Annual Report - Micro Technologies - 2009-2010

MICRO TECHNOLOGIES (INDIA) LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Dear Shareholders,

Your Directors are pleased to present the Eighteenth Annual Report and the
audited accounts for . the financial year ended March 31, 2010.



FINANCIAL RESULTS

The financial performance of your Company for the financial year ended
March 31, 2010 is summarised below:
(Rs.in millions)
Particulars Standalone 2008-2009 Consolidated
2009-2010

Turnover - Sales & Other Incomes 3126.17 2307.24 4616.32
Operating Profit (PBIDT) 1254.83 1007.84 1596.49
Less: Depreciation & Interest 460.33 288.95 474.50
Profit Before Tax (PBT) 794.50 718.89 1116.99
Provision For Tax - Current Year 141.50 72.80 200.10
Provision For Tax - Deferred Tax 16.62 7.12 17.11
Fringe Benefit Tax - 0.69 -
Income Tax of earlier years - 12.64 -
Net Profit before Minority Interest 636.38 625.64 899.79
Less: Minority Interest 0.00 0.00 6.31
Net Profit after Minority Interest 636.38 625.64 893.47
Balance of profit from previous year 1636.23 1032.93 1738.79
Amount available for Appropriation 2272.61 1658.57 2632.26
Transferred to General Reserve 47.72 9.50 51.49
Proposed Dividend 25.79 10.98 38.12
Dividend Tax 4.38 1.87 6.48
Balance Carried to Balance Sheet 2194.70 1645.73 2536.18

2272.61 1658.57 2632.26

REVIEW OF PERFORMANCE:

You would be pleased to note that your Company has achieved significant
growth during growth during the last financial year.

On a standalone basis, your Company achieved Total Income of Rs.3126.17
Million during the year under report as against Rs. 2307.24 Million during
the previous year, representing an increase of 35.49% The Net Profit After
Tax stood at Rs. 636.38 Million compared to Rs. 625.64 Million in the
previous year registering a growth of 2%.

On a consolidated basis, your Company achieved Total Income of Rs.4616.32
Million during the year under the report and Net Profit After Tax stood at
Rs. 893.48 Million.

DIVIDEND:

Your Directors have recommended a dividend of Rs. 2 per Equity Share @ 20%
of the Equity share capital (last year Rs. 1 per Equity Share @ 10%) for
the financial year ended March 31 st, 2010 subject to approval by
shareholders at the ensuing Annual General Meeting. The dividend will be
paid to members whose names appear in the Register of Members as on 19'
June, 2010; (20th June being sunday) in respect of shares held in
dematerialized form, it will be paid to members whose names are furnished
by National Securities Depository Limited and Central Depository Services
(India) Limited as beneficial owners as on that date.

The dividend pay out for the year under review has been formulated, keeping
in view your Company's need for capital for its growth plans and the intent
to finance such plans through internal accruals to the maximum.

DEPOSITS:

Your Company has not accepted any deposits within the meaning of Section
58A of the Companies Act, 1956 read with Companies (Acceptance of Deposits)
Rules, 1975 made thereunder.

SUBSIDIARIES:

Your Company has two subsidiaries viz; Micro Secure Solutions Limited and
Micro Retail Limited incorporated in the year 2007 and 2008 respectively.
Your Company holds more than 90% of the total equity share capital of these
companies.

DIRECTORS:

Mr. S.G. Koppikar and Mr Vinayak Hajare have resigned from the Board of the
Company with effect from 30th March 2010 and 21st May 2010 respectively
However Mr S.G Koppikar continues as a director on the Board of the
Company's subsidiary Micro Retail Limited The Board appreciates the
contribution made by them during their tenure as directors of the Company.
Mr. Vijay Bhatia and Mr. Prakash Bhave have been appointed as Additional
directors on the Board of the Company with effect from 28th April 2010 and
21st May 2010 respectively. Your Directors recommend their regularization
as Directors. Mr. A.R. Kale who retires by rotation and being eligible
offers himself for reappointment at this ensuing Annual General Meeting.
Your directors recommend his reappointment.

A brief write-up on the directors seeking re-appointment on account of
retirement by rotation and regularization has been given in this Annual
Report under the heading'Corporate Governance'.

MATERIAL CHANGES AND COMMITMENTS DURING THE YEAR:

1. Conversion of Warrants:-

On March 30, 2010,18,40,000 equity shares of Rs. 10 each (at a premium of
Rs.128.29/-) were allotted pursuant to conversion of warrants which had
been allotted on December 24th 2009.

2. Conversion of FCCB:-

On 21st May 2010 the Company has allotted 80,551 equity shares pursuant to
conversion of 5 bonds of FCCB (Foreign Currency Convertible Bonds) of USD
100000/-each.

3. Capital Work-in-Progress (CWIP):

Capital Work-in-Progress (CWIP) includes both tangible and intangible
assets including Advances and payments of Rs. 65 Cr. The part of the cost
is towards advance paid for purchase of a land worth Rs.25 Cr for future
expansion. The costs capitalized are those costs incurred after
establishing the commercial viability of the project and which are directly
attributable to development of the project. They include preliminary
environmental monitoring and engineering work, costs associated with
planning approval process for the land development and material purchase.
The Directors are of the opinion that the proposed land development will be
financed and that it is probable that the project will proceed to
completion. If the project were not probable, this would involve the
expensing of a substantial proportion of the Rs. 25 Cr included in capital
work in progress at 31 March 2010 through the profit and loss. The part of
the CUP worth Rs. 40 Cr. involves proceedings towards development of
modules to be made into the future products as per the ongoing projects.

The Directors have considered the probability of the project proceeding by
assessing the commercial viability of the project, the expectation of
obtaining finance and the requirements of the regulatory processes

Some facilities / assets do remain idle for some time due to technical or
economical reason. Sometimes it requires considerable time to bring the
assets for its intended use. However, Idle assets no longer required, are
expensed after proper scrutiny at the year end.

4. Loan and Advances:

Your company has given Rs. 41 Cr of Advances to suppliers for critical
equipments and components.

These Advances works as current assets and save the opportunity cost of
keeping the money idle. In exchange we build a bond of trust and long term
relationship with our supplier. We have a strong relationship with our
supplier and looking forward for creating same bonding in new marketplace
over wide geographies.

Being in competitive marketplace of IT/ITES collaborations provides strong
chances of survival and growth.

Directors believe in same philosophy of mutual understanding and support to
conquer the market together. They believe in equal growth of company,
Investors and Partners (Supplier, Franchisee) together. None should be felt
left behind. We believe in idea of growing as a family rather individually.

5. Human Resources Development:

Your company's human resource strategies and practices are designed to
ensure that they integrate with and support the corporate business
strategies of your Company. The Board wishes to place on record its
appreciation of the contribution made by ail employees in ensuring high
level of performance and growth during the year.

6. Extraordinary General Meeting:

Your Company has not convened any Extra-ordinary General Meeting during
this period from the last AGM.

