Tech Mahindra - Annual Report - 2008-2009

TECH MAHINDRA LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

TO
THE SHAREHOLDERS

Your Directors present their Twenty-second Annual Report together with the
audited accounts of your Company for the year ended 31st March 2009.

FINANCIAL RESULTS:

Rs. in Million
For the year ended 31st March 2009 2008

Income 43,153 37,023

Profit before depreciation and tax 11,980 9,083

Depreciation (1,074) (736)

Profit before tax 10,905 8,347

Provision for taxation (1,039) (689)

Profit after tax before non-recurring /
exceptional items 9,866 7,658

Non-recurring / exceptional items - (4,401)

Profit for the year after tax and non-recurring /
exceptional items 9,866 3,257

Provision in respect of earlier years written back - 165

Balance brought forward from previous year 5,202 4,261

Profit available for appropriation 15,068 7,683

Dividend - Final (paid for the year 2007-08)* (1) -

- Interim (Paid) (487) -

- Final (Proposed) - (668)

Tax on dividend - On interim dividend (83) -

- On final dividend - (113)

Transfer to General Reserve (1,000) (1,700)

Balance carried forward 13,497 5,202

* In respect of equity shares allotted pursuant to ESOP, after 31st March
2008 and before the record date.

DIVIDEND:

During the year, your Directors declared interim dividend @ 40%, i.e. Rs. 4
per equity share of Rs. 10 each on 21st October 2008. Your Directors
recommend that the same be treated as final dividend for the year.

The Interim Dividend of Rs. 4 per equity share has been paid to the
Shareholders, whose names appeared in the Register of Members as on 29th
October 2008, the Record Date fixed for this purpose.

The amount so distributed together with tax on distributed profit amounted
to Rs. 570 Million as against Rs. 781 Million for the previous year.

CHANGES IN SHARE CAPITAL:

During the year under review, your Company allotted 370,765 equity shares
of face value Rs. 10 each on the exercise of stock options under its
various Employee Stock Option Plans and consequently the number of issued,
subscribed and paid-up equity shares has increased from 121,362,869 equity
shares to 121,733,634 equity shares of Rs.10 each aggregating to
Rs.1,217,336,340.

BUSINESS PERFORMANCE / FINANCIAL OVERVIEW:

Your Company is a leading provider of integrated services to the global
telecom ecosystem. Your Company's capabilities span across Business Support
Systems (BSS), Operations Support Systems (OSS), Network Design &
Engineering, Next Generation Networks, Mobility, Security Consulting,
Testing, and other areas.

Your Company's solutions portfolio includes Consulting, Application
Development & Management, Network Services, Solution Integration, Product
Engineering, Managed Services, Remote Infrastructure Management and BPO.
Your Company continues to provide best shore solutions to its customers,
thereby delivering value while maintaining the highest quality standards.

Your Company's initiatives towards improving customer focus have progressed
well in the previous year. Your Company continued to delight its customers
with its domain expertise as well as its ability to deliver and manage end
to end solutions. Your Company has been able to propose new and innovative
solutions to its existing and prospective customers which would help them
in the current challenging economic conditions. Your Company has made
substantial progress as a preferred provider of services to greenfield
operators globally.

Your Company has been investing into its sales and marketing and has
increased its geographic spread. These investments will hold your Company
in good stead in these difficult times.

Your Company continued to see strong and profitable growth in the Financial
Year 2008-09 across all markets driven by good performance in existing and
new areas of business.

During the year under review, total income increased to Rs. 43,153 Million
from Rs. 37,023 Million in the previous year, registering a growth rate of
17%. On a consolidated level, total income increased to Rs. 44,269 Million
from Rs. 38,705 Million in the previous year, a growth of 14%.

During the year, 68% of your Company's revenue came from Europe, 25% came
from USA and 7% came from Rest of the World (ROW).

The Profit before depreciation amounts to Rs. 11,980 Million (27% of
revenue) as against Rs. 9,083 Million (25% of revenue) in the previous
year.

Profit after tax, before exceptional items, has increased to Rs. 9,866
Million from Rs. 7,658 Million. At a consolidated level, profit after tax,
before exceptional items, increased to Rs. 10,146 Million from Rs. 7,695
Million in the previous year, a growth of 32%.

RECENT MATERIAL CHANGES:

Your Directors wish to apprise the members about the current status in the
matter of Satyam Computer Services Limited (Satyam).

Members may be aware, Satyam's founder and the then Chairman, Mr. B.
Ramalinga Raju, submitted a letter to the then Board of Directors informing
them that the Company's accounts were falsified over a period of several
years. This letter was also copied to the Chairman of Securities and
Exchange Board of India (SEBI) and the Stock Exchanges where equity shares
of Satyam are listed.

In light of Mr. Raju's statements, the Government of India filed a petition
before the Company Law Board (CLB) to suspend Satyam's then-existing Board
of Directors and appointed Government nominees on the Board of Satyam.

After receiving necessary approvals from CLB and SEBI, the Board of Satyam
invited an Expression of Interest on 13th March 2009 from prospective
Investors to participate in the bidding process for acquisition of a
controlling stake in Satyam.

Satyam is the fourth largest Indian IT software and services company with a
well-diversified client base spread across BFSI, manufacturing, retail,
transport, logistics, telecom, media, healthcare and pharma etc. It has
operations in more than 65 countries and development centers in 28 cities
located in 14 countries, 20 of which are outside India.

The announcement of the bid presented a unique strategic opportunity to
your Company to catapult itself to the next level of growth for the
following reasons :

* Diversify across customers, verticals, geographies and technology
offerings

* Minimal overlaps in terms of target industry segments and clients

* Likely synergy benefits

* Ability to sell a wide range of services to your Company's existing
customers

* Common support and control systems - reduction in operating expenses

Your Company, therefore, decided to participate in the Satyam bidding
process, through its wholly owned subsidiary, Venturbay Consultants Private
Limited (Venturbay), at Rs. 58 per share. Venturbay was declared as the
highest bidder on 13th April 2009 and as the winning bidder post the CLB
approval on 16th April 2009.

Venturbay deposited a sum of Rs. 29,107 Million in the Escrow Account to
cover the cost of 31% preferential issue by Satyam and a 20% open offer. On
5th May 2009, the Board of Directors of Satyam allotted 302,764,327 shares
of Satyam to Venturbay, representing 31% of its share capital. On 6th May
2009, Venturbay as the Acquirer' and your Company as the Person Acting in
Concert' filed the draft Letter of Offer with SEBI for acquiring upto 20%
of the expanded share capital of Satyam. On 27th May 2009, the Board of
Satyam appointed four nominee directors of Venturbay, Mr. Vineet Nayyar,
Mr. C. P. Gurnani, Mr. Sanjay Kalra and Mr. Ulhas N. Yargop (collectively,
the 'Venturbay Directors'), to the Board of Directors of Satyam. Mr. Vineet
Nayyar has been designated as Whole-time Director of Satyam, effective 1st
June 2009.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

A detailed analysis of your Company's performance is discussed in the
Management Discussion and Analysis Report, which forms part of this Annual
Report.

