Annual Report FY 2006-07 - Glodyne Technoserve

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To, 

The Members of 

PARADYNE INFOTECH LIMITED 

DIRECTORS’ REPORT 


Your Directors have pleasure in presenting the Tenth Annual Report, together with the Audited Accounts for the financial 

year ended March 31, 2007. 

CONSOLIDATED FINANCIAL RESULTS: 

Particulars Year Ended Year Ended 

March 31, 2007 March 31, 2006 

(Rs. In Million) (Rs. In Million) 

Total Income 1680.99 875.64 

Profit / (Loss) Before Taxes 227.72 87.40 

Less: Provision for Income Tax (net off short / (excess) 17.50 6.74 

provision for earlier years) 

Less: Provision for deferred tax/wealth tax/fringe benefit tax 9.37 6.10 

Profit / (Loss) After Taxes 200.85 74.56 

Add: Balance brought forward from previous year 98.61 38.56 

Add: Excess Depreciation written back 1.03 

Profit available for Appropriation 299.46 113.12 

Less: Transfer to General Reserve 3.70 

Less: Proposed Dividend @ 10% 10.88 10.88 

Less: Proposed 10th year Celebration Dividend @ 2% 2.17 

Less: Provision for Tax on Dividend 2.22 1.52 

Less: Transferred to Debenture Redemption Reserve 2.10 2.10 

Balance carried to Balance Sheet 279.42 98.62 

DIVIDEND 

Your Company has been growing at an impressive rate. However, your Directors consider that the Company should 

plough back the profits to generate higher returns. Considering the need to augment resources for Company’s expansion 

plans, the Directors recommend for your approval a dividend @10 % and a Special 10th Year Celebration Dividend @2%. 

i.e. Rs. 1.20 per equity share of Rs. 10 each (Previous year Rs. 1.00 each per share). The dividend amount will absorb a 

total Rs. 15.27 million including corporate tax on dividend. 

OPERATIONS 

Owing to the various strategic initiatives of your Company and inorganic growth, during the year under review, the 

Company has posted a very impressive performance by recording a growth of 91.97% over the previous year’s revenues. 

The Company earned a total income of Rs. 1680.99 Million. Company’s Operating Profit Margins improved by over 300 

basis points over last year which reflects the operational efficiencies of the Company. The Earnings Before Interest, Tax, 

Depreciation and Adjustments (EBITDA) stood at Rs. 263.40 Million as compared to the last year’s Rs.109.85 Million, 

recording a growth of 140%. The Company’s profit after tax stood at Rs. 200.85 Million as compared to previous year’s 

Rs.74.55 Million, recording a growth of 169%. 

FUTURE OUTLOOK 

The IT industry globally grew at a healthy speed during the year 2007. The Technology IMS market globally and India’s 

share in that market is growing at a very fast rate. The IT Software and Services export market grew at 32.6 percent, 

beating the industry projections. The Technology infrastructure management services market, one of the SBUs in which 

your Company operates, has shown the trends of growing significantly. The share of the Indian players in the 

Paradyne Infotech Limited Annual Report 2006-2007 

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Technology infrastructure management services market globally, is expected to rise multifold in the future. The domestic 

market for the software services as well as the Technology IMS also provides good opportunities to fuel the business, 

including various e-governance projects. Backed by the expertise and experience in the area of Technology IMS and the 

nuance and effectiveness of the Software as a Service model, your Company is poised to take benefit of the growth 

trends in the industry. The increased client base in the US, would also help your Company for its business. 

OVERSEAS ACQUISITION 

Your Company has charted out the organic and inorganic growth plans for achieving multifold growth. Mr. Annand 

Sarnaaik, Chairman of the Company, during the last Annual General Meeting, has informed the members about the 

Company’s plans of inorganic growth. Accordingly, during the year, your Company has acquired Links Group 

International Inc, U.S.A. (“LGI Inc.”). LGI Inc. is a profit making company in the business of software services and is 

based out of Virginia, U.S.A. The acquisition was done through Dyne Techservices Inc., U.S.A. and your Company 

acquired a 100% stake of LGI Inc. Thus, making it a step-down wholly owned subsidiary of your company. 

DIRECTORS 

During the year, Mr. Ved Prakash Arya was appointed as an additional director on the Board of the Company, w.e.f. 19th 

October 19, 2006. 

Mr. Avtar Saini was also appointed as an additional director of the Company w.e.f. August 24, 2007. Pursuant to Section 

260 of the Companies Act, 1956, Mr. Ved Prakash Arya and Mr. Avtar Saini hold the office of the Director upto the date of 

the Annual General Meeting. The Company has received notices under section 257 of the Companies Act, 1956 from 

members, proposing the candidature of Mr. Ved Prakash Arya and Mr. Avtar Saini respectively, for appointment as a 

Director liable to retire by rotation, at the ensuing Annual General Meeting (A.G.M.). 

Mr. Shantanu Rooj resigned from the Directorship of the Company w.e.f. August 24, 2007. Also, pursuant to the 

provisions of the Companies Act, 1956 and in accordance with the Articles of Association of the Company, Mr. Neeraj 

Vashisht will be retiring by rotation at the ensuing Annual General Meeting. However, due to his pre occupancy and work 

assignments, he has expressed his inability to offer himself for re-appointment. Your Directors put on record the sincere 

appreciation for the valuable contributions made by Mr. Neeraj Vashist and Mr. Shantanu Rooj during their Directorship 

with the Company. 

The Board of Directors of the Company pursuant to the recommendation of the Remuneration Committee, at their 

respective meeting held on August 24, 2007, approved the re-appointment of Mr. Annand Sarnaaik and Mrs. Divvyani A. 

Sarnaaik as Chairman & Managing Director and Executive Director, respectively, on the terms and conditions as 

contained the draft service agreement, subject to approval of the Shareholders. 

Shareholders attention is drawn to the relevant items appearing in the Notice of the Annual General Meeting and the 

explanatory statement, seeking the approval of the members in this matter. 

Your Directors recommend the appointment / re-appointment of Mr. Ved Prakash Arya, Mr Avtar Saini, Mr. Annand 

Sarnaaik and Mrs. Divvyani A. Sarnaaik for your approval. 

EMPLOYEES STOCK OPTION SCHEME 

The Shareholders of the Company at the Ninth Annual General Meeting had accorded their approval to the Employee 

Stock Option Scheme (“Paradyne ESOS 06”). In terms of the said Scheme, Compensation Committee at its three 

meetings held during the year granted 2,36,140 stock options, 1,73,520 stock options and 76,130 stock options 

aggregating to a total number of 4,85,790 options during the year. The particulars required under the SEBI (Employee 

Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are annexed to and form part of this 

report. 

SUBSIDIARY COMPANIES 

As on March 31, 2007, your Company has three Wholly Owned Subsidiaries namely Intercon Management Services 

Private Limited, India, Dyne Techservices Inc., U.S.A. and Links Group International Inc., U.S.A. 

As per section 212 of the Companies Act, 1956, the Company is required to attach the Directors’ Report, Balance Sheet 

and Profit and Loss Account of the subsidiaries to its Balance Sheet. Under Section 212 (8) of the Companies Act, 1956, 

the Central Government has the power to grant exemption from this requirement. The Company has made necessary 

application to the Central Government, as the Company presents the audited consolidated accounts of the Company and 

its subsidiaries in this Annual Report. Your Directors believe that the audited consolidated accounts, present a full and fair 

picture of the state of affairs and financial conditions of the Company and its subsidiaries, as per global practice. 

22 Paradyne Infotech Limited Annual Report 2006-2007 

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The Central Government has vide its letter ref. no. 47/352/2007 -CL -III granted its exemption to the Company. Therefore 

the Annual Report of your Company does not contain separate financial statements of these subsidiaries, but contains 

audited consolidated financial statements of the Company and its subsidiaries. 

However, a statement of the Company’s interest in the subsidiaries and a summary of the financials of the subsidiaries 

are given along with the consolidated accounts. The annual accounts of the subsidiaries along with the related 

information will be made available to the Members seeking such information at any point of time. The annual accounts of 

the subsidiaries are also available for inspection on any working day during business hours at the Registered Offices of 

the subsidiaries. 

CORPORATE GOVERNANCE 

A separate section on Corporate Governance Report and a Certificate from the Company’s Statutory Auditors confirming 

compliance with the conditions of Corporate Governance by the Company as stipulated in Clause 49 of the Listing 

Agreement are annexed to and forming part of this report. 

AWARDS 

The Company was awarded “Excellence Award” by the Institute of Economic Studies, New Delhi. Mr. Annand Sarnaaik, 

Chairman was also awarded with the coveted ‘Udyog Ratna” award by the Institute. 

STATUTORY INFORMATIONS 

CONSERVATION OF ENERGY, EFFORTS FOR EXPORT MARKET DEVELOPMENT, R & D ACTIVITIES, FOREIGN 

EXCHANGE EARNINGS & OUTGO AND TECHNOLOGY ABSORPTION 

As required under Section 217(1)(e) of the Companies Act, 1956 and the rules made thereunder, the necessary details 

are given hereunder: 

Conservation of Energy 

As your Company’s business comprises of Technology IMS and Software Services and related activities, the operations 

are not energy intensive. Hence the particulars required to be furnished in respect of conservation of energy are nil. 

However, the Company takes all possible steps to conserve energy at all the stages of its activities. 

Export Market Development 

Your Company’s wholly owned subsidiary, viz. Dyne Techservices Inc., acts as a marketing and delivery arm of the 

Company to increase the export revenue and tap the overseas market and is increasingly expected to help the Company 

in marketing of its products and services in U.S.A. During the year, the Company acquired a software services company 

in the U.S.A. viz. LGI Inc., which will also add to the export revenue prospects of the Company. 

Research & Development Activities 

Your Company being predominately a service provider, continuously invests in the Research and Development Activities 

including specific areas like up gradation / customization of the products / solutions offered by the Company as per 

Customer needs as well as generic feature changes and technological changes. These activities benefit the Company in 

keeping its offerings in line with the Customer expectations as well as wider acceptability of the offerings. It also helps in 

quality assurance to keep the offerings above the expectations of the customers. 

Foreign Exchange Earnings and Outgo / Technology Absorption 

During the year under review, the Company has earned Rs. 207.79 Million in foreign currency (Previous year Rs. 75.12 

Million) and has spent Rs. 0.09 Million (Previous year - Rs. 0.32 Million). 

The Company has not imported any foreign technology & hence the requisite particulars in this regard are nil. The 

Company being in the Technology Industry, always endeavors to learn and absorb new technologies and provide newer 

technology and tools to the employees for applying in the project execution. 

DISCLOSURE OF PARTICULARS UNDER SECTION 217(2A) 

The disclosure about the details of the employees drawing remuneration in excess of the limits specified under Section 

217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of employees) Rules, 1975, during the year 

under review forms part of this report. There were two employees who were in receipt of the remuneration in excess of 

the prescribed limits. The prescribed details of the employees are annexed to and form part of this report. 


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DIRECTORS’ RESPONSIBILITY STATEMENT 


Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm: (i) that in the 

preparation of the accounts for the financial year ended March 31, 2007, the applicable accounting 

standards have been followed along with proper explanation relating to material departures; 

(ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and 

estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company 

at the end of the financial year under review and of the profit for the year under review; 

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in 

accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for 

preventing and detecting fraud and other irregularities; 

(iv) that the Directors have prepared the accounts for the financial year ended March 31, 2007 on a going concern 

basis. 

FIXED DEPOSITS 

During the year under review, the Company has not accepted any deposits falling within the purview of Section 58A of 

the Companies Act, 1956 and as such, no principal or interest amount was outstanding on the date of the Balance 

Sheet. 

AUDITORS 

M/s. Nilesh M. Kapadia & Co., Chartered Accountants, Mumbai, the present Auditors hold their office until the conclusion 

of the ensuing Annual General Meeting. The present auditors have confirmed their willingness and eligibility under 

Section 224(1B) of the Companies Act, 1956 for their re-appointment. Your Directors recommend their re-appointment at 

the ensuing Annual General Meeting for your approval. 

HUMAN CAPITAL 

Human Resources are the most important assets in the Service industry. Attracting and retaining skilled people and 

upgrading the existing team are the key challenges in the industry. Your Company recognizes the importance of its 

human resources and accordingly takes several measures / programs to help the employees grow better. The attrition 

rate of your company’s employees’ has been below the industry average. 

ACKNOWLEDGEMENTS 

The Board of Directors put on record their sincere thanks to the clients, vendors, bankers, media, analysts for their 

continued support and co-operation. 

Your Directors also place on record their appreciation for the business associates and shareholders. Your Directors thank 

all the Government and regulatory authorities connected with the Company’s business for their support during the year 

and also appreciate the contribution and hard work of the employees at all levels for the growth of the organization. 

For and On Behalf Of The Board 

Place : Mumbai Annand Sarnaaik 

Date : August 24, 2007 Chairman & Managing Director 


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ANNEXURE I TO THE DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2007 

Information to be disclosed under the Securities and Exchange Board of India (Employee Stock Option Scheme 

and Employee Stock Purchase Scheme) Guidelines, 1999: 

(a) Options granted 4,85,790 

(b) Pricing Formula Price of shares on the Stock Exchange on the trading 

day preceding the date of grant 

(c) Options vested Nil 

(d) Options Exercised Nil 

(e) The total number of shares arising as Nil 

a result of exercise of option 

(f) Options lapsed 4,600 

(g) Variation of terms of options N.A. 

(h) Money realised by exercise of options Nil 

(I) Total number of options in force 4,81,190 

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

(i) Senior Managerial Persons Name Options Granted 

during the year ended 

March 31, 2007 

(ii) Any other employee who receives a Nil 

grant in any one year of option 

amounting to 5% or more of options 

granted during that year 

(iii) Identified employees who were granted Nil 

option, during any one year, equal to or 

exceeding 1% of the issued capital 

(excluding outstanding warrants and 

conversions) of the company at the time 

of grant 

(k) Diluted Earnings Per Share (EPS) 12.66 

Sharadchandra L.Rege 47980 

Haneef Shaikh 29190 

Ashish O. Mittal 47980 

Krishnan Seshadri 31810 

Krishna Chintam 51000 

(l) Where the company has calculated the The Company has calculated the employee 

employee compensation cost using the compensation cost using the intrinsic value of stock 

intrinsic value of the stock options, the options. Had the fair value method been used, in 

difference between the employee respect of stock options granted, the employee 

compensation cost so computed and the compensation cost would have been higher by 

employee compensation cost that shall Rs.18,40,040, Profit after tax lower by Rs.18,40,040/ 

have been recognised if it had used the fair and the basic and diluted earnings per share would have 

value of the options, shall be disclosed. The been lower to that extent, accordingly. 

impact of this difference on profits and on 

EPS of the company shall also be disclosed 


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(m) Weighted-average exercise prices and N.A. 

weighted-average fair values of options 

shall be disclosed separately for options 

whose exercise price either equals or 

exceeds or is less than the market price 

of the stock. 


(n) A description of the method and significant The fair-value of the stock options granted on 20/11/06, 

assumptions used during the year to estimate 6/3/07 and 28/3/07, have been calculated using Black 

the fair values of options, including the Scholes Options pricing Formula and the significant 

following weighted-average information: assumptions made in this regard are as follows: 

20/11/06 06/03/07 28/03/07 

(i) risk-free interest rate, 7.52 8.04 8.08 

(ii) expected life, 3.5 3.5 3.5 

(iii) expected volatility, 60.78 62.81 62.94 

(iv) expected dividend yield, and 1.46% 1.46% 1.46% 

(v) the price of the underlying share in market 79.90 78.90 88.80 

at the time of option grant. 


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I. CORPORATE GOVERNANCE PHILOSOPHY 

CORPORATE GOVERNANCE REPORT 


Corporate Governance requires setting forth highest standard of Transperancy and Corporate ethics for the 

Company and following those standards, in addition to the fiduciary duties owed by an organization towards its 

stakeholders. Your Company believes in this and strives hard to maintain and excel practices which would lead to 

these goals. Your Company believes in setting forth goals to enhance shareholders value and delivering it through 

a combination of performance, quality and transparency in operations. To maintain the standards of fiduciary duties, 

the Company follows the formal practices of Corporate Governance. 

II. BOARD OF DIRECTORS 

A) Composition: 

Your Company’s Board of Directors has an optimum combination of Executive and Non-Executive Directors for its 

independent functioning. As on the date of this report, the Board comprises of 6 Directors, consisting of 2 Executive 

and 4 Non-Executive Directors. All 4 Non-Executive Directors are Independent Directors. The Chairman of the 

Company is Executive Chairman and the composition of the Board of Directors is consistent with the provisions of 

the Clause 49 of the Listing Agreement. 

Subsequent to the year ended on March 31, 2007, Mr. Shantanu Rooj resigned from the directorship of the 

Company and Mr. Avtar Saini was appointed as an additional director. 

B) Non Executive Directors’ Compensation and Disclosures: 

The Non Executive Directors on the Board of the Company are paid sittings fees for attending the Board meetings, 

Audit Committee and Investor Grievance Committee meetings. All such fees paid to the Non Executive Directors 

are fixed by the Board of Directors. The Shareholders of the Company at their ninth Annual General Meeting had 

approved the payment of commission to the Non-Executive Directors upto 1% of the net profits of the Company. 

However, no such commission has been paid to the Non-Executive Directors for the year under consideration. 