7. Delisting/Fresh listing of Securities:

The shares of your company will continue to be listed on The Stock
Exchange, Mumbai (BSE) and The National Stock exchange (NSE), which has
nation-wide trading terminals and, therefore, provides full liquidity to
the investors.

The Global Depository Receipts (GDRs) issued by your Company during the
year are listed with Luxembourg Stock Exchange, (LSE), Foreign Currency
Convertible Bonds (FCCB's) issued by your Company are listed with Singapore
Stock Exchange, (SGX).

Further during the year on March 30, 2010,18,40,000 equity shares of Rs. 10
each (at a premium of Rs. 128.29/-) were allotted pursuant to conversion of
warrants which had been allotted on December 24' 2009. On 21 s May 2010
the Company has allotted 80,551 equity shares pursuant to conversion of 5
bonds of FCCB (Foreign Currency Convertible Bonds) of USD 100000/-each.

Your Company is in the process of listing these shares on the Stock
Exchanges and hopes to get the same done at the earliest.

8. Directors' Responsibility Statement:

As required by sub-section (2AA) of Section 217 of the Companies Act, 1956,
the Directors state:

(a) That in the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures;

(b) That the directors have selected such accounting policies and applied
them consistently and made is probable that the project will proceed to
completion. If the project were not probable, this would involve the
expensing of a substantial proportion of the Rs. 25 Cr included in capital
work in progress at 31 March 2010 through the profit and loss. The part of
the CWIP worth Rs. 40 Cr. involves proceedings towards development of
modules to be made into the future products as per the ongoing projects.

The Directors have considered the probability of the project proceeding by
assessing the commercial viability of the project, the expectation of
obtaining finance and the requirements of the regulatory processes

Some facilities / assets do remain idle for some time due to technical or
economical reason. Sometimes it requires considerable time to bring the
assets for its intended use. However, Idle assets no longer required, are
expensed after proper scrutiny at the year end.

4. Loan and Advances:

Your company has given Rs. 41 Cr of Advances to suppliers for critical
equipments and components.

These Advances works as current assets and save the opportunity cost of
keeping the money idle. In exchange we build a bond of trust and long term
relationship with our supplier. We have a strong relationship with our
supplier and looking forward for creating same bonding in new marketplace
over wide geographies.

Being in competitive marketplace of IT/ITES collaborations provides strong
chances of survival and growth.

Directors believe in same philosophy of mutual understanding and support to
conquer the market together. They believe in equal growth of company,
Investors and Partners (Supplier, Franchisee) together. None should be felt
left behind. We believe in idea of growing as a family rather individually.

5. Human Resources Development:

Your company's human resource strategies and practices are designed to
ensure that they integrate with and support the corporate business
strategies of your Company. The Board wishes to place on record its
appreciation of the contribution made by all employees in ensuring high
level of performance and growth during the year.

6. Extraordinary General Meeting:

Your Company has not convened any Extra-ordinary General Meeting during
this period from the last AGM.

7. Delisting/Fresh listing of Securities;

The shares of your company will continue to be listed on The Stock
Exchange, Mumbai (BSE) and The National Stock exchange (NSE), which has
nation-wide trading terminals and, therefore, provides full liquidity to
the investors.

The Global Depository Receipts (GDRs) issued by your Company during the
year are listed with Luxembourg Stock Exchange; (LSE), Foreign Currency
Convertible Bonds (FCCB's) issued by your Company are listed with Singapore
Stock Exchange, (SGX).

Further during the year on March 30, 2010,18,40,000 equity shares of Rs.10
each (at a premium of Rs.128.29/-) were allotted pursuant to conversion of
warrants which had been allotted on December 24th 2009. On 21 'May 2010 the
Company has allotted 80,551 equity shares pursuant to conversion of 5 bonds
of FCCB (Foreign Currency Convertible Bonds) of USD 100000/- each.

Your Company is in the process of listing these shares on the Stock
Exchanges and hopes to get the same done at the earliest.

8. Directors' Responsibility Statement:

As required by sub-section (2AA) of Section 217 of the Companies Act, 1956,
the Directors state:-

(a) That in the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures;

(b) That the directors have selected such accounting policies and applied
them consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of your
Company at the end of the financial year and of the profit or loss of your
Company for the period;

(c) That the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956, for safeguarding the assets of your
Company and for preventing and detecting fraud and other irregularities;
and

(d) That the directors had prepared the annual accounts on a going concern
basis.

9. Consolidated Financial Statements:

In accordance with the Accounting Standard AS-21 on Consolidated Financial
Statements read with Accounting Standard AS-23 on Accounting for
Investments in Associates, the audited Consolidated Financial Statements
are provided in the Annual Report.

PARTICULARS UNDER SECTION 212 OF THE COMPANIES ACT:

As per Section 212 of the Companies Act, 1956, we are required to attach
the Directors' Report, Balance Sheet and Profit and Loss Account of our
subsidiaries. We had applied to the Government of India for an exemption
from such an attachment as we present the audited Consolidated Financial
statements in the Annual Report. The Government of India has granted us
exemption from complying with provisions of Section 212. Accordingly, the
Annual Report does not contain the financial statements of these
subsidiaries. We will make available the audited annual accounts and
related information of subsidiaries, where applicable, upon request by any
of our investors, these documents will also be available for inspection
during business hours at our Registered Office in Mahape, Navi Mumbai,
Maharashtra and also at the Registered Office of the subsidiaries in
Andheri, Mumbai Maharashtra.

CORPORATE GOVERNANCE:

Your Company is committed to maintain the highest standards of Corporate
Governance. The Directors adhere to the requirements set out by the
Securities and Exchange Board of India's Corporate Governance practices and
have implemented all the stipulations prescribed. Your Company has
implemented several best corporate governance practices as prevalent
globally. The Report on Corporate Governance as stipulated under Clause 49
of the Listing Agreement forms part of the Annual Report.

The Company has engaged M/s Makarand M. Joshi & Co, a Practising Company
Secretaries Firm, based in Navi Mumbai to render advisory services and
supervise the over all statutory compliances and adherence to corporate
laws within the secretarial function of the Company. They have had a rich
and varied experience of past ten years in the areas of Statutory
compliance services, Consultancy and services in aspects of Merger &
acquisitions, takeover and joint ventures, due-diligence audit, public
issue/private placement consultancy etc.

Further the Company has also engaged the world renowed Legal Consultants
LEGASIS, which stands for Legal Systems and Integrated Solutions. Legasis
is a process driven organization and stands apart from other LPO companies
because of its distinctive IT-enabled legal support services Legasis' core
strength is in its ability to deliver value to law firms and corporate
counsel by leveraging the industry expertise and legal framework. They
provide the following services: Legal Research, Document Review, Contract
Management, Legal & Regulatory Compliance Management, Due Diligence
Support, IPR Support Services, Litigation Support, Document Management, and
Corporate Secretary Services

AUDITORS:

The Auditors, M/s. K.M.Gupta & Co., Chartered Accountants, Navi Mumbai have
expressed their willingness for re-appointment as auditors of your Company
at the ensuing Annual General Meeting. A certificate from M/s K.M. Gupta &
Co., Chartered Accountants, Mumbai has also been received to the effect
that their appointment, if made, would be within the limits as prescribed
under Section 224(1 B) of the Companies Act, 1956.

