Annual Report - Zensar Technoligies - 2009-2010

ZENSAR TECHNOLOGIES LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Your Directors are pleased to present their 47th Annual Report together
with the Audited Accounts for the year ended 31st March 2010.



FINANCIAL HIGHLIGHTS

The Financial Results for the year are as under:

Zensar Technologies Limited (Rs. Crore)
Year ended Year ended
31st March 2010 31st March 2009

Income from operations 497.08 421.87

Miscellaneous Income 8.15 8.75

Total 505.24 430.62

Profit Before Taxation 86.59 66.68

Profit After Taxation 84.15 60.47

Proposed Dividend 11.87 10.78

Transfer to General Reserves 75.00 75.00

Zensar Technologies and
Subsidiaries (Consolidated)

Income from operations 952.76 908.08
Miscellaneous Income 8.28 14.08
Total 961.03 922.16
Profit Before Taxation & Minority Interest 149.15 111.82

Profit After Taxation and 127.26 86.26
before Minority Interest

Minority Interest (0.30) (0.30)

Profit After Taxation 127.56 86.56

FINANCIAL RESULTS:

During the financial year 2009-10, your Company recorded total income of
Rs. 505.24 Crore comprising Income from Software Development and Allied
Services of Rs. 497.08 Crore, and other income of Rs. 8.15 Crore. The
Company recorded a net profit of Rs. 84.15 Crore reflecting a growth of
39.15%.

On a consolidated basis, your Company has maintained steady growth with
total income of Rs. 961.03 Crore comprising Income from Software
Development and Allied Services of Rs. 952.76 Crore and other income of
Rs.8.28 Crore. The Consolidated Profit before Taxation and minority
interest was Rs. 149.15 Crore reflecting a growth of 33.38%. The
Consolidated Profit after Taxation was Rs. 127.56 Crore reflecting an
increase of 47.36%.

BUSINESS UPDATE:

We started the year 2009 amidst speculation and uncertainty precipitated by
the economic downturn which affected almost every economy in the world.
However, the developments during the year, demonstrated the resilience of
Zensar and the Company delivered excellent growth in profits and revenue.
While there was certainty that these tumultuous times would pass, the
Company viewed this crisis as an opportunity, not only exhibiting
resilience but also sustaining its growth.

The advent of 2010 has signaled the revival of outsourcing within core
markets, along with the emerging markets increasingly adopting outsourcing
for enhanced competitiveness. The Company has leveraged this and had built
upon its relationships with existing customers and has acquired many new
customers through the year. The investments that the Company has made in
the business have helped us gain a stronger position in the market than in
2009.

The year witnessed the emergence of and thrust on its core themes for the
next decade - Diversification, Specialization, Transformation, Innovation
and inclusive growth. As a Company we targeted new growth engines beyond
our core offerings, invested in developing innovative solutions for our
endcustomers, strengthened internal capabilities by acquiring and

training talent and investing in people initiatives. This coupled with our
compelling and dynamic value proposition and competitiveness ensured that
Zensar remained committed in creating shareholder value.

The domestic market is at an inflection point with the rise of India I nc.,
growing adoption of IT to achieve greater efficiencies and the Indian
government fuelling the demand with various eGovernance initiatives. The
year witnessed longer term comprehensive outsourcing engagements with the
overall domestic market posting strong growth. Recognizing the
opportunities, the Company has reaffirmed its commitment to the domestic
market with focus on key segments of government, healthcare, manufacturing
and logistics in India by launching new offerings and partnerships to
service the sectors. The Company has also been recently empanelled as IT
consultant for the nationwide Restructured Accelerated Power Development
and Reforms Programme (R-APDRP) launched by the Ministry of Power, Govt. of
India in the XI Five year Plan to prevent frequent outages, and
transmission and distribution losses due to theft and unmetered supply.

Emerging markets of India, South Africa and continental Europe continue to
be drivers of new business for the Company and with a number of customers
ready now to move offshore which is a significant trend for the Company.
Amongst the new wins in these territories are, a large total financial
services provider; a leading integrator of competitive, innovative and
practical business solutions based on information and communication; an
independent private London bank, providing banking and investment services;
provider of talent management, erecruitment and payroll software solutions
to corporate companies across the globe.

The Company has also seen some new product launches which include the
launch the Procurement Platform for our BPO Services, which helps customers
realize the potential of technology and outsourcing without having to incur
capital expenditure and pay only for the number of transactions managed.
The launch of ZenAutoPro, Zensar's tool for automated code generation to
advance the script development process and to save the overall automation
time as compared to traditional Test Automation is yet another outcome of
our focus on constant innovation.

In addition to growth in the areas of Package Implementation, Testing and
Infrastructure Management, Zensar's new Impact Sourcing service for process
and technology transformation for recessionary markets with assured results
has received an excellent responsefrom the market.

The Company has seen immense traction in the Enterprise Applications
business and has been adding new customers to its Oracle business over the
year. The Company is also now a Platinum Partner (Highest level of
partnership) in the Oracle Partner Network Specialized program. The status
is a recognition of our expertise across the breadth of Oracle products.
Your Company is also a Gold Certified Partner for Microsoft, which
represent the highest level of competence and expertise with Microsoft
technologies.

QAI India Limited, a Software Engineering Institute (SEI) - an authorized
lead appraiser has audited the Company's processes and has renewed your
Company's CMMI certification (Maturity Level 5 of CMMI for Developmentv
1.2).

Additionally, your Company has also ensured that all operational levers
work towards enhancing productivity to continue the growth journey that we
have seen in the past.

BUY-BACK:

During the year the Company completed Buyback of 24,24,000 Equity Shares
through Tender Offer Route at a price of Rs. 165/per Equity Share. The
Equity Shares so bought back constituted 10.11 % of the Equity Share
Capital of the Company. The total amount utilised for Buyback was Rs. 39.99
Crore. A sum of Rs. 242.40 Lacs was transferred to Capital Redemption
Reserve Account.

