Annual Report - Onmobile Global - 2009-2010

ONMOBILE GLOBAL LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Dear Members,

The Directors take pleasure in presenting the 10th Annual Report on the
business and operations of the Company together with the Audited Financial
Statements and Accounts for the year ended March 31, 2010.



RESULTS OF OPERATIONS

FINANCIAL HIGHLIGHTS OF ONMOBILE GLOBAL LIMITED (STANDALONE)

For the year 2009-10 (Rs. Millions)
PARTICULARS 2009-10 2008-09

Net Revenue 3,639.14 3,271.10

Earning before other income, 981.34 1,185.92
depreciation, finance charges
and tax

Other Income 180.37 236.09

Depreciation 452.44 420.53

Finance Charges 2.20 0.03

Earnings before tax 707.07 1,001.45

Earnings after tax 528.96 706.81

Equity Share Capital 585.17 578.33

Reserves and Surplus 6,645.94 6,067.64

Networth 7,231.51 6,646.26

Investments 2,897.45 2,298.39

Gross Block 4,781.32 1,961.38

Net Block 3,384.36 1,015.42

Net Current Assets 2,748.55 3,453.30

Cash and Cash Equivalents 1,693.52 2,771.10

No. of Equity shares 58,516,792 57,833,319

Earnings per share (Diluted) (In Rs.) 8.9 11.8

BUSINESS PERFORMANCE/FINANCIAL OVERVIEW

Standalone Financial:

During 2009-10, the Company recorded net revenue of Rs.3639.14 million, an
increase of 11% over the previous year of Rs. 3271.10 million. The earnings
after tax of the Company was Rs.528.96 million in 2009-10 as compared to
Rs. 706.81 million in 2008-09. The diluted earnings per share (EPS) is
Rs.8.9 per share as compared to Rs. 11.8 per share for 2008-09.

Consolidated Financial:

During 2009-10, the Company recorded consolidated net revenue of
Rs.4,544.03 million, an increase of 12% over the previous year of
Rs.4,063.57 million. The consolidated earnings after tax of the Company for
the year 2009-10 was Rs. 423.50 million as compared to Rs. 851.97 million
in 2008-09. The consolidated diluted earnings per share (EPS) for the year
2009-10 is Rs. 7.2 as compared to Rs. 14.3 per share in 2008-09.

Appropriations

A. Dividend:

The Company has expanded its business to more than 20 countries over the
last couple of years which has resulted in considerable investment in
tangible and intangible assets. This has been funded through internal
accruals. The Company may also require additional funds in the coming years
to finance this expansion. Hence, the directors do not recommend any
dividend for the year ended March 31, 2010. The register of members and the
share transfer books will remain closed from July 16 to July 23, both days
inclusive. The Annual General Meeting of the Company has been scheduled for
July 24, 2010.

B. Transfer to Reserves:

The Company propose to retain Rs. 2,436.84 million in the Profit and Loss
Account.

Liquidity:-

As on March 31, 2010 the Company had liquid assets including investments in
fixed deposits and Mutual funds of Rs. 2,209.34 million.

CHANGES TO THE SHARE CAPITAL:

During the year under review, the Company allotted 75,862 equity shares of
face value Rs. 10/- each as a result of preferential allotment to the
founders and employees of Telisma SA based on the agreement for their
performance signed as a part of the acquisition of Telisma SA (approved by
the shareholders on August 01, 2009) and 607,611 equity shares on the
exercise of stock options under its various Employee Stock Option Plans,
which increased the number of issued, subscribed and paid-up equity shares
from 57,833,319 to 58,516,792. The issued and paid up equity share capital
of the Company as on the date of this report stands at Rs. 585,167,920
(equity shares of face value Rs. 10/- each).

Initial Public Offering:

The details pertaining to the utilization of IPO proceeds till March 31,
2010 is specified in the notes to accounts section of the Annual Report.

SIGNIFICANT EVENTS THIS YEAR:

A. International market Expansion (Telefonica and vodafone)

Telefonica VAS Business:

During the year under review, the Company had signed a mediation agreement
with Telefonica Internacional, S.A.U, Spain (Telefonica), for acquiring
exclusive market development and deployment rights to provide the company
access to deploy various Value Added Services including Ring back tones
(RBT), Music radio, Soccer portal, Voice Search, etc. in the Latin American
telecommunication markets where Telefonica operates.

Telefonica is the third largest telecom operator in the world based on
subscribers, with presence in over 20 countries including Latin American
countries. As per the said agreements, the Company is in the process of
deploying the services in 13 Latin American Countries and has made an
initial commitment of Euros 37 Million.

Vodafone VAS Business:

During the year under review, the Company had also signed another new
business agreement with Vodafone Group Services (Vodafone Global), for
enabling the Company to deploy various Value Added Services including RBT,
Music radio and several other VAS services in Vodafone Global emerging
markets. As per the said agreements, the Company has launched services in
Romania and South Africa.

These agreements with Telefonica and Vodafone Global are in continuation of
the Company's long-term plans to expand its business into International
markets. The Company currently has deployments in emerging markets
including Asia, Africa and Eastern Europe and this new partnership with
leading international customers should significantly accelerate the
Company's growth in large, fast growing VAS markets and assist in
fulfilling the company's aspiration to be the leading VAS Company in the
world.

B. Divestment - ver se Innovation Private Limited During the year the
Company sold 67,475 Equity Shares of the Company's holding in Ver se
Innovation Private Limited for a value of Rs. 30,000,000/-. As a result of
the above the Company's shareholding in Ver se Innovation Private Limited
('Ver se') stands reduced and as a result which Ver se has become an
associate of the Company.

C. Registration under Special Economic Zone During the year, the company
applied for registration under the Special Economic Zone (SEZ) for its new
international business.

SUBSIDIARIES

As on March 31, 2010, the Company has the following Subsidiaries:

1. OnMobile Singapore Pte. Ltd.
2. PT. OnMobile Indonesia
3. Vox mobili S.A.
4. Vox mobili Inc.
5. Phonetize Solutions Private Limited
6. Telisma SA
7. OnMobile Europe B.V.
8. OnMobile USA, LLC (Subsidiary for part of the year)
9. Servicios de Telefonia Onmobile, S.A. de C.V. (Subsidiary for part of
the year)
10. OnMobile Australia Pty. Ltd.

