cmc annual report 2006-07

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ContentsCorporate Information 2

Notice 3

Directors’ Report 5

Management Discussion and Analysis 14

Corporate Governance Report 19

Declaration of the Managing Director & CEO 28

Secretarial Auditors’ Certificate on Corporate Governance 28

Company Secretary’s Responsibility Statement 29

Auditors’ Report 30

Balance Sheet 34

Profit & Loss Account 35

Cash Flow Statement 36

Schedules & Notes on Accounts 37

Balance Sheet Abstract and Company’s General Business Profile 53

Information under Section 212 of the Companies Act, 1956 54related to Subsidiary Company

Consolidated Financial Statements

Auditors’ Report 55

Consolidated Accounts 56

CMC LimitedThirty first annual report 2006 - 2007

Annual General Meeting on Monday,

June 25, 2007 at 3.30 p.m. at Bhartiya

Vidya Bhavan Auditorium, BVB

Hyderabad Kendra

No. 5-9-1105, Basheerbagh-King Koti

Road, Hyderabad-500029

CMC-1.p65 5/23/2007, 3:41 PM1

CMC Limited

Thirty first annual report 2006 - 2007

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CORPORATE INFORMATION

Board of DirectorsMr S Ramadorai (Chairman)Mr R Ramanan (Managing Director & CEO)Mr Ishaat HussainDr KRS MurthyMr Surendra SinghMr C B BhaveMr Shardul Shroff

Management TeamMr R Ramanan (Managing Director & CEO)Mr J K Gupta (CFO)Mr Prasad Rangnekar (Head of Operations)Mr Prabhat Mittra (Global Head - CS & ITES)Mr Uday Bhobe (Global Head - SI)Mr Saibal Ghosh (Global Head, E&T & National Sales Head)Mr Dilip Madhav Pai (CIO)Mr S V Ramanan (Head-HR & Corp. Communications)Mr Vivek Agarwal (Company Secretary & Head – Legal)

Statutory AuditorsM/s S.B. Billimoria & Co.Chartered Accountants

Secretarial AuditorsM/s Chandrasekaran AssociatesCompany Secretaries

Internal AuditorsM/s Ernst & Young Pvt. Ltd.

Registered OfficeCMC CentreOld Mumbai HighwayGachibowli, Hyderabad-500032Tel. : 040-66578000 (10 lines)Fax : 040-23000509

Corporate OfficePTI Building, 5th Floor4, Sansad MargNew Delhi-110001Tel. : 011-23736151 (8 lines)Fax : 011-23736159

Principal BankersCanara BankState Bank of Bikaner & JaipurICICI Bank

Audit CommitteeDr KRS MurthyMr Surendra SinghMr C B Bhave

Share Transfer-cum-ShareholdersGrievance CommitteeMr Surendra SinghMr R RamananMr Shardul ShroffMr Vivek Agarwal

Remuneration CommitteeDr KRS MurthyMr S RamadoraiMr C B BhaveMr Surendra Singh

Executive CommitteeMr S RamadoraiMr R RamananMr Ishaat HussainDr KRS MurthyMr C B Bhave

Nomination CommitteeMr S RamadoraiMr R RamananMr Ishaat HussainDr KRS Murthy

Ethics and Compliance CommitteeMr Surendra SinghMr R RamananMr Shardul ShroffMr Vivek Agarwal

Registrars & Share Transfer AgentsM/s Karvy Computershare Private LimitedKarvy House, 46, Avenue 4, Street No 1Banjara Hills, Hyderabad - 500 034

Stock Exchanges where Company’sSecurities are listedBombay Stock Exchange Ltd.National Stock Exchange of India Ltd.The Calcutta Stock Exchange Ass. Ltd.

Web site

www.cmcltd.com

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NOTICENotice is hereby given that the 31st Annual General Meeting of the Members of CMC Limited will be held on Monday, June 25, 2007 at 3.30P.M. at Bhartiya Vidya Bhavan Auditorium, BVB Hyderabad Kendra No. 5-9-1105 Basheerbagh-King Koti Road, Hyderabad – 500 029, AndhraPradesh, to transact the following business:ORDINARY BUSINESS:1. To receive, consider and adopt the audited Profit and Loss Account for the year ended 31st March, 2007 and the Balance Sheet as at that

date and the Reports of the Board of Directors and the Auditors thereon.2. To declare a dividend.3. To appoint a Director in place of Mr Surendra Singh, who retires by rotation and, being eligible, offers himself for re-appointment.4. To appoint a Director in place of Mr C B Bhave, who retires by rotation and, being eligible, offers himself for re-appointment.5. To appoint Statutory Auditors and to fix their remuneration.

Mumbai BY ORDER OF THE BOARDApril 14, 2007 For CMC LIMITED

Registered Office: VIVEK AGARWALCMC Centre COMPANY SECRETARY & HEAD - LEGALOld Mumbai Highway, GachibowliHyderabad-500 032 (A.P.)

Notes:1. A Member entitled to attend and vote is entitled to appoint a Proxy to attend and vote at the meeting instead of himself and

the Proxy need not be a Member of the Company. The Proxy Form must be deposited at the Registered Office of the Companynot later than 48 hours before the commencement of the meeting.

2. The relevant details of item nos. 3 & 4 above pursuant to Clause-49 of the listing agreement are annexed hereto.3. Members who hold shares in dematerialised form are requested to bring their DP ID and Client ID numbers for easy identification of

attendance at the meeting.4. For the convenience of the Members, attendance slip is enclosed elsewhere in the Annual Report. Members/Proxy Holders/Authorised

Representatives are requested to fill in and affix their signatures at the space provided therein and surrender the same at the venue.Proxy/Authorised Representatives of a member should state on the attendance slip as ‘Proxy’ or ‘Authorised Representative’ as the casemay be.

5. The Register of Members and the Share Transfer Books of the Company will remain closed from Monday, June 18, 2007 to Friday, June22, 2007 (both days inclusive).

6. The dividend as recommended by the Board of Directors, if declared at the Annual General Meeting, will be paid at par after June 25,2007 to (i) those shareholders whose names appear on the Company’s Register of Members after giving effect to all valid sharetransfers in physical form lodged with the Company on or before June 16, 2007; (ii) in respect of shares held in electronic form to thosebeneficiaries whose names appear in the statements of beneficial ownership furnished by National Securities Depository Limited(NSDL) and Central Depository Services (India) Ltd. (CDSL) as at the end of business hours on June 15, 2007.

7. In accordance with SEBI’s directions vide their Circular No. DCC/FITT/Cir-3/2001 dated October 15, 2001, arrangements have beenmade to credit your dividend amount directly to your bank account through the Electronic Clearing Service (ECS).In case you hold shares in physical form, please furnish your bank details in the ECS Mandate Form enclosed separately together witha xerox copy of your cheque leaf and return to our Registrars, Karvy Computershare Private Limited on or before June 16, 2007. The saiddetails in respect of the shares held in electronic form should be sent to your respective Depository Participant and not to the Registraras the Registrar is obliged to use only the data provided by the Depository while making payment of dividend.

8. Pursuant to provisions of Section 205A(5) of the Companies Act, 1956, dividends which remain unclaimed for a period of 7 years fromthe date of transfer of the same to the Company’s unpaid dividend account will be transferred to the Investor Education and ProtectionFund (IEP Fund) established by the Central Government. The following are the details of the dividends paid by the Company andrespective due dates for claiming by the Shareholders:

Dividend Year Date of Declaration of divided Last date for claim

1999-00 28-09-2000 27-09-2007

2000-01 28-09-2001 27-09-2008

2001-02 29-08-2002 28-08-2009

2002-03 31-07-2003 30-07-2010

2003-04 30-08-2004 29-08-2011

2004-05 17-06-2005 16-06-2012

2005-06 27-06-2006 26-06-2013

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CMC Limited


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DETAILS OF DIRECTORS RETIRING BY ROTATION AND SEEKING REAPPOINTMENT(In Pursuance of Clause 49 of the Listing Agreement)

Name

Date of Birth

Date of Appointment

Qualifications

Expertise in specific functional areas

Chairman/ Director of other Companies

Chairman/ Member of Committees of theBoard of Companies of which he is aDirector

Mr Surendra Singh

21.07.1937

16.10.2001

M.Sc., Retd. I.A.S. Officer

Business and Finance Management

NIIT LimitedNIIT Technologies LimitedJubilant Organosys LimitedBAG Films LimitedUTI Bank LimitedNIIT SmartServe Limited

NIIT LimitedShareholders/Investors Grievance-ChairmanAuditNIIT Technologies LimitedAuditUTI Bank LimitedShareholders/Investors Grievance-ChairmanJubilant Organosys LimitedAuditCMC LimitedShareholders/Investors Grievance-ChairmanAuditRemunerationEthics & Compliance

Mr C B Bhave

28.08.1950

16.10.2001

B.E. (Electrical)

Business and Finance Management

National Securities Depository Ltd.–Chairman& Managing DirectorAvaya Global Connect Ltd.NSDL Database Management Ltd.-ChairmanIDFC Trustee Company Ltd.

Avaya Global Connect Ltd.Shareholders/Investors GrievanceAuditCMC LimitedAuditRemunerationExecutive

BY ORDER OF THE BOARDFor CMC LIMITED

Mumbai VIVEK AGARWALApril 14, 2007 COMPANY SECRETARY & HEAD - LEGAL

Further the Company shall not be in a position to entertain the claims of the Shareholders for the unclaimed dividends which havebeen transferred to the credit of IEP Fund.In view of the above, the Shareholders are advised to send all the un-encashed dividend warrants pertaining to the above years to ourRegistrar & Share Transfer Agents for revalidation and encash them before the due dates for transfer to the IEP Fund.

9. Pursuant to Section 109A of the Companies Act, 1956, Shareholders are entitled to make nomination in respect of shares held by them.Shareholders desirous of making nominations are requested to send their requests in Form No. 2B in duplicate (which will be madeavailable on request) to the Registrar & Share Transfer Agents of the Company.

10. Members are requested to send their queries, if any, to the Company’s Corporate Office at New Delhi at least ten days before the dateof the meeting so that information can be made available at the meeting.

11. As an austerity measure, copies of the Annual Report will not be distributed at the Annual General Meeting. Members are requested tobring their copies to the meeting.

BY ORDER OF THE BOARD For CMC LIMITED

Mumbai VIVEK AGARWALApril 14, 2007 COMPANY SECRETARY & HEAD – LEGAL

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1. FINANCIAL RESULTS

(Rs. in Crores)

Particulars 2006-07 2005-06

Income from Sales and Services 988.91 828.79

Other Income 5.49 28.97

Total Income 994.40 857.76

Operating Expenses 897.59 784.71

Profit before Depreciation, Interest and Tax 96.81 73.05

Depreciation 8.24 9.10

Interest 3.70 3.84

Profit before Tax 84.87 60.11

Provision for Taxation (incl. deferred Income Tax) 20.78 16.00

Profit after Tax 64.09 44.11

Add: Profit brought forward from previous year 167.11 143.90

Amount available for appropriations 231.20 188.01

Appropriations

Proposed Dividend 12.12 7.58

Tax on Proposed Dividend 2.05 1.06

Transfer to General Reserve 6.41 4.41

Balance carried to Balance Sheet 210.62 174.96

231.20 188.01

1.1 OPERATING RESULTS

During the year, your Company earned total revenue of Rs. 994.40 crores compared with Rs. 857.76 crores

during the previous year, registering a growth of 16%. The income from Sales and Services at Rs. 988.91

crores registered a growth of 19% compared with Rs. 828.79 crores earned in the last year, mainly on account

of 126% growth in ITES, 28% growth in SI, 11% growth in E&T and 10% growth in CS business.

DIRECTORS’ REPORT

TO THE MEMBERS OF CMC LIMITED

Your Directors have pleasure in presenting the 31st Annual Report and the Audited Statement of Accounts for the year

ended March 31, 2007.

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CMC Limited


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The profit before tax at Rs. 84.87 crores registered an increase of 41% over the previous year mainly on

account of increased business from high value added services. The Company made a provision of tax totalling

to Rs. 20.78 crores, inclusive of Fringe Benefit Tax amounting to Rs. 1.89 crore. The profit after tax stood at

Rs. 64.09 crores registering an increase of 45% over the previous year. Average tax rate came down to 24.5%

in the previous year compared to 26.6% in the year 2005-06.

2. DIVIDEND

Your Directors recommend payment of dividend at 80% of paid-up equity share capital for the year ended

March 31, 2007.

3. BUSINESS OPERATIONS

3.1 Customer Services (CS)

Customer Services Strategic Business Unit (CS SBU) undertakes all activities related to IT infrastructure

including infrastructure architecture, design and consulting services; turnkey systems integration of large

network and data center infrastructures including supply of associated equipment and software; on-site

and remote facilities management of multi-location infrastructures of domestic and international clients.

The CS SBU earned revenue of Rs. 579.04 crores during the year compared to Rs. 528.47 crores earned during

the previous year, registering an increase of 10% over the previous financial year. The CS SBU added new

services in the areas of large-scale nationwide application rollout projects; total Infrastructure outsourcing;

high-end infrastructure design, process and security consulting; business continuity and disaster recovery

planning and consultancy; remote infrastructure management. The SBU also had major successes in offshore

managed-services for several international clients in the banking, finance and insurance sectors.

3.2 Systems Integration (SI)

The SI SBU undertakes the activities of solution deployment that includes software development, software

maintenance and support, turnkey project implementation and systems consultancy. The SI SBU earned

revenue of Rs. 297.25 crores during the current year compared with Rs. 231.74 crores earned in the previous

year, registering an increase of 28%. In the domestic market the SI SBU continues to be dominant player in

general insurance sector, securities sector, defense, games management and e-Governance space. In the

Global market, SI SBU continues to be strong in shipping, transportation and embedded systems. Embedded

system revenue grew 21% during the year.

2005-06

Total Revenue: Rs. 857.76 crores

ITES3.7%

SI27.0%

E&T4.5%

CS61.6%

Others3.2%

Total Revenue: Rs. 994.40 crores

2006-07

ITES7.2%

SI29.9%

E&T4.3%

CS58.2%

Others0.4%

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3.3 IT Enabled Services (ITES)

The ITES Strategic Business Unit (SBU) undertakes business process outsourcing services including total

front-office/back-office outsourcing; office records digitization and document management; examination

results and recruitment management; legacy data migration management; inbound call center services

with specific business domain expertise, and on-demand software services. The ITES SBU earned revenue of

Rs. 71.21 crores during the year compared to Rs. 31.48 crores earned in the previous year registering an

increase of 126%. The year has seen the transformation of the ITES business from being a niche player in on-

site digitization, examination and recruitment processing, cards digitization and electoral rolls processing in

the domestic market to being a mature player in sophisticated knowledge-based digitization business for

large international clients. During the year, ITES SBU added two large international clients in the digitization

space in synergy with TCS. ITES SBU earned 56% of its revenue from international markets during the year.

3.4 Education & Training (E&T)

E&T SBU of the Company offers courses on information technology including professional courses, career

development courses etc. E&T SBU embarked on increasing the business in private sector, focusing on more

profitable corporate segments during the year.

The E&T SBU earned revenue of Rs. 42.39 crores compared to Rs. 38.24 crores earned in the previous year,

registering an increase of 11% over the previous financial year. E&T SBU has been focusing on fast growing

corporate segment and has established itself as a preferred vendor of E&T services to a large number of IT

and ITES Companies in India. E&T SBU was able to get a break through in the BPO segment and partnered

with some of the large BPO Companies and offered its professional training programmes to the individual

Companies. E&T SBU has identified Application Roll Out Training as one of the growth areas. During the year,

E&T offered its services to DTH service Company and also launched number of new courses to provide

training coupled with work experience to unemployed fresh graduates.

3.5 SPECIAL ECONOMIC ZONE & STP

3.5.1 Special Economic Zone:

The Company obtained necessary approvals and started the work for setting up an IT and ITES Sector specific

Special Economic Zone (SEZ), named Synergy Park, at its Campus at Gachibowli, Hyderabad. The proposed

SEZ is being built in total area of 50.87 acres of land. The Synergy Park is being built in two phases. Phase I

will have 2832 seat capacity and Phase II will have 7175 seat capacity taking the total to over 10,000 seat

capacity besides common facilities like Auditorium and Canteen facilities etc. Phase I would be completed

before July 31, 2007, and the Phase II is planned to be completed by June 30, 2009. The Company has spent

a total of Rs. 26.12 crores on SEZ project during the year.

3.5.2 Software Technology Park:

Your Company has set up a new Software Technology Park (STP) at Kolkata during the year. The Company

now has three STPs, the other two being in Hyderabad and Mumbai. The Kolkata STP is currently engaged

primarily in executing new international contracts won during the year in ITES space.

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4. SUBSIDIARY COMPANY

Your Company has a wholly owned subsidiary CMC Americas Inc. in USA. Copies of the Balance Sheet, Profit

& Loss Account and Report of the Auditors of the Subsidiary Company have not been attached as per approval

granted by the Central Government under Section 212(8) of the Companies Act, 1956. However, as per the

exemption letter of the Central Government, a statement containing the financial details of the Subsidiary

Company for the year ended March 31, 2007 is included in the Annual Report. As per Accounting Standard

21 issued by The Institute of Chartered Accountants of India, the Consolidated Financial Statements have

been attached which include the financial information of its Subsidiary.

The Annual Accounts of the Subsidiary Company and related detailed information will be made available to

the Shareholders of the Company seeking such information at any point of time. The Annual Accounts of

the Subsidiary Company are also kept for inspection by any investors at the Registered Office of your

Company.

5. FIXED DEPOSIT

During the year, the Company has not accepted any fixed deposits under Section 58A of the Companies Act,

1956.

6. LISTING

The equity shares of the Company are listed with Bombay Stock Exchange Limited, National Stock Exchange

and Calcutta Stock Exchange. There are no arrears on account of payment of listing fees to the Stock

Exchanges.

7. DIRECTORS

Mr Surendra Singh and Mr C B Bhave are retiring by rotation at the ensuing Annual General Meeting and,

being eligible, offer themselves for re-election.

The Company has a Nomination Committee. The nomenclature of this Committee is detailed in the Corporate

Governance report attached to the Annual Report. The objectives of the Committee are to identify the

Independent Directors and to refresh the composition of the Board from time to time.

8. COMMUNITY DEVELOPMENT

The Company has been actively promoting and supporting its staff members to volunteer for activities

related to community services. The Company has chosen to focus its efforts towards helping the under

privileged and physically challenged children to overcome their shortcomings by organizing medical check-

ups, sports activities and also helping their institutions with volunteers and financial support.

The Company has also taken up a programme of harnessing its expertise in IT to develop an ATM which can

be used by visually handicapped persons. This is based on recognition of fingerprints automatically by the

ATM.

The Company promotes active participation among staff members in activities related to community services

with emphasis on volunteering their services. As a part of this, the Company organized Medical Health Camp

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for the Mentally Challenged children and their parents; Candle stalls were put up at various offices on Diwali

which were made by mentally challenged children of Aashirwad Special Education; Donation campaign in

which CMCites donated clothes, bedsheets, linen, blankets etc was organized for distribution to beneficiary

NGOs.

During the year under review, your Company also organized a ‘Special Athletic Event 2006’ for the mentally

challenged children.

9. BUSINESS EXCELLENCE AND QUALITY INITIATIVES

Your Company had embarked on the excellence journey with adoption of Tata Business Excellence Model

(TBEM) three years ago. The process has kept the organizational focus on continuous improvement and

evaluation of progress against internal and external benchmarks. The Company went through the external

assessment process for the third year in succession and was evaluated as having “shifted a score band”

signifying improvement over the previous year.

Key business processes like business planning, business acquisition, review, reporting and communication

have been addressed and changes have been brought about to make them more effective in meeting the

business objectives.

Continuous and consistent internal communication from the top management through various modes has

been initiated to focus on business excellence and continuous improvement.

10. CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the report on Management

Discussion and Analysis, Corporate Governance as well as the Secretarial Auditors’ Certificate regarding

compliance of conditions of Corporate Governance form a part of the Annual Report. Your Company is also

following the Secretarial Standard norms issued by the Institute of Company Secretaries of India.

11. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as required under the Companies (Disclosure of Particulars in the Report of Board of Directors)

Rules, 1988 in respect of energy conservation, technology absorption and foreign exchange earnings and

outgo is given in Annexure-I to this Report.

12. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors based on the

information and representations received from the operating management confirm that:

i) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed

with no material departures;

ii) The Directors had selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the

state of affairs of the Company as on March 31, 2007 and of the profit of the Company for that

period;

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iii) The Directors had taken proper and sufficient care to the best of their knowledge and ability for the maintenance of

adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the

assets of the Company and for preventing and detecting fraud and other irregularities; and

iv) The Directors had prepared the Annual Accounts on a ‘going concern’ basis.

13. AUDITORS

M/s S B Billimoria & Co., the Statutory Auditors of the Company, hold office until the ensuing Annual General Meeting. The said

Auditors have, under Section 224(1-B) of the Companies Act, 1956, furnished the Certificate regarding their eligibility for re-

appointment.

