Iflex 2006-07

i-flex annual report 2006-07
Cover Page.indd 1 7/24/2007 6:01:38 PM

The 2005-2006 Annual Report used the metaphor of fire to depict the energy and passion that drive our achievements.
The 2004-2005 Annual Report carried the theme of circles to depict our 360-degree coverage of the financial domain.
For excellence in design, production and communication, we won:
• Society of Technical Communication (STC), Australian Chapter - Merit Award (2005 - 2006)
• League of American Communications Professionals (LACP), Magellan Awards - Honors Award (2005 - 2006)
• League of American Communications Professionals (LACP) Awards - Bronze Award (2004 - 2005)
• Society of Technical Communication (STC), Australian Chapter - Distinguished Award (2004 - 2005)

The Power of ‘n’ 2
Visionn 3
Corporate Information 8
Directors’ Report 11
Corporate Governance Report 21
Financials
Indian GAAP
Unconsolidated 33
Consolidated 75
US GAAP 99
Annual General Meeting (AGM) notice I
Attendance Slip & Proxy Form XIII
Annual Report 2006-2007_B & W.indd 1 7/27/2007 3:32:10 PM

The Power of ‘n’
i-flex is the leading IT solutions provider to the financial services industry worldwide. Oracle is the world’s
most successful enterprise software company. For years, i-flex and Oracle have worked together as partners
to empower banks and financial institutions and make them successful in their businesses.
With Oracle acquiring a majority stake in i-flex last year, the breadth and depth of the joint offerings of both
companies have become even more integrated, rich and powerful, to create a unified capability that is unique
in the industry. Today, we stand for:
• the most comprehensive range of solutions for financial institutions from a single source
• a unique combination of integrated and best-of-breed applications
• a business process-oriented approach that aligns IT initiatives with business needs and enables an
evolutionary transformation of IT infrastructure
• a strong commitment to open systems and industry standards, ensuring interoperability
• a partner-oriented approach to the market, ensuring comprehensive solution delivery
The superscript “n” in “i-flexn ” reflects the enormity of this combined impact. Through this consolidated,
potent, enriched and integrated portfolio of solutions and services, we now can accelerate our progress
towards realizing our vision – to empower financial institutions around the world with competitive advantage
and propel their businesses to greater growth and success.

We are at a new and exciting point in our journey, ready to embark on When we launched FLEXCUBE, we used the term, “mission impossible”
yet another voyage of infinite potential and immense possibilities. It brings to represent our goals for the future. We soon went on to make every
back nostalgic memories of the time we started out from offices in India, mission, however difficult, a reality. A year back, we adopted the theme
15 years ago, to bravely enter the financial services industry and capture a ‘Renaissance’, or the spirit of revival and reinvention, in the context of our
share of business in this specialized domain. All we had then was a dream, relationship with leading enterprise technology company, Oracle. Oracle’s
a burning ambition and plenty of courage. acquisition of a majority stake in i-flex has opened new doors for us,
especially with many large top-tier financial institutions in the advanced
This was unchartered territory for any Indian IT company at that time – our markets.
vision was to deliver significant value to our customers’ businesses rather
than merely provide technical resources on a cost-based model. Our bold Oracle today stands out as a clear leader in its vision of integrated,
move, to build world-class products and solutions targeted exclusively at standards-based applications, and is moving aggressively to fulfill that
the global financial services industry, in those days was unconventional. vision. With the formation of the new Oracle Financial Services Global
But, in fact, it is this clear focus and unrelenting zeal to make our customers Business Unit, managed by a team from i-flex that has extensive
excel in their businesses that has stood us in good stead and made us the experience, domain expertise and a proven track record of leadership
leading IT solutions provider to the financial services industry. in financial services, there will be a consolidation and integration of our
growing portfolio of financial services applications to provide the best-in-
The journey, thus far, has been truly breathtaking, satisfying and rewarding. class solutions that our customers expect.
From the time MicroBanker, our first banking product, was ranked No. 1
in the world by International Banking Systems (IBS), UK, in its league table Today, our rich suite of solutions continues to expand, keeping pace with
of wholesale back-office products in 1995, to FLEXCUBE®, our flagship rapidly changing market requirements, and arming our customers with
suite, being launched in Bangalore in 1997; our name change from CITIL unrivaled competitive advantage. Large retail and corporate banking
to i-flex in 2000; the company going public on the Indian bourses as deployments, our sustained leadership in the risk and compliance area
i-flex® solutions limited in 2002, to Oracle Corporation, the world’s leading through a comprehensive Governance, Risk and Compliance framework,
technology enterprise software company, acquiring a majority stake in the the enablement of process-driven enterprises through our process
company – it has been one breathtaking and rewarding journey. repository for banks, and new focus on emerging areas such as Islamic
Banking, among others, set the course for rapid growth.
Our core guiding principles – customer focus, domain expertise and global
reach – remain unchanged. We continue to build, invest and enhance Our joint vision for the future is that every bank and financial institution,
our offerings continuously and deliver complete solutions to our customers large or small, in any part of the world, advanced or emerging, will transact
through our “build-buy-ally” strategy. We build our own solutions (FLEXCUBE on software that is powered by us. I believe our potential is limitless and
and ReveleusTM, among others). We also buy products (DaybreakTM, the opportunity is at hand.
Mantas®) or acquire stakes in companies whose solutions complement
our own. Where neither is feasible, we forge strategic partnerships and
alliances. In the future, we will continue to invest in creating world-class Rajesh Hukku
intellectual property, expand our business solutions footprint and enter Chairman
new markets, while leveraging our partnerships and alliances. i-flex solutions limited
Recounting some glittering moments from i-flex’s history