*Ver se Innovation Private Limited (was Subsidiary for part of the year and
is not a subsidiary as on March 31, 2010)

As per Section 212 of the Companies Act, 1956, we are required to attach
the directors' report, balance sheet, and profit and loss account of our
subsidiaries. The Company had applied to the Government of India seeking
exemption from such an attachment as the Company presents the audited
consolidated financial statements in the Annual Report. The Government of
India has granted exemption from complying with Section 212. Accordingly,
the annual report does not contain the financial statements of these
subsidiaries. The company will make available the audited annual accounts
and related information of the Subsidiary companies, where applicable, upon
request by any investor of the Company. These documents will also be made
available for inspection during business hours at our registered office.
The Company has given the necessary details requested by the Government of
India along with the statement regarding subsidiary companies under section
212 of the Companies Act, 1956 as a part of this Annual Report for the
Financial Year 2009-2010.

NEw LOCATIONS:

The Company continued its expansion internationally during this year as
well. The Company had significant new deployments in Indonesia and
Bangladesh. The Company had signed various important global contracts
during the year under review. As part of the Company's global expansion,
the Company now also has new branch offices in Dubai, Bogota and Bucharest.
The Company also has new subsidiaries in Miami and Mexico City.

material Changes for the period between End of the Financial Year and the
Date of the Report There have been no Material Changes for the period
between end of the financial year 2009-10 and the date of this report. New
Products & Services deployed in the year 2009-2010

This year the company took various new initiatives and developed new
products and introduced various enhancements to its existing products. As
we are scaling globally rapidly, we have invested significantly in
scalability, reliability, internationalization and productization.

The following are some of the many new products and services and
enhancements introduced by the Company during the financial year 2009-10:

1. Ringback Tone:

During the year the Company launched 'OnMobile Churn Management' product,
in one of its leading operators in India for RBT. This has reduced churn on
RBT by a notable %age. The Company has taken this encouraging result to
sign up a leading operator in Indonesia for churn reduction on their core
service.

OnMobile recently launched Reverse RBT, through which the Company is
offering users the experience to listen to their own choice of music - from
Hollywood, regional, international, as well as jokes, news, etc. Research
indicates that approximately 23% of callers do not prefer RBT as they
wouldn't want to pay for something they don't hear. Therefore, this service
is intended to capture the market segment which does not subscribe to RBT.

The Company also launched the next version of the OnMobile Corporate RBT
product, allowing enterprises greater control and flexibility on the
provisioning of RBT for their employees.

2. Subscription Manager:

We have evolved our Subscription Manager to offer even more flexibility in
charging, packaging and bundling of our products.

3. Voice Portal:

On the Speech front, the Company launched new tuned versions of four south
Indian languages and Hindi for the Indian market, Bengali for the
Bangladesh market and is investing in several additional languages as we
expand globally. We also launched a new platform for Speech Recognition
products for the Phone that uses distributed speech architecture.

4. Social Address Book:

Over the past year, the Company has made a significant investment in the
Social Address Book. It allows endusers to connect to each other though the
Network Address Book (NAB) and to share profiles, presence, multimedia
albums and so on. The Social Address Book has been released and is already
deployed with a large customer in Europe. This allows operators to leverage
their assets more effectively and provide compelling services to consumers.

5. My Social Home:

My Social Home allows users to see all their feeds from social networks on
a single screen, including Facebook, Linked In etc.

6. Messaging Platform:

Messaging Platform is a comprehensive and scalable platform which supports
SMS/USSD/Voice. OnMobile has added significant enhancements including
Intelligent Campaign Management Platform (to make the marketing campaigns
more effective) and Integrated Messaging Platform (to make the messaging
across channels more efficient)

7. teliPhone:

The Company's new application 'teliPhone', is a software component which
can be integrated in any type of iPhone application. It enables users to
access and search on their iPhone, simply by using their voice. If for
example in a Yellow Pages type application, the user says 'I'm looking for
a flower seller', the directory will find and display the flower sellers
situated near the user's geographical location. This solution is a step
further into the fast evolving iPhone market and shows our capability to
propose multimodal search solutions.

8. pollenStudio 2.0:

This is the second generation of the distributed training platform. The
pollenStudio enables users and partners to develop language resources for
automatic speech recognition; it is the key tool used for the fast and
efficient development of new languages for voice M-Search.

9. Business Intelligence:

OnMobile has invested significantly last year in technology, people,
processes and tools, to understand consumers better through Quantitative
and Qualitative means.

QUALITY AND OPERATIONAL EFFICIENCY:

The Company is committed to the eight guiding Quality Management principles
of Customer Focus, Leadership, People Involvement, Process Approach, System
Approach to Management, Continual Improvement, Fact-Based Decision- Making
and Mutually Beneficial Supplier Relationships. The Company's Information
Security Management System conforms to the ISO 27001:2005 standard since
June 2009.

The certificate is valid for Airtel Client Delivery Unit and support
functions. The Company's various products/services are subjected to
periodic and rigorous assessments by reputed external assessors.

About ISO/IEC 27001:

The ISO/IEC 27001 is an information security management system (ISMS)
standard published by the International Organization for Standardization
and the International Electro Technical Commission. ISO/IEC 27001 provides
an ISMS model for adequate and proportionate security controls to protect
information assets and give confidence to interested parties. This sets the
standard for handling the Confidentiality, Integrity and Availability of an
Information Asset.

A suite of workflow tools have been deployed to ensure quality and timely
delivery of increasingly large number of deliverables and to provide
enhanced operational metrics. These are supported by a vibrant intranet
which aims to increase collaboration across teams and geographies. The
Company has automated various business processes across the organization
including resource and asset planning and tracking enabling a better user
experience and higher productivity for employees.

Based on the previous experience and learning through various deployments
in different countries, the Company has developed a comprehensive Parallel
Deployment Process to streamline all its future product deployments. This
will help the predictability of the Company's deployments and significantly
reduce the timelines.

AWARDS AND RECOGNITION/BRANDING

Industry Recognition:

Voice & Data recognized the Company as India's Best MVAS Company and
accorded the V&D100 award for 2009. The V&D100 Awards are popularly
recognized by the Indian communications industry as V&D100 is the most
reliable chronicle. The Company has received this award for the third year
in a row.

