in compensation levels. All actuarial gain/

loss are immediately recorded to the profit and loss account and are

not deferred. The Company makes contributions to a fund administered

and managed by the Life Insurance Corporation of India (LIC) to fund the

gratuity liability. Under this scheme, the obligation to pay gratuity remains

with the Company, although LIC administers the scheme.

Short term compensated absences are provided for based on estimates.

Long term compensated absences are provided for based on actuarial

valuation. The actuarial valuation is done as per projected unit credit

method.

i. Leases

a. Where the Company is the lessee

Lease of assets under which substantially all the risks and benefits

incidental to ownership are transferred to the Company are classified

as finance leases. These assets are capitalized at the lower of the fair

value and present value of the minimum lease payments at the inception

of the lease term and disclosed as leased assets. Lease payments are

apportioned between the finance charges and reduction of the lease

liability based on the implicit rate of return. Finance charges are charged

directly against income. Lease management fees, legal charges and

other initial direct costs are capitalized

Leases of assets under which all the risks and rewards of ownership are

effectively retained by the lessor are classified as operating leases. Lease

payments under operating leases are recognized as an expense on a

straight-line basis over the lease term.

b. Where the Company is the lessor

Assets given under a finance lease are recognized as a receivable at

an amount equal to the net investment in the lease. Lease rentals are

apportioned between principal and interest on the IRR method. The

principal amount received reduces the net investment in the lease and

interest is recognized as revenue

j. Income-tax

Tax expense comprises of current, deferred and fringe benefit tax.

Current income tax and fringe benefit tax is measured at the amount

expected to be paid to the tax authorities in accordance with the Indian

Income Tax Act. Deferred income taxes are recognized for the future tax

consequences attributable to timing differences between the financial

statement determination of income and their recognition for tax purposes.

Deferred tax is measured based on the tax rates and the tax laws enacted

or substantively enacted at the balance sheet date. Deferred tax assets

are recognized and carried forward only to the extent that there is a

reasonable certainty that sufficient future taxable income will be available

against which such deferred tax assets can be realized. Unrecognized

deferred tax assets of earlier years are re-assessed and recognized to the

extent that it has become reasonably certain that future taxable income

will be available against which deferred tax assets can be realized.

Deferred tax asset is recognized only on those timing differences, which

reverses in post tax free period, as Company enjoys exemption under

Section 10A of Income Tax Act, 1961.

Minimum Alternative tax (MAT) credit is recognized as an asset only when

and to the extent there is convincing evidence that the Company will pay

normal income tax during the specified period. In the year in which the

MAT credit becomes eligible to be recognized as an asset in accordance

with the recommendations contained in guidance note issued by the

Institute of Chartered Accountants of India, the said asset is created by

way of a credit to the profit and loss account and shown as MAT Credit

Entitlement. The Company reviews the same at each balance sheet date

and writes down the carrying amount of MAT Credit Entitlement to the

extent there is no longer convincing evidence to the effect that Company

will pay normal Income Tax during the specified period.

k. Earnings per share

The earnings considered in ascertaining the Company’s earnings per

share comprise the net profit after tax. The number of shares used in


computing basic earnings per share is the weighted average number

of shares outstanding during the year. The number of shares used in

computing diluted earnings per share comprises the weighted average

number of shares considered for deriving basic earnings per share and

also the weighted average number of shares, if any which would have

been issued on the conversion of all dilutive potential equity shares. The

number of shares and potentially dilutive equity shares are adjusted for

the bonus shares and sub-division of shares.

l. Share-based compensation/payments

The Company uses the intrinsic value method of accounting for its

employee share based compensation plan and other share based

arrangements. Under this method compensation expense is recorded

over the vesting period of the option, if the fair market value of the

underlying stock exceeds the exercised price at the measurement date,

which typically is the grant date.

m. Provision and contingencies

A provision is recognized when an enterprise has a present obligation as

a result of past event and it is probable that an outflow of resources will

be required to settle the obligation, in respect of which a reliable estimate

can be made. Provisions are not discounted to its present value and

are determined based on management estimate required to settle the

obligation at the balance sheet date. These are reviewed at each balance

sheet date and adjusted to reflect the current management estimates.

n. Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank

and in hand and short-term investments with an original maturity of three

months or less.

3. Commitments and contingent liabilities

a. Capital commitments

Contracts remaining to be executed on capital account and not provided

for (net of advances) aggregates to Rs. 1,654,626 (includes capital

commitment through issuance of letter of intents of Rs. 260,505) as at

March 31, 2008 (March 31, 2007 – Rs. 1,875,264).

b. Contingent liabilities

Financial bank guarantees given to banks on behalf of

subsidiaries, aggregates to Rs. 8,052 as at March 31, 2008

(March 31, 2007 – Rs. 39,384).

c. Loan to Equinox Global Services Ltd. (‘Equinox’)

Loan given to Equinox had a conversion option in equity shares of Equinox

which was exercisable till March 31, 2008. The conversion option has

been extended till May 31, 2009. In case of conversion, interest at 8%

would not be payable by Equinox and hence no interest has been accrued

on the loan. The conversion option can be further extended, as per the

mutually agreed terms.

4. Leases

a. Where Company is lessee

Finance lease

The Company takes vehicles under finance lease of upto five years. Future

minimum lease payments under finance lease as at March 31, 2008 and

2007 are as follows:

As at March 31, 2008

Principal Interest Total

Not later than one year 7,850 1,233 9,083

Later than one year but not later than five years 10,862 1,139 12,001

Total minimum payments 18,712 2,372 21,084


Principal Interest Total

Not later than one year 9,161 1,558 10,719

Later than one year but not later than five years 15,399 1,598 16,997


Operating lease

The Company has taken certain office premises and residential premises

for employees under operating lease, which expire at various dates through

year 2013. Gross rental expenses for the year ended March 31, 2008

aggregated to Rs. 443,103 (March 31, 2007 – Rs. 288,521). The

minimum rental payments to be made in future in respect of these leases

are as follows:

March 31, 2008 March 31, 2007

Not later than one year 398,244 162,537Later than one year but not later than five years 878,660 272,838

Later than five years 440,361 10,5721,717,265 445,947

b. Where Company is lessor

The Company has given IT equipments under finance lease for a period

of five years. Present value of minimum lease payments receivable under

this finance lease as at March 31, 2008 and 2007 are as follows:

March 31, 2008 March 31, 2007


21,680 36,643




5. Derivatives

The Company enters into forward foreign exchange contracts and option

contracts where the counterparty is a bank. The Company purchases

forward foreign exchange contracts and option contracts to mitigate the

risks of change in foreign exchange rate on receivables and payables

denominated in certain foreign currencies. The Company considers

the risk of non-performance by the counterparty as non-material. As

at March 31, 2008 and 2007 the Company has following outstanding

derivative instruments:

(Amount in ‘000 foreign currency)

March 31, 2008 March 31, 2007Particulars

Forward contracts – Sell In USD 112,000 123,000 In EUR 4,000 3,500Option contracts – Sell In USD – 16,500

The Company has following foreign currency exposures which are not hedged as at March 31, 2008 and 2007.

March 31, 2008 March 31, 2007Particulars Receivables Payables Net Receivables Payables Net

In USD 67,086 12,066 55,020 78,511 58,338 20,173In EUR 15,904 2,489 13,415 14,655 4,175 10,480In GBP 15,087 5,034 10,053 9,293 3,561 5,732In SGD 14,895 9,001 5,894 4,848 4,622 226In AED 2,194 – 2,194 1,052 – 1,052In CAD 2,508 – 2,508 836 – 836In MYR 2,788 – 2,788 5,435 – 5,435In JPY 83,556 261,627 (178,071) 272,631 248,099 24,532In AUD 839 – 839 – – –In ZAR 11 2,668 (2,657) – – –In CHF 6 91 (85) – 97 (97)In RUB – 251 (251) – 212 (212)In SEK – 88 (88) – – –

6. Share-based compensation/payments

a) Employee Stock Purchase Scheme (‘ESPS’)












employees.

On the acceptance of the offer, the selected employee shall undertake to

pay within ten years from the date of acceptance of the offer the cost of

the shares incurred by the Trust including repayment of the loan relatable


























Number of shares


Shares forfeited during the year 16,847 21,228

Closing balance of unallocated shares 158,963 142,116



Shares forfeited during the year (16,847) (21,228)

Closing balance of allocated shares 221,101 355,212











b) Employee Stock Option Plan (‘ESOP’)






The weighted average share price for the year over which stock options

were exercised was Rs. 1,890.

The details of options unvested and options vested and exercisable as on

March 31, 2008 are as follows:

Range of exercise

prices


price (Rs.)

Weighted average




419-560 45,003 480 5.31,291-1,291 52,450 1,291 8.1

431,253 1,025 7.2


March 31, 2007 were as follows:

Range of exercise

prices


price (Rs.)

Weighted average




419-560 35,003 505 6.8530,485 989 8.1







Had compensation cost been determined in a manner consistent with the

fair value approach, the Company’s net income and earnings per share

as reported would have changed to the amounts indicated below:



Net income as reported 4,108,745 3,546,739Add: Compensation expense included in reported income – –

Less: Compensation expense determined using fair value of options (54,918) (115,596)

Proforma net income 4,053,827 3,431,143Basic earnings per shareAs reported 49.10 44.82Proforma 48.44 43.36Diluted earnings per shareAs reported 49.02 43.60Proforma 48.37 42.20

7. Employee benefit obligation

Defined contribution plans

During year ended March 31, 2008 and 2007, the Company contributed

following amounts to defined contributions plans:



Particulars

Provident fund 157,065 133,753Superannuation fund 52,167 43,676 209,232 177,429




Defined benefit plan – gratuity

The amounts recognized in the balance sheet are as follows:



Particulars

Present value of funded obligations

173,999 131,397

Fair value of plan assets (228) (4,697)Net liability 173,771 126,700

Amounts in balance sheet:Liability 173,771 126,700Asset – –Net liability 173,771 126,700

The amounts recognized in the profit and loss account for the year ended

March 31, 2008 and 2007 are as follows:



Particulars

Current service cost 28,825 21,408Interest cost 9,579 5,830Expected return on plan assets (228) (136)

Recognized net actuarial (gain) loss 23,905 31,049

Total included in ‘employee benefit expense’ 62,081 58,151

Actual return on plan assets (241) 146

Changes in present value of defined benefit obligation representing

reconciliation of opening and closing balances thereof are as follows:



Particulars

Defined benefit obligation at beginning of the year

131,397 83,226

Current service cost 28,825 21,408Interest cost 9,579 5,830Benefits paid (19,237) (10,126)Actuarial (gain) loss 23,435 31,059Defined benefit obligation at end of the year 173,999 131,397

Changes in the fair value of plan assets representing reconciliation of

opening and closing balances thereof are as follows:



Particulars

Fair value of plan assets at beginning of the year

4,697 1,818

Expected return on plan assets 228 136Actuarial gain (loss) (470) 10Contribution by employer 15,010 12,859Benefits paid (19,237) (10,126)Fair value of plan assets at end of the year 228 4,697

Plan assets are administered by LIC and 100% of the plan assets are

invested in lower risk assets, primarily in debt securities.

The assumptions used in accounting for the gratuity plan are set out as

below:

March 31, 2008 March 31, 2008

Discount rate 7.70% 8.00%Expected return on plan

assets 7.50% 7.50%Withdrawal rates

Age (Yrs.) Rates Age (Yrs.) Rates21–30 25% 21–30 25%31–34 20% 31–34 20%35–44 15% 35–44 15%45–59 1% 45–59 1%

The estimates of future salary increase, considered in actuarial valuation,

take account of inflation, seniority, promotions and other relevant factors

such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its

long-term plans of growth and industry standards. The discount rates are

based on current market yields on government bonds consistent with the

currency and estimated term of the post employment benefits obligations.

Plan assets are administered by the LIC and invested in lower risk assets,

primarily debt securities. The Company’s contribution to the fund for the

year ended March 31, 2009 is expected to be Rs. 30,000. The expected

benefit payments from the fund as of March 31, 2008 are below:

Year ending March 31 Amount

2009 27,8182010 33,4062011 38,7622012 45,7752013 53,3272014–2017 209,571


Since the Company has adopted AS 15 (Revised) from April 1, 2006

and thereby has not given disclosure for the following for previous three

annual financial years:

a. The present value of the defined benefit obligation, the fair value of the

plan assets and the surplus or deficit in the plan; and

b. The experience adjustments arising on plan liabilities and plan

assets.

8. Segment information

Business segments are defined as a distinguishable component of an

enterprise that is engaged in providing a group of related products or

services and that is subject to differing risks and returns and about which

separate financial information is available. This information is reviewed

and evaluated regularly by the management in deciding how to allocate

resources and in assessing the performance.

The Company is organized geographically and by business segment. For

management purposes the Company is primarily organized on a

worldwide basis into two business segments:

a) Product licenses and related activities (‘Products’) and

b) IT solutions and consulting services (‘Services’).

The business segments are the basis on which the Company reports

its primary segment information to management. Product licenses and

related activities segment deals with banking software products like the

FLEXCUBE suite of products, Reveleus and MicroBanker which cater to

needs of corporate, retail and investment banking as well as treasury

operations and data warehousing requirements. The related activities

include enhancements, implementation and maintenance activities.

IT solutions and consulting services comprise of bespoke software

development, provision of computer software solutions and related

consulting services arising from such activities. This segment is further

sub-divided in the following sub-segments i.e. Business intelligence,

Customer relationship management, Brokerage, e-commerce, Internet

services and IT and Business consulting.

The Company does not track assets and liabilities geographically.


Particulars Products Services Corporate Total

Revenue 11,035,574 6,894,144 – 17,929,718 Cost of revenue (5,018,021) (5,294,550) – (10,312,571)Gross profit 6,017,553 1,599,594 – 7,617,147 Selling and marketing expenses (663,425) (109,002) – (772,427)General and administrative expenses (540,344) (457,310) (1,295,101) (2,292,755)Depreciation and amortization (267,005) (237,521) (98,569) (603,095)Income from operations 4,546,779 795,761 (1,393,670) 3,948,870 Provision for diminution in value of investment (120,000)

Interest income 419,974 Other income, net 66,556 Income before provision for taxes 4,315,400 Provision for taxes (206,655)Net income 4,108,745

Other informationCapital expenditure by segment 104,918 728,940 85,073 918,931 Segment assets 8,147,551 6,631,903 18,060,097 32,839,551 Segment liabilities 2,922,572 1,464,146 326,342 4,713,060 Shareholders' funds – – 28,126,491 28,126,491





Particulars Products Services Corporate Total

Revenue 8,909,532 6,613,912 – 15,523,444 Cost of revenue (3,864,229) (5,020,347) – (8,884,576)Gross profit 5,045,303 1,593,565 – 6,638,868 Selling and marketing expenses (627,123) (98,379) – (725,502)General and administrative expenses (444,829) (424,040) (1,016,967) (1,885,836)Depreciation and amortization (255,130) (236,065) (74,156) (565,351)Income from operations 3,718,221 835,081 (1,091,123) 3,462,179 Interest income 365,535 Other expense, net (17,232)Income before provision for taxes 3,810,482 Provision for taxes (263,743)Net income 3,546,739

Other informationCapital expenditure by segment 226,932 153,112 50,925 430,969 Segment assets 8,051,748 8,202,353 14,014,383 30,268,484 Segment liabilities 3,547,580 2,481,813 254,333 6,283,726 Shareholders' funds – – 23,984,758 23,984,758

Segment revenue and expense:

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services.

The expenses which are not directly attributable to a business segment are shown as corporate expenses.

Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of debtors, deposits for premises and fixed assets, net of

allowances. Segment liabilities primarily includes deferred revenues, finance lease obligation, advance from customer, accrued employee cost and other

current liabilities. While most of such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and

liabilities used jointly by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between

the segments are shown as part of corporate assets and liabilities.

Geographical segments

The following table shows the distribution of the Company’s sales by geographical market:



Regions Amount % Amount %

United States of America 4,349,898 24% 5,333,405 34%Europe 6,808,422 38% 4,541,764 30%Asia Pacific 3,552,274 20% 3,002,966 19%Middle East, India and Africa 3,054,457 17% 2,505,454 16%Latin America and Caribbean 164,667 1% 139,855 1%

17,929,718 100% 15,523,444 100%


9. Names of related parties and description of relationship:

Relationship Names of related partiesPrincipal shareholder and it’s affiliates ("Oracle") Oracle Global (Mauritius) Limited

Oracle (India) Private Limited Oracle USA, Inc.Oracle Corporation (Thailand) Co Limited

Subsidiaries i-flex solutions b.v. i-flex solutions pte ltdi-flex solutions inc.i-flex America inc.SuperSolutions Corporation (Effective January 8, 2008 merged with i-flex America inc.)

Castek Software Inc. and its subsidiariesMantas Inc and its subsidiariesISP Internet Mauritius Companyi-flex Processing Services Inc. (Equinox Corporation till September 12, 2007)

Equinox Global Services Ltd.i-flex Processing Services Limitedi-flex Consulting (Asia Pacific) Pte Ltd.i-flex solutions s.a.Flexcel International Private Limited [Refer Note 13(a) of Schedule 15]

Joint ventures Flexcel International Private Limited [Refer Note 13(a) of Schedule 15]

Associates Login SA

Other entities where company has significant influence i-flex Employee Stock Purchase Scheme Trust

Key Managerial Personnel (‘KMP’) Rajesh Hukku – Chairman and Non Executive DirectorR Ravisankar – Vice ChairmanDeepak Ghaisas – Vice Chairman and Company SecretaryN R Kothandaraman (N R K Raman) – Managing Director and Chief Executive Officer

Makarand Padalkar – Chief Financial OfficerAvadhut (Vinay) Ketkar – Chief Accounting Officer (w.e.f. April 1, 2007)Dilip Kulkarni – Chief Compliance Officer (w.e.f. April 1, 2007)Joseph John – Executive Vice President, Universal Banking ProductsV Shankar – Executive Vice President and Global Head, PrimeSourcing & Insurance Solutions

Olivier Trancart– Executive Vice President, Global Sales and CEO i-flex solutions b.v.

