net 4 india...desi s. valli bharat chawla brijesh chand mathur manish wadhawan surya s. chadha 01...

NET 4 INDIA Annual Report | 2009-10

Table of ConTenTs

Board of Directors

From the Desk of Chairman and Managing Director

Directors’ Report

Annexure to the Directors’ Report

Report on Corporate Governance

Auditor’s Certificate on Corporate Governance

CEO Certificate on Financial Statements

Management Discussions and Analysis

Auditor’s Reports

Annexure Referred to Auditor’s Reports

Balance Sheet

Profit & Loss Account

Cash Flow Statement

Schedules forming part of Balance Sheet & Profit & Loss Account

Significant Accounting Policies and Notes to Accounts

Balance Sheet Abstract and Company’s General Business Profile

Statement Pursuant to Section 212 of the Companies Act, 1956, relating to Subsidiary Companies

Details of Subsidiary Companies

Subsidiary Companies

Net 4 Communications Limited Net 4 Signapore Pte. Limited

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board of direCTors

CHAIRMAN AND MANAGING DIRECTOR

WHOLE-TIME DIRECTOR

NON-EXECUTIVE DIRECTORS

AUDITORS

LEGAL ADVISOR

VICE PRESIDENT - FINANCE & ACCOUNTS

COMPANY SECRETARY

Jasjit Singh Sawhney

Amarjit Singh Sawhney

Sandip K. Ghosh

M/s Sandy Associates, Chartered AccountantsNew Delhi

K.K Lahiri, Advocate

Swagata Roy

Krishan Kumar

Desi S. Valli

Bharat Chawla Brijesh Chand Mathur

Manish Wadhawan Surya S. Chadha

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BANKER

OFFICES

REGISTRAR AND TRANSFER AGENT

State Bank of IndiaSouth Extension Part- INew Delhi- 110049

REGISTERED OFFICE

AB-11, Community CentreSafdarjung EnclaveNew Delhi - 110029INDIATel: +91-11-26711150 / 54Fax: +91-11-41653217

MCS LimitedF-65, Okhla Industrial AreaPhase- I, New Delhi - 110020Tel: +91-11-41406149 / 51 / 52Fax: +91-11-41709881Email: [email protected] [email protected]: www.mcsdel.com

CORPORATE OFFICE

D-25, Sector-3NoidaUttar Pradesh - 201301INDIATel: +91-120-4323500Fax: +91-120-4323520

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Dear Shareholders,

It gives me immense pleasure to apprise you that we are back to the profitable growth that you have been used to from your Company for many years now. We can confidently say now that the last two quarters of FY 2008-09, were an aberration caused by widespread global panic.

Your Company has ended this year with record revenues and record profits. We are pleased to report the consolidated revenue of Rs 195.13 Crores an increase of 21.50% from Rs 160.60 Crores in the previous year. Our PAT has grown by 37% from Rs 8.40 Crores last year to Rs. 11.50 Crores in FY 2009-10.

One of your Company’s significant achievements has been the induction of investment, via preferential allotments, by highly reputed Private Equity Funds. Your Company raised an aggregate of Rs. 31 Crores from M/s Madison India Capital, M/s Granite Hill India Opportunities Fund and M/s QS India Hosting. These funds will enable us to execute our expansion plans, which would propel your Company into a much bigger and stronger Company in the coming years.

We continued to invest in upgrading our existing infrastructure and also allocated sizeable amounts of investments in Research & Development. Our infrastructure platform for our web services business has been successfully migrated to a virtualized environment, giving us significant additional capacity to add customers and greater opera-tional efficiencies to manage them.

This coming year, we shall embark upon two significant expansions. The first will be setting up a 30,000 square foot Data Centre in Chennai. This location will give us the much needed space capacity and will also serve as our Man-aged & Security services delivery unit. Your Company shall also be adding IP/MPLS VPN services to its portfolio and will implement the requisite network expansion in the coming year.

The 3G and BWA auctions have taken place in the last few months and judging by the amounts paid by telecom operators, they see significant demand in the future. We concur with their view on the potential and whilst it may not immediately go the mobile growth way, there is likely to be a multi fold growth in the near future. Our set of services will surely be a direct beneficiary of growth of the user base and usage of internet services.

We stand more confident today of significant future growth, than we probably ever have been. Most of the pieces of the jigsaw are in place for us and we are working hard to embrace the current and future opportunities. The coming few years look set to be the ones that will significantly reward all stakeholders who have been a part of this journey.

Sincerely,

Jasjit Singh SawhneyChairman and Managing Director

from The desk of Chairman & managing direCTor

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direCTors’ reporT

Dear Members,M/s Net 4 India Limited

On behalf of the Board of Directors of your Company, it is our privilege to present the 24th Annual Report on the business and operations of the Company together with the Audited Statement of Accounts for the financial year ended March 31, 2010 and Auditor’s Report thereon.

(Rs. In lacs, except per share data)Year Ended March 31st 2010 2009Particulars Consolidated Standalone Consolidated StandaloneOperating Income 19513.74 10837.70 16067.23 9790.00Net Profit before Tax 1765.37 1061.85 1307.35 906.15Net Profit after Tax/Amount available for Appropriation

1150.48 695.17 840.42 595.32

Amount transferred to General Reserve 51.90 174.00 14.90 149.00Balance retained in Profit & Loss Ac-count

1198.80 750.62 629.55 384.45

Dividend 65.18 65.18 167.50 167.50Earning Per Share-Basic & Diluted 6.66 4.02 5.02 3.55

Results of Operations

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Performance

The year under review witnessed an improved Turnover as compared to the previous year figure and the Profit after Tax and consequently, Earning per Share (EPS) of the Company has also increased as compared to previous year. A brief comparison of year on year (YoY) is as under:

Consolidated Results

Total Income for the year ended March 31, 2010 was Rs. 19,705.32 Lacs as compared to Rs. 16,284.89 Lacs re-corded during the previous fiscal, an increase of 21%. Profit after Tax increased from Rs. 840.42 Lacs for the year ended March 31, 2009 to Rs. 1,150.48 Lacs for the year ended March 31, 2010 an increase of 36.90%. Earnings per Share (EPS) increase from Rs.5.02/- per share in March 31, 2009 to Rs.6.66/- per share in March 31, 2010, an increase of 32.67%.

Standalone Results

Total Income for the year ended March 31, 2010 was Rs. 11,225.95 Lacs as compared to Rs. 10,179.43 Lacs recorded during the previous fiscal, an increase of 10.28%. Profit after Tax increased from Rs. 595.32 Lacs for the year ended March 31, 2009 to Rs. 695.17 Lacs for the year ended March 31, 2010 an increase of 16.77%. Earnings per Share (EPS) increase from Rs.3.55/- per share in March 31, 2009 to Rs.4.02/- per share in March 31, 2010, an increase of 13.24%.

Business Overview

Your Company achieved important mile stones in the year 2009-10. During the year, the Company has scaled new heights and set several benchmarks in terms of networth, turnover and profits.

In order to meet the capital requirements for various expansions in business, your Company has made an allotment of 1,697,812 Equity Shares of Rs. 10 each for cash at a premium of Rs. 77.76 per Share vide its Board Meeting dated December 8, 2009 to M/s. Madison India Capital HC, Mauritius and the consent of the shareholders in the form of Special Resolution in terms of Section 81(1A) of the Companies Act, 1956 has been obtained at the Extra-ordinary General Meeting of the Company held on 9th November, 2009.

A detailed discussion on the same and future opportunities is provided in the Management Discussion and Analysis Statement is presented in a separate section forming part of Annual Report.

Subsidiaries

Your Company has two Wholly-Owned Subsidiaries, M/s Net 4 Singapore Pte Limited and M/s Net 4 Communications Limited.

Net 4 Singapore Pte Limited

Net 4 Singapore Pte Limited was incorporated primarily to manage the Companies’ proposed International Whole-sale VoIP Business. The Company has already been awarded with the Service Based Operator (SBO) License in Singapore in the previous year. However, the Company is yet to start its business operations.

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Net 4 Communications Limited

Net 4 Communications Limited was incorporated in the year 2005 having its Registered Office at Kolkata. During the year under review, Total Income of the Company increased to Rs. 8,682 Lacs from 6,235.70 Lacs, at a growth rate of 39.23%. The Profit after Tax increased from Rs. 297.32 Lacs to Rs. 459.73 Lacs an increase of 54.62%.

Particulars under Section 212 of the Companies Act, 1956

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors’ Report, Balance Sheet, and Profit and Loss Account of our subsidiaries to the Balance Sheet of the Company. As per the requirement of Section 212 (1) of the Companies Act, 1956, the documents of the Subsidiary Companies has been attached to the Balance Sheet of M/s Net 4 India Limited. These documents will also be available for inspection during business hours at our Registered Office and also at the Registered Office of the concerned Subsidiaries.

Dividend

The Board of Directors of your Company have recommended Dividend @ 10% (Rupee 1 per Share) for the year 2009-10 (previous year 10%) to the shareholders other than Promoters and Promoter’s group, subject to the ap-proval of shareholders in their ensuing Annual General Meeting.

Directors

During the year Mr. Surya S. Chadha was appointed as a Non-Executive Director of the Company vide Extra-ordinary General Meeting of the members of the Company held on November 9, 2009.

Thereafter, Ms. Biba Sawhney resigned as Director from the Board of Directors of the Company w.e.f. December 8, 2009 due to some other pre-occupations. The Board placed on record deep sense of appreciation for the valuable contribution made by Ms. Biba Sawhney during her tenure as a Director of the Company.

Further, in accordance with the provisions of the Companies Act, 1956 read with Articles of Association of the Com-pany, Mr. Sandip K. Ghosh and Mr. Brijesh Chand Mathur, Directors of the Company are retiring by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. The Board recom-mends the appointment of the above Directors.

Directors Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Re-sponsibility Statement, it is hereby confirmed that:

(i) in the preparation of the Annual Accounts, the applicable accounting standards had been followed and wherever required, proper explanations relating to material departures have been given;

(ii) the Directors have 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 at March 31, 2010 and of the profit of the Company for the year ended on that date;

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

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(iv) the Directors have prepared the Annual Accounts of the Company on a “going concern” basis.

Human Resource

Net4 takes pride in its highly motivated and competent human resource that contributed its best to bring the Com-pany to its present heights. The productivity of the employees is reflected in the consistent improvement over the years. We have also set up a scalable recruitment and human resources management process, which enables us to attract and retain high caliber employees.

Your Company provides an environment which encourages initiative, innovative thinking and rewards performance without regard to various external factors such as race, sex, color, creed, religion, national origin, citizenship, age, marital status or orientation.

Your Company ensures and focused on training and development of its personnel through various internal and ad-vanced training programs, succession planning, participation at national and international conferences, job rotation, on-the-job training, and various workshops.

Fixed Deposit

During the year under review your Company has accepted deposits within the meaning of Section 58 A of the Com-panies Act, 1956 read with Companies (Acceptance of Deposit) Rules, 1975 for Rs. 3,88,14,000/-. In terms of the provisions of Investor Education and Protection Fund (IEPF) Rules, 2001, there was no unclaimed interest and / or principal amount due for transfer to Investors Education & Protection Fund, established by the Central Government under Section 205C(1) of the Companies Act, 1956 for the year ended March 31, 2010.

Corporate Governance

Your Company is committed to maintain the highest standards of Corporate Governance. The Company adheres to the requirements set out by the Securities and Exchange Board of India’s Corporate Governance practices and the requirements of the Listing Agreement and has implemented all the mandatory stipulations prescribed there under. Report on Corporate Governance for the year ended March 31, 2010 in terms of Clause 49 of the Listing Agree-ments entered into with the Stock Exchanges in India forms part of the Annual Report. Certificate from the Auditors of the Company, M/s. Sandy Associates, Charatered Accountants, New Delhi confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement, is annexed to this Report.

Management Discussion and Analysis Statement

Management Discussion and Analysis Statement on the Company’s performance, industry trends and other mate-rial changes with respect to the Company and its Subsidiaries, wherever applicable is attached to this Report.

Code of Conduct

In terms of Clause 49 of the Listing Agreement, the Company has formulated a Code of Conduct for the Directors and Senior Managerial Personnel. All the Board Members and Senior Managerial Personnel have given their con-sent to adhere to the Code of Conduct to the Compliance Officer of the Company. As per the requirement of Listing Agreement, the Code of Conduct is also available on Company’s website www.net4.in.

The Company has also formulated a ‘Code of Internal Procedures and Conduct for prevention of Insider Trading in Shares of the Company’ as per the provisions of SEBI (Prevention of Insider Trading Regulations) 2000, as amend-ed from time to time, providing guidelines to the designated employees while dealing in shares of the Company.

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Listing Information

Your Company is listed on the Bombay Stock Exchange (Scrip Code: 532912) and Delhi Stock Exchange (Scrip Code: 113089). The listing fee for the year 2009-10 has been paid to both the Stock Exchanges. The application with the National Stock Exchange had already been filed for listing and the same is pending for its approval.

Auditors and Auditors’ Report

M/s. Sandy Associates, Statutory Auditors of the Company, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office, if re-appointed.

The Auditors’ Report and Notes to on Accounts referred to in the Auditors’ Report are self-explanatory and therefore, does not call for any further comments.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings & 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 en-closed and marked as Annexure I to this Report.

Particulars of the Employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are given in Annexure II to the Directors’ Report.

Mr. Jasjit Singh Sawhney, Chairman & Managing Director and Mr. Amarjit Singh Sawhney, Whole Time Director of the Company are relatives and particulars in respect thereof are given in Corporate Governance Report. None of other employee is relative of any of the Directors of the Company.

Acknowledgements

The Directors place on record the appreciation and gratitude for the co-operation and assistance extended by vari-ous departments of the Union Government, State Government, Bankers and Financial Institutions. The Directors also place on record their appreciation of dedicated and sincere services of the employees of the Company at all levels. The Company will make every effort to meet the aspirations of its Shareholders and wish to sincerely thank them for their whole hearted co-operation and support at all times.

For and on behalf of the Board of Directors

Place: NoidaDated: August 31, 2010

Sd/-Jasjit Singh SawhneyChairman & Managing Director (DIN: 00111020)

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PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUTGO

The Statement pursuant to Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is as under:

A. CONSERVATION OF ENERGY

The operations of your Company are not energy conservative. We have a focused strategy to optimize energy consumption. We purchase PCs and Laptops that meet the environmental standards, replace old hardware with latest and more energy-efficient hardware, and thus, are decreasing the amount of equipment to further reduce our energy consumption. The Company is on a constant look out for efficient energy conservations technologies and introduces them at required places.

B. RESEARCH AND DEVELOPMENT (R & D)

1. Specific areas in which R & D is carried out by the Company are as under:

The core business of the Company i.e. Internet and Related Services require continuous research and development, adoption of new and more efficient technologies and innovation. Your Company has been making sincere efforts to build competence and improve the services in its area of operations by carrying out continuous research and development activities.

2. Benefits derived as a result of the above R & D:

Your Company has been able to develop processes and methodologies that have resulted in constant improvement in quality of the products and services and overall productivity of the Company.

3. Future plan of action:

The Company intends to develop its own R & D division in near future.

4. Expenditure on R & D

(a) Capital(b) Recurring(c) Total(d) Total R & D expenditure as a percentage of total turnovers.

Since, there is no separate R & D division, as such any separate allocation of funds for R & D, there-fore, exact amount spent on research and development is not ascertainable.

C. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Efforts in brief, made towards technology absorption, adaptation and innovation. Since the core business of the Company requires adoption and absorption of emerging technologies, the Company is making continuous efforts in absorbing and deploying the new technologies.

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2. Benefits derived as a result of the above efforts e.g. product improve-ment, cost reduction, product development, import substitution, etc.

The adoption and development of new technologies has resulted in the improvement in quality of its products and services and productivity of the Company.

3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished:

(a) Technology imported - Nil(b) Year of Import - N.A.(c) Has technology been fully absorbed - N.A.(d) If not fully absorbed, areas where this has not taken place, reasons therefore and future plans

of action - N.A.

D. FOREIGN EXCHANGE EARNINGS & OUTGO

Your Company has taken the various initiatives to increase exports, developments of new export markets for the services. Establishment of overseas Subsidiary at Singapore and making arrangements with International Call Carriers are some of the steps taken to increase the export in the near future. The particulars regarding Foreign Exchange Earnings during the period under review appearing in the Note No. (V) to the Notes to Ac-counts (Schedule ‘S’). The particulars regarding Foreign Exchange Expenditure during the period are appear-ing in Note No. (VI) to the Notes to Accounts.

For and on behalf of the Board of DirectorsNet 4 India Limited



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STATEMENT PURSUANT TO SECTION 217 (2A) OF THE COMPANIES ACT, 1956 AND THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975

Name Mr. Amarjit Singh Sawhney Mr. Jasjit Singh SawhneyDesignation Whole Time Director Chairman & Managing DirectorRemuneration received Rs. 22,82,520/- p.a. Rs. 32,89,560/- p.a.Nature of duties Look after the entire Finance & Le-

gal functionsLooks after the entire Operations

Qualifications and Experience B.A. Economics and more than 40 years experience

B. A.(Hons.) and more than 15 years experience

Date of commencement of em-ployment.

5th January ,2000 5th January ,2000

Age of the Employee 70 years 37 yearsLast Employment Business Director(Operations) in O-NetPercentage of equity shares held by the Employee in the Company within the meaning of sub-clause (iii) of clause (a) of sub-section (2A) of Section 217 of the Act.

4.34% 0.00%

Notes:

(1) Remuneration received includes Basic Salary, Dearness Allowance, Overtime, Ex-Gratia / Compensation Payments, Commission, Bonus, Company’s Contribution to Provident Fund, and monetary value of per-quisites.

(2) Nature of Employment is contractual or as per agreement wherever applicable. Other terms and conditions applicable to them are as per Company’s rules.