During the year the company was named the 'Star Company' in the Small and
Medium Enterprise category at the prestigious Business Standard awards.

Other Recognitions:

The Company's CEO (Mr. Arvind Rao) was awarded as the 'DQ Path Breaker of
the year' award from Data Quest in the year 2009.

The Company has again been recognized as one of the 50 fastest growing
technology companies in India by Deloitte Touche Tohmatsu and received
'Technology Fast 50 India award again in the year 2009 program. The Company
has received this award for the third year in a row. The Company has been
recognized as one of the 500 fastest growing technology companies in Asia
Pacific by Deloitte Touche Tohmatsu and received 'Technology Fast 500 Asia
Pacific' award in the 2009 program. The Company has received this award for
the third year in a row. During the year under review the contest run by
the Company for BBC - Bill Gates foundation, along with the campaign, had
won a Cannes Bronze in the mixed media category

INFRASTRUCTURE:

As of March 31, 2010, the Company has obtained on lease, office spaces at
Bangalore and Mumbai. Further, the Company owns an office space in Mumbai.
Apart from this the Company has set up offices at Gurgaon, Sydney,
Singapore, Kuala Lumpur, Jakarta, Paris, Dhaka, Seattle, Bucharest,
Pretoria, Kathmandu, Dubai, London, Amsterdam, Miami, Bogota and Mexico
City.

HUMAN RESOURCES MANAGEMENT:

The Company has completed over 9 years of its existence in the VAS
industry. In this journey, it has enriched the lives of several
professionals across the globe. Innovation, forward thinking, customer
centric approach of our employees has been the key differentiator to
achieve business excellence. We believe in attracting the best in class
talent from the industry across the globe. Our workforce comprises of
talents of various nationalities from Asia, Europe, North and South Amercia
& Africa.

During the year 2009-10 the Company has added a net of 77 Full Time
Employees + Contract employees across various functions like Product, Sales
& Marketing, Delivery & Operations, Engineering etc. As on March 31, 2010
employee strength was 1,132 Full Time Employees + Contract Employees. Our
total head count for the group is (1,242 Full Time Employees and Contract
employees). The annualized attrition % for confirmed FTE for the year 2009-
10 is 18.8% as compared to 15.7% in 2008-09.

Strengthening the Foundation:

One of the initiatives for the year 2009-2010 was to bring in the role
clarity across organization. This was achieved by successful implementation
of Role Based Organization. This exercise has enabled the Company to retain
and attract appropriate talent by defining the roles and mapping it to the
relevant job bands.

The second major initiative has been the initiation of training needs
assessment exercise. The Company started an extensive training and
development needs assessment exercise to cover technical, domain,
behavioral and leadership skills for all roles across organization.
Leadership development programs and defining training road map are the
initiatives in pipeline for the year 2010-11.

Corporate Social Responsibilities:

OnMobile is a responsible corporate citizen, and strives to give back to
the community it operates in. The corporate social initiatives, which the
Company identified and implemented, are as under:

1. Tie up with GiveIndia Payroll giving program (monthly contribution by
employees) to NGO's through GiveIndia a nonprofit organization that aims to
channelize and provide resources to Non-Governmental Organizations across
India.

2. Rang De - Awareness about micro finance and contribution to the
initiative

3. Contribution to Chief Minister's Karnataka Flood relief fund

4. 1st Pay day Program - Join the campaign against child labor

The Company also partnered with Spastic Society and CRY for various
initiatives. Support for setting up kiosk was provided for them for sale of
their products to employees.

RESEARCH AND DEVELOPMENT/EDUCATION AND KNOW-HOW INITIATIVES:

While India has been the main market, the Company is fast expanding into
many other developing and developed markets.

* The Research and development (R & D) efforts are focused on

* Reaching out to as many users as possible across multiple channels, given
the different capabilities of handsets and networks;

* Making the services affordable, particularly given the low-ARPU and
challenging recharge patterns, in the developing markets;

* Serving a totally-new set of subscribers, who have joined the mobile
network;

* Making the services easy to use, with Localization, Easier Content
Discovery and Personalization.

CORPORATE GOvERNANCE:

The Company is committed to maintain the highest standards of corporate
governance. The Company meets the standards and guidelines set by the
Securities and Exchange Board of India on Corporate Governance and have
implemented all the stipulations prescribed. A detailed report on corporate
governance pursuant to the requirements of Clause 49 of the Listing
Agreement forms part of the Annual Report. The certificate(s) from the
auditors of the Company, Deloitte Haskins & Sells, Chartered Accountants,
and independent practicing Company Secretary Mr. Hegde confirming
compliance of conditions of corporate governance as stipulated under the
aforesaid Clause 49 are annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

In accordance with the Listing Agreements, the Management Discussion and
Analysis Report is presented in the separate section forming part of the
Annual Report.

DIRECTORS:

Mr. HH Haight and Prof. Jayantha Rama Varma, Directors retire by rotation
and being eligible, offer themselves for reappointment at the forthcoming
Annual General Meeting of the Company.

Brief resumes of the directors offering for re-appointment are included in
the notice for the Annual General Meeting.

AUDITORS:

The statutory auditors of the Company, M/s. Deloitte Haskins & Sells,
Chartered Accountants, who retire as statutory auditors of the Company at
the conclusion of the forthcoming Annual General Meeting, offer themselves
for re-appointment and have also confirmed that their appointment, if made,
will be within the limits under Section 224(1B) of the Companies Act, 1956.
The auditor's report is self explanatory.

RESPONSIBILITY STATEmENT OF THE BOARD OF DIRECTORS:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the directors to
the best of their knowledge and belief confirm that:

i. in the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures;

ii. they have selected and applied consistently and made judgments and
estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company as at the end of the financial
year and of the profit of the Company for that period;

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

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

PARTICULARS OF EMPLOYEES:

In terms of provisions of Section 217 (2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, the names and
other particulars of employees are set out in the Annexure to the
Directors' Report. However, having regard to the provisions of Section 219
(1)(b)(iv) of the Companies Act, 1956, the Annual Report excluding the
aforesaid information is being sent to all the members of the Company and
others entitled thereto. Any member interested in obtaining such
particulars may write to the Company Secretary at the Registered Office of
the Company.