During the financial year ended March 31, 2007, an aggregate of 12,000 stock options were granted to the Non 

Executive Directors; each director being granted 2400 stock options. None of these stock options have vested 

during the year ended March 31, 2007. Details of the fees paid to the Non Executive Directors are disclosed else 

where in this report. 

C) Other provisions related to Board and Committees: 

During the financial year 2006 - 2007, six Board Meetings were held i.e. on April 21, 2006; July 24, 2006; August 

24, 2006; October 19, 2006; January 24, 2007 & March 28, 2007. The gap between two meetings did not exceed 

four months. All the information required to be placed before the Board as per Clause 49 of the Listing Agreement 

was made available to the Board. 

Directors of the Company have confirmed to the Board that none of them is a member of more than ten committees 

or a Chairman of more than five committees across all the companies in which they are acting as Directors. For the 

purpose of reckoning this limit, membership / chairmanship of Audit Committee and Shareholders Grievance 

Committee are only considered. 

Compliance Report of all the applicable laws are placed periodically before the Board of Directors and reviewed by 

them. 

Information regarding the composition of the Board, attendance at Board Meetings (BM) held during the financial 

year under review and the last Annual General Meeting (AGM) and number of Directorships and Memberships / 

Chairmanships in Committees of other Companies are given below: 


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Name of Director Category FY 2006-07 Attendance at As on March 31, 2007 

BM Last AGM Audit Director Other 

Committee ships in other Committee Position 

companies# 

Member Chairman 

Mr. Annand Sarnaaik Promoter 

Director 6 YES 5 4 

Mrs. Divvyani Promoter 

A. Sarnaaik Director 6 YES N.A. 2 

Mr. Shantanu Rooj1 Independent 

Non-Executive 5 NO N.A. 5 

Mr. Dhiren B. Kothary Independent 

Non-Executive 6 YES 5 3 

Mr. Y. Krishnamurthy Independent 

Non-Executive 4 YES 5 

Mr. Neeraj Vashisht Independent 

Non-Executive 2 YES 2 

Mr. Ved Prakash Arya2 Independent 

Non-Executive 2 N.A. N.A. 14 

1. - resigned from the post of director, subsequent to March 31, 2007. 

2. - appointed as an additional director w.e.f. October 19, 2006. 

# - includes directorship in Private Companies. 

D) Code of Conduct 

Pursuant to the provisions of Clause 49 of the Listing Agreement, the Company has laid down separate Code of 

Conduct for its Directors and for the Senior Managerial Personnel of the Company. The same has been posted on 

the Company’s Website. The Directors & Senior Managerial Personnel of the Company have affirmed the 

compliance with their respective Code of Conduct for the financial year ended on March 31, 2007 to the Company. 

A declaration to this effect signed by the CEO of the Company is annexed to this report. 

III. BOARD COMMITTEES 

The Board of Directors of the Company has formed following committees for the effective exercise of powers and 

responsibilities as envisaged in Clause 49 of the Listing Agreement. 

A. Audit Committee 

In accordance with the provisions of Section 292A of the Companies Act, 1956 and Clause 49 of the Listing 

Agreement, an independent and qualified Audit Committee of the Board consisting of three Independent and one 

Executive Director, has been constituted. 

The Composition of and the details of the Audit Committee meetings held are given below: 

Name Designation 

Mr. Dhiren B. Kothary Chairman 

Mr. Y. Krishnamurthy Member 

Mr. Neeraj Vashisht Member 

Mr. Annand Sarnaaik Member 

Mr. Ved Prakash Arya has been adopted as a member of the Committee w.e.f. July 30, 2007. The Chairman of the 

Committee has accounting and financial management expertise and all other members are financially literate. The 

Company Secretary is the Secretary to the Committee. 

The Committee held five meetings during the year 2006 - 07 on April 21, 2006; July 24, 2006; August 24, 2006; 

October 19, 2006 and January 23, 2007. The time gap between any two meetings was less than four months. The 

attendance of the members at the committee meetings is given at the Table of attendance of the Board Meetings. 


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The terms of reference of the Committee, in brief are as follows: 


To overview of the Company’s financial reporting process and the disclosure of its financial information to ensure 

correctness and fairness of the financial statements, reviewing with management the quarterly / annual financial 

statements before submission to the Board, recommending the appointment and removal of internal / external 

auditors and fixing of their remuneration, reviewing the adequacy of internal control systems and the internal audit 

function, discussion with internal auditors of any significant findings and follow-up thereon, deciding on the scope 

of internal audit functions, reviewing the Company’s financial and risk management policies, looking into reasons 

for defaults, if any, review of managerial letters, letters of internal control weakness issued by internal / external 

auditors, statement of significant related party transactions, if any, ensuring compliance with the internal control 

systems. 

B. Remuneration Committee 

In accordance with Schedule XIII of the Companies Act, 1956 and Clause 49 of the Listing Agreement, a 

Remuneration Committee has been constituted to deliberate and determine on matters like the remuneration 

payable to, terms and conditions of appointment and other matters relating to executive directors / managerial 

persons; to deliberate and recommend on the structuring of the remuneration package and formulate remuneration 

policies. 

The Composition of the Remuneration Committee is as follows: 

Name Designation 

Mr. Dhiren B. Kothary Chairman 

Mr. Neeraj Vashisht Member 

Mr. Shantanu Rooj Member 

Mr. Ved Prakash Arya Member 

The Company Secretary acts as Secretary to the Committee. No meetings of the Committee were required to be 

held during the year. 

Remuneration Policy 

The Company’s remuneration policy is directed towards rewarding performance and achievements. The 

remuneration consists of basic pay, perquisites, performance allowances, bonus, incentives and commission. The 

remuneration and structure varies as per the various grades depending upon the job responsibilities , qualifications, 

experience etc. The policy aims to drive the human resources to achieve higher levels of performance, reward the 

merits and work as a motivating force. 

The remuneration of the Executive Directors is approved by Remuneration Committee, the Board of Directors and 

the shareholders of the Company. 

Details of remuneration to all the Directors for the F.Y. 2006 -2007: 

(Rs. in Thousands) 

Name Salary Perqui- Commi Bonus Sitting Total No. of 

sites ssion Fees Stock 

Options 

granted 

Annand Sarnaaik 30,35 200 32,35 

Divvyani A. Sarnaaik 30,35 200 32,35 

Ved Prakash Arya 12 12 2400 

Shantanu Rooj 35 35 2400 

Dhiren B. Kothary 56 56 2400 

Y. Krishnamurthy 39 39 2400 

Neeraj Vashisht 18 18 2400 


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Notes: 


a) Salary includes Housing/House Rent Allowance, Medical Reimbursement, Leave Travel Concession, 

Gratuity, Provident Fund, Earned Leave, etc. No performance linked incentives were paid to the Directors. 

b) Mr. Annand Sarnaaik & Mrs. Divvyani A. Sarnaaik were appointed as Managing Director & CEO and 

Executive Director & COO respectively for a term of three years from September 25, 2004 and hold office till 

September 24, 2007. The appointment is on contractual basis, which can be terminated with six months’ 

notice period for severance and no fees for severance. 

Shareholders approval is being sought, at the ensuing Annual General Meeting for re -appointment of Mr. 

Annand Sarnaaik as Chairman & Managing Director and Mrs. Divvyani A. Sarnaaik as Executive Director. 

Their brief terms of appointment and the details regarding the remuneration package are given in the 

explanatory statement to the respective resolutions proposing their re -appointment, in the Notice of the 

AGM. 

As per the previous appointment terms, each of the aforesaid Managerial Personnel is entitled to get 

Commission in addition to their monthly remuneration and other perquisites and benefits, subject to the 

overall limit of 5 per cent of the Net Profit of the Company in a financial year, and provisions of Schedule XIII 

to the Companies Act, 1956. For the financial year ended March 31, 2007, both the aforesaid managerial 

personnel have forgone their commission entitlement in the interest of the Company. 

c) No commission has been paid to the Non-Executive Directors of the Company. Non-Executive Directors of 

the Company are paid sitting fees for attending Board / Committee Meetings as approved by the Board 

within the limits prescribed under the Companies Act, 1956. 

d) In accordance with the approval granted by the shareholders of the Company at the Ninth AGM held on 

September 29, 2006, the Company has issued 2400 stock options each to five Non Executive Directors, 

aggregating to 12000 stock options, during the year 2006 -2007. The stock options were issued at the 

prevailing market price without discount to the issue price. The stock options will vest after a period of one 

year from the date of grant and can be exercised within a period of two years from the date of vesting. Except 

the stock options held by the Non Executive Directors as mentioned above, the Non Executive Directors do 

not hold any shares or other convertible instruments. 

C. Shareholders/ Investors’ Grievance Committee 

This Committee is constituted by the Board to look into the matters relating to the investors servicing and redress 

the grievances of the investors. 

The terms of reference of the Committee include approval of registration of transfer of shares and other securities 

issued and that may be issued from time to time; approve or reject application for transmission of shares; approve/ 

reject applications for re-materialisation, subdivision, consolidation, transposition and thereupon issue share 

certificates to the shareholders; redressal of shareholders’ and investors’ complaints such as transfer of shares, 

non-receipt of Annual Reports, non-receipt of dividend declared etc.; report to the Board about important 

developments in the area of servicing of shareholders; take initiatives for better servicing of the shareholders. 

The Committee met five times during the year 2006-07 on April 21, 2006; July 24, 2006; August 31, 2006; October 

19, 2006 and January 24, 2007. 

The composition of the Investors’ Grievance Committee and particulars of meetings attended by the members of 

the Investor’s Grievance Committee are given below: 

Name Designation No. of Meetings during the period 

Held Attended 

Mr. Shantanu Rooj Chairman 5 5 

Mr. Dhiren B. Kothary Member 5 5 

Mrs. Divvyani A. Sarnaaik Member 5 5 

During the year ended March 31, 2007, the Company received 39 complaints from the shareholders; No 

Complaints were unresolved as on March 31, 2007. The status on Investors’ complaints is also reported to the 

Investors’ Grievance Committee from time to time. 


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Compliance Officer: Mr. Amit Jaste is the Company Secretary and Compliance Officer of the Company. He acts 

as Secretary to the Investors’ Grievance Committee. 

D. Managing Committee 

A Managing Committee of Board of Directors has been constituted to take decision on the routine matters within the 

scope of its authority. It enables the management to take quick decisions on the day to day matters pertaining to the 

routine business and to save the valuable time of the Board as well as to avoid the administrative difficulties. The 

Managing Committee met frequently during the year under review to manage its day to day functions. 

E. Compensation Committee 

A Committee of the Board named Compensation Committee, consisting of majority of independent directors, has 

been formed, primarily to administer the Employee Stock Option Scheme of the Company. The brief description of 

terms of reference include: 

Formulating detailed terms and conditions of ESOS, managing and supervising the scheme, frame suitable policies 

and systems to ensure compliances with applicable rules and regulations and to perform such other functions, that 

the Committee is required under SEBI’s guidelines, recommending the overall compensation structure of the 

Organization and review thereof as required by the Management. 

Mr. Dhiren B. Kothary, Mr. Shantanu Rooj and Mr. Annand Sarnaaik, are the members of the said Committee. The 

Committee met thrice during the year on November 20, 2006; March 6, 2007 and March 28, 2007. All the members 

attended the meetings held during the year under review. 

IV. MANAGEMENT DISCUSSION & ANALYSIS 

A detailed Report on the Management Discussion and Analysis prepared in accordance with Sub-clause F (i) of 

Clause 49 is enclosed and forms part of this Annual Report. 

V. DISCLOSURES 

During the year under consideration, there were no materially significant transactions with the related parties that 

had potential conflict with the interests of the Company at large. However, the particulars of transactions between 

the Company and the related parties as per the Accounting Standard 18 are set out in Note 10 of Schedule N - Part 

B in notes to standalone accounts, forming part of the accounts. 

The Company was not subject to any non-compliance and during last three years, no penalties or strictures were 

imposed on the Company by Stock Exchange or SEBI or other statutory authority, on any matter related to capital 

markets. 

The Company has put in place a Whistle Blower policy and no person was denied access to Audit Committee. The 

Company has complied with all the mandatory provisions of the Clause 49 of the Listing agreement. The Company 

has complied with the Non mandatory requirement relating to Remuneration Committee and Whistle Blower Policy. 

The business risks associated with the Company specifically and with the industry generally are assessed by the 

Management of the Company. These include risks like Strategic Risks, Competition risks, Company Process and 

performance risks as well as geographical risks, general economic conditions, industry trends etc. These risks 

assessed along with the procedures to minimize the effect of such risks are periodically informed to and reviewed 

by the Board. 


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VI. GENERAL BODY MEETINGS 

The details of the last three Annual General Meetings held, were as under: 


Financial Location Date Time Special resolutions passed 

Year 

2005 MIG Club, September 02.00 PM 1. Alteration in Memorandum of Association 

2006 Bandra (East) 29, 2006 consequent to increase in Authorized Capital. 

Mumbai - 400 051. 2. Alteration of Articles of association consequent 

to increase in Authorized Capital. 

3. Payment of Commission to Non Executive 

Directors up to 1% of Net Profit. 

4. Approval of Employees Stock Option Scheme for 

the employees of the Company. 

5. Approval of Employees Stock Option Scheme for 

the employees of the Subsidiary Companies. 

2004 801, Balarama September 04.00 PM 1. Alteration of Articles of Association of the 

2005 Bandra Kurla 30, 2005 Company. 

Complex 2. Payment of Sitting Fees to the Non- Executive 

Bandra (E) Directors of the Company. 

Mumbai - 400 051. 3. Holding of place of profit by a relative of a 

Director of the Company. 

2003 801, Balarama September 11.00 AM NIL 

2004 Bandra Kurla 30, 2004 

Complex 

Bandra (E) 

Mumbai - 400 051. 

There was neither any special resolution passed last year through postal ballot nor it is proposed to conduct any 

special resolution through postal ballot at the ensuing Annual general Meeting. 

VII. SHAREHOLDERS 

A) Disclosures regarding appointment or re-appointment of directors: 

As per the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Neeraj 

Vashisht is liable to retire by rotation at the ensuing Annual General Meeting of the Company. However, due to his 

pre occupancies, he has expressed his inability for his re-appointment. 

During the year, Mr. Ved Prakash Arya was appointed as an additional director on the Board of the Company, w.e.f. 

October 19, 2006. Mr. Avtar Saini was appointed as an additional director of the Company w.e.f. August 24, 2007. 

Pursuant to Section 260 of the Companies Act, 1956, Mr. Ved Prakash Arya and Mr. Avtar Saini hold the office of 

the Director upto the date of the Annual General Meeting. The Company has received notices under Section 257 of 

the Companies Act, 1956 from members, proposing the candidature of Mr. Ved Prakash Arya and Mr. Avtar Saini 

respectively for appointment as a Director liable to retire by rotation, at the ensuing Annual General Meeting. Brief 

resume & other details of these Directors are given below: 

Mr. Ved Prakash Arya is an Engineering Graduate from University of Rajasthan and Masters in Business 

Administration from India’s premier management institute, IIM, Ahmedabad, Ved has also spent one year in 

ESSEC, France doing research. Ved has also completed his Advanced Management Program from Harvard 

Business School, Boston. 

Ved is a founder of Milestone Capital Advisors, an Asset Management Company. Ved was the Chief Operating 

Officer (COO) and Director - Operations for Pantaloon Retail (India) Limited. He has also been the driving force 

behind setting Pantaloon Group’s Real Estate Venture Fund, Kshitij & Horizon. He has total 14 years of rich 

experience. Ved is the founder Director of RAI (Retailers Association of India). Ved does not hold any shares in the 

Company. However, he holds 2400 Stock Options of the Company. The details of the Companies in which Ved is a 

director / committee member is as below: 


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Name of the Company 

Pantaloon Retail(India) Limited 

Idiom Design and consulting Limited 

PAN India Restaurants Limited 

Kshitij Investment Advisory Company Limited 

Planet Retail Holdings Private Limited 

Supreme Trade Links Limited 

Gupta Infrastructure (India) Private Limited 

Committee Position 

Name of Company 

Idiom Design and consulting Limited 


New Horizon Retail Private Limited 

Futurebazaar India Limited 

Navratna S G Highway Properties Private Limited 

Pantaloon Food Products (India) Limited 

Home Solutions Retail (India) Limited 

Foot-Mart Retail India Limited 

Indivision Investment Advisors Limited 

Committee 

Remuneration Committee 

Mr. Avtar Saini is B.E. in Electrical Engineering from University of Bombay and a Masters in Electrical Engineering 

from the University of Minnesota. Avtar worked at Intel from April 1982 till January 2004. He managed Intel 

business in the Indian subcontinent and built the engineering team from start to over 1500 engineers. His long 

illustrious career of close 22 years in US coupled with business and engineering management in India and a strong 

technology background make him uniquely qualified to work with technology companies. In January 2004, Avtar left 

Intel to work with smaller US based technology companies. Avtar was awarded 7 U.S. patents for his work in 

microprocessor design. Avtar is a director of Savera Technologies Pvt. Ltd and e-infochips Limited. As on March 31, 

2007, Avtar does not hold any shares/stock options in the Company. 