AMALGAMATION:

A Scheme of Amalgamation of Zensar OBT Technologies Limited and Zensar
Transformation Services Limited with the Company was sanctioned by the
Hon'ble High Court of Judicature at Bombay on 09th April, 2010. The Order
passed by Hon'ble High Court of Judicature at Bombay approving the said
amalgamation was filed with Registrar of Companies, Pune on 17th April,
2010. Accordingly this scheme has been given effect to in these Accounts
and the assets and liabilities of the Subsidiary Companies, atthe
respective bookvalue, have been transferred to and vested in the
Companywith effectfrom O1st April, 2009.

DIVIDEND:

In view of your Company's profitable performance, your Directors are
pleased to recommend, for your approval, dividend at the rate of Rs. 5.50
per share on the Equity Shares of Rs. 10/- each for the financial yearended
31st March, 2010. The Dividend, if approved bytheshareholders in the
ensuingAnnual General Meetingwould result in an outflow of Rs. 13.84 Crore
including Dividend Distribution Tax, Surcharge and Cess thereon. The
Dividend would be paid to those shareholders whose names appear in the
Register of Members on 05th July, 2010.

TRANSFER TO RESERVE:

Your Directors propose to transfer a sum of Rs. 75.00 Crore to General
Reserve.

FIXED DEPOSITS:

Currently, your Company does not have any Fixed Deposit Scheme.

DIRECTORS:

Mr. H.V. Goenka and Mr. P. K. Choksey retire by rotation at the ensuing
Annual General Meeting and, being eligible, offer themselves for
reappointment. Brief particulars of the Directors, their expertise in
various functional areas are given in the notice conveningtheAnnual General
Meeting

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
AND OUTGO:

The provisions relating to disclosure of details regarding energy
consumption, both total and per unit of production are not applicable as
the company is engaged in service sector and provides IT and IT related
services.

Particulars prescribed under sub- section (1)(e) of Section 217 of the
Companies Act, 1956, read with the Companies (Disclosure of particulars in
the Report of Board of Directors) Rules, 1988, in respect of technology
absorption are set out in Annexure A' to this report.

Particulars regarding Foreign Exchange earnings and expenditure during the
year are given in Note 14 and Note 15 of Notes to Accounts respectively.
Particulars regarding R & D expenditure during the year are given in Note
22 of Notes to Accounts.

DIRECTORS' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217 (2AA) OF
THE COMPANIES ACT, 1956 The Directors confirm that:-

i) in the preparation of the annual accounts, the applicable accounting
standards have been followed and there has been no material departure;

ii) appropriate accounting policies have been selected and applied
consistently and the Directors have 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 31st March 2010 and the profit of the Company
for the year ended 31st March 2010;

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

iv) the annual accounts have been prepared on a goingconcern basis.

PARTICULARS OF EMPLOYEES:

Information as per Section 217(2A) of the Companies Act, 1956, read with
Companies (Particulars of Employees) Rules, 1975 are set out in Annexure
B' to this report.

SUBSIDIARY COMPANIES:

AS per Section 212 of the Companies Act, 1956, your Company is required to
attach the Directors' Report, Balance Sheet, and Profit and Loss Account of
its Subsidiary Companies. Accordingly, an application has been made to the
Ministry of Corporate Affairs (MCA), Government of India, requesting an
exemption from such attachment as the Audited Consolidated Financial
Statements in the Annual Report present a full and fair picture of the
state of affairs and the financial condition of the Company. The approval
is awaited

The Company will make available the annual accounts of the subsidiary
companies and the related detailed information upon request by any member
of the Company. These documents/details will also be available for
inspection by any member of the Company at its registered office during
business hours on working days.

Consolidated Financial Statements of your Company along with its
subsidiaries, prepared in accordance with the relevant Accounting Standards
issued by The Institute of Chartered Accountants of India, forms part of
this Annual Report.

CORPORATE GOVERNANCE:

Your Company continues to benchmark itself with the best-of-thebreed
practices as far as the corporate governance standards are concerned. Your
Company has complied with regulations provided in clause 49 of the listing
agreement it has entered into with the stock exchanges. The compliance
report on the various requirements under the said clause along with the
practicing Company Secretary's certification thereof is provided in the
corporate governance section of this report. In terms of the Listing
Agreement, the Management Discussion and Analysis Report is annexed and
forms part of the Annual Report.

EMPLOYEES STOCK OPTION PLAN:

Currently, the Company has two Employees Stock Option Schemes in force
namely, 02002 Employees Stock Option Scheme' and 02006 Employees Stock
Option Scheme' for granting Term based and performance based Stock Options
to Employees. In the financial year 2009-10, 26,941numbers of equity shares
were allotted under 2002 Employees Stock Option Scheme' and 7,256 numbers
of equity shares were allotted under '2006 Employees Stock Option Scheme'.
The Disclosures in compliance with Clause 12 of the Securities and Exchange
Board of India (Employees Stock Option Scheme and Employees Stock Purchase
Scheme) Guidelines, 1999 in this respect are stated in Annexure C to this
report.

GROUP:

Pursuant to intimation from the promoters, the name of the Promoters and
entities comprising the group' as defined under the Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP) are disclosed in Annexure D to
this report.

AUDITORS:

M/s Price Waterhouse, Chartered Accountants, Auditors of the Company,
retire at the ensuing Annual General Meeting and, being eligible, offer
themselves for re-appointment. The Company has received a Certificate from
the Auditors that they are qualified under Section 224(1 B) of the
Companies Act, 1956, to act as the Auditors of the Company, if re-appointed
along with confirmation that have valid certificate issued by 'Peer Review
Board' of the Institute of Chartered Accountant of India (ICAI).

ACKNOWLEDGEMENTS:

The Board places on record their appreciation of the contribution of
Associates at all levels, customers, business and technology partners,
vendors, investors, Government Authorities and all other stakeholders
towards the performance of the Company during the year under review.