Atul Gupta– Sr. Vice President, Process and Quality Management GroupVijay Sharma– Sr. Vice President, i-flex ConsultingS Hariharan – Sr. Vice President, Infrastructure Services GroupVivek Govilkar – Sr. Vice President, Human Resources and TrainingV Srinivasan – Vice President, Corporate Development and Chief of Staff (w.e.f. April 1, 2007)

Manmath Kulkarni – Sr. Vice President and Chief Architect for Retail and Internet Banking (w.e.f. April 1, 2007)

S Sundararajan – Sr. Vice President, Customer Fulfillment (w.e.f. April 1, 2007)




Transactions and balances outstanding with these parties are described below:

Transactions Amount receivable (payable)Year ended

March 31, 2008Year ended



March 31, 2007

RevenueOracle 8,285 37,777 6,809 5,007 Subsidiaries

i-flex solutions b.v. 4,346,018 3,404,183 1,715,650 2,139,752 i-flex solutions inc. 4,101,909 4,683,722 2,415,349 3,997,048 i-flex solutions pte ltd 3,264,769 2,479,979 1,707,982 1,559,613 i-flex Consulting (Asia Pacific) Pte Ltd. 590 – 627 –i-flex Processing Services Inc. 4,788 – 17,663 –Equinox Global Services Ltd. – 22,597 1,428 26,558 SuperSolutions Corporation – 72,947 – 112,872 Mantas inc. 42,888 – 7,441 –Castek Software Inc. 6,635 19,298 17,664 –i-flex solutions s.a. 370,732 – 425,682 –Flexcel International Private Limited – – 14,802 –

Joint ventureFlexcel International Private Limited 19,527 45,085 – 46,272

Interest on loan Subsidiaries

i-flex America inc. 20,855 26,264 72,498 56,332 ISP Internet Mauritius Company 1,338 1,518 4,397 3,336

Unbilled revenueSubsidiaries

i-flex solutions b.v. – – 93,833 117,291 i-flex solutions inc. – – 215,402 267,767 i-flex solutions pte ltd – – 184,101 199,746 Equinox Global Services Ltd. – – – 2,603 Castek Software Inc. – – 7,669 19,205 i-flex solutions s.a. – – 2,880 –

Advance from CustomersOracle 12,724 – 12,724 –

Loan outstanding [Refer Note 2]Subsidiaries

i-flex America inc. (34,800) – 398,800 433,600 Equinox Global Services Ltd. 110,000 140,000 500,000 390,000 ISP Internet Mauritius Company (3,306) – 37,882 41,188

Provision for diminution in investmentSubsidiary

ISP Internet Mauritius Company 120,000 – 120,000 –

Loan to trust and employees Repayment of loan by ESPS Trust – 4,925 – –

Rental depositKey managerial personnel (225) 125 100 325

Advance rent Key managerial personnel (13) – 43 56

RentKey managerial personnel 90 128 – –

Remuneration [Refer Note 1]Key managerial personnel 113,471 71,995 – –

Reimbursement of expenses Subsidiaries

i-flex solutions b.v. 964,119 537,907 (144,157) (277,490)i-flex solutions inc. 2,100,529 1,996,997 (383,993) (2,173,480)i-flex solutions pte ltd 1,239,695 839,642 (297,449) (219,532)i-flex America inc. – 12,999 12,886 12,999 SuperSolutions Corporation – 1,144 – (63,709)ISP Internet Mauritius Company – 1,169 – 1,169






March 31, 2007

i-flex Processing Services Ltd. 42,970 2,399 45,369 2,399 Flexcel International Private Limited – – 36,278 –

Joint ventureFlexcel International Private Limited 24,309 10,225 – 11,969

Application softwareOracle 211,462 230,617 – –Subsidiaries

SuperSolutions Corporation – 39,627 – (39,627)

Cost of salesSubsidiaries

i-flex solutions inc. 38,098 – (12,546) – Mantas inc. 7,581 – (7,581) –

Provision for doubtful debtsSubsidiaries

i-flex solutions b.v. 16,743 9,854 26,302 10,250 i-flex solutions inc. 56,023 15,529 75,886 28,320 i-flex solutions pte ltd 6,308 27,298 30,614 26,427

Other expensesOracle 2,050 1,411 – –Joint venture

Flexcel International Private Limited 289 –

Professional feesSubsidiary

Flexcel International Private Limited – – (11,411) –Joint venture

Flexcel International Private Limited 32,592 30,508 – –Associates

Login SA 25,098 – (3,310) –

Deferred revenue Oracle – – (2,703) (4,245)Subsidiaries

i-flex solutions b.v. – – (371,947) (455,084)i-flex solutions inc. – – (277,494) (295,093)i-flex solutions pte ltd – – (281,383) (191,543)i-flex solutions s.a. – – (60,214) –Mantas inc. (175)

Joint ventureFlexcel International Private Limited – – (2,720) –

Lease rentKey managerial personnel 1,942 3,462 – –

Other transactionsDividend paid Oracle – 200,742 – –ESPS Trust – 9,670 – –Key managerial personnel – 8,265 – –

Investments during the yeari-flex America inc. 472,940 5,678,974 – –i-flex Processing Services Limited 12,500 500 – –i-flex solutions b.v. 751,189 – – –Flexcel International Private Limited 25,424 – – –

1. Includes salary, bonus and perquisites.

2. Loan given to subsidiaries represents loan to i-flex America inc. amounting to Rs. 398,800 (interest LIBOR + 50 basis points) as at March 31, 2008

(March 31, 2007 – 433,360) and ISP Internet Mauritius Company amounting to Rs. 37,882 (interest LIBOR + 50 basis points) as at March 31, 2008

(March 31, 2007 – 41,188).

Maximum balance outstanding during the year were as follows:

March 2008 March 2007

i-flex America inc. 433,360 465,300 ISP Internet Mauritius Company 41,188 44,199 Equinox Global Services Ltd. 500,000 390,000






10. Supplementary information

a. Aggregate expensesFollowing are the aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI to the Act:

Salaries and bonus 8,131,233 6,720,213 Staff welfare expenses 284,257 202,515 Contribution to provident and other funds 285,167 240,418 Travel related expenses (net of recoveries) 1,778,512 1,844,414 Professional fees 1,018,490 885,379 Application software 543,139 506,138 Communication expenses 159,382 142,490 Rent 451,554 302,262 Advertising expenses 41,705 124,939 Power 192,256 130,131 Insurance 51,297 58,301 Repairs and maintenance:

Leasehold premises 24,426 11,995 Computer equipments 23,444 24,562 Others 40,624 26,627

Rates and taxes 18,941 24,847 Finance charge on leased assets 2,064 1,766 Provision for doubtful debts, net 152,714 74,063 Bad debts 13,392 –Other expenses 165,156 174,854

13,377,753 11,495,914

b. Managerial remuneration (on accrual basis)Salary and incentives 4,369 330 Contribution to provident and other funds 418 24 Commission to non whole time directors 2,900 2,920

7,687 3,274

Mr. Rajesh Hukku (Managing Director of the Company till April 30, 2007) has been paid remuneration aggregating Rs. 27,468 (including bonus of Rs. 21,354 which was provided as on March 31, 2007) for the year ended March 31, 2008 (March 31, 2007– Rs. 41,313) from i-flex solutions inc., a wholly owned subsidiary of the Company. Mr. R Ravisankar (Director from May 1, 2007) has been paid remuneration aggregating Rs. 16,629 (including bonus of Rs. 14,236 which was provided as on March 31, 2007) for the year ended March 31, 2008 from i-flex solutions inc., a wholly owned subsidiary of the Company. During the year ended March 31, 2008, Mr. Deepak Ghaisas (Director from May 1, 2007) and Mr. N R K Raman (Managing Director and Chief Executive Officer from May 1, 2007) have been paid bonus of Rs. 15,220 and Rs. 7,266 respectively which was provided as on March 31, 2007. These bonus amounts have not been included in the managerial remuneration above since these payments are made in capacity of an employee and relate to compensation before them becoming Directors of the Company.

The Company accrues for gratuity benefit, compensated absences and bonus for all employees as a whole. It is not possible to ascertain the provision for individual director and hence the same has not been disclosed above.




Computation of net profit for calculating commission payable to non-whole time directors in accordance with Section 198 of the Act.

Net income after tax and prior period item 4,108,745 3,546,739 Add:Managerial remuneration 4,787 354 Commission to non-wholetime Directors 2,900 2,920 Depreciation and amortization as per books of accounts 603,095 565,351 Donation 7,287 6,202 Provision for income taxes 206,655 263,743

4,933,469 4,385,309 Less:Profit on sale of fixed assets, net 443 –Depreciation and amortization as per Section 350 of the Act (Note below) 603,095 565,351 Net profit on which commission is payable 4,329,931 3,819,958

Commission payable to non-wholetime Director:Maximum allowed as per Companies Act, 1956 (1 percent) 43,299 38,200 Maximum approved by the shareholders (1 percent) 43,299 38,200 Commission approved by the Board of Directors 2,900 2,920

Note 1: The Company depreciates fixed assets based on estimated useful lives of the assets. The rates of depreciation used by the Company are higher than the

minimum rates prescribed by Schedule XIV of the Act.

c. Payments to auditorsStatutory audits (including quarterly audits) 5,618 5,107 Tax audit 674 561 Special reports 1,348 2,133 Certifications 337 392 Out-of-pocket expenses 787 750

8,764 8,943

d. Earnings in foreign currency (on accrual basis)Product licenses and related revenue 10,537,249 8,382,073 IT solutions and consulting services 6,810,326 6,567,372 Interest income 23,027 2,222

17,370,602 14,951,667

e. Expenditure in foreign currency (on accrual basis)Salaries and bonus 3,461,186 2,751,932 Traveling, net of recovery 1,276,979 1,005,574 Professional fees 588,682 519,581 Application software 76,805 107,653 Foreign taxes 58,489 64,307 Advertising 17,519 34,874 Seminar expenses 1,126 26,507 Others 78,038 130,040

5,558,824 4,640,468

f. Value of imports on CIF basis - capital goods 226,043 143,047






g. Remittance in foreign currencies for dividendThe Company has not remitted any amount in foreign currencies on account of dividends during the year to non-resident shareholders. The particulars of dividends declared and paid to non-resident shareholders are as under:

Year of dividend payment 2007–08 2006–07 Year to which it relates 2006–07 2005–06 Number of non-resident shareholders 507 734 Number of equity shares held 71,156,872 56,128,427 Amount of dividend – 280,642



11. Utilization of IPO Funds

Proceeds from issue of shares 1,780,800 1,780,800 Less: Issue expenses (103,074) (103,074)Net IPO Proceeds 1,677,726 1,677,726 Less: Utilization of funds Bangalore Development Centre (554,753) (554,753)Mumbai Development Centre (1,017,600) (730,410)Investment in/loans to subsidiary companies

i-flex solutions b.v. (24,380) (24,380)i-flex solutions pte. (6,626) (6,626)i-flex solutions inc. (73,064) (73,064)Setting up Dubai marketing office (1,303) (1,303)

Unutilized IPO funds – 287,190

12. Utilization of preferential allotment money

a. Allotment of shares to OracleProceeds from issue of shares to Oracle 5,814,999 5,814,999 Less: Utilization of funds for investment in i-flex America inc. (5,814,999) (5,678,974)Unutilized funds – 136,025

b. Allotment of options to GEProceeds from issue of options to GE 401,679 401,679 Less: Utilization of funds for operations (401,679) (40,441)Unutilized funds – 361,238





N R K Raman

Managing Director


Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008

13. Investments in wholly owned subsidiaries

a. Flexcel International Private Limited, (Flexcel); an erstwhile 40:40:20 joint venture between i-flex, HDFC Bank Limited and its group companies and Lord Krishna Bank (since merged with Centurion Bank of Punjab) provides the capability of FLEXCUBE through an Application Service Provider (‘ASP’) model to various banks and financial institutions in India. On March 31, 2008 i-flex has acquired the balance 60% stake for a total consideration of Rs. 25,424 whereby Flexcel International Private Limited has become a 100% subsidiary of i-flex.

As per the audited financial statements of Flexcel, it has made a loss of Rs. 3,636 for the year ended March 31, 2008 and has accumulated losses of Rs. 12,820 as at the balance sheet date. i-flex had already provided for diminution in value of investments in Flexcel of Rs. 20,680 in the financial year ended March 31, 2005. Considering improvement in the financial position of Flexcel, the management is of the view that no additional provision for diminution in the value of investments in Flexcel is required.

b. As at March 31, 2008, the Company has total investment of Rs. 6,291,743 in its US based wholly owned subsidiary, i-flex America inc. (‘IAI’). The Company has further outstanding loan given amounting to Rs. 398,800. IAI is holding Company in the US for i-flex US operations and various acquired Companies. Of the above investment, IAI had invested Rs. 5,806,963 in acquisition of Mantas inc. (‘Mantas’) in October, 2006. Since the date of acquisition Mantas has been incurring losses. The Company believes that these losses are initial start-up losses. The Company believes that with integration of Mantas products with i-flex suite of products and synergies achieved due to sharing of operations Mantas would achieve significant increase in future revenues and cost savings. Based on the future projection, the Company has estimated future cash flows from Mantas and concluded that fair value of the business is higher than current book value. Management believes that it would be able to achieve the future projection and hence considers that there is no diminution in value of investment in Mantas and accordingly in IAI.

c. As at March 31, 2008, the Company has total investment of Rs. 192,115 in ISP Internet Mauritius Company (‘ISP’), a corporation organized under the laws of the Republic of Mauritius. ISP holds all the shares in Equinox Corporation, a company incorporated under the state laws of Delaware (‘Equinox US’) and majority shares in Equinox Global Services Ltd., a corporation organized under the laws of India (‘Equinox India’). Besides the strategic investments in ISP, i-flex also has granted a loan of Rs. 37,882 to ISP and Rs. 500,000 to Equinox India.

On consolidated basis along with its subsidiaries, ISP has incurred a loss of Rs. 129,005 for the year ended March 31, 2008 and an accumulated loss of Rs. 678,809 as at the balance sheet date. Considering the uncertainty about the future profitability of ISP, the Company has made a provision of Rs. 120,000 during the year ended March 31, 2008 towards diminution in the value of its investments in ISP.

14. During the current year, the Company has utilized the securities premium account for payment of stamp duty of Rs. 7,301 on allotment of equity shares. This includes Rs. 6,863 related to previous years. General and administrative expenses includes an amount of Rs. 2,584 towards penalty charges for making delayed payment of stamp duty.

15. Fringe benefit tax is recorded net of recovery amount of Rs. 17,888 on account of stock option exercised during the year ended March 31, 2008. During the current year company has taken an additional Fringe benefit tax charge of Rs. 24,496 pertaining to previous years.

16. Prior year amounts have been reclassified, where necessary to confirm with current year’s presentation.





2008 2007

Cash flows from operating activities Income before provision for taxes 4,315,400 3,810,482

Adjustments to reconcile income before provision for taxes to cash (used in) provided by operating activities:

Depreciation and amortization 603,095 565,351 Profit on sale of fixed assets, net (443) 4,554 Marked to market of current investment 104 810 Interest income (419,974) (365,535)Effect of exchange difference on cash and bank balances 28,777 (4,301)Finance charge on leased assets 2,064 1,766 Provision for diminution in value of investment 120,000 –Provision for doubtful debts, net 152,714 74,063 Bad debts 13,392 –

4,815,129 4,087,190 Changes in assets and liabilities, net of effect of acquisitionDecrease (increase) in sundry debtors and unbilled revenue 1,333,706 (3,664,637)Decrease (increase) in loans and advances 51,232 (563,206)(Increase) decrease in current liabilities and provisions (1,527,665) 1,764,376 Cash from operating activities 4,672,402 1,623,723 Payment of domestic and foreign taxes (730,059) (818,170)Net cash provided by operating activities 3,942,343 805,553

Cash flows from investing activitiesAdditions to fixed assets including capital work-in-progress (980,548) (1,120,053)Net investment in lease 9,902 (20,610)Investment in subsidiary companies (1,262,053) (5,679,474)Deposit for office premises (640,536) (1,225,252)Proceeds from sale of fixed assets 559 11,608 Bank fixed deposits having maturity of more than 90 days matured 6,866,148 7,679,391 Bank fixed deposits having maturity of more than 90 days booked (8,472,217) (6,723,628)Proceeds from maturity of investments – 20,000 Interest received 402,465 314,787 Net cash used in investing activities (4,076,280) (6,743,231)

Cash flows from financing activitiesIssue of shares against Employee Stock Option scheme and options to IBM 40,024 678,514

Issue of shares to Oracle Global Mauritius Limited – 5,814,999 Share application money from GE – 361,238 Advance against equity shares to be issued under ESOP scheme 265 –Share issue expenses (7,301) –Repayment of loan by Employee Stock Purchase Scheme (‘ESPS’) Trust – 4,925

Loan to subsidiaries (71,894) (96,313)Payment of dividend and tax thereon – (436,350)Payment of lease obligations (11,779) (10,322)Net cash (used in) provided by financing activities (50,685) 6,316,691

Effect of exchange difference on cash and bank balances (28,777) 4,301

Net increase in cash and cash equivalents (213,399) 383,314 Cash and cash equivalents at beginning of the year 1,179,050 795,736 Cash and cash equivalents at end of the year (Note 1) 965,651 1,179,050

Statement of cash flow for the year ended March 31



2008 2007

Note 1: Component of cash and cash equivalentCash and bank balances [Refer Schedule 6 (b)] 6,400,880 5,007,470 Less:Bank deposits having maturity of more than 90 days (5,426,355) (3,820,288)Margin money deposit (7,067) (6,067)Unclaimed dividend accounts (1,807) (2,065)Cash and cash equivalents at the end of the year 965,651 1,179,050

Statement of cash flow (continued)for the year ended March 31




N R K Raman

Managing Director


Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008




Balance sheet abstract and company’s general business profile

I. Registration detailsRegistration number 5 3 6 6 6 State Code 1 1

Balance Sheet date 3 1 0 3 2 0 0 8Date Month Year

II. Capital raised during the year (amount in Rs. thousands)Public issue Rights issue

N I L N I LBonus issue Private placement

N I L N I L

III. Position of mobilization and deployment of funds (amount in Rs. thousands)Total liabilities Total assets

3 2 8 3 9 5 5 1 3 2 8 3 9 5 5 1Sources of funds Paid-up capital Reserves and surplus

4 1 8 7 3 7 2 7 7 0 7 4 8 9Secured loans Unsecured loans

N I L N I LApplication of funds Net fixed assets Investments

3 1 1 4 2 7 7 7 2 3 4 1 4 9

Net current assets Miscellaneous expenditure1 7 5 5 6 3 5 1 N I L

Accumulated lossesN I L

IV. Performance of company (amount in Rs. thousands)Total income Total expenditure

1 8 4 1 6 2 4 8 1 4 1 0 0 8 4 8+/– Profit/loss before tax +/– Profit/loss after tax

+ 4 3 1 5 4 0 0 + 4 1 0 8 7 4 5

(Please tick appropriate box + for profit, – for loss)Earning per share in Rs. Basic Dividend rate %

4 9 . 1 0 N I L

Earning per share in Rs. Diluted4 9 . 0 2

V. Generic names of three principal products/services of company(as per monetary terms)Item Code number(ITC code) N . A .

Product description

S O F T W A R E D E V E L O P M E N T S E R V I C E S

S O F T W A R E P R O J E C T A S S I G N M E N T S

S O F T W A R E P R O D U C T M A N A G E M E N T


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ding

Com

pany

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

2008

45

2,3

31

2

1,1

67

3

25

,70

2

(14

0,1

29

) (2

1,6

42

) (8

0,4

78

)

b.

for

the

prev

ious

fin

anci

al y

ears

of

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry 2

28

,59

4

1,0

72

4

12

,33

9

(63

8,2

44

) (6

2,9

35

) (1

59

,11

9)

Net

agg

rega

te o

f Pro

fit/(

loss

es) o

f th

e su

bsid

iary

so

far

as it

con

cern

s th

e M

embe

rs o

f th

e H

oldi

ng C

ompa

ny a

nd is

dea

lt w

ith o

r pr

ovid

ed f

or in

the

acc

ount

s of

the

Hol

ding

Com

pany

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

200

8–

––

––

–

b.

for

the

prev

ious

fin

anci

al y

ears

of

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry–

––

––

–




Stat

emen

t pur

suan

t to

Sect

ion

212

of th

e Co

mpa

nies

Act

, 195

6 re

latin

g to

sub

sidi

ary

com

pani

es (c

ontin

ued)

(All

amou

nts

in t

hous

ands

of

Indi

an R

upee

s)

i-

flex

solu

tions

inc.

i-fle

x so

lutio

ns (C

anad

a) in

c2C

aste

k H

unga

rian

Hol

ding

s In

c.3

Cas

tek

Inc.

Cas

tek

Sof

twar

e Fa

ctor

y Lt

d.C

aste

k R

BG

Inc.