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Corporate Governance Philosophy

At Net4, it is our belief that as we move closer towards our aspirations of becoming a global Corporation, our Cor-porate Governance standard must be globally benchmarked and that gives us the confidence of having put in the right building blocks for future growth and ensuring that we achieve our ambitions in a prudent and sustainable manner.

Traditional views of governance as a regulatory and compliance requirement have given way to adoption of gov-ernance tailored to the specific needs of the Company. Clause 49 of the Listing Agreement has set the benchmark compliance rules for a Listed Company and the baseline for governance standards. Net4 not only adheres to the prescribed corporate practices as per Clause 49 but is constantly striving to adopt emerging best practices world-wide. It is our endeavor to achieve higher standards and provide oversight and guidance to management in strategy implementation and risk management and fulfillment of stated goals and objectives.

The Corporate Governance structure in the Company assigns responsibilities and entrusts authority among differ-ent participants in the organization viz. Board of Directors, the Senior Management Personnel, Employees etc. The Company had in fact adopted Corporate Governance and practices.

We are committed to meeting the aspirations of all our stakeholders. This is demonstrated in shareholder returns, high credit ratings, governance processes and an entrepreneurial, performance focused work environment.

In our commitment to practice sound governance principles, we are guided by the following core principles:

Transparency

To maintain utmost transparency in our interactions, dealings and day to day affairs.

Disclosures

To ensure timely dissemination of Price Sensitive Information and other matters concerning our stakeholders.

Stakeholders’ Interests

To promote the interests of all the Stakeholders including Customers, Shareholders, Employees, Lenders, Vendors and the Community.

Compliances

To comply with all the laws and regulations as applicable to the Company.

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1. Company’s Philosophy on Code of Governance

The Company endeavors to comply Corporate Governance by adherence with utmost transparency, disclo-sures and fairness in the business operations. Good Corporate Governance is ongoing process. Corporate Governance entails and ensures accountability of the persons in charge of the Company on the one hand and develops benefits to Investors, Customers, Vendors and the Society at large on the other hand. The Company believes that good Corporate Governance practice is an excellent tool to secure the corporate excellence. The Company has and will continue to focus its resources, strengths and strategies, in order to achieve this Vision, while upholding the core values of transparency, integrity, honesty and accountability.

2. Board of Directors

The role of the Board of Directors is to effectively govern the affairs of the Company for the benefit of its shareholders. The Board strives to ensure the success and continuity of the Company’s business through the election of qualified management. It is also responsible for ensuring that the Company’s activities are conducted in a responsible and ethical manner.

(A) Composition of Board

The Board of Directors consists of an optimum combination of Executive, Non-Executive and In-dependent Directors. The functional (Whole Time) Directors have core expertise in their functional area of operations in the Company and have enriched and varied experience.

The Board of Directors consists of 8 Directors, comprising 2 Whole-Time Directors including the Chairman and Managing Director, 6 Non-Executive Directors out of which 4 are Independent Di-rectors. The composition of the Board of Directors is in confirmity with Clause 49 of the Listing Agreement.

The composition of the Board of Directors is as follow:

Director Category of Director No. of Director-ships in other Companies (*)

No. of Memberships/Chairmanships of

Board/ Committees in other Companies (**)

Executive Director

Mr. Jasjit Singh Sawh-ney

Promoter Director/ Chairman & Manag-ing Director

1 1

Mr. Amarjit Singh Sawhney

Promoter Director/ Whole Time Director

1 1

Non Executive DirectorsMs. Biba Sawhney(Resigned on 08.12.2009)

Promoter /Non – Ex-ecutive Director

- -

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Mr. Sandip K. Ghosh Non – Executive Inde-pendent Director

1 1

Mr. Bharat Chawla Non – Executive Inde-pendent Director

- -

Mr. Manish Wadhwan Non – Executive 1 -Mr. Desi S. Valli Non -Executive Direc-

tor 1 -

Mr. Brijesh Chand Mathur

Non –Executive Inde-pendent Director

- -

Mr. Surya S. Chadha(Appointed on 09.11.2009)

Non -Executive Direc-tor

- -

*Excludes Directorships in Indian Private Limited Companies, Foreign Companies, Section 25 Companies, member-ships of Managing Committees of various Chambers/Bodies and Alternate Directorships.

**Represents Memberships / Chairmanships of Audit Committee and Shareholders & Investors Grievance Committee of all Indian Public Limited Companies.

(B) Attendance of the Directors at Board Meeting, last Annual General Meeting and Extra Or-dinary General Meetings Held during the year

(i) Board Meetings

In the year 2009-10, 8 meetings of the Board of Directors were held on 09.04.2009, 30.06.2009, 31.07.2009, 05.10.2009, 12.10.2009, 31.10.2009, 08.12.2009 and 30.01.2010 respectively. The periodicity between two Board Meetings was within the maximum time gap as prescribed in the Listing Agreement / Companies Act, 1956.

The attendance of Directors in the aforesaid meetings is as under:

Name of Director No of Board Meetings AttendedMr. Jasjit Singh Sawhney 8Mr. Amarjit Singh Sawhney 8Mr. Desi S. Valli 6Ms. Biba Sawhney (Resigned on 08.12.2009) 0Mr. Sandip K. Ghosh 7Mr. Manish Wadhawan 8Mr. Bharat Chawla 0Mr. Brijesh Chand Mathur 8Mr. Surya S. Chadha (Appointed on 09.11.2009) 1

The Company Secretary prepares the agenda and the explanatory notes, in consultation with the Chairman and Managing Director and circulates the same in advance to the Directors. Every Director is free to suggest inclusion of items on the Agenda. The Board meets at least once in every quarter inter alia to review the quarterly results. Additional meetings are held, when nec-essary.

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The Chairman and Managing Director of the Company from time to time invite officers and oth-er employees of the Company to attend the Board Meetings, whenever deemed appropriate.

All Directors on the Board and various departments of the Company, communicate to the Com-pany Secretary the matters requiring approval of the Board, well in advance, so that these can be included in the Agenda for the scheduled Board Meeting.

(ii) Annual General Meetings

The Last Annual General Meeting was held on 30.09.2009. Attendance of Directors in the aforesaid meeting is as under:

Name of the Directors Attendance of last AGM Held on 30.09.2009

Mr. Jasjit Singh Sawhney PresentMr. Amarjit Singh Sawhney PresentMr. Desi S. Valli AbsentMs. Biba Sawhney (Resigned on 08.12.2009) AbsentMr. Sandip K. Ghosh PresentMr. Manish Wadhawan AbsentMr. Bharat Chawla AbsentMr. Brijesh Chand Mathur AbsentMr. Surya S. Chadha (Appointed on 09.11.2009) N.A.

(iii) Extra-ordinary General Meetings:

Date / Place of Meet-ing

Nature of Business Transacted Special Resolution Passed

09.11.2009 / Noida (Ut-tar Pradesh)

(i) Allotment of Equity Shares on a preferential basis

(ii) Alteration in the Articles of Asso-ciation

(iii) Appointment of Mr. Surya S. Chad-ha as Director

Yes

Yes

N.A.

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Attendance of Directors in the aforesaid meeting is as under:

Name of the Directors Attendance at EGM Held on 09.11.2009

Mr. Jasjit Singh Sawhney PresentMr. Amarjit Singh Sawhney PresentMr. Desi S. Valli AbsentMs. Biba Sawhney (Resigned on 08.12.2009) AbsentMr. Sandip K. Ghosh PresentMr. Manish Wadhawan AbsentMr. Bharat Chawla AbsentMr. Brijesh Chand Mathur AbsentMr. Surya S. Chadha (Appointed on 09.11.2009) N.A.

(C) Retirement / Appointment and Re-appointment of Directors / Whole Time Directors / Man-aging Director

Mr. Sandip K. Ghosh and Mr. Brijesh Chand Mathur are Directors, who are being liable to retire by rotation and being eligible, offer themselves for reappointment. The Board recommends their appoint-ment as Directors.

Ms. Biba Sawhney resigned from the Directorship of the Board on December 8, 2009 due to some other pre-occupations and Mr. Surya S. Chadha was appointed as a Non- Executive Director in the Extra-ordinary General Meeting of the Company held on November 9, 2009.

(D) Relationship amongst Directors and their Relatives

Mr. Jasjit Singh Sawhney, Chairman & Managing Director is the son of Mr. Amarjit Singh Sawhney, Whole Time Director. Ms. Biba Sawhney, Non Executive Director (upto 08.12.2009), is the daughter of Mr. Amarjit Singh Sawhney. Apart from the above relation, none of the other Directors have any of their relatives in employment of the Company or on the Board.

(E) Loans to Directors

No loans have been given to/or outstanding from any of the Directors of the Company.

3. Board Committees

To give utmost priority to important functional areas which require specialized attention, various committees of the Board are constituted.

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Name of the Committee Name of Director Chairman / MemberAudit Committee Mr. Sandip K. Ghosh

Mr. Manish Wadhawan Mr. Bharat ChawlaMr. Brijesh Chand Mathur

ChairmanMemberMemberMember

Shareholders’/Investors’ Grievance Committee

Mr. Sandip K. Ghosh Mr. Manish Wadhawan Mr. Bharat ChawlaMr. Brijesh Chand Mathur


Remuneration Committee Mr. Sandip K. Ghosh Mr. Manish Wadhawan Mr. Bharat ChawlaMr. Brijesh Chand Mathur


Management Committee Mr. Jasjit Singh Sawhney Mr. Amarjit Singh Sawhney Mr. Desi S. Valli Mr. Sandip K. Ghosh


The Committees of the Board are constituted in compliance with the provisions of the Companies Act, 1956 and Listing Agreement entered into with the Stock Exchanges.

The Board may, from time to time, constitute one or more Functional Committees delegating thereto powers and duties with respect to specific purposes. Meetings of such Committees are held as and when the need arises. Time schedule for holding the meetings of such Functional Committees are finalized in consultation with the Committee Members. The Committee(s) so constituted act in accordance with their terms of refer-ence and / or with respect to the functions assigned or the powers delegated by the Board of Directors.

Any decision taken in the Committee meeting which is outside its scope / powers and/ or its terms of refer-ence may be subsequently ratified by the Board of Directors and shall have effect as if they were originally decided by the Committee within their terms of reference / powers and scope and the decision shall have effect accordingly. The minutes of respective committee meetings are also kept in the meeting of the Board of Directors held immediately after the Committee Meeting for noting.

A brief on the terms of reference, meetings held during the year and attendance of members in these meet-ings is as under:

A. Audit Committee

The main function of the Committee is to continuously monitor and effectively supervise the Company’s financial reporting process with a view to provide accurate, timely and proper disclo-sures and to maintain the integrity and quality of the financial reporting. The terms of reference of the Audit Committee are in accordance with Section 292A of the Companies Act, 1956 and the guidelines set out in the Listing Agreement.

The Committee is headed under the stewardship of Mr. Sandip K. Ghosh, an independent Non - Executive Director. Mr. Sandip K. Ghosh, a Chartered Accountant by profession has vast, varied and multifarious experience in Financial Management, Corporate Affairs and Accounting matters.

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The Committee during the year 2009-10 met 4 times and Mr. Sandip K. Ghosh attended 3 meet-ings of the Committee and Mr. Bharat Chawla did not attend any meeting. Mr. Manish Wadhawan and Mr. Brijesh Chand Mathur attended all the Meetings of the Committee. Representative of the Statutory Auditors and Financial Controller were invited to be present at the meetings. All the members of the Committee are Independent Directors.

B. Shareholders & Investors’ Grievance Committee

The terms of reference include giving approval for issue of duplicate certificates, to oversee and review all matters connected with transfer of securities of the Company, to continuously monitor and give di-rections for prompt resolution of Shareholders’/Investors’ complaints like transfer of shares, non-receipt of the balance sheet, non-receipt of dividend, etc. The Committee also supervises the working of Reg-istrar and Share Transfer Agents of the Company and recommends measures for overall improvement in the quality of investor services. The Committee during the year 2009-10 met 5 times and Mr. Sandip K. Ghosh attended 4 meetings of the Committee and Mr. Bharat Chawla did not attend any meeting. Mr. Manish Wadhawan and Mr. Brijesh Chand Mathur attended all the meetings of the Committee. In order to expedite the process of share transfers, the Committee has delegated the power of share transfer to Company Secretary of the Company who shall attend to share transfer formalities at least once in a fortnight. The Company has received 26 complaints for non- receipt of Annual Report, non – receipt of Dividend warrant for the year 2008-09 and updation in contact details and all the complaints have been resolved promptly. Outstanding complaints as on 31.03.2010 were Nil.

C. Remuneration Committee

The terms of reference include to consider, recommend and review the remuneration of Executive Directors and Senior Management Personnel based on their performance and defined assessment criteria. There was no meeting of the Committee during the year 2009-10.

D. Management Committee

The terms of reference include (i) deciding on borrowing, loan, advances, overdrafts from banks, fi-nancial institutions, individuals, foreign institutions, etc, (ii) to decide investment to be made in the joint venture, acquisition, collaboration, and/or incorporation of a new company and other tasks entrusted, delegated by the Board of Directors from time to time.

The Committee during the year 2009-10 met 7 times and Mr. Desi S. Valli and Mr. Sandip K. Ghosh both attended 6 meetings, Mr. Amarjit Singh Sawhney attended 5 meetings, Mr. Jasjit Singh Sawhney attended 4 meetings of the Committee respectively.

4. Remuneration of Directors:

Details of remuneration of the Directors for the financial year ended March 31, 2010:

Director Relationship with other Director

Salary# Perquisites andOther benefits##

Sitting Fees Total

Mr. Amarjit Singh Sawhney

Father of Mr. Jasjit Singh Sawhney & Ms. Biba Sawhney

20,40,600 2,41,920 - 22,82,520

(In Rupees)

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Mr. Jasjit Singh Sawhney

Son of Mr. Amarjit Singh Sawhney and Brother of Ms. Biba Sawhney

30,03,000 2,86,560 - 32,89,560

Mr. Desi S Valli - - - 3,000/- 3,000/-Ms. Biba Sawh-ney (Resigned on 08.12.2009)

Daughter of Mr. Amarjit Singh Sawh-ney and sister of Mr. Jasjit Singh Sawh-ney

- - Nil Nil

Mr. Sandip K. Ghosh

- - - 5,000/- 5,000/-

Mr. Manish Wadhawan

- - - 4,250/- 4,250/-

Mr. Bharat Chawla

- - - Nil Nil

Mr. Brijesh Chand Mathur

- - - 4,250/- 4,250/-

Mr. Surya S. Chadha (Ap-pointed on 09.11.2009)

- - - 250/- 250/-

Total 55,88,830/-

# Salary also includes Performance Pay.

## Perquisites and other benefits include allowances, contribution to Provident and other funds but exclude company’s contribution to Gratuity Fund.

The appointment of Whole Time /Executive Directors is guided by the standard terms and conditions of the appointment as applicable to employees.

5. Management Discussion and Analysis Statement

“Management Discussion and Analysis Statement” on the Company’s performance, industry trends and other material changes with respect to the Company and its Subsidiaries, wherever applicable is appended with this Report.

6 Brief Profile of the Directors proposed to be re-appointed

As a matter of good corporate practice, your Board has decided that at the time of introduction of the Direc-tors to the Shareholders, a brief profile of the Director shall be given:

1. Mr. Sandip K. Ghosh

Mr. Sandip K. Ghosh, a Chartered Accountant by profession with more than 34 years of experience in the field of Accounts and Finance. He joined the Board of Net 4 India Limited on October 1, 2001 and presently working as Non - Executive Director.

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Your Company has benefited a lot by the knowledge and experience of Mr. Sandip K. Ghosh. His ten-ure is liable to retire by rotation at the ensuing Annual General Meeting of the Company. Mr. Sandip K. Ghosh being eligible, offers himself for re-appointment. The Board of Directors has recommended his appointment as Director.

Other Companies in which Mr. Sandip K. Ghosh holds Directorship and Committee Member-ships:

Name of Company Nature of Interest

Audit Committee Investor Grievance Committee

Remuneration Committee

M/s Net 4 Communi-cations Limited

Director No No Member

M/s Net 4 Singapore Pte. Limited

Director No No No

M/s Net 4 Barter Pri-vate Limited

Director No No No

Shareholding in the Company

Mr. Sandip K. Ghosh does not hold any share of Net 4 India Limited.

2. Mr. Brijesh Chand Mathur

Mr. Brijesh Chand Mathur, a Chartered Accountant by profession with more than 32 years of experi-ence in the field of Accounts, Taxation and Finance. He joined the Board of Net 4 India Limited on September 25, 2007 and presently working as Non - Executive Director.

Your Company has benefited a lot by the knowledge and experience of Mr. Brijesh Chand Mathur. His tenure is liable to retire by rotation at the ensuing Annual General Meeting of the Company. Mr. Brijesh Chand Mathur being eligible, offers himself for re-appointment. The Board of Directors has recommended his appointment as Director.

Other Companies in which Mr. Brijesh Chand Mathur holds Directorship and Committee Mem-berships:

Name of Company

Nature of Interest

Audit Committee Investor Grievance Committee

Remuneration Committee

N. A. N. A. N. A. N. A. N. A.

Shareholding in the Company

Mr. Brijesh Chand Mathur does not hold any share of Net 4 India Limited.

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7. Chairman

Mr. Jasjit Singh Sawhney is a Chairman and Managing Director (CMD) of the Board of Directors of the Com-pany. His primary role is to provide leadership to the Board and the Corporate Management for realizing the approved strategic plan and business objectives. He presides over the Board and Shareholders Meetings.

8. Related Party Transactions

There have been no significant material related party transactions. Disclosure in relation to all the mate-rial, financial and commercial transactions, where directors have personal interest have been reported and those transactions are disclosed in Note No. S (xviii) to the Accounts in the Annual Report.