14. PARTICULARS OF STAFF

Information as required under section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees)

Rules, 1975, as amended, regarding particulars of employees drawing remuneration of Rs. 24 lacs per annum or Rs.2 lacs per

month, as the case may be is set out in the Annexure – II to this report. The Ministry of Company Affairs has amended the

Companies (Particulars of Employees) Rules, 1975 to the effect that the particulars of the employees of the Companies engaged

in Information Technology Sector, posted and working outside India, not being Directors or their relatives, need not be included

in the statement but, such particulars shall be furnished to the Registrar of Companies. Accordingly, the statement included

in this report does not contain the particulars of employees who are posted and working outside India.

15. ACKNOWLEDGEMENTS

The Directors wish to convey their appreciation to business associates for their support and contribution during the year. The

Directors would also like to thank the employees, shareholders, customers, suppliers and bankers for the continued support

given by them to the Company and their confidence reposed in the management.

For and on behalf of the Board

Mumbai S RAMADORAI

April 14, 2007 Chairman

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Annexure-I

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO

A. CONSERVATION OF ENERGY

Your Company is not an industry as listed in Schedule to rule 2 of the Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rule, 1988.

B. TECHNOLOGY ABSORPTION

Efforts made in technology absorption - as per Form B given below:

FORM B

1. Research and Development (R&D)

a. Specific Areas in which Research and Development (R&D) is being carried out by the Company

i. GPS based Vehicle tracking system

ii. RFID based Vehicle tracking system

iii. Biometric technologies based cheque validation systems

iv. Biometric adapter for ATMs to enable personal identification

v. Further refinements and upgradation of Fingerprint identification technology

b. Benefits derived from the above

i. GPS based vehicle tracking system is an all terrain solution which enhances and helps in offering complete end to endsolutions for any logistics and fleet movement tracking requirement.

ii. RFID based vehicle tracking system is a cost effective solution for specific applications wherein GPS based system would betoo complex.

iii. Integration of biometric solutions to enable personal identification for financial transactions have enabled secure financialtransactions to the visually challenged or to those who are not literate. This has enabled the Company to open a new segmenti.e Add ons to bank ATMs and extend the application of biometric to a wider end use.

iv. The upgradation and enhancement of fingerprint suite has led to faster and more accurate matching of fingerprints in linewith the competition.

c. Future Plan of Action

i. Develop a suite of products to enhance our capability in providing cost effective vehicle tracking systems to domains likeshipping, road transportation, fleet management and such applications in police, para military and other security agencies.

ii. Extending the biometric suite of products to other civilian uses as in national ID card and other large scale identificationsystems.

iii. Providing an integrated solution to the financial and banking industry for personal identification using biometric technologies.

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d. Expenditure on R&D

(Rs. in croress)

Particulars 2006-07 2005-06

A Capital 0.57 0.21

B Recurring 11.09 11.60

C Total 11.66 11.81

D Total R&D Expenditure as a Percentage of Turnover 1.17 1.38

2. Technology absorption, adaptation and innovation

a. Efforts made towards technology absorption, adaptation and innovation

i. CMC proactively uses new and emerging technologies for conceptualizing solutions to meet its business needs. The expertisegained in early usage results in developing/enhancing our offerings and provides us an advantage in differentiating ourCompany against others.

ii. CMC constantly interacts with its large vendors and suppliers to understand and absorb new developments in technologiesand offerings and is an invaluable tool for constant updation.

iii. Project teams are encouraged to try out solutions to their problems by bringing about big and small improvements therebyfostering innovation.

b. Benefits derived as a result of the above efforts

i. Technological upgradation of the Company’s services and solutions

ii. Helps the Company in differentiating itself from the competitors and also helps us in providing long term support to oursolutions.

iii. Ability to respond to unique requirements of the customers and system engineer a solution with building blocks obtainedfrom third party sources.

c. Information regarding imported technology

Your Company has not imported any technology.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to Exports, Initiatives to increase exports, Development of new export markets for products and services& export plan

As a part of its core strategy, the Company is focusing on increasing exports of its services by leveraging wide marketing reach ofits parent Company, Tata Consultancy Services Limited. The Company has established itself as a major supplier of EmbeddedSystem Services and software solution in key industry verticals and e-Governance space.

2. Total Foreign Exchange Earnings & Outgoings

The foreign exchange earnings of the Company during the year were Rs. 121.90 crores while the outgoings were Rs. 26.16 crores.


Mumbai S RAMADORAI

April 14, 2007 Chairman

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Annexure - II

INFORMATION UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH THE COMPANIES(PARTICULARS OF EMPLOYEES) RULES, 1975

Name Designation/ Remuneration Qualification Experience Date of Age Last % ofNature of Duties (Rs.) ( Years) commencement (yrs.) employment Equity

of employment before Joining Capitalthe Company held

(A) Personnel who are in receipt of remuneration aggregating not less than Rs 24,00,000 per annum and employed throughoutthe year:

R Ramanan Managing 2,895,786 B Tech Electrical 26 16.10.2001 49 Vice President, NILDirector & CEO Engineering Tata Consultancy

IIT Mumbai Services

(B) Personnel who are in receipt of remuneration aggregating not less than Rs 2,00,000 per annum and employed for the part ofthe year:

Jonnavithula Technical Head 1,767,623 M Tech – 18 17.11.2004 43 Engineering NILSuryaprakash XIDC Digital System Manager –

CISCO – USA

Notes:

1. Remuneration includes Salary, House Rent Allowance, Commission, Provident Fund, Medical re-imbursement, LTC, Bonus, if any andTaxable value of Perquisites.

2. The Appointment is contractual as per the policy/rules of the Company.

3. Terms and conditions are as per the appointment letter given to the appointee from time to time.

4. Nature of the duties of the employee is to look after all the day to day working of the Company under the supervision and control of theHead of the concerned department.


Mumbai S RAMADORAIApril 14, 2007 Chairman

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MANAGEMENT DISCUSSION AND ANALYSIS

Overview

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and GenerallyAccepted Accounting Principles (GAAP) in India. There are no material departures from prescribed accounting standards inthe adoption of the accounting standards. The management of CMC Limited accepts responsibility for the integrity andobjectivity of these financial statements, as well as for various estimates and judgements used therein. These estimates andjudgements relating to the financial statements have been made on a prudent and reasonable basis, in order that the financialstatements reflect in a true and fair manner, the form and substance of transactions and the state of affairs and profits for theyear.

Industry structure and developmentThe Indian economy has shown vigorous growth with strong macro economic fundamentals. The GDP is estimated to havegrown by 9.2% in 2006-07 compared to 9.0% in 2005-06, as per “Economic Survey 2006-2007”. The notable feature of thecurrent growth phase is the sharp rise in the investment rate in the economy which reflect a high degree of business optimismand reinforces the outlook for growth.

As per the early estimates of NASSCOM, the Indian IT industry which is a major contributor to the GDP (5.4%), is estimated tohave crossed USD 48 billion in annual revenues in the year 2006 – 07, resulting in a growth of over 28%. Services and softwareexports would have contributed USD 31.3 billion and forecasted to register a 32.6% growth in the current year.

The domestic market size is estimated to constitute USD 8.4 billion up around 25% over the previous year. The domesticmarket continues to have strong services and solutions driven component. Systems Integration and network integrationmake up the high growth-large size category within the domestic IT services engagements; and will continue to be primedrivers in the domestic IT space.

The drivers for growth in the domestic market are the financial services, communication/media and the manufacturing verticalsin addition to the governmental sector.

Opportunity and ThreatsOpportunity:NASSCOM analysis of the IT industry shows that the expansion of the exports market as well as the domestic market isaccompanied by significant shift in the nature of engagements.

The Indian Companies are getting larger and more complex deals in the International market driving up the average size ofcontracts awarded to them. The domestic market is breaking out of the hardware led growth and the trend of software andservices gaining share is expected to continue.

The Company is well positioned to benefit from the overall economic growth in the country and the accompanying increasein IT spends on infrastructure and services. The growing demand and supply gap for trained IT professionals is estimated tobe around 40% and offers an opportunity for the Company to provide education and training services to bridge this gapboth in the IT as well as in ITES space. The Company can offer its expertise to address this market as part of the skill enhancementand upgradation plan to service professionals as well.

While Indian enterprises get into large scale digitization of their business processes, conversion/re-engineering of legacydata suitable for such digitizations offer a large opportunity. The Company has developed expertise in these areas for boththe domestic and the international market.

The Company can leverage its expertise in providing IT infrastructure set up services, life cycle support as well as SystemsIntegration services in the domestic market. The increased opportunities in Government Sector under the Nationale-Governance Plan can be addressed by the vast range of proven solutions and services which the Company has developedspecifically for Governance applications.

The international segment of IT industry offers the Company an opportunity in further leveraging its expertise in embeddedsystem, ports solutions and in providing large knowledge process outsourcing in critical back office processes for large volumeapplications. The Company has traditionally been strong in providing services and solutions in the domestic market and theemerging global market opportunities offer it the opportunity to further grow and consolidate its business.

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Threats:As the IT market in India is growing and also maturing at a fast pace, speed and low cost of delivery is becoming thedeterminants of customer choice of vendors.

MNCs and large Companies are increasingly eyeing the domestic market and bring with them economies of scale and end-to-end services capability to bear on the market. In addition, Small & Medium IT Companies are also offering niche servicesand solutions and provide an attractive proposition to the customers. The rapid technological obsolescence and the possibilityof cheaper alternative to application/solution ownership is a threat to vendors in terms of investment protection and abilityto re-engineer the solutions and services.

Scarcity of the right talent as well as the ability to retain them is one of the critical factors confronting all IT Companies.

Financial Performance:Revenues:During the year under review, the Company earned total revenue of Rs. 994.40 crores compared with Rs. 857.76 crores duringthe last year registering a growth of 15.9%. The income from sales and services at Rs. 988.91 crores registered a growth of19.3% compared with Rs. 828.79 crores earned in the last year mainly on account of 17.5% growth in SI, 9.8% growth inEducation and Training, 8.0% growth in CS, 7.7% growth in ITES in the domestic market and 54% growth in Internationalbusiness. Income from sale of purchased equipment increased by 7.3% from Rs. 376.17 crores to Rs. 403.55 crores, whileincome from services increased by 29.3% from Rs. 452.62 crores to Rs. 585.36 crores. The share of services in total operatingrevenue improved from 55% to 59%. Other income has declined from Rs. 28.97 crores to Rs. 5.49 crores. Last year otherincome included an amount of Rs. 24.66 crores on account of profit on sale of certain properties.

The segment-wise breakdown of total revenue is given below:( Rs./Crores)

Segment 2006-07 2005-06

Domestic- Customer Services 538.58 498.70- Systems Integration 87.85 74.76- ITES 30.80 28.59- Education & Training 41.96 38.22

International 289.72 188.52

Other Income 5.49 28.97

Total 994.40 857.76

Expenditure:During the year under review, the operating expenses at Rs. 897.59 crores increased by 14.4% compared with Rs. 784.71crores incurred in the previous year in line with 19.3% increase in operating revenues. As a percentage of total operatingrevenue, these expenses registered a decline from 94.7% to 90.8%. The operating costs have gone up mainly on account of8% increase in living expenses due to 54% increase in international business and 10% increase in manpower costs primarilydue to 2.3% increase in average manpower strength during the current year compared with the previous year and increase inaverage manpower cost due to salary increases. The total manpower strength has increased to 3509 as on 31st March 2007compared to 3431 at the beginning of the year. The manpower cost as a percentage of operating revenue has declined from19.2% to 17.7%. Other operating expenses increased by 32.3% mainly on account of increased outsourced services fromRs. 61.60 crores to Rs. 77.53 crores (an increase of 25.9%) due to increased business, Rs. 23.47 crores provisioning on accountof possible losses that may arise from a contract under dispute.

The interest cost decreased by 4% to Rs. 3.70 crores during the current year compared with Rs. 3.84 crores incurred in the lastyear as a result of reduction in borrowings from Rs. 67.07 crores to Rs. 17.76 crores. Depreciation charge declined by 9% fromRs. 9.10 crores to Rs. 8.24 crores.

As a result, Operating Profit (PBT excluding other income) has increased by 154.9% from Rs. 31.14 crores to Rs. 79.38 crores.Operating Margin has increased from 3.8% to 8.0%. PBT (including other income) has increased by 41.2% from Rs. 60.11crores to Rs. 84.87 crores and as a percentage of total revenue PBT has increased from 7.0% to 8.5%.

The provision for taxation (including deferred tax and fringe benefit tax) increased to Rs. 20.78 crores from Rs. 16.00 crores inthe last year, resulting in an increase of 29.8%. However, since the Company had larger portion of income from internationaloperations eligible for tax breaks, the effective tax rate for the Company has decreased from 26.6% to 24.5%.

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Profit After Tax (PAT) has increased from Rs. 44.11 crores to Rs. 64.09 crores, an increase of 45.3% over the previous year. PAT asa percentage of total revenue has increased from 5.1% to 6.4%.

Financial Position

Fixed AssetsThe gross fixed assets as at 31st March, 2007 was Rs. 158.07 crores (including capital WIP) compared with Rs. 131.35 crores asat the beginning of the year, resulting in an increase of 20.3% during the year, mainly on account of investment of Rs. 26.12crores in setting up Special Economic Zone (SEZ) at Gachibowli Campus of the Company at Hyderabad. The Company is in theprocess of setting up an IT & ITES specific SEZ spread across 50.87 acres of land at its Gachibowli Campus at Hyderabad. TheSEZ is coming up in two phases and is planned to create 10,000 seat capacity by the end of June 2009.

Working Capital

Net current assets as at 31st March, 2007 reduced to Rs. 154.54 crores compared to Rs. 219.95 crores at the beginning of theyear, mainly on account of decline in current assets from Rs. 505.33 crores to Rs. 503.72 crores and increase in current liabilitiesand provision from Rs. 285.38 crores to Rs. 349.18 crores during the year. Decline in current assets is attributable mainly todecrease in accrued debtors from Rs. 132.37 crores to Rs. 118.13 crores and inventory from Rs. 52.36 crores to Rs. 23.07 crores.However, it was partly offset by increase in sundry debtors from Rs. 233.02 crores to Rs. 241.67 crores. The level of debtors interms of number of days has declined from 103 days sales to 89 days. Debtors over six months (net of provisioning) haveincreased by 8% to Rs. 41.68 crores (17.2% of total debtors) from Rs. 38.73 crores (16.6% of total debtors). Of the remaining Rs.199.99 crores, debtors less than 30 days are Rs. 120.60 crores (50% of total debtors). Total debtors level including accrueddebtors have declined from 161 days to 133 days sales.

Capital Structure

Net worth of the Company as at 31st March, 2007 was Rs. 232.24 crores compared with Rs. 182.32 crores at the beginning ofthe year (after adjusting Rs.28.40 crores out of opening reserves on account of application of new AS-15 relating to accountingof post retirement benefits applicable from April 1, 2006), resulting in an increase of 27% during the year mainly on accountof profit after tax earned during the year.

Loan funds as at 31st March, 2007 were Rs. 17.76 crores, resulting in a reduction of Rs.49.31 crores over Rs.67.07 crores at thebeginning of the year.

As a result, the debt equity ratio has declined to 0.08:1 compared with 0.37:1 at the beginning of the year.

Segment-wise Review

Customer ServicesThe Customer Services SBU earned revenue of Rs. 538.58 crores from the domestic market registering an increase of 8.0%over the previous year. The total revenue of the SBU (including international revenue) was Rs. 579.04 crores registering anincrease of 9.6% over the previous year. The share of domestic revenue of CS SBU in the total operating revenue declinedfrom 60.2% to 54.2%.

Systems Integration

The Systems Integration SBU earned revenue of Rs. 87.85 crores from the domestic market registering an increase of 17.5%over the previous year. The total revenue of the SBU (including international revenue) was Rs. 297.25 crores registering anincrease of 28.3% over the previous year. The share of Domestic revenue of SI SBU in the total operating revenue declinedmarginally from 9.0% to 8.9%.

IT Enabled Services

The ITES SBU earned revenue of Rs. 30.80 crores from the domestic market registering an increase of 7.7% over the previousyear. The total revenue of the SBU (including international revenue) was Rs. 71.21 crores registering an increase of 126.2%over the previous year. The share of domestic revenue of ITES SBU in the total operating revenue decreased from 3.4% to3.1%.

Education & Training

The E&T SBU earned revenue of Rs. 41.96 crores from the domestic market registering an increase of 9.8% over the previousyear. The total revenue of the SBU (including international revenue) was Rs. 42.39 crores registering an increase of 10.9% overthe previous year. The share of E&T SBU in the total operating revenue was marginally reduced from 4.6% to 4.2%.

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International

The Company achieved strong growth in its International revenue during the year driven by SI and ITES SBUs in the Americaand the UK markets. The total International revenues of the Company increased to Rs. 289.72 crores during the year, registeringan increase of 53.68% over Rs. 188.52 crores earned in the previous year. The share of international revenue in total operatingrevenue increased from 22.7% to 29.3%.

Future outlookThe Company believes that the current trends in IT spend both domestically and in the international market presentsunprecedented opportunity for growth. Liberalization and opening up of more infrastructure sectors like roads, airports andsea ports, national e-governance initiatives and implementation of Mission Mode Projects, recent policy initiatives to makeIndian Companies more competitive including new policy on Special Economic Zone, the focus of Indian corporates tobenchmark themselves with leading global players in terms of quality of processes and competitiveness, is going to driveincrease in IT spend. The Company is well poised to exploit the emerging opportunities both in India and global market insynergy with TCS.

Risk and ConcernsA comprehensive and integrated risk management framework forms the basis of all the de-risking efforts of the Company.Formal reporting and control mechanisms ensure timely information availability and facilitate proactive risk management.These mechanisms are designed to cascade down to the level of the line managers so that risks at the transactional level areidentified and steps are taken towards mitigation in a decentralised fashion.

The Board of Directors is responsible for monitoring risk levels on various parameters and the Managing Director & CEOensures implementation of mitigation measures. The Audit Committee provides the overall direction on the risk managementpolicies.

1. Business risks

Excessive dependance on any single business segment increases risks and needs to be avoided. The Company has adoptedprudential norms wherever required, to prevent undesirable concentration in any one vertical technology client orgeographical area.

Excessive exposure to a few large clients has the potential to impact profitability and to increase credit risk. However,large clients and high repeat business lead to higher revenue growth and lower marketing cost. Therefore, the Companyneeds to strike a balance. The Company actively seeks new business opportunities and clients to reduce clientconcentration levels.

A high geographical concentration of business could lead to volatility because of political and economic factors in targetmarkets. However, individual markets have distinct characteristics – growth, IT spends, willingness to outsource, costs ofpenetration and price points. Cultural issues such as language, work culture and ethics and acceptance of global talentalso come into play. Due to these business considerations, the Company has decided not to impose any rigid limits ongeographical concentration. Exposure to the inherent risks in a specific geography consists of legal and contractual risksas well as tax related changes. The Company has a process of evaluating country risks by taking legal opinion from thelegal counsel operating/familiar with the geography.

Proactively looking for business opportunities in new geographies and thereby increasing their contribution to totalrevenues helps manage this risk.

Vertical domains relate to the industries in which clients operate. The Company has chosen to focus on selected verticalsegments with a view to leverage accumulated domain expertise to deliver enhanced value to its clients.

Being a Company exposed to rapid shifts in technology, an undue focus on any particular technology could adverselyaffect the risk profile of the Company. Given the rapid pace of technological change, the Company has chosen not toimpose rigid concentration limits. Often, industry characteristics and market dynamics determine the choice of technology.

2. Financial risks

The debtor recovery cycle of the Company is long due to dominance of Government entities in its customer profileresulting in need to finance higher level of working capital. The Company is broad-basing its client profile in order toreduce debtors recovery cycle on one hand and to strengthen the collection efforts on the other hand. In the interim, theCompany is confident to have adequate funding to finance its working capital requirements. The volatility in foreigncurrency rates may impact the profitability of the Company to the extent of its exposure to the International businessand specific currencies.

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3. Legal risks

Litigation regarding intellectual property rights, patents and copyrights is significantly high in the software industry. Inaddition, there are other general corporate legal risks. The management has clearly charted out a review anddocumentation process for contracts. Legal compliance issues are an important factor in assessing all new businessproposals.

4. Internal process risks

The key resource for the Company is its people. With increased competition from Indian and international IT servicesCompanies, there is an increased pressure on salary increases and consequent pressure on margins. As demand of specifiedskilled IT personnel outpace supplies, the Company faces increased risk of attrition. The Company has been focusing oncreating a favorable work environment that encourages innovation and meritocracy to improve employee retention andto reduce attrition rate.

Risk management processes at the operational level are a key requirement for reducing uncertainty in delivering high-quality software solutions to clients within budgeted time and cost. Adoption of quality models such as the SoftwareEngineering Institute’s Capability Maturity Model (SEI-CMM) has ensured that risks are identified and measures are takento mitigate these at the project plan stage itself.

The Company evaluates technological obsolescence and the associated risks on a continuing basis and makes investmentsaccordingly.

Internal control systems and their adequacy

The Company has an adequate system of internal controls implemented by the management towards achieving efficiency inoperations, optimum utilisation of resources and effective monitoring thereof and compliance with applicable laws. Thesystem is continuously reinforced with analysis of data to strengthen it to meet the changing requirements.

The system comprises well defined organisation structure, pre-identified authority levels and documented policy guidelinesand manuals for delegation of authority.

A qualified and independent Audit Committee of the Board of Directors reviews the internal audit reports and the adequacyof internal controls.