It’s been 15 years since we set forth on our journey in the financial services industry. We capture some moments from this glorious saga here.
• CITIL (Citicorp Information Technology Industries Limited), spun off from COSL (Citicorp Overseas • CITIL gains recognition for establishing world-class processes and quality
1992
1995
Software Limited), commences first year of operations • CITIL begins functioning as an independent standards • It attains SEI CMM Level 4, becoming the first financial software firm
company, creating next-generation software for the financial services industry worldwide; it focuses on in the world and one out of six companies worldwide to achieve this distinction at
building domain expertise and creating intellectual property in the financial services industry, making it that time • MicroBanker ranked as the No. 1 wholesale banking software in the
stand out among other Indian software companies of the era world by the International Banking Systems (IBS), UK
i-flex annual report 2006-07 3

Recent Awards and Achievements
Best Core Banking Project Award
• i-flex® solutions and Syndicate Bank, one of India’s leading public-
A Srinivasan – Vice-President,
sector banks, won the ‘Best Core Banking Project Award for Large APAC Sales & COO, i-flex solutions
Banks’ at The Asian Banker IT Implementation Awards, 2006. pte ltd – receives the award
Launched last year, the Asian Banker IT Awards aim to discover from Shivananda Naik – Minister
for Small Scale Industries, and
emerging best practices in the use of IT in the financial services Mahendra Jain – Secretary,
industry. The assessments were based on four inter-related criteria: Commerce & Industries,
Government of Karnataka.
project implementation, business value created, qualitative analysis and
architectural design, and technical innovation. • i-flex was presented with the EPCES Export Award for 2004-05, for Best
SEZ (non-SSI) for EOUs & SEZ Units, from The Export Promotion Council,
New Delhi, India.
N R K Raman – Managing Director

& CEO, i-flex solutions – and
C P Swarnkar – Chairman and
Managing Director, Syndicate Bank Atul Gupta – Senior Vice-President,
– with the judges, after accepting Process and Quality Management
the ‘Best Core Banking Project Group – received the EPCES Export
Award for Large Banks’. Award for 2004-05 for Best SEZ
(Non-SSI) (Electronic & Computer
Software) from Kamal Nath –
One of the 38 Best Earners in Financial Services Union Minister of Commerce and
Industry, India.
• Research by The American Banker and Financial Insights, an IDC
company, resulted in i-flex receiving the FinTech citation at the BAI-RDS
IBS ranks FLEXCUBE® the #1 Banking Solution
conference in Las Vegas, USA, for best fiscal results. The FinTech 100
for the Fifth Consecutive Year
evaluates IT services companies on fiscal year-end revenues and the
percentage attributed to the financial services industry. • FLEXCUBE retained its position as the world’s No.1 selling banking
solution for the fifth consecutive year, in International Banking Systems’
• Forbes Asia ranked i-flex No. 12 in its ‘Best under Billion List’. (IBS) Annual Sales League Tables for 2006, leading all other banking
products across all categories in the number of new wins for the year.
Export Awards
SWIFTReady Silver Label (2007) awarded to FLEXCUBE for Payments
• i-flex was awarded the Certificate of Excellence in IT Exports
for the year 2005-2006 by the STPI, Government of India, and • FLEXCUBE V.UM Release 7.3 received the SWIFTReady Silver 2007
Department of Information Technology and Biotechnology, Government Label for complying with SWIFT Criteria for its payments application.
of Karnataka, India. This label identifies products that are compliant with SWIFT, integrate
efficiently into the SWIFT environment, increase traffic automation, and
achieve straight-through processing (STP).
The Banker Magazine commends Reveleus™ for Innovation

• Reveleus and the Reveleus’ Basel II Solution were ‘Highly Commended’
by The Banker magazine and The Financial Times in the Compliance
Initiative Innovation category of The Banker Technology Awards, 2006.
The awards recognize the innovation and excellence of technical
N R K Raman receiving the award applications and services for the front-, middle-, and back-office functions
from H D Kumaraswamy – Chief
Minister, Government of Karnataka.
in financial services companies, and the strategies used by these
companies to use technology effectively.
• i-flex won the Best Export Award, Product Category: IT and BT –
Non SSI Gold, from the Department of Commerce and Industries,
Government of Karnataka, for the year 2005-2006.
• CITIL establishes the Center of Excellence for business intelligence to provide • FLEXCUBE® makes its debut in November. This launch set the stage for
1996
1997
specialized consulting and software products, as well as services in data i-flex becoming the global leader in providing world-class solutions to the
warehousing and business intelligence financial services industry

