ramco loo final221105 · ramco systems limited (our company was incorporated as a public limited...

LETTER OF OFFER For Equity Shareholders of the Company Only

RAMCO SYSTEMS LIMITED (Our Company was incorporated as a public limited company under the Companies Act, 1956 in the State of Tamil Nadu

on February 19, 1997 as Ramco Systems Limited)

Registered Office: 47, PSK Nagar, Rajapalayam 626 108; Tel: +91 4563 235688; Fax: +91 4563 236773 Corporate Office: 64, Sardar Patel Road, Taramani, Chennai 600 113; Tel: +91 44 2235 4510; Fax: +91 44 2235 2884

Website: www.ramco.com; Email: [email protected] Contact Person/Compliance Officer: Mr. Subramanian Narayan

For private circulation to the Equity Shareholders of the Company only LETTER OF OFFER

ISSUE OF 3,070,757 EQUITY SHARES OF RS. 10 EACH OF RAMCO SYSTEMS LIMITED AT A PREMIUM OF RS. 200 PER EQUITY SHARE, I.E. AN ISSUE PRICE OF RS. 210 PER EQUITY SHARE AND

AGGREGATING RS. 644,858,970 ON RIGHTS BASIS TO THE EQUITY SHAREHOLDERS OF RAMCO SYSTEMS LIMITED IN THE RATIO OF 1 (ONE) EQUITY SHARE FOR EVERY 4 (FOUR) EQUITY

SHARES HELD ON THE RECORD DATE i.e. DECEMBER 2, 2005 (“ISSUE”). THE ISSUE PRICE IS 21 (TWENTY ONE) TIMES THE FACE VALUE OF EACH EQUITY SHARE

GENERAL RISKS Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to the section titled “Risk Factors” beginning on page vi of this Letter of Offer before making an investment in this Issue.

ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect.

LISTING The existing Equity Shares of the Company are listed on Bombay Stock Exchange Limited (“BSE”), The National Stock Exchange of India Limited (“NSE”) and the Madras Stock Exchange Limited (“MSE”). The Company has received “in-principle” approvals from BSE, NSE and the MSE for listing the Equity Shares arising from this Issue vide letters dated October 10, 2005, August 31, 2005 and August 18, 2005, respectively. The Designated Stock Exchange for the Issue shall be the BSE. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

Kotak Mahindra Capital Company Limited Bakhtawar, 3rd Floor, 229, Nariman Point, Mumbai 400 021 Tel: +91 22 5634 1100 Fax: +91 22 2284 0492 Email: [email protected] Website: www.kotak.com

Cameo Corporate Services Limited Subramanian Building No. 1, Club House Road, Chennai 600 002 Tel : +91 44 2846 0390-5 Fax : +91 44 2846 0129 Email: [email protected] Website: www.cameoindia.com

ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR REQUEST FOR

SPLIT APPLICATION FORMS ISSUE CLOSES ON

DECEMBER 19, 2005 JANUARY 3, 2006 JANUARY 18, 2006

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TABLE OF CONTENTS

SECTION I: DEFINITIONS AND ABBREVIATIONS.................................................................................... iii Conventional / General Terms............................................................................................................................. iii Issue Related Terms.............................................................................................................................................. iv Abbreviations ........................................................................................................................................................ iv Company / Industry related terms ......................................................................................................................... v

SECTION II: RISK FACTORS............................................................................................................................vi SECTION III: INTRODUCTION .........................................................................................................................1

Summary ................................................................................................................................................................1 The Issue ................................................................................................................................................................2 Selected Financial Information .............................................................................................................................3 General Information ..............................................................................................................................................7 Capital Structure..................................................................................................................................................10 Objects of the Issue ..............................................................................................................................................18 Basis for Issue Price ............................................................................................................................................21 Statement of Possible Tax Benefits available to Ramco Systems Limited and its Shareholders.........................23 Promise versus Performance...............................................................................................................................35

SECTION IV: ABOUT THE ISSUER COMPANY ..........................................................................................36 Industry Overview................................................................................................................................................36 Business ...............................................................................................................................................................39 Regulations and Policies .....................................................................................................................................55 History and Corporate Structure.........................................................................................................................60 Management.........................................................................................................................................................69 Promoters.............................................................................................................................................................77 Related Party Transactions .................................................................................................................................83 Dividend policy ....................................................................................................................................................86 Exchange Rates and Currency of Presentation ...................................................................................................87

SECTION V: FINANCIAL STATEMENTS ......................................................................................................88 AUDITORS’ REPORT .........................................................................................................................................89 Financial And Other Information Of Group Companies ..................................................................................155 Stock Market Data For Equity Shares Of Our Company..................................................................................171 Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Of Ramco Systems Limited In Accordance With Consolidated Indian GAAP .................................................................................176 Management Discussion And Analysis Of Financial Condition And Results Of The Operations of Unconsolidated Financial Statements under Indian GAAP ..............................................................................191

SECTION VI: LEGAL AND OTHER INFORMATION................................................................................196 Outstanding Litigation and Defaults .................................................................................................................196 Government Approvals ......................................................................................................................................207 Material Developments......................................................................................................................................207 Description Of Certain Indebtedness ................................................................................................................208

SECTION VII: OTHER REGULATORY AND STATUTORY DISCLOSURES.......................................211 SECTION VIII: ISSUE INFORMATION ........................................................................................................219

Terms of the Issue ..............................................................................................................................................219 SECTION IX: OTHER INFORMATION ........................................................................................................233

Material Contracts and Documents for Inspection ...........................................................................................233 Declaration ........................................................................................................................................................235

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SECTION I: DEFINITIONS AND ABBREVIATIONS Term Description

Ramco, the Company, our Company, the Issuer, Issuer Company, we or us

Unless the context specifically mentions otherwise, refers to Ramco Systems Limited, a public limited company incorporated under the Companies Act, 1956 and having its registered office at 47, PSK Nagar, Rajapalayam 626 108

Associate or Associates Currently means, Ramco Redlex and Ramco Triamun, either individually or collectively, as the context may require

Demerger Scheme By way of an order dated December 24, 1999, the Hon’ble High Court of

Judicature at Madras sanctioned a scheme of arrangement for the transfer of the software business undertaking of Ramco Industries Limited to us, with effect from April 1, 1999

Group Currently means the Company, its Subsidiaries and its Associates taken collectively

Ramco Infotech Ramco Infotech Solutions Limited, India Ramco Malaysia Ramco Systems SDN BHD Malaysia Ramco Redlex Redlex 47 Pty Ltd., South Africa; trading in the name of “Citiworks” Ramco RSA RSL Enterprise Solutions (Pty) Limited, South Africa Ramco Singapore Ramco Systems Pte Limited, Singapore Ramco Switzerland Ramco Systems Limited, Switzerland Ramco Triamun Triamun Ramco Healthcare Systems Limited, Switzerland Ramco USA Ramco Systems Corporation, USA Subsidiary or Subsidiaries Currently means (i) Ramco Infotech, (ii) Ramco Malaysia, (iii) Ramco RSA,

(iv) Ramco Singapore, (v) Ramco Switzerland and (vi) Ramco USA Conventional / General Terms

Term Description Act/ Companies Act The Companies Act, 1956, as amended Articles Articles of Association of the Company Auditor Statutory auditors of the Company being CNGSN & Associates, Chartered

Accountants Board or Board of Directors

Board of Directors of the Company

Capital or Share Capital Share capital of the Company, as on a specific date Delisting Guidelines SEBI (Delisting of Securities) Guidelines, 2003 Equity Share(s) or Share(s) means the Equity Share(s) of the Company having a face value of Rs. 10, being

fully paid-up, unless specifically mentioned otherwise Equity Shareholder(s)/ Shareholders

means the holder of Equity Share(s)

FY / Fiscal Financial Year ending March 31, unless otherwise specified. The financial year ending of our Associates, Ramco Redlex and Ramco Triamun is February 28 and December 31, respectively

Memorandum Memorandum of Association of the Company SEBI Act, 1992 The Securities and Exchange Board of India Act, 1992, as amended SEBI DIP Guidelines The SEBI (Disclosure and Investor Protection) Guidelines, 2000, as amended Stock Exchanges BSE, NSE or MSE, individually or collectively as the context may require Takeover Code The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997,

as amended

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Issue Related Terms

Term Description CAF Composite Application Form Consolidated Certificate In case of multiple physical shares, the Company would issue one consolidated

certificate for the Equity Shares allotted to one folio Designated Stock Exchange

The designated stock exchange for the Issue shall be the BSE

Draft Letter of Offer The draft letter of offer dated August 12, 2005 filed with SEBI for its comments Investor(s) Shall mean the holder(s) of Equity Shares of the Company as on the Record Date,

i.e. December 2, 2005and Renouncees, who are eligible to apply for and receive their Rights Entitlement, subject to applicable law

Issue Issue of 3,070,757 Equity Shares of Rs. 10 each of the Company at a premium of Rs. 200 per Equity Share, i.e. an Issue Price of Rs. 210 per Equity Share and aggregating Rs. 644,858,970 on rights basis to Equity Shareholders of the Company in the ratio of 1 (One) Equity Share for every 4 (Four) Equity Shares held on the Record Date, being December 2, 2005

Issue Closing Date January 18, 2006 Issue Opening Date December 19, 2005

Issue Price Rs. 210 per Equity Share, being 21 (twenty one) times the face value of each Equity Share

KMCC or Lead Manager Kotak Mahindra Capital Company Limited Letter of Offer Letter of offer dated November 18, 2005, filed with the Stock Exchanges, after

receiving and incorporating the observations by SEBI on the Draft Letter of Offer Record Date Shall mean the record date fixed by the Company for the purpose of this Issue,

being December 2, 2005 Registrar to the Issue or Registrar

Cameo Corporate Services Limited

Renouncees Shall mean the persons who have acquired Rights Entitlements from Equity Shareholders

Rights Entitlement The number of Equity Shares that a shareholder is entitled to, on the basis of the ratio decided, in proportion to his/her shareholding in the Company as on the Record Date

Abbreviations

Term Description AGM Annual General Meeting AS Accounting Standard, issued from time to time by the Institute of Chartered

Accountants of India BIFR Board of Industrial and Financial Reconstruction BSE Bombay Stock Exchange Limited CDSL Central Depository Services (India) Limited DP Depository Participant EGM Extraordinary General Meeting ESOP 2000 Means the Employee Stock Option Plan, 2000 of the Company, as approved by the

Shareholders at the EGM held on August 28, 2000 ESOS 2003 Means the Employee Stock Option Scheme, 2003 of the Company, as approved by

the Shareholders at the EGM held on April 9, 2003 ESOS 2004 Means the Employee Stock Option Scheme, 2004 of the Company, as approved by

the Shareholders at the EGM held on December 24, 2004 ESPS 2004 Means the Employee Stock Purchase Scheme, 2004 of the Company, as approved by

the Shareholders at the EGM held on December 24, 2004 FEMA Foreign Exchange Management Act, 1999 FII(s) Foreign Institutional Investors registered with SEBI under applicable laws HUF Hindu Undivided Family Income Tax Act The Income Tax Act, 1961 and amendments thereto MSE Madras Stock Exchange Limited NRI(s) Non Resident Indian(s)

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Term Description NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited OCB Overseas Corporate Bodies RBI The Reserve Bank of India SEBI Securities and Exchange Board of India

Company / Industry related terms

Term Description BFSI Banking, Financial Services and Insurance BI&DW Business Intelligence and Data warehousing CPM Corporate Performance Management CRM Customer Resource Management DecisionWorks Ramco DecisionWorks e.Applications Ramco e.Applications EIS Executive Information Systems ERP Enterprise Resource Planning HRM Human Resource Management IT Information Technology LAN Local Area Network Products Software Development of our Enterprise Products, together with the repository of new

business components, upon completion of the development phase, costs in relation to which have been classified and grouped as “Product Software” under Fixed Assets.

R&D Research and development Technology Platform Development of technology platform framework, which enables us to provide

standard and customised enterprise solutions, costs in relation to which have been classified and grouped as “Technology Platform” under Fixed Assets.

Virtualworks Ramco Virtualworks

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SECTION II: RISK FACTORS

An investment in Equity Shares involves a high degree of risk. You should carefully consider all the information in this Letter of Offer, including the risks and uncertainties described below, before making an investment in our Equity Shares. If any of the following risks actually occur, our business, results of operations and financial condition could suffer, the price of our Equity Shares could decline, and you may lose all or part of your investment. The consolidated financial and other implications of material impact of risks concerned, unless otherwise specified, wherever quantifiable, have been disclosed in the risk factors mentioned below. INTERNAL RISK FACTORS We have incurred losses in the past.

In fiscal 2005, 2004 and 2003, our losses on a consolidated basis aggregated Rs. 679.26 million, Rs. 507.96 million and Rs. 598.60 million, respectively. In fiscal 2005, 2004 and 2003, our losses on an unconsolidated basis aggregated Rs. 403.60 million, Rs. 348.65 million and Rs. 273.19 million, respectively. These losses were on account of various reasons; particularly our significant expenditure on R&D and incurring fixed operational costs like employee and administrative expenses. We cannot assure you that we will be able to reverse this position in the future and this may continue to adversely affect our results of operations and financial conditions. Further, in fiscal 2005, 2004 and 2003 our unconsolidated net worth was Rs. 1,457.30 million, Rs. 2,522.27 million and Rs. 1,669.94 million respectively. The consolidated networth of our group for fiscal 2005, 2004 and 2003 was Rs. 1,515.33 million, Rs. 936.20 million and Rs. 146.67 million respectively. In fiscal 2005 and 2003, we had negative cash flows of Rs. 41.96 million and Rs. 36.36 million, respectively. In fiscal 2005, 2004 and 2003, we had negative earnings per share of Rs. 10.94, Rs. 40.19 and Rs. 35.33, respectively. In fiscal 2005, 2004 and 2003, we had negative returns on networth of 8.83%, 13.82% and 16.36%, respectively. Our Subsidiaries have incurred losses on an unconsolidated basis in the past, which has resulted in a negative net worth. In addition to our losses, our Subsidiaries have also incurred losses on a stand alone basis in the past. In fiscal 2004 and 2003, our Subsidiaries suffered losses aggregating Rs. 159.45 million and Rs. 325.42 million, respectively. These losses were on account of various reasons, particularly our fixed operational costs like employee and administrative expenses. As a result of their losses, these Subsidiaries have not been able to make payments inter alia in relation to loans granted by us and receivables due to us. We cannot assure you that we will be able to recover any future payments or dues. Though, we cannot provide any assurance that these Subsidiaries will be profitable or that our investments will be recovered, we propose to continue funding the capital expenditure and working capital requirement of these Subsidiaries, including by way of loans and/or equity infusion. The financial performance of these Subsidiaries adversely affects our results of operation and financial conditions. Our following Subsidiaries have incurred losses:

Rs. in million Profit/ (Loss) for the year ended

March 31, Accumulated losses

As on March 31, Name of the company 2003 2004 2005 2003 2004 2005 Ramco Systems Corporation, USA (121.40) 8.32 278.49 1041.48 1033.16 - Ramco Systems Limited, Switzerland (127.48) (158.35) 261.73 444.82 577.30 - Ramco Systems Sdn. Bhd., Malaysia (29.24) 16.88 (1.13) 3.50 - - Ramco Systems Pte. Ltd., Singapore (47.29) (25.51) 55.42 31.45 56.96 - RSL Enterprise Solutions (Pty) Ltd, South Africa NA (0.79) 14.78 NA 0.79 -

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Our following subsidiaries have a negative networth:

Rs. in million Negative Net worth

As on March 31, Name of the company 2003 2004 2005 Ramco Systems Corporation, USA (520.75) (473.59) - Ramco Systems Limited, Switzerland (244.32) (370.03) - RSL Enterprise Solutions (Pty) Ltd, South Africa - (0.77) - Ramco Systems Pte. Ltd., Singapore (11.27) (35.52) - Some of our Promoter group companies have a negative networth as a result of losses incurred by them in the past The following Promoter group companies have incurred losses and have a negative networth:

Rs. in million Loss for the year ended

March 31, Negative Net worth

As on March 31, Name of the company 2003 2004 2005 2003 2004 2005 Nalina Agricultural Farms Private Limited 0.003 0.004 0.004 NA

NA NA

Nirmalashankar Farms and Estates Private Limited 0.003 0.002 0.002 NA

NA NA

Ram Sandhya Farms Private Limited 0.003 0.003 0.003 NA NA NA Ramamandiram Agricultural Estate Private Limited 0.005 0.012 0.008 NA

NA NA

Ramco Management Private Limited 1.01 0.38 0.43 0.691 0.982 1.419 Sri Nithyalakshmi Farms Private Limited 0.003 0.002 0.002 NA

NA NA

Sri Sandhya Farms (India) Private Limited 0.045 0.046 0.043 NA 0.029 0.071 Sri Saradha Deepa Farms Private Limited 0.037 0.548 0.018 NA 0.502 0.519 Thanjavur Spinning Mills Limited 5.30 NA NA 32.625 28.05 17.176 Thanjavur Spinning Mills Limited, forming part of the Promoter group of companies has been classified as a potentially sick company and has been referred to the Board for Industrial and Financial Reconstruction (BIFR). However, we are yet to receive a response from BIFR. Our revenues are highly dependent on the business operations of our Subsidiaries. A substantial portion of our revenues arise on account of the business operations of our Subsidiaries. In fiscal 2005, 2004 and 2003, the revenues from our Subsidiaries as a percentage of the total revenues earned by the Group was 69.01%, 64.17% and 57.19% respectively. Since our business and financial performance is highly dependent on the sales and the marketing effort of our subsidiaries, any failure on the part of our Subsidiaries to meet such expectations may adversely affect our revenues and results of operations. For more details on our business model, please refer to the section titled “Business Model” on page 50 of this Letter of Offer. Our revenues and expenses are difficult to predict and may vary significantly from period to period. Our revenues are difficult to predict and are likely to fluctuate due to a number of factors, many of which are outside of our control. These factors include: • changes in our pricing policies or those of our competitors; • the effect of high attrition rates due to salary pressure in the market and the time required to train and

productively utilize new employees, particularly IT professionals; • unanticipated cancellations, contract terminations or deferrals of projects; • unanticipated variations in the duration, size and scope of our projects; • our ability to successfully anticipate and offer products and services that our customers will require in

the future;

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• our ability to successfully complete projects on a timely basis to reduce our cost structure, including fixed costs, to streamline our operations and to reduce product costs;

• our ability to fund and sustain our research and development activities; • the timing of our or our competitors’ new products or product enhancements or any delays in such

introductions by us; and • changes in customer budgets that could affect both the timing and size of any transaction; Our operating results have historically been subject to yearly and quarterly fluctuations and are expected to continue to fluctuate, which may adversely affect the market price of our listed securities and could cause our share price to decline.

Our operating expenses are budgeted based on our estimates of revenues. A high percentage of our expenses are fixed, particularly expenses related to our personnel and facilities, which are fixed in advance for specific periods. Any failure to accurately estimate the resources and time required for the performance of the contract or any failure to complete our contractual obligations within the performance levels committed could adversely affect our profitability. Any inaccuracy in our estimates of the resources required to complete ongoing projects, may cause significant variations in our operating results in that particular period.

We have a number of contingent liabilities, and our profitability could be adversely affected if any of these contingent liabilities materialize. Our contingent liabilities as of March 31, 2005 include guarantees issued by banks in favour of our Subsidiaries and various government authorities and others amounting to Rs. 51.11 million and approximately Rs. 175.61 million in estimated claims against us in connection with legal proceedings and claims against us. If any of these contingent liabilities materialize, they could adversely affect our profitability. For more details of our contingent liabilities, please refer to the section titled “Outstanding Litigation and Defaults”on page 196 of this Letter of Offer. We have not declared any dividends in the past. In the past, we have not declared any dividends to our Shareholders. The declaration and payment of dividends will be recommended by our Board of Directors and approved by our shareholders, in their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements and overall financial condition. No tangible asset will be created from the proceeds of the Issue. The proceeds of the Issue will be utilized primarily to meet our working capital requirements, research and development costs and marketing costs. We only propose to spend Rs. 50 millon on capital expenditure and as such no material tangible asset would be created out of the proceeds of the Issue. We face competition from global and Indian enterprise solution companies We face competition from global and Indian enterprise solution companies who use their significant resources and experience in a variety of competitive ways, including by making acquisitions and investing large amounts in research and development and pursuing aggressive marketing and sales initiatives. We may in the future not be able to provide similar or better technology solutions than our competitors. As a result, we may experience a significant decline in demand of our offerings, which could negatively affect our revenues and results of operations. Our revenues are dependant on our ability to innovate and develop unique offerings that meet customer expectations. We operate in a market characterized by frequently changing customer requirements. Our success depends largely on the timely and successful introduction of high quality new products and upgrades, as well as cost reductions on current products to address the operational speed, efficiency and cost requirements of our customers. In addition, if we are unable to predict customer preferences or industry changes or if we are unable to modify our products and services on a timely basis, we may lose customers. Further, if we experience technical errors or delays in releasing new products or new versions of products, we could lose revenues. Flaws in our software could also subject us to liability and warranty claims, which could adversely affect our business and operating results.

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We incur substantial R&D costs. Our business strategy is based upon our ability to ensure that unique and competitive products and technologies are offered to customers on a regular basis. In order to develop and sell such products, we incur substantial R&D costs. In fiscal 2005, 2004 and 2003 our R&D costs on an unconsolidated basis was Rs. 185.20 million, Rs. 291.50 million and Rs. 248.00 million, representing 15.10% 33.90% and 29.20% of our total revenues, respectively. If we are unable to sustain our R&D efforts, our results of operations may be adversely affected. We have incurred substantial expenditure to develop our current technology platform, being VirtualWorks. We expect that this technology platform will enable us to significantly increase our revenues in the future. However, we cannot assure you that the commercialization of this technology platform will be profitable or that our competitors will not develop a platform that is superior to VirtualWorks. We believe that we must continue to dedicate a significant amount of resources to our R&D efforts to maintain our competitive position. However, we cannot assure you that our R&D efforts will yield significant revenues, if at all. Our revenues are dependant on our ability to effectively market and implement our enterprise products and services. We provide enterprise products and services. We are also dependant on our partnerships, strategic alliances and other marketing arrangements to efficiently market our offerings in each of the target verticals. The nature of our offerings is such that after they are deployed, we usually need to only provide maintenance services. Therefore, the quantum of repeat business for our offerings is low. Further, in view of the limited nature of the engagements and to ensure better revenues, we are highly dependant on our ability to effectively market our products and services to new customers on an ongoing basis especially to top tier customers. We cannot assure you that we will be appointed by such customers to implement our offerings on a regular basis and this inability may adversely affect our financial performance and results of operations. We have made significant investments in developing software products, which we believe are designed to meet the needs and expectations of our customers. Our current software products or any new software products that we develop may not be commercially successful. If we are unable to suitably market and implement our products to multiple customers, we may not be able to recoup the cost of such investments and this may adversely affect our results of operations. Our products may contain flaws, which could result in damage to our reputation and loss of customers.

We provide our customers with products and services that are critical to the operations of their business. Our software solutions may contain undetected flaws, which could result in a claim against us for substantial damages, regardless of our responsibility for such a failure or defect. Although we attempt to contractually limit our liability for damages, including consequential damages, we cannot assure you that the limitations on liability will be enforceable in all cases. In respect of Ramco USA and Ramco Switzerland, we have taken certain coverage for errors and omission, while in respect of other areas we do not have any general liability insurance coverage. We cannot assure that the insurance covers taken by us will be fully adequate and any such occurrence on account of errors and omission could result in damage to our reputation and loss of customers, which would adversely affect our business, results of operations and financial condition. Our product sales cycle is long. We spend a considerable amount of time and money in order to effectively market our offerings, including by way of internal discussions with customers, presentations and pilot projects to convince them of its suitability for their purpose. These efforts may not necessarily result in our being engaged by such customers. In such cases, we may incur substantial expenses during the product sales cycle, which we may not be able to recoup.

We have provided for an impairment charge in relation to certain items Based on certain technical assumptions, internal estimates and in accordance with AS-28, we have provided for a net impairment charge of Rs. 125.00 million in fiscal 2005, due to the obsolescence of certain software components. Since there is a high rate of obsolescence in our business, sometimes even before they commence commercial operations, we may have to provide for similar impairment charges in the future. Our international operations expose us to complex management, legal, tax and economic risks. We have Subsidiaries, Associates and branch offices in 9 countries and a significant number of our IT services professionals are assigned to engagements outside India. Our revenues from our international operations as a

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percentage of total revenues for fiscal 2005, fiscal 2004 and fiscal 2003 was 69.01%, 64.17% and 57.19% respectively. As a result of our expanding international operations we are subject to risks inherent to establishing and conducting operations in international markets, including: • Cost structures and cultural and language factors, associated with managing and coordinating our global

operations; • Compliance with a wide range of foreign laws, including immigration, labour and tax laws; • Restrictions on repatriation of profits and capital; and • Potential difficulties with respect to protection of our intellectual property rights in some countries.

The appreciation of the Rupee, particularly against the US Dollar, Swiss Franc and South African Rand would have a material adverse effect on our results of operations We report our financial results in Rupees, but a significant portion of our income has been and may continue to be primarily denominated in US Dollar, Swiss Franc and South African Rand, exposing us to foreign currency risks. The exchange rate between the Rupee and the US Dollar, Swiss Franc and South African Rand has changed substantially in recent years and may continue to do so in future. We have currently not entered into any hedging arrangements to mitigate any foreign exchange fluctuation risk and cannot assure you that we will be able to mitigate the adverse impact of currency fluctuations on the results of our operations.

Any inability to manage our growth could impact our profitability. In fiscal 2005, 2004 and 2003, our total revenues have grown to Rs. 2,246.14 million, Rs. 1,725.79 million and Rs. 1,614.33 million, respresenting a compounded annual growth rate of 17.96%. We have also increased our total employee strength to 1,795 persons from approximately 1,336 persons since the last fiscal year. We may further increase our employee strength in the near future. We expect our growth to place significant demands on our management and other resources, including on our Subsidiaries and branch offices in various international jurisdictions. Continued expansion increases the challenges involved in: recruiting, training and retaining skilled technical, sales and management personnel; adhering to our high quality and process execution standards; and maintaining high levels of customer satisfaction. Any inability to manage and integrate such growth may have an adverse effect on our business, results of operation and financial condition. Our transfer pricing agreements with our Subsidiaries and other taxation matters may be challenged by regulators, which may subject us to higher taxes and adversely affect our earnings. We are subject to direct and indirect taxes, in India and various foreign jurisdictions, including income tax, sales tax, value-added tax and service tax. In the ordinary course of our business, we have entered into several inter-company transactions across jursidictions. We believe that we operate in compliance with all applicable transfer pricing laws in these jurisdictions. Our inter-company transfer pricing arrangements have been accepted by the Income Tax Department in India. However, there can be no assurance that we will continue to be found to be operating in compliance with transfer pricing laws, or that such laws will not be amended, which may require us to change our transfer pricing practices or operating procedures. Any modification of transfer pricing laws may result in a higher overall tax liability to us and adversely affect our earnings and results of operations.

Our business is dependent on our intellectual property and any failure to protect such intellectual property rights will adversely affect our business. We rely on a combination of copyright, patent, trademark, trade secrets, confidentiality procedures and contractual commitments to protect our proprietary information. Despite our efforts, these measures can only provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and use our intellectual property. Any intellectual property owned by us may be invalidated, circumvented or challenged. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope of the claims we seek, if at all. If we cannot protect our proprietary technology against unauthorized copying or use, we may not remain competitive. The source code of our software applications is a critical asset of our operations. We will lose our competitive edge if any of our competitors appropriate such intellectual property. Under certain contracts we are required to keep our source code in escrow or enter into specific secrecy/confidentiality agreements with such customers. However, we cannot assure you that there will be no unauthorized disclosures of our source code pursuant to such escrow arrangements. Further, given the complex nature of the software development involving human intelect, we cannot rule out the replication of similar products by our existing or ex-eomplyees.

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We may be infringing on intellectual property rights of third parties.

Claims of intellectual property infringement or trade secret misappropriation may be asserted against us or our customers in connection with their use of our products and the outcome of such claims may be uncertain. An unfavorable outcome in such a claim could require us to cease offering for sale the products that are the subject of such a claim, pay substantial monetary damages to a third party and/or make ongoing royalty payments to a third party. Certain of our customer contracts provide that in the event of a third party claim for intellectual property infringement, we shall either obtain permission from the third party to continue to use the offending intellectual property or find a substitute for the offending intellectual property. In the event that we are unable to provide either of these remedies to our customers, our customers’ contracts provide that we shall refund the license fee received, after deducting a reasonable charge for the time period during which the customers used the software. If we are not able to successfully challenge such claims, our business and results of operations could be materially affected. Many of our customer contracts can be terminated without cause and with limited notice Many of our customer contracts provide for termination of the contract with or without cause by providing 15 to 60 days’ notice. In the case of licens agreements, if a customer terminates the agreement before paying license fees, no license is granted to the customer. In case of service agreements, notwithstanding the reason for termination, the Company is entitled to all amounts due and payable by the customer (s) in respect of the work done by the Company prior to the date of termination. However, majority of our customer contracts do not provide for any penalty provisions for early termination by the customers. We may not have sufficient insurance to mitigate our business risks. We rely on insurance to mitigate some risks andif we are unable or choose not to maintain sufficient insurance, we may be exposed to potential claims. We have in the past and may in the future choose not to obtain insurance for certain risks facing our business. Certain customer contracts require us to maintain specific insurances such as workmen’s compensation and comprehensive general liability insurance. We have obtained such insurance coverage as required by our customers. However, we cannot assure you that such insurance will cover all of our liability. If we are found liable for a significant claim in the future, our operating results could be negatively impacted. We may not be able to hire and retain qualified technical and managerial personnel Our ability to execute projects, which meet the customer’s expectations, depends largely on our ability to attract, train, motivate and retain qualified and experienced professionals. Competition for specialized technical personnel in the technology industry is strong. We also face competition for skilled professionals from international labour markets. Our attrition rates for fiscal 2005, fiscal 2004 and fiscal 2003 on an unconsolidated basis was 32%, 40%, and 23% respectively. We define attrition as the ratio of the number of employees that have left us during a defined period to the average of the total number of employees that are on our payroll at the beginning and end of such period. Any increase in our attrition rates, particularly with respect to experienced software personnel will adversely affect our growth strategy and significantly impact our resource management. Apart from our employees, we also engage IT professionals provided by external agencies and hired for particular projects. We may be unable to ensure that such external agencies continue to retain such personnel. Entry barriers could limit our ability to expand our operations in international jurisdictions. We derive a substantial portion of our revenues from onsite operations in the United States, Europe and Asia Pacific region. In fiscal 2005, 2004 and 2003 our revenues from onsite operations as a percentage of our total revenues was 69.01%, 64.17% and 57.19% respectively. Immigration laws in these countries are subject to legislative change, political and economic conditions, particularly in relation to grant of work permits and business visas. Our ability to staff projects with software professionals who are not citizens of the country where the work is to be performed is constrained by such entry barriers, which could have a material impact on our business, financial condition and results of operations. We face risks associated with investments, strategic partnerships and alliances or other ventures. In order to enhance our capabilities, technical expertise and geographic coverage, we have in the past and may in the future enter into joint ventures, strategic partnerships and alliances, which may prove to be difficult to integrate and manage or may not be successful. These difficulties may disrupt our ongoing business, affect our

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management and employees and increase our expenses. Any divestments, disassociation, withdrawal from such alliances, strategic partnerships, joint ventures in future could adversely affect us. We require certain approvals or licenses in the ordinary course of business, and the failure to obtain them in a timely manner or at all may adversely affect our operations. We require certain approvals, licenses, registrations and permissions for conducting our business in India and various foreign jurisdictions, which have currently been obtained for our business. However wherever applicable, if our approvals or licenses are not renewed on expiry or if the new approvals or licenses are not obtained in time, our business may be adversely affected. For more information, please refer to the section titled “Government Approvals” beginning on page 207 of this Letter of Offer. We have availed of loans from banks, financial institutions and our Promoters. Our working capital requirements have been and are expected to continue to be extensive. In order to finance our business, we have incurred significant levels of debt. For more details please refer to the section titled “Description of Certain Indebtedness” on page 208 of this Letter of Offer. We may need to obtain additional sources of funding, which may include equity, debt or convertible debt financing, in the future. Further, since most of the loans obtained by us have been secured or guaranteed by our Promoters, we may not in the future, be able to raise any additional debt if our Promoters decline to provide such guarantees. A high level of debt, failure to meet the covenants in the loan agreement and poor business performance could materially affect our ability to fund the operation of our business. If operating cash flows are not sufficient to meet our expenses as they become due, we may be required to delay or reduce capital expenditures or the development of newproducts, be forced to sell or dispose of our assets and/or may have to forego potential business opportunities. Our Promoters and other principal shareholders will continue to control us. Our Promoters hold 55.95% of our pre-Issue equity capital. They currently exercise substantial control over us and inter alia have the power to elect and remove a majority of our Directors and/or determine the outcome of certain important proposals, which require the specific approval of our Board of Directors or shareholders. Assuming the Promoters subscribe to the entire Issue, they will collectively hold 64.80% of the fully diluted post Issue equity capital. We cannot assure you that the interest of our Promoters and other major shareholders will not conflict with the interests of other shareholders, including yourselves. We may issue fresh shares, which may result in dilution of investor share holding in our Company Any future equity offerings by us, sale by significant shareholders and/or the issue of Equity Shares pursuant to exercise of stock options under the various employee stock option plans or by way of an induction of strategic investors, may lead to a dilution of investor shareholding in our Company and/or affect the market price of our Equity Shares. Valuations in the software / information technology industry may not be sustained in future and current valuations may not be reflective of future valuations for the industry. We are global providers of enterprise products and solutions. Though we believe that in India there are no directly comparable competitors, based on the current market capitalization and the industry in which they operate, we believe that iGate Global Solutions Limited, MphasisBFL Limited, Iflex Solutions Limited, Polaris Software Lab Limited and 3i Infotech Limited may be the closest comparable listed companies. Valuations in the software/information technology industry may not be sustained in future and current valuations may not be reflective of future valuations for the industry. Our Company and the group companies of our Promoters are involved in certain legal proceedings in India. Our Company alongwith the group companies of our Promoters are involved in certain legal proceedings and claims in India in relation to certain civil, criminal, taxation and other matters. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. We have in the past and may in the future need to make provisions in our financial statements in relation to certain legal proceedings, which could increase our expenses and our current liabilities. We cannot assure you that these legal proceedings will be decided in our favour. Any adverse decision may have a significant effect on our business and results of operations.

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There are 3 criminal suits initiated by us for an amount aggregating around Rs.1.35 million, 6 civil suits initiated by us for an amount aggregating around Rs. 2.80 million. In addition to these cases we have also initiated 2 winding up petitions for an amount aggregating around Rs. 1.02 million, an arbitration proceeding for an amount aggregating around Rs. 253,953 and an economic offence of Rs. 5.00 million. There is 1 civil suit initiated against us for which there is no financial implication on the Company and also 1 labour case for an amount of Rs. 2,783.90 initiated against us. For more information regarding these legal proceedings, please refer to the section titled “Outstanding Litigation and Defaults” beginning on page 196 of this Letter of Offer. EXTERNAL RISK FACTORS We are subject to various Indian and international income tax benefits. We are currently a loss making entity and therefore do not avail of the Indian tax benefits applicable to companies engaged in export activities. However, if we are able to generate profits, we may avail of such tax benefits, if they are still available. In 1997, Ramco Malaysia was awarded the Multimedia Super Corridor (MSC) status enabling it to derive certain tax benefits from the Government of Malaysia. However, we cannot assure you that it will continue to derive such tax benefits. For more details on the tax benefits available in India, please refer to the section titled “Statement of Possible Tax Benefits available to Ramco Systems Limited and its Shareholders” beginning on page 67 of this Letter of Offer. Applicability of certain labour laws may adversely affect our profitability. India has stringent labour legislations that protect the interests of workers, including legislation that sets forth detailed procedures for dispute resolution and employee removal and legislation that imposes certain financial obligations on employers upon retrenchment. Though we are exempt from the applicability of certain labour law legislations there can be no assurance that such laws will not become applicable to us in the future. In addition, our employees may form unions in the future. If the labour laws become applicable to our workers or if our employees unionize, it may become difficult for us to maintain flexible labour policies, discharge employees or downsize, and our profitability may be adversely affected. With respect to our employees located at customer premises overseas, we may be exposed to risks arising from contract labour legislations in such jurisdictions. Further, we cannot assure you that there will be no adverse change in the relevant labour legislations in the respective jurisdictions. Remunerative pressures in India may result in increased costs and we may lose our competitive advantage. Remuneration for skilled professionals in India have historically been lower than remuneration costs in other jurisdictions, particularly the United States and Europe. However, remuneration increases in India may prevent us from sustaining this competitive advantage and may negatively affect our revenue margins. Remuneration in India is increasing at a faster rate than in the United States, which could result in increased costs for software professionals, particularly project managers and other mid-level professionals. We may be forced to increase the levels of remuneration paid to our employees to remain competitive and contain attrition. Compensation increases may result in a material adverse effect on our business, results of operation and financial condition. Our ability to raise capital outside India and to enter into acquisition transactions with non-Indian companies is subject to Indian laws. Indian laws constrain our ability to raise capital outside India through the issuance of equity or convertible debt securities and restrict the ability of non-Indian companies to acquire us. Generally, any foreign investment in, or an acquisition of, an Indian company requires approval from the relevant government authorities in India, including the Reserve Bank of India. However, there are certain exceptions to this approval requirement for information technology companies on which we are able to rely. Changes to such policies may create restrictions on our capital raising abilities. If the Government of India does not approve the investment or acquisition, or implements a limit on the foreign equity ownership of information technology companies, our ability to obtain investments, and/or enter into acquisitions with, foreign investors will be limited. In addition, making investments in and/or the strategic acquisition of a foreign company by us requires various approvals from the Government of India and the relevant foreign jurisdiction, and we may not be able to obtain such approvals.

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Our operating results may be negatively impaired if there is an international economic slowdown. A significant portion of our revenues are dependent on customers located in the United States, Europe and the Asia Pacific region. Economic slowdowns and other factors that affect the economic health of these regions may affect our business. If there is an economic downturn in these regions, our customers may reduce or postpone their contracts significantly, which may in turn lower the demand for our products and services and negatively affect our revenues and profitability. Force majeure events, terrorist attacks and other acts of violence or war involving India, the United States or other countries could adversely affect the financial markets, result in a loss of customer confidence and adversely affect our business, results of operations, financial conditions and cash flows. Certain events that are beyond our control, including the recent floods in Mumbai, tsunami or seismically generated sea wave capable of considerable destruction, which affected several parts of South East Asia, including India and Sri Lanka on December 26, 2004, terrorist attacks, such as the ones that occurred in London on July 7, 2005, New York and Washington, D.C., on September 11, 2001 and New Delhi on December 13, 2001, and other acts of violence or war (including civil unrest, military activity and hostilities among neighboring countries, such as between India and Pakistan), which may involve India, the United States or other countries, may adversely affect worldwide financial markets, and could lead to economic recession. These acts may also result in a loss of business confidence and have other consequences that could adversely affect our business, results of operations and financial condition. More generally, any of these events could lower confidence in India. Any such event could adversely affect our financial performance or the market price of the Equity Shares. Our business may be disrupted by regional conflicts in South Asia.

South Asia has, from time to time-experienced instances of civil unrest and hostilities among neighbouring countries, such as between India and Pakistan. In the past there have been military confrontations along the India-Pakistan border. The potential for hostilities between the two countries is higher due to recent terrorist incidents in India, troop mobilisations along the border, and the aggravated geopolitical situation in the region. Military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications and making travel more difficult. Such political tensions could create a greater perception that investments in Indian companies involve a higher degree of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies, including the Equity Shares and on the market for the Company’s products and services. After this Issue, the price of the Equity Shares may be highly volatile, or an active trading market for the Equity Shares may not develop. The prices of the Equity Shares on the Indian stock exchanges may fluctuate after this Issue as a result of several factors, including: volatility in the Indian and global securities market; our results of operations and performance; subsequent corporate actions taken by us, performance of our competitors, the Indian information technology industry, information technology enabled services industry and the perception in the market about investments in the information technology sector; adverse media reports on us or the Indian information technology enabled services industry; changes in the estimates of our performance or recommendations by financial analysts; significant developments in India’s economic liberalization and deregulation policies; and significant developments in India’s fiscal and environmental regulations.

We may be adversely affected by economic, regulatory, political and military uncertainties in India and surrounding countries. In the early 1990s, India experienced significant inflation, low growth in gross domestic product and shortages of foreign currency reserves. Since 1991, the Government of India has pursued policies of economic liberalisation, and has provided significant tax incentives and relaxed certain regulatory restrictions in order to encourage foreign investment in specified sectors of the economy, including in the information technology sector. We cannot assure you that the liberalization policies will continue. Various factors, including a collapse of the present coalition government due to the withdrawal of support of coalition members, could trigger significant changes in India’s economic liberalization and deregulation policies, disrupt business and economic conditions in India generally and our business in particular. Our financial performance and the market price of the Equity Shares may be adversely affected by changes in inflation, exchange rates and controls, interest rates, Government of India policies (including taxation policies), social stability or other political, economic or diplomatic developments affecting India in the future.

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Notes to Risk Factors i. Our net worth on a consolidated basis, as restated on September 30, 2005 and on March 31, 2005, is

Rs.1,346.37 million and Rs. 1,515.33 million respectively. The net asset value per share (book value) on a consolidated basis as on September 30, 2005 and on March 31, 2005 is Rs.109.72 and Rs.128.85 respectively.

ii. This is an issue of 3,070,757 Equity Shares of Rs. 10 each of the Company at a premium of Rs. 200 per

Equity Share, i.e. an Issue Price of Rs. 210 per Equity Share and aggregating Rs. 644,858,970 on rights basis to Equity Shareholders of the Company in the ratio of 1 (One) Equity Share for every 4 (Four) Equity Shares held on the Record Date, being December 2, 2005.

iii. We had entered into certain related party transactions for fiscal 2005, 2004 and 2003. For details, please

refer to the section titled “Related Party Transaction” on page 83 of this Letter of Offer. iv. Before making an investment decision in respect of this Issue, you are advised to refer to the section

titled ‘Basis for Issue Price’ on page 21 of this Letter of Offer. v. For details on basis of allotment please refer to the sub section titled ‘Basis of Allotment’ on page 225 of

this Letter of Offer. vi. The average cost of acquisition of Equity Shares of our Company by our Promoters, being Mr. P R

Ramasubrahmaneya Rajha, Mr. P R Venketrama Raja, Madras Cements Limited, Rajapalayam Mills Limited, Ramco Industries Limited and The Ramaraju Surgical Cotton Mills Limited is Rs. 254.90, Rs. 93.38, Rs. 231.48, Rs. 200, Rs.264.16 and Rs. 200 per Equity Share, respectively.

vii. You may contact the Lead Manager for any complaints pertaining to the Issue, including any

clarification or information relating to the Issue. The Lead Manager is obliged to provide the same to you.

1

SECTION III: INTRODUCTION Summary We are a part of the Rs. 15 billion Ramco Group, a diversified industrial conglomerate. We commenced operations as a software business division of Ramco Industries in 1989. Our Company was incorporated as a public limited company in 1997. Pursuant to a scheme of arrangement sanctioned by the High Court of Judicature, at Madras on December 24, 1999, the software undertaking of Ramco Industries Limited was demerged and transferred to us with effect from April 1, 1999 (the Demerger Scheme). We have wholly owned subsidiaries in Switzerland, Malaysia, Singapore, South Africa and India and associates in Switzerland and South Africa. We also have a 98% owned subsidiary in the US. We are a global provider of Enterprise Solutions and Services in key industries such as manufacturing, aviation, logistics, banking and financial services. We offer rich functionality, cost effective seamless integration and fully web-integrated services, which helps our customers close the gap between business objectives and IT capabilities. Our focus domains are (i) Enterprise Solutions; (ii) Virtual Shoring Solutions and (iii) Secure Converged Networking (iv) CRM implementation and other IT Services. We have delivered our enterprise solutions and services to over 1,000 customer installations across 40 countries serving over 100,000 users. We offer high quality and cost effective services to our customers through our mature delivery processes, scalable infrastructure and skilled global resource base. Our ability to develop adaptive solutions is powered by our recently developed technology platform, Ramco VirtualWorks. We believe that VirtualWorks is a virtual software factory, which helps us deliver large, complex, web-based enterprise solutions on a technology platform of the customer’s choice. VirtualWorks is an innovative technology platform, which transforms business processes into quality software applications in a considerably shorter time frame. It is an adaptive software platform, which facilitates easy modifications to align the software application with the changing business processes. VirtualWorks provides partners and customers with the following business benefits: • Flexible, powerful solutions; • Advanced change management capabilities; • Faster time to benefit; • Better quality; • Optimal costs for the life cycle of ownership. Our proven processes and methodologies are important elements of our mature global delivery model. They help us in delivering high quality and cost-effective IT products and services from multiple locations in a timely, consistent and accurate manner, maintain a high level of customer satisfaction and to focus on improvements in all aspects of delivery. The processes and methodologies that we use at our delivery centers in India conform to ISO 9001 standards. We have been currently assessed at SEI CMM Level 5. Dataquest in their Customer Satisfaction Audit in the Enterprise Application segment has ranked us as number one. (Source: Data Quest-IDC Survey, Volume XXIII, No. 1 January 15, 2005). Leveraging on our strong domain expertise, sound business practices and customer-centric focus, we have built significant global relationships with several multinational corporations and government entities and have successfully demonstrated the ability to manage large customer relationships. Our engagements are project specific contractual arrangements with continous inputs for maintenance and enhancements. Our senior executives continuously maintain and develop these relationships through multiple contacts at different levels in the customer organization. Our notable engagements in specific industry domains such as eGovernance, healthcare and aviation are expected to strengthen our Adaptive Enterprise Solutions, including the eThekwini engagement with the Durban Municipality of South Africa and the healthcare application service provider alliance with Triamun AG. With our sales and marketing team organized by industry service offerings and geography, we are able to effectively cross-sell services to our existing customer base as well as successfully obtain new business. Each office has its own business development, presales and implementation consultants and marketing personnel. In addition, several of our senior executives are based in customer geographies and focused on developing customer relationships. Our customers include large global corporations like Swatch Group, Switzerland; Kardex Remstar Group, Switzerland; Radisson, UK; Commerce Bank, USA; Revertex, Malaysia; HDB Corp., Singapore, and ICICI Bank, India.

2

The Issue The details of this Issue are as set out below: Equity Shares to be issued 3,070,757 Equity Shares

Rights Entitlement 1 (One) Equity Share for every 4 (Four) Equity Shares held on the Record Date

Record Date December 2, 2005

Issue Price per Equity Share Rs. 210

Equity Shares outstanding prior to the Issue 12,283,029 Equity Shares

Equity Shares outstanding after the Issue 15,353,786 Equity Shares

Terms of the Issue For more information, please refer to the section titled “Issue Information” beginning on page 219 of this Letter of Offer.

Objects of the Issue For more information, please refer to the section titled “Objects of the Issue” beginning on page 18 of this Letter of Offer.

3

Selected Financial Information Selected Unconsolidated Financial Information of Ramco Systems Limited The following tables set forth our selected historical unconsolidated financial information derived from our restated and audited unconsolidated financial statements for the six month period ended September 30, 2005 and the years ended March 31, 2005, 2004, 2003, 2002 and 2001, prepared in accordance with Indian GAAP, the Companies Act and SEBI DIP Guidelines and restated as described in the Auditors Report of CNGSN & Associates dated November 16, 2005 included in the section titled “Financial Statements” beginning on page 88 of this Letter of Offer, and this table should be read in conjunction with the financial statements mentioned therein and the notes thereto. Statement of Profits and Losses (As Restated)

Rs. in million

Year ended March 31,

Six Months ended

September 30, 2005

2005 2004 2003 2002 2001

Income Sales 651.25 1154.81 823.09 810.25 938.37 1202.34 Other Income 10.33 73.01 36.09 39.59 46.89 67.42 Total Income 661.58 1,227.82 859.18 849.84 985.26 1,269.76 Expenditure Cost of Resale Material 206.48 314.91 253.22 365.15 372.24 551.28 Employee Compensation & Benefits 326.17 543.13 341.56 351.51 350.84 313.51 Sales & Marketing Expenses 6.38 30.46 70.51 25.87 25.16 20.01 Administrative & Other Expenses 100.26 184.30 248.42 168.16 220.16 192.20 Interest & Finance Charges 60.97 113.81 119.51 68.92 52.90 20.97 Depreciation & Amortisation 88.91 169.83 158.63 143.42 51.58 159.72 Total Expenditure 789.17 1,356.44 1,191.85 1,123.03 1,072.88 1,257.69 Profit/(Loss) before Tax & Extraordinary Items (127.59) (128.62) (332.67) (273.19) (87.62) 12.07 Extraordinary Items - 274.98 - - - -

Profit/(Loss) before Tax (127.59) (403.60) (332.67) (273.19) (87.62) 12.07 Impact of material adjustment and prior period items

- -

(15.97) - - (0.59)

Provision for Taxation (3.80) - - - - (1.65) Profit/(Loss) after Tax (131.39) (403.60) (348.65) (273.19) (87.62) 9.83

4

Statement of Assets and Liabilities (As Restated)

Rs. in million As at March 31, As at

September 30, 2005

2005 2004 2003 2002 2001

A. Fixed Assets Gross Block 2,125.35 2,113.42 1,958.54 1,333.74 1,313.81 639.38 Less : Depreciation 693.61 605.62 479.52 378.84 305.23 255.29 Net Block 1,431.74 1,507.80 1,479.03 954.90 1,008.58 384.09 Capital Work in Progress 171.12 85.63 5.55 B. Investments 1,222.45 1,222.45 834.41 794.41 754.91 754.91 C. Current Assets, Loans and

advances

Inventories 22.97 27.46 23.64 43.70 37.79 76.76 Sundry Debtors 320.26 400.64 909.64 852.60 629.59 688.78 Cash and Bank Balances 299.63 83.09 125.05 99.43 135.81 457.20 Loans and Advances 114.23 107.11 568.85 200.12 186.08 228.75 Other Current Assets 11.44 14.21 18.24 14.18 2.67 6.96 768.53 632.50 1,645.43 1,210.03 991.94 1,458.45 D. Liabilities and Provisions Secured Loans 738.01 510.48 327.37 356.28 355.72 206.09 Unsecured Loans 1,057.05 1,027.50 880.55 620.55 60.00 111.49 Current Liabilities and Provisions 463.68 367.47 314.30 312.57 193.03 262.43 2,258.74 1,905.45 1,522.22 1,289.40 608.75 580.01 E. Net worth 1,335.11 1,457.30 2,522.27 1,669.94 2,146.68 2,022.99 F. Represented by 1. Share capital 123.18 122.84 115.97 77.68 77.68 77.68 2. Net Reserves 1,343.31 1,334.46 3,110.37 2,407.78 2,428.07 2,542.61 Less: Misc Expenses not written off 460.11 276.83 597.30 Less: Profit & Loss account 131.39 - 704.07 355.42 82.24 Net worth 1,335.11 1,457.30 2,522.27 1,669.94 2,146.68 2,022.99

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Selected Consolidated Financial Information of Ramco Systems Limited The following tables set forth our selected historical consolidated financial information derived from our restated and audited consolidated financial statements for the six months ended September 30, 2005 and the years ended March 31, 2005, 2004, 2003 and 2002, all prepared in accordance with Indian GAAP, the Companies Act and SEBI DIP Guidelines and restated as described in the Auditors Report of CNGSN & Associates dated November 16, 2005 included in the section titled “Financial Statements” beginning on page 88 of this Letter of Offer, and this table should be read in conjunction with the financial statements mentioned therein and the notes thereto. Statement of Profits and Losses (As Restated)

Rs. in million Year ended March 31,

Six months ended

September 30, 2005

2005 2004 2003 2002

Income:

Sales 1,238.10 2,205.14 1,709.25 1,560.57 1,733.57

Other Income 12.09 40.99 16.54 53.76 24.88

Total Income 1,250.18 2,246.14 1,725.79 1,614.33 1,758.45

Expenditure

Cost of Resale Material 228.89 375.56 241.25 383.72 416.83

Employee Compensation & Benefits 742.07 1,342.97 1,076.41 1,018.13 984.84

Sales & Marketing Expenses 60.61 136.66 119.79 80.74 60.72 Administrative & Other Expenses 232.92 422.24 464.57 446.37 401.87

Interest & Finance Charges 63.01 116.18 126.20 91.71 78.65

Depreciation & Amortisation 92.87 178.60 189.42 192.27 84.20

Total Expenditure 1,420.37 2,572.21 2,217.64 2,212.94 2,027.11

Profit/(Loss) before Tax and Extraordinary Items

(170.19) (326.07) (491.85) (598.61) (268.66)

Extraordinary Items - 349.92 - - -

Profit/(Loss) before Tax (170.19) (675.99) (491.85) (598.61) (268.66)

Impact of material adjustment and prior period items

- - (15.97) - -

Provision for Taxation (6.56) (6.30) (0.27) 0.01 (3.86)

Equity in Earnings/Losses of Associates - 3.03 0.13 - -

Profit/(Loss) after Tax (176.75) (679.26) (507.96) (598.60) (272.51)

6

Statement of Assets and Liabilities (As restated)

Rs. in million As at March 31,

As at

September 30, 2005 2005 2004 2003 2002

A. Fixed Assets Gross Block 3,232.47 3,219.21 2,070.03 1,418.58 1,394.60 Less : Depreciation 792.06 701.91 561.65 454.33 374.54 Net Block 2,440.41 2,517.30 1,508.38 964.25 1,020.06 CWIP 77.13 - 85.63 - - B. Investments 6.22 6.35 82.46 41.24 34.35 C. Current Assets, Loans and advances Inventories 22.97 27.46 27.59 43.70 37.79 Sundry Debtors 731.99 677.40 519.45 583.82 633.61 Cash and Bank Balances 403.03 276.42 247.33 163.95 192.36 Loans and Advances 133.14 124.74 98.70 90.82 128.51 Other Current Assets 17.09 26.78 49.77 27.72 8.97 1,308.23 1,132.80 942.85 910.00 1001.23 D. Liabilities and Provisions Secured Loans 803.88 565.02 382.20 714.48 791.23 Unsecured Loans 1,062.54 1,038.16 886.03 626.47 66.11 Current Liabilities and Provisions 619.21 537.95 414.88 427.86 297.90 2,485.62 2,141.12 1,683.11 1,768.81 1,155.24 E. Net worth 1,346.37 1,515.33 936.20 146.67 900.40 F. Represented by 1. Share capital 123.18 122.84 115.97 77.68 77.68 2. Reserves 1,374.23 1,390.03 3,228.23 2,454.68 2,449.24 Less : Misc Expenses not written off 0.07 0.12 64.00 548.28 387.72 Less : Profit & Loss account 150.98 - 2,344.00 1,837.40 1,238.80

3. Minority Interest - 2.59 - - - Net worth 1,346.37 1,515.33 936.20 146.67 900.40

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General Information Dear Shareholder(s), Pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on May 9, 2005 and the subsequent approval of the Rights Issue Committee 2005 on July 30, 2005 and November 16, 2005 it has been decided to make the following offer to the Equity Shareholders of the Company, with a right to renounce: ISSUE OF 3,070,757 EQUITY SHARES OF RS.10 EACH OF THE COMPANY AT A PREMIUM OF RS. 200 PER EQUITY SHARE, I.E. AN ISSUE PRICE OF RS. 210 PER EQUITY SHARE AND AGGREGATING RS. 644,858,970 ON RIGHTS BASIS TO EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 1 (ONE) EQUITY SHARE FOR EVERY 4 (FOUR) EQUITY SHARES HELD ON THE RECORD DATE, BEING DECEMBER 2, 2005 (“ISSUE”). THE ISSUE PRICE IS 21 (TWENTY ONE) TIMES THE FACE VALUE OF EACH EQUITY SHARE. Registered office Ramco Systems Limited 47, PSK Nagar, Rajapalayam 626 108 Tel: +91 4563 235688 Fax: +91 4563 236773 Email: [email protected] Corporate office Ramco Systems Limited No. 64, Sardar Patel Road, Taramani, Chennai 600 113 Tel: +91 44 2235 4510 Fax: +91 44 2235 2884 Web site: www.ramco.com Email: [email protected] Registrar of Companies Our Company, bearing Registration Number 18-37550, is registered with the Registrar of Companies, Tamil Nadu at Chennai, located at Block 6, Second Floor, Shastri Bhavan, 26, Haddows Road, Chennai 600 006. Board of Directors The Board of Directors of our Company currently comprises: 1. Mr. P.R. Ramasubrahmaneya Rajha, Chairman 2. Mr. P.R. Venketrama Raja, Vice Chairman and Managing Director 3. Mr. V. Jagadisan, Independent Director 4. Mr. S.S. Ramachandra Raja, Non Executive Director 5. Mr. N.K. Shrikantan Raja, Non Executive Director 6. Mr. M.M. Venkatachalam, Independent Director

For more details on our Directors, please refer to the section titled “Management” beginning on page 69 of this Letter of Offer. Company Secretary and Compliance Officer Mr. Subramanian Narayan Ramco Systems Limited No. 64, Sardar Patel Road, Taramani, Chennai 600 113 Tel: +91 44 2235 4510

8

Fax: +91 44 2235 2884 Email: [email protected] Legal Counsel for the Issue Amarchand & Mangaldas & Suresh A. Shroff & Co. 201, Midford House, Midford Garden, M.G.Road, Bangalore 560 001 Tel: +91 80 2558 4870 / 5112 4950 Fax: +91 80 2558 4266 Bankers to the Company UTI Bank Limited No. 82, Dr. Radhakrishnan Salai, Mylapore, Chennai 600 004 Tel : +91 44 2811 1088 Fax : +91 44 2811 1084 Contact Person : Mr. K. S. Ramasubramaniam Citibank N.A. No. 2, Club House Road, Chennai 600 002 Tel : +91 44 2846 1196 Fax : +91 44 2846 0610 Contact Person : Mr. K Srinivasan Lead Manager to the Issue Kotak Mahindra Capital Company Limited 3rd Floor, Bakhtawar 229 Nariman Point Mumbai 400 021 Tel: +91 22 5634 1100 Fax: +91 22 2282 6632 Email: [email protected] Website: www.kotak.com Registrar to the Issue Cameo Corporate Services Limited Subramanian Building, No. 1, Club House Road, Chennai 600 002. Tel : +91 44 2846 0390-5 Fax : +91 44 2846 0129 Email: [email protected] Website: www.cameoindia.com Contact Person : Mr. R. D. Ramasamy Bankers to the Issue UTI Bank Limited No. 82, Dr. Radhakrishnan Salai, Mylapore, Chennai 600 004 Tel : +91 44 2811 1088 Fax : +91 44 2811 1084 Contact Person : Mr. K. S. Ramasubramaniam

9

Statutory Auditors to the Company CNGSN & Associates Chartered Accountants “Agastya Manor” No. 20, Raja Street, T.Nagar, Chennai- 600 017 Tel : +91 44 2431 1480 Fax : +91 44 2431 1485 The selection of various agencies and intermediaries, including the registrar to the Issue, bankers to the Issue, bank collection centres, legal advisor to the Issue, advertising agencies, public relations agencies will be or have been finalised by the Company in consultation with the Lead Manager. Credit Rating This being an issue of Equity Shares, no credit rating is required. The details of the ratings received by the Company for other securities/ instruments in the last three years are as follows:

Borrowing Programs Amount Rs. Rating Agency Rating

Date of Rating Letter

Commercial Paper Programme

Rs. 100,000,000 ICRA Limited A1+ June 3, 2005

Short Term Non Convertible Debenture Programme Rs. 250,000,000 ICRA Limited A1+* June 9, 2004

* This rating factored an unconditional and irrevocable guarantee from Madras Cements Limited to meet

all obligations arising out of short-term debt programme. Note: ICRA Limited (formerly, Investment Information and Credit Rating Agency of India Limited) is an

independent and professional company providing investment information and credit rating services. “A” is the highest-credit-quality rating assigned by ICRA to short-term debt instruments. Instruments rated in this category carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1+ to reflect their relatively stronger credit quality.

10

Capital Structure Financial data presented in this Section is derived from our unconsolidated financial statements prepared in accordance with Indian GAAP. Share capital as at the date of filing of the Letter of Offer with SEBI and after the Issue is set forth below.

Nominal/ Aggregate

Value (Rs.) A. Authorised Capital 30,000,000 Equity Shares of Rs. 10 each 300,000,000

B. Issued and Subscribed Capital before the Issue 12,632,232 Equity Shares of Rs. 10 each 126,322,320

C. Paid-Up Capital before the Issue 12,283,029 Equity Shares of Rs.10 each 122,830,290

D. Present Issue being offered to the Equity Shareholders through the Letter of Offer 3,070,757 Equity Shares of Rs. 10 each at a premium of Rs.

200 per Equity Share, i.e. at an Issue Price of Rs. 210

30,707,570

E. Post Issue paid up Equity Share Capital 15,353,786 Equity Shares of Rs. 10 each 153,537,860

F. Share Premium Account Existing share premium account 1,343,315,974 Share premium account after the Issue 1,957,467,374

*The present Issue size is worked out in the ratio of 1 (One) Equity Share for every 4 (Four) Equity Shares held on the Record Date. Notes to the Capital Structure

1. Share Capital History of our Company:

Date of Allotment

No of equity shares

Face Value (Rs.)

Issue Price (Rs.)

Cumulative number of

equity shares

Consideration (Cash, bonus, consideration

other than cash)

Details of Allotment/ Forfeiture

Share Premium

(Rs.) March 10, 1997

700 10 10 700 Cash To the subscribers to the Memorandum of Association

0

March 25, 1999

27,500 10 10 28,200 Cash Allottment to Ramco Industries Limited

0

June 16, 1999

237,000 10 10 265,200 Cash Various allottees 0

June 23, 1999

1,100,000(a

) 10 10 1,365,200 Cash Allotment of

partly paid shares to RSL Employee Trust

0

August 4, 1999

4,200 10 10 1,369,400 Cash Various allottees 0

August 21, 1999

2,000 10 10 1,371,400 Cash Various allottees 0

January 12, 2000

2,376,719(b

) 10 303 3,748,119

Consideration other than cash

Allotment to Ramco Industries

Limited in relation to

investments acquired in

696,378,667

11

Date of Allotment

No of equity shares

Face Value (Rs.)

Issue Price (Rs.)


equity shares


other than cash)


Share Premium

(Rs.) overseas

Subsidiaries

January 12, 2000

(850,000) 10 10 2,898,119 Forfeiture Foreiture of shares by RSL

Employee Trust

0

March 9, 2000

4,333,153(c

) 10 10 7,231,272 Demerger of

Ramco Systems Limited from

Ramco Industries Limited

Issue of shares to the shareholders

of Ramco Industries

Limited pursuant to court

sanctioned demerger order.

0

March 27, 2000

502,000 10 3,480 7,733,272 Cash Private Placement (Re-issue of portion

of forfeited shares)

1,711,405,353

(Net of issue

expenses) April 28, 2003

3,550 10 254 7,736,822 Cash Exercise of options granted

under ESOP 2000

866,200

May 30,2003


under ESOP 2000

1,079,700

June 23, 2003

3,775 10 254 7,745,022

Cash Exercise of options granted

under ESOP 2000

921,100

January 3 2004

3872511 10 200 11,617,533 Cash Allotment of shares pursuant to rights issue

710,316,124 (Net of

rights issue

expenses) January 6, 2005

611,449 10 331 12,228,982 Cash Preferential Allotment to

Promoters/Promoter group

196,275,1

29

February 23, 2005

(1,228) 10 10 12,227,754 Forfeiture Forfeiture of partly paid shares issued pursuant to rights issue

116,660

March 28, 2005


under ESOP 2000

1,443,050

March 28, 2005


under ESOS 2003

3,767,500

April 15, 2005


under ESOP 2000

455,700

12

Date of Allotment

No of equity shares

Face Value (Rs.)

Issue Price (Rs.)


equity shares


other than cash)


Share Premium

(Rs.) April 15, 2005


under ESOS 2003

1,507,000

April 29, 2005


under ESOP 2000

651,000

April 29, 2005


under ESOS 2003

527,450

June 1, 2005 400 10 227 12,261,079 Cash Exercise of options granted

under ESOP 2000

86,800

June 1, 2005 4,775 10 284 12,265,854 Cash Exercise of options granted

under ESOS 2003

1,308,350

June 13, 2005


under ESOP 2000

651,000

June 13, 2005

550 10 284 12,269,404 Cash Exercise of options granted

under ESOS 2003

150,700

June 22, 2005

400 10 227 12,269,804 Cash Exercise of options granted

under ESOP 2000

86,800

June 22, 2005


under ESOS 2003

424,700

July 20, 2005


under ESOP 2000

726,950

July 20, 2005


under ESOS 2003

2,274,200

October 29, 2005

25 10 200 12,283,029 Cash Cancellation of forfeited partly

paid Equity Shares (forfeited on February 23,

2005)

2,375

Adjustments on March 31, 2005 as per Scheme of Arrangement

(1,987,873,214)

Total 12,283,029 1,343,315,974

13

(a) 1,100,000 partly paid Equity Shares were allotted to the RSL Employee Trust in relation to the Company’s Employee Share Purchase Plan. 850,000 shares were forfeited by the RSL Employee Trust, since it was unable to make full payment on the Equity Shares, pursuant to a call made by the Company on them. The Company reissued 502,000 of these forfeited Equity Shareson March 27, 2000 to certain FII’s and domestic mutual funds. SEBI in its letter dated April 18, 2000 addressed to the Madras Stock Exchange, while approving the listing of the 502,000 Equity Shares has specifically restricted the reissuance of the remaining 348,000 Equity Shares, which therefore remain forfeited and unissued. The partly paid amount of Rs. 1 per Equity Share paid-up earlier against such Equity Shares has been credited to the forfeited account and group under equity share capital. Expenses amounting to Rs. 30.10 million pertaining to reissue have been debited to the share premium account.

(b) 2,376,719 Equity Shares were allotted to Ramco Industries Limited at a premium of Rs. 293 per Equity

Share, as consideration for the transfer of its entire investment in its overseas Subsidiaries. The allotment was approved by our Shareholders at the EGM held on November 10, 1999 and subsequently by the RBI.

(c) 4,333,153 Equity Shares were allotted to the shareholders of Ramco Industries Limited pursuant to the sanction of the High Court of Judicature at Madras vide its Order dated December 24, 1999, approving the Scheme of Arrangement providing for demerger of the software business undertaking of Ramco Industries Limited to Ramco Systems Limited.