The

Fina

ncia

l Yea

r of

the

Sub

sidi

ary

Com

pany

end

ed o

n M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 D

ecem

ber

21

, 2

00

7 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8

Hol

ding

Com

pany

i-fle

x A

mer

ica

inc.

i-fle

x A

mer

ica

inc.

Cas

tek

Sof

twar

e In

c.C

aste

k S

oftw

are

Inc.

Cas

tek

Sof

twar

e In

c.C

aste

k S

oftw

are

Inc.

Hol

ding

Com

pany

’s in

tere

st1

00

% h

eld

by A

mer

ica

Inc.

10

0%

hel

d by

i-

flex

Am

eric

a In

c.1

00

% h

eld

by C

aste

k S

oftw

are

Inc.

10

0%

hel

d by

C

aste

k S

oftw

are

Inc.

10

0%

hel

d by

C

aste

k S

oftw

are

Inc.

10

0%

hel

d by

C

aste

k S

oftw

are

Inc.

Sha

res

held

by

the

Hol

ding

C

ompa

ny in

the

Sub

sidi

ary

Nil

52

8,1

38

,67

6 c

omm

on

shar

es o

f C

AD

0.0

03

25

83

per

sha

re

10

0 c

omm

on s

hare

s at

C

AD

1.0

0 p

er s

hare

2

,00

0 c

omm

on s

hare

s at

av

erag

e pr

ice

of

US

D 6

82

.19

per

sha

re

2,0

00

com

mon

sha

res

at

aver

age

pric

e of

U

SD

68

2.1

9 p

er s

hare

95

0 c

omm

on s

hare

s at

av

erag

e pr

ice

of U

SD

24

5.3

7 p

er s

hare

Net

agg

rega

te o

f P

rofit

/(lo

sses

) of

the

subs

idia

ry s

o fa

r as

it c

once

rns

the

Mem

bers

of

the

Hol

ding

Com

pany

and

is n

ot d

ealt

with

in t

he a

ccou

nts

of t

he H

oldi

ng C

ompa

ny

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

2008

(30

7,9

40

) (2

54

,70

6)

(1)

(2,3

82

) (4

59

) (2

7,8

40

)

b.

fo

r th

e pr

evio

us f

inan

cial

yea

rs o

f

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry (1

52

,79

7)

(51

7,9

70

) 1

.24

(9

,44

3)

(62

,04

4)

(22

3,0

33

)

Net

agg

rega

te o

f P

rofit

/(lo

sses

) of

the

subs

idia

ry s

o fa

r as

it c

once

rns

the

Mem

bers

of

the

Hol

ding

Com

pany

and

is d

ealt

with

or

prov

ided

for

in t

he a

ccou

nts

of t

he H

oldi

ng C

ompa

ny

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

2008

––

––

––

b.

for

the

prev

ious

fin

anci

al y

ears

of

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry–

––

––

–


(All

amou

nts

in t

hous

ands

of

Indi

an R

upee

s)

M

anta

s in

cM

anta

s Lt

dS

otas

inc.

Man

tas

Sin

gapo

re P

te L

tdM

anta

s (In

dia)

Pvt

. Lt

d.IS

P In

tern

et M

aurit

ius

Com

pany

The

Fina

ncia

l Yea

r of

the

Sub

sidi

ary

Com

pany

end

ed o

n M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8

Hol

ding

Com

pany

i-fle

x A

mer

ica

inc.

Man

tas

inc.

Man

tas

inc.

Man

tas

inc.

Man

tas

inc.

i-fle

x so

lutio

ns lt

dH

oldi

ng C

ompa

ny’s

inte

rest

10

0%

hel

d by

i-

flex

Am

eric

a In

c.1

00

% h

eld

by M

anta

s in

c.1

00

% h

eld

by M

anta

s in

c.1

00

% h

eld

by M

anta

s in

c.1

00

% h

eld

by M

anta

s in

c.1

00

%

Sha

res

held

by

the

Hol

ding

C

ompa

ny in

the

Sub

sidi

ary

1 s

hare

of

US

D 0

.01

par

va

lue

com

mon

sto

ck a

t U

SD

1.0

0

Nil

Nil

Nil

Nil

“25

20

0 S

erie

s A

ord

inar

y sh

ares

of

No

Par

val

ue4

80

0 S

erie

s B

ord

inar

y sh

ares

of

No

Par

val

ue”

Net

agg

rega

te o

f P

rofit

/(lo

sses

) of

the

subs

idia

ry s

o fa

r as

it c

once

rns

the

Mem

bers

of

the

Hol

ding

Com

pany

and

is n

ot d

ealt

with

in t

he a

ccou

nts

of t

he H

oldi

ng C

ompa

ny

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

2008

(26

9,2

77

) (1

21

,23

3)

(1,1

07

) (3

06

) (1

,27

3)

(1,7

17

)

b.

fo

r th

e pr

evio

us f

inan

cial

yea

rs o

f

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry (1

16

,11

5)

(83

,33

9)

(11

5)

(30

0)

(37

7)

(26

,17

5)

Net

agg

rega

te o

f P

rofit

/(lo

sses

) of

the

subs

idia

ry s

o fa

r as

it c

once

rns

the

Mem

bers

of

the

Hol

ding

Com

pany

and

is d

ealt

with

or

prov

ided

for

in t

he a

ccou

nts

of t

he H

oldi

ng C

ompa

ny

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

200

8–

––

––

–

b.

for

the

prev

ious

fin

anci

al y

ears

of

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry–

––

––

–

Stat

emen

t pur

suan

t to

Sect

ion

212

of th

e Co

mpa

nies

Act

, 195

6 re

latin

g to

sub

sidi

ary

com

pani

es (c

ontin

ued)




(All

amou

nts

in t

hous

ands

of

Indi

an R

upee

s)

i-

flex

Pro

cess

ing

Ser

vice

s In

c.4

Equi

nox

Glo

bal S

ervi

ces

Lim

ited

i-fle

x P

roce

ssin

g S

ervi

ces

Ltd

Flex

cel I

nter

natio

nal

Priv

ate

Lim

ited

The

Fina

ncia

l Yea

r of

the

Sub

sidi

ary

Com

pany

end

ed o

n M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8 M

arch

31

, 2

00

8

Hol

ding

Com

pany

ISP

Inte

rnet

Mau

ritiu

s C

ompa

ny

ISP

Inte

rnet

Mau

ritiu

s C

ompa

ny

i-fle

x so

lutio

ns lt

di-

flex

solu

tions

ltd

Hol

ding

Com

pany

’s in

tere

st1

00

% h

eld

by IS

P In

tern

et M

aurit

ius

Com

pany

99

.83

% h

eld

by IS

P In

tern

et M

aurit

ius

Com

pany

10

0%

hel

d by

i-

flex

solu

tions

ltd

10

0%

hel

d by

i-

flex

solu

tions

ltd

Sha

res

held

by

the

Hol

ding

C

ompa

ny in

the

Sub

sidi

ary

20

,00

0 c

omm

on s

tock

of

US

D 0

.01

/- e

ach

5,8

08

,66

0 e

quity

sha

res

of

Rs.

10

/- e

ach

fully

pai

d-up

50

,00

0 E

quity

sha

res

of

Rs.

10

/- e

ach

fully

pai

d-up

51

,70

,00

0 E

quity

Sha

res

of

Rs.

10

/- e

ach,

ful

ly p

aid

up

Net

agg

rega

te o

f P

rofit

/(lo

sses

) of

the

subs

idia

ry s

o fa

r as

it c

once

rns

the

Mem

bers

of

the

Hol

ding

Com

pany

and

is n

ot d

ealt

with

in t

he a

ccou

nts

of t

he H

oldi

ng C

ompa

ny

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

2008

(61

,37

1)

(58

,09

7)

1,1

11

(3

,63

5)

b.

for

the

prev

ious

fin

anci

al y

ears

of

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry (3

12

,14

9)

(18

1,5

98

) (2

,84

9)

(8,4

10

)

Net

agg

rega

te o

f P

rofit

/(lo

sses

) of

the

subs

idia

ry s

o fa

r as

it c

once

rns

the

Mem

bers

of

the

Hol

ding

Com

pany

and

is d

ealt

with

or

prov

ided

for

in t

he a

ccou

nts

of t

he H

oldi

ng C

ompa

ny

a.

for

the

finan

cial

yea

r en

ded

on

Mar

ch 3

1,

2008

––

––

b.

for

the

prev

ious

fin

anci

al y

ears

of

the

subs

idia

ry s

ince

it b

ecam

e a

subs

idia

ry–

––

–

Not

es:

1

Sup

erSol

utio

ns C

orpo

ratio

n (m

erge

d w

ith i-

flex

solu

tions

inc.

eff

ectiv

e Ja

nuar

y 2,

2008).

Hen

ce t

he f

inan

cial

s ar

e as

of

Dec

embe

r 31,

2007.

2

Form

erly

“C

aste

k Sof

twar

e In

c”3

Dis

solv

ed o

n D

ecem

ber

21,

2007. H

ence

the

fin

anci

als

are

as o

f D

ecem

ber

21,

2007.

4

Form

erly

kno

wn

as “

Equi

nox

Cor

pora

tion”

5

Sot

as L

td. w

as d

isso

lved

on

Mar

ch 1

3, 2007.

6

Exch

ange

rat

es t

aken

into

con

side

ratio

n fo

r co

nver

sion

are

as

of M

arch

31,

2008.

Stat

emen

t pur

suan

t to

Sect

ion

212

of th

e Co

mpa

nies

Act

, 195

6 re

latin

g to

sub

sidi

ary

com

pani

es (c

ontin

ued)


Stat

emen

t pur

suan

t to

exem

ptio

n re

ceiv

ed u

nder

Sec

tion

212(

8) o

f the

Com

pani

es A

ct, 1

956

rela

ting

to s

ubsi

diar

y co

mpa

nies

(All

amou

nts

in t

hous

ands

of

Indi

an R

upee

s)

Nam

e of

the

su

bsid

iary

Com

pany

Rep

ortin

g cu

rren

cyEx

chan

ge

rate

6S

hare

C

apita

lR

eser

ves

Tota

l as

sets

Tota

l lia

bilit

ies

Inve

stm

ent

othe

r th

an

Inve

stm

ent

in

Sub

sidi

ary

Turn

over

Pro

fit/(

Loss

) be

fore

tax

atio

nP

rovi

sion

for

ta

xatio

nP

rofit

aft

er

Taxa

tion

Pro

pose

d D

ivid

end

Cou

ntry

of

Inco

rpor

atio

n

i-fle

x so

lutio

ns b

.v.

EUR

63

.00

8

82

,00

0

68

0,9

25

3

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9,4

45

2

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20

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5,8

12

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6

60

4,2

29

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51

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9)

45

2,3

31

–

The

Net

herla

nds

i-fle

x so

lutio

ns s

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EUR

63

.00

3

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0

22

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9

64

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60

6

22

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– 6

91

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21

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39

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66

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8

40

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78

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8,3

76

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25

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lting

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a Pac

ific)

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39

.88

6

45

,46

5

(77

8,3

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50

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8

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10

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7)

6,1

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69

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2)

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39

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39

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71

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50

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8)

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i-fle

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lutio

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c.U

SD

39

.88

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86

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3

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6,2

20

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7,3

29

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11

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07

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0)

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SA

i-fle

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lutio

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anad

a) In

c.2

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83

9,6

79

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72

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53

7,6

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70

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32

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2

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4,7

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ada

Cas

tek

Hun

garia

n H

oldi

ngs

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3C

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39

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Can

ada

Cas

tek

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D 3

9.8

8

54

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2

(11

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5)

63

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8

21

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1

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04

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8)

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82

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US

A

Cas

tek

Sof

twar

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ctor

y Lt

d.U

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39

.88

5

4,4

12

(6

2,5

03

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,94

8

12

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9

––

(42

9)

(30

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59

)–

US

A

Cas

tek

RB

G In

c.U

SD

39

.88

3

8

(25

0,8

73

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2

50

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5

––

(27

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0)

– (2

7,8

40

)–

US

A

Man

tas

inc.

US

D 3

9.8

8

4,9

05

,91

7

(38

5,3

92

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,86

5,7

98

3

45

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3

– 9

69

,46

9

(26

9,7

68

) 4

91

(2

69

,27

7)

–U

SA

Man

tas

Ltd

GB

P 7

9.4

9

– (2

04

,57

2)

9,2

37

2

13

,80

9

––

(12

1,2

33

)–

(12

1,2

33

)–

UK

Sot

as In

c.U

SD

39

.88

–

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Financial statements for the year ended

March 31, 2008 prepared in accordance with

Indian Generally Accepted Accounting Principles

(Indian GAAP) (Consolidated).

financials




The following discussion is based on our audited consolidated financial

statements, which have been prepared in conformity with accounting

principles generally accepted in India and complying in all material

respects the notified Accounting Standards by Companies (Accounting

Standards) Rules, 2006 and the relevant provisions of the Companies

Act, 1956.

The financial statements are consolidated for i-flex (“the Group”)

that includes i-flex solutions ltd and its subsidiaries, i-flex solutions

b.v., i-flex solutions pte ltd, i-flex America inc., i-flex solutions inc.,

Castek Software Inc., Mantas inc., i-flex Consulting (Asia Pacific) Pte Ltd.,

i-flex solutions s.a., i-flex Processing Services Ltd., ISP Internet Mauritius

Company, i-flex Processing Services Inc., Equinox Corporation, Equinox

Global Services Ltd. and Flexcel International Private Limited Investment

in associate company, Login SA, has been accounted for using the equity

method, since we exert significant influence over their operations.

You should read the following discussion of our financial condition and

results of operations together with the detailed consolidated Indian GAAP

financial statements and the notes to those statements. Our fiscal year

ends on March 31 of each year.

Information technology in the financial services industry

Financial institutions today face many challenges in their quest to

offer innovative products and services to customers. The focus is on

transforming business models, identifying cost-saving opportunities and

offering targeted services and improved service levels to customers.

Financial institutions are therefore striving to gain competitive advantage

by reducing costs, enhancing reputation and creating greater institutional

resilience.

Governance, risk and compliance are emerging as strategic priorities

for financial institutions. The stringent regulatory environment is forcing

organizations to select platforms focused on enterprise-wide governance,

risk and compliance management. Institutions are more inclined to adopt

an integrated approach as opposed to a piecemeal solution involving

fragmented systems and one-off processes that compound compliance

costs.

In the core transaction processing area, banks are becoming more

receptive to the value proposition and the benefits of process

transformation. i-flex is helping banks streamline processes and leverage

their existing IT infrastructure to reach new efficiency levels.

Overview

Together with Oracle, i-flex offers best-of-breed functionality for financial


to market dynamics in a fiercely challenging business environment. With

the experience of delivering value-based solutions to global financial

institutions, our offerings help financial institutions gain competitive

advantage through cost-effective solutions while, simultaneously,

adhering to the stringent demands of a dynamic regulatory environment.

Playing the role of a specialized IT partner to financial services institutions

worldwide, i-flex’s approach is comprehensive with a wide range of

products, custom solutions and consulting services.

Our solutions portfolio includes packaged applications, custom application

software development, deployment, maintenance and support services,

business and IT consulting services, technology deployment and

management services and the knowledge process outsourcing in the

financial services domain.

As of March 31, 2008, the Group had cumulatively serviced over 800

customers in more than 130 countries through its portfolio of products

and services.

We are organized by region and business segment. We have two

major business segments - the Products Business (comprising product

licensing, customization, implementation and support) and the Services

Business (providing customized software and consulting services).

We also have Knowledge Process Outsourcing Services (providing

value-added knowledge outsourcing). These segments are described in

greater detail below:

Products

The i-flex portfolio includes FLEXCUBE®, a complete banking product

suite for retail, consumer, corporate, investment and internet banking

and asset management and investor servicing. Since its launch in 1997,

more than 300 financial institutions in over 115 countries have chosen

FLEXCUBE.

FLEXCUBE enables banks to standardize, optimize and transform their

processes. The latest release, FLEXCUBE 10.0, helps financial institutions

respond faster to market dynamics and define and track processes,

while ensuring compliance. The suite is also equipped with SWIFT 2007

enhancements and supports SEPA payment processing. FLEXCUBE was

recognized as a leader in the Magic Quadrant for International Retail Core

Banking in February 2008 by Gartner.

FLEXCUBE® for Islamic Banking is a Sharia-compliant product and a

solution for both Islamic and conventional banks.

The FLEXCUBE® Private Banking Suite is a comprehensive solution

for private banking, giving wealth managers a unified view--and

analyses--of their customers’ wealth across asset classes with the added

benefits of performance tracking and improved customer relationship

management.

FLEXCUBE® Investor Services helps fund management companies,

transfer agency service providers and fund distributors design innovative

products and offer efficient investor services to their customers. The

solution was featured by Barrington Partners in ‘The Next Generation’

Transfer Agency Review in February 2008.

FLEXCUBE® Lending Suite is an integrated customer-centric solution

that addresses every lending requirement from origination, to servicing to

collections. DaybreakTM, part of the FLEXCUBE Lending Suite, manages

multiple lending products through an enterprise-wide consumer lending

platform.

Analytics for financial services: i-flex’s analytics offering for

financial services comprises an integrated suite of award-winning

solutions – ReveleusTM and Mantas--that help financial institutions

maximize profitability, minimize risks and deliver enterprise-wide

compliance.

The GRC framework brings together Reveleus’ unrivalled expertise in risk

and control, coupled with Mantas’ industry-leading behavior detection

technology--both deeply rooted in the financial services industry. This

combination helps financial institutions gauge the effectiveness of

governance policies, manage business risks and future-proof compliance

expenditure across various regulatory mandates.

The Reveleus suite of analytical applications is focused on the areas

of risk management, customer insight and enterprise-wide financial

performance. The Reveleus’ Risk Analytics product addresses some of

Management’s discussion and analysis of financial condition and results of operations


the most complex global challenges facing the financial industry today,

including multi-jurisdictional Basel II compliance and operational risk

management.

Reveleus was well positioned in Gartner’s ‘Leaders Quadrant’ in its

‘Basel II Risk Management Application Software Magic Quadrant for 2005’

and ‘2006 Basel II Software Applications Magic Quadrant’. Reveleus

was also ‘Highly Commended’ for its Compliance Initiative Innovation in

The Banker Technology Awards for 2006. Reveleus was also rated as

the number one GRC Solution Provider in the 2008 Operational Risk &

Compliance “Compliance Software Rankings”.

Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior

Detection Platform™ is the industry’s most comprehensive solution

for detecting risk, enhancing customer relationships and addressing

regulatory requirements in the anti-money laundering, trading and

broker compliance areas. Waters Magazine ranked Mantas as the Best

Anti-Money Laundering Solution for 2007, 2005 and 2004 and Best

Compliance Solution for 2003. The award was voted on by the subscribers

of Waters, a monthly magazine that covers information technology and

solutions in the financial services industry.

Mantas, along with the Reveleus suite of products, offers customers a

single, unified platform for governance, risk and compliance. Some of

the specific challenges Mantas addresses are global AML compliance,

MiFID, the market abuse directive, customer risk and suitability and

account takeover and identity theft.

i-flex offers strategic business software and services for the global

Property and Casualty insurance market. The Insure3 suite provides

insurance carriers with a suite of core business processing systems

for insurance product and process configuration, policy processing,

customer billing, claims management and services.

Services

PrimeSourcingTM, i-flex’s global IT services division, provides

comprehensive customized IT solutions for banking, securities and

insurance. These high-quality IT solutions reflect the division’s domain

expertise in financial services with specialized practice lines for payments,

business intelligence, CRM, Oracle Technology & Applications and testing.