Human Resources

The Company has always provided an open and challenging work environment wherein the staff members get an opportunityto rapidly gain and assimilate knowledge.

The Company’s focus during the year has been three fold:

(i) Improve per person productivity through improved utilization and by managing the staff mix between regular andoutsourced person power.

(ii) Shift resources from low realization projects to higher realization International projects.

(iii) Increase learning and development opportunities for every staff member.

The Company synergized its learning and development activities with that of TCS by adopting their best practices in “peopleengagement” activities as well as in getting access to TCS resources in this area.

Major thrust is being given in the next year by focused effort in bringing about a measurable change in training coverage andeffectiveness.

The staff strength of the Company as on 31st March, 2007 was 3509 as compared to 3431 as on 31st March, 2006.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Company’s objectives, expectations or predictionsmay be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materiallyfrom those expressed in the statement. Important factors that could influence the Company’s operations include change inGovernment regulations, tax laws, economic & political developments within and outside the country and such other factors.

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CORPORATE GOVERNANCE REPORT

Company’s philosophy on Corporate Governance

As part of the Tata Group, CMC’s philosophy on Corporate Governance is founded upon a rich legacy of fair and transparent governancepractices. The Corporate Governance philosophy has been further strengthened with the adoption of the Tata Business Excellence Model

and Tata Code of Conduct and the adoption of the requirements under Clause 49 of the Listing Agreement with the Stock Exchanges.

I. Board of Directors

(A) Composition of Board

The present Board consists of one Executive Director and six Non-Executive Directors. Out of the Non-Executive Directors, four areIndependent Directors and the other two represent the Promoters. The Non-Executive Directors with their diverse knowledge, experienceand expertise brings in their independent judgment to the deliberations and decisions of the Board. Apart from the sitting fees paid forattending Board/Committee Meetings, the Non-Executive Directors did not have any material pecuniary relationship or transactions withthe Company during the year 2006-07.

The Company has a Non-Executive Chairman. The number of Independent Directors is more than one-third of the total number of Directors.The Company meets the requirements relating to the composition of Board of Directors.

(B) Non-Executive Directors’ compensation and disclosures

The Non-Executive Directors of the Company are paid sitting fee as fixed by the Board of Directors within the limits prescribed under theCompanies Act, 1956. No stock options were granted to Non-Executive Directors or Independent Directors during the year under review.

(C) Other provisions as to Board and Committees

During the year 2006-07, 10 meetings of the Board of Directors were held on April 15, April 25, July 17, August 14, October 14, November 22and December 13 in 2006, on January 13, February 26 and March 17 in 2007.

The 30th Annual General Meeting of your Company was held on June 27, 2006.

None of the Directors of the Board serve as Members of more than 10 Committees nor do they Chair more than 5 Committees, as per the

requirements of the Listing Agreement.

Detailed information is given in the table:

Name Category Board Attendance No. of outside No. of CommitteesMeetings at the Directorships* andattended AGM held Positions held

during the on 27.06.2006 Member Chairmanyear

Mr S Ramadorai Non-Independent 10 Yes 11 03 01 (Chairman) Non-executiveMr R Ramanan Non-Independent 10 Yes 01 01 -

ExecutiveMr Ishaat Hussain Non-Independent 09 Yes 12 06 04

Non-executiveDr KRS Murthy Independent 08 Yes 02 01 01

Non-executiveMr Shardul Shroff Independent 02 No 06 04 -

Non-executiveMr Surendra Singh Independent 08 Yes 06 04 03

Non-executive

Mr C B Bhave Independent 10 Yes 04 03 -Non-executive

*This does not include directorships in Private Limited Companies, Foreign Companies and Companies under Section 25 of the Companies Act, 1956.

(D) Code of Conduct

(i) The Board of Directors has laid down Code of Conduct for all Board Members and Senior Management of the Company. The copies ofCode of Conduct as applicable to the Directors as well as Senior Management of the Company are uploaded on the website of theCompany – www.cmcltd.com.

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(ii) The Members of the Board of Directors and Senior Management personnel have affirmed the compliance with the Code applicable tothem during the year ended March 31, 2007. The Annual Report of the Company contains a Certificate duly signed by the MD & CEO inthis regard.

II. Audit Committee

(A) Qualified and Independent Audit Committee

The Company complies with the provisions of Section 292A of the Companies Act, 1956 as well as requirements under the listingagreement pertaining to the Audit Committee. Its functioning is as under:

(i) The Audit Committee consists of the three directors as members who are all independent directors.

(ii) All members of the Committee are financially literate and one of the members, Mr C B Bhave, is having the requisite financialmanagement expertise.

(iii) The Chairman of the Audit Committee is an independent director.

(iv) The Chairman of the Audit Committee was present at the last Annual General Meeting.

(v) The Chief Financial Officer, Addl. General Manager – Corporate Finance & Accounts, Internal Auditors and the representatives ofthe Statutory Auditors and such other officials of the Company are invited to attend the Audit Committee meetings as and whenrequired.

(vi) The Company Secretary acts as the Secretary to the Committee.

(B) Meeting of Audit Committee

During the year, 8 Audit Committee meetings were held on April 15, June 20, July 17 and October 14 in 2006 and on January 13,February 13, February 26 and March 17 in 2007. The Audit Committee meetings are held both at Corporate Office and other locations.

The composition of the Audit Committee and number of meetings attended by the Members are given below:

Name of Member Composition of the Audit Committee Number of meetings attended

Dr KRS Murthy Independent Director 8

Mr CB Bhave Independent Director 8

Mr Surendra Singh Independent Director 7

The Chairman of the Committee is Dr KRS Murthy.Two Members were present in all the meetings of the Audit Committee.

(C) Terms of reference

Apart from all the matters provided in clause 49 of the Listing Agreement and section 292A of the Companies Act, 1956, the terms ofreference of the Audit Committee include:

1. Management discussion and analysis of financial condition and results of operations of the Company.

2. Statement of related party transactions.

3. The reports of Statutory Auditors.

4. The appointment of Internal Auditors, reviewing Internal Audit Reports and weaknesses of Internal Control.

5. Reviewing Internal Audit Programme.

6. All major contracts entered into with various parties.

The Minutes of the Audit Committee are being circulated to the Board of Directors.

III. Subsidiary Companies

(i) The Company does not have any non listed Indian Subsidiary Company.

(ii) The Minutes of the Subsidiary Company are placed at the Board Meetings of the Holding Company. The financial statements of

the unlisted Subsidiary Company were put up at the Board Meetings of the Holding Company.

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IV. Disclosures

(A) Basis of related party transactions

(i) The statements containing the transactions with related parties were submitted periodically to the Audit Committee.

(ii) There were no material individual transactions with related parties during the year, which were not in the normal course ofbusiness as well as on an arm’s length basis.

(iii) There is no related party transactions that may have potential conflict with the interest of the Company at large.

(iv) There is no non-compliance by the Company and no penalties, strictures imposed on the Company by Stock Exchange or SEBI orany statutory authority, on any matter related to capital market, during the last three years.

(v) The Company is maintaining Whistle Blower Policy in the Company and no personnel has been denied access to the Audit

Committee.

(B) Disclosure of Accounting Treatment

During the year, there has been no change in Accounting Standard.

(C) Board Disclosures – Risk Management

The Company has laid down procedures to inform the Board of Directors about the Risk Management and its minimization procedures.The Audit Committee and the Board of Directors review these procedures periodically.

(D) Proceeds from public issues, rights issues, preferential issues etc.

The Company did not have any of the above issues during the year under review.

(E) Remuneration of Directors

(i) Executive Director

(a) The remuneration of the Executive Directors is decided by the Remuneration Committee and recommended to the Board ofDirectors based on criteria such as industry benchmarks, the Company’s performance vis-à-vis the industry, performancetrack record of the Executive Director/ appointee(s). The Company pays remuneration by way of salary, perquisites andallowances consisting of fixed and variable components.

(b) Mr R Ramanan is working as the Managing Director & Chief Executive Officer of the Company.

(c) The salary, bonus, benefits and perquisites paid to Mr R Ramanan, Managing Director & CEO during the year 2006-07, was

Rs. 28,95,786.

(ii) Non-Executive Directors

(a) The Non-Executive Directors are entitled only for sitting fee for attending the Board/Committee Meetings. A sitting fee ofRs. 10,000 per meeting of the Board and Audit Committee and Rs. 5,000 per meeting of the Remuneration Committee, ShareTransfer-cum-Shareholders Grievance Committee and other Committees is paid for attending such meetings to them. Thesitting fee payable to the Non-Executive Directors of Remuneration Committee stands revised to Rs. 10,000 per meetingw.e.f. April 01, 2007.

(b) Payment of sitting fee to Non-Executive Directors for the year ended March 31, 2007:

Name of Director Sitting Fee paid (Rs.)

Mr S Ramadorai 1,20,000Mr Ishaat Hussain 1,00,000Dr KRS Murthy 1,80,000Mr Surendra Singh 2,45,000Mr CB Bhave 1,95,000Mr S Shroff 6,00,000

(c) The Non-Executive Directors have disclosed that they do not hold any shares and/or convertible instruments in the Company.

(d) There have been no new appointments of Non-Executive Directors on the Board of Directors of the Company during theyear under review.

(e) There has been no pecuniary relationship or transactions of the Non-Executive Directors vis-à-vis the Company during theyear under review.

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(F) Management

The Management Discussion and Analysis Report has been included separately in the Annual Report to the Shareholders.

(G) Shareholders

(i) Mr Surendra Singh and Mr C B Bhave are retiring from the Board by rotation at the Annual General Meeting and, being eligible,offer themselves for re-election as Non-Executive Directors. The brief resume and other details of these Directors are givenseparately in the Annual Report.

(ii) The quarterly results and presentations made by the Company to analysts are put on the Company’s website – www.cmcltd.com.

(iii) Share Transfer-cum-Shareholders Grievance Committee

The Share Transfer cum Shareholders Grievance Committee is constituted under the Chairmanship of a Non-Executive Director toconsider and approve various requests for transfer, sub-division, consolidation, renewal, exchange, issue of new Certificates inreplacement of old ones and redressal of the grievances of the Shareholders as may be received from time to time.

The present composition of the Share Transfer-cum-Shareholders Grievance Committee is as under:

Mr Surendra Singh .. ChairmanMr R Ramanan .. MemberMr Shardul Shroff .. MemberMr Vivek Agarwal .. Member

The Committee has had 20 Meetings during the year ended March 31, 2007.

Mr Vivek Agarwal, Company Secretary & Head - Legal, is the Compliance Officer and can be contacted at:

CMC Limited Tel: 91-11-23736151PTI Building, 5th Floor Fax: 91-11-237361594, Sansad Marg E-mail: [email protected] Delhi-110001

In addition to the above e-mail of the Compliance Officer, the Investors/Shareholders can also lodge their complaints, if any, ate-mail [email protected].

35 investors’ complaints/queries were received during the year under review and no complaints/queries were pending as on

March 31, 2007.

(iv) The Board of Directors of the Company has delegated the power of share transfer to the Share Transfer-cum-Shareholders GrievanceCommittee and the Registrar and Share Transfer Agents. The meetings of the Share Transfer-cum-Shareholders GrievanceCommittee to attend to share transfer formalities are held on fortnightly basis generally.

V. Report on Corporate Governance

The quarterly compliance report has been submitted to the Stock Exchanges where the Company’s equity shares are listed in therequisite format duly signed by the Compliance Officer.

The other information on Corporate Governance for the benefits of shareholders is as under:

GENERAL BODY MEETINGS

Location and time of General Meetings held in the last 3 years:

Year Type Date Venue Time Whether anySpecial Resolution

passed in previous AGM

2004 AGM 30.08.2004 Bhartiya Vidya Bhavan Auditorium, 2.30 p.m. Yes u/s 31 forBVB Hyderabad Kendra No. 5-9-1105, adopting new

Basheerbagh-King Koti Road, set of Articles ofHyderabad – 500 029, A.P. Association

2005 AGM 17.06.2005 - do - 2.30 p.m. No

2006 AGM 27.06.2006 - do - 2.30 p.m. No

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Whether Special Resolutions:

(a) Were put through postal ballot last year:

Yes, a Resolution was passed by requisite majority for alteration in Object Clause of Memorandum of Association as under:

“Special Resolution u/s 17 of the Companies Act, 1956 to alter the Object Clause of the Memorandum of Association of the Companyas per the Postal Ballot Notice dated 13.01.2007.”

Details of voting pattern:

S.No. Description No. of Votes No. of SharesBallot Papers received 2088 8986227

1. Votes in Favour 2044 8985715

2. Votes Against 9 46

3. Invalid Votes 35 466

Persons who conducted the postal ballot exercise:

Dr S ChandrasekaranChandrasekaran AssociatesCompany Secretaries11-F, Pocket IVMayur Vihar Phase-IDelhi-110091

(b) Are proposed to be conducted through postal ballot:

No

Means of Communication:

Quarterly report sent to each household : The results of the Company are published in theof shareholders. newspapers.

Quarterly results and in which newspaper : Results are normally published in Business Standardnormally published in. and in Eenadu (Telugu – Hyderabad edition).

Any website where displayed. : Yes, the results are displayed on the Company’s website www.cmcltd.com

Whether it also displays official news releases : Yes

Whether the website displays the presentation : Yes, the Company holds a conference call with Analysts and Institutionalmade to the institutional investors and to Investors after the quarterly, half yearly and annual financial results havethe analysts. been approved by the Board of Directors, where information is disseminated

and analysed.

General Shareholder InformationAnnual General Meeting:

(i) Date, time and Venue : Monday, June 25, 2007 at 3.30 p.m.Bhartiya Vidya Bhavan AuditoriumBasheerbaghHyderabad-500029

(ii) Financial year : 1st April to 31st March

(iii) Date of Book Closure : Monday, June 18, 2007 to Friday, June 22, 2007(both days inclusive)

(iv) Dividend Payment Date : The dividend warrants will be posted on or before July 24, 2007.

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(v) Listing

The Stock Exchanges on which the Company’s shares are listed:

Bombay Stock The Calcutta Stock The National Stock Exchange of India Ltd.Exchange Limited, Exchange Association Ltd. Exchange Plaza, 5th FloorPhiroze Jeejeebhoy 7, Lyons Range Plot No.C/1, G BlockTowers Kolkata-700001 Bandra-Kurla ComplexDalal Street Bandra (E), Mumbai-400051Mumbai-400001

(vi) Stock Code

Bombay Stock Exchange Limited : 517326The National Stock Exchange of India Ltd. : CMC

(vii) Market price information

The reported high and low closing prices during the year ended March 31, 2007 on the National Stock Exchange and the BombayStock Exchange where your Company’s shares are frequently traded, are given below:

National Stock Exchange Bombay Stock ExchangeMonth High (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

April-06 660.00 504.90 645.00 522.20May-06 614.00 460.00 614.70 465.00June-06 528.85 337.00 505.00 335.00July-06 460.00 403.00 449.00 401.00Aug-06 555.00 397.05 544.00 396.00Sept-06 571.00 491.00 572.00 488.00Oct-06 700.00 550.00 705.00 548.00Nov-06 700.00 643.00 694.75 640.00Dec-06 695.00 605.45 700.00 602.00Jan-07 1310.00 674.00 1320.00 631.10Feb-07 1285.00 1007.00 1275.00 1050.00Mar-07 1469.00 1070.15 1429.00 1077.35

(viii) Performance in Comparison to BSE SensexThe performance of the Company’s scrip on the BSE as compared to the Sensex is as under:

BSE Sensex CMC LIMITEDMonth High Low High (Rs.) Low (Rs.)

April-06 12102.00 11008.43 645.00 522.20May-06 12671.11 9826.91 614.70 465.00June-06 10626.84 8799.01 505.00 335.00July-06 10940.45 9875.35 449.00 401.00Aug-06 11794.43 10645.99 544.00 396.00Sept-06 12485.17 11444.18 572.00 488.00Oct-06 13075.85 12178.83 705.00 548.00Nov-06 13799.08 12937.30 694.75 640.00Dec-06 14035.30 12801.65 700.00 602.00Jan-07 14325.92 13303.22 1320.00 631.10Feb-07 14723.88 12800.91 1275.00 1050.00Mar-07 13386.95 12316.10 1429.00 1077.35

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(ix) Registrars and Share Transfer Agents

The Members are requested to correspond with the Company’s Registrar & Share Transfer Agents – M/s Karvy Computershare PrivateLimited quoting their folio number at the following address:

M/s Karvy Computershare Private LimitedKarvy House, 46, Avenue 4, Street No. 1,Banjara Hills, Hyderabad 500 034Tel: 040- 23312454/23320251Fax: 040-23311968

Email: [email protected]

(x) Share Transfer System

Shares lodged for transfer at the Registrar’s address are normally processed and approved by Share Transfer-cum-ShareholdersGrievance Committee on a fortnight basis. All requests for dematerialisation of shares are processed and the confirmation is given tothe Depositories within 15 days. Grievances received from Members and other miscellaneous correspondence on change of address,mandates etc. are processed by the Registrar within 30 days.

(xi) Distribution of shareholding

(a) Distribution of shareholding (no of shares) as on March 31, 2007:

No. of shares No. of % of Total no. of % of holdingshareholders shareholders shares

1-500 31808 98.75 751468 4.96501-1000 191 0.59 148782 0.981001-2000 73 0.22 115191 0.762001-3000 29 0.09 75916 0.503001-4000 15 0.05 53238 0.354001-5000 11 0.03 51605 0.345001-10000 28 0.09 195951 1.2910001 & above 55 0.17 13757849 90.81Total 32210 100 15150000 100Physical Mode 76 0.23 11256 0.07

Electronic Mode 32134 99.77 15138744 99.93

(b) Shareholding pattern as on March 31, 2007:

Category No. of shares Percentage of issuedheld share capital

Promoter-Tata Consultancy Services Limited 7744961 51.12Mutual Funds and UTI 1844331 12.18Banks 50 0.00Financial Institutions/ Insurance Companies 1782960 11.77FIIs 1706429 11.26NRIs/Foreign Nationals 78531 0.52Private Bodies Corporates 437913 2.89Indian Public 1554825 10.26Total 15150000 100.00

The authorized and paid-up capital of your Company are Rs.35 crores and Rs.15.15 crores, respectively. The Company has not changedits share capital (due to rights, bonus, preferential issue, IPO, buyback, capital reduction, amalgamation, de-merger etc.) during the yearunder review.

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(c) Top ten Shareholders as on March 31, 2007:

Category Name No. of shares Percentage

Promoter Tata Consultancy Services Limited 7744961 51.12Mutual Fund HDFC Trustee Company Ltd – HDFC Equity Fund 1244984 8.21FII Aberdeen Asset Managers Limited A/c Aberdeen International 960000 6.34Ins. Co. Life Insurance Corporation of India 934220 6.17Ins. Co. General Insurance Corporation of India 406941 2.68Ins. Co. The New India Assurance Company Ltd. 234131 1.55FII Merrill Lynch Capital Markets Espana S.A.S.V. 210107 1.39Mutual Fund Fidelity Trustee Pvt. Ltd. – A/c Fideli 148769 0.98Mutual Fund HDFC Trustee Company Ltd – HDFC MF Monthly Income Plan 140000 0.92FII Goldman Sachs Investments (Mauritius) Ltd. 133015 0.88

(xii) Dematerialisation of shares and liquidity99.93% of the equity shares have been dematerialised by about 99.77% of the total shareholders as on March 31, 2007. The Company’sshares can be traded only in dematerialised form as per SEBI notification. The Company has entered into Agreement with NSDL andCDSL whereby shareholders have the option to dematerialise their shares with either of the depositories. Equity shares are activelytraded in BSE and NSE.

(xiii) Outstandings GDRs/ADRs/Warrants or any convertible instruments, conversion date and likely impact on equity

The Company has not issued any GDRs/ADRs/Warrants or any convertible instruments.

(xiv) Plant locationsYour Company is not a manufacturing unit and thus not having any Plant. However, our offices are located in almost all metropolitancities in India.

(xv) Address for correspondenceThe Company Secretary & Head-LegalCMC LimitedPTI Building, 5th Floor4, Sansad MargNew Delhi-110001Tel.: 91-11-23736151-58Fax : 91-11-23736159Email: [email protected]

(xvi) Electronic Clearing Service (ECS)The Company is availing of the ECS facility to distribute dividend to those Members who have opted for it, through the ECS facility inmetropolitan cities.

NON-MANDATORY REQUIREMENTS(a) Remuneration Committee

The Company is having a Remuneration Committee consisting of Non-Executive Directors, with the Chairman being an IndependentDirector.During the year, 2 Remuneration Committee meetings were held on April 15 and August 14 in 2006.

The members of the Remuneration Committee are as follows:Name Attendance in meeting- Dr KRS Murthy – Chairman 02- Mr S Ramadorai 02- Mr Surendra Singh 01- Mr C B Bhave 02

The scope and function of the Remuneration Committee is to review and fix the remuneration payable to the Executive Directors ofthe Company.

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(b) Ethics & Compliance CommitteeThe Company also has an Ethics and Compliance Committee for the following purpose:

- Set forth the policies relating to and oversee the implementation of the code of conduct for prevention of insider trading andcode of corporate disclosure practices.

- Take on record the status reports prepared by the compliance officer dealing in securities by the specified persons on monthlybasis.