9. Code of Conduct

As a part of Company’s constant endeavour to set a high standard of conduct for its employees, it has for-mulated ‘The Code of Conduct for Board Members and Senior Management Personnel’ in compliance with the provisions of Clause 49 of the Listing Agreement. The Code lays down guidelines and advises the Board and Senior Management Personnel on procedures to be followed, disclosures to be made and to follow eth-ics as per rules of the Company. The purpose of this Code is to ensure an ethical and transparent process in managing the affairs of the Company and promote ethical conduct. The Code has been circulated to all the members of the Board and Senior Management Personnel and the compliance of the same is affirmed by them annually. The Company Secretary has been appointed as the Compliance Officer under this Code. The code of Conduct is also available on Company’s website www.net4.in.

10. Insider Trading Regulations

In terms of the provisions of SEBI (Prevention of Insider Trading Regulations) 2000, as amended, the Company has formulated a “Code of Internal Procedures and Conduct for Prevention of Insider Trading in shares of the Company”. The objective of the Code is to prevent misuse of Price Sensitive Information and purchase and/or sale of shares of the Company by an insider on the basis of Unpublished Price Sensitive Information. The Code lays down guidelines and advises the Directors, Officers and Designated Employees on procedures to be followed and disclosures to be made, while dealing in the shares of the Company.

11. Publication of Unaudited/Audited Financial Results

Period Name of NewspaperAudited Financial Results for the year ended 31.03.2010

Economic Times (English) & Jansatta (Hindi)

Unaudited Financial Results for the Quarter ended on 31.12.2009

Economic Times (English) & Jansatta (Hindi)


The Financial Express (English) & Jansatta (Hindi)


The Financial Express (English) & Jansatta (Hindi)

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The audited yearly / unaudited quarterly results of the Company are also displayed on the Website of the Company at www.net4.in.

12. General Body Meetings

(a) Location and time where last three Annual General Meetings were held:

Year Date Time Venue2007 24.09.2007 11.00 A.M. AB-11, Community Centre, Safdar-

jung Enclave, New Delhi – 110 0292008 30.09.2008 10:30 A.M. Hotel Centrum, D-984 New Friends

Colony, New Delhi – 110 0652009 30.09.2009 11.00 A.M. IKON Residency, D-823, New Friends

Colony, New Delhi - 110065

(b) Special Resolutions

In the Annual General Meeting held on 2008 and 2007, no Special Resolutions were passed.

In the Annual General Meeting held on 2009, Special Resolution for the alteration in the Articles of Associa-tion of the Company was passed.

(c) Resolutions passed through Postal Ballot

During the year 2009-10, no resolutions was passed through Postal Ballot.

Postal Ballot in the ensuing Annual General Meeting

At the ensuing Annual General Meeting, there is no resolution proposed to be passed by Postal Ballot.

13 (a). Disclosures on materially significant related party transactions i.e. transactions of the Company of material nature, with its Promoters, the Directors or the Management, their Subsidiaries or Relatives, etc. that may have potential conflict with the interests of the Company at large.

The Board has received disclosures from the Key Managerial Personnel relating to the transactions entered into with Companies where they and/or their relatives have interest.

The Company’s major related party transactions are generally with its Subsidiaries and Associate Companies and were in the normal course of business .During the year ended 31st March, 2010, there were no materially significant related party transactions with its Promoters, the Directors or the Management, their Subsidiaries or Relatives etc. which may have potential conflict with the interests of the Company at large.

The related party transactions during the year are disclosed at Note No. S (xviii) to the Notes to Ac-counts of the Annual Report for the year ended March 31, 2010.

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(b). Details of non-compliance by the Company, penalties, strictures imposed on the Company by Stock Exchanges or SEBI, or any statutory authority, on any matter related to Capital Markets, during the last three years.

During the last three years, there have been no instances of non compliance by the Company, no pen-alties or strictures were imposed on the Company by any Stock Exchange, Securities and Exchange Board of India (SEBI) or any other statutory authority on any matter relating to the Capital Markets.

(c). Whistle Blower Policy and affirmation that no Personnel have been denied access to the audit committee.

The Company promotes ethical behavior in all its business activities and has put in place mechanism of reporting illegal or unethical behaviour. Employees are free to report violations of laws, rules, regu-lations or unethical conduct to their immediate supervisor or the Chairman of Audit Committee. The reports received from any employee will be reviewed by the Audit Committee. The Directors and Man-agement Personnel are obligated to maintain confidentiality of such reportings and ensure that the whistle blowers are not subjected to any discriminatory practices. Any employee, if he/she so desires, have free access to meet Senior Level Management and report any matter of concern. No employee of the Company is denied access to the Audit Committee to make any representation. During the year, no Personnel had approached the Audit Committee.

(d). Compliance with Code of Corporate Governance

The Company is regularly complying with the mandatory requirements of Code of Corporate Gover-nance as indicated in Clause 49 of the Listing Agreement.

Clause 49 of the Listing Agreement further states that the non-mandatory requirements may be imple-mented as per the discretion of the Company. The Company has implemented the following non-mandatory requirement:

(i) Remuneration Committee

The Company has set up a Remuneration Committee to approve specific aspects of the remu-neration of Directors and Senior Management Personnel.

(ii) Audit Qualification

The Company is in the regime of unqualified financial statements.

(iii) Training of Board Members

New members on the Board of Directors are apprised about the operations, policies and pro-cedures of the Company. They are further informed about the duties and liabilities of a Direc-tor in the course of discharging his duties on the Board and are also apprised about the laws, rules and regulations which they should be aware of as a Director. Executive brief of relevant statutory changes and landmark pronouncements encompassing important laws such as the Companies Act, 1956, SEBI Act, FEMA etc. is circulated to all the Directors of the Company, every quarter.

23


(e). Accounting Standards

The Company has been following Accounting Standards laid down by the Institute of Chartered Ac-countants of India in the preparation of the financial statements of the Company.

(f). Subsidiary Company

The Company has two Wholly-Owned Subsidiaries viz. Net 4 Communications Limited and Net 4 Singapore Pte. Limited.

The Subsidiary Companies are Board managed with their Boards having the rights and obligations to manage such Companies. All minutes of the meetings of the unlisted Subsidiary Companies are placed before the Company’s Board meeting regularly.

(g). Risk Management

The Audit Committee and the management regularly review the risk management strategy of the Company to ensure the effectiveness of risk management policies and procedures.

(h). Certification

The Chairman & Managing Director and the Whole Time Director of the Company have furnished the requisite certificates to the Board of Directors under Clause 49 (V) of the Listing Agreement with the Stock Exchanges certifying that:

a. They have reviewed the financial statements and the cash flow statement for the year ended 31.03.2010 and the same does not contain any materially untrue statement or omit any material fact or contain any misleading statement.

b. The financial statements present a true and fair view of the Company’s affairs and are in compli-ances with the existing Accounting Standards, applicable laws and regulations and no transac-tions entered into by the Company during the year were fraudulent, illegal or violative of Com-pany’s Code of Conduct.

c. They accepted the responsibility for establishing and maintaining internal controls and their ef-fectiveness, and they have disclosed the deficiencies, if any in the design and operation of internal controls, significant changes in the accounting policies or in the internal control or the instances of significant fraud, if any of which they have aware to the Auditors and the Audit Com-mittee and the steps they have taken to rectify those deficiencies.

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14. Means of Communication Quarterly Results: Quarterly Results published in leading financial dailies in English and Hindi.

News Release, Presentation etc: Official News, Releases are displayed on the Company website.

Annual Report: Annual Report containing, inter alia, Audited Annual Accounts, Consolidated Financial Statements, Directors’ Report, Auditor’s Report, and other important information is circulated to members and others entitled thereto.

Designated E-mail ID: The Company has designated the E-mail ID [email protected] exclusively for investor servicing.

15. General Information

(a) Annual General Meeting

Day, Date & Time: Wednesday, 30th day of September, 2010 at 10:30 AMVenue: The Executive Club, Chatarpur Mandir Road, Chatarpur, New Delhi – 110 030Book Closure: September 18, 2010 to September 25, 2010 (both days inclusive)

(b) Dividend Payment History

The Company has paid Dividend in the last three years. The details of the Dividend paid are as fol-lows:

S. No. Year Ended Rate of Dividend Total Amount(Rs.)

Date of AGM in which dividend was declared

1 31.03.2007 10% 16,25,00,000 24.09.20072 31.03.2008 10% 16,75,00,000 30.09.20083 31.03.2009 10% 48,20,285 30.09.2009

(c) Registrar & Transfer Agent

As per the provisions of Listing Agreements entered with the Stock Exchanges, the Company has appointed M/s MCS Limited, as the Common Registrar and Share Transfer Agents for the shares of the Company held in both physical and electronic modes. All correspondence with regard to share transfers and matters related therewith may directly be addressed to the Share Registrar and Transfer Agents at the address given below:

MCS Limited

F-65, Okhla Industrial Area, Phase - I, New Delhi – 110 020Tel: 011 - 41406149 / 51 / 52Fax: 011 - 41709881Email: [email protected]; [email protected]

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(d) Share Transfer System

The Share Transfer System of the Company in the physical segment consists of activities like receipt of Share Certificates along with Transfer Deeds, its verification and approval of transfers by Share-holders and Investors Grievance Committee and dispatch of certificates to respective transferees. To expedite the process of Share Transfers, the Board has delegated the authority for transfer/transmis-sion of shares to the Shareholders and Investors Grievance Committee.

Majority of Share Transfer requests are processed and the Share Certificates are returned within a period of 15 days from the date of receipt, subject to the documents being valid and complete in all respects.

Shares held in the dematerialized form are electronically traded in the Depository and R & T Agent periodically receive from the depository, the beneficiary holdings so as to enable them to update their records.

The Company obtains from a Company Secretary in Practice half-yearly Certificate of compliance with the share transfer formalities as required under Clause 47(c) of the Listing Agreement with the Stock Exchanges and files a copy of the Certificate with the Stock Exchanges.

(e) Outstanding GDRs/ADRs/Warrants or any Convertible Instruments

The Company has not issued any ADR/ GDR/Warrants or any Convertible Instruments.

(f) Financial Calendar: 1st April to 31st March

Financial reporting for the quarter ending

- June, 2009 : July, 2009- September, 2009 : October, 2009- December, 2009 : January, 2010- March, 2010 : Latest by 30th May, 2010

(g) Listing on Stock Exchanges and Stock Code

The shares of the Company are listed at Bombay Stock Exchange and Delhi Stock Exchange. The details regarding the Stock Exchanges and stock codes are as follows:

Name of the Stock Exchange along with its Address Stock CodeBombay Stock Exchange Limited (BSE), P. J. Towers, Dalal Street, Mum-bai – 400 001, Maharashtra

532912

Delhi Stock Exchange Association Limited (DSE), 3/1, Asaf Ali Road, New Delhi – 110 003

113089

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(h) Demat ISIN Number in NSDL & CDSL for Equity Shares: INE553E01012

Capital structure as on 31.03.2010 No. of Shares Percentage

Issued Capital 1,84,47,812 100.00Listed Capital with DSE & BSE 1,84,47,812 100.00Held in Demat Form in NSDL & CDSL 1,82,38,807 98.87Held in Physical Form 2,09,005 1.13

(i) Shareholding Pattern as on 31st March 2010

S. No Category No. of Shares % of HoldingA. Promoter’s Holding

-Indian Promoters -Foreign Promoters

76,29,71043,00,000

41.3623.31

Sub-Total 1,19,29,710 64.67B. Non Promoter Holdinga.b.c.

-Private corporate Bodies-FII-Indian Public

46,47,1194,00,00010,19,791

25.192.175.53

d. -Other (NRIs/Insurance Co.) 4,51,192 2.44Sub-Total 65,18,102 35.33

GRAND TOTAL 1,84,47,812 100.00

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(j) Market Price Data

The High, Low Share Price of the Company on the Bombay Stock Exchange (BSE), vis-à-vis BSE Sensex, Number of Shares traded and Net Turnover, during the period from April, 2009 to March, 2010 are as under:

Month Share Prices BSE Sensex No. of shares traded

Net turn-over(Rs. in thousands)

High Low High LowApril 2009 66.95 40.10 11492.10 9546.29 221920 12897883May 2009 68.10 47.60 14930.54 11621.30 228899 13066198June 2009 79.20 66.75 15600.30 14016.95 769436 55386319July 2009 88.00 65.00 15732.81 13219.99 861184 62804941August 2009 96.50 84.25 16002.46 14684.45 539390 49847691September 2009

94.20 79.70 17142.52 15356.72 665804 58281447

October 2009 99.00 83.00 17493.17 15805.20 563710 49814411November 2009 90.00 82.55 17290.48 15330.56 1005517 87983355December 2009 98.90 85.15 17530.94 16577.78 673353 59656823January 2010 101.45 74.50 17790.33 15982.08 948310 79964490February 2010 97.60 78.05 16669.25 15651.99 1406129 125105067March 2010 94.75 83.00 17793.01 16438.45 1886923 165392698

*Source: www.bseindia.com

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The monthly market data relating to the Closing Price of the Shares of the Company vis-à-vis BSE Sensex is as under:

Month Closing Share Price of Company Closing BSE Sensex April 2009 52.40 11,403.25May 2009 65.85 14,625.25June 2009 71.90 14,493.84July 2009 84.70 15,670.31August 2009 91.90 15,666.64September 2009 87.90 17,126.84October 2009 86.60 15,896.28November 2009 86.90 16,926.22December 2009 89.35 17,464.81January 2010 78.95 16,357.96February 2010 92.90 16,429.55March 2010 89.25 17,527.77

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(k) Dematerialization of Shares and Liquidity

In accordance with the directions of the Securities & Exchange Board of India (SEBI) trading in the shares of the Company by all categories of investors in demat form has been made compulsory w.e.f. April 5, 1999. The Company has executed agreement with both the depositories of the Country i.e. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) for admission of its securities under demat mode. As on March 31, 2010, around 99% of the total Equity Share Capital of the Company has been dematerialized by the shareholders and held in the name of the NSDL / CDSL.

At present, 99% of the Shares of the Company are held in Demat (electronic) mode. The shares of the Company are available for trading system of both National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The Company submits the Secretarial Audit Report for reconciliation of Share Capital of the Company obtained from a Company Secretary in Practice to the Stock Exchanges within the prescribed period.

(l) Address for Correspondence

The shareholders may address their communication/ suggestions/ grievances/ queries to the Regis-trar and Share Transfer Agents at their address mentioned above or to:

The Company SecretaryNet 4 India LimitedRegistered Office: AB-11, Community Centre, 1st & 2nd Floor, Safdarjung Enclave, New Delhi- 110 029.

Corporate Office: D-25, Sector 3, Noida - 201301, Uttar Pradesh, E-Mail: [email protected]


Place: New DelhiDated: May 25, 2010


30


For Sandy AssociatesChartered AccountantsFRN No: 007337N


Sd/-(Sandeep Gupta)ProprietorMembership No: 86069

audiTor’s CerTifiCaTe on CorporaTe governanCe

To, The Members of M/s. Net 4 India Limited

We have examined the compliance of conditions of Corporate Governance by M/s Net 4 India Limited (“the Com-pany”), for the year ended on March 31, 2010, as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement.

We state that no investor grievance is pending for a period exceeding one month against the Company as per the records maintained by the Shareholders’ / Investors’ Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the ef-ficiency or effectiveness with which the management has conducted the affairs of the Company.

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To,The Board of DirectorsM/s. Net 4 India Limited

Dear Sirs,

Sub: CEO / CFO Certificate

(Issue in accordance with the provisions of Clause 49 of the Listing Agreement)

We have reviewed the financial statements, read with the cash flow statement of M/s Net 4 India Limited for the year ended on March 31, 2010 and that to the best of our knowledge and belief, we state that;

(a) (i) These statements do not contain any materially untrue statement or omit any material fact or contain statements that may be misleading;

(ii) These statements present a true and fair view of the Company`s affairs and are in compliance with current accounting standards, applicable laws and regulations.

(b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or in violation of the company`s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls for financial reporting. We have evaluated to effectiveness of internal control systems of the Company and have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, and steps taken or proposed to be taken for rectifying these deficiencies.

(d) We have indicated to the Auditors and Audit Committee:

(i) Significance changes in accounting policies made during the year and that the same have been disclosed suitably in the notes to the financial statements; and

(ii) That there were no instances of significant fraud of which we have become aware.

Yours Sincerely,

Sd/- Sd/-Jasjit Singh Sawhney Amarjit Singh SawhneyCMD & CEO Whole Time DirectorDIN: 00111020 DIN: 00110823

Date: May 25, 2010Place: New Delhi

Ceo CerTifiCaTe on finanCial sTaTemenTs

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managemenT disCussion & analysis

We witnessed a near “V” shaped recovery in business sentiment in the last year. Whilst Q4 09 ended on a very shaky note, over the 4 quarters we saw a remarkable recovery in demand from businesses. This was a combina-tion of both, pent up demand arising out of “on hold expenditure” and implementation of IT strategies that would yield businesses long term cost savings and efficiencies. The noise level on “CLOUD” based services has also increased and we are beginning to see a lot of first time application usage happening in the cloud/hosted model.

We conducted a market survey in the early part of the year and one of the highlights was that whilst people had heard about the company, the knowledge on the depth of services provided was severely lacking. To correct this, we undertook an aggressive brand building and service awareness marketing campaign during the second half of the year, which we are happy to report, has been extremely successful. Enquires for all services have significantly increased, in some cases even doubled from the preceding quarters and order closure ratios have gone up for all services. We hope to fully reap the benefits of this and ongoing campaigns going forward.

Web Services

Data Centre Services

Last year’s emphasis by businesses on outsourcing this activity continued through this year. Deeper IT implemen-tation by enterprises also meant that they needed more space, storage and associated computing resources. This trend worked well for us and our decision during the early part of the year to expand our Data Centres in Mumbai and Chennai enabled us to continue to serve existing demand.

We also began providing Virtual Private Servers as a service. This enabled us to start migrating the space and power intensive non rack mountable servers to our virtualized infrastructure. Not only will this free up space in our regional IDCs to add more customers who want local presence, it will also ensure that the existing utilized area is more profitable.