CONSERvATION OF ENERGY AND TECHNOLOGY ABSORPTION:

The Company, being a service provider organization, most of the information
as required under Section 217(1)(e) of the Companies Act, 1956, read with
the Companies (Disclosure of particulars in the report of the Board of
Directors) Rules, 1988, as amended is not applicable. However, the Company
endeavors to effectively utilize and conserve energy by using improved
technology in its infrastructure such as lightings and paper usage.

FIXED DEPOSITS:

In terms of the provision of Section 58A of the Companies Act, 1956 read
with the Companies (Acceptance of Deposits Rules) 1975, the Company has not
accepted any fixed deposits during the year under review.

EMPLOYEE STOCK OPTION PLAN (ESOP):

The Company had approved following ESOP Schemes i.e. the Employee Stock
Option Plan-I, 2003, Employee Stock Option Plan -II, 2003, Employee Stock
Option Plan -III, 2006, Employee Stock Option Plan -I, 2007, Employee Stock
Option Plan -II, 2007 and Employee Stock Option Plan -I, 2008, ESOP Plan-
II, 2008, ESOP Plan-III, 2008 and ESOP Plan-IV, 2008 for granting stock
options to its employees. All the schemes endeavor to provide incentives
and retain employees who contribute to the growth of the Company. A summary
disclosure in compliance with the Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme
Guidelines, 1999), as amended, is presented as below and the complete
details have been disclosed under Notes to Accounts Schedule 19 which forms
part of the Annual Report. During the year under review there has been no
variation in the terms of ESOP schemes.

No. of Options
Particulars Plan I Plan II Plan III Plan I Plan II Plan I
2003 2003 2006 2007 2007 2008

Options 1,196,247 - 511,888 139,130 - -
Outstanding
on April 01,
2009

Options - - - - - -
Granted
During the
Year

Options 518,070 - 53,138 14,527 - -
Exercised
During the
Year

Options 64,701 - 42,588 19,686 - -
Forfeited
During the
Year

Options - - - - - -
Lapsed
during the
Year

Options 613,476 - 416,162 104,917 - -
Granted
Outstanding
at the End
of the Year

Weighted NA NA NA 322 NA NA
average
exercise
price per
option (after
adjusting for
Bonus issue,
if applicable)

No. of Options
Particulars Plan II Plan III Plan IV
2008 2008 2008

Options 100,000 723,200 173,953
Outstanding
on April 01,
2009

Options - 283,330 -
Granted
During the
Year

Options - 21,876 -
Exercised
During the
Year

Options - 161,757 -
Forfeited
During the
Year

Options - - -
Lapsed
during the
Year

Options 100,000 822,897 173,953
Granted
Outstanding
at the End
of the Year

Weighted NA NA NA
average
exercise
price per
option (after
adjusting for
Bonus issue,
if applicable)

NA: Not Applicable

* Below are the employees receiving 5% or more of the total number of
options granted during the year.

Name of the Employee No. of Options

Anuj Bahl 25,000
Rakesh Jain 25,000
Kanad Das 25,000
Srinivas M 25,000
Shampa Kochhar 16,000

The Company accounted the above options using the intrinsic value method
and thus, the difference between the fair value of the underlying shares in
the year of grant and the options exercise value was charged to the profit
and loss account. Accordingly, the compensation charge thereon in the
current year is Rs.0.11 million (Previous year-Rs. 0.06 million). If the
Company had accounted the option under fair value method, amortizing the
stock compensation expense thereon over the vesting period, the reported
profit for the year ended March 31, 2010 would have been lower by Rs.21.05
million (Previous year Rs.26.12 million) and Basic and diluted EPS would
have been revised to Rs.8.7/- (Previous year Rs 11.8/-) and Rs.8.5/-
(Previous year- Rs 11.4/-) respectively as compared to Rs.9.2/- (Previous
year Rs 12.2/-) and Rs.9.0/- (Previous year Rs 11.8/-) without such impact.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Rs. million
Description Year ended
March 31, March 31,
2010 2009

Foreign exchange earnings 349.49 163.66
Foreign exchange outgo 2,932.55 597.70

*The above figures are reported on accrual basis

ACKNOWLEDGMENTS:

The Board of Directors takes this opportunity to express their appreciation
to the customers, shareholders, investors, vendors, and bankers who have
supported the Company during the year. The directors place on record their
appreciation to the OnMobilians at all levels for their contribution to the
Company. The Directors would like to make a special mention of the support
extended by the various departments of the Government of India,
particularly the Software Technology Parks, the Service tax and Income tax
Departments, the Customs and Excise departments, the Ministry of Commerce,
the Department of Telecommunications, the Reserve Bank of India, Ministry
of Company Affairs, Securities and Exchange Board of India and look forward
to their support in all future endeavors.

For and on behalf of the board of directors

Arvind Rao Chandramouli Janakiraman
Chairman and Managing Director Director

Place: Bangalore
Date : April 30, 2010

MANAGEMENT DISCUSSION AND ANALYSIS

1. INDUSTRY OVERVIEW:

Globally, in terms of mobile subscriptions, India is the second largest
wireless market after China. Propelled by higher disposable incomes,
falling tariffs and increased affordability of handsets, the wireless
sector has been exhibiting phenomenal growth over the past few years.
According to the Telecom Regulatory Authority of India (TRAI), India added
16.9 million mobile phone users in April 2010 taking the total number of
telephone subscribers in the country to 638.05 million. With this, the
overall tele-density in India reached 54.10%. In the wireless segment, the
subscriber base increased from 391.76 million in March 2009 to 584.32
million in March 2010, registering a growth of 49.15%. This industry has
been attracting huge investment in recent times which is likely to
accelerate with the entry of new players and the launch of new services
like 3G.

The growth in the telecom industry is primarily due to voice as compared to
data usage. Call rates have been declining due to growing competition
especially with new licenses being offered and the need to increase the
subscriber base in rural areas given the saturation in urban and metro
markets. This has led to a decrease in the Average Revenue Per User (ARPU).
The decrease in the ARPU can also be attributed to the nature of the Indian
mobile market which is largely prepaid. This implies that most of the
subscribers are added from the bottom of the pyramid with low usage. In
this scenario, Mobile Value Added Services (MVAS) will prove to be a
potential long term revenue stream by not only adding to the ARPU but also
serving as a differentiator between operators. Further, MVAS will serve the
need of consumers to get more out of their mobile phones than just basic
communication.