- Decide penal action in respect of violation of the SEBI Regulations/code by any specified person.

The composition of the Ethics and Compliance Committee is given below:

Mr Surendra Singh ChairmanMr R Ramanan MemberMr Shardul Shroff MemberMr Vivek Agarwal, MemberCompany Secretary & Head - Legal

(c) Executive Committee

The Company has an Executive Committee. The objectives and role of Executive Committee are as follows:

- Long term financial projections and cash flows.

- Capital and Revenue Budgets and Capital Expenditure Programmes.

- Acquisitions, divestment and business restructuring proposals.

- Senior management succession planning.

- Any other item as may be decided by the Board.

During the year, 2 Executive Committee meetings were held on February 26 and March 17, 2007. All members were present inboth the meetings.

The composition of the Executive Committee is given below:

Mr S Ramadorai ChairmanMr R Ramanan MemberMr Ishaat Hussain MemberDr K R S Murthy MemberMr C B Bhave Member(w.e.f. 17-03-2007)

(d) Nomination Committee

The company has a Nomination Committee. The objectives of the Committee are to identify the Independent Directors and torefresh the composition of the Board from time to time.

The composition of the Nomination Committee is as under:

Mr S Ramadorai ChairmanMr R Ramanan MemberMr Ishaat Hussain MemberDr K R S Murthy Member

(e) Whistle Blower Policy

Your Company has established a mechanism called ‘Whistle Blower Policy’ for employees to report to the management instancesof unethical behavior, actual or suspected, fraud or violation of the Company’s code of conduct or ethics policy.

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DECLARATION OF THE MANAGING DIRECTOR & CEO

This is to certify that the Company has laid down Code of Conduct for all Board Members and Senior Management of the Company and thecopies of the same are uploaded on the website of the Company – www.cmcltd.com

Further certified that the Members of the Board of Directors and Senior Management personnel have affirmed having complied with theCode applicable to them during the year ended March 31, 2007.

Date : April 14, 2007 R RAMANANPlace : Mumbai MANAGING DIRECTOR & CEO

CORPORATE GOVERNANCE COMPLIANCE CERTIFICATE

The MembersCMC LimitedCMC CentreOld Mumbai Highway, GachibowliHyderabad - 500 032

We have examined all relevant records of CMC Limited (the Company) for the purpose of certifying of the conditions of the CorporateGovernance under Clause 49 of the Listing Agreement with Stock Exchanges for the financial year ended 31st March, 2007. We have obtainedall the information and explanations which to the best of our knowledge and belief were necessary for the purposes of certification.

The compliance of the conditions of Corporate Governance is the responsibility of the management. Our examination was limited to theprocedure and implementation thereof. This certificate is neither an assurance as to the future viability of the Company nor of the efficacyor effectiveness with which the management has conducted the affairs of the Company.

On the basis of our examination of the records produced explanations and information furnished, we certify that the Company has compliedwith the conditions of Clause 49 of the Listing Agreement.

Chandrasekaran AssociatesCompany Secretaries

Dr S ChandrasekaranDate : April 16, 2007 Senior PartnerPlace : New Delhi (Membership No. FCS 1644, CP 715)

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COMPANY SECRETARY’S RESPONSIBILITY STATEMENT

The Company Secretary confirms that the Company has:

i) maintained all the books of accounts and statutory registers required under the Companies Act, 1956 (“the Act”) and the rulesmade thereunder;

ii) filed Annual Reports and Annual Returns with the Registrar of Companies and also filed the documents time to time with StockExchanges;

iii) not entered into any contract or transactions in terms of Section 297 of the Act;

iv) not provided any loan to any Director of the Company in terms of Section 295 of the Act;

v) paid remuneration to its managerial personnel within the limits specified in terms of Section 198, 309 read with Schedule XIII ofthe Act;

vi) altered the Object Clause of the Memorandum of Association of the Company by the Postal Ballot Process and complied with theformalities of the Act;

vii) issued all notices required to be given for convening of Board Meetings, Committee Meetings and Annual General Meetingwithin the time limit prescribed by Law;

viii) conducted the Board Meetings, Committee Meetings and Annual General Meeting as per the Act;

ix) complied with all the requirements relating to the Minutes of the proceedings of the Meetings of the Board of Directors, Committeesand the Shareholders;

x) made the disclosures required under the Act including those required in pursuance of the disclosures made by the Directors;

xi) obtained all necessary approvals of the Directors, Shareholders and other Authorities as per the requirements;

xii) not exceeded its borrowing powers;

xiii) paid dividend amounts to the Shareholders within the time limit prescribed;

xiv) complied with the requirements of the Listing Agreement entered into with the Stock Exchanges;

xv) complied with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997;

xvi) complied with the provisions of SEBI (Prohibition of Insider Trading) Regulations, 1992.

For CMC LIMITED

Mumbai Vivek AgarwalApril 14, 2007 Company Secretary & Head - Legal

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AUDITORS’ REPORT

TO THE MEMBERS OFCMC LIMITED

1. We have audited the attached Balance Sheet of CMC Limited, as at 31 March, 2007, the Profit and Loss Account and theCash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statementsare the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made bythe Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specifiedin paragraphs 4 & 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 necessaryfor the purposes of our audit;

b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears fromour examination of those books;

c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement withthe books of account;

d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report complywith the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) In our opinion and to the best of our information and according to the explanations given to us, the said accountsgive the information required by the Companies Act, 1956, 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 31 March, 2007;

ii. in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

5. On the basis of written representations received from the directors, as on 31 March, 2007, and taken on record by theBoard of Directors, we report that none of the directors is disqualified as on 31 March, 2007, from being appointed as adirector in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

For S.B. Billimoria & Co.Chartered Accountants

Mumbai Jitendra Agarwal14 April, 2007 Partner

(Membership No. 87104 )

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ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph 3 of our report of even date)

i. a. The Company has maintained proper records showing full particulars, including quantitative details and situationof fixed assets.

b. The Company has a programme of physically verifying its fixed assets in a phased manner designed to cover allassets over a period of two years, which in our opinion is reasonable having regard to the size of the Company andthe nature of its business. In accordance with this programme, the Management had carried out a physical verificationof fixed assets at some locations during the year and necessary adjustments were made for discrepancies arisingout of such verification.

c. The Company has not disposed off substantial part of its fixed assets during the year.

ii. a. As explained to us, inventory in the Company’s possession has been verified by the Management during the year atreasonable intervals. For materials lying with third parties or at customers’ sites aggregating to Rs. (000s) 40,092 inthe absence of confirmations from such parties, we have relied on certification from the respective Project Managers.

b. In our opinion, the procedures of physical verification of inventories followed by the Management are reasonableand adequate in relation to the size of the Company and the nature of its business.

c. In our opinion, the Company has maintained proper inventory records. The discrepancies noticed between thephysical stocks and book records were not material and the same have been properly dealt with in the books ofaccount.

iii. The Company has not granted or taken any loans, secured or unsecured, to or from Companies, firms or other partieslisted in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of clause4(iii) of the Order are not applicable to the Company.

iv. In our opinion and according to the information and explanations given to us, there is adequate internal control systemcommensurate with the size of the Company and the nature of its business for the purchase of inventory and fixedassets and for the sale of goods and services.

v. Based on the examination of the books of account and related records and according to the information and explanationsprovided to us, there are no contracts or arrangements with Companies, firms or other parties which need to be listed inthe register maintained under Section 301 of the Companies Act, 1956.

vi. The Company has not accepted any deposits from the public, within the meaning of Sections 58A and 58AA or any otherrelevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

vii. In our opinion the Company has an adequate internal audit system commensurate with the size of the Company and

nature of its business.

viii. According to the information and explanations given to us, the Central Government has not prescribed maintenance ofcost records under clause (d) of sub-section (1) of Section 209 of the Companies Act, 1956 for the Company.

ix. According to the information and explanations given to us and the records of the Company examined by us:

a. the Company has generally deposited its statutory dues including Provident Fund, Investor Education and ProtectionFund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty and Cess within theprescribed time with the appropriate authorities during the year and that there are no undisputed amounts payablein respect of these dues which have remained outstanding as at 31 March 2007 for a period of more than sixmonths from the date they became payable. The Company’s operations do not give rise to any Excise Duty.

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b. dues of Income Tax, Sales Tax and Works Contract Tax aggregating to Rs. (000s) 38,937 have not been deposited onaccount of various disputes as set out in the Attachment. We have been further informed that there are no dues inrespect of Wealth Tax, Customs Duty and Cess which have not been deposited on account of any dispute. TheCompany’s operations do not give rise to any Excise Duty.

x. The Company does not have any accumulated losses nor has incurred any cash losses during the current and theimmediately preceding financial year.

xi. Based on the examination of the books of account and related records and according to the information and explanationsprovided to us, the Company has not defaulted in repayment of dues to the banks. The Company has not taken anyloans from financial institutions nor has it issued any debentures.

xii. According to the information and explanations given to us, the Company has not granted loans and advances on thebasis of security by the way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause4(xii) of the Order are not applicable to the Company.

xiii. In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Accordingly, provisions of clause 4(xiii) of the Order are not applicable to the Company.

xiv. In our opinion and according to the information and explanations given to us the Company is not dealing in shares,securities and debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are notapplicable to the Company.

xv. According to the information and explanations given to us, the Company has not given any guarantee for loans takenby others from banks or financial institutions.

xvi. According to the information and explanations given to us and the records of the Company examined by us, the Company

has not obtained any term loans during the year.

xvii. According to the information and explanations given to us, and on an overall examination of the Balance Sheet of theCompany, funds raised on short term basis have prima facie, not been utilised for long term investment.

xviii. According to the information and explanations given to us, the Company has not made any preferential allotment ofshares to parties and Companies covered in the register maintained under Section 301 of the Companies Act, 1956.

xix. According to the information and explanations given to us, the Company has not issued any debentures during theperiod covered by our report. Accordingly, the provisions of clause (xix) of the Order are not applicable to the Company.

xx. The Company has not raised any money by way of public issues during the year.

xxi. According to the information and explanations given to us and to the best of our knowledge and belief, no fraud on orby the Company has been noticed or reported during the year.

For S.B. BILLIMORIA & CO.Chartered Accountants

Mumbai Jitendra Agarwal14 April, 2007 Partner

(Membership No. 87104)

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ATTACHMENT(Referred to in paragraph ix b. of Annexure to the Auditors’ Report)

Information pursuant to clause 4(ix)(b) of Companies (Auditor’s Report) Order, 2003 as amended by Companies(Auditor’s Report) (Amendment) Order, 2004 in respect of dues disputed, not deposited with various authorities.

Nature of Dues Amount Financial Forum where(Rs./000s) Year/Period the dispute is pending

Income TaxA. Maharashtra

i. Assessment Tax 6,014 2003-04 CommissionerSales TaxA. West Bengal

i. Tax demand on disallowance of credit for Tax Deducted at 2,571 1997-98 to Deputy Commissioner -Source (TDS), concessional sales tax forms and set off of 2002-03 Commercial Taxesamount of tax paid to sub-contractors

ii. Tax demand imposed on enhancement of turnover 1,288 2003-04 Deputy Commissioner -Commercial Taxes

3,859B. Bihar

i. Tax demand and penalty imposed on enhancement of 3,919 1990-91, Commercial Taxesturnover during assessment and delay in filing of return. 1991-92 to Tribunal

1992-933,919

C. Madhya Pradeshi. Tax demand and penalty imposed on enhancement of turnover. 317 1987-88 High Courtii. Tax demand imposed on enhancement of turnover. 142 2002-03 Assistant Commissioner

459D. Orissa

i. Tax demand on disallowance of claim of service charges & 384 1994-95,of sales tax deducted at source. 2001-2002 & Assistant Commissioner

2002-03ii. Tax demand on disallowance of claim of service & labour charges. 809 1995-96, Sales Tax Tribunal

1999-2000 &2000-01

1,193E. Uttar Pradesh

i. Tax demand on inter state sales deemed as intra state sales. 364 1994-95 Sales Tax Tribunalii. Tax demand on disallowance of non taxable turnover. 38 1996-97 Deputy Commissioner –

Appealsiii. Tax demand on disallowance of credit for TDS and tax 287 2002-03 Assessing Authority

deposited through challans.689

F. Tamil Nadui. Tax demand imposed on enhancement of turnover 106 1994-95 CTO

& 1998-99ii. Tax demand imposed on enhancement of turnover 498 1996-97 Appellate Assistant

Commissioneriii. Tax demand on notional profit on cost of maintenance spares 92 1997-98 Appellate Assistant

and on disallowance of concessional sales tax forms. Commissioner696

G. KeralaTax demand for dispute on tax rate 49 1996-97 Assistant Commissioner

H. Andhra PradeshTax demand sales assessed as Works Contract. 18,190 2001-02 & Appellate Deputy

2002-03 CommissionerI. Jharkhand

Tax demand for dispute in Tax Rate 162 2001-02 Assistant CommissionerWorks Contract Tax

A. Delhii. Tax demand on disallowance of input credit. 52 1999-00 Assessing Authorityii. Tax demand on recomputation of gross turnover on the

basis of tax deducted at source certificates furnished. 3,655 2002-03 Assessing AuthorityTotal 3,707Grand Total 38,937

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BALANCE SHEET AS AT 31 MARCH, 2007

Schedule As at As atRef. 31.3.07 31.3.06

Rs./000s Rs./000s

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

For S B Billimoria & Co S Ramadorai R Ramanan Dr K R S MurthyChartered Accountants Chairman Managing Director & CEO Director

Jitendra Agarwal J K Gupta Vivek Agarwalsain S Singh S ShroffPartner Chief Financial Officer Company Secretary & Head-Legal Director DirectorMembership No. 87104

Mumbai Mumbai14 April, 2007 14 April, 2007

SOURCES OF FUNDS

1. Shareholders’ Funds(a) Share Capital 1 151,500 151,500(b) Reserves & Surplus 2 2,170,859 1,955,667

2,322,359 2,107,167

2. Loan Funds(a) Secured Loans 3 177,556 520,679(b) Unsecured Loans 4 — 150,000

177,556 670,679

3. Deferred Tax Liabilities (See note 18) — 68,799

2,499,915 2,846,645

APPLICATION OF FUNDS

4. Fixed Assets 5(a) Gross Block 1,298,516 1,292,660(b) Less: Depreciation 750,077 748,170

(c) Net Block 548,439 544,490

(d) Capital Work in Progress 282,178 20,818

5. Investments 6 81,801 81,801

6. Deferred Tax Assets (See note 18)42,104 —

7. Current Assets(a) Inventories 7 230,651 523,596(b) Sundry debtors 8 2,416,659 2,330,232(c) Unbilled revenues 1,181,304 1,323,649(d) Cash and bank balances 9 360,782 265,033(e) Loans and advances 10 847,776 610,835

5,037,172 5,053,3458. Less : Current Liabilities and Provisions 11

(a) Current Liabilities 2,911,007 2,705,788(b) Provisions 580,772 148,021

3,491,779 2,853,8099. Net Current Assets

1,545,393 2,199,536

2,499,915 2,846,645Notes forming part of the financial statements 16

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2007

Schedule Year ended Year endedRef. 31.3.07 31.3.06

Rs./000s Rs./000s

INCOME1. Sales and Services 12 9,889,148 8,287,9022. Other Income 13 54,889 289,669

9,944,037 8,577,571EXPENDITURE3. Operating and other expenses 14 8,975,841 7,847,0474. Depreciation 5 82,429 91,0215. Interest (Net) 15 37,032 38,417

9,095,302 7,976,485

Profit Before Tax 848,735 601,0866. Provision for taxes

– Current income tax 177,992 135,342– Deferred income tax 10,898 7,345– Fringe benefit tax 18,855 17,299

Profit After Tax 640,990 441,1107. Balance brought forward

from previous year 1,749,686 1,439,070

8. Less: Adjustment for increase in opening povision forretirement benefits (see note 17) 78,566 –

1,671,120 1,439,070

Amount available for appropriations 2,312,110 1,880,1709. Appropriations

(a) General Reserve 64,099 44,110(b) Proposed Dividend 121,200 75,750(c) Tax on Proposed Dividend 20,598 10,624

(d) Balance carried to Balance Sheet 2,106,213 1,749,686

Basic and diluted Earnings Per Share (Rupees) (See note 21) 42.31 29.12

Notes forming part of the financial statements 16





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CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2007Year ended Year ended

31.3.07 31.3.06

Rs./000s Rs./000s Rs./000sA. CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax* 848,735 601,086Adjustments for :

Depreciation 82,429 91,021Interest paid 39,619 41,466Bad debts/advances written off (net) 191,418 64,115Unclaimed balances/provisions written back (13,555) (12,401)Provision for doubtful debts 1,174 43,543Unrealised Foreign exchange loss/(gain) 6,707 (9,099)Fixed assets written off 2,120 869(Profit) /Loss on sale of fixed assets 2,133 (246,581)Transfer from capital reserve (895) (3,079)

311,150

Operating profit before working capital changes 1,159,885 570,940Adjustments for :

Trade and other receivables (121,112) (487,052)Inventories 292,945 (203,562)Trade payables and other liabilities 400,765 611,635

Cash generated from operations 1,732,483 491,961Direct taxes paid/deducted at source (260,622) (252,898)

NET CASH FROM/(USED) IN OPERATING ACTIVITIES (A) 1,471,861 239,063

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets (359,265) (103,035)Sale of fixed assets 7,274 262,833

NET CASH FROM/(USED) IN INVESTING ACTIVITIES (B) (351,991) 159,798

C. CASH FLOW FROM FINANCING ACTIVITIESInterest paid (39,915) (41,201)Proceeds/(Payment) of short term borrowings (493,123) (146,520)Dividend paid (including dividend tax) (86,374) (77,534)

NET CASH USED IN FINANCING ACTIVITIES (C) (619,412) (265,255)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) 500,458 133,606

Cash and cash equivalents as on 1 April, 2006 [Excluding unrealised exchange difference of Rs. (‘000s) 1,201] 263,832 130,226

Less: Transitional provisions as per AS-15 not affecting Cash Flow (404,906) –

CASH AND CASH EQUIVALENTS AS ON 31 MARCH, 2007[Excluding unrealised exchange difference of Rs. (‘000s) 1,398] 359,384 263,832

* includes project grants from Government of Rs. (‘000s) Nil (Previous year Rs. (‘000s) 177)

As per our report attached For and on behalf of the Board




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37

SCHEDULES FORMING PART OF THE ACCOUNTS

As at As at31.3.07 31.3.06

Rs./000s Rs./000s

Schedule 1 : SHARE CAPITAL

Authorised[35,000,000 (Previous year 35,000,000) equity sharesof Rs. 10 each] 350,000 350,000

Issued, Subscribed and Paid up15,150,000 (Previous year 15,150,000) equity sharesof Rs. 10 each fully paid up 151,500 151,500

Of the above:7,744,961 (Previous year 7,744,961) equity shares are heldby Tata Consultancy Services Limited, the Holding Company.