AMALGAMATION OF SUBSIDIARIES:

As reported in the previous Annual Report, iPolicy Networks Limited and
Tech Mahindra (R & D Services) Limited merged with your Company and
effective 20th May 2008, iPolicy Networks Limited and Tech Mahindra (R & D
Services) Limited stand dissolved without winding-up. The Appointed date
i.e. the date from which the provisions of the Scheme of Amalgamation came
into operation was 1st April 2008.

With this amalgamation, Tech Mahindra (R&D Services) Inc., which was a step
down subsidiary of your Company through Tech Mahindra (R&D Services)
Limited became a direct subsidiary of your Company.

With a view to streamline the US operations, Tech Mahindra (R&D Services)
Inc. was merged with Tech Mahindra (Americas) Inc. w.e.f. 1st July 2008.

QUALITY:

In the Financial Year 2008-09, your Company's passion towards quality has
helped in achieving another quality accreditation i.e. SEI-CMMI L5 v1.2, in
addition to other accreditations like ISO 9001:2000, ISO/IEC 20000-1:2005,
ISO/IEC 27001:2005, SEI-CMMI Level 5 v1.1, P-CMM Level 5 and SSE-CMM Level
3. Your Company is the third in the world to have been appraised for SSE-
CMM Level 3.

Processes in your Company are designed to develop solutions that meet
client specifications in accordance with statutory and other industry-wide
standards. Continuous improvement in these processes is a way of life with
a goal of ensuring greater customer satisfaction by improved quality,
productivity and cycle time.

HUMAN RESOURCES:

During the Financial Year 2008-09, your Company along with its subsidiaries
made a net addition of 2,088 employees to its workforce. The employee
strength was 24,972 as at 31st March 2009, as compared to 22,884 a year
before, registering an increase of 9%. BPO services also registered a
growth of 9% as the headcount went up to 3,769 from 3,445, a year before.

Employee Learning and Development/Interface with Academia

Your Company believes in human potential and invests in the growth and
development of individuals with its on-going training and other
developmental initiatives.

Every year, your Company hires bright engineers from across the country. In
order to align them with the Company's culture and values and at the same
time bring them at par with the required telecom domain knowledge, in-depth
and exhaustive 14 weeks induction training is conducted.

Complementing this, your Company runs earn while you learn' programs for
science graduates who are enrolled for the MS program in Telecommunications
and Software Engineering, in collaboration with BITS, Pilani, which is
partially and in some cases 100% sponsored by your Company.

In order to help employees define their learning path which is in-line with
the technology area, client and role they are associated with, your Company
has crafted QUEST, a learning framework. It allows online end-to-end
management of learning paths which includes, creating new learning paths,
assigning of trainings, courseware deployment and online examinations. To
complement the on-line learning, employees across the globe are provided
with online training courses and virtual sessions.

Your Company also provides learning assistance to its employees who aspire
to undertake higher education and have tie-ups for Distance Education
Programs with Indian Institute of Technology (IIT ), Bombay, Birla
Institute of Technology (BITS), Pilani and University College of London,
UK.

Due to business requirements and out of personal career aspirations, many
employees do wish to undertake various technology certifications. To help
employees with the same, your Company has an enterprise level partnership
with M/s Promatric which provides in-house testing centers enabling
employees to undertake certification examinations at their convenience and
as per required standards.

Leadership Development:

Your Company believes in nurturing talent, motivating indigenous innovation
and promoting leadership development.

To bring in fresh ideas and young talent, your Company has been running the
Global Leadership Cadre (GLC) program for the past three years selecting
management graduates from premier Business Institutes across the globe and
also technical specialists from within the organization. These highly
talented participants have shown very low learning curve and your Company
has been able to provide them faster career progression, thereby creating a
pool for leadership.

To compliment the GLC program, your Company has also introduced Management
Training program where management graduates from various Business Schools
across India are hired and groomed for future GLC roles.

For middle managers, your Company has associated with XLRI Jamshedpur for a
one month residential Management Development Program giving them an
overview of all aspects of management.

For senior management, your Company conducted Entrepreneurship training
programs in association with IIMC, India and also participated in similar
programs that have been organized by Mahindra & Mahindra Limited, the
holding company in association with Michigan University, US.

SUBSIDIARY COMPANIES:

During the year, your Company acquired the entire share capital of
Venturbay Consultants Private Limited (Venturbay). Consequently, w.e.f.
19th March 2009, Venturbay became a wholly owned subsidiary of your
Company.

As on 31st March 2009, your Company has 11 subsidiaries, including one
step-down subsidiary. There has not been any material change in the nature
of the business of the subsidiaries. As reported in the previous Annual
Report, iPolicy Networks Limited and Tech Mahindra (R & D Services) Limited
merged with your Company and effective 20th May 2008, iPolicy Networks
Limited and Tech Mahindra (R & D Services) Limited stand dissolved without
being wound - up.

With this amalgamation, Tech Mahindra (R&D Services) Inc., which was a step
down subsidiary of your Company through Tech Mahindra (R&D Services)
Limited became a direct subsidiary of your Company.

With a view to streamline the US operations, Tech Mahindra (R&D Services)
Inc. was merged with Tech Mahindra (Americas) Inc. w.e.f. 1st July 2008.

As required under the Listing Agreements with the Stock Exchanges, the
Consolidated Financial Statements of your Company and all its subsidiaries
are attached. The Consolidated Financial Statements have been prepared in
accordance with Accounting Standards AS 21, AS 23 and AS 27 issued by The
Institute of Chartered Accountants of India and show the financial
resources, assets, liabilities, income, profits and other details of your
Company and its subsidiaries and associate companies as a single entity,
after elimination of minority interest.

Your Company has been granted exemption for the year ended 31st March 2009
by the Ministry of Corporate Affairs vide its letter dated 20th March 2009
from attaching to its Balance Sheet, the copy of the Balance Sheet, Profit
and Loss Account, Reports of the Board of Directors and Auditors of each of
its subsidiaries. Since Venturbay became a subsidiary after this
application, your Company re-applied to the Ministry seeking exemption from
attaching the aforesaid documents in respect of Venturbay with the Balance
Sheet of your Company, which was approved by the Ministry vide its letter
dated 20th May 2009. As directed by the Central Government, the financial
details of the subsidiaries have been separately furnished forming part of
this Annual Report. These documents will also be available for inspection
by any member at the Registered Office of the Company and the office of the
respective subsidiary companies during working hours upto the date of the
Annual General Meeting. Documents of the subsidiaries will be submitted on
request to any member wishing to peruse a copy, on receipt of such request
by the Assistant Company Secretary of the Company at the Registered Office
/ Corporate Office of the Company.