Top Analyst Firms rank Reveleus as the Leading Solution for Basel II S Hariharan named one of the Top 100 CIOs in the Country
and Operational Risk • S Hariharan – Senior Vice-President, Infrastructure and Support Services,
i-flex solutions – was ranked among the top 100 CIOs in the country,
Mantas, an i-flex business, ranked by Waters Magazine
at the Indian CIO 100 Symposium and Awards Ceremony in Mumbai.
• Waters Magazine ranked Mantas for Best Anti-Money Laundering The CIO 100 is considered to be one of the most prestigious awards in
Solution for 2007, 2005 and 2004 and Best Compliance Solution for the IT industry.
2003. The award is voted by the subscribers of Waters, a monthly
magazine that covers information technology and solutions in the financial Vivek V Govilkar receives the HR Achievers Award
services industry. • Vivek V Govilkar – Senior Vice-President, Human Resources and Training,
i-flex solutions – was presented with the HR Achievers Award at a function
PrimeSourcing™ receives a Gold Rating for Compliance with organized by Indira Group of Institutions, Pune, India.
Policies and Standards
• PrimeSourcing, i-flex’s IT Services division, was awarded the Gold
Rating for 2006 for compliance with policies and standards by a leading
investment bank in the SmartSourcing IT Services Provider category, for
the second year in a row.
Vivek V Govilkar – SVP, Human
The Brown-Wilson Group ranks Equinox as Top Outsourcer for Resources and Training,
Mortgage Banks i-flex solutions – receiving the HR
Achievers Award from
• A survey administered by the Brown-Wilson Group, authors of the A Sunderajan – Managing Director,
best-selling book, The Black Book of Outsourcing, ranked Equinox, Thomas Assessments – at Indira
an i-flex company, as the top outsourcing vendor to the Mortgage Banking Group of Institutions, Pune.
Industry in 2006. Survey participants rated Equinox’s mortgage process

Certifications and Quality Benchmarks
outsourcing services as No. 1 in the industry, ahead of those provided by
India-based outsourcing competitors, as well as suppliers from the USA. Successfully completed an SAS70 Review of Internal Controls for
the Fifth Consecutive Year
IAOP ranks Equinox a Leader in Global Outsourcing
i-flex office at Mumbai certified for ISO 27001 Compliance
• Equinox was ranked in the Leaders’ category in the 2007 Global
• The i-flex office at Goregaon, Mumbai, was certified for ISO 27001
Outsourcing 100, by The International Association of Outsourcing
compliance. ISO 27001 is one of the most widely accepted information
Professionals (IAOP), for the second year in a row.
security governance standards. This certification affirms i-flex’s
Rajesh Hukku receives the Stevie’s Best Chairman Award for 2006 firm commitment towards standardizing corporate governance and
compliance levels in the company.
• Rajesh Hukku was named Stevie’s Best Chairman for 2006.
The Stevie Awards, hailed as the “Business world’s Oscars”, are conferred Achievements
in the following three categories: The American Business Awards,
The International Business Awards and The Stevie Awards for Women • Posted annual revenues of Rs. 2,061 crores (Indian GAAP Consolidated)
Entrepreneurs. Last year, the International Stevie Award winners were for 2006-2007. Net profits increased by 50 percent.
selected from more than 700 categories around the world.
• Combined revenues from USA and Europe grew from 67 to 70 percent.
• Rajesh Hukku was also recognized among the 50 Outstanding Asian • Number of customers serviced increased from 642 to 753; FLEXCUBE
Americans in Business for 2006. now has a global presence in over 105 countries, with 315 customers.
• Annual products revenue registered a 47 percent increase to
Rs. 1,121 crores. The product tank size stood at USD 82.5 million,
the highest level reached till date, showing a 27 percent year-on-
year increase.
• Employee strength grew to 9,000 plus.
• Opened new offices in London, New Jersey, Seoul and Taipei; invested in
new office space across Mumbai, Pune, Bangalore and Chennai in India.
Rajesh Hukku at the Stevie Awards • Acquired Mantas, a leading software company providing solutions for
ceremony. Standing next to him regulatory compliance, governance and anti-money laundering, in an all
is Allyson Stewart-Allen from
International Marketing Partners. cash transaction of USD 122.6 million.
• The consulting business expanded with the acquisition of CAPCO’s
Singapore operations.
• MicroBanker becomes the 6th international banking product in the world • FLEXCUBE sees accelerated growth; is ranked the world’s No. 2 banking solution
1998
1999
to be used by 100 customers • FLEXCUBE starts gaining traction and in the IBS Sales League Table • FLEXCUBE Information Center, a Web-enabled
international leadership business intelligence system, is launched, along with a Center of Excellence for
CRM • Java Center for financial services is established