For and on behalf of the Board

H.V. Goenka
Chairman

Place: Mumbai
Dated: 22nd April 2010

Annexure-A

PARTICULARS PURSUANT TO COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT
OF BOARD OF DIRECTORS) RULES, 1988.

A. RESEARCH & DEVELOPMENT (R & D):

Your Company is happy to report that it continues to focus on inhouse
Research and Development program/activities (program recognized by
Department of Science and Industrial Research (DSIR), Department of Science
and Technology (DST), Governmentof India, in September 2008) in
followingareas:

Global Delivery Model/Solution BIuePrint Development:

Your Company conceptualized and built Solution BIuePrint (S13P) - a
Framework for automated software development, which focuses on capturing
customer business processes and visual blueprinting the solution to be
developed. The modeling technology used in SBP facilitates model
transformation to leverage productivity gain through automation. Global
Delivery Model (GDM) remains appropriate for growing global needs to
leverage network of resources, domain/technology specialists and in
aligning best-in-class processes. SBP with collaborative feature to assist
in better understanding amongst stakeholders is further enhanced with
automated Test Scenario identification, Java/J2EE design pattern
implementation to address business needs in IS systems. A unique Round-trip
Engineering feature enables synchronization of popular Java IDE with model
Classdiagram, thus simplifying /enhancing impact analysis process during
development and enhancement of code for Java based application. The
experience gained so far sets the future path of maturing and enhancing SBP
Framework architecture, based on flexible Open Source Community components
/tools, to have integration with Ontology frameworks and Domain Specific
Language/Models. Your Company is happy to report that a SBP Community
Edition version is launched through our solutionblueprint.com site and
continues to be a contributing member of Open Source community with it's
vision of Global citizenship in new-age IT world.

Use of Open Source Technologies:

Open Source Technologies bring solutions for changing business needs and
continues to be a preferred choice for organizations worldwide looking for
cost effective solutions. With growing confidence in adopting technologies
such as MySql for Database, Portal Solutions, PHP for scripting language
using Open source components and developing plug-in components to
build/enhance functionality your Company has executed internal projects and
addresses solution space using such technologies for the customers. Your
Company continues to be a member of thevery popular Open Source Eclipse
platform.

T-Zen Test Manager tool & SaaS (Software as a service):

Software Test Manager Tool facilitates the testing during development
process. Your Company has developed a bug tracking tool - Tzen and hosted
it in the Cloud for the use by associates engaged with customers worldwide.
This is an inhouse developed tool for our software development community.
It allows us to freely use and also add functionality as required. The
features include integration with open source tool - Mantis with built-in
hosting capability to reduce individual installations and maintenance. The
delivery mechanism for this tool to customer is Software as a Service
(SaaS) and commercial model is 'pay per use'

Cloud Technology and SOA (Service Oriented Architecture):

With Distributed computing leading to exploration of Cloud technologies and
SOA framework creating architectural choices, our growing maturity in the
solution space enables internal IT to be engineered for the future with eye
on the current business needs. This will enable us to follow the blueprint
for integrating our own internal IT application gradually including legacy
systems to realize Next Generation Integrated Information System.

B. TECHNOLOGY ADOPTION AND ASSIMILATION:

Development of IT Systems for internal use:-

Your Company continues to enhance IT systems for its own use in line with
changing business needs. The integrated IT systems is based on mature and
stable applications such as Project Initiation / Allocations, workflow
engine based Performance Management systems, collaborative work through
portal services and knowledge management, Blogs /discussion threads for
associates.

Your company has embarked upon development and deployment of next
generation of IT systems for internal use that will facilitate higher
automation and productivity. This is towards preparation to grow towards
half billion dollar revenue mark.

Innovation Council:

Your Company has created and institutionalized Council to identify
opportunities for Technology and Process Innovation applicable in its work.
Your Company is happy to report that Innovation in Technology & Process, a
High Maturity Key Process Area from CMMI-Dev model, was assessed
successfully this year. Council is empowered to conceptualize, develop and
implement these ideas. These initiatives will generate Intellectual
Property for the Company in its chosen industry vertical and technology
focus areas.

Annexure-C

Disclosures in compliance with clause 12 of the Securities and Exchange
Board of India (Employees Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999, as amended are set out below:

1. Name of the Scheme : 2002 Employees Stock Option Scheme

2. Total number of : 2,328,806
options to be granted
under the plan

3. Options Granted : Nil
during the year

4. Pricing formula : The Compensation Committee decides exercise
price for the Stock Options based on the
market price i.e. the closing price on the
Stock Exchange where trading volume is more
on the previous day of the Compensation
Committee Meeting held for granting of Stock
Options. Compensation Committee may determine
the Exercise Price at a premium or discount
of a maximum of 20% on the market price.

5. Options vested as of : 196,961
31st March 2010

6. Options exercised : 26,941
during the year

7. Total number of : 704,547
shares arising as a
result of exercise of
options till 31st
March 2010

8. Options lapsed/ : 43,290
cancelled during the
year (1)

9. Variation of terms of : During the year there has been no variation
options in the terms of options.

10. Money realized by : Rs. 3,317,125
exercise of options
during the year.

11. Total number of : 256,526
options in force at the
end of the year

12. Employee-wise : Senior Management comprises the Managing
details of Stock Options Director and his direct reports. Accordingly,
granted to Senior the details of Stock Options granted are as
Managerial Personnel as follows:- Dr. Ganesh Natarajan - 500,000;
on 31st March 2010. Mr. Parmod Bhalla - 100,000; Mr.Vivek Gupta-
21,039; Mr. Nitin Parab 18,476; Mr. V.
Balasubramanian 19,125; Mr. S.Balasubramaniam
10,407; Prameela Kalive - 1,575;
J Pardhasaradhi - 2,100; Krishna Ramaswamy-
1,575 Of these, certain stock options have
been exercised.