B) Directors’ shareholding as on March 31, 2007: 

Name of Director No. of Shares % of total share capital 

Executive-Promoter Directors 

1. Annand Sarnaaik 4417863 40.61 

2. Divvyani A. Sarnaaik 2642363 24.29 

Non Executive Directors 

3. Shantanu Rooj 0 0 

4. Dhiren B. Kothary 0 0 

5. Y. Krishnamurthy 0 0 

6. Neeraj Vashisht 0 0 

7. Mr. Ved Prakash Arya 0 0 

As on March 31, 2007, all the Non Executive Directors hold 2400 stock options each, of the Company. Mrs. Nita D. 

Kothary, wife of Mr. Dhiren B. Kothary holds 45000 equity shares of the Company. 

C) Means of communication: 

The Company has promptly reported to all the Stock Exchanges where the securities of the Company are listed, its 

quarterly / half yearly / annual financial results. The Company’s periodical financial results as well as the press 

releases are displayed on the website of the Company - www.paradyne.in. The financial results are published in 

one English and one Marathi daily newspaper, normally in Business Standard and Sakal respectively. They are 

also uploaded on the SEBI’s EDIFAR website www.sebiedifar.nic.in. The Company also simultaneously sends to 

the Stock Exchanges press releases, if any, issued by it. 

Since the periodical financial results are published in leading newspapers and posted on the Company’s website, 

the results are not sent to the households of the shareholders. Company’s presentation made to the analysts during 

the year is available on the website of the Company. 


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D) General shareholder information 

1) Annual General Meeting 

Date Monday, September 24, 2007 

Time 12.30 p.m. 


Venue MIG Club, Bandra (East), Mumbai - 400051. 

2) Financial Calendar for the Year 2007 - 2008 (Tentative) 

Meeting Type Purpose Date / Tentative Date 

Board Meeting Quarterly results for June 2007 July 30, 2007 

Board Meeting Quarterly results for September 2007 By end of October 2007 

Board Meeting Quarterly results for December 2007 By end of January 2008 

Board Meeting Quarterly results for March 2007 By end of April 2008 

Annual General Meeting Adoption of accounts for FY 2007 -08 By end of August 2008 

3) Financial year April 1st to March 31st 

4) Date of Book Closure Saturday, September 15th to Monday, September 24th, 2007 

(Both days inclusive) 

5) Dividend Payment Date 

Dividend if declared will be paid on or after September 24, 2007 

6) Listing 

The Company’s shares are listed on Bombay Stock Exchange (BSE) and National Stock Exchange of India 

Limited (NSE). The stock codes are as follows: 

Stock Exchange Stock Code 

BSE 532672 

NSE PARADYNE 

The ISIN of company’s equity shares with NSDL and CDSL is INE932G01013. 

Annual Listing Fees for the financial year 2007 - 2008 have been duly paid to the BSE, NSE respectively. 

Annual Custodian Fees for the financial year 2007 - 2008 have been paid to NSDL / CDSL. 


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7) Market Price Data 

a) Monthly high and low prices: 


The monthly high and low prices of the Company’s shares traded at the Bombay Stock Exchange 

Limited (BSE) and National Stock Exchange of India Limited (NSE) for the year ended March 31, 2007, 

are as given below. 

Month & Year BSE NSE 

High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) 

April 2006 78.00 66.05 75.90 58.35 

May 2006 93.15 57.00 93.55 58.80 

June 2006 66.90 41.85 68.10 41.60 

July 2006 61.45 50.10 62.65 47.30 

August 2006 71.90 56.50 72.00 56.15 

September 2006 69.40 61.05 69.40 60.05 

October 2006 77.70 63.25 80.00 63.00 

November 2006 84.80 65.00 84.95 65.00 

December 2006 119.40 72.35 119.85 69.60 

January 2007 121.50 100.00 122.40 99.60 

February 2007 117.50 82.00 117.70 88.10 

March 2007 98.00 69.00 98.60 66.55 

b) Performance in comparison to broad based indices: 

The chart herein below shows the comparison of the Paradyne’s share price movement vis-à-vis the 

movement of the BSE Sensex and NSE Nifty: 

Paradyne’s share price vis-à-vis BSE Sensex: 


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Paradyne’s share price vis-à-vis NSE Nifty: 

8) Registrar & Transfer Agent 


BIGSHARE SERVICES PRIVATE LIMITED is the Registrar & Share Transfer Agent (R&T Agent) of your Company. 

The R&T agent has adequate infrastructure and skill set to service the investors. Shareholders correspondence 

should be addressed to the R&T Agent of the Company, at the correspondence address mentioned in point 14 

below. 

9) Share transfer system 

Request for share transfer in physical form, along with necessary documents duly completed, once lodged with the 

Registrar & Transfer Agent are normally processed within 15 days. The Registrar & Transfer Agent also processes 

all dematerialization / rematerialization requests, within the prescribed time. The Investors’ Grievance Committee is 

also empowered to approve the Share transfer requests, request relating to issue of share certificates on account of 

split / consolidation, duplicate issue, remat of shares etc. The Demat Status report and the bought and sold report in 

respect of the shares held in demat form are periodically reported to the Committee / Board. 

10) Distribution of shareholding as on March 31, 2007 

Distribution of shareholding by number of shares held: 

Range (in Rs.) Total % of Total Total Holding % of Total 

Holders Holders in Rupees Share Capital 

1-5000 7,903 90.22 11388870 10.470 

5001-10000 433 4.94 3670780 3.37 

10001 - 20000 210 2.40 3173770 2.92 

20001 - 30000 78 0.89 2047770 1.88 

30001 - 40000 31 0.35 1131230 1.04 

40001 - 50000 31 0.35 1481960 1.36 

50001 - 100000 41 0.47 2956150 2.72 

100001 - 99999999 33 0.38 82925710 76.24 

Total 8,760 100.00 108776240 100.00 


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Distribution of shareholding by ownership 


Category of Total Number of Total shareholding as a 

shareholder shares percentage of total number 

of shares 

Shareholding of Promoter and 

Promoter Group 

Indian 

1. Promoter Individuals 7060226 64.91 

2. Relatives of Promoters 329250 3.03 

Foreign 0 0 

Total Shareholding of Promoter and 

Promoter Group 7389476 67.94 

Public shareholdings 

Institutions 

3. Financial Institutions/ Banks 3200 0.03 

Non-institutions 

4. Bodies Corporate 792698 7.29 

5. Individuals 2546978 23.41 

6. Any Other - Clearing members 48127 0.44 

7. -NRI 97145 0.89 

Total Public Shareholding 3488148 32.06 

TOTAL 10877624 100.00 


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11) Dematerialisation of shares 


Your Company’s shares can only be traded in compulsory demat segment in the stock exchanges. As on March 

31, 2007, 98.60% of the Company’s shares are held in electronic form. The break up of shares in physical and 

demat form as on March 31, 2007 is as follows: 

Category No. of shares % of total shares 

Shares in Demat form 10724897 98.60 

Shares in Physical form 152727 1.40 

Total 10877624 100.00 

12) Outstanding GDRs/warrants/convertible instruments and their impact on equity. 

The Company has not issued any GDRs/ADRs/Warrants as on March 31, 2007. During the year, the Company has 

issued stock options pursuant to the Paradyne Employee Stock Option Scheme. The details of the same are given 

in the annexure to the Directors’ report. The impact of the same has been taken into consideration while calculating 

the Earnings Per Share( EPS) and has been disclosed in the accounts of the Company. 

13) Office Locations 

Since the Company is in the service industry, it does not have any plant locations. The office locations are given 

below. 

Corporate office: 801, Balarama Building, Bandra Kurla Complex, Bandra (E), Mumbai- 400 051 

Technology IMS Center: 53/2476, Radheshyam, Gandhinagar, Bandra (E), Mumbai - 400 051. 

U.S. Offices: 1) 2700, Augustine Drive, Suite 190, Santa Clara, California 95054, U.S.A. 

2) 14120 Parke Long CT., Suite 225, Chantilly, Virginia 2015, U.S.A. 

Other office locations: 

Mumbai 6th Floor, Balarama, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. 

Pune 103/104, Monoplex Plaza, Deep Bunglow Chowk, Model Colony, Pune - 411 016 

Bangalore 207 & 208 - Raheja Chambers, Museum Road, Bangalore - 560001 

Delhi 15-B, Atmaram House, Tolstoy Marg, New Delhi. 

14) Address for correspondence 

All correspondences by Shareholders should be addressed to the Registrar & Transfer Agent (R&T Agent) M/s. 

Bigshare Services Pvt. Ltd. or the Registered Office of the Company at the addresses mentioned below. 

In case any shareholder is not satisfied with the response or do not get any response within reasonable period from 

the R&T Agent, they may approach the Company Secretary and Compliance Officer at the Registered Office of the 

Company. 

Registered Office: Registrar and Transfer Agent (R&T) 

Paradyne Infotech Limited M/s. Bigshare Services Pvt. Ltd. 

801, Balarama Building UNIT: Paradyne Infotech Limited 

Bandra Kurla Complex E - 2/3, Ansa Industrial Estate, 

Bandra (East) Saki Vihar Road, Saki Naka 

Mumbai - 400 051 Andheri (E), Mumbai - 400 072 

Maharashtra, India Maharashtra, India 

Tel. - + 91 - 22- 6696 3333 Tel. - + 91 - 22- 2847 3747 / 3474 / 0652, 

Fax - + 91 - 22- 6696 3344 Fax - + 91 - 22- 2847 5207 

Email: cs@paradyne.co.in Email: bss@bigshareonline.com 

15) Compliance officer 

Mr. Amit Jaste is the Company Secretary and the Compliance Officer of the Company. 

16) Auditor’s certificate on corporate governance 

As required under clause 49 of the Listing Agreement, the Auditor’s certificate on compliance of the Corporate 

Governance norms is attached with this report. 


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Declaration of Compliance with the Code of Conduct for Board of Directors and Senior Management PersonneI 

I, Annand Sarnaaik, Chairman & Managing Director of the Company, hereby declare that pursuant to Clause 49 I (D) of 

the Listing Agreement, the Board members and Senior Management personnel have given affirmation about their 

compliance with their respective Code of Conduct of the Company for the financial year ended March 31, 2007. 

For Paradyne Infotech Limited 

Annand Sarnaaik 

Chairman & Managing Director 

Date : August 24, 2007 

Auditor’s Certificate of Compliance with the Corporate Governance Requirements under Clause 49 of Listing 

Agreement 

To 

Members of Paradyne Infotech Limited 

We have examined the compliance of the conditions of Corporate Governance by Paradyne Infotech Limited (“the 

Company”) for the year ended March 31, 2007, as stipulated in Clause 49 of the Listing Agreement of the Company with 

The Bombay Stock Exchange, Mumbai and National Stock Exchange of India Ltd. Mumbai. The compliance with the 

conditions of Corporate Governance is the responsibility of the Company’s management. Our examination was limited to 

procedures and implementation thereof adopted by the Company during the year for ensuring the compliance of the 

conditions of Corporate Governance referred to above. It is neither an audit nor an expression of an opinion on the 

financial statements of the Company. 

In our opinion, and to the best of our knowledge and according to the information and explanations given to us, we 

hereby certify that the Company has complied with the conditions of Corporate Governance, stipulated in the 

abovementioned Listing Agreements for the year ended March 31, 2007. 

Based on confirmation received from the Company’s Registrar and Share Transfer Agent, and representations made by 

management, we certify that no investor grievances are pending for a period exceeding one month against the Company 

as at March 31, 2007. 

We further state that our report is neither an assurance as to the future viability of the Company nor the efficiency or 

effectiveness with which the management has conducted the affairs of the Company. 

For Nilesh Kapadia & Co. 

Chartered Accountants 

Nilesh Kapadia 

Partner 

Date : August 24, 2007 

Membership No: 33697 


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1. BUSINESS OVERVIEW OF THE COMPANY 

MANAGEMENT DISCUSSION ANDANALYSIS 

MANAGEMENT DISCUSSION AND ANALYSIS 

In the larger Information Technology sphere of business, your Company is in the business of providing IT Services 

across two high growth areas; Technology Infrastructure Management Services (Technology IMS) and Application 

Software Services. The Company provides innovative solutions for a dynamic environment where business and 

technology strategies converge. The approach focuses on new ways of business combining IT innovation and 

adoption that help synchronize the Customers their strategy, systems and infrastructure. 

The Company which was started with a vision to become a global IT Services player has supported it by focusing on 

delivering high quality IT services which has opened a new era and placed it on the global map. 

Our Strategic Business Units (SBUs) 

Your Company provides services which can be bifurcated into SBUs as follows: 

Technology IMS 

Technology IMS involves the managing the IT infrastructure of our client organizations to provide them support for 

the Critical IT assets and applications so as to ensure that business of clients not only runs smoothly, but technology 

support helps them build confidence in their client delivery time and quality. Technology IMS would include a 

breadth of service like server management, data base management, data center management, desktop solutions, 

network management etc. Your Company has over these years built expertise in the Technology IMS services and 

delivering solutions that are in sync with the client’s business goals. The services are provided through a hybrid- 

Onsite- Remote IMS model through which bring-in technology, knowledge, global processes and tools to improve 

the SLA, support and help business for overall growth. 

Applications Software Services 

Applications Software Services include application development and maintenance, of customised and packaged 

application software for customers, and application systems migration and testing, which includes the migration of 

applications from legacy environments to current technologies, as well as performing quality assurance functions on 

customised applications. It also includes enterprise services which are Business process management, enterprise 

application integration and IT consulting. Another area of operation for the Company is Customer Relationship 

Management Services. 

2. INDUSTRY STRUCTURE & DEVELOPMENTS 

FY 2006-07 witnessed a revalidation of the Indian Information Technology growth story, driven by a maturing 

appreciation of India’s role and growing importance in global services trade. Industry performance was marked by 

sustained double-digit revenue growth, steady expansion into newer service-lines and increased geographic 

penetration. Changing economic and business conditions, rapid technological innovation, proliferation of the internet 

within the country and globalization are creating an increasingly competitive market environment that is driving 

corporations to transform the manner in which they operate. Customers are increasingly demanding improved 

products and services with accelerated delivery time and at lower prices. To adequately address these needs, 

corporations are focusing on their core competencies and are using outsourced technology service providers to help 

improve productivity, develop new products, conduct research and development activities, reduce business risk, and 

manage operations more effectively. 

According to the annual NASSCOM survey, the Indian IT-ITES industry (including domestic market) recorded an 

overall growth of 30.7% as against a projected growth of 27%, clocking revenues of USD 39.6 billion in FY 200607 

up from USD 30.3 billion in FY 2005-06. The software and services exports segment grew by 33% to register 

revenues of USD 31.4 billion in FY 2006-07 up from USD 23.6 billion in FY 2005-06. The domestic segment grew by 

23% to register revenues of USD 8.2 billion in FY 06-07 up from USD 6.7 million. 


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The trend in the domestic market is also highly encouraging, the market showing signs of moving from hardware led 

growth to software and services gaining share and this trend is expected to continue. 

A Gartner study indicates that 32% of a CIO’s IT budget goes into internal resources to service infrastructure 

operations and management. And this, being a big chunk, becomes the first area for some cost trimming. This had 

led to opportunities in the Technology IMS space in delivering these services remotely. The global market size for 

Technology IMS is approx $ 145 bln. 

3. OPPORTUNITIES & STRENGTHS 

Paradyne is well-positioned to take advantage of the global and domestic opportunities. IT sector embraces 

unbound opportunities in the form of domestic and overseas market. The concept of offshore IT Services continues 

to provide a comprehensive range of IT Services across geographies and from different locations across the globe. 

Midsized companies are tapping the opportunities by focusing on domain knowledge and process management 

skills, demonstrating the value of a focused solution provider. We believe that our competitive strengths include 

Innovative Insights and leadership, Proven Delivery Model, Extensive and advanced end-toend products & services, 

our commitment to superior quality and process execution, Long-term client relationship, management and vision to 

be an employer of choice. We have been executing mission-critical projects involving multiple technology platforms. 

As more and more organizations are looking forward to continued IT support and expert management of their IT 

infrastructure, this sector has increasing potential for growth. The increased government spending on IT and the 

large scale of their operations provide an opportunity to the Company for rendering Technology IMS Services. There 

is also a trend of Remote Infrastructure Management Services in the overseas market. 

As per Forrester report the market size of Technology IMS services is more than $ 145 bln, the Indian pie from this 

sector is not more than $ 2 bln. There is a huge opportunity in this area for your company as it has built expertise, 

processes and practices over the years in this space. There is a huge market for Onsite - Remote IMS hybrid model, 

both domestically as well as internationally. Paradyne has built in expertise and processes to tap the opportunities in 

this space and emerge as one of the leaders in these services. The Company has invested into setting up a state of 

the art of the tech centre from the IPO proceeds and built on additional infrastructure. As the operations of the 

company would increase, the facilities would be scaled up. 

Apart from the software projects, there is a huge market in the Human Resource Information Management field as 

every organization intends to effectively manage its Human Resources with minimum cost. Paradyne’s product 

‘HrWorQ’ caters to the all aspects of Human Resource Information Management, which faces negligible competition 

in domestic market and thus, there is vast opportunity for the product implementation. The Paradyne’s process 

capabilities and range of services provide a compelling value proposition for both older customers to stay and grow 

with the Company, while attracting newer customers. 

The domestic market is moving from being a hardware oriented to services oriented. At this point of change, your 

company is ideally positioned to cater to the market. In the Technology IMS space, a hybrid model of onsite and 

remote IMS has been built which has found acceptance by the domestic clients due to the huge benefits of faster 

resolution time and cost reduction. In the Software space HRIMS services are being offered on Software as a 

Service model as there is a huge potential in this area considering the number of organizations that still don’t 

have a HRIMS suite due to many hindrances like upfront investments, operations, scalability, flexibility and 

domain expertise. 