2. Details of the shareholding pattern before and after the Issue:

As on November 11, 2005 Post Issue Shareholding1

Shareholder Equity Shares

heldPercentage

holdingEquity Shares

heldPercentage

holding Promoters Indian Promoters Core Promoters (Refer to point No. 3 below)

6,873,212 55.95 8,591,515 55.95

Other Promoters 408,974 3.34 511,217 3.34 Foreign Promoters 405,528 3.30 506,910 3.30 Total Promoters holding 7,687,714 62.59 9,609,642 62.59 Non-promoters Mutual Funds and UTI 35,835 0.29 44,794 0.29 Banks Financial Institutions and Insurance Companies 306,894 2.50 383,618 2.50 Foreign Institutional Investors 636,775 5.18 795,969 5.18 Total Non Promoter holding 979,504 7.97 1,224,380 7.97 Private Corporate Bodies 1,002,747 8.16 1,253,434 8.16 Non-Resident Indians/ Overseas Corporate Bodies/ Others 42,780 0.35 53,475 0.35 Total Others Holding 1,045,527 8.51 1,306,909 8.51 General Public 2,570,284 20.93 3,212,855 20.93 TOTAL 12,283,029 100.00 15,353,786 100.00 1 Post-Issue shareholding is based on the assumption that all the Shareholders (including the Promoters) will subscribe to the full extent of their Rights Entitlement in this Issue.

3. Details of the Promoters shareholding as on November 11, 2005:

Promoters No of shares held Percentage holding Mr. P R Ramasubrahmaneya Rajha 281,875 2.29 Mr. P R Venketrama Raja 510,075 4.15 Madras Cements Limited 1,694,248 13.79 Rajapalayam Mills Limited 519,051 4.23 Ramco Industries Limited 3,857,772 31.41 The Ramaraju Surgical Cotton Mills Ltd 10,191 0.08 Total 6,873,212 55.95

14

4. The Promoters as stated in point 3 above, have confirmed that they intend to subscribe to the full extent

of their Rights Entitlement in the Issue. These Promoters reserve their right to subscribe to their entitlement in the Issue either by themselves, their relatives or a combination of entities controlled by them, including by subscribing for Equity Shares arising from renunciation, if any, made within the promoter group to another person forming part of the promoter group. In addition to their Rights Entitlement, Madras Cement Limited (MSL) and Ramco Industries Limited (RIL) shall apply for additional Equity Shares in the Issue in case of an undersubscription, such that at least 90% of the Issue is subscribed. As a result of this subscription and consequent allotment, MSL and RIL may acquire shares over and above their Rights Entitlement in the Issue, which may result in an increase of the shareholding being above the current shareholding with the entitlement of Equity Shares under the Issue. This subscription and acquisition of additional Equity Shares by MSL and RIL, if any, will not result in a change of control of the management of the Company and shall be exempt in terms of the proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than for meeting the requirements indicated in the section titled “Objects of the Issue” beginning on page 18 of this Letter of Offer, there is no other intention/purpose for this Issue, including any intention to delist the Company, even if, as a result of allotments to the Promoters in this Issue, the Promoters shareholding in the Company exceeds their current shareholding. Subscription by and allotment to the Promoters of any unsubscribed portion, over and above their Rights Entitlement in the Issue shall be in compliance with the provisions of the Listing Agreement and other applicable laws prevailing at that time, including in relation to continuous listing requirements.

Our Promoters have provided the following undertaking, in terms of the SEBI (Delisting of Securities) Guidelines, 2003:

“I/We hereby undertake that, if as a result of this Issue, the public shareholding in the Company after the Issue falls below the “permissible minimum level” as specified in the listing condition or listing agreement, I/we will either individually or jointly with the promoter group make an offer for sale of our holdings so that the public shareholding is raised to the “permissible minimum level” within a period of three months from the date of allotment in the proposed Issue, as per the requirements of Clause 17.1 and 17.2 of SEBI (Delisting of Securities) Guidelines, 2003 or as per any amendment thereto or any other period as may be directed by SEBI or any other appropriate authority.”

5. Details regarding top 10 shareholders as on specific dates:

a. The date of filing the Letter of Offer with SEBI As on November 11, 2005

Sl. No. Shareholder Equity Shares held

Percentage holding

1 Ramco Industries Limited 3,857,772 31.41 2 Madras Cements Limited 1,694,248 13.79 3 Platinum Asset Management Limited 468,812 3.81 4 Shri P.R. Venketrama Raja 510,075 4.15 5 Rajapalayam Mills Limited 519,051 4.23 6 United India Insurance Company 281,194 2.29 7 Mr. P R Ramasubrahmaneya Rajha 281,875 2.29 8 Ms. Nalina Ramalakshmi 187,225 1.52 9 Ms. Saradha Deepa 185,633 1.51 10 Mr. Jhunjhunwala Rakesh Radheshyam 135,175 1.10

Total 8,121,060 66.11

b. 10 days prior to the date of filing the Letter of Offer with SEBI As on November 4, 2005


Percentage holding

1 Ramco Industries Limited 3,857,772 31.41 2 Madras Cements Limited 1,694,248 13.79 3 Platinum Asset Management Limited 468,812 3.81 4 Shri P.R. Venketrama Raja 510,075 4.15 5 Rajapalayam Mills Limited 519,051 4.23 6 United India Insurance Company 281,194 2.29

15


Percentage holding

7 Mr. P R Ramasubrahmaneya Rajha 281,875 2.29 8 Ms. Nalina Ramalakshmi 187,225 1.52 9 Ms. Saradha Deepa 185,633 1.51 10 Mr. Jhunjhunwala Rakesh Radheshyam 135,175 1.10

Total 8,121,060 66.11

c. Two years prior to the date of filing the Letter of Offer with SEBI As on November 14, 2003


Percentage holding

1 Ramco Industries Limited 2,403,719 31.04 2 Madras Cements Limited 832,084 10.74 3 Rajapalaiyam Mills Ltd 346,034 4.47 4 United India Insurnace Company Ltd 282,860 3.65 5 Mr.P.R.Venketrama Raja 239,350 3.09 6 Mr.P.R.Ramasubrahmaneya Rajha 186,520 2.41 7 Mrs.Nalina Ramalakshmi 147,084 1.90 8 Ms. Sharada Deepa 146,584 1.89 9 Mr. Jhunjhunwala Rakesh Radheshyam 130,000 1.68 10. Ms. Rukmani Anni KT 84,374 1.09 Total 4,798,609 61.96

6. During the year 1999-2000, the Company established the employee Share Purchase Plan (ESPP) which

provided for the issuance of 11,00,000 shares to eligible employees (including certain employees of the subsidiaries). The share were issued to an employee welfare trust called the RSL Employee Trust (“Trust”) at Rs. 10/ each and Re. 1/- was paid –up by the Trust as application money. Subsequently, the Trust expresses its inability to pay the remaining money due on all the 11,00,000 shares and offered to pay the balance amount (i.e., Rs. 9/- per share) only in respect of Rs. 2,50,000 shares. Accordingly, 8,50,000 shares were forefeited. The balance 2,50,000 shares have been allotted to employees at par (i.e., Rs. 10/-each) as per their grade and number of years of services under an agreememt of sale, and the employees would need to be in the employment of the Company over a four year period to get the shares on a progressive basis. As on date, 67,300 number of shares remained with the trust and these shares represent the shares not been vested due to non-fuffillment of conditions of the scheme.

We have instituted three employee stock option schemes, being the ESOP 2000, ESOS 2003 and ESOS 2004, and one employee stock purchase scheme, being the ESPS 2004. Our Shareholders have approved ESOP 2000, ESOS 2003, ESOS 2004 and ESPS 2004 at the EGMs held on August 28, 2000, April 9, 2003, December 24, 2004 and December 24, 2004, respectively. Each of ESOP 2000, ESOS 2003, ESOS 2004 and ESPS 2004 is compliant with the provisions of the SEBI (Employee Stock Option Plan and Employee Stock Purchase Plan) Guidelines, 2000, as amended. ESOP 2000, ESOS 2003, ESOS 2004 and ESPS 2004 are administered by our Compensation Committee. As on August 10, 2005, there are 48,800 and 4,28,150 options outstanding against ESOP 2000 and ESOS 2003, respectively. As on the date of filing of this Letter of Offer, there are no options outstanding against ESOS 2004 and no Equity Shares have been allotted under ESPS 2004.

The details of the options granted and outstanding under ESOP 2000 and ESOS 2003, as of the date of this Letter of Offer have been detailed in the table below:

ESOP 2000 ESOS 2003 Sl. No Particulars First Grant Second Grant First Grant 1 Options Granted 126,150 67,700 464,500 2 Exercise price Rs. 254 each Rs. 227 each Rs.284 each 3 Options vested 126,150 236,80 171,675 4 Options exercised 11,750 18,900 36,350 5 Total number of Equity

Shares arising as a result of exercise of options

11,750 18,900 36,350

6 Options lapsed 114,400 Nil Nil 7 Variation of terms of options No change Change in No Change

16

exercise price from Rs. 254 to Rs. 227, due to rights issue in

2003 8 Money realized by exercise

of options 2,984,500 4,290,300

10,323,400

9 Total number of options in

force Nil 48,800

428,150

10 Person-wise details of

options granted to

(i) Key managerial employees

Nil 39,500 39,500

(ii) Any other employee who received a grant in any one year of options amounting to 5% or more of option granted during that year

Nil Nil Nil

(iii) Identified employees who are granted options, 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 Nil Nil

11 Diluted Earning Per Share (EPS) pursuant to issue of shares on exercise of options (for the unconsolidated financial statement of the Company)

NA NA NA

12 Vesting schedule April 12, 2001 to April 11, 2002

January 1, 2004 to December 31,

2004

January 1, 2004 to December 31,

2004 13 Lock-in Nil Nil Nil

7. Details regarding options granted to Directors and key managerial employees:

We have not granted any options to our Directors under ESOP 2000, ESOS 2003, ESOS 2004 or ESPS 2004. We have granted the following options under ESOP 2000 and ESOS 2003 to certain key managerial personnel:

Sl. No.

Name of key managerial personnel

Total number of options granted

Number of Equity Shares issuable upon exercise of options

1 Mr. Girish A Menon 12,500 12,500 2 Mr. K. Ramachandran 12,500 12,500 3 Mr. Kamesh Ramamoorthy 18,000 18,000 4 Mr. S. Parameswar 18,000 18,000 5 Mr. S. Parthasarathy 18,000 18,000 TOTAL 79,000 79,000

As on the date of this Letter of Offer, 16 employees hold 18,900 Equity Shares arising from exercise of their options under ESOP 2000. Further, 4,780 options have vested for certain key managerial personnel under ESOP 2000, but have not yet been exercised. . None of our Directors have been granted any options under ESOP 2000. As on the date of this Letter of Offer, 113 employees hold 36,350 Equity Shares arising from exercise of their options under ESOP 2003. Further, 1,35,325 options have vested for certain key managerial personnel under ESOP 2003, but have not yet been exercised. None of our Directors have been granted any options under ESOP 2000.

17

8. As on the date of this Letter of Offer, there are no outstanding warrants, options or rights to convert

debentures, loans or other instruments into Equity Shares, apart from the outstanding options granted under ESOP 2000 and ESOS 2003.

9. Except as disclosed herein, there would be no further issue of capital, including by way of issue of

bonus shares, preferential allotment, rights issue or exercise of employee stock options during the period commencing from the date of submission of this Letter of Offer with SEBI till the date the Equity Shares arising under this Issue are listed on the Stock Exchanges.

10. We presently do not intend or propose to alter our capital structure for six months from the date of

opening of the Issue, by way of split or consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or exchangeable, directly or indirectly for Equity Shares) whether preferential or otherwise, except that we may grant stock options or issue shares arising from the exercise of options granted to our employees pursuant to our ESOP 2000, ESOS 2003, ESOS 2004 and/or ESPS 2004 or, if we enter into acquisition(s) or joint venture(s) or induct strategic investors/ partners for furthering our business, wherein we may consider raising additional capital to fund such activity or use Equity Shares as currency for such transactions.

11. There shall be only one denomination of the Equity Shares, unless otherwise permitted by law. We shall

comply with such disclosure and accounting norms as may be specified by SEBI from time to time. 12. The Company has not raised any bridge loans against the proceeds of the Issue. 13. The Company has not revalued its assets since inception. 14. As on the date of this Letter of Offer, we have 6,263 Shareholders.

18

Objects of the Issue The objectives of the Issue are primarily to raise capital for our business and operations, including to (i) meet our working capital requirements in India and that of our Subsidiaries; (ii) fund the ongoing R&D efforts; (iii) to meet the marketing costs; (iv) meet the capital expenditure requirements and (v) to meet the issue related expenses. The proceeds of this Issue are to be utilised for the following activities:

Rs. in million Activity Amount required Working capital requirements 753.45 Research and development costs 180.46 Marketing costs 51.46 Capital expenditure 50.00 Issue expenses 20.00 Total 1,055.37

The main objects of our Memorandum of Association permits us to undertake our existing activities and the activities for which the funds are being raised by us, through the present Issue. Funds requirement The total estimated funds requirement for the aforesaid requirements is approximately Rs. 1,055.37 million. The means of financing the fund requirements is as follows:

Rs. in million Sl. No.

Particulars Funding required

1 Proceeds of this Issue 644.86 2 Term Loans/ Short Term Loans/ Working Capital Loans 410.51 Total 1,055.37

Means of finance We have obtained sanctions for certain loans in order to meet a portion of our funds requirement. The details of these loans are given below:

Rs. in million Sl. No. Manner of Funding Amount of funding

1. Term loan from Federal Bank 250 2. Short term loan from HDFC Bank Limited 100 Total 350

We have received a sanction letter dated June 30, 2005 from Federal Bank for a secured term loan of Rs. 250 million. We have drawn the entire amount and utilised the same to the extent of Rs. 60 million to meet our working capital requirements and the balance has been deposited in various bank accounts. We have also received a sanction letter dated April 28, 2005 from HDFC Bank for a short term loan of Rs. 100 million. However, no money has been drawn till November 16, 2005. We have made firm arrangements to meet the entire estimated fund requirements, excluding the Issue proceeds though Term Loans. In view of this, 80% of the estimated fund requirements, after excluding the Issue proceeds have been tied up in compliance with Clause 2.8 of the SEBI Guidelines. The balance 20% will be raised through fresh borrowings.

19

Funds Utilisation (i) Working capital requirements

The proceeds of this Issue will be used to meet our working capital requirements in India and that of our Subsidiaries, which arise primarily from expenses relating to payments to sundry creditors, employees, general and administration expenses and selling expenses. We expect our working capital requirements to significantly increase due to an increase in the volume of our business and a reduction in our current liabilities. In addition to the proceeds of this Issue, we plan to infuse long term funds to meet our working capital margin requirements.

Rs. in million

Particulars Requirement as of

March 31, 2005 Projected requirement

as of March 31, 2006 Current Assets Inventory 27.46 68.72 Receivables 1,329.87 1,631.64 Investment in Software WIP 0.00 20.00 Cash & Bank Balances 83.09 200.13 Loans & Advances / Other Current Assets 588.82 750.76 Total Current Assets 2,029.24 2,671.25 Current Liabilities Sundry Creditors & other Liabilities 439.13 327.69 Working Capital Gap 1,590.11 2.343.56 Changes in Working Capital Position - 753.45 Total Current Liabilities 2,029.24 3,424.7

The aforesaid estimates of working capital have not been assessed by any bank or financial institution and have only been estimated by us.

(ii) Research and development costs

As part of our business strategy, we propose to continue to enhancing and enriching our technology offerings by continuing to invest in R&D efforts, based on our perceptions of customer needs and the industry in which they operate. We expect our R&D efforts to benefit our business operations, target new customers and meet their requirements and to increase our intellectual property. Towards this end, we propose to incur the following R&D costs:

Rs. in million Particulars Amount Personnel Cost 129.41 Travel 4.44 Administrative expenses 1.61 Capital Expenditure on R&D 45.00 Total 180.46

(iii) Marketing costs

We are making efforts to increase our market reach and customer acceptability in various jurisdictions, particularly in US, Europe, Middle East and Asia Pacific. We are focusing on advertising, public relations and other marketing efforts, including increasing the size of our sales and marketing teams. In order to meet these incremental costs, we propose to deploy a certain portion of the proceeds of the Issue towards the following marketing costs:

Rs. in million Particulars Amount Public Relations 15.23 Telemarketing 4.83 Trade Shows/Sales Conference 7.22 Advertisements and sales promotion 24.18 Total 51.46

20

(iv) Capital Expenditure

As part of our normal business and other operations, including expenditure towards our hardware and software requirements, we incur capital expenditure on a regular basis. We estimate our capital expenditure requirements for fiscal 2006 is Rs. 50.00 million, comprising of Rs. 25 million towards software, Rs. 20 million hardware expenditure and Rs. 5 million towards other fixed assets.

(v) Issue Expenses:

The total expenses of the Issue are estimated to be approximately Rs. 20.0 million. The expenses of this Issue include, among others, fees and expenses payable to the Lead Manager, Registrar to the Issue, Legal Counsel to the Issue, Auditor, printing and stationary expenses and other expenses. All expenses with respect to the Issue would be borne by the Company. The net proceeds of the Issue would be used to meet all or any of the uses of the funds described above.

Expenses of the Issue The estimated Issue expenses are as under:

Sl. No. Expenses incurred

Percentage of total Issue expenses

Percentage of total Issue size

1. Lead Manager, Legal Counsel and Auditors 65.00% 2.02% 2. Registrar to the Issue and Others (Printing, stamp

duty, listing fees, depository fees and other related expenses)

35.00% 1.09%

Total 100.00% 3.11% Interim use of proceeds: The management, in accordance with the policies set up by the Board, will have the flexibility in deploying the proceeds received by us from the Issue. Pending utilization for the purposes described above, we intend to temporarily invest the funds in high quality, interest/dividend bearing liquid instruments including money market mutual funds, deposits with banks for the necessary duration. Such investments would be in accordance with investment policies approved by the Board from time to time. We also intend to apply part of the net proceeds of the Issue, pending utilisation for the purposes described above, to temporarily reduce our working capital borrowings from banks and financial institutions. No part of the Issue proceeds will be paid by us as consideration to Promoters, Directors, key management personnel, Subsidiaries, Affiliates or Promoter group companies. Monitoring of utilization of funds: There is no requirement for a monitoring agency in terms of Clause 8.17 of the SEBI DIP Guidelines. The Audit Committee appointed by the Board of Directors will monitor the utilization of the Issue proceeds.

21

Basis for Issue Price Investors should read the following summary alongwith the sections titled “Risk Factors” and “Financial Statements” beginning on pages vi and 88 of this Letter of Offer, respectively and other details about the Company, its Subsidiaries and Affiliate included in this Letter of Offer. Qualitative Factors Provide customised solutions. We aim to provide customised offerings that meet our customer’s expectations, taking into account that each of our customers business is different and that standard practices must be enhanced to meet specific industry needs. We are able to provide enterprise software and solutions that can deliver larger, complex, web based enterprise class solutions on any technology platform. Focus on R&D, expansion and innovation. Our emphasis on research and development has enabled us to devise our own process technologies and expand our service capabilities. We believe that continued focus on research and development will enable us to further develop new software and solutions and novel applications for existing products, possibly enter into new lines of business and broaden our intellectual property base. Products and services that meet international standards. Our processes and methodologies are important elements of our mature global delivery model, which allows us to deliver high quality and cost-effective IT services from multiple locations in a reduced timeframe. Large customer base. We have built significant relationships with several multinational corporations and government entities in the global arena, by demonstrating our ability to manage large customer relationships. We are able to effectively respond to the demands of our customers by leveraging our industry experience with our high quality processes, project management capabilities and breadth of technical expertise in various customer geographies. Experienced senior management. Our senior management team consists of experienced professionals with diverse skills and considerable experience in the ERP business, including in software, research and development, custom research, international business and finance. Quantitative Factors Information presented in this section is derived from our unconsolidated restated financial statements, prepared in accordance with Indian GAAP. 1. Earning Per Share (EPS) (as adjusted for changes in capital)

Rupees Weight Year ended March 31, 2003 (35.33) 1 Year ended March 31, 2004 (40.19) 2 Year ended March 31, 2005 (10.94) 3 Weighted Average (24.76)

Notes:

(1) The earning per share has been computed on the basis of adjusted profits and losses for the

respective years/ periods after considering the impact of accounting policy changes, prior period adjustments/ regroupings pertaining to earlier years before extraordinary items (net of taxes) as per the Auditors’ Report.

(2) The face value of each Equity Share is Rs. 10

2. Price/Earning (P/E) ratio in relation to the Issue Price of Rs. 210

a. Based on year ended March 31, 2005, EPS is Rs. (10.94)

b. P/E based on twelve months ended March 31, 2005: Not applicable as the EPS on March 31, 2005 is negative.

c. P/E based on weighed average EPS: Not applicable as the weighted average EPS is negative.

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d. Industry P/E(1)

i) Highest 243.20 ii) Lowest 1.0 iii) Industry Composite 22.90 (1) Source: Capital Market Vol. XX/17 dated October 24 – November 6, 2005 Category:

Computers – Software – Medium/ Small

3. Return on Average Net Worth:

Year RONW % Weight Year ended March 31, 2003 (16.36) 1 Year ended March 31, 2004 (13.82) 2 Year ended March 31, 2005 (8.83) 3 Weighted Average (11.75)

Note: The earning per share has been computed on the basis of adjusted profits and losses for the respective years/ periods after considering the impact of accounting policy changes, prior period adjustments/ regroupings pertaining to earlier years and before extraordinary items (net of taxes) as per the Auditors’ Report.

4. Minimum Return on Increased Net Worth required to maintain pre-issue EPS: Not relevant as the pre-issue EPS is negative.

5. Net Asset Value

Net Asset Value per Equity Share represents shareholders’ equity less miscellaneous expenses as divided by weighted average number of Equity Shares. Net Asset Value per Equity Share as at March 31, 2005 is Rs. 123.92. The Net Asset Value per Equity Share after the Issue is Rs. 141.74 Issue Price per Equity Share: Rs. 210

6. Comparison of Accounting Ratios – Based on the current market capitalization and the nature of

services that they provide, the comparison of accounting ratios for the closest comparable listed competitors in India is given below.

Comparable listed Indian company

Face Value per share (Rs.) Basic EPS (Rs.) P/E

RONW (%)

Book Value/ Share (Rs.)

IGate Global Solutions 4 4.1 39.5 4.1 116.1 Mphasis BFL 10 5.4 38.2 10.9 70.8 3i Infotech 10 1.2 30.2 13.3 52.8 Industry Composite 22.90

Source: Capital Martket Vol. XX/17 dated Oct 24 –Nov6, 2005 Category: Computers – Software – Medium/ Small

7. The face value of each Equity Share is Rs. 10 per Equity Share and the Issue Price of Rs. 210 per Equity

Share is 21 (twenty one) times of the face value. 8. Information as required by Government of India, Ministry of Finance, circular No. F2/5/SE/76 dated

February 5, 1977 as amended vide their Circular of even number dated 8, 1977 is given below: As theIssue will open in December 2005, the requirement as per the above circular for inclusion of working results for last but one month from the date of Letter of Offer will be upto September 30, 2005. We have included the restated audited financial statements for the six months ended September 30, 2005. Please refer to the section titled “Financial Statements” on page 88 of this Letter of Offer.

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Statement of Possible Tax Benefits available to Ramco Systems Limited and its Shareholders Auditor’s Report We hereby report that the enclosed annexure states the possible income-tax benefits available to the Company and its shareholders under the current tax laws in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives the Company faces in the future, the Company may or may not choose to fulfil. The benefits discussed below are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue. We do not express any opinion or provide any assurance as to whether: • the Company or its shareholders will continue to obtain these benefits in future; or • the conditions prescribed for availing the benefits have been / would be met with. The contents of this annexure are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company. For CNGSN & Associates Chartered Accountants Per CN Gangadaran Partner Membership No.: 011205 Chennai Date: August 11, 2005

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ANNEXURE XIII - STATEMENT OF POSSIBLE BENEFITS AVAILABLE TO THE COMPANY AND ITS SHAREHOLDERS A. Benefits available to the Company under the Income-tax Act, 1961 (‘Act’)

1. Deduction under Section 80HHE of the Act

As per the provisions of Section 80HHE of the Act, an Indian company engaged in the business of : • export out of India of computer software or its transmission from India, to a place outside India by

any means; or • providing technical services outside India in connection with the development or production of

computer software can claim a deduction under this section to the extent of the profits derived by the assessee from such business. For this purpose the profits derived from the business shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. The deduction under this Section is gradually being phased out and no deduction can be claimed by the Company after Assessment Year 2005-06.

2. Deduction under Section 10A of the Act: Under the provisions of Section 10A of the Act, a company which is engaged in the business of export of articles or things or computer software and which satisfies the prescribed conditions is eligible to claim a benefit with respect to profits derived by its undertaking/s from the export of articles or things or computer software for a period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking/s begin to manufacture or produce such articles or things or computer software. The eligible deduction would be the amount which bears to the profits of the undertaking/s the same proportion as the export turnover of the undertaking/s bears to the total turnover of the undertaking/s. Profits on domestic turnover would get taxed. The benefit is available subject to fulfillment of conditions prescribed by the Section and no benefit under this Section shall be allowed to any assessee with respect to any such undertaking for the assessment year beginning on the 1st day of April 2010 and subsequent years.

3. Exemption In Respect Of Unit’s Income And Dividend

As per the provisions of Section 10(33), any income arising from the transfer of a capital asset, being a unit of the Unit scheme, 1964 referred to in Schedule I to the Unit Trust of India (Transfer of undertaking and Repeal) Act 2002 and where the transfer of such asset takes place on or after the 1st day of April 2002 is exempt from tax in the hands of the Company. Dividends (whether interim or final) declared, distributed or paid by a domestic company for any assessment year commencing on or after April 1, 2003 are exempt in the hands of the Company, in its capacity as shareholder, as per the provisions of Section 10(34) of the Act, if the same is subject to dividend distribution tax under section 115O of the Act.

4. Computation of capital gains

Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding. Under section 48 of the Act, if the investments in shares are sold after being held for not less than twelve months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long-term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed cost of acquisition. As per the provisions of Section 112(1)(b) of the Act, long term capital gains as computed above would be subject to tax at a rate of 20 percent (plus applicable surcharge). However, as per the proviso to Section 112(1) of the Act, if the tax payable in respect of long term capital gains resulting on transfer of listed securities or units or zero coupon bonds, calculated at the rate of 20 percent with indexation benefit exceeds the tax payable on gains computed at the rate of 10 percent without indexation benefit,

25

then such gains are chargeable to tax at the rate of 10 percent without indexation benefit (plus applicable surcharge). Gains arising on transfer of short term capital assets are currently chargeable to tax at 35 percent (plus applicable surcharge). However, as per section 111A of the Act, short term capital gain arising from transfer of an equity shares in a company listed on a recognized stock exchange or a unit of an equity oriented fund would be taxable at 10 percent (plus applicable surcharge), in cases where securities transaction tax has been paid as per Chapter VII of the Finance (No.2) Act, 2004.

5. Exemption of long- term capital gains from income tax

As per the provisions of Section 10(38) of the Act, long term capital gain arising from transfer of an equity share in a company or unit of an equity oriented fund is exempt from income-tax in cases where securities transaction tax has been paid as per Chapter VII of the Finance (No.2) Act, 2004. • Long term capital gain arising from transfer of an ‘eligible equity share’ in a company

purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more are exempt from tax under section 10(36) of the Act. ‘Eligible equity share’ means: o any equity share in a company being a constituent of BSE-500 Index of Bombay

Stock Exchange Limited as on March 1, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognized stock exchange in India; or

o any equity share in a company allotted through a public issue on or after March 1, 2003 and listed on a recognized stock exchange in India before March 1, 2004 and the transaction of sale of such equity share is entered into on a recognized stock exchange in India.

• As per the provisions of Section 54EC of the Act and subject to the conditions specified

therein, capital gains arising to the Company on transfer of a long term capital asset shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. However, if the Company transfers or converts the notified bonds into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money

• As per the provisions of Section 54ED of the Act and subject to the conditions specified

therein, capital gains arising from transfer of long term capital assets, being listed securities or units of a mutual fund specified under section 10(23D) of the Act or the UTI shall not be chargeable to tax to the extent such gains are invested in acquiring equity shares forming part of an “eligible issue of capital” within six months from the date of transfer of the said long term capital assets. Eligible issue of capital has been defined as an issue of equity shares which satisfies the following conditions –

o the issue is made by a public company formed and registered in India; and

o the shares forming part of the issue are offered for subscription to the public.

6. Expenditure on Scientific Research

In accordance with and subject to the provisions of Section 35(2AB), the Company would be entitled to deduction in respect of expenditure incurred on Scientific Research (not being expenditure in the nature of cost of any land or building) related to the business, to the extent of one and one half times of the expenditure so incurred.

7. In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004,

transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder, shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase and sale of equity share in a company through the recognized stock exchange is liable to securities transaction tax @ 0.075% of the value payable by both buyer and seller (0.1% with effect from 1 June, 2005 as per the Finance Act, 2005). The non-delivery based sale transactions are liable to tax @ 0.015%

26

of the value payable by the seller (0.02% with effect from 1 June, 2005 as per the Finance Act, 2005).

B. Benefits available to I. Resident shareholders 1. Income of a minor exempt up to certain limit

Under Section 10(32) of the Act, any income of minor children clubbed in the total income of the parent under Section 64(1A) of the Act will be exempt from tax to the extent of Rs. 1,500 per minor child.

2. Dividends exempt under Section 10(34)

Dividends (whether interim or final) declared, distributed or paid by the Company for any assessment year commencing on or after April 1, 2003 are exempt in the hands of shareholders as per the provisions of Section 10(34) of the Act, if the same is subject to dividend distribution tax under section 115O of the Act.


Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding. Under section 48 of the Act, if the investments in shares are sold after being held for not less than twelve months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long-term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed cost of acquisition. As per the provisions of Section 112(1) of the Act, long term capital gains as computed above would be subject to tax at a rate of 20 percent (plus applicable surcharge). However, as per the proviso to Section 112(1) of the Act, if the tax payable in respect of long term capital gains resulting on transfer of listed securities or units or zero coupon bonds, calculated at the rate of 20 percent with indexation benefit exceeds the tax payable on gains computed at the rate of 10 percent without indexation benefit, then such gains are chargeable to tax at the rate of 10 percent without indexation benefit (plus applicable surcharge). Gains arising on transfer of short term capital assets are currently chargeable to tax at 30% percent (plus applicable surcharge). However, as per section 111A of the Act, short term capital gain arising from transfer of an equity shares in a company listed on a recognized stock exchange or a unit of an equity oriented fund would be taxable at 10 percent (plus applicable surcharge), in cases where securities transaction tax has been paid as per Chapter VII of the Finance (No.2) Act, 2004.


As per the provisions of Section 10(38) of the Act, long term capital gain arising from transfer of an equity share in a company or unit of an equity oriented fund is exempt from income-tax in cases where securities transaction tax has been paid as per Chapter VII of the Finance (No.2) Act, 2004.

• Long term capital gain arising from transfer of an ‘eligible equity share’ in a company

purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more are exempt from tax under section 10(36) of the Act. ‘Eligible equity share’ means:

o any equity share in a company being a constituent of BSE-500 Index of Bombay

Stock Exchange Limited as on 1 March 2003 and the transactions of purchase and sale of such equity share are entered into on a recognized stock exchange in India; or

o any equity share in a company allotted through a public issue on or after 1 March

2003 and listed on a recognized stock exchange in India before 1 March 2004 and the transaction of sale of such equity share is entered into on a recognized stock exchange in India.

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• As per the provisions of Section 54EC of the Act and subject to the conditions specified therein, capital gains arising to the shareholder on transfer of a long term capital asset shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. However, if the shareholder transfers or converts the notified bonds into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.


therein, capital gains arising from transfer of long term capital assets, being listed securities or units of a mutual fund specified under section 10(23D) of the Act or the UTI shall not be chargeable to tax to the extent such gains are invested in acquiring equity shares forming part of an “eligible issue of capital” within six months from the date of transfer of the said long term capital assets. Eligible issue of capital has been defined as an issue of equity shares which satisfies the following conditions o the issue is made by a public company formed and registered in India; and o the shares forming part of the issue are offered for subscription to the public.

• Under section 54F of the Act, long-term capital gains (in cases not covered under section 10(38)

of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will be exempt from capital gain tax subject to certain conditions, if the net consideration from such shares are used for purchase of residential house property within a period of one year before and two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer.

• In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004, transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder, shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase and sale of equity share in a company through the recognized stock exchange is liable to securities transaction tax @ 0.075% of the value payable by both buyer and seller (0.1% with effect from 1 June, 2005 as per the Finance Act 2005). The non-delivery based sale transactions are liable to tax @ 0.015% of the value payable by the seller (0.02% with effect from 1 June, 2005 as per the Finance Act 2005).

• In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in

respect of the taxable securities transactions entered into in the course of his business would be eligible for rebate from the amount of income-tax on the income chargeable under the head “Profit and gains of business or profession” arising from taxable securities transactions. As such, no deduction in respect of amount paid on account of securities transaction tax will be allowed in computing the income chargeable to tax as capital gains

II. Benefits available to Non-Resident Indian shareholders 1. Income of a minor exempt up to certain limit

Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income of the parent under Section 64(1A) of the IT Act will be exempt from tax to the extent of Rs. 1,500 per minor child.

2. Dividends exempt under Section 10(34)



Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding.

28

Under section 48 of the Act, if the investments in shares are sold after being held for not less than twelve months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long-term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed cost of acquisition.

Gains arising on transfer of short term capital assets are currently chargeable to tax at 30% percent (plus applicable surcharge). However, as per section 111A of the Act, short term capital gain arising from transfer of an equity shares in a company listed on a recognized stock exchange or a unit of an equity oriented fund would be taxable at 10 percent (plus applicable surcharge), in cases where securities transaction tax has been paid as per Chapter VII of the Finance (No.2) Act, 2004.

4. Capital gains tax - Options available under the Act (A) Where shares have been subscribed in convertible foreign exchange - Option available under

Chapter XII-A of the Act Under section 115-I of the Act, the non-resident Indian shareholder has an option to be governed by the provisions of Chapter XIIA of the Income Tax Act, 1961 viz. “Special Provisions Relating to Certain Incomes of Non-Residents” which are as follows: - • As per the provisions of Section 115D read with Section 115E of the Act and subject

to the conditions specified therein, long term capital gains arising on transfer of an Indian company’s shares, will be subject to tax at the rate of 10 percent (plus applicable surcharge), without indexation benefit.

• Under provisions of section 115F of the Act, long-term capital gains (in cases not

covered under section 10(38) of the Act) arising to a non-resident Indian from the transfer of shares of the company subscribed to in convertible Foreign Exchange shall be exempt from Income tax, if the net consideration is reinvested in specified assets within six months of the date of transfer. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted into money within three years from the date of their acquisition.

• As per the provisions of Section 115G of the Act, Non-Resident Indians are not

obliged to file a return of income under Section 139(1) of the Act, if their only source of income is income from investments or long term capital gains or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVII-B of the Act.

• Under Section 115H of the Act, where the Non-Resident Indian becomes assessable as

a resident in India, he may furnish a declaration in writing to the Assessing Officer, along with his return of income for that year under Section 139 of the Act to the effect that the provisions of the Chapter XII-A shall continue to apply to him in relation to such investment income derived from the specified assets for that year and subsequent assessment years until such assets are converted into money.

• As per the provisions of Section 115I of the Act, a Non-Resident Indian may elect not

to be governed by the provisions of Chapter XII-A for any assessment year by furnishing his return of income for that assessment year under Section 139 of the Act, declaring therein that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the Act.

(B) Where the shares have been subscribed in Indian Rupees

Under section 48 of the Act, if the investments in shares are sold after being held for not less than twelve months, the gains (in cases not covered under section 10(38) of the Act), if any, will be treated as long-term capital gains and the gains shall be calculated by deducting from the gross consideration, the indexed cost of acquisition.

29

Under Section 112 of the Act and other relevant provisions of the Act, long-term capital gains (i.e. if shares are held for a period exceeding 12 months) (in cases not covered under section 10(38) of the Act), arising on transfer of shares in the company, shall be taxed at a rate of 20% (plus applicable surcharge & cess) after indexation as provided in the second proviso to section 48. The amount of such tax should however, be limited to 10% (plus applicable surcharge & cess) without indexation, at the option of the shareholder, if the transfer is made after listing of shares.


• As per the provisions of Section 10(38) of the Act, long term capital gain arising from transfer of an equity share in a company or unit of an equity oriented fund is exempt from income-tax in cases where securities transaction tax has been paid as per Chapter VII of the Finance (No.2) Act, 2004.

• Long term capital gain arising from transfer of an ‘eligible equity share’ in a company

purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more are exempt from tax under section 10(36) of the Act. ‘Eligible equity share’ means:


Stock Exchange Limited as on March 1, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognized stock exchange in India; or

o any equity share in a company allotted through a public issue on or after

March 1, 2003 and listed on a recognized stock exchange in India before March 1, 2004 and the transaction of sale of such equity share is entered into on a recognized stock exchange in India.


therein, capital gains arising to the Company on transfer of a long term capital asset shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. However, if the Company transfers or converts the notified bonds into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.


therein, capital gains arising from transfer of long term assets, being listed securities or units of a mutual fund specified under section 10(23D) of the Act or the UTI shall not be chargeable to tax to the extent such gains are invested in acquiring equity shares forming part of an “eligible issue of capital” within six months from the date of transfer of the said long term capital assets. Eligible issue of capital has been defined as an issue of equity shares which satisfies the following conditions –

o the issue is made by a public company formed and registered in India; and

o The shares forming part of the issue are offered for subscription to the public.

• Under section 54F of the Act, long-term capital gains (in cases not covered under section

10(38) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will be exempt from capital gain tax subject to certain conditions, if the net consideration from such shares are used for purchase of residential house property within a period of one year before and two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer.

• In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in respect of the taxable securities transactions entered into in the course of his business would be eligible for rebate from the amount of income-tax on the income chargeable under the head “Profit and gains of business or profession” arising from taxable securities transactions. As

30

such, no deduction will be allowed in computing the income chargeable to tax as capital gains, such amount paid on account of securities transaction tax.

• In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act, 2004, transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder, shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase and sale of equity share in a company through the recognized stock exchange is liable to securities transaction tax @ 0.075% of the value payable by both buyer and seller (0.1% with effect from 1 June, 2005 as per the Finance Act 2005). The non-delivery based sale transactions are liable to tax @ 0.015% of the value payable by the seller (0.02% with effect from 1 June, 2005 as per the Finance Act 2005)

6. Provisions of the Act vis-à-vis provisions of the tax treaty

As per Section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the relevant tax treaty to the extent they are more beneficial to the non-resident.

III. Benefits available to other Non-Residents 1. Income of a minor exempt up to certain limit

Under section 10(32) of the Act, any income of minor children clubbed in the total income of the parent under section 64(1A) of the Act will be exempt from tax to the extent of Rs 1,500 per minor child.

2. Dividends exempt under section 10(34) of the Act



Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding. As per the provisions of Section 112(1)(c) of the Act, long term capital gains as computed above would be subject to tax at a rate of 20 percent (plus applicable surcharge). However, as per the proviso to Section 112(1) of the Act, if the tax payable in respect of long term capital gains resulting on transfer of listed securities or units, calculated at the rate of 20 percent with indexation benefit exceeds the tax payable on gains computed at the rate of 10 percent without indexation benefit, then such gains are chargeable to tax at the rate of 10 percent without indexation benefit (plus applicable surcharge). o Gains arising on transfer of short term capital assets are currently chargeable to tax at 35

percent (plus applicable surcharge). However, as per section 111A of the Act, short term capital gain arising from transfer of an equity shares in a company listed on a recognized stock exchange or a unit of an equity oriented fund would be taxable at 10 percent (plus applicable surcharge), in cases where securities transaction tax has been paid as per Chapter VII of the Finance (No.2) Act, 2004.

4. Exemption of capital gains from income tax


• Long term capital gain arising from transfer of an ‘eligible equity share’ in a company,

purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more, are exempt from tax under section 10(36) of the Act. ‘Eligible equity share’ means:

31

o any equity share in a company being a constituent of BSE-500 Index of Bombay Stock Exchange Limited as on March 1, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India; or

o any equity share in a company allotted through a public issue on or after

March 1, 2003 and listed on a recognised stock exchange in India before March 1, 2004 and the transaction of sale of such equity share is entered into on a recognised stock exchange in India.

• As per the provisions of Section 54EC of the Act and subject to the conditions specified therein, capital gains arising to the Company on transfer of a long term capital asset shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. However, if the Company transfers or converts the notified bonds into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.

• As per the provisions of section 54ED of the Act and subject to the conditions specified

therein, capital gains arising from transfer of long term assets, being listed securities or units of a mutual fund specified under section 10(23D) of the Act or of the UTI shall not be chargeable to tax to the extent such gains are invested in acquiring equity shares forming part of an “eligible issue of share capital” within six months from the date of transfer of the said long term capital assets. Eligible issue of share capital has been defined as an issue of equity shares which satisfies the following conditions - o the issue is made by a public company formed and registered in India; and

o the shares forming part of the issue are offered for subscription to the public.

• Under section 54F of the Act, long-term capital gains (in cases not covered under section

10(38) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will be exempt from capital gain tax subject to certain conditions, if the net consideration from such shares are used for purchase of residential house property within a period of one year before and two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer.

5. Provisions of the Act vis-à-vis provisions of the treaty

As per section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the relevant tax treaty to the extent they are more beneficial to the non-resident.

IV. Benefits available to Foreign Institutional Investors (“FIIs”) 1. Taxability of capital gains

• As per the provisions of section 115AD of the Act, FIIs will be taxed on the capital gains income at the following rates:

Nature of income Rate of tax Long term capital gains 10 percent Short term capital gains 30 percent / 10 percent1

The above tax rates would be increased by the applicable surcharge. The benefits of indexation and foreign currency fluctuation protection as provided by section 48 of the Act are not available to FIIs.

• As per section 90(2) of the Act, the provisions of the Act would prevail over the provisions of

the tax treaty to the extent they are more beneficial to the non-resident.

1 Reduced rate of 10 percent if the transaction of sale is entered into on or after the date on which Chapter VII of the Finance (No.2) Act, 2004 comes into force; and such transaction is chargeable to securities transaction tax under that Chapter.

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2. Exemption of capital gain from income tax


• Long term capital gain arising from transfer of an ‘eligible equity share’ in a company,

purchased during the period March 1, 2003 to February 29, 2004 (both days inclusive) and held for a period of 12 months or more, are exempt from tax under section 10(36) of the Act. ‘Eligible equity share’ means:


Stock Exchange Limited as on March 1, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India; or

o any equity share in a company allotted through a public issue on or after March 1, 2003 and listed on a recognised stock exchange in India before March 1, 2004 and the transaction of sale of such equity share is entered into on a recognised stock exchange in India.


therein, capital gains arising to the Company on transfer of a long term capital asset shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months from the date of transfer. However, if the Company transfers or converts the notified bonds into money within a period of three years from the date of its acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money.

• As per the provisions of section 54ED of the Act and subject to the conditions specified

therein, capital gains arising from transfer of long term assets, being listed securities or units of a mutual fund specified under section 10(23D) of the Act or of the UTI shall not be chargeable to tax to the extent such gains are invested in acquiring equity shares forming part of an “eligible issue of share capital” within six months from the date of transfer of the said long term capital assets. Eligible issue of share capital has been defined as an issue of equity shares which satisfies the following conditions -

o the issue is made by a public company formed and registered in India; and o the shares forming part of the issue are offered for subscription to the public.

• Dividends (whether interim or final) declared, distributed or paid by the Company for any

assessment year commencing on or after April 1, 2003 are exempt in the hands of shareholders as per the provisions of Section 10(34) of the Act, if the same is subject to dividend distribution tax under section 115O of the Act.

• In terms of Securities Transaction Tax as enacted by Chapter VII of the Finance (No.2) Act,

2004, transactions for purchase and sale of the securities in the recognized stock exchange by the shareholder, shall be chargeable to securities transaction tax. As per the said provisions, any delivery based purchase and sale of equity share in a company through the recognized stock exchange is liable to securities transaction tax @ 0.075% of the value payable by both buyer and seller (0.1% with effect from 1 June, 2005 as per the Finance Act 2005). The non-delivery based sale transactions are liable to tax @ 0.015% of the value payable by the seller (0.02% with effect from 1 June, 2005 as per the Finance Act 2005)

• In terms of section 88E of the Act, the securities transaction tax paid by the shareholder in

respect of the taxable securities transactions entered into in the course of his business would be eligible for rebate from the amount of income-tax on the income chargeable under the head “Profit and gains of business or profession” arising from taxable securities transactions. As

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such, no deduction will be allowed in computing the income chargeable to tax as capital gains, such amount paid on account of securities transaction tax.

V. Benefits available to Mutual Funds

As per the provisions of section 10(23D) of the Act, any income of Mutual Funds registered under the Securities and Exchange Board of India Act, 1992 or Regulations made thereunder, Mutual Funds set up by public sector banks or public financial institutions and Mutual Funds authorized by the Reserve Bank of India would be exempt from income tax, subject to such conditions as may be prescribed in this behalf.

VI. Benefits available to Venture Capital Companies / Funds

As per section 10(23FB) of the Act, all Venture capital companies/funds registered with Securities and Exchange Board of India, subject to the conditions specified, are eligible for exemption from income tax on all their income, including dividend from and income from sale of shares of the company.

VII. Benefits available to the Members of the Company under Wealth Tax Act, 1957

Shares of the Company held by the shareholder will not be treated as an asset within the meaning of Section 2(ea) of Wealth Tax Act, 1957 and hence in this respect, Wealth Tax Act will not be applicable.

VIII. Benefits to shareholders of the Company under the Gift Tax Act, 1958.

Gift made after 1st October 1998 is not liable for any gift tax, and hence, gift of shares of the company would not be liable for any gift tax.

C. Benefits available to the Company under Indirect tax Laws

The Company has one unit registered under the Software Technology Parks (‘STP’) Scheme. The key benefits that could be available under indirect tax laws to a STP unit, subject to satisfaction of the specified conditions, are as under: Customs duty on Specified goods, which are in the nature of capital goods, office equipment, components etc., procured by a STP unit are exempt from customs duty. All goods, other than prohibited goods under the EXIM Policy are exempt from customs duty and Excise duty. Specified goods such as capital goods, office equipment and consumables etc procured from local manufacturers are exempt from excise duty. All goods procured from local manufacturers are exempt from excise duty. Further, in order to avail the above benefits, the unit will be required to meet prescribed export obligations. Sales tax Concessions under the State Sales Tax legislations (depending upon the relevant State where the unit is set-up) and under the Central Sales Tax Act could also be available in respect of goods procured by a STP unit. Further, export sales made by the Company would qualify as ‘exempted sale’ for the purpose of Sales Tax Concessions under the State Sales Tax legislations (depending upon the relevant State where the unit is set-up). The Company would be eligible for exemption available to a consulting engineer from service tax on services rendered in relation to computer software. Further, no service tax will be leviable on the taxable services if the proceeds are received in convertible foreign exchange in India and the same are not repatriated outside India.

Notes: • All the above benefits are as per the current tax law as amended by the Finance Act, 2005 • The stated benefits will be available only to the sole / first named holder in case the shares are

held by joint holders. • In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be

further subject to any benefits available under the Double Taxation Avoidance Agreements, if any, between India and the country in which the non-resident has fiscal domicile.

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• In view of the individual nature of tax consequences, each investor is advised to consult his / her own tax advisor with respect to specific tax consequence of his / her participation in the scheme.

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Promise versus Performance We previously made a rights issue of Equity Shares to our Equity Shareholders in 2003. The issue comprised 3,872,511 Equity Shares at a premium of Rs. 190 each in the ratio of one equity share for every two share held, aggregating Rs. 774.50 million.

Issue opened on November 12, 2003 Issue closed on December 12, 2003 Date of completion of dispatch of share certificates

Resident Indians: January 6, 2004 Non-Resident Indians – Immediately after receipt of approval from RBI.

Object of the issue (a) to meet the working capital requirements of the Company including long term margin requirements and loans/advances to subsidiaries; (b) fund the ongoing research and development; (c) meet the marketing/market development costs; (d) capital expenditure of the issue; and (e) meet the expenses of the issue.

There were no financial projections made in our last rights issue letter of offer. As against the estimated total fund requirement of Rs. 1,123.00 million, the actual utilization as certified by our statutory auditor in our audit financial statement for the year ended March 31, 2005 was Rs. 1,080.68 million.

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SECTION IV: ABOUT THE ISSUER COMPANY Industry Overview Enterprise Resource Planning Enterprise Resource Planning (ERP) is an industry term for the broad set of activities supported by multi-module application software that helps a manufacturer or other businesses manage the important parts of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also include application modules for the finance and human resources aspects of a business. Typically, an ERP system uses or is integrated with a relational database system. The deployment of an ERP system can involve considerable business process analysis, employee retraining, and new work procedures. Global And Indian IT Industry The ERP market is a part of the fast growing Indian Information Technology (IT) and Information Technology Enables Services (ITES) industry in India. The Indian IT and ITES industry has recorded a 34.5 per cent growth in exports, clocking revenues of $17.2 billion in FY 2004-05, as compared with export revenues of $12.8 billion in 2003-04. NASSCOM has projected that the Indian IT and ITES exports are likely to grow by 30-32 per cent in FY 05-06, clocking revenues of $22.5 billion. (Source: Forecast: Global Industries, Worldwide, 2002-2007 (Executive Summary), Gartner Research, August 4, 2004) The worldwide business spending on IT by vertical markets estimated for the period 2003-2008 is as follows:

Traditionally, India's software exports have primarily comprised custom application development and application outsourcing - with India accounting for 15 percent share in the global market for these services in 2004. Over the last few years, several Indian companies have also expanded their service export to include packaged software implementation, systems integration, network infrastructure management and IT consulting. ERP software is viewed as an increasingly significant sector of the software industry in India. The Indian market for ERP was estimated at US$ 60 million in FY 2003-04, and is expected to cross 100 million in FY 2005-06. Some of the Indian software players in the ERP software market are 3i Infotech Limited, I-flex Solutions Limited, Infosys Technologies Limited, Polaris Software Services Limited and Tata Consultancy Services. Forecasts and trends for the ERP industry After two straight years of decline, the Asia Pacific ERP software market turned the corner in 2003 with a 5 percent growth and is expected to grow steadily to reach USD 531.4 million in 2008. The overall ERP market is

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expected to book a compound annual growth rate (CAGR) of 9 percent from 2003 through 2008, reaching USD 531.4 million by 2008. (Source: Market Share and Forecast: ERP, Asia/Pacific, 2001-2008 (Executive Summary), Gartner Research, June 2, 2004) From 2004 through 2009, the worldwide market for ERP applications is forecast to grow at a CAGR of 6.3 percent. During this period, Europe (Western Europe, Central and Eastern Europe combined) and Japan will have lower-than-average annual growth rates. Regions that are forecast to grow faster than the worldwide growth rate include Asia/Pacific, which was forecast to grow at 8.3 percent, and Latin America, which was forecast to grow at 8.6 percent (see chart below). (Source: Forecast: ERP Software, Worldwide, 2004-2009, Preliminary (Executive Summary) Gartner Research, May 6, 2005) New License revenue Annual Growth by Region/Country, 2003-2009

Industry Trends

The financial management system (FMS) and manufacturing segments are the largest constituents of ERP software market in Asia-Pacific, a trend that is expected to continue during the next five years. (Source: Market Share and Forecast: ERP, Asia/Pacific, 2001-2008 (Executive Summary), Gartner Research, June 2, 2004) Enterprise Asset Management (EAM) - The market for EAM is perceived to offer great financial value and encourage rapid user adoption. But, to date, it has remained only a steady and predictable segment within ERP that has focused on asset-intensive industries and is overshadowed by other segments and technology trends. EAM is forecast to grow at a more normalized pattern from 2005 through 2009, resulting in a five-year CAGR of 5.6 percent. (Source: Forecast: ERP Software, Worldwide, 2004-2009, Preliminary (Executive Summary) Gartner Research, May 6, 2005)

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Financial Management Systems (FMS) - Driven by an increasing focus on corporate governance and transparency, which was fueled by compliance legislation, such as Sarbanes-Oxley Act of 2002 and the International Accounting Standards finance applications led ERP growth during 2004. Growth within the segment is currently forecast to level out in 2006 as a majority of organizations will have completed purchases, with total new license revenue exceeding $3 billion in 2009. (Source: Forecast: ERP Software, Worldwide, 2004-2009, Preliminary (Executive Summary) Gartner Research, May 6, 2005) Human capital management (HCM)- HCM has historically preformed well and is forecast to outperform other ERP application segments through 2009. Growth of HCM applications leverages the trend of becoming increasingly vertical, especially as usage of HCM capabilities moves beyond the organization and to employees and managers throughout the business. This trend leads to growth opportunities to sell tailored applications to buyers outside the HR organization. It is currently forecast that the HCM segment will experience a five-year CAGR of 7.5 percent. (Source: Forecast: ERP Software, Worldwide, 2004-2009, Preliminary (Executive Summary) Gartner Research, May 6, 2005) Manufacturing – The manufacturing segment has yet to fully recover, though it did generate healthy growth during 2004. Growth in this sector came from increased buying in regions and the midmarket, which represents divisions or “spokes” to larger entities, or “hubs”. The five year growth projections for license revenue is 6.3%. (Source: Forecast: ERP Software, Worldwide, 2004-2009, Preliminary (Executive Summary) Gartner Research, May 6, 2005)

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Business I. Overview

We are a part of the Rs. 15 billion Ramco Group, a diversified industrial conglomerate. We commenced operations as a software business division of Ramco Industries in 1989. We incorporated Ramco Systems Limited as a public limited company in 1997. Pursuant to a scheme of arrangement sanctioned by the High Court of Judicature, at Madras on December 24, 1999, the software undertaking of Ramco Industries Limited was demerged and transferred to us with effect from April 1, 1999 (the Demerger Scheme). We have wholly owned subsidiaries in Switzerland, Malaysia, Singapore, South Africa and India and associates in Switzerland and South Africa. We also have a 98% owned subsidiary in the US. We are a global provider of Enterprise Solutions and Services in key industries such as manufacturing, aviation, logistics, banking and financial services. We offer rich functionality, cost effective seamless integration and fully web-integrated services, which helps our customers close the gap between business objectives and IT capabilities. Our focus domains are (i) Enterprise Solutions; (ii) Virtual Shoring Solutions and (iii) Secure Converged Networking (iv) CRM implementation and other IT Services. We have delivered our Enterprise Solutions and Services to over 1,000 customer installations across 40 countries serving over 100,000 users. We offer high quality and cost effective services to our customers through our mature delivery processes, scalable infrastructure and skilled global resource base. Our ability to develop adaptive solutions is powered by our recently developed technology platform, Ramco VirtualWorks. VirtualWorks is a virtual software factory, which helps us deliver large, complex, web-based enterprise solutions on a technology platform of the customer’s choice. VirtualWorks is an innovative technology platform, which transforms business processes into quality software applications in a considerably shorter time frame. It is an adaptive software platform, which facilitates easy modifications to align the software application with the changing business processes. VirtualWorks provides partners and customers with the following business benefits: • Flexible, powerful solutions; • Advanced change management capabilities; • Faster time to benefit; • Better quality; • Optimal costs for the life cycle of ownership. Our proven processes and methodologies are important elements of our mature global delivery model. They help us in delivering high quality and cost-effective IT products and services from multiple locations in a timely, consistent and accurate manner, maintain a high level of customer satisfaction and to focus on improvements in all aspects of delivery. The processes and methodologies that we use at our delivery centers in India conform to ISO 9001 standards. We have been currently assessed at SEI CMM Level 5. Dataquest in their Customer Satisfaction Audit in the Enterprise Application segment has ranked us as number one. (Source: Data Quest-IDC Survey, Volume XXIII, No. 1 January 15, 2005). Leveraging on our strong domain expertise, sound business practices and customer-centric focus, we have built significant global relationships with several multinational corporations and government entities and have successfully demonstrated the ability to manage large customer relationships. Our engagements are project specific contractual arrangements with continous inputs for maintenance and enhancements. Our senior executives continuously maintain and develop these relationships through multiple contacts at different levels in the customer organization. Our notable engagements in specific industry domains such as eGovernance, healthcare and aviation are expected to strengthen our Adaptive Enterprise Solutions, including the eThekwini engagement with the Durban Municipality of South Africa and the healthcare application service provider alliance with Triamun AG. With our sales and marketing team organized by industry service offerings and geography, we are able to effectively cross-sell services to our existing customer base as well as successfully obtain new business. Each office has its own business development, presales and implementation consultants and marketing personnel. In addition, several of our senior executives are based in customer geographies and focused on developing customer relationships. By adopting a careful global growth strategy, we have built a satisfied customer base over the past decade. Our customers include large global corporations like Swatch Group, Switzerland; Kardex Remstar Group, Switzerland; Radisson, UK;

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Commerce Bank, USA; Revertex, Malaysia; HDB Corp., Singapore, and ICICI Bank, India. II. Competitive Strengths

Provide customised solutions. We aim to provide customised offerings that meet our customer’s expectations, taking into account that each of our customers business is different and that standard practices must be enhanced to meet specific industry needs. We are able to provide enterprise software and solutions that can deliver larger, complex, web based enterprise class solutions on any technology platform. VirtualWorks developed ground up by us is a process-to-application creation and delivery platform that confers strong advantages in the entire software development life cycle. Our offerings can be tailored to suit unique individual business requirements. Focus on R&D, expansion and innovation. Our emphasis on research and development has enabled us to devise our own process technologies and expand our service capabilities. We believe that continued focus on research and development will enable us to further develop new software and solutions and novel applications for existing products, possibly enter into new lines of business and broaden our intellectual property base. As on June 30, 2005 we have filed 16 non-provisional patent applications in India, US and Europe. As on March 31, 2005, we have spent Rs. 1,824 million (including Rs. 436.6 million spent by the erstwhile software undeertaking of Ramco Industries Ltd, before demerger) million on research and development investments. Products and services that meet international standards. Our processes and methodologies are important elements of our mature global delivery model, which allows us to deliver high quality and cost-effective IT services from multiple locations in a reduced timeframe. The processes and methodologies that we use at our delivery centres in India conform to ISO 9001 standards. We have been currently assessed at SEI CMM Level 5. Large customer base. We have built significant relationships with several multinational corporations and government entities in the global arena, by demonstrating our ability to manage large customer relationships. We are able to effectively respond to the demands of our customers by leveraging our industry experience with our high quality processes, project management capabilities and breadth of technical expertise in various customer geographies. Our senior executives and dedicated account managers continuously maintain and develop these relationships through multiple contacts at different levels in the customer organisation. Experienced senior management. Our senior management team consists of experienced professionals with diverse skills and considerable experience in the ERP business, including in software, research and development, custom research, international business and finance.

III. Our Strategy

Increase reach and penetration through focus on market initiatives. To ensure better revenues, we propose to focus on our ability to effectively market our products and services, especially to top tier customers. We plan to expand our customer base by constructively utilizing our extensive network of Subsidiaries, Associates and branches located in nine countries. We intend to exploit the power of our technology by increasing the reach, in terms of geographical spread and penetration and in terms of sales volumes of our products and services. We propose to strengthen our marketing through streamlining of marketing activities, setting up of infrastructure and processes and augmenting of sales and marketing personnel. This coupled with appropriate branding and positioning of our offerings, will help us penetrate global markets and establish leaderships in the enterprise solutions space. Growth through partnerships. Our success is dependent on an ecosystem of process consultants, business domain consultants and partners. We are actively pursuing various types of partnerships, including (i) strategic partnerships, to jointly address a particular vertical or geography with value addition by both parties, (ii) business partnerships, for sales co-operation, (iii) implementation partnerships, for jointly implementing the solution and (iv) complementing solution partners in relation to other products to provide a better solution to the customer. We have currently entered into partnerships with industry leaders like Siebel, Nortel and others to draw on their domain strength and market presence. Maintain and expand offerings base. We are committed to developing our competencies in the enterprise solutions and services space and build offerings to address various customers requirements

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through various strategic partnerships. We are looking to extend our basket of solutions and services to our existing customers and will continue to assist them in enhancing their performance and profitability. Invest in research and development. We shall continue to lay emphasis on research and development to develop new products and provide innovative services. By investing in R&D we seek to ensure faster development and delivery of assembled solutions, increase in value for customers and partners, effective management of engagements involving partners, better quality of solutions and increase in productivity. Our continued investment in research and development will enable us to negotiate change with agility. Brand building: We propose to invest significantly in the development of our brand name in the global market place. We have put in place an integrated marketing plan to enhance visibility and help close large deals with strategic customers. Our efforts are focused primarily on sponsored corporate events, seminars, webinars, analyst briefings, advertising and other relevant activities. Effective utilization of resources: We aim to improve our productivity and efficiency of our operations through effective utilisation of our resources located in India and overseas. Ramco VirtualWorks allows us to manage and control projects with greater efficiency

IV. Description of our Business A. Enterprise wide offerings

We are a global provider of Enterprise Solutions and Services in key industries such as manufacturing, aviation, logistics, banking and financial services. Our focus domains are (i) Enterprise Solutions; (ii) Virtual Shoring Solutions and (iii) Secure Converged Networking and IT Services. Our Enterprise Solutions segment comprises Adaptive Enterprise Solutions and Enterprise Products and Services. Adaptive Enterprise Solutions primarily consists of solutions developed on our recently developed proprietary platform, Ramco VirtualWorks® (VirtualWorks). VirtualWorks enables the rapid assembly of personalised solutions (with a mix of pre-assembled business functions and processes) to meet the customer’s specific needs and to enable them to achieve their best and unique business practices. Our suite of offerings using VirtualWorks, titled Ramco Enterprise Series have been developed on this platform using our domain expertise in various industry verticals, with a focus on manufacturing, aviation, banking, financial sector and insurance, human resources, logistics, e-governance and healthcare. In relation to Enterprise Products and Services, we offer separate products like (a) Ramco e.Applications™ (e.Applications), ready to use business solutions for small and mid size enterprises in several industry verticals, especially manufacturing, aviation, human resources, corporate solutions (including logistics) and enterprise asset management, deploying (b) Ramco DecisionWorks™ (DecisionWorks), an easy to use Corporate Performance Management (CPM) solution to help managers take timely and informed decisions, and (c) Ramco Optima ™ (Optima), which offers tangible benefits in process stability, productivity, quality and efficiency, using. Since 2004, we have begun marketing Virtual Shoring Solutions using the VirtualWorks technology platform, wherein the license to use VirtualWorks is granted to the customer for a fixed cost. Depending on the needs of the customer, we can customize these solutions. Any further sub-licensing by such customer upon development of a successful business model would generate additional usage fee payments for us. Additionally, we also provide training facilities and services to instruct employees of such customers to effectively develop solutions using the VirtualWorks platform at the customer site. Apart from our enterprise solutions business, we also offer Secure Converged Networking and Information Technology (SCNIT) Services. Our SCNIT services cater to the requirements of Customer Resource Management (CRM), Business Intelligence and Data Warehousing (BI&DW), Networking and Information Security. We offer a range of converged solutions for deployment in our customer’s Local Area Network (LAN) and Wide Area Network (WAN). Our Information Security professionals help our customers implement information security solutions by benchmarking with industry best practices and adopting a risk assessment based approach. Using our expertise in enterprise solutions, CRM, networking and

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information security, we can design, supply, deploy and maintain contact center technology infrastructure. We offer CRM process modelling and consulting services based on our understanding of products and customer requirements over different industry domains. We have a strong and ongoing relationship with Siebel Systems Inc. (Siebel) since 2000 for Siebel implementation, support and maintenance. We are also well equipped to provide BI&DW solutions in the IT Services space.

B. Details of our specific offerings I. Enterprise Solutions a. Adaptive Enterprise Solutions

Our Adaptive Enterprise Solutions primarily consists of the Ramco Enterprise Series, a suite of world-class software solutions serving large businesses, which are configurable to match the unique industry and business processes of our customers. Our solution delivery platform for the Ramco Enterprise Series is VirtualWorks. VirtualWorks enables the rapid assembly of personalised solutions (with a mix of pre-assembled business functions and processes) to meet the customer’s specific needs and to enable them to achieve their best business practices. VirtualWorks offers the following features to its customers:

i. A business process based approach radically different from the traditional, data-centric approach

found in product-based and custom solution development.

ii. Integrated software delivery process that defines the scope of your project and the requirements for your application.

iii. Code generators that create the application using the various models created as part of the delivery

process.

iv. Application preview facility to visualize your applications and get user acceptance before they are assembled.

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v. Architecture developed in a technology-neutral environment, and proven on Jave 2 Enterprise Edition (J2EE) and .NET platforms. Customers can combine their third-party or legacy systems with business process components from VirtualWorks to fill the gaps in their existing applications portfolio

The solutions offered derive the strengths of vertical domain competencies and geographic reach through strategic alliances. Developing an application using VirtualWorks The conventional Software Development Life Cycle (SDLC) involves the following phases: Requirement specification; High Level Design; Low Level Design; Coding; Unit Testing; System Testing; Acceptance Testing; Deployment; Maintenance & Enhancement. The above phases have been abstracted into four phases in development using Ramco Virtualworks namely: Solutioning; Engineering; Roll Out & change On Demand. Contrary to conventional SDLC, development using Ramco VirtualWorks involves event driven process chains, which are captured in the form of a model (described in terms of processes, functions, activities, user interfaces and tasks). This data is then translated into a software application using code generators. By using VirtualWorks, we are able to provide the same model irrespective of the technology platform on which they operate, i.e. provide technology agnostic solutions. Customers are able to visualise the application before its development, and measure the impact of any change suggested Some key differentiators in the VirtualWorks methodology as against the conventional software development process are given below:

Conventional software development process VirtualWorks methodology Requirement Specification & High Level Design

Solutioning

Voluminous documentation Auto generated documentation Non-reusable prototype Auto generated user interface from the model Specifications in IT terminology Functional specifications by business user Upfront technology decisions inter alia on platform, network, hardware, system software

No technology decisions during solutioning stage

Low Level Design, Coding, Unit Testing, System Testing

Engineering

Development from scratch Reusable model with presentation and gateway layer with major portion of the application being auto-generated

Does not support distributed development Designed for distributed development; 100% internet architected

Technology related compatibility issues Technology agnostic High occurrence of defects due to manual programming

Auto-generated code for multiple technologies with only business logic to be coded in stored procedures

Development for Enterprise Application Integration (EAI)

Platform inherently provides web services (EAI built in)

Acceptance Testing, Deployment Roll-out Not designed for distributed development Deployment across physical locations and

technology platforms; truly distributed Effort involved for training and implementation is high

100% internet architected; less expensive offshore resources

Maintenance / Enhancement Change-on-demand Manual impact analysis Automated impact analysis on the model Obsolescence of application due to shifts in technology trends; becoming ‘legacy’

Model is always current; application can be generated in any future platform of choice

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Using VirtualWorks, we can create highly configurable, scalable, extendable, multi-tier applications rich in functionality and which can change on demand. We have extensive experience in developing and supporting e-business applications using various technology platforms.