Mobile Value Added Services (MVAS):

Mobile Value Added Services are enhanced services that provide more value
to the mobile phone than basic tele-services. These are availed separately
by the subscriber as they are not part of the basic voice offer. Currently,
MVAS account for approximately 10% of the operator's revenue. MVAS can be
categorised as: Entertainment VAS (Jokes, Ringtones, Caller Ring Back Tones
(CRBT), Mobile Radio, etc), Information VAS (Movie Reviews, News,
Astrology, Stock Updates, etc) and mCommerce VAS (transactional services
such as mobile banking, mobile payments, etc). The growth in the VAS market
is driven by Entertainment VAS both in terms of volume and revenue. While
Information VAS is gradually becoming more popular, mCommerce VAS is still
at a nascent stage.

2. OPPORTUNITIES AND CHALLENGES

Opportunities:

The Indian telecommunication industry is poised for strong growth in the
coming years. Rural areas will be a major growth driver for the industry.
With the commencement of services by the new 3G licenses, competition is
set to intensify further. 3G wireless broadband will mark a quantum leap in
wireless communication with services like high speed internet access and
video calls on the mobile.

All this bodes well for the MVAS industry. With a decline in the ARPU,
telecom companies are expected to increase their emphasis on VAS relative
to their core business. Operators are making significant investments to
ensure more effective communication with the subscribers about the various
services being offered to them. Regional and linguistic content will
provide a further boost to the MVAS market. In the coming years,
Entertainment VAS will remain the key VAS driver while Information VAS and
mCommerce VAS are likely to witness significant growth. Emerging market
nations offer immense opportunity for growth as well as their consumers
exhibit similar characteristics and usage behaviour as Indian consumers.
These include high percentage of prepaid consumers, low ARPUs, handsets
purchased independent of the mobile connection, local and regional language
constraints and limited adoption of data services.

Challenges:

A number of challenges need to be surmounted by the MVAS industry before it
can realise its full potential. With new VAS being introduced every week,
significant effort needs to be put in to ensure customer awareness.
Language barriers and limited availability of local content are some of the
other factors that prevent MVAS from growing faster. There is also an
urgent need to focus on VAS other than Entertainment VAS to diversify the
VAS market and extend its consumer base to all sections of the population.
However, adequate security measures need to be undertaken before mCommerce
VAS can become widely prevalent.

3. OUTLOOK:

OnMobile Global Limited is one of India's largest white labeled Data and
Value Added Services (VAS) companies for Mobile, Landline and Media Service
Providers. Several customers in 25 countries rely on the Company to bring
VAS to over 700 million consumers. The Company is in a capital investment
and global business expansion mode. During the year, the Company has
undertaken significant measures to expand its reach in emerging markets
including Latin American countries. Given the Company's wide product
portfolio, significant and expanding global reach, long-term relationships
with blue-chip operators, continuous product, technical and process
innovation, insight into consumer needs, assured quality and time-to-market
speed, OnMobile is well poised to become the world's leading global MVAS
company.

4. RISKS AND CONCERNS:

The Company is operating in an extremely competitive environment. As it
gets into the expansion mode, it is poised to exploit several new
opportunities. The Company ensures that the risks it undertakes are
commensurate with better returns. Through strategic focus, forward thinking
and contingency planning, the Company has devised a framework to mitigate
risks involved in all corporate activities in order to maximise
opportunities and minimise adversities.

* OnMobile's products are aimed primarily at end-user telecommunication
subscribers and hence expose the Company to the risk of industry
concentration. The Company is also exposed to the risk of client
concentration as it derives a significant portion of its revenue from a few
major carrier customers, as these carrier customers continue to dominate
the market share of the Indian telecommunication industry. Geographic
concentration risk arises as India contributes around 75% of the Company's
revenues. Further, OnMobile currently depends on music related services,
including ringback tones, ringtone downloads and music messaging
applications for significant amount of its revenue. This leads to product
concentration risk.

The Company endeavours to de-risk from the above by geographical expansion
and product innovation, through organic and inorganic means. Mitigation of
risk through organic route involves expansion of the Company's geographic
presence to new carrier customers by leveraging its expertise and track
record in India. The Company also takes advantage of its leading market
position in India to launch, test and develop innovative applications and
services with its existing carrier customers, thereby expanding the breadth
of services, as well as to extend these new applications and services in
new international markets as they become commercially viable. Mitigation of
risk through inorganic route involves continually seeking new growth and
acquisition opportunities in its existing line of business as well as
related businesses to expand its geographic presence and product offerings.
The Company will pursue similar opportunities in other regions to
strengthen and grow its business, including investment in or acquisition of
minority or majority stakes in companies which support its business and
product strategy.

* The Company operates in a highly competitive market. As new entrants
emerge in the industry due to the opportunities available and as existing
competitors seek to expand their services, the competition would intensify
further. Competitors in the future may include other content aggregators
and wireless software companies from India and abroad.

OnMobile is India's leading company and a recognised brand in the MVAS
segment in the country. It has established a strong reputation for
innovation and quality in the industry. Also, there exist high
technological and time-to-market barriers in the business that make the
entry of new players extremely difficult. These include the development of
innovative revenue generating products as well as joint revenue and product
planning and service deployments with customers involving complex hardware
systems and software applications deeply embedded within the carrier's
network infrastructure.

* Most of the Company's customer contracts are on a revenue sharing basis.
Therefore, the Company receives revenue only if its customers' end-user
subscribers use or subscribe to the services offered by them. As a result,
the Company's revenue is subject to uncertainties that are beyond its
control, such as market acceptance of its application services by its
customers' end-user subscribers and the subscriber churn rate and are
dependent on the pricing of the services, product placement and marketing
and promotion activities conducted by the Company's customers, either
jointly with the Company or solely.

Given the Company's in-depth understanding of consumer needs, creative user
interface and continued focus on developing innovative products, the
Company is certain of its products enjoying good positioning on its
customers' menus and websites. Further, the Company will continue to invest
in research and development to remain at the forefront of developments in
the telecommunication industry and to develop new and differentiated
products and services/upgrade or improve the existing ones, for each of its
customers.