Paradyne completed its very first inorganic story by acquiring Links Group International Inc. in the US. This was in 

line with the growth strategy of having organic and inorganic elements focused towards geographic de-risking, new 

market penetration and client acquisition. Inorganic story would be a part of growth for the organization. There are 

opportunities to grow multi-fold with strategic acquisitions and collaborations which would enable the company to 

become global entity. 


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The company operates in business areas where both capex investment and opex optimization are involved. If there 

is any kind of economic slowdown, we would be able to cater to the needs when the organizations would look for 

opex optimization and Technology IMS and software outsourcing would be the way forward. 

4. THREATS & RISKS 

As the exports revenues for the Company increase, the pressure of rupee appreciation would have some impact on 

the company’s financials. The global macro economic concerns may pose a risk element for the Company. Global 

IT majors and consulting firms are setting up shop in India or expanding their existing capacity. With the increased 

pressure on the resource pool, competition is bound to get more intense. The increased competition between IT 

vendors, both Indian and MNC’s, will impact their ability to raise prices and deliver as per customer’s expectations. 

There are also certain areas that need to be seriously looked at like availability of skilled personnel, country level 

risks, margin-pressure, fast changing technologies and attrition rates. To cater to the increasing customer demand 

for IT professionals with strong technology and domain knowledge, the Company will have to invest increasingly 

higher amounts in facilities, training & development, of its personnel and infrastructure development. Our Company 

has been constantly taking strategic steps to ensure that these factors do not have an adverse impact on the 

business of the Company. The rising wages of IT professionals and lower rupee realizations, because of the 

strength of the currency, will have an effect on gross margins. We plan to minimize the impact of rising employee 

costs by increasing employee productivity and managing the resource mix. The manageability of the large scale 

contracts to ensure the best service to the clients is also the area to be looked at. However, the Company has since 

managed many large-scale contracts for the Technology IMS. The Company is also taking adequate steps to 

ensure quality services to all its clients. 

5. OUTLOOK 

The Management of the Company believes and expects both the Technology IMS and Software Service SBU 

(Strategic Business Unit) to grow in the coming years. With the Technology IMS space opening up to outsourcing, 

considering the tremendous benefits for organizations globally, your company is positioned to capitalize on this 

demand and be a leader in this space. Processes, practices, ITIL standards and talent have been built and we 

would continue further investments in the same. The Remote IMS would be our focus area and would also be taken 

to global shores. Keeping in view the potentials of the software market and the Company’s expertise in the focused 

area, the outlook continues to be positive. The software industry continues to grow at a consistently healthy pace, 

the software service SBU is expected to become a major contributor to the growth of the Company. HrWorQ - a 

premium product of the Company caters to the Human Resource Management System. Globally, the HR software 

market is estimated to be around USD 2 billion. Considering the potential of this market, the Company has rolled out 

the HRIMS services on Software as a Service model. The other product of the Company - FinWorQs is a Banking 

Solution, which the Company aims to provide the niche market of the small and mid sized banks. Your company 

completed its first acquisition of Links Group International Inc. based out of Virginia, USA. Company would continue 

to have focus on organic and inorganic growth focused on market penetration, services offerings, client acquisition 

and geographic de-risking. 

6. INTERNAL CONTROLS 

Internal controls promote efficiencies, reduce risks and help ensure the reliability of financial statements & 

compliance with laws and regulations. Paradyne has adequate internal controls in place to ensure that the 

Company is on course toward profitability goals and achievement of its mission and fulfillment of vision. Internal 

controls are structured in a way to help management deal with rapidly changing economic and competitive 

environments, shifting customer demands and priorities, and continuous business re-engineering for future 

growth. 

All employees of Paradyne follow the internal control policies and procedures to ensure that company achieves 

effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and 

regulations. 


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In addition to the setting up of adequate Control environment, Paradyne conducts a periodic risk assessment to 

identify and analyze the relevant risks to achievement of the objectives, forming a basis for determining how the 

risks should be managed. 

Paradyne has policies and procedures to ensure management’s directives are carried out the way the process 

is designed. Control activities are performed at all levels in the organization with the help of a range of diverse 

control activities including approvals, authorizations, verifications, reconciliations, reviews and segregation of 

duties. 

Paradyne has adequate information systems to ensure that pertinent information is identified, captured and 

communicated to employees. Management Information systems are designed to produce reports containing 

financial performance, highlighting operational efficiencies achieved, compliance with laws and regulations. These 

reports also capture information on external events and economic conditions to help management in informed 

decision making. 

Employees, Management, Internal & External Auditors and Board of Directors are actively involved in providing 

value add at their respective levels and improving the systems. 

7. FINANCIAL PERFORMANCE 

The Consolidated Gross Revenue for the year ended on March 31, 2007 amounted to Rs. 1680.99 million as 

compared to Rs. 875.64 million of the previous year, recording a growth of 91.97%. The Consolidaated Net Profit 

after Tax for the year increased to Rs. 200.85 million as compared to Rs. 74.56 million of the previous year, 

recording a growth of 169%. 

These results are a result of the management’s initiatives of increasing the revenues from value added services, 

inorganic growth, addition of new clients, increased repeat orders from existing clients, cross selling of services and 

favorable industrial growth. It is expected that the IT services sector will continue to show robust growth as 

witnessed during the period under review. Paradyne stands to make the most out of the opportunities and looks 

forward to sustained growth. Paradyne will continue to invest in people and processes to ensure a steady growth. 

8. HUMAN RESOURCES 

Paradyne is a people organization. Human Resource group has an unique positioning in its scheme of things. 

Paradyne as an organization is driven by its strong values and constant effort is made to map the values the human 

assets bring along with them to the Paradyne values towards creating a seamless organization. 

HR at Paradyne has three dimensional approach, namely to hire the Best, to motivate the Best and to retain the 

Best. Best is the key to its success. HR group has put in appropriate systems and processes in place to drive the 

organization towards achieving its goal of making Paradyne a “Preferred Employer”. It has endeavored to improve 

the value of the stake holders through “Employee Branding”. 

Various HR initiatives in the form of reward and recognition schemes, market realistic compensation and benefit 

plan, just in time manpower planning process and performance improvement and career progression plan have 

helped in improving ‘shelf life’ of members in the organization. 

Training and development initiatives, knowledge management and competency mapping process in Paradyne have 

created multiskilled manpower and also have helped to create a successful succession planning model to address 

attrition related issues. 


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CONSOLIDATED FINANCIAL STATEMENTS 

CONSOLIDATED AUDITORS’ REPORT 

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF PARADYNE INFOTECH LIMITED ON 

CONSOLIDATED FINANCIAL STATEMENTS OF PARADYNE INFOTECH LIMITED AND ITS SUBSIDIARIES 

1. We have examined the attached consolidated Balance Sheet of PARADYNE INFOTECH LIMITED (“the 

Company”) and its subsidiaries (collectively referred to as “the Paradyne Group”) as at 31st March, 2007 and 

also the consolidated Profit and Loss Account and the consolidated Cash Flow Statement for the year ended on 

that date. 

2. These financial statements are the responsibility of the company’s management. Our responsibility is to express 

an opinion on these financial statements based on our audit. We conducted our audit in accordance with 

generally accepted auditing standards in India. Those standards require that we plan and perform the audit to 

obtain reasonable assurance about whether the financial statements are prepared, in all material respects, in 

accordance with an identified financial reporting framework and are free of material misstatements. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 

An audit also includes assessing the accounting principles used and significant estimates made by the 

management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 

a reasonable basis for our opinion. 

3. We did not audit the financial statements of Intercon Management Services Private Limited (a subsidiary), 

whose financial statements reflect total assets of Rs.309.05 Lakhs as at 31st March, 2007, total revenue of 

Rs.15.54 Lakhs and net cash inflows amounting to Rs. 1.16 Lakhs. These financial statements and other 

financial information have been audited by other auditors whose reports have been furnished to us, and our opinion 

is based solely on the report of other auditors. 

4. The financial statements of Dyne Techservices Inc., whose financial statements reflect total assets of Rs.3,545.87 

lakhs as at 31st March, 2007 and total revenue of Rs.3,468.82 lakhs have not been audited. For the purpose of 

consolidation, we have relied on financial statements and other financial information of this subsidiary as 

approved by the Board Directors of the said subsidiary, and our opinion is based solely thereon. 

5. We report that the consolidated financial statements have been prepared by the Company’s management in 

accordance with the requirements of the Accounting Standard (AS) 21, Consolidated Financial Statements, 

issued by the Institute of Chartered Accountants of India. 

6. Subject to the matter referred to in paragraph 4 above, based on our audit and on our consideration of other 

auditors on separate financial statements and on the other financial information on the components, to the best 

of our information and according to the explanations given to us, we are of the opinion that the attached 

consolidated financial statements give a true and fair view in conformity with the accounting principles generally 

accepted in India: 

(a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Paradyne Group as at March 31, 

2007; 

(b) in the case of the Consolidated Profit and Loss Account, of the consolidated results of operations of the 

Paradyne Group for the year ended on that date; and 

(c) in the case of the Consolidated Cash Flow Statement, of the cash flows of the Paradyne Group for the year 

ended on that date. 

For Nilesh M. Kapadia & Co. 


Nilesh M. Kapadia 

Partner 

Mumbai Membership no.33697 

August 24, 2007 


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Consolidated Balance Sheet as at 31st March, 2007 

Particulars Schedule 



As at As at 

31.03.2007 31.03.2006 

SOURCES OF FUNDS 

Shareholders’ Funds 

Share Capital A 108,776 108,776 

Reserves and Surplus B 373,564 188,299 

482,340 297,075 

Loan Funds 

Secured Loans C 111,498 61,582 

Deferred Tax Liability 22,860 13,937 

Minority Interest 29 23 

TOTAL 616,727 372,617 

APPLICATION OF FUNDS 

Fixed Assets 

Gross Block D 208,220 110,687 

Less:- Depreciation 46,491 21,250 

Net Block 161,729 89,437 

Capital Work in progress 7,620 20,773 

169,349 110,210 

Goodwill (on Consolidation) 220,486 13,807 

Investments E 1 1 

Current Assets, Loans & Advances F 

Inventories 16,640 10,725 

Sundry Debtors 370,729 161,801 

Cash and Bank Balances 119,682 93,235 

Loans and Advances 50,824 32,388 

557,875 298,149 

Current Liabilities and Provisions G 

Liabilities 299,752 33,696 

Provisions 31,232 15,854 

330,984 49,550 

Net Current Assets 226,891 248,599 

Miscellaneous Expenditure H 

(To the extent not written off or adjusted) 

Significant Accounting policies and N 

Notes to Accounts 

TOTAL 616,727 372,617 

As per our report of even date For and on behalf of the Board 



Nilesh M. Kapadia Annand Sarnaaik Ved Prakash Arya Avtar Saini Ashish O. Mittal 

Partner Chairman & Director Director Sr. VP. Acc. & Finance 

Membership No.: 33697 Managing Director 

Mumbai, Mumbai, 

Date 24th August, 2007 Date: 24th August, 2007 

Divvyani A. Sarnaaik Dhiren B. Kothary Y. Krishnamurthy Amit Jaste 

Executive Director Director Director Company Secretary 


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Consolidated Profit & Loss Account for the year ended 31st March, 2007 



Year ended Year ended 


INCOME 

Revenue from Operations I 1,678,043 866,644 

Other Income J 2,954 8,998 

EXPENDITURE 

T o t a l 1,680,997 875,642 

Operating & Other expenses K 1,417,600 765,785 

Finance Charges L 10,431 11,545 

Non-cash Charges M 25,241 10,908 

T o t a l 1,453,272 788,238 

Profit before Tax 227,725 87,404 

Less: Provision for Taxation 

Current Taxes (17,498) (6,738) 

[including short / (excess) provision of 

(Rs.2,20,637/-) (P.Y. 1,78,727/-) for prior years] 

Wealth Tax (4) 

Fringe Benefit Tax (450) (493) 

Deferred Taxes (8,922) (5,606) 

Net Profit after Tax before minority interest 200,855 74,563 

Minority Interest (6) (4) 

Net Profit after Tax & Minority Interest 200,849 74,559 

Balance brought forward 98,616 38,560 

Add: Excess depreciation written back 1,028 

Amount Available for Appropriation 300,493 113,119 

Appropriation: 

Proposed Dividend 

- Dividend @ 10% 10,878 10,878 

- Special Celebration Dividend @ 2% 2,175 

Tax on Proposed Dividend 2,218 1,526 

Transfer to General Reserve 3,700 

Transfer to Debenture Redemption Reserve 2,100 2,100 

Balance Carried to Balance Sheet 279,422 98,615 

300,493 113,119 

Significant Accounting policies and 

Notes to Accounts N 

Earning per Share - Basic (Rs.) 18.46 8.24 

-Diluted (Rs . ) 17.52 8.24 

(refer Note B-9 of Schedule ‘N’) 












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CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2007 

Particulars 




Net Profit before Taxation and extraordinary items 227,725 87,404 

A. Cash Flow from Operating Activities : 

Adjustment for : 

Depreciation & amortisation 25,241 10,908 

Finance Charges 10,431 11,545 

Interest received (2,679) (6,778) 

Foreign Exchange Fluctuation Loss / (Gain) 6,377 (1,650) 

Loss on sale / Scrap of fixed assets 1,185 

Excess provision written back (0) (512) 

Bad debts written off 173 39,543 2,311 17,009 

Operating Profit before working capital changes 267,268 104,413 


Decrease / (Increase) in Inventories (5,915) 1,103 

Decrease / (Increase) in Trade & Other Receivables (233,705) (86,203) 

(Decrease) / Increase in Trade Payables 266,249 26,629 6,124 (78,976) 

Cash generated from operations 293,897 25,437 

Taxes paid (including Fringe Benefit Tax) (6,208) (6,102) 

Net Cash Flow from Operating Activities 287,689 19,335 

B. Cash Flow from Investing Activities : 

Interest received 2,679 6,778 

(Increase)/ Decrease in fixed assets & Capital Work-in Progress (84,380) (38,124) 

Increase in Goodwill (206,679) 

Net Cash from Investment Activities (288,380) (31,346) 

C. Cash Flow from Financing Activities : 

Proceeds from Issue of Equity Shares (including Securities Premium) 138,639 

Proceeds/ (payment) of Secured loans 49,917 6,992 

Proceeds/ (payment) of Unsecured loans (593) 

Finance Charges (10,431) (11,545) 

Payment of Share Issue Expenses (21,024) 

Dividend paid (including Dividend Tax) (12,348) 27,138 (10,709) 101,760 

Net Cash from Financing Activities 

Net (Decrease)/Increase in cash and cash equivalent 26,447 89,749 

Cash and cash equivalent at the beginning of the year 93,235 3,485 

Cash and cash equivalent at the end of year 119,682 93,235 

Notes: 

1 Cash and Cash equivalents consists of Cash on hand and balances 

with Banks and are as per Schedule F annexed to and forming part 

of the accounts. 