Our application development process is backed by our ‘right-shore’ methodology, where we help our customers select a model best suited for them, which could be either an onsite or onshore-offsite or offshore model. We have considerable experience in developing enterprise applications, backed by our strong technical and functional domain knowledge, to reduce the total cost of ownership to our customers. Our production support involves usage of help desks for supporting the production environment. We enter into service level agreements with our customers for both our application maintenance and production support. The typical implementation methodology of VirtualWorks for a customer is diagrammatically represented below:

Industry specific offerings We have used VirtualWorks to the advantage of our customers worldwide in several major industries, including manufacturing, aviation, banking, financial sector and insurance, human resources, corporate solutions (including logistics), e-governance, healthcare and enterprise asset management. Our top customers in relation to Adaptive Enterprise Solutions in each of the verticals are (i) Manufacturing - Preferred Meal, USA; Kardex Ag, Switzerland; Swatch Group, Switzerland; (ii) Healthcare – Triamun AG, Switzerland. (iii) Aviation - ConAir, Canada; (iv) BFSI – Commerce Bank, USA; ICICI Bank, India; (v) HRMS - Government of Andhra Pradesh, India; (vi) Logistics - Kaiser, Switzerland; and (vi) e-Governance – eThekwini Municipality, South Africa. Some of the industry verticals in which we offer considerable value addition to our customers and the details of our offerings in such verticals are given below:

(i) Manufacturing

We provide solutions for the process manufacturing and discrete manufacturing verticals in this segment. Process Manufacturing is designed for the specific needs of the process production industry. Discrete manufacturing is built to address the manufacturing, planning and control

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needs of distinct manufacturing industries. Our solutions allow users to define processes in a flexible manner, in order to adapt to current or changed manufacturing management practices. This solution meets the unique requirements of multi-site multi-plant process companies in the batch (Chemicals, Food & Beverages, Metals, Textiles) and continuous process (Cement, Refineries) industry segments. It has core capabilities like manufacturing resource planning (MRP), capacity requirements planning (CRP), scheduling, plant operations and integration with other applications. The solutions enables multi-location manufacturing, with the ability to allocate demand, check and transfer stocks across locations, facilitating both centralised aggregate planning (with detailed planning at each location) and decentralised planning (where location planners execute all planning tasks). The benefits of this solution include:

• Enterprise wide flow of production related information • Reduces inventory and eliminates wastage, enabling cost-efficient operations • Planning & execution of manufacturing processes to meet customer delivery dates

Case Study A leading dairy products processing company in USA required an integrated solution to efficiently manage the operations of its companies. We implemented a farm-to-store solution encompassing process production, receivable management, accounts payables, order entry, shipping, purchasing, inventory and truck logistics. This solution has improved tracking, monitoring and execution of customer orders through the supply chain.

(ii) Healthcare

We provide customized solutions encompassing patient management, physician management, pharmacy management, claims submission, remittance advice and payment, claims inquiry, enrollment transactions, eligibility transactions and materials management. Case Study Triamun AG is a leading medical distributor in Switzerland, which sought to host an integrated ERP software for physicians and pharmacy on a subscription basis. We implemented a solution encompassing Finance, Inventory, VAT, Sales and Purchase and Insurance. The solution received the "Gold Award" in the category of "Most Innovative Software" presented at CeBIT 2003, Hanover by the ASP Consortium.

(iii) Aviation

The challenges facing the aviation industry are streamlining process intensive activities and optimising operational and maintenance economics. Our aviation industry solution has been developed ground up for the airline, MRO (Maintenance, Repair & Overhaul) and helicopter organizations. Our solution provides the following benefits to our customers: • Decreased operating costs • Improved inventory management due to reduced holding costs • Increased employee productivity • Reduced maintenance costs through effective planning • Accurate tracking of components & costs

Case Study A leading helicopter services company in USA, required an enterprise solution encompassing Engineering, Flight Operations, Reliability, Hangar Maintenance, Shop Maintenance, Warranty Administration, Inventory, Procurement and Electronic Flight Bag. After implementation of this solution, they requested us to implement an analytical solution with performance

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benchmarks to analyse/monitor various performance objectives and goals. We implemented DecisionWorks, our Corporate Performance Management solution in this regard. The Company has benefited from our solutions with improved operational efficiency, streamlined business processes, effective asset utilization and component yield, besides reduced maintenance and inventory overheads.

(iv) Banking, Financial Services And Insurance (BFSI)

We provide BFSI solutions covering back office applications (Accounting, Receivables Management, eProcurement), Lending solutions, Payment solutions, Risk Management applications and Complementing Financial applications. We possess domain expertise in Treasury applications, trade finance, systems audit, relationship management, money market operations etc. We also provide secure inter-location financial applications. Case Study Commerce Bank, a leading regional bankin the USA focusing on Insurance Services and Commercial Market operations engaged us for a loan origination solution. We have provided them with a blueprint of an automated solutions for their complete lending process (from sale to booking). We are now engineering the solution for the small and medium business loan origination. This would simplify their document intensive process and optimize their dependencies on factors such as staff expertise, external sources of information (like background credit checks) and regulatory requirements.

(v) Human Resources Management (HRM)

Our HRM solution is architected to handle shared human resource services and meet all statutory requirements. It is a completely web based solution handling the employee lifecycle in its entirety. It comprises personnel, payroll, benefits, training and web-enabled solutions for employees and applicants. The solution helps plan, organise, service and manage the human resources in order to propel the organisation through change. Case Study A leading bank in the United Arab Emirates providing retail and corporate banking services wanted an integrated HRM solution to improve productivity and reduce paperwork. We implemented a centralized HR and Payroll system which can handle quicker payroll processing, greater data-level security, reduce HR administrative time through employee-self service, and HR analytics.

(vi) Logistics This solution addresses the material requirement planning needs of enterprises. It comprises specialised applications, covering functions necessary for direct and indirect material procurement, sub-contracting, inventory planning and control, stores management and physical stock verification. Our solution facilitates requisitioning, ordering, receiving and warehousing across various geographies.

The benefits of this solution include:

• High supply chain visibility and control • Tight integration of inbound and outbound logistics • Accuracy from forecasting to order fulfilment

Case Study A leading integrated logistics provider in India engaged us to implement a fully integrated customized solution for courier logistics that supports intrinsic business processes encompassing Operations, Customer Service and Sales and integrates with its proprietary systems and third party applications. Our solution has facilitated efficient handling of multi-mode and multi-leg shipments and improved transparency in customer order tracking and resource utilization.

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(vii) e-Governance

We offer customized enterprise solutions for Government and public service entities with pre-assembled business functions. Our solutions facilitate e-governance and public administration with a focus on functions such as finance and administration, social services, health care, public safety, criminal justice, transportation and public works. For more information, also refer to the section titled “Business-Virtual Shoring Solution” on page 48 of this Letter of Offer. The benefits of this solution include: • Providing complete geographical access to various government departments. • Addressing the various needs of stakeholders such as citizens, businesses, employees

and administrators. • Supports virtual learning where users have the ability to collaborate between

themselves.

b. Enterprise Products and Services Our offerings in the Enterprise Products and Services include Ramco e.Applications, DecisionWorks and Optima.

(i) Ramco e.Applications

We launched Ramco Marshall, an ERP suite in 1993. Several updates and versions have been released by us therafter. Version 3.1 of Marshall was renamed in 1999 as Ramco e. Applications. Ramco e. Applications is a client server based ERP suite that offers comprehensive customer specific enterprise solutions in verticals like Enterprise Asset Management, Discrete Manufacturing, Process Manufacturing, Human Resources Management and Corporate Solutions. These solutions are built around 35 core business applications, which can be combined with function and industry specific add-ons to deliver either generic enterprise solutions or focused industry and organisation specific solutions. These applications are enabled for the internet, e-commerce and Electronic Data Interchange (EDI).

Case Study A leading manufacturer of adhesive chemicals for the food, personal care, household and pharmaceutical industries wanted to replace its legacy application with a solution that would help improve its business performance. We implemented the Process Production suite comprising Production, Financials, Human Resources, Inventory and Quality, which has helped improve their yield, cash flow, accounting and provided greater control of operations.

(ii) Ramco DecisionWorks

Corporate Performance Management (CPM) provides an essential model for successfully managing an organisation. CPM describes the methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise. DecisionWorks is a smart and easy to use, web architected CPM solution for performance management, planning, monitoring, analysing and reporting on an organisation’s critical business processes. The componentised architecture of DecisionWorks facilitates managers to phase the implementation of CPM in their organization. DecisionWorks is a powerful tool to automate management initiatives in certain areas, including Strategic Performance Management, Business Intelligence, Business Analytics (Planning and Forecasting), Business Process Management (in light of business value and repetition level of the processes), Business Activity Monitoring and Application Data Migration. Additional analysis in the form of planning models, ‘what-if’ scenarios and optimisation is also possible.

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DecisionWorks can integrate with all major ERP, CRM and SCM systems through its utility tool Business Integrator that can collate data from all Open DataBase Connectivity (ODBC) compliant sources and other data sources such as Extensible Markup Language (XML) and Excel.

(iii) Ramco Optima

Using our expertise in implementing Control and Automation projects on a turnkey basis with Opto22 (manufacturers of optically isolated solid state relays) and SCADA (Supervisory Control and Data Acquisition) systems, we have developed a platform for building complex applications that model engineering processes. Ramco Optima, a world-class process optimization solution improves plant productivity in process intensive industries such as cement, power, chemicals and fertilizers. It can be deployed for real-time monitoring, for analysing difficult process scenarios, decision support and expert control and offers tangible benefits in process stability, productivity, quality and energy consumption efficiency.

II. Virtual Shoring Solutions

The business benefits of rapidly developing and deploying adaptive enterprise solutions using VirtualWorks as a virtual software factory to large organizations and development partners worldwide has opened up several business opportunities for us. Since 2004, we have begun marketing Virtual Shoring Solutions using the VirtualWorks technology platform, wherein the license to use VirtualWorks is granted to the customer for a fixed cost. Any further sub-licensing by such customer upon development of a successful business model would generate additional fixed access fee payments for us. Additionally, we also provide training facilities and services to instruct employees of such customers to effectively deploy the VirtualWorks platform at the client site. Our top customer in relation to Virtual Shoring Solutions is e-Thekwini Municipality, South Africa. Case Study A South African municipality, eThekwini Municipality, Durban with over 18,500 employees sought to provide automated local governance solutions to its citizens. By licensing VirtualWorks, our technology platform, we have enabled eThekwini to deploy an array of Local Governance solutions developed by local IT companies. The engagement with the eThekwini municipality is our first virtual shoring model. The municipality has chosen VirtualWorks as the ‘platform of choice” for development and delivery of local governance solutions by independent local IT companies in South Africa, to meet specific strategic, operational and socio-economic objectives, which may at a later date be exported to other parts of Africa. In this model, we derive our revenue by way of a one-time access fee for providing the VirtualWorks platform to eThekwini, a percentage based fee for continued access applicable for each product for the contined access of Virtual work platform and usage fees per developer per month for consulting, training and support services rendered by us. We propose to enter into similar strategic engagements with leading solution providers and certain Fortune 500 companies on a worldwide basis.

III. Secure Converged Networking and IT Services (SCNIT)

Enterprise networks are experiencing a transition from individual networks carrying voice, data, video and applications to a unified next generation network supporting all of them, which is being termed as “convergence”. As traditional voice and packet networks converge, security vulnerabilities increase and increase the need for secure convergence. Our SCNIT services cater to the requirements of Customer Resource Management (CRM), Business Intelligence and Data Warehousing (BI&DW), Networking, Information Security and Contact Centers.

a. Customer Research Management (CRM)

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Our CRM practice involves strategic CRM consulting, turnkey implementation of Siebel applications, offshore based Siebel development, application support and maintenance, CRM analytics, CRM outsourcing and interaction CRM solutions. We have a strong and ongoing relationship with Siebel Systems Inc. and have been an implementation partner of Siebel since 2000. Our Siebel services include development, customisation, testing, report development, upgrades, workflow, production support, enhancements and Service Guarantees™. For the implementation, we offer Ramco’s Accelerated CRM Execution (RACE™), a comprehensive, phased and iterative methodology to execute Siebel projects using an onsite-offshore model.

We also have an Interaction CRM (iCRM) practice, to provide technology solutions in the intersection of voice and software applications, which finds application in the call center and business process outsourcing space. Case Study

Honeywell International Inc., USA a diversified technology and manufacturing company has engaged our CRM services for a multi-year consulting assignment to support Siebel Applications (production support, user support maintenance, enhancement and development requests and management control) including its interfaces to enterprise and networking applications.

b. Business Intelligence and Data Warehousing (BI&DW) The shift in customers requirements with respect to Siebel services from configuration to Siebel Analytics has expanded the scope of BI&DW services. We provide the entire range of BI&DW services, including need analysis, solution architecture, data modelling, e-business intelligence and data warehouse/data mart design, implementation, integration and customisation. We use our business intelligence expertise by using tools and technologies like building Decision Support Systems (DSS), Online Analytical Processing (OLAP), Executive Information Systems (EIS) and data mining. Our implementation methodology is highly process oriented, fully utilising our vast experience on leading technology environments and our functional and business domain knowledge to create a robust BI solution with state of the art tools and a low cost of ownership.

c. Converged Networking

We offer a wide range of converged solutions for enterprise Local Area Network (LAN) and Wide Area Network (WAN). In this space, we offer IP telephony, content switching and unified messaging using Nortel products. The Internet is in a constant state of change. A typical web site is now a complex grouping of specialized technology, including a firewall, a router, load-balancing devices, cache servers and web servers and hosted externally. Customers seek to maximize the availability, scalability, security, and agility of e-business applications by using content switches. The benefits include faster static content download, more allocation of resources to dynamic transactions and reduction in content-serving costs. Case Study The existing network of Bombay Stock Exchange Limited (BSE) was insufficient to handle the BOLT trading application. Based on a technical analysis, the Local Area Network was upgraded by us as the technology services partner to a Layer 3 Switched network using Nortel Networks range of products. This network is running successfully for the past 5 years and is being continuously upgraded to keep pace with the change in technology.

d. Information Security Solutions Ramco RADAR is a group of qualified professionals who help our customers implement information security policies by benchmarking with industry best practices and adopting a risk assessment based approach. We continuously innovate in the areas of testing, piloting and proofing in order to maintain a state of the art security competency center.

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We help corporates guard their network with perimeter defense solutions, by way of firewalls, access lists and a security policy that complements the business objectives. We offer Virtual Private Network (VPN) solutions, which ensure confidentiality and integrity of data transmitted over the public network, using strong encryption products and appliance based solutions from Nortel and Nokia. We also help set up full-fledged Public Key Infrastructure (PKI) to address issues of authentication, transaction integrity, confidentiality and non-repudiation. RADAR addresses authentication requirements by using SecurID and Smart Card solutions from RSA. We scan corporate networks with commercially available software, hacker community tools and custom built tools to find potential vulnerabilities in the network and operating system infrastructure. In relation to content security, we provide solutions to protect server farms, scan all content passing through the Internet gateway and protect workstations from the moment any user logs on. Currently, we offer virus scan solutions from TrendMicro Inc. and Uniform Resource Locator (URL) filtering from Websense. We also offer our services in the form of security strategy consulting, security risk assessment and technology provisioning. We work closely with the customer to design a security framework around key strategic objectives, analyse the existing IT infrastructure using various techniques and tools to investigate vulnerabilities and designing and implement solutions depending on their current and future requirements. Case Study Tata Tele Services Limited (TTSL) required a security solution to protect their complex network spread across multiple locations in India. The Company engaged us to deploy and manage the security solution. As part of the security solution we implemented a Firewall / Virtual Private Network Solution and an Intrusion Detection System at the Network and Host levels to protect their network from being exploited.

e. Contact Centers Using our expertise in enterprise solutions, CRM, networking and information security, we can design, supply, deploy and maintain contact center technology infrastructure. Our contact center solutions address aspects of planning, architecture design, deployment, training and maintenance. Some solutions deploying Nortel Concerto, Periphonics and custom built applications have been deployed at certain contact centers in India and USA.

f. IT Infrastructure Management Services

We offer comprehensive network and security infrastructure management services delivered from our remote network operations center in Chennai, covering areas such as application monitoring, database monitoring, network monitoring, server monitoring and monitoring security products and infrastructure and provide management reports, alerts and audits to our customers.

C. Business Model We typically provide our enterprise products and service offerings to our customers either (i) directly or (ii) through our Subsidiaries and Associates. Our engagements with customers acquired directly is by way of contractual arrangements or by way of purchase orders for the purchase of specific licenses. We enter into software licensing agreements, professional services agreements and support services agreements with certain customers depending on their requirements and the scope of work. Under these contractual arrangements, our revenues comprise of license fees, annual maintenance fees and customization fees. We enter into Professional Services Agreements, License Agreements and/or Master Annual Maintenance Agreements with the relevant Subsidiaries or Associates, which provides us the business based on its independent sales and marketing efforts.

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• Professional Services Agreements

Our Subsidiaries are often required to render professional services to their customers. However, the relevant Subsidiaries may not possess the necessary professional expertise for certain service engagements. In such cases, under the terms of the Professional Services Agreement, such Subsidiaries have the option of contracting for appropriate software engineering resources from us in the relevant geographies, to perform specific work/purchase orders. For short-term assignments, the relevant Subsidiary would pay us on such basis as may be agreed to between us, including bearing all travel and accommodation costs of the deputed software professional. In case of longer duration assignments, we transfer our employees to the rolls of the relevant Subsidiary.

• License Agreement

Under the terms of the License Agreement, our Subsidiaries are appointed as our resellers, in relation to the marketing and licensing of our proprietary software products in the relevant jurisdictions. Such Subsidiary will be the licensee for the proprietary software resold by it and will have the right to make copies of the same for selling the sub licenses in the applicable territory. As consideration for this licensing, we charge a fixed royalty based on the sub-licensing revenues realized by such Subsidiary.

• Annual Maintenance Service Agreement Under the terms of the Annual Maintenance Services Agreement, our Subsidiaries are permitted to perform annual maintenance services to customers in connection with our licensed proprietary software products. For performing these services, we charge a fee based on the services revenue generated by that Subsidiary.

D. Partnerships and Alliances

We believe that partnerships are an ideal solution to expanding our market reach (without the increased costs of marketing impacting our revenues), to provide our customers with best of breed solutions and to increase our penetration in the global markets. Through these strategic partnerships and alliances we are able to provide our customers with a wider basket of offerings, reduce and control the total cost of ownership to the customer and establish one to one relationships with customers, suppliers and business partners.

We entered into various types of partnerships, including (i) strategic partnerships, to jointly address a particular vertical or geography with value addition by both parties; (ii) business partnerships, for sales co-operation; (iii) implementation partnerships for jointly implementing the solution; and (iv) complementing solution partners, in relation to other products to provide a better solution to the customer.

E. Marketing, Sales and Distribution

We have customers in over 40 countries and operate out of 16 offices in 9 countries, including Germany, India, Malaysia, Singapore, South Africa, Switzerland, United Arab Emirates, United Kingdom and USA. Each of these offices is staffed with marketing personnel involved in business development, presales and implementation consultants. The business development teams and presales consultants are responsible for generating revenue through direct as well as indirect channels. We depend on our alliances, process consultants, business domain consultants, channel and implementation partners for furthering our sales, marketing and distribution

F. Risk Management We have taken steps to mitigate certain risks, particularly in relation to intellectual property, product quality and customer confidentiality. In order to protect our investments in R&D, we have applied for multiple patents in relation to VirtualWorks.

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We have established a comprehensive quality management system to address the product quality requirements of our solutions. We have also installed secure processes for prevention of leakage of such information, including by, executing confidentiality agreements with employees, screening of web browsing by employees, restrictions on compromising web sites (including external mail sites, objectionable web sites and ftp access) and disabling of external data devices like floppy drives and usb ports. In this behalf, we have also been certified as ISO 9001-2000. We have been currently assessed at SEI CMM Level 5. We are in the process of achieving compliance with ISO 27001 norms. In addition to the above, we have also instituted a comprehensive knowledge management initiative to store various software artifacts related to our unique processes and solutions offered to customers. This ensures easy access and continuity in terms of handover from one team to another or during attrition.

G. Competition The enterprise resource space market that we operate in is highly competitive. Our competitors are global ERP giants like SAP and Oracle. Certain Indian companies like 3i-Infotech Limited, I-flex Solutions Limited amd Polaris Software Lab Limited also provide ERP solutions.

Some of our international competitors, such as SAP and Oracle, have recently expanded their operations in India, which has resulted in increased competition. Oracle is currently the worlds largest enterprise software company and recently acquired the entire business of PeopleSoft Inc. and J.D. Edwards and Company. Apart from SAP and Oracle who are our major competitors, we also face competition from other Indian and global enterprise solution companies, including IBM Corporation, Microsoft Corporation Infosys Technologies Limited and Wipro Limited. Since our offerings range from specific products to customised solutions, we also face competition from other companies operating in similar industry verticals who provide niche products or customised solutions targeting such segments, like Iflex Solutions Limited, Infosys Technologies Limited, 3i Infotech Limited, Polaris Software Solutions Limited and Tata Consultancy Services in the BFSI vertical. While we expect these competitive pressures to continue, we believe that our current industry leadership position in India, our customer base and our success in attracting and retaining highly skilled employees will enable us to compete effectively in our industry. We believe that price alone is not a sustainable competitive advantage in an environment where IT is becoming increasingly critical to a customers core corporate strategy. We have therefore endeavored to build our competitive positioning on our ability to manage large customer relationships, delivery excellence, engagement model innovation, industry specific knowledge and experience and scalable organization structure.

H. Research and Development

We place significant emphasis on research and development to propel future growth. We are recognized by the Government of India as one of their approved inhouse research and development institution. We have been providing continuous innovations in applications, technology business solutions and methodologies for software development life cycles to our customers located in various jurisdictions. In fiscal 2005, fiscal 2004 and fiscal 2003 we spent Rs. 185.20 million, Rs. 282.44 million and Rs. 248.0million, respectively on research and development. As on June 30, 2005, 312 professionals were engaged exclusively by us for research and development activities. In continuation of our R&D efforts we have made further enhancements in our solution delivery methodologies and application of technologies. Since 2002-03 we have started publishing a separate profit and loss account, balance sheet and schedules in respect of our research and development activities and annexed as part of the annual accounts of our Company. Currently our research and development efforts are concentrated in developing (i) Ramco VirtualWorks – a technology platform and (ii) Adaptive Enterprise Software Solutions, i.e., products developed on specific verticals deploying Ramco VirtualWorks.

I. Intellectual Property

We have filed 16 patent applications each in India, US and Europe including. We have also applied for registration of trademarks associated with us and our products and services. We own the trademark for ‘Marshall” and “Empres” in India. The Ramco Systems logo and “Ramco” have been registered in Singapore and Malaysia. “Ramco Marshall” has been registered in USA, Switzerland, Belgium, Netherlands, Luxemburg, German, France, Italy, Liechtenstein, Portugal and Spain. “Ramco Virtual Works” has been registered in the USA.

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J. Human Resources

Our success depends to a great extent on our ability to recruit, train and retain high quality IT professionals. Accordingly, we place special emphasis on the human resources function in our organization. We primarily recruit professionals who hold a bachelor’s degree in engineering or a master’s degree in computer application. We also employ business management graduates with functional experience. We recruit such professionals through networking, referral scheme, advertisements and consultants. Our recruitment policy is based on a competency based selection methodology. The qualification wise distribution of all our employees (consolidated), including our subsidiaries as on March 31, 2005 is as follows:

Qualifications Number of Employees Percentage Bachelors Degree in Engineering 1052 58.60 Masters Degree 412 23.00 Doctorate 5 0.30 Bachelors Degree, Diploma others 326 18.20

We place special emphasis on the training of our employees to enable them to develop their skills and competencies and to meet our changing requirements. We have a dedicated recruitment team, which is aligned with a training division to ensure that the new recruits become deployable faster. The Company continues to invest time and effort in employee skills enhancement, competency building and development of our human resources through a well planned, need based training both in technical and behavioral areas. Our employee policy is to create a committed work force through people, enabling processes and knowledge sharing practices based on our value system. We identify and reward employees on a performance basis. We have a performance linked variable compensation policy that is payable twice every year. We create a sense of ownership through issue of stock options to deserving employees. Our various stock option schemes are aimed at continuing this philosophy by providing employees the opportunity to participate and share in wealth creation. For more details on our ESOP plans, please refer to the section titled “Capital Structure” beginning on page 10 of this Letter of Offer. In addition, we also provide our employees with benefits including medical reimbursement, leave travel allowance, hospitalisation and personal accident insurance, emergency loan and advance besides statutory benefits.

K. Facilities

We own the corporate office of our Company situated in Chennai. This facility houses the various business units and support functions such as sales, marketing, finance, R&D, human resources and quality. In addition to our corporate office, we operate out of other locations in India and overseas including out of leased properties. We have several properties locations in India and abroad. For further information relating to the property, owned and leased by us please refer to the section titled “Other Regulatory and Statutory Disclosures” beginning on page 211 of this Letter of Offer.

L. Infrastructure and Security

Our delivery centers in Chennai have state of the art infrastructure facilities including servers located in the centralized secured datacentres and desktop computers (clients distributed across the datacentres), which are interconnected with high speed LAN including a fiber optic backbone. Our offices in various locations are also connected over secured VPN tunnels.

We protect ourselves by using perimeter security components inter alia, like physical security, firewall, IDS, gateway anti virus. All computers are also protected with enterprise wide antivirus software implementation. In addition, to these technical components on security, we are in the process of obtaining BS 7799 certification. BS7799 is a widely recognized security standard for enterprises, which includes in its coverage comprehensive security issues and contains a significant number of control requirements that companies have to comply with and maintain on a regular basis. This certification will enable us to manage risk in the larger business context, particularly to ensure business continuity.

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M. Quality; Certifications; Awards

We employ stringent quality standards. Our quality policy states that “We will achieve excellence in quality through continuous process improvement to deliver solutions that exceed customer expectations, on time and within budget.” The processes and methodologies that we use at our delivery centres in Chennai have been certified as ISO 9001 standards by KPMG. We have been currently assessed at SEI CMM Level 5. We are also currently in the process of being evaluated for certification as ISO 27001 compliant. We have received the following awards and certifications in relation to our services and offerings: • ASP Gold Award in category “Most Innovative Solution” at CEBIT in Hannover in 2003 • Best Customer Success Story Presentation award in the APICS show 2003 • Best Vendor Award for excellence in implementation at Phillips Innovation Campus, Bangalore • The Intelligent20 award for our HRMS implementation in the Singapore Sports Council in

2000 • Ranked number one in the Enterprise Applications Segment in the DQ-IDC India Customer

Satisfaction Audit 2005 • Certified as a Microsoft Gold Partner in 2005

N. Insurance

We have taken certain insurance policies for office insurance, fire and special perils insurance, group personal insurance and group health insurance. In respect of Ramco USA Ramco Switzerland, we have taken certain coverage for errors and omission.

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Regulations and Policies The technology sector in India is primarily regulated under the terms of the Software Technology Parks Scheme, which permits the establishment of units engaged in software development. Several state governments have also enacted specific legislations in this regard, including various incentives to investors to set up software units within the respective state. Setting up a STP Unit An application is required to be made by the company desirous of setting up a unit as an STP to the Director of the STPI, which approval is ordinarily granted within 15 days of such application being made subject to (a) items to be manufactured or exported are not restricted or prohibited; (b) the location is in conformity with the prescribed parameters; (c) the export obligation laid down in the STP Scheme is fulfilled; and (d) the unit is amenable to bonding by Customs and all manufacturing operations are carried out in the same premises. The registration as a STP is location specific. The company pursuant to the requirements of the STP approval, would be require to execute an agreement with the Government of India agreeing to comply with conditions prescribed in the STP approval, inter alia the export obligations and customs bonding of the premises. In order to be able to obtain the STP license, the company would require the following licenses: 1) manufacturing consent from the relevant customs department; 2) an Importer Exporter Code from the Directorate General of Foreign Trade (in order to be able to export

its services/products); 3) registration under the Tamil Nadu Shops and Establishments Act, 1947. State specific benefits In addition to the benefits offered to an ITES company under the STP Scheme, certain benefits are also available under the relevant state legislation/regulations. These benefits include rebates/waivers in relation to payments for transfer of property and registration (including for purchase/lease of premises), waiver of conversion fee for land, entry tax exemptions, labour law relaxations, exemption from state pollution control requirements and commercial usage of electricity. The State Government of Tamil Nadu has offered certain benefits to IT companies. . In this behalf, the Tamil Nadu government issued an Information Technology Policy (IT Policy) in 2002. Some of the salient features of this IT Policy are summarised below: • Capital subsidy as applicable to electronics industries at 20% of fixed assets subject to a maximum of

Rs. 20.0 lakhs will be available for all IT companies, irrespective of their location in the State. • New units (small, medium or major) where more than 40% of the total workers employed are women

shall be eligible for an additional capital subsidy of 5% of investment in fixed assets subject to a ceiling of Rs.10 lakhs.

• 50% exemption of the stamp duty and the registration fee will be given at the time of purchase of land or building for IT companies. This will be conditional to the concerned company putting up the facilities to commence the operations within twelve months from the date of the transaction.

• There will be no locational restrictions for setting up units exclusively engaged in software development or training.

• All software industries, including services and training institutions will be entitled to ‘Industry’ status and eligible for all concessions and incentives applicable to Industries.

• Continuous power supply for low tension units as per LT Tariff III-C and for High Tension units as per HT Tariff I-A shall be provided to IT companies while ensuring the quality of power as required by the industry.

• All software companies will be exempted from the purview of Tamil Nadu Pollution Control Board. In addition to the exemption already given from Chapter II of the Tamil Nadu Shops and Establishments Act 1947, further exemption from the provisions of Chapter III of the Tamil Nadu Shops and Establishments Act, 1947 covering sections 12 to 16 will be granted for IT companies.

• The Tamil Nadu (Industrial Establishments) National and Festival Holidays Act, 1959 is applicable to IT companies. Under Rule 6A of the National and Festival Holidays Rules 1959, if companies require their employees to work on a national or festival holiday, they have to send a notice in Form 6A to the Inspector having jurisdiction over the area in which the company is situated. IT companies will be

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exempted from the provisions of Rule 6A and Rule 7 of the Tamil Nadu Industrial Establishments (National and Festival Holidays Rules 1959.)

• IT companies will be permitted to self certify indicating that they are compliant with and maintaining the registers and forms under the: - Tamil Nadu Shops and Establishments Act, 1947; - Payment of Wages Act, 1936; - Minimum Wages Act, 1948; - Workmen Compensation Act, 1923; - Contract Labour (Regulation and Abolition) Act, 1970; - Employees State Insurance Act, 1948; - Employment Exchanges Compulsory Notification of Vacancies Act, 1959; - Payment of Gratuity Act, 1972; and - Equal Remuneration Act, 1976.

• The Motor Vehicles Act, 1988 has been amended to enable IT companies to make use of hired privately owned omnibuses to transport their employees between their residences and work place.

Labour laws India has stringent labour related legislations protecting the interests of employees. There is a clear distinction between (i) employees who are ‘workmen’ (as defined under various enactments including the Industrial Disputes Act, 1947 (the “IDA”) and (ii) employees who are not ‘workmen’. Workmen have been provided several benefits and are protected under various labour legislations, whilst those persons who have not been classified as workmen are generally not afforded statutory benefits or protection, except in relation to bonus, provident fund and gratuity. Employees are usually subject to the terms of their employment contracts with their employer, which contracts are regulated by the provisions of the Indian Contract Act, 1872. The relevant shops and establishments law in which the IT unit is situated regulates the conditions of service of employees of IT companies. including working hours, overtime payable, the leave policy, weekly holidays, sick leave benefit and maternity benefits. Termination of a non-workman is governed by the terms of the relevant employment contract. As regards a ‘workman’, the IDA sets out certain requirements in relation to the termination of the services of the workman’s services. This includes detailed procedure prescribed for resolution of disputes with labour, removal and certain financial obligations upon retrenchment. The applicability of such laws depends on the number of workers employed and their monthly remuneration.

Intellectual Property Protection 1. Copyright India The Copyright Act, 1957 governs copyright protection in India. In India, Copyright may subsist in original literary, dramatic, musical or artistic works, cinematograph films, and sound recordings. Software, both in source and object code, constitutes a literary work under Indian Law and is clearly afforded copyright protection in India. Under Indian law, registration is not a prerequisite for acquiring or enforcing a copyright in a work. However, a registration in the Register of Copyrights does constitute prima facie evidence of the particulars entered therein and also creates a presumption that the person in the Register is the actual author, owner or right holder to the Copyright. However this presumption may be disproved. In summation, a copyright registration clearly expedites infringement proceedings and significantly reduces delay caused due to evidentiary considerations. Once registered, the term of a copyright registration is 60 years plus the life of the author. Indian law prescribes a detailed list of what acts do and what do not constitute infringement of copyright. Reproduction of a copyrighted work, issuing of copies to the public, performance in public, making a translation of the work, making an adaptation of the work and making a cinematograph film of the work without consent of the owner of copyright are all acts which amount to an infringement of copyright. With respect to computer software, in addition to the above, any unauthorized sale and commercial rental will also amount to infringement of copyright.

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Indian law of copyright also prescribes exceptions to infringement. In respect of computer software, the most notable exception is the making of copies or adaptation of a computer programme by the lawful possessor of a copy of such computer programme in order that it may be utilized for the purposes for which it was supplied. Various other exceptions exist. There are three types of remedies against infringement of copyright under Indian law. Firstly civil proceedings provide for remedies including damages, account of profits, injunction and delivery-up of infringing copies. Civil proceedings have to be instituted in the district court with appropriate jurisdiction. Secondly criminal remedies including imprisonment of the accused or imposition of fine or both, seizure of infringing copies and delivery up of infringing copies may be availed. Criminal offences are to be tried by a metropolitan magistrate or a judicial magistrate of the first class. A third set of remedies are administrative remedies which may be obtained by the Registrar of Copyright to ban the import of infringing copies into India and the delivery up of infringing copies. United States In the United States, a computer program, either in its original "source code" format, or in its machine-readable format, is generally deemed to fall within the definition of ”writing" for copyright purposes and is consequently eligible for copyright protection. In 1980, U.S. copyright laws were amended to make explicit that computer programs, to the extent they embody an author's original creation, are proper subject matter of copyright. This protection is however not available to all components of computer programs. Following the decision in Lotus Development Corp. v. Paperback Software International, (1990) 740 F. Supp. 37, it has been made clear that only the particular expression of an idea or concept that is being used in a particular piece of software will be afforded copyright protection. However, it is also clear that literal components of a program, pure ideas and pure algorithms will not be entitled to copyright protection in the US. For instance it has been held recently by US courts that a mere method of operation in the nature of a menu command is undeserving of protection ab initio. In addition to the above it must be noted that copyright protection of software is subject to various exceptions like fair use and independent creation which permit processes reverse engineering and decompilation of software depending on the jurisdiction in which such protection is claimed. International treaties for copyright protection India is a signatory to the Convention of International Union for the Protection of Literary and Artistic Works signed at Berne (the “Berne Convention”). India is also a signatory to the Universal Copyright Convention, 1952, the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations 1961 (Rome Convention) and as a member of the World Trade Organisation is a signatory to the Agreement on Trade Related aspects of Intellectual Property Rights (the “TRIPS Agreement”). The TRIPS Agreement embodies a set of minimum standards that all signatories have to adhere to in respect of all forms of intellectual property protection, including copyright. Indian copyright law is TRIPS compliant. The Berne Convention, originally concluded in 1886 protects the rights of authors in their literary and artistic works. The Convention requires that the signatory countries provide the same rights to foreigners from other member countries as to their own citizens and mandates automatic protection not subject to procedural formalities. The Convention also provides for minimum substantive standards of protection, dealing with the duration of copyright and the exclusive rights that the author shall hold. The Convention does not, however, define precisely what works fall within its protections; aside from providing a non-exclusive list of examples, the Convention leaves signatory countries to determine for themselves what they consider "literary and artistic works." The UCC provides similar protections, including national treatment and minimum substantive rights to be granted to copyright holders. The substantive provisions include the right of any person whose work was first published in a signatory country to claim protection under the UCC regardless of nationality, and the automatic creation of a copyright upon the printing of a copyright symbol and certain other information. In recent years, the international community has reached a consensus to provide intellectual property protection for computer software under the copyright regime. Through a combination of regional and multinational agreements, including the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), the conclusion of TRIPs has resulted in over 100 signatories of the General Agreement on Tariffs and Trade granting copyright protection to software. Under the agreement, computer programs fall within the coverage of the Berne Convention. TRIPs thus ensures that owners of copyrights in computer programs enjoy the same minimum standards of copyright protection granted to other forms of literary expression.

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2. Patents India In India, the law governing patents is the Patents Act, 1970 ("Patents Act"). Having been amended recently by the Patents (Amendment) Act, 1999, Patents (Amendment) Act, 2002, the Patent Amendment Ordinance, 2004 and the Patent Amendment Act, 2005 there has been an attempt to make the Indian patent regime compliant with TRIPS. Broadly, under the Indian Patent Act an invention must satisfy the requirements of novelty, utility and non obviousness. Public use or publication of an invention prior to the making of an application for a patent may result in the application being rejected. Any earlier patent, earlier publication, document published in any country, earlier product showing the same invention, or earlier disclosure or use by the inventor will prevent the granting of a patent in India. The Indian Patent Act, 1970 currently prohibits the patenting of computer program per se. The Patent Amendment Ordinance, 2004 widened the position on software protection to include as patentable subject matter (a.) Technical applications of computer programs to industry; and (b) Combinations of computer programs with the hardware. However, the Patent Amendment Act, 2005 does not include this specific amendment. Therefore, our computer software products may not be entitled to or may otherwise be denied patent protection. The Patent Amendment Act 2005 permits both pre and post grant patent opposition proceedings on grounds like patentability (novelty, inventiveness and industrial applicability); nondisclosure or incorrect mention of source and geographical origin of biological material used in the invention and anticipation of invention by knowledge (oral or otherwise) available within any local or indigenous community in India or elsewhere. The ordinance also prohibits any person resident in India from applying for patent for an invention outside India without making an application for the invention in India. The resident may wait for six weeks or obtain written permission of the Controller of Patents to make foreign aplications. Before granting such permission in respect of invention, which is relevant for defense purpose or atomic energy, the Controller has to obtain prior consent of the Central Government. United States The US patent regime provides that a person who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent”. The US patent regime follows the “first to invent” as opposed to the “first to file” followed in other jurisdictions and consequently, the patent could be granted to the inventor who proves priority of invention, regardless of him filing the patent application. The patent application must be filed in the US Patent and Trademark Office within one year of any public disclosure. Any inventor, regardless of citizenship, may apply for a patent on the same basis as a US citizen. All US patent applications must be made, or authorised to be made, by the inventor. This differs from the practice in most countries where application is usually filed in the name of the owner of the patent. Following the decision of the federal circuit in State Street Bank and Trust Co. v. Signature Financial Group, Inc.2 in 1998, the number of software-related patents has grown exponentially; in 2000, over 20,000 software-related patents were granted, almost 15 times the number in 1990. Thus, it is clear that the extension of patent protection to Software is a well-established practice in the United States and that such protection can be easily obtained. European Community The European Patent Convention, administered by the European Patent Office, creates a single European procedure for the grant of patent, which is recognized in all the member countries. Moreover, European patents can be granted on the basis of an international application filed in accordance with the Patent Co-operation Treaty, as outlined below, for all member countries of the European Patent Convention.

2State Street Bank and Trust Co. v. Signature Financial Group, Inc , F.3d 1368, 1370 (Fed. Cir. 1998) (holding that patent claims covering a computerized accounting system "are directed to statutory [patentable] subject matter"), cert. denied, 525 U.S. 1093 (1999).

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According to Article 52(1) EPC, a European patent shall be granted for any inventions which are susceptible of industrial application, which are new and which involve an inventive step. Further, in accordance with Rules 27 and 29 EPC, in order to be patentable, an invention must be of a technical character to the extent that it must relate to a technical field, must be concerned with a technical problem and must have technical features in terms of which the matter for which protection is sought can be defined in the patent claim. The EPC does not define the term "invention". It does, however, include a list of subject matter and activities, which are deemed not to be inventions. According to Article 52(2) EPC, methods for doing business, mathematical methods, presentations of information and programs for computers shall not be regarded as inventions. Article 52(3) EPC, however, stipulates that this provision shall exclude patentability of the subject-matter or activities referred to only to the extent to which a European patent application relates to such subject-matter or activities as such. It follows that, although methods for doing business, programs for computers, etc., are as such explicitly excluded from patentability, a product or a method which is of a technical character may be patentable, even if the claimed subject-matter defines or at least involves a business method, a computer program, etc. Summarizing the above, methods for doing business and computer programs are not always excluded from patentability and software is only patentable where it can be seen to have a ‘technical effect’. International Treaties The Paris Convention for the Protection of Industrial Property, 1883 requires member countries to guarantee to the citizens of the other countries the same rights in patent and trademark matters that it gives to its own citizens. Further, this treaty grants a right of priority to the applicant which means that the applicant, who has filed an application in any contracting states, may apply for protection in any other contracting states within 12 months and claim priority over other applications which have been filed by other applicants during the said 12-month period. 3. Trade Secrets and Confidential Information In India trade secrets and confidential information enjoy no special statutory protection and are protected under Common Law.

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History and Corporate Structure The business of our Company was originally undertaken by a division of Ramco Industries Limited since 1989. Our Company was incorporated on February 19, 1997 as ‘Ramco Systems Limited’, a public limited company under the Companies Act, 1956 with its registered office situated at 47, PSK Nagar, Rajapalayam 626 108. In 1999, the Honorable High Court of Madras passed an order dated December 24, 1999, approving a scheme of arrangement for the transfer of the software business undertaking of Ramco Industries Limited to us (“Demerger Scheme”). Pursuant to this order our Company acquired the software business undertaking from Ramco Industries Limited with effect from April 1, 1999. In accordance with the Demerger Scheme, the assets and liabilities of the software business undertaking of Ramco Industries Limited were transferred to Ramco Systems Limited at book value. The shareholders of Ramco Industries Limited became shareholders of Ramco Systems Limited as shares were allotted to shareholders of Ramco Industries Limited in the ratio of one Ramco Systems Limited share for every one share held in Ramco Industries Limited. The shares of Ramco Systems Limited, after implementation of the Demerger Scheme, were granted the permission for listing by the various stock exchanges. Our Company was granted permission on October 5, 2000 to list its shares on the BSE with effect from October 9, 2000. The shares of our Company began trading on the BSE on October 9, 2000. Our Company was granted permission to list its shares on the MSE on March 28, 2000. The shares of the Company began trading on the MSE on March 29, 2000. We were also granted permission to list our shares on the NSE on April 17, 2000, with effect from April 12, 2000. The shares of our Company began trading on the NSE on April 12, 2000. Simultaneously, we acquired the investments of Ramco Industries Limited in our overseas subsidiary companies. The sale was duly approved by the shareholders of Ramco Industries Limited at the EGM held on November 10, 1999 and also by the RBI pursuant to its letter dated December 18, 1999. On August 4, 2005, the High Court of Judicature at Madras sanctioned the Scheme of Arrangement filed by the Company in relation to the adjustment of an amount not exceeding Rs. 2,000.00 million out of the balance standing in our share premium account as on the appointed date (viz. March 31, 2005), in respect of (i) trade receivables due from certain Subsidiaries amounting to Rs. 880.20 million and (ii) accumulated losses as on the appointed date. The Company also received sanctions from appropriate authorities for giving effect to the Scheme of Arrangement and related matters with respect to Ramco Systems Corporation, USA and Ramco Systems Limited, Switzerland, to strengthen the financial position of those Subsidiaries. For more details, please refer to ‘Note 14’ in the section titled “Financial Statements” on page 88 of this Letter of Offer Our Corporate Structure Our existing corporate structure is as under:

Ramco Systems Limited, India

Subsidiaries

• Ramco Infotech Solutions Limited, India

• Ramco Systems SDN BHD Malaysia

• Ramco Systems PTE Limited, Singapore

• RSL Enterprise Solutions (Pty) Limited, South Africa

• Ramco Systems Limited, Switzerland

• Ramco Systems Corporation, USA

Associate Companies

• Redlex 47 Pty Ltd., South Africa

• Triamun Ramco Healthcare Systems Limited, Switzerland

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History and Major Events

Year Key Events, Milestones and Achievements

1989 Ramco Systems established as a business division of Ramco Industries Limited

1992 Ramco Systems Corporation, USA incorporated

1993 • Ramco Systems Limited, Switzerland incorporated;

• Gold Partner for Nortel Enterprise Products

1994 First edition of ERP, Marshal 2.1

1995 • Ramco Systems Pte Limited, Singapore incorporated;

• Ramco Systems Sdn. Bhd, Malaysia incorporated

1997 • Ramco Systems Limited incorporated as a public limited company;

• ISO 9001 certified

1999 • Demerger Scheme sanctioned by the High Court of Judicature at Madras

• Launch of web-enabled ERP, e.Applications 3.1 2000 Siebel Implementation Partner

2001 Release of Ramco VirtualWorks™ 1.0, Enterprise Application Framework

2002 • Ramco Enterprise Solutions Pty Limited, South Africa incorporated;

• Development Centres assessed at SEI-CMM Level 5;

• Release of Ramco Business Decisions (Business Intelligence Solution)

2003 • Release of Ramco DecisionWorks (CPM platform);

• ISO 9001 : 2000 certified;

• ASP Gold Award in category “Most innovative solution” at CEBIT in Hannover for Triamun solution

2004 • Release of Ramco VirtualWorks 2.0, Virtual Software Factory;

• Virtual Shoring Operations commenced with eThekwini Municipality in South Africa

2005 • Microsoft Gold Certified Partner

• Tops the Enterprise Applications Segment in the DQ – IDC India Customer Satisfaction Audit

• SEI CMM Level 5 accredition Main Objects of our Company The main objects of our Company as contained in our Memorandum of Association are: 1. To carry on the business pertaining to or connected with and involving information technology,

computer data processing, computerized information retrieval systems, computer software, development and management feasibility studies, analysis and design or turnkey systems for scientific, mathematical, statistical, engineering, statutory, financial, banking, commercial, and business application, data base management, software techniques, word processing software, electronic funds, transfer systems, on-line acquiring systems, transactional processing systems, data capture, data logging, data preparation, computer graphics, plotting and charting software, process control software, simulation and modeling.

2. To import, export, purchase or sell, manufacture and deal in all kinds of computer peripherals and

accessories equipment’s and systems including digital, analogue, hybrid, main-frame computer, super-mini, super micro, micro computers, dumb and intelligent computer terminals, specialized financial, retail engineering, receipting terminal and controller systems, electronic fuel transistor, Automatic Tele Machines, Post of sale equipments, data entry and capture equipment, distributive and processing networks data communications equipment, monitors, emulators, floppy, mini-floppy disc drives, diskettes, mini diskettes drives, data cassette recorders, card readers, card punchers, optical character recogniser, magnetic ink readers, Winchester technology, hard disk, cartridge hard disks, matrix character, impact, non-impact, thermal ink jet, laser printing systems, electric sensitive wheel and ball printers, oscillatory and graphic printers, plotters X-Y recorders, strip chart recorders, micro processor kit, computer game sets and build-up systems, computer clips and components, computer stationeries, forms, other original equipment manufacturer products and spare parts for all these equipment and to repair, refurbish and perform remedial services to the above mentioned equipments.

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3. To carry on as advisors, consultants, contractors, to any persons, firms, corporations requiring knowledge, expertise or know-how in the field of computers, data processing, information, retrieval, modern scientific techniques of information and all things used in connection therewith and to organize, run and give seminars, training, general and specific courses on computer system software, hardware and applications.

4. To carry on business of imparting training in computers and software for clients in India and abroad. 5. To establish, provide, maintain and conduct or otherwise subsidise research laboratories, experimental

stations, workshops and libraries for scientific, industrial, commercial and technical research and experiments; to undertake and carry on scientific, industrial, commercial, economic, statistical and technical research, surveys and investigations; to promote studies, research, investigation and invention, both scientific and technical by providing subsidising endowing or assisting laboratories, colleges, universities, workshops, libraries, lectures, meetings, exhibitions and conferences and by providing for the remuneration to the scientists, scientific or technological professors or teachers and the award of scholarship, grants and prizes, generally to encourage, promote, and reward studies, research, investigation, experiments, tests and inventions of any kind.

6. To carry on the business as importer, exporter, buyers, lessors and sellers of and in dealers in all types of

electronic components and equipments necessary for attaining the above objects. Amendment to our Memorandum of Association

Sl No Date Amendments 1 June 16, 1999 Increase in authorized capital from Rs. 500,000 to Rs. 150,000,000. 2. July 22, 2005 Increase in authorized capital from to Rs. 150,000,000 to Rs. 300,000,000.

Details of Subsidiaries We currently have six Subsidiaries being (i) Ramco Infotech Solutions Limited, India; (ii) Ramco Systems SDN BHD Malaysia; (iii) Ramco Systems Pte Limited, Singapore; (iv) RSL Enterprise Solutions (Pty) Limited, South Africa; (v) Ramco Systems Limited, Switzerland (vi) Ramco Systems Corporation, USA In this sub-section, financial data for the Subsidiaries has been derived from their financial statements prepared in accordance with the relevant GAAP. (i) Ramco Infotech Solutions Limited, India (“Ramco Infotech”)

Ramco Infotech was incorporated as a wholly owned subsidiary of the Company on November 1, 2004. It was incorporated as a public limited company and obtained its certificate of commencement of business on February 18, 2005. Ramco Infotech has not commenced any business operations till date. The registered office of Ramco Infotech is located at 47 P.S.K. Nagar, Rajapalayam, Tamil Nadu 626 108. Ramco Infotech was registered with the objective of carrying out the marketing of our software products and services and also providing software development and related business activities. Ramco Infotech may from time to time consider various options to acquire, invest or seek suitable business opportunities Board of Directors The directors on the board of Ramco Infotech as on March 31, 2005 are: 1. Mr. P. R. Ramasubrahmaneya Rajha 2. Mr. P. R. Venketrama Raja 3. Mr. S. S. Ramachandra Raja 4. Mr. N. K. Shrikantan Raja

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Financial Performance The financial performance for Ramco Infotech from November 1, 2004 to March 31, 2005 is as follows:

(Rs. in million, except per share data)

Six Months ended September 30, 2005

Year ended March 31, 2005

Sales and other income - - Profit/(Loss) after tax - - Equity capital (par value Rs. 1 per share) 0.05 0.05 Reserves and Surplus - - Profit/(Loss) per equity share (Rs.) - - Book value per equity share (Rs.) 10.00 10.00

(ii) Ramco Systems SDN BHD Malaysia (“Ramco Malaysia”)

Ramco Malaysia was incorporated on May 3, 1995 as a wholly owned subsidiary of Ramco Industries Limited. Ramco Malaysia became our Subsidiary, pursuant to our acquisition of Ramco Industries Limited investments in it, in 1999. The registered office of Ramco Malaysia is located at 11th Floor Wisma Damansara, Jalan Semantan, Damansara Heights, Malaysia 50490, Kuala Lumpur. Ramco Malaysia is engaged in marketing our products and services in Malaysia. In 1997, Ramco Malaysia was awarded the Multimedia Super Corridor (MSC) status enabling it to derive certain tax benefits from the Government of Malaysia. Board of Directors The directors on the board of Ramco Malaysia as on March 31, 2005 are: 1. Mr. P. R. Venketrama Raja 2. Ms. Saw Bee Lean 3. Ms. Lum Chee Yeng 4. Mr. K. Ramachandran

Financial Performance The operating results of Ramco Malaysia for the last three years is set forth below:

(Rs. in million, except per share data) Six months

ended September

30, 2005


2005


2004


2003

Sales and other income 19.92 46.65 92.29 57.04 Profit/(Loss) after tax 1.27 (1.13) 16.88 (29.24) Equity capital (par value Malaysian Ringet 1 per share)

18.22 18.22 18.22 18.22

Reserves and Surplus 4.64 3.23 11.62 (3.5) Profit/(Loss) per equity share (Rs.)

1.00 (0.88) 13.19 (22.84)

Book value per equity share (Rs.)

17.86 16.75 23.31 11.5

(iii) Ramco Systems PTE. Limited, Singapore (“Ramco Singapore”)

Ramco Singapore was incorporated on October 17, 1995, as a wholly owned subsidiary of Ramco Industries Limited. Ramco Singapore became our Subsidiary, pursuant to our acquisition of Ramco Industries Limited investments in it, in 1999. The registed office of Ramco Singapore is located at 78, Shenton Way # 26-02A, Singapore. Ramco Singapore is engaged in marketing our products and services and providing software development and related business activities in Singapore and certain other countries in the South East Asian region.

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Board of Directors The directors on the board of Ramco Singapore, as on March 31, 2005 are: 1. Mr. P. R. Venketrama Raja 2. Mr. Iyengar Vijaykumar Gopalan 3. Mr. K. Ramachandran Financial Performance The operating results of Ramco Singapore, for the last three years is set forth below:


ended September 30,

2005


2005


2004


2003

Sales and other income 39.36 73.67 72.72 102.64 Profit/(Loss) after tax 1.02 55.42 (25.51) (47.29) Equity capital (par value Singapore Dollar 1 per share)

18.62

18.62 18.62 18.62 Reserves and Surplus 2.17 0.61 (54.13) (29.89) Profit/(Loss) per equity share (Rs.)

1.40 76.44 (35.18) (65.23)

Book value per equity share (Rs.)

28.67 26.52 (48.99) (15.55)

(iv) RSL Enterprise Solutions Pty Limited, South Africa (“Ramco RSA”)

Ramco RSA was incorporated in South Africa on October 10, 2002 as Exclusive Access Trading 8 (Pty) Limited. In 2003, it became a wholly owned subsidiary of our Company, and its name was changed to RSL Enterprise Solutions Pty Limited. The registered office of Ramco RSA is located at 20 Kingsmead, Boulevard, Kingsmead Office Park, Durban 4001. Ramco RSA is engaged in marketing our products and services and providing software development and related business activities. Board of Directors The directors on the board of Ramco RSA as on March 31, 2005 are: 1. Mr. P.R.Venketrama Raja 2. Mr.Kamesh K. Ramamoorthy 3. Mr.B. Jaishankar Financial Performance The operating results of Ramco RSA for the last two years is set forth below:


Six months ended

September 30, 2005


2005


2004

Sales and other income 198.23 253.79 16.03 Profit/(Loss) after tax 68.35 14.78 (0.79) Equity capital (par value South African Rand 1 per share)

- - -

Reserves and Surplus 82.23 13.20 (0.77) Profit/(Loss) per equity share (Rs.) 683,505 147,755 (7,944) Book value per equity share (Rs.) 822,256 131,995 (7,672)

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(v) Ramco Systems Limited, Switzerland (“Ramco Switzerland”)

Ramco Switzerland was incorporated on September 9, 1993 as a joint venture partnership between Ramco Industries Limited and Univag AG of Switzerland. In 1996, Ramco Industries Limited acquired all the shares held by Univag and converted the joint venture into a wholly owned subsidiary. Subsequently, in 1999 Ramco Switzerland became our Subsidiary, pursuant to our acquisition of Ramco Industries Limited Investment in it. The registered office of Ramco Switzerland is located at Lange Gasse 90, Postfach CH- 4020 Basel, Switzerland. Ramco Switzerland is engaged in marketing our products and services and providing software development and related business activities.

Board of Directors The directors on the board of Ramco Systems Limited, Switzerland, as on March 31, 2005 are: 1. Mr. P. R. Venketrama Raja 2. Dr. Stephen Eschmann 3. Mr. Erwin Brunner Financial Performance The operating results of Ramco Systems Limited, Switzerland, for the last three years is set forth below:


ended September

30, 2005


2005


2004


2003

Sales and other income 156.41 245.07 227.61 220.06 Profit/(Loss) after tax 10.80 261.73 (158.35) (127.48) Equity capital (par value CHF 1000 per share)

29.33 29.33 271.27 288.67

Reserves and Surplus 79.92 77.79 (577.30) (444.82) Profit/(Loss) per equity share (Rs.)

7.72 186.95 (16,495) (13,280)

Book value per equity share (Rs.) 78.03 76.51 (31,878) (16,265) (vi) Ramco Systems Corporation, USA (“Ramco USA”)

Ramco USA, was incorporated on October 1, 1992 as a Subsidiary of Ramco Industries Limited. Ramco USA became our Subsidiary, pursuant to our acquisition of Ramco Industries Limited investments in it, in 1999. The registered office of Ramco USA is located at 18510, Decatur Road, Monte Sereno, California, 95030 USA. We own 98% of Ramco USA while the remaining shareholding is held by certain individuals. Ramco USA operates mainly through its principal office at New Jersey, with another office in Milpitas (California) and is engaged in marketing our products and services and providing software development and related business activities.

Board of Directors The directors on the board of Ramco USA as on March 31, 2005 are: 1. Mr. P. R. Ramasubrahmaneya Rajha 2. Mr. P. R. Venketrama Raja 3. Mr. S. R. Srirama Raja 4. Ms. Nalina Ramalakshmi 5. Mr. K. Ramachandran

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Financial Performance The operating results of Ramco USA, for the last three years is set forth below:


ended September

30, 2005


2005


2004


2003

Sales and other income 393.56 930.83 704.06 543.63 Profit/(Loss) after tax (32.81) 278.49 8.32 (121.40) Equity capital (par value USD 0.10 per share)

105.74 105.74 443.17 443.17

Reserves and Surplus (12.62) 14.34 (916.76) (963.92) Profit/(Loss) per equity share (Rs.)

(0.17) 1.41 0.07 (0.97)

Book value per equity share (Rs.) 0.47 0.61 (3.79) (4.17) Details of Associates We currently have two Associate companies being (i) Redlex 47 Pty Limited, South Africa; and (ii) Triamun Ramco Healthcare Systems Limited, Switzerland. In this section financial data for these Associates have been derived from their financial statements prepared in accordance with the relevant GAAP. (i) Redlex 47 Pty Limited, South Africa (“Ramco Redlex”)

Ramco Redlex was incorporated by way of a shareholders agreement between Ramco RSA and Dream World Investments 48, Pty. Limited (“Dream World”) on February 5, 2004. For more details on the Shareholders Agreement, please refer to sub section titled “Shareholder Agreements” on page 67 of this Letter of Offer. Ramco Redlex is permitted to use the trading name ‘Citiworks’. The registered office of Ramco Redlex is located at 4th Floor Walnut Grove, Walnut Road, Durban, 4001. Ramco Redlex is engaged in marketing our products and services and providing software development and related business activities. Board of Directors The directors on the board of Redlex Ramco as on February 28, 2005 are: 1. Dr. Nhlanhla Msomi 2. Mr. Wolaganathan (Willy) Govender 3. Ms. Nomgsobo Sangweni 4. Mr. B. Jaishankar 5. Mr.Kamesh K. Ramamoorthy

Financial Performance The operating results of Ramco Redlex for the period ended February 28, 2005 is set forth below:


Year ended February 28, 2005 Sales and other income 182.94 Profit/Loss after tax 10.02 Equity capital (par value South African Rand 1 per share) 0.01 Reserves and Surplus 9.67 Profit/Loss per equity share (Rs.) 5011.33 Book value per equity share (Rs.) 4839.92

(ii) Triamun Ramco Healthcare Systems Limited, Switzerland (“Ramco Triamun”)

Ramco Triamun was incorporated on November 15, 2001, subsequent to a memorandum of understanding between Ramco Switzerland and Triamun AG on September 28, 2001, to derive benefits

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from the marketing and other strengths of Triamun AG and to carry out joint process reengineering and IT projects for customers in the healthcare sector. For more details on the memorandum of understanding, please refer to sub section titled “Memorandum of Understanding” on page 68 of this Letter of Offer. The registered office of Ramco Triamun is located at CH-6340 Baar, Ruessenstrasse 12, Switzerland. However, at its board meeting held on April 1, 2005, the directors discussed whether Ramco Triamun should be discontinued, since no joint projects have been executed by Ramco Triamun and majority of the revenue stream continues to be directly between Triamun and Ramco on the basis of an existing software development agreement. Board of Directors The directors on the board of Ramco Triamun as on December 31, 2004 are: 1. Mr. Alex Mauderli 2. Mr. Fritz Hirsbrunner 3. Mr. Peter Wagner 4. Mr. P.R.Venketrama Raja Financial Performance The operating results of Ramco Triamun for the last three years is set forth below:

(Rs. in million, except share data) Year ended

December 31, 2004

Year ended December 31,

2003

Year ended December 31,

2002 Sales and other income 101.77 79.91 37.62 Profit/(Loss) after tax 0.04 0.27 1.93 Equity capital (par value CHF 10 per share) 3.47 3.47 3.47 Reserves and Surplus 2.65 2.28 2.06 Profit/(Loss) per equity share (Rs.) 4.43 26.92 192.95 Book value per equity share (Rs.) 612.22 574.55 552.82

Material Agreements 1. Shareholder Agreement We have not entered into any shareholder agreements with any of our shareholders. However our Subsidiary, Ramco RSA has entered into a shareholders agreement with Dream World Investments 48 (Proprietary) Limited (“Dream World”) on February 5, 2004, to form an Associate company, being Ramco Redlex, to provide information technology solutions, primarily in South Africa. Ramco RSA has the option over time to reduce its current shareholding of 30% in Ramco Redlex to a mutually acceptable minimum level. The salient features of this shareholders agreement are: Services: Ramco RSA shall provide services such as software code writing/generation, blue printing and other services towards implementation of the IT solutions, technical support, updates, marketing, consultancy on hardware procurement, networking, security in connection with networking, other technical support, training support and supply of competent personnel. Ramco Systems Limited is also required to host their proprietary Ramco VirtualWorks platform at the premises of Ramco Redlex’s clients. Directors and Management: There shall be a minimum of four directors out of which Ramco RSA and Dream World shall appoint two directors each. As long as the shareholding of Ramco RSA, in Ramco Redlex does not fall below 15% it shall have the right to appoint two directors. In the event that the shareholding falls below 15% but, not below 5% then they shall have the right to appoint one director. The first chairperson to the board of directors shall be appointed by Dream World, for a period of two years and thereafter the chairperson shall alternate between the directors appointed by Ramco RSA and Dream World. Disposal of Shareholding: Any shareholder intending to sell, transfer or in any manner alienate any portion or all of its equity shall give not less than three months written notice to the directors of Ramco Redlex.

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Termination: The agreement may be terminated at any time in writing by all the shareholders and shall terminate automatically without notice on the date when all the shares are beneficially owned by one shareholder. Further in case of a default or breach of the agreement, a non-defaulting shareholder may terminate the Agreement, by notice in writing to the defaulting shareholder. Intellectual Property: Upon the termination of the agreement for any reason, the right of Ramco Redlex to use and exploit intellectual property of Ramco Systems Limited or Ramco RSA shall also terminate. All intellectual property in relation to RamcoVirtualWorks and other pre built components in relation to Ramco RSA or Ramco Systems Limited will always belong to Ramco Systems Limited. Governing laws: The agreement shall be governed by the laws of South Africa. 2. Memorandum of Understanding We have not entered into any memorandum of understanding as of the date of this Letter of Offer with any third party. However our Subsidiary, Ramco Switzerland has entered into a memorandum of understanding with Triamun AG on September 28, 2001 (“MOU”), to set up a joint venture company, being Ramco Triamun, to carry out process reengineering and IT projects for customers in the healthcare sector including consulting services such as process reengineering etc. The salient features of this MOU are as follows: Shareholding: Both parties are to hold 50% of the share capital of Ramco Triamun. Board of Directors: Both parties are to appoint two directors each. Shareholder Agreement: Both parties were to enter into a shareholders agreement that laid down decision mechanisms in the board, right of pre-emption of shares etc. However, as on the date of filing of this Letter of Offer the parties have not entered into any such shareholders agreement. Exclusivity: Ramco Triamun shall have a “first right of refusal” with respect to the products offered by either of the parties. Both parties shall nominate each a person who is authorized to make operational decisions for Ramco Triamun. The parties shall offer all customer enquiries and all own projects in the healthcare sector for realization. The exclusivity is worldwide, with the exception of the USA and of some countries or projects in South East Asia. In the case of opportunities outside of Europe, where Ramco Triamunis not able to bring in significant value addition, may opt to address the opportunity in its own name. 3. Other Material Agreements We have not entered into any other material agreements, as detailed in Clause 6.9.4.5 of the SEBI DIP Guidelines.