i-flex solutions financials at a glance All figures in Rs. million except EPS & Book value
Our 10 years in the industry *As per Indian GAAP Consolidated results
1997-98 1998-99 1999-00 2000-01 *2001-02 *2002-03 *2003-04 *2004-05 *2005-06 *2006-07
Total Revenue 825.86 1,444.31 2,062.69 3,211.21 4,295.27 6,239.14 8,017.87 11,645.21 15,113.54 20,976.66
Total Expenses 509.24 909.53 1,312.30 2,016.85 2,991.95 4,277.53 5,703.26 8,693.82 12,176.59 16,837.90
EBT 316.62 534.78 750.39 1,194.36 1,303.32 1,961.61 2,314.61 2,951.39 2,936.95 4,138.75
Tax 8.70 30.44 57.66 94.15 150.33 252.73 526.75 627.06 560.42 415.96
EAT 307.92 504.34 692.73 1,100.21 1,152.99 1,708.88 1,787.86 2,324.33 2,376.53 3,722.80
EPS 3.70 6.06 8.32 13.21 13.84 20.52 21.47 27.91 28.53 44.70
Book Value 9.72 15.58 25.46 38.12 56.58 92.79 112.01 137.51 165.65 283.57
Note: All EPS and Book Values are computed based on the current equity capital base of 83,288,580 shares
EVA 173.87 264.03 328.33 548.39 472.33 669.33 720.91 903.50 1,149.83 1,294.00
Key performance indicators 2006-2007

Operating revenues Net income
22000 4000.00
20,609.38 3,722.80
20000
3500.00
18000
14,823.00 3000.00
16000
14000 2500.00 2,324.33 2,376.53

in Rs. million
in Rs. million
12000 11,385.93
2000.00 1,787.86
10000 1,708.88
8000 7,881.29 1500.00

6,141.21 1,100.21 1,152.99
6000
1000.00
4,157.18 692.73
4000 3,038.56 504.33
1,971.24 500.00 307.92
2000 796.06 1,390.18
0 0.00
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07* 1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
Earnings per share 44.70

Book value
45.00 300.00
283.57
40.00 270.00
35.00 240.00
30.00 27.91 28.53 210.00
25.00 180.00 165.65

21.47 137.51
Rs.
Rs.
20.52
20.00 120.00
112.01
92.79
15.00 13.21 13.84 90.00
10.00 8.32 60.00 56.58

6.06 38.12
5.00 3.70 30.00 25.46
9.27 15.58
0 0
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07* 1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
Earnings per share is computed on the equity capital base of 83,288,580 shares as on March 31, 2007. Book Value is computed on the equity capital base of 83,288,580 shares as on March 31, 2007.
Economic value added

1350.00
1,294.00
1200.00 1,149.83
1050.00
903.50
900.00
in Rs. million
750.00 720.91
669.33
600.00
548.39 472.33
450.00
328.33
300.00 264.03
173.87
150.00
0
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
• CITIL renamed i-flex solutions limited • Center of Excellence for e-services launched • Financial software development facilities established at Pune and Chennai
2000
2001
• Separate business unit established to address the Applications Services Provider • Fully-owned subsidiaries set up in USA and Singapore • i-flex solutions b.v. in
(ASP) market • i-flex solutions b.v., a 100 percent subsidiary of the company, opened Amsterdam, The Netherlands, becomes operational • i-flex Consulting™ is launched
in Amsterdam, The Netherlands

14%
India, Middle East & 54%
39% Africa Products
USA Revenue
18%
Asia Pacific 46%
Services
28% Revenue
Europe
1%
Latin America &
Caribbean
Region-wise revenues Operating revenues
5% 2%
Other expenses KPO-Services
5%
Facility Costs
4%
Application software
43%
9% Services
Professional fees
13%
Travel cost 64% 55%
Staff Cost Products
Expenditure breakup Revenue breakup
Customers serviced... ... across countries

800 140
753
128
123
700 642 120 112
108
600 544
100 93
480
500 84
Customer Count
Country Base
80 74
400 404 66
345 60 55
51
300
281
206 238 40
200
163
100 20
0 0
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07* 1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
Number of employees including those in subsidiaries

10000
9,068
9000
8000 6,858
6000
5000 4,747
4000
2,974
3000
2,032 2,327
2000 1,590
1,017
1000 657 790
0
1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* 2006-07*
• i-flex goes public, listed on the Bombay Stock Exchange (BSE) and the National • i-flex’s North American development, support and demonstration center set
2002
2003
Stock Exchange (NSE), New Delhi. Scrip sees exponential growth in a span of five years up in New York • Reveleus Basel II solutions framework for enterprise risk
and becomes one of the newest and best performing stocks from the Indian software management, a complete set of analytics and metrics compliant with the Bank of
industry • Reveleus™ launched to address the business intelligence and analytics International Settlement (BIS) requirements, launched • Signed a global strategic
market • First software development center outside India launched in Singapore
• FLEXCUBE touches the 100th customer mark • FLEXCUBE ranked No.1 banking solution in IBS’ alliance with IBM to deliver and market core banking replacement solutions to medium and large size
Sales League Table; remains top of the IBS charts for the next five years • i-flex’s IT services division banks in markets worldwide
is branded PrimeSourcing • Signed agreement with HP as strategic alliance partner