The demand outlook over the coming period is extremely strong in both number of customers and depth of man-aged services sought by businesses. In light of this traction we are setting up a 30,000 square foot Data Centre in Chennai, which will also cater to customers looking for larger cage spaces and house our Managed & Security ser-vices delivery unit. This data centre will also become the primary site for the rest of our web services business over this year, with Delhi (current primary) and Mumbai as the secondary and tertiary respectively. We will strengthen our capability on the Managed services and Security services front with a combination of in house expertise and strategic partnerships, which would go a long way in increasing margins and customer stickiness in this business.

Business E-Mail Services

The renaming of this service segment is due to the moving of high end messaging services to the newly created Hosted Applications segment. Whilst technically these services are also Hosted email, the end user market sees it in a different light. Business email services will be targeted at SOHOs, Small and the lower end of medium enter-prises.

The space provided by us along with email accounts has not been in line with the market trend and customer de-mand, which may have hampered the potential growth to a certain extent. We decided, however to hold on to the increase in space for new and existing users until we had implemented our upgraded storage and virtualized server infrastructure. We shall be coming in line with the market on this very shortly and expect there to be significant increase in business.

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We have also upgraded our webmail version, which is used by most small companies. This version is many times faster than the previous version and has a host of new features, which we believe are not provided by any other service providers

All in all, India is still highly underserved in this space and with 26 million MSMEs in India the opportunity is im-mense. Our constant endeavour to stay ahead in terms of quality and features, which makes us ideally positioned to take advantage of the imminent uptake of these services by businesses. Our expansion to select international markets was on hold on account of the upgrades in platform and infrastructure. We shall test the waters in some of these markets during this year.

Hosted Applications

Our services in this area currently include Hosted Microsoft Exchange – Exmail and Hosted Microsoft CRN Dynam-ics. In addition to just providing these services on a hosted/VPS model we have also begun providing managed services on these applications for customers hosting these applications on servers collocated in our Data Centres and in their own premises.

Going forward we feel that almost all applications will be consumed in a Hosted model. It would neither be feasible nor right to work towards having our own applications. We have that on the messaging/email side and that really is the starting point for most businesses. We would follow a two pronged strategy here. Firstly, work with industry best generic business application vendors and provide their applications on a hosted and VPS model. Secondly we would work with industry specific application vendors to bring white label or co branded applications to specific industry verticals, again on the hosted and VPS model.

Our recent upgrades in platform and infrastructure have been made with keeping in mind the flexibility required to provide multiple applications/services to a single customer.

Web Hosting & Domain Registartion

In web hosting we felt some pressure from the market, largely due to misleading communication from most players in the business. Hosting companies began aggressively advertising and messaging “Unlimited” space, whilst the fine print and corresponding conditions have been far from the spirit/meaning of the word. In spite of pressures to follow suite, we have taken a decision, on principle, not to do this. In fact our approach has been to highlight our liberal corresponding conditions, that costs the customers less overall and also to significantly increase the space given in the same packages. Although recent, this seems to be paying off and we are beginning to see a respect-able increase in business.

New registrations grew at a reasonable pace. However, we continued to mainly serve direct customers. Our back-end application upgrades to adequately cater to the reseller market faced delays due to other higher priority work and we were not able to garner business from the reseller market. We have learnt from our mistakes and will cer-tainly be a major player in this segment going forward.

Towards the end of FY 09/10, we saw a major increase in the domain renewals business, as it was the completion of 5 years from 2005 when .IN domains were opened to general public and 5 year registrations were mandatory then. A large number of domains came up for renewal during Q4 and we are happy to report that we attained renewal rates even higher than our general average.

ICANN approved, at the first stage, IDN cctlds in 12 Indian languages. With a few other formalities remaining, these should be commercially available with this financial year and we are excited about the potential opportunity on the horizon. Further, as mentioned last year, we eagerly await the opportunity of bidding for our own gtld extension as a registry.

34


VOIP Solutions

We added a decent number of customers in the last year, and whilst there was marginal price erosion, it was noth-ing like what we witnessed in the last few years. We innovated with pricing/pulse to specific routes and packages during this period, which helped to keep margins largely intact.

Enquiries from customers are quite robust especially from Software companies and BPOs. The number of SMEs upgrading to broadband is increasing, albeit at a moderate pace. With the near plug and play nature of our VoIP services, the adoption is picking up. Although it is highly unlikely that there would be any further price erosion go-ing forward, the larger telcos are likely to drop rates for ISD calls. For now as the gap in pricing is large it should significantly impact this business

In spite of TRAI recommending for a second time, that Internet telephony be opened up for domestic traffic also, the same has not happened on account of near policy freeze from the government. Whilst of negligible direct impact to our revenues, it is important from an enterprise customer perspective as they would essentially enable least cost routing on their PBXs and save money on all their calls. With 3G and BWA auctions out of the way and ISD prices already relatively low, this policy change should happen soon.

Network Integration

We saw a subdued H1 in this line of business. However, it just took off in the second half of the year. This was a combination of pent up demand and late budget allocations from companies that had to be exhausted by the end of the financial year. Companies took on network upgrades that were on hold and began bolstering their systems architectures as they streamlined more business functions with IT implementations.

The coming year looks very promising for this segment as there would still be some pent up demand in the system. The government and related agencies are likely to be very large spenders here and we aim to set up a specific sales unit to address this market. Medium and large enterprises still have a lot of room for growth. All in all there is growth from most market segments that we aim to capitalize on.

35


audiTors’ reporT

The Members M/s. NET 4 INDIA LTD

1 We have audited the attached Balance Sheet of M/s. NET 4 INDIA LTD. as at March 31, 2010, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3 As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report) (Amendment) Order,2004, 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 specified in paragraphs 4 and 5 of the said Order.

4 Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

(ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

(iii) The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

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

(v) On the basis of written representations received from the directors, as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors of the Company is disquali-fied as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

36


(vi) In our opinion and to the best of our information and according to the explanations given to us, the said ac-counts give 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010; and

(b) in the case of the Profit and Loss Account, of the profit for the year ended on that date.

(c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

For Sandy AssociatesChartered Accountants


Sd/-(Sandeep Gupta)ProprietorMembership No: 86069FRN No: 007337N

37


annexTure refferred To audiTors’ reporTs

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS’ REPORT TO THE MEMBERS OF M/S NET 4 INDIA LTD. ON THEIR ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2010.

1. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

All the assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on such verification.

Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going con-cern assumption.

2. As explained to us, inventory (excluding stock with third parties) have been physically verified by the management at regular intervals during the year. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its business.

In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

The company is maintaining proper records of inventory. No material discrepancies have been noticed by the management on verification between the physical stocks and the book records.

3. The Company has taken interest free unsecured loan from a party listed in the register maintained under section 301 of the Companies Act, 1956, (maximum amount Rs. 205 lakhs) the terms and conditions of which are prima facie not prejudicial to the interests of the Company.

The Company has neither granted nor taken any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

The company has given interest free advances in the nature of loans to the employees of the company, the repayment in respect of which is regular and as stipulated, where such stipulations exist.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business for the pur-chase of finished goods, fixed assets and for the sale of goods. During the course of our audit, no major weakness has been noticed in the internal controls system in respect of these areas.

5. In our opinion, and according to the information and explanations given to us, the transactions that need to be entered in the register in pursuance of section 301 of the Act have been entered, and the transactions have been made at prices which are reasonable with regard to the prevailing market prices at the relevant time.

6. The Company has accepted deposits from the public and the provisions of Sections 58A of the Companies Act, 1956 and the rules framed there under, wherever applicable, have been complied with.

38


7. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8. The Central Government has not prescribed maintenance of Cost records under section 209(1) (d) of the Companies Act, 1956 in respect to the company.

9. According to the information and explanations given to us, and on the basis of our examination of the books of account, the Company has generally been regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Income Tax, Wealth tax, Sales-tax, Customs duty, Investor Edu-cation and Protection Fund and any other material statutory dues applicable to it. Interest has been depos-ited wherever applicable.

According to the information and explanations given to us, no undisputed dues payable in respect of Provi-dent Fund, Investor Education and Protection Fund, Income tax, Wealth tax, Sales tax, Customs duty, Cess and other material statutory dues were outstanding at March 31, 2010 for a period of more than six months from the date they become payable.

According to the information and explanations given to us, there are no dues in respect of Sales tax, In-come tax, Wealth tax, Customs duty and Cess which have not been deposited with the appropriate authori-ties on account of any dispute.

10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the financial year immediately proceeding such financial year. Ac-cordingly, clause 4(x) of the order is not applicable.

11. In our opinion and according to the information and explanations given to us, the Company has not de-faulted in repayment of dues to any bank or financial institution. The Company has not issued any deben-tures.

12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, clause 4(xii) of the order is not applicable.

13. The Company is not a chit fund, mutual benefit fund or a society. Accordingly, clause 4(xiii) of the order is not applicable.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not applicable.

15. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantee for loans taken by others from banks or financial institutions are not prima-facie prejudicial to the interests of the Company.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. According to the Cash Flow Statement and records examined by us and according to the information and explanations given to us, on overall basis, funds raised on short term basis have not been used during the year for long term investment and vice versa.

39




Sd/-(Sandeep Gupta)ProprietorMembership No: 86069FRN No: 007337N

18. The Company has not made any preferential allotment to parties and companies covered in the register maintained under section 301 of the Act. Accordingly, clause 4(xviii) of the order is not applicable.

19. The Company has not issued any debentures. Accordingly, clause 4(xix) of the order is not applicable.

20. The Company has not raised any money by public issues during the year. Accordingly, clause 4(xx) of the order is not applicable.

21. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

40


Schedule March 31, 2010 March 31, 2009SOURCES OF FUNDSSHAREHOLDERS’ FUNDShare Capital A 184,478 167,500 Reserves & Surplus B 515,457 306,633 LOAN FUNDSSecured Loans C 255,486 241,769 Unsecured Loans D 177,029 107,511 DEFERRED TAX LIABILITY 57,560 50,292

1,190,010 873,705APPLICATION OF FUNDSFIXED ASSETS EGross Block 749,273 601,145 Less:Depreciation and amortization 372,817 299,574 Net Block 376,456 301,571 Capital Work in Progress 13,308 389,764 - 301,571INVESTMENTS F 210,787 210,787 CURRENT ASSETS, LOANS & ADVANCES Inventories 195,038 182,697 Sundry Debtors G 289,661 251,708 Cash and Bank Balances H 41,074 36,720 Other Current Assets I 51,328 20,772 Loans and Advances J 347,787 145,363

924,888 637,260 Less: CURRENT LIABILITIES & PROVISIONS KCurrent Liabilities 184,488 144,707 Provisions 151,091 131,406

335,579 276,113 NET CURRENT ASSETS 589,309 361,147

MISCELLANEOUS EXPENDITURE L 150 200 (To the extent not written off or adjusted)

1,190,010 873,705Significant Accounting Policies RNotes to Accounts S

As per our report of even date attached,

For Sandy Associates Chartered Accountants,Sd/-Sandeep GuptaProprietor Membership No : 86069Place : New Delhi Date : May 25, 2010


Sd/-Amarjit S. SawhneyDirector

Sd/-Desi S. ValliDirector

Sd/-Jasjit S. SawhneyCMD

Sd/-Krishan KumarCompany Secretary

in Rs.’000

balanCe sheeT as aT marCh 31, 2010

41


Schedule 2009-10 2008-09Operating Income Domestic 1,042,120 926,496 Overseas 41,650 52,504

1,083,770 979,000 Cost of Sales and Services M 611,502 535,911 Gross Profit 472,268 443,089 Personnel Cost N 116,435 125,052 General and Administrative Expenses O 141,697 116,714 Selling and Marketing Expenses P 9,731 15,740

267,863 257,506 Operating Profit before interest, depreciation and amortization 204,405 185,583 Interest Costs 45,927 41,463 Depreciation E 84,226 84,212 Amortization on intangible assets E 6,892 8,236

137,045 133,911 Operating Profit after interest, depreciation and amortization 67,360 51,672 Other Income Q 38,825 38,943 Net Profit before tax 106,185 90,615 Provision for Taxation Income Tax 29,400 27,100 Fringe Benefit Tax - 1,712 Deferred Tax 7,268 2,271 Net Profit after tax 69,517 59,532

Amount available for appropriation 69,517 59,532 Proposed Dividend 6,518 16,750 Tax on Dividend 154 2,847 Proposed Dividend & Tax thereon written back 13,957 - Amount transferred to General Reserve 1,740 1,490 Balance retained in Profit & Loss Account 75,062 38,445 Earning per Equity Share - Basic and Diluted (Rs.) 4.02 3.55

Significant Accounting Policies RNotes to Accounts S

in Rs.’000

profiT & loss aCCounT for The year ended marCh 31, 2010

For Sandy Associates Chartered Accountants,Sd/-Sandeep GuptaProprietor Membership No : 86069Place : New Delhi Date : May 25, 2010







42


2009-10 2008-09

A CASH FLOW FROM OPERATING ACTIVITIESNet Profit before Tax and Extraordinary items 106,185 90,615 Adjustments for :Depreciation 84,226 84,212 Amortisation of intangible assets 6,892 8,236 Assets discarded/ Loss on sale of fixed assets 2,482 2,877 Bad debts 1,130 157 Interest costs 45,927 41,463 Interest and dividend income (2,442) (9,018)Preliminary Exp written off 50 50 Operating Profit before Working Capital Changes 244,450 218,592 Adjustments for :Sundry Debtors (39,083) (37,210)Inventories (12,341) (69,381)Current Assets, Loans and Advances (96,975) 10,362 Provision for retirement benefits 3,210 2,252 Current Liabilities 39,781 5,334 Cash generated from Operations 139,042 129,949 Taxes paid (49,860) (40,720)NET CASH GENERATED BY OPERATING ACTIVITIES 89,182 89,229

B CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets and change in capital work in progress (182,853) (97,030)Proceeds on disposal of fixed assets 1,060 - Interest and dividend income 2,442 9,018 NET CASH USED IN INVESTING ACTIVITIES (179,351) (88,012)

C CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of share capital 16,978 - Proceeds from securities premium 132,022 - Proceeds from secured loans 13,717 (24,353)Nett proceeds from unsecured loans (16,628) 96,217 Dividends paid during the period (4,820) (16,750)Dividend tax paid during the period (819) (2,847)Interest costs (45,927) (41,463)NET CASH USED FROM FINANCING ACTIVITIES 94,523 10,804

in Rs.’000

Cash flow sTaTemenT for The year marCh 31, 2010

43


D NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (A) + (B) + (C )

4,354 12,021

CASH AND CASH EQUIVALENTS , beginning of period (Refer Note) 36,720 24,699

CASH AND CASH EQUIVALENTS , end of the year (Refer Note) 41,074 36,720

Notes: (1) The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Account-ing Standard -3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India

(2) Previous year’s figures have been regrouped wherever necessary.

AUDITORS’ CERTIFICATE

We have verified the above Cash Flow Statement of Net 4 India Ltd derived from the audited financial statements for the year ended March 31, 2010, and found the same to be drawn in accordance therewith and also with the requirements of Clause 32 of the listing agreement with stock exchange.

Place : New DelhiDate : May 25, 2010

Place : New DelhiDate : May 25, 2010






Sd/-Sandeep GuptaProprietor Membership No : 86069

For Sandy Associates Chartered Accountants,

44


sChedules forming parT of balanCe sheeT

SCHEDULE `A` March 31,2010 March 31,2009SHARE CAPITAL

Authorised24,000,000 (P.Y.24,000,000) Equity Shares of Rs 10 each 240,000 240,000 10,00,000 (P.Y.10,00,000) Preference Shares of Rs 10 each 10,000 10,000

250,000 250,000 Issued, Subscribed and Paid-up1,84,47,812 (P.Y.16,750,000) Equity Shares of 184,478 167,500 Rs.10 each fully paid up

184,478 167,500 Notes:- During the year, the company has issued and alloted 16,97,812 equity shares of Rs 10 each on a preferential basis at a pre-mium of Rs 77.76 per share resulting in addition of Rs 1,32,022 in the share premium account

April 1,2009 Additions March 31,2010SCHEDULE `B`RESERVES & SURPLUS

Share Premium 130,000 132,022 262,022 General Reserve 43,680 1,740 45,420 Profit & Loss Account 132,953 75,062 208,015

306,633 208,824 515,457 SCHEDULE `C`SECURED LOANS

Loans from Banks - Cash Credit / Working Capital Loans 212,490 205,000 (Secured against entire current assets) - Term Loan 31,000 27,000 (Secured by first charge on all present and future fixed assets) - Other Loans 11,996 9,769 (Secured against hypothecation of vehicles)

255,486 241,769

Notes:- Amount repayable within one year

42,673

65,694

in Rs.’000

45


SCHEDULE `D`UNSECURED LOANS

Short Term loans from banks - 40,064Other Loans - From Banks/Institutions 65,215 38,983 - From Others 20,500 28,464 Fixed Deposits 38,814 - Intercorporate Loans 52,500 -

177,029 107,511 Notes:- Amount repayable within one year 105,615 76,701

46


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47


SCHEDULE `F` March 31,2010 March 31,2009INVESTMENTS

(a) LONG TERM INVESTMENTS (UNQUOTED) AT COSTNon TradeIn subsidiary companies2,805,000 (P.Y.2,805,000) shares of Rs.10 each fully paid 200,700 200,700 up of Net 4 Communications Ltd, a wholly owned subsidiary 100,000 (P.Y.1,00,000) shares of SGD 1 each fully paid up 2,738 2,738 of Net 4 Singapore Pte Ltd, a wholly owned subsidiary In other companies 9,900 (P.Y. 9,900) shares of Rs.10 each fully paid up 99 99 of Net 4 Technology Ltd 70,500 (P.Y. 70,500) shares of Rs.100 each fully 7,050 7,050 paid up of Net 4 Barter Pvt Ltd

(b) CURRENT INVESTMENTS SBI Infrastructure Fund - Series I 200 200 20,000 (P.Y. 20,000) units of Rs. 10 each

210,787 210,787

Aggregate book value of quoted investments 200 200 Market Value of quoted investmentas 207 113

SCHEDULE `G`SUNDRY DEBTORS (Unsecured and considered good)

Over six months 23,627 16,420 Others 266,034 235,288

289,661 251,708

SCHEDULE `H`CASH AND BANK BALANCES

Cash in hand 162 173 Cheques in hand and Remittances in transit - 470 With scheduled banks in: Current Accounts 19,615 15,441 Deposit Accounts as margin money 20,977 20,174 Deposit Accounts 308 445 Unclaimed dividend accounts 12 17

41,074 36,720

in Rs.’000

48


SCHEDULE `I` March 31,2010 March 31,2009OTHER CURRENT ASSETS

Deposits 47,991 18,777 Interest accrued 1,212 - Prepaid expenses 2,125 1,995

51,328 20,772 SCHEDULE `J`LOANS AND ADVANCES

(Unsecured, considered good)Advance income tax 141,213 92,402 Advance fringe benefit tax 4,864 3,816 Intercorporate Loans 58,700 - Advances recoverable in cash or in kind or 143,010 49,145 for value to be received

347,787 145,363 SCHEDULE `K`CURRENT LIABILITIES AND PROVISIONS

A) Current LiabilitiesSundry creditors 130,141 109,175 Advances from customers 9,567 5,479 Accrued salaries and benefits 9,235 8,607 Expenses Payable 3,069 4,625 Withholding and other taxes payable 23,821 7,635 Unearned revenue 2,574 2,694 Unclaimed dividend* 13 16 Other liabilities** 6,068 6,476

184,488 144,707 * Not due for deposit to Investor Education and Protection fund** Includes Rs 17 (P.Y. 16) dues to directors as sitting fees payable** Includes Rs. 14,68 (PY NIL) due to Net 4 Singapore Pte Ltd, a wholly owned subsidiary.