* The ARPU of the Company's carrier customers is influenced by the
demographic makeup of their subscriber base. A substantial number of new
subscribers of carrier customers are from non-metro areas and they tend to
have lower levels of ARPU. The Company has invested resources in
understanding consumer needs and their spending pattern in order to
increase the penetration of value-added services. This has led to the
development of new pricing solutions thereby making products affordable to
the existing as well as new subscribers.

5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

In any industry, the processes and internal control systems play a critical
role in the health of the Company. OnMobile's well defined organisational
structure, documented policy guidelines, defined authority matrix and
internal controls ensure efficiency of operations, compliance with internal
policies and applicable laws and regulations as well as protection of
resources. Moreover, the Company continuously upgrades these systems in
line with the best available practices. The internal control system is
supplemented by extensive internal audits, regular reviews by the
management and standard policies and guidelines to ensure reliability of
financial and all other records to prepare financial statements and other
data. The management information system provides timely and accurate
information for effective control.

6. DISCUSSION ON CONSOLIDATED FINANCIAL PERFORMANCE:

The consolidated financial statements relate to OnMobile Global Limited,
referred to as 'the Company' and its subsidiaries, together referred to as
'the Group'.

The consolidation for the FY 2009-10 includes figures of OnMobile USA LLC
and Servicios De Telefonia Onmobile Sa De Cv, Mexico formed during the
year. Also, the FY-2009-10 figures include the full year consolidation
impact of Telisma SA as against 9 months consolidation impact included in
FY 2008-09.

Further, the Company has stepped up investment for international expansion
and incurred significant costs for deploying its services in emerging
markets such as Latin America. These costs have been absorbed in the
financials given below. However, there was no corresponding revenue during
the year under review.

In Rs. Million Except EPS
FY 2009-10 % of Total FY 2008-09 % of Total Growth %
Revenue Revenue

Revenue 4,544.03 4,063.57 12

Cost of Sales 1,322.72 29 777.43 19 70
and Services

Manpower Cost 1,474.91 33 1,203.59 30 23

Administration 915.23 20 801.28 20 14
and other
expenses

Earnings before 831.17 18 1,281.27 31 (35)
Other Income,
Depreciation
and Amortization,
Finance charges
and taxes

Other Income 228.38 5 310.09 8 (26)

Depreciation and 440.73 10 439.67 11 0
Amortization

Finance Charges 2.70 0 0.55 0 390

Earnings before 616.12 13 1,151.14 26 (46)
Tax

Provision for 192.62 4 299.17 7 (35)
taxation

Earnings after 423.50 9 851.97 19 (50)
Tax

Less: Minority 9.45 0 - - -
Share in Income

Add: Share of 13.93 0 - - -
Profit from
Associate
Concerns

Profit 427.98 9 851.97 - (50)
attributable
Consolidated
Group

EPS - Basic 7.4 14.8
EPS - Diluted 7.2 14.3

Revenue:

Revenue is derived from Telecom Value Added Services, Sale of User licenses
and other services. Revenue from Telecom Value Added Services including
royalty income is recognised on provision of services in terms of revenue
sharing arrangements with the telecom operators. Revenue from sale of user
licenses for software applications is recognised when the applications are
functionally installed at the customer's location as per the terms of the
contracts and Revenue from Other Services including maintenance services is
recognised proportionately over the period during which the services are
rendered as per the terms of contract.

The revenue for FY 2009-10 was Rs. 4,544 million as against Rs. 4,064
million for FY 2008-09, thus recording a growth of 12% despite a loss of
one major customer in the Indian market.

The total number of customers added during the FY 2009-10 was 12 (5
international telecom operators and remaining in media, M-commerce and
others).

The segmentation of revenue by geography is as follows:

In Rs. Million
FY 2009-10 % of Total FY 2008-09 % of Total Growth %
Revenue Revenue

India 3,395.30 75 3,134.47 77 8
Outside India 1,148.73 25 929.10 23 24
Total Revenue 4,544.03 4,063.57 12

Cost of Sales and Services:

Cost of Sales and Services consists of the amount incurred towards content
fee, royalty and cost of hardware and software development charges.

Content fee and royalty is paid to content providers such as music label
companies, royalties agencies, sports licensing authorities and other
content licensors from whom the Group sources and aggregates content,
pursuant to licensing agreements with them. Cost of hardware and software
development charges primarily represent cost of tools and services procured
by the Group for providing / enhancing the quality of its services to the
customers.

During the FY 2009-10, the cost of sales and services has increased by 70%
to Rs. 1,323 million from Rs. 777 million incurred in FY 2008-09. The break
up is as follows:

In Rs. Million
FY 2009-10 % of Total FY 2008-09 % of Total Increase %
Revenue Revenue

Content fee 902.67 20 513.18 12 76
and Royalty

Cost of 420.05 9 264.25 7 59
hardware and
software
development
charges


Cost of Sales 1,322.72 29 777.43 19 70
and Services

The increase is due to

* Changes in contractual terms of payment for some services.

Manpower Costs:

Manpower costs comprise of salaries including bonuses paid to employees,
contributions made to various employee welfare funds and expenses incurred
towards welfare of the employees.

During the FY 2009-10, the Group incurred a manpower cost of Rs. 1,475
million as against Rs. 1,204 million in the FY 2008-09 thus, representing
an increase of 23% over the previous year. The total employee strength as
on March 31, 2010 was 1,242 which included a net addition of 77 full time
and contract employees during the financial year.

During the year, there was an increased and sustained focus on improving
the existing employee productivity and optimisation of human resources.

Administration and other expenses:

In the FY 2009-10, the administration and other expenses increased by 13%
to Rs. 907 million as against Rs. 801 million incurred in FY 2008-09. The
break up of the expenses is given below:

In Rs. Million
FY 2009-10 % of Total FY 2008-09 % of Total Increase %
Revenue Revenue

Rent and other 229.68 5 189.38 5 21
facilities cost

Travelling and 191.71 4 149.01 4 29
Conveyance

Legal, 127.43 3 118.10 3 7
professional &
consultancy
charges

Communication 92.38 2 90.17 2 2
charges

Others 274.03 6 254.62 6 8

Total 915.23 20 801.28 20 14

The reasons for the increase in the expenses are as follows:

* Rent and other facilities cost: The Group has added new office premises
in Delhi and France to accommodate the increased business activity.