CORPORATE INFORMATION Mohan Bhatia
Nikos Goutsoulas
i-flex solutions ltd. P Prasannavadanan
Peter Yorke
Prabhakar Ravoori
R Narasimhan
Board of Directors R Ramamurthi
Charles Phillips S Ramakrishnan
Deepak Ghaisas Sridhar Padmanabhan
Derek Williams Sridhar Ramachandran
N R Kothandaraman (N R K Raman) (Managing Director and CEO, Sunder Annamraju
i-flex solutions) Swati Srinivasan
R Ravisankar Thomas Mathew
Rajesh Hukku (Chairman, i-flex solutions) V Senthil Kumar
Sam Bharucha V Srinivasan
Tarjani Vakil Venkata Subramanian
William T Comfort, Jr Vikram Gupta
Y M Kale Yung Wu
Senior Management Company Secretary

Deepak Ghaisas
Executive Vice-Presidents
Joseph John Chief Financial Officer
Olivier Trancart Makarand Padalkar
V Shankar
Chief Accounting Officer & Compliance Officer
Senior Vice-Presidents Avadhut (Vinay) Ketkar
Anand Phanse
Atul Gupta Solicitors
Kishore Kapoor Ramesh P Makhija & Co.
Manmath Kulkarni
Nandu Kulkarni Auditors
S Hariharan S. R. Batliboi & Associates
S Sundararajan
Sajal Mukherjee Internal Auditors
Vijay Sharma Mukund M Chitale & Co.
Vivek Govilkar
Bankers
Vice-Presidents Bank of India
A Srinivasan Central Bank of Libya
Cafó Boga Citibank N.A.
Don Ganguly HDFC Bank Ltd.
Dilip Kulkarni Kotak Mahindra Bank Ltd.
Dinesh Shetty Laxmi Vilas Bank
G Narasimhan State Bank of Mauritius Ltd.
George Thomas Yes Bank Ltd.
Gopinath Govindan
Gratian Perez Registrars & Transfer Agents
Jambu Natarajan Intime Spectrum Registry Ltd.
K Laxminarayan C 13, Pannalal Silk Mills Compound
Kapil Gupta L.B.S. Marg, Bhandup (W)
M Ravikumar Mumbai 400 078
Mahesh Rao
Meenakshy Iyer
• Consumer lending systems provider, SuperSolutions Inc., USA, acquired as a 100 • i-flex assessed at CMMi Level 5; also, certified BS 7799 compliant. BS 7799 are
2004
2005
percent subsidiary • i-flex Technology Deployment and Management Services (TDMS) for security standards and policies addressing information security • 51 percent equity
IT infrastructure management services launched • Regulatory reporting solutions major, stake acquired in Castek® Software Inc., a Toronto-based provider of insurance
FRS, and i-flex solutions form an alliance to ease the burden of global regulatory reporting systems for the global Property & Casualty (P&C) insurance industry • IPR acquired
for banks • Acquires 33 percent stake in Paris-based Login SA, extending capabilities for CAPCO’s Operational Risk Tool Suite (ORTOS); tool renamed as Reveleus
into the treasury solutions arena • Equinox Corporation acquired to provide KPO (Knowledge Process Operational Risk • Citigroup’s 41 percent stake in i-flex acquired by Oracle
Outsourcing) services to mortgage institutions, auto financers and credit companies

Registered Office Lower Ground floor, B Tower
i-flex solutions limited Diamond District
Unit 10-11, SDF-1 Airport Road
SEEPZ, Andheri (E) Bangalore 560 008, India
Mumbai 400 096, India
SJR I Park
Offices Ground & First Floor, Tower – 2
i-flex Center EPIP Zone, Whitefield Road, Whitefield
399, Subhash Road Bangalore 560 066, India
Vile Parle (E)
Mumbai 400 057, India Pride Silicon Plaza
2nd Floor
i-flex Park Next to Chatushringi
Nirlon Compound Senapati Bapat Road
Western Express Highway Pune 411 053, India
Goregaon (E)
Mumbai 400 063, India i-flex Center
Block 9A, Ambrosia - II
i-flex Annexe Bhavdhan Khurd, Tal. Mulshi
Nirlon Compound Pune 411 021, India
Western Express Highway
Goregaon (E) i-flex Heights
Mumbai 400 063, India Lohia Jain IT Park
Paud Road, Kothrud
Corporate Center A Pune 411 029, India
Andheri Kurla Road
Andheri (E) 143/1, Uttamar Gandhi Salai, Nugambakkam
Mumbai 400 059, India Chennai 600 034, India
Marchon House 99, Venkatnarayana Road, T Nagar