(See note 1)

Schedule 2 : RESERVES & SURPLUS

(a) Capital Reserve(Grants from Government of India)

(i) Opening balance 1,442 4,521(ii) Less: Transferred to Profit and Loss Account 895 3,079

(iii) Closing balance 547 1,442

(b) General Reserve(i) Opening balance 204,539 160,429(ii) Add: Transferred from Profit and Loss account 64,099 44,110(iii) Less -Adjustment for increase in opening provision for

short term employee benefits (See note 17) 132,465 —(iv) Less -Adjustment for increase in opening provision for

retirement benefits (See note 17) 72,074 —

(v) Closing balance 64,099 204,539

(c) Profit and Loss account 2,106,213 1,749,686

2,170,859 1,955,667

Schedule 3 : SECURED LOANS

From banksCash credit accounts 27,556 120,679Short term loan 150,000 400,000

177,556 520,679

Note:1. Cash credits and short term loan from banks are secured by hypothecation of inventories, debtors and other current assets.2. Loans repayable within one year Rs. ‘(000s) 150,000 (Previous year Rs. ‘(000s) 400,000)

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As at As at31.3.07 31.3.06

Rs./000s Rs./000s

Schedule 4 : UNSECURED LOANS

a. Short Term Loans(i) From banks – 100,000(ii) Commercial paper – 50,000

– 150,000

Note:1. Loans repayable within one year Rs. ’(000s) Nil [Previous year Rs. ‘(000s) 150,000]2. Maximum amount outstanding on commercial paper during the year Rs. ‘(000s) 500,000 [Previous year Rs. ‘(000s) 300,000]

Schedule 5 : FIXED ASSETS (See note 6)Amounts in Rs./000s

GROSS BLOCK DEPRECIATION NET BLOCK

Particulars As at Additions Deductions/ As at As at For the Deductions/ As at As at As at01.04.06 Adjustments 31.03.07 01.04.06 year Adjustments 31.03.07 31.03.07 31.03.06

(a) Land(i) Leasehold 59,197 418 — 59,615 8,891 792 — 9,683 49,932 50,306(ii) Freehold 605 — — 605 — 605 605

(b) Buildings(i) Leasehold 16,167 — — 16,167 12,077 1,572 — 13,649 2,518 4,090(ii) Freehold 305,384 — 150 305,234 61,012 4,977 34 65,955 239,279 244,372

(c) Plant & Machinery(i) Computers 575,422 74,679 70,800 579,301 425,459 55,860 65,608 415,711 163,590 149,963(ii) Office and

other equipment 47,270 3,127 5,161 45,236 26,861 3,169 3,538 26,492 18,744 20,409(iii) Others 182,095 10,283 6,960 185,418 152,668 9,688 6,140 156,216 29,202 29,427

(d) Furniture & Fittings 100,666 9,398 8,978 101,086 58,906 5,815 5,202 59,519 41,567 41,760

(e) Vehicles 5,854 — — 5,854 2,296 556 — 2,852 3,002 3,558

TOTAL 1,292,660 97,905 92,049 1,298,516 748,170 82,429 80,522 750,077 548,439 544,490

(f) Capital work-in-progress 20,818 262,156 796 282,178 — — — — 282,178 20,818

GRAND TOTAL 1,313,478 360,061 92,845 1,580,694 748,170 82,429 80,522 750,077 830,617 565,308

Previous Year 1,266,965 111,562 65,049 1,313,478 696,550 91,021 39,401 748,170 565,308 570,415

As at As at31.3.07 31.3.05

Rs./000s Rs./000s

Schedule 6 : INVESTMENTS (At cost)

Long-term, Non-trade investments (unquoted)

160,001,000 (Previous year 160,001,000)non-assessable shares of USD 0.01 each, fully paid upin CMC Americas Inc., USA(formerly known as Baton Rouge International Inc.),a wholly owned subsidiary. 81,801 81,801

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As at As at31.3.07 31.3.06

Rs./000s Rs./000s

Schedule 7 : INVENTORIES

(a) Finished goods - equipment for resale 197,697 477,952(b) Components/spares for maintenance and resale 21,171 33,692(c) Education and training material 10,005 8,858(d) Work-in-progress 1,778 3,094

230,651 523,596

Note: Finished goods include goods in transit Rs. ‘(000s) 1,667 (Previous year Rs. ‘(000s) 40,089)

Schedule 8 : SUNDRY DEBTORS

a. Over six months old (unsecured):Considered good 416,791 387,326Considered doubtful 209,451 222,274

626,242 609,600b. Others (unsecured):

Considered good 1,985,279 1,927,552

2,611,521 2,537,152Less: Provision for doubtful debts 209,451 222,274

2,402,070 2,314,878

c. Future lease installments receivable (unsecured) (See note 14b) 40,711 45,422Less: Unearned finance and service charges 26,122 30,068

14,589 15,354

2,416,659 2,330,232

Notes:1. (i) Debtors include amounts due from a subsidiary company 202,744 123,867

(ii) Maximum balance outstanding during the year 220,682 123,867

2. (i) Debtors include amounts due from the holding company 833,152 531,636(ii) Maximum balance outstanding during the year 1,272,096 531,636

Schedule 9 : CASH AND BANK BALANCES

(a) Cash on hand [including stamps on hand 2,587 1,642Rs. ‘(000s) 16 (Previous year Rs. ‘(000s)22)]

(b) Cheques/demand drafts on hand 28,217 24,217(c) Balance with scheduled banks in:

(i) Current accounts 71,373 37,541(ii) Cash credit accounts 75,910 89,438(iii) Deposit accounts* 182,695 112,195

360,782 265,033

*includes Rs. ‘(000s) 1,195 on account of fixed deposits pledged withcustomers as security (Previous year Rs. ‘(000s) 6,195)

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As at As at31.3.07 31.3.06

Rs./000s Rs./000s

Schedule 10 : LOANS AND ADVANCES

(a) Advances recoverable in cash or in kind orfor value to be received* 599,177 434,059

(b) Advance income tax and tax deducted at source[Net of provision for tax Rs. ‘(000s) 1,130,714 {Previous year 258,290 186,467Rs. ‘(000s) 1,147,738} & Firnge benefit tax Rs. ‘(000s) 27,212{Previous year Rs. ‘(000s) 17,299}]

(c) Less: Advances considered doubtful 857,467 620,526

9,691 9,691

847,776 610,835(d) Of the above, amounts :

(i) Fully secured 27,136 55,520(ii) Unsecured, considered good 820,640 555,315(iii) Considered doubtful 9,691 9,691

857,467 620,526Notes:1. Amounts due from directors 172 —2. Maximum amounts due from directors during the year 172 —3. * includes deposits with Customs, Octroi, Electricity Boards etc. 11,179 21,954

Schedule 11 : CURRENT LIABILITIES AND PROVISIONS

LIABILITIES(a) Sundry Creditors* (See note 23) 1,478,042 1,617,071(b) Customers’ security deposits and credit balances and

advance against supplies and services to be rendered 596,598 432,378(c) Investor Education and Protection Fund - Unclaimed dividend 1,284 1,053(d) Unearned revenue 724,136 571,978(e) Other liabilities 110,837 82,902(f ) Interest accrued but not due 110 406

2,911,007 2,705,788PROVISIONS(a) Proposed dividends 121,200 75,750(b) Provision for Tax on Proposed dividends 20,598 10,624(c) Provision for leave encashment 233,568 61,647(d) Provision for post retirement bebefits 56,553 —(e) Provision for Gratuity 148,853 —

580,772 148,021

3,491,779 2,853,809

*Sundry Creditors include:Due to Small Scale Industrial Undertakings 872 1,143Due to Others 1,477,170 1,615,928

1,478,042 1,617,071

The names of small scale industrial undertakings to whom the company owes a sum outstanding for more than 30 days aggregating toRs. ‘(000) 720 [Previous year Rs. ‘(000) 857] are Victoria Forms, CCS Infotech Limited, Numeric Power Systems Ltd.

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Year ended Year ended31.3.07 31.3.06

Rs./000s Rs./000s

Schedule 12 : SALES AND SERVICES

(a) Sale of purchased equipment 4,035,455 3,761,689(b) Services

(i) Software services 3,283,722 2,582,868(ii) Maintenance services 685,719 777,006(iii) Other services 1,432,551 770,597

(c) Education and training 437,693 382,368(d) Lease rentals 14,008 13,374

9,889,148 8,287,902

Note: Lease rentals include income Rs. ‘(000s) 8,171 [Previous year Rs. ‘(000s) 10,053] under finance leases.

Schedule 13 : OTHER INCOME

(a) Project Grants from Government – 177(b) Gain on foreign exchange fluctuations (Net of loss) – 4,327(c) Profit on sale of fixed assets (Net of loss) – 246,581(d) Transfer from capital reserve - capital grants (See note 2e) 895 3,079(e) Unclaimed balances/provisions written back 13,555 12,401(f ) Miscellaneous income 40,439 23,104

54,889 289,669

Schedule 14 : OPERATING AND OTHER EXPENSES

1. Equipment Purchased for Resale 3,958,933 3,659,413

2. Payments to and Provisions for Employees(a) Salaries, allowances and incentives 1,516,770 1,369,384(b) Contribution to provident and other funds 99,704 112,034(c) Staff welfare expenses 122,576 108,045(d) Retirement benefits cost (See note 19) 7,101 –

Sub-Total 1,746,151 1,589,463

3. Operating and Administration Expenses(a) Components/spares for maintenance and resale 333,218 255,850(b) Sub-contracted/outsourced services 775,313 616,048(c) Purchased software 49,093 42,799(d) Freight, handling and packing expenses 36,920 34,571(e) Rent and hire charges 103,736 59,336(f ) Rates and taxes 16,816 10,125(g) Repairs and maintenance:

(i) Building 32,543 32,748(ii) Plant and machinery 28,572 31,370(iii) Other 8,421 11,227

(h) Electricity charges 72,310 60,334(i) Insurance 6,424 7,284

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(j) Travelling and conveyance 248,759 230,961

(k) Printing, stationery and computer consumables 27,480 21,167

(l) Communication and postage 70,064 71,516

(m) Advertisement, publicity and business promotion 17,292 14,114

(n) Directors’ fees 900 540

(o) Professional and legal fees 72,734 43,037

(p) Education and training :

(i) Payments to franchisees 113,410 99,838

(ii) Other expenses 77,128 92,558

(q) Living expenses – overseas contracts 744,702 688,645

(r) Bad debts/advances written off 190,001 64,115[net of bad debts recovered Rs.’(000s) 1,417{Previous year Rs.’(000s) 912}]

(s) Provision for doubtful debts 1,174 43,543

(t) Loss on disposal of fixed assets (net) 4,253 869

(u) Loss on foreign exchange fluctuations (Net of Gain) 17,274 –

(v) Other expenses (see note 15) 222,220 65,576

Sub-Total 3,270,757 2,598,171

Total 8,975,841 7,847,047


Rs./000s Rs./000s

Schedule 14 : OPERATING AND OTHER EXPENSES (Contd.)

Schedule 15 : INTEREST

1. Interest expense

(a) On fixed loans 28,012 34,217(b) Cash credit accounts with banks 11,187 6,785

(c) Others 420 464

39,619 41,4662. Less: Interest earned

(a) Loans and advances 196 541

(b) Fixed deposits with banks [Tax deducted at sourceRs. ‘(000s) 228 {Previous year Rs. ‘(000s) 188}] 1,347 1,614

(c) Others [Tax deducted at source Rs. ‘(000s) 156(Previous year Rs. ‘(000s) 93}] 1,044 894

2,587 3,049

37,032 38,417

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Schedule 16 : NOTES FORMING PART OF THE ACCOUNTS

1. Background

CMC Limited (“the Company”) is engaged in the design, development and implementation of software technologies and applications,providing professional services in India and overseas, and procurement, installation, commissioning, warranty and maintenance ofimported/ indigenous computer and networking systems, and in education and training.

The Company was a Government of India (GoI) enterprise up to 15 October, 2001. Under the disinvestment process, GoI sold 7,726,500shares representing 51 percent of the share capital to Tata Sons Limited, on 16 October, 2001. The GoI further sold its entire remainingshares representing 26.25 percent of the share capital, in March 2004 by an open offer to the public.

On 29 March, 2004, as per specific approval granted by SEBI, Tata Sons Limited transferred its entire shareholding in the Company toTata Consultancy Services Limited (a subsidiary of Tata Sons Limited). As a result, the Company has become a subsidiary of TataConsultancy Services Limited.

2. Significant Accounting Policies

a. Basis of accountingThe financial statements have been prepared under the historical cost convention and comply with the Accounting Standardsprescribed by the Institute of Chartered Accountants of India and referred to in Section 211(3)(c) of the Companies Act, 1956.

b. Use of estimatesThe preparation of financial statements requires the management of the Company to make estimates and assumptions thataffect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of thefinancial statements and reported amounts of income and expenses during the period. Example of such estimates includeprovisions for doubtful debts, future obligations under employee retirement benefit plans, provision for income taxes, accountingfor contract costs expected to be incurred to complete software development and the useful lives of fixed assets and intangibleassets. Contingencies are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated.Actual results could differ from such estimates.

c. Fixed assets and depreciation

i. All fixed assets are stated at cost less accumulated depreciation. Cost includes purchase price and all other attributable costsof bringing the assets to working condition for intended use.

ii. Fixed assets acquired out of grants, the ownership of which rests with the grantor, are capitalised at cost.

iii. Capital work-in-progress comprises the cost of fixed assets that are not ready for their intended use at the balance sheetdate.

iv. Depreciation on all assets is charged proportionately from the date of acquisition/installation on straight line basis at ratesprescribed in Schedule XIV of the Companies Act, 1956 except in respect of:• Leasehold assets that are amortised over the period of lease.• Computers, Plant and Machinery - (other items), that are depreciated over six financial years.

Assets costing less than Rs. 5,000 individually have been fully depreciated in the year of purchase.

d. Revenue Recognition

i. Revenue relating to equipment supplied is recognised on delivery to the customer and acknowledgement thereof, inaccordance with the terms of the individual contracts.

ii. Revenue from software development on fixed price contracts is recognised according to the milestone achieved as specifiedin the contract, and is adjusted on the “proportionate completion” method based on the work completed.

iii. On time and material contracts, revenue is recognised based on time spent as per the terms of the specific contracts.

iv. Revenue from warranty and annual maintenance contracts is recognised pro-rata over the life of the contracts. Maintenancerevenue on expired contracts on which services have continued to be rendered is recognised on renewal of contract or onreceipt of payment.

v. Revenue from “Education and Training” is recognised on accrual basis over the course term.

vi. Dividend income is recognised when the Company’s right to receive dividend is established.

e. Grants

i. Grants received for capital expenditure incurred are included in “Capital Reserve”. Fixed assets received free of cost areconsidered as a grant and are capitalised at notional value with a corresponding credit to the Capital Reserve account.

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An amount equivalent to the depreciation charge on such assets is appropriated from capital reserve and recognised asrevenue in the Profit and Loss Account.

ii. Grants received for execution of projects is recognised as revenue to the extent utilized.

iii. Unutilised grants are shown under other liabilities.

f. Inventories

Inventories include finished goods, stores and spares, work-in progress and education and training material.

i. Inventories of finished goods mainly comprising equipment for resale are valued at the lower of cost (net of provision forobsolescence) or net realisable value.

ii. Inventories of stores and spares are valued at cost, net of provision for diminution in the value. Cost is determined on weightedaverage cost basis.

iii. Inventories of “Education and Training material” are valued at the lower of cost and net realisable value. Cost is determinedon the “First In first Out” basis.

iv. Work-in-progress comprises cost of infrastructural facilities in the process of installation at customers’ sites. These are valuedat cost paid/payable to sub-contractors.

g. Research and Development Expenses

Research and development costs of revenue nature are charged to the Profit and Loss account when incurred. Expenditure ofcapital nature is capitalised and depreciated in accordance with the rates set out in paragraph 2(c).

h. Foreign exchange transactions

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Monetary itemsdenominated in foreign currency and outstanding at the Balance Sheet date are translated at the exchange rate ruling on thatdate. Exchange differences, other than on foreign currency loans to acquire fixed assets from countries outside India are recognizedin the profit and loss account. In case of forward contracts for foreign exchange, the difference between the forward rate and theexchange rate at the date of the transaction are recognised over the life of the contract.

i. Investments

Long-term investments are stated at cost, less provision for other than temporary diminution in the carrying value of eachinvestment.

j. Leases

Assets given under finance leases are recognised as receivables at an amount equal to the net investment in the lease and thefinance income is based on a constant rate of return on the outstanding net investment.

Lease arrangements where the risks and rewards incident to ownership of an asset substantially vest with the lessor, are recognizedas operating leases. Lease rents under operating leases are recognized in the profit and loss account on a straight line basis.

k. Retirement benefits

i. Post-employment benefit plans

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

For defined benefit schemes, the cost of providing benefits is determined using Projected Unit Credit Method, with actuarialvaluation being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the Profit & Lossaccount for the period in which they occur. Past service cost is recognised to the extent the benefits are already vested, andotherwise is amortised on a Straight-line method over the average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefitobligations as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. Any assetresulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions infuture contributions to the scheme.

ii. Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange of services rendered byemployees is recognised during the period when the employee renders the services. These benefits include compensatedabsences and performance incentives.

l. Provision for taxation

Income tax comprises current tax and deferred tax. Deferred tax assets and liabilities are recognised for the future tax consequences

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of timing differences, subject to the consideration of prudence. Deferred tax assets and liabilities are measured using the tax ratesenacted or substantively enacted by the Balance Sheet date.

m. Impairment

At each balance sheet date, the Company reviews the carrying amounts of its fixed assets to determine whether there is anyindication that those assets suffered an impairment loss. If any such indication exists, the recoverable amount of the asset isestimated in order to determine the extent of impairment loss. Recoverable amount is the higher of an asset’s net selling priceand value in use. In assessing value in use, the estimated future cash flows expected from the continuing use of the asset and fromits disposal are discounted to their present value using a pre-discount rate that reflects the current market assessments of timevalue of money and the risks specific to the asset.

Reversal of impairment loss is recognized immediately as income in the profit and loss account.

n. Earnings per Share

The earnings considered in ascertaining the Company’s’ EPS comprises the net profit after tax. The number of shares used incomputing Basic EPS is the weighted average number of shares outstanding during the year.

3. Segment Information

i. Business segments

Based on similarity of activities, risks and reward structure, organisation structure and internal reporting systems, the Companyhas structured its operations into the following segments:Customer Services (CS): Hardware supplies and maintenance, facilities management and provision of infrastructure facilities.Systems Integration (SI): Systems study and consultancy, software design, development and implementation, softwaremaintenance and supply of computer hardware in accordance with customers’ requirements.IT Enabled Services (ITES) - (Formerly Indonet): Value added services, data network, data center services, web design andhosting etc.Education and Training (E&T): IT education and training service through its own centers and through franchisees.

Segment revenue and expenses include amounts, which are directly identifiable to the segment and allocable on a reasonablebasis. Segment assets include all operating assets used by the segment and consist primarily of debtors, inventory and fixedassets. Segment liabilities include all operating liabilities and consist primarily of creditors, advances/deposits from customersand statutory liabilities.

ii. Geographic segments

The Company also provides services overseas, primarily in the United States of America, United Kingdom and Middle East & AfricaRegion.

4. Research and Development Expenses

Expenditure includes “Research and Development” expenditure aggregating to Rs.’ (000s) 110,902 (Previous year Rs.’ (000s) 115,980).Amounts aggregating to Rs.’ (000s) 5,687 (Previous year Rs.’ (000s) 2,086) have been capitalised.

5. Contingent liabilities and commitmentsAt at As at

31.03.07 31.03.06

Rs./000s Rs./000sa. Claims against the company not acknowledged as debts

� Liability on income tax 6,014 18,838� Under litigation 133,012 32,661� ESI Demand 280 280� Disputed demands raised by Sales tax authorities for which the

Company has gone on appeal against the department* 32,177 31,350b. Unexpired Letters of Credit 375,455 435,418c. Guarantees issued by bankers against Company’s counter guarantee 1,013,489 1,277,283d. Others 24,016 26,540e. Sales tax on leased assets 3,726 3,726f. Estimated amount of contracts remaining to be executed on capital

account (net of advances) and not provided for 75,631 82,862

* No provision is considered necessary since the Company expects favourable decisions.

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6. Fixed Assets

Gross Block as at 31 March, 2007 includes:

a. Assets acquired from Grants and aggregating to Rs. ’(000s) 41,865 (Previous year Rs. ’(000s) 41,865) being the property ofGovernment of India. The depreciation for the year on such assets is Rs. ’(000s) 895 (Previous year Rs. ’(000s) 3,079) and theaccumulated depreciation at the year end is Rs. ’(000s) 41,390 (Previous year Rs. ’(000s) 40,495).

b. Assets aggregating to Rs. ’(000s) 7,210 (Previous year Rs. ’ (000s) 7,210) received free of cost. The depreciation for the year on suchassets is Rs. Nil (Previous year Rs. Nil) and the accumulated depreciation thereon is Rs.’ (000s) 7,138 (Previous year Rs. ’(000s) 7,138).

c. Plant and machinery given on lease aggregating to Rs. ’(000s) 19,812 (Previous year Rs. ’(000s) 30,198). The depreciation for theyear is Rs. ’(000s) 1,555 (Previous year Rs. ’ (000s) 3,498), the accumulated depreciation thereon being Rs. ’(000s) 15,297 (Previousyear Rs. ’(000s) 24,029).


Rs./000s Rs./000s7. Earnings in foreign currency

a. Export (Services) 1,091,561 692,871

b. Export (Hardware) 24,644 11,351

c. Technical consultancy services & others 102,827 105,215

8. Expenditure in Foreign Currency

a. Living allowance 60,345 139,185b. Travel 7,935 6,275c. Material cost 23,080 10,024d. Overseas branch expenses and Others 170,303 29,823

9. Remittances in foreign currencies for dividends

The particulars of dividend paid to non-resident shareholders in foreign currency during the year :

Units Year ended Year ended31.03.07 31.03.06

No. of non-resident shareholders Nos. Nil 20No. of shares held by them Nos. Nil 8,700Gross amount of dividend Rs. /000s Nil 39Year to which dividends relate 2004-05

10. Value of imports (calculated on CIF basis)a. Equipment /System software 1,994,668 1,606,770b. Stores and spares 3,190 4,019c. Capital equipment 50,634 138,001

11. Goods in Transit exclude customs duty pending clearance Rs. ’(000s) 49 (Previous year Rs. ‘(000s) 112).

12. Managerial Remuneration

a. Managerial Remuneration for Directors’(excluding provision for encashable leave and gratuityas separate figures for Whole-time Directors is not available). 2,896 879

b. The above is inclusive of:• Estimated expenditure on perquisites [includes Rs. (000s) Nil

(Previous year Rs. (000s) Nil) paid towards retirement benefits] 1,495 318• Contribution to Provident and Superannuation Fund 162 55

c. Directors sitting fees 900 540

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13. Information in regard to Purchases, Sales, Opening and Closing StocksComputer equipment and Peripherals


Nos. Rs./000s Nos. Rs./000sOpening stock 30,987 437,863 13,579 268,890Purchases 124,398 3,711,873 236,862 3,828,386Sales 142,737 4,031,148 219,454 3,758,571Closing stock* 12,648 196,030 30,987 437,863

* does not include goods in transit Rs. ‘(000s) 1,667 (Previous year Rs. ‘(000s) 40,089).

The quantitative details relate to quantities of main sub-systems whereas amounts include revenues relating to components as well, for which amountscan not be segregated.