* Travelling and Conveyance/ Communication charges: There has been an
increase in business activity especially, as the Group expands its
geographical presence internationally.

Earnings before Other Income, Depreciation and Amortisation, Finance
charges and taxes (EBIDTA):

The Group earned an EBIDTA of Rs. 831.17 million in the FY 2009-10 as
compared to Rs. 1,281.27 million, representing a 35% decline over the
previous year.

Other Income:

Other Income primarily consists of interest earned on Fixed Deposits and
dividends yielded on Mutual Funds. There has been a substantial decrease in
the other income earned in the current FY 2009-10, Rs. 228 million as
compared to Rs. 310 million of FY 2008-09. This is due to the reduction of
Corpus by Rs. 550 million in the current FY and reduction in average rate
of interest income from 8% to 5% during the year.

During the FY 2009-10, the Company has earned a profit of Rs. 25 million
from sale of investment in subsidiary (Ver se Innovation Private Limited).

Depreciation and Amortisation:

The Group provided a sum of Rs. 441 million and Rs. 440 million towards
depreciation for the FY 2009-10 and FY 2008-09, respectively. Based on an
internal technical evaluation, the Company has revised the estimated useful
life of Telefony Cards from 3 years to 5 years resulting in reduction of
depreciation costs by Rs. 100 million.

Depreciation on assets is provided on a monthly basis using the straight
line method based on the useful life of the assets. Also currently,
expenditure incurred on research and development is not being capitalised.

The depreciation as a percentage of average gross block is 11% and 23% for
the years ended March 31, 2010 and 2009, respectively.

Finance Charges:

The finance charges represent interest payable towards the finance lease
entered into by the Company for procurement of computer and electronic
equipments.

Earnings before Tax:

The Earnings before Tax of Rs. 619 million in the current FY 2009-10, as
compared to Rs. 1,152 million earned during the previous year, represent a
46% decline over the previous year.

Provision for taxation:

The amount provided for taxation in the current year is Rs. 193 mllion as
against Rs. 299 million provided in FY 2008-09.

Earnings after Tax:

The Earnings after Tax of Rs. 424 million in the current FY 2009-10, as
compared to Rs. 852 million earned during the previous year, represent a
50% decline over the previous year.

FINANCIAL CONDITION

Share Capital:

The authorised share capital of the Group is Rs. 750 million, comprising of
74,500,000 equity shares of Rs. 10/-each and 500,000 preference shares of
Rs. 10/- each.

Currently as at March 31, 2010, the Group has 58,516,792 equity shares of
Rs. 10/- each as issued, subscribed and paid up capital which increased
from 57,833,319 equity shares of Rs. 10/- each as at March 31, 2009. The
increase was consequent to allotment of 607,611 fully paid up equity shares
of Rs. 10/- each in pursuance of stock options exercised in April 2009,
August 2009, November 2009 and February 2009 (adjusted for Bonus issue in
the ratio of 12:1) and allotment of 75,862 equity shares of face value of
Rs 10/- each as a result of preferential allotment to the founders and
employees of Telisma SA.

Reserves and Surplus

A summary of the reserves and surplus is given below:
In Rs. million
As at March As at March
31, 2010 31, 2009

Securities premium 4,209.10 4,181.65

Foreign Currency Translation (5.53) 50.72
Reserve

Profit and Loss account 2,606.78 2,178.80

Total 6,810.35 6,411.17

The increase in the share premium account during the year is due to the
amount received on allotment of ESOPs and preferential allotment to Telisma
SA, net of adjustment on account of issue on bonus shares and adjustment
relating to erstwhile subsidiary.

Foreign Currency Translation Reserve' represents exchange differences
arising out of consolidation in case of nonintegral operations. In case of
'Integral operations', these exchange differences are included under
Exchange Loss/ Gain and charged to the Profit and Loss.

The balance retained in the Profit and Loss Account as at March 31, 2010
was Rs. 2,606.78 million.

The total net worth of the Group as March 31, 2010 is Rs. 7,396 million
with a book value of each share being Rs. 126. The corresponding numbers
for the previous FY are Rs. 6,990 million and Rs. 121 respectively.

LOAN FUNDS

Loan funds represent:

* During the previous year, the Company had entered into a finance lease
arrangement for procurement of computers and electronic equipments and the
secured loans represent the amount payable towards the finance lease.

* During the previous year, one of the subsidiaries has taken a loan to
meet its working capital requirement.

Deferred Payment Liability:

Deferred payment liability represents amount payable towards the investment
in subsidiaries and acquisition of new market development and deployment
rights.

As at March 31, 2009, the total amount payable was Rs. 129 million. During
the current FY 2009-10, the movement in Deferred Payment liability is given
below:

* Rs. 1,390 million payable to Telefonica Internacional, S.A.U, Spain
towards accrual of liability relating to acquisition of market development
and deployment rights.

* Rs. 330 million payable to a customer in Europe towards deploying value
added services on an exclusive basis in the region.

The total deferred liability as at March 31, 2010 stands at Rs. 1,720
million.

Deferred Tax Liability and Asset:

Deferred tax assets and liabilities are recognised for the future tax
consequences of temporary differences between carrying values of the assets
and liabilities and their respective tax bases and are measured using
enacted tax rates applicable on the Balance Sheet date. Deferred Tax assets
are recognised subject to management's judgment that realisation is
virtually certain.

The deferred tax liability represents deferred tax liability of the Company
and as on March 31, 2010 is Rs. 94 million as compared to Rs. 68 million as
on March 31, 2009.

The deferred tax asset represents deferred asset of one of the subsidiaries
and as on March 31, 2010 is Rs. 0.23 million as compared to Rs. 0.95
million as on March 31, 2009.

Goodwill on consolidation:

Goodwill on consolidation represents the excess of cost to the Company of
its investments in the subsidiary over its share of the equity of the
subsidiary, at the date on which the investments in the subsidiary company
were made.

The goodwill as on March 31, 2010 is Rs. 2,046 million as compared to Rs.
2,108 million as on March 31, 2009. Decrease in Goodwill is on account of
adjustment of investment in Telisma Rs. 35 million and goodwill in Ver se
moved to investment in associates during the FY 2009-10.