2nd Floor, Chennai 600 017, India
J.B. Nagar, Andheri-Kurla Road
Millennium House
Andheri (E)
12, Trubnaya Street
Mumbai 400 059, India
Moscow 103045, Russia
i-flex Park
i-flex solutions limited
C/o Embassy Business Park
205, Building 3,
C.V. Raman Nagar
Dubai Internet City
Bangalore 560 093, India
Dubai, United Arab Emirates (UAE)
i-flex Center
Subsidiary Office – India
# 333, Kundalahalli, Brookefields
i-flex Processing Services Limited
i-flex Center
i-flex Center of Learning 399, Subhash Road, Vile Parle (E)
Plot No. 13, Doddanekundi Mumbai 400 057, India
Industrial Area, Phase II
Subsidiary Offices – Asia-Pacific
Whitefield Road
i-flex solutions pte ltd
Mahadevapura Post
27, International Business Park
# 02-01 Primefield Landmark Building
Singapore 609 924
• Oracle’s stake in i-flex increased to 55.1 percent • Mantas Inc., a • Oracle’s stake in i-flex stands at 81.02 percent (as of
2006
2007
leading solutions provider in the anti-money laundering space, acquired; March 31, 2007) • Rajesh Hukku named the leader of Oracle’s
the firm is now a fully owned subsidiary of i-flex • Market capitalization Financial Services Global Business Unit (FSGBU) • R Ravisankar
crosses USD 5 billion and Deepak Ghaisas join the leadership team of the FSGBU
• N R Kothandaraman (N R K Raman) dons the mantle of MD and
CEO of i-flex solutions

Offices Subsidiary Offices – North America
Room 806, Central Plaza i-flex America inc. & i-flex solutions inc.
No. 227 HuangPi Road North 99 Park Avenue, Suite 1530
Shanghai 200003 New York 10016, USA
China
SuperSolutions Corporation
6, FL 17, Fukoku Seimei Building 10050 Crosstown Circle
2-2-2 Uchisaiwaicho, Chiyoda-ku Suite 600, Eden Prairie
Tokyo 1000011 MN 55344, USA
Japan
Mantas
#103-504, Garam Apt. Ilwon-dong 13650 Dulles Technology Drive
Kangnam-gu Suite 300, Herndon
Seoul 135239 VA 20171, USA
South Korea
Offices
Room 4-1, 5F, No.51, Sec. 2 i-flex solutions inc.
Keelung Rd., Xinyi District 60, State Street, Suite 700
Taipei City 110, Taiwan (R.O.C.) Boston, MA 02109, USA
Level 10, Margaret Street i-flex solutions inc.

Sydney, NSW 2000 355 Lexington Avenue, FL 4
Australia New York, NY 10017, USA
Subsidiary Office - Europe i-flex solutions inc.

i-flex solutions b.v. 9 E. 37th Street, FL 12
World Trade Center, B-Tower, 12th Floor New York, NY 10016, USA
Strawinskylaan 1245
1077 XX Amsterdam i-flex solutions inc.
The Netherlands Reveleus
399 Thornall Street, 6th Floor
Offices Edison, NJ 08837, USA
Niederlassung Deutschland
Mainzer LandstraBe 49a i-flex solutions inc.
60329 Frankfurt am Main 5805 Blue Lagoon Drive, Suite 295
Germany Miami, Florida 33126, USA
121, Meridian Place Castek Software Inc.

Off Marsh Wall 1 Yonge St, Suite 2300
South Quay Toronto, Ontario, Canada
London E14 9FE, UK
Subsidiary Office – Mauritius
Level 25 ISP Internet Mauritius Company
40 Bank Street 10, Frere Felix de Valois Street
Canary Wharf Port Louis, Mauritius
London E14 5NR, UK
Offices
i-flex solutions b.v. Equinox Corporation
Molyneux House 10, Corporate Park, Suite 130
Bride Street, Dublin 8 Irvine, CA, 92606, USA
Ireland
Equinox Global Services Pvt. Ltd.
Fitzwilliam Hall DLF Infinity Tower A, 3rd Floor
Fitzwilliam Place, Dublin 2 DLF Cyber City, Phase II
Ireland Gurgaon 122 002
Haryana, India
Subsidiary Office - i-flex solutions b.v.
6-8 Kifissias Avenue
Paradissos, Maroussi
Athens 15125
Greece

Directors’ report
Financial year 2006-07
Dear Members, taxes and prior period item stood at Rs. 3,810.48 million during the year
against Rs. 2,895.11 million last year, translating into a growth of 32%.
The Directors take great pleasure in presenting their report on the The Company’s net income after taxes and prior period items increased
business and operations of your Company along with the Annual Report to Rs. 3,546.74 million this year from Rs. 2,407.99 million last year, a
and audited financial statements for the Financial Year 2006-07. growth of 47%.
Revenue, on the basis of consolidated financials is Rs. 20,609.38 million