B) Provisions

Retirement benefits 12,147 8,937 Income tax 127,500 98,100 Fringe benefit tax 4,772 4,772 Dividend 6,518 16,750 Tax on dividend 154 2,847

151,091 131,406 Total (A + B) 335,579 276,113

SCHEDULE `L`MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted)Balance brought forward 200 250Less: Written off during the period 50 50

150 200

in Rs.’000

49


SCHEDULE `M` 2009-10 2008-09COST OF SALES AND SERVICES

(Increase)/decrease in stock (12,340) (69,382)Purchases and other direct cost 623,842 605,293

611,502 535,911 SCHEDULE `N`PERSONNEL COST

Salaries, wages and bonus 103,760 111,098 Contribution to provident and other funds 10,384 10,417 Staff welfare, staff training and recruitment 2,291 3,537

116,435 125,052

SCHEDULE `O`GENERAL AND ADMINISTRATIVE EXPENSES

Rent 23,219 22,733 Electricity and water charges 20,776 21,115 Communication 8,599 7,464 Travelling and conveyance 11,678 13,107 Repair, maintenance and office expenses 16,573 17,324 Legal and Professional charges 13,898 7,496 Bank, processing and financing charges 13,129 9,859 Security and support staff 3,781 4,561 Lease Rental 16,207 4,783 Membership and subscription 851 554 Printing and stationery 1,452 1,415 Loss on sale/discarding of fixed assets 2,482 2,877 Insurance premium 1,340 815 Auditors remuneration 180 195 Bad debts written off 1,130 157 Directors' sitting fees 17 16 Conferences & Meetings 358 872 Irrecoverable advances written of 1,500 - Miscellaneous expenses 3,915 341 Preliminary Exp written off 50 50 Exchange Differences 562 980

141,697 116,714

in Rs.’000

sChedules forming parT of profiT & loss aCCounT

50


SCHEDULE `P` 2009-10 2008-09SELLING AND MARKETING EXPENSES

Advertising and marketing 2,801 11,764 Entertainment and business promotion 5,792 2,803 Sales commission and incentives 931 903 Exhibition expenses 207 270

9,731 15,740 SCHEDULE `Q`OTHER INCOME

Sale of shared services including facilities and personnel 20,263 12,217 Dividend from subsidiary company - 5,610 Balances written back 40 1,393 Interest 2,442 3,408 Miscellaneous income 330 565 Income from Infrastructure and support services 15,750 15,750

38,825 38,943

in Rs.’000

51


(i) Basis of Accounting

The financial statements are prepared in accordance with Indian Generally Accepted Accounting principles (“GAAP”) under the historical cost convention on an accrual basis. GAAP comprises mandatory Accounting Standards issued by the Institute of Chartered Accountants of India (“ICAI”), the provisions of the Compa-nies Act, 1956, and guidelines issued by the Securities and Exchange Board of India. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

The Management evaluates all recently issued or revised accounting standards on an ongoing basis.

(ii) Use of Estimates

The preparation of the financial statements in conformity with GAAP requires the management to make esti-mates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes and the useful lives of fixed assets and intangible assets.

The management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Profit and Loss Account in the year in which the asset is identified as impaired. Where no reliable estimate can be made; a disclosure is made as contingent liability. Actual results could differ from those estimates.

(iii) Fixed Assets and Depreciation

a) Tangible Assets:Fixed assets are stated at cost, less accumulated depreciation. Costs directly attributable to the pur-chase of fixed assets are capitalized until fixed assets are ready for use. Capital work-in-progress comprises of advances paid to acquire fixed assets, and the cost of fixed assets that are not yet ready for their intended use before the balance sheet date.

All assets discarded/ dismantled are written off assuming that the scrap value for the same is Nil. If and when such discarded assets are disposed off partially or fully, the amounts realized during the year are credited to the profit and loss account of that year.

b) Depreciation:Depreciation of Fixed Assets is provided on a pro-rata basis on the written down value method at the rates prescribed under Schedule XIV to the Companies Act, 1956, on all assets, except for the fol-lowing:Leasehold improvements are depreciated over the remaining period of lease or 10 years whichever is lesser.Individual low cost assets (acquired for less than Rs.5,000/-) are depreciated within a year of acquisi-tion.

c) Intangible Assets and amortization:Intangible assets are amortized over their respective individual estimated useful lives on a straight line basis, commencing from the date the asset is available to the company for its use. Management, using reasonable and supportable assumptions, has estimated the useful lives for the intangible as-sets as follows:

sChedule ‘ r ’ - signifiCanT aCCounTing poliCies

52


Trademarks 20 yearsGoodwill 10 years

Trademarks represent the brand image of the company and constitute an asset with no limited useful life. Based on advice received by the management and as per the provisions of the Trade Marks and Merchan-dise Act of 1999, the company can retain the ownership and registration of the trademarks perpetually by renewing the registration at the end of every ten years, leading to the view that the useful life of its trade-marks are unlimited. However, as a matter of abandon precaution, the cost of the Trademarks is being amortized over a period of 20 years.

(iv) Investments

Trade investments are the investments made to enhance the company’s business interests. Investments are either classified as current or long-term based on the management’s intention at the time of purchase. Current investments are carried at the lower of cost and fair value. Long Term Investments are stated at cost. Provision for diminution in their value is made only if such a decline is other than temporary in the opinion of the management.

(v) Revenue Recognition

The Company recognizes revenue on accrual basis. Revenue from the sale of hardware/software prod-ucts is recognized when the sale is completed with the passing of title. Revenue from services is recog-nized in the ratio of period expired over the total agreement period. Revenue from Fixed Price Contracts is recognized proportionately over the period in which services are rendered.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sales price and the then carrying value of the investment. Lease rentals are rec-ognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the company’s right to receive dividend is established.

(vi) Foreign Currency Transactions

Investments in foreign entities are recorded at the exchange rates prevailing on the date of making the investments.Expenditure in foreign currency is accounted at the exchange rate prevalent when such expenditure is incurred. Exchange differences are recorded when the amount actually received on sales or actually paid when expenditure is incurred, is converted into Indian Rupees. The exchange differences arising on for-eign currency transactions are recognized as income or expense in the period in which they arise except in respect of liabilities for acquisition of fixed assets, where such exchange difference is adjusted in the carrying cost of the respective fixed asset.Monetary current assets and monetary current liabilities that are denominated in foreign currency are translated at the exchange rate prevalent at the date of the balance sheet. The resulting gain or loss is also recorded in the profit and loss account.

(vii) Inventories

Inventory is valued at lower of cost (determined on First in First out basis) and estimated net realizable value.Cost is inclusive of all purchase costs and other costs incurred in bringing the inventories to their present location and conditions.

53


(viii) Retirement Benefits

All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a prede-termined rate (presently 12.0%) of the employees’ basic salary. These contributions are made to the fund administered and managed by the Government of India. In addition, some employees of the Company are covered under the employees’ state insurance schemes, which are also defined contribution schemes recognized and administered by the Government of India.

The Company’s contributions to both these schemes are expensed in the Profit and Loss Account. The Company has no further obligations under these plans beyond its monthly contributions. Gratuity has been provided in the Profit and Loss Account as per the provisions of the Payment of Gratuity Act, 1972. A lump sum payment is made to employees on retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment.Provision for Leave encashment is made on the basis of unutilized leave due to employees at the end of the year.

(ix) Research and development

Revenue expenditure incurred on research and development is expensed as incurred. Capital expenditure is included in the respective heads under fixed assets and depreciation thereon is charged to the profit and loss account.

(x) Borrowing Cost

Interest and other costs in connection with the borrowing of funds to the extent related/attributed to the ac-quisition/construction of qualifying fixed assets are capitalized upto the date when such assets are ready for its intended use and other borrowing costs are charged to Profit & Loss Account.

(xi) Leases

Lease rentals in respect of assets taken on ‘Operating Lease’ are charged to the profit & loss Account on straight line basis over the lease term.

(xii) Earning per Share

Basic earning per share (EPS) is calculated by dividing the net profit after tax for the year (including the post-tax effect of extraordinary items, if any) attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue and share split.

(xiii) Taxation

Tax expense for the year comprises of current tax and deferred tax.Income tax is computed using the tax effect accounting method, where tax is accrued in the same period the related revenue and expense arises. Provision is made for income tax annually based on the tax li-ability computed, after considering tax allowances and exemptions.

54


The differences that result between the profit considered for income taxes and the profit as per the finan-cial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accu-mulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of the respective carrying values at each balance sheet date. The income tax provision for the interim period is made based on the best estimate of the an-nual average tax rate expected to be applicable for the full fiscal year.

(xiv) Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or pay-ments. The cash flows from regular revenue generating, financing, and investing activities of the company are segregated.

(xv) Contingent Liabilities

Depending on the facts of each case, and after evaluation of relevant legal aspects, the Company makes a provision when there is a present obligation as a result of a past event where the outflow of economic resources is probable and a relevant estimate of the amount of obligation can be made. The disclosure is made for all possible or present obligations that may but probably will not require outflow of resources as contingent liability in the financial statement.

55


sChedule ‘s’- noTes To aCCounTs

(i) All amounts in the financial statements are presented in Rupees thousands, except for share data and as otherwise stated.

(ii) Previous year’s figures have been regrouped, rearranged and reclassified, wherever necessary to con-form to current year’s classification.

(iii) Deferred Tax

Provision for deferred tax for the year ended March 31, 2010 has been made in accordance with the provi-sions of Accounting Standard 22 on Accounting for Taxes on Income, issued by The Institute of Chartered Accountants of India. The deferred tax charge of Rs. 7,268/- (Previous year - Rs. 2,271/-), for the current year has been recognized in the Profit & Loss Account and comprises of the following:

2009-10 (Rs.)

2008-09 (Rs.)

Related to fixed assets 8,720 3,598

Provisions charged in the financial statements but allowed as a deduction under the Income Tax Act in future years(to the extent considered realizable)

1,452 1,327

7,268 2,271

(iv) Value of Imports on CIF Basis (on payment basis)

2009-10 (Rs.)

2008-09 (Rs.)

Finished Goods - 357 Capital Goods 539 157

539 514

(v) Earnings in Foreign Exchange (on receipt basis)

2009-10 (Rs.)

2008-09 (Rs.)

Income from sales and services 53,658 38,772

56


(vi) Expenditure in Foreign Currency (on payment basis)

2009-10 (Rs.)

2008-09 (Rs.)

Domains 41,164 47,633 Travelling 46 254 Consultancy 2,833 2,634 Membership and Subscription Charges 275 134 Others 1,227 1,719

45,545 52,374

(vii) Remuneration to Auditors

2009-10 (Rs.)

2008-09 (Rs.)

Statutory Audit Fees 150 150 Tax Audit Fees 30 30 For certification and consultation in other matters 76 100 Expenses reimbursed -- 15

256 295

(viii) Managerial Remuneration

2009-10 (Rs.)

2008-09 (Rs.)

Salary 5,044 5,044Contributions to Provident and other funds 528 528Sitting Fees 16 16Total Remuneration 5,588 5,588

The computation of net profits in accordance with Section 309(5) read with section 349 of the Com-panies Act, 1956, has not been given as the company does not envisage any payment of commission to directors.

(ix) Capital expenditure incurred for “in house” research & development include addition to Computers and Networking Equipment of Rs 91,895.

(x) Provision for Doubtful Debts

Periodically the company evaluates all customer dues to the company for collectability. The need for provisions is assessed based on various factors including collectability of specific dues, risk perceptions of the industry in which the customer operates, and general economic factors, which could affect the customer’s ability to settle. As at March 31, 2010, the company has provided for doubtful debts of Rs. Nil (as at March 31, 2009 Rs. Nil/-) on dues from customers. The company continues pursuing the parties for recovery of the dues, in part or full.

57


The company has written off Rs. 1,130/- (P.Y. Rs. 157/-) as bad debts during the year.

(xi) The company’s operations predominantly relate to providing IP Communications sales and services. There is thus only one reportable business segment encompassing a comprehensive range of ser-vices, including software development, packaged software integration, colocation, web hosting, web development, web mailing solutions, internet telephony and sales and integration of related network-ing equipment.Secondary segmental reporting is performed on the basis of the geographical location of custom-ers.

Geographical Segment (Rs. in crores)Year ended March 31,2010 Year ended March 31,2009

Particulars Domestic Overseas Domestic Overseas

Revenues 104.21 4.16 92.65 5.25Net Fixed Assets 38.98 - 30.16 -Debtors 28.72 .25 23.80 1.37Current Assets (Other than Debtors) 63.52 - 38.56 -

(xii) Term Deposits aggregating to Rs. 20,977/- (P.Y.Rs. 20,174/-) have been pledged with Bank as a security towards non-fund based facilities availed from Bank.

(xiii) Remittance in Foreign Currency on account of Dividend

The Company has paid dividend in respect of shares held by Non–residents by way of credit to their Non-Resident External Account (NRE A/c) or NRO A/c or otherwise by way of remittance in foreign currency.

The total amount remitted in this respect is given herein below:

a) Number of Non Resident Shareholders 8b) Number of Equity Shares held by them 40,743c) Amount of Dividend Paid (Rs. ‘000) 41d) Year to which dividend relates 2008-09e) Tax deducted at source Rs. Nil

(xiv) The Company is taking steps to ascertain the actuarial Gratuity liability and necessary adjustments from the calculations done presently will be made on determination thereof. Meanwhile, the Company has established a Gratuity Fund, called the “Net 4 India Ltd Employees Gratuity Fund”, under an irrevocable Trust for making provisions of gratuity benefits to the employees of the Company.

(xv) Capital work in progress comprises of advances to vendors of Rs 13,308

(xvi) Sundry Creditors, to the extent to which they could be identified as small scale and ancillary undertakings on the basis of information available with the Company, do not include amounts greater than Rs. One Lakh outstanding for more than thirty days.

58


(xvii) The Company’s leasing arrangements are in respect of operating leases for premises (residential, office, stores etc). These leasing arrangements which are not non cancellable range between 11 months and 3 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are shown as Rent under Schedule ‘O’.

The Company also has leased facilities under non – cancellable operating leases for equipments for a period of 4 to 5 years. The future lease payments in respect of these leases are as follows:

March 31, 2010Obligations on non cancellable leases :Not later than one year 23,279Later than one year but not later than five years 50,549Later than five years --Total 73,828

(xviii) Related Party Disclosures as required by Accounting Standard-18:List of Related Parties and Relationships

i) Holding CompaniesNil

ii) Subsidiaries of the CompanyDomesticNet 4 Communications LtdOverseasNet 4 Singapore Pte Limited

iii) Entity having Significant InfluenceTrak Online Net India Pvt Ltd.Jiwan Financial Holdings Ltd

iv) Key Management Personnel and relatives of such personnelExecutive DirectorsJasjit SawhneyAmarjit S. SawhneyNon Executive Directors Desi S. Valli Relative of DirectorPawanjot Kaur SawhneySuzane S Pai

59


v) Entity where relative of Key Management Personnel exercises significant influenceSterling Capital Pvt Ltd

Significant Related Party Transactions (Rs. in lakhs) Nature of Transaction Subsidiary

CompanyEntity having

significant influence

Key Manage-ment Person-nel and their

relatives

Others* Total

Capital Transactions Loans taken -- -- 205 -- 205 Previous year -- -- 0 -- 0 Loans repaid -- -- 285 -- 285 Previous year -- -- 10 -- 10Revenue Transactions Purchase of goods and services

-- 1,090 -- -- 1,090

Previous year -- 578 -- -- 578 Sale of goods and services

-- -- -- -- --

Previous year 1 -- -- -- 1 Sharing of costs and services including facili-ties and personnel

231 158 -- -- 389

Previous year 740 158 -- -- 898Dividend paid -- -- -- -- -- Previous year -- 84 8 21 113Dividend received -- -- -- -- -- Previous year 56 -- -- -- 56Investments -- -- -- -- -- Previous year -- -- -- -- --Balances at the end of the year Unsecured Loans -- -- 205 -- 205Current Liabilities 15 152 -- -- 167

• Details of remuneration paid to directors are given in note (viii) above.* Entity where relative of key management personnel exercises significant influence

60


(xix) Basic Earnings Per Share

2009-10 (Rs.)