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Management Board of Directors The following table sets forth details regarding our Board of Directors as at the date of this Letter of Offer:

Name, Designation, Father's Name, Address, Occupation and Term National of

Age (years) Other Directorships in Indian companies

Mr. P. R. Ramasubrahmaneya Rajha, Chairperson, S/o Late Mr. PAC Ramaswamy Raja R/o “Ramamandiram” Tenkasi Road, Rajapalyam 626 117 Occupation: Industrialist Term: Subject to retirement by rotation

India 70 Madras Cements Limited Madras Chipboard Limited Nalina Agricultural Farms Private Limited Nirmala Shankar Farms & Estates Private Limited Rajapalayam Mills Limited Ram Sandhya Farms Private Limited Ramamandiram Agricultural Estate Private Limited Ramco Industries Limited Ramco Infotech Solutions Limited RCDC Securities and Investments Private Limited Sandhya Spinning Mill Limited Sri Nithyalakshmi Farms Private Limited Sri Sandhya Farms (India) Private Limited Sri Saradha Deepa Farms Private Limited Sri Vishnu Shankar Mill Limited Sudharsanam Investments Limited Thanjavur Spinning Mill Limited The Ramaraju Surgical Cotton Mills Limited

Mr. P.R. Venketrama Raja, Vice Chairman and Managing Director, S/o Mr. P. R. Ramasubrahmaneya Rajha R/o “Ramamandiram” Tenkasi Road, Rajapalyam 626 117 Occupation: Industrialist Term: For 5 years from March 23, 2005

India 46 Madras Cements Limited Nalina Agricultural Farms Private Limited Nirmala Shankar Farms & Estates Private Limited Ram Sandhya Farms (Private) Limited Ramamandiram Agricultural Estate Private Limited Ramco Industries Limited Ramco Infotech Solutions Limited RCDC Securities and Investments (Private) Limited Rajapalayam Mills Limited Sri Nithyalakshmi Farms (Private) Limited Sri Sandhya Farms (India) Private Limited Sri Saradha Deepa Farms Private Limited Sudharsanam Investments Limited Sandhya Spinning Mill Limited Thanjavur Spinning Mill Limited The Ramaraju Surgical Cotton Mills Limited Sri Vishnu Shankar Mill Limited

Mr. V. Jagadisan Independent Director, S/o Late Mr. K. Vaidyanathaswamy R/o 2, 1st Main Road, Gandhi Nagar, Adyar

India 73 KG Denim Limited PEC Potentiometers Limited Southern Technologies Limited

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Name, Designation, Father's Name, Address, Occupation and Term National of

Age (years) Other Directorships in Indian companies

Chennai 600 020 Occupation: Chartered Accountant Term: Subject to retirement by rotation Mr. S.S. Ramachandra Raja Non Executive Director, S/o Mr. S.N.R. Srirenga Raja R/o 58, PSK Nagar, Rajapalayam 626108 Occupation: Business Term: Subject to retirement by rotation

India 70 Rajapalayam Mills Limited Ramco Industries Limited Ramco Infotech Solutions Limited Sri Sethu Ramasamy Farms Private Limited Sri Vishnu Shankar Mill Limited

Mr. N.K. Shrikantan Raja Non Executive Director S/o Mr. N.R. Krishnama Raja R/o Bhavanam 102, PSK Nagar, Rajapalayam 626108 Occupation: Business Term: Subject to retirement by rotation

India 57 Ramco Industries Limited Ramco Infotech Solutions Limited Sandhya Spinning Mill Limited Sri Vishnu Shankar Mill Limited Sri Yannarkay Servicers Limited Sudarsanam Investments Limited The Ramaraju Surgical Cotton Mills Limited

Mr. M. M. Venkatachalam Independent Director, S/o Late Mr. M.M. Muthiah R/o 10 Valliammai Achi Street, Kotturpuram, Chennai 600 085 Occupation: Industrialist Term: Subject to retirement by rotation

India 47 Ambadi Enterprises Limited Apex Abstracting & Editing Services Limited Cholamandalam Distribution Services Limited Cholamandalam Factoring Limited Cholamandalam Securities Limited Confectionary Specialities Limited Coromandel Bathware Limited EID Parry (India) Limited Laser Words Private Limited MM Muthaiah Sons Private Limited New Ambadi Estates Private Limited Parry Agro Industries Limited Parry Engineering & Exports Limited Parry Investments & Finance Compan Limited Polutech Limited

Brief Biography of our Directors Mr. P.R. Ramasubrahmaneya Rajha, 70 years, Chairman and Director is the son of late Mr. P.A.C. Ramasamy Raja, the founder of the Ramco group of industries. Mr. P. R. Ramasubrahmaneya Rajha obtained a bachelors degree in Physics from the University of Madras in 1955. After the expiry of Mr. P.A.C. Ramasamy Raja in 1962, Mr. P.R.Ramasubrahmaneya Rajha began managing the Ramco group of industries. Mr. P.R. Ramasubrahmaneya Rajha is also a member of the Executive Committee of the Tamil Nadu Chamber of Commerce & Industry and President of the Rajapalayam Chamber of Commerce & Industry. Mr. P.R. Venketrama Raja, 46 years, Managing Director and son of Mr. P.R.Ramasubrahmaneya Rajha is the founder promoter of Ramco Systems Limited. He was awarded a bachelor’s degree in chemical engineering from the University of Madras in 1981 and a Masters in Business Administration from University of Michigan, USA in 1983. Mr. P.R.Venketrama Raja is a senior member of the board of nine companies (with sixteen business units) of the diversified Ramco group of industries, including Madras Cements Limited and Ramco Industries Limited.

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Mr. V. Jagadisan, 73 years, Independent Director, is a senior chartered accountant and a tax consultant in Chennai. He is also a director on the board of several companies including Southern Technologies Limited. He has been on our Board since June 15, 2001. Mr. S.S. Ramachandra Raja, 70 years, Non Executive Director, has obtained a degree in Science from the University of Madras in 1956. He is on the board of several companies, including Ramco Industries Limited, Rajapalayam Mills Limited, and Sri Vishnu Shankar Mill Limited. He has been on our Board since February 19, 1997. Mr. N.K. Shrikantan Raja, 57 years, Non Executive Director, holds a degree in Commerce from University of Madras in 1971. He is on the board of several companies, including Ramco Industries Limited, Sri Vishnu Shankar Mill Limited. He has been on our Board since February 19, 1997. Mr. M.M. Venkatachalam, 47 years, Independent Director, was awarded a graduate degree in agriculture from the University of Agricultural Sciences in Bangalore in 1980 and a Masters in Business Administration from the George Washington University, USA in 1985. Mr. M.M. Venkatachalam is the son of Late Mr. M.M. Muthiah of the Murugappa Group of companies. He was the Vice Chairman of The Planters’ Association of Tamilnadu and the past president of The Employers’ Federation of Southern India. He is the Managing Director of Laser Word Private Limited. He has been on our Board since April 5, 2001. Borrowing Powers of Directors Pursuant to a resolution approved by our Shareholders at an EGM held on February 18, 2000, the current borrowing powers of the Directors pursuant to Section 293(1)(a) and Section 293(1)(d) of the Companies Act is Rs. 2,500 million or the aggregate amount of paid up capital and free reserve, whichever is higher.

Compensation of Our Directors Pursuant to an EGM held on April 4, 2005 our Shareholders resolved to pay Mr. P.R. Venketrama Raja, a salary of Rs.60,000 per month and perquisites in addition to salary to the extent of Rs. 3,60,000 per annum, including housing, medical reimbursement, leave travel concession, club fees, personal accident insurance, car and telephone, provident fund, gratuity, superannuation/annuity fund, encashment of leave and commission. In the Board meeting held on June 15, 2001, it was resolved to pay only sitting fees to the other Directors for attending Board /Committee meetings, as follows:

Sl. No. Meeting of Directors Sitting Fees payable 1. Board Meeting Rs.5000/- 2. Audit Committee Rs.5000/- 3. Shareholders Committee Rs.2500/-

Other than to Mr. P.R. Venketrama Raja, we do not pay any remuneration (except sitting fees) to our directors. Terms of Appointment The terms of appointment of our Directors are given below:

Sl. No Name of Director Terms of appointment 1. Mr. P.R. Ramasubrahmaneya Rajha Annual General Meeting dated July 28, 2004 wherein the

Shareholders: Resolved that Mr. P. R. Ramasubrahmaneya Rajha who retires by rotation be and is hereby re-appointed as Director of the Company.

2. Mr. P.R. Venketrama Raja Extra-Ordinary General Meeting dated April 4, 2005 wherein the Shareholders: Resolved that in accordance with the provisions of Section 269, 309, 311 and other applicable provisions, if any, of the Companies Act, 1956 read with Schedule XIII thereto, and subject to the approval of the Central Government, financial institutions, banks and Reserve Bank of India

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Sl. No Name of Director Terms of appointment

wherever necessary, the re-appointment of Mr. P.R.Venketrama Raja, as Vice Chairman and Managing Director of the Company for a period of five years with effect from March 23, 2005 by the Board of Directors at its meeting held on February 23, 2005 be and is hereby approved.

3. Mr. V. Jagadisan Annual General Meeting of the Company dated August 11, 2003 wherein the Shareholders: Resolved that Mr. V. Jagadisan who retires by rotation be and is hereby re-appointed as Director of the Company.

4. Mr. S.S. Ramachandra Raja Annual General Meeting dated September 9, 2002 wherein the Shareholders: Resolved that Mr. S. S. Ramachandra Raja who retires by rotation be and is hereby re-appointed as Director of the Company.

5. Mr. N.K. Shrikantan Raja Annual General Meeting dated July 28, 2004 wherein the Shareholders: Resolved that Mr. N. K. Shrikantan Raja who retires by rotation be and is hereby re-appointed as Director of the Company.

6. Mr. M.M. Venkatachalam Annual General Meeting dated August 11, 2003 wherein the Shareholders: Resolved that Mr. M. M. Venkatachalam who retires by rotation be and is hereby re-appointed as Director of the Company.

Corporate Governance The provisions of the Clause 49 of the Listing Agreement entered into with the Stock Exchanges with respect to corporate governance are applicable to us. We comply with such provisions, including with respect to the appointment of independent Directors to our Board and the constitution of the Investor Grievances Committee.

Audit Committee The Audit Committee was constituted by our Directors vide their Board meeting held on January 25, 2001. The purpose of the Audit Committee is to ensure the objectivity, credibility and correctness of our financial reporting and disclosure processes, internal controls, risk management policies and processes, tax policies, compliance and legal requirements and associated matters. The Audit Committee currently consists of Mr. S.S. Ramachandra Raja, Mr. M.M. Venkatachalam and Mr. V. Jagadisan. The primary objective of the Audit Committee is to monitor and provide effective supervision of the financial control and reporting system. The Audit Committee reviews the following: • Internal audit reports. • Auditor’s Report on the financial statements. • Strength and weakness of the internal controls and recommendations relating thereto. • Compliance with accounting standards • Capital Expenditure • Monitoring of Cost Control measures Compensation Committee The Compensation Committee was constituted by our Directors vide their Board meeting held on October 22, 2000. The function of the Compensation Committee is to grant options to eligible employees under the various Employees Stock Option Schemes and to decide on the exercise price in accordance with the applicable scheme. The Compensation Committee currently consists of Mr. P.R. Ramasubrahmaneya Rajha, Mr. V.Jagadisan and Mr. M.M.Venkatachalam.

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The primary objective of the Compensation Committee is to constantly review the compensation levels across various positions in the Company, in order to ensure that the Company offers attractive compensation in line with the industry standards, to retain and develop best talent.

Shareholders Committee The Shareholders Committee was constituted by our Directors vide their Board meeting held on January 25, 2001. The main focus of the Shareholders Committee’s is on the basic rights of the Shareholders including, transfer of shares, transmission / transposition of shares, issue of duplicate / split share certificates, sub division / consolidation of shares, consolidation of folios, dematerialisation of physical shares / rematerialisation of electronic shares, and such other issues relating to shares. Currently, Mr. P.R. Ramasubrahmaneya Rajha, Mr. P.R.Venketrama Raja and Mr. N.K. Shrikantan Raja are the members of the Committee. Our Company Secretary is the Secretary of the Committee. Allotment Committee The Allotment Committee was constituted by our Directors vide their Board meeting held on March 7, 2003. This Committee is responsible for the allotment of shares under ESOP 2000/ESOS 2003. Currently, the members of the Allotment Committee are Mr. P.R.Venketrama Raja, Mr.M.M.Venkatachalam and Mr. V.Jagadisan.

The terms of reference of the Allotment Committee is given below: The Allotment Committee is authorized to allot shares and or securities of the Company including under any employees stock option schemes (ESOS) /employees stock purchase schemes (ESPS)/ public issue of equity shares/rights issue of equity shares / bonus issue of equity shares/ preferential issue of equity shares and warrants/ debenture issues / issue of preference shares/ADR/GDR and any other issue of shares and or securities made by the company from time to time. Remuneration Committee The Remuneration Committee was constituted by our Directors vide their Board meeting held on February 23, 2005. The Remuneration Committee is responsible for the determination of remuneration package of all the Directors of the Company. Currently, Mr. M.M.Venkatachalam, Mr. V.Jagadisan and Mr. N.K. Shrikantan Raja are the other members of the Remuneration Committee. Shareholding of our Directors Our Articles of Association do not require our Directors to hold any Equity Shares in our Company. The following table details the shareholding of our Directors in their personal capacity and/or either as sole or first holder.

Name of Directors

Number of Equity Shares

(Pre-Issue)

Percentage of shares held (Pre-Issue)

Number of Equity Shares

(Post-Issue)*

Percentage of shares held (Post-Issue)

Mr. P.R. Ramasubrahmaneya Rajha 281,875 2.29 352,344 2.29 Mr. P.R. Venketrama Raja 510,075 4.15 637,594 4.15 Mr. S.S. Ramachandra Raja 24,126 0.20 30,158 0.20 Mr. N.K. Shrikantan Raja 5,361 0.04 6,702 0.04

* The number of shares for the column entitled Number of Equity Shares (Post-Issue) has been calculated assuming full subscription to rights entitlement in this Issue.

Interest of Promoters, Directors and significant Shareholders Except as stated in “Related Party Transactions” on page 83 of this Letter of Offer and to the extent of their shareholding in our Company, our Promoters do not have any other interest in our business. The Directors of our Company do not have any interest in our Company other than to the extent of the remuneration or benefits to which they are entitled as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business and to the extent of the Equity Shares held by them in the Company, or funds controlled by them, if any, and options granted to them under the ESOP.

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We have not granted any options to our Directors under ESOP 2000, ESOS 2003, ESOS 2004 or ESPS 2004. Except as stated otherwise in this Letter of Offer, we have not entered into any contract, agreement or arrangement during the preceding 2 years from the date of this Letter of Offer in which the Directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them. There have been no changes to our Board of Directors during the last 3 years. No other persons have significant rights in our Company under the terms of our Articles of Association. Management Organisation Structure The organisation structure of the senior management (including Presidents/Vice Presidents) is presented below:

Organizational Structure

Kamesh RamamoorthyExecutive Vice President -

Enterpirse Solutions

S ParthasarathyExexcutive Vice President -

Virtual Shoring Services

S ParameswarExecutive Vice President -

SCN & CRM& India Operations

K RamachandranSenior Vice President -

Finance

Girish A MenonSenior Vice President -

Corporate Services

Geography Heads

P R Venketrama RajaVice Chairman, Managing Director & CEO

Ramco Systems Limited

Key Managerial Personnel The details of our key managerial personnel are as follows: Mr. Kamesh Ramamoorthy, 44 years, Executive Vice President is the Head of Enterprise Solutions Business Unit. He was awarded a Bachelors of Engineering degree in electronics and communications from BITS, Ranchi, in 1982. Prior to joining us as executive vice president, he was the country head of Ramco USA and was primarily responsible for the growth of the revenues of the subsidiary to USD 21 million. He has also worked with Ramco Systems Limited in Switzerland. Prior, to joining us, he worked with Wipro Infotech Limited, Bombay in various positions, including in systems software, business development, and as regional manager. He was awarded the best business development manager by Sun Microsystems Inc. for growth of Sun servers and software in India. He is also a member of the “Who’s Who Executive Club of the USA.” His remuneration for the year ended March 31, 2005 was Rs. 3.42 million Mr. S. Parthasarathy, 46 years, Executive Vice President is the Head of Corporate R&D and Virtual Shoring Solutions Business Unit. He was awarded his degree of Bachelor of Science in applied science from Madurai University in 1979. He obtained a Bachelor of Engineering degree in electrical technology and electronics from the Indian Institute of Science, Bangalore. He also received his Masters of Science in Computer Science from Virginia Tech in the USA in 1991. Prior, to joining us, in 1997, he worked as Senior Information Officer at the World Bank, Washington D.C. and as a systems analyst with Tat Burroughs Limited, prior to joining the World Bank. He has completed a thesis on “Specifications and storage of domain knowledge based on database schema”. His remuneration for the year ended March 31, 2005 was Rs. 3.57 million Mr. Parmeswar Subramanian, 49 years, Executive Vice President is the Head of Services and Systems Integration. He has done his Bachelor of Technology in Chemistry, from Madras University in 1977 and also has a MBA (PGDBM) from Xavier Institute, Jamshedpur in 1979. He has been working with our Company since 1994. Prior to joining us, he was working with Digital GlobalSoft Limited (now known as HP GlobalSoft Limited), Bangalore as a Sales Operations Manager. He started his career in Ramco as the Head of Enterprise Networking, went on to become the Country Head, of Ramco USA and also head of the global CRM practice. His remuneration for the year ended March 31, 2005 was Rs. 3.68 million

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Mr. K. Ramachandran, 50 years, Senior Vice President-Finance obtained a Bachelors Degree in physics in 1975 and became a member of the Institute of Chartered Accountants of India in 1979. He has been working with our Company since 1996. Prior to joining us he was working for S&S Power Switch Gear Limited as the General Manager, Finance. He is also an Associate Member of the Institute of Chartered Accountants of India and also the Internal Auditors Association. He is also a registered faculty member at the Institute of Certified Financial Analysts of India. He has wide experience in mergers and amalgamations and handling capital issues. His remuneration for the year ended March 31, 2005 was Rs. 3.08 million Mr. Girish Menon, 48 years, Senior Vice President-Corporate Services is responsible for management control and planning functions. He has completed his Bachelors degree in chemical engineering from the Department of Chemical Technology, University of Bombay in 1979 and his masters in management studies from the Jamnalal Bajaj Institute of Management Studies, University of Bombay in 1981. He has been working with our Company since 1996. Prior to joining our Company, he was employed with Modi Olivetti Ltd, Mumbai and was responsible for the their western region operations. He is also a member of Tamil Nadu State Council of Confederation of Indian Industry (CII). His remuneration for the year ended March 31, 2005 was Rs. 2.97 million All the abovementioned key managerial personnel are permanent employees of our Company. The remuneration of each of our key personnel is as per the statement pursuant to Section 217(2A) of the Companies Act and the Companies (Particulars of Employees) Rules, 1975.

Shareholding of Our Key Managerial Personnel in our Company Our Articles of Association do not require our key managerial personnel to hold any Equity Shares in our Company. The following table details the shareholding of our key managerial personnel in their personal capacity and either as sole or first holder. Sl.No. Name of Key Managerial Personnel Number of Equity Shares 1. Mr. Kamesh Ramamoorthy 10,006 2. Mr. S.Parthasarathy 12,500 3. Mr. Parameswar Subramaniam 7,573 4. Mr..K.Ramachandran 4,435 5. Mr. Girish Menon 6,631 Total 39,063 Inventive Plan for Our Key Managerial Personnel As part of our initiative to reward employees, we introduced a Performance Linked Variable Compensation (“PLVC”) with effect from April 1, 2004. PLVC is linked to a ‘Task Based Evaluation System’ wherein all the results achieved by the individuals is taken into consideration for arriving at the performance level. PLVC is paid based on the performance level of an individual employee and the performance of the Company. Interest of Key Managerial Personnel The key managerial personnel of our Company do not have any interest in our Company other than to the extent of the remuneration or benefits to which they are entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business and to the extent of the Equity Shares held by them in the Company, if any, and options granted to them under the ESOP 2000 and ESOS 2003. For more details on the options granted under ESOP 2000 and ESOS 2003 to certain key managerial personnel, please refer to the sub-section titled “Details regarding options granted to Directors and key managerial employees” on page 16 of this Letter of Offer Details of loans taken by key managerial personnel in our Company Except as stated otherwise in this Letter of Offer, we have not entered into any contract, agreement or arrangement during the preceding 2 years from the date of this Letter Of Offer in which the key managerial personnel are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them.

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Changes in our Key Managerial Employees during the last three years

Name of Key Managerial Employees Position Held

Date of Appointment Date of Change Reason

Mr. Kashinath Ramachandran

Vice President –HR

July 1, 1993 June 15, 2005 Retired

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Promoters I. Individual Promoters Our founder promoters are Mr. P R Ramasubrahmaneya Rajha and his son Mr. P R Venketrama Raja.

Mr. P. R. Ramasubrahmaneya Rajha, 70 years, Chairman, is one of the founding promoters of the Company. For more details on him, please refer to the section titled “Brief Biography of our Directors” on page 77 of this Letter of Offer. His driving license number is R/TN/67Z/001576/2003. His Indian voter ID is TN/35/209/0213322.

Mr. P. R. Venketrama Raja, 46 years, Vice Chairman and Managing Director, is one of the founding promoters of the Company. For more details on him, please refer to the section titled “Brief Biography of our Directors” on page 77 of this Letter of Offer. His driving license number is R/TN/0672/001728/1998. He does not have an Indian voter ID.

We confirm that the Permanent Account Number, Bank Account Number and Passport Number of the individual Promoters have been submitted to the BSE, NSE and MSE at the time of filing this Letter of Offer with these Stock Exchanges. II. Body Corporate Promoters In addition to the individual Promoters, the following bodies corporate are also Promoters of the Company: 1. Madras Cements Limited 2. Rajapalayam Mills Limited 3. Ramco Industries Limited 4. The Ramaraju Surgical Cotton Mills Limited Our Promoters, Mr. P. R. Ramasubrahmaneya Rajha and Mr. P. R. Venketrama Raja are in control of the above mentioned body corporates. 1. Madras Cements Limited (“MCL”)

MCL was incorporated on July 3, 1957 as a public limited company under the Companies Act, with its registered office at Ramamandiram, Rajapalayam 626 117 in Tamil Nadu.The Company received its certificate of commencement of business on July 31, 1957. MCL has been listed on the BSE since 1994, the NSE since 1994 and is also listed on the MSE. The main business of MCL is to manufacture cement and allied products, under the brand name ‘Ramco’. MCL is one of the largest cement companies in South India with four manufacturing facilities located in Tamil Nadu, Andhra Pradesh and Karnataka, with an aggregate installed capacity of 5.99 million tones. There has been no change in the management of MCL. Shareholding Pattern

The shareholding pattern of MCL as of June 30, 2005 is as set forth below:

Sl. No. Name of the Shareholder No of Shares Percentage A. PROMOTERS’ HOLDING: 1. Promoters: a.

Indian Promoters (including NRIs holding 6000 shares)

4,830,100

39.99

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Sl. No. Name of the Shareholder No of Shares Percentage b. Foreign Promoters Nil Nil 2. Persons acting in concert 289,860 2.40 Sub-Total 5,119,960 42.39

B. NON-PROMOTERS HOLDING 3. Institutional Investors: a. Mutual Funds and UTI 1,211,555 10.03 b. Banks, Financial Institutions, Insurance Companies,

Central/State Govt.Institutions/Non-Govt. Institutions)

2,147,702

17.78 c. FIIs 112,052 0.93 Sub-Total 3,471,309 28.74

4. Others: a. Private Corporate Bodies 989,970 8.20 b. Indian Public 2,432,573 20.14 c. NRIs/OCBs 57,938 0.48 d. Non-domestic companies 6,100 0.05 Sub-total 3,486,581 28.87 GRAND TOTAL 12,077,850 100.00

Board of Directors The directors on the board of MCL as on June 30, 2005 are:

1. Mr. P R Ramasubrahmaneya Rajha 2. Mr. N Vasudevan 3. Mr. M G Balasubramanian

4. Mr. B P Deshmukh 5. Dr.V Gauri Shanker

6. Mr. P R Venketrama Raja 7. Mr. R Nagarajan

Financial Performance The operating results of MCL for the last three years is set forth below:

(Rs. in million, except share data)

Particulars Year ended

March 31, 2005 Year ended


March 31,2003 Sales and other income 7,451 6,998 6,304 Profit/(Loss) after Tax (before adjustments) 559 334 130 Equity Capital (par value Rs.10 per Share) 121 121 121 Reserves 3,228 2,806 2,574 Earnings per share 46 27.61 107.17 Book value per share 274 237 2,193

The high and low for the equity shares of MCL in the last six months as quoted in the BSE and the NSE is provided below. The shares of MCL have not been quoted on the MSE in the last six months.

Month High Date Low Date BSE 1,522.90 September 6,

2005 936.00 May 3, 2005

NSE 1,516.45 September 6, 2005

942.90 May 3, 2005

Investors’ complaints as on June 30, 2005 – Nil

2. Rajapalayam Mills Limited (“RML”)

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Rajapalayam Mills Limited was incorporated on February 24, 1936 as a public limited company under the Companies Act, 1913. The registered office of RML is situated at P.A.C.Ramasamy Raja Salai, Post Box No.1, Rajapalayam, 626 117 Tamil Nadu. RML received its certificate of commencement of business on December 22, 1936. RML has been listed on the BSE since September 18, 2003 and is also listed on the MSE. RML is engaged in the business of manufacturing cotton yarn. There has been no change in the management of RML.

Shareholding Pattern The equity shareholding pattern of RML as on June 30, 2005 was as follows:

Name of the Shareholder No of Shares Percentage Promoters’ Holding Indian Promoters Mr. P.R. Ramasubrahmaneya Rajha 238,770 6.80 Mr. .P.R.Venketrama Raja 372,280 10.60 Madras Cements Ltd 362,800 10.33 Ramco Industries Ltd 423,680 12.06 The Ramaraju Surgical Cotton Mills Ltd 150,100 4.27 Sri Vishnushankar Mill Ltd 14,870 0.42 Sandhya Spinning Mill Ltd 250 0.01 Other Promoters 191,910 5.46 Persons Acting in Concert 134,110 3.82 Others 1,623,810 46.22 (i)Private Corporate Bodies 74,078 2.11 (ii)Indian Public 1,504,201 42.82 (iii)NRIs 44,501 1.27 Total 3,512,580 100.00

Board of Directors

The directors on the board of RML as on June 30, 2005 are: 1. Mr. P.R.Ramasubrahmaneya Rajha

2. Mrs. R.Sudarsanam 3. Mr. P.R.Venketrama Raja 4. Mr. S.S.Ramachandra Raja 5. Mr. N.K.Ramasuwami Raja 6. Mr. K.T.Krishnan 7. Mr. P.Gurusamy Chettiar 8. Mr. P.S.Jaganatha Raja 9. Mr. N.R.K.Venkatesh Raja 10. Mr. V.S.Vemban Financial Performance The operating results of RML for the last three years is set forth below:





March 31, 2003 Sales and other income 1,550.40 1,333.98 1,223.26 Profit/(Loss) after Tax (before adjustments) 82.50 97.08 92.50 Equity Capital (par value Rs.10 per Share) 35.10 35.13 30.13 Reserves 851.30 819.80 696.28 Earnings per share 24 28 31 Book value per share 252.36 227 225

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The high and low for the equity shares of RML in the last six months as quoted in the BSE and MSE is provided below. The shares of RML have not been quoted on the MSE in the last six months. Month High Date Low Date BSE 731.90 September 8,

2005 312.15 May 3, 2005

There were no investor grievances during the year. Investors’ complaints as on June 30, 2005 – Nil 3. Ramco Industries Limited (“RIL”)

RIL was incorporated on January 27, 1965 under the name of Southern Asbestos Cements Limited as a public limited company under the Companies Act and received its certificate for commencement of business on March 12, 1965. On November 4, 1977 the name of the company was changed to Southern Asbestos Cement Limited. On June 30, 1988 the name of Southern Asbestos Cement Limited was changed to Ramco Industries Limited. Its registered office is situated at 47, PSK Nagar, Rajapalayam 626 108. RIL has been listed on the BSE since October 9, 2000, NSE since November 1996 and the MSE since March 29, 1966. The business of RIL is classified into the building products division, the cotton yarn division (100% EOU) and the windmills division. There has been no change in the management of RIL.

Shareholding Pattern The equity shareholding pattern of RIL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage A Promoters’ Holding 1. Indian Promoters Mr. P.R. Ramasubrahmaneya Rajha 227,750 5.26 Mrs. R. Sudarsanam 117,581 2.71 Mr. P.R. Venketrama Raja 264,250 6.10 M/s Rajapalayam Mills Limited 396,034 9.14 M/s Madras Cements Limited 668,625 15.43 Mrs. Nalini Ramalakshmi 147,084 3.40 Mrs. Saradha Deepa 146,584 3.38 Mrs. K.T. Rukmani Anni 84,574 1.95 M/s Ramco Management Pvt. Limited 90,290 2.08 Other Promoters 123,762 2.86 Sub-Total 2,266,534 52.30

2. Foreign Promoters 0 0 3. Persons acting in Concert 192,274 4.44 Sub-total 2,458,808 56.74

B Non-Promoters’ Holding 1. Institutional Investors A Mutual Funds & UTI 66,163 1.53 B Banks, financial Institutions, Insurance

Companies 370,384 8.55

Foreign Institutional Investors 16,750 0.39 Sub-total 453,297 10.47

2. Others A Private Corporate Bodies 142,010 3.28 B Indian Public 1,234,475 28.49 C NRI’s/OCB’s 34,508 0.79 D Others 10,055 0.23 Subtotal 1,421,048 32.79 Grand Total 4,333,153 100.00

Board of Directors

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The directors on the board of RIL as on June 30, 2005 are: 1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mr. S.S.Ramachandra Raja 4. Mr. N.K.Shrikantan Raja 5. Mr. S.Arjuna Raja 6. Mr. K.T.Ramachandran 7. Mr. M.G.Balasubramanian 8. Mr. R.Nagarajan Financial Performance The operating results of RIL for the last three years is set forth below:





March 31,2003 Sales and other income 2,085 1,727.1 1,536.4 Profit/(Loss) after Tax (before adjustments) 288 241 186 Equity Capital (par value Rs.10 per Share) 43 43 43 Reserves 1,782 1,543 1,338 Earnings per share 67 56 43 Book value per share 421.28 364.88 317.44

The high and low process for the equity shares of RIL in the last six months as quoted in the BSE and the NSE is provided below. The shares of RIL have not been quoted on the MSE in the last six months.

Month High Date Low Date BSE

1,241.00 September 12,

2005 700.00 May 2, 2005 NSE

1269.60 September 9,

2005 694.70 May 2, 2005 There were 10 investor grievances during the year 2004-05. All these complaints have been resolved. Investors’ complaints as on June 30, 2005 – Nil

4. The Ramaraju Surgical Cotton Mills Limited (“RSCML”)

RSCML was incorporated on February 20, 1939 as a public limited company under the name of ‘The Surgical Cotton Mills Ltd’. Subsequently, on June 22, 1943 the name of the company was changed to The Ramaraju Surgical Cotton Mills Limited. The Company commenced its business on February 7, 1940. Its registered office is situated at PAC, Ramasamy Raja Salai, Rajapalayam 626 117. RSCML has been listed on the MSE since 1944. RSCML is engaged in the business of producing cotton yarn, absorbent cotton wool, gauze and bandages, plaster of paris and plaster of paris bandages. There has been no change in the management of RSCML. Shareholding Pattern The shareholding pattern of RSCML as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage I Promoters’ Holding A Indian Promoters 1 Shri P.R. Ramasubrahmaneya Rajha 15,510 1.57 M/s.Rajapalayam Mills Ltd 61,000 6.18

82

Sl. No. Name of the Shareholder No of Shares Percentage Smt.Nalina Ramalakshmi 249,950 25.33 2 Smt. Saradha Deepa 20,350 2.06 3 Smt.Sethuramammal R 25,640 2.60 4 Smt.Chittammal R 20,150 2.04 5 Smt.Sudarsanam R 11,740 1.19 6 Other Promoters 26,910 2.73 Sub-total 431,250 43.71 B Foreign Promoters Nil Nil C Persons acting in Concert 38,210 3.87 Sub-total 469,460 47.58 II Non-Promoters’ Holding A Institutional Investors Nil Nil B Mutual Funds & UTI Nil Nil C Banks, financial Institutions, Insurance Companies 21,690 2.20 D Foreign Institutional Investors Sub-total 21,690 2.20 III Others A Private Corporate Bodies 20,540 2.10 B Indian Public 474,750 48.12 C NRI’s/OCB’s Nil Nil D Others Nil Nil Subtotal 495,490 50.22 Total 986,640 100.00

Board of Directors

The directors on the board of RSCML as on June 30, 2005 are:

1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R. Chandrasekaran 3. Mr. P.R.Venketrama Raja 4. Mrs. R.Sudarsanam 5. Mrs. R.Nalina Ramalakshmi 6. Mr. N.R.K.Ramkumar Raja 7. Mr. M.R.S.Radhakrishna Raja 8. Mr. N.K.Shrikantan Raja 9. Mr. P.J.Alaga Raja

Financial Performance The operating results of RSCML for the period March 31, 2003 to March 31, 2005 is set forth below:





March 31, 2003 Sales and other income 655 581 422 Profit/(Loss) after Tax (before adjustments) 23.24 7 9 Equity Capital (par value Rs.10 per Share) 10 10 10 Reserves 129.31 109 108 Earnings per share 23.56 4.45 9.05 Book value per share 121.36 92.23 102.21

The shares of RSCML have not been quoted on the MSE in the last six months. Investors’ complaints as on June 30, 2005 – Nil

83

Related Party Transactions As per Accounting Standard (AS 18) issued by the Institute of Chartered Accountants of India, our related parties are given below:

a. Subsidiary Companies (“Subsidiaries”):

• Ramco Systems Corporation, USA, • Ramco Systems Ltd., Switzerland, • Ramco Systems Pte Ltd., Singapore. • Ramco Systems Sdn Bhd., Malaysia, • RSL Enterprise Solutions (Pty) Ltd., South Africa • Ramco Infotech Solutions Ltd., Chennai

b. Enterprises over which the above persons exercise significant influence and with which we had

transactions during the year (“Group”): • Rajapalayam Mills Ltd. • Madras Cements Ltd. • Ramco Industries Ltd. • The Ramaraju Surgical Cotton Mills Ltd.

c. Key Management Personnel and Relatives (“KMP”):

• Shri.P.R.Ramasubrahmaneya Rajha • Shri.P.R.Venketrama Raja

Our transactions with the above Related Parties for the six months ended September 30, 2005 are given below:

Rs. in million. Type of transaction Subsidiaries Group KMP Export of software & Services

Transaction during the six months Outstanding as on September 30, 2005

136.37 45.87

-- --

-- --

Sale of goods & services


-- --

2.15 0.01

-- --

Royalty Transaction during the six months Outstanding as on September 30, 2005

22.76 16.36

-- --

-- --

Purchase of Assets Transaction during the six months Outstanding as on September 30, 2005

-- --

-- --

-- --

Sale of Assets Transaction during the six months Outstanding as on September 30, 2005

-- --

-- --

-- --

Cost of services availed Transaction during the six months Outstanding as on September 30, 2005

3.12 123.05

-- --

-- --

Loan availed Transaction during the six months Outstanding as on September 30, 2005 (Including interest due)

-- --

200.00 135.73

-- --

Loans given Transaction during the six months Outstanding as on September 30, 2005 (Including interest due)

-- --

-- 1.40

-- --

Investments Transaction during the six months Outstanding as on September 30, 2005

-- --

-- --

-- --

Interest Expenses Income

-- --

4.81 --

-- --

Our transactions with the above Related Parties for the year ended March 31, 2005 are given below:


Transaction during the year Outstanding as on March 31, 2005

515.43 219.27

-- --

-- --



-- --

10.39 0.21

-- --

84

Type of transaction Subsidiaries Group KMP

Royalty Transaction during the year Outstanding as on March 31, 2005

42.99 --

-- --

-- --

Purchase of Assets Transaction during the year Outstanding as on March 31, 2005

-- --

0.22 0.01

-- --

Sale of Assets Transaction during the year Outstanding as on March 31, 2005

-- --

-- --

-- --

Cost of services availed Transaction during the year Outstanding as on March 31, 2005

73.70 140.13

-- --

-- --

Loan availed Transaction during the year Outstanding as on March 31, 2005 (Including interest due)

-- --

597.00 150.00

-- --

Loans given Transaction during the year Outstanding as on March 31, 2005 (Including interest due)

1.49 --

-- 1.40

-- --

Investments Transaction during the year Outstanding as on March 31, 2005

0.50 41.43

-- --

-- --


-- 27.01

8.87 --

-- --

Preferential Issue Transaction during the year -- 147.41 54.98 Year ended March 31, 2004

Rs. in million Type of transaction Subsidiaries Group KMP

Export of software & Services


194.94 390.05

-- --

-- --



-- --

20.23 3.70

-- --


73.20 323.86

-- --

-- --


-- --

-- --

-- --


-- --

-- --

-- --


3.73 47.29

-- --

-- --

Loan availed Transaction during the year Outstanding as on March 31, 2004 (including interest due)

-- --

330.00

66.89

-- --

Loans given Transaction during the year Outstanding as on March 31, 2004 (including interest due)

356.02 484.10

-- 1.40

-- --


0.00 39.50

-- --

-- --


-- 20.94

9.65 --

-- --

85

Year ended March 31, 2003

Rs. in million Type of transaction Subsidiaries Group KMP

Export of software & Services


146.11 313.82

-- --

-- --



-- --

7.27 0.15

-- --


52.12 283.05

-- --

-- --


-- --

-- --

-- --


-- --

-- --

-- --


6.29 45.33

-- --

-- --

Loan availed Transaction during the year Outstanding as on March 31, 2003

-- --

113.00 93.00

-- --


40.94 124.54

-- 1.41

-- --

Investments Transaction during the year

Outstanding as on March 31, 2003 39.50 39.50

-- --

-- --


-- 5.14

8.27 --

-- --

86

Dividend policy The declaration and payment of dividends will be recommended by our Board of Directors and approved by our shareholders, in their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements and overall financial condition. In the past we have not declared any dividends to our Shareholders.

87

Exchange Rates and Currency of Presentation This Letter of Offer contains translations of some Rupee amounts, particularly into US Dollars and Swiss Francs which should not be construed as a representation that those Rupee or US Dollar amounts or Swiss Franc amounts could have been, or could be, converted into Indian Rupees or US Dollars or Swiss Francs, as the case may be, at any particular rate, the rates stated below, or at all. Except as otherwise stated in this Letter of Offer, all translations from Indian Rupees to US Dollars or Swiss Francs contained in this Letter of Offer have been based on the rate given by the Reserve Bank of India. The following table sets forth, for each period indicated, information concerning the number of Rupees for which one US Dollar could be exchanged at the rate given by the Reserve Bank of India. The row titled average in the table below is the average of the daily rate on the last day of each full month during the period. In this Letter of Offer, US Dollar amounts have been translated into Rupees for each period, and presented solely to comply with the requirements of the Clause 6.8.4 of the SEBI Guidelines. Investors are cautioned not to rely on such translated amounts.

Year ended March

31, 2002 Year ended March

31, 2003Year ended March

31, 2004Year ended March

31, 2005Period End 46.35 48.68 47.45 43.65Average 45.51 47.45 48.39 46.06Low 43.45 46.50 47.54 43.65High 46.55 48.68 48.85 47.45

88

SECTION V: FINANCIAL STATEMENTS The following financial statements are being presented in this Letter of Offer: 1. Unconsolidated Restated Financial Statements of Ramco Systems Limited, prepared in accordance with

Indian GAAP, as at and for the six month period ended September 30, 2005 and the years ended March 31 2005, 2004, 2003, 2002 and 2001.

2. Consolidated Financial Statements, as Restated, prepared in accordance with Indian GAAP, for the six

month period ended September 30, 2005 and the years ended March 31 2005, 2004, 2003 and 2002 for Ramco Systems Limited, Ramco USA, Ramco Switzerland, Ramco Singapore, Ramco Malaysia, Ramco RSA, Ramco Infotech, Ramco Redlex and Ramco Triamun.

The aforesaid financial statements have been presented in the following manner:

Annexures Particulars Page Nos.

Auditor’s Report 89 I to VIII Unconsolidated Restated Financial Statements of Ramco Systems Limited,

prepared in accordance with Indian GAAP, as at and for the six month period ended September 30, 2005 and the years ended March 31, 2005, 2004, 2003, 2002 and 2001

92

X to XIV Consolidated Financial Statements of Ramco Systems Limited, as Restated, prepared in accordance with Indian GAAP, for the six month period ended September 30, 2005 and the years ended March 31 2005, 2004, 2003 and 2002

116

Statement of Profit and Loss, Statement of Assets and Liabilities, Significant Accounting Policies and Notes to Accounts of the Subsidiaries, being

XV to XVII (i) Ramco USA 129 XVIII to XX (ii) Ramco Switzerland 134 XXI to XXIII (iii) Ramco Singapore 139

XXIV to XXVI (iv) Ramco Malaysia 144 XXVII to XXIX (v) Ramco RSA 148 XXX to XXXII (vi) Ramco Infotech 152

89

Unconsolidated Restated Financial Statements of Ramco Systems Limited, prepared in accordance with Indian GAAP, as at and for the six month period ended September 30, 2005 and the years ended March 31 2005, 2004, 2003, 2002 and 2001 and Consolidated Financial Statements, as Restated, prepared in accordance with Indian GAAP, for the six month period ended September 30, 2005 and the years ended March 31 2005, 2004, 2003 and 2002 for Ramco Systems Limited, Ramco USA, Ramco Switzerland, Ramco Singapore, Ramco Malaysia, Ramco RSA, Ramco Infotech, Ramco Redlex and Ramco Triamun. AUDITORS’ REPORT To The Board of Directors Ramco Systems Ltd., Chennai. Dear Sirs, 1. We have examined the financial information of Ramco Systems Limited (the Company) as set out in

Annexures I to IX attached to this report stamped and initialled by us for identification and as approved by the authorized Directors pursuant to the resolution of the Board of Directors of the Company, which has been prepared in accordance with Paragraph B (1) – Part II of Schedule II of the Companies Act, 1956 of India (‘the Act’) and the amendments thereof and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 issued by the Securities and Exchange Board of India (SEBI) on January 19, 2000 in pursuance to Section 11 of the Securities and Exchange Board of India Act 1992 and the related amendments from time to time thereto, to the extent applicable.

UNCONSOLIDATED FINANCIAL INFORMATION AS PER THE AUDITED FINANCIAL STATEMENTS 2. We have examined the attached restated Statement of Profits and Losses and the restated Cash Flow

Statement of the Company for each of the years ended March 31, 2005, 2004, 2003, 2002 and 2001 (Annexures I and III respectively) and for the six months ended September 30, 2005 and the restated Statement of Assets and Liabilities of the Company as at those dates (Annexure II) together referred to as “ Summary Statements” together with the Significant Accounting Policies and Notes to the Restated Financial Statements set out in Annexures IV and V respectively.

3. These Summary Statements have been extracted from the audited financial statements of the Company

for the respective periods audited by the respective auditors of each year. We were auditors of the Company for the years ended March 31, 2005 and 2004 and for the six months ended September 30, 2005. For the years ended March 31, 2003, 2002 and 2001 we have relied on the work of a firm of chartered accountants other than us, who were the auditors for the relevant periods.

4. In accordance with the aforesaid SEBI Guidelines, also attached are:

(i) Statement of accounting ratios based on the adjusted profits relating to earnings per share, net asset value and return on net worth - Annexure VI

(ii) Statement of Dividend – Annexure VII (iii) Statement of Tax Shelters – Annexure VIII (iv) Capitalisation statement – Annexure IX

CONSOLIDATED FINANCIAL STATEMENT 5. We have examined the attached summarized restated Consolidated Balance Sheet Statement of the

Company and its Subsidiaries and Associates, collectively referred to as ‘the Group’ as set out in Annexure XI as at March 31, 2005, 2004, 2003 and 2002 and for the six months ended September 30, 2005 and the related Consolidated Profit and Loss Account and the Consolidated Cash Flow Statement for the years / periods ended on those dates (Annexures X and XII respectively) collectively referred to as the ‘Consolidated Summary Statements’ together with the Significant Accounting Policies and Notes to the Consolidated Summary Statements set out in Annexures XIII and XIV respectively, stamped and initialled by us for the purpose of identification. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these summarized restated consolidated financial statements based on our audit.

90

6. The Consolidated Summary statement, as set out in Paragraph 5 above, have been prepared from the

Restated Financial Statement of the Company, its Subsidiaries and Associates. The financial statements of the Subsidiaries and Associates (Annexures XV to XXXII) for the six months ended September 30, 2005 have been audited by us and for the other periods, the said statements have been audited by their respective auditors, and our opinion is based solely on the reports of the respective auditors.

7. We conducted our audit in accordance with generally accepted auditing standards in India. These

standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared in all material respects, in accordance with and identified financial reporting framework and are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosure 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.

8. We have audited the financial statements of the Company for the years ended March 31, 2005 and 2004

and for the six months ended September 30, 2005. We did not audit the financial statements of the Company for the years ended March 31, 2003, 2002 and 2001, whose financial statements reflect the total assets and revenues as below. Rs. in million

Year ended March 31, Particulars 2003 2002 2001 Assets 3,462.29 2,921.47 2,937.87 Revenues 849.84 985.26 1,269.76

These financial statements of the parent company have been audited by other auditors, whose reports have been furnished to us and our opinion is based solely on the reports of other auditors

9. We did not audit the financial statements of the following Subsidiaries, whose financial statements

reflect the total assets and revenues as below:


Particulars 2005 2004 2003 2002 2001 Ramco Systems Sdn. Bhd., Malaysia Assets Revenues

21.44 46.65

29.83 92.29

18.22 57.05

44.94 65.62

39.28 57.75

Ramco Systems Pte Ltd., Singapore Assets Revenues

19.23 73.67

21.44 72.72

20.18

102.64

35.04

160.95

25.38 91.29

Ramco Systems Ltd., Switzerland Assets Revenues

121.79 245.07

456.93 227.61

399.68 220.06

430.66 274.25

398.85 234.37

RSL Enterprise Solutions Pty Ltd., South Africa Assets Revenues

13.20 253.79

1.66 16.03

Ramco Systems Corporation, USA Assets Revenues

894.38 543.63

886.12 518.26

829.19 701.34

These financial statements of the Subsidiaries have been audited by other auditors whose reports have been furnished to us and our opinion is based solely on the report of other auditors.

10. We did not audit the financial statements of the following Associates, whose financial statements reflect

the total assets and revenues as below:

91

Rs. in million Period/Year ended December 31,

Particulars 2004 2003 2002 Triamun Ramco Healthcare Systems Ltd., Swiss

Assets Revenues

35.31 101.77

31.36 79.91

19.06 37.62

Period/Year ended February 28, 2005 2004

Redlex 47 (Pty) Ltd, South Africa

Assets Revenues

51.67 182.94

- -

These financial statements of the Associates have been audited by other auditors whose reports have been furnished to us and our opinion is based solely on the report of other auditors.

11. The Consolidated Financial Statements have been prepared by the Company’s management in

accordance with the requirements of the relevant Accounting Standards (AS) issued by the Institute of Chartered Accountants of India, being AS 21 – “Consolidated Financial Statements” and AS 23 – “Accounting for Investments in Associates in Consolidated Financial Statements”.

12. In our opinion, the financial information of the Company, as attached to this report, as mentioned in

paragraph 2 above, after making groupings/ adjustments have been prepared in line Paragraph B (1) – Part II of schedule II of the Act and the SEBI Guidelines.

13. This report is intended solely for your information and inclusion in the Draft Letter of Offer in

connection with the proposed Rights Issue of the Company and is not be used, referred to or distributed for any other purpose without our prior written consent.

For CNGSN & Associates, Chartered Accountants, C.N.GANGADARAN, Partner Membership Number: 011205 Place: Chennai Date: November 16, 2005

92

Annexure I RAMCO SYSTEMS LIMITED, INDIA STATEMENT OF PROFIT AND LOSSES (AS RESTATED)

Rs. in million


Six months ended

September 30, 2005 2005 2004 2003 2002 2001

Income: Sales 651.25 1154.81 823.09 810.25 938.37 1202.34Other Income 10.33 73.01 36.09 39.59 46.89 67.42Total Income 661.58 1,227.82 859.18 849.84 985.26 1,269.76 Expenditure Cost of Resale Material 206.48 314.91 253.22 365.15 372.24 551.28Employee Compensation & Benefits 326.17 543.13 341.56 351.51 350.84 313.51Sales & Marketing Expenses 6.38 30.46 70.51 25.87 25.16 20.01Administrative & Other Expenses 100.26

184.30 248.42 168.16 220.16 192.20

Interest & Finance Charges 60.97 113.81 119.51 68.92 52.90 20.97Depreciation & Amortisation 88.91 169.83 158.63 143.42 51.58 159.72Total Expenditure 789.17 1,356.44 1,191.85 1,123.03 1,072.88 1,257.69Profit/(Loss) before Tax & ExtraordinaryItems

(127.59) (128.62) (332.67) (273.19) (87.62) 12.07

Extraordinary Items - 274.98 - - - -

Profit/(Loss) before Tax (127.59) (403.60) (332.67) (273.19) (87.62) 12.07 Impact of material adjustment and prior period items

- - (15.97) - - (0.59)


93

Annexure II RAMCO SYSTEMS LIMITED, INDIA STATEMENT OF ASSETS AND LIABILITIES (AS RESTATED)


As at September

30, 2005 2005 2004 2003 2002 2001

A. Fixed Assets Gross Block 2,125.35 2,113.42 1,958.54 1,333.74 1,313.81 639.38 Less : Depreciation 693.61 605.62 479.52 378.84 305.23 255.29 Net Block 1,431.74 1,507.80 1,479.03 954.90 1,008.58 384.09 Capital Work in Progress 171.12 - 85.63 - - 5.55B. Investments 1,222.45 1,222.45 834.41 794.41 754.91 754.91 C. Current Assets, Loans and

advances

Inventories 22.97 27.46 23.64 43.70 37.79 76.76 Sundry Debtors 320.26 400.64 909.64 852.60 629.59 688.78 Cash and Bank Balances 299.63 83.09 125.05 99.43 135.81 457.20 Loans and Advances 114.23 107.11 568.85 200.12 186.08 228.75 Other Current Assets 11.44 14.21 18.24 14.18 2.67 6.96 768.54 632.50 1,645.43 1,210.03 991.94 1,458.45 D. Liabilities and Provisions Secured Loans 738.01 510.48 327.37 356.28 355.72 206.09 Unsecured Loans 1,057.05 1,027.50 880.55 620.55 60.00 111.49 Current Liabilities and

Provisions 463.68 367.47 314.30 312.57 193.03 262.43

2,258.74 1,905.45 1,522.22 1,289.40 608.75 580.01 E. Net worth 1,335.11 1,457.30 2,522.27 1,669.94 2,146.68 2,022.99 F. Represented by 1. Share capital 123.18 122.84 115.97 77.68 77.68 77.68 2. Net Reserves 1,343.31 1,334.46 3,110.37 2,407.78 2,428.07 2,542.61 Less: Misc Expenses not

written off 460.11 276.83 597.30

Less: Profit & Loss account 131.39 - 704.07 355.42 82.24 Net worth 1,335.11 1,457.30 2,522.27 1,669.94 2,146.68 2,022.99

94

Annexure III RAMCO SYSTEMS LIMITED, INDIA Cash Flow Statement (As Restated)

Rs. in million


Six months ended

September 30, 2005 2005 2004 2003 2002 2001

A Cash Flow From Operating Activities Net Profit / (Loss) before tax (127.59) (403.60) (332.67) (273.18) (87.62) 11.48 Add: Interest 60.97 113.81 119.51 68.92 52.90 20.96 (66.62) (289.79) (229.14) (204.27) (34.73) 32.44 Add: Depreciation and

Amortisation 88.91 169.83 158.63 143.42 51.58 50.57

Add: Extraordinary Expenditure - 274.98 - - - - 22.29 155.02 (70.51) (60.85) 16.85 83.01 Less: Interest Received 1.72 30.78 24.51 10.11 22.34 50.73 Profit on sale of assets, net (0.63) (3.89) (1.13) (0.66) 0.01 (0.96) Miscellaneous Income 8.60 41.91 11.57 29.37 24.06 16.61 Operating Profit before

Working Capital Changes 12.59 86.22 (105.46) (99.67) (29.56) 16.63

Less: Increase / Decrease in

Current assets:

Trade and Other receivables (73.24) 418.74 425.78 237.05 (101.85) 314.57 Inventories (4.49) 3.82 (20.06) 5.90 (38.96) 34.71 Other current assets (other than

Cash and Bank) (2.77) (4.03) 4.07 11.50 (4.28) 3.64

93.10 (332.31) (515.25) (354.12) 115.54 (336.29) Add: Increase/Decrease in

Current Liabilities:

Trade Payables & Taxes 96.21 (15.06) 1.73 119.54 (69.40) (82.17) Bank Borrowings (0.28) (43.70) (24.33) 65.78 153.92 (1.13) Cash generated from operations 189.03 (391.07) (537.85) (168.80) 200.05 (419.59) Interest payments 60.97 113.81 119.51 68.92 52.90 20.96 Net Cash (used in) / from

operating activities 128.06 (504.88) (657.36) (237.72) 147.16 (440.55)

B. Cash Flow from Investing Activities: Purchase of Fixed assets (185.74) (243.00) (50.64) (53.96) (187.79) (48.99) Investment in Companies 39.50 (322.44) (39.50) - - Miscellaneous Expenditure - 22.40 (242.42) (274.03) (223.18) Less: Sale of fixed assets 1.77 5.03 2.41 3.07 2.61 2.66 Interest received 1.72 30.78 24.51 10.11 22.34 50.73 Miscellaneous Income 8.60 41.91 11.57 29.37 24.06 16.62 Profit on sale of assets, net (0.63) (3.89) (1.13) (0.66) 0.01 (0.96) Net cash (used in) / from

Investing Activities (174.28) (129.67) (313.32) (293.98) (412.79) (203.12)

C. Cash Flow from Financing Activities

95

Proceeds from issue of share

capital 9.20 218.83 740.88 - - -

Proceeds from secured borrowings

501.35 251.71 - 154.01 1.25 128.72

Proceeds from unsecured borrowings - for R&D activites

- 190.80 243.80 247.90 - -

Proceeds from unsecured borrowings -for others

400.00 413.70 156.20 312.65 50.00 160.00

Less: Repayment of finance

Liabilities 273.54 24.90 4.59 (219.23) (5.53) 25.93

Repayment of unsecured borrowings

370.45 457.55 140.00 - (101.49) 36.64

Income Tax 3.80 - - - - 1.65 Net Cash from financing

activities 262.76 592.59 996.29 495.33 (55.78) 224.50

Net Increase / (Decrease) in cash and cash equivalents

216.54 (41.96) 25.61 (36.36) (321.41) (419.17)

Cash and Cash equivalents as on April 1, 2005

83.09 125.05 99.44 135.81 457.22 876.39

Cash and Cash equivalents as on September 30, 2005

299.63 83.09 125.05 99.44 135.81 457.22

96

Annexure IV RAMCO SYSTEMS LIMITED, INDIA Significant Accounting Policies I. Basis of Preparation The financial statements are prepared under the historical cost convention in accordance with the Generally Accepted Accounting Principles (GAAP) and materially comply with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. All income and expenditure having a material bearing on the financial statements are recognized on accrual basis. II. Revenue Recognition A. Software & Related Services

i) License Fees

License Fee revenue is recognized on delivery of the software.

ii) Implementation Fees

Implementation Contracts are either milestones based or time and material based. In case of milestone contract, revenue is recognized upon achievement of the milestones as per the terms of the contract. In case of time and material contracts, revenue is recognized based on billable time spent in the project, priced at the contractual rate.

iii) Annual Maintenance Contract

Revenue from Maintenance services is recognized on a pro-rata basis over the period of the contract. B. Value Added Resale Hardware & software Revenue from sales is recognized upon despatch of goods to customers. C. E-Commerce Revenue from the fixed price / fixed time frame contracts is recognized upon the achievement of specified milestones identified in the related contracts in accordance with the percentage of completion method. D. Other Income Interest on bank deposits is recognized on accrual basis. III. Fixed Assets and Depreciation A. Tangible Assets Fixed Assets are capitalized at historical cost and includes freight, installation cost, finance cost, taxes and duties and other incidental expenses incurred during the installation stage. Depreciation is charged on a pro-rata basis on the Straight Line Method as per the rates prescribed under Schedule XIV of the Companies Act, 1956. Individual assets not exceeding Rs.5,000/- are depreciated in full in the year of purchase. Assets acquired on Hire Purchase are capitalized at the gross value and interest thereon charged to Profit & Loss Account.

97

In respect of Assets leased prior to April 1, 2001, the lease rentals paid during the year are charged to Profit & Loss Account. In respect of assets leased on or after April 1, 2001, the accounting treatment prescribed by Accounting Standard 19 on "Leases” is followed. B. Intangible Assets Costs incurred in the development of ERP product, together with repository of new business components, upon completion of the development phase, have been classified and grouped as “Product Software” under Fixed Assets.

Similarly, costs incurred in the development of technology platform framework, which would enable the Company to provide solutions - both standard and customised – in an efficient manner, have been classified and grouped as “Technology Platform” under Fixed Assets, once the same is available for use.

The useful life of these assets is estimated as ten years and depreciation is charged accordingly. IV. Investments Long term investments are stated at cost and short term investments are valued at lower of cost and net realisable value. Diminution in value is provided for where the management is of the opinion that the diminution is of permanent nature. V. Inventories Inventories are valued at lower of cost and net realisable value. Cost includes cost incurred in bringing the inventories to their present location and condition and is determined based on FIFO method. VI. Foreign Currency Transactions The functional currency of the Company is Indian Rupee. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transaction. The monetary items denominated in the foreign currency at the year end are translated at the exchange rates prevailing on the date of the balance sheet or wherever forward contracts are booked, at the respective rates as per such forward contracts and the loss or gain arising out of such transactions is adjusted in the Profit & Loss Account. Exchange difference in respect of foreign currency liabilities incurred for acquiring fixed assets is added to the cost of respective fixed assets. VII. Translation of Financial Statements of Foreign Branch All income and expenditure transactions during the year are reported at a monthly moving average exchange rate for the respective periods. Monetary assets and liabilities are translated at the rate prevailing on the balance sheet date. Non-monetary assets and liabilities are translated at the rate prevailing on the date of the transaction and the balance in ‘head office account’ whether debit or credit, is reported at the amount of the balance in the ‘branch account’ in the books of the head office after adjusting for un-responded transactions. Net gain / loss on foreign currency translation is recognized in the Profit & Loss Account. VIII. Retirement Benefits Gratuity In accordance with the Indian law, the Company provides for gratuity, a defined benefit retirement plan (“The Gratuity Plan”), covering all employees. These employees are covered under the Group Gratuity Scheme of the LIC. The Gratuity is charged to Profit & Loss Account on the basis of year’s premium, computed by Life Insurance Corporation of India. Superannuation Apart from being covered under the Gratuity Plan described above, the senior officers of the Company are participants in a defined contribution benefit plan maintained by the Life Insurance Corporation of India. The plan is termed as superannuation plan to which the Company makes contributions based on a specified

98

percentage of each covered employee’s salary. The Company has no further obligations under the plan beyond its contributions. Provident Fund In addition to the above benefits, all employees receive benefits from a Provident fund, which is a defined contribution plan. Both the employee and employer each make monthly contributions to the plan equal to 12 % of the covered employee’s salary. These contributions are made to the employees’ provident fund maintained by the Government of India. The Company has no further obligations under the plan beyond its monthly contributions. Leave Encashment Leave encashment liability ascertained by actuarial valuation is provided in the books of accounts. IX. Earnings per share Profit after tax is adjusted for prior period adjustments and divided by the number of equity shares outstanding as on the Balance Sheet date.

X. Impairment of assets The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

99

Annexure V RAMCO SYSTEMS LIMITED, INDIA 1. Change in Accounting Policies: The Company has not changed any accounting policies in the last five years 2. Prior Period Items


Details

Six months ended

September 30, 2005 2005 2004 2003 2002 2001

On account of reversal of sales revenue, which have been wrongly accrued in respective years

- - (15.97) - - (85.21)

Charging off of expenditure deferred to subsequent periods, in the year of incurrence.

- - - - - (24.53)

Taking credit in P&L account the R&D expenditure amortized and charging the same to Capital Reserves

- - - - - 109.15

TOTAL - - (15.97) - - (0.59) 3. Fixed Assets

Rs. in million As at As at March 31,

Particulars September

30, 2005 2005 2004 2003 2002 2001 Gross Block 2,125.35 2,113.42 1,958.54 1,333.74 1,313.81 639.38 Less: Depreciation 693.61 605.62 479.52 378.84 305.23 255.29 Net Block 1,431.74 1,507.80 1,479.03 954.90 1,008.58 384.09 Capital Work in Progress 171.12 - 85.63 - - 5.55

4. Investments:


Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Investments in Subsidiaries (Trade – Unquoted):

Ramco Systems Corporation, USA

743.41 743.41 429.40 429.40 429.40 429.40

Ramco Systems Limited, Switzerland

441.70 441.70 288.67 288.67 288.67 288.67

Ramco Systems Pte Ltd, Singapore

18.62 18.62 18.62 18.62 18.62 18.62

Ramco Systems SDN BHD, Malaysia

18.22 18.22 18.22 18.22 18.22 18.22

RSL Enterprise Solutions (Pty) Ltd

0.00 0.00 0.00 - - -

Ramco Infotech Solutions Ltd

0.50 0.50 - - - -

Investments in others (Trade – Unquoted):

Triamun AG - 39.50 39.50 - - Investments in Mutual

100

As at March 31,

Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Funds – Short Term (Non trade-unquoted) Sundaram Money Fund Plan

- 40.00 - - -

Total 1,222.45 1,222.45 834.41 794.41 754.91 754.91

101

5. Inventory Rs. in million

As at March 31,

Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Resale Hardware & Software Materials

22.97 27.46 23.64 43.70 37.79 76.76

Total 22.97 27.46 23.64 43.70 37.79 76.76 (Valued at cost or Net realizable value whichever is lower) 6. Sundry Debtors


Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Outstanding for period exceeding 6 months

Subsidiaries 18.25 34.12 570.88 501.45 304.98 180.05 Others 47.85 42.35 32.49 83.00 73.55 93.06 Other debts Subsidiaries 43.99 136.13 143.04 95.42 121.98 141.74 Others 210.17 188.04 163.23 172.73 129.08 273.93 Grand Total 320.26 400.64 909.64 852.60 629.59 688.78

7. LOANS AND ADVANCES (Unsecured, Considered Good)


Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Advances recoverable in cash or in kind: To Subsidiaries To others

-59.47

-57.22

484.09 35.77

124.5436.48

79.11 71.76

109.12 86.70

Tax deducted at source 41.46 36.08 33.77 28.35 24.38 25.11 Deposits with government Departments and others

13.30 13.80 15.22 10.75 10.83 7.82

Total 114.23 107.11 568.85 200.12 186.08 228.75 8. OTHER CURRENT ASSETS


Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Prepaid Expenses 10.77 13.90 17.78 13.97 2.65 3.61 Interest Accrued 0.67 0.31 0.46 0.21 0.02 3.34 Total 11.44 14.21 18.24 14.18 2.67 6.96 9. SHARE CAPITAL


Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Authorized Share capital 30,000,000 equity shares of Rs 10/- each

300.00 150.00 150.00 150.00 150.00 150.00

Issued Share capital 12,632,232 equity shares of Rs 10/- each

126.32 125.97 119.66 80.81 80.81 80.81

Subscribed Share capital

102

As at March 31,

Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 12,632,232 equity shares of Rs 10/- each

126.32 125.97 119.66 80.81 80.81 80.81

Paid up capital 12,283,004Equity shares of Rs 10/- each fully paid up

122.83 122.48 116.18 77.33 77.33 77.33

Add: Forfeited Shares 0.35 0.35 0.35 0.35 0.35 0.35 Less: Calls in arrears - - (0.56) - - - Total 123.18 122.84 115.97 77.68 77.68 77.68 Of the above: 43,33,153 equity shares of face value Rs 10/- each have been allotted to the shareholders of Ramco Industries Limited credited as fully paid up pursuant to the approval of the scheme of arrangement (De-merger) for the transfer of software business undertaking of Ramco Industries Limited to Ramco Systems Limited by the Honourable High Court of Madras, vide order dated December 24, 1999. 23,76,719 equity shares have been allotted to M/s. Ramco Industries Limited as fully paid up shares of face value of Rs 10/- each at a premium of Rs 293/- per share pursuant to a contract for the transfer of its entire investment in the overseas subsidiary companies without payment being received in cash. The above allotment has been duly approved by the Shareholders of the Company in the Extra ordinary general Meeting held on November 10, 1999 and by the Reserve Bank of India. 10. SHARE PREMIUM ACCOUNT


Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Balance in Share premium account

1,343.31 1,334.46 3,110.37 2,407.78 2,407.78 2,407.78

11. SECURED AND UNSECURED LOANS


Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Secured Loans: Bank Borrowings 201.37 201.65 245.36 269.69 203.92 50.00 Term Loan from Housing Development Finance Corporation Ltd

- 10.04 12.00 15.71 22.13 26.89

Sundaram Home Finance Ltd - 2.42 3.18 3.31 27.95 28.72 State Bank of Mauritius - - - - 100.00 100.00 Housing Development Finance Corporation Ltd

33.25 44.33 66.50 66.50 - -

Standard Chartered Bank - 250.00 - - - - Federal Bank 250.00 - - - - - UTI Bank Ltd 250.00 - - - - - Hire Purchase Loans 3.39 2.04 0.33 1.07 1.73 0.48 Debentures - - - - - - TOTAL 738.01 510.48 327.37 356.28 355.72 206.09 Unsecured Loans: From Banks – Short term Loans 775.05 627.50 527.55 477.55 60.00 110.00 From Directors - - - - - 1.49 From Others 282.00 400.00 353.00 143.00 - - TOTAL 1,057.05 1,027.50 880.55 620.55 60.00 111.49

103

Borrowings from the banks for working capital amounting to Rs.76.70 mn (Previous year Rs.45.03 mn) are secured by a pari-passu first charge on current assets including stocks and book debts and by a pari-passu second charge on the fixed assets of the Company except assets given as exclusive charge and assets acquired on hire purchase or lease.

Borrowings from Standard Chartered Bank (under Banks / FIs) amounting to Nil (Previous year Rs.250.00 mn) are secured by a first charge on the fixed assets of the Company and supported by a Corporate Guarantee from Madras Cements Limited.

Borrowings from UTI Bank Limited (under Banks / FIs) amounting to Rs.250.00 mn (Previous year Nil) are secured by a Subservient charge on the current assets of the Company and supported by a Corporate Guarantee from Madras Cements Limited.

Borrowings from Federal Bank Limited (under Banks / FIs) amounting to Rs.250.00 mn (Previous year Nil) are secured by a first charge by way of equitable mortgage on fixed assets (Corporate Office, Adyar) and supported by a Letter of Comfort from Madras Cements Limited.

Balance borrowings from the banks for working capital amounting to Rs.124.67 mn (Previous year Rs.156.63 mn) are secured by a pari-passu second charge on current assets including stocks and book debts and by a pari-passu second charge on the fixed assets of the Company except assets given as exclusive charge and assets acquired on hire purchase or lease.

Borrowings from HDFC Bank Limited (under Banks / FIs) amounting to Rs.33.25 mn (Previous year Rs.44.33 mn) are secured by an exclusive charge on the Land at Santhome, Chennai.

Assets acquired under Hire Purchase Finance are hypothecated to the Hire Purchase Companies as security.