EMPLOYEE STOCK OPTION PLAN:

Details required to be provided under the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 are set out in Annexure I to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR):

Your Company continues to demonstrate its deep commitment to social
responsibility. It contributes 1% of its profit after tax (PAT) every year
to fund its CSR activities, most of which are undertaken on its behalf by
the Tech Mahindra Foundation.

During the year under review, your Company has donated Rs. 90.12 Million to
Tech Mahindra Foundation. The Foundation works to give concrete expression
to your Company's keenness to make a meaningful and sustainable
contribution to the well-being of the less fortunate members of our
society. Tech Mahindra Foundation is very focused in its approach and
concentrates its endeavours on providing quality education and vocational
skills to vulnerable sections of the community.

During the year under review, the Foundation selected several new not-for-
profit organizations spread over Pune, Mumbai, Noida, Delhi and Bangalore.
It now works with 45 NGOs enabling it to reach out to many more children,
with special attention to the educational needs of such vulnerable sections
as girls from economically disadvantaged minority families.

As far as vocational training is concerned, the Foundation has made a
special effort to link up with organizations making innovative use of
technology to reach out to the needs of the physically, particularly
visually challenged.

Last year, the Foundation had reported the launch of the initiative to
honour outstanding teachers and principals working in the Municipal schools
of Delhi. These were selected through a rigorous and independent process.
Mr. Keshub Mahindra, Chairman of Mahindra & Mahindra Limited distributed
the awards to 20 principals on 22nd February 2009 at a ceremony attended by
the Municipal Commissioner of Delhi.

Your Company also supported the Bihar Flood Relief program launched by
Mahindra group by donating Rs. 5 Million. The employees of your Company
also contributed Rs. 9.79 Million towards Bihar Flood Relief. Your Company
also supports the Nanhi Kali program run by the K. C. Mahindra Education
Trust.

An increasing number of your Company employees is volunteering their free
time to help partner NGOs of the Foundation. Your Company in collaboration
with the Foundation has finalized a policy for Employee Social
Responsibility Options. This initiative has been undertaken to give
employees an avenue for participation in CSR going beyond the activities of
the Foundation. Under this initiative, employees would be invited to
present proposals for supporting NGOs/charitable organizations working in
the fields of education, health, environment and child welfare. Your
Company will provide financial aid to these organizations.

CORPORATE GOVERNANCE PHILOSOPHY:

Your Company believes that Corporate Governance is a voluntary code of
self-discipline. In line with this philosophy, it follows healthy Corporate
Governance practices and reports to the shareholders the progress made on
the various measures undertaken. Your Directors have reported the
initiatives on Corporate Governance adopted by your Company in the section
Corporate Governance' in the Annual Report.

DIRECTORS:

Mr. Anupam Puri, Dr. Raj Reddy and Mr. Paul Zuckerman retire by rotation
and being eligible, offer themselves for re-appointment.

Mr. M. Damodaran, ex-Chairman of SEBI, Mr. Ravindra Kulkarni and Mr. B. H.
Wani, both eminent corporate lawyers were appointed as Additional Directors
during the year. They hold office upto the date of the ensuing Annual
General Meeting.

The Company has received Notices from Members under Section 257(1) of the
Companies Act, 1956, alongwith the requisite amount of deposit, signifying
their intention to propose the candidatures of Mr. M Damodaran, Mr.
Ravindra Kulkarni and Mr. B. H. Wani as Directors of the Company, at the
forthcoming Annual General Meeting.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors,
based on the representation received from the Operating Management and
after due enquiry, confirm that:

i. in the preparation of the annual accounts, the applicable accounting
standards have been followed;

ii. they have, in the selection of the accounting policies, consulted the
Statutory Auditors and these have been applied consistently and reasonable
and prudent judgments and estimates have been made so as to give a true and
fair view of the state of affairs of the Company as at 31st March 2009 and
of the profit of the Company for the year ended on that date;

iii. proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;

iv. the annual accounts have been prepared on a going concern basis.

AUDITORS:

M/s. Deloitte Haskins & Sells, Chartered Accountants, the Auditors of your
Company, hold office up to the conclusion of the forthcoming Annual General
Meeting of the Company and have given their consent for re-appointment. The
shareholders will be required to elect auditors for the current year and
fix their remuneration. Your Company has received a written confirmation
from M/s. Deloitte Haskins & Sells, Chartered Accountants to the effect
that their appointment, if made, would be in conformity with the limits
prescribed in Section 224 of the Companies Act, 1956. The Board recommends
the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants
as the Auditors of the Company.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION:

In view of the nature of activities that are being carried on by your
Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988, concerning conservation of
energy and technology absorption, respectively are not applicable to your
Company. Your Company being a software solution provider requires minimal
energy consumption and every endeavour has been made to ensure the optimal
use of energy, avoid wastage and conserve energy as far as possible.

FOREIGN EXCHANGE EARNINGS AND OUTGO:

The foreign exchange earnings of your Company during the year were
Rs.42,792 Million (Previous Year Rs. 35,637 Million), while the outgoings
were Rs. 15,554 Million (Previous Year Rs. 18,133 Million).

PARTICULARS OF EMPLOYEES:

Your Company had 630 employees who were in receipt of remuneration of not
less than Rs. 2,400,000 during the year or Rs. 200,000 per month during any
part of the said year. However, as per the provisions of Section
219(1)(b)(iv) of the Companies Act, 1956, the Directors' Report being sent
to the shareholders does not include this Annexure. Any shareholder
interested in perusing a copy of the Annexure may write to the Assistant
Company Secretary at the Registered Office / Corporate Office of the
Company.

DEPOSITS AND LOANS/ADVANCES:

Your Company has not accepted any deposits from the public or its employees
during the year under review. The particulars of loans/advances and
investment in its own shares by listed companies, their subsidiaries,
associates, etc., required to be disclosed in the annual accounts of the
Company pursuant to Clause 32 of the Listing Agreement are furnished
separately.

AWARDS/RECOGNITION:

Your Company continued its quest for excellence in its chosen area of
business to emerge as a true global brand. Several awards and rankings
continue to endorse your Company as a thought leader in telecom industry.