2008-09 (Rs.)

Net Profit after tax available for equity shareholders 69,517 59,532Weighted average number of equity shares 17,280,276 16,750,000Basic earnings per share of Rs. 10/- each 4.02 3.55

The Company does not have any outstanding dilutive potential equity shares. Consequently, the basic and diluted earnings per share of the company remain the same.

(xx) Contingent Liabilities

Outstanding guarantees and counter guarantees to various banks, in respect of the guarantees given by those banks in favour of various government authorities and others amounting to Rs. 658/- (Previous year-Rs. 2,772/-).Guarantees to Banks against credit facilities extended to subsidiary amount to Rs. 358,300/- (Previous year – Rs. 358,300/-)Guarantees to Banks against credit facilities extended to associates amount to Rs. 100,000/- Claims against the company, not acknowledged as debts amount to Rs. 256/- (Previous year- Rs. 256/-)

(xxi) Estimated amount of unexecuted capital contracts (net of advance) - Rs. 13,045 (Previous year-Rs. Nil).

(xxii) It is not possible to furnish details of the quantities, due to heterogeneity of the items involved. Also, the Company is primarily engaged in the provision of services related to internet, which cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain information as required under paragraph 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

(xxiii) Schedule ‘A’ to ‘S’ form an integral part of the Balance Sheet and Profit and Loss Account.

Signatures to Schedule ‘A’ to ‘S’


Sd/-Sandeep GuptaProprietorMembership No : 86069

Place: New DelhiDate: May 25, 2010


Sd/-Amarjit S. Sawhney Director




61


balanCe sheeT absTraCT and Company’s general business profile

1. REGISTRATION DETAILS

2. CAPITAL RAISED DURING THE YEAR (AMOUNT IN Rs. ‘000)

3. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (AMOUNT IN Rs. ‘000)

4. PERFORMANCE OF THE COMPANY (AMOUNT IN Rs. ‘000)

4. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF THE COMPANY

(as per monetary terms)Item Code No. (ITC Code)Product Description IP Communications Services provider

SOURCES OF FUNDS

APPLICATION OF FUNDS

CIN No.State Code

Balance-Sheet Code

L 7 2 2 0 0 D L 1 9 8 5 P L C 0 2 2 6 4 95 5

3 1

N I L

1 5 2 5 5 8 9

1 8 4 4 7 8

3 8 9 7 6 4

1 0 8 3 7 7 0

2 5 5 4 8 6

5 8 9 3 0 9

1 0 6 1 8 5

5 7 5 6 0

N I L

4 . 0 2 10

N I L

1 5 2 5 5 8 9

5 1 5 4 5 7

2 1 0 7 8 7

9 7 7 5 8 5

1 7 7 0 2 9

1 5 0

6 9 5 1 7

N I L 1 6 9 7 8

0 3 1 0Date

Public issue

Total Liabilities

Paid-up Capital

Net Fixed Assets

Turnover

Secured Loans

Net Current Assets

Profit/Loss Before Tax

Deferred Tax Liability

Accumulated Losses

Earning per share in Rs.

Rights issue

Total Assets

Reserves & Surplus

Investments

Total Expenditure

Unsecured Loans

Misc. Expenditure

Profit/Loss After Tax

Dividend rate %

Bonus issue Private Placement

Month Year







62


sTaTemenT persuanT To seCTion 212 of The Companies aCT, 1956

Statement Pursuant to Section 212 of the Companies Act, 1956, relating to Subsidiary companies

1 Name of Subsidiary Company Net 4 Communications Ltd Net 4 Singapore PTE Limited2 Financial year ended 31.03.2010 31.12.20093 Date from which it became Subsidiary

Company08.07.2005 08.12.2006

4 a Shares held by the holding company in the Subsidiary at the end of the financial year of the Subsidiary

28,05,000 equity shares of Rs. 10 each fully paid up

1,00,000 equity shares of SGD 1 each fully paid up

b Extent of interest of holding company at the end of the financial year of the Subsid-iary companies

100% 100%

5 The net aggregate amount of profits or losses of the Subsidiary so far as it con-cerns the members of holding company

a Not dealt with in the holding company’s accounts:i) For the financial year ended 31st March 2010

Rs. 459.73 lakhs Loss : Rs. 8.21 lakhs

ii) For the previous financial years Rs. 1,053.92 lakhs Loss : Rs. 7.43 lakhsb Dealt with in the holding company’s ac-

counts:i) For the financial year ended 31st March 2010

Nil Nil

ii) For the previous financial years Nil Nil6 Changes in the interest of the Company

between the end of the Subsidiary’s finan-cial year and 31st March 2010:Number of Shares acquired N.A Nil

7 Material changes between the end of the Subsidiary’s financial year and 31st March 2010 (Rs in lakhs)

a Fixed Assets (net additions) N.A Nilb Investments made N.A Nilc Investments sold N.A Nild Moneys lent by the Subsidiary Company N.A Nile Moneys borrowed by the Subsidiary Com-

pany other than for meeting current liabili-ties

N.A Nil







63


deTails of subsidiary Companies

in Rs.’0001 Name of Subsidiary Company Net 4 Communications Ltd Net 4 Singapore PTE Limited2 Capital 28,050 2,738 3 Reserves 306,399 - 4 Total Assets 775,711 3,905 5 Total Liabilities 775,711 3,905 6 Investments - - 7 Total Income 886,200 - 8 Profit Before taxation 70,794 821 9 Provision for taxation 24,821 - 10 Profit After taxation 45,973 821 11 Proposed Dividend 5,610 - 12 Tax on dividend 953 -







64


SUBSIDIARY COMPANIES

Net 4 Communications Limited

65


direCTor’s reporT

Dear Members,M/s Net 4 Communications Limited

Your Directors take pleasure in presenting their 5th Annual Report on the business and operations of the Company together with the Audited Accounts for the year ended March 31, 2010.

Financial Highlights

(In Rs. 000’)Particulars For the year ended

March 31, 2010For the year ended March 31, 2009

Operating Income 867,604 622,920Other Income 596 650Cost of Sales & Services 625,465 440,065Net Profit before Interest, Depreciation and Tax 197,746 145,429Depreciation and Amortization 96,579 78,727Net Profit before Interest and Tax 101,167 66,702Interest & Finance Charges 30,373 21,360Net Profit before Tax 70,794 45,342Provision for Taxation including Deferred Tax 24,821 15,610Net Profit after Tax 45,973 29,732Balance of Profit/Loss brought forward 85,234 55,502Amount available for appropriation 134,897 85,234Proposed Dividend 5,610 00Tax on Dividend 953 00General Reserve 3,450 00Balance to be carried forward 124,884 85,234

Performance

The year under review was a transformational year for the Company. During the year, the Company has scaled new heights and set several benchmarks in terms of turnover and profits. The year 2009-10 gave better results along with hopes of recovery from global recessionary trends and improving business sentiments.

The Total Income of the Company increased to Rs. 8,682 Lacs against Rs. 6,235.70 Lacs, in the previous year. Profit after Tax for the year was Rs. 459.73 Lacs as against Rs. 297.32 Lacs in the previous year.

During the past few years, we have been also able to move from a pure network integration model to network and systems integration and now see ourselves on the verge of a complete IT Services business model. We have man-aged to retain the core skilled Personnel and move them up the learning curve to execute larger and more involving engagements. The Company has a large clientele of firms from diverse industry verticals which contribute signifi-cantly to its revenues.

66


Your Company, therefore, sees huge opportunity of expanding its networking facilities in offering co location and managed co location services in independent Data Centers thereby, increasing market reach and penetration as well as building redundancy for disaster management.

Your Company is one of the leading Network and System integration providers and derives it’s base revenues through these services. Enterprise/business networks were designed with non-delay-sensitive applications such as email in mind. Over the past two decades, as real time bi-directional IP-based voice and video services have be-come increasingly commercially significant, there has been growing interest in enhancing IP-based networks to pro-vide greater assurance that traffic is reliably and consistently delivered. Further, the deepening of IT within almost all business processes has also meant that the systems and data centre infrastructure requirements are growing.

Your Company is strategically placed to take advantage of this expanding market, it has managed to train and retain a large pool of talent, who can cater to the aforementioned requirements. As the market expands Net 4 Commu-nications will expand its managed service offerings from its own data centre and then move onwards to managing servers remotely for customers.

Dividend

The Board of Directors of the Company have recommended dividend @ 20% (Rupees 2 per Share) for the year 2009-10 (previous year Nil) subject to the approval of members in the ensuing Annual General Meeting of the Com-pany.

Directors

There has been no change in the composition of the Board of Directors since the date of last Annual General Meet-ing of the Company.

Further, in accordance with the provisions of Companies Act, 1956 read with Articles of Association of the Company, Mr. Manish Wadhawan, Director is retiring by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment as a Director of the Company. The Board recomends the appointment of Mr. Man-ish Wadhawan as Director.

Auditors and Auditors’ Report

M/s Avinash Verma & Associates, Chartered Accountants, Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. The Company has received letters from them to the effect that their re-appointment, if made, would be within the prescribed limits under Sec-tion 224 (1B) of the Companies Act, 1956 and that they are not disqualified for such appointment / re-appointment within the meaning of Section 226 of the said Act. Your Directors recommend their re-appointment as the Statutory Auditors of the Company for the year ended March 31, 2011.

The Auditors’ Report of the Financial Statements for the year ended March 31, 2010 together with Notes to Ac-counts are self explanatory and therefore, does not call for any further explanation.

Fixed Deposit

Your Company has not accepted any deposits within the meaning of Section 58 A of the Companies Act, 1956 dur-ing the year. As such, no amount of principal or interest was outstanding as of the Balance Sheet date.

67


Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & Outgo

As the Company is not engaged in the activity pertaining to manufacturing, therefore, furnishing of details on con-servation of energy is not applicable to the Company. Information as required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 in respect of Energy Conservation, Technology Absorp-tion and Foreign Exchange Earnings and Outgo is enclosed and marked as Annexure - I to the Report.

Particulars of the Employees

None of the employees of the Company fall within the preview of Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended.

Directors Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Re-sponsibility Statement, it is hereby confirmed that:

Acknowledgements

Your Directors thank all customers, vendors, investors and bankers for their continued support to your Company’s growth. Your Directors place on record their appreciation of the contribution made by the employees at all levels, who, through their competence, hard work, dedication, and team work have enabled the Company to accelerate its growth.

Your Directors thank the Government of India and various Government Agencies for their support during the year, and look forward to their support in the future.

(i) That in the preparation of the Annual Accounts, the applicable accounting standards had been followed and wherever required, proper explanations relating to material departures.

(ii) That the Directors had selected such accounting policies and applied them consistently and made judg-ments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period.

(iii) That Proper and sufficient care has been taken for maintenance of adequate accounting records in ac-cordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) That the Accounts have been prepared on a going concern basis.



Sd/-Jasjit Singh SawhneyChairmanDIN: 00111020

68


A. Particulars With Respect To Conservation Of Energy:

The operations of your Company are not Energy Conservative. Adequate measures have been taken to conserve energy by using energy efficient computers and equipments with latest technologies. Your Com-pany is on the constant look out for newer and efficient energy conservation technologies and introduces them appropriately.

B. Research and Development (R & D)

Your Company continued its R & D efforts to build competence in Internet & related services thereby ensur-ing continuous movement up the value chain. Since business and technologies are changing constantly, continuous research and development needs to be undertaken. Your Company has been able to develop processes and methodologies that have resulted in constant improvement in quality and productivity. How-ever, there is no separate allocation of funds for R & D, therefore, exact amount spent on research and development is not ascertainable.

C. Technology Absorption, Adaptation and Innovation

Your Company’s core businesses demand absorption of emerging technologies to stay at the cutting edge of technology. New methods for absorbing, adapting and effectively deploying new technologies have been developed.

D. Foreign Exchange Earnings and Outgoings

The particulars regarding Foreign Exchange Earnings during the period under review appearing in the Note No. (iv) to the Notes to Accounts (Schedule ‘R’).



Sd/-Jasjit Singh SawhneyChairmanDIN: 00111020

annexure – i To The direCTors’ reporT

69


audiTor’s reporT

The Members M/s. NET 4 COMMUNICATIONS LIMITED.

1 We have audited the attached Balance Sheet of M/s. NET 4 COMMUNICATIONS LTD. as at March 31, 2010, the Profit and Loss Account and also the Cash Flow Statement for the period ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3 As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report) (Amendment) Order,2004, 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 specified in paragraphs 4 and 5 of the said Order.

4 Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

(ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

(iii) The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

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

(v) On the basis of written representations received from the directors, as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors of the Company is disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

70


(vi) In our opinion and to the best of our information and according to the explanations given to us, the said ac-counts give 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:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010; and

(b) in the case of the Profit and Loss Account, of the profit for the period ended on that date.

(c) In the case of the Cash Flow Statement, of the cash flows for the period ended on that date

For Avinash Verma & AssociatesChartered Accountants(Regn No : 007533N)


Sd/-(Avinash Verma)ProprietorMembership No : 86351

71


ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS’ REPORT TO THE MEMBERS OF M/S NET 4 COMMUNICATIONS LIMITED ON THEIR ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2010.

1. The Company has maintained proper records showing full particulars, including quantitative details and situ-ation of fixed assets.

As explained to us, physical verification of all major items of fixed assets was conducted by the management during the year. In our opinion, the frequency of physical verification is reasonable having regard to the size and operations of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification.

In our opinion, the Company has not disposed off a substantial part of its assets during the year and the go-ing concern status of the Company is not affected.

2. The inventories have been physically verified by the management during the year. In our opinion, the fre-quency of verification is reasonable.

In our opinion and according to the information and explanation given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

The company is maintaining proper records of inventory. No material discrepancies have been noticed by the management on verification between the physical stocks and the book records.

3. The Company has neither granted nor taken any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

The company has given interest free advances in the nature of loans to the employees of the company, the repayment in respect of which is regular and as stipulated, where such stipulations exist.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business for the pur-chase of finished goods, fixed assets and for the sale of goods. During the course of our audit, no major weakness has been noticed in the internal controls system in respect of these areas.

5. In our opinion, and according to the information and explanations given to us, the transactions that need to be entered in the register in pursuance of section 301 of the Act have been entered, and the transactions have been made at prices which are reasonable with regard to the prevailing market prices at the relevant time.

6. The Company has not accepted any deposits from the public and consequently, the directives issued by the Reserve Bank of India, the provisions of Sections 58A and 58AA of the Companies Act, 1956 and the rules framed there under are not applicable.

7. The Company has no formal internal audit department as such but its control procedures ensure reasonable internal checking of its financial and other records.

8. According to the information and explanations given to us, the Central Government has not prescribed main-tenance of Cost records under section 209(1) (d) of the Companies Act, 1956 in respect to the company.

9. According to the information and explanations given to us, and on the basis of our examination of the books of account, the Company has generally been regular in depositing with appropriate authorities undisputed

annexure referred To audiTors’ reporT

72


statutory dues including provident fund, income tax, wealth tax, sales-tax, customs duty, investor educa-tion and protection fund and any other material statutory dues applicable to it. Interest has been deposited wherever applicable.

According to the information and explanations given to us, no undisputed dues payable in respect of income tax, wealth tax, sales tax, customs duty and cess, other than Rs. 33.81 lakhs in respect of service tax, were outstanding at March 31, 2010 for a period of more than six months from the date they become payable.

According to the information and explanations given to us, there are no dues in respect of sales tax, income tax, wealth tax, customs duty, and cess that have not been deposited with the appropriate authorities on account of any dispute.

10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the financial year immediately preceding such financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to any bank or financial institution. The Company has not issued any debentures.

12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, clause 4(xii) of the order is not applicable.

13. The Company is not a chit fund, mutual benefit fund or a society. Accordingly, clause 4(xiii) of the order is not applicable.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not applicable.

15. The company has not given guarantee for loans taken by others from banks or financial institutions. Accord-ingly, clause 4(xv) of the order is not applicable.

16. In our opinion, the term loans have been applied for the purpose for which they were raised.

17. According to the information and explanation given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that there are no funds raised on short-term basis that have been used for long term investment.

18. The Company has not made any preferential allotment to parties and companies covered in the register maintained under section 301 of the Act. Accordingly, clause 4(xviii) of the order is not applicable.

19. The Company has not issued any debentures. Accordingly, clause 4(xix) of the order is not applicable.

20. The Company has not raised any money by public issues during the year. Accordingly, clause 4(xx) of the order is not applicable.