These IT solutions encompass the complete lifecycle of an IT application

asset--from conceptualization to deployment and maintenance.

The division also provides in-depth expertise across a range of

technologies such as Java, Microsoft, mainframe and open source.

It’s IT processes are certified as SEI-CMMi Level 5 and it leverages

well-established COBIT-compliant global infrastructure and development

centers, including a comprehensive pool of proprietary methodologies,

tools and best practices.

PrimeSourcing division of i-flex was appraised at CMMI V1.1 Level 5

during February 2005. As part of our continuous process improvement

endeavour, we are in the process of upgrading to the latest version of

CMMI namely V1.2.

i-flex TDMS (Technology Deployment and Management Services) specializes in conceptualization, design, evaluation, implementation and

management of IT infrastructure for financial institutions. These services

are based on best practices such as ITIL (IT Infrastructure Library) and

COBIT (Control Objectives for Information and related Technology)

models, a globally accepted standard for IT management and control

framework and BS7799 (ISO17799).

The i-flex Consulting division offers an end-to-end consulting

partnership, providing comprehensive business and technology solutions

that enable financial services enterprises to improve process efficiencies;

optimize costs; meet risk and compliance requirements; define IT

Architecture; and, manage the transformation process. Consulting

services are offered in the areas of business transformation, risk and

compliance, program management, IT architecture, IT governance and

process improvement. i-flex’s solution approach for financial services

institutions is process-driven and rests on the i-flex Process Framework for Banking (iPFBTM).

The ‘i-flex Process Framework for Banking’, is a banking process

repository created by drawing on i-flex’s domain expertise and best

practices. Organized by process areas and defined in a manner

understandable by the business, iPFB helps banks with process

transformation and a phased migration to an SOA environment.

i-flex BPO completes the gamut of i-flex’s comprehensive offering for

the financial services industry. Part of i-flex Processing Services Limited

(iPSL), a 100 % owned subsidiary of i-flex solutions, i-flex BPO excels in

providing cost-effective and high-quality knowledge processing services

for the banking, capital markets, insurance and asset management

domains. i-flex also provides the ASP services for its products through its

100% owned subsidiary. In addition to providing ASP services, FLEXCEL

also provides value added services to its customers such as training,

testing, hosting, operations, roll-outs, infrastructure building and support

and application support.

i-flex BPO was selected in the Leaders Category for the ‘2007 Global

Outsourcing 100’ by The International Association of Outsourcing

Professionals (IAOP). The Global Outsourcing 100 defines the standard for

excellence in outsourcing service delivery. Earlier, the same organization

had recognized i-flex BPO as one of the ‘Top 50 Global Outsourcers &

Top 30 Global Offshore Vendors’. Dataquest magazine rated i-flex BPO

among the top 10 ‘dream employers’ in the BPO sector in 2007. i-flex

BPO also bagged the ‘Excellence in Gender Inclusivity - Best Emerging

Company’ award at the NASSCOM-India Today Woman Corporate

Awards for Excellence in Gender Inclusivity awards.

Corporate development

Oracle Global (Mauritius) Limited (“Oracle”) ownership interest in the

Company is 80.58 % as on March 31, 2008.

On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) formed

i-flex solutions s.a., Greece to acquire the banking business from Athens

Technology Center SA (“ATC”).

On November 16, 2007, Castek Software Inc. (“Castek”) became a

wholly owned subsidiary of i-flex America inc. with acquisition of the

balance 23.21% shares of Castek from minority shareholders.

On January 2, 2008, SuperSolutions Corporation a wholly owned

subsidiary of i-flex America inc. was merged with i-flex solutions inc

which is also a wholly owned subsidiary of i-flex America inc.

On March 31 2008, Flexcel International Private Limited (“Flexcel”),

(joint venture with HDFC Bank Limited and its group companies and Lord

Krishna Bank) became wholly owned subsidiary of i-flex solutions ltd

with acquisition of balance 60% shares of Flexcel from its co-venture

parties.




Business metrics

Our total revenues in fiscal 2008 were Rs. 23,802.4 million, representing

an increase of 15% from Rs. 20,609.4 million in fiscal 2007. The net

income in fiscal 2008 was Rs. 4,155.9 million, as against Rs. 3,722.8

million in fiscal 2007. Our net income margins are 17% and 18% for the

fiscal years 2008 and 2007 respectively. We define net income margins

for a particular period as the ratio of net income to total revenues during

such period. We had 11,006 employees as on March 31, 2008 against

9,068 at the end of the previous year.

Products business


Year ended March 31

2008 2007

Product revenues 13,879.8 11,211.0 Cost of product revenues (5,986.7) (4,350.5)Sales and marketing expenses (2,230.9) (1,961.4)General and administrative expenses (979.9) (820.4)

Depreciation and amortization (328.1) (307.1)Inter –Segment Expense (11.3) – Income from operations 4,342.9 3,771.7Operating margin* 31% 34%

*Operating margin is defined as income from operations from the Products

Business (excluding corporate expenses) as a percentage of total products

revenue.

Products revenue

As of March 31, 2008, our product revenues were Rs. 13,879.8 million

during the fiscal year ended March 31, 2008, an increase of 24% from

Rs. 11,211.0 million during the fiscal year ended March 31, 2007. Our

product revenues represented 58% and 54% of our total revenues for

fiscal years ended 2008 and 2007, respectively.

Our product revenues comprise license fees, professional fees for

implementation and enhancement services and annual maintenance

contract (post contract support – ‘PCS’) fees for our products.

License fee

Our standard licensing arrangements for products provide the user a

perpetual right to use the product for a pre-defined number of users

and sites upon the payment of a license fee. The license fee is a

function of a variety of quantitative and qualitative factors including the

number of copies sold, the number of concurrent users supported, the

number and combination of the modules sold and the number of sites

and geographical locations supported. The licenses are non-exclusive,

personal, non-transferable and royalty free.

Implementation fee

Along with licensing of products to customers, customers can also

optionally avail services related to the implementation of products

at customer sites, integration with other customer systems and

enhancement of products to address the specific requirements of

customers. The customer is typically charged a service fee either on

a fixed price basis or a time and material basis. Implementation and

enhancement services comprise functional enhancements (if needed),

interface building, implementation planning, data conversion, training

and product walkthroughs and are provided to customers who enter

into licensing arrangements with us and have opted to seek the services

from us.

Annual maintenance contracts fees

We also earn fees relating to the provision of annual maintenance

contracts after the implementation of a product and following the

expiration of the warranty period. Under these agreements, we provide

technical support, maintenance, problem solving and upgrades of the

licensed products. These support agreements are typically entered for a

period of 12 months.

As the revenues from license fees and implementation and enhancement

services rendered by us depend on the number of new customers we add

and the milestones completion and timing of the implementation, etc.,

these revenues typically vary from year to year. The annual maintenance

contracts generate steady revenues and would grow to the extent of new

customers coming under Post Contract Support.

The percentages of our revenue from these streams are as follows:

Fiscal Year Ended March 31

2008 2007

License fees 23% 29%Implementation and customization fees 59% 54%

PCS arrangements 18% 17%Total 100% 100%

Cost of products revenue and operating expenses

The cost of our product revenues consists of costs attributable to the

implementation, enhancement, maintenance and continued development,

including research and development efforts, of our core product offerings

- the FLEXCUBE suite of products, Reveleus and other products. These

costs primarily consist of compensation expenses for all of our software

professionals working in the Products Business, project-related travel

expenses, professional fees paid to software services vendors and the

cost of application software for internal use.


development costs are expensed as incurred until technological feasibility

is established. Software product development cost incurred subsequent

to the achievement of technological feasibility is not material and is

expensed as incurred.

Our operating expenses include selling and marketing expenses, general

and administrative expenses that consist of commissions payable to

our partners, product advertising, marketing expenses and allocated

overhead expenses associated with support and monitoring functions

such as human resources, facilities and infrastructure expenses, quality

assurance and financial control and depreciation and amortization.


project needs and therefore such personnel are fully utilized. Utilization

rates for our Services Business were 71% for both fiscal 2008 and 2007

respectively.

Cost of services revenue and operating expenses

The cost of revenues for services consists primarily of compensation

expenses for our software professionals, cost of application software

for internal use, travel expenses and professional fees paid to software

services vendors. We recognize these costs as incurred. Our operating


allocated overhead expenses associated with support and monitoring

functions such as human resources, corporate marketing, information

management systems, quality assurance and financial control and

depreciation.

Knowledge Process Outsourcing (KPO) Services Business


Year ended March 31

2008 2007

Services revenues 569.3 444.8 Cost of services revenues (394.5) (298.4)Sales and marketing expenses (125.4) (112.6)General and administrative expenses (117.4) (125.1)

Depreciation and amortization (27.1) (24.6)Inter-Segment Expense (7.8) – Income from operations (102.9) (115.9) Operating margin* (18%) (26%)

*Operating margin is defined as income from operations from the Knowledge Process Outsourcing (KPO) Services Business (excluding corporate expenses)

as a percentage of total services revenue

Knowledge Process Outsourcing (KPO) Services Revenues

Our KPO services revenues represented 2% of our total revenues for the

fiscal year ended March 31, 2008 and 2007. Our KPO services revenues

were Rs. 569.3 million in the fiscal year ended March 31, 2008, an

increase of 28% from Rs. 444.8 million in the fiscal year ended

March 31, 2007. This business line is currently in investment phase.

In the financial year, we had to face the down turn specifically in the

mortgage processing services from United States and in spite of these

factors, we were able to reduce the losses in the business from 26% to

18%.

Cost of Knowledge Process Outsourcing (KPO) Services Revenues and Operating Expenses

The cost of revenues for KPO Services consists primarily of compensation

expenses for our professionals, travel expenses and professional fees

paid to vendors. We recognize these costs as incurred. Our operating


allocated overhead expenses.

Services business


Year ended March 31

2008 2007

Services revenues 9,379.1 8,919.8 Cost of services revenues (6606.9) (6,391.1)Sales and marketing expenses (337.6) (320.4)General and administrative expenses (584.0) (458.9)

Depreciation and amortization (244.6) (241.5)Inter-Segment Expense (93.9) –Income from operations 1,512.1 1,508.0 Operating margin* 16% 17%

*Operating margin is defined as income from operations from the Services Business

(excluding corporate expenses) as a percentage of total services revenue.

Services revenue

Our services revenues represented 39% and 43% of our total revenues for




March 31, 2007.

The contracts relating to our Services Business are either time and

material contracts or fixed price contracts. The percentage of total

services revenues from time and material contracts was 86% in fiscal

2008 and 88% in fiscal 2007, with the remainder of our services

revenues attributable to fixed price contracts.

We provide our services through offshore centers located in India, onsite

teams operating at our customers’ premises and our development

centers located in other parts of the world. Offshore services revenues

consists of revenue from work conducted at our development centers

in India and for Indian customers at their locations. Onsite revenues

consist of work conducted at customer premises outside India and our

development centers outside India. The composition of our onsite and

offshore revenue is determined by the project lifecycle. Typically, the work

involving the design of new systems or relating to a system roll-out would

be conducted onsite, while the core software development, maintenance

and support activity may be conducted offshore. We received 64% and

69% of our services revenue from on-site work and 36% and 31% from

off-shore work during the fiscal years 2008 and 2007 respectively.

Our services revenues and profits are also affected by the rate at which

our software professionals are utilized. The utilization rate is calculated

as the percentage billed for our personnel in a particular period to

average number of staff that is considered billable in that same period.

For the purpose of calculating the number of billable staff, we exclude the

personnel that are engaged in management, administration, marketing

support, initial training (six months for personnel without any prior

work experience and three months for personnel with over two years

experience) and personnel allocated to the approved internal investment

projects. Our onsite personnel deployment on projects is based on




Geographic breakup of revenues

Our overall revenues continue to be well diversified. The following table represents the percentage breakup of our revenues for our Products and Services

Business by region:



Products Revenues

Services Revenues

Total Revenues

Products Revenues

Services Revenues

Total Revenues

USA 17% 56% 33% 21% 62% 40%Middle East, India and Africa 19% 5% 13% 20% 8% 14%Asia Pacific 19% 19% 19% 19% 16% 18%Europe 44% 20% 34% 39% 14% 27%Latin America and Caribbean 1% 0% 1% 1% 0% 1%Total 100% 100% 100% 100% 100% 100%

Customer concentration

Our operations and business depend on our relationships with a number

of large customers. Our revenues from our top ten customers for fiscal

2008 were at 33% and for fiscal year 2007 were at 23% of our total

revenues. The top ten customers in our Services Business contributed

48% of the total services revenues and the top ten customers in our

Products Business, contributed 34% of the total products revenues

during fiscal 2008.

The percentage of total revenues during fiscal years 2008 and 2007 that

we derived from our largest customer, top five customers and top ten

customers is provided in the accompanying table. In the table, various

affiliates of Citigroup are classified as separate customers and the last

row sets forth the percentage of total revenues we earned from the

various affiliates of Citigroup with respect to our Products and Services

Business individually and with respect to our business taken as a whole.

Products Revenue

Services Revenue

Total Revenues

2008 2007 2008 2007 2008 2007

Top customer 8% 6% 13% 5% 7% 3%Top 5 customers 23% 22% 34% 19% 24% 13%Top 10 customers 34% 35% 48% 30% 33% 23%Citigroup and its affiliates 11% 15% 36% 44% 21% 28%

Trade receivables

Trade receivables as of fiscal March 31, 2008 and 2007 were Rs. 8,454.0

and Rs. 7,494.4 million respectively. Our days sales outstanding (which

is the ratio of sundry debtors to total sales in a particular year multiplied

by 365) for fiscal 2008 and 2007 were approximately 119 and 120

respectively. The Group periodically reviews its account receivables

outstanding as well as the aging, quality of the account receivables,

customer relationship and history of the client. The following table

presents the age profile of our debtors:

Year ended March 31

Period in days 2008 2007

0–180 87% 87%More than 180 13% 13%Total 100% 100%

Foreign currency and treasury operations


while a majority of our expenses are incurred in Indian Rupees with

the remaining expenses incurring in U.S. Dollars (USD) and European

currencies.

We follow a conservative philosophy of treasury operations and the

policy is to invest funds substantially in time deposits with well-known

and highly rated Indian and foreign banks. The Company has ensured

adequate controls over asset management including cash management

operations, credit management and debt collection.

The Group also balances funds in USD accounts or INR deposits

based on the comparative exchange rates, interest rates and currency

requirements. The Group books forward covers from time to time in line

with its treasury management philosophy.

Income taxes

Currently, we partially benefit from the tax holidays the Government

of India provides to software products and IT services exporters from

specially designated software technology parks in India. As a result of

these incentives, our operations have been subject to relatively lower tax

liabilities in India. These tax incentives currently include a 10-year tax

holiday from Indian corporate income-taxes for the operation of seven

of our Indian facilities. As a result a substantial portion of our pre-tax

income has not been subject to tax in recent years.

The Finance Act, 2000 restricts the ten-year tax holiday available from the

fiscal year in which the undertaking begins to manufacture or produce or

until fiscal 2010(as extended in Finance Act, 2008), whichever is earlier.

Accordingly, facilities set up after fiscal 2000 will enjoy the benefit of the

tax holiday only until fiscal 2010. For seven of our facilities, these benefits

expire in stages through 2010. Income taxes also include foreign taxes

representing income taxes payable overseas by us in various countries.

Employee Stock Purchase Scheme (‘ESPS’)













employees.

On acceptance of the offer, the selected employee shall undertake to pay

within ten years from the date of acceptance of the offer the cost of the

shares incurred by the Trust including repayment of the loan relatable


























(Number of shares)


Shares forfeited during the year 16,847 21,228Closing balance of unallocated shares 158,963 142,116



Shares forfeited during the year (16,847) (21,228)Closing balance of allocated shares 221,101 355,212


Employee Stock Option Plan (‘ESOP’)























The weighted average share price for the period over which stock options

was exercised was Rs. 1,890.



Range of exercise

prices


price (Rs.)

Weighted average




419-560 45,003 480 5.31,291-1,291 52,450 1,291 8.1

431,253 1,025 7.2

Analysis of our financial results

Comparison of fiscal 2008 with fiscal 2007

Revenues

Our total revenues in the fiscal year ended March 31, 2008 were

Rs. 23,802.4 million, an increase of 15% over our total revenues of

Rs. 20,609.4 million in the fiscal year ended March 31, 2007. The

increase in revenues was attributable to a 24% increase in the revenues

from our Products Business and 5% increase in the revenues from our

Services Business.

Products revenues

Our products revenues in the fiscal year ended March 31, 2008 were

Rs. 13,879.8 million, an increase of 24% over our products revenues

of Rs. 11,211.0 million in the fiscal year ended March 31, 2007 on the

strength of large customer wins in Europe and ASPAC. The revenues

from license fees comprised 23% of the revenues, implementation fees

comprised 59% and Annual Maintenance Contracts comprised 18% of

the revenues for the fiscal 2008.

Services revenues

Our services revenues represented 39% and 43% of our total revenues for




March 31, 2007. Revenues from time and material contracts comprised

86% of the revenues and fixed price contracts comprised 14% for the

fiscal 2008.

Knowledge Process Outsourcing (KPO) Revenue

Our revenues from KPO Services in the fiscal year ended March 31, 2008

were Rs. 569.3 million, an increase of 28% over our revenues from KPO

Services of Rs. 444.8 million in the fiscal year ended March 31, 2007.

Interest and other income

Our interest and other income in the fiscal year ended March 31, 2008

was Rs. 639.7 million, an increase of 78% over our interest and other

income of Rs. 359.7 million in the fiscal year ended March 31, 2007.

The increase in interest income amounted to Rs. 75.5 million resulting

from additional funds placed with banks and hardening of interest rates

over fiscal 2007. Additionally the foreign exchange gain contributed

an increase of Rs. 174 million during the year mainly due to lower

appreciation of Rupee against the US Dollar as compared to Fiscal 2007

and sharp depreciation of Rupee against Euro.

Cost of revenues and operating expenses

Cost of revenues

Our cost of revenues in the fiscal year ended March 31, 2008 was

Rs. 13,040.3 million, an increase of 18% over our cost of revenues

of Rs. 11,066.1 million in the fiscal year ended March 31, 2007. Our

cost of revenues as a percentage of total revenue was 55% in the fiscal

year ended March 31, 2008, compared to 54% in the fiscal year ended

March 31, 2007.

We invest significantly both in our Products and Services businesses to

meet emerging market requirements and create the foundation for the

growth in future. In the financial year 2007-08, we continued to invest

enhancing the product suite and announced FLEXCUBE 10.0, which

helps financial institutions respond faster to market dynamics and define

and track processes, while ensuring compliance. We also launched our

Private Wealth Management solution – FLEXCUBE Private Banking. We

further strengthened our analytics offering for financial services which

comprises an integrated suite of award-winning solutions – ReveleusTM

and Mantas. In our Services business, we invested in strengthening

our competencies in the payments area. We also invested in creating

a strong offering in MiFID - the new regulatory compliance area in

capital markets in Europe. During the year, i-flex BPO launched iGPM

(i-flex Global Processing Model) a new generation, platform-based loan

processing solution from i-flex BPO.

Our cost of products revenues in the fiscal year ended March 31, 2008

was Rs. 5,986.7 million, an increase of 38% over our cost of products


Our cost of products revenues as a percentage of products revenues was


fiscal year ended March 31, 2007. This increase, as stated above, was

largely attributable to the higher investments in the product business.