14. Lease Commitments

a. Operating LeaseThe Company has taken property on operating lease and has recognized rent of Rs. ’(000) 9,147 (Previous Year Rs. (‘000) 6,242)The total of future minimum lease payments under leases for the following periods:-

Particulars As at As at31.03.07 31.03.06

(Rs./000s) (Rs./000s)

a. Not later than one year 4,965 7,648b. Later than one year but not later than five years 504 9,493

b. Finance LeaseThe Company has purchased and given on lease computer equipment, peripherals and system software. The details are asfollows:-

Particulars As at As at31.03.07 31.03.06Rs./000s Rs./000s

a. Total gross investment 40,711 45,422• Not later than one year 8,422 7,786• Later than one year but not later than five years 32,289 31,147• Later than five years — 6,489

b. Present value of Minimum Lease Payments receivable 14,590 15,354• Not later than one year 880 689• Later than one year but not later than five years 13,710 9,594• Later than five years — 5,071

c. Unearned Finance Income 26,122 30,068

15. Auditors’ Remuneration

Other expenses include Auditors’ remuneration as follows:Year ended Year ended

31.03.07 31.03.06(Rs./000s) (Rs./000s)

Statutory Audit 2,000 1,500Tax audit 800 600Other services 1,200 1,040Reimbursement of service tax 490 320Reimbursement of out-of-pocket expenses 450 244

4,940 3,704

16. Pending RBI approval, certain anticipated losses from past international operations amounting to Rs. ’(000s) 8,089 (Previous yearRs. ’(000s) 8,089), which stands provided for, are not written off.

Sanction of Reserve Bank of India for expenditure incurred on overseas operations amounting to Rs. ’(000s) 3,436 (Previous yearRs. ’(000s) 3,436) during the year 1991-92 has not yet been received.

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17. Short term employee benefits and post-retirement benefits as at 31 March, 2006 have been recomputed to comply with the revisedAccounting standard 15 “Employee Benefits” (AS-15) issued by the Institute of Chartered Accountants of India. The difference betweenthe amount so computed and the provision for post-retirement benefits as at 31 March, 2006 has been adjusted against the openingbalance (as at 1 April 2006) of General Reserve to the extent of Rs. ’(000s) 72,074 [net of deferred tax Rs.’(000s) 30,828] and from theProfit & Loss account to the extent of Rs. ’(000s) 78,566 [net of deferred tax Rs. ’(000s) 39,235].

In addition, liability for short term employee benefits amounting to Rs. ’(000s) 132,465 [net of deferred tax of Rs. ’(000s) 51,738] hasbeen adjusted against the opening balance in the profit and loss account.

18. Taxes

a. Current income tax includes taxes deducted in foreign jurisdiction Rs. ’(000s) 18,673 (Previous year Rs. ’(000s) 6,201).b. Deferred tax assets and liabilities are being offset as they relate to taxes on income levied by the same governing taxation laws.c. Break up of deferred tax assets/liabilities and reconciliation of current year deferred tax charge.

(All amounts in Rs./000s)

Opening Charged/ Charged/ Closing(Credited) (Credited)

to Reserves to P&L(i) Deferred Tax Liabilities:

Tax impact of difference between carrying 100,827 – 3,680 104,507amount of fixed assets in the financial statementsand the income tax return

(ii) Deferred Tax Assets:Tax impact of expenses charged in the financial 32,028 121,801* (7,218) 146,611statements but allowable as deductions in futureyears under income tax

Net Deferred Tax Liability (i-ii) 68,799 (121,801) 10,898 (42,104)

*See note 18 above

19. Retirement benefit plansa. Defined contribution plan

The Company makes contribution towards provident fund to a defined contribution retirement benefit plan for qualifyingemployees. The Company’s contribution to the Employees’ Provident Fund is deposited in a trust formed by the Company underthe Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 which is recognised by the Income-tax authorities. Theprovident fund plan is operated by the Regional Provident Fund Commissioner. Under the scheme, the Company is required tocontribute a specified percentage of payroll cost to the retirement benefit scheme to fund the benefits.

The Company recognised Rs.’ (000s) 86,404 (Previous year Rs.’ (000s) 82,610) for provident fund contributions in the Profit & Lossaccount. The Contribution payable to the plan by the Company is at the rate specified in rules of the scheme.

b. Defined benefit plani. Gratuity Plan

The Company makes annual contribution to the Employee’s Group Gratuity-cum-Life Assurance scheme of the Life InsuranceCorporation of India, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment tovested employees at retirement, death while in employment or on termination of employment of an amount equivalent to15 days salary payable for each completed year of service or part thereof in excess of 6 months. Vesting occurs upon completionof 5 years of service.

ii. Medical PlanThe Medical plan liability arises on retirement and death of an employee. The aforesaid liability is calculated on the basis offixed annual amount per employee (based on the basic salary) for qualifying employees.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out on31 March, 2007. The present value of the defined benefit obligation and the related current service cost and past service cost, weremeasured using Projected Unit Credit Method.

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49

c. The following tables set out the funded status of the gratuity plan and medical plan and amounts recognised in the Company’sfinancial statements as at 31 March, 2007:

i. Change in benefit obligations:

Particulars Gratuity MedicalBenefit Plan Total

(Rs. / 000s) (Rs. / 000s) (Rs. / 000s)

Present value of obligations as on 1.04.06 (A) 186,456 53,742 240,198Current service cost (B) 18,068 4,007 22,075Interest cost (C) 12,747 4,299 17,046Actuarial gain on obligation (D) 27,166 2,280 29,446Benefits paid (E) 35,099 3,215 38,314

Present value of obligations as on 31.03.07 (F=A+B+C-D-E) 155,006 56,553 211,559

ii. Change in Plan assets:

Particulars Gratuity Medical Benefit Plan

[Unfunded] Total(Rs. / 000s) (Rs. / 000s) (Rs. / 000s)

Fair value of plan assets as on 01.04.06 (A) 19,495 — 19,495Expected return on plan assets (B) 1,318 — 1,318Employer’s Contributions (C) 19,183 — 19,183Benefits paid (D) 35,099 — 35,099Actuarial gain (E) 1,256 — 1,256

Fair value of plan assets as on 31.03.07 (F=A+B+C-D+E) 6,153 — 6,153

iii. Net Liability (i-ii) 148,853 56,553 205,406

iv. Net Cost for the year ended 31 March, 2007:


(Rs. / 000s) (Rs. / 000s) (Rs. / 000s)

Current Service cost (A) 18,068 4,007 22,075Interest cost (B) 12,747 4,299 17,046Expected return on plan assets (C) 1,318 - 1,318Actuarial gain recognised during the year (D) 28,422 2,280 30,702

Net cost (E=A+B-C-D) 1,075 6,026 7,101

v. Principal actuarial assumptions:

S.No. Particulars Rate (%)

i. Discount rate 8.25ii. Salary escalation rate 4.00

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20. Related Party Disclosures

a. List of related partiesi. Company holding substantial interest in voting power of the Company

• Tata Sons Limited (the ultimate holding Company)• Tata Consultancy Services Limited (the holding Company)

ii. Fellow Subsidiaries• Tata AIG General Insurance Company Limited• Tata AIG Life Insurance Company Limited• Tata Consultancy Services Deutschland GmbH• Tata Consultancy Services Netherlands BV• Tata Consultancy Services Sverige AB• Tata Consultancy Services, Germany• Tata Teleservices Limited• Tata Information Technology (Shanghai) Company Limited• Tata Sky Limited• E2E Serwiz Solutions Limited• TCE Consulting Engineering Ltd

iii. Subsidiary• CMC Americas, Inc. (formerly Baton Rouge International, Inc.)

iv. Key Management Personnel• Mr. R. Ramanan

b. Transactions /balances outstanding with Related Parties.(All amounts in Rs./ 000s)

Transactions/ Holding Subsidiary Fellow Key TotalOutstanding Company Company Subsidiary ManagementBalances Personnel

Purchase of goods/services 608,907 192,220 33,099 — 834,226

(note a)

(541,764) (77,674) (11,570) — (631,008)Sale of goods 2,082,690 2,831 69,408 — 2,154,929

(note b)(1,312,689) (23,629) (32,533) — (1,368,851)

Service Income 1,975,608 825,116 58,697 — 2,859,421(note c)

(1,233,975) (789,416) (23,476) — (2,046,867)Managerial — — — 2,896 2,896Remuneration — — — (879) (879)Other 43,335 — 311 — 43,646transactions* (note d)

(34,852) — — — (34,852)Debtors/Unbilled 1,101,611 275,159 52,834 — 1,429,604revenues outstanding (note e)at year end (824,129) (191,756) (37,014) — (1,052,899)Creditors / 394,534 74,805 13,666 — 483,005Advances at (note f )year end (117,948) (61,978) (9,281) — (189,207)

*Includes dividend paid to holding CompanyNotes:

a. Includes purchases from E2E Serwiz Solutions Ltd - Rs.’(000s) 16,956 and Tata Information Technology (Shanghai) Company Limited -Rs.’(000s) 12,821

b. Includes sales to pertains Tata Teleservices Limited - Rs.’(000s) 62,889c. Includes service income from Tata Consultancy Services, Sverige AB - Rs.’(000s) 25,169 and Tata Sky Limited - Rs.’(000s) 32,582d. Includes other transactions with Tata AIG General Insurance Ltd.e. Includes amount recoverable from Tata Teleservices Limited - Rs.’(000s) 31,059, Tata Consultancy Services, Sverige AB - Rs’(000s) 9,615 and

Tata Consultancy Services, Germany - Rs.’(000s) 6,461.f. Includes amount payable to Tata Information Technology (Shanghai) Company Limited - Rs.’(000s) 12,821.

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51

21. Earnings per shareUnits Year ended Year ended

31.03.07 31.03.06

Net profit attributable to shareholders Rs./000s 640,990 441,100Weighted average number of equity shares in issue Nos. 000s 15,150 15,150Basic earning per share of Rs.10 each Rs. 42.31 29.12

The Company does not have any outstanding dilutive potential equity shares.


a. Financial information about the primary business segments is given below: (All amounts in Rs./000s)

Customer System ITES Education TotalServices Integration and Training

i. SEGMENT REVENUE- Sales and Services 5,770,549 2,989,988 708,318 420,293 9,889,148

(5,282,687) (2,309,096) (314,249) (381,870) (8,287,902)- Other Income 19,803 (17,485) 3,781 3,598 9,697

(1,984) (8,306) (558) (569) (11,417)ii. SEGMENT RESULTS 450,413 631,356 206,949 78,154 1,366,872

(330,044) (443,020) (15,099) (73,205) (861,368)iii. UNALLOCABLE EXPENSES 481,105

(net of unallocable income) (221,865)iv. OPERATING PROFIT 885,767

(639,503)v. INTEREST EXPENSE (NET) 37,032

(38,417)vi. PROVISION FOR TAX

- Current income tax 177,992 (135,342)

- Deferred income tax 10,898 (7,345)

- Fringe benefit tax 18,855(17,299)

vii. NET PROFIT 640,990 (441,100)

viii. OTHER INFORMATIONSegment assets 2,588,295 1,378,826 375,356 140,068 4,482,545

(2,768,744) (1,476,812) (230,811) (139,919) (4,616,286)Unallocable assets 1,509,149

(1,084,168)TOTAL ASSETS 5,991,694

(5,700,454)Segment liabilities 1,919,465 538,918 238,178 127,942 2,824,503

(1,793,982) (474,833) (186,820) (121,377) (2,577,012)Unallocable liabilities 844,832

(1,016,275)TOTAL LIABILITIES 3,669,335

(3,593,287)Capital Expenditure 6,316 30,651 32,216 7,274

(31,752) (38,135) (1,289) (17,430)Depreciation 12,612 25,127 9,093 6,605

(15,800) (30,340) (4,104) (6,573)Non-cash expenses otherthan depreciation 96,528 143,207 6,918 948

(44,794) (64,853) (4,632) (487)

i. Unallocated assets include investments, advance tax and tax deducted at source.ii. Unallocated liabilities include secured/unsecured loans, deferred tax/current tax liabilities, proposed dividend and tax on proposed

dividend.iii Amounts in brackets represent previous year’s figures.

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S Ramadorai R Ramanan Dr K R S MurthyChairman Managing Director & CEO Director

J K Gupta Vivek Agarwalsain S Singh S ShroffChief Financial Officer Company Secretary & Head-Legal Director Director

Mumbai14 April, 2007

23. The identification of Micro, Small and Medium Enterprise Suppliers under the Micro, Small and Medium Enterprises Development Act,2006, is based on the information available with the Management regarding their status. There are no dues to Micro, Small and MediumEnterprise Suppliers as on March 31, 2007.

24. Previous year’s figures have been presented for the purpose of comparison and have been regrouped where necessary.

b. Geographical Segment(All amounts in Rs./000s)

India United States United Others Totalof America Kingdom

SEGMENT REVENUE- Sales and Services 8,547,956 947,848 119,557 273,787 9,889,148

(7,382,650) (691,526) (104,514) (109,212) (8,287,902)- Other Income 9,697 - - - 9,697

(11,417) - - - (11,417)TOTAL ASSETS 5,139,040 285,323 54,477 512,854 5,991,694

(5,064,777) (201,119) (65,201) (369,357) (5,700,454)TOTAL LIABILITIES 3,382,593 85,738 8,483 192,521 3,669,335

(3,504,887) (483) (28,711) (59,206) (3,593,287)

Note: Amounts in brackets represent previous year’s figures.

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53

I. Registration DetailsRegistration No. State Code

Balance Sheet DateDate Month Year

II. Capital raised during the year (Amount in Rs. ‘000)Public Issue Rights Issue

Bonus Issue Private Placement (includes Adv. against Equity)

III. Position of mobilisation and deployment of funds (Amount in Rs. ‘000)Total Liabilities Total Assets

Sources of Funds Paid-up Capital (including Advance against Equity) Reserves and Surplus

Secured Loans Unsecured Loans

Application of FundsNet Fixed Assets Investments

Net Current Assets Miscellaneous Expenditure

Deferred Tax Assets

Accumulated Loss

IV. Performance of the Company (Amount in Rs. ‘000)Turnover Total Expenditure

Profit/(Loss) Before Tax Profit/(Loss) after Tax

Earning Per Share in Rs. Dividend Rate (%)

V. Generic Names of three Principal Products/Services of the Company (as per monetary terms)Item Code No.(ITC Code)ProductDescription AUTOMATIC DATA PROCESSING MACHINES

N I L

2 4 9 9 9 1 5

1 9 7 0

3 1 0 3 0 7

0 1

N I L

1 5 1 5 0 0

1 7 7 5 5 6

8 3 0 6 1 7

1 5 4 5 3 9 3

4 2 1 0 4

9 9 4 4 0 3 7

8 4 8 7 3 5

4 2 . 3 1

N I L

2 4 9 9 9 1 5

N I L

2 1 7 0 8 5 9

N I L

8 1 8 0 1

N I L

9 0 9 5 3 0 2

6 4 0 9 9 0

8 0

8 4 . 7 1

+/-+

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VITO THE COMPANIES ACT, 1956

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE


S Ramadorai R RamananChairman Managing Director & CEO

J K Gupta Vivek AgarwalsainChief Financial Officer Company Secretary & Head-Legal


N I L

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STATEMENT PURSUANT TO EXEMPTION UNDER SECTION 212 (8) OF THECOMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANY

As on 31 March, 2007

US $ INR

a. Capital 1,600,010 70,032,438

b. Reserves 1,623.758 71,071,888

c. Total Assets 12,961,097 567,307,216

d. Total Liabilities 9,737,329 426,202,890

e. Investments — —

Year Ended 31 March, 2007

US $ INR

f. Turnover 38,411,028 1,681,250,696

g. Profit/(Loss) before taxation 1,749,405 76,571,457

h. Provison for taxation 595,000 26,043,150

i. Profit/(Loss) after taxation 1,154,405 50,528,307

j. Proposed Dividend — —

Note : US $ have been converted to INR at the exchange rate prevailing on 31.03.2007 (1 US $ = INR 43.77)





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AUDITORS’ REPORT

TO THE BOARD OF DIRECTORSOF CMC LIMITED ON THE CONSOLIDATED FINANCIAL

STATEMENTS OF CMC LIMITED AND ITS SUBSIDIARY

We have examined the attached Consolidated Balance Sheet of CMC Limited (“the Company”) and its subsidiary as at 31March, 2007 and the consolidated Profit and Loss Account for the year then ended and the Cash Flow Statement for the yearended on that date.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinionon these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditingstandards in India. Those standards require that we plan and perform the audit to obtain reasonable assurance whether thefinancial statements are prepared, in all material respects, in accordance with an identified financial reporting framework andare free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statements. We believe that our audit provides a reasonablebasis for our opinion.

We did not audit the financial statements of the Company’s subsidiary, whose financial statements reflect total assets ofRs. (000s) 539,630 as at 31 March, 2007 and total revenues of Rs. (000s) 1,363,913 for the year then ended. These financialstatements have been audited by other auditors whose reports have been furnished to us, and our opinion, insofar as itrelates to the amounts included in respect of the Company’s subsidiary, is based solely on the report of the other auditors.

We report that the consolidated financial statements have been prepared by the Company in accordance with the requirementsof Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of Indiaand on the basis of the separate audited financial statements of the Company and its subsidiary included in the consolidatedfinancial statements.

On the basis of the information and explanations given to us and on the consideration of the separate audit reports onindividual audited financial statements of the Company and its subsidiary, we are of the opinion that:

a. the Consolidated Balance Sheet gives a true and fair view of the consolidated state of affairs of the Company and itssubsidiary as at 31 March, 2007; and

b. the Consolidated Profit and Loss Account gives a true and fair view of the consolidated results of operations of the Companyand its subsidiary for the year ended on that date.

c. the Consolidated Cash Flow Statement gives a true and fair view of the consolidated cash flows of the Company and its

subsidiary for the year ended on that date.

For S.B. Billimoria & Co.

Chartered Accountants

Mumbai Jitendra Agarwal

14 April, 2007 Partner

Membership No: 87104

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CONSOLIDATED BALANCE SHEET AS AT 31 MARCH, 2007

Schedule As at As atRef. 31.3.07 31.3.06

Rs./000s Rs./000s

SOURCES OF FUNDS

1. Shareholders’ Funds(a) Share Capital 1 151,500 151,500(b) Reserves & Surplus 2 2,233,584 1,969,623

2,385,084 2,121,123

2. Loan Funds(a) Secured Loans 3 177,556 520,679(b) Unsecured Loans 4 — 150,000

177,556 670,679

3. Deferred Tax Liabilities (See note 14) — 68,799

2,562,640 2,860,601APPLICATION OF FUNDS

4. FIXED ASSETS 5(a) Gross Block 1,332,351 1,326,625(b) Less:Depreciation 783,381 781,957

(c) Net Block 548,970 544,668

(d) Capital Work in Progress 282,178 20,818

5. GOODWILL 3,412 3,412

6. DEFERRED TAX ASSETS(a) For the Parent (See note 14) 42,104 —(b) For the Subsidiary 3,808 3,168

45,912 3,1687. CURRENT ASSETS

(a) Inventories 6 230,651 523,596(b) Sundry debtors 7 2,571,514 2,456,860(c) Unbilled revenues 1,155,670 1,343,365(d) Cash and bank balances 8 537,657 343,310(e) Loans and advances 9 871,659 621,679

5,367,151 5,288,8108. LESS : CURRENT LIABILITIES AND PROVISIONS 10

(a) Current Liabilities 3,092,460 2,843,349(b) Provisions 592,523 156,926

3,684,983 3,000,275

9. NET CURRENT ASSETS 1,682,168 2,288,535

2,562,640 2,860,601Notes forming part of the consolidated financial statements 15


For S B Billimoria & Co S Ramadorai R Ramanan Dr K R S MurthyChartered Accountants Chairman Managing Director & CEO



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CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH, 2007

Schedule Year ended Year endedRef. 31.3.07 31.3.06

Rs./000s Rs./000s

INCOME

1. Sales and services 11 10,798,132 8,871,900

2. Other Income 12 54,889 289,669

10,853,021 9,161,569

EXPENDITURE

3. Operating and other expenses 13 9,808,357 8,373,920

4. Depreciation 5 82,613 91,115

5. Interest (Net) 14 34,131 36,494

9,925,101 8,501,529

Profit Before Tax 927,920 660,040

6. Provision for Taxes (See note 11) 234,679 174,565

Profit after tax carried forward to Reserves and Surplus 693,241 485,475

Basic and diluted Earnings Per Share (Rupees) (See note 18) 45.76 32.04

Notes forming part of the consolidated financial statements





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


Rs./000s Rs./000s Rs./000sA. CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax* 927,920 660,040Adjustments for :

Depreciation 82,613 91,115Interest paid 39,619 41,466Bad debts/advances written off (net) 190,693 64,115Unclaimed balances/provisions written back (13,555) (12,401)Provision for doubtful debts 1,174 49,654Unrealised Foreign exchange loss/(gain) 6,707 (9,099)(Profit) /Loss on sale of fixed assets 2,133 (246,581)Fixed assets written off 2,120 869Transfer from capital reserve (895) (3,079)

310,609

Operating profit before working capital changes 1,238,529 636,099Adjustments for :

Trade and other receivables (93,436) (576,513)Inventories 292,945 (203,562)Trade payables and other liabilities 420,376 629,830