21 To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

For Avinash Verma & AssociatesChartered Accountants(Regn No : 007533N)


Sd/-(Avinash Verma)ProprietorMembership No : 86351

73


Schedule March 31, 2010 March 31, 2009SOURCES OF FUNDSSHAREHOLDERS’ FUNDShare Capital A 28,050 28,050 Reserves & Surplus B 306,399 263,299 LOAN FUNDSSecured Loans C 197,646 159,444 Unsecured Loans D 47,536 23,802 DEFERRED TAX LIABILITY 33,277 28,256

612,908 502,851 APPLICATION OF FUNDSFIXED ASSETS EGross Block 529,752 419,636 Less:Depreciation and amortization 326,163 247,622 Net Block 203,589 172,014 CURRENT ASSETS , LOANS & ADVANCES Inventories 79,755 79,045 Sundry Debtors F 253,725 179,377 Cash and Bank Balances G 30,919 17,160 Other Current Assets H 11,874 1,390 Loans and Advances I 195,840 113,883

572,113 390,855 Less: CURRENT LIABILITIES & PROVISIONS JCurrent Liabilities 112,426 30,575 Provisions 50,377 29,481

162,803 60,056 NET CURRENT ASSETS 409,310 330,799

MISCELLANEOUS EXPENDITURE K 9 38(To the extent not written off or adjusted)

612,908 502,851 Significant Accounting Policies QNotes to Accounts R

For Avinash Verma & Associates Chartered Accountants,Sd/-Avinash Verma Proprietor Membership No : 86351 Place : New Delhi Date : May 24, 2010


Sd/-Desi S. ValliManaging Director

Sd/-Amarjit S.SawhneyDirector

Sd/-Jasjit S.SawhneyDirector

Sd/-S.KartikCompany Secretary

in Rs.’000

balanCe sheeT as aT marCh 31, 2010


74


For Avinash Verma & Associates Chartered Accountants,Sd/-Avinash Verma Proprietor Membership No : 86351 Place : New Delhi Date : May 24, 2010






Schedule 2009-10 2008-09Operating Income Domestic 854,330 591,459 Overseas 13,274 31,461

867,604 622,920 Cost of Sales and Services L 625,465 440,065 Gross Profit 242,139 182,855 Personnel Cost M 22,523 17,989 General and Administrative Expenses N 21,681 18,247 Selling and Marketing Expenses O 785 1,840

44,989 38,076 Operating Profit before interest, depreciation and amortization 197,150 144,779 Interest Costs 30,373 21,360 Depreciation E 96,143 78,291 Amortization on intangible assets F 436 436

126,952 100,087 Operating Profit after interest, depreciation and amortization 70,198 44,692 Other Income P 596 650 Net Profit before tax 70,794 45,342 Provision for Taxation Income Tax 19,800 14,000 Fringe Benefit Tax - 172 Deferred Tax 5,021 1,438

24,821 15,610Net Profit after tax 45,973 29,732 Add : Balance brought forward from previous year 85,234 55,502 Excess provision for tax for earlier years 3,690 - Amount available for appropriation 134,897 85,234 Proposed Dividend 5,610 - Tax on Dividend 953 - Amount transferred to General Reserve 3,450 - Balance retained in Profit & Loss Account 124,884 85,234 Earning per Equity Share - Basic and Diluted (Rs.) 16.39 10.60 Significant Accounting Policies Q Notes to Accounts R

in Rs.’000

profiT & loss aCCounT for The year ended marCh 31, 2010


75


2009-10 2008-09

A CASH FLOW FROM OPERATING ACTIVITIESNet Profit before Tax and Extraordinary items 70,794 45,342 Adjustments for :Depreciation 96,143 78,291 Amortisation of intangible assets 436 436 Assets discarded/ (Profit) / Loss on sale of fixed assets 2,079 - Interest Income (540) (647)Preliminary Exp written off 28 28 Interest Exp 30,373 21,360

Operating Profit before Working Capital Changes 199,313 144,810 Adjustments for :Sundry Debtors (74,348) (16,383)Inventories (710) (24,825)Current Assets, Loans and Advances (65,341) (32,287)Provision for retirement benefits 268 51 Current Liabilities 81,851 9,605 Cash generated from Operations 141,033 80,971 Taxes paid (18,139) (25,632)NET CASH GENERATED BY OPERATING ACTIVITIES 122,894 55,339

B CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets (130,234) (59,171)Interest received 540 647NET CASH USED IN INVESTING ACTIVITIES (129,694) (58,524)

C CASH FLOW FROM FINANCING ACTIVITIESSecured loans 38,202 19,444 Unsecured loans 12,730 13,486 Dividend paid - (5,610)Dividend tax paid - (953)Interest expense (30,373) (21,360)NET CASH USED FROM FINANCING ACTIVITIES 20,559 5,007

Cash flow sTaTemenT for The year marCh 31, 2010

in Rs.’000

76


D NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (A) + (B) + (C )

13,759 1,822

CASH AND CASH EQUIVALENTS , beginning of period (Refer Note) 17,160 15,338

CASH AND CASH EQUIVALENTS , end of the year (Refer Note) 30,919 17,160

Notes : (1) The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard -3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India (2) Previous year’s figures have been regrouped wherever necessary.

Place : New Delhi Date : May 24, 2010

AUDITORS’ CERTIFICATE

We have verified the above Cash Flow Statement of Net 4 Communications Ltd derived from the audited financial statements for the year ended March 31, 2010, and found the same to be drawn in accordance therewith and also with the requirements of Clause 32 of the listing agreement with stock exchange.

For Avinash Verma & Associates Chartered Accountants,

Sd/-Avinash Verma Proprietor Membership No : 86351

Place : New Delhi Date : May 24, 2010






77


sChedules forming parT of balanCe sheeT

SCHEDULE `A` March 31,2010 March 31,2009SHARE CAPITALAuthorised50,00,000 (P.Y. 50,00,000) Equity Shares of Rs.10 each 50,000 50,000 Issued, Subscribed and Paid -up28,05,000 (P.Y. 28,05,000) Equity Shares of Rs.10 each 28,050 28,050 fully paid up held by the holding company Net 4 India Ltd

28,050 28,050

SCHEDULE `B`RESERVES & SURPLUSShare Premium 172,650 172,650 General Reserve 8,865 5,415 Surplus in Profit and Loss account 124,884 85,234

306,399 263,299 SCHEDULE `C`SECURED LOANSLoans from Banks - Cash Credit / Working Capital Loans 120,000 120,000 - Term Loan* 77,646 39,444 (Secured against present and future fixed assets, stocksbook debts and other current assets of the company)

197,646 159,444

Notes:- *Amount repayable within one year 21,360 19,200

SCHEDULE `D`UNSECURED LOANSShort Term loans from banks 19,841 23,523 Other Loans - From Banks/Institutions 27,695 - - From Others - 279

47,536 23,802

Notes:- Amount repayable within one year 31,244 23,523

in Rs.'000

78


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79


SCHEDULE `F` March 31,2010 March 31,2009SUNDRY DEBTORS (Unsecured and considered good)Over six months 34,728 18,468 Others 218,997 160,909

253,725 179,377

SCHEDULE `G`CASH AND BANK BALANCESCash in hand 99 43 With scheduled banks in: Current Accounts 15,562 5,037 Deposit accounts as margin money 15,258 12,080

30,919 17,160

SCHEDULE `H`OTHER CURRENT ASSETSDeposits 11,673 1,275 Prepaid expenses 201 115

11,874 1,390

SCHEDULE `I`LOANS AND ADVANCES (Unsecured and considered good)

Advance income tax 48,992 32,853 Advance fringe benefit tax 382 425 Advances recoverable in cash or in kind or for value to be received 146,466 80,605

195,840 113,883

SCHEDULE `J`CURRENT LIABILITIES AND PROVISIONSA) Current LiabilitiesSundry creditors 84,529 22,917 Accrued salaries and benefits 889 709 Expenses Payable 69 55 Withholding and other taxes payable 24,199 6,719 Other liabilities* 2,740 175

112,426 30,575 * Includes dues to directors as sitting fees payable

in Rs.'000

80


in Rs.'000B) ProvisionsRetirement benefits 475 207 Income tax 42,960 28,720 Fringe benefit tax 379 554 Dividend 5,610 - Tax on dividend 953 -

50,377 29,481

Total (A + B) 162,803 60,056

SCHEDULE `K`MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)Balance brought forwardLess: Written off during the period 9 38

3828

6628

81


SCHEDULE `L` 2009-10 2008-09COST OF SALES AND SERVICES(Increase)/decrease in stock (709) (24,823)Purchases and other direct costs 626,174 464,888

625,465 440,065

SCHEDULE `M`PERSONNEL COST*Salaries, wages and bonus 21,150 16,845 Contribution to provident and other funds 974 730 Staff welfare, staff training and recruitment 399 414

22,523 17,989

*Common personnel costs shared from holding company included under relevant heads

SCHEDULE `N`GENERAL AND ADMINISTRATIVE EXPENSESRent 2,962 2,691 Electricity and water charges 3,577 2,851 Communication 1,307 1,225 Travelling and conveyance 1,624 1,866 Repair, maintenance and office expenses* 885 420 Legal and professional 1,849 1,414 Bank, processing and financing charges* 4,941 3,400 Security charges 252 360 Membership and subscription 131 139 Printing and stationery 276 257 Insurance 564 427 Auditors remuneration* 50 84 Directors' sitting fees* 3 6 Other miscellaneous expenses* 967 3,079 Preliminary expenses written off* 28 28 Loss on sale/discarding of fixed assets* 2,079 - Exchange Differences* 186 -

21,681 18,247

*Other than these, all administrative expense heads include expenses shared from holding company for use of common facilities

sChedules forming parT of profiT and loss aCCounT

in Rs.'000

82


SCHEDULE `O`SELLING AND MARKETING EXPENSES*Advertising and marketing 398 1,580 Entertainment and business promotion 102 8 Commission and brokerage 285 252

785 1,840

*Expenses shared from holding company for use of common facilities are included under relevant heads

SCHEDULE `P`

OTHER INCOME

Interest 540 647 Miscellaneous income 56 3

596 650

in Rs.'000

83


(i) Basis of Accounting

The financial statements are prepared in accordance with Indian Generally Accepted Accounting prin-ciples (“GAAP”) under the historical cost convention on an accrual basis. GAAP comprises mandatory Accounting Standards issued by the Institute of Chartered Accountants of India (“ICAI”), the provisions of the Companies Act, 1956, and guidelines issued by the Securities and Exchange Board of India. Ac-counting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

The Management evaluates all recently issued or revised accounting standards on an ongoing basis.

(ii) Use of Estimates

The preparation of the financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures re-lating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes and the useful lives of fixed assets and intangible assets.

The management periodically assesses using, external and internal sources, whether there is an indi-cation that an asset may be impaired. An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Profit and Loss Account in the year in which the asset is identified as impaired. Where no reliable estimate can be made; a disclosure is made as contingent liability. Actual results could differ from those estimates.

(iii) Fixed Assets and Depreciation

a) Tangible Assets:Fixed assets are stated at cost, less accumulated depreciation. Costs directly attributable to the pur-chase of fixed assets are capitalized until fixed assets are ready for use. Capital work-in-progress comprises of advances paid to acquire fixed assets, and the cost of fixed assets that are not yet ready for their intended use before the balance sheet date.

All assets discarded or dismantled are written off assuming that the scrap value for the same is nil. If and when such discarded assets are disposed off partially or fully, the amounts realized during the year are credited to the profit and loss account of that year.

b) Depreciation:Depreciation of Fixed Assets is provided on a pro-rata basis on the written down value method at the rates prescribed under Schedule XIV to the Companies Act, 1956.Cost of leasehold premises and structured improvements are depreciated over the period of lease.Individual low cost assets (acquired for less than Rs.5,000/-) are depreciated within a year of ac-quisition.

c) Intangible Assets and amortization:Intangible assets are stated at cost, less accumulated amortization. Goodwill is being amortized over a period of 10 years.

sChedule ‘Q ’ - signifiCanT aCCounTing poliCies

84


(iv) Investments

Trade investments are the investments made to enhance the company’s business interests. Investments are either classified as current or long-term based on the management’s intention at the time of pur-chase. Current investments are carried at the lower of cost and fair value. Long Term Investments are stated at cost. Provision for diminution in their value is made only if such a decline is other than temporary in the opinion of the management.

(v) Revenue Recognition

The Company recognizes revenue on accrual basis. Revenue from the sale of hardware/software prod-ucts is recognized when the sale is completed with the passing of title. Revenue from services is recog-nized in the ratio of period expired over the total agreement period. Revenue from Fixed Price Contracts is recognized proportionately over the period in which services are rendered.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sales price and the then carrying value of the investment. Lease rentals are rec-ognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the company’s right to receive dividend is established.

(vi) Foreign Currency Transactions

Investments in foreign entities are recorded at the exchange rates prevailing on the date of making the investments. Expenditure in foreign currency is accounted at the exchange rate prevalent when such expenditure is incurred. Exchange differences are recorded when the amount actually received on sales or actually paid when expenditure is incurred, is converted into Indian Rupees. The exchange differences arising on foreign currency transactions are recognized as income or expense in the period in which they arise.Monetary current assets and monetary current liabilities that are denominated in foreign currency are translated at the exchange rate prevalent at the date of the balance sheet. The resulting gain or loss is also recorded in the profit and loss account.

(vii) Inventories

Inventory is valued at lower of cost (determined on First In First Out basis) and estimated net realizable value.Cost is inclusive of all purchase costs and other costs incurred in bringing the inventories to their present location and conditions.

(viii) Retirement Benefits

All employees of the Company are entitled to receive benefits under the Provident Fund, which is a de-fined contribution plan. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (presently 12.0%) of the employees’ basic salary. These contributions are made to the fund administered and managed by the Government of India. The Company’s contribution is expensed in the Profit and Loss Account. The Company has no further obligations beyond its monthly contributions.Gratuity has been provided in the Profit and Loss Account as per the provisions of the Payment of Gratuity Act, 1972. A lump sum payment is made to employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment.Provision for Leave encashment is made on the basis of unutilized leave due to employees at the end of the year.

85


(ix) Research and development Revenue expenditure incurred on research and development is expensed as incurred. Capital expen-diture is included in the respective heads under fixed assets and depreciation thereon is charged to the profit and loss account.

(x) Borrowing Cost

Interest and other costs in connection with the borrowing of funds to the extent related/attributed to the acquisition/construction of qualifying fixed assets are capitalized upto the date when such assets are ready for its intended use and other borrowing costs are charged to Profit & Loss Account.

(xi) Leases

Lease rentals in respect of assets taken on ‘Operating Lease’ are charged to the profit & loss Account on straight line basis over the lease term.

(xii) Earning Per Share

Basic earning per share (EPS) is calculated by dividing the net profit after tax for the year (including the post-tax effect of extraordinary items, if any) attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue and share split.

(xiii) Taxation

Tax expense for the year comprises of current tax and deferred tax.Income tax is computed using the tax effect accounting method, where taxes are accrued in the same period the related revenue and expenses arise. Provision income tax is made annually based on the tax liability computed, after considering tax allowances and exemptions.

The differences that result between the profit considered for income taxes and the profit as per the finan-cial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the ac-cumulated timing differences at the end of an accounting period based on prevailing enacted or substan-tially enacted regulations. Deferred tax assets are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of the respective carrying values at each balance sheet date. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full fiscal year.

(xiv) Miscellaneous Expenditure

Preliminary expenses incurred on incorporation are being written off over a period of five years com-mencing from incorporation.

86


(xv) Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing, and investing activities of the company are segregated.

(xvi) Contingent Liabilities

Depending on the facts of each case, and after evaluation of relevant legal aspects, the Company makes a provision when there is a present obligation as a result of a past event where the outflow of economic resources is probable and a relevant estimate of the amount of obligation can be made. The disclosure is made for all possible or present obligations that may but probably will not require outflow of resources as contingent liability in the financial statement.

87


(i) All amounts in the financial statements are presented in Rupees thousands, except for share data and as otherwise stated.

(iI) Previous year’s figures have been regrouped, rearranged and reclassified, wherever necessary to conform to current year’s classification.

(iii) Deferred Tax

Provision for deferred tax for the year ended March 31, 2010 has been made in accordance with the provi-sions of Accounting Standard 22 on Accounting for Taxes on Income, issued by The Institute of Chartered Accountants of India. The deferred tax charge of Rs. 5,021/- (Previous year charge - Rs. 1,438/-), for the current year has been recognized in the Profit & Loss Account and comprises of the following:

2009-10 (Rs.)

2008-09 (Rs.)

Related to fixed assets 5,118 1,473Provisions charged in the financial statements but al-lowed as a deduction under the Income Tax Act in future years(to the extent considered realizable)

97 35

5,021 1,438

(iv) Earnings in Foreign Exchange (on receipt basis)

2009-10 (Rs.)

2008-09 (Rs.)

Income from sales and services 43,702 -

(v) Remuneration to Auditors

2009-10 2008-09Statutory Audit Fees 35 35Tax Audit Fees 15 15Others -- 34

50 84

(vi) Provision for Doubtful Debts

Periodically the company evaluates all customer dues to the company for collectability. The need for provi-sions is assessed based on various factors including collectability of specific dues, risk perceptions of the industry in which the customer operates, and general economic factors, which could affect the customer’s ability to settle. As at March 31, 2010, the company has not provided for any doubtful debts as the company is confident of collecting all amounts due nor written of any amount as bad debts during the year.

sChedule ‘r ’ - noTes To aCCounTs

88


(vii) The company’s operations predominantly relate to providing IP Communication sales and services. There is thus only one reportable business segment encompassing a comprehensive range of services, including software development, packaged software integration, colocation, web development, internet telephony and sales and integration of related networking equipment.

Secondary segmental reporting is performed on the basis of the geographical location of customers.

Geographical Segment (Rs. in crores)Year ended March 31,2010

Particulars Domestic Overseas Revenues 85.43 1.33 Net Fixed Assets 20.36 - Debtors 25.37 - Current Assets (Other than Debtors) 31.84 -

(viii) Term Deposits aggregating to Rs.15,258/- (P.Y.Rs. 12,080/-) have been pledged with Bank as a security towards non-fund based facilities availed from Bank.

(ix) Miscellaneous Expenditure (to the extent not written off / adjusted) of Rs.9/- (P.Y. Rs. 38/-) represents pre-liminary and preoperative expenses and is being written off over a period of five years.

(x) Sundry Creditors, to the extent to which they could be identified as small scale and ancillary undertakings on the basis of information available with the Company, do not include amounts greater than Rs. One Lakhs outstanding for more than thirty days.

(xi) The Company’s leasing arrangements are in respect of operating leases for premises (residential, office, stores etc). These leasing arrangements which are not non cancellable range between 11 months and 3 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are shown as Rent under Schedule ‘N’.

(xii) Managerial Remuneration

2009-10 2008-09Salary 1,510 1,500Contribution to Provident and other funds 180 180Sitting Fees 3 6

Total Remuneration 1,693 1,686

The computation of net profits in accordance with Section 309(5) read with section 349 of the Compa-nies Act, 1956, has not been given as the company does not envisage any payment of commission to directors.