Financial highlights
this year, an increase of 39% as compared to Rs. 14,823.00 million last
As per Indian GAAP Unconsolidated year. The Earnings before Taxes on a consolidated basis is Rs. 4,131.13
million this year as compared to Rs. 3,028.46 million last year, an
(All amounts in millions of Indian Rupees) increase of 36%. The Company’s net income before prior period item
Year ended Year ended increased to Rs. 3,722.80 million this year as compared to Rs. 2,473.94
March 31, 2007 March 31, 2006 million last year, an increase of 50%.
Revenue 15,523.44 11,538.22 A detailed analysis of the financials is given in the Management’s
Income from operations before Discussion and Analysis report that forms part of this Annual Report.
depreciation & amortization 4,027.53 2,983.71
Depreciation & amortization 565.35 387.81
Interest/other income Dividend
(expenses) 348.30 299.21
Income before taxes 3,810.48 2,895.11 Your Company has aggressive growth plans to capitalize on its brand
Provision for tax 263.74 447.57 and market opportunities and, therefore, needs to invest substantially in
Net income after tax 3,546.74 2,447.54 the growth of the business. Keeping this in view and in order to enhance
Prior period item – 39.55 shareholder value by conserving funds for reinvestment and funding for
Net income 3,546.74 2,407.99 future acquisitions, the Board has decided not to declare a dividend in the
Balance brought forward 464.24 492.49 current year. The funds will be used to further invest in infrastructure and
Profit available for other growth opportunities to enhance the leadership of your Company
appropriation 4,010.98 2,900.48 in the market.
Transfer to general reserve – 2,000.00
Proposed dividend – 381.44
Corporate dividend tax 0.17 53.66 Transfer to reserves
Dividend paid on stock options
exercised before AGM 2006 1.24 1.14 The Company does not propose to transfer any amount to the General
Balance carried forward 4,009.57 464.24 Reserve out of the amount available for appropriation. An amount of
Rs. 4,009.57 million is proposed to be retained in the Profit & Loss
As per Indian GAAP Consolidated financial statements: Account.
(All amounts in millions of Indian Rupees)

Share capital
Year ended Year ended
March 31, 2007 March 31, 2006 On September 14, 2006, the Company issued and allotted 4,447,418
equity shares on a preferential basis to Oracle Global (Mauritius) Limited,
Revenue 20,609.38 14,823.00 the Promoters of the Company, at Rs. 1,307.50 per share primarily to
Income from operations before fund the acquisition of Mantas Inc.
depreciation & amortization 4,424.50 3,204.18
Depreciation & amortization (653.02) (460.37) During the year the Company also allotted 2,552,795 equity shares to
Interest/other income its Directors/employees who exercised their options under its Employee
(expenses) 359.65 284.65
Income before taxes 4,131.13 3,028.46 Stock Option Plan.
Provision for tax (415.96) (560.42)
As a result, as on March 31, 2007, the paid up equity share capital of
Net income for the year before
minority interest, share of the Company increased to 83,288,580 equity shares of face value of
profit (loss) of associate and Rs. 5/- each.
prior period items 3,715.17 2,468.04
Minority interest – 2.57
Share of profit (loss) of Oracle’s acquisition of i-flex’s shares
associate and prior period As on April 1, 2006, Oracle Global (Mauritius) Ltd. (“Oracle”) was holding
items 7.63 3.33
Prior period items – (97.41) 36,422,788 equity shares (47.74% paid up capital) of the Company.
Net income 3,722.80 2,376.53 During the period April 2006 to June 2006, Oracle further acquired
3,725,524 equity shares. On September 14, 2006, the Company
allotted 4,447,418 equity shares to Oracle on preferential basis. On
Performance December 4, 2006, Oracle made an open offer to the members of the
Company to acquire up to 34.93% of the then capital of the Company.
On an unconsolidated basis, your Company’s revenue grew to
Through this offer, Oracle acquired 22,885,968 equity shares of the
Rs. 15,523.44 million during the financial year 2006-07 from
Company. As of March 31, 2007, Oracle holds 67,481,698 equity
Rs. 11,538.22 million last year, a growth of 35%. The net income before
shares (81.02% of the capital of the Company).