Fixed Assets:

A statement of movement in fixed assets is given below:

In Rs. Million
Gross Block As at March As at March Movement on Movement on
31, 2010 31, 2009 account of account of
acquisition additions/
Deletions
Leasehold

Improvements 47.76 35.79 - 11.97

Buildings 106.74 106.74 - -

Office 10.10 7.59 - 2.51
equipments

Computer and 1,684.00 1,440.56 - 243.44
Electronic
equipment

Furniture and 20.02 19.19 - 0.83
Fixture

Motor Car 13.75 13.75 - -

Leased Assets 122.58 48.21 - 74.37

Software 792.33 821.60 - (29.27)

Intellectual 37.21 42.9 - (5.69)
Property

Market Development 2,393.81 - - 2393.81
and Deployment
Rights

Capital Work in 92.14 71.51 - 20.63
Progress

Total 5,320.44 2,607.84 - 2,712.60

The Company incurred an amount of Rs. 2,713 million (Rs.602 million in the
previous year) as capital expenditure in the FY 2009-10. This includes the
impact of foreign exchange on opening gross block of assets in
subsidiaries. Addition to the gross block mainly comprises of:

* Addition to computers and electronic equipments resulting from expanding
operations and

* Addition of Market Development and Deployment Rights in the international
markets.

Investments:

Investments as at March 31, 2010 of Rs. 677 million comprise of short term
investments of holding company Rs. 527 million and subsidiaries Rs. 81
million in money markets. It also includes Rs. 69 million being investment
in Associate (Ver se Innovation Private Limited).

The increase in investment as compared to Rs. 87 million as on March 31,
2009 is on account of shifting the investible surplus of the Company in
Bank Deposits to Mutual Funds during the year. Further investment in
Associate Rs. 69 million is shown under investment during current year.

Sundry Debtors:

The Sundry debtors (net of provision for doubtful debts) amount to Rs.
1,690 million as on March 31, 2010 as against Rs. 1,445 million as on March
31, 2009.

The age profile of the debtors (net of provision) is given below:

In Rs. Million
As at March 31 2010 2009

Less than 6 months 1,600.43 1,384.21
More than 6 months 89.07 61.02

Cash and Bank Balances:

The cash and bank balance as on March 31, 2010 was Rs. 1,883 million as
against a balance of Rs. 2,855 million as on March 31, 2009. The decrease
in balance is due to the shift of investments of the Company from Bank
Fixed Deposit to Mutual Funds during the FY 2009-10, Rs. 522 million and
payments towards market development and deployment rights Rs. 482 million.
The cash balance as on March 31, 2010 includes Rs. 1,686 million invested
in Fixed deposits with Public Sector and Private Sector Banks.

Loans and Advances:

The loans and advances outstanding as on March 31, 2010 is Rs. 2,120
million as compared to Rs. 1,686 million outstanding as on March 31, 2009,
thus representing an increase of Rs. 434 million.

The increase is resulting from:

* Increase in deposit with statutory authorities in connection with demand
notices relating to KST, KVAT and CST.

* Increase in advance Income Tax and Tax deducted at source.

Current Liabilities and Provisions:

The Current Liabilities and Provisions outstanding as on March 31, 2010 is
Rs. 2,531 million as compared to Rs. 2,018 million as on March 31, 2009
thus representing an increase of Rs. 513 million.

The increase of Rs. 513 million is the net result of:

* Decrease in Sundry creditors due to payment of liability of Rs. 85
million to erstwhile Holding companytowards MMP 2500 software.

* Increase in Sundry Creditors for capital items and expenses.

* Increase in Income Tax provisions.

* Increase in other liabilities towards TDS

7. material developments in human resources:

Human Resources (HR) are an integral and important part of any
organisation. OnMobile recognises that innovation, forward thinking and the
customer centric approach of its employees have been key differentiators to
achieve business excellence. Thus, the Company has put in place sound
policies for the growth and progress of its employees. Individual
performance management systems have been implemented to encourage merit and
enhance innovative thinking. Roles and responsibilities are clearly defined
at all levels and mapped to relevant job bands. Successful implementation
of the Role Based Organization was thus, one of the key initiatives taken
during the year.

Another major initiative taken during the year has been the initiation of
an extensive training and development needs assessment exercise that covers
technical, domain, behavioural and leadership skills for all roles across
the organisation. Leadership development programmes and defining the
training road map are the initiatives in pipeline for 2010-11.

OnMobile's workforce comprises of professionals from various nationalities
across Europe, LATAM and Asia. The Company aims to become a preferred
employer and employ best-in-class talent. To facilitate the same, it has a
well drawn recruitment policy and a performancebased compensation policy,
including ESOPs, to enable the employees to develop a sense of ownership
with the organisation.

As on March 31, 2010, the Company had 1,242 employees (including full time
and contract employees) including the employees in the subsidiary. During
the year, the Company added net 77 Full Time Employees (FTE) as well as
Contract employees across various functions like Product, Sales &
Marketing, Delivery & Operations, Engineering, etc. The annualised
attrition percentage for confirmed FTE for 2009-10 is 18.8% as compared to
15.7% in 2008-09.

8. Corporate Social Responsibility:

As a responsible corporate citizen, the Company strives to give back to the
community it operates in. A number of corporate social initiatives were
identified and implemented during the year including:

* Tie-up with GiveIndia Payroll Giving Programme (monthly contribution
by employees) to Non Governmental Organisations (NGOs) through
GiveIndia, a non-profit organisation that aims to channelise and
provide resources to NGOs across India.

* Rang De - Awareness about micro finance and contribution to the
initiative.

* Contribution to Chief Minister's Karnataka Flood relief fund.

* 1st Pay Day Programme - Joined the campaign against child labour.

* Partnership with CRY and the Spastic Society on various initiatives
including support for setting up kiosks for the sale of their products to
employees.

9. Cautionary statement:

Statements in the Management Discussion and Analysis describing the
industry's projections and estimates(which are based on reliable third
party sources) as well as Company's objectives, estimates, projections and
expectations may be 'forward-looking statements' within the meaning of
applicable securities laws and regulations. Actual results could differ
materially from those expressed or implied. Important factors that could
influence the Company's operations include economic developments within the
country, demand and supply conditions in the industry, changes in
Government regulations, tax laws and other factors such as litigation and

labour relations.