89


(xiii) Related Party Disclosures as required by Accounting Standard-18:

a) The Company is a wholly owned subsidiary of Net 4 India Ltd.

b) Key Management Personnel Desi S. ValliJasjit Sawhney*Amarjit S. Sawhney*S. K. Ghosh*

*appointed by the Holding Company i.e. Net 4 India Ltd. The Company pays no remuneration to them, as their remuneration, being either full-time employees of the Holding Company and paid by Net 4 India Ltd or otherwise compensated by associate companies of the Holding Company.

c) Significant Related Party Transactions(Rs. in lakhs)

Nature of Transaction Holding Company

Entity having significant influence

Key Management Personnel and their relatives

Total

Capital Transactions Loans repaid -- -- 3 3 Previous year -- -- -- --Revenue Transactions Purchase of goods and services -- 85 -- 85 Previous year -- 133 -- 133 Sharing of costs and services -- -- -- including facilities and personnel 231 -- -- 231 Previous year 740 -- -- 740Dividend Paid -- -- -- --Previous year 56 -- -- 56

(xiv) Most of the employees of the Company are on secondment from the Holding Company i.e. Net 4 India Ltd. The liabilities for retirement benefits in respect of gratuity and leave encashment for those employees have been accounted for by the Holding Company.

(xv) Basic Earnings Per Share

2009-10 (Rs.)

2008-09 (Rs.)

Net Profit after tax available for equity shareholders 45,973 29,732Weighted average number of equity shares 2,805,000 2,805,000Basic earnings per share of Rs. 10/- each 16.39 10.60

The Company does not have any outstanding dilutive potential equity shares. Consequently, the basic and diluted earnings per share of the company remain the same.

90


(xvi) Contingent Liability

Outstanding guarantees to banks, in respect of the guarantees given by those banks in favour of others amounting to Rs. 5/- (Previous year-Rs. Nil/-).

(xvii) It is not possible to furnish details of the quantities, due to heterogeneity of the items involved. Also, the Company is primarily engaged in the provision of services related to internet, which cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain informa-tion as required under paragraph 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

(xviii) Schedule ‘A’ to ‘R’ form an integral part of the Balance Sheet and Profit and Loss Account.

Signatures to Schedule ‘A’ to ‘R’

For Avinash Verma & AssociatesChartered Accountants

Sd/-Avinash VermaProprietor

For and on behalf of the Board of DirectorsChartered Accountants

Sd/-Desi ValliManaging Director

Sd/-Amarjit S. SawhneyDirectorPlace: New Delhi

Date: May 24, 2010

Sd/-Jasjit S. SawhneyDirector


91


1. REGISTRATION DETAILS

2. CAPITAL RAISED DURING THE YEAR (AMOUNT IN Rs. ‘000)

3. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (AMOUNT IN Rs. ‘000)

4. PERFORMANCE OF THE COMPANY (AMOUNT IN Rs. ‘000)

4. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF THE COMPANY(as per monetary terms)Item Code No. (ITC Code)Product Description IP Communications Services provider

SOURCES OF FUNDS

APPLICATION OF FUNDS

CIN No.State Code

Balance-Sheet Code

1 0 4 0 2 52 1

3 1

N I L

7 7 5 7 1 1

2 8 0 5 0

2 0 3 5 8 9

8 6 7 6 0 4

1 9 7 6 4 6

4 0 9 3 1 0

7 0 7 9 4

3 3 2 7 7

N I L

1 6 . 3 9 20

N I L

7 7 5 7 1 1

3 0 6 3 9 9

N I L

7 9 6 8 1 0

4 7 5 3 6

9

4 5 9 7 3

N I L N I L

0 3 1 0Date

Public issue

Total Liabilities

Paid-up Capital

Net Fixed Assets

Turnover

Secured Loans

Net Current Assets

Profit/Loss Before Tax

Deferred Tax Liability

Accumulated Losses

Earning per share in Rs.

Rights issue

Total Assets

Reserves & Surplus

Investments

Total Expenditure

Unsecured Loans

Misc. Expenditure

Profit/Loss After Tax

Dividend rate %

Bonus issue Private Placement

Month Year





Sd/-Jasjit S. SawhneyDirector


balanCe sheeT absTraCT and Company’s general business profile

92


SUBSIDIARY COMPANIES

Net 4 Signapore Pte. Limited

93


direCTors’ reporT

The directors present their report to the members together with the audited financial statements of the Company for the financial year ended 31 December 2009.

Directors

The directors in office at the date of this report are Jasjit Singh Sawhney, Sandip Kumar Ghosh, Desi Subri Valli and Aidan Healy.

Arrangements to enable directors to acquire shares and debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Directors’ interest in shares or debentures

According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations.

Directors’ contractual benefits

Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except as disclosed in the accompany-ing financial statements and in this report, and except that certain directors have employment relationships with the Company and its related corporations and have received remuneration in those capacities.

Share options

There were no options granted during the financial year to subscribe for unissued shares of the Company.

No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company.

There were no unissued shares of the Company under option at the end of the financial year.

Independent auditors

The independent auditors, Entrust Public Accounting Corporation, have expressed their willingness to accept re-appointment.

On behalf of the directors:

Sd/-Jasjit Singh SawhneyDirector

Singapore31 MAR 2010

Sd/-Sandip Kumar GhoshDirector

94


Statement by Directors

In the opinion of the directors,

(a) the statement of comprehensive income, statement of financial position, statement of changes in equity and statement of cash flows together with the notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Company at 31 December 2009 and of the results of the business, changes in equity and cash flows of the Company for the financial year then ended; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

Sd/-Jasjit Singh SawhneyDirector

Singapore31 MAR 2010

Sd/-Sandip Kumar GhoshDirector

On behalf of the directors:

95


audiTors’ reporT

Independent Auditors’ Report to the Members of Net 4 Singapore Pte. Ltd.

We have audited the accompanying financial statements of Net 4 Singapore Pte. Ltd., which comprise the state-ment of financial position as at 31 December 2009, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and a summary of significant ac-counting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Stan-dards. This responsibility includes:

a devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and trans-actions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheet and to maintain accountability of assets;

b selecting and applying appropriate accounting policies; and

c making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial state-ments in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the ap-propriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We are unable to obtain proper documentary evidence to verify the correctness and appropriateness of carrying value of trade payable amounting to SGD9,053.

96


Except for the foregoing paragraph, in our opinion,

(a) the financial statements of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Company as at 31 December 2009 and the results changes in equity and cash flows of the Company for the financial year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

Sd/-ENTRUST PUBLIC ACCOUNTING CORPORATION Public Accountants and Certified Public AccountantsSingapore

31 MAR 2010

97


NOTE 2009 2008

Current assets SGD SGD

Trade receivable 7 101,544 122,000

Other current asset 8 14,051 14,426

Cash and cash equivalents 9 1,385 4,242

116,980 140,668

Total assets 116,980 140,668

EQUITY AND LIABILITIES

Capital and reserves

Share capital 10 100,000 100,000

Accumulated losses (46,865) (22,262)

53,135 77,738

Current liabilities

Trade and other payables 11 63,845 62,930

63,845 62,930

Total equity and liabilities 116,980 140,668

The accompanying notes form an integral part of these financial statements.

sTaTemenT of finanCial posiTion

98


NOTE 2009 2008

SGD SGD

Revenue 4 - 142,350

Cost of sales - - (136,468)

Gross profit - 5,882

Expenses:

Administrative expense (21,471) (18,056)

Other expenses 5 (3,132) (9,052)

Loss before income tax (24,603) (21,226)

Income tax expense 6 - -

Loss for the financial year (24,603) (21,226)

Total comprehensive income (24,603) (21,226)


sTaTemenT of Comprehensive posiTion

99


Share capital Accumulated Loss Total equity

SGD SGD SGD

Balance as at 1 January 2008 100,000 (1,036) 98,964

Total comprehensive income for the financial year

- (21,226) (21,226)

Balance as at 31 December 2008 100,000 (22,262) 77,738

Balance as at 1 January 2009 100,000 (22,262) 77,738

Total comprehensive income for the financial year

- (24,603) (24,603)

Balance at 31 December 2009 100,000 (46,865) 53,135

sTaTemenT of Changes in eQuiTy


100


NOTE 2009 2008

SGD SGD

Cash flows from operating activities

Loss before income tax (24,603) (21,226)

Changes in working capital:

Trade receivable 20,456 (122,000)

Other current asset 375 41

Trade and other payables 915 61,930

Net cash outflow from operating ac-tivities and net decrease in cash and cash equivalents held

(2,857)

(81,255)

Cash and equivalents at the beginning of financial year

4,242 85,497

Cash and equivalents at the end of financial year

9 1,385 4,242

sTaTemenT of Cash flows


101


These notes form an integral part of and should be read in conjunction with the accompanying financial state-ments.

1. General information

The Company is incorporated and domiciled in Singapore. The address of its registered office is at 30 Bideford Road, #18-01 Thong Sia Building, Singapore 229922.

The principal activities of the Company are to carry on the businesses of telephony and internet ser-vices.

However, the Company did not carry out any business operations during the financial year.

2. Significant accounting policies

2.1 Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting Stan-dards (“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of these financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Company’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. Interpretations and amendments to published standards effective in 2009 On 1 January 2009, the Company adopted the new or amended FRS and Interpretations to FRS (INT FRS) that are mandatory for application from that date. Changes to the Company’s accounting policies have been made as required, in accordance with the relevant transitional provisions in the respective FRS and INT FRS.

The following are the new or amended FRS that are relevant to the Company:

FRS 1 (revised) Presentation of financial statements (effective from 1 January 2009). The revised stan-dard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. All non-owner changes in equity are shown in a performance statement, but entities can choose whether to present one perfomance statement (the statement of com-prehensive income) or two statements (the income statement and statement of comprehensive income). The Company has chosen to adopt former alternative. Where comparative information is restated or reclassified, a restated statement of financial position is required to be presented as at the beginning comparative period. There is no restatement of the statement of financial position as at 1 January 2008 in the current financial year.

2.2 Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Company’s activities. Revenue is presented, net of goods and services tax, rebates and discounts.

noTes To The finanCial sTaTemenTs

102


The Company recognises revenue when the amount of revenue and related cost can be reliably mea-sured, when it is probable that the collectibility of the related receivables is reasonably assured and when the specific criteria for each of the Company’s activities are met.

Revenue from rendering of services is recognised when the Company has delivered the services to the customer, the customer has accepted the services and the collectability of the related receivables is reasonably assured.

2.3 Financial assets

(a) Classification

The Company classifies its financial assets as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except those maturing later than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are classi-fied within “trade and other receivables”, “loans to related parties” and “cash and cash equivalents” on the statement of financial position.

(b) Recognition and derecognition

Financial assets are recognised when there is a contractual right to receive cash or financial as-sets; or to exchange financial instruments with another enterprise. Financial assets are derecog-nised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.

Trade receivables that are factored out to banks and other financial institutions with recourse to the Company are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as borrowings.

(c) Measurement

Financial assets are initially recognised at fair value plus transaction costs.

Loans and receivables are subsequently carried at amortised cost using the effective interest method.

(d) Impairment

The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.

An allowance for impairment of loans and receivables including trade and other receivables, is rec-ognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delin-quency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of esti-mated future cash flows, discounted at the original effective interest rate. The amount of allowance for impairment is recognised in the statement of comprehensive income.

103


2.4 Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost, using the effective interest method.

2.5 Provision for other liabilities and charges

Provisions for other liabilities and charges are recognised when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

2.6 Fair value estimation

The fair values of current financial assets and liabilities carried at amortised cost approximate their car-rying amounts.

2.7 Income taxes

Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substan-tively enacted by the balance sheet date.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.

A deferred income tax liability is recognised on temporary differences arising on investments in subsidiar-ies, associated companies and joint ventures, except where the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:

(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and

(ii) based on the tax consequence that will follow from the manner in which the Company expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expense in the statement of comprehensive income, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combina-tion is adjusted against goodwill on acquisition.

104


2.8 Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents include depos-its with financial institutions which are subject to an insignificant risk of change in value.

2.9 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account.

2.10 Currency translation

(a) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements are presented in Singapore Dollar.

(b) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences from the settlement of such transactions and from the translation of mon-etary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised statement of comprehensive income, unless they are arise from borrow-ings in foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations. Those currency translation differences are rec-ognized in the currency translation reserve in the financial statements and transferred to the state-ment of comprehensive income as part of the gain or loss on disposal of the foreign operation.

Non-monetary items measured at fair values in foreign currencies are translated using the ex-change rates at the date when the fair values are determined.

3. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circum-stances.

There are no critical accounting estimates and assumptions made by the Company concerning the fu-ture.

4. Revenue

2009 2008

SGD SGD

Rendering of services - 142,350

105


5. Other expenses

2009 2008

SGD SGD

Bank Charges 338 511

Foreign exchange differences (net) 1,719 8,541

Others 1,075 -

3,132 9,052

6. Income tax expenses

There is no current income tax expense as the Company is in a loss making position.

7. Trade receivable

2009 2008

SGD SGD

Trade receivable 101,544 122,000

Trade receivable is non-interest bearing and the average credit period is 120 days (2008: 120 days).

At the balance sheet date, the carrying amount of trade receivable approximates its fair vale.

Trade receivable is denominated in Singapore Dollar.

8. Other current assets

2009 2008

SGD SGD

Deposit 14,051 14,426

At the balance sheet date, the carrying amount of other current asset approximates its fair value.

Other current asset is denominated in United States Dollar.

106


9. Cash and cash equivalents

2009 2008

SGD SGD

Bank Balance 1,385 4,242

At the balance sheet date, the carrying amounts of cash and cash equivalents approximate their fair value.

Cash and cash equivalents are denominated in United States Dollar.

For the purposes of the statement of cash flow, the cash and cash equivalents comprised the following:

2009 2008

SGD SGD

Cash and cash equivalents (as above) 1,385 4,242

Cash and cash equivalents per statement of cash flows 1,385 4,242

10. Share capital

2009 2008

SGD SGD

100,000 ordinary shares issued and fully paid 100,000 100,000

11. Trade and other payables

2009 2008

SGD SGD

Trade payable 9,053 9,295

Other payable:

- Holding company 54,792 53,635

63,845 62,930

107


Trade payable is non-interest bearing and the average credit period is 120 days (2008: 120 days).

Due to holding company is unsecured, interest-free and repayable on demand.

Based on directors’ opinion, at the balance sheet date, the carrying amount of trade payables approxi-mate its fair value.

At the balance sheet date, the carrying amount of other payable approximates its fair value.

Trade and other payables are denominated in the following currencies:

2009 2008

SGD SGD

Singapore Dollar 54,792 53,635

United States Dollar 9,053 9,295

63,845 62,930

12. Holding company

The holding company is Net 4 India Limited, incorporated in India.

13. Financial risk management

The Company’s activities expose it to a variety of financial risk.

(i) Foreign currency risk

The Company is exposed to foreign currency risk arising from future commercial transactions, recognised assets and liabilities, primarily with respect to the United States Dollar. The Com-pany monitors the foreign currency exchange rate movements closely to ensure that their expo-sures are minimised.

The Company’s currency exposure to United States Dollar is as follows:

2009 2008

SGD SGD

Cash and cash equivalents 1,385 4,242

Trade and other payables (9,053) (9,295)

Net financial liabilities (7,668) (5,053)

108


At 31 December 2009, if the United States Dollar had strengthened/weakened by 10% (2008: 10%) against the Singapore Dollar with all other variables including tax rate being held constant, the Company’s loss after tax for the financial year would have been SGD767 (2008: SGD505) higher/lower as a result of currency translation gains/losses on the remaining United States Dollar denominated financial instruments.

(ii) Interest rate risk

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of financial instrument will fluctuate because of changes in market interest rate.

The Company’s exposure to movements in market interest rates is minimised as the Company has no material interest bearing assets or liabilities.

(iii) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. For trade receivables, the Company adopts the policy of dealing only with customers of appropriate credit history. For other financial assets, the Company adopts the policy of dealing only with high credit quality counterparties.

Financial assets that are past due and/or impaired

The age analysis of trade receivable past due but not impaired are as follows:

2009 2008

SGD SGD

Past due < 3 months - 122,000

Past due over 6 months 101,544 -

101,544 122,000

(iv) Liquidity risk

The Company adopts prudent liquidity risk management by maintaining sufficient cash and avail-ability of funding from the holding company.

The table below analyses the maturity profile of the Company’s financial liabilities (including de-rivative financial liabilities) based on contractual undiscounted cash flows.

109


Not later than

1 year

SGD

At 31 December 2009

Trade and other payables 63,845

63,845

At 31 December 2008

Trade and other payables 62,930

62,930

(v) Capital risk

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise share-holder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back is-sued shares, obtain new borrowings or sell assets to reduce borrowings.

The Company is not subject to any externally imposed capital requirements

14. New accounting standards and FRS interpretations

Certain new accounting standards, amendments and interpretations to existing standards have been published and they are mandatory for the Company’s accounting periods beginning on or after 1 January 2010 or later periods and which the Company has not earlier adopted. The Company’s does not expect that adoption of these accounting standards or interpretations will have a material impact on the Com-pany’s financial statements.

15. Authorisation of financial statements

These financial statements were authorised for issue in accordance with a resolution of the directors on 31 MAR 2010.

110


16. Detailed Income Statement

2009 2008SGD SGD

Revenue - 142,350

Less: Cost of sales -

Purchases (136,468)

Gross Profit - 5,882

Operating expenses

Bank charges (338) (511)

Foreign exchange differences (net) (1,719) (8,541)

Professional fees (21,471) (18,056)

Others (1,075) -

(24,603) (27,108)

Loss before income (24,603) (21,226)

Income tax expenses - -

Loss for the financial year (24,603) (21,226)

This schedule does not form part of audited statutory financial statements.

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