13. Employees who were : Nil
granted options
amounting to 5% or more
of the options granted
during the year.

14. Employees who were : Dr. Ganesh Natarajan : 500,000 As of 31st
granted options in any March 2010, all these options have been
one year equal to or exercised.
exceeding 1% of the
issued capital of the
Company at the time
of grant.

15. Diluted Earnings : Rs. 35.33
Per Share (EPS) pursuant
to issue of shares on
exercise of option
calculated in accordance
with Accounting
Standard (AS 20)

16. Where the Company : The Company calculates the Employee
has calculated the Compensation Cost using the intrinsic value
employee compensation of the Stock Options. The difference between
cost using the intrinsic the Employee Compensation Cost computed as
value of the stock per Intrinsic Value method and Fair Value
options, the difference Method is Rs 0.26 Crore for the year, Fair
between the employee Value being higher than Intrinsic Value.
compensation cost so The impact on Profits and EPS is 0.26 Crore
computed and the and Re.0.11 respectively.
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 EPS of the
company shall also be
disclosed.

17. Weighted-average : Weighted average exercise price of the
exercise prices and options is Rs.63.60 Weighted average fair
weighted-average fair value of the options is Rs. 73.04
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 on
the grant date

18. Description of the : The Company has used the Black Scholes Model
method and significant for estimating the Fair Value of the options.
assumptions used during The Company has applied the following
the year to estimate the assumptions while computing thefairvalue:
fair values of options:

1. Risk-free interest rate: 7.50%
2. Expected life: 84 months

3. Weighted average of expected 42.50%
volatility:

4. Expected dividends: 1.57%

5. The weighted average price of Rs.151.00
the underlying share in market at
the time of option grant:

1. Name of the Scheme : 2006 Employees Stock Option Scheme

2. Total number of : 1,000,000
options to be granted
under the plan

3. Options Granted : 79,000
during the year

4. Pricing formula : The Compensation Committee shall determine
the exercise price in respect of each grant
of option. However, the exercise price shall
be with premium or discount of a maximum of
20% on the market price as defined under the
Securities and Exchange Board of India
(Employees Stock Option Scheme and Employees
Stock Purchase Scheme) Guidelines 1999.

5. Options vested as of : 222,660
31st March 2010

6. Options exercised : 7,256
during the year

7. Total number of : 7,256
shares arising as a
result of exercise of
options till 31st
March 2010

8. Options lapsed/ : 11,820
cancelled during the
year (1)

9. Variation of terms of : During the year there has been no variation
options in the terms of options.

10. Money realized by : Rs.1,214,800
exercise of options
during the year.

11. Total number of : 533,404
options in force at the
end of the year

12. Employee-wise : Senior Management comprises the Managing
details of Stock Options Director and his direct reports. Accordingly,
granted to Senior the details of Stock Options granted are as
Managerial Personnel as follows:- Dr. Ganesh Natarajan - 200,000;
on 31st March 2010. Mr. Vivek Gupta - 30,000;
Mr. Nitin Parab - 30,000;
Mr. V. Balasubramanian 30,000;
S Balasubramaniam - 5,000;
Prameela Kalive - 3,000,
Krishna Ramaswamy - 3,000

13. Employees who were : 1. Ajay Bhandhari - 10,000
granted options 2. Deepanjan Banerjee - 12,000
amounting to 5% or more 3. Ankit Ghosh - 12,000
of the options granted 4. Harish Lala - 12,000
during the year.

14. Employees who were : Nil
granted options in any
one year equal to or
exceeding 1% of the
issued capital of the
Company at the time
of grant.

15. Diluted Earnings : Rs. 35.33
Per Share (EPS) pursuant
to issue of shares on
exercise of option
calculated in accordance
with Accounting
Standard (AS 20)

16. Where the Company : The Company calculates the Employee
has calculated the Compensation Cost using the intrinsic value
employee compensation of the Stock Options. The difference between
cost using the intrinsic the Employee Compensation Cost computed as
value of the stock per Intrinsic Value method and Fair Value
options, the difference Method is Rs 0.83 Crore for the year, Fair
between the employee Value being higher than Intrinsic Value.
compensation cost so The impact on Profits and EPS is 0.83 Crore
computed and the and Re.0.35 respectively.
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 EPS of the
company shall also be
disclosed.

17. Weighted-average : Weighted average exercise price of the
exercise prices and options is Rs.74.09 Weighted average fair
weighted-average fair value of the options is Rs. 82.10
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 on
the grant date

18. Description of the : The Company has used the Black Scholes Model
method and significant for estimating the Fair Value of the options.
assumptions used during The Company has applied the following
the year to estimate the assumptions while computing thefairvalue:
fair values of options:

1. Risk-free interest rate: 7.50%
2. Expected life: 84 months

3. Weighted average of expected 42.50%
volatility:

4. Expected dividends: 1.57%

5. The weighted average price of Rs.151.00
the underlying share in market at
the time of option grant:

(1) As per the 2002 ESOP and 2006 ESOP, options lapse after completion of
the exercise period, which is 10 years from the dates of respective
vesting. If an option is cancelled on account of separation of the
employee, without having been exercised, such cancelled option shall become
available forfuturegrant underthe plan.

MANAGEMENT DISCUSSION AND ANALYSIS

Corporate Profile:

Zensar Technologies is a globally focused software and services Company
spread across 18 countries, with its headquarters in Pune, India and a
centre in Hyderabad; it has its other delivery centres in Gdansk in Poland,
Slough in UK and Shenzhen in China.

With 5234 associates and sales and operations presence across US, UK,
Germany, Finland, Middle East, South Africa, Singapore, Australia, Japan,
Poland and China, the Company delivers comprehensive services for mission-
critical applications, enterprise applications, e-business applications and
BPO Services and is poised for growth in years to come.

The Company provides end-to-end services from IT solutions to Business
Process Outsourcing services, from consulting to implementation across
diverse technology platforms and industry domains through a Global Delivery
Model, delivering 247 services.

The Company has been recognized by the Department of Scientific and
Industrial Research (DSIR) in recognition of the inhouse R&D efforts. DSIR
is a nodal department that grants recognition to in-house R&D units in
Industry, Scientific and Industrial Research Organizations (SIROs).

With a landscape of global operations comes a vast diversity of customers,
partners and a global talent pool. The Zensar team comprises at least 14
nationalities-Albanian, American, British, Canadian, Chinese, Filipino,
Indian, Israeli, Italian, Japanese, Mexican, Pole, South African, and
counting as the Company is expanding.

At Zensar individuality, creativity, innovation and flexibility are
celebrated and this creates enormous diversity which brings in a world
culture' to the organization and equips it to be a true transformation
partner to global corporations.

Indian IT 2000-10 Industry Outlook:

We started the year 2009 was the year of speculation and uncertainty
brought in by the economic downturn which affected almost every economy in
the world but the year steadily opened up to be better than expected with
good results from companies across the industry. The developments during
the year, demonstrated India's resilience and maturity, driven by sound
macroeconomic fundamentals.

For the Indian IT-BPO industry, this downturn signaled the beginning of a
paradigm shift in the way the industry thinks and operates- the ability to
carve out new product and process strategies, explore new market
opportunities beyond the traditional strongholds in software exports and
build a more cooperative relationship with the knowledge worker community -
developments which will have long term positive impacts on our industry.
The industry targeted on building new growth engines, beyond the core
offerings, invested in developing innovative solutions for overseas and
domestic end-customers, focused on end-to-end capabilities in selected core
areas, strengthened internal capabilities by upgrading talent and making
knowledge investments.

The Indian IT industry is estimated to aggregate revenues of USD 73.1
billion in FY 2010, with the IT software and services industry
accountingfor USD 63.7 billion of revenues. During this period, direct
employment is expected to reach nearly 2.3 million, an addition of 90,000
employees, while indirect job creation is estimated at 8.2 million. As a
proportion of national GDP, the sector revenues have grown from 1.2 per
cent in FY1998 to an estimated 6.1 per cent in FY 2010. Its share of total
Indian exports (merchandise plus services) increased from less than 4
percent in FY 1998 to almost 26 percent in FY 2010.

Export revenues are estimated to gross USD 50.1 billion in FY 2010, growing
by 5.4 per cent over FY 2009, and contributing 69 per cent of the total IT-
BPO revenues. Software and services exports (including BPO) are expected to
account for over 99 per cent of total exports, employing around 1.8 million
employees.

Domestic IT-BPO revenues are expected to grow at almost 8.5 per cent to
reach INR 1,088 billion in FY 2010. Rise of Indian corporations facing
competitive market conditions through an increasingly globalised Indian
market, increased spend by the government in several e-Governance
initiatives, enhanced connectivity and increased levels of IT spending are
key factors, which make the domestic market lucrative today. Coupled with
the fact that companies are looking to improve competitiveness by adopting
global best practices, leverage customised service offerings and new
delivery models such as SaaS, which ensures greater cost savings. Domestic
IT services is expected to grow by 12 per cent in FY 2010. The domestic BPO
segment has continued its strong performances over the past few years,
growing by 22 per cent over FY 2009, to reach INR 108 billion, driven by
large deals in the telecom and BFSI space.

The industry's vertical spend also saw the impact of the downturn globally.
Banking and Financial Services, one of the largest vertical in terms of IT
adoption suffered the greatest brunt of the recession. It plunged into a
decline afterwitnessing below average growth rate of 3.6 per cent in 2008.
Government and healthcare segments continued to grow, same as last year,
but quite slow in comparison.

The government market is one of the largest and steadily growing vertical
industries worldwide for technology spending, with over USD 175 billion -
targeted for IT hardware, software, and services. There is an increasing
demand for discretionary spending due to the emergence of new national
priorities such as national security, immigration policy and disaster
readiness.

Zensar Technologies Limited

Government and the healthcare verticals turned out to be potential spenders
and relatively recession resistant for the second consecutive year

The advent of 2010 has signaled the revival of outsourcing within core
markets, along with the emerging markets increasingly adopting
outsourcingforenhancedcompetitiveness. Keydemand indicators in the last two
quarters have helped the industry post good results. Though full recovery
is expected in another two quarters, development of new growth levers,
improved efficiency and changing demand outlook signifies signs of
recovery.

Opportunities and Threats:

The new decade will be different in terms of opportunities and challenges,
as Indian vendors begin to compete with larger Western incumbents in all
markets and small and medium firms offer their own point of view' to an
increasingly discerning customer base. As global economies limp back to
positive GDP growth and the high unemployment percentages in the West
continue to create protectionist voices against outsourcingto other
countries, the industry will continue to face the pressures of low
incremental demand and constantdemand for morefor less'.

At Zensar too we have identified areas where the Company will need to focus
in the year ahead -

* Exploring innovative business models to move from the linear model and
make investments in intellectual property and hosted applications and
platforms such as SaaS, Cloud Services and transform processes where global
centres around the world can be seamlessly integrated to deliver value.

* Entering the large SME segment with hosted solution suite which aims to
help mid-size and small companies get started with a lower up-front cost by
eliminating capital outlay traditionally required for acquiring a software
license or IT hardware will be a focus for Zensar in the years ahead.

* Revisiting gain sharing arrangements and charging premium for expertise
and guaranteed results to develop deeper trust based relationships with
customers and develop long term relationships.

* Introducing Platform-based BPO services offerings for changing market
needs that includes 'integrated platform' that will offer a standard
software offering, not just the people and the process expertise.

* Actively collaboratingin providing world-classgovernment-tocitizen (G2C)
Services for the domestic market and capitalize on reforms that are paving
way for increased IT-BPO spend by the government.

* Market conditions expected to remain challenging due to continued
volatility in currency and rising manpower costs.

Future Outlook:

As our industry moves towards exploring new frontiers, there are many

reasons that will limit us and it is imperative for stakeholders to break
out of the traditional mould that resulted in past successes and step up to
the aspirations of the future. This would need new business models,
reinvented service offerings and an enabling environment supported by
adequate levels of infrastructure and talent. The financial crisis has
driven accelerated growth of Software-as-a-Service based solutions.
Companies avoided non-critical software expenditures whenever possible, and
the most obvious cutbacks were in core ERP upgrades. Companies shifted the
funding to more businesscritical software purchases, such as, vertical-
specific software, where the R01 is more direct and more easily defined.
Companies are expected to buy more subscription-based SaaS software
solutions in lieu of on-premise software, in part because of the desire to
consume software out of the operating budget rather than thecapital budget.

At Zensar, we have delivered beyond expectations even when the times were
tough and there is reason to believe that it will continue to do so in this
decade too. With our innovative approach and solid management practices
driven by a stable leadership team, a diversified services portfolio that
aligns to market needs, coupled with a wide geographic spread and increased
efficiencies, the Company is certain about exceeding expectations of growth
in years to come.

Segment-wise Performance:

For the financial year under consideration, your Company has reported
results of the Strategic Business Units (SBUs) viz. Global Transformation
Services (GTS) and Enterprise Application Services (EAS).

The Company recognizes each of the SBUs as its primary segments. Secondary
segmental reporting is done on the basis of geographical location of
clients.

The performance of these segments have been separately reported in Note
no.9 of the Consolidated Financial statements of the Company.

Internal Control:

Strong internal controls and their rigorous testing is one of the strengths
of Zensar. All the stakeholders of Zensar benefit from this strength of the
organization. Strong internal controls minimize the risk of frauds by
introducing effective checks and balances into the financial system.
Zensar's Audit Committee along with Management oversees financial controls
and their implementation. The Audit Committee meets regularly, reviews and
verifies the controls in accordance with the Terms of Reference given by
the Board of Directors.

Talent Management

At Zensar, our focus is to develop individual and team competencies and
capabilities for driving operational excellence and building a high
performance organization. Hence our Talent Management programme is focused
on Talent Acquisition, Development and Retention.

Some key metrics from last year:

- Our global team has grown from 4684 to 5234
- Our retention rate stood at 84% for this year
- Our critical talent retention hasstoodat98%
- Internal talent pool development - 70% of our new managerial requirements
have been met internally through our leadership development programmes

The following is a summary of our key talent management initiatives:

Talent Development:

Training and Organization Development

We drive sustained training and development programmes for
buildingastrongglobaltalentpool internally for fueling our growth and
expansion plans. Our focus on management pipeline has led to 70% internal
fulfillment through our leadership development program. Some of these
development programmes are:

- Development Centers (DC) to assess and develop managers and leaders.

- Leadership and Managerial Development Programs (LDP and MDP) programme
which is a sustained year long course for leadership pipeline development.

- Performance Planning and Evaluation process, which is used for
identification of talent development needs, career planning decisions and
inputs for the rewards and recognition practices.

- Structured mentoring framework to help associates develop their skills

Organization and Management Review (OMR) is our comprehensive process to
review the organization structure and key people development processes and
ensure alignment to the overall strategy of the Company. The process is
also used to identify critical positions and resources in the organization
and draw up comprehensive succession plans for each critical position and
career plans for all high potential associates.

Talent on Demand'

Campus Hiring:

The COE pipeline, our initiative to partner with selected colleges and
activity trainingfor future requirements provides a steady and reliable
pipeline of fresh talent.

Zensar has built a very strong partnership with the Academia to collaborate
in nurturing fresh talent. This initiative has been extremely successful in
reducing the deployment time of our fresh hires, and today 60% of our fresh
talent acquisition comes through this programme.

Talent Engagement:

Building highly engaged talent teams is the focus for all our Talent
Management initiatives. Our 5 F (Flexible, Fast, Focused, Friendly, Fun)
culture of balancing business requirements with people priorities helps us
sustain a high energy and high performance work culture for the
organization.

The Associate Relations function in Zensar is unique and has been
established to provide Zensarians with 'one face' for any HR related
issues. The Associate Relations team proactively addresses issues and
concerns of associates and brings them to the notice of the management for
effective resolution.

Work Life Balance: Zensar has been constantly striving to provide
opportunities for associates to strike the right balance between
professional and personal aspirations & interests. Our Time Off Scheme',
the on-campus Child Care Center, the Zensar Fun Zone our on-campus Medical
Center and the on campus Counselor facility are some of the initiatives in
that direction.

Rewards & Recognition:

This is a continuous effort to recognize and reward performance, passion
and commitment at Zensar. Our rewards and recognition process ensures
Zensar recognizes associate contribution to organizational growth at all
levels. The rewards scheme range from on the spot rewards to project awards
and last but not the least recognition of excellence through the Annual
Excellence Awards.

Open Culture: Thriving on Transparency and Openness:

Zensar provides multiple platforms at all levels to bring the associates
and the management teams together to share perspectives, views and thoughts
on all aspects of working together through initiatives such as Everybody
Meeting (EBM), informal meets called the Pizza and Coke meeting and other
open forums.

In addition, Zensar has a very vibrant platform for virtual collaboration -
our Intranet called ZenLounge is actively used by our associates for
sharing views, technical collaboration as well as information sharing.

Diversity and Inclusion (D&I):

Zensar has been constantly striving to build a diverse and inclusive work
culture that respects and thrives on diversity in gender, age, nationality,
race and capability.

The unique Vision Community is one of our key D&I initiatives where cross-
functional teams across the levels in the organization contribute to the
strategy building exercise of the organization.

WE (Women for Excellence) is another key D&I initiative for us to help
foster leadership in the women associates and encourage them to break their
internal glass ceilings and work to realize their true potential. Zensar
received the 'WILL 2009 Women's Choice Awards' in recognition for the
contribution in creating a most enabling and inclusive environment for
women & leveraging the vast talent pool of women at the workplace.

Corporate Social Responsibility:

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 health initiatives. Many of the community projects and
programs are driven by active participation from our employees. Our
commitment to address important societal needs extends throughout our
philanthropic outreach programs driven by the Zensar Foundation. The
foundation also works with various NGOs and organization with similar
objectives.

Financial Management:

Accounting principles consistently used in the preparation of financial
statements are also consistently applied to record income and expenditure
in individual segments.

1. REVENUE:

Revenue for the year ended 31' March 2010 is as under:

A. BY SBU Rs. Crores
SBU 2009-10 2008-09

Global Transformation Services (GTS) 683.32 620.32
Enterprise Application Services (EAS) 269.01 284.39
Others 0.42 3.37

Total 952.76 908.08

B. BY GEOGRAPHY:

Geography

United States of America 575.72 526.26
United Kingdom 150.52 148.30
Rest of the World 226.52 233.52

Total 952.76 908.08

C. BY LOCATION:

Location

Onsite 60% 64%
Offshore 40% 36%

2. OTHER INCOME:

Other Income comprises dividends from mutual fund investments, interest on
bank deposits, profit on sale of investments and others. Other income
during the current year was Rs. 8.28 Crores as against Rs.14.08 Crores in
the previous year.

3. SHARE CAPITAL:

During the year, the Company has bought back 24,24,000 numbers of equity
shares and has allotted 34,197 equity shares of Rs 10 each, fully paid up,
pursuant to exercise of stock options under the 02002 ESOP' and 02006 ESOP'
scheme. The subscribed Equity Share Capital as at 31st March, 2010 was
2,15,75,867 number of Equity Shares of Rs. 10 each. As of 31st March, 2010
the number of Stock Options outstanding was 4,19,621.

4. RESERVES AND SURPLUS:

The Company's reserves and surplus as on 31st March 2010 was Rs. 321.96
Crores as against Rs. 234.65 Crores in 2008-09 after offset of the
following against the reserve:

1. Rs.3.12 Crores for Good-will.
2. Rs. 37.57 Crores for Buy Back of Equity shares.

5. SECURED LOAN:

As of 31st March 2010, secured loan outstanding was Rs. 44.68 Crores as
against Rs. 75.74 Crores outstanding as of 31st March 2009. This decrease
was mainly on account of partial repayment of secured loan.

6. FIXED ASSETS:

There was an increase in Gross Block of Fixed Assets by Rs. 10.86 Crores.
Capital work-in-progress of Rs. 1.36 Crores is mainly on account of civil
works related to the construction of a Development Centre at our Campus in
Kharadi, Pune.

7. RETURN ON CAPITAL EMPLOYED:

The return on capital employed (ROCE) for the year 2009-10 is 39%.

8. DEBTORS

The position of outstanding debtors was: Rs. Crores
As at 31st As at 31st
March, 2010 March, 2009

Outstanding for less than 144.28 130.26
six months

Outstanding for more than 14.18 16.76
six months

Provision for doubtful debts (15.85) (13.75)

Total Sundry Debtors 142.62 133.28

9. CASH AND BANK BALANCES:

The Cash and Bank Balances represent the Company's balances in banks in
India and overseas. The Company also retainsfunds in the Exchange Earners
Foreign Currency (EEFC) account in India, which is mainly used to meet the
remittance requirements of the Company's branches and also for travel
purposes. The Company possessed cash and bank balances (India and overseas)
of Rs. 129.97 Crores as on 31st March, 2010.

10. OTHER CURRENT ASSETS:

Other Current Assets of Rs. 43.89 Crores consist mainly of accrued income
i.e. where services have been rendered as per contract but the client has
not been billed as on 31st March 2010.

11. LOANS AND ADVANCES:

The Loans and Advances largely comprise advances recoverable in cash or in
kind for value to be received amounting to Rs. 73.65 Crores as on 31st
March, 2010 (Previousyear: Rs. 53.63 Crores), against which a provision for
doubtful advances has been created to the extent of Rs. 0.35 Crores
(Previous year Rs. 1.05 Crores).

12. CURRENT LIABILITIES &PROVISIONS:

Current liabilities amounting to Rs. 102.23 Crores (Previous year Rs.
104.58 Crores) represent payments due to suppliers and advances from
customers. Provisions consist mainly of accrual for expenses and provision
for tax and dividend.

13. PROVISION FOR TAXATION:

The Company's income-tax expense is Rs. 21.90 Crores (Previous year
Rs.25.55 Crores).

14. CONTINGENT LIABILITIES:

Contingent Liabilities have been disclosed in Note 3 in the 'Notes to the
Accounts'.

Risk Management:

Risk management is the identification, assessment, and prioritization of
risks followed by coordinated and economical application of resources to
minimize, monitor, and control the probability and/or impact of unfortunate
events or to maximize the realization of opportunities. Risks can come from
various avenues like financial markets, project failures, legal
liabilities, credit risk, accidents, natural causes and disasters as well
as deliberate attacks from an adversary. The essence of risk management
lies in maximizing areas of control over outcome and minimizing areas where
the Company has no control over outcome. Risk Management is a dynamic
process which should constantly be able to identify all the emerging risks
and propose solutions to manage these. The risk perception also constantly
varies depending on the size of the business, business segment, location,
scale of business. In these challenging business conditions, the Company
constantly strives to identify areas of potential risks, understand the
risks, devise a system to mitigate and manage the risks.

Risk management is an integral part of the charter of the Board of
Directors at Zensar. Your company has set up Risk Management Council which
is responsible for monitoring risk levels on various parameters and suggest
measures to address the same. This council works in consultation with the
Board of Directors, Audit committee, Management Council Members, Functional
and Country heads. The Risk Council has devised Risk Management Process
which is reviewed periodically in changing economic scenario and industry
conditions. It essentially identifies the risks by collating information on
new and existing risks and also effective mitigation of such risks. The
risk management framework at Zensar is as follows:

Risk Identification:

The company identifies internal and external risk factors in the context of
organizational strategy. The objective of Risk Identification is to
identify all possible risks to which the company is exposed to, in a timely
and proactive manner. Risk Identification methods at Zensar has the
following attributes:

1. Examination of all areas of the project in a systematic manner.

2. Being proactive rather than reactive

3. Synthesize risk information from all available sources of risk
information.

Risk Assessment:

Once risks have been identified, they are assessed as to their potential
severity of loss and to the probability of occurrence.

Risk Prioritization:

The objective of Risk Prioritization is to prioritize the identified risks
for mitigation. Both qualitative and quantitative methods can be used to
categorize the risks as to their relative severity and potential impact on
the company as a whole. To effectively compare identified risks, and to
provide a proactive perspective, the risk prioritization method in your
company considers the following factors:

* probability of the risk occurring.

* consequence of the risk.

* cost and resources required to mitigate the risk.

Mitigation Plan:

The Risk Council has designed Risk Mitigation Plan and the same is reviewed
periodically.

Monitoring of Risks:

Regular risk monitoring provides management and the Board with assurance
that established controls and risk mitigation policies are functioning
properly.

Your Company also periodically evaluates its risk bearing capacity and
accordingly selects appropriate risk management strategies. Company sets up
processes and internal control measures to mitigate risks. Further, Risks
are periodically evaluated to ascertain applicability to changing business
scenarios.

Certain risks to which the Company is exposed are listed below:

Client Risk:

Excessive exposure to a few clients could impact the Company's revenues and
profitability in case of loss of these clients or a significant downsizing
of projects given to the Company by these clients.

Risk Mitigation:

The Company has been engaged in long-term relationships with its major
customers thus mitigating the risk of inconsistent revenues. The Company
also, on a periodical basis, updates its clients' credit risk assessment.

Vertical Risk:

Zensar may be excessively dependent on select verticals. A downturn in the
fortunes of clients in this group or a reduction in their IT spending/
budgets, would adversely affect Zensar's own profitability.

Risk Mitigation:

Zensar provides solutions to a wide range of verticals spanning across
banking & finance, retail, manufacturing, distribution, telecom and
utilities segments. Zensar has prudently selected these verticals on the
basis of their rapid growth and the critical dependence of these verticals
on IT solutions to increase their respective business efficiency. The
Company has adequately distributed its business across verticals to
mitigate any risk through such exposure.

New Customer Segments:

Zensar's capability to execute projects in new customer segments could
adversely affect its delivery capabilities due to lack of expertise or
domain knowledge.

Risk Mitigation:

The Company's ability to execute new projects stems from its strong
Research and thorough analysis of the project requirements. Your Company
has a policy of doing a meticulous due diligence, advanced studies and
thorough research for every project that it undertakes, especially in new
customer segments. Risks and potential problem areas peculiar to that
segment are first identified, analyzed and alternate solutions to the same
are found even beforeventuring into a new segment.

Geographical Concentration Risk:

A high geographical concentration of business could be a risk especially in
the event of political and economic instability in the target markets.

Risk Mitigation:

The Company is present in the largest IT economies in the world (US,
Europe, Japan), which are expected to be least affected even in advent of a
slowdown. To cap its geographic risk, Zensar intends to strengthen its
presence across other regions like South East Asia, Middle Easttonameafew.

Technology Obsolescence Risk:

The Company's ability to remain competitive depends on the ability to adapt
to changing technology. Zensar may also have invested in certain
technologies, which may become obsolete in the future.

Risk Mitigation:

The Company continuously updates itself in terms of various emerging
technologies and trains its resources suitably.

Client Liability Risk:

A Client Liability Risk arises in the advent of the failure or deficiency
in services rendered to a particular client. Any such deficiency could
result in a claim for substantial damages against Zensar.

Risk Mitigation:

Zensar pays adequate attention to the negotiation and documentation of
contracts wherein an effort is made to limit the contractual liability for
damages arising out of negligent acts, errors, mistakes or omissions in
service delivery.

International Exposure Risk:

A limited experience in facilities outside India could result in
regulatory, export, visa and tax complications, leading to a possible non-
compliance of local laws and contractual obligations.

Risk Mitigation:

Zensar understands the local country environments systematically which has
helped reduce the related risks. Besides, the Company works with local
partners, which enables better understanding of then uances of the
respective territories.

Human Resource Risk:

A software company has to give special emphasis on its employees given the
nature of business. Poor job satisfaction can lead to low productivity,
discontent and subsequently attrition in human resources, which could drain
valuable knowledge and customer experience and, hence, potentially have an
adverse impacton revenues.

Risk Mitigation:

The Company continuously creates and maintains a pool of worldclass
resources by recruiting best talents from leading colleges and from within
the industry, imparting efficient and effective training and facilities,
blending them into productive resources by creating challenging
opportunities on projects. Zensar manages the careers of its employees in
order to groom them to assume bigger responsibilities. Zensar's systems
measure competencies and create a transparent performance-led incentive
system. A number of initiatives have also been taken to make Zensar a fun
place to work in.

Foreign Currencies Risk:

As the Company's revenues are in Foreign Currencies and expenses are
incurred in Rupee, there is an inherent foreign currency exposure, which
could impact revenues as well as profitability. Volatility in the currency
market may have a further potential impact on the Company.

Risk Mitigation:

The Company has an active treasury department which constantly monitors the
foreign currency exposures and takes suitable measures to address this
risk.

CAUTIONARY STATEMENT:

This Report to the Shareholders is in compliance with the Corporate
Governance Standard incorporated in the Listing Agreement with the Stock
Exchanges and as such cannot be construed as holding out for any forecasts,
projections, expectations, invitations, offers, etc. within the meaning of
applicable securities laws and regulations. This Report furnishes
information as laid down within the different headings provided under the
sub-head Management Discussion and Analysis to meet the Listing Agreement

requirements.