The board recommends appointment of M/s. KM . Gupta & Co. as auditors.

K. M. Gupta & Co. is a medium sized C.A. firm in the field of Audit and
Taxation for more than 34 years. The firm has a grueling, hardcore and
penetrating experience in the areas of Accounting, Internal Audit,
Management Audit, Statutory Audit, Company law matters, Taxation (Direct &
Indirect). The firm has well qualified, well trained and highly motivated
man power.

ACKNOWLEDGMENTS:

Your Directors wish to express their appreciation of the continued co-
operation and support of the Central and State Governments, Bankers,
Financial Institutions, Customers, Dealers, Suppliers, Consultants and all
the shareholders. The Directors also acknowledge and wish to thank for the
hard work, dedication and commitment to all the employees.

For and on behalf of the Board of Directors

Dr. P Sekhar Ms.Jayanthi Sekhar
Chairman & Managing Director Executive Director

Place: Navi Mumbai
Date : 21st May, 2010

ANNEXURE TO THE DIRECTORS' REPORT

Particulars as prescribed under section 217(1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of continued Particulars in the
Report of Board of Directors) Rules, 1988:

Conservation of energy and Foreign exchange earnings and outgo:

The operations of your company are not energy intensive. Your Company
evaluates on an ongoing basis new Technologies and Techniques to make
infrastructure more energy efficient. Investments are made on a continuous
basis to reduce energy consumption.

The information on foreign exchange earnings and outgo are contained in the
notes to the accounts in schedule R. Your Company continues to strive to
improve its export earnings.

Development, Technology absorption, Adaptation and Innovation:

Your Company has continually invested into efforts for developing
technologies and products for affordable and high end security products. A
number of products that were IT enabled security and messaging focused, was
introduced during the year and has been actively accepted by the global
market. Your company has also partnered with the local governments and
corporate in developing products that addressed specific local needs.

Specific Areas in which Product Development is carried out by the Company:

a. Security Group which focuses on developing latest products oriented
towards security business. The products include Personal Security for
Israeli Market amounting to Rs 25 Cr, Fleet Monitoring System amounting to
Rs. 10 Cr. An investment of Rs 10 Cr on Cloud Computing where already a
product is launched on Fleet Monitoring System. These products incorporate
the state of the art technologies and also are built to perform under the
rigorous conditions of extreme Indian and foreign environments as certified
by various testing laboratories such as ERTL (Electronic Research Testing
Laboratories), ARAI (Automotive Research Agency India), and CCOE (Chief
Controller of Explosives) etc.

b. Messaging group which focuses on developing latest products oriented
towards messaging business. The investment are predominantly done on mobile
based solution Mobile Control System (RakuBakapu) for Japanese market
amounting to Rs 35 Cr.

Benefits Derived From Product Development:

As a result of the Company's Product Development activities, it has been
able to retain its technological leadership, achieve cost reduction and
retain customer acceptance despite working capital constraints. Improving
export business with development of customer specific OTC (Over the
Counter) Products. Your Company has achieved a brand image in customer's
perception as an innovative and Research oriented company.

Recognition of Your Company Product Development:

Your Company won' Innovative Products Award' by NASSCOM for its Micro Wi-Fi
security System, innovative software for monitoring and securing the Wi-Fi
network activity

Your Company has been awarded the Gold Category, International Quality
Summit award as per the announcement by US based B. I.D (Business
initiatives Directions) in New York, US. This recognition is based on the
criteria of the OC100 quality model, implemented in over 1000 countries.
The International Quality Summit Convention 2010 is given to your Company
on the basis of the business activities and for the achievements in the
area of the quality. B.I.D is one of the most important US based
organizations in the world presenting a quality Award on the basis of
principles.

Future Plan of Action:

In line with the Product Development road map and to put the Division on a
fast track, your company has entered into agreements with a number of
global technology companies in order to bring latest & appropriate
technologies. These products will drive the cost of security down by
promoting mass multiplication.

To develop & encourage indigenous technology as a part of our cost
effective product development strategy. Our endeavor is to emphasize more
on R& D to maintain our design superiority. Further investment in
Development will be planned as and when needed.

Product Development Investments:

Development Investments categorized under various research and development
activities during the year amounted to Rs. 75 Crores, which is 24.59% of
the turnover.

Director believe that the technological development undertaken shall yield
commercial results over 6 useful lives hence has been depreciated over six
useful lives of the software modules. We estimate the useful life of our
capitalized software and amortize the value over that estimated life. If
the actual useful life is shorter than our estimated useful life, we will
amortize the remaining book value over the remaining useful life or the
asset may be deemed to be impaired and, accordingly, a write-down of the
value of the asset may be required.

The Directors have considered the probability of the project proceeding by
assessing the commercial viability of the project, the expectation of
obtaining finance and the requirements of the regulatory processes.

MANAGEMENT DISCUSSION AND ANALYSIS

A. Indian Security Scenario & Security Industry Structure & Development:

Introduction:

As the globalization, interdependence and digital technology have
substantially reshaped the foundations of our society, the relationship
between security and society has grown increasingly complex and dynamic
over the last two decades and India as a whole now confronts a range of
increasingly diffuse threats.

The terrorist assault on India and worldwide not only shifted the balance
between privacy and security but also will change the balance between
freedom and security. To this end, notion of security has been transformed
from an administrative subject to a business continuity issue.

Moreover, as technology continues to advance the methods available to
protect a home premises, or business, the electronic security industry is
reporting an increase in both revenues and consumer demand. Technology
developments that enhance the accuracy ease of use anc speed of operation
of security systems also bolster spending, not only in upgrading existing
security systems but also by improving market penetration.

Market Potential & Size of Indian Security Market:

Moreover, continuous threat of terrorism, development of India's
infrastructure and the overa!! expansion of the nation's civil aviation
capacity promise to increase overall security spending to over US$10-12
billion by 2016. According to our estimates, India's total Homeland
Security spending in the Indian market under all major threat domains will
amount to an estimated total of US$8 billion by 2016. The Hotel
infrastructure security itself is projected to total over US$1.2 billion
and Transport Security (including Aviation, Railway) is projected to US$1
billion. Moreover, the Banking & Financial Services security is estimated
to over US$800 million. Government facilities & real estate is pegged at
US$400 million. Public Health & Healthcare sector needs security spending
in the order of US$660 million and Industry sector demands over US$800
million.

As per RNCOS latest research report, 'Indian CCTV Market Analysis', the
CCTV market in Indian, which is currently estimated at over Rs 750 Crore,
is projected to grow at a CAGR of more than 34% during 2010-2012. RNCOS
research also indicates that demand for IP based or digital or network
video surveillance technology will emerge as fast growing in comparison of
analog technology.

The Indian GPS and Telematics market potential is pegged at US$450 million.
The Indian Location Based Service (LBS) market propels revenue growth of
around US$300 million with LBS service is growing at the rate of 50% and
LBS will cost US$1 to US$2 per month per subscriber in next few years.

Role of Micro Technologies (India) Ltd:

However, providing security in this era of globalization requires more than
one company, or even one government. Security in the 21 st century requires
a concerted, collaborative effort between businesses, governments and
individual citizens. It requires that we push intelligence out to every
edge of these networks, gather and analyze information in real time and
react faster to all threats. In short, providing security today requires
that we all get smarter. To this end, securing the physical and digital
assets of our clients, business partners and employees has been a
significant part of your company business for decades.

Your company has not only recognized that the R&D to be the linchpin of
technological advance, but also realized that its levels and rates of
growth of its expenditures are viewed as reliable indicators of innovative
capacity. Therefore, Micro Technologies has been supporting its R&D
activities to conceptualize, develop and manufacture security products that
succeed in competitive markets and meet environmental and regulatory
requirements.

Your companies self reliance has created itself a diversified and cutting
edge security company, adding innovation to existing technologies as well
as developing new ones.

Your company today has earned its reputation for providing leading security
solutions in India and overseas for Vehicle, Home, Mobile and Premises and
continues to successfully partner with key world players from countries
like Israel, Japan, Belgium to provide security solutions for vehicle,
Mobile and personnel and more in those countries.

Israel Market for Micro products: Micro Products have a huge potential for
Vehicle, Premise & Emergency Security Services with business potential of
around USD 10-15 Millions. Your Company & Bio-Guard Systems , a Israel
based Company have formed a Joint venture for expansion of Micro products
in European market with the business potential of around USD 5-6 Million
and the expansion will be in the regions of Poland & Portugal.

Japan Market for Micro products: Japan, is one of the lucrative market for
Micro products. Your Company has Products like Raku Raku Backup used for
remote backup of users' data from Mobile Handset which has will given a
boost to Wireless application and systems with a revenue potential of USD
7-10 Millions.

Sri Lanka Market for Micro Products: With Micro Products the niche

Srilankan market can be targeted with driving the business network and
trends. Your Company entered into a business partnership with Sri Lankan
based firm I Systems for vehicle security, Home security & Mobile security
based products with a revenue generation of around USD 4-5 Million.

Your company has developed a mindset to nurture its Public and Private
Protection sector to accomplish its mission through recognition of the
merits of shared assistance and cooperation. To this end, it is in
consultations with a few Indian State Governments to develop Security
Technology Zone (STZ), implementing Safe & Secure City project, providing
video blanket to major cities and many more. These projects will not only
make India a global manufacturing hub for security products & solutions but
also save huge foreign exchange through paying custom duties on electronic
security gadgets. These projects will also attract large FDIs from various
countries in the world and will create lots of employment opportunities for
both skilled and non-skilled workers in India.

Your company envisages an Integrated Sustainable Rural Development Strategy
that is intended to spearhead its commitment to collaborate with Ministry
of Rural Development towards an attainment of the internal capacity for an
integrated sustainable development of rural India through technological
prowess. However, Micro Technologies has realized that Information &
Communication Technology (ICT) can be critical driver of making cohesive
rural communities with universal access to social amenities and of taking
active part in decision making. So, the company is in consultation with
various state governments to implement Information & Communication
Technology (ICT) as a technology driver to empower rural development.

Your company has brought out a publication entitled 'India's Security
Requirements A Global Perspective, that will help the readers to become
more knowledgeable and enlightened about the scope of security challenges
faced by India. Considering both physical and cyber threats facing our
nation, books such as this can make an important contribution by enhancing
the understanding of the security threats faced and solutions that can be
contemplated.

B. Micro Technologies (India) Limited and its Subsidiaries:

1. Your Company is a leading global developer, manufacturer and marketer of
security devices. Product lines include the much-needed security devices,
life support systems and web-based software. It is recognized as an
innovative company at the cutting edge of security technology and one of
the first companies to develop security systems using SMS (Short Messaging
Services) on a mobile GSM platform. It aims at displaying not just the
technological innovation and prowess but also the product diversity in
various segments of vehicle, premises, mobile, other assets and now entered
into Energy & Rural informatics.

Micro Retail Ltd., the subsidiary of Micro Technologies (India) Ltd. is one
amongst the first companies in the Security Retail Sector. MRL (Micro
Retail Ltd.) encourages the spirit of entrepreneurship with its essence
lying in an agreement between two independent undertakings, the MRL and its
retail partner. MRL is promoting a new concept in retail sector in terms of
retailing the Life Support System, Messaging & Security products in India
and overseas. Retailing is now the fuel for expansion of the MRL system.
Indian retail industry is the most promising emerging market for
investment. In 2007, the retail trade in India had a share of 8-10% in the
GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is
expected to reach 22% by the end of 2010.

MSSL (Micro Secure Solutions Ltd.) the subsidiary of Micro Technologies is
a company engaged in providing a range of Premises security products for
commercial & residential premises with an exceptionally high level of
customer satisfaction, irrespective of the type of the premises. MSSL's
security solutions are backed by innovative, quality driven and cost
effective products developed by your Company. MSSL product range results in
savings for their clients/customers by addressing the total security needs
and reducing obsolescence, which protect people and their property. MSSL
caters to a range of clients across diverse sectors such as Retail,
Corporate, Households, and PSUs in India and abroad.

ii. Business Strategy

The Company follows cohesive strategy in developing its business:

Creation of new products: Your Company intends to provide Research &
Development along with the initiation of Innovative Technology particularly
with a view to capitalize on the first mover advantage that it has in the
IT based security industry and further plans to expand the size of its
market, while mitigating business risk by reducing its dependence on only a
few products.

Expansion and enhancement of new ranges of security products: Your Company
intends to expand and enhance its range of products. The Company operates
in a highly technical and dynamic field. Your Company believes that the key
to success is to offer innovative and technologically advanced products.

Developing marketing and sales alliances: Your Company intends to grow and
strengthen its strategic alliances with distributor networks, which will
assist the Company in sales and delivery

Geographical expansion of product offerings: Your Company intends to
further expand the client base for its product offerings. Your Company
proposes to carry out the expansion with the help of strategic acquisitions
and by entering into strategic alliances, with a view to eventually
establishing a greater presence in new markets.

Subsidiary Formation: Your Company has initiated forming subsidiaries for
its main product line so as to create an impact and concentrate on the
product based market segment.

Maintenance of the existing customer base: Your Company trains the staff at
Micro Shoppes, enabling them to meet any customer requirement. Your Company
also maintains a 24-hour customer care service. Further, as the Company
develops its portfolio of products and services, its existing customer base
should continue to grow.

Brand equity: Your Company intends to invest in developing and enhancing
recognition of its brands, including its corporate name, through brand
building efforts, communication and promotional initiatives such as
interaction with industry research organizations, participation in industry
events, public relations, media campaigns and investor relations efforts.

Maintaining strategic focus on the Indian market: Your Company believes
that India remains strategically important to its growth. The Company
intends to continue to focus on growing its businesses in India. It will
also continue to utilize the experience and expertise gained through Indian
operations to expand globally.

Growth through acquisitions: Your Company evaluates potential acquisition
targets that offer an opportunity to grow its business by increasing its
international presence.

iii. Segment wise Performance

IT - 8
MESSAGING - 19
SECURITY - 73

iv. Opportunities & Threats:

The concept of complete security in vehicle, home and mobile security is
making its place in the mind of people. With burgeoning economy, plenty of
disposable income, and breakdown of traditional Indian nuclear families the
sense of having complete security has set in amongst minds of many people.
The opportunities thus presented are immense by these factors and MTIL with
right set of integrated products and solutions cater to such requirements,
to exploit the full potential of these opportunities. Presently low
penetration in the premises, automobile and other asset security market
hence there is a huge potential demand for security products. Increasing
rate of crime and terror has made security systems unavoidable for
individuals and personal assets like that of homes, offices and commercial
establishments. With a core competency in Research and Development newer
range of security products with advance technology has been the most
competitive opportunity for your Company.

Your Company started development of products, which are ahead of their time
when it came to other companies developing such similar products. Hence,
MTIL has basically a first mover's advantage. The products from MTIL have
been innovative and provide comprehensive security as against the other
products. Thus, there is hardly any competition in vehicle, home and mobile
security domain. Existing and potential new competition with cheaper
options available in the market have always been a persistent threat.

v. Outlook, Risks and Concerns:

Your Company's risk management activities include a review of top risks
including exposure, potential impact and mitigation plans. Your Company has
in place various risk management practices in the areas of physical
security, information security, business continuity management, project and
account level risk management. The broad features of these activities are
discussed under the heading 'Risk Management Report' forming a part of this
Annual Report

vi. Internal Control systems and their adequacy:

Your Company has a proper and adequate system of internal controls
commensurate with the size of your Company and the nature of its business
to ensure that all the assets are safeguarded and protected against loss
from unauthorized use or disposition, and that transactions are authorized,
recorded and reported correctly and adequately.

Your Company's internal controls are supplemented by internal audits,
review by management and documented policies, guidelines and procedures.
The internal control is designed to ensure that financial and other records
are reliable for preparing financial information and for maintaining
accountability of assets. All financial and audit control systems are also
reviewed by the Audit Committee of the Board of Directors of the Company on
a yearly basis.

The CEO and CFO Certification provided in the CEO and CFO certification
section of the Annual Report discusses the adequacy of our internal control
systems and procedures.

vii. Financial Performance with respect to operational performance:

Your Company's ability to improve profit margins will depend on factors
that include the degree to which and the speed with which your Company will
be able to increase operational efficiencies and reduce operating costs.
Delays or difficulties in implementing and consolidating process
improvements, such as those designed to reduce travel, telecommunication
and customer service costs, or installing new products and services and in
consolidating various functions, including administrative functions,
eliminating duplicate operations and consolidating facilities could
adversely affect the timing or effectiveness of cost reduction and margin
improvement efforts. Your Company has an effective system of forecasting
and budgeting for costs so as to ensure optimum utilization of resources.
It is continuously i~ the rocess of reviewing its systems and procedures to
implement tighter controls.

Your Company's Business Partners and its ability to retain customers are
important factors in the understanding the revenue and profits of your
Company's businesses. Your Company's ability to retain existing customers
depends on a number of factors, including:

* Customer satisfaction
* Service offerings by competitors
* Customer service levels
* Price

Contribution of Business Partners to growth:

Longer the customer relationships are, they are more likely to be more
profitable. A significant portion of your Company's revenues is generated
from existing clients and your Company has also been successful in adding
new clients every year. Moreover your Company owns all the intellectual
property rights associated with its products hence it has a complete
control over the pricing. However, there can be no assurance that the
Company would be able to retain all/significant proportion of its existing
clients.

Financial Performance

Cost analysis 2009 2010

Selling and Distribution vis-a-vis Sales 3% 2%
Interest vis-a-vis Sales 1% 2%
Depreciation vis-a-vis Sales 11% 12%

Returns Ratios

EBITDA 44% 40%
PBT 31% 25%
PAT 27% 20%
RoCE 28% 25%

Growth Ratio

Net sales 34% 35%
EBITDA 35% 25%
PAT 19% 2%
EPS 17% 2%

Other Key Ratios

Debt Eqity Ratio 0.35 0.40
Debt Asset Ratio 0.23 0.26
Current Ratio 6.34 5.91
Quick Ratio 4.76 4.38

Viii. Human Resources:

The Human Resource department of Your Company has been very active in
creating a competitive organizational process to articulate new agenda's
for the employees. Forming the right kind of attitude among its employees
towards the organization strongly depends upon the Human Resource
Department.

In July 2009, renewed policies were introduced by the HR department to make
more flexible, competitive and enthusiastic environment in the
organization. Many Training programs related to personality development,
sales and Quality Control were organized by the HRD of Your Company.
Product Knowledge Sharing session for all the employees other than the
product engineers so as to make them aware about the various development
the company is making in terms of its utility and feature with some
progressive changes in the induction program.

C. Intellectual and Knowledge Capital:

The unprecedented success of your company over these years has proved that
it has always been up to the challenge. It has also built in to the company
a robust knowledge management system keeping its long term objectives in
mind. But this has to be a continuing program that is not only geared to
developing new technologies but also to studying the evolution of the
global market and to plan the possible scenarios under which your company
has to work in the future. Your company also realizes that it cannot grow
entirely on its own without the support of the entire business sector.

Your company used its knowledge resources in developing a National Security
Plan wherein understanding the overall security requirements in India,
right from addressing the external threats to the level of safeguarding the
internal threats. The attempt to construct a National Security Plan has
been translated into a book 'India's Security Requirement A Global
Perspective' which qualifies and quantifies the right set of information
from the Security.

D. R & D:

Your Company is aggressively expanding its business to various geographies
of the globe. We have come across variety of needs in terms of security
systems. With an active team of professionals who are very much cognizant
about the fact that continuing innovation is critical and one cannot depend
on simply milking currently saleable products. It's about re-inventing the
business process and building entirely new markets that meet untapped
customer needs. We have organized ourselves to move faster with the pace of
the changing consumer demands. In the last few years, Your Company have
been successfully launched 250+ products in the market. We have also come
up with products like Micro Jai Kisan for the rural sector of India which
is a breakthrough in terms of research and development.

Your Company not only stand out with its exclusive range of innovative
technologies but also is a trend setter in meeting the current requirements
in the field of security. To keep fast pace with strategic technologies for
the masses, your company has shifted its focus on new areas like Wi-Fi and
Cloud Computing. Your Company is the first organization to use cloud
computing for the security segment and has given a path-breaking innovation
in security product by embedding Cloud Computing in its innovative, fleet
monitoring system of Micro FMS. Taking into account the increasing threat
perception, your Company came up with Micro WSS (Wi-Fi Security System).

E. Product Line:

a. Security & Tracking Products:-

* Micro VBB (Vehicle Black Box): Micro VBB is a messaging and anti-theft
security system, in which various sensors are installed into the vehicle.
The owner of the vehicle will receive an SMS alert on the occurrence of
various events concerned to his vehicle. Micro VBB is available in various
models with various features, which can be customized to suit individual
requirements in terms of cost and functions. VBB incorporates a GSM device,
which acts as a communicator between user and the vehicle. Using a mobile
phone, the user can control the vehicle and can immediately immobilize the
vehicle through an SMS

* Micro HSS (Home Security System): Micro HSS is a premises security
system, which can also be customized to specification and is available with
various features and in different models to suit cost and functional
requirements. It is a security system deployed on the premises to alert the
registered user through SMS in case of any unauthorized or prohibited
access in the user's premises.

* Micro BTS (Buddy Tracking System): Micro BTS, a location based product,
is geared towards delivering highly personalized services to the present
generation of mobile telephony users who are constantly on the move. Micro
BTS enables the subscriber to stay in touch when they travel to another
region or country. It is sort of a community-based approach to GPS tracking
where every user is in control. Using this system, one can share one's
position with his/her friends and family, creates and joins groups, records
and reviews his/her track history.

* Micro FMS (Fleet Monitoring System): Micro FMS can be used to manage a
fleet of vehicles efficiently using an on-line inventory system, which can
process a variety of data and generate reports to suit various
requirements. Fleet monitoring provides road transport companies and
private fleets with a comprehensive, integrated suite of functions and
services to address the end-to-end transportation process from vehicle
dispatch through logistics management and settlement.

* Micro BSS (Bike Security System): Micro BSS is a small hardware device
developed for the security of all type of two wheeler vehicles. In the
event of movement or tampering of the bike, the owner is immediately
alerted through an alarm. Micro BSS with its innovative features has a
real-time alert system which alerts the user immediately as soon as anyone
tampers with the bike.

* Micro SSS (Shop Security System): Micro SSS is a security system deployed
in Shop to alert the registered user of any unwanted access to one's Owner
Shop. The Registered User is warned about this intrusion through an Alert
Message. It provides the Registered User with various controls through
Messaging Service. These Users will also receive Intrusion Message on their
Mobile phone if in an enabled state. Apart from Messaging as a mode of
intimation during any anomaly such as intrusion, smoke detection or Gas
Leakage, the system is also incorporated with audio effects through Siren,
which is an additional facility to the system.

* Micro OSS (Office Security System): Micro OSS is a security system
deployed in office premises to warn the registered user of any unwanted
access. The registered user gets intimation through an Alert Message. Any
anomaly such as intrusion, smoke detection or Gas Leakage it is intimated
also through the incorporated audio system which gives the sound effects of
Siren, which is an additional facility to the system.

* Micro IBB (Intelligent Black Box): Micro IBB is a system combining
custom-built hardware and a security system for the control of an unmanned
location. Micro IBB helps to reduce and prevent destruction, losses and
human suffering caused by calamities, accidents, anomalies by timely
detection and dissemination of (add) information to the correct recipient
in the correct format and the correct communication device.

* Micro ISS (Intelligent Surveillance System): Micro ISS is unique one pack
solution of Premises Security. Micro ISS come bundled with all the
customized solutions as per the client requirement whether it is an access
control or a Power failure or real time monitoring during the night or
intrusion detection. Micro ISS would be one solution to all the
requirements of security needs. With several innovative features of live
monitoring with CCTV camera both internally and externally and there is
24/7 recording at the server which can be viewed at any point of time with
authorization from anywhere in the world in seconds. The external cameras
are weather proof cameras for non hindered and clear recording with special
night vision features which can even clearly record the videos in the
absence of light. This seamless and simple to operate and maintain,
solution reduces the manpower needs at the same time it increases the
security capability and thereby reducing the costs of security.

* Micro DMS (Disaster Management System): Micro DMS helps to prevent or
reduce the destruction, loss, human suffering or any economic losses caused
by the Calamities, Accidents, and Anomalies by immediate detection and
dissemination of timely, correct and relevant information to the correct
recipient in the correct format and the correct communication device to
mitigate the preparedness planning. It is a customized technology, which
meets your security requirement. Micro DMS integrate many types of sensors,
audio-visual equipment and is the best solution to meet your specific
needs. Micro DMS also has inbuilt integration of Fire Management System. It
is a mechanical device fitted in a secured place, wherein it can be
effectively used as a warning to escape from fire, in case of sudden
outbreak of fire. Based on the signals captured by the server appropriate
messages for intimation are sent to the various registered users through
mobile or email immediately.

* Micro VDP(Video Door Phone): Micro VDF an Integrated Intercom Security
System that can be integrated with the HSS- Home Security System into an
easy to use, convenient and affordable system. It is a system that enables
both video and audio communications between users over a commonly connected
telephone line. It is a multi-purpose product for monitoring and
identifying visitors before letting them in your home.

* Micro WSS (Wi-fi Security System): Micro WSS allows the administrator to
monitor the activity of the user and provide information about the Wi-Fi
access through the authorized web account. It automatically detects the
change in security settings and sends an alert email containing the
information aboutthe new machine.

* Micro LNTS (Lost Notebook Tracking System): Micro LNTS is a software
product embedded on notebook hard drives, allowing systems to be tracked as
soon as they are connected to the Internet. Micro LNTS not only tracks &
recovers stolen computers - it deters theft. When a laptop is loaded with
Micro Lost Notebook Tracking System, tracking-agent software silently
connects with the company's monitoring centre whenever the device is
connected to the Internet. The user may login to their web-based personal
tracking and monitoring page through www.microlnts.net to view and
track their laptop and that too from any corner of the world.

* Micro CARMS (Cyber Activity Remote Monitoring System): Micro CARMS is a
unique solution offered by Your Company keeping in view the depth of
involvement of the computer facility in exploring new avenues of crime and
its inference. Micro Cyber Activity Remote Monitoring System (CARMS) a
powerful monitoring tool that aids to curb on cyber crime and maintain a
serene environment within cyber cafes. Micro Cyber Activity Remote
Monitoring System (CARMS) showcases the power of technology and the true
utilization of technology for restoring peace in society by keeping a check
on the various cyber crimes.

* Micro LMTS (Lost Mobile Tracking System): Micro LMTS is a cost-effective
solution to secure compatible mobile phone handsets by installing the
software into the handsets. The Company believes that LMTS is the only
available software product for mobile phone security, which caters to
different models of various handset manufacturers. Micro LMTS detects any
change of the mobile phone SIM card. This product is globally downloadable
from the web with present users in various countries.

b. Messaging Products:

* Micro MLL (Micro Life Line): Micro MLL is an intelligent scheduler and
communicator, the Company believes Micro MLL employs a unique and effective
mode of communicating information with minimal time and effort. Micro MLL
is a three-dimensional messaging system, which enables SMS, e-mail and
voice messaging at a click. It also facilitates group messaging and
emergency messaging.

* Micro MCS (Mobile Controller System) : Micro MCS is highly advanced
software that helps to remotely manage your own mobile handset with the
help of add-on recipient mobile number. It creates a backup of all the
contact details even after the loss of mobile handset and the registered
owner can retrieve; delete the contact details, MMS and SMS with the add-on
users mobile.

c. IT Products:

* Micro SAMS (Student Attendance Management System) : Micro SAMS is unique
software and an automated system for access, attendance and effective
communication. Micro SAMS generates various MIS reports in order to take
prompt action related to Attendance. RFID/ Biometric based login and logout
for Lecturer, students and guest lecturers with image is captured using
webcam for attendance. The system alerts the administrator about any
discrepancy in the reporters.

* Micro EVPMS (Exhibitor Visitor Participant Management System) : Micro
EVPMS is a Next Generation system prepared for the management of
exhibitions, keeping in mind the needs of Exhibition Industry. It gives
complete solution to the big organizers to manage the participants list and
details and make proper use of it when needed. It is also useful for the

Exhibitors to manage the visitors. The visitors use this to keep a track on
the current and upcoming exhibitions and other details about the exhibition
and the exhibitors. EVPMS is an automated system for Exhibitions and
benefits Organizers, Exhibitors &Visitors.

d. Energy Products:

* Micro EBB (Electric Black Box) : Micro EBB is developed for Power Supply
Plants and Energy Distribution systems that could give daily/periodic
details of power (Electricity) consumption by individual consumer and also
provide web accounts for them to view their use of power! Thus helping them
to individually monitor their total unit power consumption through the web
For Electricity Provider - Electricity consumption recording system This
helps the power supply plants to keep a record on the total energy
consumption in total units for each of their clients and misuse thus
preventing them to exceed a particular limit. The system comes with added
features of security management.

e. Consumer Durable Products:

* Micro Power: Micro Power Sine wave Home UPS is an exceptionally powerful
top of the line technology product based on Digital Signal Processing with
in-built Smart Battery management, 5 stage batteries Charge Control System
and an in built Diagnostic aid. It has seven audio alarms to give an idea
about Reset, System Fault, Overload, Short Circuit, Low Battery, Water
Reminder or if there is a weak DC connection.

f. Identity Management:

* Micro UID (Unique Identity System) : Micro Unique Identification Card
will be a leap in personal identification. It will store information such
as Date of Birth, PAN, Residential, Banking, Personal Identification,
Health and Passport details along with even information on RTO Registration
and Property details using the biometric method. All information will be
incorporated in a chip designed like a smart card. Micro UID enables to
create a one stop database for individual information and appropriate
authentication. The system will store unique information of an individual
for emergency access. The ID card will use biometric information of the
individual for identification as an additional avenue for authentication.
The ID card will also have all the information in a backup system at a
centralized location, which will be accessible to the concerned persons.
Verification is possible only by the user, and the use of the biometric
device, along with verification codes, will reduce the possibility of
duplication to almost nil.

9. Rural Informatics:

* Micro Jai Kisan : Micro Jai Kisan is a MOBILE BASED REMOTE MANAGEMENT OF
MOTOR PUMP SET for the Farmers in order to save time, -Energy and Water.
Micro Jai Kisan for Automated Motor Pump (AMP) It will help farmers and
cultivators to plan their farm irrigation in order to save time, save water
and save labor. Once the small yet hi-tech device is installed the
farmers/cultivators can switch on/off his/her motor pump from anywhere and
at anytime by using a phone call (Mobile Phone or Land Line or PCO). The
Key Features include Mobile based remote management of motor pump sets,
Start or stop motor pump set from any location through phone call, Phone
call can be made by mobile or land line or PCO , This unit tells you if the
power is present or not.

h. New Upcoming Products:

* Micro ERS (Emergency Response System): Micro ERS is location based
product that allows the user to intimate his recipients via SMS and Email
about his/her real time GPS/GSM based location; along with date and time,
when he/she is in emergency. It is one touch response system, typically a
three-digit number which can be easily remembered and dialed quickly. The
same information can also be viewed on a GPS map on the user's web account.

F. Other Initiatives

CSR (Corporate Social Responsibility)

'India's Security Requirement A Global Perspective'

Your Company under the guidance of Dr. P Sekhar (Chairman and Managing
Director) done extensive amount of work for last few years in developing
the National Security Plan wherein understanding the overall security
requirements in India, right from addressing the external threats to the
level of safeguarding the internal threats. The attempt to construct a
National Security Plan has been translated into a book 'India's Security
Requirement A Global Perspective' which qualifies and quantifies the right
set of information from the Security perspective and give more specific and
detailed information to number of multinational companies who are seriously
weighing their options to enter as manufacturers, system integrators and
solution providers in India or form local alliances and thereby helps
global companies gain acceptance and visibility in India. The first edition
on India's Security Requirements has exposed a detailed requirement of over
8 Billion USD worth Indian Security Market for Critical Infrastructure
Security to the Global audience in the next few years.

We have also released the 2'd edition of the book with the following
upgrades.

The contents as well as the data pertinent to each sector are refurbished

A comprehensive analysis regarding the estimation of the security
expenditure on each sector is carried out.

An essential component of our corporate social responsibility is to care
for the community. We endeavor to make a positive contribution to the
underprivileged communities by supporting a wide range of socio-economic,
educational and sports initiatives. Many of the programs are driven by
active participation from our employees. Our commitment to address
important societal needs extends throughout our philanthropic programs. We
initiated many CSR activities during the current year, we actively
participated in the fund-raising program organized by Rotary Club of Navi
Mumbai Sunrise were we gave free stalls to our associates to display their
range of service and products.

Micro Secure Think Tank (MSTT):

Micro Secure Think Tank (MSTT) is a non-profit security forum to promote
Security expertise and advisory services in order to educate and spread
awareness about new and improved technology.

The issues discussed under the MSST forum:

1. Insights of Hotel Security-Citizen's Perspective

2. Organization responsibility for security of their premises, staff and
visitors

3. How parents must be responsible for what kids do on Internet

MICT Training Program:

Through MICT Training Program your Company offers a culture that fosters
the total well-being of each employee. To reach the professional potential,
Your Company offers a myriad of tools and resources to help each
individual. Your Company also host a Learn and Earn offer through its
training division 'MICT'- Micro Institute of Computer Technology. The prime
idea behind the concept of MICT is to train all the budding programmers and
shaping the future of tomorrow's IT world. The program is articulated in
such a way as to provide hands-on work experience on various projects. MICT
has been poised with not mere theoretical training but also a professional
practical training providing live training & education in Embedded as well
as Software fields wherein the trainees will gain online knowledge while
facing & solving real life difficulties in software development.

The objective of MICT is to teach latest IT based security technology to
aspiring professionals with the aid of practical knowledge.

Micro Entrepreneurship Program:

Micro Entrepreneurship Program, a new concept where the Company welcomes
young entrepreneurs to turn their financial dreams into reality.

The objective behind Micro Entrepreneurship Program is to promote and
identify entrepreneurship qualities, provide a platform for growth and
infrastructure for their success and each individual is provided an
opportunity in terms of technology to tap the 13213 and 132C markets along
with a global exposure with exclusive range of Micro Products. Each Micro
Product in itself has more than a $ billion global market; technology
licensing of product; and retail selling is the catch of Micro
Entrepreneurship Program.

Working on phase wise revenue based model and tapping Major potential
Market executing market specific strategies with a strong support of Your
Company are some of the key driving factors of this program which can be
duplicated into other similar markets.

G. Reach

Domestic:

Your Company has made redundant effort to reach out to its clients. Your
Company was amongst the few security companies, entering the retail
Industry.

Micro Retail Ltd. (MRL) has introduced static as well as mobile retail
partners entitled 'Micro Shoppe' (MS). The concept behind the launch of
MICRO SHOPPE is to bring to the masses the innovative products and create
awareness for the high-end technology and IT enabled safety and life
support products developed by Your Company. The aim is to build the success
of Security Products through MICRO SHOPPE by extending the brands to all
the places across the nation. MRL has also appointed several 'Super
Stockist' in multiple cities to enhance the availability of the products in
their specific region. Reaching the customers to a larger extend MRL also
concentrated on making numerous 'Dealers' & 'Direct Sales Associates'
(DSAs) to market and sale IT enabled security products and life-support
system, developed by MTIL, in local as well as global markets.

Micro Service Centers: MRL also have outlets responsible for Installation
and Sales Support known as Micro Service Centers. These centers provide
prompt services after the sale of the products in terms of Installation and
Support. These outlets are well equipped with trained technical staff.
These Micro Service Centers (MSC) work as a supporting unit with Micro
Shoppe or work as an entirely different unit.

International Market:

Your Company has captured the major part of domestic market but it has also
been very active in acquiring the International market with its well
equipped with latest technologies. We ensure that our product /solution to
meet the international standards of quality and service. We have marked our
presence in the international market like South Africa, Japan, Israel,
Australia, and the Middle East countries like Saudi Arabia Mongolia,
Tanzania etc. We are still growing with leaps and bounds.

H. Brand Visibility:

After a huge exposure in print and electronics medium, lately in 2009 your
company ventured into a new advertising and branding strategy, 'Social
Media Marketing', a rapidly moving medium in today's advertising and public
relation world. The other mediums which your company adopted include the
booming Mobile marketing with attractive'SMS Campaigns' with multiple
schemes and offers and Online Marketing, taking the most out of the
popular websites and redirecting them to ourwebsites for product purchase
and brand visibility.

The benefit of these campaigns eases the communication with the target
audience. This campaign proved very effective in terms in branding,
visibility and product selling.

RISK MANAGEMENT:

Your Company's risk management activities includes a review of report on
top risks including exposure, potential impact and mitigation plans. Your
Company has in place various risk management practices in the areas of
physical security, information security, business continuity management,
project and account level risk management. which are reviewed on a
quarterly basis by the Audit Committee of the Company.

The Committee acknowledges that the Company currently faces highly unusual
market circumstances and believes that the current Risk Framework along
with risk assessment, monitoring and reporting practices are adequate to
cover foreseeable material risks facing the Company and will strengthen the
risk management practices across the Company.

RISK ASSESSMENT AND REVIEW:

Any Company needs to ensure that it has a proper continuous risk
identification and management process. This process will generally involve
the following steps:

Identifying, ranking and sourcing risks inherent in the Company's strategy
(including its overall goals and appetite for risk);

Selecting the appropriate risk management approaches and transferring or
avoiding those risks that the business is not competent or willing to
manage;

Implementing controls to manage the remaining risks;

Monitoring the effectiveness of risk management approaches and controls;

Learning from experience and making improvements.

The following are the broad features of your Company's Risk Assessment and
Review structure:

1. Assessment of exposure to counter parties such as clients and vendors
including credit evaluation

2. Risk assessment of business and regulatory environment

3. Review of risk management practices relating to physical security,
information security and other operational risks

IDENTIFICATION OF RISKS:

The Management has identified below certain areas of risks where your
Company is vulnerable:

Economic Risks:

This year the world economy has recently witnessed recessionary times of
such magnitude which have never been experienced or documented in the past.
Your Company has been able to tide over the tough times and hold its ground
through the past four quarters. Though apparently there has not been any
damage caused by the recession but there always exists a risk in relation
to the same.

Competition risks:

Although the Company operates in a niche market, new competitors may enter
the markets or current competitors could decide to focus more on these
markets, and thereby intensifying the already highly competitive conditions
that already exist. These new entrants and existing competitors could offer
or introduce new technologies, offer a different service model and thereby
endangering the Company's present business. But the Company has been a
pioneer in innovation and has a very strong product pipeline to support its
endeavors.

International Operations Risks:

Your Company has made its presence felt the world over by expanding in the
Middle east, South East Asia, North America etc. International operations
are subject to various risks which could adversely affect those operations
or the business as a whole, including:

Costs of customizing products and services for foreign customers;

Difficulties in managing and staffing international operations;

The burdens of complying with a wide variety of foreign laws; and

Exposure to local economic conditions.

Credit Risks:

Your Company's ability to recover dues from a client is dependent on the
credit terms given to the client. With clients and operations all across
the world, effective procedures and recovery mechanism have to be in place
to avoid excessive bad debts. The Company constantly reviews credibility of
existing customers and follows rigorous credit checks on prospective
clients before fixing credit limits and credit periods.

Liquidity Risks

The Company's cash flow is dependent to a large extent on the credit terms
extended to clients and the effective recovery of dues from them. Delays in
recovery of dues, has a direct impact on the Company's liquidity position.
Owing to the current uncertainties in the world economy and possible
down-trends in the fortunes of the clients, the Company's working capital
cycle time may be affected impacting liquidity of the Company. But the
financial results of the Company portray the ability of the company to
manage and maintain liquidity despite the negative outlook all around.

Legal, Conractual and Regulatory Risks:

As the Company operates in various countries round the world, it requires
legal compliances of all rules, regulations and laws in these countries.
Non-compliance exposes the Company to penal and or monetary repercussions
besides generating negative publicity for the Company. The Company has
appointed legal counsel and consultants in the various countries where it
operates to ensure compliance with their respective regulations.

Technological Risks:

The Company's ability to remain competitive depends on the ability to adapt
to changing technology. As a provider of information technology services,
the Company strives to adapt and respond to the technological advances
offered by competitors and the technological requirements of clients, in
order to maintain and improve the Company's competitive position and

thereby avoid obsolescence of any kind.