Cash generated from operations 1,858,414 485,854Direct taxes paid/deducted at source (283,936) (271,630)

NET CASH FROM/(USED) IN OPERATING ACTIVITIES (A) 1,574,478 214,224

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets (359,800) (103,094)Sale of fixed assets 7,272 262,828Foreign exchange translation adjustment (arising on consolidation) (3,482) 1,532

NET CASH FROM/(USED) IN INVESTING ACTIVITIES (B) (356,010) 161,266

C. CASH FLOW FROM FINANCING ACTIVITIESInterest paid (39,915) (41,201)Proceeds/(Payment) of short term borrowings (493,123) (146,520)Dividend paid (including dividend tax) (86,374) (77,534)

NET CASH FROM FINANCING ACTIVITIES (C) (619,412) (265,255)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) 599,056 110,235CASH AND CASH EQUIVALENTS AS ON 1 APRIL, 2006 342,109 231,874[Excluding unrealised exchange difference of Rs.’(000s) 1,201]Less: Transitional provisions as per AS-15 not affecting Cash Flow (404,906) -

CASH AND CASH EQUIVALENTS AS ON 31 MARCH, 2007 536,259 342,109[Excluding unrealised exchange difference of Rs.’(000s) 1,398]

* includes project grants from Government of Rs.’(000s) Nil (Previous year Rs.’(000s) 177)





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As at As at31.3.07 31.3.06

Rs./000s Rs./000sSchedule 1 : SHARE CAPITAL

Authorised35,000,000 (Previous year 35,000,000) equity share of Rs.10 each 350,000 350,000

Issued, Subscribed and Paid up15,150,000 (Previous year 15,150,000) equity shares of Rs.10 each fully paid up 151,500 151,500

Of the above:7,744,961 (Previous year 7,744,961) equity shares are held by Tata ConsultancyServices Limited, the Holding Company

(See note 2)

Schedule 2 : RESERVES AND SURPLUS

(a) Capital Reserve(Grants from Government of India)(i) Opening balance 1,442 4,521(ii) Less: Transferred to Profit and Loss Account 895 3,079

(iii) Closing balance 547 1,442

(b) General Reserve(i) Opening balance 204,539 160,429(ii) Add: Transferred from Profit and Loss account 64,099 44,110(iii) Less: Adjustment for increase in opening provision for

compensated absences (See note 13) 132,465 —(iv) Less: Adjustment for increase in opening provision for

short term employee benefits (See note 13) 72,074 —

(v) Closing balance 64,099 204,539

(c) Foreign currency translation reserve(arising on consolidation)(i) Opening balance 16,421 14,889(ii) Add: Adjustment for current year (3,482) 1,532

(iii) Closing balance 12,939 16,421

(d) Profit and Loss account(i) Opening balance 1,747,221 1,392,230(ii) Add: Additions during the year 693,241 485,475(iii) Less: Adjustment for increase in opening provision

for retirement benefits (See note 13) 78,566 -

2,361,896 1,877,705(iv) Less: Proposed dividend 121,200 75,750(v) Less: Tax on Proposed dividend 20,598 10,624(vi) Less: Transfer to General reserve 64,099 44,110

2,155,999 1,747,221

2,233,584 1,969,623

Schedule 3 : SECURED LOANS

From banksCash credit accounts 27,556 120,679Short term loan 150,000 400,000

177,556 520,679

Note:1. Cash credits and short term loan from banks are secured by hypothecation of inventories, debtors and other current assets.2 Loans repayable within one year Rs.’(000s) 150,000 [Previous year Rs.’(000s) 400,000]

SCHEDULES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

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As at As at31.3.07 31.3.06

Rs./000s Rs./000sSchedule 4 : UNSECURED LOANS

a. Short Term Loans(i) From banks — 100,000(ii) Commercial Paper — 50,000

— 150,000Note:1. Loans repayable within one year Rs.’(000s) Nil [Previous year Rs.’(000s) 150,000]2 Maximum amount outstanding on commercial paper during the year Rs.’(000s) 500,000 [Previous year Rs.’(000s) 300,000]

Schedule 5 : FIXED ASSETS (See note 7)(All amounts in Rs./000s)

GROSS BLOCK DEPRECIATION NET BLOCK

Particulars As at Additions Deductions/ As at As at For the Deductions/ As at As at As at01.04.06 Adjustments 31.03.07 01.04.06 year Adjustments 31.03.07 31.03.07 31.03.06

(a) Land(i) Leasehold 59,197 418 — 59,615 8,891 792 — 9,683 49,932 50,306(ii) Freehold 605 — — 605 — — — — 605 605

(b) Buildings(i) Leasehold 16,167 — — 16,167 12,077 1,572 — 13,649 2,518 4,090(ii) Freehold 305,384 — 150 305,234 61,012 4,977 34 65,955 239,279 244,372

(c) Plant & Machinery(i) Computers 601,261 75,146 71,306 605,101 451,120 56,044 66,116 441,048 164,053 150,141(ii) Office and

other equipment 55,396 3,195 5,320 53,271 34,987 3,169 3,697 34,459 18,812 20,409(iii) Others 182,095 10,283 6,960 185,418 152,668 9,688 6,140 156,216 29,202 29,427

(d) Furniture &Fittings 100,666 9,398 8,978 101,086 58,906 5,815 5,202 59,519 41,567 41,760

(e) Vehicles 5,854 — — 5,854 2,296 556 — 2,852 3,002 3,558

TOTAL 1,326,625 98,440 92,714 1,332,351 781,957 82,613 81,189 783,381 548,970 544,668

(f) Capital work-in-progress 20,818 262,156 796 282,178 — — — — 282,178 20,818

GRAND TOTAL 1,347,443 360,596 93,510 1,614,529 781,957 82,613 81,189 783,381 831,148 565,486

Previous Year 1,307,135 111,621 71,313 1,347,443 736,512 91,115 45,670 781,957 565,486 570,623

As at As at31.3.07 31.3.06

Rs./000s Rs./000sSchedule 6 : INVENTORIES

(a) Finished goods - equipment for resale 197,697 477,952(b) Components/spares for maintenance and resale 21,171 33,692(c) Education and training material 10,005 8,858(d) Work-in-progress 1,778 3,094

230,651 523,596

Note: Finished goods include goods in transit Rs. ‘(000s) 1,667 [Previous year Rs. ‘(000s) 40,089]

Schedule 7 : SUNDRY DEBTORSa. Over six months old (unsecured):

Considered good 422,140 416,475Considered doubtful 236,511 250,615

658,651 667,090b. Others (unsecured):

Considered good 2,134,783 2,025,032

2,793,434 2,692,122Less: Provision for doubtful debts 236,511 250,616

2,556,923 2,441,506c. Future lease installments receivable (unsecured) (See note 16b) 40,711 45,422

Less: Unearned finance and service charges 26,122 30,068

14,589 15,354

2,571,512 2,456,860

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As at As at31.3.07 31.3.06

Rs./000s Rs./000sSchedule 8 : CASH AND BANK BALANCES

(a) Cash on hand [including stamps on handRs.’(000s) 16 (Previous year Rs.’(000s) 22)] 2,587 1,642

(b) Cheques/demand drafts in hand 28,217 24,217(c) Balance with scheduled banks in:

(i) Current accounts 220,051 88,059(ii) Cash credit accounts 75,910 89,438(iii) Deposit accounts* 210,892 139,954

537,657 343,310

*includes Rs.’(000s) 1,195 on account of fixed deposits pledged with customers as security[Previous year Rs.’(000s) 6,195]

Schedule 9 : LOANS AND ADVANCES

(a) Advances recoverable in cash or in kind orfor value to be received 626,255 444,903

(b) Advance income tax and tax deducted at source(Net of provision for tax Rs. ‘(000s) 1,133,910[Previous year Rs.’(000s) 1,147,738] & Fringe benefit tax Rs. ‘(000s) 27,212[Previous year Rs. ‘(000s) 17,299]) 255,095 186,467

881,350 631,370(c) Less: Advances considered doubtful 9,691 9,691

871,659 621,679Schedule 10 : CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES(a) Sundry Creditors 1,563,311 1,678,448(b) Customers’ security deposits and credit balances and

advance against supplies and services to be rendered 686,385 505,292(c) Investor Education and Protection Fund *- Unclaimed dividend 1,284 1,053(d) Unearned revenue 730,533 575,248(e) Other liabilities 110,837 82,902(f ) Interest accrued but not due 110 406

3,092,460 2,843,349PROVISIONS(a) Proposed dividend 121,200 75,750(b) Provision for tax on proposed dividend 20,598 10,624(c) Provision for leave encashment 252,459 70,552(d) Provision for post retirement benefits 49,413 —(e) Provision for Gratuity 148,853 —

592,523 156,926

3,684,983 3,000,275

*Does not include any amounts outstanding as on 31 March, 2007 which are required to be credited to Investor Education and Protection Fund.

Schedule 11 : SALES AND SERVICES

(a) Sale of purchased equipment 4,035,455 3,761,689(b) Services

(i) Software services 4,192,706 3,166,866(ii) Maintenance services 685,719 777,006(iii) Other services 1,432,551 770,597

(c) Education and training 437,693 382,368(d) Lease rentals 14,008 13,374

10,798,132 8,871,900

Note: Lease rentals include income Rs.’(000s) 8,171[Previous year Rs.’(000s) 10,053] under finance leases.

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Rs./000s Rs./000sSchedule 12 : OTHER INCOME

(a) Project Grants from Government — 177(b) Gain on foreign exchange fluctuations (Net of loss) — 4,327(c) Profit on sale of fixed assets (Net of loss) — 246,581(d) Transfer from capital reserve - capital grants 895 3,079(e) Unclaimed balances/provisions written back 13,555 12,401(f ) Miscellaneous income 40,439 23,104

54,889 289,669

Schedule 13 : OPERATING AND OTHER EXPENSES

1. Equipment Purchased for Resale 3,958,933 3,659,4132. Payments to and Provisions for Employees

(a) Salaries, allowances and incentives 1,974,659 1,729,662(b) Contribution to provident and other funds 101,716 113,809(c) Staff welfare expenses 122,740 108,124(d) Retirement Benefits 7,101 —

Sub-Total 2,206,216 1,951,595

3. Operating and Administration Expenses(a) Components/spares for maintenance and resale 333,218 255,850(b) Sub-contracted/outsourced services 1,183,483 826,829(c) Purchased software 49,302 44,213(d) Freight, handling and packing expenses 38,503 36,045(e) Rent and hire charges 110,910 66,449(f ) Rates and taxes 22,862 13,383(g) Repairs and maintenance:

(i) Building 32,543 32,748(ii) Plant and machinery 28,726 31,439(iii) Other 8,422 11,227

(h) Electricity charges 72,310 60,334(i) Insurance 52,029 44,855(j) Travelling and conveyance 275,978 258,890(k) Printing, stationery and computer consumables 28,806 23,124(l) Communication and postage 76,485 78,077(m) Advertisement, publicity and business promotion 18,000 14,905(n) Directors’ sitting fees 900 540(o) Professional and legal fees 100,924 63,371(p) Education and training :

(i) Payments to franchisees 113,410 99,838(ii) Other expenses 77,128 92,558

(q) Living expenses – overseas contracts 573,483 514,382(r) Bad Debts/advances written off 189,276 64,115

[net of bad debts recovered Rs.’(000s) 1,417{Previous year Rs.’(000s) 912}]

(s) Provision for doubtful debts 1,174 49,654(t) Loss on disposal of fixed assets (net) 4,253 869(u) Loss on foreign exchange fluctuations (Net of gain) 17,274 —(v) Other expenses 233,809 79,217

Sub-Total 3,643,208 2,762,912

Total 9,808,357 8,373,920

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Rs./000s Rs./000sSchedule 14 : INTEREST

1. Interest expense

(a) On fixed loans 28,012 34,217(b) Cash credit accounts with banks 11,187 6,785(c) Others 420 464

39,619 41,466

2. Less: Interest earned

(a) Loans and advances 196 541(b) Fixed deposits with banks [Tax deducted at source

Rs.’(000s) 228 {Previous year Rs.’(000s) 188}] 1,347 1,614(c) Others [Tax deducted at source Rs.’(000s) 156 {Previous

year Rs.’(000s) 93}] 3,945 2,817

5,488 4,972

34,131 36,494SCHEDULE 15

NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS

1. These accounts comprise a consolidation of the Balance Sheet, Profit and Loss Account and Cash Flow Statement of CMC Limited, acompany incorporated in India and its wholly owned subsidiary CMC Americas, Inc. (formerly known as Baton Rouge International,Inc.), which is incorporated in the United States of America.

2. Background

CMC Limited (the parent) is engaged in the design, development and implementation of software technologies and applications,providing professional services in India and overseas, and procurement, installation, commissioning, warranty and maintenance ofimported/ indigenous computer and networking systems, and in education and training.

The Parent was a Government of India (GoI) enterprise up to 15 October, 2001. Under the disinvestment process, GoI sold 7,726,500shares representing 51 percent of the share capital to Tata Sons Limited, on 16 October, 2001. The GoI further sold its entire remainingbalance representing 26.25 percent of the share capital, in March 2004 by an open offer to the public.

On 29 March, 2004, as per specific approval granted by SEBI, Tata Sons Limited transferred its entire shareholding in the Company toTata Consultancy Services Limited (a subsidiary of Tata Sons Limited). As a result, the Parent has become a subsidiary of Tata ConsultancyServices Limited.

CMC Americas, Inc. (the Subsidiary) derives its revenue throughout the United States of America from two sources:

a. Information technology services at customer sites for a contract fee.

b. Auxiliary services, such as maintenance contracts, systems upgrades, and training of customer personnel.

3. Significant Accounting Policies

a. Basis of accounting

The financial statements of the Parent have been prepared under the historical cost convention and comply with the AccountingStandards prescribed by the Institute of Chartered Accountants of India.

b. Use of estimates

The preparation of financial statements requires the management of the Company to make estimates and assumptions thataffect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of thefinancial statements and reported amounts of income and expenses during the period. Example of such estimates includeprovisions for doubtful debts, future obligations under employee retirement benefit plans, provision for income taxes, accountingfor contract costs expected to be incurred to complete software development and the useful lives of fixed assets and intangibleassets. Contingencies are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated.Actual results could differ from such estimates.

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c. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Parent and its wholly owned subsidiary madeupto 31 March each year. All significant inter-company transactions and balances are eliminated on consolidation. Goodwillarising on consolidation represents the excess of the cost of acquisition over the book value of assets and liabilities at the date ofacquisition.

d. Fixed assets and depreciation

i. All fixed assets are stated at cost less accumulated depreciation. Cost includes purchase price and all other attributable costsof bringing the assets to working condition for intended use.

ii. Fixed assets acquired out of grants, the ownership of which rests with the grantor, are capitalised at cost.iii. Capital work-in-progress comprises the cost of fixed assets that are not ready for their intended use at the balance sheet

date.iv. Depreciation on all assets of the Parent is charged proportionately from the date of acquisition/installation on straight line

basis at rates prescribed in Schedule XIV of the Companies Act, 1956 except in respect of:� Leasehold assets that are amortised over the period of lease.

� Computers, Plant and Machinery - (other items), that are depreciated over six financial years.

Assets costing less than Rs. 5,000 individually have been fully depreciated in the year of purchase.

Depreciation on assets of the Subsidiary is charged based on the estimated useful life of the assets using the straight linemethod of depreciation.

e. Revenue Recognition

i. Revenue relating to equipment supplied is recognised on delivery to the customer and acknowledgement thereof, inaccordance with the terms of the individual contracts.

ii. Revenue from software development on fixed price contracts is recognised according to the milestone achieved as specifiedin the contract, and is adjusted on the “proportionate completion” method based on the work completed.

iii. On time and material contracts, revenue is recognised based on time spent as per the terms of the specific contracts.

iv. Revenue from warranty and annual maintenance contracts is recognised pro-rata over the life of the contracts. Maintenancerevenue on expired contracts on which services have continued to be rendered is recognised on renewal of contract or onreceipt of payment.

v. Revenue from “Education and Training” is recognised on accrual basis over the course term.

f. Grants

i. Grants received for capital expenditure incurred are included in “Capital Reserve”. Fixed assets received free of cost areconsidered as a grant and are capitalised at notional value with a corresponding credit to the Capital Reserve account.An amount equivalent to the depreciation charge on such assets is appropriated from capital reserve and recognised asrevenue in the Profit and Loss Account.

ii. Grants received for execution of projects is recognised as revenue to the extent utilized.iii. Unutilised grants are shown under other liabilities.

g. Inventories

Inventories include finished goods, stores and spares, work-in progress and education and training material.

i. Inventories of finished goods mainly comprise of equipment for resale are valued at the lower of cost (net of provision forobsolescence) or net realisable value.

ii. Inventories of stores and spares are valued at cost, net of provision for diminution in the value. Cost is determined on weightedaverage cost basis.

iii. Inventories of “Education and Training material” are valued at the lower of cost and net realisable value. Cost is determinedon the “First In first Out” basis.

iv. Work-in-progress comprises cost of infrastructural facilities in the process of installation at customers’ sites. These are valuedat cost paid/payable to sub-contractors.

h. Research and Development Expenses

Research and development costs of revenue nature are charged to the Profit and Loss account when incurred. Expenditure ofcapital nature is capitalised and depreciated in accordance with the rates set out in paragraph 3(d).

i. Foreign exchange transactions

Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. Monetary items

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denominated in foreign currency and outstanding at the Balance Sheet date are translated at the exchange rate ruling on thatdate. Exchange differences, other than on foreign currency loans to acquire fixed assets from countries outside India are recognizedin the profit and loss account. In case of forward contracts for foreign exchange, the difference between the forward rate and theexchange rate at the date of the transaction are recognised over the life of the contract.

In respect of the subsidiary, income and expenses are translated into the reporting currency at the average rate. All assets andliabilities are translated at the closing rate. The resulting exchange differences are transferred to foreign currency translationreserve.

j. Leases

Assets given under finance leases are recognised as receivables at an amount equal to the net investment in the lease and thefinance income is based on a constant rate of return on the outstanding net investment.

Lease arrangements where the risks and rewards incident to ownership of an asset substantially vest with the lessor, are recognizedas operating leases. Lease rents under operating leases are recognized in the profit and loss account on a straight line basis.

k. Retirement benefitsi. Post-employment benefit plans (for the Parent)

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.For defined benefit schemes, the cost of providing benefits is determined using Projected Unit Credit Method, with actuarialvaluation being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the Profit & lossaccount for the period in which they occur. Past service cost is recognised to the extent the benefits are already vested, andotherwise is amortised on a Straight-line method over the average period until the benefits become vested.The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefitobligations as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. Any assetresulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions infuture contributions to the scheme.

ii. Short-term employee benefits (for the Parent)The undiscounted amount of short-term employee benefits expected to be paid in exchange of services rendered byemployees is recognised during the period when the employee renders the services. These benefits include compensatedabsences and performance incentives.

iii. The Subsidiary is the sponsor of a defined contribution 401 (K) Profit sharing Plan for its employees. Subsidiary contributionto the plan for the year ended 31 March, 2007 aggregated to Rs.’(000s) 2,012 (Previous year Rs.’(000s) 1,785). The Subsidiaryalso sponsors a separate profit sharing plan for its employees. Benefits are paid upon retirement, total disability, death ortermination. The Subsidiary did not make a contribution for the year ended 31 March, 2007.

l. Provision for taxationIncome tax comprises of current tax and deferred tax. Deferred tax assets and liabilities are recognised for the future taxconsequences of timing differences, subject to the consideration of prudence. Deferred tax assets and liabilities are measuredusing the tax rates enacted or substantively enacted by the Balance Sheet date.

m. Impairment

At each balance sheet date, the Company reviews the carrying amounts of its fixed assets to determine whether there is anyindication that those assets suffered an impairment loss. If any such indication exists, the recoverable amount of the asset isestimated in order to determine the extent of impairment loss. Recoverable amount is the higher of an asset’s net selling priceand value in use. In assessing value in use, the estimated future cash flows expected from the continuing use of the asset and fromits disposal are discounted to their present value using a pre-discount rate that reflects the current market assessments of timevalue of money and the risks specific to the asset.Reversal of impairment loss is recognized immediately as income in the profit and loss account.

n. Earnings per Share

The earnings considered in ascertaining EPS comprise the net profit after tax. The number of shares used in computing Basic EPSis the weighted average number of shares outstanding during the year.


i. Business segments

Based on similarity of activities, risks and reward structure, organisation structure and internal reporting systems, the Parent hasstructured its operations into the following segments:Customer Services: Hardware supplies and maintenance, facilities management and provision of infrastructure facilities.Systems Integration (SI): Systems study and consultancy, software design, development and implementation, software

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maintenance and supply of computer hardware in accordance with customers’ requirements. The operations of the Subsidiaryfall in this category.IT Enabled Services (ITES) - (Formerly Indonet): Value added services, data network, data center services, web design andhosting etc.Education and Training (E&T): IT education and training service through its own centers and through franchisees.Segment revenue and expenses include amounts, which are directly identifiable to the segment and allocable on a reasonablebasis. Segment assets include all operating assets used by the segment and consist primarily of debtors, inventory and fixedassets. Segment liabilities include all operating liabilities and consist primarily of creditors, advances/deposits from customersand statutory liabilities.

ii. Geographic segments

The Parent also provides services overseas, primarily in the United States of America, United Kingdom and Middle East and AfricaRegion.

5. Research and Development Expenses

Expenditure includes “Research and Development” expenditure for the Parent aggregating to Rs.’ (000s) 110,902 (Previous year Rs.’(000s) 115,980). Amounts aggregating to Rs.’ (000s) 5,687 (Previous year Rs.’ (000s) 2,086) have been capitalised.

6. Contingent liabilities and commitments

For the Parent:

As at As at31.3.07 31.3.06

Rs./000s Rs./000sa. Claims against the Company not acknowledged as debts

� Liability on income tax 6,014 18,838� Under litigation 133,012 32,661� ESI Demand 280 280� Disputed demands raised by Sales tax authorities for which the

Company has gone on appeal against the department * 32,177 31,350b. Unexpired Letters of Credit 375,455 435,418c. Guarantees issued by bankers against Company’s counter guarantee 1,013,489 1,277,283d. Others 24,016 26,540e. Sales tax on leased assets 3,726 3,726f. Estimated amount of contracts remaining to be executed on capital

account (net of advances) and not provided for 75,631 82,862

* No provision is considered necessary since the Company expects favourable decisions.

7. Fixed Assets

Gross Block for the Parent as at 31 March, 2007 includes:

a. Assets acquired from Grants and aggregating to Rs.’(000s) 41,865 (Previous year Rs.’(000s) 41,865) being the property of Governmentof India. The depreciation for the year on such assets is Rs.’ (000s) 895 (Previous year Rs.’ (000s) 3,079) and the accumulateddepreciation at the year end was Rs.’ (000s) 41,390 (Previous year Rs.’ (000s) 40,495).

b. Assets aggregating to Rs.’(000s) 7,210 (Previous year Rs.’(000s) 7,210) received free of cost. The depreciation for the year on suchassets is Rs. Nil (Previous year Rs. Nil) and the accumulated depreciation thereon is Rs.’ (000s) 7,138 (Previous year Rs.’ (000s) 7,138).

c. Plant and machinery includes assets given on lease aggregating to Rs.’(000s) 19,812 (Previous year Rs.’(000s) 30,198). Thedepreciation for the year is Rs.’ (000s) 1,555 (Previous year Rs. ’(000s) 3,498), the accumulated depreciation thereon being Rs.’(000s)15,297 (Previous year Rs.’(000s) 24,029).

8. Sundry DebtorsSundry debtors of the subsidiary include Rs. ’(000s) Nil (Previous year Rs.’(000s) 223) retained by a customer, which are expected to beremitted to the subsidiary during 2007.

9. Current Liabilities

Customers’ security deposits and credit balances and advance against supplies and services to be rendered include a note payabledated 1 June, 1996, amounting to Rs. ’(000s) 50,336 (Previous year Rs.’(000s) 51,313) due by the Subsidiary to an unrelated corporateentity. The note is due on demand and bears interest at 1% over the 1 year U.S. dollar LIBOR (total rate of 6.25% at 31 March, 2007).

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10. Self Insurance

The subsidiary became self-insured for a portion of its medical and prescription drug benefits. The subsidiary has accrued the estimatedliability for claims reported and processed, as well as claims incurred but not reported through 31 March, 2007. It has also obtainedreinsurance coverage for the policy year 1 October, 2006 through 30 September, 2007.

11. Pending RBI approval, certain anticipated losses for the Parent amounting to Rs. ’(000s) 8,089 (Previous year Rs.’(000s) 8,089), whichstands provided for, are not written off.Sanction of Reserve Bank of India for the Parent for expenditure incurred on overseas operations amounting to Rs.’ (000s) 3,436 (Previousyear Rs.’ (000s) 3,436) during the year 1991-92 has not yet been received.

12. Provision for Income Tax

The provision for taxes on income is as follows:


Rs./000s Rs./000sa. Current taxes

i. Domestic taxes* 196,847 152,641ii. Foreign taxes 27,658 17,716

b. Deferred taxesi. Domestic taxes 10,898 7,345ii. Foreign taxes (724) (3,137)

Total 234,679 174,565

*includes taxes in foreign jurisdiction Rs. ’(000s) 18,673 (Previous year Rs.’(000s) 6,201)

13. Short term employee benefits and post-retirement benefits as at 31 March, 2006 have been recomputed to comply with the revisedAccounting standard 15 “Employee Benefits” (AS-15) issued by the Institute of Chartered Accountants of India. The difference betweenthe amount so computed and the provision for post-retirement benefits as at 31 March, 2006 has been adjusted against the openingbalance (as at 1 April 2006) of General Reserve to the extent of Rs. (000s) 72,074 [net of deferred tax Rs.’(000s) 30,828] and from theProfit & Loss account to the extent of Rs.’(000s) 78,566 [net of deferred tax Rs.’(000s) 39,235].In addition, liability for short term employee benefits amounting to Rs.’(000s) 132,465 [net of deferred tax of Rs.’(000s) 51,738] hasbeen adjusted against the opening balance in the profit and loss account.

14. Deferred Tax

a. Deferred tax assets and liabilities are being offset as they relate to taxes on income levied by the same governing taxation laws.b. Break up of deferred tax assets/liabilities and reconciliation of current year deferred tax charge for the Parent:


Opening Charged / Charged/ Closing(Credited) (Credited)

to Reserves to P&L

i. Deferred Tax LiabilitiesTax impact of difference between carrying amount offixed assets in the financial statements and the income tax return 100,827 - 3,680 104,507

ii. Deferred Tax AssetsTax impact of expenses charged in the financial statementsbut allowable as deductions in future years under income tax 32,028 121,801** (7,218) 146,611

Net Deferred Tax Liability (i-ii) 68,799 (121,801) 10,898 (42,104)

** See note 13 above

15. Retirement benefit plans (For Parent)

a. Defined contribution plan

The Company makes contribution towards provident fund to a defined contribution retirement benefit plan for qualifyingemployees. The Company’s contribution to the Employees’ Provident Fund is deposited in a trust formed by the Company underthe Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 which is recognised by the Income-tax authorities. Theprovident fund plan is operated by the Regional Provident Fund Commissioner. Under the scheme, the Company is required tocontribute a specified percentage of payroll cost to the retirement benefit scheme to fund the benefits.

The Company recognised Rs.’ (000s) 86,404 (Previous year Rs.’ (000s) 82,610) for provident fund contributions in the Profit & Loss

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account. The Contribution payable to the plan by the Company is at the rate specified in rules of the scheme.

b. Defined benefit plan (for the Parent)

i. Gratuity Plan

The Company makes annual contribution to the Employee’s Group Gratuity-cum-Life Assurance scheme of the Life InsuranceCorporation of India, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment tovested employees at retirement, death while in employment or on termination of employment of an amount equivalent to15 days salary payable for each completed year of service or part thereof in excess of 6 months. Vesting occurs upon completionof 5 years of service.

ii. Medical Plan

The Medical plan liability arises on retirement and death of an employee. The aforesaid liability is calculated on the basis offixed annual amount per employee (based on the basic salary) for qualifying employees.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation were carried out on31 March, 2007. The present value of the defined benefit obligation and the related current service cost and past service cost,were measured using Projected Unit Credit Method.

c. The following tables set out the funded status of the gratuity plan and medical plan and amounts recognised in the Company’sfinancial statements as at 31 March, 2007:

i. Change in benefit obligations:


(Rs. / 000s) (Rs. / 000s) (Rs. / 000s)

Present value of obligations as on 1.04.06 (A) 186,456 53,742 240,198Current service cost (B) 18,068 4,007 22,075Interest cost (C) 12,747 4,299 17,046Actuarial gain on obligation (D) 27,166 2,280 29,446Benefits paid (E) 35,099 3,215 38,314

Present value of obligations as on 31.03.07 (F=A+B+C-D-E) 155,006 56,553 211,559

ii. Change in Plan assets:

Particulars Gratuity Medical Benefit Plan

[Unfunded] Total(Rs. / 000s) (Rs. / 000s) (Rs. / 000s)

Fair value of plan assets as on 01.04.06 (A) 19,495 — 19,495Expected return on plan assets (B) 1,318 — 1,318Employer’s Contributions (C) 19,183 — 19,183Benefits paid (D) 35,099 — 35,099Actuarial gain (E) 1,256 — 1,256

Fair value of plan assets as on 31.03.07(F=A+B+C-D+E) 6,153 — 6,153

iii. Net Liability (i-ii) 148,853 56,553 205,406iv. Net Cost for the year ended 31 March, 2007:


(Rs. / 000s) (Rs. / 000s) (Rs. / 000s)

Current Service cost (A) 18,068 4,007 22,075Interest cost (B) 12,747 4,299 17,046Expected return on plan assets (C) 1,318 — 1,318Actuarial gain recognised during the year (D) 28,422 2,280 30,702

Net cost (E=A+B-C-D) 1,075 6,026 7,101

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v. Principal actuarial assumptions:S.No. Particulars Rate (%)i. Discount rate 8.25ii. Salary escalation rate 4.00

16. Lease Commitments

a. Operating LeaseThe parent and subsidiary have taken property on operating lease and have recognized rent of Rs. ’(000s) 16,337(Previous YearRs.’(000) 13,355) .The total of future minimum lease payments under leases for the following periods:-

Particulars Year ended Year ended31.3.07 31.3.06

Rs./000s Rs./000s

a. Not later than one year 10,058 10,204

b. Later than one year but not later than five years 2,678 9,493

b. Finance LeaseThe Parent has purchased and given on lease computer equipment, peripherals and system software. The details are as follows:

As at As at31.3.07 31.3.06

Rs./000s Rs./000s

a. Total gross investment 40,711 45,422• Not later than one year 8,422 7,786• Later than one year but not later than five years 32,289 31,147• Later than five years — 6,489

b. Present value of Minimum Lease Payments receivable 14,590 15,354• Not later than one year 880 689• Later than one year but not later than five years 13,710 9,594• Later than five years — 5,071

c. Unearned Finance Income 26,122 30,068

17. Related Party Disclosures

a. List of related parties

i. Company holding substantial interest in voting power of the Parent/Subsidiary.• Tata Sons Limited (the Ultimate Holding Company)• Tata Consultancy Services Limited (the Holding Company)

ii. Fellow Subsidiaries• Tata AIG General Insurance Company Limited• Tata AIG Life Insurance Company Limited• Tata Consultancy Services Deutschland GmbH• Tata Consultancy Services Netherlands BV• Tata America International Corporation• Tata Consultancy Services Sverige AB• Tata Consultancy Services , Germany• Tata Teleservices Limited• Tata Information Technology (Shanghai) Company Limited• Tata Sky Limited• E2E Serwiz Solutions Limited• TCE Consulting Engineering Ltd

iii. Key Management Personnel• Mr. R. Ramanan

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b. Transactions /balances outstanding with Related Parties. (All amounts in Rs./000s)

Transactions/ Holding Fellow Key TotalOutstanding Company Subsidiary ManagementBalances Personnel

Purchase of goods/services 608,907 93,077 — 701,984

(note a)

(541,764) (81,684) — (623,448)Sale of goods 2,082,690 69,408 — 2,152,098

(note b)(1,312,689) (32,533) — (1,345,222)

Service Income 2,610,190 58,697 — 2,668,887(see note c)

(1,752,206) (30,236) — (1,782,442)Managerial — — 2,896 2,896Remuneration — — (879) (879)Other 43,335 311 — 43,646transactions* (note d)

(34,852) — — (34,852)Debtors/unbilled 1,295,556 52,834 — 1,348,390revenue as at year end (note e)

(985,207) (37,014) — (1,022,221)Creditors / 394,534 29,641 — 424,175Advances as at (note f )year end (117,948) (16,019) — (133,967)

* Includes dividend paid to Holding Company

Note: Amounts in brackets represent previous year’s figures.Notes:

a. Includes purchases from E2E Serwiz Solutions Ltd - Rs.’(000s) 16,956, Tata Information Technology (Shanghai) Company Limited- Rs.’(000s) 12,821 and Tata America International Corporation – Rs.’(000s) 59,978

b. Includes sales to pertains Tata Teleservices Limited - Rs.’(000s) 62,889c. Includes service income from Tata Consultancy Services, Sverige AB - Rs.’(000s) 25,169 and Tata Sky Limited - Rs.’(000s) 32,582d. Includes other transactions with Tata AIG General Insurance Ltd.e. Includes amount recoverable from Tata Teleservices Limited - Rs.’(000s) 31,059, Tata Consultancy Services, Sverige AB - Rs’(000s)

9,615 and Tata Consultancy Services, Germany - Rs.’(000s) 6,461.f. Includes amount payable to Tata Information Technology (Shanghai) Company Limited - Rs.’(000s) 12,821 and Tata America

International Corporation – Rs.’(000s) 15,976

18. Earnings per share

Units Year ended Year ended31.03.07 31.03.06

Net profit attributable to shareholders Rs./000s 693,241 485,475Weighted average number of equity shares in issue Nos. 000s 15,150 15,150Basic earning per share of Rs.10 each Rs. 45.76 32.04The Company does not have any outstanding dilutive potential equity shares.

CMC-Conso-54.p65 5/23/2007, 3:42 PM70

71

19. Segment Informationa. Financial information about the primary business segments is given below:


Customer System ITES Education TotalServices Integration and Training

i. SEGMENT REVENUE- Sales and Services 5,770,549 3,898,972 708,318 420,293 10,798,132

(5,282,687) (2,893,094) (314,249) (381,870) (8,871,900)- Other Income 19,803 (17,485) 3,781 3,598 9,697

(1,984) (8,306) (558) (569) (11,417)

ii. SEGMENT RESULTS 450,413 707,636 206,949 78,154 1,443,152(330,044) (500,051) (15,099) (73,205) (918,399)

iii. UNALLOCABLE EXPENSES 481,101(net of unallocable income) (221,865)

iv. OPERATING PROFIT 962,051 (696,534)

v. INTEREST EXPENSE (NET) 34,131 (36,494)

vi. PROVISION FOR TAX- Current income tax 204,926

(153,058)- Deferred income tax 10,898

(4,208)- Fringe benefit tax 18,855

(17,299)vii. NET PROFIT 693,241

(485,475)viii. OTHER INFORMATION

Segment assets 2,588,295 1,712,738 375,356 140,068 4,816,457(2,768,744) (1,715,866) (230,811) (139,919) (4,855,340)

Unallocable assets 1,431,166(1,005,536)

TOTAL ASSETS 6,247,623 (5,860,876)

Segment liabilities 1,919,465 732,121 238,178 127,942 3,017,706 (1,793,982) (621,300) (186,820) (121,377) (2,723,479)

Unallocable liabilities 844,833 (1,016,274)

TOTAL LIABILITIES 3,862,53(3,739,753)

Capital Expenditure 6,316 31,186 32,216 7,274(31,752) (38,194) (1,289) (17,430)

Depreciation 12,612 25,311 9,093 6,605(15,800) (30,433) (4,104) (6,573)

Non-cash expenses otherthan depreciation 96,528 143,207 6,918 948

(44,794) (70,965) (4,632) (487)

i. Unallocated assets include investments, advance tax and tax deducted at source.ii. Unallocated liabilities include secured/unsecured loans, deferred tax/current tax liabilities, proposed dividend and tax on

proposed dividend.iii Amounts in brackets represent previous year’s figures.

CMC-Conso-54.p65 5/23/2007, 3:42 PM71

CMC Limited

72


b. Geographical Segment(All amounts in Rs./000s)

India United States United Others Totalof America Kingdom

SEGMENT REVENUE- Sales and Services 8,547,956 1,856,832 119,556 273,788 10,798,132

(7,382,650) (1,275,524) (104,514) (109,212) (8,871,900)- Other Income 9,697 — — — 9,697

(11,417) — — — (11,417)

TOTAL ASSETS 5,061,272 619,018 54,477 512,856 6,247,623 (4,986,397) (439,921) (65,201) (369,357) (5,860,876)

TOTAL LIABILITIES 3,379,398 282,137 8,483 192,521 3,862,539(3,504,886) (146,950) (28,711) (59,206) (3,739,753)

Note: Amounts in brackets represent previous year’s figures.

20. Previous year’s figures have been presented for the purpose of comparison and have been regrouped where necessary.





CMC-Conso-54.p65 5/23/2007, 3:42 PM72

Affix RevenueStamp

of 15 Paise

CMC Limited

Registered Office: CMC Centre, Old Mumbai Highway, Gachibowli, Hyderabad - 500032, A.P.

ATTENDANCE SLIP

Folio No.

Name

I certify that I am a registered Shareholder/Proxy for registered Shareholder of the Company.

I hereby record my presence at the 31st Annual General Meeting of the Company at Bhartiya Vidya Bhavan Auditorium, BVB HyderabadKendra, No. 5-9–1105, Basheerbagh-King Koti Road, Hyderabad-500 029, A.P., on Monday, June 25, 2007 at 3.30 p.m.

SignatureNote:Please sign this attendance slip and hand it over at the attendance counter at the ENTRANCE OF THE MEETING HALL.

I/We..........................................................................................................................................................................................................................................................................

of................................................................................................................................................................................................................................................................................(Write full address)

......................................................................................................................................................being a Member(s) of CMC LIMITED, hereby appoint

................................................................................................................ of ........................................................................................................................(Write full address)

...................................................................................................................................................................................................................................................................................

or failing him/her...............................................................................of...............................................................................................................................................................

....................................................................................as my/our proxy to attend and vote for me/us and on my/our behalf at the 31st Annual GeneralMeeting to be held on Monday, June 25, 2007 at 3.30 p.m. and at any adjournment thereof.

AS WITNESS under my/our hands this day of , 2007

Folio No. .......................................................... DPID No. .................................................................. Client ID No. .............................................................

Signature ......................................................... .............................

NOTES :1. The Proxy need NOT be a Member.2. The Proxy Form must be deposited at the Registered Office not less than 48 hours before the scheduled time for holding the meeting.

DP ID

Client ID

CMC Limited

Registered Office: CMC Centre, Old Mumbai Highway, Gachibowli, Hyderabad - 500032, A.P.

PROXY FORM

Proxy+Form.p65 5/23/2007, 4:05 PM73

CMC Limited

Twenty ninth annual report 2004 - 2005

Proxy+Form.p65 5/23/2007, 4:05 PM74

CMC Limited

April 14, 2007

The Shareholders ofCMC Limited

Re: Payment of Dividend by Electronic Clearing Services (ECS)

Dear Shareholder,

We are pleased to inform you that the Board of Directors at their meeting held on April 14, 2007 have recommended payment of dividendfor the year ended March 31, 2007 @ Rs. 8.00 per equity share. This dividend will be paid after the same is declared at the 31

st Annual General

Meeting scheduled to be held on June 25, 2007.

In accordance with SEBI’s directions vide their Circular No. DCC/FITT/Cir-3/2001 dated October 15, 2001, arrangements have been made tocredit your dividend amount directly to your bank account through the Electronic Clearing Service (ECS).

We, therefore, request you to furnish your bank details in the ECS Mandate Form printed overleaf together with a xerox copy ofyour cheque leaf and return to our Registrars, Karvy Computershare Private Limited on or before June 16, 2007 in case you holdshares in physical form. The said details in respect of the shares held in electronic form should be sent to your respective Deposi-tory Participant and not to the Registrar as the Registrar is obliged to use only the data provided by the Depository while makingpayment of dividend. Please mention the correct 9 digit MICR Code for giving the ECS credit to your account.

In case of receiving your request after the due date, the mandate will not be considered for this dividend. However, the same will be used forfuture dividend payments, unless the same is amended or revoked by you.

In the absence of adequate response from the shareholders of any particular centre(s), the Company reserves its right of paying the dividendby dividend warrants.

Thanking you,

Yours faithfully,

For CMC Limited

VIVEK AGARWALCompany Secretary & Head - Legal

Proxy+Form.p65 5/23/2007, 4:05 PM75

RE: PAYMENT OF DIVIDEND BY ELECTRONIC CLEARING SERVICES (ECS)

Shareholders authorization to receive dividend through Electronic Credit Service Mechanism

1. Name of the first/sole shareholder

2. Folio No./D.P. ID & Client ID Nos.

3. Name of the Bank in full

4. Branch, Address & Tel No.

5. 9-digit code number of the Bank and Branch

appearing on the MICR cheque

6. Account Number (as given on the cheque book)

7. Account type (Please tick)

(Please attach a photocopy of a cheque issued to you by your bank, for verification of the above particulars.)

I hereby declare that the particulars given above are correct and complete. If the transaction is delayed or not effected at all for any reason(s),

beyond the control of the Company, I will not hold the Company responsible. I agree to discharge the responsibility expected of me as a

participant under the scheme.

Date :

Place : Signature

Encl: Copy of the cheque leaf

NOTES

1. In case you hold shares in physical form, please send the aforesaid form duly filled in and signed by all the shareholders to our Registrars,

M/s Karvy Computershare Private Limited at their Office - Karvy House, 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad - 500034.

2. In case you hold shares in D’mat form, please furnish the aforesaid details to your depository participant and not to the Registrars.

MANDATE FORM

Savings Bank Current Cash Credit

Proxy+Form.p65 5/23/2007, 4:05 PM76

cmc annual report 2006-07

Economy & Finance

place of mr surendra

place of mr c b bhave

director ceodr krs murthy

annual general meeting

annual report

members of cmc limited

gachibowli hyderabad

cmc limited registered