Use of IPO proceeds has made great strides in expanding its partner network in a number
of countries, especially the non-English speaking countries in Europe,
In June 2002, your Company completed its Initial Public Offer (IPO) in
Latin America, Asia and Francophone Africa.
India and listed its shares on the National Stock Exchange of India Ltd.
(NSE) and Bombay Stock Exchange Ltd. (BSE). Out of the IPO proceeds Your Company made major progress on multiple areas in its relationship
of Rs. 1,780.80 million, the Company has utilized Rs. 1,493.61 million with Oracle, from aligning its solutions with Oracle to offering a much
up to March 31, 2007 for its infrastructure projects in Mumbai and more comprehensive solutions portfolio to its customers, to closely align
Bangalore, and in expanding its marketing reach. the joint sales and marketing efforts.
Your Company also issued shares to Oracle Global (Mauritius) Limited Strategically, your Company has taken several other important partnering
on a preferential basis on September 14, 2006. Out of the proceeds of initiatives, a notable one being a joint collaborative initiative between
Rs. 5,815.00 million, the Company has utilized Rs. 5,679.47 million up i-flex, Oracle and IBM to provide next generation solutions to top tier
to March 31, 2007 towards the acquisition of Mantas Inc. financial institutions worldwide. This alliance brings together the world’s
No. 1 IT vendor, the world’s No. 1 enterprise software vendor and the
Infrastructure world’s No. 1 core banking solution provider, representing a unique and
compelling value proposition to top tier financial institutions around the
During the year, your Company made significant additions to its world.
infrastructure to meet the growing business requirements. The Company
opened new offices in Bangalore, Pune and Chennai and the Company’s
subsidiaries added offices in Athens, Dublin, New Jersey, London, Subsidiaries
Seoul and Taipei to accommodate the increasing workforce. These new Your Company has subsidiaries in India, USA, Singapore, the Netherlands,
premises expanded the capacity by about 2,000 seats. Construction of Canada and Mauritius to handle operations as well as to strengthen
the Company’s landmark building in Goregaon, Mumbai is completed marketing and sales efforts in the respective markets and ensure deeper
and the operations have recently commenced in the first phase of this penetration in these regions.
building. Your Company is in the process of finalizing a lease for over
a million square feet of contiguous office space in Bangalore. Your During the financial year, i-flex Processing Services Limited became a
Company has also entered into the MOU for acquisition of a large 100 wholly owned subsidiary of the Company. i-flex America inc., a wholly
acre piece of land in Nasik (Maharashtra) as a future growth center. owned subsidiary of the Company, acquired a 100% equity capital of
Mantas Inc., and Mantas Inc. became the subsidiary of the Company.
i-flex solutions pte ltd, a wholly owned subsidiary of the Company
Acquisitions
acquired 100% equity capital of i-flex Consulting (Asia Pacific) pte ltd and
On October 2, 2006, the Company through its subsidiary, accordingly, i-flex Consulting (Asia Pacific) pte ltd became the subsidiary
i-flex America inc., acquired 100% ownership in Mantas Inc. for a of the Company.
total consideration of USD 126.43 million (Rs. 5,807 million) including
transaction cost of USD 4.98 million (Rs. 229.8 million). The financial Pursuant to Section 212 of the Companies Act, 1956, the Company is
statements of Mantas Inc. are consolidated with the Company from required to attach to its Annual Report the Directors’ Report and financial
October 2, 2006. The Company has recorded goodwill on account of the statements of its subsidiaries. Since the Company presents audited
consolidation of Rs. 5,410 million as on March 31, 2007. consolidated financial statements under Indian GAAP and US GAAP in
its Annual Report, the Company has applied to the Central Government
Mantas Inc. is a leading provider of Anti-Money Laundering (AML) of India for an exemption from attaching the Directors’ Report, Balance
compliance software and related services. The Mantas Behavior Detection Sheet and Profit and Loss Account of its subsidiaries to the Annual
PlatformTM is the industry’s most comprehensive solution for detecting risk, Report. The approval from the Central Government in this regard is
enhancing customer relationships and addressing regulatory requirements awaited and in case the exemption under Section 212 (8) of the Act
in the Anti-Money Laundering, trading and broker compliance areas. This is granted to the Company by the Central Government, the financial
acquisition greatly strengthens your Company’s offerings in the Risk and statements of the subsidiaries of the Company shall not be attached to
Compliance area led by its ReveleusTM platform. the Annual Report of the Company. In that case the Company undertakes
that the financial statements of the subsidiary companies for the year
On January 3, 2007, the Company, through its subsidiary ended March 31, 2007 will be made available to the members on
i-flex solutions pte ltd, acquired 100% ownership in request at the Registered Office/Corporate Office of the Company and
i-flex Consulting (Asia Pacific) pte ltd, the erstwhile Capital Markets the same will be kept open for inspection by any member during the
Company Pte. Ltd. (“CAPCO”) for a total consideration of USD 1.05 office hours of the Company.
million (Rs. 46.4 million) and recorded goodwill of Rs. 38.3 million on
consolidation of CAPCO. This acquisition will strengthen i-flex Consulting’s
ability to provide high-end consulting to banks in the Asia Pacific Fixed deposits
region. The combined i-flex–CAPCO team provides a compelling pool During the financial year 2006-07, the Company has not accepted any
of expertise to assist banks in business transformation, management of fixed deposit within the meaning of Section 58A of the Companies Act,
large technology implementations and addressing risk and compliance 1956, and as such, no amount of principal or interest was outstanding
requirements. as of the date of the Balance Sheet.
Global alliances
Awards, honors and recognitions
Your Company lays great emphasis in building and expanding its partner
Your Company has consistently received wide recognition for leadership
network with organizations which can promote, sell, implement and
and achievements.
support its offerings around the world. During the year, your Company

– i-flex solutions and Syndicate Bank, one of India’s leading – Equinox ranked in the Leaders’ category in The 2007 Global
public-sector banks, won the ‘Best Core Banking Project Award for Outsourcing 100 by The International Association of Outsourcing
Large Banks’ at The Asian Banker IT Implementation Awards, 2006. Professionals (IAOP) for the second year in a row.
Launched last year, the Asian Banker IT Awards aim to discover
emerging best practices in the use of IT in the financial services
Litigation
industry. The assessments were based on four inter-related criteria:
project implementation, business value created, qualitative analysis PortfolioScope, a company based in the United States of America, has
and architectural design, and technical innovation. filed a lawsuit in a US District Court for the District of Massachusetts
alleging misappropriation of confidential and proprietary information by
– