Annual Report - NIIT Technologies - 2009-2010

NIIT TECHNOLOGIES LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Dear Shareholders,

The Board of Directors of the Company take pleasure in presenting the
report on its business and for the financial year ended March 31, 2010.



Financial Results

The highlights of the operating financial results for the financial year
2009-10 are as follows:-

(Figures in Rs.mn except for EPS)
Particulars FY 2009-10 FY 2008-09

Consolidated Revenues 9,137 9,799

Standalone financials:

Income from operations 4,936 5,021

Other Income 113 396

Total Income 5,049 5,417

Profit before deprecation and taxes 1,253 1,277

Depreciation 246 296

Provision for tax & deferred tax 57 97

Profit After Tax 951 885

Earning Per Share (Basic) (In Rs.) 16.19 15.07

Review of operations:

The year gone by witnessed extreme turbulence and volatility. While robust
fundamentals ensured that the recessionary impact on India was relatively
moderate, nonetheless in an increasingly globalised environment, India also
could not escape declining GDP growths, rising unemployment and weakened
consumer demand. The government induced monetary and fiscal measures across
global economies propelled the recovery and now the continued sequential
growth in revenues and margins reflect that the worst of the impact on the
economic environment is behind us.

Inspite of the recessionary forces and downturns, the Company was able to
post good results. The total consolidated revenues were down by Rs. 662 mn
from Rs 9,799 mn in the previous year to IRS. 9137 mn for

the year 2009-10. The profit before taxes for the same period grew to Rs.
1421 mn from Rs.1389 mn in the previous year. The consolidated net profit
after taxes for the year 2009-10 attributable to equity shareholders after
minority interest stood at Rs.1264 mn as compared to IRS. 1148 mn in the
previous year. During the year, the Company's focus on the chosen industry
verticals & endeavor to improve performance in businesses across all
geographies, helped achieve visible growth rates in revenue & continued
profitability. The revenue profile of the Company is well diversified
across the three main geographic areas with EMEA contributing 43% to
revenues, 34% from Americas and the balance from Asia and Australia which
has helped the Company mitigate the single geography risk. The company has
identified cloud computing as a thrust area for the coming time.

Outlook:

Continuous innovation in newer service offerings like Cloud Computing,
strong domain capabilities and inorganic initiatives to expand its market
access will be key to the growth in the future years. In the last couple of
years, the Company has embarked on a number of initiatives to turn its
business model from a linear, IT services-centric one to a non-linear one.
The Company believes these initiatives catalyze its momentum and improve
its profitability in the future The Company continues to scale its
infrastructure to support its long-term growth strategy, which includes the
setting up of an SEZ in Greater Noida.

Employee Stock Option Scheme (ESOP):

During the year 2009-10, 61,150 equity shares of the Company of Rs. 10/-
each, fully paid up, were allotted under the Employee Stock Option Plan
2005 of the Company upon exercise of stock options.

Under ESOP 2005, the Compensation Committee, in their meeting held on 19th
October, 2009 has granted stock option to select employees/directors of the
company/ subsidiary companies. Details of options granted under ESOP 2005
are annexed to this Report, as annexure B, in accordance with SEBI
(Employee Stock Option Scheme and Employee Stock Option Purchase Scheme)
Guidelines, 1999, and modifications thereto.

Reserves:

The Company has transferred an amount of Rs 95 Mn to General Reserve (RS.
88 Mn last year).

Dividend:

The Board has recommended a dividend of Rs.7 per equity share of Rs.10/-
each (previous year Rs.6.50 per equity share) on the share capital, subject
to approval of the shareholders at the ensuing Annual General Meeting.

Increase in Capital:

During the year the Company issued 61,150 shares on the exercise of stock
options under the Employee Stock Option Scheme of the Company (ESOP 2005).
Due to this the outstanding issued, subscribed and paid up equity capital
increased from Rs. 587,266,950 to Rs. 587,878,450 as at March 31, 2010.

Subsidiary Companies:

As on March 31, 2010, the Company has subsidiaries in the United States of
America, Japan, United Kingdom, Netherlands, Belgium, Germany, Switzerland,
Austria, India, Singapore, Thailand, Australia, Canada and Dubai.

As required under the Listing Agreement with the stock exchange(s) a
consolidated financial statement of the Company and all its subsidiaries
has been prepared and attached hereto.

The Company has been granted exemption by the Ministry of Corporate Affairs
vide its letter No, 47/183/2010-CL-III dated April 06, 2010 from attaching
the audited accounts of the subsidiaries to the annual accounts of your
Company for the current year. The annual accounts of the subsidiary
companies and related detailed information will be made available to any
member of the Company or subsidiary company upon request and are also
available for inspection by any member of the Company, during the business
hours, at the registered office of the Company and that of the subsidiary
company concerned. The annual accounts of the individual subsidiary
companies shall also be made available on the website of the company.

The process of winding up of NIT SmartServe Limited, U.K, a step down
subsidiary, was completed during the financial year and accordingly the
name of the Company was stuck off by the Register of Companies, Companies
House, U.K on 28th July, 2009, and accordingly stands dissolved effective
from this date.

The Company has signed an agreement replacing the Joint Venture Agreement
with Adecco Group which provides for, amongst others, the transfer of the
entire shareholding held by one of the Joint Venture Partner namely Adecco
Holding Europe BV in the Joint Venture Company 'Adecco NIIT Technologies
Private Limited' to the Company upon completion of certain formalities,
after which the Company would become the holding company.

During the year under review the Company entered into an exclusive
partnership with Hitachi Information Systems Limited to offer services in
Cloud Computing.

During the year, the Company has entered into a strategic partnership with
Singapore Airport Terminal Services (SATS) to globally market and implement
the state of art COSYS intelligent Solutions 'COSYS Intelligent Solutions
(CIS)' to help air cargo ground handling agents improve their cargo
handling capabilities.

The Company follows global standards of development, including ISO
9001:2000 certification, assessment at Level 5 of SEI-CMMi frameworks and
BS 7799 information security management certification.

Postal Ballot:

During the year, the Company did not pass any resolution though postal
ballot process prescribed under Section 192A of the Companies Act, 1956
read with Companies (Passing of Resolution by Postal Ballot) Rules, 2003.

Corporate Governance and Management Discussion and Analysis Statement:

The Company is in compliance of all mandatory requirements regarding
corporate governance as stipulated under Clause 49 of the listing agreement
with the stock exchange(s). For the fiscal year ending 2010, the compliance
report is provided in the Corporate Governance section of the Annual
Report. A certificate issued by the statutory auditors of the Company on
confirming compliance of the conditions of corporate governance stipulated
in clause 49 of the listing agreement with the stock exchange(s) forms part
of the Corporate Governance Report.

The report on Corporate Governance and Management Discussion and Analysis
statement is provided in this Annual Report.

Directors:

As per the provisions of the Companies Act, 1956 and Articles 67, 68 and 69
of the Articles of Association of the Company, Mr. Subroto Bhattacharya and
Mr. Surendra Singh, Directors of the Company, retire by rotation at the
forthcoming Annual General Meeting and being eligible, offer themselves for
reappointment. Mr. Rajendra S Pawar has been re-appointed as Chairman &
Managing Director and Mr. Arvind Thakur has been re-appointed as CEO and
Jt. Managing Directors by the Board in its meeting held on May 5, 2010, for
a period of five years w.e.f. June 01, 2010. The appointment of Mr.
Rajendra S Pawar and Mr. Arvind Thakur requires the approval of members at
the ensuing Annual General Meeting.

Directors' Responsibility Statement:

As required under Section 217 (2AA) of the Companies Act, 1956, the Board
of Directors of the Company hereby states and confirms:-

a) That in preparation of Annual Accounts for the financial year,
applicable Accounting Standards have been followed along with the proper
explanations relating to material departures;

b) That they have selected the accounting policies described in the notes
to accounts; which have been consistently applied, except where otherwise
stated and made judgments and estimates that are reasonable and prudent so
as to give a true and fair view of the state of affairs of the Company as
at March 31, 2010 and of the profit or loss of the Company for that year;

c) That they 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 the Company and for
preventing and detecting fraud and other irregularities; and

d) That the Annual Accounts have been prepared on the historical cost
convention, as a going concern basis and on accrual basis.

Information relating to Conservation of Energy, Technology Absorption,
Research and Development and Exports and Foreign Exchange Earnings and
Outgo and other information forming part of the Directors' Report in terms
of Section 217(1)(e) of the Companies Act, 1956, and Rules made thereunder

- Conservation of energy:

The operations of the Company involve low energy consumption. However,
adequate measures, wherever possible, have been taken to conserve energy.
The Company is continuously evaluating new technologies and invests in them
to make its infrastructure more energy efficient.

- Technology absorption:

In today's world, perpetually evolving technologies and increasing
competition define the global market space. In order to maintain its
position of leadership, the Company has continuously and successfully
developed innovative methods for absorbing, adapting and effectively
deploying new technologies.

- Research & Development:

During the year, the Company continued its research in software
engineering. These efforts have resulted in innovative products in software
engineering to support both maintenance and development projects.
Expenditure on research and development is not significant in relation to
the nature and size of operations of the Company.

- Export and Foreign Exchange Earnings and Outgo:

The details of foreign exchange earnings and outgo are mentioned in Note
Nos. 10 and 12 contained in the Notes to Accounts (Schedule No. 18 )
forming part of the Balance Sheet as at March 31, 2010 and Profit and Loss
Account for the year ended on that date.

Public Deposits:

The Company has not accepted any fixed deposits during the year hence no
amount of principal or interest was outstanding on the date of the Balance
Sheet.

Particular of Employees:

The statement of employees pursuant to Section 217(2A) of the Companies
Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975,
is annexed as annexure A hereto and forms part of this report.

Auditors:

M/s. Price Waterhouse, Chartered Accountants, the Statutory Auditors of the
Company, retire at the conclusion of the ensuing Annual General Meeting and
being eligible, offer themselves for re-appointment.

Auditors' Report:

The Report of the Auditors' on the Annual Accounts of your Company forms
part of the Annual Report and is self explanatory.

Export Initiatives:

During the year 90% of the revenues were derived from exports. The Company
has developed a substantial direct marketing network across the various
countries in America, Europe and Asia Pacific. These offices are equipped
with sales and marketing team, who market is the services to the
international clients in the respective countries.

During the year the Company participated in various conferences, seminar
and summits across the world to enhance the company's business growth and
awareness of the services being offered to various prospective clients.

Awards and Achievements:

During the year, the Company bagged several recognitions at the Indian and
global levels. Few of the significant honors amongst all are mentioned
here-in-below:-

* Ranked amongst top 7 service providers in Gartner's Industry research
report in 2010 'Seven Vendors Dominate the European Market for General
Insurance Policy Administration Systems'

* NIT GIS received the Best Software Company of the Year award 2009-2010 at
the Map India 2010 Conference

* Received the Award for 'Innovation in Career Development.' from the
Global HR Excellence Awards at the Global HRD Congress 2010

* Amongst the top 50 IT Innovators for the year 2009 by NASSCOM

* Ranked Number 1 in the Datamonitor Black Book of Outsourcing 2009 Travel
Industry survey for the second consecutive year

* Ranked amongst the Best 5 Companies in Air Transportation by The
International Association of Outsourcing Professionals (IAOP) in its The
Global Outsourcing 100 listing for the year 2009

* Ranked among the Best 20 Industry leaders in Financial Services
(Insurance and Banking) by The International Association of Outsourcing
Professionals (IAOP) in its The Global Outsourcing 100 listing for the year
2009

* Ranked amongst the Top 20 Best Managed Outsourcing Vendors by the 2009
Black Book of Outsourcing

* Ranked amongst India's 500 Best Performing Companies by demonstrating
exceptional innovation and perseverance by Inc. India for the year 2009

Human Resource Initiatives:

The Human Resource initiatives of the Company in the year under review were
aligned to the overall business strategy of the organisation as well as the
career aspirations of staff members. Learning and development of the
workforce was a priority during the year and focused around leadership
development, achieving better productivity and building a sales-driven
organisation. Processes and policies enabled greater involvement of staff
members in the execution of the organisational strategy. There was a steep
increase in the average days of training per staff member and the overall
staff coverage in learning initiatives. Recruitment processes were further
strengthened. Processes and policies enabled job rotations, career growth
and helped maintain a healthy work environment. ESOP program in the year
covered staff members in Middle manager level and above to keep the focus
of organisation tide over global crisis and take the next level of managers
to participate in brave and bold initiatives taken by the organisation in
cost management and other people related initiatives.

Acknowledgement:

The Directors take this opportunity to thank all investors, business
partners, clients, technology partners, vendors, financial
institutions/banks, regulatory and government authorities, media and Stock
Exchanges, for their continued support during the year. Your Directors
place on record their appreciation of the contribution made by NIITians at
all levels for their commendable teamwork, dedicated and wholehearted
efforts, without which your Company's consistent growth would not have been
possible.

For and on behalf of the Board

Place: New Delhi Rajendra S. Pawar
Dated: May 05, 2010 Chairman
(DIN 00042516)
Annexure B

Disclosure under SEBI (Employee Stock Option Scheme & Employee Stock
Purchase Scheme) Guidelines, 1999

(a) Options granted:

Grant I 660,750 (August 2, 2005)
Grant II 70,600 (August 11, 2005)
Grant III 280,000 (June 20, 2007)
Grant IV 477,750 (July 28, 2008)
Grant V(Vest I) 1,199,700 (October 19, 2009)'
Grant V(Vest II) 1,199,700 (October 19, 2009)

Total 3,888,500

*The options were granted after issuance of bona, shares.

(b) the pricing formula;

At a price not less than the then existing face value of the share of the
Company,
Grant Price Market Price Discount

Grant I : Rs. 115.00 Rs. 149.50 23% of Market Price
Grant II : Rs. 150.85 Rs. 150.85 No
Grant III: Rs. 523.50 Rs. 523.50 No
Grant IV: Rs. 108.00 Rs. 107.40 No
Grant V : Rs. 127.20 Rs. 127.20 No
(Note: Prices for Grant IV & V are post bonus issue)

(c) options vested;

As at March 31, 2010

Grant I : 597,400
Grant II : 16,000
Grant III: 100,105
Grant IV: 438,750
Grant V : Nil

Total 1,152,255

(d) options exercised;

As at March 31, 2010

Grant I : 516,575
Grant II : 16,000
Grant III: NIL
Grant IV: 46,525
Grant V : NIL

Total 579,100

(e) the total number of shares arising as a result of exercise of option:

579,100


(f) options lapsed;

As at March 31, 2010

Grant I: 186,525
Grant II: 54,600
Grant III: 339,702
Grant IV: 61,500
Grant V(Vest I) : 95,700
Grant V(Vest II): 95,700

Total 833,727

(g) variation of terms of options:

None

(h) money realized by exercise of options;

Grant I: Rs.56,952,050
Grant II: Rs. 2,413,600
Grant IV: Rs. 5,240,700
Total Rs.64,606,350

(i) total number of options in force;

Grant I NIL
Grant II : NIL
Grant III : 80,298*
Grant IV : 369,725
Grant V (Vest I) : 1,104,000
Grant V (Vest II) : 1,104,000

Total 2,658,023

*Post bonus adjustment

(j) employee wise details of options granted to:-

(i) senior managerial personnel during the year:

A summary'' of options granted to senior managerial personnel are as
under:-

No. of employees covered: 14 (Fourteen)

No. of options granted to such personnel : 362,250 (Three Lakh Sixty Two
Thousand Two Hundred and Fifty Only

*includes employees who are one level below the Board or CEO working in
executive capacity.

**only summary given due to sensitive nature of information, details of
which can be obtained from the Registered Office by the members of the
Company, upon request.

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

Nil

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

Nil

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

Rs. 16.19 (previous year: Rs. 15.07)

(l) Where the company has calculated the employee compensation cost using
the intrinsic value of the stock options, the difference between the
employee compensation cost so computed and the employee compensation cost
that shall have 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:

Please refer to Notes Nos. 20 and 24 contained in the Notes to Accounts
(Schedule No, 18) forming part of the Balance Sheet as at March 31, 2010
and Profit and Loss Account for the year ended on that date.

(m) Weighted-average exercise 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:

Weighted Average Exercise Price (Rs.)Weighted average Fair Value (Rs.)

Grant I* 115.00 59.20
Grant II* 150.85 41.18
Grant III* 523.50 168.11
Grant IV 108.00 43.78
Grant V(Vest I) 127.20 50.24
Grant V (Vest II) 127.20 56.16

* Pre bonus issue

(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:

(i) risk-free interest rate,

Grant I 7%

Grant II 7%

Grant III 7.93%

Grant IV 9.24%

Grant V (Vest I) 6.83%

Grant V (Vest II) 7.01%

(ii) expected life,

Grant I 2.5 years
Grant II 2.5 years
Grant III 2.5 years
Grant IV 2.5 years
Grant V (Vest I) 2.5 years
Grant V (Vest II) 3.5 years

(iii) expected volatility

Grant I Grant II Grant III Grant IV Grant V
Vest I Vest II

10% 10% 51.13% 65.62% 66.17% 64.78%

(iv) expected dividends, and

The shares to be issued under stock options shall rank pari-passu,
including the right to receive dividend.

Expected dividend payouts to be paid during the life of the option reduce
the value. of a call option by creating drop in market price of the stock.
Adjustments for known dividend payouts over the life of the option are made
to the formulae under Black Scholes method. However, in the present case,
as the life of the option is greater than one year, there is considerable
difficulty in estimating the amount and time of future dividend payouts
with certainty. Hence, future dividend payouts have not been incorporated
in the valuation analysis

(v) the price of the underlying share in market at the time of option
grant:

For Grant I the market price was Rs. 149.50
For Grant II the market price was Rs. 150.85
For Grant III the market price was Rs. 523.50
For Grant IV the market price was Rs. 107.40
For Grant V the market price was Rs. 127.20

Note: For Grant I, Grant II and Grant III options vested, exercise and
lapse includes pre and post bonus issue adjustment.

MANAGEMENT DISCUSSION AND ANALYSIS

Industry Structure and Overview:

Navigating through one of the worst recession in past 60 years

The Domino effect post bursting of the US housing bubble, followed by the
financial crisis precipitated by fall of Lehman Inc's in Sept 2008, brought
the world to a standstill and pushed most of the developed economies in to
recession. While robust fundamentals ensured that the impact of the
recession was relatively moderate on India, in an increasingly globalised
environment, India could not escape declining GDP growths. However, prompt
action including the stimulus packages announced by governments across the
developed and developing economies ascertained to contain the downfall.

Review of Financial Year (FY) 2009-10 (April - March):

The Indian Information Technology (IT) Industry showed resilience to the
global meltdown which was witnessed in past 2 years. The financial year
2009-10 saw the bottoming out and also a slow, but steady recovery of
business for the industry. For NIIT Technologies Ltd, the revenues de-
growth bottomed out in 1QFY10. Although the Global Software industry is
beginning to come out of the shadow of Global recession, it continues to
reel under environment of high volatility and uncertainty, arising out of
fresh challenges from wide currency movements and Sovereign debt issues of
the Euro zone.

However the worst seems to be behind us and corporations are beginning to
invest in programs to maintain their competitiveness in a tougher economic
environment. Although IT budgets have been curtailed, Indian IT companies,
including NIIT Technologies Ltd have benefited on account of their robust
offshore value proposition. Companies globally remained cautious about
spending as the early signs of global recovery could well be illusory;
coming on the back of impetus from stimulus packages announced by various
governments across the world.

Glance at the Global IT Market:

As per NASSCOM Strategic review 2010, worldwide technology products and
services related spend is estimated to reach USD -1.5 trillion in Calendar
Year (CY) 2009, a decline of 2.9 per cent over CY 2008. The decline was
steeper at 8 percent for Hardware spends, while the Software services spend
was marginally lower at USD 589 bn in CY 2009 versus USD 591 bn in CY 2008,
with. demand stronger for outsourcing than for discretionary and project
based services.

Global sourcing outpaced the IT spend, which led to a stagnant first half
but a resurgent second half in the year of 2009. According to NASSCOM, the
aggregate revenues for Indian IT players in FY 09-10 were USD 73.1 bn, with
IT Software & Services providing USD 63.7 bn in revenues. There was a 5.4
percent growth in global business (exports) taking the total exports to USD
50.1 Ion. Customers were more .focused on resetting the operating costs,
which led to decline in their technology spending by 3 percent. This impact
was majorly visible in hardware spending, which declined by a good 8
percent. The IT Services market remained flat with some decline visible in
EMEA market and Banking, Financial Services and Insurance (BFSI) segment.
Travel and tourism took a significant hit with airlines reducing IT spend
by as much as 7 percent. Spend on compliance requirements remained steady.

Outlook for CY10:

Worldwide spending on Information Technology will continue to feel the
effects of the global recession throughout 2010. However, Forrester
Research Inc, expects IT to recover faster than the overall economy, driven
by renewed focus on innovations like smart computing systems and integrated
solutions that combine the elements of hardware, software and services.
Smaller vendors, or those that lack substantial elements of an integrated
portfolio, will need to more tightly couple with partners to weave their
offerings into smart solutions, while service companies will find
opportunities to be the glue that delivers these complex structures to
clients.

Forrester expects IT services to grow at 6 percent-7 percent in CY 2010.
Service-level agreements (SLAs) and pricing will be more explicitly tied to
business outcomes while project financing will become even more popular
when customer liquidity remains a key financial issue. Customer engagements
will be consulting led to demonstrate understanding of business context for
technology decisions.

Overall, IDC forecasts that worldwide IT spending will reach USD 1.48
trillion in CY 2010, still below the USD 1.5 trillion recorded in CY 2008.
IT spending is not expected to fully recover from the global recession
until sometime in CY 2011. On a global basis, IDC expects hardware spending
to grow by 5 percent in CY 2010, while software spending and IT services
spending will grow by 2 percent and 3 percent respectively, in constant
currency. According to Forrester Research, Software will show the most
robust growth of any IT market segment in CY 2010, up 9.7 percent from CY
2009.

Indian IT geared up to Cross the USD 50 billion mark:

The performance estimates from NASSCOM - India's premier trade body and the
chamber of commerce of the IT-BPO industries in India, expects IT export
revenue for the Indian IT-BPO industry to reach USD-50 billion in FY10.
Indian software industry contributes -25 percent to total Indian exports
and -6 percent to India's GDP.

NASSCOM also expects the Software and services exports revenues to grow by
13-15 percent and domestic revenues to grow by 15-17 percent in FY11 after
mid single digit growth in previous year

Financial Year Exports Growth Domestic Growth
(USD bn) % (INR on) percent

FY 09-10 49.7 5.5% 662 12%
FY 10-11 (outlook) 56-57 13%-15% 761-775 15%-17%

Source-NASSCOM:

IT Sector was a net hirer in FY10; with total direct employment crossing -
2.3 million and 90,000 jobs added during the year. Also with improving
business environment for FYI 1 the manpower addition is expected to be much
higher than FY10.

On the growth drivers NASSCOM estimates Indian Government IT spend at
around INR 250 billion by FY 11 - a CAGR of 30 percent. It also expects
Asia Pacific (APAC) region to be fastest growing geography with an
estimated growth of 10 percent in FY 11.

Company Overview:

NIIT Technologies Ltd (NTL) is a global IT solutions organization,
servicing customers in North America, Europe, Asia and Australia. It offers
Technology and Business Services to organizations in select industry
segments.

NIIT Technologies has a business philosophy to be the 'best' in the chosen
segments and be 'big enough'; in contrast to being the 'biggest' and just
'good enough. By virtue of this specialization it has been acknowledged by
a number of independent surveys as the best in class. It follows the
highest standards of operations which includes ISO 9001:2000 certification,
assessment at Level 5 of SEI-CMMi version 1.2, ISO 27001 information
security management certification. Its data centre operations are assessed
at the international ISO 20000 IT management standards'

Strategy:

Post its de merger with NIIT Ltd in Year 2004, NIIT Technologies embarked
upon a strategy to 'Focus and differentiate'. Company has been able to walk
the talk on its strategy, reflected through the contribution of its focused
verticals of - BFSI, Travel Transportation & Logistics and Retail &
Manufacturing, which has gone up from 69 percent of revenue in FY05, to 85
percent of revenues in FY10. Of the remaining 15 percent, increasingly
business is getting focussed on the Government sector which is set to
become another major segment.

Business Transformation:

The first phase in transformation journey of NIT Technologies was completed
when it reinvented itself from being a provider of generic technology
services to be an industry specific solution provider. The Company's next
phase of transformation involves making the business non-linear by evolving
new service offerings (integrated services, platform based services, cloud
services) to provide higher value to its clientele'.

Business Innovation - Thrust on Non linear Business:

Innovation is the key to transformation. NIIT Technologies has emphasized
in increasing its share of business from new methods of services deliveries
which are non-linear as compared to Full Time Equivalent (FTE). These new
methods of services deliveries exists in various forms like that of
Intellectual Property (IP) based Products and solutions, Platform based
services, SaaS, Managed services, Utility based pricing, pay as you use and
SLA based pricings. The traditional IT services methodologies of delivery
like the Time & Material (T&M) are rapidly being replaced by innovative
ways of services deliveries mentioned above. WIT Technologies has been in
the fore-front in adopting these for its clients and has been able to gain
good traction.

Managed Services:

Three years ago the Company announced its foray into the new business
segment of Remote Infrastructure Management (RIM). It has been amongst the
first to do so among comparable peers. The Company has also integrated this
offering with its Application Management and Business Process Management to
provide a compelling & unique value proposition of integrated services to
its customers. Managed services contributed 13 percent of Revenues in FY10

IP / Platform based services:

Over the last 2 years, the Company has made investments into reworking its
frameworks & products (both owned & acquired) into Platform-based services.
Rooms Solutions which is NIIT Technologies' wholly owned subsidiary has its
Insurance Platform 'Subscribe', which has a sizable share in Lloyds
insurance market. Likewise its German subsidiary Softec GMBH owns a revenue
accounting platform 'Monalisa' which is deployed across over 30 airlines.
These services contribute 14 percent of revenue in FY10

Cloud Computing:

Cloud computing is reshaping the IT marketplace, creating new opportunities
for suppliers and catalyzing changes in traditional IT offerings

It is an emerging megatrend defined as standardized IT capability delivered
via the Internet in a pay-per-use and self-service manner. Cloud computing
primarily evolved with the growing acceptance of SaaS, and the industry
looking to replicate the success of offering software-as-a service (SaaS)
to not just platforms / applications (PaaS) but also infrastructure /
hardware (IaaS or HaaS).

NIIT Technologies pursuing its non-linear services model of business is an
early entrant in the cloud arena. During the year, it has announced a
partnership with Hitachi Information systems of Japan to jointly offer
cloud services. Through this partnership NIIT Technologies and Hitachi
Information Systems will provide unmatched value based on the strengths of
both companies. Hitachi systems with its reliable and scalable
infrastructure would own the Cloud, while NIIT Technologies will harness
its competencies and world class process capability in Remote
Infrastructure and Managed Services to operate the Cloud. This will enable
customers of both firms to experience the highest quality of reliability,
security and service. With Cloud computing gaining impetus, both companies
will be able to offer the complete portfolio of services around the Cloud
infrastructure to cater to the changing IT landscape.

Geographic Information System (GIS):

Geographic Information System which integrates hardware, software, and data
for capturing, managing, analyzing, and displaying all forms of
geographically referenced information is being increasingly used by
Customers and Governmental department as an enabler to bring in increased
efficiencies in revenue generation and costs curtailments. NIIT
Technologies has a JV with ESRI Inc, the world leader in GIS space. Company
is focusing on leveraging the world class GIS products of ESRI and to offer
solutions to customers including Government and quasi-governmental
organizations.

People Resources:

As of March 31, 2010, the global staff strength of NIT Technologies stood
at 4,476 against 4,238 in FY09. At the year end the Company has an offshore
development capacity of around 400,000 square feet. The construction work
for the campus in Greater Noida is almost complete and it is expected to be
operational by end of FY11.

Financial Highlights:

Consolidated Financial Highlights:-

The consolidated financials take into account the financials of NIIT
Technologies Limited and its subsidiaries, including subsequent level
companies after eliminating inter-company transactions. NIIT Technologies
posted a consolidated income of Rs 9,137 million for the financial year
ending March 31, 2010. Through the year the Company grew sequentially
quarter on quarter, however, overall revenues were marginally lower
representing a 7 percent decline over previous year's revenues of Rs 9,799
million.

Segmental Revenue:

NIIT Technologies Ltd derives its revenue primarily from exports which
contribute 89 percent of Company's revenues, while domestic markets account
for 11 percent of revenues; this is largely similar to FY09.

Geography Mix:

NIIT Technologies has a balanced mix of revenues coming across globe. For
FY10, EMEA (Europe, Middle East and Africa) accounted for around 43 percent
of revenues, versus 50 percent in previous year. The lower share was on
account more challenging conditions in Europe and adverse fluctuations in
GBP and Euro. Americas accounted for 33 percent versus 31 percent in
previous year. Share of APAC was 13 percent in FY10 versus 10 percent in
previous year. India accounted for 11 percent of revenues shade better than
9 percent reported in FY09.

Vertical Mix:

Company focuses on 3 verticals which contribute 85 percent of revenues in
FY10 versus 84 percent in FY09. TTL (Travel Transportation and Logistics)
vertical contributes 31 percent to revenues in FY10 versus 28 percent in
FY09. BFSI contributes 43 percent in FY10 similar to FY09. Retail and
Manufacturing share has been lower at 11 percent in FY10 as compared to 13
percent in FY09, other verticals including government contribute 15 percent
versus 16 percent in FY09

Client profile:

The Company's client-wise revenues are more broadbased. The Top five
clients contributed 33 percent of the revenues similar to previous year.
The Top 10 clients contributed 47 percent of the revenues versus 45 percent
in FY09, while 62 percent of the revenues contribution was from the Top 20
customers against 60 percent the previous year. The Company continued to
bag fresh orders at a regular pace, and its total intake in FY10 stood at
USD 276 million.

Top Client Mix:

Audited Consolidated Profitability Rs Million
FY 2010 FY 2009 FY 2008

Revenue 9,137 9,799 9,415
Expenses 7,249 8,035 7,652
Operating Profit 1,888 1,764 1,763
Operating Profit margin 21% 18% 19%
PBT 1,421 1,389 1,509
PAT 1,264 1,148 1,353

An expense analysis of the Company shows that personnel constituted the
highest element of cost at 56 percent, (57 percent in FY09) of revenues,
development and boughtout materials constituted 8 percent, selling,
marketing General and administration at 16 percent. Depreciation and
amortization accounted for 4 percent, leaving a PBT margin of 16 percent
for the year versus 14 percent margins in the previous year.

Audited Consolidated Balance Sheet Rs Million

Particulars as on March 31, 2010 March 31, 2009

Sources of Funds:

Share Capital 588 587
ESOP Outstanding - 2
Reserves and Surplus 5,210 3,287
Net Worth 5,798 3,876
Minority Interest 28 22
Loanfunds 217 348

Total 6,043 4,246

Application of Funds

Fixed Assets
Gross Block 4,559 4,737
Depreciation 2,706 2,632

Net Black 1,853 2,105
Capital Work in Progress 1,288 1,052
Investment 465 -
Deferred Tax Asset 107 435
Net Current Assets 2,330 654

Total 6,043 4,246

Share Capital:

The paid up share capital of the Company stands at IRS 588 million
constituting 587,878,450 equity shares of Rs 10/- each

1. EMPLOYEE STOCK OPTION PLAN:

(i) The Company established NIIT Technologies Stock Option Plan 2005 (ESOP
2005) in the year 2005-06 and the same was approved at the Annual General
Meeting of the Company on 29th July 2004. The plan was set up so as to
offer and grant for the benefit of employees of the company and its
subsidiaries, who are eligible under Securities Exchange Board of India
(SEBI) Guidelines (excluding promoters), options of the company in
aggregate up to 3,850,000 options under ESOP 2005, in one or more tranches,
and on such terms and conditions as may be fixed or determined by the Board
in accordance with the provisions of law or guidelines issued by the
relevant authorities in this regard. As per the plan each option is
exercisable for one equity share of face value of Rs 10 each fully paid up
on payment to the company for such shares at a price to be determined in
accordance with ESOP 2005. SEBI has issued the Employee's Stock Option
scheme and Employee Stock Purchase Scheme Guideline, 1999 which is
applicable to the above ESOP 2005.

Description Grant I Grant III Grant IV
2009-10 2008-09 2009-10 2008-09 2009-10 2008-09

Date of Grant August 02, 2005 June 20, 2007 July 28, 2008


Date of August 02, 2006 June 20, 2008 July 28, 2009
Vesting

Live grants 74,850 106,300 92,155 378,750 461,250 477,750
all beginning
(during the
year Nos)

Foreheited/ - - - 278,645 22,500 16,500
lapsed till
vesting period
(Nos)

Options vested - - - 100,105 438,750 -
(NOS)

Options 60,225 3,150 11,857 7,950 22,500 -
forrfeited post
vesting (Nos)

Options 14,625 28,300 - - 46,525 -
Exercised
(Nos)

Exercisable/ - 74,850 80,298 92,155 369,725 461,250
outstanding
at the end
of the year
(Nos)

Exercise Price Rs.76.67 Rs.76.67 Rs.349 Rs.349 Rs.108 Rs.108

Remaining Nil 123 days 446 days 811 days 849 days 1,214
Contractual days
Life

Fair value of
Options based
on Black
and Spindles
model (as per
independent
Mean's report)

Pre-Bonus Rs.59.20 Rs.59.20 Rs.168.11 Rs.168.11 - -
Post-Bonus Rs39.46 Rs.39.46 Rs.112.07 Rs.112.07 Rs.43.78 Rs.43.76

Intrinsic value Rs.23 Rs.23 - - - -
of options

Description Grant V
2009-10 2008-09

Date of Grant October 19,2009

Date of October October
Vesting 18,2010 18,2011

Live grants 1,199,700 1,199,700
all beginning
(during the
year Nos)

Foreheited/ 95,700 95,700
lapsed till
vesting period
(Nos)

Options vested - -
(NOS)

Options - -
forrfeited post
vesting (Nos)

Options - -
Exercised
(Nos)

Exercisable/ 1,104,000 1,104,000
outstanding
at the end
of the year
(Nos)

Exercise Rs.127.20 Rs.127.20
Price

Remaining 1,299 1,664
Contractual days days
Life

Fair value of - -
Options based Rs.50.23 Rs.56.16
on Black
and Spindles
model (as per
independent
Mean's report)
Pre-Bonus
Post-Bonus

Intrinsic - -
value of
options

Note:

During the year, the Compensations/Remuneration Committee at its meeting
held on October 19, 2009 has approved issue of 2,399,400 options (Grant-V)
out of the option under ESOP 2005, to Managerial Personnel of the Company /
Subsidiaries.

The assumptions used by the independent valuer for determination of fair
value as per the Black & Scholes model is as follows:

a) Market price considered is the latest available closing price, prior to
the date of the grant.

b) Exercise price is the price payable by the employees for exercising the
option.

c) As the life of the option is greater than one year there is considerable
difficulty in estimating the amount and time of future dividend payouts
with certainty, hence future dividend payout have not been incorporated in
the valuation analysis.

d) Volatility - Variance in the stock price is considered as 10 percent
(for Grant I) , 51.13 percent ( for Grant III) , 65.62 percent (for Grant
IV), 66.12 percent (for Grant V Tranche I) and 64.75 percent ( for Grant V
Tranche II) is based on historical volatility in the share price movement
of the company and four other comparable companies.

e) Average life of the options is considered to be 2.5 Years for Grant I,
Grant III, Grant IV, Grant V Tranche I and 3.5 years for Grant V Tranche I
I.

f) Risk less interest rate has been assumed at 7 percent (Grant I), 7.93
percent (Grant III), 9.24 percent (Grant IV), 9.83 percent (Grant V Tranche
I) and 7.01 percent (Grant V Tranche II) based on long term government
bonds of ten year residual maturity.

(ii) Other information regarding employee share based payment is as below:

Description Grant III Grant IV Grant V
Tranche I Tranche II
2009-10 2008-09 2009-10 2008-09 2009-10 2009-10

Expense - - - - - -
accounted for
during the
period based
on intrinsic
value of the
option

Additional Nil 2320290 5277262 13665207 26389532 13194766
expense had
the Company
recorded the
ESOP expense
based on fair
value of the
option

For impact on Basic and Diluted earnings Per Share, had fair value of the
option been used for determining Employee Stock Option Plan expense, refer
notes.

Minority Interest:

The minority shareholding includes the interest of third parties in one of
the Company's subsidiaries, NIIT GIS Limited (as minority shareholders),
provision for which has been made based on the profits of the respective
subsidiary.

Loan Funds:

The loans funds primarily secured loan stood at Rs 217 million in FY10
versus Rs 348 million, Company repaid its Term Loan as per the repayment
schedule

Fixed Assets:

During the year, capital investment of Rs. 178 million were made for
project - related capital assets and capacity increases. Capital Work in
Progress (CWIP) is at Rs. 1287 million largely for the new SEZ campus
development at Greater Noida.

Investments:

Investments of Rs 465 million reflect investments made in short term liquid
mutual funds

Net Current Assets:

The elements of net current assets are as follows:-

Current Assets, Loans and Advances

* Trade Receivables: Debtor days stand at 74, on a total sundry debtor's
position of Rs.1,851 million

* Cash and Bank: Cash and Bank balance as on March 31, 2010 is Rs. 1,430
million

* Other Current Assets: This primarily includes unbilled revenues &
Interest Receivable stand at Rs 156 million

* Loans and Advances: This includes advances, pre-paid expenses, security
deposits made by the company in the normal course of business and advance
taxes deposited. These stood at Rs 1089 million

Current Liabilities and Provisions:

This represents sundry creditors, including capital creditors, advances
from customers, unearned revenues, security deposits, provisions for leave
encashment, gratuity, dividend and other liabilities. Current liabilities
and Provisions stand at Rs 2200 million

Related Party Transactions:

Related Party transactions are defined as transactions of the company with
the Promoters, Directors or the Management, their subsidiaries or other
related parties who may have a potential conflict with the interests of the
company at large. All transactions covered under related party transactions
were regularly ratified and/or approved by the Board, the guiding
principles being arm's length, fairness and transparency. The details of
related party transactions are given in the Notes to Accounts section.

NIIT TECHNOLOGIES LTD: STANDALONE Rs Million
FY 2010 FY 2009

Revenue 4,936 5,021

PBT 1,008 981

PAT 951 885

Revenue from Operations:

The revenues from operations for the year stood at Rs 4,936 versus 5,021
million in FY 09

Other Income:

The other income earned by the Company includes Capital Gains and Dividend
Income on the mutual fund investments, Recoveries made from subsidiaries
for common services and asset usage charges recovered from the Group
Company. The company reported Rs. 113 million of Other Income in FY10
versus Rs 396 in FY09

Revenue Recognition Policy:

The significant Accounting policies and practices followed by NIT
Technologies Limited are disclosed in Note 1 of Schedule '18' (Notes to
Accounts) for the year.

Rs Million
Impact of Foreign Currency FY 2010 FY 2009

Earning in Foreign currency 4,465 4,559
Revenue Expenditure in Foreign Currency 1,536 1,578
Net Revenue Earning in Foreign Currency 2,929 2,981
Capital Expenditure in Foreign Currency 21 107
Net Foreign Currency Earnings 2,908 2,874

EXPENDITURE

Personnel:

The personnel cost was Rs 2,546 million, 52 percent of the revenue line,
same percentage as compared with last year's

Development, Production and Execution:

This cost constituted 8 percent of revenues. It includes the cost of
products purchased for resale.

Other Expenditure:

Other expenditure including administration, marketing spend, travel and
communication costs were lower at 17 percent as compared with 21 percent of
last year. This was as result of stringent cost management during year at
backdrop of challenging business environment

Depreciation:

The Company's depreciation charge was Rs 246 million, 5 percent of
revenues.

Profit after Tax:

PAT for company was at Rs. 951 million in FY10 versus Rs 885 million in
previous year.

Dividend:

The Board of Directors of the Company has recommended a dividend of Rs.
7.00 per Equity Share of Rs.10/- each, higher than Rs. 6.50 declared in
Previous year.

BALANCE SHEET

Fixed Assets:

During the year, the Company added Rs. 156 million to its gross block of
assets for project related capital expenditure and capacity increases.

Investments: Rs Million
FY 2010 FY 2009

Investment in subsidiaries & JV 1,146 1,086

Mutual funds 465 -

Total 1,611 1,086

Current Assets, Loans and
Advances Cash and Bank

Fixed Deposits 281 260
Cash in hand & balances with Banks 23 248

Total 304 508

Other Current Assets:

This includes Unbilled Revenue of Rs. 29 million, Interest Receivable of Rs
7 million and Dividend Receivable of Rs 44 million.

Loans and Advances:

The loans and advances stand at Rs. 834 million at the end of the year. The
outstanding amount represents loan to subsidiaries, Pre-paid expenses and
other constituents in the normal course of business. These also include
advances to suppliers. advance tax (net of provision), rent advances and
security deposits given for premises. Capital Structure

The share capital of the Company stands at Rs 588 million versus Rs 587
million in FY09.

Reserves:

The reserves and surplus of the company are as follows:-
Rs Million

FY2010 FY 2009

Capital redemption reserve 17 17
Share premium 10 4
General Reserves 1113 1016
Hedging Reserve (248) (1515)
Profit and Loss Account 3270 2889

Total - I 4162 2412

Loan Funds:

The Company had secured Loans amounting to Rs 9 million versus Rs 9 million
in FY09

Awards and Recognitions:

* Ranked Number 1 in the Datamonitor Black Book of Outsourcing 2009 Travel
Industry survey for the second consecutive year

* Ranked amongst top 7 service providers in Gartner's Industry research
report in 2010 'Seven Vendors Dominate the European Market for General
Insurance Policy Administration Systems'

* Ranked amongst the Best 5 Companies in Air Transportation by The
International Association of Outsourcing Professionals (IAOP) in its The
Global Outsourcing 100 listing for the year 2009

* Ranked amongst the, Best 20 Industry leaders in Financial Services
(Insurance and Banking) by The International Association of Outsourcing
Professionals (IAOP) in its The Global Outsourcing 100 listing for the year
2009

* Ranked amongst the Top 20 Best Managed Outsourcing Vendors by the 2009
Black Book of Outsourcing

* Amongst the top 50 IT Innovators for the year 2009 by NASSCOM

* NIT GIS received the Best Software Company of the Year award 2009-2010 at
the Map India 2010 Conference

* Received the Award for 'Innovation in Career Development,' from the
Global HR Excellence Awards at the Global HRD Congress 2010

* Ranked amongst India's 500 Best Performing Companies by demonstrating
exceptional innovation and perseverance by Inc. India for the year 2009

Opportunities, Threats, Risk and Concerns, Risk Mitigation

Opportunities:

Challenging macroeconomic environment also throws in pockets of
opportunities. Although the global slowdown and recessionary conditions
would have adverse impact on most of the global corporations; they would
have a larger impact on organisation in the Banking, Financial Services and
Insurance space (BFSI) which constitute 43 percent of NTL's revenues in
2010. Also the nature of the Industry like Airline in Travel Transportation
posed more difficulties during recession. However, major global
corporations, which are crawling back to normalcy are still in the cost
cutting mode, which is why they have been demanding to deliver 'More for
Less' in the IT services space. NIIT Technologies understands the factors
in play and has supported its clients as their technology partner, knowing
their challenges, the paths they choose, the strategies and tactics they
have to deploy to strengthen themselves.

NTL has a dominant positioning in the verticals it has presence in. For
example in Travel vertical, NTL has been being ranked at No 1 amongst
global IT vendors by the Data Monitor Black Book of outsourcing;
consecutively for year 2008 and 2009. Also it has been ranked at No 3 in
Insurance vertical in year 2008

The sub-prime crisis, inflationary environment fuelled by high oil &
commodity prices & volatile exchange rate scenarios are all part of the
business environment. In such an environment, the key to growth is likely
to be innovative service offerings, and a deep understanding of customer
needs. The external growth factors include the growing impact of
technology-led innovation, which leads to increasing demand for global
sourcing and the gradually evolving socio-political attitudes.

The value proposition of the Indian iTES industry is largely supported by
its abundant talent that is expected to support diverse operations, cost
advantage, emphasis on quality, information security and rapid growth in
key business infrastructure.

Risks and Risk Mitigation:

The ITES Industry thrives under a dynamically changing and highly
competitive business environment. The Company too faces several business
risks, of which some prominent ones are discussed hereunder alongside the
risk mitigation approach followed by the Company:

Concentration risks:

The Company has taken significant steps to ensure that it does not become
too dependent on few clients or any particular geography. EMEA and the
America contributed 43 percent and 33 percent revenues respectively during
FY10, with the balance contribution coming from the Asian region, including
India which contributed 11 percent to revenue.

However, considerable efforts are being made to generate business from new
geographies. Revenue from clients are also spread across with top 20
customers contributing 62 percent the business in FY 10.

M&A execution risks:

The Company has chosen organic and inorganic route to grow exponentially in
the future years. During the course, the Company may be exposed to risks
such as, increase in cost on account of staffing/advisory fees, due
diligence lapses and practical challenges in integration.

The Company follows a strategic approach in pursuance of its M & A
activities and many of the risks are mitigated by restricting the choice of
target companies by applying certain rigorous selection criteria as also by
proper resourcing of the integration efforts. The Company also uses team of
experts in carrying out the due diligence thereby reducing the risk of
lapses. It has successful track record of integrating two acquisitions in
recent years.

Investment portfolio related risks:

In order to deal with surplus cash, the Company, as a policy, does not
prefer to invest in high risk assets such as equities and low liquidity
assets like real estate etc. The primary area of risk for the Company's
market exposures are related to the interest rate risk on its investment
securities. To mitigate interest rate risk, all surplus funds are invested
in appropriate avenues upon a review by the investment committee. All
investment decisions are driven by certain guiding principles like, safety
of investments, liquidity and returns

Employee-related risks:

Attrition: Human Resource functions and initiatives of the Company are
driven by a strong set of values and policies. The Company has maintained a
competitive, healthy and harmonious work environment at all levels. The
Company has taken new initiatives to strengthen its recruitment processes,
values and vision programmes, leadership and performance management
programmes to retain the best talent.

Constraints in availability of skilled resources:

The Company offers competitive salary constantly benchmarked to the market,
world class infrastructure, excellent work culture, high class training and
career development and long term growth prospect, to remain an employer of
choice. The Company's development centers are in cities which have good
availability of skilled manpower.

Competition-related risk:

Indian IT services market remains a very competitive space. The Company is
facing competition from large Indian IT vendors and global vendors which
are increasing their India presence by setting up offshore delivery
centres.

The Company follows global standards of development, including an ISO
9001:2000 certification, assessment at Level 5 of SEI-CMMi frameworks and
BS 7799 information security management certification.

The Company/Subsidiaries are managed by locally recruited professionals and
talents across all geographies, They have established strong interaction
with various analyst firms worldwide through participation in IT
conferences and industry specific events attended by CIO's and executives
of major corporations. Sales & marketing and delivery infrastructure of the
Company is world class. This helps the Company to maintain its competitive
edge over other players.

Exchange rate risk: Hedge Accounting:

In accordance with its Risk management policies and procedures, the Company
uses derivative instruments such as foreign currency forward contracts to

hedge its risks associated with foreign currency fluctuations relating to
certain firm commitments and highly probable forecasted transactions. The
derivatives that qualify for

hedge accounting and designated as cash flow hedges are initially measured
at fair value & are remeasured at a subsequent reporting date and the
changes in the fair value of the derivatives i.e gain or loss (net of tax
impact) is recognized directly in shareholders' funds under hedging reserve
to the extent considered highly effective. Gain or loss on derivative
instruments that either does not qualify for hedge accounting or not
designated as cash flow hedges or designated cash flow hedges to the extent
considered ineffective are recognized in the Profit and Loss account.

Hedge accounting is discontinued when the hedging instrument expires, sold,
terminated, or exercised, or no longer qualifies for hedge accounting. The
cumulative gain or loss on the hedging instrument recognized in
shareholder's funds under hedging reserve is retained there until the
forecasted transaction occurs subsequent to which the same is adjusted
against the related transaction. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognized in
shareholder's fund is transferred to profit and loss account in the same
period.

The functional currencies for the Company and its subsidiaries' operations
are the respective currencies of the countries in which they operate.
Substantial portion of the Company's revenues is derived from foreign
exchange; any fluctuation in this could have an impact on the Company's
performance. The Company actively books foreign exchange forward
covers/derivative options to hedge against foreign currency fluctuations
related to its bills receivables and anticipated realisations from
projected revenues.

Geo-political risks:

The ability of Indian ITES services companies to secure offshore projects
from client organisations abroad is often subject to threat perceptions as
regards the Indian subcontinent. Current civil situations in neighbouring
countries of India may have negative implications for the operations of the
Company. To mitigate these risks and to ensure continued delivery of
services to clients irrespective of any geo-political disturbances, the
Company has been taking appropriate measures in respect of disaster
recovery and business continuity in different locations.

Liquidity Risk:

Company has strong processes and account management systems for collection
of Receivables, its DSO's as of 31st March 2010 stand at 74 days. Also
company shares long term relationships with its clients and generates
around 92 percent repeat business. It also monitors projects on regular
basis and tracks issues relating to cost escalations. Company has sturdy
process for contract evaluation procedure and multiple vetting systems.
Company get sizable business from Government and semi government
departments, though the receivable days tend to be higher than company
average, management takes adequate measures to restrict these within
acceptable levels.

Obsolescence Risk:

NIIT Technologies Ltd operates in a highly dynamic IT services industry,
which exposes itself to change in technologies, software, products, method
of services delivery, systems, processes, standards etc. NTL operated in
multiple aspect of technology like developing application, maintaining new
and old applications, software application support, IT Infrastructure
management, ERP implementations, offering managed services, remote infra
management, data center management, product sale, platform based services,
BPO services etc, Hence NIIT Technologies keep a tab on the disruptive
models in global software products and services which impacts its business
competitiveness. Further Company operates under highest global standards of
development

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an adequate system for internal control covering all
financial and operating functions commensurating with Company's size and
business. These ensure that its assets and interests are carefully
protected. The systems and processes are continually reviewed for its
effectiveness and augmented by documented policies and procedures.

A strong internal audit programme under the leadership of its dedicated
internal audit team that ensures adequate processes, systems and internal
controls are implemented strictly. The Company has implemented one of the
leading ERP solutions in its global operations in order to integrate
various facets of business operations which has enabled the Company to
control, monitor and review its worldwide operations online and has
strengthened the ability of internal controls to function effectively. The
Audit Committee, which is a sub-committee of your Board of Directors,
reviews adherence to internal control systems, internal audit reports and
implementation of suggestions. This Committee reviews all quarterly and
yearly financial results of the Company and conveys to the Board its
recommendation for consideration of such results and their approval.

ADDITIONAL DISCLOSURES:

The Company in the context of this report means NIIT Technologies Limited
and/or its subsidiaries.

Certain statements made in this report relating to the Company's
objectives, projections, outlook, estimates, etc, may constitute 'forward
looking statements' within the meaning of applicable laws and regulations.
Actual results may differ from such estimates or projections etc., whether
expressed or implied. Several factors including but not limited to climatic
conditions and economic conditions affecting demand and supply, government
regulations and taxation, natural calamities, etc., over which the Company
does not have any direct control, could make significant difference to the

Company's operations.