2 Previous year figures have been regrouped, rearranged, recast wherever considered necessary. 












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Consolidated Schedules attached to and forming part of the accounts for the year ended 31st March, 

2007 (Rs. in Thousands) 

SCHEDULE A - SHARE CAPITAL 

AUTHORISED: 

As at 31-3-2007 As at 31-3-2006 

1,50,00,000 (1,20,00,000) Equity Shares of Rs. 10/- each 150,000 120,000 

ISSUED, SUBSCRIBED AND PAID UP: 

1,08,77,624 (1,08,77,624) Equity Shares of Rs. 10 each fully paid up 108,776 108,776 

Of the above: 

33,91,706 (33,91,706) Equity Shares of Rs. 10/- each were 

alloted as Bonus Shares by way of capitalisation of General 

Reserve and balance in Profit and Loss Account 

SCHEDULE B - RESERVES AND SURPLUS 

(A ) Securities Premium 

Opening Balance 84,605 

(in respect of issue of 33,00,926 Equity Shares issued 

at a premium of Rs. 32/- per share) 

Add: Addition during the year 105,630 

Less: Expenses on issue of Equity Shares 84,605 (21,025) 84,605 

(B ) Debenture Redemption Reserve 


Add: Transferred from Profit & Loss Account 2,100 4,200 2,100 2,100 

(refer Note B-3(ii) of Schedule ‘N’) 

(C ) Foreign Currency Translation Reserve 

(arising on Consolidation) 

Opening Balance 51 43 

Add: Adjustment for Current Year (1,340) 8 

Closing Balance (1,289) 51 

(D ) General Reserve 

As per last balance sheet 2,926 2,926 

Add: Transferred from Profit & Loss Account 3,700 6,626 

(E) Profit and Loss Account 279,422 98,616 

Total 373,564 188,299 


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SCHEDULE C - LOAN FUNDS 

(A ) Secured Loans 


From Banks 




Cash Credit facilities 77,107 15,513 

Working Capital Term Loans 18,959 12,421 

Term Loan against Property 18,562 

Vehicle loans 2,664 98,730 1,589 48,085 

From Others 168 897 

[Amount Due within one year in resepct of Loans 98,898 48,982 

from Banks /Others Rs.74,00,493/- (Rs.63,10,690/-)] 

Debentures 

9% Secured Non-Convertible Redeemable 

Debentures issued to Wipro Limited 12,600 12,600 

SCHEDULE ‘D’ - FIXED ASSETS 

111,498 61,582 

Gross Block Depreciation Net Block 

Particulars As at Additions Deductions As at As at Additions Deductions Upto As at As at 

April 1, during the during March 31, April 1, during the during March 31, March 31, March 31, 

2006 year the year 2007 2006 year the year 2007 2007 2006 

STPI- Premises 4,865 4,865 476 79 555 4,309 4,389 

Office Premises 8,943 8,943 1,911 146 2,057 6,887 7,032 

Plant and Machinery 158 158 155 4 159 0 4 

Office Equipments 1,228 1,382 2,610 294 83 377 2,232 935 

Furniture & Fixture 5,536 7,614 13,150 1,173 429 1,602 11,548 4,362 

Motor Vehicles 2,134 1,865 3,999 153 253 406 3,593 1,981 

Computer Systems 87,823 86,672 174,495 17,088 24,247 41,335 133,160 70,735 

Current Period 110,687 97,533 208,220 21,250 25,241 46,491 161,729 89,438 

Previous Year 80,991 31,724 (2,028) 110,687 10,768 10,906 (425) 21,250 89,437 

SCHEDULE ‘E’ INVESTMENTS 

Long Term Investments (at Cost) 

Trade Investment ( Unquoted - Fully Paid Up) 

100 (100) Equity Shares of Mandvi Co-operative Bank Ltd. 1 1 

(Equity Share of Face Value of Rs.10/- each) 

1 1 


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SCHEDULE: F - CURRENT ASSETS, LOANS AND ADVANCES 

CURRENT ASSETS 




1. INVENTORIES 

(As taken and certified by the Management) 

Goods for Resale 

Computer Equipments, Peripherals and Software 16,640 10,725 

2. SUNDRY DEBTORS : ( Unsecured, Considered Good) 

Outstanding for over six months 33,890 42,989 

Others 336,839 370,729 118,812 161,801 

3. CASH AND BANK BALANCES 

-Cash on Hand 617 1,601 

Balances with Scheduled Banks 

(refer Note B-10 of Schedule “N”) 

(i) In Deposit Accounts 19,635 82,153 

(ii) In Current Accounts 75,143 8,243 

(iii) In Dividend Account 58 3 

94,836 90,398 

Balances with Non - Scheduled Banks 

In Current Accounts 

(i) Bank of America, U.S.A. 

[Maximum Balance outstanding during the year 

(Rs. 1,86,95,198 (P.Y. Rs. 12,35,372] 

18,695 1,235 

(ii) Silicon Valley Bank, U.S.A 


(Rs. 1,16,26,523 (P.Y. Rs. NIL)] 

5,273 

(iii) Walchovia Bank, U.S.A 


(Rs. 1,23,03,220 (P.Y. Rs. NIL)] 

261 

24,229 119,682 1,235 93,235 

LOANS AND ADVANCES 

(Unsecured, considered good unless otherwise stated) 

(i) Advances recoverable in cash or in kind or for 46,650 28,030 

value to be received 

(ii) Deposits 4,027 4,083 

(iii) Other Current Assets 147 50,824 275 32,388 

Total 557,875 298,149 

SCHEDULE : G - CURRENT LIABILITIES & PROVISIONS 

CURRENT LIABILITIES : 

( i ) Sundry Creditors for goods, services & expenses 90,165 29,829 

(ii) Advances from Customers 6,830 1,965 

(iii) Interest Accrued but not due 2,008 1,043 

(iv ) Unclaimed Dividend * 55 

(* There is no amount due & outstanding to be credited 

to Investor Education & Protection Fund) 

(v ) Other Liabilities 200,694 299,752 859 33,696 

PROVISIONS : 

For Staff Retirement Benefits 952 592 

For Proposed Dividend 13,053 10,878 

For Tax On Dividend 2,218 1,526 

For Income Tax (including Fringe Benefit Tax) 15,009 31,232 2,859 15,854 

Total 330,984 49,550 


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SCHEDULE ‘H’ 

MISCELLANEOUS EXPENDITURE 


Preliminary Expenses 



As at 31-3-2007 As at 31-3-2007 

As per Last Balance Sheet 2 

Less: Amortised during the Year (2) 

Balance Carried to Balance Sheet 

SCHEDULE ‘I’ 

REVENUE FROM OPERATIONS 

Technology IMS 995,318 689,058 

Software Services 682,725 177,436 

Consultancy Charges 150 

SCHEDULE ‘J’ 

OTHER INCOME 

1,678,043 866,644 

Interest received - Gross 2,679 6,778 

(Tax deducted at Sources Rs.5,71,467/-( Rs.15,24,194/-) 

Rent Income 240 

Sundry Balances / Provisions Written Back 512 

Foreign Exchange Fluctuation Gain (Net) 1,658 

Miscellaneous Income 35 50 

2,954 8,998 


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SCHEDULE ‘K’ 

OPERATING & OTHER EXPENSES 




Material Cost, Software Development,Contract & Service Charges 1,185,084 712,714 

Staff Costs 

Salaries, allowances, Incentives & Staff Related payment 164,559 29,719 

Contribution to Statutory Funds 1,076 274 

Staff Welfare 349 261 

Staff Training & Recruitment 1,210 167,194 827 31,081 

Directors’ Remuneration 

Directors Salaries and allowances 6,352 4,950 

Contribution to Statutory Funds 118 52 

Directors Sitting Fees 128 6,598 26 5,028 

Communication Costs 2,963 1,476 

Advertisement, publicity and Business Promotion 449 265 

Sales Commission & Discount 631 556 

Legal & Professional Expenses 11,356 2,425 

Office Maintenance 2,607 774 

Traveling & Conveyance 9,429 3,449 

Electricity Charges 957 637 

Rent 7,147 1,099 

Insurance 6,981 206 

Auditors’ Remuneration 618 365 

Postage & Courier Charges 1,649 730 

Printing and Stationery 814 412 

Rates & Taxes 1,061 100 

Donations 86 211 

Loss on Foreign Exchange Fluctuations (net) 8,648 

Vehicle Expenses 572 101 

Loss on Sale / Scrap of Fixed Assets 1,185 

Membership & Subscription 89 45 

Loss by Flood 2,184 

Bad Debts Written off 173 2,311 

Miscellaneous Expenses 310 615 

SCHEDULE ‘L’ 

FINANCE CHARGES 

1,417,600 765,785 

Interest on Debentures 1,243 1,243 

Bank Interest 8,247 9,057 

Bank Charges & Commission 941 1,245 

SCHEDULE ‘M’ 

NON-CASH CHARGES 

10,431 11,545 

Depreciation 25,241 10,906 

Preliminary Expenses amortised 2 


25,241 10,908 

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STATEMENT RELATING TO SUBSIDIARY COMPANIES AS ON MARCH 31, 2007 

(Rs. In Thousands) 

Name of the Subsidiary Company Intercon Dyne Links Group 

Management Techservices Inc. International Inc., 

Services Pvt. Ltd. 

Issued & Subscribed Share Capital 100 58,498 218 

Reserves 9,673 1,818 45,352 

Total Assets 30,905 259,151 114,877 

Total Liabilities 21,132 198,835 69,525 

Investments - 207,053 

Turnover 1,554 30,460 316,423 

Profit / Loss before Taxation 390 1,870 46,822 

Provision for taxation 371 187 2,341 

Profit / Loss after Taxation 19 1,683 44,481 



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SCHEDULE N: CONSOLIDATED SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 

Background 

Paradyne Infotech Limited (‘the Company’) is engaged in Technology Infrastructure Management Services and 

Application Software Services in India and Overseas. 

A. Significant Accounting Policies 

1. Principles of Consolidation 

The Consolidated financial statements relate to Paradyne Infotech Limited (“the Company”) and its subsidiaries. 

The consolidated financial statements have been prepared on the following basis: 

a) The financial statements of the Company and its subsidiaries are combined on a line-by -line basis by 

adding together the book values of like items of assets, liabilities, income and expenses, after fully 

eliminating intra-group balances and intra-group transactions resulting in unrealised profits or losses 

in accordance with Accounting Standard (AS)- 21 -”Consolidated Financial Statements” issued by the 

Institute of Chartered Accountants of India. 

b) In case of foreign subsidiaries, being non-integral foreign operations, revenue items are consolidated 

at the average rate prevailing during the year. All assets and liabilities are converted at rates prevailing 

at the end of the year. Any exchange difference arising on consolidation is recognised in the exchange 

fluctuation reserve. 

c) The difference between the cost of investment in the subsidiaries, over the net assets at the time of 

acquisition of shares in the subsidiaries is recognised in the financial statements as Goodwill or Capital 

Reserve as the case may be. 

d) The difference between the proceeds from disposal of investment in subsidiary and the carrying amount 

of its assets less liabilities as of the date of disposal is recognised in the consolidated statement of 

Profit and Loss account as the profit or loss on disposal of investment in subsidiary. 

e) Minority Interest’s share of net profit of consolidated subsidiaries for the year is identified and adjusted 

against the income of the group in order to arrive at the net income attributable to shareholders of the 

company. 

f) Minority Interest’s share of net assets of consolidated subsidiaries is identified and presented in the 

consolidated balance sheet separate from liabilities and equity of the company’s shareholders. 

g) As far as possible, the consolidated financial statements are prepared using uniform accounting policies 

for like transactions and other events in similar circumstances and are presented in the same manner 

as the Company’s separate financial statements. 

f) The list of subsidiaries considered in these consolidated financial statements with percentage holding 

is summarised below: 

Name of Subsidiaries Country of Proportion Of ownership 

Incorporation interest 

Intercon Management Services Pvt.Ltd. India 99.70% 

Dyne Techservices Inc. USA 100% 

2. Basis of Accounting 

The financial statements have been prepared under the historical cost convention and comply with the 

Accounting Standards prescribed by the Institute of Chartered Accountants of India and referred to in Section 

211 (3C) of the Companies Act, 1956. The Company generally follows the mercantile system of accounting and 

recognizes income and expenditure on accrual basis except those with significant uncertainties or otherwise are 

accounted on cash basis. 

3. Use of estimates 

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) 

requires management to make estimates and assumptions that affect the reported amount of assets, 


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liabilities, revenues and expenses and disclosure of contingent liabilities on the date of financial statements. The 

recognition, measurement, classification or disclosures of an item or information in the financial statements have 

been made relying on these estimates to a greater extent. 

4. Revenue Recognition 

The Direct revenue of the Company comprises the income from following principal activities: 

i. Technology IMS - This represents Technology Integration and Management Services. Technology 

Integration activities include resales and Integration of Hardware / System Software/ Database Software 

/ Networking Products with or without one another. Revenue from Technology Integration is recognized 

on delivery to the customer and acknowledgement thereof, in accordance with the terms of the individual 

contracts. Management Services represents amount charged for Facility Management Services, 

Maintenance upkeep of Hardware / System Software/ Database Software / Networking Products. Revenue 

from Management Services is recognized over the life of the contracts. Maintenance revenue on expired 

contracts on which services have continued to be rendered is recognized on renewal of contract or on 

receipt of payment. Hitherto, Technology Integration and Management Services were classified as separate 

streams of revenue. However considering the interconnected nature of such activities, these have been 

grouped together from current financial year. 

ii. Software Services- representing charges for development of software for customer and sale of licenses 

of software and other products. Revenue from Software services is recognized when the software is 

developed and installed / delivered to the customers as per the terms of the contract. Revenue on sale 

of licenses of software and other products is recognized on delivery / installation, as the case may be. 

Recognition norms for Indirect Revenue: 

i. Interest Income- Interest Income is recognized on time proportion basis. 

ii. Dividend Income- Dividend Income is recognized on when the Company’s right to receive dividend is 

established. 

iii. Rental Income- Rental Income is recognized on accrual basis. 

5. Fixed assets and depreciation 

i. All fixed assets are stated at cost less accumulated depreciation. For this purpose cost includes 

purchase price and all other attributable costs of bringing the assets to working condition for intended 

use. 

ii. Depreciation on all assets is provided pro-rata to the period of use, under straight-line method, at 

rates prescribed in Schedule XIV of the Companies Act, 1956. 

iii. Capital Work-in-progress includes advances paid for acquiring Fixed Assets. 

6. Investments 

Long term Investments are stated at cost. A provision for diminution in value is made to recognize a decline, 

other than temporary, in the value of long term investments. Short-term investments are valued at lower of cost 

and net realizable value. 

7. Inventories 

Inventories include stocks of Computer equipments, Peripherals and traded software in respect of 

Technology Infrastructure Management Services of the Company and the same is valued at lower of cost 

(net of provision for obsolescence) or net realizable value. Cost is determined on First In First Out (FIFO) 

basis. 

8. Foreign exchange transactions 

Transactions in foreign currencies are generally recorded at the exchange rate prevailing on the date of the 

transaction. Monetary items denominated in foreign currency and outstanding at the Balance Sheet date are 

translated at the exchange rate ruling on that date. Exchange differences on foreign exchange transactions 

other than those relating to fixed assets are recognized in the profit and loss account. Any 


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gain/loss on exchange fluctuation on the date of payment of expenditure incurred for acquisition of fixed assets 

is treated as an adjustment to the carrying cost of such fixed assets. 

9. Accounting for Employee Benefits 

The Company makes contribution to Provident Fund and the same is charged to Profit and Loss account. 

Provision for gratuity and Leave Encashment is determined as per actuarial valuation at the year-end and the 

same is charged to the Profit and Loss Account. 

10. Accounting for Taxes 

Current taxes and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities, using 

the applicable tax rates and tax laws. 

Deferred tax resulting from “timing differences” between book and tax profits is accounted for using the tax rates 

and laws that have been enacted or substantively enacted as on the balance sheet date. Deferred tax assets 

are recognized and carried forward only if there is a virtual/ reasonable certainty that the assets will be realized 

in future. 

11. Impairment 

Impairment Loss is recognized whenever the carrying amount of an asset is in excess of its recoverable amount. 

The Impairment Loss is recognized as an expense in the Statement of Profit and Loss and carrying amount of 

the asset is reduced to its recoverable value. 

12. Employee Stock Options 

(a) During the year, the Company has granted 4,85,790 stock options to its employees and employees of its 

subsidiary company. In accordance with the Employee Stock Option Scheme and Employee Stock 

Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India (“SEBI”), the 

Company has elected to use the “Intrinsic Value method” to account for the compensation cost of stock 

options to employees. For the year ended 31st March 2007, Company has been advised that there is no 

accounting impact in the books of account in respect of such options. Had the Company adopted “Fair 

Value Method” for calculating the Compensation cost, the total accounting impact for the year would have 

been Rs.18.40 Lakhs, profits after tax lower by Rs.18.40 Lakhs and basic and diluted earnings per share 

would have been lower by Re.0.16 & Re.0.94 respectively. 

(b) Summary of Stock Options: 

Particulars No. of stock options Weighted average 

exercise price (Rs.) 

Options outstanding on 1st April 2006 NIL Not Applicable 

Options granted during the year 4,85,790 75.67 

Options forfeited/lapsed/ cancelled during the year (4,600) 75.67 

Options exercised during the year NIL Not Applicable 

Options outstanding on 31st March 2007 4,81,190 75.67 

Options vested but not exercised on 31st March 2007 NIL Not Applicable 

(c) Average share price on the date of exercise of the option: Not Applicable 

(d) Information in respect of Options outstanding as at 31st March 2007: 

Exercise price Number of options Average remaining life 

68.10 2,31,540 2years 

79.50 1,73,520 2years 

89.95 76,130 2years 

(e) The fair value of option granted on 20th November 2006, 6th March 2007 & 28th March 2007 is Rs40.85, 

38.05 and Rs 42.79 per share respectively. 


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(f) The fair value has been calculated using the Black Scholes Options Pricing Model and the significant 

assumptions made in this regard are as follows: 

Particulars 20th November 2006 6th March 2007 28th March 2007 

Risk free interest rate (Range) 7.50% to 7.55% 8.04% to 8.05% 8.06% to 8.10% 

Expected life 2years 2years 2years 

Expected volatility 60.78% 62.81% 62.94% 

Expected dividend yield 1.46% 1.46% 1.46% 

Exercise Price (Rs.) 68.10 79.50 89.95 

Stock Price (Rs.) 79.90 78.90 88.80 

The above disclosures have been consequent to the issue of Guidance note on accounting for Employee 

share based payment issued by the Institute of Chartered Accountants of India in the year 2005 and 

applicable for the periods on or after 1st April2005. 

13. Provisions and Contingent Liabilities and Contingent Assets 

The Company recognizes a provision when there is a present obligation as a result of a past event that probably 

requires outflow of resources, which can be reliably estimated. Disclosures for a contingent liability is made, 

without a provision in books, when there is an obligation that may, but probably will not, require outflow of 

resources. Contingent Assets are neither recognized nor disclosed in the financial statements. 

14. Earning per Share (EPS) 

The earning considered in ascertaining the Company’s EPS comprises the net profit after tax and Minority 

Interest. The number of shares used in computing Basic EPS is the weighted average number of shares 

outstanding during the year duly adjusted for additional shares issued during the year, if any. 

15. Cash Flow Statement 

Cash Flows are reported using the indirect method, whereby net profits before tax is adjusted for the effect 

of transaction of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. 

The cash flows from regular revenue generating, investing and financing activities are segregated. 