Our cost of services revenues in the fiscal year ended March 31, 2008

was Rs. 6,606.9 million, an increase of 3% over our cost of services


The cost of services revenues as a percentage of services revenues was


fiscal year ended March 31, 2007.

Sales and marketing expenses

Our sales and marketing expenses in the fiscal year ended March 31, 2008

were Rs. 2,697.5 million, an increase of 13% over our sales and marketing

expenses of Rs. 2,395.5 million in the fiscal year ended March 31, 2007.

Our sales and marketing expenses as a percentage of total revenues was

at 11% for the fiscal year ended March 31, 2008 compared to 12% for

the fiscal year ended March 31, 2007.

Our sales and marketing expenses for our Products Business in the fiscal

year ended March 31, 2008 were Rs. 2,230.9 million, an increase of

14% over our sales and marketing expenses for our Products Business

of Rs. 1,961.4 million in the fiscal year ended March 31, 2007. Sales

and marketing expenses for our Products Business as a percentage of

products revenues was 16% in the fiscal year ended March 31, 2008,


Our sales and marketing expenses for our Services Business in the fiscal


over our sales and marketing expenses for our Services Business of

Rs. 320.4 million in the fiscal year ended March 31, 2007. Sales and

marketing expenses for our Services Business as a percentage of services

revenues remained at 4% for the fiscal year ended March 31, 2008 and

the fiscal year ended March 31, 2007.

General and administrative expenses

Our general and administrative expenses in the fiscal year ended

March 31, 2008 were Rs. 3,392.2 million, an increase of 25% over

our general and administrative expenses of Rs. 2,723.3 million in the

fiscal year ended March 31, 2007. This increase is attributable to

expansion of our existing facilities and creation of new development

centers to meet the growth requirements. Our general and administrative

expenses as a percentage of total revenues was 14% in the fiscal year

ended March 31, 2008, compared to 13% in the fiscal year ended

March 31, 2007.

General and administrative expenses for our Products Business in the

fiscal year ended March 31, 2008 were Rs. 979.9 million, an increase

of 19% over our general and administrative expenses for our Products

Business of Rs. 820.4 million in the fiscal year ended March 31, 2007.

Our general and administrative expenses for our Products Business as a

percentage of products revenues was 7% for both the fiscal years ended

March 31, 2008 and March 31, 2007.

General and administrative expenses for our Services Business in the fiscal


over our general and administrative expenses for our Services Business

of Rs. 458.9 million in the fiscal year ended March 31, 2007. Our general

and administrative expenses for our Services Business as a percentage

of services revenues was 6% in the fiscal year ended March 31, 2008,


Income taxes

Our provision for income taxes in the fiscal year ended March 31, 2008

was Rs. 441.7 million, an increase of 6% over our provision for income

taxes of Rs. 416.0 million in the fiscal year ended March 31, 2007. Our

effective tax rate was 9.6% in the fiscal year ended March 31, 2008


Income from operations and net income

As a result of the foregoing factors, income from operations increased by

5% to Rs. 3,966.4 million in fiscal 2008 from Rs. 3,771.5 million in fiscal

2007 and net income increased by 12% to Rs. 4,155.9 million in fiscal

2008 from Rs. 3,722.8 million in fiscal 2007. Our net margins decreased

to 17% from 18% in fiscal 2007. We define net income margins for a

particular period as the ratio of net income to total revenues during such

period.

Liquidity and capital resources

Our capital requirement relate primarily to financing the growth of our

business. We have historically financed the majority of our working capital,

capital expenditure and other requirements through our operating cash

flow. During fiscal 2008 and 2007, we generated cash from operations

of Rs. 4,012.0 million and Rs. 1,645.9 million respectively.

i-flex is a zero debt company. We expect that our primary financing

requirements in the future will be capital expenditure and working

capital requirements in connection with the expansion of our business.

We believe that the cash generated from operations will be sufficient to

satisfy our currently foreseeable capital expenditure and working capital

requirements.

Human capital

We recruit graduates from leading engineering and management

institutions. We also hire functional experts from the banking industry.

We had a net addition of 1,938 employees during the fiscal year taking

our employee strength to 11,006 employees as on March 31, 2008. The

blend of functional knowledge and technical expertise, coupled with i-flex

training and experience make our employees unique.

We enjoy cordial relationships with our employees and endeavour to

give them an excellent, professionally rewarding and enriching work

environment. We operate an effective performance management system

with a focus on employee development. This measures key result

areas, competencies and training needs ensuring all-round employee

development.

Risks and concerns

Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk exposures are due to the following:

– foreign exchange rate fluctuations,

– fluctuations in interest rates; and

– fluctuations in the value of our investments.




As of March 31, 2008, we had Cash and Bank Balances of Rs. 8,965.6

million out of which Rs. 5,539.8 million was in interest–bearing bank

deposits. Consequently, we face an exposure on account of fluctuation

in interest rates. These funds were invested in bank deposits of longer

maturity (more than 90 days) to earn a higher rate of interest income.


while a majority of our expenses are incurred in Indian Rupees and the

balance in US Dollars and European currencies. Our functional currency

for Indian operations and consolidated financials is the Indian Rupee.

We expect the majority of our revenues will continue to be generated

in foreign currencies for the foreseeable future and a significant portion

of our expenses, including personnel costs and capital and operating

expenditure, to continue to be incurred in Indian Rupees.

In addition, we face normal business risks such as global competition

and country risks pertaining to countries that we operate in.

Integration of mergers and acquisitions

i-flex has acquired companies in the past, i.e., SuperSolutions Corporation,

USA, ISP Internet Mauritius Company, Mauritius, Castek Software Inc.,

Canada, Mantas inc., USA and i-flex Consulting (Asia Pacific) Pte Ltd.,

Singapore. During the year, we acquired i-flex solutions s.a. and the balance

stake in Castek Software Inc. and Flexcel International Private Limited.

These mergers and acquisitions involve inherent risks, including:

– unforeseen contingent risks or latent liabilities relating to these

businesses that may only become apparent after the merger or

acquisition is finalized;

– integration and management of the operations, sales and marketing,

personnel and systems;

The company as part of its policies ensures that the companies acquired

are successfully integrated into the mainstream business.

SWOT analysis

Strengths:

– Comprehensive solutions portfolio.

– World-class technology

– Deep domain expertise

– Extensive global client base

– Superior quality and cost-efficient delivery

– High quality manpower resources

– Strong R&D capability, well linked with business

Weaknesses:

– Exposure to various economies

Opportunities:

– India is a favoured outsourcing destination

– Increasing momentum in purchasing core banking systems by large

and global financial institutions

– Entry into hitherto untapped markets

– Expanding solutions portfolio and entry into new market segments

– consumer finance, business analytics, Basel II, Anti-Money

Laundering, Private Wealth Management, Islamic banking, among

others

– Need for banks to improve performance and efficiency through

effective use of information technology solutions

Threats:

– Increasing competition

– Legislative and visa related restrictions

Outlook

The worldwide market for financial services is transforming at a rapid

pace. New asset classes such as private equity and hedge funds are

attracting investors and shifting the focus within capital markets.

The payments space, a major source of revenue and profit, is being

restructured, thus altering the fundamental dynamics of the banking

industry. Financial services institutions are also leveraging all available

technologies to offer services on a “self service” approach leading to

business and technology innovation.

Emerging markets are becoming increasingly important sources of growth

for firms in mature economies. Global financial institutions will need

to excel in areas such as off shoring, taxation and financial reporting,

service and process innovation and in internal controls to sustain their

growth and profitability

With a process-driven approach based on a Service-Oriented Architecture,

your company has the distinct advantage of offering banks the combined

benefits of interoperability, extensibility and standardization. Jointly with

Oracle, your company provides best-of-breed functionality for financial


to market dynamics in a fiercely challenging business environment.

Encompassing retail, corporate and investment banking, funds, cash

management, trade, treasury, payments, lending, private wealth

management, asset management and business analytics, among others,

these solutions help financial institutions drive innovation and become

‘model enterprises’ of the future.

Acquisitions


On July 2, 2007, i-flex b.v. acquired 90% shares in banking business

from ATC. The acquisition was structured by way of transfer of all


contracts, employees and fixed assets of banking business from ATC to

a newly formed entity, i-flex solutions s.a., Greece

b. Castek Software Inc.

In November 2007, i-flex America inc. entered into an agreement to

acquire remaining equity shares in Castek from minority shareholders.

The transaction was completed in April 2008.

c. Flexcel International Private Limited

On March 31, 2008, Flexcel became a wholly owned subsidiary of

i-flex solutions ltd with acquisition of balance 60% shares of Flexcel from

i-flex’s co-venture parties.

Internal control systems and their adequacy

i-flex group has in place adequate systems of internal control and

documented procedures covering all financial and operating functions.

These systems have been designed to provide reasonable assurance with

regard to maintaining proper accounting controls, monitoring economy

and efficiency of operations, protecting assets from unauthorized use or

losses and ensuring reliability of financial and operational information.

The group continuously strives to align all its processes and controls with

global best practices.




Auditors’ report

To the Board of Directors of

i-flex Solutions Limited:

1. We have audited the attached consolidated balance sheet of

i-flex Solutions Limited, its subsidiaries, associate company and joint

venture (together referred to as ‘the Group’ as described in Note 1 of

schedule 15 to the financial statements) as at March 31, 2008 and

also the consolidated profit and loss account and the consolidated

cash flow statement for the year ended on that date annexed

thereto. These financial statements are the responsibility of the

Group’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 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 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 presentation. We believe that our audit provides

a reasonable basis for our opinion.

3. We report that the consolidated financial statements have been

prepared by the Group’s management in accordance with the

requirements of Accounting Standard (‘AS’) 21, Consolidated

Financial Statements, AS 23, Accounting for Investments in

Associates in Consolidated Financial Statements and AS 27,

Financial Reporting of Interests in Joint Ventures issued by the

Institute of Chartered Accountants of India.

4. In our opinion and to the best of our information and according to

the explanations given to us, the consolidated financial statements

give a true and fair view in conformity with the accounting principles

generally accepted in India:

(a) in the case of the consolidated balance sheet, of the state of

affairs of the Group as at March 31, 2008;

(b) in the case of the consolidated profit and loss account, of the

profit of the Group for the year then ended; and

(c) in the case of the consolidated cash flow statement, of the cash

flows of the Group for the year then ended.




Partner


Mumbai, India

May 5, 2008



Schedules 2008 2007

Sources of fundsShareholders’ fundsShare capital 1 418,737 416,443 Share application money pending allotment 265 401,679 Reserves and surplus 2 27,351,571 23,202,085 Deferred tax liability 3 4,677 1,745 Minority Interest 6,273 –

27,781,523 24,021,952

Application of fundsFixed Assets 4Cost 11,088,250 9,626,043 Less: Accumulated depreciation, amortization and impairment 2,575,047 2,030,937 Net book value 8,513,203 7,595,106 Capital work-in-progress and advances 1,313,536 1,346,108

9,826,739 8,941,214

Investments 5 54,935 59,167

Deferred tax asset 3 230,280 141,483

Current assets, loans and advances 6Sundry debtors 8,453,962 7,494,396 Cash and bank balances 8,965,620 7,197,754 Other current assets 1,137,091 1,194,592 Loans and advances 5,241,646 4,325,016

23,798,319 20,211,758 Less: Current liabilities and provisions 7Current liabilities 5,601,777 4,910,518 Provisions 526,973 421,152

6,128,750 5,331,670

Net current assets 17,669,569 14,880,088

27,781,523 24,021,952


The schedules referred to above and notes to accounts form an integral part of the consolidated balance sheet.

Consolidated balance sheet as at March 31




N R K Raman

Managing Director


Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008




(All amounts in thousands of Indian Rupees, except share and per share data)

Schedules 2008 2007

Revenue 8 23,802,363 20,609,382 Cost of revenue 9 (13,040,290) (11,066,050)Gross profit 10,762,073 9,543,332

Operating expensesSelling and marketing expenses 10 (2,697,519) (2,395,495)General and administrative expenses 11 (3,392,247) (2,723,336)Depreciation and amortization (705,888) (653,023)Income from operations 3,966,419 3,771,478

Non-operating income (expenses)Interest income 12 464,767 376,907 Other income (expenses), net 13 174,938 (17,253)Income before provision for taxes 4,606,124 4,131,132

Provision for taxesCurrent tax (774,424) (413,192)MAT credit 362,605 –Deferred tax 85,867 70,625 Fringe benefit tax (Refer Note 13 of Schedule 15) (115,733) (73,391)Net income for the year before share of profit of associate company and minority interest 4,164,439 3,715,174

Share of (loss) profit of associate company (4,128) 7,622 Net income for the year before share of minority interest 4,160,311 3,722,796 Share of Minority interest (4,425) –

Net income for the year 4,155,886 3,722,796

Profit and loss account, beginning of the year 4,352,335 630,950 Amount available for appropriation 8,508,221 4,353,746 Appropriations:Dividend paid on stock options exercised – (1,237)Tax on dividend paid on stock options exercised – (174)Surplus carried to Balance Sheet 8,508,221 4,352,335

Earnings per share of Rs. 5/- each (in Rs.) 14 Basic 49.66 47.05 Diluted 49.58 45.76


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

Consolidated profit and loss for the year ended March 31




N R K Raman

Managing Director


Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008


(All amounts in thousands of Indian Rupees, except share and per share data)



Schedule 1: Share capital

Authorized:100,000,000 (March 31, 2007 – 100,000,000) equity shares of Rs. 5/- each 500,000 500,000

Issued, subscribed and fully paid-up:83,747,441 (March 31, 2007 – 83,288,580) equity shares of Rs. 5/- each 418,737 416,443

a. Of the above, 67,481,698 (March 31, 2007 – 67,481,698) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).

b. Of the above, 62,121,800 (March 31, 2007 – 62,121,800) equity shares of Rs. 5/- each had been issued as fully paid up bonus shares by

capitalizing the securities premium account.

c. Refer Note 6(b) of Schedule 15 for the options granted for unissued equity shares.

Schedule 2: Reserves and surplus

Securities premiumBalance, beginning of the year 9,012,187 2,543,366 Received during the year 439,409 6,468,821 Share issue expenses (Refer Note 12 of Schedule 15) (7,301) –Balance, end of the year 9,444,295 9,012,187

General reserveBalance, beginning of year 10,145,191 10,238,569 Adjustment for employee benefits provision – (93,378)Balance, end of the year 10,145,191 10,145,191

Foreign currency translation reserveBalance, beginning of year (310,164) –Addition during the year on net investment in Non integral operations (436,879) (310,164)Balance, end of the year (747,043) (310,164)

“Gain on dilution of equity investment in joint venture(Refer Note 8-c of Schedule 15)” 907 2,536

Profit and loss account 8,508,221 4,352,335 27,351,571 23,202,085

Schedule 3: Deferred tax asset (liability)

Deferred tax asset Difference between book and tax depreciation 196,177 124,351 Expenditure allowable on actual payment 8,566 10,132 Provision for doubtful debts 25,537 7,000

230,280 141,483 Deferred tax liabilityDifference between book and tax depreciation (4,677) (1,745)

(4,677) (1,745) 225,603 139,738

Schedules annexed to and forming part of the accountsfor the year ended March 31




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Schedule 5: Investments

a. Long term investments (at cost)

i. Trade (unquoted)EBZ Online Private Limited242,240 (March 31, 2007 – 242,240) equity shares of Rs. 10/- each, fully paid-up 45,000 45,000 Less: Provision for diminution in value of investment (45,000) (45,000)

– –Login SA33,000 (March 31, 2007 – 33,000) equity shares of EUR 2/- each, fully paid up 16,723 9,101 Add: Share of (loss)/profit of associate company (4,128) 7,622

12,595 16,723 ii. Non trade (unquoted)

National Savings Certificate – VIII issue 131 131

iii. Non trade (quoted)6.75% Tax Free US-64 Bonds331,225 (March 31, 2007 – 331,225) Bonds of Rs. 100/- each, fully paid-up 33,123 33,123

b. Current Investment (cost or fair value, whichever is lower)

Non trade (quoted)9% Dhanalakshmi Bank Bond Series VI10 (March 31, 2007 – 10) Bonds of Rs. 1,000,000 each, fully paid up 9,086 9,190

54,935 59,167

Aggregate cost of quoted investments 42,209 42,313 Aggregate market value of quoted investments 42,689 42,133 Aggregate cost of unquoted investments 12,726 16,854

Schedule 6: Current assets, loan and advances

a. Sundry debtors (unsecured)

Debts outstanding for a period exceeding six months:Considered good 1,068,579 939,161 Considered doubtful 349,689 182,208

1,418,268 1,121,369 Other debts - considered good 7,385,383 6,555,235

8,803,651 7,676,604 Less: Provision for doubtful debts (349,689) (182,208)

8,453,962 7,494,396

b. Cash and bank balances

Cash in hand 2,172 2,133 Cheques on hand 9,748 50,111 Balances with scheduled banks:

Current accounts in foreign currency 756,915 455,269 Other current accounts 127,634 84,079 Deposit accounts 5,539,750 3,715,847 Deposit amount of Unutilized IPO funds – 287,190 Preferential issue – 497,263 Margin money deposit/Escrow account 122,377 19,292 Unclaimed dividend accounts 1,807 2,065

Balances with non-scheduled banks: Current accounts in foreign currency 2,005,270 1,751,989 Deposit account in foreign currency 399,947 332,516

8,965,620 7,197,754






c. Other current assets

Interest accrued on:Bank deposits 71,298 71,013 Bonds 746 741

Unbilled revenue 888,741 1,038,228 Gross investment in lease 32,215 42,118 Contract work in progress 144,091 42,492

1,137,091 1,194,592

d. Loans and advances (unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received:Premises and other deposits 3,170,427 2,517,095 Prepaid expenses 319,874 363,051 Advance tax, net of provision for taxes 1,018,471 929,639 MAT credit entitlement 362,605 –Forward contract receivable 86,563 305,630 Other advances 283,706 209,601

5,241,646 4,325,016

Schedule 7: Current liabilities and provisions

a. Current liabilities

Accrued expenses 2,354,961 1,872,843 Deferred revenues 2,068,997 2,079,018 Accounts payable 370,945 315,596 Advances from customers 32,162 19,832 Investor Education and Protection Fund to be credited by unclaimed dividends* 1,807 2,065 Unearned finance income 10,163 16,234 Other current liabilities 762,742 604,930

5,601,777 4,910,518

*There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.

b. Provisions

Provision for gratuity 176,506 129,487 Provision for compensated absence 332,976 291,665 Provision for taxation, net of advance tax 17,491 –

526,973 421,152



Schedule 8: Revenue

Product licenses and related activities 13,871,996 11,193,090 IT solutions and consulting services 9,846,694 9,364,575 Share of sales of joint venture company 83,673 51,717

23,802,363 20,609,382

Schedule 9: Cost of revenue

Employee costs 9,659,411 7,993,454 Travel related expenses (net of recoveries) 1,720,956 1,718,746 Professional fees 1,081,675 767,239 Application software 578,248 586,611

13,040,290 11,066,050




Schedule 10: Selling and marketing expenses

Employee costs 1,450,595 1,228,129 Professional fees 268,476 365,899 Traveling expenses 345,630 329,042 Advertising expenses 87,862 150,368 Rent 63,646 43,212 Communication expenses 84,667 57,424 Provision for doubtful debts 174,775 87,611 Other expenses 221,868 133,810

2,697,519 2,395,495

Schedule 11: General and administrative expenses

Employee costs 1,407,137 1,156,421 Professional fees 362,348 250,610 Rent 599,981 414,154 Communication expenses 202,240 196,609 Power 195,599 133,066 Traveling expenses 97,456 100,422 Other expenses 527,486 472,054

3,392,247 2,723,336

Schedule 12: Interest income

Interest on:Bank deposits 442,897 367,409

[includes tax deducted at source of Rs. 83,643 (March 31, 2007 – Rs. 74,589)]Bonds 3,141 3,639

[includes tax deducted at source of Rs. 204 (March 31, 2007 – Rs. 212)]Income tax refund 12,079 –Lease assets 6,071 5,274 Loans to employees 579 585

464,767 376,907

Schedule 13: Other income (expenses)

Foreign exchange gain (loss), net 174,072 (22,623)Loss on sale of fixed assets, net (7,820) (4,554)Miscellaneous income 8,686 9,924

174,938 (17,253)

Schedule 14: Reconciliation of basic and diluted shares used in computing earnings

per shareNo of shares

Weighted average shares outstanding for basic earnings per share 83,686,985 79,125,096 Add: Effect of dilutive stock options 129,381 2,230,666 Weighted average shares outstanding for diluted earnings per share 83,816,366 81,355,762




Schedule 15: Notes to accounts

1. Background and nature of operations

i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India with limited liability on September 27, 1989. The Company along with its

subsidiaries, joint venture and associates is principally engaged in the business of providing information technology solutions and business process

outsourcing services to the financial services industry worldwide. i-flex has a suite of banking products, which caters to the needs of corporate, retail,

investment banking, treasury operations and data warehousing.

i-flex is a subsidiary of Oracle with Oracle having 80.58% ownership interest in the Company as at March 31, 2008.

The Company at its Board Meeting held on April 4, 2008 passed a resolution to change its name to “Oracle Financial Services Limited”. This change will

be effective after all necessary regulatory filings and approvals are obtained by the Company.

The Company has following subsidiaries, joint venture (Refer Note 8-c) and associates (hereinafter collectively referred as the “Group”):

Companies Country of Incorporation Voting Interest Relationship

Direct holdingi-flex solutions b.v. The Netherlands 100% Subsidiaryi-flex solutions pte ltd Singapore 100% Subsidiaryi-flex America inc. United States of America 100% SubsidiaryISP Internet Mauritius Company Republic of Mauritius 100% Subsidiaryi-flex Processing Services Limited India 100% SubsidiaryFlexcel International Private Limited (Refer Note 8-c) India 100% SubsidiaryLogin SA France 33% AssociateSubsidiaries of i-flex America inc.i-flex solutions inc. United States of America 100% SubsidiarySuperSolutions Corporation (merged withi-flex solutions inc. effective January 2, 2008) United States of America 100% Subsidiary

Castek Software Inc. Canada 100% SubsidiaryMantas inc. United States of America 100% SubsidiarySubsidiaries of Mantas inc.Mantas Limited United Kingdom 100% SubsidiarySotas Inc. United States of America 100% SubsidiaryMantas Singapore Pte Ltd Singapore 100% SubsidiaryMantas (India) Pvt. Ltd. India 100% SubsidiarySotas Limited United Kingdom 100% SubsidiarySubsidiaries of Castek Software Inc.Castek Hungarian Holdings Inc. Canada 100% SubsidiaryCastek Inc. United States of America 100% SubsidiaryCastek Software Factory Ltd. United States of America 100% SubsidiaryCastek RBG Inc. United States of America 100% SubsidiarySubsidiary of i-flex solutions b.v. i-flex solutions s.a. Greece 90% SubsidiarySubsidiary of i-flex solutions pte limitedi-flex Consulting (Asia Pacific) Pte Ltd. Singapore 100% SubsidiarySubsidiaries of ISP Internet Mauritius Companyi-flex Processing Services Inc. United States of America 100% SubsidiaryEquinox Global Services Ltd. India 99.83% Subsidiary

2. Summary of significant accounting policies

a. Basis of presentation and consolidation

The consolidated financial statements includes the accounts of i-flex,

its subsidiaries, joint venture and associate company and are prepared

in accordance with accounting principles generally accepted in India

under the historical cost convention on the accrual basis of accounting,

in conformity with accounting principles generally accepted in India and

complying in all material respects the notified Accounting Standards

by Companies (Accounting Standards) Rules, 2006 and the relevant

provisions of the Companies Act, 1956 (‘the Act’). The accounting

policies applied by the Group are consistent with those used in the

previous years. The financial statements are presented in the general

format specified in Schedule VI to the Act. However, as these financial

statements are not statutory financial statements, full compliance with

the Act are not required and hence these financial statements do not

reflect all the disclosure requirements of the Act.

The consolidated financial statements are prepared in accordance

with the principles and procedures required for the preparation and

presentation of consolidated financial statements as laid down under

AS 21, ‘Consolidated Financials Statements’, AS 23, ‘Accounting for

Investments in Associates in Consolidated Financial Statements’ and AS

27, ‘Financial Reporting of Interest in Joint Venture’, issued by the Institute

of Chartered Accountants of India (ICAI). The financial statements of the

Company and its subsidiaries are consolidated on a line to line basis by

adding together like items of assets, liabilities, income and expenses.

Any excess of the cost to the parent company of its investment in a

subsidiary and the parent company’s portion of equity of subsidiary at

the date, at which investment in the subsidiary is made, is described


as goodwill and recognized separately as an asset in the consolidated

financial statements. All significant inter-company transactions and

balances between the entities included in the consolidated financial

statements have been eliminated. Investment in associate company is

accounted under equity method in consolidated financial statements.

The accounting policies have been consistently applied by the Group

and are consistent with those used in the previous years. The significant

accounting policies adopted by the Group, in respect of the consolidated

financial statements are set out below.

b. Use of estimates

The preparation of financial statements in conformity with generally

accepted accounting principles requires management to make

estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent liabilities at the date of the

financial statements and the results of operations during the reporting

year end. Although these estimates are based upon management’s best

knowledge of current events and actions, actual results could differ from

these estimates.

c. Fixed assets, depreciation and amortization

Fixed assets including assets under finance lease arrangements are

stated at cost less accumulated depreciation. The Group capitalizes all

direct costs relating to the acquisition and installation of fixed assets.

Advances paid towards the acquisition of fixed assets outstanding at each

balance sheet date and the cost of fixed assets not ready to use before

such date are disclosed under ‘Capital work-in-progress and advances’.

Customer contracts and product Intellectual property rights (IPRs) are

capitalized based on a fair value. The Group records the difference

between considerations paid to acquire these contracts and the fair value

of assets and liabilities acquired as goodwill.

The Group purchases certain specific use application software, which is in

ready to use condition, for internal use. It is estimated that such software

has a relatively short useful life, usually less than one year. The Group,

therefore, charges to income the cost of acquiring such software.

The Company computes, depreciation and amortization using straight-line

method, at the rates specified in Schedule XIV to the Act or based on

the estimated useful life of assets, whichever is higher. All other entities

in the group including joint venture company and associate compute

depreciation and amortization using straight line method based on

estimated useful life of the assets. The estimated useful life considered

for depreciation of fixed assets is as follows:

Asset description Asset life (in years)

Tangible assetsImprovement of leasehold premises

Lesser of estimated useful life(7 years) or lease term

Buildings 20Computer equipments 3Electrical and office equipments 2 – 7Furniture and fixtures 2 – 7Leased assets Lesser of estimated useful life

(3 – 5 years) or lease term Intangible assetsGoodwill on acquisition 3 – 5Customer contract 5Product IPR 5PeopleSoft ERP 5

Goodwill arising on consolidation is evaluated for impairment annually.

The carrying amounts of assets are reviewed at each balance sheet date

if there is any indication of impairment based on internal/external factors.

An impairment loss is recognized wherever the carrying amount of an

asset exceeds its recoverable amount. The recoverable amount is the

greater of the assets net selling price and value in use. In assessing

value in use, the estimated future cash flows are discounted to their

present value at the weighted average cost of capital. After impairment,

depreciation is provided on a revised carrying amount of assets over its

remaining useful life.

d. Investments

Investments that are readily realizable and intended to be held for

not more than a year are classified as current investments. All other

investments are classified as long-term investments. Trade investments

refer to the investments made with the aim of enhancing the Group’s

business interests in providing information technology solutions to the

financial services industry world wide. Long term investments are stated

at cost less provision for diminution on account of other than temporary

decline in the value of the investment.

Current investments are stated at lower of cost and fair value determined

on an individual investment basis.

e. Foreign currency transactions

Foreign currency transactions during the year are recorded at the

exchange rates prevailing on the date of the transaction. Foreign currency

denominated monetary items are translated into reporting currency

at the closing rates of exchange prevailing at the date of the balance

sheet. Non-monetary items, which are carried in terms of historical cost

denominated in a foreign currency, are reported using the exchange

rate at the date of the transaction. Exchange differences arising on

the settlement of monetary items or on reporting company’s monetary

items at rates different from those at which they were initially recorded

or reported in previous financial statement, are recognized as income

or as expenses in the year in which they arise except those arising from

investments in non-integral operations.

In respect of forward exchange contracts entered into by the Company

to hedge the foreign currency risk, the premium or discount arising at

the inception of forward exchange contracts is amortized as expense

or income over the life of the contract. Exchange differences on such

contracts are recognized in the statement of profit and loss in the

year in which the exchange rates change. Any profit or loss arising on

cancellation or renewal of forward exchange contract is recognized as

income or as expense for the year. The Company uses foreign currency

option contracts to hedge its exposure to movement in foreign exchange

rates. Any profit or loss arising on settlement or expiry of option contracts

is recognized as income or expense for the year.

Foreign operations of the group are classified under integral and non

integral foreign operations. The financial statements of integral foreign

operations are translated as if the transactions of foreign operations have

been those of the Company itself. In translating the financial statements of

non-integral foreign operations for incorporation in financial statements,

the assets and liabilities, both monetary and non-monetary, of the

non-integral foreign operations are translated at closing rate, income and

expense items of the non-integral foreign operations are translated at

the average exchange rate; all the resulting exchange differences are

accumulated in foreign currency translation reserve until the disposal of

the net investment. On the disposal of a non-integral foreign operation,




the cumulative amount of the exchange differences which have deferred

and which relate to that operation are recognized as income or a expenses

in the same period in which the gain or loss on disposal is recognized.

f. Revenue recognition

Revenue is recognized as follows:

Product licenses and related revenue:

– License fees are recognized, on delivery and subsequent milestone

schedule as per the terms of the contract with the end user.

– Implementation/Enhancement services are recognized, as services

are provided when arrangements are on a time and material

basis. Revenue for fixed price contracts are recognized using the

proportionate completion method to the extent of achievement of

customer certified milestones.

– Product maintenance revenue is recognized, over the period of the

maintenance contract.

IT solutions and consulting services:

Revenue from IT solutions and consulting services are recognized as

services and are provided when the arrangements are on a time and

material basis. Revenue from fixed price contracts are recognized using

the proportionate completion method to the extent of achievement of

customer certified milestones. Proportionate completion is measured

based upon the efforts incurred to date in relation to the total estimated

efforts to complete the contract. If the proportionate completion efforts

are higher than the related contractual milestone requiring customer

acceptance, revenue is recognized only to the extent customer

acceptance has been received.

The Group monitors estimates of total contract revenue and cost on a

routine basis throughout the delivery period. The cumulative impact of

any change in estimates of the contract revenue or costs is reflected

in the period in which the changes become known. In the event that

a loss is anticipated on a particular contract, provision is made for the

estimated loss.

Revenue in excess of billings is classified as unbilled revenue while billing

in excess of earnings is classified as deferred revenue. Contractually

recoverable expenses are deferred while other costs are expensed off in

the year in which it is incurred.

Reimbursable expenses for projects are invoiced separately to customers

and although reflected as sundry debtors to the extent outstanding as at

year-end, are not included as revenue or expense.

Interest income

Interest income is recognized on a time proportion basis taking into

account the amount outstanding and the rate applicable

g. Research and development expenses for software products


product development costs are expensed as incurred until technological

feasibility is established. Software product development costs incurred

subsequent to the achievement of technological feasibility are not

material and are expensed as incurred.

h. Employee benefits

The Group’s employee benefits primarily cover provident fund,

superannuation, gratuity and compensated absences.

Provident fund and superannuation fund are defined contribution schemes

and the Group has no further obligation beyond the contributions made to

the fund. Contributions are charged to profit and loss account in the year

in which they accrue.

Gratuity liability is defined benefit obligation and recorded based on

actuarial valuation done on projected unit credit method made at the end

of the year. The gratuity liability and net periodic gratuity cost is actuarially

determined after considering discount rates, expected long term return

on plan assets and increases in compensation levels. All actuarial gains/

losses are immediately recorded to the profit and loss account and are

not deferred. The Company makes contributions to a fund administered

and managed by the Life Insurance Corporation of India (LIC) to fund the

gratuity liability. Under this scheme, the obligation to pay gratuity remains

with the Company, although LIC administers the scheme.

Short term compensated absences are provided for based on estimates.

Long term compensated absences are provided for based on actuarial

valuation. The actuarial valuation is done as per projected unit credit

method.

i. Leases

a. Where the Company is the lessee

Lease of assets under which substantially all the risks and benefits

incidental to ownership are transferred to the Company are classified

as finance leases. These assets are capitalized at the lower of the fair

value and present value of the minimum lease payments at the inception

of the lease term and disclosed as leased assets. Lease payments are

apportioned between the finance charges and reduction of the lease

liability based on the implicit rate of return. Finance charges are charged

directly against income. Lease management fees, legal charges and

other initial direct costs are capitalized

Leases of assets under which all the risks and rewards of ownership are

effectively retained by the lessor are classified as operating leases. Lease

payments under operating leases are recognized as an expense on a

straight-line basis over the lease term.

b. Where the Company is the lessor

Assets given under a finance lease are recognized as a receivable at

an amount equal to the net investment in the lease. Lease rentals are

apportioned between principal and interest on the IRR method. The

principal amount received reduces the net investment in the lease and

interest is recognized as revenue.

j. Income-tax

Tax expense comprises of current, deferred and fringe benefit tax.

Current income tax and fringe benefit tax for the Company is measured

at the amount expected to be paid to the tax authorities in accordance

with the Indian Income Tax Act. Deferred income taxes are recognized for

the future tax consequences attributable to timing differences between

the financial statement determination of income and their recognition

for tax purposes. The effect on deferred tax assets and liabilities of a

change in tax rates is recognized in profit and loss account using the tax


rates and tax laws that have been enacted or substantively enacted by

the balance sheet date. Deferred tax assets and deferred tax liabilities

across various countries of operation are not set off against each other

as the company does not have a legal right to do so. Deferred tax assets

are recognized and carried forward only to the extent that there is a

reasonable certainty that sufficient future taxable income will be available

against which such deferred tax assets can be realized. In situations

where there are carry forward losses, deferred tax asset is recognized

only if there is virtual certainty supported by convincing evidence that

future taxable income will be available against which deferred tax asset

can be realized. Unrecognized deferred tax assets of earlier years are

re-assessed and recognized to the extent that it has become reasonably

certain or virtually certain that future taxable income will be available

against which deferred tax assets can be realized. Deferred tax asset is

recognized only on those timing differences, which reverses in post tax

free period, as Company enjoys exemption under Section 10A of Income

Tax Act, 1961.

Minimum Alternative Tax (MAT) credit is recognized as an asset only

when and to the extent there is convincing evidence that the Company

will pay normal income tax during the specified period. In the year in

which the MAT credit becomes eligible to be recognized as an asset

in accordance with the recommendations contained in guidance Note

issued by the ICAI, the said asset is created by way of a credit to the

profit and loss account and shown as MAT Credit Entitlement. The

Company reviews the same at each balance sheet date and writes down

the carrying amount of MAT Credit Entitlement to the extent there is no

longer convincing evidence to the effect that Company will pay normal

Income Tax during the specified period.

Tax expense relating to overseas operations is determined in accordance

with tax laws applicable in countries where such operations are domiciled.

Advance taxes and provisions for current income taxes are presented in

the balance sheet after off-setting advance taxes paid and income tax

provisions arising in the same tax jurisdiction and enterprise.

k. Earnings per share

The earnings considered in ascertaining the Group’s earnings per

share comprise the net profit after tax. The number of shares used in

computing basic earnings per share is the weighted average number

of shares outstanding during the year. The number of shares used in

computing diluted earnings per share comprises the weighted average

number of shares considered for deriving basic earnings per share and

also the weighted average number of shares, if any which would have

been issued on the conversion of all dilutive potential equity shares. The

number of shares and potentially dilutive equity shares are adjusted for

the bonus shares and sub-division of shares.

l. Share-based compensation/payments

The Group uses the intrinsic value method of accounting for its employee

share based compensation plan and other share based arrangements.

Under this method compensation expense is recorded over the vesting

period of the option, if the fair value of the underlying stock exceeds the

exercised price at the measurement date, which typically is the grant

date.

m. Provision and contingencies

A provision is recognized when an enterprise has a present obligation as

a result of past event and it is probable that an outflow of resources will

be required to settle the obligation, in respect of which a reliable estimate

can be made. Provisions are not discounted to its present value and

are determined based on management estimate required to settle the

obligation at the balance sheet date. These are reviewed at each balance

sheet date and adjusted to reflect the current management estimates.

n. Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank

and in hand and short terms investments with an original maturity of

three months or less.

3. Commitments and contingent liabilities

a. Capital commitments

Contracts remaining to be executed on capital account and not provided

for (net of advances) aggregates to Rs. 1,656,835 (includes capital

commitment through issuance of letter of intents of Rs. 260,505) as at

March 31, 2008 (March 31, 2007 – Rs. 1,955,320).

b. Contingent Liabilities

Financial bank guarantees given to banks aggregates to Rs. 8,701 as at

March 31, 2008 (March 31, 2007 – Rs. 39,384).

4. Leases

a. Where Company is lessee

Finance lease

The Group takes vehicles, furniture and fixture and computer equipments

under finance lease of upto five years. Future minimum lease payments

under finance lease as at March 31, 2008 and 2007 are as follows:


Principal Interest TotalNot later than one year 7,850 1,233 9,083Later than one year but not later than five years 10,862 1,139 12,001



Not later than one year 10,842 1,687 12,529Later than one year but not later than five years 15,537 1,601 17,138


Operating lease

The Group has taken certain office premises and residential premises for

employees under operating lease, which expire at various dates through

year 2018. Gross rental expenses for the year ended March 31, 2008

aggregated to Rs. 643,291 (March 31, 2007 – Rs. 425,610). The

minimum rental payments to be made in future in respect of these leases

are as follows:

March 31, 2008 March 31, 2007

Not later than one year 620,512 337,542Later than one year but not later than five years 1,348,630 633,324

Later than five years 759,346 17,631 2,728,488 988,497




b. Where Company is lessor

The Company has given IT equipments under finance lease for a period

of five years. Present value of minimum lease payments receivable under

this finance lease as at March 31, 2008 and 2007 are as follows:

March 31, 2008 March 31, 2007


21,680 36,643

5. Derivatives

The Company enters into forward foreign exchange contracts and option

contracts where the counterparty is a bank. The Company purchases

forward foreign exchange contracts and option contracts to mitigate the

risks of change in foreign exchange rate on receivable and payables

denominated in certain foreign currencies. The Company considers

the risk of non-performance by the counterparty as immaterial. As at

March 31, 2008 and 2007 the Company has following outstanding

derivative instruments:

(Amount in ‘000 foreign currency)

March 31, 2008 March 31, 2007

Forward contracts – SellIn USD 112,000 123,000In EUR 4,000 3,500Option contracts – SellIn USD – 16,500

The Company has following foreign currency exposures which are not hedged as at March 31, 2008 and 2007.

March 31, 2008 March 31, 2007Particulars Receivables Payables Net Receivables Payables Net

In USD 174,423 141,836 32,587 103,130 128,980 (25,850)In EUR 46,171 37,120 9,051 35,614 34,695 919 In GBP 21,793 21,260 533 14,601 14,586 15 In SGD 21,418 24,522 (3104) 14,699 9,446 5,253 In JPY 231,441 347,785 (116,344) 446,547 293,569 152,978 In MYR 9,240 2,788 6,452 13,658 5,435 8,223 In ZAR 11 2,668 (2,657) – – –In AUD 1,497 872 625 – – –In CAD 3,420 2,635 785 836 – 836 In AED 2,194 – 2,194 1,217 – 1,217In CHF 6 91 (85) 1 – 1 In RUB – 251 (251) – 212 (212)In SEK – 88 (88) – – –

6. Share-based compensation/payments

a. Employee Stock Purchase Scheme (‘ESPS’)












employees.

On the acceptance of the offer, the selected employee shall undertake to

pay within ten years from the date of acceptance of the offer the cost of

the shares incurred by the Trust including repayment of the loan relatable



























Number of shares

Opening balance of unallocated shares 142,116 120,888Shares forfeited during the year 16,847 21,228Closing balance of unallocated shares 158,963 142,116

Opening balance of allocated shares 355,212 2,080,546Shares exercised during the year (117,264) (1,704,106)Shares forfeited during the year (16,847) (21,228)Closing balance of allocated shares 221,101 355,212


b. Employee Stock Option Plan (‘ESOP’)

Pursuant to ESOP scheme approved by the shareholders of the Company held on August 14, 2001, the Board of Directors, on March 4, 2002 approved

the Employees Stock Option Scheme (‘the Scheme’) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries.

According to the Scheme, the Company has granted 4,548,920 options prior to the IPO and 559,000 options at various dates after IPO. As per the

scheme, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months and is

subject to continued employment of the employee or director with the company or its subsidiaries. Options have exercise period of 10 years.











The weighted average share price for the year over which stock options was exercised was Rs. 1,890.



Range of exercise

prices


price (Rs.)

Weighted average



1,291-1,291 246,800 1,291 8.1

Options vested and exercisable 265-265 51,000 265 3.9

419-560 45,003 480 5.31,291-1,291 52,450 1,291 8.1

431,253 1,025 7.2


March 31, 2007 were as follows:

Range of exercise

prices


price (Rs.)

Weighted average



1,291-1,291 347,500 1,291 9.1 Options vested and exercisable 265-265 77,982 265 4.9

419-560 35,003 505 6.8530,485 989 8.1




Had compensation cost been determined in a manner consistent with the

fair value approach, the Company’s net income and earnings per share

as reported would have changed to the amounts indicated below:

March 31, 2008 March 31, 2007

Net income as reported 4,155,886 3,722,796Add: Compensation expense included in reported income – –

Less: Compensation expense determined using fair value of options (54,918) (115,596)

Proforma net income 4,100,968 3,607,200Basic earnings per share

As reported 49.66 47.05Proforma 49.00 45.59

Diluted earnings per shareAs reported 49.58 45.76Proforma 48.94 44.37

7. Employee benefits

Defined contribution plans

During the year ended March 31, 2008 and 2007, the Group contributed

following amounts to defined contributions plans:


Provident fund 157,065 133,753Superannuation fund 52,167 43,676

209,232 177,429

Defined benefit plan-gratuity

The amounts recognized in the balance sheet are as follows:


Present value of funded obligations 173,999 131,397

Fair value of plan assets (228) (4,697)Present value of unfunded obligations 2,735 2,787

Unrecognized past service cost – –Net liability 176,506 129,487

Amounts in balance sheet:Liability 176,506 129,487Asset – –Net liability 176,506 129,487

The amounts recognized in the profit and loss account are as follows:


Current service cost 30,512 22,147 Interest cost 9,802 5,928 Expected return on plan assets (228) (136)Recognized net actuarial loss 21,943 31,644 Total, included in ‘employee benefit expense’ 62,029 59,583

Actual return on plan assets (241) 146

Changes in present value of defined benefit obligation representing

reconciliation of opening and closing balances thereof are as follows:


Defined benefit obligation at beginning of the year 134,184 84,581

Current service cost 30,512 22,147 Interest cost 9,802 5,928 Benefits paid (19,237) (10,126)Actuarial loss 21,473 31,654 Defined benefit obligation at end of the year 176,734 134,184

Changes in the fair value of plan assets representing reconciliation of

opening and closing balances thereof are as follows:


Fair value of plan assets at beginning of the year 4,697 1,818

Expected return on plan assets 228 136 Actuarial (loss)/gain (470) 10Contributions by employer 15,010 12,859Benefits paid (19,237) (10,126)Fair value of plan assets at end of the year 228 4,697

Plan assets are administered by LIC and 100% of the plan assets are

invested in lower risk assets, primarily in debt securities.

The assumptions used in accounting for the gratuity plan are set out as

below:

March 31, 2008 March 31, 2007

Discount rate 7.55% – 7.70% 8.00%Expected returns on plan assets 7.50% 7.50%


The estimates of future salary increase, considered in actuarial valuation,

take account of inflation, seniority, promotions and other relevant factors

such as supply and demand in the employment market.

The Group evaluates these assumptions annually based on its long-term

plans of growth and industry standards. The discount rates are based on

current market yields on government bonds consistent with the currency

and estimated term of the post employment benefits obligations. Plan

assets are administered by the LIC and invested in lower risk assets,

primarily debt securities. The Company contribution for the year ended

March 31, 2009 is expected to be Rs. 30,775. The expected benefit

payments as of March 31, 2008 are below

Year ending March 31

2009 28,5932010 34,1062011 39,3682012 46,2772013 53,6732014–2017 210,057

The Group has adopted AS 15 (Revised) from April 1, 2006 and thereby

has not given disclosure for the following for previous three annual

financial years:

a. the present value of the defined benefit obligation, the fair value of

the plan assets and the surplus or deficit in the plan; and

b. the experience adjustments arising on plan liabilities and plan

assets.

8. Acquisition of Companies


On July 2, 2007, i-flex solutions b.v. (“i-flex b.v.”) acquired banking

business from Athens Technology Center SA (“ATC”) for Rs. 670,052

(including acquisition expenses amounting to Rs. 7,920). The acquisition

was structured by way of transfer of all contracts, employees and

fixed assets of banking business from ATC to a newly formed entity,

i-flex solutions s.a., Greece with 90% shares owned by i-flex b.v. Further

the company has right to acquire balance 10% shares (based on earn out

formulae) over 3 years in a tranche of 5%, 3% and 2% after completion

of 1, 2 and 3 years respectively from the date of acquisition. As the

consideration payable is dependent on future revenue and profits the

same is considered to be a contingent consideration and will be accounted

when the liability arises. The Group consolidated i-flex solutions s.a.

from July 2, 2007 and recorded goodwill on consolidated amounting

to Rs. 656,635 based on the assets and minority interest recorded as

below:

Particulars

Bank balance 12,958Fixed assets 1,755Less: Minority interest (1,296)Net Assets 13,417Goodwill 656,635Purchase Consideration 670,052

b. Castek Software Inc. (“Castek”)

On November 16, 2007, Castek became wholly owned subsidiary of

i-flex America inc. with acquisition of the balance 23.23% shares of Castek

from minority shareholders for a total consideration of Rs. 327,394. As

part of the acquisition certain employees owning share of Castek where

paid additional consideration amounting to Rs. 90,809 based on the no.

of shares held by them. The Group has recorded additional consideration

payment as employee compensation.

The Group recorded balance consideration as goodwill of Rs. 238,015

considering Castek’s negative net worth and minority losses being

absorbed by the Group till the date of acquisition.

Out of above payment Rs. 107,334 is payable on April 7, 2008 and

included in Escrow account.

c. Flexcel International Private Limited (“Flexcel”)

On March 31 2008, Flexcel (joint venture with HDFC Bank Limited and

its group companies and Lord Krishna Bank) became wholly owned

subsidiary of i-flex solutions ltd with acquisition of balance 60% shares

of Flexcel from its co-venture parties. The Group paid total consideration

of Rs. 25,424 and recorded goodwill amounting to Rs. 1,629 net of

proportionate assets and liabilities acquired as below:

Particulars

Fixed assets 36,355Current assets 60,334Current liabilities (72,894)

23,795

The Group adjusted above goodwill against gain on dilution recorded in

earlier year.





Particulars Products Services KPO-Services

Joint ventures

Corporate Eliminations Total

RevenueExternal revenue 13,871,996 9,371,230 475,464 83,673 – 23,802,363 Inter-segment revenue 7,811 7,832 93,873 11,320 – (120,836) –Total revenue 13,879,807 9,379,062 569,337 94,993 – (120,836) 23,802,363 Cost of revenue (5,986,685) (6,606,863) (394,487) (52,255) – – (13,040,290)Gross profit 7,893,122 2,772,199 174,850 42,738 – (120,836) 10,762,073 Selling and marketing expenses (2,230,936) (337,630) (125,432) (3,521) – – (2,697,519)General and administrative expenses (979,916) (583,987) (117,378) (8,361) (1,702,605) (3,392,247)Depreciation and amortization (328,086) (244,600) (27,100) (7,531) (98,571) – (705,888)Inter segment expense (11,320) (93,873) (7,832) (7,811) – 120,836 –Income (loss) from operations 4,342,864 1,512,109 (102,892) 15,514 (1,801,176) – 3,966,419

Interest income 464,767 Other income, net 174,938 Income before provision for taxes 4,606,124 Provision for taxes (441,685)Net income for the year before share of loss of associate company and minority interest 4,164,439

Share of loss of associate company (4,128)Net income for the year before share of minority interest 4,160,311

Share of Minority interest (4,425)Net income for the year 4,155,886

Other informationCapital expenditure by segment 1,090,753 825,999 7,997 – 185,571 – 2,110,320 Segment assets 13,795,127 6,222,022 321,872 – 13,571,252 – 33,910,273 Segment liabilities 3,422,631 1,049,677 98,230 – 1,569,162 – 6,139,700 Shareholders’ funds – – – – 27,770,573 – 27,770,573

9. Segment information

Business segments are defined as components of an enterprise about

which separate financial information is available. This information is

reviewed and evaluated regularly by the management, in deciding how to

allocate resources and in assessing the performance.

The Group is organized geographically and by business segment. For

management purposes the Group is primarily organized on a worldwide

basis into three business segments:

a. Product licenses and related activities (‘Products’) and

b. IT solutions and consulting services (‘Services’)

c. Knowledge Processing Services (‘KPO-Services’)

The business segments are the basis on which the Group reports its

primary operational information to management. Product licenses and

related activities segment deals with banking software products like

the FLEXCUBE suite of products, Reveleus, MicroBanker, Daybreak and

anti-money laundering and compliance solutions which cater to needs of

corporate, retail and investment banking as well as treasury operations

and data warehousing requirements. The related activities include

enhancements, implementation and maintenance activities. Product

segment further comprises of casualty insurance carriers which include

insurance product and process configuration, policy administration,

customer management, billing and claims management.

IT solutions and consulting services comprise of bespoke software

development, provision of computer software solutions and related

consulting services arising from such activities. This segment is further

sub-divided in the following sub-segments i.e. Business intelligence,

Customer relationship management, Brokerage, e-commerce, Internet

services and IT and Business consulting.

KPO-Services comprises of knowledge process outsourcing services to

the mortgage banking industry.

The activities of the joint venture are disclosed as a separate segment.

(Refer note 8-c of Schedule 15)



Particulars Products Services KPO-Services

Joint ventures

Corporate Eliminations Total

RevenueExternal revenue 11,193,090 8,919,800 444,775 51,717 – – 20,609,382 Inter-segment revenue 17,953 – – – (17,953) –Total revenue 11,211,043 8,919,800 444,775 51,717 – (17,953) 20,609,382 Cost of revenue (4,350,515) (6,391,068) (298,432) (26,035) – – (11,066,050)Gross profit 6,860,528 2,528,732 146,343 25,682 – (17,953) 9,543,332 Selling and marketing expenses (1,961,393) (320,373) (112,588) (1,141) – – (2,395,495)General and administrative expenses (820,356) (458,868) (125,056) 631 (1,319,687) – (2,723,336)Depreciation and amortization (307,078) (241,485) (24,624) (5,685) (74,151) – (653,023)Inter segment expense – – – (17,953) – 17,953 –Income (loss) from operations 3,771,701 1,508,006 (115,925) 1,534 (1,393,838) – 3,771,478

Interest income 376,907 Other expenses, net (17,253)Income before provision for taxes 4,131,132 Provision for taxes (415,958)Net income for the year before share of profit of associate company 3,715,174

Share of profit of associate company 7,622 Net income 3,722,796

Other informationCapital expenditure by segment 5,686,716 191,662 13,100 7,857 85,784 – 5,985,119 Segment assets 12,999,204 5,732,294 336,175 36,378 10,249,571 – 29,353,622 Segment liabilities 3,118,195 930,957 115,417 8,129 1,160,717 – 5,333,415 Shareholders’ funds – – – – 24,020,207 – 24,020,207

Segment revenue and expense

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services and

knowledge process outsourcing services. The expenses which are not directly attributable to a business segment are shown as corporate expenses.

Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of debtors, deposits for premises and fixed assets. Segment

liabilities primarily includes deferred revenues, finance lease obligation, advance from customer, accrued employee cost and other current liabilities.

While most such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly

by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are

shown as part of corporate assets and liabilities.

Geographical segments

The following table shows the distribution of the group’s consolidated sales by geographical market:

Year EndedMarch 31, 2008

Year EndedMarch 31, 2007

Regions Amount % Amount %

United States of America 7,840,933 33% 8,145,729 39%Europe 8,110,823 34% 5,699,472 28%Asia Pacific 4,513,093 19% 3,639,511 18%Middle East, India and Africa 3,172,847 13% 2,984,815 14%Latin America and Caribbean 164,667 1% 139,855 1%

23,802,363 100% 20,609,382 100%




10. Related party transactions

Names of Related Parties and description of relationship:

Relationship Names of related partiesPrincipal shareholder and it’s affiliates (“Oracle”) Oracle Global (Mauritius) Limited

Oracle (India) Private Limited Oracle USA, inc.Oracle Corporation (Thailand) Co Ltd

Joint Venture Flexcel International Private Limited (Refer note 8-c of Schedule 15)

Key Managerial Personnel (‘KMP’) Rajesh Hukku – Chairman and Non Executive DirectorR Ravisankar – Vice ChairmanDeepak Ghaisas – Vice Chairman and Company SecretaryN R Kothandaraman (N R K Raman) – Managing Director and Chief Executive Officer

Makarand Padalkar – Chief Financial OfficerAvadhut (Vinay) Ketkar – Chief Accounting Officer (w.e.f. April 1, 2007)Dilip Kulkarni – Chief Compliance Officer (w.e.f. April 1, 2007)Joseph John – Executive Vice President, Universal Banking ProductsV Shankar – Executive Vice President and Global Head, PrimeSourcing & Insurance Solutions

Olivier Trancart – Executive Vice President, Global Sales and CEO i-flex solutions b.v.

Atul Gupta – Sr. Vice President, Process and Quality Management GroupVijay Sharma – Sr. Vice President, i-flex ConsultingS Hariharan – Sr. Vice President, Infrastructure Services GroupVivek Govilkar – Sr. Vice President, Human Resources and TrainingV Senthil Kumar – Chief Marketing Officer, i-flex solutions b. v.V Srinivasan – Vice President, Corporate Development and Chief of Staff (w.e.f. April 1, 2007)

Manmath Kulkarni – Sr. Vice President and Chief Architect for Retail and Internet Banking (w.e.f. April 1, 2007)

S Sundararajan – Sr. Vice President, Customer Fulfillment (w.e.f. April 1, 2007)

Kishore Kapoor – CEO i-flex solutions pte ltdCafo Boga – COO – i-flex solutions inc.Sajal Mukherjee – Sr. Vice President Americas – PrimeSourcingMahesh Rao – CEO – i-flex Processing Services Limited (w.e.f. April 1, 2007)

Yung Wu – CEO Castek Software Inc.S. Ramakrishnan – CEO – ReveleusAnand Phanse – Sr. Vice President, North America Citigroup Relationship (w.e.f. April 1, 2007)






March 31, 2007

OracleRevenue 369,899 252,984 290,863 223,032 Purchase of Software 265,772 238,561 – –Professional fees – 1,197 – –Other expenses 2,387 6,095 (6,674) (2,917)Deferred Revenue – – (91,790) (160,688)Dividend paid – 200,742 – –

Flexcel International Private Limited Revenue 11,716 27,051 – 27,763 Professional Fees 19,555 18,305 – –Other Expenses 24,309 10,225 – 7,181 Deferred Revenue – – – (3,662)

Key managerial personnelRent 90 128 – –Rental deposit (225) 125 100 325 Remuneration (Note) 250,317 235,336 – –Lease Rent 1,942 3,462 – –Dividend paid – 8,441 – –Advance rent (13) – 43 56

Note: Includes salary, bonus and perquisites

11. Aggregate expenses



Salaries and bonus 11,876,188 9,877,743 Staff welfare expenses 347,610 266,086 Contribution to provident and other funds 293,345 234,175 Travel related expenses (net of recoveries) 2,164,042 2,148,210 Professional fees 1,712,499 1,383,748 Application software 633,941 641,250 Rent 663,627 457,366 Communication expenses 286,907 254,033 Advertising expenses 169,517 220,812 Power 205,137 138,783 Rates and taxes 45,579 26,342 Repairs and maintenance:

Leasehold premises 34,677 15,420 Computer equipments 39,132 40,518 Others 48,298 28,365

Insurance 54,504 60,156 Finance charge on leased assets 4,164 5,284 Bad debts 15,465 –Advances written off – 8,351 Provision for doubtful debts, net 174,775 87,611 Other expenses 360,649 290,628

19,130,056 16,184,881

Transactions and balances outstanding with these parties are described below:




12. During the current year, the Company has utilized the securities premium account for payment of stamp duty of Rs. 7,301 on allotment of equity

shares. This includes Rs. 6,863 related to previous years. General and administrative expenses includes an amount of Rs. 2,584 towards penalty

charges for making delayed payment of stamp duty.

13. Fringe benefit tax is recorded net of recovery amount of Rs. 17,888 on account of stock option exercised during the year ended March 31, 2008.

During the current year, the Company has taken an additional fringe benefit tax charge of Rs. 24,496 pertaining to previous years.

14. The Group’s goodwill carrying value of Rs. 6,383,530 as on March 31, 2008 relates to acquired subsidiaries Mantas Inc, i-flex solutions s.a.,

SuperSolutions Corporation, Castek Software Inc., ISP Mauritius and i-flex Consulting (Asia Pacific) Pte Ltd., respectively. The Group has evaluated

goodwill carrying value for impairment and has obtained valuation of each of the above subsidiaries from an independent external valuation expert

as on March 31, 2008. The Group believes that with integration of different products acquired from above subsidiaries with i-flex suites of products

and synergies achieved due to sharing of operations, these entities would achieve significant increase in future revenues and cost savings. Based on

the future projection, the Group has estimated future cash flows from each entity and concluded that fair value of the business of above subsidiaries

is higher than current book value. Management believes that it would be able to achieve the future projection and hence considers that there is no

provision for impairment of goodwill required except Rs. 57,958 which was provided in respect of SuperSolutions Corporation in the year ended

March 31, 2006.

15. Prior year comparatives

Prior year amounts have been reclassified, where necessary to conform with current year presentation.




N R K Raman

Managing Director


Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008



2008 2007

Cash flows from operating activities Income before provision for taxes 4,606,124 4,131,132

Adjustments to reconcile income before provision for taxesto cash used in operating activities:

Depreciation and amortization 705,888 653,023 Deferred compensation expense – 33,451 Loss on sale of fixed assets, net 7,820 4,554 Advances written off – 8,351 Marked to market of current investment 104 810 Interest income (464,767) (376,907)Effect of exchange difference on cash and bank balances (18,499) 10,102 Finance charge on leased assets 4,164 5,284 Bad debts 15,465 –Provision for doubtful debts, net 174,775 87,611

5,031,074 4,557,411 Changes in assets and liabilities, net of effect of acquisitionIncrease in sundry debtors and unbilled revenue (735,610) (2,564,646)Increase in loans and advances 132,760 (422,597)Increase in current liabilities and provisions 545,326 1,159,238 Cash from operating activities 4,973,550 2,729,405 Payment of domestic and foreign taxes (961,498) (1,083,505)Net cash provided by operating activities 4,012,052 1,645,9001

Cash flows from investing activitiesAdditions to fixed assets including capital work in progress (1,167,043) (1,242,105)Net Investment in lease 9,903 (20,610)Acquisition of company, net of cash acquired (921,955) (5,520,840)Deposits for Office Premises (653,332) (1,258,128)Proceeds from sale of fixed assets 2,683 13,157 Bank fixed deposits having maturity of more than 90 days matured 6,870,484 7,679,391 Bank fixed deposits having maturity of more than 90 days booked (8,671,617) (6,741,189)Proceeds from sale of investments – 20,000 Interest received 458,407 352,312 Net cash used in investing activities (4,072,470) (6,718,012)

Cash flows from financing activitiesIssue of shares against ESOP scheme and options to IBM 40,024 678,514 Share application money from GE – 361,238 Share issue expenses (7,301) –Issue of shares to Oracle Global Mauritius Limited – 5,814,999 Advance against equity shares to be issued under ESOP Scheme 265 –Repayment of loan by Employee Stock Purchase Scheme ('ESPS’) Trust – 4,925 Payment of dividend and tax thereon – (436,350)Payment of lease obligations (19,340) (16,302)Net cash provided by (used in) financing activities 13,648 6,407,024

Effect of exchange difference on translation (89,324) (68,430)

Net increase (decrease) in cash and cash equivalents (136,094) 1,266,483 Cash and cash equivalents at beginning of the year 3,351,773 2,085,290 Cash and cash equivalents at end of the year (Note 1) 3,215,679 3,351,773

Consolidated statement of cash flow for the year ended March 31





2008 2007

Note 1: Component of cash and cash equivalentCash and bank balances [Refer Schedule 6 (b)] 8,965,620 7,197,754

Less:Bank deposits having maturity of more than 90 days (5,625,757) (3,824,624)Margin money deposit/Escrow account (122,377) (19,292)Unclaimed dividend accounts (1,807) (2,065)Cash and cash equivalents at end of the year 3,215,679 3,351,773

Consolidated statement of cash flow (continued)for the year ended March 31




N R K Raman

Managing Director


Y M Kale

Director


Partner


Deepak Ghaisas

Director & Company

Secretary

Tarjani Vakil

Director

Mumbai, India

May 5, 2008

Mumbai, India

May 5, 2008


AGM Notice




NOTICE is hereby given that the Nineteenth Annual General Meeting of

i-flex solutions ltd will be held at The Leela Kempinski, Sahar, Andheri

(East), Mumbai 400 059 on Friday, August 22, 2008 at 3.00 p.m. to

transact the following business:

Ordinary Business:

1. To receive, consider and adopt the Audited Balance Sheet as on

March 31, 2008, the Profit and Loss Account for the year ended on

that date and the Reports of the Board of Directors and the Auditors

thereon.

2. To appoint a Director in place of Mr. Y M Kale, who retires by

rotation and, being eligible, offers himself for re-appointment.

3. To appoint a Director in place of Ms. Tarjani Vakil, who retires by

rotation and, being eligible, offers herself for re-appointment.

4. To appoint a Director in place of Mr. Charles Phillips, who retires by

rotation and, being eligible, offers himself for re-appointment.

5. To appoint Auditors of the Company and to fix their remuneration.

Special Business:

6. To consider and, if thought fit, to pass, with or without modification(s),

as an Ordinary Resolution the following:

“RESOLVED THAT pursuant to the provisions of Section 228 and

other applicable provisions, if any, of the Companies Act, 1956, the

Board of Directors of the Company be and is hereby authorized to

appoint Branch Auditors to conduct the audit of branch office(s) of

the Company whether existing or which may be opened hereafter,

in India or abroad, in consultation with the Company’s Statutory

Auditors, any person(s) qualified to act as Branch Auditors within the

meaning of Section 228 of the Companies Act, 1956 and to fix their

remuneration.”

7. To consider and, if thought fit, to pass, with or without modification(s),

as an Ordinary Resolution the following:

“RESOLVED THAT Mr. Sergio Giacoletto Roggio, who was appointed

as an Additional Director of the Company and who holds office until

the date of the Annual General Meeting pursuant to Section 260 of

the Companies Act, 1956 and Article 109 of Articles of Association

of the Company and in respect of whom the Company has received

a notice from a member under Section 257 of the Companies Act,

1956, proposing his candidature, be and is hereby appointed as a

Director of the Company, liable to retire by rotation.”

By Order of the Board

Deepak Ghaisas

Vice Chairman & Company Secretary

Registered Office:

Unit 10-11, SDF 1, SEEPZ,

Andheri (East),

Mumbai 400 096

July 21, 2008

Notes:

a) The information as required pursuant to Clause 49 of the listing

agreement along with an Explanatory Statement as required under

Section 173 (2) of the Companies Act, 1956 in respect of item nos.

6 and 7 mentioned in the above Notice are annexed hereto.

b) The Register of Members and the Share Transfer Books of the

Company will remain closed from Monday, August 18, 2008 to

Friday, August 22, 2008, both days inclusive, for the purpose of

Annual General Meeting.

c) A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO

APPOINT A PROXY OR PROXIES TO ATTEND AND VOTE INSTEAD

OF HIMSELF ON A POLL ONLY AND THAT A PROXY NEED NOT BE A

MEMBER.

d) The instrument appointing proxy should be deposited at the

Registered Office of the Company not less than 48 hours before the

commencement of the meeting.

e) The members/proxies are requested to bring duly completed

Attendance Slips sent herewith for attending the meeting.

f) The documents referred to in the Notice and the Explanatory

Statement annexed hereto are available for inspection by the

members of the Company at the Registered Office of the Company

between 2.00 p.m. to 4.00 p.m. on any working day of the

Company.

g) The members who hold shares in physical form are requested to

notify promptly any change in their addresses to the Company’s

Registrar and Transfer Agents, Intime Spectrum Registry Ltd.

having its office at C-13, Pannalal Silk Mills Compound, L.B.S Marg,

Bhandup (West), Mumbai 400 078. The members who hold shares

in demat mode are requested to notify promptly any change in their

addresses to their Depository Participants.

h) The members seeking any information with regard to accounts are

requested to write to the Company at its registered office at an early

date to enable the Management to keep the information ready.

i) Pursuant to Sections 205A, 205C and other applicable provisions,

if any, of the Companies Act, 1956, any money transferred to the

unpaid dividend account which remains unpaid or unclaimed for a

period of 7 years from the date of such transfer is now required

to be transferred to the ‘Investor Education and Protection Fund’

set up by the Central Government. Accordingly, the amount of

unclaimed dividend for the financial year ended March 31, 2001

will be transferred to the ‘Investor Education and Protection Fund’

in due course. Once the amount is so transferred, no claim shall

lie against the aforesaid fund or the Company in respect of such

dividend amount thereafter. The members are requested to send to

the Company their claims, if any, for the dividend for financial year

2000-2001 onwards immediately.

Notice to members


ADDITIONAL INFORMATION PURSUANT TO CLAUSE 49 OF THE

LISTING AGREEMENT WITH REGARD TO DIRECTORS SEEKING

APPOINTMENT/RE-APPOINTMENT AT THE NINETEENTH ANNUAL

GENERAL MEETING:

Mr. Y M Kale

Mr. Y M Kale born on November 4, 1947 was the President of the Institute

of Chartered Accountants of India in the year 1995-96 and is also a

Fellow member of the Institute of Chartered Accountants of England

and Wales. He has contributed to various governmental and regulatory

bodies such as committees of Securities and Exchange Board of India

including Committee of Offer Documents, Committee of Takeovers and

Committee on Accounting for Corporates and participated as a member

of the Group for Introduction of Concurrent Audit of Banks, organized

by the Reserve Bank of India and was also member of the National

Drugs and Pharmaceutical Development Council of Central Government.

Mr. Kale was also on the Board of the International Accounting Standards

Committee from 1995 to 1998 as India representative. He is also a

Director on the Board of various Public companies.

Mr. Kale is a member of the Board of Directors of the Company since

June 25, 2001. He is the Chairman of the Audit Committee and a

member of the Compensation Committee of the Company.

Mr. Kale holds 2,000 equity shares of face value of Rs. 5/- each of the

Company as on date.

Mr. Kale, a Non-Executive Independent Director of the Company, is

entitled to receive commission pursuant to provisions of Section 198 and

309 of the Companies Act, 1956.

Mr. Kale holds directorship and committee membership* in the following

Companies:

List of other Directorships held

Membership in Committees of other

companies

Chairmanship in Committees of

other companies

Ashok Leyland Ltd. – –Ennore Foundries Ltd. – –Hinduja Life Insurance

Company Limited– –

Hinduja General

Insurance Company

Limited

– –

*only the Audit and Shareholders’ Grievances Committees are considered.

Ms. Tarjani Vakil

Ms. Tarjani Vakil, born on October 30, 1936, has done her Masters in

Arts from University of Mumbai. In October 1996, she retired as the

Chairperson and Managing Director of Export – Import Bank of India

(“EXIM Bank”). Since inception in 1982 till 1996, EXIM Bank grew at an

average rate of 20% p.a. Ms. Vakil contributed to the development of

EXIM Bank as a unique credit agency offering finance, information and

advisory services at all stages of the business cycle.

Ms. Vakil was actively involved in carrying extensive interaction with

multilateral agencies for initiation of an informal annual dialogue among

heads of Export Credit Agencies in Asia and Australia in 1996 and for

setting up Global Procurement Consultants Ltd. (a public-private sector

partnership) offering international procurement services.

Ms. Vakil has been a member consultant for carrying a study of the

feasibility for establishment of an Export Credit Guarantee facility for GCC

countries (1992), for establishment of Export-Import Bank of Malaysia

(1994) and other developing countries of Asia and Africa. She has

also been a consultant to International Trade Centre, Geneva (1996),

Mckinsey Inc. for setting up an Export Import Institution in Egypt and

MIGA (1999). Currently, she is a Director on the Boards of a few major

corporates in India.

Ms. Vakil has won several awards including Mahila Shiromani -1992,

CEO of the Year-1995, Woman of the Year-1996, etc. She was placed as

the highest ranking woman official in Banking in Asia and named among

the 50 most powerful women in the world in the 1996 Survey conducted

by KPMG Peat Marwick, USA.

Ms. Vakil is a member of the Board of Directors of the Company since

May 26, 2004. She is a member of the Audit Committee and Chairperson

of Shareholders’ Grievances Committee, Transfer Committee and ESOP

Allotment Committee.

Ms. Vakil holds 3,700 equity shares of face value of Rs. 5/- each of the

Company as on date.

Ms. Vakil as a Non-Executive Independent Director of the Company is

entitled to receive commission pursuant to provisions of Section 198 and

309 of the Companies Act, 1956.

Ms. Vakil holds directorships and committee memberships* in the

following Companies:


Membership in Committees of

other companies

Chairpersonship in Committees of other companies

Asian Paints Limited–

Chairperson of Audit Committee

Mahindra Intertrade Limited–


Aditya Birla Nuvo Limited–


DSP Merrill Lynch Trustee Co. Pvt. Ltd.

Member of Audit Committee

–

Alkyl Amines Chemical Limited

– –

Idea Cellular Limited Member of Audit Committee

–



Mr. Charles Phillips, born on June 10, 1959, holds a BS in Computer

Science from the United States Air Force Academy, an MBA from Hampton

University and a JD from New York Law School and is a member of the

bar in Washington D.C. and Georgia.

Mr. Charles Phillips is President of Oracle Corporation and a member

of the Board of Directors. He is responsible for global field operations

including consulting, marketing, sales, alliances and channels and

customer programs, as well as corporate strategy. Prior to joining

Oracle, Mr. Phillips was a Managing Director with Morgan Stanley in its

technology group. Prior to his career on Wall Street, Mr. Phillips was a

Captain in the United States Marine Corps.

Mr. Phillips is on the boards of Viacom Corporation, Jazz at Lincoln Center

in New York City and New York Law School. Mr. Phillips also serves as a

director of Viacom Inc. and Morgan Stanley.




Mr. Phillips is a member of the Board of Directors of the Company

since November 24, 2005. He is also a member of the Compensation

Committee.

Mr. Charles Phillips is not holding any equity share of the Company as

on date.

Mr. Charles Phillips holds directorships and committee memberships* in

the following Companies:


Membership in Committees of other

companies


other companies

Oracle Corporation – –Viacom Inc. – –Morgan Stanley Member of Audit

Committee

–


Mr. Sergio Giacoletto Roggio

Mr. Sergio Giacoletto Roggio, born on December 28, 1949 holds a

Master’s Degree in Computer Science from the University of Turin, Italy.

Mr. Sergio Giacoletto Roggio is the Executive Vice President of Oracle

Corporation, Europe, Middle East and Africa and serves as a member

of Oracle’s Executive Management Committee. Based in Geneva,

Mr. Sergio Giacoletto Roggio oversees a network of 106 offices in 54

countries, with the responsibility for managing all of Oracle’s operations,

growth and profitability throughout the Europe, Middle East and Africa

region.

Mr. Sergio Giacoletto Roggio was appointed Executive Vice President in

June 2000 and in this role has established Oracle as the leading enterprise

software provider for businesses and governments throughout the region.

Additionally, Mr. Sergio Giacoletto Roggio pioneered a campaign to assist

the ten new European Union member states and subsequent candidate

countries gain technological advantage, through the establishment of a

dedicated Oracle regional management group focused on the European

Union enlargement region.

Prior to his appointment as Executive Vice President,

Mr. Sergio Giacoletto Roggio was Senior Vice President, Business

Solutions for Oracle Europe, Middle East and Africa with responsibility

for the Consulting and Applications businesses, as well as Strategic

Partners.

Mr. Sergio Giacoletto Roggio joined Oracle in 1997 from AT&T, where he

was President, Value Added Services. He previously spent 20 years with

Digital Equipment Corporation in various roles, including the responsibility

for the Europe, Middle East and Africa Services organization.

Mr. Sergio Giacoletto Roggio has served on multiple company boards

and IT industry associations and he is a member of the World Council

for Sustainable Business Development; is a member of the South African

Presidential International Advisory Council on Information Society and

Development; and has co-authored the book Information in the Enterprise:

It’s More than Technology (1992).

Mr. Sergio Giacoletto Roggio does not hold any equity share of the

Company as on date.

Mr. Sergio Giacoletto Roggio holds directorship and committee

membership* in the following Companies:


Membership in Committees of

other companies


other companies

CSR plc UK – –



Explanatory Statement as required by Section 173 (2)

of the Companies Act, 1956

The following Explanatory Statement sets out all the material facts

relating to the special business mentioned in the accompanying Notice

dated July 21, 2008.

Item no. 6

The Company has branch offices in India and abroad and may also open

new branches in future. It may be necessary to appoint branch auditors

for conducting the audit of the books of accounts of the Company at such

branches.

The Board of Directors of the Company (“the Board”) seeks approval of

the members for authorising the Board to appoint Branch Auditors and

to fix their remuneration in consultation with the Statutory Auditors of the

Company.

No Director is in any way concerned or interested in the resolution at item

no. 6 of the Notice to the members.

Your Directors recommend the resolution at item no. 6 of the Notice.

Item no. 7

Mr. Sergio Giacoletto Roggio was appointed as an Additional Director of

the Company at the Board Meeting held on October 26, 2007. Pursuant

to and in accordance with the provisions of the Section 260 of the

Companies Act, 1956 and Article 109 of the Articles of Association of the

Company, he holds office up to the date of this Annual General Meeting

and is eligible for appointment.

The Company has received a notice from a member, along with the

requisite deposit under Section 257 of the Companies Act, 1956,

proposing his candidature for appointment as Director of the Company.

The details regarding the above proposed appointee as the Director and

his detailed resume are given in the annexure attached to this Notice.

Mr. Sergio Giacoletto Roggio’s immense knowledge and experience will

add great value to the Company. Except Mr. Sergio Giacoletto Roggio,

none of the Directors of the Company is concerned or interested in the

resolution at item no. 7 of the Notice to the members.

Your Directors recommend the resolution at item no. 7 of the Notice.

By Order of the Board

Deepak Ghaisas

Vice Chairman & Company Secretary

Registered Office:

Unit 10-11, SDF 1, SEEPZ,

Andheri (East),

Mumbai 400 096

July 21, 2008

Annexure to notice

All Company or product names are trademarks or registered trademarks of their respective owners




I/We ...................................................................................................... of ........................................................................in the

district of ...................................................................................................... being a member/members of the above

named Company, hereby appoint ..............................................................................................................................

of ................................................. in district of .........................................................................................

or failing him/her ................................................................. of ...................................................................................... in the

district of ........................................................................... as my/our proxy to attend and vote for me/us and on my/our behalf at

the Nineteenth Annual General Meeting of the Company to be held on Friday, August 22, 2008 at 3.00 p.m. at The Leela Kempinski,

Sahar, Andheri (East), Mumbai 400 059 and at any adjournment thereof.

Signed this ................................................. day of ................................................. 2008.

Ledger Folio No. ............................................... DP.ID. ................................................ Client ID. .............................................

No. of Shares held ............................................................

Note: 1. The proxy need not be a member.

2. The proxy form duly signed across Re.1/- revenue stamp should reach the

Registered Offi ce of the Company not less than 48 hours before the time fi xed for the meeting.

PROXY FORM


Registered Offi ce: 10-11, SDF 1, SEEPZ,

Andheri (East), Mumbai 400 096

ATTENDANCE SLIP

I hereby record my presence at the Nineteenth Annual General Meeting of the Company to be held on Friday, August 22, 2008 at

3.00 p.m. at The Leela Kempinski, Sahar, Andheri (East), Mumbai 400 059.

Full name of the Shareholder .........................................................................................................................................................

(in block letters)

Ledger Folio No. ................................................ DP.ID. ................................................ Client ID. ..............................................

Number of Shares held ..................................................................................................................................................................

Signature of Shareholder or proxy attending .....................................................................................................................................

Full name of Proxy ........................................................................................................................................................................

(in block letters)

Please give full name of the 1st Joint Holder.

Mr./Mrs./Ms. ..............................................................................................................................................................................

Note: Please fi ll in the attendance slip and hand it over at the ENTRANCE OF THE HALL


Registered Offi ce: 10-11, SDF 1, SEEPZ,

Andheri (East), Mumbai 400 096

Please affi xRe. 1/-revenue

stamp and sign across


www. i f l exso lu t i ons .com

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