Of the total unsecured loans of Rs.1,057.05 mn (Previous year Rs.1,027.50 mn), Rs.625.05 mn (Previous year Rs.620.00 mn) are supported by a Corporate Guarantee from Madras Cements Limited and Rs.300.00 mn (Previous year Rs.257.50 mn) are supported by a Corporate Guarantee from Ramco Industries Limited.

12. CURRENT LIABILITIES & PROVISIONS Rs. in million

As at March 31,

Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 For Purchases 154.91 81.50 99.44 148.56 100.91 166.15 For Expenses To Subsidiaries 123.04 132.54 86.79 84.84 35.05 18.20 Others 184.80 152.50 127.14 78.25 56.14 75.22 Provision for taxation 0.93 0.93 0.93 0.93 0.93 2.86 TOTAL 463.68 367.47 314.30 312.57 193.03 262.43

There are no outstanding exceeding a sum of Rs 0.10 million to small scale undertakings, for more than 30 days.

13. CONTINGENT LIABILITY Rs. in million

As at March 31,

Particulars

As at September

30, 2005 2005 2004 2003 2002 2001 Estimated amount of contracts remaining to be executed on capital account

8.93 0.56 12.92 15.33 4.99 36.69

Bank Guarantees 46.57 51.11 55.17 53.76 60.55 68.07 Letters of credit 71.91 33.21 59.38 7.66 58.12 6.80 Customs duty payable on Raw material stock at Bonded Warehouses

- - - - - 1.62

Octroi Liability - - 2.90 2.65 1.86 - Income Tax Liability (Disputed pending before the First appellate Authority)

76.10 175.61 175.61 92.49 - -

104

14 : Scheme of arrangement and related matters:- The shareholders of the Company, in the Extrordinary General Meeting convened under the directions of the Hon’ble High Court of Madras pursuant to an application made by the Company and held on the 6th June 2005, approved the implementation by the Company of a scheme of arrangement, whereby the accumulated losses of the Company as it would appear as on 31st March 2005 and the amounts due to the Company from its overseas subsidiaries viz., Ramco Systems Corporation, USA, Ramco Systems Ltd., Swiss and Ramco Systems Pte Ltd., amounting to an amount of Rs 88.02 crs, both aggregating together up to an amount not exceeding Rs 200 crs. would be set off against the share premium account . The scheme was duly approved by the Hon’ble High Court of Madras vide its order dated 4th August 2005. The Company has also obtained necessary approvals from its secured creditors and other statutory authorities that were required for carrying out the implementation of the said scheme. Pursuant to the receipt of necessary approvals, the Company has set off the following amounts against the share premium account: Rs.Crs 1. Accumulated losses as on 31st March 2005 (inclusive of the losses for the current year ended 31st March 2005) 110.77 2. Amounts due from its overseas subsidiaries, towards royalties, service charges and reimbursement of expenses as below: a.Ramco Systems Corporation -USA 37.96 b.Ramco Systems Ltd., ,Switzerland 43.20 c.Ramco Systems Pte. Ltd., Singapore 6.86 Sub total 88.02 Total 198.79 In addition to the waiver of dues referred under item (2) above, the Company also converted loans advanced to and due from Ramco Systems Ltd, Switzerland to the extent of Rs.15.30 crs and Ramco Systems Corporation, USA to the extent of Rs.31.40 crs., aggregating together to an amount of Rs.46.70 crs., into equity shares of the respective subsidiaries. Pursuant to an approval from the Reserve Bank of India, the subsidiaries referred above also carried out the financial restatements, in accordance with and in compliance with the local regulations, of the respective accounts by setting off their accumulated losses appearing as on 31st March 2005, against the equity share capital / share premium as applicable, without effecting any extinguishments in the number of shares, as detailed below: a) Ramco systems Corporation, USA:

Particulars No. of shares Total Value Share capital as on 31.03.05 125,970,800 12,502,080 Add: Capitalisation of Loan due to the parent company

71,593,750 7,159,375

Sub-total 197,564,550 19,661,455 Less: Set off of accumulated losses (16,790,130) Final Share Capital as on 31.03.05 197,564,550 2,871,325

b) Ramco Systems Ltd. - Swiss:

Particulars No. of shares Total Value CHF Share capital as on 31.03.05 9600 9,600,000 Add: Capitalisation of Loan due to the parent company

1,390,400 4,436,363

Sub-total 1,400,000 14,036,363 Less: Set off of accumulated losses (11,143,320) Final Share Capital as on 31.03.05 (inclusive of share premium of CHF 1,493,043)

1,400,000 2,893,043

105

The market development phase of the business in both the above subsidiaries is good in the opinion of the management of the Company and accordingly the restatements made in the financial statements of the respective subsidiaries, to facilitate a proper compliance as per the local regulations and also to provide a clear understanding of the same, to the present / prospective customers and financial institutions in the respective geographies, do not reflect a diminution in the value of the investments made by the Company in the respective subsidiaries. Accordingly, the difference in the value of investments in the equity capital of the subsidiaries as appearing in the books of accounts of the Company and the corresponding amounts of the equity capital in the books of accounts of the respective subsidiaries is reflected as “Goodwill” in the “Consolidated Financial Statement” of the Company and its subsidiaries prepared in accordance with AS 21. 15. Note on Extraordinary Matters

Expenses under the head "Extraordinary Items" represent the value of asset impairment amounting to Rs.235.48 mn (previous year Nil) on account of investment in the Product Software R&D and other recoverable loans & advances, which in the opinion of the Company, needs to be provided in accordance with Accounting Standard-28 and diminution in the value of investment amounting to Rs.39.50 mn (previous year Nil) in accordance with Accounting Standard 13, issued by The Institute of Chartered Accountants of India.

106

16. BUSINESS SEGMENTS In accordance with Accounting Standard 17, issued by the Institute of Chartered Accountants of India, the Company has determined its primary operating segments as: Product Software and Related Services: Engaged in the development, licensing, implementation and maintenance of software solutions. Other Software Related Services: Engaged in providing professional services and implementing projects, and consisting of two sub-segments, being (i) Project and Other Software Services and (ii) CRM and Other IT Services. Secured Convergent Networking Solutions: Engaged in the development and sale of network and communication hardware, security software and other related services. These operating segments were identified from the structure of the Company’s internal organization. Our primary segment revenues in India, on an unconsolidated basis as at September 30, 2005 and for fiscal 2005, 2004 and 2003 is given below:

Rs. Million For the Year Ended March 31,

Segment Revenue - Primary Segments

Six months ended

September 30, 2005 2005 2004 2003

1. Segment Revenue A.Product Software and related Services 249.80 490.42 301.93 184.18 B. Other Software Related Services 1. Project and Other Software Services 93.39 204.06 131.51 150.92 2. CRM and Other IT Services 18.82 23.34 11.90 8.77 B. Other Software Related Services Total 112.21 227.40 143.41 159.69

C.Secured Convergent Networking Solutions 289.24 436.99 377.75 466.38

Total Revenue 651.25 1,154.81 823.09 810.25 Less: Inter Segment Revenue - - - - Net Sales / Income from Operations 651.25 1,154.81 823.09 810.25 2. Segment Profit / (Loss) before tax and interest A.Product Software and related Services 21.33 135.44 66.80 1.57 B. Other Software Related Services 1. Project and Other Software Services 40.59 71.82 6.65 (7.29) 2. CRM and Other IT Services 0.93 2.08 (3.20) (3.84) B. Other Software Related Services Total 41.52 73.91 3.45 (11.13)

C.Secured Convergent Networking Solutions 17.46 11.83 7.55 34.96

Total 80.31 221.18 77.80 25.39 Less: Interest 60.97 113.81 119.51 68.92 Less: Extra ordinary items - 274.98 - - Less: Other unallocable expenditure net of unallocable income

146.94 235.99 290.97 229.66

Less: Impact of material adjustment and prior period items

- - 15.97 -

3. Profit/(Loss) before tax (127.59) (403.60) (348.65) (273.19)

107

Segment Revenue – Secondary Segments The Company’s secondary reporting segment is the geographies from which the revenues accrue and they have been identified as: (i) India Middle East and Africa region, consisting of India the Middle East and Africa. (ii) Africa, mainly consisting of South Africa (iii) Asean, consisting of Malaysia, Singapore, Thailand, Philippines and other countries in the region. (iv) Europe, consisting of United Kingdom, Switzerland, Germany and Benelux (Belgium, Netherlands and

Luxemburg). (v) America, mainly consisting of North and South America and rest of the world. Our secondary segment revenues in India, on an unconsolidated basis for period ended September 30, 2005 is given below:

Rs. Million SECONDARY SEGMENT REPORTING For the six months ended September 30, 2005

Particulars India &

Middle East Asean Europe America Total Segment Revenue

A. Product Software and Related Services 108.88 21.66 56.40 62.86 249.80

B. Other Software Related Services 1. Project and Other Software Services 45.18 - 40.32 7.90 93.40 2. CRM and Other IT Services 11.54 7.27 18.81

B. Other Software Related Services Total 56.72 - 40.32 15.17 112.21 C. Network Solutions 289.24 289.24

Total Revenue 454.84 21.66 96.72 78.03 651.25 Less: Inter Segment Revenue - - - - - Net Sales / Income from Operations 454.84 21.66 96.72 78.03 651.25 Our secondary segment revenues in India, on an unconsolidated basis for fiscal 2005, 2004 and 2003 is given below: SECONDARY SEGMENT REPORTING For the Year Ended March 31, 2005

Particulars

India, Middle East & Africa Asean Europe America Total

Segment Revenue A. Product Software and Related Services 181.08 19.13 119.42 170.79 490.42 B. Other Software Related Services 1. Project and Other Software Services 119.39 1.87 73.82 8.98 204.07 2. CRM and Other IT Services 10.96 0.52 - 11.85 23.33 B. Other Software Related Services Total 130.36 2.39 73.82 20.83 227.40 C. Network Solutions 435.65 1.35 - - 436.99 Total Revenue

747.09 22.87 193.24 191.62

1,154.81 Less: Inter Segment Revenue - - - - - Net Sales / Income from Operations 747.09 22.87 193.24 191.62 1,154.81

108

SECONDARY SEGMENT REPORTING For the Year EndedMarch 31, 2004

Particulars India, Middle East & Africa Asean Europe America Total

Segment Revenue A. Product Software and Related Services 130.00 43.44 38.61 89.89 301.93 B. Other Software Related Services 1. Project and Other Software Services 56.51 4.81 67.39 2.83 131.54 2. CRM and Other IT Services 8.56 - - 3.34 11.90 B. Other Software Related Services Total

65.07 4.81 67.39 6.17 143.42

C. Network Solutions 366.79 10.96 - - 377.75 Total Revenue 561.85 59.21 106.01 96.06 823.09 Less: Inter Segment Revenue - - - - - Net Sales / Income from Operations 561.85 59.21 106.01 96.06 823.09

SECONDARY SEGMENT REPORTING For the Year Ended March 31, 2003


Segment Revenue A. Product Software and Related Services

102.17 24.81 20.10 37.10 184.18

B. Other Software Related Services 1. Project and Other Software Services

35.51 28.44 77.09 9.88 150.92

2. CRM and Other IT Services 7.46 - - 1.32 8.78 B. Other Software Related Services Total

42.96 28.44 77.09 11.20 159.7

C. Network Solutions 466.38 - - - 466.38 Total Revenue 611.51 53.25 97.19 48.30 810.25 Less: Inter Segment Revenue - - - - - Net Sales / Income from Operations 611.51 53.25 97.19 48.30 810.25

The Company believes that it is not practical to provide details of segmental assets as the assets (except those identified as related to Research and Development activities and to units located at the Software Technology Park) are used interchangeably among segments. Significant liabilities contracted are based on the Company’s requirements on the whole and are not identifiable to any of the reportable segment and as such have not been disclosed separately.

109

17. RELATED PARTY TRANSACTIONS: As per Accounting Standard (AS 18) issued by the Institute of Chartered Accountants of India, the Company’s related parties are given below:

a. Subsidiary Companies (“Subsidiaries”):

• Ramco Systems Corporation, USA, • Ramco Systems Ltd., Switzerland, • Ramco Systems Pte Ltd., Singapore. • Ramco Systems Sdn Bhd., Malaysia, • RSL Enterprise Solutions (Pty) Ltd., South Africa • Ramco Infotech Solutions Ltd., Chennai

b. Key Management Personnel and Relatives (“KMP”):

• Shri.P.R.Ramasubrahmaneya Rajha • Shri.P.R.Venketrama Raja

c. Enterprises over which the above persons exercise significant influence and with which the Company has transactions during the year (“Group”): • Rajapalayam Mills Ltd. • Madras Cements Ltd. • Ramco Industries Ltd. • The Ramaraju Surgical Cotton Mills Ltd.

The Company’s transactions with the above Related Parties for the six months ended September 30, 2005 are given below:



136.37 45.87

-- --

-- --

Sale of goods & services Transaction during the six months Outstanding as on September 30, 2005

-- --

2.15 0.01

-- --

Royalty Transaction during the six months Outstanding as on September 30, 2005

22.76 16.36

-- --

-- --


-- --

-- --

-- --

Sale of Assets Transaction during the six months Outstanding as on September 30, 2005

-- --

-- --

-- --

Cost of services availed Transaction during the six months Outstanding as on September 30, 2005

3.12 123.05

-- --

-- --

Loan availed Transaction during the six months Outstanding as on September 30, 2005 (Including interest due)

-- --

200.00 135.73

-- --

Loans given Transaction during the six months Outstanding as on September 30, 2005 (Including interest due)

-- --

-- 1.40

-- --

Investments Transaction during the six months Outstanding as on September 30, 2005

-- --

-- --

-- --


-- --

4.81 --

-- --

110

The Company’s transactions with the above Related Parties for the year ended March 31, 2005 are given below:

Rs. in million.

Type of transaction Subsidiaries Group KMP Export of software & Services


515.43 170.25

-- --

-- --

Sale of goods & services Transaction during the year Outstanding as on March 31, 2005

-- --

10.39 0.21

-- --


42.99 --

-- --

-- --


-- --

0.22 0.01

-- --


-- --

-- --

-- --


73.70 132.54

-- --

-- --

Loan availed Transaction during the year Outstanding as on March 31, 2005 (Including interest due)

-- --

597.00 150.00

-- --


1.49 --

-- 1.40

-- --


0.50 -

-- --

-- --


-- 27.01

8.87 --

-- --

Preferential Issue Transaction during the year -- 147.41 54.98

Year ended March 31, 2004 Rs. in million



194.94 390.05

-- --

-- --


-- --

20.23 3.70

-- --


73.20 323.86

-- --

-- --


-- --

-- --

-- --


-- --

-- --

-- --


3.73 47.29

-- --

-- --

Loan availed Transaction during the year Outstanding as on March 31, 2004 (including interest due)

-- --

330.00 66.89

-- --


356.02 484.10

-- 1.40

-- --


0.00 39.50

-- --

-- --


-- 20.94

9.65 --

-- --

111

Year ended March 31, 2003 Rs. in million



146.11 313.82

-- --

-- --


-- --

7.27 0.15

-- --


52.12 283.05

-- --

-- --


-- --

-- --

-- --


-- --

-- --

-- --


6.29 45.33

-- --

-- --

Loan availed Transaction during the year Outstanding as on March 31, 2003

-- --

113.00 99.46

-- --


40.94 124.54

-- 1.41

-- --

Investments Transaction during the year


-- --

-- --


-- 5.14

8.27 --

-- --

112

Annexure VI RAMCO SYSTEMS LIMITED, INDIA FINANCIAL RATIOS


Particulars

Six months ended

September 30, 2005 2005 2004 2003 2002 2001

Earnings per Share (Rs.) (10.71) (10.94) (40.19) (35.33) (11.33) 1.27 Net Asset Value per Share (Rs.) 108.80 123.92 290.78 215.94 277.59 261.60 Return on Net worth (%) (9.84) (8.83) (13.82) (16.36) (4.08) 0.49

Definition of Ratios Earnings per Share (Rs.) = Net Profit (restated) after tax, before extraordinary items (net of tax)

Number of weighted average equity shares outstanding

Net Asset value per share (Rs.) = Networth excluding revaluation reserves Number of weighted average equity shares outstanding

Return on Net worth (%) = Net Profit (restated) after tax, before extraordinary items (net of tax) Net worth excluding revaluation reserves and miscellaneous expenditure

113

Annexure VII RAMCO SYSTEMS LIMITED, INDIA DIVIDENDS Dividends declared in respect of each financial year are as under:

Year ended March 31, Particulars

Six months ended September 30, 2005 2005 2004 2003 2002 2001

Rate of dividend (%) Nil Nil Nil Nil Nil Nil Amount of Dividend (Rs.) Nil Nil Nil Nil Nil Nil

114

Annexure VIII RAMCO SYSTEMS LIMITED, INDIA STATEMENT OF TAX SHELTER


Particulars

Six months ended

September 30, 2005 2005 2004 2003 2002 2001

Profit before Tax as per Books (127.59) (403.60) (332.67) (273.19) (87.62) 12.07 Tax Rate 36.5925% 36.5925% 35.875% 35.88% 35.70% 39.55% Notional Tax Liability - - - - - 4.8

Adjustments: Difference between Tax depreciation and book depreciation

66.4

Difference between claim for deduction of Product Research & Development under Sec.35 (2AB) and amortisation in books

(235.3)

Other adjustments (73.8) Net adjustments - - - - - (242.7) Tax saving thereon (96.0) Provision for Taxation as per Books (Under Sec.115JA / 115JB of the Income Tax Act, 1961)

- - - - - 1.6

Note : 1. For the year ended March 31, 2001, the net adjustments for these years mentioned above, have the effect of

converting the “book profit” into “taxable loss”. Hence provision for Minimum Alternate Tax (MAT) under Sec. 115 JA / 115 JB of the Income Tax Act, 1961 has been made.

2. For the period / years ended September 30 2005, March 31, 2005, 2004, 2003 and 2002, there was a book loss

and the taxable income also resulted in loss and hence no provision for taxation was made in the books.

115

Annexure IX RAMCO SYSTEMS LIMITED, INDIA CAPITALISATION STATEMENT AS ON September 30, 2005

Rs. in million Pre-issue As adjusted for issue Debt Secured Debt 738.01 738.01 Unsecured Debt 1,057.05 1,057.05 Total Debt 1,795.06 1,795.06 Shareholders Funds Share capital 123.18 153.89 Reserves 1,343.31 1,957.46 Less :

Revaluation Reserve 0.00 0.00 Misc. Expenses not written off 0.00 0.00 Profit & Loss account 131.39 131.39

Total Shareholders Funds 1,335.11 1,979.96 Debt / Equity 1.34 0.91

116

Annexure X RAMCO SYSTEMS LIMITED Consolidated Statement of Profit and Losses (As restated)


Six months ended September 30,

2005 2005 2004 2003 2002Income: Sales 1,238.10 2,205.14 1,709.25 1,560.57 1,733.57 Other Income 12.08 40.99 16.54 53.76 24.88 Total Income 1,250.18 2,246.14 1,725.79 1,614.33 1,758.45 Expenditure Cost of Resale Material 228.89 375.56 241.25 383.72 416.83 Employee Compensation & Benefits 742.07 1,342.97 1,076.41 1,018.13 984.84 Sales & Marketing Expenses 60.61 136.66 119.79 80.74 60.72 Administrative & Other Expenses 232.92 422.24 464.57 446.37 401.87 Interest & Finance Charges 63.01 116.18 126.20 91.71 78.65 Depreciation & Amortisation 92.87 178.60 189.42 192.27 84.20 Total Expenditure 1,420.37 2,572.21 2,217.64 2,212.94 2,027.11 Profit/(Loss) before Tax and Extraordinary Items

(170.19) (326.07) (491.85) (598.61) (268.66)

Extraordinary Items - 349.92 - - - Profit/(Loss) before Tax (170.19) (675.99) (491.85) (598.61) (268.66)Impact of material adjustment and prior period items

- -

(15.97) - -

Provision for Taxation (6.56) (6.30) (0.27) 0.01 (3.86) Equity in Earnings/(Losses) of Associates

- 3.03 0.13 - -


117

Annexure XI RAMCO SYSTEMS LIMITED Consolidated Statement Of Assets And Liabilities (As restated)


As at September 30,

2005 2005 2004 2003 2002 A. Fixed Assets Gross Block 3,232.47 3,219.21 2,070.03 1,418.58 1,394.60 Less : Depreciation 792.06 701.91 561.65 454.33 374.54 Net Block 2,440.41 2,517.30 1,508.38 964.25 1,020.06

CWIP 77.13 - 85.63 - - B. Investments 6.22 6.35 82.46 41.24 34.35 C. Current Assets, Loans and advances Inventories 22.97 27.46 27.59 43.70 37.79 Sundry Debtors 731.99 677.40 519.45 583.82 633.61 Cash and Bank Balances 403.03 276.42 247.33 163.95 192.36 Loans and Advances 133.14 124.74 98.70 90.82 128.51 Other Current Assets 17.09 26.78 49.77 27.72 8.97 1,308.23 1,132.80 942.85 910.00 1001.23 D. Liabilities and Provisions Secured Loans 803.88 565.02 382.20 714.48 791.23 Unsecured Loans 1,062.54 1,038.16 886.03 626.47 66.11 Current Liabilities and Provisions 619.21 537.95 414.88 427.86 297.90 2,485.62 2,141.12 1,683.11 1,768.81 1,155.24 E. Net worth 1,346.37 1,515.33 936.20 146.67 900.40 F. Represented by 1. Share capital 123.18 122.84 115.97 77.68 77.68 2. Reserves 1,374.23 1,390.03 3,228.23 2,454.68 2,449.24 Less : Misc Expenses not written off 0.07 0.12 64.00 548.28 387.72 Less : Profit & Loss account 150.98 - 2,344.00 1,837.40 1,238.80 3. Minority Interest 2.59 Net worth 1,346.37 1,515.33 936.20 146.67 900.40

118

Annexure XII RAMCO SYSTEMS LIMITED Consolidated Cash Flow Statement (As restated)

Rs. in million


A. Cash Flow From Operating Activities

Six months ended

September 30, 2005 2005 2004 2003 2002

Net Profit / (Loss) before tax (170.19) (691.96) (507.82) (598.61) (268.66) Add: Interest 63.01 116.18 126.20 91.71 78.65 (107.18) (575.78) (381.63) (506.90) (190.01) Add: Depreciation and Amortisation 92.87 178.60 189.42 192.27 84.20 Extraordinary Expenditure 349.92 (14.31) (47.27) (192.20) (314.63) (105.81) Less: Interest Received 2.05 3.96 4.69 5.47 16.79 Dividend Received - - - - - Profit/(loss) on sale of assets, net 0.25 (2.97) (1.03) (0.43) (0.18) Miscellaneous Income 9.14 35.80 11.76 48.72 7.59 11.45 36.79 15.28 53.76 24.20 Operating Profit before Working Capital

Changes (25.76) (84.06) (207.62) (368.39) (130.01)

Less: Increase / Decrease in Current assets: Trade and Other receivables 64.24 292.57 (127.45) (113.19) (646.55) Inventories (4.49) (0.13) (16.11) 5.90 (38.96) Other current assets (other than Cash and

Bank) (9.69) (22.99) 22.05 18.75 (7.13)

50.06 269.44 (121.50) (88.54) (692.64) (75.82) (353.51) (86.12) (279.85) 562.64 Add: Increse/Decrease in Current Liabilities: Trade Payables & Taxes 81.26 123.07 (12.98) 129.96 (536.53) Bank Borrowings 11.05 (43.99) (327.71) (11.53) 393.73 Cash generated from operations 16.49 (274.43) (426.81) (161.42) 419.84 Interest payments 63.01 116.18 126.20 91.71 78.65 Net Cash (used in) / from operating

activities (46.51) (390.61) (553.00) (253.13) 341.19

119

Six months

ended Year ended March 31,

B. Cash Flow from Investing Activities: September 30,

2005 2005 2004 2003 2002 Purchase of Fixed assets (95.05) (253.18) (78.20) (58.01) (194.14)

Investment in Companies/Mutual Funds 0.13 36.61 (41.22) (6.89) (34.35) Investments in R&D activities - - - Miscellaneous Expenditure (0.03) (259.25) (262.37) (333.56) Less: Sale of fixed assets 1.77 5.03 2.56 3.07 2.89 Interest received 2.05 3.96 4.69 5.47 16.79 Equity in earnings/(losses) of Associates 3.03 1.50 - - Miscellaneous Income 9.14 35.80 11.76 48.72 7.59 Profit / (loss) on sale of assets, net 0.25 (2.97) (1.03) (0.43) (0.18) Net cash (used in) / from Investing Activities (81.71) (171.76) (359.21) (270.43) (534.96) C. Cash Flow from Financing Activities Proceeds from issue of share capital 9.20 218.83 740.88 - - Proceeds from secured borrowings 501.35 251.71 - 154.01 1.25 Proceeds from unsecured borrowings 400.00 609.70 400.00 560.55 Less: Repayment of unsecured borrowings 375.62 457.58 140.44 0.02 (5.53) Income Tax 6.56 6.30 0.27 - (3.85) Repayment of secured borrowings 273.54 24.90 4.57 219.23- (161.39) Net Cash from financing activities 254.83 591.46 995.59 495.15 (169.53) Net Increase / (Decrease) in cash and cash equivalents

126.61 29.09 83.38 (28.41) (363.31)

Cash and Cash equivalents as on April 1, 2005

276.42 247.33 163.95 192.36 555.66

Cash and Cash equivalents as on September 30, 2005

403.03 276.42 247.33 163.95 192.36

120

Annexure XIII Significant Accounting Policies for the Consolidated Financial Statements of Ramco Systems Limited, its Subsidiaries and Associates I. Basis of Preparation

The financial statements are prepared under the historical cost convention and the accounts are prepared in accordance with the generally accepted accounting principles, the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956 as adopted consistently by the Company.

II. Principles of Consolidation

The Consolidated Financial Statements covers Ramco Systems Limited, India, the parent company and its Subsidiaries namely,

1. Ramco Systems Corporation, USA 2. Ramco Systems Limited, Switzerland 3. Ramco Systems Pte Limited, Singapore 4. Ramco Systems SDN BHD, Malaysia 5. RSL Enterprise Solutions (Pty) Limited, South Africa and 6. Ramco Infotech Solutions Limited, Chennai

The consolidated financial statements have been prepared on the following basis: The Financial Statements of Subsidiaries have been combined on a line-by-line basis by adding together the book values of like item of assets, liabilities, income and expenditure after eliminating intra-group balances and intra-group transactions resulting in unrealized profits or losses, as prescribed by Accounting Standard 21. The Financial Statements of the affiliates have been consolidated using the Equity Menthod as prescribed by Accounting Standard 23. The consolidated financial statements are prepared by adopting uniform accounting policies for like transactions or other events in similar circumstances and are presented to the extent possible, in the same manner as the parent company’s financial statements.

III. Translation to Indian Rupees

The functional currency of the parent company is Indian Rupee. The functional currencies of the Subsidiaries are their respective local currencies. Their accounts are converted from their local currency to Indian Rupees in the following manner: All income and expense items are translated at the moving average rate of exchange applicable for the year. All monetary and non-monetary assets and liabilities are translated at the closing rate as on Balance Sheet date. The equity share capital is stated at the exchange rate at the date of investment. The exchange difference arising out of the year end translation is debited or credited to Translation Reserve account and is being classified under Reserves and Surplus account.

IV. Other significant accounting policies:

These are set out in the “Significant accounting policies” of the financial statements of Ramco Systems Ltd., India, as set out in Annexure IV.

121

Annexure XIV RAMCO SYSTEMS LIMITED Notes on Accounts to the Consolidated Financial Statements of Ramco Systems Limited, its Subsidiaries and Associates 1. The Consolidated Financial Statements cover Ramco Systems Limited, India, the parent company and

its Subsidiaries and Associates as given below:

Sl.No Name Country % holding Year ended Subsidiaries 1 Ramco Systems Corporation USA 98% March 31 2 Ramco Systems Limited Switzwerland 100% March 31 3 Ramco Systems Sdn. Bhd. Malaysia 100% March 31 4 Ramco Systems Pte Ltd Singapore 100% March 31 5 RSL Enterprise Solutions (Pty) Ltd South Africa 100% March 31 6 Ramco Infotech Solutions Limited Chennai 100% March 31 Associate 1 Triamun Ramco Healthcare Systems

Limited Switzerland 50% December 31

2 Redlex 47 (Proprietary) Limited South Africa 30% February 28 2. Change in Accounting Policies: The Company has not changed any accounting policies in the last four years 3. Prior Period Items

Rs. in million

Six months


Details September

30, 2005 2005 2004 2003 2002 On account of reversal of sales revenue, which have been wrongly accrued in respective years

- - (15.97) - -

TOTAL - - (15.97) - - 4. Secured Loans (a) India: Borrowings from the banks for working capital amounting to Rs.76.70 mln (Previous year Rs.45.03 mln) are secured by a pari-passu first charge on current assets including stocks and book debts and by a pari-passu second charge on the fixed assets of the Company except assets given as exclusive charge and assets acquired on hire purchase or lease. Borrowings from Standard Chartered Bank (under Banks / FIs) amounting to Rs.Nil (Previous year Rs.250.00 mln) are secured by a first charge on the fixed assets of the Company and supported by a Corporate Guarantee from Madras Cements Limited. Borrowings from UTI Bank Limited (under Banks / FIs) amounting to Rs.250.00 mln (Previous year Rs.Nil) are secured by a Subservient charge on the current assets of the Company and supported by a Corporate Guarantee from Madras Cements Limited. Borrowings from Federal Bank Limited (under Banks / FIs) amounting to Rs.250.00 mln (Previous year Nil) are secured by a first charge by way of equitable mortgage on fixed assets (Corporate Office, Adyar) and supported by a Letter of Comfort from Madras Cements Limited. Balance borrowings from the banks for working capital amounting to Rs.124.67 mln (Previous year Rs.156.63 mln) are secured by a pari-passu second charge on current assets including stocks and book debts and by a pari-passu second charge on the fixed assets of the Company except assets given as exclusive charge and assets acquired on hire purchase or lease.

122

Borrowings from HDFC Bank Limited (under Banks / FIs) amounting to Rs.33.25 mln (Previous year Rs.44.33 mln) are secured by an exclusive charge on the Land at Santhome, Chennai. Assets acquired under Hire Purchase Finance are hypothecated to the Hire Purchase Companies as security. Of the total unsecured loans of Rs.1057.05 mln (Previous year Rs.1027.50 mln), Rs.625.05 mln (Previous year Rs.620.00 mln) are supported by a Corporate Guarantee from Madras Cements Limited and Rs.300.00 mln (Previous year Rs.257.50 mln) are supported by a Corporate Guarantee from Ramco Industries Limited.

(b) USA: Borrowings from banks amounting to Rs.65.87 million (USD 1.50 million) [Previous Year Rs.54.54 million (USD 1.25 million)] are secured by cash deposits of Ramco Systems Limited, India. 5. Taxation

Provision for taxation made during the year 2004-05 pertains to the current year tax provision by Ramco Systems Pte. Limited, Singapore and RSL Enterprise Solutions (Pty) Limited, South Africa. 6. Earnings per share (EPS) FINANCIAL RATIOS Six months ended Year ended March 31, Particulars September 30, 2005 2005 2004 2003 2002 Earnings per Share (Rs.) (14.40) (28.00) (58.56) (77.41) (35.24) Net Asset Value per Share (Rs.) 109.72 128.85 107.93 18.97 116.43 Return on Net worth (%) (13.13) (21.73) (54.26) (408.12) (30.27)

Definition of Ratios Earnings per Share (Rs.) = Net Profit (restated) after tax, before extraordinary items (net of tax)

Number of weighted average equity shares outstanding

Net Asset value per share (Rs.) = Networth excluding revaluation reserves Number of weighted average equity shares outstanding

Return on Net worth (%) = Net Profit (restated) after tax, before extraordinary items (net of tax) Net worth excluding revaluation reserves and miscellaneous expenditure

7. Related Party Transactions: As per Accounting Standard (AS 18) issued by the Institute of Chartered

Accountants of India, the Company`s related parties are given below:

a. Key Management Personnel and Relatives (KMP)

1. Shri.P.R.Ramasubrahmaneya Rajha 2. Shri.P.R.Venketrama Raja

Enterprises over which the above persons exercise significant influence and with which the Company has transactions during the year [Group]

1. Rajapalayam Mills Ltd., 2. Madras Cements Ltd., 3. Ramco Industries Ltd., 4. The Ramaraju Surgical Cotton Mills Ltd.,

123

The Company`s transactions with the above Related Parties are given below:

Current Year – period ended

September 30, 2005

Group Rs.

million

Group USD

million

KMP Rs. million

KMP USD million

Loans availed Transaction during the six months Outstanding as on September 30, 2005

200.00 135.73

4.55 3.09

-- --

-- --

Loans given Transaction during the six months Outstanding as on September 30, 2005

-- 1.40

-- 0.03

-- --

-- --

Interest paid Transaction during the six months 4.81 0.11 -- -- Sale of goods & services


2.15 0.01

0.05 0.00

-- --

-- --


- -

- -

-- --

-- --

Previous Year Loans availed Transaction during the year


13.68 3.44

-- --

-- --

Loans given Transaction during the year Outstanding as on March 31, 2005

-- 1.40

-- 0.00

-- --

-- --

Interest paid Transaction during the year 8.87 0.20 -- -- Sale of goods & services


10.39 0.21

0.23 0.00

-- --

-- --


0.22 0.00

0.00 0.00

-- --

-- --

Preferential Issue Transaction during the year 147.41 3.38 54.98 1.26 Previous Year Loans availed Transaction during the year

Outstanding as on March 31, 2004 330.00

66.89 7.52 1.53

-- --

-- --

Loans given Transaction during the year Outstanding as on March 31, 2004

-- 1.40

-- 0.03

-- --

-- --

Interest paid Transaction during the year 9.65 0.21 -- -- Sale of goods & services


20.23 3.70

0.44 0.08

-- --

-- --

The above transactions were done in the ordinary course of business and at commercial rates. 8. Contingent Liabilities

Particulars As at

September 30, 2005

(Rs. in million)

As at September

30, 2005 (USD in million)

As at

-March 31, 2005

(Rs. in million)

As at -March


As at -March

31, 2004 (Rs. in

million)

As at -March


(a) Estimated amount of contracts remaining to be executed on capital account

8.93

0.20

0.56 0.01

12.92

0.29

(b) Bank Guarantees 46.57 1.06 51.11 1.17 61.38 1.40

(c) Letters of Credit 71.91 1.64 33.21 0.76 59.38 1.35

(d) Octroi Liability Nil Nil Nil Nil 2.90 0.07

(e) Income Tax Liability 76.10 1.73 175.61 4.03 175.61 4.00

124

9. Note on extraordinary items Expenses under the head "Extraordinary Items" represent the value of asset impairment amounting to Rs.310.42 mn (USD 6.91 mn) (Previous year Nil) on account of investment in the Product Software R&D and other recoverable loans & advances, which in the opinion of the Company, needs to be provided in accordance with Accounting Standard-28 and diminution in the value of investment amounting to Rs.39.50 mn (USD 0.88 mn) (Previous year Nil) in accordance with Accounting Standard 13, issued by The Institute of Chartered Accountants of India. 10. Minority Interest: As the share of accumulated loss attributable to the % Minority Interest in Ramco Systems Corporation, USA, is more than their share holding, the share of accumulated loss is restricted to their share holding. 11 : Scheme of arrangement and related matters:- The shareholders of the Company, in the Extrordinary General Meeting convened under the directions of the Hon’ble High Court of Madras pursuant to an application made by the Company and held on the 6th June 2005, approved the implementation by the Company of a scheme of arrangement, whereby the accumulated losses of the Company as it would appear as on 31st March 2005 and the amounts due to the Company from its overseas subsidiaries viz., Ramco Systems Corporation, USA, Ramco Systems Ltd., Swiss and Ramco Systems Pte Ltd., amounting to an amount of Rs 88.02 crs, both aggregating together up to an amount not exceeding Rs 200 crs. would be set off against the share premium account . The scheme was duly approved by the Hon’ble High Court of Madras vide its order dated 4th August 2005. The Company has also obtained necessary approvals from its secured creditors and other statutory authorities that were required for carrying out the implementation of the said scheme. Pursuant to the receipt of necessary approvals, the Company has set off the following amounts against the share premium account: Rs.Crs 1. Accumulated losses as on 31st March 2005 (inclusive of the losses for the current year ended 31st March 2005) 110.77 2. Amounts due from its overseas subsidiaries, towards royalties, service charges and reimbursement of expenses as below: a.Ramco Systems Corporation -USA 37.96 b.Ramco Systems Ltd., ,Switzerland 43.20 c.Ramco Systems Pte. Ltd., Singapore 6.86 Sub total 88.02 Total 198.79 In addition to the waiver of dues referred under item (2) above, the Company also converted loans advanced to and due from Ramco Systems Ltd, Switzerland to the extent of Rs.15.30 crs and Ramco Systems Corporation, USA to the extent of Rs.31.40 crs., aggregating together to an amount of Rs.46.70 crs., into equity shares of the respective subsidiaries. Pursuant to an approval from the Reserve Bank of India, the subsidiaries referred above also carried out the financial restatements, in accordance with and in compliance with the local regulations, of the respective accounts by setting off their accumulated losses appearing as on 31st March 2005, against the equity share capital / share premium as applicable, without effecting any extinguishments in the number of shares, as detailed below: a) Ramco systems Corporation, USA: Particulars No. of shares Total Value USD Share capital as on 31.03.05 125,970,800 12,502,080 Add: Capitalisation of Loan due to the parent company 71,593,750 7,159,375 Sub-total 197,564,550 19,661,455 Less: Set off of accumulated losses (16,790,130) Final Share Capital as on 31.03.05 197,564,550 2,871,325

125

b) Ramco Systems Ltd. - Swiss: Particulars No. of shares Total Value Share capital as on 31.03.05 9600 9,600,000 Add: Capitalisation of Loan due to the parent company 1,390,400 4,436,363 Sub-total 1,400,000 14,036,363 Less: Set off of accumulated losses (11,143,320) Final Share Capital as on 31.03.05 (inclusive of share premium of CHF 1,493,043)

1,400,000 2,893,043

The market development phase of the business in both the above subsidiaries is good in the opinion of the management of the Company and accordingly the restatements made in the financial statements of the respective subsidiaries, to facilitate a proper compliance as per the local regulations and also to provide a clear understanding of the same, to the present / prospective customers and financial institutions in the respective geographies, do not reflect a diminution in the value of the investments made by the Company in the respective subsidiaries. Accordingly, the difference in the value of investments in the equity capital of the subsidiaries as appearing in the books of accounts of the Company and the corresponding amounts of the equity capital in the books of accounts of the respective subsidiaries is reflected as “Goodwill” in the “Consolidated Financial Statement” of the Company and its subsidiaries prepared in accordance with AS 21. 12. Segment Revenue In accordance with Accounting Standard 17, issued by the Institute of Chartered Accountants of India, the Company has determined its primary operating segments as: Product Software and Related Services: Engaged in the development, licensing, implementation and maintenance of software solutions. Other Software Related Services: Engaged in providing professional services and implementing projects, and consisting of two sub-segments, being (i) Project and Other Software Services and (ii) CRM and Other IT Services. Secured Convergent Networking Solutions: Engaged in the development and sale of network and communication hardware, security software and other related services. These operating segments were identified from the structure of the Company’s internal organization. The revenues and results of each of the primary segments are given below:

(Rs. in millions)

Six months ended For the year ended March 31,

Segment Revenue - Primary Segments September 30,

2005 2005 2004 2003 Rs. USD Rs. USD Rs. USD Rs. USD 1. Revenue A.Product Software and related Services 688.66 15.83 1063.34 23.68 757.50 16.50 608.12 12.60 B. Other Software Related Services 1. Project and Other Software Services 50.17 1.15 267.26 5.95 236.35 5.15 254.38 5.26 2. CRM and Other IT Services 202.63 4.65 409.00 9.11 338.59 7.37 231.69 4.80 B. Other Software Related Services Total

252.80 5.80 676.26 15.06 574.94 12.52 486.08 10.06

C.Secured Convergent Networking Solutions

296.64 6.82 465.54 10.37 376.80 8.21 466.38 9.66

Total 1238.10 28.45 2,205.14 49.11 1,709.25 37.22 1,560.58 32.32 Less: Inter Segment Revenue - - - - - - - - Net Sales / Income from Operations 1238.10 28.45 2,205.14 49.11 1,709.25 37.22 1,560.58 32.32

126

Six months ended For the year ended March 31,

Segment Revenue - Primary Segments September 30,

2005 2005 2004 2003 Rs. USD Rs. USD Rs. USD Rs. USD 2. Segment Profit / (Loss) before tax and interest

A.Product Software and related Services 136.35 3.13 163.74 3.65 (32.83) (0.71) (114.78) (2.38) B. Other Software Related Services 1. Project and Other Software Services (73.96) (1.70) (98.37) (2.19) (54.20) (1.18) (188.19) (3.90) 2. CRM and Other IT Services (2.43) (0.06) 36.81 0.82 30.88 0.67 (10.94) (0.23) B. Other Software Related Services Total

(76.39) (1.76) (61.56) (1.37) (23.31) (0.51) (199.13) (4.12)

C.Secured Convergent Networking Solutions

18.64 0.43 14.64 0.33 8.20 0.18 34.96 0.72

Total 78.60 1.80 116.82 2.61 (47.94) (1.04) (278.95) (5.78) Less: Interest 63.00 1.45 116.18 2.60 147.14 3.20 91.71 1.90 Less: Other unallocation expenditure net of unallocable income

185.79 4.26 326.72 7.28 296.77 6.46 227.94 4.72

Less: Extra ordinary Items - - 349.91 7.79 - - - - Less: Current Taxation 6.56 0.15 6.30 0.14 0.28 0.01 - - Add: Equity in Earnings /(Losses) of affiliates

- - 3.03 0.07 0.14 - - -

Less: Impact of material adjustment and prior period items

- - 15.97 0.35 - -

Pofit/(Loss) after Tax (176.75) (4.06) (679.26) (15.13) (507.96) (11.06) (598.60) (12.40) The Company’s secondary reporting segment is the geographies from which the revenues accrue and they have been identified as: (i) India and Middle East region, consisting of India, the Middle East and Africa. (ii) Asean, consisting of Malaysia, Singapore, Thailand, Philippines and other countries in the region. (iii) Europe, consisting of United Kingdom, Switzerland, Germany and Benelux (Belgium, Netherlands and

Luxemburg). (iv) America, mainly consisting of North and South America and rest of the world.

(Rs. in millions) SECONDARY SEGMENT

FOR THE PERIOD ENDED SEPTEMBER 30, 2005

Particulars India, Middle East & Africa

Asean Europe America Total

Segment Revenue INR USD INR USD INR USD INR USD INR USD A. Product Software and Related Services 448.03 10.30 51.88 1.19 153.61 3.53 186.24 4.28 839.76 19.30 B. Other Software Related Services 1. Project and Other Software Services 93.40 2.15 - - 2.80 0.06 14.49 0.33 110.68 2.54 2. CRM and Other IT Services 18.82 0.43 - - - - 191.09 4.39 209.90 4.82 B. Other Software Related Services Total 112.22 2.58 - - 2.80 0.06 205.58 4.72 320.58 7.36 C. Network Solutions 289.24 6.65 7.40 0.17 - - - - 296.64 6.82 Total Revenue 849.49 19.53 59.28 1.36 156.41 3.59 391.82 9.00 1456.98 33.48 Less: Inter Segment Revenue 34.63 0.80 21.66 0.50 84.56 1.94 78.04 1.79 218.88 5.03 Net Sales / Income from Operations 814.86 18.73 37.62 0.86 71.85 1.65 313.78 7.21 1238.10 28.45

127

( in millions) SECONDARY SEGMENT

FOR THE YEAR ENDED MARCH 31, 2005


Segment Revenue INR USD INR USD INR USD INR USD INR USD A. Product Software and Related Services

717.87 15.99 78.68 1.75 156.80 3.49 485.39 10.81 1,438.74 32.04

B. Other Software Related Services

1. Project and Other Software Services

197.19 4.39 13.14 0.29 113.41 2.53 65.53 1.46 389.27 8.67

2. CRM and Other IT Services

23.35 0.52 - - 5.93 0.13 379.72 8.46 409.00 9.11

B. Other Software Related Services Total

220.54 4.91 13.14 0.29 119.34 2.66 445.25 9.92 798.27 17.78

C. Network Solutions 436.99 9.73 28.04 0.62 - - - - 465.03 10.35 Total Revenue 1,375.40 30.63 119.86 2.67 276.14 6.15 930.64 20.72 2,702.04 60.17 Less: Inter Segment Revenue

496.90 11.06 - - - - - - 496.90 11.06

Net Sales / Income from Operations

878.50 19.57 119.86 2.67 276.14 6.15 930.64 20.72 2,205.14 49.11

( in millions) SECONDARY SEGMENT

FOR THE YEAR ENDED MARCH 31, 2004 Particulars India, Middle

East & Africa Asean Europe America Total


300.09 6.54 143.28 3.12 143.40 3.13 323.84 7.05 910.61 19.83


1. Project and Other Software Services

112.23 2.44 11.51 0.25 115.91 2.52 52.45 1.14 292.10 6.36


11.90 0.26 - - - - 326.69 7.12 338.59 7.37


124.13 2.7 11.51 0.25 115.91 2.52 379.14 8.26 630.69 13.73

C. Network Solutions 377.75 8.23 10.02 0.22 - - - - 387.77 8.45 Total Revenue 801.97 17.47 164.81 3.59 259.31 5.65 702.98 15.31 1,929.07 42.01 Less: Inter Segment Revenue

219.82 4.79 - - - - - - 219.82 4.79


582.15 12.68 164.81 3.59 259.31 5.65 702.98 15.31 1,709.25 37.22

( in millions)

SECONDARY SEGMENT FOR THE YEAR ENDED MARCH 31, 2003




180.14 3.73 124.01 2.57 126.78 2.63 255.10 5.28 686.03 14.21


1. Project and Other 111.07 2.30 34.80 0.72 119.40 2.47 64.74 1.34 330.01 6.83

128

SECONDARY SEGMENT FOR THE YEAR ENDED MARCH 31, 2003



Segment Revenue INR USD INR USD INR USD INR USD INR USD Software Services


8.78 0.18 - - - - 222.91 4.62 231.69 4.80


119.85 2.48 34.80 0.72 119.40 2.47 287.65 5.96 561.70 11.63

C. Network Solutions 466.38 9.65 - - - - - - 466.38 9.65

Total Revenue 766.36 15.87 158.81 3.29 246.18 5.10 542.75 11.24 1,714.10 35.50 Less: Inter Segment

Revenue 153.52 3.18 - - - - - - 153.52 3.18


612.84 12.69 158.81 3.29 246.18 5.10 542.75 11.24 1,560.58 32.32

Inter segment revenues under India, Middle East and Africa segment represents the value of services rendered by the Company under revenue segments (a) and (b) above to its Subsidiaries located in the other secondary segments. The Company believes that it is not practical to provide such details as the assets (except those identified as related to Research and Development activities and units located at Software Technology Park) are used interchangeably among segments. Significant liabilities contracted are based on the Company’s requirements on the whole and are not identifiable to any of the reportable segment and as such have not been disclosed separately.

129

Annexure XV RAMCO SYSTEMS CORPORATION, USA STATEMENT OF PROFITS AND LOSSES

Rs. in million


Six months ended

September 30, 2005 2005 2004 2003 2002 2001

Income: Sales 393.23 930.65 702.98 542.71 517.54 696.83 Other Income 0.33 0.18 1.08 0.92 0.72 4.51 Total Income 393.56 930.83 704.06 543.63 518.26 701.34 Expenditure Cost of Resale Material 86.14 202.64 54.58 112.88 142.04 116.67 Employee Compensation & Benefits 249.85 544.30 477.65 336.72 429.57 540.81 Sales & Marketing Expenses 11.54 23.41 19.36 21.97 9.90 10.79 Administrative & Other Expenses 74.70 131.39 123.64 168.91 115.29 176.56 Interest & Finance Charges 1.45 19.73 16.67 22.64 29.13 18.22

Depreciation 2.69 5.25 3.84 1.91 4.95 4.83 Total Expenditure 426.37 926.72 695.74 665.03 730.88 867.88Profit/(Loss) before extraordinary items (32.81) 4.11 8.32 (121.40) (212.62) (166.54) Extraordinary Items - (105.19) - - - -Writeback of TP / Royalty - 379.58 - - - -Profit/(Loss) before Tax (32.81) 278.49 8.32 (121.40) (212.62) (166.54) Provision for Taxation - - - - - 2.34 Profit/(Loss) after Tax (32.81) 278.49 8.32 (121.40) (212.62) (168.88)

130

Annexure XVI RAMCO SYSTEMS CORPORATION, USA STATEMENT OF ASSETS AND LIABILITIES


September

30, 2005 2005 2004 2003 2002 2001A. Fixed Assets Gross Block 63.23 60.73 54.66 46.83 46.80 46.32 Less : Depreciation 54.50 51.45 47.22 43.38 41.47 36.52 Net Block 8.73 9.27 7.44 3.45 5.33 9.80 B. Investments - - - - - - C. Current Assets, Loans and

advances

Sundry Debtors 231.76 214.51 220.60 195.02 286.14 288.66 Cash and Bank Balances 52.08 124.72 82.36 40.29 11.79 38.46 Loans and Advances 23.60 27.47 54.99 57.62 31.19 149.38 Other Current Assets 5.22 9.48 26.41 0.04 1.27 3.35 312.66 376.18 384.36 292.96 330.38 479.85 D. Liabilities and Provisions Secured Loans 65.87 54.54 54.83 296.06 305.62 195.69 Unsecured Loans 5.49 5.45 343.55 77.59 76.68 112.73 Current Liabilities and Provisions 156.92 205.38 467.01 443.50 428.95 427.19 228.27 265.37 865.38 817.16 811.25 735.61 E. Net worth 93.12 120.08 (473.59) (520.75) (475.55) (245.97) F. Represented by 1. Share capital 105.74 105.74 443.17 443.17 443.17 443.17

2. Reserves

20.19

14.34

116.40

77.56

60.64 77.60 Less : Profit & Loss account 32.81 - 1033.16 1041.48 979.36 766.74 Net worth 93.12 120.08 (473.59) (520.75) (475.55) (245.97)

131

Annexure XVII RAMCO SYSTEMS CORPORATION, USA SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS Significant Accounting Policies 1. Accounts are maintained on accrual basis. The transactions are in local currency (US Dollars) and are

translated for reporting in Indian Currency as provided in item 2 below:

2. Translation to Indian Rupees: For the purpose of the accounts, all income and expense items are translated at the moving average rate of exchange applicable for the year. All monetary and non-monetary assets and liabilities are translated at the closing rate as on Balance Sheet date. The equity share capital is stated at the exchange rate prevailing at the date of investment by the holding company. The exchange difference arising out of the translation is debited or credited to Translation Reserve account and is being classified under Reserves and Surplus account. 3. Revenue Recognition

A) Software & Related ServicesLicense Fees

License Fees License Fee revenue is recognized on delivery of the software.

Implementation Fees Implementation Contracts are either milestones based or time and material based. a) In case of milestone contract, revenue is recognized upon achievement of the milestones as per the terms of

the contract. b) In case of time and material contracts, revenue is recognized based on billable time spent in the project,

priced at the contractual rate. Services Revenue from Fixed price contracts is recognized on milestones achieved as per the terms of the specific contract.

Annual Maintenance Contract

Revenue from Maintenance services is recognized on a pro-rata basis over the period of the contract.

B) Value Added Resale Hardware & software Revenue from sales is recognized upon despatch of goods to customers. C) E-Commerce Revenue from the fixed price / fixed time frame contracts is recognized upon the achievement of specified milestones identified in the related contracts in accordance with the percentage of completion method. 4. Fixed Assets & Depreciation

Fixed assets are stated net of depreciation. Depreciation is provided on Straight Line Method. Depreciation rates are applied after considering the applicable laws of the State and management estimation of the useful life of the asset. However, the rates of depreciation provided are higher than the rates specified under Schedule XIV to the Companies Act, 1956.

The estimated useful life of the assets is: Hardware and Software 5 years Furniture, Fittings and Office Equipment 7 years 5. Holding Company Transactions

132

The Company has significant transactions with its parent company for financial support. The same is unsecured and interest is charged at reasonable rates. However there are no fixed terms of repayment. The Company has significant transactions with its holding company, which are trade related. However the same is unsecured, interest free and has no fixed terms of payment.

NOTES TO ACCOUNTS 1 The Company is a majority owned subsidiary of Ramco Systems Limited, India. The accounts are prepared

and audited to attach with the accounts of the Ramco Systems Limited, the holding company so as to comply with the provisions of the Companies Act, 1956.

2 For translating local currency (US Dollars) into Indian Rupees the exchange rate applied is as per paragraph 2

of the accounting policies given above. 3. Secured Loans:

Borrowings from banks amounting to Rs.65.87 million (USD 1.50 million) [Previous Year Rs.54.54 million (USD 1.25 million)] are secured by cash deposits of Ramco Systems Limited, India.

4. Current Liabilities:

The Company does not have any dues to any small-scale industrial undertaking.

5. Contingent liability – NIL 6. Taxation:

No provision has been made for current quarter as the Company has reported losses.

7. Additional information as required by Schedule VI of the Companies Act, 1956.

Rs. in million Year ended March 31, Six months ended

September 30, 2005 2005 2004 Sales: Ramco e. Application and other Software & Services

393.23

930.65

702.98

Expenditure in Foreign Currency on account of Transfer Price, Royalty, Debit notes & Interest

88.36 88.36 121.93

8. Note on Waiver / adjustment of dues by the parent company : Certain trade payables were waived pursuant to a schme of arrangement by the parent company and the loan due to the parent company was converted into equity and the accumulated losses were set off against the equity as on 31.03.05. This scheme does not require any local regulatory approvals. The parent company had received approvals from appropriate regulatory authorities in India and the effect for those has been given. The results for the financial year 2004-05 and the financial position as on 31st March 2005 before and after the waiver / adjustment is as given below:

USD Mn Rs. mn Loss for the year before waiver of trade payables (2.24) (101.09) Less: Waiver of trade payables by the parent company 8.62 379.58 Profit for the year 6.38 278.49 Add: Carried forward loss from previous year (23.17) (1033.16) Less: Transfer from Currency Translation Reserve 103.23 Final accumulated loss (16.79) (651.44) Less: Set off of accumulated loss against equity (16.79) (651.44) Loss after adjustment Nil Nil Share capital 12.50 443.17

133

Add: Conversion of loan payable to the parent 7.16 314.01 company into equity

Less. Set off of accumulated loss (16.79) (651.44) Final share capital 2.87 105.74 9. Note on extraordinary items:

"Extraordinary Income" represents the waiver of Interest payable to a related company amounting to Rs.42.25 million (USD 0.95 Million). “Extraordinary Expenses” represent the write off of loan receivable from another related company amounting to Rs.30.25 million (USD 0.67 Million) and write off of Bad Debts amounting to Rs.117.19 million (USD 2.61 Million).

134

Annexure XVIII RAMCO SYSTEMS LIMITED, SWITZERLAND STATEMENT OF PROFITS AND LOSSES

Rs. in million


Six months ended

September 30, 2005 2005 2004 2003 2002 2001

Income: Sales 155.87 243.85 222.25 202.33 273.49 232.74 Other Income 0.54 1.21 5.36 17.73 0.76 1.63 Total Income 156.41 245.07 227.61 220.07 274.25 234.37 Expenditure Cost of Resale Material 12.38 171.54 77.62 63.13 39.79 31.47 Employee Compensation & Benefits 97.32 173.90 179.87 157.33 130.27 106.94 Sales & Marketing Expenses 19.75 46.13 28.48 32.05 24.26 20.12 Administrative & Other Expenses 14.83 53.08 64.25 50.77 39.06 34.06 Interest & Finance Charges 0.58 9.48 10.93 5.29 2.96 1.96 Depreciation & Amortisation 0.75 1.88 24.81 38.98 22.87 25.11Total Expenditure 145.61 456.01 385.96 347.55 259.21 219.66 Profit/(Loss) before Extraordinary items & Tax

10.80 (210.94) (158.35) (127.48) 15.04 14.71

Extraordinary Items - 40.69 - - - -Writeback of TP/Royalty - 431.98 - - - -

Profit/(Loss) before Tax 10.80 261.73 (158.35) (127.48) 15.04 14.71

Provision for Taxation - - - - - - Profit/(Loss) after Tax 10.80 261.73 (158.35) (127.48) 15.04 14.71

135

Annexure XIX RAMCO SYSTEMS LIMITED, SWITZERLAND STATEMENT OF ASSETS AND LIABILITIES


September

30, 2005 2005 2004 2003 2002 2001A. Fixed Assets Gross Block 30.41 32.68 22.74 21.91 21.54 18.21 Less : Depreciation 27.73 29.06 20.61 19.73 17.95 15.88 Net Block 2.69 3.62 2.13 2.18 3.59 2.33 B. Investments 1.69 1.83 1.46 1.73 34.35 - C. Current Assets, Loans and advances Sundry Debtors 98.77 78.70 70.17 71.35 97.76 77.61 Cash and Bank Balances 9.68 12.84 7.57 14.65 14.99 28.28 Loans and Advances 90.27 94.66 70.91 1.16 1.81 1.35 Other Current Assets - 2.80 2.01 11.01 5.02 5.75 198.72 189.01 150.66 98.16 119.59 113.00 D. Liabilities and Provisions Secured Loans - - - 62.14 129.89 - Unsecured Loans 2.32 14.68 185.65 48.87 12.10 110.18 Current Liabilities and Provisions 91.58 72.74 338.62 235.39 139.40 111.16 93.90 87.42 524.27 346.39 281.40 221.34 E. Net worth 109.20 107.03 (370.03) (244.32) (123.87) (106.02) F. Represented by 1. Share capital 29.33 29.33 271.27 288.67 288.67 253.91 Share Application Money - - - - 34.76 2. Reserves 69.11 77.79 - - - - Less : Misc Expenses not written off 0.04 0.09 64.00 88.17 105.41 73.26 Less : Profit & Loss account (10.80) - 577.30 444.82 307.13 321.43 Net worth 109.20 107.03 (370.03) (244.32) (123.87) (106.02)

136

Annexure XX RAMCO SYSTEMS LIMITED, SWITZERLAND SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS Significant Accounting Policies 1. Accounts are maintained on accrual basis. The transactions are in local currency (Swiss Francs-CHF) and are

translated for reporting in Indian Currency as provided in item 2 below. 2. Translation to Indian Rupees: For the purpose of the accounts, all income and expense items are translated at the moving average rate of exchange applicable for the year. All monetary and non-monetary assets and liabilities are translated at the closing rate as on Balance Sheet date. The equity share capital is stated at the exchange rate prevailing at the date of investment by the holding company. The exchange difference arising out of the year-end translation is debited or credited to Translation Reserve account and classified under Reserves and Surplus Account.

3. Revenue Recognition A) Software & Related Services

i) License Fees License Fee revenue is recognized on delivery of the software. ii) Implementation Fees Implementation Contracts are either milestones based or time and material based. a) In case of milestone contract, revenue is recognized upon achievement of the milestones as per the terms of the

contract. b) In case of time and material contracts, revenue is recognized based on billable time spent in the project, priced

at the contractual rate. iii) Services Revenue from Fixed price contracts is recognized on milestones achieved as per the terms of the specific contract. iv) Annual Maintenance Contract Revenue from Maintenance services is recognized on a pro-rata basis over the period of the contract. B) Value Added Resale Hardware & software Revenue from sales is recognized upon despatch of goods to customers. C) E-Commerce Revenue from the fixed price / fixed time frame contracts is recognized upon the achievement of specified milestones identified in the related contracts in accordance with the percentage of completion method. 4. Fixed Assets & Depreciation:

Fixed assets are stated net of depreciation. Depreciation is provided on Straight Line Method.

137

Depreciation rates are applied after considering the applicable laws of the State and management estimation of the useful life of the asset. However, the rates of depreciation provided are higher than the rates specified under Schedule XIV to the Companies Act, 1956.

The estimated useful life of the asset are as follows: EDP Hardware 5 years EDP Software 5 years Furniture 8 years Office Equipments 8 years 5. Holding Company Transaction:

The Company has transactions with its parent company for financial support. The same is unsecured and interest is charged at reasonable rates. However there are no fixed terms of repayment. The amount due in respect of trade related activities are unsecured, interest free and have no fixed terms of payment.

6. Software Development Cost:

Software Development costs have been capitalized and amortized over its useful life. NOTES TO ACCOUNTS 1. The Company is a wholly owned subsidiary of Ramco Systems Limited, India. The accounts are prepared and

audited to attach with the accounts of the Ramco Systems Limited, the holding company to comply with the provisions of the Companies Act, 1956.

2. For translating local currency (Swiss Francs-CHF) into Indian Rupees the exchange rate applied is as per

paragraph 2 of the accounting policies given above. For the current quarter, Translation reserve is grouped along with Profit & Loss Account on the asset side, being exchange loss on conversion.


The Company does not have any dues to any small-scale industrial undertaking.

4. Research & Development: The balance in the un-amortized research and development expenditure as on April 1, 2004 amounting to Rs.63.83 million being software localization costs incurred for parent company has been transferred to them in 2004-05.

5. Contingent Liability: Nil (Previous year Nil) 6. Retirement benefits:

There exists a Federal Obligatory Pension Fund to which the employee contributes 50% and the employer contributes 50%.

7. Taxation:

The Company has not provided for taxation, as it has carry forward losses of earlier years. 8. Additional information as required by Schedule VI of the Companies Act, 1956

Rs. in million Year ended March 31, Six months

ended September 30,

2005

2005 2004

Sales A. Ramco e. Application and other Software & Services

155.87

243.86

222.25

B. Expenditure in Foreign Currency on account of Transfer Pricing, Royalty, Debit notes & Interest

2.53 186.70 85.20

138

9. Note on Waiver / adjustment of dues by the parent company Certain trade payables were waived pursuant to a schme of arrangement by the parent company and the loan and interest due to the parent company was converted into equity and the accumulated losses were set off against the equity as on 31.03.05. This does not require any local regulatory approvals. The parent company had received approvals from appropriate regulatory authorities in India and the effect for these had been given. The results for the financial year 2004-05 and the financial position as on 31st March 2005 before and after the waiver / adjustment of dues is as given below: CHF Mn Rs. mn Loss for the year before waiver of trade payables (4.48) (170.25) Less: Waiver of trade payables 11.98 431.98 Profit for the year 7.50 261.73 Add: Carried forward loss from previous year (18.64) (576.97) Add: Transfer to Currency Translation Reserve (21.60) Final accumulated loss (11.14) (336.85) Less: Set off of accumulated loss against equity (11.14) (336.85) Loss after adjustment Nil Nil Share capital 9.60 271.27 Add: Conversion of loan & interest payable to 4.43 153.03

the parent company into equity, comprising of Share Capital CHF 1.40 mln and Share Premium of 3.63 mln

Less. Set off of accumulated loss (11.14) (336.85) Final share capital + Share Premium 2.89 87.45 Represented by Share Capital 1.40 29.33 Share Premium 1.49 58.12 9. Note on extraordinary items:

"Extraordinary Income" represents the write back of loans payable to related companies amounting to Rs.40.69 Million (CHF 1.29 Million).

139

ANNEXURE XXI RAMCO SYSTEMS PTE LTD., SINGAPORE STATEMENT OF PROFITS AND LOSSES

Rs. in million


Six months ended

September 30, 2005 2005 2004 2003 2002 2001

Income: Sales 39.36 73.22 72.72 102.41 160.79 91.03 Other Income - 0.46 - 0.23 0.17 0.26 Total Income 39.36 73.67 72.72 102.64 91.29 Expenditure Cost of Resale Material 18.44 43.27 36.44 62.19 81.00 24.00 Employee Compensation & Benefits 14.10 26.03 42.54 52.77 42.03 33.21 Sales & Marketing Expenses 0.12 2.07 0.45 0.77 6.10 2.19 Administrative & Other Expenses 5.54 12.85 16.92 27.95 17.57 21.43 Depreciation 0.14 0.97 1.60 5.11 1.51 0.79 Total Expenditure 38.34 85.19 97.95 148.79 148.21 81.62 Profit/(Loss) before Tax and Extraordinary Items

1.02 (11.52) (25.23) (46.15) 12.74 9.67

Extraordinary Items - 1.14 - - - - Writeback of TP/Royalty - 68.64 - - - - Profit/(Loss) before Tax 1.02 55.98 (25.23) (46.15) 12.74 9.67 Provision for Taxation - 0.56 0.27 1.14 3.86 3.88 Profit/(Loss) after Tax 1.02 55.42 (25.51) (47.29) 8.88 5.79

140

Annexure XXII RAMCO SYSTEMS PTE. LTD, SINGAPORE STATEMENT OF ASSETS AND LIABILITIES


As atSeptember

30, 2005 2005 2004 2003 2002 2001 A. Fixed Assets Gross Block 7.12 7.13 7.02 6.87 4.40 2.38 Less : Depreciation 6.91 6.91 5.95 4.57 2.72 1.21 Net Block 0.21 0.22 1.07 2.30 1.68 1.17 B. Investments - - - - - - C. Current Assets, Loans and advances Sundry Debtors 22.50 8.64 13.85 46.71 42.09 39.85 Cash and Bank Balances 1.40 7.34 4.90 1.89 19.34 21.00 Loans and Advances 14.22 12.36 13.86 15.70 5.15 3.57 Other Current Assets 0.44 0.29 4.94 2.40 - 0.04 38.56 28.62 37.55 66.69 66.57 64.46 D. Liabilities and Provisions Current Liabilities and Provisions 17.98 9.62 74.14 80.26 36.48 40.25 17.98 9.62 74.14 80.26 36.48 40.25 E. Net worth 20.79 19.23 (35.52) (11.27) 31.77 25.38 F. Represented by 1. Share capital 18.62 18.62 18.62 18.62 18.62 18.62 2. Reserves 2.17 0.61 2.82 1.56 16.42 6.76 Less : Misc Expenses not written off - - - - 3.26 - Less : Profit & Loss account - - 56.96 31.45 - - Net worth 20.79 19.23 (35.52) (11.27) 31.77 25.38

141

Annexure XXIII RAMCO SYSTEMS PTE LTD, SINGAPORE SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS Significant Accounting Policies 1. Accounts are maintained on accrual basis. The transactions are in local currency (Singapore Dollars-S$) and

are translated for reporting in Indian Currency as provided in item 2 below. 2. Translation to Indian Rupees:

For the purpose of the accounts, all income and expense items are translated at the moving average rate of exchange applicable for the year. All monetary and non-monetary assets and liabilities are translated at the closing rate as on Balance Sheet date. The equity share capital is stated at the exchange rate prevailing at the date of investment by the holding company. The exchange difference arising out of the year end translation is debited or credited to Translation Reserve account and is being classified under Reserves and Surplus account.

3. Revenue Recognition A) Software & Related Services i) License Fees

License Fee revenue is recognized on delivery of the software. ii) Implementation Fees

Implementation Contracts are either milestones based or time and material based. a) In case of milestone contract, revenue is recognized upon achievement of the milestones as per the terms of

the contract. b) In case of time and material contracts, revenue is recognized based on billable time spent in the project,

priced at the contractual rate. iii) Services Revenue from fixed price contracts is recognized on milestones achieved as per the terms of the specific contract iv) Annual Maintenance Contract Revenue from Maintenance services is recognized on a pro-rata basis over the period of the contract. B) Value Added Resale Hardware & software Revenue from sales is recognized upon despatch of goods to customers. C) E-Commerce Revenue from the fixed price / fixed time frame contracts is recognized upon the achievement of specified milestones identified in the related contracts in accordance with the percentage of completion method. 4. Fixed Assets & Depreciation:

Fixed assets are stated net of depreciation. Depreciation is provided on Straight Line Method. Depreciation rates are applied after considering the applicable laws of the State and management estimation of the useful life of the asset. However, the rates of depreciation provided are higher than the rates specified under Schedule XIV to the Companies Act, 1956.

142

The estimated useful life of the asset are as follows Computer 3 years Lease line equipment 3 years Office Equipments 3 years

5. Holding Company Transaction:

The Company has significant transactions with its holding company, which are trade related. However the same is unsecured and interest free.

6. Software Development Cost: Software Development costs have been capitalized and amortized over its useful life NOTES TO ACCOUNTS 1. The Company is a wholly owned subsidiary of Ramco Systems Limited, India.. The accounts are prepared

and audited to attach with the accounts of the Ramco Systems Limited, the holding company to comply with the provisions of the Companies Act, 1956.

2. For translating local currency (Singapore Dollars S$) into Indian Rupees the exchange rate applied is as per

paragraph 2 of the accounting policies given above. 3. Current Liabilities:

The Company does not have any dues to any small-scale industrial undertaking 4. Contingent liability – NIL 5. Taxation:

Provision has been made for current year taxation. 6. Additional information as required by Schedule VI of the Companies Act, 1956


ended September

30, 2005

2005 2004

A. Sales Ramco e. Application and other Software & Services

39.36

73.22

72.73

B. Expenditure in Foreign Currency on account of Transfer Pricing, Royalty, Debit notes

15.76 21.75 36.94

7. Note on Waiver of dues by the parent company: Certain trade payables were waived pursuant to a schme of arrangement by the parent company. This does not require any local regulatory approvals. The parent company had received approvals from appropriate regulatory authorities in India and the effect for these had been given. The results for the financial year 2004-05 and the financial position as on 31st March 2005 before and after the waiver of dues is as given below: S$ Mn Rs. mn Loss for the year before waiver of trade payables (0.48) (13.22) Less: Waiver of trade payables by the parent company 2.62 68.65 Profit for the year 2.14 55.42 Add: Carried forward loss from previous year (2.11) (56.96) Add: Transfer from Currency Translation Reserve 2.43 Final accumulated profit after adjustment 0.03 0.89

143

8. Note on extraordinary items:

"Extraordinary Income" represent the write back of loan payable to a related company amounting to Rs.9.30 million ( S$ 0.37 Million). "Extraordinary Expenses" represent the write off of loan receivable from another related company amounting to Rs.10.44 million ( S$ 0.39 Million ).

144

Annexure XXIV RAMCO SYSTEMS SDN. BHD., MALAYSIA STATEMENT OF PROFITS AND LOSSES

Rs. in million


Six months ended

September 30, 2005 2005 2004 2003 2002 2001

Income: Sales 19.92 46.65 92.08 56.39 65.27 57.75 Other Income - - 0.21 0.65 0.35 - Total Income 19.92 46.65 92.29 57.05 65.62 57.75 Expenditure Cost of Resale Material 7.08 3.61 26.39 21.17 3.65 - Employee Compensation & Benefits

7.23

23.17 33.54 32.53 25.19 21.42

Sales & Marketing Expenses 0.12 0.46 0.93 0.08 2.04 5.35 Administrative & Other Expenses 4.02 10.67 14.02 30.81 27.64 22.85 Depreciation & Amortisation 0.20 0.57 0.53 2.85 3.29 2.58 Total Expenditure 18.65 38.48 75.41 87.44 61.81 52.20 Profit/(Loss) before Tax and Extraordinary Items

1.27 8.17 16.88 (30.39) 3.81 5.55

Extraordinary Items - 9.30 - - - - Profit/(Loss) before Tax 1.27 (1.13) 16.88 (30.39) 3.81 5.55 Provision for Taxation - - - (1.15) - - Profit/(Loss) after Tax 1.27 (1.13) 16.88 (29.25) 3.81 5.55

145

Annexure XXV RAMCO SYSTEMS SDN. BHD., MALAYSIA STATEMENT OF ASSETS AND LIABILITIES


As at September

30, 2005 2005 2004 2003 2002 2001A. Fixed Assets Gross Block 9.56 9.35 9.49 9.24 8.05 7.88 Less : Depreciation 9.04 8.78 8.35 7.82 7.17 5.06 Net Block 0.52 0.57 1.14 1.42 0.88 2.82 B. Investments - - - - - - C. Current Assets, Loans and advances Sundry Debtors 10.95 8.52 18.08 15.02 29.79 25.87 Cash and Bank Balances 9.71 3.87 12.97 7.68 10.43 10.70 Loans and Advances 10.52 17.20 10.33 11.83 13.48 11.90 Other Current Assets - - - - - - 31.18 29.59 41.38 34.53 53.70 48.47 D. Liabilities and Provisions Current Liabilities and Provisions 8.84 8.72 12.69 21.24 11.85 12.02 8.84 8.72 12.69 21.24 11.85 12.02 E. Net worth 22.86 21.44 29.83 14.72 42.72 39.28 F. Represented by 1. Share capital 18.22 18.22 18.22 18.22 18.22 18.22 2. Reserves 4.64 3.23 11.62 - 26.72 21.06 Less : Misc Expenses not written off - - - - 2.21 - Less : Profit & Loss account - - - 3.50 - - Net worth 22.86 21.44 29.83 14.72 42.72 39.28

146

Annexure XXVI RAMCO SYSTEMS SDN. BHD., MALAYSIA SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS Significant Accounting Policies 1. Accounts are maintained on accrual basis. The transactions are in local currency (Malaysian Ringgitt RM)

and are translated for reporting in Indian Currency as provided in item 2 below: 2. Translation to Indian Rupees: For the purpose of the accounts, all income and expense items are translated at the moving average rate of

exchange applicable for the year. All monetary and non-monetary assets and liabilities are translated at the closing rate as on Balance Sheet date. The equity share capital is stated at the exchange rate at the date of investment by the holding company. The exchange difference arising out of the translation is debited or credited to Translation Reserve account and is being classified under Reserves and Surplus account.

3. Revenue Recognition A) Software & Related Services i) License Fees

License Fee revenue is recognized on delivery of the software. ii) Implementation Fees Implementation Contracts are either milestones based or time and material based.

a) In case of milestone contract, revenue is recognized upon achievement of the milestones as per the terms of the contract.

b) In case of time and material contracts, revenue is recognized based on billable time spent in the project,

priced at the contractual rate. iii) Services Revenue from fixed price contracts is recognized on milestones achieved as per the terms of the specific contract iv) Annual Maintenance Contract Revenue from Maintenance services is recognized on a pro-rata basis over the period of the contract. B) Value Added Resale Hardware & software Revenue from sales is recognized upon despatch of goods to customers. C) E-Commerce Revenue from the fixed price / fixed time frame contracts is recognized upon the achievement of specified milestones identified in the related contracts in accordance with the percentage of completion method. 4. Fixed Assets & Depreciation:

Fixed assets are stated net of depreciation. Depreciation is provided on Straight Line Method. Depreciation rates are applied after considering the applicable laws of the State and management estimation of the useful life of the asset. However, the rates of depreciation provided are higher than the rates specified under Schedule XIV to the Companies Act, 1956. The estimated useful life of the asset are as follows: Plant & Machinery EDP 5 years

147

Plant & Machinery Software 3 years Office Equipments 5 years

5. Holding Company Transaction: The Company has significant transactions with its holding Company which are trade related. However the same is unsecured and interest free.

6. Software Development Cost: Software Development costs have been capitalized and amortized over its useful life.

NOTES TO ACCOUNTS 1. The Company is a wholly owned subsidiary of Ramco Systems Limited, India. The accounts are prepared

and audited to attach with the accounts of the Ramco Systems Limited, the holding Company to comply with the provisions of the Companies Act, 1956.

2. For translating local currency (Malaysian Ringgitt-RM) into Indian Rupees the exchange rate applied is as

per paragraph 2 of the accounting policies given above. For the current period, the translation reserve is grouped along with Profit & Loss account on the Asset side being exchange loss on conversion.


The Company does not have any dues to any small scale industrial undertaking 4. Contingent liability – NIL 5. Taxation:

No provision for Tax is made in the Current period’s accounts as the Company has been granted pioneer status incentive arising from its Multimedia Super Corridor (MSC) Status.

6. Additional information as required by Schedule VI of the Companies Act, 1956


Six months ended

September 30, 2005

2005 2004

A. Sales Ramco e. Application and other Software & Services

19.92

46.65

92.08


7.32 3.63 28.13

7. Note on Extra ordinary items: “Extraordinary Expenses” represent the write off of loan receivable from Ramco Systems Pte. Ltd, Singapore amounting to Rs.9.30 million (RM 0.79 Million).

148

Annexure XXVII RSL ENTERPRISE SOLUTIONS (PTY) LIMITED, SOUTH AFRICA STATEMENT OF PROFITS AND LOSSES

Rs. in million


Six months ended

September 30, 2005 2005 2004Income: Sales 197.35 252.87 15.94Other Income 0.89 0.92 0.10Total Income 198.23 253.79 16.03 Expenditure Cost of Resale Material 35.22 136.51 12.81Employee Compensation & Benefits 42.84 32.45 1.25Sales & Marketing Expenses 22.70 34.13 0.06Administrative & Other Expenses 26.18 29.93 2.69Interest & Finance Charges - 0.16 0.03Depreciation & Amortisation 0.18 0.10 -Total Expenditure 127.12 233.28 16.84 Profit/(Loss) before Tax 71.11 20.51 (0.79) Provision for Taxation 2.76 5.74 - Profit/(Loss) after Tax 68.35 14.78 (0.79)

149

Annexure XXVIII RSL ENTERPRISE SOLUTIONS (PTY) LIMITED, SOUTH AFRICA STATEMENT OF ASSETS AND LIABILITIES


As at September 30, 2005 2005 2004

A. Fixed Assets Gross Block 2.28 1.40 0.17 Less : Depreciation 0.27 0.09 - Net Block 2.01 1.30 0.17 B. Investments - - - C. Current Assets, Loans and advances Sundry Debtors 110.00 136.65 1.03 Cash and Bank Balances 30.02 44.05 14.47 Loans and Advances 5.67 7.96 1.00 Other Current Assets - - 2.11 145.69 188.66 18.62 D. Liabilities and Provisions Unsecured Loans - - 1.66 Current Liabilities and Provisions 65.48 176.77 17.89 176.77 19.56 E. Net worth 82.23 13.20 (0.77) F. Represented by 1. Share capital - - - 2. Reserves 82.23 13.20 - Less : Profit & Loss account - - 0.77 Net worth 82.23 13.20 (0.77)

150

Annexure XXIX RSL ENTERPRISE SOLUTIONS (PTY) LTD., SOUTH AFRICA SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS Significant Accounting Policies 1. Accounts are maintained on accrual basis. The transactions are in local currency (Rand) and are translated

for reporting in Indian Currency as provided in item 2 below. 2. Translation to Indian Rupees: For the purpose of the accounts, all income and expense items are translated at the moving average rate of

exchange applicable for the year. All monetary and non-monetary assets and liabilities are translated at the closing rate as on Balance Sheet date. The equity share capital is stated at the exchange rate prevailing at the date of investment by the holding Company. The exchange difference arising out of the year end translation is debited or credited to Translation Reserve account and is being classified under Reserves and Surplus account.

3. Revenue Recognition A) Software & Related Services i) Licence Fees

Licence Fee revenue is recognised on delivery of the software. ii) Implementation Fees

Implementation Contracts are either milestones based or time and material based.

a) In case of milestone contract, revenue is recognised upon achievement of the milestones as per the terms of the contract. b) In case of time and material contracts, revenue is recognised based on billable time spent in the project, priced at the contractual rate.

iii) Services

Revenue from fixed price contracts is recognised on milestones achieved as per the terms of the specific contract.

iv) Annual Maintenance Contract Revenue from Maintenance services is recognised on a pro-rata basis over the period of the contract. B) Value Added Resale Hardware & Software

Revenue from sales is recognised upon despatch of goods to customers. C) E-Commerce

Revenue from the fixed price / fixed time frame contracts is recognised upon the achievement of specified milestones identified in the related contracts in accordance with the percentage of completion method.

4. Fixed Assets & Depreciation:

Fixed assets are stated net of depreciation. Depreciation is provided on Straight Line Method.

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Depreciation rates are applied after considering the applicable laws of the State and management estimation of the useful life of the asset. However, the rates of depreciation provided are higher than the rates specified under Schedule XIV to the Companies Act, 1956.

The estimated useful life of the asset are as follows Computer 3 years Office Equipments 3 years 5. Holding Company Transaction:

The Company has significant transactions with its holding Company which are trade related. However the same is unsecured and interest free.

6. Software Development Cost:

Software Development costs have been capitalised and amortized over its useful life. NOTES TO ACCOUNTS 1. The Company is a wholly owned subsidiary of Ramco Systems Limited India. The accounts are prepared


2. For translating local currency (Rand) into Indian Rupees the exchange rate applied is as per paragraph 2

of the accounting policies given above. 3. The accounts pertain to the financial period from April 1,2004 to March 31,2005. 4. Current Liabilities:

The Company does not have any dues to any small scale industrial undertaking.

5. Contingent liability – NIL 6. Taxation:

Provision has been made for current year taxation. 7. Additional information as required by Schedule VI of the Companies Act, 1956


ended September 30, 2005 2005 2005

A. Sales Ramco e. Application and other Software &

Services

197.35

252.87

15.94


45.59 153.01 17.02

152

Annexure XXX RAMCO INFOTECH SOLUTIONS LIMITED, CHENNAI STATEMENT OF PROFITS AND LOSSES

Rs. in million

Period ended

September 30, 2005 Year ended March

31, 2005 Income: Nil Nil Expenditure Administrative & Other Expenses 0.00 0.00 Profit/(Loss) before Tax 0.00 0.00 Provision for Taxation Nil Nil Profit/(Loss) after Tax 0.00 0.00

153

Annexure XXI RAMCO INFOTECH SOLUTIONS LIMITED, CHENNAI STATEMENT OF ASSETS AND LIABILITIES

Rs. in million As of September 30, 2005 As of March 31, 2005

A. Fixed Assets Nil Nil B. Investments Nil Nil C. Current Assets, Loans and advances Cash and Bank Balances 0.51 0.51 0.51 0.51 D. Liabilities and Provisions Current Liabilities and Provisions 0.04 0.04 0.04 0.04 E. Net worth 0.47 0.47 F. Represented by 1. Share capital 0.50 0.50 2. Reserves Less : Misc Expenses not written off 0.03 0.03 Less : Profit & Loss account 0.00 0.00 Net worth 0.47 0.47

154

Annexure XXXII RAMCO INFOTECH SOLUTIONS LIMITED, CHENNAI NOTES TO ACCOUNTS 1. Accounts are maintained on accrual basis. The transaction currency is Indian Rupees. 2. The Company was incorporated under Indian Companies Act 1956 on November 1, 2004. There is no

significant trading during the year ended March 31, 2005 except for the preliminary expenses of Rs.0.03 million incurred.

3. The Company is a wholly owned subsidiary of Ramco Systems Limited, India. The accounts are prepared


155

Financial And Other Information Of Group Companies Our Promoters have direct ownership control of all the Indian group companies described herein. Financial data for each group company has been derived from its financial statements prepared in accordance with Indian GAAP. Companies 1. Nalina Agricultural Farms Private Limited 2. Nirmalashankar Farms & Estates Private Limited 3. Ontime Transport Company Limited 4. Rajapalayam Trading and Finance Company Pvt. Ltd 5. Ram Sandhya Farms Private Limited 6. Ramamandiram Agricultural Estate Private Limited 7. Ramco Private Limited 8. Ramco Management Private Limited 9. RCDC Securities and Investments Private Limited 10. Sandhya Spinning Mill Limited 11. Sri Nithyalakshmi Farms Private Limited 12. Sri Sandhyafarms (India) Private Limited 13. Sri Saradha Deepa Farms Private Limited 14. Sri Vishnu Shankar Mill Ltd 15. Sudharsanam Investments Limited 16. Thanjavur Spinning Mill Limited Partnerships 1. Gowri House Metal Works 2. Gowrishankar Screws The details of each Indian group companies and partnerships mentioned above have been described below in the same order.

Companies 1. Nalina Agricultural Farms Private Limited (“NAFPL”)

NAFPL was incorporated on October 14, 1997 as a private limited company under the Companies Act, 1956 with its registered office at No.1, Gandhi Kalaimanram Road. Rajapalayam 626117. NAFPL is engaged in agricultural activities. Shareholding Pattern

The shareholding pattern of NAFPL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage

1 Mr. P.R.Ramasubrahmaneya Rajha 100 33.33 2 Mr. P.R.Venketrama Raja 100 33.33 3 Mrs. R. Sudarsanam 100 33.33 Total Equity Shares 300 100.00

The preference shareholding pattern of NAFPL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 330 34.02 2 Mr. P.R.Venketrama Raja 320 32.99 3 Mrs. R. Sudarsanam 320 32.99 Total Preference Shares 970 100.00

156

Board of Directors

The directors on the board of NAFPL as on June 30, 2005 are: 1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. R. Sudarsanam Financial Performance The operating results of NAFPL for the last three years is set forth below:

(Rs.in million, except share data)

Particulars Year ended March



31, 2003 Sales and other income Nil Nil Nil Profit/(Loss) after Tax (0.004) (0.004) (0.003) Equity Capital (par value Rs.10 per share)

0.003 0.003 0.003 Reserves Nil Nil Nil Earnings per share Nil Nil Nil Book Value per share (81.41) (66.83) (51.54)

2. Nirmalashankar Farms and Estates Private Limited (“NSFEL”)

NSFEL was incorporated on November 10, 1998 as a private limited company under the Companies Act with its registered office at No.1, Gandhi Kalaimanram Road. Rajapalayam 626117. NSFEL is engaged in agricultural activities. Shareholding Pattern

The equity shareholding pattern of NSFEL as on June 30, 2005 was as follows:


1 Mr. P.R.Ramasubrahmaneya Rajha 100 11.11 2 Mr. P.R.Venketrama Raja 100 11.11 3 Mrs. P.V.Nirmala Raja 700 77.78 Total Equity shares 900 100.00

The preference shareholding pattern of NSFEL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 300 32.97 2 Mr. P.R.Venketrama Raja 300 32.97 3 Mrs. P.V. Nirmala Raja 310 34.06 Total Preference Shares 910 100.00

Board of Directors

The directors on the board of NSFEL as on June 30, 2005 are: 1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. R. Sudarsanam Financial Performance The operating results of NSFEL for the last three years is set forth below:

157






0.009 0.009 0.009

Reserves Nil Nil Nil Earnings per share Nil Nil Nil Book Value per share (7.37) (5.13) (2.67)

3. Ontime Transport Company Limited (“OTCL”)

OTCL was incorporated on April 16, 2002 as a public limited company and received its certificate for commencement of business on April 23, 2002. The registered office of OTCL is located at No.47, P.S.K.Nagar, Rajapalayam 626108. OTCL is in engaged in the transportation business.

Shareholding Pattern

The equity shareholding pattern of OTCL as on June 30, 2005 is as follows:

Sr.No Name of the Shareholder Number of Shares Percentage

1. Rajapalayam Mills Ltd 50,000 35.53 2. Ramco Industries Ltd 50,000 35.53 3. Sandhya Spinning Mill Ltd 20,000 14.22 4. Sri Vishnu Shankar Mill Ltd 10,000 7.10 5. The Ramaraju Surgical Cotton Mills Ltd 10,000 7.10 6. Others 700 0.50 Total 140,700 100.00

Board of Directors

The directors on the board of OTCL as on June 30, 2005 are:

1. Mr. A.V.Dharmakrishnan 2. Mr. S.A.Bhima Raja 3. Mr. S.Kanthimathinathan

Financial Performance

The operating results of OTCL since April 2002 is set forth below:

(Rs. in million, except share data) Particulars Year ended March



31, 2003 Sales and other income 1,017.5 910.1 506.9 Profit/(Loss) after Tax 1.07 0.9 3.0 Equity Capital (par value Rs.10 per share)

1.4 1.4 1.4

Reserves 5.0 3.9 3.0 Earnings per share (Rs.) 8 7 21 Book Value per share (Rs.) 46 38 31

4. Rajapalayam Trading and Finance Company Private Limited (“RTFC”)

RTFC was incorporated on November 20, 1936 under the Companies Act, 1913 as a private limited company, with its registered office at 98, Hospital Road, Rajapalayam. Though RTFC is engaged in the business of finance, it is only earning interest on advances granted earlier and has not transacted any business in the past 15 years.

158


The equity shareholding pattern of RTFC as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. PAC Ramasamy Raja 742 24.73 2 Mr. P.R.Ramasubrahmaneya Rajha 758 25.26 3 Mr. S.N.Ramasamy Raja 375 12.50 4 Mr. S.N.Rama Raju 113 3.76 5 Mr. S.R.Narayanan Raja 50 1.66 6 Mr. S.N.Radhakrishna Raja 112 3.73 7 Mr. S.N.Bhaskara Raja 100 3.33 8 Mr. S.S.Ramachandra Raja 188 6.26 9 Mr. S.S.Ramasubramania Rajha 187 6.23 10 Mr. S.N.R.Dharmaraja 188 6.26 11 Mr. S.N.R.D Ramasubramania Raja 187 6.23 Total Equity shares 3,000 100.00

Board of Directors The directors on the board of RTFC as on June 30, 2005 are: 1. Mr. S.N.Rama Raju 2. Mr. S.S.Ramasubramania Rajha Financial Performance The operating results of RTFC for the last three years is set forth below:




March 31, 2004


2003 Sales and other income 0.014 Nil Nil Profit/(Loss) after Tax 0.005 0.005 0.005 Equity Capital 0.275 0.275 0.275 Reserves 0.370 0.366 0.360 Earnings per share 1.54 1.68 1.68 Book Value per share 215.10 213.56 211.93

5. Ram Sandhya Farms Private Limited (“RSFL”)

RSFL was incorporated on November 8, 2002 under the Companies Act as a private limited company with its registered office at No.1, Gandhi Kalaimanram Road, Rajapalayam 626117. RSFL is engaged in agricultural activities. Shareholding Pattern The equity shareholding pattern of RSFL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 3400 13.60 2 Mr. P.R.Venketrama Raja 3300 13.20 3 Mrs. R.Sudarsanam 3300 13.20 4 Ms. Sandhya P.V. 15000 60.00 Total Equity shares 25000 100.00

159

Board of Directors

The directors on the board of RSFL as on June 30, 2005 are:

1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. R.Sudarsanam Financial Performance The operating results of RFSL for the period March 31, 2002 to March 31, 2004 is set forth below:




31, 2004 Year ended

March 31, 2003 Sales and other income Nil Nil Nil Profit/(Loss) after Tax (0.003) (0.003) (0.003) Equity Capital (par value Rs.10 per share)

0.025 0.025 0.025

Reserves Nil Nil Nil Earnings per share Nil Nil Nil Book Value per share 9.63 9.76 9.89

6. Ramamandiram Agricultural Estate Private Limited (“RAEPL”)

RAEPL was incorporated on October 14, 1997 as a private limited company under the Companies Act with its registered office at No.1, Gandhi Kalaimanram Road, Rajapalayam 626117. RAEPL is engaged in agricultural activities. Shareholding Pattern The equity shareholding pattern of RAEPL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 100 10.00 2 Mr. P.R.Venketrama Raja 100 10.00 3 Mrs. R.Sudarsanam 100 10.00 4 Mr. P.R.Abinav Ramasubramaniam Raja 700 70.00 Total Equity Shares 1000 100.00

The preference shareholding pattern of RAEPL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 200 22.22 2 Mr. P.R.Venketrama Raja 200 22.22 3 Mrs. R.Sudarsanam 200 22.22 4 Mr. P.R.Abinav Ramasubramaniam Raja 300 33.33 Total Preference shares 900 100.00

Board of Directors

The directors on the board of RAEPL as on June 30, 2005 are: 1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. R. Sudarsanam

Financial Performance The operating results of RAEPL for the last three years is set forth below:

160





31, 2003 Sales and other income 0.002 Nil Nil Profit/(Loss) after Tax (0.008) (0.012) (0.005) Equity Capital (par value Rs.10 per share)

0.010 0.010 0.010


7. Ramco Private Limited (“RPL”)

RPL was incorporated on December 28, 1942 as a private limited company under the Indian Companies Act, 1913 with its registered office at Ramamandiram, Tenkasi Road, Rajapalayam 626117. RPL is engaged in investment activities. Shareholding Pattern The equity shareholding pattern of RPL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 13 4.66 2 Mr. P.R.Venketrama Raja 80 28.67 3 Mrs. R.Sudarsanam 28 10.04 4 Others 158 56.63

Total 279 100.00 Board of Directors The directors on the board of RPL as on June 30, 2005 are: 1. Mrs. R.Sudarsanam 2. Mrs. R.Chittammal

Financial Performance The operating results of RPL for the last three years is set forth below:





March 31, 2003 Dividend income Nil 0.122 0.089 Profit/(Loss) after Tax 0.150 0.121 0.088 Equity Capital (par value Rs.1000 per share)

0.279 0.279 0.279

Reserves 0.228 0.212 0.199 Earnings per share 544.24 433.69 315.41 Book Value per share 1817.45 1759.86 1713.26

8. Ramco Management Private Limited (“RMPL”)

RMPL was incorporated on April 16, 1943 under the Indian Companies Act, 1913 with its registered office at PAC, Ramasamy Raja Salai, Rajapalayam 626117. RMPL is engaged in various investment activities such as shares, stocks, debentures and bonds.


The equity shareholding pattern of RMPL as on June 30, 2005 was as follows:

161

Equity shares of Rs.100 each fully paid-up

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 225 25.00 2 Mr. P.R.Venketrama Raja 225 25.00 3 Mrs. R.Sudarsanam 225 25.00 4 Mrs. R.Chittammal 225 25.00 Total Equity Shares 900 100.00

Equity shares of Rs.500 each fully paid-up


1 Mr. P.R. Ramasubrahmaneya Rajha 5 25.00 2 Mr. S.N.Radhakrishna Raja 2 10.00 3 Mr. P.S. Subba Raja Family Trust 1 5.00 4 Mr. K.S. Perumal Raja 1 5.00 5 Mr. P.S. Alaga Raja 1 5.00 6 Mr. T.A.K. Manialaga Raja 1 5.00 7 Mr. P.A. Jagannatha Raja 1 5.00 8 Mr. M.R.S. Radhakrishna Raja 1 5.00 9 Mrs. A. Manjammal 1 5.00 10 Mrs. R.Sethuramammal 1 5.00 11 Mrs. N.R.K. Sethuramaml 1 5.00 12 Mrs. R. Chittammal 1 5.00 13 Mr. S.N. Bhaskara Raja 1 5.00 14 Mr. P.R. Venketrama Raja 1 5.00 15 Mrs. R. Sudarsanam 1 5.00

Total Equity Shares 20 100.00

Board of Directors

The directors on the board of RMPL as on June 30, 2005 are: 1. Mr. S.S.Ramachandra Raja 2. Mr. M.R.S.Radhakrishna Raja Financial Performance The operating results of RMPL for the last three years is set forth below:





31, 2003 Sales and other income 0.73 0.77 0.50 Profit/(Loss) after Tax (0.43) (0.38) (1.01) Equity Capital (par value Rs.100 and Rs. 500 per share)

0.10 0.10 0.010

Reserves 0.005 0.005 0.005 Earnings per share N.A N.A N.A Book Value per share (1538.04) (1070.65) (34750.00)

9. RCDC Securities and Investments Private Limited (“RSIPL”)

RSIPL was incorporated on March 20, 1961 as a private limited company originally as Ramco Cement Distribution Company Private Limited. Subsequently on June 3, 1999 the name was changed to RCDC Securities and Investments Private Limited. The main business of RSIPL is to act as an investment company in India or outside India and to buy, underwrite, invest in, acquire, hold and deal in shares, stocks, debentures, and bonds.

162


The share capital of RSIPL comprises of equity shares of nominal values, Rs. 10 each fully paid up and Rs. 2.50 each fully paid up. The shareholding pattern of RSIPL as on March 31, 2005 is as follows: Equity shares of Rs.10 each fully paid-up

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mrs. R. Chittammal 4,000 38.10 2 Mrs. R. Sudarsanam 3,000 28.60 3 Mr. S.S. Ramachandra Raja 2,500 23.80 4 Mr. P.R. Ramasubrahmaneya Rajha 1,000 9.50 Total 10,500 100.00

Equity shares of Rs.2.50 each fully paid-up

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mrs. N.K. Sethuramammal 2,000 36.40 2 Mr. S. Arjuna Raja 1,000 18.20 3 Mr. K. Thiruvengada Mudaliar (deceased) 1,000 18.20 4 Mrs. K.T. Rukmani Anni 1,000 18.20 5 Mr. S.R. Rajagopalan(deceased) 200 3.60 6 Mr. S.N. Subramanian(deceased) 100 1.80 7 Mr. S.R. Narayana Raja (deceased) 100 1.80 8 Mrs. K. Vijayalakshmi 100 1.80 Total 5,500 100.00

Board of Directors The directors on the board of RSIPL as on June 30, 2005 are:

1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja Financial Performance The operating results of RSIPL for the last three years is set forth below:





31, 2003 Sales and other income 0.020 0.012 0.006 Profit/(Loss) after Tax (before adjustments)

0.010 0.009 0.004

Equity Capital (par value Rs.10 and Rs. 2.50 per Share)

0.119 0.119 0.04

Reserves 0.150 0.138 0.129 Earnings per share 0.740 0.56 0.27 Book value per share 16.80 16.06 10.58

10. Sandhya Spinning Mill Limited (“SSML”)

SSML was incorporated on March 16, 1994 as a public limited company under the Companies Act with its registered office at No.47, P.S.K.Nagar, Rajapalayam 626108. SSML commenced its business on July 20, 2004. SSML is engaged in the business of manufacturing cotton yarn.

163


The equity shareholding pattern of SSML as on June 30, 2005 was as follows:

SL.No Name of the Shareholder Number of Shares Percentage 1. Mr. P.R. Ramasubrahmenya Rajha 41,000 2.44 2. Mr. P.R. Ventketrama Raja 42,000 2.50 3. Ms. V. Sandhya 350,350 20.84 4. Others 1,248,050 74.22 Total 1,681,400 100.00

Board of Directors

The directors on the board of SSML as of June 30, 2005 comprise: 1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. P.V.Nirmala Raju, 4. Mrs. R.Sudarsanam 5. Mr. M.R.S.Radhakrishna Raja 6. Mr. N.K.Shrikantan Raja 7. Mr. K.T.Krishnan Financial Performance

The operating results of SSML for the last three years is set forth below:

(Rs. in million except share data)




31, 2003 Sales and other income 257.58 177.14 169.87 Profit/(Loss) after Tax 8.80 3.19 2.45 Equity Capital (par value Rs.10 per share) 16.81 16.81 16.81 Reserves 9.56 5.55 5.20 Earnings per share 8.75 2.43 2.95 Book Value per share 15.68 13.29 13.09

11. Sri Nithyalakshmi Farms Private Limited (“SNFL”)

SNFL was incorporated on September 23, 1998 as a private limited company under the Companies Act with its registered office at No.1, Gandhi Kalaimanram Road. Rajapalayam 626117. SNFL is engaged in agricultural activities. Shareholding Pattern The equity shareholding pattern of SNFL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 100 33.33 2 Mr. P.R.Venketrama Raja 100 33.33 3 Mrs.R.Sudarsanam 100 33.33

Total Equity shares 300 100.00 The preference shareholding pattern of SNFL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 330 34.02 2 Mr. P.R.Venketrama Raja 320 32.99 3 Mrs.R.Sudarsanam 320 32.99

Total Preference Shares 970 100.00

164

Board of Directors The directors on the board of SNFL as of June 30, 2005 comprises: 1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. R. Sudarsanam

Financial Performance The operating results of SNFL for the last three years is set forth below:






(0.003) (0.003) (0.003)


12. Sri Sandhya Farms (India) Private Limited (“SSFL”)

SSFL was incorporated on December 13, 1996 as a private limited company under the Companies Act with its registered office at No.1, Gandhi Kalaimanram Road, Rajapalayam 626117. SSFL is engaged in agricultural activities.


The equity shareholding pattern of SSFL as on June 30, 2005 was as follows:


1 Mr. P.R.Ramasubrahmaneya Rajha 100 10.00 2 Mr. P.R.Venketrama Raja 100 10.00 3 Mrs. R. Sudarsanam 100 10.00 4 Ms. Sandhya P.V. 700 70.00 Total Equity Shares 1,000 100.00

The preference shareholding pattern of SSFL as on June 30, 2005 was as follows:


1 Mr. P.R.Ramasubrahmaneya Rajha 120 13.33 2 Mr. P.R.Venketrama Raja 120 13.33 3 Mrs. R. Sudarsanam 120 13.33 4 Ms. Sandhya P.V. 540 60.00 Total Preference Shares 900 100.00

Board of Directors

The directors on the board of SSFL as on June 30, 2005 are:

1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. R.Sudarsanam 4. Mrs. P.V. Nirmala

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Financial Performance The operating results of SSFL for the last three years is set forth below:






(0.043) (0.046) (0.045)

Equity Capital (par value Rs.10 per Share)

0.010 0.010 0.010

Reserves Nil Nil Nil Earnings per share Nil Nil Nil Book value per share (2,049.41) (117.41) (71.73)

13. Sri Saradha Deepa Farms Private Limited (“SSDFL”)

SSDFL was incorporated on October 14, 1997 as a private limited company under the Companies Act with its registered office at No.1, Gandhi Kalaimanram Road. Rajapalayam 626117. SSDFL is engaged in agricultural activities.

Shareholding Pattern The equity shareholding pattern of SSDFL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya

Rajha 100 33.33

2 Mr. P.R.Venketrama Raja 100 33.33 3 Mrs. R.Sudarsanam 100 33.33 Total Equity Shares 300 100.00

The preference shareholding pattern of SSDFL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya

Rajha 330 34.02

2 Mr. P.R.Venketrama Raja 320 32.99 3 Mrs. R.Sudarsanam 320 32.99 Total Preference Shares 970 100.00

Board of Directors

The directors on the board of SSDFL as of June 30, 2005 comprises:

1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja 3. Mrs. R.Sudarsanam

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Financial Performance The operating results of SSDFL for the last three years is set forth below:





31, 2003 Sales and other income 0.201 0.054 Nil Profit/(Loss) after Tax (0.018) (0.548) (0.037) Equity Capital (par value Rs.10 per share)

0.003 0.003 0.003

Reserves Nil Nil Nil Earnings per share Nil Nil Nil Book Value per share (2,049.41) (1990.16) (163.16)

14. Sri Vishnu Shankar Mill Ltd (“SVSML”)

SVSML was incorporated on March 23, 1981 as a public limited company under the Companies Act with its registered office at Sri Vishnu Shankar Mill Premises, Post Box No.109, P.A.C.Ramasamy Raja Salai, Rajapalayam 626 117. SVSML is engaged in the business of manufacturing cotton yarn.

Shareholding Pattern The equity shareholding pattern of SVSML as on June 30, 2005 was as follows:

Sl.No Name of the Shareholder Number of Shares Percentage

1 Mr. P.R.Ramasubrahmaneya Rajha 134,560 8.97 2 Mr. P.R.Venketrama Raja 48,000 3.20 3 Bodies Corporate 260,960 17.40 4 Others 1,056,480 70.43 Total Equity Shares 1,500,000 100.00

Board of Directors

The directors on the board of SSFL as on June 30, 2005 are: 1. Mr. P.R.Ramasubrahmaneya Rajha 2. Ms. S.Sharada Deepa 3. Mr. P.R.Venketrama Raja 4. Mr. S.S.Ramachandra Raja 5. Mrs. R.Chittammal 6. Mr. N.K.Shrikantan Raja 7. Mr. S.R.Srirama Raja 8. Dr. K.T.Krishnan 9. Mr. Arunkumar Goenka Financial Performance

The operating results of SSFL for the last three years is set forth below:

(Rs. in million except share data)




31, 2003 Sales and other income 602.58 513.50 472.20 Profit/(Loss) after Tax 6.03 11.91 7.34 Equity Capital (par value Rs.10 per share) 15 15 15 Reserves 97.55 95.80 97 Earnings per share 6.12 7.94 4.89 Book Value per share 75.03 74 75

15. Sudharsanam Investments Limited (“SIL”)

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SIL was incorporated on July 16, 1998 as a private limited company under the Companies Act, as Sudharsanam Investments Private Limited. On January 22, 1999 it changed its name to Sudharasnam Investments Limited and became a deemed public limited company. The main business of SIL is to act as an investment company in India or outside India and to buy, underwrite, invest in, acquire, hold and deal in shares, stocks, debentures, bonds etc. Shareholding Pattern

The equity shareholding pattern of SIL as on June 30, 2005 was as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Ramco Industries Limited 4249994 99.99 2 Mr. P.R. Ramasubrahmaneya Rajha 1* 3 Mr. P.R. Venketrama Raja 1* 4 Dr.K.T. Krishnan 1* 5 Mr. N.K. Shrikantan Raja 1* 6 Mr. S.S. Ramachandra Raja 1* 7 Mr. S. Arjuna Raja 1* Total Equity shares 425,0000 100

* Nominee Holding Board of Directors The directors on the board of SIL as on June 30, 2005 2005 are:

1. Mr. P.R.Ramasubrahmaneya Rajha 2. Mr. P.R.Venketrama Raja

3. Mr. S. Arjuna Raja 4. Dr. K.T.Krishnan 5. Mr. NK.Shrikantan Raja

Financial Performance The operating results of SIL for the last three years is set forth below:






1.19 0.9 0.5

Equity Capital (par value Rs.10 per Share)

42.5 42.5 42.5

Reserves 1.45 0.3 - Earnings per share 0.28 0.21 0.13 Book value per share 10.34 10.07 9.84

16. Thanjavur Spinning Mill Limited (“TSML”)

TSML was incorporated on June 9, 1961 as a public limited company under the Companies Act as ‘Thanjavur Textiles Ltd’. Subsequently on January 5, 2001, its name has been changed to Thanjavur Spinning Mill Ltd. Its registered office is located at Rajapalayam Mills Premises, PAC Ramasamy Raja Salai, Rajapalayam 626 117. TSML commenced its business on August 9, 1961. The main business of TSML is to manufacture cotton yarn. TSML had filed its reference with the Board for Industrial and Financial Recontruction (BIFR) on August 9, 2002 and at the hearing held on June 28, 2005 it has been declared as sick industrial company byBIFR. TSML has stated that it could make its net worth exceed its accumulated losses before March 31, 2006 on their own, as per the rehabilitation package to be formulated and submitted by them.

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Shareholding Pattern The equity shareholding pattern of TSML as on June 30, 2005 is as follows:

Sl. No. Name of the Shareholder No of Shares Percentage 1 Mr. P.R.Ramasubrahmaneya Rajha 9,890 0.36 2 Mrs. R.Sudaharsanam 3,288 0.12 3 Ms. R.Sethurammal 890 0.03 4 Mrs. R.Chittammal 888 0.03 5 Rajapalayam Mills Ltd 775,000 28.70 6 Ramco Industries Ltd 750,000 27.78 7 Sudharsanam Investments Ltd 60,000 2.22 8 Ramco Management Private Ltd 55,000 2.04 9 Other Promoters 265,036 9.82 10 Persons acting in concert 39,800 1.47 11 Non-Promoters Holding 740,208 27.42 Total Equity Shares 2,700,000 100.0

Board of Directors The board of directors of TSML as on June 30, 2005 comprises of 1. Mr. P.R.Ramasubrahmaneya Rajha

2. Mr. S.Arjuna Raja 3. Mr. K.T.Ramachandran 4. Dr.K.T.Krishnan 5. Mr. P.R.Venketrama Raja 6. Mr. S.Krishnaswamy Kamaya Naicker 7. Mr. R.Sivasubramanian Financial Performance The operating results of TSML for the last three years is set forth below:





March 31, 2003 Sales and other income 367.83 374 269.30 Profit/(Loss) after Tax (before adjustments) 6.19 26.1 (5.3) Equity Capital (par value Rs.10 per Share) 27 27 27 Reserves 6 6 6 Earnings per share 2.29 9.66 Nil Book value per share (4.12) (173) (434)

Partnerships 1. M/s. Gowri House Metal Works

M/s. Gowri House Metal Works started as a sole proprietorship, and was subsequently converted into a partnership firm from January 1, 1960. It is engaged in the business of manufacture and sale of screws, nails, etc. Its main place of business is situated at 1/III, Old No.1408, Malayadipatti, Rajapalayam 626 117.

169

The details of the partnership is given below:

Sl.No. Name of Partner Percentage of profit (%) 1. Mrs. R.Sudarsanam 55 2. Mrs. R.Chittammal 30 3. Mrs. N.R.K.Sethuramammal 15 Total 100

Financial Performance The operating results of M/s. Gowri House Metal Works for the last three years is set forth below:





31, 2003 Sales and other income 19.715 21.172 18.816 Profit/(Loss) after Tax 0.947 1.710 0.930 Partners Capital Account 8.368 6.938 4.637 Reserves N.A N.A N.A Earnings per share N.A N.A N.A Book Value per share N.A N.A N.A

2. M/s. Gowrishankar Screws

M/s Gowrishankar Screws was constituted as a partnership vide partnership deed dated August 23, 1985. It is engaged in the business of manufacture and sale of woodscrews, wirenails and buffing tacks and etc. Its main place of business at 4/III, (Old No.1411) Malayadipatti, Rajapalayam 626 117.

The details of the partnership is given below: Sl.No. Name of Partner Percentage of profit (%) 1. Mrs. R.Nalina Ramlaksmi 50 2. Mrs. S. Sharada Deepa 50 Total 100

Financial Performance

The operating results of M/s. Gowrishankar Screws for the last three years is set forth below:





31, 2003 Sales and other income 13.723 13.020 12.831 Profit/(Loss) after Tax 1.130 0.952 0.721 Partners Capital Account 1.806 0.976 0.898 Reserves N.A N.A N.A Earnings per share N.A N.A N.A Book Value per share N.A N.A N.A

Entities disassociated from Promoters As on the date of the Letter of Offer, there are no entities, which the Promoters have disassociated from. Common pursuits

We do not have any common pursuits, conflict of interest (including related party transactions within the aforesaid promoter group), the significance of these transactions, if any, on the financial performance of the companies (including sales or purchase) does not exceed 10% of the total sales or purchase of the Company, including material items of income/expenditure arising out of transactions in the promoter group. Group companies making losses

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The following companies forming part of the Promoter group of companies have accumulated losses:

1. Nalina Agricultural Farms Private Limited; 2. Nirmalashankar Farms and Estate Private Limited; 3. Ram Sandhya Farms Private Limited; 4. Ramamandiram Agricultural Estate Private Limited; 5. Ramco Management Private Limited; 6. Sri Nithyalakshmi Farms Private Limited; 7. Sri Sandhyafarms (India) Private Limited; 8. Sri Saradha Deepa Farms Private Limited; and 9. Thanjavur Spinning Mills Limited.

For more information on the losses, please refer to the section titled “Risk Factors” on page vi of this Letter of Offer. Group Companies with negative net worth The following companies forming part of the Promoter group of companies have a negative net worth. They are:

1. Nalina Agricultural Farms Private Limited; 2. Nirmalashankar Farms and Estate Private Limited; 3. Ram Sandhya Farms Private Limited; 4. Ramamandiram Agricultural Estate Private Limited; 5. Ramco Management Private Limited; 6. Sri Nithyalakshmi Farms Private Limited; 7. Sri Sandhyafarms (India) Private Limited; 8. Sri Saradha Deepa Farms Private Limited; and 9. Thanjavur Spinning Mills Limited. Sick companies/BIFR proceedings Thanjavur Spinning Mills Limited, forming part of the Promoter group of companies has been referred to the BIFR as a potential sick company. Struck off from the Register of the Registrar of Companies

Sudharsan Travel Services Private Limited (registration no. 18-40825) has been struck off from the register of the Registrar of Companies, Tamil Nadu vide order no. 40825/560(5) 2004 dated July 28, 2004.

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Stock Market Data For Equity Shares Of Our Company Our Equity Shares are listed on the BSE, NSE and MSE. (i) The high and low closing prices recorded on the BSE and NSE and MSE for the preceding three

years and the number of Equity Shares traded on the days the high and low prices were recorded are stated below:

BSE

Year ending

March 31 High (Rs.) Date of High

Volume on date of high (no. of shares)

Low (Rs.) Date of Low

Volume on date of low (no. of shares)

Average price for the year

(Rs.)

2003 539.72 January 24, 2003 300707 106.45 November 12,

2002 667 237.36

2004 455.55 April 7, 2003 119481 205.65 October 8,

2003 3161 292.47

2005 480.25 December 29, 2004 16093 188.35 May 17, 2004 1723 311.76

April 1, 2005 to November 18, 2005 518.85

September 12, 2005 52,411 335.10 June 20, 2005 2,609 395.37

NSE

Year ending

March 31 High (Rs.) Date of High

Volume on date of

high (no. of shares) Low (Rs.)

Date of Low

Volume on date of low

(no. of shares)


(Rs.)

2003 543.87 January 24, 2003 1,306,919 105.87

November 12, 2002 1,821 237.56

2004 456.09 April 7, 2003 572,415 204.53

October 8, 2003 11,852 293.55

2005 479.75 December 29, 2004 49,921 190.85

May 17, 2004 3,621 311.84

April 1, 2005 to November 18, 2005 516.85

September 12, 2005 72,357 336.5

June 20, 2005 5,697 395.79

MSE The Equity Shares have not been traded on the MSE and information in this behalf is not available. (ii) The high and low prices and volume of Equity Shares traded on the respective dates during the

last six months is as follows: BSE

Month, Year High (Rs.)

Date of High

Volume on date of


Date of Low


(no. of shares)


(Rs.) November, 2005* 409.45

November 14, 2005 4,558 362.50

November 1, 2005 1,283 385.67

October, 2005 451.55

October 4, 2005 9,002 362.55

October 28, 2005 486 402.87

September, 518.85 September 52,411 449.9 September 6,548 472.03

172


Date of High

Volume on date of


Date of Low


(no. of shares)


(Rs.) 2005 12, 2005 5, 2005 August, 2005 457.6

August 19, 2005 17,505 381.95

August 5, 2005 2,568 408.3

July, 2005 400.30 July 26, 2005 23,484 348.20

July 14, 2005 1,531 368.23

June, 2005 365.90 June 1, 2005 137 335.10

June 20, 2005 2,609 351.67

May, 2005 393.35 May 6, 2005 59,926 355.05

May 2, 2005 30,756 374.57

*Updated till November 18, 2005 NSE


Date of High

Volume on date of


Date of Low


(no. of shares)


(Rs.) November, 2005*

404.6 November 14, 2005

4,558 368.25 November 2, 2005

2,738 386.97

October, 2005

452.7 October 4, 2005

15,826 362.2 October 28, 2005

2,140 403.71

September, 2005

516.85 September 12, 2005

72,357 447.95 September 5, 2005

13,858 472.57

August, 2005

411.35 August 11, 2005

20,630 383.55 August 3, 2005

14, 375 392.11

July, 2005 400.55

July 26, 2005 33,531 347.65

July 15, 2005 4,198 367.24

June, 2005 365.15

June 1, 2005 25,617 336.5

June 20, 2005 5,697 351.9

May, 2005 392.15

May 6, 2005 59,907 355.35

May 2, 2005 52,326 374.5

*Updated till November 18, 2005 MSE The Equity Shares have not been traded on the MSE and information in this behalf is not available. The market price of our Equity Shares was Rs. 390.10 on the BSE on July 30, 2005, the trading day immediately following the day on which Committee meeting was held to finalize the the Issue. The market price of our Equity Shares was Rs. 382.40 on the NSE on July 30, 2005, the trading day immediately following the day on which Committee meeting was held to finalize the the Issue. For details of the transactions in Equity Shares by the Promoter, the promoter group and directors of the Company during the last six months please refer to the sub section titled “Notes to Capital Structure” on page 10 of this Letter of Offer. (iii) Week-end prices of Equity Shares of the Company for the last four weeks is given below:

Week ended on Closing price on BSE (Rs.) Closing price on NSE (Rs.)

November 18, 2005 380.45 382.15

November 11, 2005 388.40 393.45

November 2, 2005 367.7 368.25 October 28, 2005 362.55 362.2

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(iv) Current market price of our Equity Shares (as on November 18, 2005) on the BSE was Rs. 380.45 and on the NSE was Rs. 382.15

(v) Highest and lowest prices of our Equity Shares

The highest and lowest prices in the last four weeks were:

BSE NSE Highest 388.40 393.45 Lowest 362.55 362.20

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Selected Financial Data (As Per Consolidated Financial Statements Under Indian GAAP) Statement of Profits and Losses (As Restated)

Rs. in million

Six months


September

30, 2005 2005 2004 2003 2002

Income:

Sales 1,238.10 2,205.14 1,709.25 1,560.57 1,733.57 Other Income 12.09 40.99 16.54 53.76 24.88

Total Income 1,250.18 2,246.14 1,725.79 1,614.33 1,758.45

Expenditure

Cost of Resale Material 228.89 375.56 241.25 383.72 416.83

Employee Compensation & Benefits 742.07 1,342.97 1,076.41 1,018.13 984.84

Sales & Marketing Expenses 60.61 136.66 119.79 80.74 60.72

Administrative & Other Expenses 232.92 422.24 464.57 446.37 401.87

Interest & Finance Charges 63.01 116.18 126.20 91.71 78.65 Depreciation & Amortisation 92.87 178.60 189.42 192.27 84.20

Total Expenditure 1,420.37 2,572.21 2,217.64 2,212.94 2,027.11

Profit/(Loss) before Tax and Extraordinary Items

(170.19) (326.07) (491.85) (598.61) (268.66)

Extraordinary Items - 349.92 - - -

Profit/(Loss) before Tax (170.19) (675.99) (491.85) (598.61) (268.66)

Impact of material adjustment and prior period items

-- (15.97) - -

Provision for Taxation (6.56) (6.30) (0.27) 0.01 (3.86)

Equity in Earnings/Losses of Associates - 3.03 0.13 - -


175

Statement of Assets and Liabilities (As restated)

Rs. in million

As of March 31,

As of

September 30, 2005

2005 2004 2003 2002

A. Fixed Assets Gross Block 3,232.47 3,219.21 2,070.03 1,418.58 1,394.60 Less : Depreciation 792.06 701.91 561.65 454.33 374.54 Net Block 2,440.41 2,517.30 1,508.38 964.25 1,020.06 CWIP 77.13 - 85.63 - - B. Investments 6.22 6.35 82.46 41.24 34.35 C. Current Assets, Loans and advances Inventories 22.97 27.46 27.59 43.70 37.79 Sundry Debtors 731.99 677.40 519.45 583.82 633.61 Cash and Bank Balances 403.03 276.42 247.33 163.95 192.36 Loans and Advances 133.14 124.74 98.70 90.82 128.51 Other Current Assets 17.09 26.78 49.77 27.72 8.97 1,308.23 1,132.80 942.85 910.00 1001.23 D. Liabilities and Provisions Secured Loans 803.88 565.02 382.20 714.48 791.23 Unsecured Loans 1,062.54 1,038.16 886.03 626.47 66.11 Current Liabilities and Provisions 619.21 537.95 414.88 427.86 297.90 2,485.62 2,141.12 1,683.11 1,768.81 1,155.24 E. Net worth 1,346.37 1,515.33 936.20 146.67 900.40 F. Represented by 1. Share capital 123.18 122.84 115.97 77.68 77.68 2. Reserves 1,374.23 1,390.03 3,228.23 2,454.68 2,449.24 Less : Misc Expenses not written off 0.07 0.12 64.00 548.28 387.72 Less : Profit & Loss account 150.98 - 2,344.00 1,837.40 1,238.80

3. Minority Interest - 2.59 - - - Net worth 1,346.37 1,515.33 936.20 146.67 900.40

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Management’s Discussion And Analysis Of Financial Condition And Results Of Operations Of Ramco Systems Limited In Accordance With Consolidated Indian GAAP You should read the following discussion of our financial condition and results of operations together with our audited/examined consolidated restated financial statements prepared in accordance with Indian GAAP including the schedules, annexure and notes thereto and the reports thereon, which appear on page 88 of this Letter of Offer. You should also read the section titled “Risk Factors” beginning on page vi of this Letter of Offer, which discusses a number of factors and contingencies that could impact our financial condition, results of operations and cash flows. The following discussion relates to Ramco Systems Limited and its subsidiaries and associates on a consolidated basis. Our financial statements have been prepared in accordance with Indian GAAP, the accounting standards referred to in Section 211(3C) of the Companies Act and the other applicable provisions of the Companies Act. The following discussion is also based on internally prepared statistical information and publicly available information. Unless otherwise stated, the financial information used in this section is derived from our audited consolidated financial statements under Indian GAAP, as restated. All references to a particular fiscal year are to the 12-month period ended March 31 of that year, except for our Associates, being Ramco Triamun and Ramco Redlex, whose financial year ends on December 31 and February 28, respectively. In this section only, any reference to "we", "us" or "our" refers to Ramco Systems Limited, our Subsidiaries and our Associates on a consolidated basis. OVERVIEW We are a global provider of enterprise solutions and services in key industries such as manufacturing, aviation, logistics, banking and financial services. We offer rich functionality, cost effective seamless integration and fully web-integrated services, which helps our customers close the gap between business objectives and IT capabilities. Our focus domains are (i) Enterprise Solutions; (ii) Virtual Shoring Solutions and (iii) Secure Converged Networking (iv) CRM implementation and other IT Services. With our strong domain skills and customer centric approach, we have developed several strategic customer relationships. We deliver our enterprise solutions and services to customer installations across various geographies and representing several industry segments. We offer high quality and cost effective services to our customers through our mature delivery processes, scalable infrastructure and skilled global resource base. Our proven and functionally rich vertical and horizontal applications have been redeployed and expanded with this innovative architecture. Our ability to develop adaptive enterprise solutions is powered by a path-breaking platform Ramco VirtualWorks. VirtualWorks is a Virtual Software Factory for delivering large, complex, web-based enterprise class solutions on a technology platform of the customer’s choice. This is an innovative platform, which transforms business processes into software applications with much better quality and in a considerably shorter time frame. The software application is also adaptive as the platform facilitates easy modifications to align the software application with the changing business processes. Our proven processes and methodologies are important elements of our mature global delivery model. They help us in delivering high quality and cost-effective IT products and services from multiple locations in a timely, consistent and accurate manner, maintain a high level of customer satisfaction and to focus on improvements in all aspects of delivery. The processes and methodologies that we use at our delivery centers in India conform to ISO 9001 standards.We have been currently assessed at SEI CMM Level 5. Leveraging on our strong domain expertise, sound business practices and customer-centric focus, we have built significant global relationships with several multinational corporations and government entities and have successfully demonstrated the ability to manage large customer relationships. This is reflected in the long duration of our relationships with some of our customers and in the joint development of engagement models that have resulted in the sharing of productivity gains between our customers and us. Our senior executives and dedicated account managers continuously maintain and develop these relationships through multiple contacts at different levels in the customer organization. Notable engagements in specific industry domains such as manufacturing, healthcare & public service (including e-Governance), aviation and BFSI are expected to strengthen the canvas for adaptive enterprise solutions, including the eThekwini engagement with the Durban Municipality of South Africa and the Healthcare ASP alliance with Triamun AG. Substantial portion of our business and revenues are generated by our Subsidiaries and Associates located in various geographies. In United States, we operate through our 98% owned subsidiary Ramco USA. In Europe, we conduct our business through our wholly owned Ramco Switzerland and through our associate company

177

Ramco Triamun. Our business in the Asia-Pacific region is conducted through our wholly owned Subsidiaries in Singapore and Malaysia, being Ramco Singapore and Ramco Malaysia. In South Africa, we have a wholly owned Subsidiary, Ramco RSA and an Associate company, being Ramco Redlex. In addition to our Subsidiaries and Associates we also have branches located in UAE, UK and Germany. The functional currency of the Company is the Indian Rupee. The functional currency for our Subsidiaries, Associates and branch offices is the respective local currency of each Subsidiary, Associate or branch office. All our transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transaction. The monetary items denominated in the foreign currency at the year end are translated at the exchange rates prevailing on the date of the balance sheet. The exchange difference arising out of the year end translation is debited or credited to the Currency Translation Reserve account and is being classified under the reserves and surplus account or the profit and loss account as the case may be. The consolidated financial statements included in this Letter of Offer are reported in Indian Rupees. Our margins and net income are affected by the movements of the Indian Rupee against other currencies particularly the U.S. Dollar, Swiss Franc and South African Rand. In fiscal 2005, 2004 and 2003, approximately 71.66%, 68.94% and 61.19% respectively of our total income was earned in currencies other than the Indian Rupee. For the same periods, approximately 65.92% 74.23%, and 88.09% respectively of our costs of resale material, employee costs, sales and marketing expenses, administration and other expenses and interest expenses as a percentage of total income were incurred in currencies other than the Indian Rupee. As of the date of this Letter of Offer, we have not entered into any hedging or forex contract to minimise our exposure to foreign exchange fluctuations Accordingly, the appreciation of the Indian Rupee against such foreign currencies can adversely affect our results of operations. The results of all our Subsidiaries and Associates are consolidated in the results of Ramco Systems Limited from their respective dates of incorporation. Factors affecting results of operations Several factors have affected our results of operations, financial condition and cash flow significantly over the past three years. These factors include: • General economic conditions in India and large global markets, particularly the United States; • Changes in the demand for IT products and services, particularly in the Enterprise Solutions &

Networking sectors sectors; • Fluctuations in the rate of exchange between the Rupee and major foreign currencies, particularly the

U.S. Dollar, Swiss Francs and South African Rand; • Competition in India, the United States and other international markets from other IT product and

service companies, especially the effect of such competition on our ability to penetrate these markets; • Changes in interest rates; and • Changes in net working capital, including collections/receivables from our Subsidiaries. These factors and a number of future developments may affect our results of operations, financial condition and cash flow in future periods. We believe that in addition to the foregoing factors, the future developments which may affect our future results of operations, financial condition and cash flow include: • Time taken to develop our new enterprise solutions and products, particularly in relation to

VirtualWorks; • Acceptance of our product offerings in the domestic and international markets; • Pricing pressures for both our Product and Service businesses, due to continued competition from other

IT product and service companies; • Capital expenditures and recurring R&D expenditure, if any, including Product Software and

Technology Development; • Intense competition in hiring and retaining skilled IT personnel; • Our ability to expand international operations and increase our global customer base; • New strategic partnerships, alliances or mergers/acquisitions/divestments; and • Obtaining funding for additional working capital requirements. For more information on these and other factors/ developments, which have or may affect us, please refer to the sections titled “Risk Factors" and "Business" beginning on pages vi and 36, respectively of this Letter of Offer. Revenues

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Our revenues are primarily generated from license and professional fees for our ERP solution services. In addition, we also provide other IT services like CRM and networking solutions. We derive revenues from provision of services offshore and onsite. Offshore revenues consist of revenues earned from work conducted in our offshore facilities located in India. Onsite revenues consist of revenues from work conducted at customers premises or from our premises outside India. Currently, a significant proportion of our enterprise solution and IT services revenues are derived from work performed by our off-shore facilities located in India. Many of our customer contracts provide for termination of the contract with or without cause by providing 15 to 60 days’ notice. In the case of licens agreements, if a customer terminates the agreement before paying license fees, no license is granted to the customer. In case of service agreements, notwithstanding the reason for termination, the Company is entitled to all amounts due and payable by the customer (s) in respect of the work done by the Company prior to the date of termination. However, majority of our customer contracts do not provide for any penalty provisions for early termination by the customers. Additionally, our contracts with customers are typically limited to a one time sale contract and without any commitment to a specific volume of business or future work. For our accounting purpose, we have classified our revenues under three segments. The breakup of revenues based on our various segments have been given in the table below:

Rs. in million For the year ended March 31, Description 2005 2004 2003 Software: a) Product software and related services

b) Project and other software services Software total

1,063.34

267.26 1,330.60

757.50 236.35 993.85

608.12 254.38 862.50

CRM and other IT services 409.00 338.59 231.69 Secured Convergent Networking solutions 465.54 376.80 466.38 Total Sales 2205.14 1709.25 1560.58 Other Income 41.00 16.54 53.75 Total Income 2,246.14 1,725.79 1,614.33

Income from product software includes license fees and professional fees for implementation and customer specific enhancement services. In addition, we also enter into an annual maintenance contract for servicing the products licensed. We also undertake project and other software services using our components. We derive a significant proportion of our revenues from customers in three sectors including manufacturing, healthcare and public service (including e-Governance), aviation and BFSI. We have recently begun to provide Virtual Shoring Solutions (VSS), where we license our technology platform framework to our customers. In India, we market our licenses (including implementation and integration) either directly or through our channel partners. We recognise license fees upon the delivery of the license to the customer. We also market our licenses overseas through our Subsidiaries and overseas branches. We normally charge a fixed royalty on the total fees charged by the Subsidiaries to their customers, which we recognise upon the sale of the license by the relevant Subsidiary to the end-customer. As a result, our revenues from royalty are dependent on the number of products that have been licensed by our Subsidiaries. Based on the requirement of the overseas customers, we are able to provide a composite mix of on-site and offshore work (to reduce the overall cost of ownership), for which we charge the relevant Subsidiaries on an arms length basis. We also collect revenues from annual maintenance contracts entered into by us with our customers for continued support of our products and solutions. We recognize these fees in respect of software products ratably over the tenure of the underlying contract. In fiscal 2005, 2004 and 2003, our revenues from product software and related services (currently includes Enterprise Solutions (viz. Adaptive Enterprise Solutions and Enterprise Products and Services) and Virtual Shoring Solutions) as a percentage of total income were 59.24%, 57.59% and 53.43% respectively. We offer implementation, customisation, testing, report development, migration, workflow, analytics and other related CRM services and solutions centered on global CRM products and IT based services. We provide these services primarily in the United States. In fiscal 2005, 2004 and 2003, our revenues from this segment as a percentage of total income were 18.21%, 19.62% and 14.35% respectively. We also provide Secure Converged Networking Solutions for the converged needs of voice, video and data across local and wide area networks in India, alongwith an emphasis on information security. In fiscal 2005,

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2004 and 2003, our revenues from this segment as a percentage of total income were 20.73%, 21.83% and 28.89% respectively. In addition to the sales income generated independently by us, we are also assisted in our sales and marketing efforts by our various partners and alliances. For more details on our partners and alliances, please refer to the section titled “Business- Partners And Alliances” on page 51 of this Letter of Offer. We have classified our revenues into four geographic segments comprising India, Middle East and Africa, ASEAN, Europe and United States. A significant proportion of our revenues are derived from customers located in India, Middle East and Africa and the United States. The geographic breakdown of our revenues is:

For the year ended March 31, 2005 2004 2003 India, Middle East and Africa 39.84 34.06 39.27 ASEAN 5.44 9.64 10.18 Europe 12.52 15.17 15.78 America 42.20 41.13 34.78 Total Sales Income 100.00% 100.00% 100.00%

Other Income In addition to our revenues from our regular business operations, we also have certain other income. This other income consists primarily of interest income, dividend income, income earned on foreign exchange fluctuations, profit earned on fixed assets sold or discarded and miscellaneous income consisting of rental income. In fiscal 2005, fiscal 2004 and fiscal 2003, our other income as a percentage of our total income was 1.82%, 0.96%, and 3.33%, respectively. Cost of resale material, Employee compensation, Sales & Marketing and Administrative expenses To generate our revenues, we incur certain expenses in relation to cost of resale materials, employee compensation & benefits, sales and marketing and administrative expenses. Our cost of revenues includes cost of resale materials for our networking solutions segment including materials that we buy from third parties like Nortel and Checkpoint for resale to the customers. Revenues from cost of resale is recognized upon despatch of goods to customers. Employee compensation and benefits include salaries, bonus, gratuity, superannuation and provident fund contribution and staff welfare expenses. In relation to our employees who are contracted to work for our Subsidiaries at onsite customer locations, we debit the entire expenses relating to that employee (including their monthly salaries, travel and related costs) to the relevant Subsidiary. Our revenues and consequently, our gross profits for our enterprise solutions and IT services are affected by employee utilization rates (of employees in that segment), which is defined as the proportion of total billed person months to total available person months for off-shore development work. We manage utilization by monitoring project requirements and timetables. Based on the specific project requirements, we estimate the number of consultants to be assigned to a project. An unanticipated termination of a significant project may cause us to experience lower IT professional utilization. For fiscal 2005 and 2004, the utilisation rate of our employees has been 74% and 52% respectively. Our employee utilization was higher in fiscal 2005 as a result of higher off shore work executed in fiscal 2005 due to increased sales volumes. Our other costs include sales and marketing expenses and administrative expenses. Our sales and marketing expenses primarily includes our advertisement promotion expenses whereas administrative expenses include expenses like travel, consultancy, insurance, communication, rent and bad debts. Interest Interest is comprised principally of interest expense on our bank debt facilities and short-term working capital loans. For more information, please refer to section titled “Description of Certain Indebtedness” on page 208 of this Letter of Offer.

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Depreciation Depreciation relates principally to depreciation of our facilities, hardware, equipment and intangible assets such as our technology platform and product software. Depreciation relating to our intangible assets are written off over a period of 10 years after the product software and the technology platform have been put to use. Research and Development Expenses During the course of each fiscal year, we incur research and development expenses relating to the Product Software and the Technology Platform. We have classified and grouped costs incurred in the development of our Enterprise Products, together with the repository of new business components, upon completion of the development phase, as “Product Software” under Fixed Assets. Similarly, costs incurred in the development of technology platform framework, which enables us to provide standard and customised enterprise solutions, have been classified and grouped as “Technology Platform” under Fixed Assets. The useful life of these assets is estimated at ten years and depreciation is charged accordingly. For the purpose of availing certain tax benefits under the Income Tax Act, we maintain a separate R&D balance sheet, profit & loss account including the schedules. Employee Stock Option Schemes We instituted an Employee Stock Option Plan in 2000, an Employee Stock Option Scheme in 2003, and an Employee Stock Option Plan and Employee Stock Purchase Scheme in 2004. For more details on these schemes, refer to section titled “Capital Structure” on page 10 of this Letter of Offer. Taxes Our net income from our business earned outside India is subject to tax in the country where we perform the work. Currently, there are certain tax holidays / exemptions that the Government of India gives to the export of IT services from specially designated Software Technology Parks, or STPs, in India. We have two designated STP Units. However, due to our losses, we have not been able to avail of this benefit in India. In Malaysia, we enjoy the Multimedia Super Corridor (MSC) status, which entitles us to enjoy a five year tax holiday from November 1997, which has since been extended for another 5 year term till November 2007. Apart from Malaysia and India we do not avail of any tax benefits in any of the other jurisdications in which we operate. RESULTS OF OPERATIONS Income The following table sets forth certain financial information as a percentage of our total revenues for the periods indicated

Rs. in million Fiscal 2005 Fiscal 2004 Fiscal 2003

Income Sales & Services 98.17 99.04 96.67 Other Income 1.83 0.96 3.33 Expenditure Cost of Resale Material 16.72 13.98 23.77 Employee Compensation & Benefits` 59.79 62.37 63.07 Sales & Marketing Expenses 6.08 6.94 5.00 Administrative & Other Expenses 18.80 26.92 27.65 Interest & Finance Charges 5.17 7.31 5.68 Depreciation 7.95 6.33 6.86 Profit/(Loss) before Amortisation, Extrordinary items & Tax (14.51) (23.85) (32.03) Amortisation of Product Research and Development Expenditure 0.01 4.65 5.05 Profit/(Loss) before Extraordinary Items & Tax (14.52) (28.50) (37.08) Extraordinary Items (15.58) 0.00 0.00 Profit/(Loss) before Tax (30.10) (28.50) (37.08) Adjustment due to restatement (0.93) Provision for Taxation 0.28 0.02 0.00 Equity in Earnings /( Losses) of Affiliates 0.14 0.01 0.00 Profit/(Loss) after Tax (30.24) (29.43) (37.08)

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RESULTS OF OPERATIONS — SIX MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO FISCAL 2005 Total Income Our total income from software and related services, CRM and other IT services, secured convergent networking solutions services and other income was Rs. 1,250.18 million for the six months ended September 2005 compared to Rs. 2,246.14 million in fiscal 2005. Total Expenditure During the six months ended September 2005, our total expenditure was Rs. 1,426.93 million as compared to Rs. 2,928.43 million in fiscal 2005. Our cost of resale for the six months ended September 2005 was Rs. 228.89 million as compared to Rs. 375.56 million in fiscal 2005. Our employee cost for the six months ended September 2005 was Rs. 742.07 million as compared to Rs. 1,342.97 million in fiscal 2005. Our sales and marketing expenses for the six months ended September 2005 was Rs. 60.61 million as compared to Rs. 136.66 million for fiscal 2005. Our administrative and other expenses for the six months ended September 2005 was Rs. 232.92 million as compared to Rs. 422.23 million in fiscal 2005 Our interest expense for the six months ended September 2005 was Rs. 63.01 million as compared to Rs. 116.18 million in fiscal 2005. Our depreciation expense for the six months ended September 2005 was Rs. 92.87 million as compared to Rs. 178.60 million in fiscal 2005. We did not incur any extraordinary expenses for the six months ended September 2005, whereas our extraordinary expenses was Rs. 349.92 million in fiscal 2005. Loss Before Taxation Losses before taxation for the six months ended September 2005 were Rs. 170.19 million as compared to Rs. 675.99 million in fiscal 2005. Taxes As we have incurred a loss, no provision for tax has been made for the six months ended September 2005 and fiscal 2005, except for tax provisions in the case of Ramco RSA which has made a profit. Equity in Earnings / (Losses) of Affiliates Our share of net profit/ loss from our Associates, i.e., Ramco Triamun (50%) and Ramco Redlex (30%), was nil for the six months ended September 2005 as compared to Rs. 3.03 million in fiscal 2005. Loss After Taxation As a result, losses after taxation for the six months ended September 2005 were Rs. 176.75 as compared to Rs. 679.26 million in fiscal 2005. Due to the skewed revenue streams and linear incurrence of expenditure, the fixed costs could not fully be absorbed by the revenue generated, leading to incurrence of losses. RESULTS OF OPERATIONS — FISCAL 2005 COMPARED TO FISCAL 2004 Income During fiscal 2005 our total income was Rs. 2,246.14 million as compared to Rs. 1,725.79 million in fiscal 2004. Our growth in total income was led by an increase in income from software and related services by 33.88%to Rs. 1330.60 million in fiscal 2005 from Rs. 993.82 million in fiscal 2004 and comprised 59.24% of total income for fiscal 2005 as compared to 57.59% during fiscal 2004. There was an overall improvement in the sales,

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particularly with Ramco USA registering a 32% growth in fiscal 2005 over the previous fiscal. The revenues from our South African operations routed through Ramco Redlex have also increased from Rs.15.94 million in fiscal 2004 to Rs. 252.87 million in fiscal 2005. The increase in revenues from South Africa was primarily because of receipt of license fees for our VirtualWorks Platform for a muncipiality in South Africa. Income from CRM and other IT services was Rs. 409.00 million, comprising 18.21% of total income in fiscal 2005, as compared to Rs. 338.59 million, or 19.62% of total income, for fiscal 2004. Secured Convergent Networking Solutions services contributed Rs. 465.54 million, or 20.73% of total income, fiscal 2005, as compared to Rs. 376.80 million, or 21.83% of total income, for fiscal 2004. Other income for the fiscal 2005 was Rs. 40.99 million, or 1.82% of total income as compared to Rs. 16.54 million, or 0.96% of total income in fiscal 2004. The increase in other income in fiscal 2005 is attributable to favourable foreign exchange fluctuation gain and higher income from sublease of property. Ramco USA continued to be our most significant revenue segment, accounting for 42.20% of our total sales revenues in fiscal 2005 compared to 41.13% in fiscal 2004. Ramco Switzerland accounted for 11.06% of our total revenues in fiscal 2005 compared to 13 % in fiscal 2004. The India Middle East & Africa segment accounted for 39.84% of our total sales revenues in fiscal 2005 compared to 34.06% in fiscal 2004. Expenditure During fiscal 2005, our total expenditure was Rs. 2,928.43 million as compared to Rs. 2,217.91 million in fiscal 2004, representing an increase of 32.04%. Our cost of resale for fiscal 2005 was Rs. 375.56 million as compared to Rs. 241.25 million in fiscal 2004. Of this total cost of resale, the costs relating to networking solutions as a percentage of its revenue was 72.03% during fiscal 2005 as compared to 66.26% for fiscal 2004. Our employee cost for fiscal 2005 was Rs. 1,342.97 million as compared to Rs. 1,076.41 million in fiscal 2004, representing an increase of 24.76% of our employee cost. The increase of our employee cost was mainly because of higher utilization of offshore employees for deliveries of research and development expenditure during the fiscal 2005, consequent to higher utilization of offshore personnel for project deliveries. Out of the total employee cost, the cost of outsourced services for fiscal 2005 was Rs. 183.42 million and Rs. 135.39 million for fiscal 2004. Our sales and marketing expenses for fiscal 2005 was Rs. 136.66 million, or 6.08% of total income, compared to Rs. 119.79 million or 6.94% of total income for fiscal 2004. Expenses in fiscal 2005 were higher mainly because of higher sales commission incurred in South Aftrica and the higher marketing expenses in Switzerland Our administrative and other expenses for fiscal 2005 was Rs. 422.23 million, or 18.80% of total income, compared to Rs. 464.57million for fiscal 2004, which was 26.92% of total income for fiscal 2004. Higher expenses in fiscal 2004, were mainly on account of stock write off of Rs.18.92 million and adverse forex fluctuation of Rs.38.43 million Our interest expense for fiscal 2005 was Rs. 116.18 million, as compared to Rs. 126.20 million for fiscal 2004, representing a decrease of 7.94%. Interest cost was lower in fiscal 2005 due to reduction in interest rates on borrowings. Our average interest cost was 6.17% in fiscal 2005 as compared to 8.84% in fiscal 2004. Our depreciation expense for fiscal 2005 was Rs. 178.51 million, compared to Rs. 109.23 million in fiscal 2004. Depreciation expenses increased owing to the commencement of charging of depreciation on the Product Software in fiscal 2005. There was no unamortised research and development expenditure in India at the beginning of the fiscal 2005 and hence there was no amortisation of such expenditure during the year. The amortization of product research and development expenditure for fiscal 2005 for our Ramco Switzerland totaled Rs. 0.09 million, or 0.004% of total income. Amortization expenditure for fiscal 2004 was Rs. 80.19 million, or 4.65 % of total income representing Rs. 56.80 million and Rs. 23.39 million towards amortisation of R&D expenditure in India and Swiss respectively. Extraordinary expenditure comprises of impairment charges for our product software of Rs. 125.00 million, diminution in the value of investment of Rs. 39.50 million, impairment in the value of Ramco Switzerland localization of Rs. 68.23 and write off of bad debts of Rs. 117.19 million of Ramco USA

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Due to the obsolescence of certain software components, we in accordance with AS-26 and based on certain technical assumptions and our internal estimates, have provided for an impairment charge for our product software of Rs. 125.00 million. Diminution in the value of investments represents write off of our equity investments of Rs. 39.50 million made in Triamun AG. This was done after Triamun AG, as a result of accumulated losses, reduced its equity share capital. We also wrote off Rs. 68.23 million representing impairment in the value of software localization cost incurred for Ramco Switzerland. Loss Before Taxation Losses before taxation was Rs. 675.99 million for fiscal 2005, compared to a loss of Rs. 491.85 million for fiscal 2004. Adjustments for prior period expenses Adjustments for prior period expenses for fiscal 2005 was nil compared to Rs. 15.97 million for fiscal 2004. This adjustment was on account of giving effect to the prior period expenses in the nature of sales reversal accounted during the fiscal 2005. Taxes As we have incurred a loss, no provision for tax has been made in fiscal 2005 and fiscal 2004, except in the case of Ramco RSA which has made a profit, where a tax provision of Rs.5.73 million has been made. Equity in Earnings / (Losses) of Affiliates Our share of net profit/ loss from our Associates, i.e., Ramco Triamun (50%) and Ramco Redlex (30%), was Rs. 3.03 million in fiscal 2005 as compared to Rs 0.13 million in fiscal 2004. Loss After Taxation As a result, losses after taxation for fiscal 2005 was Rs. 679.26 million, compared to Rs. 507.96 million in fiscal 2004. Due to the skewed revenue streams and linear incurrence of expenditure, the fixed costs could not fully be absorbed by the revenue generated, leading to incurrence of losses. RESULTS OF OPERATIONS — FISCAL 2004 COMPARED TO FISCAL 2003 Income During fiscal 2004 our total income was Rs. 1,725.79 million as compared to Rs. 1,614.33 million in fiscal 2003. Our growth in total income was led by an increase in income from software and related services by 15.23% to Rs. 993.85 million in fiscal 2004 from Rs. 862.50 million in fiscal 2003 and comprised 57.57% of total income for fiscal 2004 as compared to 53.48% during fiscal 2003. Ramco USA registered a 29.53% growth in revenues in fiscal 2004 over the previous fiscal. Ramco RSA in its first year of operations in fiscal 2004 had revenues of Rs.15.94 million. Income from CRM & other IT services was Rs. 338.59 million, comprising 19.62% of total income in fiscal 2004, as compared to Rs. 231.69 million, or 14.35% of total income, for fiscal 2003. Secured Convergent Networking Solutions services contributed Rs. 376.80 million, or 21.83% of total income, fiscal 2004, as compared to Rs. 466.38 million, or 28.89% of total income, for fiscal 2003. Other income for the fiscal 2004 was Rs.16.54 million, or 0.96% of total income as compared to Rs. 53.75 million, or 3.33% of total income in fiscal 2003. The increase in other income in fiscal 2003 was mainly on account of earnings due to foreign exchange fluctuations. Ramco USA continued to be our most significant revenue segment, accounting for 41.13% of our total sales revenues in fiscal 2004 compared to 34.78% in fiscal 2003. Ramco Switzerland accounted for 13% of our total sales revenues in fiscal 2004 compared to 12.97% in fiscal 2003. The India, Middle East & Africa segment accounted for 34.06% of our total sales revenues in fiscal 2004 compared to 39.27% in fiscal 2003.

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Expenditures During fiscal 2004, our total expenditure was Rs. 2,217.91 million as compared to Rs. 2,212.93 million in 2003, representing an increase of 0.22%. Our cost of resale for the fiscal 2004 was Rs. 241.25 million as compared to Rs. 383.71 million in fiscal 2003. Of the total cost of resale, the cost relating to networking solutions as a percentage of its revenue was 66.26% during fiscal 2004 as compared to 77.31% for fiscal 2003. Our employee cost for 2004 was Rs. 1,076.41 million as compared to Rs. 1,018.13 million in fiscal 2003, representing an increase of 6% of our employee cost. Out of the total employee cost, our cost of outsourced services for fiscal 2004 was Rs. 135.39 million, and Rs. 65.64 million for fiscal 2003. Our sales and marketing expenses for fiscal 2004 was Rs. 119.79 million, or 6.94% of total income, compared to 80.74 million or 5.00% of total income for fiscal 2003. Expenses in fiscal 2004 were higher because of product launch expenses and increased spending on advertisements. Our administrative and other expenses for fiscal 2004 was Rs. 464.57 million, or 26.92% of total income, compared to Rs. 446.38 million for fiscal 2003, which was 27.65% of total income for fiscal 2003. The increase was mainly on account of foreign exchange fluctuation expense of Rs. 38.43 million incurred in fiscal 2004 and also stock write off of Rs. 18.92 million. Our interest expense for fiscal 2004 was Rs. 126.20 million as compared to Rs. 91.71 million for fiscal 2003, representing an increase of 37.61% due to higher borrowings in fiscal 2004 for meeting the operational requirements. Our average interest cost was 8.84% in fiscal 2004 as compared to 8.93% in fiscal 2003. Our depreciation expenses for fiscal 2004 was Rs. 109.23 million compared to Rs. 110.75 million in fiscal 2003. Our amortization of research and development expenditure for fiscal 2004 totalled Rs. 80.19 million, or 4.65% of total income, compared to Rs. 81.52 million, or 5.05 % of total income, for fiscal 2003. Losses Before Taxation Our losses before taxation was Rs. 491.85 million for fiscal 2004, compared to a loss of Rs. 598.61 million for fiscal 2003. Adjustments for prior period expenses Adjustments for prior period expenses for fiscal 2004 totalled Rs. 15.97 million compared to nil for fiscal 2003. This adjustment was on account of giving effect to the prior period expenses in the nature of sales reversal. Taxes As we have incurred a loss, no provision has been made in fiscal 2004 and fiscal 2003 Equity in Earnings /(Losses) of Affiliates This represents the earnings from Triamun Ramco Healthcare Systems Limited, Switzerland, amounting to Rs. 0.13 million for fiscal 2004. However, no there were no earkings from Associates in fiscal 2003. Losses After Taxation As a result, losses after taxation for fiscal 2004 was Rs. 507.96 million, compared to Rs. 598.60 million in fiscal 2003. Due to the skewed revenue streams and linear incurrence of expenditure, the fixed costs could not fully be absorbed by the revenue generated, leading to incurrence of losses. SEASONALITY AND INFLATION

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Seasonality has not had a significant impact on the results of our operations. During fiscal years 2005, 2004 and 2003 the All India Wholesale Price Index (all commodities) increased by 5.1%, 4.6% and 6.5% respectively. Inflation has not had a significant effect on our results of operations to date. LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs have been to finance our working capital requirements, our research and development expenses and our capital expenditures. To fund these costs, we have relied principally on cash flows from operations and short-term and long-term borrowings. As of March 31, 2005, we had outstanding long-term debt of Rs. 58.83 million. In addition, we have short-term working capital facilities of Rs. 1,554.34 million with various commercial banks and our borrowings there under are typically for a term of upto 12 months. Our long term and short term loans have been primarily sanctioned on the basis of corporate guarantees issued by our promoters, i.e., Madras Cement Limited and Ramco Industries Limited. Cash Flow The table below summarizes our standalone cash flows under Indian GAAP for fiscal 2005, 2004 and 2003:

Rs. in million

For the year ended March 31, 2005 2004 2003

Net Cash Generated from Operating Activities (390.61) (553.00) (253.13)

Net Cash from (Used in) Investing Activities (171.76) (359.21) (270.43)

Net Cash Generated from (Used in) Financing Activities 591.46 995.59 495.15

Net Increase/(Decrease) in Cash and Cash Equivalents 29.09 83.38 (28.41) Operating Activities Net cash outflow for operating activities amounted to Rs. 390.61 million in fiscal 2005. Changes in current assets and current liabilities that had an impact in fiscal 2005 include increase in sundry debtors of Rs. 282.51 million, decrease in hardware and software materials of Rs. 0.13 million, increase in loans and advances of Rs. 26.51 million and increase in current liabilities of Rs. 79.55 million. Increase in sundry debtors is primarily because of increase in debtors due to increased activity in Ramco RSA. Net cash outflow for operating activities amounted to Rs. 553.00 million in fiscal 2004. Changes in current assets and current liabilities that had an impact in fiscal 2004 include decrease in sundry debtors of Rs. 135.34 million, decrease in hardware and software materials of Rs. 16.11 million, increase in loans and advances of Rs. 7.89 million and decrease in current liabilities of Rs. 340.69 million. Decrease in sundry debtors is primarily because of higher realization of our debtors in India and Ramco Singapore. Decrease in current liabilities is because of higher repayment of bank borrowings. Net cash outflow for operating activities amounted to Rs. 253.13 million in fiscal 2003. Changes in current assets and current liabilities that had an impact in fiscal 2003 include decrease in sundry debtors of Rs. 75.50 million, increase in hardware and software materials of Rs. 5.90 million, decrease in loans and advances of Rs. 37.69 million and increase in current liabilities of Rs. 118.43 million. Decrease in sundry debtors is primarily because of high realization of debtors in Ramco USA, increase in current liabilities is because of increased creditors for purchases and expenses in India and Ramco USA Investing Activities Net cash outflow for investing activities was Rs. 171.76 million in fiscal 2005 as compared to net cash outflow for investing activities of Rs. 359.21 million in fiscal 2004. The decrease in net cash outflow for investing activities resulted primarily from decrease in investment in R&D activities and realization of certain short-term investments in fiscal 2005. Net cash outflow for investing activities was Rs. 359.21 million in fiscal 2004 as compared to net cash outflow for investing activities of Rs. 270.43 million in fiscal 2003. The increase in net cash outflow for investing activities resulted primarily from temporary short term investment in mutual funds and higher deferred revenue expenditure in fiscal 2004. Financing Activities

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Net cash from financing activities was Rs. 591.46 million in fiscal 2005 as compared to net cash from financing activities of Rs. 995.59 million in fiscal 2004. The decrease in net cash resulted primarily from higher repayment of borrowings. Net cash from financing activities was Rs. 995.59 million in fiscal 2004 as compared to net cash from financing activities of Rs. 495.15 million in fiscal 2003. The increase in net cash resulted primarily from the proceeds from the rights issue in fiscal 2004. Accounts Receivables In relation to receivables other than from Subsidiaries, our days of sales outstanding (which is the ratio of sundry debtors to total sales in a particular period multiplied by the number of days in that period) for fiscal 2005, 2004 and 2003 were approximately 112 days, 114 days and 137 days, respectively. Our provisions for bad debts were Rs. 18.41, Rs. 29.95 million and Rs. Nil million for fiscal 2005, 2004 and fiscal 2003 respectively. Further, we wrote off bad debts totaling Rs. 8.20 million, Rs. 35.11 million and Rs. 86.67 million during fiscal 2005, 2004 and fiscal 2003, respectively. We are actively working with our clients to reduce our days of sales outstanding. The following table presents the percentage profile of our debtors in terms of days for which accounts receivable have been outstanding:


Period in Days 2005 2004 2003 0-180 93.17 65.45 51.75 More than 180 6.83 34.55 48.25 Total 100.00 100.00 100.00

Capital Expenditure We have made investments totaling approximately 1,035.35 million over the last three fiscal years in order to fund the development of our product software and technology platform, our offices and facilities and acquisition of computer hardware and software. We expect to continuously invest in our research and development. While we have no current plans to make any acquisitions and equity investments, we may from time to time and in the course of expanding our international presence, consider making equity investments in targeted international markets and/or enter into strategic alliances. We expect to fund our capital expenditure requirements through a combination of internally generated cash and external funding. Our capital expenditure plans are subject to availability of financing on acceptable terms; and changes in management’s views of the desirability of current plans among others. Contractual Obligations, Including Long-term Debt The following table discloses our contractual and other obligations, excluding contingent liabilities, that were outstanding as of March 31, 2005 and the effect such obligations are expected to have on liquidity and cash flow in future periods:

Rs. in million Payments Due By Period Total Within 1 year 2-3 years 4-5 years After 5 years Short-term Loans 1,544.34 1544.34 Long-term Debt Obligations 35.22 35.22 Other Long-term Liabilities 23.61 23.61 - - Total 1,603.17 1,579.56 23.61

The weighted average rate of interest with respect to outstanding long-term loans for the respective periods was 8.93%, 8.84% and 6.17% per annum for fiscal March 31, 2003, 2004 and 2005, respectively. We fund our short-term working capital requirements through cash flow from operations, overdraft facilities with domestic banks, short- and medium-term borrowings from financial institutions. The following table describes our total indebtedness for the last 3 years:

Rs. in million As at March 31, 2005 2004 2003 Short-Term Debt 1,544.34 1,186.21 1,254.36 Total current portion of Long Term Debt 35.22 23.19 4.57

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Other Long-Term Debt 23.61 58.83 82.02 Total 1,603.17 1,268.23 1,340.95 The terms of certain of our borrowings contain certain restrictive covenants. As of the date of this Letter of Offer we believe that we are in full compliance with all the covenants and undertakings as described above. For more information on our debt obligation, please refer to the section titled “Description of Certain Indebtedness” on page 208 of this Letter of Offer. Transactions with related parties For details, please refer to the section titled “Related Party Transactions” beginning on page 83 of this Letter of Offer. Off-Balance Sheet Arrangements As of March 31, 2005, 2004 and 2003, we have provided financial guarantees of Rs. 51.11 million, Rs. 55.17 million and Rs. 53.76 million respectively. We have also provided letter of credit as of March 31, 2005, 2004 and 2003 of Rs. 33.21 million, Rs. 59.38 million and Rs. 7.66 million respectively. These have been provided for the purposes of import of material for the networking division. Quantitative And Qualitative Disclosure About Market Risk We are exposed to market risk from changes in foreign exchange rates and interest rates. The following discussion is based on our consolidated financial statements under Indian GAAP. Exchange Rate Risk Our margins and net income are affected by the movement of the Indian Rupee against other currencies particularly the U.S. Dollar, Swiss Franc and South African Rand. In fiscal 2005, 2004 and 2003, approximately 71.66%, 68.94% and 61.19% respectively of our total income was earned in currencies other than the Indian Rupee. For the same periods, approximately 65.92%, 74.23%, and 88.09% respectively of our costs of resale material, sales and marketing expenses, administration and other expenses were incurred in currencies other than the Indian Rupee. As of the date of this Letter of Offer, we have not entered into any hedging or forex contract to minimise our exposure to foreign exchange fluctuations Accordingly, the appreciation of the Indian Rupee against such foreign currencies can adversely affect our results of operations. Interest Rate Risk Our exposure to interest rate risks relates primarily to our debt. Approximately 14.34% of our total debt as of March 31, 2005 bears interest at floating rates, which are primarily tied to the prime lending rates of the banks that have extended loans to us. Effect Of New Accounting Pronouncements The following accounting pronouncements issued by the ICAI during the last three years, i.e with effect from April 1, 2002, have had an effect on our financial reporting: AS 11 (Revised 2003) The effects of changes in Foreign Exchange Rates: (effective April 1, 2004): This revised standard prescribes accounting for transactions in foreign currency and translating the financial statements of foreign operations. The revised standard requires, amongst others, the conversion of both monetary and non-monetary assets and liabilities at the closing rate, in the case of non-integral foreign operations. AS 23 – Accounting for investments in Associates in Consolidated Financial Statements: (effective April 1, 2002): This accounting standard sets out the principles and procedures for recognizing, in the consolidated financial statements, the effects of the investments in associates on the financial position and operating results of the group. Accordingly, we have consolidated the earnings of Ramco Redlex and Ramco Triamun in our consolidated accounts. AS 25 – Interim Financial Reporting: (effective April 1, 2002): This accounting standard prescribes the minimum content of an interim financial report and sets out the principles for recognition and measurement in a complete or condensed financial statements for an interim period. We are also required under the Listing Agreements with the Stock Exchanges to publish financial information on a quarterly basis in the prescribed

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format. While publishing the quarterly financial statements, the requirements of this accounting standard are considered. AS 26 – Intangible Assets: (effective April 1, 2003): This accounting standard deals with the treatment of expenditure incurred on intangible items. We are currently in compliance with this accounting standard in respect of research and development expenditure incurred in relation to the development of our Product Software and Technology Platform. AS 28 – Impairment of Assets: (effective April 1, 2004): The objective of this accounting standard is to ensure that its assets are carried at no more than their recoverable amount. As at each balance sheet date, we assess whether there is any indication that an asset may be impaired. If any such indication exists, we estimate the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in our profit and loss account. If there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost. We are currently in compliance with this accounting standard. AS 29 – Provisions, Contingent liabilities and Contingent Assets: (effective April 1, 2004): The objective of the accounting standard is to ensure that appropriate recognition criteria and measurement bases are applied to provisions and contingent liabilities and assets. Accordingly, our contingent liabilities are disclosed in the notes to the accounts. Critical Accounting Policies Preparation of financial statements in accordance with Indian GAAP, the applicable accounting standards issued by the ICAI and the relevant provisions of the Companies Act require our management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of our assets and liabilities, disclosures of contingent liabilities and the reported amounts of revenues and expenses. These judgments, assumptions and estimates are reflected in our accounting policies, which are more fully described in the report of our auditors in the sections titled “Financial Information- Consolidated Financial Statements” beginning on page 116 of this Letter of Offer. Certain of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant assumptions and estimates of our management. We refer to these accounting policies as our “critical accounting policies”. Our management uses our historical experience and analyses, the terms of existing contracts, historical cost convention, industry trends, information provided by our agents and information available from other outside sources, as appropriate, when forming our assumptions and estimates. However, this task is inexact because our management is making assumptions and providing estimates on matters that are inherently uncertain. While we believe that all aspects of our financial statements should be studied and understood in assessing our current and expected financial condition and results, we believe that the following critical accounting policies warrant additional attention: Changes in accounting policies in the last three years There have been no changes in our accounting policies in the last three years. Significant Developments After September 30, 2005 That May Affect The Future Of Our Operations Except as stated in this Letter of Offer and in compliance with AS4 and the note given in para 14 of page 104 relating to restructuring, to the best of our knowledge no circumstances have arisen since the date of the last financial statements as disclosed in the Letter of Offer which materially and adversely affect or are likely to affect, the trading and profitability of the Company and its Subsidiaries or the value of the consolidated assets or their ability to pay their material liabilities within the next 12 months. Except as stated in this Letter of Offer, there are no subsequent developments after the date of the report of our auditors dated November 16, 2005 which we believe are expected to have material impact on the reserves, profits, earnings per share or book value of the Company and its Subsidiaries.

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Selected Financial Data (As Per Unconsolidated Financial Statements Under Indian GAAP) Statement of Profits and Losses (As Restated)

Rs. in million

Six Months ended


September 30, 2005

2005 2004 2003 2002 2001

Income Sales 651.25 1154.81 823.09 810.25 938.37 1202.34 Other Income 10.33 73.01 36.09 39.59 46.89 67.42 Total Income 661.58 1,227.82 859.18 849.84 985.26 1,269.76Expenditure Cost of Resale Material 206.48 314.91 253.22 365.15 372.24 551.28 Employee Compensation & Benefits 326.17 543.13 341.56 351.51 350.84 313.51 Sales & Marketing Expenses 6.38 30.46 70.51 25.87 25.16 20.01 Administrative & Other Expenses 100.26 184.30 248.42 168.16 220.16 192.20 Interest & Finance Charges 60.97 113.81 119.51 68.92 52.90 20.97 Depreciation & Amortisation 88.91 169.83 158.63 143.42 51.58 159.72Total Expenditure 789.17 1,356.44 1,191.85 1,123.03 1,072.88 1,257.69Profit/(Loss) before Tax & Extraordinary Items (127.59)

(128.62) (332.67) (273.19) (87.62) 12.07

Extraordinary Items - 274.98 - - - -

Profit/(Loss) before Tax (127.59) (403.60) (332.67) (273.19) (87.62) 12.07Impact of material adjustment and prior period items

- -

(15.97) - - (0.59)


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Statement of Assets and Liabilities (As Restated)


September 30, 2005 2005 2004 2003 2002 2001

A. Fixed Assets Gross Block 2,125.35 2,113.42 1,958.54 1,333.74 1,313.81 639.38 Less : Depreciation 693.61 605.62 479.52 378.84 305.23 255.29 Net Block 1,431.74 1,507.80 1,479.03 954.90 1,008.58 384.09 Capital Work in Progress 171.12 85.63 5.55 B. Investments 1,222.45 1,222.45 834.41 794.41 754.91 754.91 C. Current Assets, Loans and

advances

Inventories 22.97 27.46 23.64 43.70 37.79 76.76 Sundry Debtors 320.26 400.64 909.64 852.60 629.59 688.78 Cash and Bank Balances 299.63 83.09 125.05 99.43 135.81 457.20 Loans and Advances 114.23 107.11 568.85 200.12 186.08 228.75 Other Current Assets 11.44 14.21 18.24 14.18 2.67 6.96 768.53 632.50 1,645.43 1,210.03 991.94 1,458.45 D. Liabilities and Provisions Secured Loans 738.01 510.48 327.37 356.28 355.72 206.09 Unsecured Loans 1,057.05 1,027.50 880.55 620.55 60.00 111.49 Current Liabilities and Provisions 463.68 367.47 314.30 312.57 193.03 262.43 2,258.74 1,905.45 1,522.22 1,289.40 608.75 580.01 E. Net worth 1,335.11 1,457.30 2,522.27 1,669.94 2,146.68 2,022.99 F. Represented by 1. Share capital 123.18 122.84 115.97 77.68 77.68 77.68 2. Net Reserves 1,343.31 1,334.46 3,110.37 2,407.78 2,428.07 2,542.61 Less: Misc Expenses not written off 460.11 276.83 597.30 Less: Profit & Loss account 131.39 - 704.07 355.42 82.24 Net worth 1,335.11 1,457.30 2,522.27 1,669.94 2,146.68 2,022.99

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Management Discussion And Analysis Of Financial Condition And Results Of The Operations of Unconsolidated Financial Statements under Indian GAAP You should read the following discussion of our financial condition and results of operations together with our audited/examined unconsolidated restated financial statements under Indian GAAP including the schedules, annexure and notes thereto and the reports thereon, which appears on page 88 of this Letter of Offer. You should also read the section titled “Risk Factors” beginning on page vi of this Letter of Offer, which discusses a number of factors and contingencies that could impact our financial condition, results of operations and cash flows. The following discussion relates to Ramco Systems Limited on a stand-alone basis. Our financial statements have been prepared in accordance with Indian GAAP, the accounting standards referred to in Section 211(3C) of the Companies Act and the other applicable provisions of the Companies Act. The following discussion is also based on internally prepared statistical information and publicly available information. Unless otherwise stated, the financial information used in this section is derived from our audited unconsolidated financial statements under Indian GAAP, as restated. Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the 12-month period ended March 31 of that year. In this section only, any reference to "we", "us" or "our" refers to Ramco Systems Limited, on an unconsolidated basis. Overview We are a global provider of Enterprise Solutions and Services in key industries such as manufacturing, aviation, logistics, banking and financial services. We offer rich functionality, cost effective, seamless integration and fully web-integrated services, which helps our customers close the gap between business objectives and IT capabilities. Our focus domains are (i) Enterprise Solutions; (ii) Virtual Shoring Solutions and (iii) Secure Converged Networking (iv) CRM implementation and other IT Services. The functional currency of the Company is Indian Rupee. All our transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transaction. The monetary items denominated in the foreign currency at the year-end are translated at the exchange rates prevailing on the date of the balance sheet. Our margins and net income are affected by the movements of the Indian Rupee against other currencies, including the U.S. Dollar, Swiss Franc and South African Rand. In fiscal 2005 and 2004, approximately 48.15%, and 37.62% respectively of our total income was earned in currencies other than the Indian Rupee. For the same periods, approximately 22.29%, and 33.30%, respectively, of our costs of resale material, sales and marketing expenses, administration and other expenses were incurred in currencies other than the Indian Rupee. As of the date of this Letter of Offer, we have not entered into any hedging or forex contract to minimise our exposure to foreign exchange fluctuations. Accordingly, the appreciation of the Indian Rupee against such foreign currencies can adversely affect our results of operations. RESULTS OF OPERATIONS Income The following table sets forth certain financial information as a percentage of our total revenues for the periods indicated:

Rs. in million Fiscal 2005 Fiscal 2004 Fiscal 2003 Income Sales 94.05 95.80 95.34 Other income 5.95 4.20 4.66 Expenditure Cost of resale material 25.65 29.47 42.97 Employee compensation & benefits 44.24 39.75 41.36 Sales & marketing expenses 2.48 8.21 3.04 Administrative & other expenses 15.01 28.91 19.79 Interest & finance charges 9.27 13.91 8.11 Depreciation 13.83 11.85 12.30 Profit/(loss) before amortisation & tax (10.48) (32.11) (27.57) Amortisation of Product Research and Development Expenditure

0.00 6.61 4.57

Profit/(Loss) before Tax & Extraordinary Items (10.48) (38.72) (32.15)

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Fiscal 2005 Fiscal 2004 Fiscal 2003 Extraordinary Items 22.40 0.00 0.00 Profit/(Loss) before Tax (32.88) (38.72) (32.15) Impact of material adjustment and prior period items - (1.86) - Provision for Taxation - - - Profit/(Loss) after Tax (32.88) (40.58) (32.15)

RESULTS OF OPERATIONS — SIX MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO FISCAL 2005 Total Income Our total income from software and related services, CRM and other IT services, secured convergent networking solutions services and other income was Rs. 661.58 million in the six months ended September 2005 compared to Rs. 1,227.82 million in fiscal 2005. Total Expenditure During the six months ended September 2005, our total expenditure was Rs. 792.97 million as compared to Rs. 1,631.42 million in fiscal 2005. Our cost of resale in the six months ended September 2005 was Rs. 206.48 million as compared to Rs. 314.91 million in fiscal 2005. Our employee cost in the six months ended September 2005 was Rs. 326.17 million as compared to Rs. 543.13 million in fiscal 2005. Our sales and marketing expenses in the six months ended September 2005 was Rs. 6.38 million as compared to Rs. 30.46 million for fiscal 2005. Our administrative and other expenses in the six months ended September 2005 was Rs. 100.26 million as compared to Rs. 184.30 million in fiscal 2005 Our interest expense in the six months ended September 2005 was Rs. 60.97 million as compared to Rs. 113.81 million in fiscal 2005. Our depreciation expense in the six months ended September 2005 was Rs. 88.91 million as compared to Rs. 169.83 million in fiscal 2005. We did not incur any extraordinary expenses in the six months ended September 2005, whereas our extraordinary expenses was Rs. 274.98 million in fiscal 2005. Loss Before Taxation Losses before taxation in the six months ended September 2005 were Rs. 127.59 million as compared to Rs. 403.60 million in fiscal 2005. Taxes We made a provision in tax of Rs. 3.80 million in the six months ended September 2005 and nil provision in fiscal 2005. Loss After Taxation As a result, losses after taxation in the six months ended September 2005 were Rs. 131.39 as compared to Rs. 403.60 million in fiscal 2005. Due to the skewed revenue streams and linear incurrence of expenditure, the fixed costs could not fully be absorbed by the revenue generated, leading to incurrence of losses. RESULTS OF OPERATIONS — FISCAL 2005 COMPARED TO FISCAL 2004 Income During fiscal 2005 our total income was Rs. 1,227.82 million as compared to Rs. 859.18 million in fiscal 2004. Our growth in total income was led by an increase in income from software and related services by 60.22% to Rs. 694.48 million from Rs. 433.45 million in fiscal 2004 and comprised 56.56% of total income for fiscal 2005 as compared to 50.45%during fiscal 2004. Income from CRM & other IT services was Rs. 23.34 million,

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comprising 1.90%of total income in fiscal 2005, as compared to Rs. 11.90 million, or 1.38% of total income, for fiscal 2004. Secured Convergent Networking Solutions services contributed Rs. 436.99 million, or 35.59% of total income, fiscal 2005, as compared to Rs. 377.75 million, or 43.97% of total income, for fiscal 2004. Other income for the fiscal 2005 was Rs. 73.01 million, or 5.95% of total income as compared to Rs. 36.09 million, or 4.20% of total income in fiscal 2004. Expenditures Our total expenditure was Rs.1,631.42 million in 2005 as compared to Rs.1,191.85 million in 2004, representing an increase of 36.88%. Our cost of resale for the fiscal 2005 was Rs. 314.91 million as compared to Rs. 253.22 million in fiscal 2004. Out of this, the cost of resale relating to networking solutions as a percentage of its revenue was 71.30% during fiscal 2005 as compared to 66.09% for fiscal 2004. Our employee cost for fiscal 2005 was Rs. 543.13 million as compared to Rs. 341.56 million in fiscal 2004, representing an increase of 59.02% of our employee cost. The increase of our employee cost was mainly because of lower capitalization of research and development expenditure during the fiscal 2005, consequent to lower deployment of personnel in R&D upon completion of the development work relating to enterprise solution. Cost of outsourced services for fiscal 2005 was Rs. 55.69 million, and Rs. 36.21 million for fiscal 2004. Our sales and marketing expenses for fiscal 2005 was Rs. 30.46 million, or 2.48% of total income, compared to Rs.70.51million or 8.21% of total income for fiscal 2004. Expenses in fiscal 2004 were higher because of preparatory expenses incurred for product launch and increase spending on advertisements. Our administrative and other expenses for fiscal 2005 was Rs. 184.31 million, or 15.01% of total income, compared to Rs. 248.43 million for fiscal 2004, which was 28.91% of total income for fiscal 2004. The decrease in expenses in fiscal 2005 was mainly on account of lower write off of stock and debtors and gains on account of foreign exchange fluctuation durings the fiscal 2005. Our interest expense for fiscal 2005 was Rs. 113.81 million as compared to Rs. 119.51 for fiscal 2004 million representing a decrease of 4.77%. Our average interest cost was 8.29% in fiscal 2005 as compared to 9.61% in fiscal 2004. Our depreciation expense for fiscal 2005 was Rs. 169.83 million as compared to Rs. 101.83 million in fiscal 2004, representing an increase of 66.78% owing to the commencement of charging of depreciation on the Product Software. Amortization of product research and development expenditure was nil in fiscal 2005 as compared to Rs. 56.80 million in fiscal 2004. There was no unamortised research and development expenditure in India at the beginning of fiscal 2005 and hence there was no amortisation of such expenditure during the year. Our extraordinary expenditure for fiscal 2005 totaled Rs. 274.98 million compared to nil for fiscal 2004. Extraordinary expenditure comprises of impairment charges for our product software of Rs. 125.00 million, diminution in the value of investment of Rs. 39.50 million, impairment in the value of Swiss software localization Rs. 68.23 and write off of interest payable by Ramco USA of Rs. 42.25 million. Due to the obsolescence of certain software components, in accordance with AS-26 and based on certain technical assumptions and our internal estimates, we have provided for an impairment charge for our product software of Rs. 125.00 million. Diminution in the value of investments represents write off of our equity investments of Rs. 39.50 million made in Triamun AG. This was carried out after Triamun AG, as a result of accumulated losses, reduced its equity share capital. We also wrote off Rs. 68.23 million representing impairment in the value of software localization cost for Ramco Switzerland. Losses Before Taxation Our losses before taxation was Rs. 403.60 million for fiscal 2005, compared to a loss of Rs. 332.67 million for fiscal 2004.

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Adjustments for prior period expenses: Adjustments for prior period expenses for fiscal 2005 totaled nil compared to Rs. 15.97 million for fiscal 2004. This adjustment was on account of giving effect to the prior period expenses in the nature of sales reversal accounted during the fiscal 2004. Taxes As we have incurred a loss, no provision has been made in fiscal 2005 and fiscal 2004. Losses After Taxation As a result, losses after taxation for fiscal 2005 was Rs.403.60 million, compared to Rs. 348.65 million in fiscal 2004. Due to the skewed revenue streams and linear incurrence of expenditure, the fixed costs could not fully be absorbed by the revenue generated, leading to incurrence of losses. RESULTS OF OPERATIONS — FISCAL 2004 COMPARED TO FISCAL 2003 Income During fiscal 2004 our total income was Rs. 859.18 million as compared to Rs. 849.84 million in fiscal 2003. Our growth in total income was led by an increase in income from software and related services by 29.35% to Rs. 433.45 million in fiscal 2004 from Rs. 335.10 million in fiscal 2003 and comprised 50.45% of total income for fiscal 2004 as compared to 39.43% during fiscal 2003. Income from CRM & other IT services was Rs. 11.90 million comprising 1.38% of total income in fiscal 2004 as compared to Rs. 8.77 million, or 1.03% of total income for fiscal 2003. Secured Convergent Networking Solutions services contributed Rs. 377.75 million, or 43.97% of total income in fiscal 2004 as compared to Rs. 466.38 million, or 54.88 % of total income, for fiscal 2003. Other income for the fiscal 2004 was Rs. 36.09 million or 4.20% of total income as compared to Rs. 39.59 million, or 4.66% of total income in fiscal 2003. Expenditures Our total expenditure was Rs. 1,191.85 million in 2004 as compared to Rs. 1,123.02 million in 2003 representing an increase of 6.13%. Our cost of resale for the fiscal 2004 was Rs. 253.22 million as compared to Rs. 365.15 million in fiscal 2003. Of this total cost of resale, the cost relating to networking solutions as a percentage of its revenue was 66.09% during fiscal 2004 as compared to 77.31% for fiscal 2003. Our employee cost for fiscal 2004 was Rs. 341.56 million as compared to Rs. 351.51 million in fiscal 2003, representing a decrease of 2.83% of our employee cost. Cost of outsourced services for fiscal 2004 was Rs. 36.21 million, and Rs. 19.77 million for fiscal 2003. Our sales and marketing expenses for fiscal 2004 was Rs. 70.51 million, or 8.21% of total income, compared to Rs. 25.87 million or 3.04% of total income for fiscal 2003. Expenses in fiscal 2004 were higher because of preparatory expenses incurred for product launch and increase spending on advertisements. Our administrative and other expenses for fiscal 2004 was Rs. 248.43 million, or 28.91% of total income, compared to Rs. 168.16 million for fiscal 2003, which was 19.79% of total income for fiscal 2003. The increase in expenses in fiscal 2004 was mainly on account of higher write off of stock and debtors and adverse foreign exchange fluctuation in fiscal 2004. Our interest expense for fiscal 2004 was Rs. 119.51 million as compared to Rs. 68.92 million representing a increase of 73.41%. Our average interest cost was 9.61 % in fiscal 2004 as compared to 10.82 % in fiscal 2003. Our depreciation expense for fiscal 2004 was Rs. 101.83 million as compared to Rs. 104.57 million in fiscal 2003, representing a decrease of 2.62%. Amortization of product research and development expenditure was Rs. 56.80 million in fiscal 2004 as compared to Rs. 38.85 million in fiscal 2003. Total amortization expense for the fiscal 2003 was actually higher at Rs.

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59.14 million. However, Rs. 20.29 million was adjusted against the residual balance in the capital reserve account and only the net balance of Rs. 38.85 million was charged to the profit & loss account. Losses Before Taxation Our losses before taxation was Rs. 332.67 million for fiscal 2004, compared to a loss of Rs. 273.19 million for fiscal 2003. Adjustments for prior period expenses Adjustments for prior period expenses for fiscal 2004 totaled Rs. 15.97 million compared to nil for fiscal 2003. This adjustment was on account of giving effect to the prior period expenses in the nature of sales reversal accounted during the fiscal 2004. Taxes As we have incurred a loss, no provision for taxes has been made in fiscal 2004 and fiscal 2003. Losses After Taxation As a result, losses after taxation for fiscal 2004 was Rs. 348.65 million, compared to Rs. 273.19 million in fiscal 2003. Due to the skewed revenue streams and linear incurrence of expenditure, the fixed costs could not fully be absorbed by the revenue generated, leading to incurrence of losses.

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SECTION VI: LEGAL AND OTHER INFORMATION Outstanding Litigation and Defaults Except as stated in this Letter of Offer, there is no outstanding or pending litigation, suit, criminal or civil prosecution, proceeding initiated for offence (irrespective of whether specified in paragraph (I) of Part 1 of Schedule XIII of the Companies Act) or litigation for tax liabilities against the Company, its Subsidiary, Promoters, Promoter group of companies or Directors and there are no defaults, non payment or overdues of statutory dues, institutional or bank dues or dues towards holders of debentures, bonds and fixed deposits and arrears of preference shares, other than unclaimed liabilities of the Company or its Subsidiaries and no disciplinary action has been taken by SEBI or any stock exchanges against the Company, its Subsidiaries, Promoters, Group Companies or Directors. Cases involving our Company (including branch offices), our Subsidiaries and our Associate Companies Suits filed by the Company Criminal Cases i. Three separate criminal complaints (C.C. No. 4127, 4128 and 4967 of 1997) have been filed in the

Court of the XIV Metropolitan Magistrate, Chennai under Section 138 of the Negotiable Instrument Act, 1882 against Hijo Exports Private Limited, Hijo Associates, Mr. Ravi Puthukarai and Ms. Rupa Ravi who were landlords of the property taken on lease by the Company. The complaint is in relation to the bouncing of the cheque that was issued towards repayment of security deposit. Non-bailable warrants have been issued against the accused and the same are to be executed. The amount involved is Rs. 1.20 million. The Company has already made a provision for the amount involved in its financial statements. The next date of hearing is February 17, 2006.

ii. A criminal complaint (C.C. No. 1662/5 of 2002) has been filed against C-Tel Infotech Limited in the

Court of the Additional Chief Metropolitan Magistrate, Mumbai for an offence under Section 138 of the Negotiable Instruments Act, 1882 in relation to the dishonour of a cheque issued by them for settlement of the Company’s invoice for materials supplied. The amount involved is Rs. 0.05 million. The Company has already made a provision for the amount involved in the financial statements. The next date of hearing is December 22, 2005.

iii. Two criminal complaints (C.C. No. 12297 of 2003 and 13924 of 2003) have been filed in the Court of

the V Metropolitan Magistrate, Hyderabad against Srimata Cyber Services (P) Limited and Mr. Surya Narayana Murthy, Chairman & CEO of Srimata Cyber Services (P) Limited for an offence under Section 138 of the Negotiable Instruments Act, 1882 in relation to the dishonour of cheques issued by them for settlement of the Company’s invoice for materials supplied. The amount involved is Rs.0.1 million. The Company has already made a provision for the amount involved in the financial statements. The next date of hearing is March 8, 2006.

Civil Cases i. A summary suit (O.S. No. 2299 of 1997) has been filed in City Civil Court, Hyderabad under the

relevant provisions (Section 37 of Rule 1) of the Civil Procedure Code, 1908, against Equator Computers Limited, a dealer for recovery of amounts due. The amount involved is Rs. 0.25 million. The Company has already made a provision for the amount involved in the financial statements. The next date of hearing is November 21, 2005.

ii. A civil suit (C.S. No. 396 of 1998) has been filed in the High Court, Madras for recovery of money

under Order VII Rule 1 of Civil Procedure Code, 1908 to recover the security deposit due from Hijo Exports Private Limited and Hijo Associates, the landlord of the property taken on lease by the Company. The amount involved is Rs. 1.20 million. The Company has already made a provision for the amount involved in the financial statements. The direction of the High Court in relation to service has been complied with by the Company. The matter is in progress.

iii. A civil suit (O.S. No. 6171 of 2001) has been filed in IV Additional City Civil Court, Chennai under

Order VII Rule 1 of Civil Procedure Code, 1908 to recover the security deposit due from Hijo Exports Private Limited and Hijo Associates, landlord of property taken on lease by the Company. The amount

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involved is Rs. 0.40 million. The Company has already made a provision for the amount involved in the financial statements. The next date of hearing is November 28, 2005.

iv. A recovery suit (C.S. 65 of 2002) had been filed in the Court of the District and Sessions Judge, New

Delhi under order VII Rule 1 of Civil Procedure Code, 1908 against Net Savvy Technologies, a dealer, for defaults in payment against supplies made. The amount involved is Rs. 0.40 million. The Company has already made a provision for the amount involved in the financial statements. The judgment has been granted in favour of the Company and is in the process of being executed.

v. A recovery suit (O.S. No. 2809 of 2003) has been filed in the City Civil Court, Bangalore under Section 2b

and order VII Rule 1 of The Civil Procedure Code, 1908 against Cross Matrix Technologies (P) Limited, a dealer, for default in payment against supplies made. The amount involved is Rs. 0.14 million. The Company has already made a provision for the amount involved in the financial statements. The next date of hearing is January 1, 2006.

vi. A recovery suit (O.S. No. 2075 of 2003) has been filed in the City Civil Court, Bangalore under Section

2b and order VII Rule 1 of The Civil Procedure Code, 1908, against India Paging Services Limited, Karnataka Bank and HDFC Bank Limited for disputes relating to letter of credit. The amount involved is Rs. 0.41 million (inclusive of interests and costs). The Company has already made a provision for the amount involved in the financial statements. The next date of hearing is January 2, 2006.

Winding up Petitions i. A winding up petition (C. P. No. 256 of 2002) has been filed in the High Court, Bangalore under

Section 433(e) and 439 of the Companies Act, 1956 against Deldot Systems Limited for default in payment for supplies made to them. The amount involved is Rs.1,86,637. The Company has already made a provision for the amount involved in the financial statements. The Official Liquidator has been appointed.

ii. A winding up petition (C. P. No. 155 of 2003) has been filed in the High Court of Andhra Pradesh under

Section 433(e) read with Section 439 of the Companies Act, 1956 against Kapital Information Technologies Limited for default in payment for supplies made to them. The amount involved is Rs.0.84 million. The Company has already made a provision for the amount involved in the financial statements. The next date of hearing is November 16, 2005.

Arbitration i. A legal notice dated August 26, 2004 had been issued by us to a former employee, Mr. Antony Babu, in

relation to the amount to be recovered from him under a Housing Loan Agreement dated July 7, 2000. The said employee resigned from services while the amount was still outstanding and to be repayed. The said former employee has alleged that he was forced to resign from the services of the Company. The amount owed to us under the loan agreement is Rs. 253,953. The Company also has a charge on immoveable property to secure the loan. Arbitration proceedings have also been initiated for recovery of the amount and notice has been issued to the employee in this regard. The Company is awaiting a response from the former employee’s counsel.

Economic Offences i. The Company has lodged a complaint with the Economic Offences Wing (EOW) at Mumbai in respect

of the Octroi amount of Rs. 5 million misappropriated by our agent. The investigation is proceeding fast and all the persons involved, except the main accused, have been identified and interrogated. The manner in which the misappropriated money was routed and transacted has also been ascertained. One of the key accused has recently been arrested.

Suits filed against the Company Civil Cases i. A case (O.S. No. 462 of 2000) has been filed in the Civil Court at Bulanshahar, Uttar Pradesh by Mr.

Sanjeev Kumar regarding the issue of 200 shares of Ramco Systems Limited arising out of the de-merger. The dispute essentially relates to the ownership of the shares and the outcome of the disputes will have no financial bearing on the Company. The case is still pending.

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Labour Cases i. An industrial dispute (Industrial Dispute No. 434 of 2004) has been filed in the Labour Court,

Karkarduma, Delhi by an employee of a contractor who was a services agency providing housekeeping and other administrative services to the Company alleging that he is an employee of the Company who has been unfairly dismissed. The employee is claiming back wages at the rate of Rs.2,783.90 for the period from February 2, 2003 against the actual amount of Rs. 2,087 paid to him and also that he be paid a minimum wage of Rs. 2783.90 from May 27, 2004 onwards. The next date of hearing is on November 29, 2005.

Contingent Liabilities


Particulars

Six months ended September 30, 2005 2005 2004 2003 2002 2001

Estimated amount of contracts remaining to be executed on capital account

8.93 0.56 12.92 15.33 4.99 36.69

Bank Guarantees 46.57 51.11 55.17 53.76 60.55 68.07 Letters of credit 71.91 33.21 59.38 7.66 58.12 6.80 Customs duty payable on Raw material stock at Bonded Warehouses

- - - - - 1.62

Octroi Liability - - 2.90 2.65 1.86 - Income Tax Liability (Disputed pending before the First appellate Authority)

76.10 175.61 175.61 92.49 - -

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Cases involving the Subsidiaries Ramco Systems Corporation, USA Suits filed by Ramco USA Winding up Petitions i. A winding-up petition has been filed in the Superior Court of New Jersey, Chancery division,

Middlesex county, U.S.A. under applicable laws in New Jersey against STS Software, New Jersey, USA for recovery of certain amounts that were due against consultancy services that was rendered to them. The amount involved is US $ 0.09 million (US$ 86,985) (Rs. 3.69 million). However, the debtor is not traceable.

ii. A winding-up (receivership action) has been filed in the Maricopa County Superior, Arizona, USA

against Resource Connection, Arizona for recovery of amounts that were due against consultancy services that was rendered to them. The amount involved is US $ 0.07 million (US$ 71,860) (Rs. 3.05 million). The debtor applied for protection under Chapter 7. The Company has put in a claim as a creditor under the Chapter 7 Proceeding.

Potential Disputes involving the Company, its Branch offices and the Subsidiaries To the best of our knowledge, belief and information, the following may be considered as potential disputes against us as of the date of filing of this Letter of Offer. i. A criminal complaint has been filed against one of our employees who was working in the Pune Office. The

employee has currently left our Company. He has been accused of electricity theft at the leased premises occupied by the Company. The charge sheet has been filed by the police. A parallel action by ACP (Assistant Commissioner of Police) for production of a bond for good behaviour by the said employee had been dismissed. As the employee has resigned, the Company does not expect to be involved any further in the case. We have also taken an undertaking from the landlord of the premises that the Company was not involved in any manner in the alleged theft.

ii. CPVision Technologiehaus AG (CPVision), a subcontractor of Ramco Switzerland, has claimed fees

amounting to CHF 30,000 and expenses amounting to CHF 15,000 in respect of work done by CPVision in a customer project. Ramco Switzerland has disputed CP Visions’ aforesaid claim on grounds of non-fulfillment of obligations by CP Vision. Disussions are on between the parties in order to resolve the matter. However no amicable settlement has been arrived at yet.

iii. Our branch office in the United Kingdom was advised to procure office connect wireless, router, adapter etc for providing security (firewall) protection for the office situated in United Kingdom. After a period of 30-35 days the specifications were revised to buy Zywall10 to replace all the above items. The order for Zywall10 Firewall was placed with a mutual understanding with Insight’s representative that at the time of delivery of Zywall10, Insight would take back the items ordered earlier without the Company being required to make any payments including towards handling or courier charges. However, Insight failed to take back the items supplied earlier at the time they delivered Zywall10. After several follow up emails and phone calls, Insight’s representative informed us that they will speak to their customer care and solve the problem and will arrange to take back the material from our office. However, the branch office of the Company has received a notice from Insight stating that the Company has failed to pay for the items supplied earlier and that Insight will take legal action unless the amounts are paid.

iv. Ramco Switzerland had received a letter dated March 9, 2004 from Maurice Lacroix Limited, a Swiss

customer based in UK. Ramco Switzerland had procured hardware from PC world and installed the same as part of the ERP implementation. Ramco Switzerland has also received consideration for these implementation services. The hardware order to PC World and the invoice to the customer was done by the branch office of Ramco Systems Limited at United Kingdom. The Company has also charged the customer a minimal sum for some local support. However, PC World has made errors in supplies which has resulted in serious problems for Maurice Lacroix Limited. Since, Ramco Switzerland front ended the supply, action has been threatened against it, and thus the letter has been sent to the Swiss office. Meanwhile, the Switserland office has negotiated with the customer and prevented any further action.

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v. An amount of USD 21, 504 is due from SG Systems to Ramco USA in relation to a consultancy (personnel supply) contract. Ramco USA have engaged legal counsel and have sent a legal notice to SG Systems. The legal notice has been replied with a counter claim for $ 5000 as damages. Ramco USA have not proceeded further as they are unable to trace the whereabouts of SG Systems. Ramco USA have been informed that the SG Systems does not exist any more.

vi. Ramco USA licensed our ERP software to California Fruit and Tomato Kitchen who stopped

implementation midway stating that they did not derive any benefits. They also returned the software. An outstanding of US$ 39,408 is due from this party against the services already rendered. However, the party is demanding a refund of US$ 81,000. Ramco USA have not initiated any legal action as the lawyers have advised them that the cost of recovery of our dues may be more than the amount recoverable. The limitation period for filing suit is 4 years from the date of failure to pay.

vii. Ramco USA has sold about $700,000 worth of license, services and annual maintenance contracts to

Kaolin Mushroom Farms. As per the license agreement, Ramco USA has acknowledged and permitted the use of the software to its various related entities. South Mill Distribution one of Kaolin’s related entity have contributed one third portion of the total value of license and services. There has been communications from South Mill Distribution that they are planning to acquire another software and also to take steps to recoup amount spent on the software from Ramco USA. We are in the process of discussing with Kaolin and South Mill Distribution to settle this issue amicably. The threat of litigation has reduced considerably.

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Cases involving our Promoters and group companies of our Promoters The litigation details of all the Promoters and the Promoter Group Companies are given below. Madras Cements Limited Suits filed by Madras Cements Limited Civil Cases

i. A case (W.P. No.12928, 12955 of 2002) has been filed in the High Court, Madras by the Director of Geology and Mining, Government of Tamil Nadu for royalty demand in respect of limestone. The amount involved is Rs 96.60 million. The High Court has stayed the demand of the Government.

ii. Ten writ appeals (W.A. No. 46/03) have been filed in the High Court, Madras against the Government

of Tamil Nadu Industries Department and the Special Tahsildar Land Acquisition challenging the land acquisition proceedings of Government of Tamil Nadu for acquiring limestone bearing lands. The amount involved is Rs 6.00 million. The matter is still pending.

iii. A total of 43 civil and 312 criminal cases filed for recovery of sales dues have been filed in the

Metropolitan Court, Chennai and the City Civil Court, Chennai for an amount aggregating Rs. 62.03 million. The cases are pending before the various authorities.

iv. Two cases (O.P. No. 69 of 1997) have been filed in the Consumer Court, Madras to recover the

advances paid for purchasing of SIPANI cars. The amount involved is Rs 1.25 million. The matters are still pending.

v. An appeal (L.I.C.D. No. 149,171,172 of 2003) has been filed in the High Court, Andhra Pradesh by the

company against the order of the sessions court for acquital of 3 dismissed employees namely Mr.Selvaram Raju, Mr.Rayappan, Mr.K.R.K.V.Prasad involved in theft of the company’s properties. The matter is not quantifiable. The appeal is still pending.

Income Tax related Cases A total of 15 cases are pending with authorities, including the Income Tax Appellate Authorities, Commissioner of Income Tax and High Court, at Madras, under various sections of the Income Tax Act, 1961. The aggregate amount involved is Rs 527.77 million. The matters are in progress. Excise related Cases i. A total of 55 cases amounting to Rs. 30.86 million are pending with various appellate authorities. ii. A total of 87 cases amounting to Rs 122.53 million are pending with various Central Excise

Appellate Authorities. iii. Two writ petitions (W.P. No. 961 and 962 of 1998) has been filed in the High Court, Madras

against the State of Tamil Nadu in relation to additional electricity tax being levied on captive generation. The amount involved is Rs 38.50 million. The matter is still pending.

iv. A case (W.A. 1704 of 2004) has been filed in the High Court, Madras against the State of Tamil

Nadu in relation to electricity tax being levied at the rate 10 paise per unit on captive generation. The amount involved is dependant on the amount of generation. The matter is still pending.

v. A case (C.A.D. 10152/2004 and C.A. 7175 –7189 of 2004) has been filed in the Supreme Court of

India against the Commissioner of Central Excise, Guntur in relation to (i) Central Excise Modvat on capital goods used in mines and (ii) Modvat credit on capital goods used in mines. The amount involved is Rs. 2.7 million. The matter is still pending.

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Labour Cases The company has filed a case (ESIOP 65/2001) in the ESI Court, Madurai against the ESI Corporation, Madurai on the applicability of ESI coverage to a section of employees. The Company has obtained a stay. The amount involved is Rs 0.085 million. The matter is still pending.

Suits filed against Madras Cements Limited

Civil Cases

i. A case (C.A. No. 7102 of 2003) has been filed in the Supreme Court of India against the Andhra Pradesh State Electricity Board (APSEB) in relation to the hike of wheeling charges. APSEB has preferred an appeal to the Supreme Court. The matter is incapable of valuation as it refers to wheeling charges and specific quantification cannot be given as there is no demand as on date. The matter is still pending.

ii. Three writ petitions (W.P. No.12657 of 2001, WP No.5097 of 2002 and WP No. 20422 of 2002) have

been filed in the High Court, Madras by the land owners (Mr. Ilavarasan, Mrs. Senthamil Selvi and Mr. Thangarasu Konar, respectively) against the land acquisition proceedings initiated by the Government for acquiring lands for the Company. The amount involved is Rs 1.31 million. The matter is still pending.

iii. Two writs (W.P. No. 6958 of 2002 and WP No. 6959 of 2002) have been filed in the High Court,

Madras by the State Government challenging the award passed by the Ministry of Mines holding that Madras Cements Limited need not pay surface rent on poramboke lands being leased to the Madras Cements Limited for mining limestone. The amount involved is Rs 0.10 million /yr. The appeal is pending.

iv. A total of 13 cases amounting to an aggregate of Rs 5.18 million have been filed in various subordinate

courts against the company involving lands purchased by them. The matters are still pending.

v. A total of four cases (C.D. No. 200/05) have been filed in various courts against the company on miscellaneous matters such as quality of cement supplied, rent disputes and disputes on security deposits. The amount involved is Rs. 0.34 million. The matters are still pending.

vi. An appeal (I.A. No.18/2003) has been filed in the Aruppukotai Sub Court by the Government of Tamil

Nadu against the order of the Judicial Magistrate Court, holding that the company is not liable to pay basic land revenue for its dry lands in the State of Tamil Nadu. The amount involved is Rs 0.014 million. The appeal is still pending.

vii. An appeal (Jute /C.C.C./2 of 1997) has been filed with the Jute Commissioner, Calcutta in relation to

the liability of the company for non-compliance of Jute Packing Materials Compulsory Use Of Packing Commodities Act 1987. The matter is not quantifiable and the appeal is still pending.

viii. A case (R.T.P. No.99 of 1990) has been filed with the MRTP Commission in relation to whether the

company has followed any restricted trade practice in pricing and selling commission. The liability is not quantifiable. The matter is still pending.

ix. A total of 21 cases involving 22,470 shares of Madras Cements has been filed in which the company has

been cited as a respondent. The aggregate amount involved is Rs. 0.22 million.

Rajapalayam Mills Limited Suits filed by Rajapalayam Mills Limited Criminal Cases A case (C.C. No. 88/2001) has been filed with the Judicial Magistrate- III, Rajapalayam against T.P. Ramasubramanian for misappropriation of funds. The next date of hearing has not yet been given.

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Suits filed against Rajapalayam Mills Limited Income Tax related cases

Cases for the Assessment Years 1993-94, 1994-95( Against the Company - High Court, Madras, Rs. 10 Million) ), 2000-01, 2001-02 has been filed against the Company with the Income Tax Appellate Tribunal, Assistant Commissioner of Income Tax, Virudhnagar. The liability is Rs. 14.91million. The next date of hearing has not yet been given. Excise related Cases A case has been filed with the CEGAT relating to cenvat credit for the period 2001-2002. The amount involved is Rs. 2.02 million. The next date of hearing has not yet been given. Labour Cases

i. A case (I.D. No. 278/89) has been filed in the labour court by Mr. S. Madhavan for payment of gratuity for

uncompleted years. The amount involved in this industrial dispute is Rs. 18,000. The next date of hearing is January 6, 2006.

ii. A case (I.D. No. 451/2000) has been filed in the labour court by Mr. Neerathilingam, who was an

apprentice who was dismissed when he absented himself for more than one month. He has raised a dispute in the Labour Court for alleged dismissal of service. The next date of hearing is January 6, 2006.

iii. A case (W.P. 3764/05) has been filed in the High Court by the Joint Action Council under the State Level

Textiles Wage Dispute. Rajapalayam Mills Limited had entered into a settlement with unions and raised the wages for workers upto Rs. 260 and filed the settlement before the Special Industrial Tribunal, Chennai for award in terms of the settlement. The Special Industrial Tribunal also passed an award. Objecting the award, the Joint Action Council filed this writ petition in the High Court. The date of hearing is yet to be given.

Environment Cases

A case (No. 1302/99) has been filed in the High Court, Madras against the company by the Tamil Nadu Pollution Control Board (TNPCB) demanding that a consent fee be paid every year by the company. As the company is not polluting either air or water, they have filed a petition in the High Court, Madras against the plea of TNPCB. The amount involved in this case is approximately Rs. 300,000.

Ramco Industries Limited Suits filed by Ramco Industries Limited Criminal Cases 44 criminal cases have been filed before various courts under Section 138 of the Negotiable Instruments Act, 1881 for dishonor of cheques by customers. These cases are pending before various courts in various states for recovery of sales dues. The aggregate amount involved is Rs. 9.32 million. Civil Cases i. Writ Petitions (W.P. No.13318 of 2005 and W.P. No. 13319 of 2005) have been filed in the High Court,

Madras in relation to certain disputes with the Tamil Nadu Electricity Board for alleged violation of terms and conditions of power supply. The amount involved is Rs. 2.741 million. The company has deposited Rs.1.688 million. The appeal is still pending.

ii. The company has filed an appeal (No. 334 of 2001) in the High Court, Madhya Pradesh against Bharat

Patni, Indore for the decree of Rs 0.627 million awarded by a District Court towards additional freight claim by a transport contractor. The amount involved is Rs 0.627 million. The company has also deposited Rs. 0.20 million as per the Court Order. The appeal is still pending.

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iii. A civil case (O.S. No. 5438 of 1995) has been filed for recovery of sales dues in the City Civil Court,

Bangalore against the Karnataka Land Army Corporation Ltd, Bangalore. The appeal is still pending and the amount involved is Rs.3.28 million.

Tax Related Cases i. Three appeals (W.P. Nos. 373/2005, 374/2005 and 375/2005) have been filed for Assessment Years 1987-

88, 1988-89, and 1989-90, respectively, before the High Court of Madhya Pradesh in the matter of the sales tax department treating our depot transfer of pipes as inter-state sales for an amount aggregating Rs. 9.59 million. As per the directions of the Hon’ble High Court, 50% of the disputed tax amount has been paid in cash and bank guarantees in relation to the balance amount have been issued. The writ petitions are yet to be disposed of.

ii. A writ petition (W.P. No. 261 of 2004) was filed in the High Court, Bombay against the Union of India and

Commercial Taxes Dept. in UT of D& NH in relation to the amendment to the central sales tax with respect to the production of C Form which is mandatory even for the units exempted from sales tax under the various sales tax incentive schemes. The case is still pending.

Excise /Sales Tax related Cases i. An appeal (T.A. No. 1176 of 2002) has been filed with the Sales Tax Appellate Tribunal, Chennai, in

relation to a dispute on levy of tax under section 3(4) of Tamil Nadu Government Sales Tax Act in relation to the purchase by issue of Form XVII for availing concessions. The amount involved is Rs.0.856 million (deposit Rs.0.706 million). The appeal is still pending.

ii. An appeal (R.C. 2947 of 2003) has been filed with the Assistant Commissioner of CT Zone VI, Tamil Nadu

against the Commercial Tax Officer, Ice House Asst. Circle. The levy of entry tax on cement purchases from outside state has been disputed. In this regard a writ petition has also been filed before Madras High Court. The amount involved is Rs.0.50 million. The appeal is still pending.

iii. An appeal (A.P. 35 of 2002) has been filed with the Asst. Commissioner of CT Zone VI, Tamil Nadu

against the CTO Ice House Asst. Circle in relation to the levy of sales tax on quota sales. The amount involved is Rs. 0.305 million. The company has deposit Rs.0.152 million. The appeal has been partly allowed and another appeal is being filed before Tribunal.

iv. An appeal (A.P. 240 of 2002) has been filed with the Sales Tax Appellate Tribunal, Chennai, against the

CTO Ice House Asst. Circle for levy of purchase tax on fly ash. The amount involved is Rs. 0.204 million. The appeal is still pending.

v. An appeal (Asst Year 2001-02) has been filed with the Asst. Commissioner of CT Zone VI, Tamil Nadu

against the CTO Ice House Asst. Circle for levy of additional sales tax. The amount involved is Rs. 0.841 million. The company has deposit Rs.0.105 million. The appeal is still pending.

vi. An appeal (Asst Years 1987-88 & 1988-89) has been filed with the MP Commercial Taxes Appellate

Tribunal against the Asst Commercier of CT Shajapur for a dispute over the method of calculation of taxable turnover inclusive of price. The amount involved is Rs. Rs.0.717 million. The appeal is still pending.

Labour Cases The company has filed an appeal (No. 35178 of 2000) in the High Court, Madras against the Order of the Presiding Officer II Addl Labour Court and 9 others to re-instate dismissed workers and to pay back wages. The High Court in its interim order has directed the company to deposit the arrears of back wages with the Court and also directed that the last drawn wages shall be continued to be paid to the employees pending disposal of the case. Arrears of Rs 0.41 million was deposited with the Court and the monthly wages of Rs.1033 are being paid to the workers. The appeal is pending.

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Suits filed against Ramco Industries Limited Civil Cases i. A case (O.S. No.1809 of 1996) has been filed in the District Munsif Court Coimbatore by Ms. Lalitha

Shroff regarding transfer of 200 shares of Ramco Industries Limited. The case is to be taken up for trial. ii. A case (O.S. No. 462 of 2000) has been filed in the Civil Court at Bulanshahar, Uttar Pradesh by Mr.

Sanjeev Kumar regarding the issue of 200 shares of Ramco Systems Limited arising out of the de-merger. The company has been made as one of the respondents. The dispute essentially relates to the ownership of the shares and the outcome of the disputes will have no financial bearing on the company. The case is still pending.

Income Tax related Cases A set of 3 department appeals (Asst. years 1999-00 & 2000-01) were filed with the Income Tax Appellate Tribunal on the issue of R&D claim under Section 35(2AB) of the Income Tax Act, 1961, and for foreign withholding tax and deduction under Section 80 HHC against the CIT (Appeals) Madurai. The amount involved is Rs.359 million. The appeal is still pending. The Ramaraju Surgical Cotton Mills Limited Suits filed by Ramaraju Surgical Cotton Mills Limited Civil Cases A case (W.P./41757/02) has been filed in the High Court of Madras against the managing director of Tamil Nadu Medical Services Corporation Limited for refund of earnest money deposit and security deposit for Rs.0.1 million paid for the tender. The matter is still pending. Excise/ Sales Tax related Cases i. An appeal (appeal against order No.35/02 dated 15.5.02) has been filed with the Excise Authorities with

regard to dispute on the cenvat credit availed on the input of lubricants and greases used in manufacturing. The amount involved is Rs.0.06 Million. The appeal is still pending.

ii. 5 cases are pending with various sales tax authorities for an amount aggregating Rs. 20.20 Million. Suits filed against Ramaraju Surgical Cotton Mills Limited Income Tax related cases There are 12 cases pending under the Income Tax Act with various Income Tax Authorities, including the Income Tax Appellate Tribunal and the High Court of Madras for an amount aggregating Rs.30.88 million. Sales Tax related cases

2 cases are pending with various sales tax authorities for an amount aggregating Rs. 4.59 Million. Thanjavur Spinning Mill Limited Suits filed against Thanjavur Spinning Mill Limited Labour Cases Four cases have been filed by certain employees in various forums in relation to unfair dismissal. These employees were dismissed due to negligence in duty, habitual absenteeism and misappropriation of monies. These cases are still pending. Income Tax related cases

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There are 2 cases pending under the Income Tax Act with the Income Tax Appellate Tribunal for an amount aggregating Rs. 41.50 million Gowrihouse Metal Works Suits filed by Gowrihouse Metal Works Income Tax related cases An income tax appeal (I.T.A. No.1818/Mds/1999) has been filed with the Income Tax Appellate Tribunal, Chennai. The matter is in relation to certain income tax matters. The amount involved is Rs.0.128 million. The matter is in progress.

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Government Approvals In vew of the approvals listed below, we can undertake our current business activities and no further material approvals are required from any Government Authority or the RBI to continue such activities. It must be distinctly understood that, in granting these licenses, the Government of India and/or RBI does not take any responsibility for our financial soundness or for the correctness of any of the statements made or opinions expressed in this behalf. We have received following approvals that are material to our business. Approvals for the Business In India, the approvals obtained and/or required to be obtained relate to our facilities and offices loacted at New Delhi, Pune, Mumbai, Ahmedabad, Bangalore and Chennai In relation to our overseas offices and subsidiaries, we have obtained the necessary approvals and registrations for conduct of business in the United States of America, Singapore, Malaysia, South Africa and Switzerland, United Arab Emirates, United Kingdom and Germany. STPI Ramco has, since inception, obtained necessary approvals required for carrying on activities as an STP. We have also obtained STPI approval, Private Bonded Warehouse License and In Bond Manufacturing Sanction Order for our STP facilities in Chennai located at (i) 7th floor, 64, Sardar Patel Road, Taramani, Chennai 600 113 and (ii) 3rd Floor, Prince Kushal Towers, 96 Anna Salai, Chennai-600 002. RBI/FIPB We have obtained necessary approvals from RBI for transfer of subsidiaries of Ramco Industries Limited to Ramco Systems Limited. Since our Company falls under the automatic route, we do not require separate FIPB approval. Miscellaneous We have also obtained necessary approvals and registrations from the tax authorities, labour department, etc. which include: • Importer-Exporter Code Number under the Foreign Trade Development and Regulation Act, 1992 • Registration under the Central Sales Tax Act, 1956 and various state sales tax legislations. • Permanent Account Number and Tax Deduction Account Number under the Income Tax Act • Service Tax Registration • Registration under the various state shops and commercial establishments legislations; • Registration with the Employees’ State Insurance Corporation under the Employees’ State Insurance

Act, 1948. • Registration under the Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976 and

the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975. All the aforesaid approvals are valid as of the date of this Letter of Offer. Material Developments Apart from the changes mentioned elsewhere in this Letter of Offer, including in the share capital as mentioned below, which have occurred since the date of the last financial statements disclosed (i.e., September 30, 2005) in this Letter of Offer, the Board of Directors are not aware of any circumstances that materially or adversely affect or are likely to affect the profitability of the Company or the value of its assets or its ability to pay its liabilities within the next twelve months.

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Description Of Certain Indebtedness Our Company has availed of various facilities from banks and financial institutions in India. The working capital facilities obtained by the Company are as follows: (i) (a) Working Capital Facilities (Based on first pari passu charge on current assets)

(Rs. in million) Sl. No. Bank/ Financial Institutions Amount of Loan

1. State Bank of India 80.00 2. UTI Bank 75.00 3. Citibank 30.00 Total 185.00

(b) Working Capital Facilities (Based on second charge of current assets)

Sl. No. Bank/ Financial Institutions Amount of Loan 1. UTI Bank 160.00 Total 160.00

(ii) Short Term Loan Facilities The short-term loan facilities obtained by the Company are as follows:

(Rs. in million) Sl. No.

Bank/ Financial Institutions/ Others

Due date Amount of Loan

1 Citibank August 12, 2006 10.00 2 UTI Bank Limited August 21, 2007 150.00 3 UTI Bank Limited August 23, 2007 100.00 4 Deutsche Trustee Services

(India) Private Limited A/c Insta Cash Plus Fund

March 3, 2006 50.00

5 Deutsche Trustee Services (India) Private Limited A/c Insta Cash Plus Fund

April 28, 2006 60.00

6 UTI Bank December 3, 2005 50.00 7 Kotak Mahindra Bank December 30, 2005 57.50 8 Punjab National Bank March 30, 2006 100.00 9 Industrial Development Bank of

India May 16, 2006 92.50

10 Citibank May 17, 2006 47.55 11 Industrial Development Bank of

India May 24, 2006 7.50

12 Citibank May 27, 2006 100.00 13 Standard Chartered Bank May 30, 2006 100.00 14 Citibank June 16, 2006 20.00 15 Standard Chartered Bank June 22, 2006 150.00 16 Citibank July 28, 2006 30.00 17 Housing Development Finance

Corporation January 31, 2007 66.50

18 ICD (Madras Cements Limited) NA 200.00 19 Federal Bank Limited September 27, 2007 250.00 Total 1,641.55

Restrictive Covenants: Certain of the above loan agreements contain restrictive clauses, which require the Company to obtain the bank/financial institutions prior approval before inter alia (i) any change in ownership or control of the Company; (ii) material change in management; (iii) change in the memorandum and articles of association; (iv) any consolidation, merger, reorganization, scheme of arrangement or compromise with its

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creditors or shareholders; (vi) obtain any further loans; and (vii) material change in shareholding of the Company. Further, some of the banks/financial institutions have the right to appoint a director on the Board of the Company. Security: Most of the loans obtained by us have been secured or guaranteed by our Promoters. In addition the Company has also created a charge on its owned properties and have hypothecated their machineries, moveable fixed assets, stock in trade and receivable to secure a few of the above mentioned loans. The details of the charges created and subsisting are as follows:

Sl. No. Bank/ Financial

Institution Amount Secured

Nature of Charge and Property over which charge is created

1. State Bank of India 280 million • Hypothecation- first pari passu charge on the stocks and book debts of the company and second pari passu charge on the entire fixed assets of the Company, including its moving plant and machinery, machinery spares, tools, accessories and other moveables both present and future (save as except book debts, stocks of raw material, work in progress of finished goods and spares charged to the bank for working capital)

• Additional security by way of pari passu second charge over the properties at 64, Sardar Patel Road, Taramani, Chennai 600 113 evidenced by a Memorandum of entry for creating joint mortgage by deposit of title deeds.

2. Citibank N.A. 30 million • Hypothecation- first pari passu charge on the stocks and bok debts of the company and second pari passu charge on the entire fixed assets of the Company, including its moving plant and machinery, machinery spares, tools, accessories and other moveables both present and future (saveas except book debts, stocks of raw material, work in progress of finished goods and spares cjharged to the bank for working capital)


3. Housing Development Finance Corporation

80 million • Equitable mortgage by deposit of title deeds of the Company’s properties situated at 86C Santhome High Road, RA Puram, Chennai 600 028

4. UTI Bank Limited 260 million • Hypothecation - Second pari passu charge on all the stock in trade both present and future consisting of raw material, stock in trade, cash and othe current assets.

• Hypothecation - Second pari passu charge on all moveabe plant and machinery, furniture, fixture and other moveable fixed assets.


5. UTI Bank Limited 90 million • Hypothecation- first pari passu charge on the entire current assets of the Company and

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collateral second pari passu charge on the machinery and other moveables and fixed assets of the Company.

6. UTI Bank Limited 250 million • Subservient charge by way of hypothecation of current assets

7 Federal Bank Limited

250 million • Secured by a first charge by way of equitable mortgage, on land and building and movable fixed assets at our corporate office.

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SECTION VII: OTHER REGULATORY AND STATUTORY DISCLOSURES Authority for the Issue Pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on May 9, 2005 and the resolutions passed by the Rights Issue Committee2005 on July 30, 2005 and November 16, 2005 it has been decided to make the following offer of 3,070,757 Equity Shares to the Equity Shareholders of the Company on a rights basis in the ratio of 1 Equity Share for every 4 Equity Shares held on the record date, beingDecember 2, 2005, at a price of Rs. 210 per Equity share. Prohibition by SEBI Neither we, nor our Directors or the Promoter Group Companies, or companies with which our Directors are associated with as directors or promoters, have been prohibited from accessing or operating in the capital markets under any order or direction passed by SEBI. Eligibility for the Issue Ramco Systems Limited is an existing company registered under the Companies Act, 1956 whose Equity Shares are listed on BSE, NSE and MSE. It is eligible to offer this Issue in terms of Clause 2.4.1(iv) of the SEBI DIP Guidelines. The Company, its Promoter, its Directors or any of the Company’s associates or group companies are currently not prohibited from accessing the capital market under any order or direction passed by SEBI. Further the Promoter, their relatives (as per Companies Act, 1956), the Company, group companies, associate companies are not detained as wilful defaulters by RBI / Government authorities. Disclaimer Clause AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI). IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THIS LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED/ CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPOSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THIS LETTER OF OFFER. THE LEAD MANAGER KOTAK MAHINDRA CAPITAL COMPANY LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THIS LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE LETTER OF OFFER, THE LEAD MANAGER ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGER KOTAK MAHINDRA CAPITAL COMPANY LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED NOVEMBER 22, 2005 WHICH READS AS FOLLOWS: WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE LETTER OF OFFER PERTAINING TO THE SAID ISSUE; ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY;

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WE CONFIRM THAT: THE LETTER OF OFFER FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE; ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS ETC., ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO INVESTMENT IN THE PROPOSED ISSUE; WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE LETTER OF OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID; AND IF UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS – NOT APPLICABLE WE CERTIFY THAT WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES AS PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF PROMOTERS’ CONTRIBUTION SUBJECT TO LOCK-IN, WILL NOT BE DISPOSED/ SOLD/ TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE LETTER OF OFFER WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE LETTER OF OFFER – NOT APPLICABLE The filing of this Letter of Offer does not, however, absolve the Company from any liabilities under Section 63 or Section 68 of the Companies Act, 1956 or from the requirement of obtaining such statutory or other clearance as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take up, at any point of time, with the Lead Manager any irregularities or lapses in this Letter of Offer. Caution The Company and the Lead Manager accept no responsibility for statements made otherwise than in this Letter of Offer or in any advertisement or other material issued by the Company or by any other persons at the instance of the Company and anyone placing reliance on any other source of information would be doing so at his own risk. The Lead Manager and the Company shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations, in research or sales reports etc. after filing of this Letter of Offer with SEBI. Disclaimer with respect to jurisdiction This Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations thereunder. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Chennai, India only. No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for that purpose, except that this Letter of Offer has been filed with SEBI for observations and SEBI has given its observations. Accordingly, the equity shares represented thereby may not be offered or sold, directly or indirectly, and this Letter of Offer may not be distributed in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Letter of Offer nor any sale hereunder, shall under any circumstances create any implication that there has been no change in our affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date.

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The Letter of Offer has been filed with SEBI, Mittal Court, ‘A’ Wing, Nariman Point, Mumbai 400021, for its observations. After SEBI gives its observations, the final Letter of Offer will be filed with the Designated Stock Exchange as per the provisions of the Act.

Disclaimer Clause of the BSE Bombay Stock Exchange Limited (“the Exchange”) has given vide its letter dated October 10, 2005 permission to the Issuer to use the Exchange’s name in this Letter of Offer as one of the Stock Exchanges on which this Issuer’s securities are proposed to be listed. The Exchange has scrutinized this Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Issuer. The Exchange does not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this Letter of Offer; or (ii) warrant that this Issuer’s securities will be listed or will continue to be listed on the Exchange; or (iii) take any responsibility for the financial or other soundness of this Issuer, its Promoters, its management or any scheme or project of this Issuer; and its should not for any reason be deemed or construed that this Letter of Offer has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. Disclaimer Clause of the NSE As required, a copy of this Letter of Offer has been submitted to National Stock Exchange of India Limited (hereinafter referred to as NSE). NSE has given vide its letter dated August 31, 2005 granted permission to the Issuer to use the Exchange’s name in this Letter of Offer as one of the Stock Exchanges on which the Issuer’s securities are proposed to be listed. The Exchange has scrutinized this Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to the Issuer. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the Letter of Offer has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this letter of offer; nor does it warrant that the Issuer’s securities will be listed or will continue to be listed on the Exchange; nor does it take any responsibility for the financial or other soundness of the Issuer, its Promoters, its management or any scheme or project of the Issuer. Every person who desires to apply for or otherwise acquire any securities of the Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever. Disclaimer Clause of the MSE Madras Stock Exchange Limited (MSE), has, vide their letter dated August 18, 2005 given permission to the Issuer to use the name of the Exchange in this Letter of Offer as one of the Stock Exchanges on which this Issuer’s securities are proposed to be listed. MSE has scrutinized this Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to the Issuer. MSE does not in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Letter of Offer; or warrant that this Issuer’s securities will be listed or will continue to be listed on the Exchange; or take any responsibility for the financial or other soundness of this Issuer, its Promoters, its Management or any scheme or project of this Issuer; and it should not for any reason be deemed or construed that this Letter of Offer has been cleared or approved by MSE. Every person who desires to apply for or otherwise acquires any securities of this Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against MSE, whatsoever, by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated in the Letter of Offer or any other reason whatsoever. Filing

This Letter of Offer was filed with SEBI, Mittal Court, Nariman Point, Mumbai 400 021. All the legal requirements applicable till the date of filing the Letter of Offer with the Stock Exchanges have been complied with. The Company has received in-principle approvals from BSE, NSE and MSE by letters dated October 10, 2005, August 31, 2005 and August 18, 2005, respectively. The Company will apply to the BSE, NSE and MSE for listing of the Equity Shares to be issued pursuant to this Issue. The Designated Stock Exchange for this Issue shall be BSE.

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Listing The existing Equity Shares are listed on the BSE, NSE and MSE. The Company has made applications to the BSE, NSE and MSE for permission to deal in and for an official quotation in respect of the Equity Shares being offered in terms of this Letter of Offer. The Company has received in-principle approvals from BSE, NSE and MSE by letters dated October 10, 2005, August 31, 2005 and August 18, 2005, respectively. The Company will apply to the BSE, NSE and MSE for listing of the Equity Shares to be issued pursuant to this Issue. The Designated Stock Exchange for this Issue shall be BSE. If the permission to deal in and for an official quotation of the securities is not granted by any of the Stock Exchanges mentioned above, within 42 days from the Issue Closing Date, the Company shall forthwith repay, without interest, all monies received from applicants in pursuance of this Letter of Offer. If such money is not paid within eight days after the Company becomes liable to repay it, then the Company and every Director of the Company who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to repay the money with interest as prescribed under the Section 73 of the Act. Consents Consents in writing of the Auditors, Lead Manager, Legal Advisors, Registrar to the Issue and Banker to the Issue to act in their respective capacities have been obtained and filed with SEBI, along with a copy of the Letter of Offer and such consents have not been withdrawn up to the time of delivery of this Letter of Offer for registration with the stock exchanges. The Auditors of the Company have given their written consent for the inclusion of their Report in the form and content as appearing in this Letter of Offer and such consents and reports have not been withdrawn up to the time of delivery of this Letter of Offer to SEBI and stock exchanges. CNGSN & Associates, auditors have given their written consent for inclusion of income tax benefits in the form and content as appearing in this Letter of Offer, accruing to the Company and its members. To the best of our knowledge there are no other consents required for making this Issue. However, should the need arise, necessary consents shall be obtained by us. Expert Opinion, if any Save and except as indicated elsewhere in this Letter of Offer, no other expert opinion has been obtained by the Company.

Expenses of the Issue The expenses of the Issue payable by the Company including brokerage, fees and reimbursement to the Lead Manager, Registrars, printing and distribution expenses, publicity, listing fees, stamp duty and other expenses are estimated at Rs. 20 million (around 3.11% of the total issue size) and will be met out of the proceeds of the Issue. Fees Payable to the Lead Manager to the Issue The fees payable to the Lead Manager to the Issue are set out in the Memorandum of Understanding entered into by the Company with Kotak Mahindra Capital Company Limited, copies of which are available for inspection at the Registered Office of the Company. Fees Payable to the Registrars to the Issue The fee payable to the Registrars to the Issue is as set out in the relevant documents, copies of which are kept open for inspection at the Registered Office of the Company. Previous Issues by the Company We made a rights issue of equity shares to our equity shareholders in 2003. For more details, please refer to section titled “Promise Vs. Performance” on page 35 of this Letter of Offer.

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Date of listing on the Stock Exchange The Equity Shares of our Company were first listed on March 28, 2000 on the MSE and on April 12, 2000 on the NSE. Thereafter, the Equity Shares were listed on the October 9, 2000 on the BSE. Issues for consideration other than cash Except pursuant to merger, amalgamations, acquisition, scheme of arrangements as stated in the section titled “Capital Structure” on page 10 of this Letter of Offer, the Company has not issued Equity Shares for consideration other than cash. The Company has not issued any Equity Shares out of revaluation reserves. Preference Shares The Company has not issued any preference shares, which are presently outstanding. Option to Subscribe Other than the present rights Issue and options granted to its employees under ESOP Schemes, the Company has not given any person any option to subscribe to the shares of the Company. Stock market data for equity shares of the Company Please refer to page 171 of the Letter of Offer for further information pertaining to stock market data for the Equity Shares of the Company. Impersonation As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of subsection (1) of Section 68A of the Companies Act, 1956 which is reproduced below: “Any person who makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years” Government Approvals Our Company was incorporated on February 19, 1997 under the Companies Act, 1956. We have obtained all necessary approvals to undertake our activities and we do not propose to enter into any new activities through this Issue, for which further approvals may be required to be obtained, except as may be required to be obtained in the normal course of our business and for intended use of Objects of the Issue. For further details, please refer to the section on “Government Approvals” on page 207 of this Letter of Offer. Important • This Issue is pursuant to the resolution passed by the Board of Directors at its meetings held on May 9,

2005 and the resolution passed by the Rights Issue Committee on July 30, 2005. • This Issue is applicable to those Equity Shareholders whose names appear as beneficial owners as per

the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the Company at the close of business hours on the Record Date i.e.December 2, 2005. The Company will arrange to dispatch the Letter of Offer and Composite Application Form (“CAF”) by Registered/Speed post to such Equity Shareholders in India.

• Your attention is drawn to the section titled ‘Risk Factors’ appearing on Page vi of this Letter of Offer. • Please ensure that you have received the Composite Application Form (“CAF”) with this Letter of Offer. • Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before

filling in the CAF. The instructions contained in the CAF are an integral part of this Letter of Offer and must be carefully followed. An application is liable to be rejected for any non-compliance of the provisions contained in the Letter of Offer or the CAF.

• All enquiries in connection with this Letter of Offer or CAF should be addressed to the Registrar to the Issue, quoting the Registered Folio number/ DP and Client ID number and the CAF numbers as mentioned in the CAF.

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• All information shall be made available to the Investors by the Lead Managers and the Issuer, and no selective or additional information would be available by them for any section of the Investors in any manner whatsoever including at road shows, presentations, in research or sales reports, etc.

• The Lead Managers and the Company shall update this Letter of Offer and keep the public informed of any material changes till the listing and trading commences.

Issue Schedule

Issue Opening Date: December 19, 2005 Last date for receiving requests for split forms: January 3, 2006 Issue Closing Date: January 18, 2006

Allotment Letters / Refund Orders The Company will issue and dispatch letters of allotment/ share certificates/ demat credit or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any within a period of 42 days from the date of closure of the Issue. If such money is not repaid within eight days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. Letters of allotment/ share certificates/ demat credit/ refund orders above the value of Rs. 1,500 will be dispatched by registered post/ speed post to the sole/ first applicant’s registered address. However, refund orders for value not exceeding Rs. 1,500 shall be sent to the applicants by way of under certificate of posting. Such cheques or pay orders will be payable at par at all the centres where the applications were originally accepted and will be marked ‘A/c payee’ and would be drawn in the name of the sole/ first applicant. Adequate funds would be made available to the Registrar to the Issue for dispatch of the letters of allotment / share certificates/ demat credit/ refund orders. In case the Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Companies Law Board under Section 113 of the Companies Act, 1956 or other applicable provisions, if any. Allottees are requested to preserve such Letters of Allotment, which would be exchanged later for the share certificates. Investor Grievances and Redressal System The Company has adequate arrangements for redressal of Investor complaints. Well-arranged correspondence system developed for letters of routine nature. The share transfer and dematerialization for the Company is being handled by Cameo Corporate Services Limited. Share Transfer Agents. Letters are filed category wise after having attended to. Redressal norm for response time for all correspondence including shareholders complaints is ten days. However, the Company endeavours to redress all the complaints within five days of the receipt of complaint. A Shareholders Committee was constituted on January 25, 2001. The Shareholders Committee currently consists of Mr. P.R. Ramasubrahmaneya Rajha, Mr. P.R.Venketrama Raja and Mr. N.K. Shrikantan Raja. Mr. P.R. Ramasubrahmaneya Rajha is the Chairperson of the Committee. The Shareholders Committee’s main focus is on the basic rights of the shareholders including, transfer of shares, transmission / transposition of shares, issue of duplicate / split share certificates, sub division / consolidation of shares, consolidation of folios, dematerialisation of physical shares / rematerialisation of electronic shares, and such other issues relating to shares. The Company Secretary is the compliance officer of the Company. Meeting of Shareholders Committee is normally scheduled once in a month. There were no complaints pending redressal as on November 10, 2005. During the period from April 1, 2004 to March 31, 2005, 115 complaints were received. All 115 complaints were resolved to the satisfaction of the shareholders.

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Status of Complaints

No. of shareholders complaints as of November 11, 2005 Nil Total number of complaints received during last financial year (2004-05) 115 Total number of complaints received during current financial year (2005-06) 1 Status of the complaints All complaints received

during last financial year have been resolved

Time normally taken by it for disposal of various types of Investor grievances 1 week Investor Grievances arising out of this Issue The Company’s investor grievances arising out of the Issue will be handled by Cameo Corporate Services Limited, being the Registrar to the Issue. The agreement between us and the Registrar will provide for retention of records with the Registrar for a period of at least one year from the last date of dispatch of Letter of Allotment/ share certificate / warrant/ refund order to enable the Registrar to redress grievances of Investors. All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio no., name and address of the first applicant, number and Equity Shares applied for, Application Form serial number, amount paid on application and the name of the bank and the branch where the application was deposited, along with a photocopy of the acknowledgement slip. In case of renunciation, the same details of the renouncee should be furnished. The average time taken by the Registrar for attending to routine grievances will be 30 days from the date of receipt. In case of non-routine grievances where verification at other agencies is involved, it would be the endeavour of the Registrars to attend to them as expeditiously as possible. The Company undertakes to resolve the Investor grievances in a time bound manner. Investors may contact the Compliance Officer in case of any pre-Issue/ post-Issue related problems such as non-receipt of letters of allotment/share certificates/demat credit/refund orders etc. Changes in Auditors during the last three years The auditors of our Company are appointed (and reappointed) in accordance with provisions of the Companies Act and their remuneration, rights and duties are regulated by Sections 224 to 233 of the Companies Act. There have been no changes of the auditors in the last three years except as detailed below

Name of Auditor Date of Appointment Date of resignation Reasons for change CNGSN & Associates, Chennai

August 11, 2003 (at the AGM)

Continuing NA

M/s S.Viswanathan, Chennai

August 9, 2000 (at the AGM)

August 10, 2003 Cessation as auditor in the normal course

Capitalisation of Reserves or Profits There has been no capitalisation of any of the Company’s reserves or profits in the last 5 years. Revaluation of Fixed Assets There has been no revaluation of the Company’s fixed assets for the last five years. Terms of Appointment of our Directors Please refer to the section titled “Management- Compensation of Our Directors” on page 71 of this Letter of Offer. Purchase of Property The Company in the ordinary course of expansion may start marketing and sales at new centres and other office premises for which it may lease or buy properties at such places. The present Issue is not being made with the

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specific objective to buy such properties. None of the Directors are interested in any property acquired by the Company during the last three years. Owned Facilities

Sl. No. Location Type of Office Area Date of Acquisition 1. Land situated at Door

No. 86C, Santhome High Road, R.A. Puram, Chennai 600028

Empty land 49,946 square feet, July 9, 2001

2. Property situated at New Door No. 64, Sardar Patel Road, Taramani, Chennai comprised in T.S. No. 45/1, 45/2, 45/ 3, 45/4, 45/5 of block 12 and T.S. No. 2 of Block 14.

Corporate office 38,383 square feet September 6, 1995

Leased Properties In addition to the owned properties mentioned above the Company has also taken on lease, properties in different locations in India, including in New Delhi, Pune, Mumbai, Ahmedabad, Bangalore and Chennai. The Subsidiaries and Associates have also taken on lease properties in foreign locations in which they are situated to run their business operations. We have initiated steps to renew / will initiate steps at appropriate time to renew these lease agreements if required. Except as stated above there is no other property which we have purchased or acquired or propose to purchase or acquire which is to be paid for wholly, or in part, from the proceeds of the present Issue or the purchase or acquisition of which has not been completed on the date of this Letter of Offer other than property in respect of which: • the contracts for the purchase or acquisition were entered into in the ordinary course of our business, and

the contracts were not entered into in contemplation of the Issue nor is the Issue contemplated in consequence of the contracts; or

• the amount of the purchase money is not material; or • disclosure has been made above.

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SECTION VIII: ISSUE INFORMATION Terms of the Issue The Equity Shares, now being issued, are subject to the terms and conditions contained in this Letter of Offer, the enclosed Composite Application Form (“CAF”), the Memorandum and Articles of Association of the Company, approvals from the RBI, the provisions of the Companies Act, 1956, guidelines issued by SEBI, guidelines, notifications and regulations for issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from time to time, terms and conditions as stipulated in the allotment advice or letter of allotment or security certificate and rules as may be applicable and introduced from time to time. Authority for the Issue This Issue is being made pursuant to the resolution passed by the Board of Directors of the Company under Section 81(1) of Companies Act at its meeting held on May 9, 2005 and the meeting of the Rights Issue Committee 2005 on July 30, 2005 and November 16, 2005 wherein the Issue price and rights entitlement ratio was approved. Basis for the Issue The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of the Company in respect of shares held in the physical form at the close of business hours on the Record Date, i.e., December 2, 2005 fixed in consultation with the Stock Exchanges. The Equity Shares are being offered for subscription in the ratio of 1 Equity Shares for every 4 Equity Shares held by the Equity Shareholders on the Record Date. Nomination facility In terms of Section 109A of the Act, nomination facility is available in case of Equity Shares. The applicant can nominate any person by filling the relevant details in the CAF in the space provided for this purpose. A sole Equity Shareholder or first Equity Shareholder, along with other joint Equity Shareholders being individual(s) may nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity Shares. A Person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original Equity Shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale of the Equity Share by the person nominating. A transferee will be entitled to make a fresh nomination in the manner prescribed. When the Equity Share is held by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at the registered office of the Company or such other person at such addresses as may be notified by the Company. The applicant can make the nomination by filling in the relevant portion of the CAF. Only one nomination would be applicable for one folio. Hence, in case the Shareholder(s) has already registered the nomination with the Company, no further nomination needs to be made for Equity Shares to be allotted in this Issue under the same folio. In case the allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires to change the nomination, they are requested to inform their respective DP. Issue to Non-Resident Equity Shareholders/Applicants and FII Applications received from NRIs and non-residents for allotment of Equity Shares shall be inter alia, subject to the conditions imposed from time to time by the RBI under the Foreign Exchange Management Act, 2000

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(FEMA) in the matter of refund of application moneys, allotment of Equity Shares, issue of letter of allotment / share certificates, payment of interest, dividends, etc. The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while approving the allotment of Equity Shares, payment of dividend etc. to the non-resident shareholders. The rights shares purchased by non-residents shall be subject to the same conditions including restrictions in regard to the repatriability as are applicable to the original shares against which rights shares are issued. By virtue of Circular No. 14 dated September 16, 2003 issued by the RBI, overseas corporate bodies (“OCBs”) have been derecognized as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003. Accordingly, OCBs shall not be eligible to subscribe to the Equity Shares. The RBI has however clarified in its circular, A.P. (DIR Series) Circular No. 44, dated December 8, 2003 that OCBs which are incorporated and are not under the adverse notice of the RBI are permitted to undertake fresh investments as incorporated non-resident entities. Thus, OCBs desiring to participate in this Issue must obtain prior approval from the RBI. On providing such approval to the Company at its registered office, the OCB shall receive the Letter of Offer and the CAF. FIIs will not need permission of the FIPB/RBI for investment in the Issue to the extent of their Rights Entitlement. However, in case of applications from such entities in excess of their entitlement, allotment will be subject to restrictions under applicable laws, including existing ceilings on FII holdings in the Company and sectoral caps on foreign direct investment in the Company, as applicable. Letter of offer and CAF shall be dispatched to non-resident Equity Shareholders in India only. Principal Terms and Conditions of the Issue Equity Shares Face value Each Equity Share shall have the face value of Rs. 10. Issue Price Each Equity Share is being offered at a price of Rs. 210 (including a premium of Rs. 200) Rights Entitlement Ratio The Equity Shares are being offered on rights basis to the existing Equity Shareholders of the Company in the ratio of 1 Equity Share for every 4 Equity Shares held as on the Record Date. Market lot The market lot for the Equity Shares in dematerialised mode is one. In case of physical certificates, the Company would issue one certificate for the Equity Shares allotted to one folio (“Consolidated Certificate”). Minimum Subscription If the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than eight days after the Company becomes liable to repay the subscription amount, i.e. forty-two days after closure of the Issue, the Company will pay interest for the delayed period, at the rates prescribed in sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956. The Issue will become undersubscribed after considering the number of shares applied as per entitlement plus additional shares. The undersubscribed portion shall be applied for only after the Issue Closing Date. The Promoter or any other person shall subscribe to such undersubscribed portion as per the relevant provisions of the law. Allotment to the Promoter of any unsubscribed portion, over and above their entitlement shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements.

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The above is subject to the terms mentioned under the section titled ‘Basis of Allotment’ on page 225 of this Letter of Offer. Fractional entitlements If the shareholding of any of the Equity Shareholders of the Company is not in multiples of 4, then the fractional entitlement of such Equity Shareholders shall be rounded up to next higher integer. The Equity Shares needed for rounding up such fractional rights entitlement shall be adjusted from the rights entitlement of the Promoters. Terms of payment Full amount of Rs. 210 shall be payable on Application. Ranking of the Equity Shares The Equity Shares shall be subject to the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects including dividends with the existing Equity Shares of the Company. Option available to the Equity Shareholders The Composite Application Form clearly indicates the number of Equity Shares that the Equity Shareholder is entitled to. If the Equity Shareholder applies for an investment in Equity Shares, then he can: • Apply for his entitlement in part; • Apply for his entitlement in part and renounce the other part; • Apply for his entitlement in full; • Apply for his entitlement in full and apply for additional Equity Shares. Renouncees for Equity Shares can apply for the Equity Shares renounced to them and also apply for additional Equity Shares. Utilisation of Issue Proceeds The Board of Directors declares that: The funds received against this Issue will be transferred to a separate bank account other than the bank account referred to sub-section (3) of Section 73 of the Act. Details of all moneys utilised out of the Issue shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the purpose for which such moneys has been utilised. Details of all such unutilised moneys out of the Issue, if any, shall be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilised moneys have been invested. The funds received against this Issue will be kept in a separate bank account and the Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the Issue has been received by the Company. Undertakings by the Company 1. The complaints received in respect of the Issue shall be attended to by the Company expeditiously and

satisfactorily. 2. All steps for completion of the necessary formalities for listing and commencement of trading at all

Stock Exchanges where the securities are to be listed will be taken within seven working days of finalization of basis of allotment.

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3. The funds required for dispatch of refund orders/ allotment letters/ certificates by registered post shall be made available to the Registrar to the Issue.

4. The certificates of the securities/ refund orders to the non-resident Indians shall be dispatched within the

specified time. 5. No further issue of securities affecting equity capital of the Company shall be made till the securities

issued/offered through the Issue are listed or till the application moneys are refunded on account of non-listing, under-subscription etc.

6. The Company accepts full responsibility for the accuracy of information given in this Letter of Offer

and confirms that to best of its knowledge and belief, there are no other facts the omission of which makes any statement made in this Letter of Offer misleading and further confirms that it has made all reasonable enquiries to ascertain such facts.

7. All information shall be made available by the Lead Managers and the Issuer to the Investors at large

and no selective or additional information would be available for a section of the Investors in any manner whatsoever including at road shows, presentations, in research or sales reports etc.

How to Apply Resident Equity Shareholders

Applications should be made on the enclosed CAF provided by the Company. The enclosed CAF should be completed in all respects, as explained in the instructions indicated in the CAF. Applications will not be accepted by the Lead Managers or by the Registrar to the Issue or by the Company at any offices except in the case of postal applications as per instructions given elsewhere in the Letter of Offer. Non-resident Equity Shareholders Applications received from the Non-Resident Equity Shareholders for the allotment of Equity Shares shall, inter alia, be subject to the conditions as may be imposed from time to time by the RBI, in the matter of refund of application moneys, allotment of Equity Shares, issue of letters of allotment/ certificates/ payment of dividends etc. The CAF consists of four parts: Part A: Form for accepting the Equity Shares offered and for applying for additional Equity Shares Part B: Form for renunciation Part C: Form for application for renouncees Part D: Form for request for split application forms Acceptance of the Issue

You may accept the Issue and apply for the Equity Shares offered, either in full or in part by filling Block III of Part A of the enclosed CAF and submit the same along with the application money and submit the same with the Bankers to the Issue or any of the branches as mentioned on the reverse of the CAF before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by the Board thereof in this regard. Applicants at centers not covered by the branches of collecting banks can send their CAF together with the cheque drawn on a local bank at Chennai/demand draft payable at Chennai to the Registrar to the Issue by registered post. Such applications sent to anyone other than the Registrar to the Issue are liable to be rejected.

Renunciation

As an Equity Shareholder, you have the right to renounce your entitlement for the Equity Shares in full or in part in favor of one or more person(s). Your attention is drawn to the fact that the Company shall not allot and/or register any Equity Shares in favor of:

• More than three persons including joint holders • Partnership firm(s) or their nominee(s) • Minors (except applying through their guardians)

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• Hindu Undivided Family • Any Trust or Society (unless the same is registered under the Societies Registration Act, 1860 or any

other applicable Trust laws and is authorized under its Constitutions to hold Equity Shares of a Company)

The right of renunciation is subject to the express condition that the Board/ Committee of Directors shall be entitled in its absolute discretion to reject the request for allotment to renouncee(s) without assigning any reason thereof. Procedure for renunciation To renounce the whole offer in favour of one renouncee

If you wish to renounce the offer indicated in Part A, in whole, please complete Part B of the CAF. In case of joint holding, all joint holders must sign Part B of the CAF. The person in whose favor renunciation has been made should complete and sign Part C of the CAF. In case of joint renouncees, all joint renouncees must sign this part of the CAF.

To renounce in part/or renounce the whole to more than one person(s) If you wish to either accept this offer in part and renounce the balance or renounce the entire offer in favour of two or more renouncees, the CAF must be first split into requisite number of forms. Please indicate your requirement of split forms in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requests for split forms. On receipt of the required number of split forms from the Registrar, the procedure as mentioned in paragraph above shall have to be followed. In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the specimen registered with the Company, the application is liable to be rejected. Renouncee(s) The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part C of the Application Form and submit the entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the application money. Change and/ or introduction of additional holders

If you wish to apply for Equity Shares jointly with any other person(s), not more than three, who is/are not already a joint holder with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated above shall have to be followed. However, this right of renunciation is subject to the express condition that the Board of Directors of the Company shall be entitled in its absolute discretion to reject the request for allotment from the renouncee(s) without assigning any reason thereof. Please note that: • Part A of the CAF must not be used by any person(s) other than those in whose favour this Issue has

been made. If used, this will render the application invalid. • Request for split form should be made for a minimum of 100 Equity Shares or in multiples thereof and

one Split Application Form for the balance Equity Shares, if any. • Request by the applicant for the Split Application Form should reach the Company on or before

November 3, 2006. • Only the person to whom this Letter of Offer has been addressed to and not the renouncee(s) shall be

entitled to renounce and to apply for Split Application Forms. Forms once split cannot be split again. • Split form(s) will be sent to the applicant(s) by post at the applicant’s risk.

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Additional Equity Shares You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to, provided that you have applied for all the Equity Shares offered without renouncing them in whole or in part in favor of any other person(s). Applications for additional Equity Shares shall be considered and allotment shall be in the manner prescribed under the section titled ‘Basis of Allotment’ on page 225 of this Letter of Offer. The renouncees applying for all the Equity Shares renounced in their favor may also apply for additional Equity Shares. In case of application for additional Equity Shares by non-resident equity shareholders, the allotment of additional securities will be subject to the permission of the RBI. Where the number of additional Equity Shares applied for exceeds the number available for allotment, the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange. The summary of options available to the equity shareholder is presented below. You may exercise any of the following options with regard to the Equity Shares offered, using the enclosed CAF:

Option Available Action Required 1. Accept whole or part of your

entitlement without renouncing the balance.

Fill in and sign Part A (All joint holders must sign)

2. Accept your entitlement in full and apply for additional Equity Shares

Fill in and sign Part A including Block III relating to the acceptance of entitlement and Block IV relating to additional Equity Shares (All joint holders must sign)

3. Renounce your entitlement in full to one person (Joint renouncees are considered as one).

Fill in and sign Part B (all joint holders must sign) indicating the number of Equity Shares renounced and hand it over to the renouncee. The renouncees must fill in and sign Part C (All joint renouncees must sign)

4. Accept a part of your entitlement and renounce the balance to one or more renouncee(s)

OR

Renounce your entitlement of all the Equity Shares offered to you to more than one renouncee

Fill in and sign Part D (all joint holders must sign) requesting for Split Application Forms. Send the CAF to the Registrar to the Issue so as to reach them on or before the last date for receiving requests for Split Forms. Splitting will be permitted only once. On receipt of the Split Form take action as indicated below.

For the Equity Shares you wish to accept, if any, fill in and sign Part A. For the Equity Shares you wish to renounce, fill in and sign Part B indicating the number of Equity Shares renounced and hand it over to the renouncees. Each of the renouncees should fill in and sign Part C for the Equity Shares accepted by them.

5. Introduce a joint holder or change the sequence of joint holders

This will be treated as a renunciation. Fill in and sign Part B and the renouncees must fill in and sign Part C.

Availability of duplicate CAF In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF on the request of the applicant who should furnish the registered folio number/ DP and Client ID number and his/ her full name and address to the Registrar to the Issue. Please note that the request for duplicate CAF should reach the Registrar to the Issue within 15 days from the Issue Opening Date. Please note that those

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who are making the application in the duplicate form should not utilize the original CAF for any purpose including renunciation, even if it is received/ found subsequently. If the applicant violates any of these requirements, he / she shall face the risk of rejection of both the applications. Application on Plain Paper An Equity Shareholder who has neither received the CAF nor is in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper, along with an Account Payee Cheque drawn on a local bank at Mumbai/ Demand Draft payable at Mumbai which should be drawn in favor of the Company and send the same by registered post directly to the Registrar to the Issue. The application on plain paper, duly signed by the applicants including joint holders, in the same order as per specimen recorded with the Company, must reach the office of the Registrar to the Issue before the Issue Closing Date and should contain the following particulars: • Name of Issuer, being Ramco Systems Limited • Name and address of the Equity Shareholder including joint holders • Registered Folio Number/ DP and Client ID no. • Number of shares held as on Record Date • Number of Rights Equity Shares entitled • Number of Rights Equity Shares applied for • Number of additional Equity Shares applied for, if any • Total number of Equity Shares applied for • Total amount paid at the rate of Rs. 210 per Equity Share • Particulars of cheque/draft • Savings/Current Account Number and name and address of the bank where the Equity Shareholder will

be depositing the refund order • PAN/GIR number, Income Tax Circle/Ward/District, photocopy of the PAN card/ PAN communication

/ Form 60 / Form 61 declaration where the application is for Equity Shares of a total value of Rs.50,000 or more for the applicant and for each applicant in case of joint names, and

• Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of the Company

Payments in such cases, should be through a cheque/ demand draft drawn in favor of ‘RSL Rights Issue’ and marked ‘A/c Payee’. Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications. Last date of Application The last date for submission of the duly filled in CAF is January 18, 2006. The Board or any committee thereof will have the right to extend the said date for such period as it may determine from time to time but not exceeding 60 (sixty) days from the Issue Opening Date. If the CAF together with the amount payable is not received by the Banker to the Issue/ Registrar to the Issue on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board/ Committee of Directors, the offer contained in this Letter of Offer shall be deemed to have been declined and the Board/ Committee of Directors shall be at liberty to dispose off the Equity Shares hereby offered, as provided under the section titled ”Basis of Allotment”. INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM. Basis of Allotment Subject to the provisions contained in this Letter of Offer, CAF, the Articles of Association of the Company and the approval of the Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following order of priority:

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1. Full allotment to those Equity Shareholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part.

2. If the shareholding of any of the Equity Shareholders of the Company is not in multiples of four, then

the fractional entitlement of such Equity Share holders shall be rounded up to the next higher integer. The Equity Shares needed for rounding up such fractional rights entitlement shall be adjusted from the rights entitlement of the Promoters. For further details please refer to the section titled “Fractional entitlements” on page 221 of this Letter of Offer.

3. Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as

part of the Issue and have also applied for additional Equity Shares. The allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date, provided there is an under-subscribed portion after making full allotment in (1) and (2) above. The allotment of such Equity Shares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the Issue and not preferential allotment.

4. Allotment to the renouncees who having applied for the Equity Shares renounced in their favour have

also applied for additional Equity Shares, provided there is an under-subscribed portion after making full allotment in (1) and (2) and (3) above. The allotment of such additional Equity Shares will be made on a proportionate basis at the sole discretion of the Board/ Committee of Directors but in consultation with the Designated Stock Exchange, as a part of the Issue and not as a preferential allotment.

After taking into account allotment to be made under (1) and (2) above, if there is any unsubscribed portion, the same shall be deemed to be ‘unsubscribed’ for the purpose of regulation 3(1)(b) of the Takeover Code which would be available for for allocation under (3) and (4) above. After considering the above allotment, if the Issue does not have subscription to the extent of 90% of the Issue size, the Promoter and the promoter group shall subscribe to such portion to ensure that the Issue is successful. After such allotments as above and to the Promoters and the promoter group, including the application for rights/renunciation and additional equity shares, any additional Equity Shares shall be disposed off by the board or committee of the Board of Directors authorised in this behalf by the Board of Directors of the Company, in such manner as they think most beneficial to the Company and the decision of the Board or committee of directors of the Company in this regard shall be final and binding. In the event of oversubscription, allotment will be made within the overall size of the issue. Allotment to Promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement and the other applicable laws prevailing at that time. Underwriting The present Issue is not underwritten. Allotment / Refund The Company will issue and dispatch letters of allotment/ share certificates/ demat credit and/ or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any, within a period of six weeks from the Issue Closing Date. If such money is not repaid within eight days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. In case of those shareholders who have opted to receive their Right Entitlement Shares in dematerialised form by using electronic credit under the depository system, an advice regarding the credit of the Equity Shares shall be given separately. In case the Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Companies Law Board under Section 113 of the Companies Act, 1956 or other applicable provisions, if any. Allottees are requested to preserve such letters of allotment, which would be exchanged later for the share certificates. For more information, please refer to the section titled ‘Letters of Allotment / Share Certificates / Demat Credit’ on page 227 of this Letter of Offer.

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Letters of allotment/ share certificates/ demat credit/ refund orders above the value of Rs. 1,500 will be dispatched by registered post/ speed post to the sole/ first applicant’s registered address. However, refund orders for value not exceeding Rs. 1,500 shall be sent to the applicants by way of under certificate of posting. Such cheques or pay orders will be payable at par at all the centres where the applications were originally accepted and will be marked ‘A/c payee’ and would be drawn in the name of the sole/ first applicant. Adequate funds would be made available to the Registrar to the Issue for the dispatch of such letters of allotment/ share certificates/ demat credit and refund orders. As regards allotment/ refund to non-residents, the following further conditions shall apply: In case of non-residents, who remit their application monies from funds held in NRE/ FCNR accounts, refunds and/ or payment of interest/ dividend and other disbursement, if any, shall be credited to such accounts, details of which should be furnished in the CAF. Subject to the approval of the RBI, in case of non-residents, who remit their application monies through Indian Rupee draft purchased from abroad, refund and/ or payment of dividend/ interest and any other disbursement, shall be credited to such accounts (details of which should be furnished in the CAF) and will be made net of bank charges/ commission in US Dollars, at the rate of exchange prevailing at such time. The Company will not be responsible for any loss on account of exchange fluctuations for converting the Indian Rupee amount into US Dollars. The share certificate(s) will be sent by registered post at the Indian address of the non-resident applicant. Letters of Allotment / Share Certificates / Demat Credit Letter(s) of allotment/ share certificates/ demat credit or letters of regret (alongwith refund orders) will be dispatched to the registered address of the first named applicant or respective beneficiary accounts will be credited within 6 (six) weeks, from the date of closure of the subscription list. In case the Company issues letters of allotment, the relative share certificates will be dispatched within three months from the date of allotment. Allottees are requested to preserve such letters of allotment (if any) to be exchanged later for share certificates. Export of letters of allotment (if any)/ share certificates/ demat credit to non-resident allottees will be subject to the approval of RBI. Option to receive Equity Shares in Dematerialized Form Applicants to the Equity Shares of the Company issued through this Issue shall be allotted the securities in dematerialised (electronic) form at the option of the applicant. The Company signed a tripartite agreement with the Registrar and NSDL on July 3, 2001 and with the Registrar and CDSL on June 20, 2001 which enables the Investors to hold and trade in securities in a dematerialised form, instead of holding the securities in the form of physical certificates. In this Issue, the allottees who have opted for Equity Shares in dematerialised form will receive their Equity Shares in the form of an electronic credit to their beneficiary account with a depository participant. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Applications, which do not accurately contain this information, will be given the securities in physical form. No separate applications for securities in physical and/or dematerialized form should be made. If such applications are made, the application for physical securities will be treated as multiple applications and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any, will be allotted in physical shares. The new equity Shares allotted in the rights issue of the Company will be listed on the BSE, NSE and MSE. Procedure for availing the facility for allotment of Equity Shares in this Issue in the electronic form is as under:

• Open a beneficiary account with any depository participant (care should be taken that the beneficiary

account should carry the name of the holder in the same manner as is exhibited in the records of the Company. In the case of joint holding, the beneficiary account should be opened carrying the names of the holders in the same order as with the Company). In case of Investors having various folios in the Company with different joint holders, the Investors will have to open separate accounts for such holdings. Those equity shareholders who have already opened such Beneficiary Account (s) need not adhere to this step.

• For equity shareholders already holding Equity Shares of the Company in dematerialized form as on the

Record Date, the beneficial account number shall be printed on the CAF. For those who open accounts later or those who change their accounts and wish to receive their Equity Shares pursuant to this Issue by

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way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF. It may be noted that the allotment of securities arising out of this Issue may be made in dematerialized form even if the original Equity Shares of the Company are not dematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the Equity Shareholders and the names are in the same order as in the records of the Company.

Responsibility for correctness of information (including applicant’s age and other details) filled in the CAF vis-à-vis such information with the applicant’s depository participant, would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be the same as registered with the applicant’s depository participant. If incomplete / incorrect beneficiary account details are given in the CAF the applicant will get Equity Shares in physical form. The Equity Shares pursuant to this Issue allotted to Investors opting for dematerialized form, would be directly credited to the beneficiary account as given in the CAF after verification. Allotment advice, refund order (if any) would be sent directly to the applicant by the Registrar to the Issue but the applicant’s depository participant will provide to him the confirmation of the credit of such Equity Shares to the applicant’s depository account. Renouncees will also have to provide the necessary details about their beneficiary account for allotment of securities in this Issue. In case these details are incomplete or incorrect, the application is liable to be rejected. Utilisation of Proceeds

Subscription received against this Issue will be kept in a separate bank account(s) and the Company would not have access to such funds unless it has received minimum subscription of 90%, of the Issue and the necessary approvals of the Designated Stock Exchange, to use the amount of subscription. General instructions for applicants 1. Please read the instructions printed on the enclosed CAF carefully. 2. Application should be made on the printed CAF, provided by the Company and should be completed in

all respects. The CAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completed in conformity with the terms of this Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission and other charges, if any. The CAF must be filled in English and the names of all the applicants, details of occupation, address, father’s / husband’s name must be filled in block letters.

3. The CAF together with cheque / demand draft should be sent to the Bankers to the Issue / Collecting

Bank or to the Registrar to the Issue and not to the Company or Lead Managers to the Issue. Applicants residing at places other than cities where the branches of the Bankers to the Issue have been authorised by the Company for collecting applications, will have to make payment by Demand Draft payable at Chennai (net of demand draft and postal charges) and send their application forms to the Registrar to the Issue by REGISTERED POST. If any portion of the CAF is / are detached or separated, such application is liable to be rejected.

4. Applications for a total value of Rs. 50,000 or more, i.e. where the total number of securities applied for

multiplied by the Issue price, is Rs. 50,000 or more the applicant or in the case of application in joint names, each of the applicants, should mention his/ her PAN number allotted under the Income-Tax Act, 1961 and also submit a photocopy of the PAN card(s) or a communication from the Income Tax authority indicating allotment of PAN (“PAN Communication”) along with the application for the purpose of verification of the number. Bidders who do not have PAN are required to provide a declaration in Form 60 / Form 61 prescribed under the I.T.Act along with the application. Bid cum Application Forms without this photocopy/ PAN Communication/ declaration will be considered incomplete and are liable to be rejected.

5. Applicants are advised to provide information as to their savings/current account number and the name

of the Company with whom such account is held in the CAF to enable the Registrar to the Issue to print the said details in the refund orders, if any, after the names of the payees. Application not containing such details is liable to be rejected.

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6. The payment against the application should not be effected in cash if the amount to be paid is Rs.

20,000 or more. In case payment is effected in contravention of this, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon. Payment against the application if made in cash, subject to conditions as mentioned above, should be made only to the Bankers to the Issue.

7. Signatures should be either in English or Hindi or in any other language specified in the Eight Schedule

to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company.

8. In case of an application under power of attorney or by a body corporate or by a society, a certified true

copy of the relevant power of attorney or relevant resolution or authority to the signatory to make the relevant investment under this Issue and to sign the application and a copy of the Memorandum and Articles of Association and / or bye laws of such body corporate or society must be lodged with the Registrar to the Issue giving reference of the serial number of the CAF. In case these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue Closing Date, then the application is liable to be rejected.

9. In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as

per the specimen signature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicants should not exceed three. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communication will be addressed to the first applicant.

10. Application(s) received from Non-Resident / NRIs, or persons of Indian origin residing abroad for

allotment of Equity Shares shall, inter alia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the matter of refund of application money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares, interest, export of share certificates, etc. In case a Non-Resident or NRI Equity Shareholder has specific approval from the RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF.

11. All communication in connection with application for the Equity Shares, including any change in

address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting the name of the first / sole applicant Equity Shareholder, folio numbers and CAF number.

12. Split forms cannot be re-split. 13. Only the person or persons to whom Equity Shares have been offered and not renouncee(s) shall be

entitled to obtain split forms. 14. Applicants must write their CAF number at the back of the cheque / demand draft. 15. Only one mode of payment per application should be used. The payment must be either in cash or by

cheque / demand draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF where the application is to be submitted.

16. A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post-dated

cheques and postal / money orders will not be accepted and applications accompanied by such cheques / demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. For payment against application in cash please refer point 6 above.

17. No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank

Registrar will acknowledge receipt of the same by stamping and returning the acknowledgment slip at the bottom of the CAF.

Grounds For Technical Rejections

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Applicants are advised to note that applications are liable to be rejected on technical grounds, including the following: • Amount paid does not tally with the amount payable for; • Bank account details (for refund) are not given; • Age of First Applicant not given; • PAN photocopy/ PAN Communication/ Form 60 / Form 61 declaration not given if Application is for

Rs. 50,000 or more; • In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant

documents are not submitted; • If the signature of the existing shareholder does not match with the one given on the Application Form

and for renouncees if the signature does not match with the records available with their depositories; • If the Applicant desires to have shares in electronic form, but the Application Form does not have the

Applicant’s depository account details; • Application Forms are not submitted by the Applicants within the time prescribed as per the Application

Form and the Letter of Offer; • Applications not duly signed by the sole/joint Applicants; • Applications by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to

invest in the Issue; • Applications accompanied by Stockinvest; • In case no corresponding record is available with the Depositories that matches three parameters,

namely, names of the Applicants (including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’s identity;

• Applications by US persons; • Applications by ineligible Non-residents (including on account of restriction or prohibition under

applicable local laws) and where last available address in India has not been provided. Mode of payment for Resident Equity Shareholders/ Applicants All cheques / drafts accompanying the CAF should be crossed ‘A/c Payee only’ and drawn in favour of ‘RSL Rights Issue’ Applicants residing at places other than places where the bank collection centres have been opened by the Company for collecting applications, are requested to send their applications together with Demand Draft for the full application amount favouring ‘RSL Rights Issue’ and crossed ‘A/c Payee only’ and payabe at Chennai directly to the Registrar to the Issue by registered post along with bank draft net of demand draft and postal charges so as to reach them on or before the Issue Closing Date. The Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any. Mode of payment for Non-Resident Equity Shareholders/ Applicants As regards the application by non-resident equity shareholders, the following further conditions shall apply: Payment by non-residents must be made by demand draft / cheque payable at Chennai or funds remitted from abroad in any of the following ways: Application with repatriation benefits

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• By Indian Rupee drafts purchased from abroad and payable at Mumbai or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or

• By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained in

Mumbai; or • By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable

in Mumbai; or FIIs registered with SEBI must remit funds from special non-resident rupee deposit account.

• Non-residents applying with repatriation benefits, cheque/drafts should be crossed “A/C Payee” and drawn in favour of “RSL Rights Issue – NR”

Application without repatriation benefits As far as non-residents holding shares on non-repatriation basis is concerned, in addition to the modes specified above, payment may also be made by way of cheque drawn on Non-Resident (Ordinary) Account maintained in Chennai or Rupee Draft purchased out of NRO Account maintained elsewhere in India but payable at Chennai. Cheques/drafts submitted by non-residents applying without repatriation benefits should be drawn in favour of ‘RSL Rights Issue’ and must be crossed ‘A/c Payee only’ for the amount payable. The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF. Applicants may note that where payment is made by drafts purchased from NRE/ FCNR/ NRO accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/ FCNR/ NRO account should be enclosed with the CAF. Otherwise the application shall be considered incomplete and is liable to be rejected. New demat account shall be opened for holders who have had a change in status from resident Indian to NRI. Note: • In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the

investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act.

• In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity

Shares cannot be remitted outside India. • The CAF duly completed together with the amount payable on application must be deposited with the

Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

• In case of an application received from non-residents, allotment, refunds and other distribution, if any,

will be made in accordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to necessary approvals.

Disposal of application and application money No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers to the Issue / receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF. The Board reserves its full, unqualified and absolute right to accept or reject any application, in whole or in part, and in either case without assigning any reason thereto. In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares allotted, will be refunded to the applicant within six weeks from the close of the Issue.

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For further instruction, please read the Composite Application Form (CAF) carefully. Important Please read this Letter of Offer carefully before taking any action. The instructions contained in the accompanying Composite Application Form (CAF) are an integral part of the conditions of this Letter of Offer and must be carefully followed; otherwise the application is liable to be rejected. All enquiries in connection with this Letter of Offer or accompanying CAF and requests for Split Application Forms must be addressed (quoting the Registered Folio Number/ DP and Client ID number, the CAF number and the name of the first Equity Shareholder as mentioned on the CAF and superscribed ‘RSL- Rights Issue’ on the envelope) to the Registrar to the Issue at the following address: Cameo Corporate Services Limited Subramanian Building No. 1, Club House Road, Chennai 600 002. Tel : (+91 44) 2846 0390-5 Fax : (+91 44) 2846 0129 Email: [email protected] It is to be specifically noted that this Issue of Equity Shares is subject to the section titled ‘Risk Factors’ beginning on page vi of this Letter of Offer. The Issue will not be kept open for more than 31 days unless extended, in which case it will be kept open for a maximum of 60 days.

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SECTION IX: OTHER INFORMATION Material Contracts and Documents for Inspection The following Contracts (not being contracts entered into in the ordinary course of business carried on by our Company or entered into more than two years before the date of this Letter of Offer) which are or may be deemed material have been entered or to be entered into by our Company. These Contracts, copies of which have been attached to the copy of this Letter of Offer, delivered to the Registrar of Companies, Tamil Nadu at Chennai for registration and also the documents for inspection referred to hereunder, may be inspected at the corporate office of our Company situated at 64, Sardar Patel Road, Taramani, Chennai 600 113 from 10.00 am to 4.00 pm on working days from the date of this Letter of Offer until the Issue Closing Date. Material Contracts 1. Letter of appointment dated August 1, 2005 to KMCC from our Company appointing them as the LM. 2. Memorandum of Understanding dated August 12, 2005 between our Company and KMCC. 3. Memorandum of Understanding / Agreements executed by our Company with Bankers to the Issue

Registrar to the Issue, etc. Material Documents 1. Our Memorandum and Articles of Association as amended from time to time. 2. Our certification of incorporation dated February 19, 1997. 3. Board resolutions in relation to this Issue and other related matters such as appointment of statutory

auditors, formation and revision of Audit, Remuneration and other committees 4. Audited Accounts for the fiscal 2005 (including financial statements) as approved by the Board on

October 29, 2005 and subject to the further approval of the shareholders at the ensuing AGM. 5. Resolutions of the Rights Issue Committee 2005 dated July 30, 2005, August 11, 2005 and November

16, 2005. 6. Present terms of employment and remuneration between Ramco and our Managing Director fixed by

way of Board meetings and approved by the Shareholders. 7. Report of the statutory auditor, dated November 16, 2005 for Unconsolidated Summary Restated

Financial Statements for the six months ended September 30, 2005 and the years ended March 31, 2005, 2004, 2003, 2002 and 2001 and the Consolidated Restated Financial Statements for the six months ended September 30, 2005 and the years ended March 31, 2005, 2004, 2003 and 2002 prepared as per Indian GAAP and mentioned in the Letter of Offer.

8. Copies of annual reports of our Company for the years ended March 31, 2005, 2004, 2003, 2002 and

2001 and for our Subsidiaries and Associates 9. Consent of the Statutory Auditors being August 11, 2005 for inclusion of their report on accounts in the

form and context in which they appear in the Letter of Offer 10. Consents of Statutory Auditors, Bankers to the Company, BRLM, Registrar to the Issue, Banker to the

Issue, Legal counsel to the Company, Directors of the Company, Company Secretary and Compliance Officer, as referred to, in their respective capacities

11. Letter dated August 11, 2005 from the Auditors of the Company confirming Statement of Possible Tax

Benefits as mentioned in Letter of Offer. 12. In-principle listing approval dated October 10, 2005, August 31, 2005 and August 18, 2005,received

from BSE, NSE and MSE, respectively 13. Due diligence certificate dated November 22, 2005 submitted by KMCC to SEBI

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14. SEBI Letter No CFD/DIL/ISSUES/PR/52445/2005 dated October 24, 2005. 15. Response dated November 18, 2005 to SEBI letter Any of the contracts or documents mentioned in this Letter of Offer may be amended or modified at any time if so required in the interest of the Company or if required by the other parties, without reference to the Shareholders subject to compliance of the provisions contained in the Companies Act and other relevant statutes.

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Declaration No statement made in this Letter of Offer contravenes any of the provisions of the Companies Act, 1956 and the rules made thereunder. All the legal requirements connected with the said issue as also the guidelines; instructions etc. issued by SEBI, Government and any other competent authority in this behalf have been duly complied with. Yours faithfully, On behalf of the Board of Directors of Ramco Systems Limited, P.R.Ramasubrahmaneya Rajha, P.R.Venketrama Raja, Chairman Vice Chairman and Managing Director S.S. Ramachandra Raja, N.K.Shrikantan Raja, Director Director V. Jagadisan, M.M.Venkatachalam Director Director Mr. K. Ramachandran, Senior Vice President Finance Place: Chennai Date: November 16, 2005 Enclosure: Composite Application Form