B. Notes to Accounts 

1. Goodwill on Consolidation as on the Balance Sheet date comprises the following: 


Particulars Year ended Year ended 

31st March 2007 31st March 2006 

Intercon Management Services Private Limited 13,807 13,807 

Dyne Techservices Inc. 206,679 NIL 

Total 220,486 13,807 

2. Operating Leases: 

The Company has various operating leases for office facilities and residential premises for employees, which are 

renewable on a periodic basis and cancelable at its option. Rental expense for operating leases included in the 

income statements for the year is Rs. 42.99 Lakhs (Rs. 10.99 Lakhs). 

3. Securities in respect of Secured Loans: 

i ) Term loans from Banks / Institutions are secured by mortgage of certain immovable and movable 

properties of the Paradyne Group and personal guarantees of certain Directors. Cash credit facility is 

secured by the hypothecation of book debts & Stock. Vehicle loans are secured by hypothecation of 

related motor vehicles. 


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ii.) The company has issued 1,26,000, 9% Non Convertible Redeemable debentures of face value of 

Rs.100/- (date of allotment of Debentures: 28th February 2005 and date of creation of Debenture Trust 

Deed: 27th May 2005). The debentures are redeemable in three installments of Rs.42 Lakhs each at 

the end of the third, fourth and fifth year respectively from the date of allotment. The debentures are 

secured by a mortgage and second charge on the movable properties of the company, immovable property 

owned by the subsidiary company and Personal guarantees of certain Directors of the Company. During the 

year, Company has created Debenture Redemption Reserve amounting to Rs.21Lakhs from the Profits of 

the Company to cover the redemption of Debentures amounting to Rs. 42 lakhs on or before 28th February 

2008. 

4. The Deferred tax liability / Asset as at 31st March 2007 comprises the following: 


Particulars As at 31st March 2007 As at 31st March 2006 

Deferred Tax Liability on account of: 


Deferred Tax Asset on account of: 

Disallowances under Income-Tax Act, 1961. (453) (171) 

Net Deferred Tax Liability 22,860 13,937 

5. Related Party Transactions: 

As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, disclosures of 

transactions with related parties as defined therein are given below: 

List of related parties with whom transactions have taken place and Relationship: a) 

Key Managerial Personnel (“KMP”) 

i ) Mr. Annand Sarnaaik- Managing Director & Chief Executive Officer 

ii ) Mrs. Divvyani A. Sarnaaik- Executive Director & Chief Operating Officer 

b) Relatives of KMP 

Mr. Nikhil Sarnaik 

Dr. Nitin Sangamnerkar 

Transactions with Related parties 


Transactions with Related Parties Key Relative of 

Management Key Management 

Personnel Personnel 

Managerial Remuneration 6,470 NIL 

(5,002) (NIL) 

Unsecured loans given / received / repaid NIL NIL 

(13,359) (1,335) 

Consultancy Fees paid NIL 200/ 

(NIL) (NIL) 

Dividend Paid 7,060 269 

(8,825) (337) 

Balance Receivable/ (Payable) NIL NIL 

(NIL) (NIL) 

Note: Previous year’s comparatives have been shown in Brackets below current financial year’s figures. 

6. Sundry Debtors and Loans and Advances are unsecured but considered good for which the company 

holds no security other than personal security of respective parties. 


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7.In the opinion of the Board, Current assets, loans and advances are realizable at a value, which is at least 

equal to the amount at which these are stated in the ordinary course of business and provision made for 

all known and determined liabilities are adequate and not in excess of the amount stated. 

8.Segment information: 

As per Accounting Standard 17 on Segment Reporting issued by the Institute of Chartered Accountants of India, 

the Company has reported segment information on consolidated basis including business conducted through its 

subsidiaries. 

Assets, liabilities, revenue and expenses directly attributable to segments are reported under each reportable 

segment. Items which are not attributable or allocable to segments are disclosed as un-allocable assets, 

liabilities, revenue or expenses, as the case may be. 

Based on the similarity of activities, risk and reward structure, organization structure and internal reporting 

system, Company has structured its operations into the following business segments: 

i. Technology IMS - It represents Technology Integration and Technology Infrastructure Management 

Services. Technology Integration activities include resales and Integration of Hardware / System 

Software/ Database Software / Networking Products with or without one another. Technology 

Infrastructure Management Services represents amount charged for Facility Management Services, 

Maintenance upkeep of Hardware / System Software/ Database Software / Networking Products. Hitherto, 

Technology Integration and Technology Infrastructure Management Services were classified as separate 


grouped together from current financial year and as result, previous year’s segment information has been 

re-grouped accordingly. 

ii. Software Services- representing charges for development of software for customer and sales of licenses 

of software and others products. 

(A ) Financial Information about Primary Business Segment is given below: 

Sr. No. Particulars Reportable Business 

1 Segment Revenue 

Technology IMS Software Services 

-Product & Services 995,318 682,725 

(690,716) (177,437) 

2 Segment Results 126,296 194,260 

(52,633) (92,463) 

3 Unallocable Income 

4 Unallocable Expenses 

5 Operating Profit 

6 Finance Charges 

7 Net Profit before tax 

8 Provision for Tax 

- Current Tax 

- Wealth Tax 

- Fringe Benfit tax 

- Deferred Tax 

9 Net Profit after Tax 

before Minority Interest 

10 Net Profit after Tax 

and Minority Interest 



Total 

1,678,043 

(868,152) 

320,556 

(145,095) 

2,954 

(7,490) 

85,354 

(53,636) 

238,156 

(98,949) 

10,431 

(11,545) 

227,725 

(87,404) 

17,498 

(6,738) 

(4) 

450 

(493) 

8,922 

(5,606) 

200,855 

(74,563) 

200,849 

(74,559) 

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Sr. No. Particulars 

Other Information 

11 Segment Assets 

12 Unallocable Assets 

13 Total Assets 

14 Segment Liabilities 

15 Unallocable Liabilities 

16 Total Liabilities 

17 Capital Expenditure 

incurred during the year 

18 Depreciation 

(B ) Financial Information about Geographical Segment is given below: 


Reportable Business 


216,163 474,538 

(133,616) (121,044) 

25,639 271,645 

(28,180) (7,244) 

35,539 61,994 

(30,067) (1,657) 

16,040 9,201 

(9,054) (1,580) 


Total 

690,702 

(254,660) 

257,010 

(167,508) 

947,711 

(422,168) 

297,283 

(35,423) 

168,108 

(89,669) 

465,371 

(125,093) 

97,533 

(31,724) 

25,241 

(10,634) 

Sr. no. Particulars India Rest of the World Total 

1 Segment Revenue 1,123,176 554,867 1,678,043 

(792,326) (75,976) (868,302) 

2 Segment Assets 283,632 664,079 947,711 

(322,979) (99,189) (422,168) 

3 Segment Liabilities 207,739 257,632 465,371 

(122,046) (3,047) (125,093) 

Note: Amounts in Bracket represent previous year’s figures 

9.Earning per share (EPS) 

Particulars 

Net profits attributable to shareholders (A) 

Add: Amortisation of Employee Compensation 

Cost (as per Intrinsic value method) recognized 

in the Accounts 

Less: Amortisation of Employee Compensation 

Cost (as per Fair value method) not recognized 


Net profits as adjusted above (B) 

Weighted average number of equity shares 

outstanding during the year (before adjusting the 

Dilutive potential equity shares) (C) 

Number of Stock Options Outstanding as on the 

balance sheet date 

Number of Dilutive potential equity shares (D) 

Total number of Equity shares for Diluted EPS 

[(C)+(D)] = (E) 

Nominal Value of Equity Shares 

Basic & Diluted EPS as reported [(A)/(C)] 

Basic EPS as adjusted [(B)/(C)] 

Diluted EPS [(B)/(E)] 


Units Year ended 

31.03.07 

Rs. 200,849 

Rs. NIL 

Rs. (1,840) 

Rs. 199,009 

Nos. 10,877,624 

Nos. 481,190 

Nos. 481,190 

Nos. 11,358,814 

Rs. 10/ 

Rs. 18.46 

Rs. 18.30 

Rs. 17.52 


Year ended 

31.03.06 

72,864 

NIL 

NIL 

74,559 

9,050,810 

NIL 

NIL 

9,050,810 

61 

10/ 

8.24 

8.24 

8.24 

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10. Utilisation of Proceeds of Initial Public Offerings 


During the financial year 2005-06, the Company had made Initial Public Offer (“IPO”) of 33,00,926 Equity 

Shares of Rs. 10/- each at a premium of Rs. 32/- per share amounting to Rs. 1386 Lakhs. The Company has 

utilized the gross public issue proceeds in the following manner: 




Funds available for utilization at the beginning of the year 84,371 NIL 

Upgradation of Products, Infrastructure, Data Centre and & 28,948 41,018 

Support Centre 

Investment in Subsidiary 38,116 13,250 

Total Utilization 67,064 54,267 

Balance Public issue proceeds pending utilization 17,307 84,371 

Pending utilization balance amounting to Rs.173 Lakhs as at 31st March 2007, Rs. 159 Lakhs has been invested 

in fixed deposits and Rs. 14 Lakhs are lying in current account with the Scheduled bank. 

11. Contingent Liabilities and commitments not provided for: 


As at 31.03.07 As at 31.03.06 

a. Unexpired Letters of Credit 4,714 8,359 

b. Guarantees issued by bankers against company’s 4,445 4,870 

counter guarantee. 

c. Capital Commitments in respect of Capital-work-in 16,380 35,700 

progress (net of advances paid) 

d. Claims against Company not acknowledged as debts 180 180 

Total 25,719 49,109 

12. The Previous year’s figures have been regrouped, reclassified and recast wherever required. Figures in 

bracket indicate previous year’s figures. 












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TO THE MEMBERS OF 

PARADYNE INFOTECH LIMITED 

AUDITORS’ REPORT 


1. We have audited the attached Balance Sheet of PARADYNE INFOTECH LIMITED (“the Company”) as at 31st 

March, 2007 and related Profit and Loss Account and Cash Flow Statement of the Company for the year ended on 

that date, annexed thereto. These financial statements are the responsibility of the company’s management. Our 

responsibility is to express an opinion on these financial statements based on our audit. 

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards 

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 

are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts 

and disclosures in the financial statements. An audit also includes assessing the accounting principles used and 

significant estimates made by the management, as well as evaluating the overall financial statement presentation. 

We believe that our audit provides a reasonable basis for our opinion. 

3. As required by the Companies (Auditor’s Report) Order, 2003 as amended by Companies (Auditor’s Report) 

(Amendment) Order, 2004 (together ‘the Order’) issued by the Central Government of India in terms of sub-section 

(4A) of section 227 of the Companies Act, 1956 (‘the Act’), and on the basis the information and explanations 

given to us and books and records examined by us in the normal course of audit and to the best of our knowledge 

and belief we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 

4. Further to our comments in the annexure referred to above, we report that: 

a) We have obtained all the information and explanations which to the best of our knowledge and belief were 

necessary for the purpose of the audit; 

b) In our opinion, proper books of accounts as required by law have been kept by the company, so far as 

appears from our examination of the books; 

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in 

agreement with the books of account; 

d) In our opinion the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report 

comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act, to the extent 

applicable; 

e) On the basis of written representations received from the directors, as on 31st March 2007, and taken on 

record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2007 

from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act; and 

f) In our opinion and to the best of our information and according to the explanations given to us, the said 

accounts, read together with the notes thereon, give the information required by the Act in the manner so 

required and give a true and fair view in conformity with the accounting principles generally accepted in India: 

i ) in the case of the Balance Sheet, of the state of affairs of the company as at 31st March, 2007; ii ) 

in the case of the Profit and Loss Account, of the profit for the year ended on that date; and iii ) in the 

case of the Cash Flow Statement, of the cash flows for the year ended on that date. 




Partner 

Mumbai: Membership No. 33697 



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ANNEXURE TO THE AUDITORS’ REPORT 


[Referred to in the Auditors’ Report to the members of Paradyne Infotech Limited (“the Company”) on the accounts 

for the year ended March 31, 2007] 

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and 

situation of fixed assets. 

(b) The fixed assets of the Company have been physically verified by the Management during the year at 

regular intervals. In our opinion, the periodicity of verification is reasonable having regard to the size of the 

Company and the nature of its assets. No material discrepancies were noticed on such verification. 

(c) As none of the fixed assets were disposed off during the year, question of commenting on going concern 

assumption does not arise. 

(ii) (a) As informed to us, the inventories have been physically verified by the Management. In our opinion, the 

frequency of such verification is reasonable. 

(b) In our opinion and according to the information and explanations given to us, the procedures adopted by 

the Management for the physical verification of inventories are reasonable and adequate in relation to the 

size of the company and the nature of its business. 

(c) In our opinion and according to the information and explanations given to us, the procedures adopted by 

the Management for the physical verification of inventories are reasonable and adequate in relation to the 

size of the company and the nature of its business.On the basis of our examination of records of inventory, 

in our opinion and according to the information and explanations given to us, the Company has maintained 

proper records of inventory and no material discrepancies were noticed on physical verification of the stocks 

as compared to the book records. 

(iii) (a) According to the information and explanations given to us, the Company has, during the year, not granted 

any loans secured or unsecured to the Companies, firms or other parties covered in the register maintained 

under Section 301 of the Companies Act, 1956. 

(b) According to information and explanation given to us, the Company has, during the year not taken any 

loans secured or unsecured from the Companies, firms or other parties covered in the register maintained 

under Section 301 of the Companies Act, 1956. 

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control 

procedures commensurate with the size of the Company and the nature of its business with regard to purchase 

of inventory and fixed assets and sale of goods and services. Further, on the basis of our examination of books 

and records of the Company, and according to the information and explanations given to us, we have neither come 

across nor have been informed of any continuing failure to correct major weakness in the aforesaid internal control 

system. 

(v) (a)(b) In our opinion and according to the information and explanations given to us, we are of the opinion that the 

particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 have been 

entered in the register required to be maintained under that section.In our opinion and according to the information 

and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding the 

value of Rupees Five Lakhs in respect of any party during the year have been made at prices which are reasonable 

having regard to the prevailing market prices at the relevant time. 

(vi) In our opinion and according to the information and explanations given to us, the Company has not accepted 

deposits from the public during the year. 

(vii) The Company has appointed a firm of Chartered Accountants to carry out its internal audit function. In our 

opinion, internal audit system is commensurate with its size and nature of its business. 

(viii) According to the information and explanations given to us, the Central Government has not prescribed 

maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 for 

any of the products of the Company. 

(ix) (a) According to the information and explanations given to us and according to the books and records examined 

by us, in our opinion, the company has been generally regular in depositing with the appropriate authorities 


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undisputed statutory dues including Provident fund, Employee State Insurance, Income-Tax, Sales Tax, 

Service Tax, and other material statutory dues applicable to it except in certain instances where delays 

were noticed. According to the information and explanations given to us, the undisputed amounts payable 

in respect of such statutory dues which have remained outstanding as at March 31, 2007 for a period of 

more than six months from the date they became payable include Service Tax Rs.2,33,750/- and Value 

Added Tax amounting to Rs.3,09,600/-. We are informed that the same have since been paid. 

(b) According to the information and explanations given to us, there are no dues which have not been 

deposited on account of any dispute with the Statutory authorities. 

(x) The Company has neither accumulated losses as at 31st March 2007 nor has it incurred any cash losses during 

the current financial year or in the immediately preceding financial year. 

(xi) Based on our audit procedures and on the basis of information and explanations given by management, we are 

of the opinion that the Company has not defaulted in repayment of its dues to any financial institution, bank or 

debenture holders. 

(xii) In our opinion and according to the information and explanations given to us, the Company has not granted any 

loans and advances on the basis of security by way of pledge of share, debentures and other securities. 

(xiii) In our opinion and according to the information and explanation given to us, the Company is not a chit fund or a 

nidhi / mutual benefit fund /society. 

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or 

trading in shares, securities, debentures and other Investments. 

(xv) In our opinion and according to the information and explanations given to us, Company has not given any 

guarantees for loans taken by others from banks or financial institutions. 

(xvi) In our opinion and according to the information and explanations given to us, Company has applied the term 

loans for the purpose for which such loans were obtained. 

(xvii) Based on the information and explanations given to us and on an overall examination of the Balance Sheet of 

the Company and other records examined by us, in our opinion, there are no funds raised on a short term basis 

which have been used for long term investment. 

(xviii) During the year under Audit, the Company has not made preferential allotment of shares to parties or companies 

covered in the register maintained under section 301 of the Companies Act, 1956. 

(xix) According to the information and explanations given to us and the records examined by us, security or charge 

has been created in respect of the debentures issued. 

(xx) During the Financial year 2005-2006, the Company had raised Rs.13,86,38,892/- by way of Initial Public Offer. 

The end use of such funds to the extent utilized has been disclosed in Note B-17 of Schedule “N” to the financial 

statements and the same has been duly verified by us. 

(xxi) During the course of our examination of the books of account and records of the Company carried out in 

accordance with the generally accepted auditing practices in India, we have not come across any instance of 

fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the 

Management. 




Partner 

Mumbai: Membership No. 33697 



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BALANCE SHEET 

Balance Sheet as at 31st March, 2007 (Rs. in Thousands) 


SOURCES OF FUNDS 

Shareholders’ Funds 

As at As at 


Share Capital A 108,776 108,776 

Reserves and Surplus B 314,538 184,203 

Loan Funds 

423,314 292,979 

Secured Loans C 104,750 43,020 

Deferred Tax Liability 21,213 13,119 

APPLICATION OF FUNDS 

Fixed Assets 

TOTAL 549,277 349,118 

Gross Block D 153,630 100,235 

Less:- Depreciation 38,096 19,267 

Net Block 115,534 80,968 

Capital Work in progress 7,620 14,500 

123,154 95,468 

Investments E 79,519 20,476 

Current Assets, Loans & Advances F 

Inventories 16,640 10,725 

Sundry Debtors 301,812 161,646 

Cash and Bank Balances 95,195 91,857 

Loans and Advances 28,918 19,696 

Current Liabilities and Provisions G 

442,565 283,924 

Liabilities 66,402 33,902 

Provisions 29,559 16,848 

95,961 50,750 

Net Current Assets 346,604 233,174 

TOTAL 549,277 349,118 


Notes to Accounts 












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PROFIT & LOSS ACCOUNT 

Profit & Loss Account for the year ended 31st March, 2007 (Rs. in Thousands) 


INCOME 



Revenue from Operations I 1,330,974 867,300 

Other Income J 2,685 7,340 

Total 1,333,659 874,640 

EXPENDITURE 

Operating & other expenses K 1,136,358 769,078 

Finance Charges L 9,320 9,645 

Non-cash Charges M 18,830 10,636 

Total 1,164,508 789,359 

Profit before Tax 169,151 85,281 

Less: Provision for Taxation 

Current Taxes (15,000) (6,333) 

[including short provision of Rs. Nil (P.Y. 1,78,727/-) 

for prior years] 

Wealth Tax (4) 

Fringe Benefit Tax (450) (493) 

Deferred Taxes (8,094) (5,586) 

Net Profit after Tax 145,607 72,865 

Balance brought forward 94,571 36,210 

Amount Available for Appropriation 240,178 109,075 

Appropriation: 


- Dividend @ 10% 10,878 10,878 

- Special Celebration Dividend @ 2% 2,175 

Tax on Proposed Dividend 2,218 1,526 

Transfer to General Reserve 3,700 

Transfer to Debenture Redemption Reserve 2,100 2,100 

Balance Carried to Balance Sheet 219,107 94,571 

240,178 109,074 


Earning per Share - Basic (Rs.) 13.39 8.05 

- Diluted (Rs.) 12.66 8.05 

(refer Note B-14of Schedule ‘N’) 












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Cash Flow Statement for the year ended 31st March, 2007 

CASH FLOW STATEMENT 




Particulars 

Net Profit before Taxation and extraordinary items 169,151 85,280 

A. Cash Flow from Operating Activities : 


Depreciation & amortisation 18,830 10,636 

Finance Charges 9,320 9,645 

Interest received (2,650) (6,778) 

Unrealised Foreign Exchange Loss 6,376 (1,658) 

Loss on sale / Scrap of fixed assets 1,185 

Excess provision written back (512) 

Bad debts written off 31,876 2,311 14,829 

Operating Profit before working capital changes 201,027 100,109 


Decrease / (Increase) in Inventories (5,915) 1,103 

Decrease / (Increase) in Trade & Other Receivables (155,557) (86,569) 

(Decrease) / Increase in Trade Payables 32,592 (128,880) 5,569 (79898) 

Cash generated from operations 72,147 20,211 

Taxes paid (including Fringe Benefit Tax) (5,962) (5,189) 

Net Cash Flow from Operating Activities 66,185 15,022 

B. Cash Flow from Investing Activities : 

Interest received 2,650 6,778 

Increase in Investment (59,044) 

Decrease/(increase) in fixed assets/Capital Work-in Progress (46,575) (38,124) 

Net Cash from Investment Activities (102,909) (31,346) 

C. Cash Flow from Financing Activities : 

Proceeds from Issue of Equity Shares 138,639 

(including Securities Premium) 

Proceeds/ (payment) of Secured loans 61,730 8,460 

Proceeds/ (payment) of Unsecured loans (593) 

Finance Charges (9,320) (9,645) 

Payment of Share Issue Expenses (21,024) 

Dividend paid (including Dividend Tax) (12,348) (10,709) 

Net Cash from Financing Activities 40,062 105,128 

Net (Decrease)/Increase in cash and cash equivalent 3,338 88,804 

Cash and cash equivalent at the beginning of the year 91,857 3,053 

Cash and cash equivalent at the end of year 95,195 91,857 

Notes: 1. Cash and Cash equivalents consists of Cash on hand and balances with Banks and are as per Schedule F annexed 

to and forming part of the accounts. 

2.Previous year figures have been regrouped, rearranged, recast wherever considered necessary. 












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SCHEDULES 

Schedules attached to and forming part of the accounts for the year ended 31st March, 2007 

SCHEDULE A - SHARE CAPITAL 

AUTHORISED: 



1,50,00,000 (1,20,00,000) Equity Shares of Rs. 10/- each 150,000 120,000 

ISSUED, SUBSCRIBED AND PAID UP: 

1,08,77,624 (1,08,77,624) Equity Shares of Rs. 10 each 108,776 108,776 

fully paid up 

Of the above: 

33,91,706 (33,91,706) Equity Shares of Rs. 10/- each were 

alloted as Bonus Shares by way of capitalisation of General 

Reserve and balance in Profit and Loss Account 

SCHEDULE B - RESERVES AND SURPLUS 

(A ) Securities Premium 


(in respect of issue of 33,00,926 Equity Shares issued 

at a premium of Rs. 32/- per share) 

Add: Addition during the year 105,630 

Less: Expenses on issue of Equity Shares (21,025) 

(B ) Debenture Redemption Reserve 


84,605 84,605 

Add:- transferred from Profit & Loss Account 2,100 2,100 

(refer Note B-8(ii) of Schedule ‘N’) 

Closing balance 4,200 2,100 

(C ) General Reserve 

As per last Balance Sheet 2,926 2,926 

Add: Transfer from Profit & Loss Account 3,700 6,626 

(D ) Profit and Loss Account 219,107 94,571 

SCHEDULE ‘C’ LOAN FUNDS 

Secured Loans 


From Banks 

T O T A L 314,538 184,203 

Cash Credit facilities 70,359 15,513 

Working Capital Term Loans 18,959 12,421 

Vehicle loans 2,664 91,982 1,589 29,523 

From Others 168 897 

[Amount Due within one year in resepct of Loans 92,150 30,420 

from Banks /Others Rs.74,00,493/- (Rs.32,02,690/-)] 

Debentures 

9% Secured Non-Convertible Redeemable 

Debentures issued to Wipro Limited 12,600 12,600 

T O T A L 104,750 43,020 


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SCHEDULE ‘D’ - FIXED ASSETS 

SCHEDULES 


Gross Block Depreciation Net Block 

Particulars As at Additions Deduction As at As at Additions As at As at As at 

April 1, during the during March 31, April 1, during the March 31, March 31, March 31, 

2006 year thed year 2007 2006 year 2007 2007 2006 

STPI- Premises 4,865 4,865 476 79 555 4,310 4,389 

Office Premises 660 660 66 11 77 584 594 

Plant and Machinery 158 158 155 4 158 4 

Office Equipments 1,228 1,182 2,410 294 74 368 2,042 934 

Furniture & Fixtures 3,367 4,359 7,726 1,035 282 1,317 6,408 2,331 

Motor Vehicles 2,134 1,865 3,999 153 253 406 3,593 1,981 

Computer Systems 87,823 45,989 133,812 17,088 18,127 35,215 98,597 70,735 

Current Period 100,235 53,395 153,630 19,267 18,830 38,096 115,534 80,968 

Previous Year 70,539 31,724 2,028 100,235 9,058 10,634 19,267 80,968 

SCHEDULE ‘E’ INVESTMENTS 

LONG TERM INVESTMENTS (AT COST) 

Trade Investments ( Unqouted - Fully Paid Up) 


(a) 997 (997) Equity Shares of Intercon Management Services Pvt.Ltd. 19,731 19,731 

A Subsidiary Company 


(b) 2,812 (160) Equity Shares of Dyne TechServices Inc, USA 59,787 744 

A wholly owned subsidiary 

[total investment value in USD 13,42,000 (USD 16,000] 

(c ) 100 (100) Equity Shares of Mandvi Co-operative Bank Ltd. 1 1 


T O T A L 79,519 20,476 


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SCHEDULE: F - CURRENT ASSETS, LOANS AND ADVANCES 

CURRENT ASSETS 

1. INVENTORIES 

(As taken and certified by the Management) 

Goods for Resale 

SCHEDULES 



Computer Equipments, Peripherals and Software 16,640 10,725 

2. SUNDRY DEBTORS : ( Unsecured, Considered Good) 

Outstanding for over six months 39,767 42,989 

(including Rs. 58,77,481/- due from a subsidiary) 

Others 262,045 301,812 118,657 161,646 

3. CASH AND BANK BALANCES 

-Cash on Hand 617 1,587 

Balances with Scheduled Banks 

(refer Note B-17of Schedule “N”) 

(i) In Deposit Accounts 19,635 82,153 

(ii) In Current Accounts 74,885 8,114 

(iii) In Dividend Account 58 95,195 3 91,857 

4. LOANS AND ADVANCES 

(Unsecured, considered good unless otherwise stated) 

(i) Advances recoverable in cash or in kind or for 7,833 16,972 

value to be received 

(ii) Deposits 20,938 2,494 

(including to Rs. 1,85,00,000/- to a subsidiary) 

(iii) Other Current Assets 147 28,918 230 19,696 

SCHEDULE ‘G’ CURRENT LIABILITIES & PROVISION 

CURRENT LIABILITIES : 

T O T A L 442,565 283,924 

(i) Sundry Creditors for goods, services & expenses 53,715 29,083 

(refer Note B-13 of Schedule “N”) 

(ii) Dues to Subsidiaries 1,434 952 

(iii) Advances from Customers 6,830 1,965 

(iv ) Interest Accrued but not due 2,008 1,043 

(v ) Unclaimed Dividend * 55 

(* There is no amount due & outstanding to be credited 

to Investor Education & Protection Fund) 

(v ) Other Liabilities 2,360 66,402 859 33,902 

PROVISIONS : 

For Staff Retirement Benefits 952 592 

For Proposed Dividend 13,053 10,878 

For Tax On Dividend 2,218 1,526 

For Income Tax (including Fringe Benefit Tax) 13,336 29,559 3,852 16,848 

[net of relative payments, if any] 

T O T A L 95,961 50,750 


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SCHEDULE ‘H’ 

MISCELLANEOUS EXPENDITURE 


Preliminary Expenses 

SCHEDULES 



As per Last Balance Sheet 2 

Less: Amortised during the Year (2) 

Balance Carried to Balance Sheet 

SCHEDULE ‘I’ 

REVENUE FROM OPERATIONS 

Technology IMS 995,318 690,716 

Software Services 335,656 176,584 

SCHEDULE ‘J’ 

OTHER INCOME 

T O T A L 1,330,974 867,300 

Interest received - Gross 2,650 6,778 

(Tax deducted at Sources Rs.5,71,467/-( Rs.15,24,194/-) 

Sundry Balances / Provisions Written Back 512 

Miscellaneous Income 35 50 

T O T A L 2,685 7,340 


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SCHEDULE ‘K’ 

OPERATING & OTHER EXPENSES 

SCHEDULES 



Material Cost, Software Development,Contract & Service Charges 1,026,702 712,715 

Staff Costs 

Salaries, allowances, Incentives & Staff related payment 67,348 29,611 

Contribution to Statutory Funds 1,076 274 

Staff Welfare 349 261 

Staff Training & Recruitment 1,172 69,945 827 30,973 

Directors’ Remuneration 

Directors Salaries and allowances 6,352 4,950 

Contribution to Statutory Funds 118 52 

Directors Sitting Fees 128 6,598 26 5,028 

Communication Costs 2,065 1,475 

Advertisement, Publicity and Business Promotion 428 265 

Discount, Commission & Brokerage 631 556 

Legal & Professional Expenses 3,853 2,362 

Office Maintenance 1,056 765 

Traveling & Conveyance 4,034 3,216 

Electricity Charges 957 637 

Rent 5,397 5,167 

Insurance 142 204 

Auditors’ Remuneration 595 354 

Postage & Courier Charges 1,178 728 

Printing and Stationery 799 409 

Rates & Taxes 454 100 

Donations 42 211 

Vehicle Expenses 144 101 

Foreign Exchange Flucutation Loss (net) 8,782 

Loss on Sale / Scrap of Fixed Assets 1,185 

Membership & Subscription 71 45 

Loss by Flood 2,184 

Bad Debts Written off 2,311 

Miscellaneous Expenses 301 271 

T O T A L 1,136,358 769,078 

SCHEDULE ‘L’ 

FINANCE CHARGES 

Interest on Debentures 1,243 1,243 

Bank Interest 7,438 7,264 

Bank Charges & Commission 639 9,320 1,138 9,645 

SCHEDULE ‘M’ 

NON-CASH CHARGES 


Preliminary Expenses amortised 18,830 2 10,636 


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NOTES TO ACCOUNTS 

SCHEDULE N: SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS 

A. Significant Accounting Policies 

(i) Basis of Accounting 

The financial statements have been prepared under the historical cost convention and comply with the 

Accounting Standards prescribed by the Institute of Chartered Accountants of India (“ICAI”) and referred to in 

Section 211(3C) of the Companies Act, 1956. The Company generally follows the mercantile system of 

accounting and recognizes income and expenditure on accrual basis ,except those with significant uncertainties 

or otherwise are accounted on cash basis. 

(ii) Use of estimates 

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) 

requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, 

revenues and expenses and disclosure of contingent liabilities on the date of financial statements. The 

recognition, measurement, classification or disclosures of an item or information in the financial statements have 

been made relying on these estimates to a greater extent. 

(iii) Revenue Recognition 

Direct revenue of the Company comprises the income from following principal activities: 

i. Technology IMS - This represents Technology Integration and Management Services. Technology 

Integration activities include resales and Integration of Hardware / System Software/ Database Software 

/ Networking Products with or without one another. Revenue from Technology Integration is recognized 

on delivery to the customer and acknowledgement thereof, in accordance with the terms of the individual 

contracts. Management Services represents amount charged for Facility Management Services, 

Maintenance upkeep of Hardware / System Software/ Database Software / Networking Products. Revenue 

from Management Services is recognized over the life of the contracts. Maintenance revenue on expired 

contracts on which services have continued to be rendered is recognized on renewal of contract or on 

receipt of payment. Hitherto, Technology Integration and Management Services were classified as separate 


grouped together from current financial year. 

ii. Software Services- This represents charges for development of software for customer and sale of licenses 

of software and other products. Revenue from Software services is recognized when the software is 

developed and installed / delivered to the customers as per the terms of the contract. Revenue on sale 

of licenses of software and other products is recognized on delivery / installation, as the case may be. 

Indirect Revenue of the Company generally comprises the following items: 

i. Interest Income- Interest Income is recognized based on time proportion and on gross basis. 

ii. Dividend Income- Dividend Income is recognized on when the Company’s right to receive dividend is 

established. 

(iv) Fixed assets and depreciation 

i. All fixed assets are stated at cost less accumulated depreciation. For this purpose cost includes 

purchase price and all other attributable costs of bringing the assets to working condition for intended 

use. Capital Work in Progress includes advances paid for acquiring fixed assets. 

ii. Depreciation on all assets is provided pro-rata to the period of use, under straight-line method, at 

rates prescribed in Schedule XIV of the Companies Act, 1956. 

(v) Investments 

Long term Investments are stated at cost. A provision for diminution in value is made to recognize a decline, 

other than temporary, in the value of long term investments. Short- term investments, if any are valued at lower 

of cost and net realizable value. 


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(vi) Inventories 


Inventories include stocks of Computer equipments, Peripherals and traded software in respect of Infrastructure 

Managed Services of the Company and the same is valued at lower of cost (net of provision for obsolescence) 

or net realizable value. Cost is determined on First In First Out (FIFO) basis. 

(vii) Foreign exchange transactions 

Transactions in foreign currencies are generally recorded at the exchange rate prevailing on the date of the 

transaction. Monetary items denominated in foreign currency and outstanding at the Balance Sheet date are 

translated at the exchange rate ruling on that date. Exchange differences on foreign exchange transactions 

other than those relating to fixed assets are recognized in the profit and loss account. Any gain/loss on 

exchange fluctuation on the date of payment of expenditure incurred for acquisition of fixed assets is treated as 

an adjustment to the carrying cost of such fixed assets. 

(ix) Accounting for Employee Benefits 

The Company makes contribution to Provident Fund and the same is charged to Profit and Loss account. 

Provision for gratuity and Leave Encashment is determined as per actuarial valuation at the year-end and the 

same is charged to the Profit and Loss Account. 

(ix) Accounting for Taxes 

Provision for current taxes and Fringe Benefit Tax is made in accordance with the relevant provisions of the 

Income - tax Act, 1961. 

Deferred tax resulting from “timing differences” between book and tax profits is accounted for using the tax rates 

and laws that have been enacted or substantively enacted as on the balance sheet date. Deferred tax assets 

are recognized and carried forward only if there is a virtual/ reasonable certainty that the assets will be realized 

in future. 

(x) Impairment 

Impairment Loss is recognized whenever the carrying amount of an asset is in excess of its recoverable 

amount. The Impairment Loss is recognized as an expense in the Statement of Profit and Loss and carrying 

amount of the asset is reduced to its recoverable value. 

(xi) Employee Stock Options 

(a) During the year, the Company has granted 4,85,790 stock options to its employees and employees of its 

subsidiary company. In accordance with the Employee Stock Option Scheme and Employee Stock 

Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India (“SEBI”), the 

Company has elected to use the “Intrinsic Value method” to account for the compensation cost of stock 

options to employees. For the year ended 31st March 2007, Company has been advised that there is no 

accounting impact in the books of account in respect of such options. Had the Company adopted “Fair 

Value Method” for calculating the Compensation cost, the total accounting impact for the year would have 

been Rs.18.40 Lakhs, profits after tax lower by Rs.18.40 Lakhs and basic and diluted earnings per share 

would have been lower by Re.0.17 & Re.0.73 respectively. 

(b) Summary of Stock Options: 


Particulars No. of stockoptions Weighted average 

exercise price (Rs.) 

Options outstanding on 1st April 2006 NIL Not Applicable 

Options granted during the year 4,85,790 75.67 

Options forfeited/lapsed/ cancelled during the year (4,600) 75.67 

Options exercised during the year NIL Not Applicable 

Options outstanding on 31st March 2007 4,81,190 75.67 

Options vested but not exercised on 31st March 2007 NIL Not Applicable 

(c) Average share price on the date of exercise of the option: Not Applicable 


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(d) Information in respect of Options outstanding as at 31st March 2007: 


Exercise price Number of options Average remaining life 

68.10 2,31,540 2years 

79.50 1,73,520 2years 

89.95 76,130 2years 

(e) The fair value of option granted on 20th November 2006, 6th March 2007 & 28th March 2007 is Rs40.85, 

38.05 and Rs 42.79 per share respectively. 

(f) The fair value has been calculated using the Black Scholes Options Pricing Model and the significant 

assumptions made in this regard are as follows: 

Particulars 20th November 2006 6th March 2007 28th March 2007 

Risk free interest rate (Range) 7.50% to 7.55% 8.04% to 8.05% 8.06% to 8.10% 

Expected life 2years 2years 2years 

Expected volatility 60.78% 62.81% 62.94% 

Expected dividend yield 1.46% 1.46% 1.46% 

Exercise Price (Rs.) 68.10 79.50 89.95 

Stock Price (Rs.) 79.90 78.90 88.80 

The above disclosures have been consequent to the issue of Guidance note on accounting for Employee 

share based payment issued by the Institute of Chartered Accountants of India in the year 2005 and 

applicable for the periods on or after 1st April2005. 

(xii) Provisions, Contingent Liabilities and Contingent Assets: 

The Company recognizes a provision when there is a present obligation as a result of a past event that probably 

requires outflow of resources, which can be reliably estimated. Disclosures for a contingent liability is made, 

without a provision in books, when there is an obligation that may, but probably will not (in the opinion of the 

management), require outflow of resources. Contingent Assets are neither recognized nor disclosed in the 

financial statements. 

(xiii) Earning per Share (EPS) 

The earning considered in ascertaining the Company’s EPS comprises the net profit after tax. The number of 

shares used in computing Basic EPS is the weighted average number of shares outstanding during the year 

duly adjusted for additional shares issued during the year, if any. 

(xiv) Cash Flow Statement 

Cash Flows are reported using the indirect method, whereby net profits before tax is adjusted for the effect of 

transaction of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The 

cash flows from regular revenue generating, investing and financing activities are segregated. 

B. Notes to Accounts 

1. Operating Leases: 

The Company has various operating leases for office facilities and residential premises for employees, 

which are renewable on a periodic basis and cancelable at its option. Rental expense for operating leases 

included in the income statements for the year is Rs. 53.97 Lakhs (Rs. 51.67 Lakhs). 

2. Earnings in foreign Currency: (Rs. in Thousands) 

Particulars 2006-07 2005-06 

Software Services (F.O.B) 179,678 75,123 

Technology IMS 28,121 NIL 

TOTAL 207,799 75,123 


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3. Value of Imports (C.I.F. Value) (Rs. in Thousands) 


Purchase of Hardware / Software 15,052 NIL 

4. Expenditure in foreign Currency 


Traveling Expenses 91 326 

5. Particulars of dividend declared and paid to non-residents 


Number of Non-resident shareholders 114 NIL 

No. of shares held by them 1,19,394 NIL 

Dividend (Rs.) 119 NIL 

6. Managerial Remuneration 


Salaries, Allowances etc. 6,352 4,950 

Contribution to Provident Fund 118 52 

Total 6,470 5,002 

The above does not include gratuity and leave encashment benefits as the provision for these are determined 

for the Company as a whole and therefore separate amount for the directors are not available. No commission is 

paid to directors and hence computation of net profits under section 198 of the Companies Act is not applicable. 

7. Auditors’ Remuneration: 


Audit fees 438 224 

Tax Audit fees 34 34 

Fees for Certification matters 123 95 

Total 595 353 

8. Securities in respect of Secured Loans: 

i ) Term loans from Banks / Institutions are secured by mortgage of certain immovable and movable 

properties of the Company and personal guarantees of certain Directors. Cash credit facility is secured 

by the hypothecation of book debts and stocks. Vehicle loans are secured by hypothecation of relative 

motor vehicles. 

ii ) The company has issued 1,26,000, 9% Non Convertible Redeemable debentures of face value of 

Rs.100/- (date of allotment of Debentures: 28th February 2005 and date of creation of Debenture Trust 

Deed: 27th May 2005). The debentures are redeemable in three installments of Rs.42 Lakhs each at 

the end of the third, fourth and fifth year respectively from the date of allotment. The debentures are 

secured by a mortgage and second charge on the movable properties of the company, immovable property 

owned by the subsidiary company and Personal guarantees of certain Directors of the Company. During 

the year, The Company has created Debenture Redemption Reserve amounting to Rs.21Lakhs from the 

Profits of the Company to cover the redemption of Debentures amounting to Rs. 42 lakhs on or before 28th 

February 2008. 


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9. The Deferred tax liability / Asset as at 31st March 2007 comprises the following: 


Particulars As at As at 


Deferred Tax Liability on account of: 


Deferred Tax Asset on account of: 

Disallowances under Income-Tax Act, 1961 (453) (171) 

Net Deferred Tax Liability 21,213 13,119 

10. Related Party Transactions: 

As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, disclosures of 

transactions with related parties as defined therein are given below: 

List of related parties with whom transactions have taken place and Relationship: 

a) Subsidiary Companies 

i. Intercon Management Services Private Limited, Mumbai 

ii. Dyne TechServices Inc., U.S.A. 

iii. Link Group Inc., U.S.A. (Subsidiary of Dyne TechServices Inc., U.S.A.) 

b) Key Managerial Personnel (“KMP”) 

i. Mr. Annand Sarnaaik - Managing Director & Chief Executive Officer 

ii. Mrs. Divvyani A. Sarnaaik - Executive Director & Chief Operating Officer 

c) Relatives of KMP 

i. Mr. Nikhil Sarnaik 

ii. Dr. Nitin Sangamnerkar 

Transactions with Related parties 


Transactions with Related Subsidiary Key Relative of 

Parties Companies Management Key 

Personnel Management 

Personnel 

Managerial Remuneration Not Applicable 6,470 NIL 

(5,002) (NIL) 

Unsecured loans given/ NIL NIL NIL 

received /Repaid (NIL) (13,359) (1,335) 

Investments 59,044 NIL NIL 

(NIL) (NIL) (NIL) 

Rent paid 1,098 NIL NIL 

(4,068) (NIL) (NIL) 

Consultancy Fees paid NIL NIL 200 


Dividend paid NIL 7,060 269 

(NIL) (8,825) (337/-) 

Deposits given 18,500 NIL NIL 


Balance Receivable / Payable 4,444 NIL NIL 

(952) (NIL) (NIL) 

Note: 1. Previous year’s comparatives have been shown in Brackets below current financial year’s 

figures. 

2.(-) represents amount payable. 


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11. Sundry Debtors and Loans and Advances are unsecured but considered good, for which the company 

holds no security other than personal security of respective parties. 

12. In the opinion of the Board, Current assets, loans and advances are realizable at a value, which is at least 

equal to the amount at which these are stated in the ordinary course of business and provision made for 

all known and determined liabilities are adequate and not in excess of the amount stated. 

13. The identification of Micro, Small and Medium enterprise suppliers is based on Management’s knowledge 

of their statues. There are no dues to Micro, Small and Medium Enterprise suppliers as on 31st March 

2007 (31st March 2006 Rs. NIL dues to small scale undertakings). 

14. Earning per share (EPS) 


Particulars Units Year ended Year ended 

31.03.07 31.03.06 

Net profits attributable to shareholders (A) Rs. 145,607 72,864 

Add: Amortisation of Employee Compensation Rs. NIL NIL 

Cost (as per Intrinsic value method) recognized 


Less: Amortisation of Employee Compensation Rs. (1,840) NIL 

Cost (as per Fair value method) not recognized 


Net profits as adjusted above (B) Rs. 143,767 72,864 

Weighted average number of equity shares Nos. 10,877,624 9,050,810 

outstanding during the year (before adjusting the 

Dilutive potential equity shares) (C) 

Number of Stock Options Outstanding as on the Nos. 481,190 NIL 

balance sheet date 

Number of Dilutive potential equity shares (D) Nos. 481,190 NIL 

Total number of Equity shares for Diluted Nos. 11,358,814 9,050,810 

EPS [(C)+(D)] = (E) 

Nominal Value of Equity Shares Rs. 10/ 10/ 

Basic & Diluted EPS as reported [(A)/(C)] Rs. 13.39 8.05 

Basic EPS as adjusted [(B)/(C)] Rs. 13.22 8.05 

Diluted EPS (as adjusted) [(B)/(E)] Rs. 12.66 8.05 

15. Segment information: 

As per Accounting Standard 17 on Segment Reporting issued by the Institute of Chartered Accountants of 

India, the Company has reported segment information on consolidated basis including business conducted 

through its subsidiaries. 

Assets, liabilities, revenue and expenses directly attributable to segments are reported under each reportable 

segment. Items which are not attributable or allocable to segments are disclosed as un-allocable assets, 

liabilities, revenue or expenses, as the case may be. 

Based on the similarity of activities, risk and reward structure, organization structure and internal reporting 

system, Company has structured its operations into the following business segments: i. Technology IMS - It 

represents Technology Integration and Management Services. Technology 

Integration activities include resales and integration of Hardware / System Software/ Database Software / 

Networking Products with or without one another. Management Services represents amount charged for 

Facility Management Services, Maintenance upkeep of Hardware / System Software/ Database Software / 

Networking Products. Hitherto, Technology Integration and Management Services were classified as 

separate streams of revenue. However considering the interconnected nature of such activities, these have 

been grouped together from current financial year and as result, previous year’s segment information has 

been re-grouped accordingly. 


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ii. Software Services- representing charges for development of software for customer and sale of licenses 

of software and other products. 

A) Financial Information about Primary Business Segments is given below: 


Sr. No. Particulars Reportable Business Total 

Segments 

1 Segment Revenue 


-Product & Services 995,318 335,656 1,330,974 

(690,716) (176,584) (867,299) 

2 Segment Results 126,296 124,763 251,059 

(52,633) (91,952) (144,584) 

3 Unallocable Income 2,685 

(7,340) 

4 Unallocable Expenses 75,273 

(56,999) 

5 Operating Profit 178,471 

(94,926) 

6 Finance Charges 9,320 

(9,645) 

7 Net Profit before tax 169,151 

(85,280) 

8 Provision for Tax 

- Current Tax 15,000 

(6,333) 

- Wealth Tax 

(4) 

- Fringe Benefit Tax 450 

(493) 

- Deferred Tax 8,094 

(5,586) 

9 Net Profit after Tax 145,607 

(72,864) 

Other Information 

Sr. No. Particulars Reportable Business Total 

Segments 


9 Segment Assets 221,223 307,974 529,197 

(133,616) (119,759) (253,374) 

10 Unallocable Assets 116,041 

(146,493) 

11 Total Assets 645,238 

(399,867) 

12 Segment Liabilities 34,578 22,607 57,185 

(28,180) (6,619) (34,799) 

13 Unallocable Liabilities 164,739 

(72,090) 

14 Total Liabilities 221,924 

(106,888) 

15 Capital Expenditure 35,539 17,856 53,395 

incurred during the year (30,067) (1,657) (31,724) 

16 Depreciation 16,040 2,789 18,830 

(9,054) (1,580) (10,634) 


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(B ) Financial Information about Geographical Segment is given below: (Rs. in Thousands) 

Sr. No. Particulars India Rest of the World Total 

1 Segment Revenue 1,123,175 207,799 1,330,974 

(792,176) (75,123) (867,299) 

2 Segment Assets 354,403 290,835 645,238 

(301,964) (97,904) (399,867) 

3 Segment Liabilities 213,330 8,595 221,924 

(104,466) (2,422) (106,888) 

Note: Amounts in Bracket represent previous year’s figures 

16. Information with regard to Purchases, Sales, Opening and Closing Stocks of Computer Equipments, 

Peripherals, Traded Software etc. in respect of Technology Infrastructure Management Services of 

the Company: 

Particulars Unit Current Year Previous Year 

Opening Stock Nos. 730 10,725 631 11,828 

Purchases Nos. 10680 448,594 20,902 571,519 

Sales Nos. 11,200 495,385 20,803 611,148 

Closing Stock Nos. 210 16,640 730 10,725 

17. Utilisation of Proceeds of Initial Public Offerings 

During the financial year 2005-06, the Company had made Initial Public Offer (“IPO”) of 33,00,926 Equity 

Shares of Rs. 10/- each at a premium of Rs. 32/- per share amounting to Rs. 1386 Lakh. The Company 

has utilized the gross public issue proceeds in the following manner: 



Funds available for utilization at the beginning of the year 84,371 NIL 

Upgradation of Products, Infrastructure, Data Centre and & 28,948 41,018 

Support Centre 

Investment in Subsidiary 38,116 13,250 

Total Utilization 67,064 54,267 

Balance Public issue proceeds pending utilization 17,307 84,371 

Pending utilization balance amounting to Rs.173 Lakh as at 31st March 2007, Rs. 159 Lakh has been 

invested in fixed deposits and Rs. 14 Lakh are lying in current account with a Scheduled bank. 

18. Contingent Liabilities and commitments not provided for: 

Particulars As at 31.03.07 As at 31.03.06 

a. Unexpired Letters of Credit 4,714 8,359 

b. Guarantees issued by bankers against company’s 4,445 4,870 

counter guarantee. 

c. Capital Commitments in respect of Capital-work-in 16,380 35,700 

progress (net of advances paid) 

d. Claims against Company not acknowledged as debts 180 180 

Total 25,719 49,109 

19. The Previous year’s figures have been regrouped, reclassified and recast wherever required. Figures in 

bracket indicate previous year’s figures. 


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I. Registration Details 

BALANCE SHEET ABSTRACT 

DISCLOSURE AS REQUIRED VIDE PART IV OF SCHEDULE VI OF THE COMPANIES ACT 1956 

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE 


Registration No. 112281 State Code 11 

Balance Sheet Date 31/03/2007 

II. Capital Raised During the year 

Public Issue Nil Right Issue Nil 

Bonus Issue Nil Private Placement Nil 

III. Position of Mobilisation and Deployment of funds 

Total Liabilities 549,277 Total Assets 549,277 

Sources of Funds 

Paid-up Capital 108,776 Reserves & Surplus 314,538 

Secured Loan 104,750 Unsecured Loan 

Deferred Tax Liability 21,213 

Application of Funds 

Net Fixed Assets 123,154 Investment 79,519 

Net Current Assets 346,604 

Misc.Expenses 

Accumulated Losses 

IV. Performance of Company 

Turnover 1,330,974 Total Expenditure 1,164,508 

Profit/Loss Before Tax 169,151 Profit/Loss after Tax 145,607 

Earning Per Share in Rs. 13.39 Dividend Rate 12% 

V. Generic Name of Principal Products/Services of Company 

Item Code No.(ITC Code) 

Product Description Information Technology 












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SECTION 212 STATEMENT 

STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 

1956: (Rs. in Thousands) 

Particulars Intercon Management Dyne Techservices Inc. Links Group 

Services Private Limited International Inc. 

The Company’s interest 

in the subsidiary as on 

March 31, 2007: 

1)No. of Shares 997 2812 5000 

2)Face Value Rs. 100/- (Rs.100) USD 0.001 USD 1 

3)Extent of Holding 99% (approximately) 100% 100% 

Net Aggregate Profit /(Loss) 

of the subsidiary Company so 

far as it concerns the members 

of the Company for the financial 

year ended March 31, 2007: 

1)Not dealt with in the 19 1,683 44,481 

books of accounts of the 

Holding Company 

2)Dealt with in the Nil Nil Nil 



Net Aggregate Profit /(Loss) 

of the subsidiary Company 

so far as it concerns the 

members of the Company for 

the previous financial years 

since it became the subsidiary: 

1)Not dealt with in the 1,214 1,683 44,481 



2)Dealt with in the Nil Nil Nil 



For and On Behalf Of The Board 

Place : Mumbai. Annand Sarnaaik 

Date : August 24, 2007 Chairman & Managing Director 


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NOTES 

NOTES 


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Annual Report FY 2006-07 - Glodyne Technoserve

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