Awards for the year:

* In the Leaders Category in The 2009 Global Outsourcing 100' (IAOP's
Annual Listing of the World's Best Outsourcing Service Providers)

* Amity Corporate Excellence Award 2009

* Deloitte Technology Fast 500 APAC 2008

* Deloitte Technology Fast 50 India 2008

* The Best Overall Recruiting & Staffing Organization of the Year Award'
(RASBIC Awards 2009)

* Award for Managing Health at Work (Employer Branding Awards 2008-2009)

* Award for Excellence in Training (Employer Branding Awards 2008-2009)

* BusinessWeek Award for Asia's Best Performing Companies, 2008

* Ranked 2nd in Telecom Software providers of India by Voice & Data, 2008
(V&D 100 Ranking)

* 'Growth Excellence Award' by Frost & Sullivan, 2008

* 6th Largest Software Services Company in India (NASSCOM 2008)

* 10th Largest IT-BPO Employers, FY 07-08 (NASSCOM 2008)

* CanvasM won the award for 'Best Start-up Company' at Mobile Content
Awards & Conference 2008 (MCA08).

* Award in 'Largest Revenue Category' of 'IT and ITeS (excluding Hardware)
Sector' by D&B - ECGC Indian Exporters Excellence Awards, 2008.

* Ranked 12th Largest TOMS vendor by Gartner in 'Market Share: Telecoms
Operations Management Systems - Worldwide, 2006-2007' April 2008

* 'Best Billing Solution' Category at 'Billing and OSS World (B/OSS)
Excellence Awards 2008', April 2008

* The Brand Leadership Award by the Asia Brand Congress, 2008

ACKNOWLEDGEMENTS:

Your Directors gratefully acknowledge the contributions made by employees
towards the success of your Company.

Your Directors are also thankful for the co-operation and assistance
received from its customers, vendors, bankers, STPI, regulatory and
Governmental authorities in India and abroad and its shareholders.

For and on behalf of the Board

Place: Mumbai Anand G. Mahindra
Date : 27th May 2009 Chairman

Particulars of loans/advances and investment in its own shares by listed
companies, their subsidiaries, associates, etc., required to be disclosed
in the annual accounts of the Company pursuant to Clause 32 of the Listing
Agreement. Loans and advances in the nature of loans to subsidiaries:

Rs. in Million
Name of the Company Balance as on 31st March Maximum outstanding
2009 [as on 31st March during the year [during
2008] the previous year]
Tech Mahindra
(Americas) Inc. - [100] 110 [218]

PT Tech Mahindra
Indonesia 25 [-] 55 [35]

iPolicy Networks
Limited - [-] - [94]

Loans and advances in the nature of loans to associates, loans and advances
in the nature of loans where there is no repayment schedule or repayment
beyond seven years or no interest or interest below section 372A of the
Companies Act, 1956 and loans and advances in the nature of loans to
firms/companies in which directors are interested - Nil

Annexure I to the Directors' Report for the year ended 31st March 2009 in
terms of clause 12.1 of the Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999

ESOP 2000

Total options granted under the 3,779,850
plan

a) Options granted during the Nil
year

b) The pricing formula Under the scheme, all the options were
granted prior to the listing of
Company's shares. These options were
granted, based on the annual valuation
done by an independent chartered
accountant.

c) Options vested as of 31st
March 2009 2,53,360

d) Options exercised during
the year 96,070

e) The total number of shares
arising as a result of exercise
of option 96,070

f) Options lapsed during the year Nil

g) Variation of terms of options In the Compensation Committee
during the year meeting of the Company held on 19th
May 2008, the Scheme was amended to
include the provision for recovery of
FBT from the employees of holding /
subsidiary companies and forward it to
the concerned employer company.

h) Money realised by exercise of Rs. 7.61 Million
options during the year

i) Total number of options in 2,53,360
force as of 31st March 2009

j) Employee wise details of
options granted to

i. Senior managerial personnel Nil

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

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

k) Diluted Earnings Per Share Rs. 76.66
(EPS) pursuant to issue of shares
on exercise of option calculated
in accordance with Accounting
Standard (AS) 20 'Earnings Per
Share'

l) Where the company has The Company uses the intrinsic value-
calculated the employee based method of accounting for stock
compensation cost using the options granted after 1st April 2005.
intrinsic value of the stock Had the compensation cost for the
options, the difference between Company's stock based compensation plan
the employee compensation cost been determined in the manner consistent
so computed and the employee with the fair value approach, the
compensation cost that shall have Company's net income would be lower
been recognized if it had used the by Rs 4 Million and earnings per share
fair value of the options, shall (Basic) would have been Rs. 81.08
be disclosed. The impact of this
difference on profits and on EPS
of the company shall also be
disclosed

m) Weighted-average exercise No options were granted during the year.
prices and weighted-average fair
values of options shall be
disclosed separately
for options whose exercise price
either equals or exceeds or is
less than the market price of
the stock

n) A description of the method
and significant assumptions used
during the year to estimate the
fair values of options, including
the following weighted-average
information: NA

i. risk-free interest rate,

ii. expected life,

iii. expected volatility,

iv. expected dividends, and

v. the price of the underlying
share in market at the time of
option grant.

ESOP 2004

Total options granted under the 10,219,860
plan

a) Options granted during the Nil
year

b) The pricing formula Under the scheme, all the options were
granted prior to the listing of
Company's shares. These options were
granted, based on the valuation done by
an independent chartered accountant.

c) Options vested as of 31st
March 2009 4,996,377

d) Options exercised during
the year Nil

e) The total number of shares
arising as a result of exercise
of option Nil

f) Options lapsed during the year Nil

g) Variation of terms of options Nil
during the year

h) Money realised by exercise of Nil
options during the year

i) Total number of options in 5,677,701
force as of 31st March 2009

j) Employee wise details of
options granted to

i. Senior managerial personnel Nil

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

iii. Identified employees who Mr. Vineet Nayyar: 3,406,620
were granted option, during any
one year, equal to or exceeding Mr. C P Gurnani : 3,406,620
1% of the issued capital
(excluding outstanding warrants Mr. Sanjay Kalra : 3,406,620
and conversions) of the company
at the time of grant

k) Diluted Earnings Per Share Rs. 76.66
(EPS) pursuant to issue of shares
on exercise of option calculated
in accordance with Accounting
Standard (AS) 20 'Earnings Per
Share'

l) Where the company has The Company uses the intrinsic value-
calculated the employee based method of accounting for stock
compensation cost using the options granted after 1st April 2005.
intrinsic value of the stock Had the compensation cost for the
options, the difference between Company's stock based compensation plan
the employee compensation cost been determined in the manner consistent
so computed and the employee with the fair value approach, the
compensation cost that shall have Company's net income would be lower
been recognized if it had used the by Rs 4 Million and earnings per share
fair value of the options, shall (Basic) would have been Rs. 81.08
be disclosed. The impact of this
difference on profits and on EPS
of the company shall also be
disclosed

m) Weighted-average exercise No options were granted during the
prices and weighted-average fair year.
values of options shall be
disclosed separately
for options whose exercise price
either equals or exceeds or is
less than the market price of
the stock

n) A description of the method
and significant assumptions used
during the year to estimate the
fair values of options, including
the following weighted-average
information: NA

i. risk-free interest rate,

ii. expected life,

iii. expected volatility,

iv. expected dividends, and

v. the price of the underlying
share in market at the time of
option grant.


ESOP 2006

Total options granted under the 5,609,805
plan

a) Options granted during the 2,52,500
year

b) The pricing formula The options granted prior to the
listing of Company's shares, were
granted, based on the annual valuation
done by an independent chartered
accountant.

The grants made post-listing of the
Company's shares on Stock Exchanges
have been made as per the latest
available closing price on the Stock
Exchange with highest trading volume,
prior to the date of the meeting of the
Compensation Committee in which options
are granted.

c) Options vested as of 31st
March 2009 11,88,133

d) Options exercised during
the year 274,695

e) The total number of shares
arising as a result of exercise
of option 274,695

f) Options lapsed during the year Nil

g) Variation of terms of options In the Compensation Committee meeting of
during the year the Company held on 19th May 2008, the
Scheme was amended to include the
provision for recovery of FBT from the
employees of holding / subsidiary
companies and forward it to the
concerned employer company.


h) Money realised by exercise of Rs. 23.39 Million
options during the year

i) Total number of options in 37,36,868
force as of 31st March 2009

j) Employee wise details of
options granted to

i. Senior managerial personnel Nil

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

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

k) Diluted Earnings Per Share Rs. 76.66
(EPS) pursuant to issue of shares
on exercise of option calculated
in accordance with Accounting
Standard (AS) 20 'Earnings Per
Share'

l) Where the company has The Company uses the intrinsic value-
calculated the employee based method of accounting for stock
compensation cost using the options granted after 1st April 2005.
intrinsic value of the stock Had the compensation cost for the
options, the difference between Company's stock based compensation plan
the employee compensation cost been determined in the manner consistent
so computed and the employee with the fair value approach, the
compensation cost that shall have Company's net income would be lower by
Rs. 4 Million and earnings per share
(Basic) would have been Rs. 81.08
been recognized if it had used the
fair value of the options, shall
be disclosed. The impact of this
difference on profits and on EPS
of the company shall also be
disclosed

m) Weighted-average exercise Grant Date 19-05-08 21-07-08
prices and weighted-average fair
values of options shall be
disclosed separately Exercise
for options whose exercise price price (Rs.) 957 668
either equals or exceeds or is
less than the market price of
the stock Fair
Value (Rs.) 291.15 240.57

Grant Date 20-10-08 23-01-09

Exercise
price (Rs.) 344 230

Fair
Value (Rs.) 133.07 69.48

n) A description of the method
and significant assumptions used
during the year to estimate the 19-05-08 21-07-08 20-10-08 23-01-09
fair values of options, including
the following weighted-average
information: 7.85% 9.34% 7.65% 5.72%

i. risk-free interest rate, 5.3 5.3 5.3 5.3
years years years years

ii. expected life, 52.82% 52.73% 55.45% 58.70%

iii. expected volatility, 7.68% 6.48% 6.48% 6.48%

iv. expected dividends, and

v. the price of the underlying
share in market at the time of
option grant. 956.70 680.80 367.50 209.30

MANAGEMENT DISCUSSION AND ANALYSIS:

INDUSTRY STRUCTURE, DEVELOPMENTS AND OUTLOOK:

Overview:

Tech Mahindra Limited is a leading provider of IT services and solutions to
the global telecommunications industry. In fiscal 2008, it was ranked by
NASSCOM as the sixth largest Indian IT services company in terms of export
revenue. It was formed in 1986 as a joint venture between Mahindra and
Mahindra Limited, one of India's largest industrial conglomerates, and
British Telecommunications plc, one of the world's leading
Telecommunications Company.

Current environment and global telecom market:

The year 2008-09 has been marred by economic recession, collapse of various
large financial institutions, and record losses being reported by large
corporates worldwide. It has been a year of volatility and uncertainty
leading to an economic downturn that has had widespread impact across the
world.

However, the Telecom segment, though not immune to these recessionary
pressures, is still expected to grow. According to an independent research
agency, the size of the global telecom services market grew by an estimated
5.7% in 2008, reaching US$ 1.34 trillion. It is expected that managed
services and unified communications will lead to steady growth during the
year. Managed network services, which accounts for 20% of the business
services market, is expected to grow to 30% of the market by 2012. The
Telecom Service Providers (TSPs) will face challenges due to reducing
legacy revenues, and will have to invest in new avenues of growth like
broadband. New business models will proliferate as new players such as
cable Multiple System Operator's (MSO's) and virtual network operators
offer Voice over Internet Protocol (VoIP) services impacting the
traditional telecommunication services market. Similarly, Telecom Equipment
Manufacturers (TEMs) could see some rationalization of budgets on their
products and platforms. Corporations will spend more time and effort in
trying to strike a balance between investment to drive growth and being
competitive and efficient.

IT spend in the Communications Industry:

According to an independent research agency, the worldwide IT spending in
communication vertical will be driven by software services and managed
services, etc. The worldwide IT spending by the communications vertical
will reach US $ 426.6 billion in 2012 from US $ 368.3 billion in the
current year. Out of this, IT services are expected to account for US$128.9
billion in 2012 from US$ 108.1 billion in 2008. Short-term cost reduction
propositions including outsourcing will remain attractive, to achieve
reduced fixed cost. To attract higher ARPU and new customers as well as
retain existing customers, TSPs are in the process of transforming their
systems, processes and networks to reduce operating cost, achieve better
efficiencies and faster time to market.

The Middle East and Africa, Latin America and emerging markets in
Asia/Pacific will continue to grow mobile and consumer fixed services,
seeking to cut other spending in preference.

OPPORTUNITIES:

Legacy to Next Generation IT transformation Service providers around the
globe, on the back of dropping legacy revenues and high cost, are looking
to transform their legacy platforms into next generation platforms. This
will enable them to optimize their product portfolio, and rationalize the
costs associated with running the systems. These transformation
initiatives, will lead to outsourcing opportunities.

Diversification:

Telecom companies are diversifying into non traditional business areas for
expansion of services. This could provide additional opportunities for
outsourcing partners to provide increased services and saving opportunities
to these companies.

Greenfield Operators in Emerging Markets:

Emerging markets are hubs for investments in this downturn due to the low
costs and growing market potential. These greenfield operators require
faster time to market as well as packaged and ready to use IT platforms.

This would provide an opportunity for end to end outsourcing vendors.

THREATS:

Consumer Fixed Line Service and Enterprise Fixed line Service will see
reductions

Consumer fixed-service spending will see further reductions because of
mobile substitution in developed markets and pre substitution in emerging
ones. Enterprise fixed services will be hurt by a downturn in the small and
midsize business sector; remote office closures, this reduced demand could
impact IT spend in TSPs.

Mature Markets may see the maximum impact of the economic crisis

Mature markets will be the hardest hit and most of the work would be
outsourced to low cost markets for cost benefits. In this trend IT services
and solution providers based out of emerging markets would be benefitted
more as TSPs in the mature markets would look to lower cost solutions to
achieve their objectives of cost efficiency as well as transformation.

Global IT companies posing challenge with growing India presence

Global IT service providers such as Accenture, EDS, CapGemini and IBM are
expanding their presence in India and pose a challenge to Indian IT service
companies with their global client relationships, deep pockets and domain
knowledge.

Emergence of other low cost destinations:

India remains the preferred offshore destination for IT Services for its
cost effective solutions and huge talent pool. However several countries
like China, Malaysia, Chile, Philippines, Singapore, Thailand and the Czech
Republic are emerging as off-shoring destinations due to their ability to
provide low cost solutions. First movers into these countries will gain
competitive advantage and an ability to differentiate their service
offering.

RISKS:

Continued recessionary pressures going into 2009:

Independent research agencies predict GDP growth forecasts for 2009 in US
and Europe to be negative and APAC, MEA to see a slowdown. Growth is
forecasted in the second half of 2009 onwards. Recessionary pressures for a
longer period may have a negative effect to our top-line since we are
dependent on our clients who are impacted by such slowdowns.

High customer concentration:

In fiscal 2009, Revenues from Top 3, Top 5, and Top 10 clients account for
75%, 81% and 87% respectively and the loss of these clients could have a
material adverse impact on our revenue and profitability.

Withdrawal of tax benefits:

Currently, we benefit from certain tax incentives under Section 10A of the
Income Tax Act for the IT services that we provide from specially
designated 'Software Technology Parks' or STPs. As a result of these
incentives, our operations in India have been subject to relatively low tax
liabilities. Under current laws, the tax incentives available to these
units terminate on the earlier of the ten year anniversary of the
commencement of operations of the unit or 31st March 2010. There is no
assurance that the Indian government will not enact laws in the future that
would adversely impact our tax incentives and consequently, our tax
liabilities and profits. When our tax incentives expire or are terminated,
our tax expense will materially increase, reducing our profitability.

Exchange rate risks:

The exchange rate between the Indian rupee and the British pound and the
rupee and the U.S. dollar has changed substantially in last year and may
continue to fluctuate significantly in the future. During fiscal 2009, the
value of the rupee against the British pound appreciated by approx 8% and
the value of the rupee against the U.S. dollar depreciated by approx 27%.
Accordingly, our operating results have been and will continue to be
impacted by fluctuations in the exchange rate between the Indian rupee and
the British pound and the Indian rupee and the U.S. dollar, as well as
exchange rates with other foreign currencies. Any strengthening of the
Indian rupee against the British pound, the U.S. dollar or other foreign
currencies could adversely affect our profitability.

ACQUISITION OF SATYAM COMPUTER SERVICES LIMITED:

TechM participated in the global competitive bidding process launched by
Satyam Board in March 2009 & in April 09 emerged as the highest bidder for
acquiring 51% stake in Satyam computers. It is a major milestone in the
journey of the Company as this acquisition would catapult the Company and
make it a leading IT Company with geographical, vertical & customer
diversification.

Opportunities:

The acquisition will put Tech Mahindra in a significantly higher playing
field. From being a niche-player with business only from telecom service
providers, it will now get exposure to the other major verticals such as
BFSI, Manufacturing, and Retail.

Challenges:

Since most of Satyam's customers will be new to Tech Mahindra, Tech
Mahindra could face some initial challenges to maintain and grow the
existing relationships with some of Satyam's clients. Given the size of
Satyam, there could be some challenges in consolidating the operations,
making it profitable and streamlining the processes in both the companies.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
PERFORMANCE:

Overview:

The financial statements have been prepared in compliance with the
requirements of the Companies Act, 1956 and Generally Accepted Accounting
Principles (GAAP) in India. The Consolidated financial statements have been
prepared in compliance with the Accounting Standards AS 21, AS 23 and AS 27
issued by the Institute of Chartered Accountants of India (ICAI).

The discussion on financial performance in the Management Discussion and
Analysis relate primarily to the stand alone accounts of Tech Mahindra
Limited. Wherever it is appropriate, information pertaining to consolidated
accounts for Tech Mahindra Limited is provided. For purpose of comparison
with other firms in this industry as well as to see the positioning and
impact that Tech Mahindra Limited has in the marketplace, it is essential
to take the figures as reflected in the Consolidated Financial Statements.

A. FINANCIAL POSITION:

1. Share Capital:

The authorized share capital of the Company is Rs. 1,750 Million, divided
into 175 Million equity shares of Rs. 10 each. The paid up share capital
stands at Rs. 1,217 Million as on 31st March 2009 compared to Rs. 1,214
Million on 31st March 2008. The increase in paid up capital during the year
is due to conversion of options into shares by employees under Employee
Stock Option Plan.

2. Reserves and surplus:

a) Share premium account:

The addition to the share premium account of Rs. 27 Million during the year
is due to the premium received on issue of 370,765 equity shares on
exercise of option under stock option plan.

b) General reserve:

General reserve stands at Rs. 2,251 Million on 31st March 2009 compared to
Rs. 2,714 Million on 31st March 2008. Rs. 550 Million has been transferred
to general reserve from profit and loss account during the year and Rs.
1,013 Million has been transferred on amalgamation.

c) Profit and loss account:

The balance retained in the profit and loss account as of 31st March 2009
is Rs. 13,947 Million compared to Rs. 5,201 Million as of 31st March 2008.

3. Loan Funds:

There are no Loan funds as at 31st March 2009 compared to Rs. 950 Million
(unsecured loan) in the previous year.

4. Fixed Assets:

The movement in Fixed Assets is shown in the table below:

Rs. in Million
As of 31st March 2009 2008
Gross Book Value
Land - free-hold 173 82
- lease-hold 436 325
Buildings 2,995 1,411
Leasehold Improvements 357 281
Plant and machinery 1,799 999
Computer equipments 2,049 1,659
Furniture and fixtures 1,024 661
Vehicles
Leased 6 48
Owned 47 39
Intangible assets 76 0
Total 8,962 5,505
Less: Accumulated depreciation & amortization 4,061 2,596
Net block 4,901 2,909
Add: Capital work-in-progress 1,541 1,385
Net fixed assets 6,442 4,294

The Net Block of Fixed Assets and Capital Work in Progress increased to
Rs.6,442 Million from Rs. 4,294 Million as at 31st March 2008.

During the year, Company incurred capital expenditure of Rs. 2,415 Million
(previous year Rs. 1,928 Million). The major items of Capital Expenditure
included Leasehold-land and improvements, Plant and Machinery, Computer
equipment and Furniture & Fixtures including amount spent on Hinjewadi,
Pune campus.

5. Investments:

The summary of Company's investments is given below:

Rs. in Million
Investments As at As at
31st March 2009 31st March 2008

Investment in Subsidiaries 905 3,340
Investment (others) 85 -
Investment in Mutual Funds 3,899 -
Total Investments 4,889 3,340
Less : Provision for diminution of value 354 354
Net Investments 4,535 2,986

I. Investment in Subsidiaries:

The Company had investment in the following subsidiaries

a) CanvasM Technologies Limited:

CanvasM was set up as a joint venture between Tech Mahindra Limited and
Motorola Cyprus Holding Limited in October 2006 with an objective to
provide software services and solutions to wire line and wireless telecom
service providers, cable companies, enterprise, media and broadcast
companies, using SI expertise of Tech Mahindra and R&D investments of
Motorola Cyprus. Tech Mahindra owns 80.1% of the shareholding while the
balance 19.9% is held by Motorola Cyprus.

b) Tech Mahindra (Americas) Inc.:

Tech Mahindra (Americas) inc. was incorporated in November 1993 to provide
marketing support services for the USA and Canada region. It acts as a
service provider for sales, marketing, onsite software development and
other related services for North America.

c) Tech Mahindra GmbH:

Tech Mahindra GmbH was established in July 2001 to provide marketing
support in central Europe region.

d) Tech Mahindra (Singapore) Pte. Limited:

Tech Mahindra (Singapore) Pte. Limited is Tech Mahindra's representative in
Singapore and acts as a service provider for sales, marketing, onsite
software development and other related services in Singapore.

e) Tech Mahindra (Thailand) Limited:

Tech Mahindra (Thailand) Limited was established in August 2005 to
strengthen its marketing infrastructure in Thailand.

f) PT Tech Mahindra Indonesia:

PT Tech Mahindra Indonesia is Tech Mahindra's representative in Indonesia
and acts as a service provider for sales, marketing, onsite software
development and other related services.

g) Tech Mahindra Foundation:

Tech Mahindra Foundation was promoted by Tech Mahindra Limited as Section
25 Company with the objective of promoting social and charitable
activities. TechM Foundation primarily concentrates on rendering assistance
to the needy and under privileged people in the society.

h) Tech Mahindra (Beijing) IT Services Limited:

Tech Mahindra (Beijing) IT Services Limited was established in December
2007 to strengthen its marketing capabilities in China.

i) Tech Mahindra (Malaysia) Sdn. Bhd.:

Tech Mahindra (Malaysia) Sdn. Bhd. was established in May 2007 as Tech
Mahindra's representative in Malaysia. It acts as a service provider for
sales, marketing, onsite software development and other related services.

j) Venturbay Consultants Private Limited (VCPL):

VCPL became wholly owned subsidiary of the Company as on 19th March 2009.
It was acquired to act as a special purpose vehicle (SPV) to bid for the
acquisition of Satyam Computer Services Limited (Satyam). It emerged as the
highest and successful bidder in the global competitive bidding process and
has since acquired 31% shares of Satyam.

Tech Mahindra (R&D Services) Limited (TMRDL) and iPolicy Networks Limited
(iPolicy) merged with the Company during the year and effective 20th May
2008, TMRDL and iPolicy stand dissolved without winding-up. The appointed
date for this merger was 1st April 2008.

II. Investment in liquid mutual funds:

The Company has been investing in various mutual funds. These are typically
investments in short-term funds to gainfully use the excess cash balance
with the Company. The investments as at 31st March 2009 were Rs. 3,899
Million compared to Nil as at 31st March 2008.

6. Deferred Tax Asset:

Deferred tax asset as at 31st March 2009 was at Rs. 155 Million as compared
to Rs. 14 Million as of 31st March 2008. Deferred tax assets represent
timing differences in the financial and tax books arising from depreciation
of assets, provision of debtors and leave encashment. Company assesses the
likelihood that the deferred tax asset will be recovered from future
taxable income.

7. Sundry Debtors:

Sundry debtors decreased to Rs. 8,545 Million (net of provision for
doubtful debts amounting to Rs. 69 Million) as of 31st March 2009 from Rs.
10,574 million (net of provision for doubtful debts amounting to Rs. 80
million) as of 31st March 2008. Debtor days as of 31st March 2009,
(calculated based on per-day sales in the last quarter) were 79 days,
compared to 98 days as of 31st March 2008. We continue to focus on reducing
receivables period by improving our collection efforts.

8. Cash and Bank Balance:

The bank balances in India include both Rupee accounts and foreign currency
accounts. The bank balances in overseas current accounts are maintained to
meet the expenditure of the overseas branches and overseas project-related
expenditure.

Rs. in Million
As of 31st March 2009 2008
Bank balances in India & Overseas
Current accounts 4,945 799
Deposit accounts 17 14
Unclaimed dividend account - 1
Total cash and bank balances* 4,961 814

* excluding unrealised (gain)/loss on foreign currency

9. Loans and Advances:

Loans and advances as on 31st March 2009 were Rs. 2,867 Million compared to
Rs. 3,477 Million as on 31st March 2008.

10. Current Liabilities and Provisions:

Current liabilities and provisions were Rs. 8,708 Million as of 31st March
2009 compared to Rs. 8,925 Million as of 31st March 2008.

B. RESULTS OF OPERATIONS:

The following table sets forth certain income statement items as well as
these items as a percentage of our total income for the periods indicated:

Fiscal 2009 Fiscal 2008
% of % of
Rs. in Revenue Rs. in Revenue
Million Million
INCOME:

Revenue from
Services 43,578 100.0% 36,047 100.0%

Other Income (425) 976

Total Income 43,153 37,023

EXPENDITURE

Personnel Cost 14,197 32.6% 12,224 33.9%

Operating and Other Expenses 16,952 38.9% 15,616 43.3%

Depreciation 1,074 2.5% 736 2.0%

Interest 25 0.1% 100 0.3%

Total Expenditure 32,248 74.0% 28,676 79.6%

Profit before tax and
exceptional items 10,905 25.0% 8,347 23.2%

Provision for Taxation (1,039) 2.4% (689) 1.9%

Profit after taxation and
before exceptional item 9,866 22.6% 7,658 21.2%

Exceptional items - - (4,401) 12.2%

Net profit for the year 9,866 22.6% 3,257 9.0%

Provision in respect of
earlier year written back - - 165 0.5%

Net Profit 9,866 22.6% 3,422 9.5%

1. Revenue:

The Company derives revenue principally from technology services provided
to clients in the telecommunications industry.

The revenue increased by 20.9% to Rs. 43,578 Million in fiscal 2009 from
Rs. 36,047 Million in fiscal 2008. This reflected an increase in the number
of clients served during the respective years as well as an increase in the
amount of business from these clients. Revenue from Europe as a percentage
of total revenue was 68.3% in fiscal 2009 compared to 76.9% in fiscal 2008.
Revenue from the Americas increased to 25.0% in fiscal 2009 from 17.3% in
fiscal 2008 while the share of revenue attributable to the Rest of the
World segment was 6.7% in fiscal 2009 compared to 5.8% in the previous
year.

Consolidated Revenue:

Consolidated Revenue for the fiscal 2009 stood at Rs. 44,647 Million
compared to Rs. 37,661 Million last fiscal, a growth of 18.5%. Consolidated
revenue grew at a CAGR of 23.5% over the last 3 years.

Consolidated revenue by Geography:

Europe contributed 66.8% of the consolidated revenue in fiscal 2009 while
Americas and Rest of the World contributed 25.4% and 7.8% respectively. The
revenue share from Europe, Americas and Rest of the World in fiscal 2008
was 73.6%, 19.4% and 7.0% respectively.

Consolidated Revenue by Segment:

For fiscal 2009, 86.8% of revenue came from TSP segment, 5.4% from TEM,
5.6% came from BPO segment while 2.2% from others. The revenue share in
fiscal 2008 from TSP, TEM, BPO and Others segment was 89.2%, 5.1%, 3.5% and
2.2% respectively.

2. Other Income:

Other income includes interest income, dividend income, profit on sale of
current investments, foreign exchange gain/loss and sundry balances written
back.

Interest income mainly consists of interest received on bank deposits.
Dividend income includes dividend received on long term investments as well
as that received on current investments.

Exchange gain/loss consists of mark to market gain/ loss on ineffective
hedges, realized gain/loss and revaluation gain/loss on translation of

foreign currency assets and liabilities.

Other income is at Rs. (425) Million in fiscal 2009 compared to Rs. 976
Million in fiscal 2008. This was primarily due to exchange loss of Rs. 731
Million in this fiscal.

3. Expenditure:

Particulars FY 2008-09 FY 2007-08 %Inc/(Dec)
Rs. in % of Rs. in % of
Million Revenue Million Revenue

Personnel Cost 14,197 32.6% 12,224 33.9% 16.1%

Operating and
Other Expenses 16,952 38.9% 15,616 43.3% 8.6%

Depreciation 1,074 2.5% 736 2.0% 45.9%

Interest 25 0.1% 100 0.3% (75.1%)

Total Expenses 32,248 74.0% 28,676 79.6% 12.5%

Personnel cost includes salaries, wages and bonus, contribution to
provident fund and other funds and staff welfare costs. The increase in
personnel cost in absolute value is mainly due to increase in headcount and
annual increments.

Operating and other expenses mainly include Subcontracting costs,
Travelling expenses, Communication expenses, Rent, Repairs and Maintenance,
Office establishment costs, Software Packages and Professional fess. The
increase is due to increase in business volumes, increase in number of
office locations in India and overseas and overall growth in business
activity.

Increase in depreciation is mainly due to increase in investment in
infrastructure and equipment to service our growing business.

The Company incurred interest expense of Rs. 25 Million in fiscal 2009 on
borrowings as compared to Rs. 100 Million in fiscal 2008.

4. Profit before tax:

Profit before tax increased by 30.7% to Rs. 10,905 Million in fiscal 2009
from Rs. 8,347 Million in fiscal 2008. Profit before tax as a percentage of
revenue was 25.0% in fiscal 2009 compared to 23.2% in fiscal 2008.

5. Income taxes:

The provision of current tax, deferred tax and fringe benefit tax for the
year ended 31st March 2009 was Rs. 1,039 Million as compared to Rs. 689
Million in the previous year, a growth of 50.7%. As a percentage of
revenue, provision for taxes increased to 2.4% in fiscal 2009 from 1.9% in
fiscal 2008. The effective tax rate in these years was 9.5% and 8.3%
respectively.

6. Profit after tax before exceptional items:

Profit after tax before exceptional items increased by 28.8% to Rs. 9,866
Million in fiscal 2009 from Rs. 7,658 Million in fiscal 2008. Profit after
tax as a percentage of revenue was 22.6% in fiscal 2009 and 21.2% in fiscal
2008.

Consolidated PAT:

Consolidated PAT before exceptional item and minority interest for the
fiscal 2009 was Rs. 10,145 Million compared to Rs. 7,695 Million last
fiscal, a growth of 31.8%. PAT as a percentage of revenue was 22.7% in
fiscal 2009 compared to 20.4% in fiscal 2008.

C. CASH FLOW:

The cash flow position for fiscal 2009 and fiscal 2008 is summarized in the
table below:

Rs. in Million
Particulars Fiscal
2009 2008

Net cash flow from operating activities* 12,003 2,097

Net cash flow from (used in) investing activities (6,204) (1,983)

Net cash flow from (used in) financing activities (1,645) 356

Cash and cash equivalents at the beginning of the
year 765 295

Cash and cash equivalents at the end of the year 4,954 765

* includes unrealized gain/(loss) on foreign currency

D. INTERNAL CONTROL SYSTEMS:

The Company maintains adequate internal control system, which provides,
among other things, reasonable assurance of recording the transactions of
its operations in all material aspects and of providing protection against
significant misuse or loss of Company's assets. The company uses an
Enterprise Resource Planning (ERP) package, which enhances the internal
control mechanism.

E. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES INCLUDING NUMBER OF PEOPLE
EMPLOYED:

Despite economic slowdown, Company continued to make addition to its human
resources during fiscal 2009. The Company had a net addition of 2,088
(previous year 3,135) employees mainly through campus recruitment in
addition to lateral hiring. The global headcount of the Company as on 31st
March 2009 was 24,972 compared to 22,884 as on 31st March 2008, a growth of
9.1%. The Company used various sources for attracting talent during the
year. It hired Engineering Graduates and Science Graduates for technical
positions whereas MBA's were recruited from premier management institutes
such as IIM's, ISB, XLRI, London Business School etc. for the future
leadership positions.

The IT attrition rate for the year 2009 and 2008 was 18.7% and 24.7%
respectively. The Company has been working towards containing the attrition
rate by continuously investing in learning and development programs for
associates, competitive compensation, creating a compelling work
environment, empowering associates at all levels as well as a well-
structured reward and recognition mechanism.

The Company believes in promoting and nurturing work environment which is
conducive to the development and growth of an individual employee, by
employing the best HR practices such as performance management, reward and
recognition policy, leadership development program, succession planning,
open work culture and effective employee communication.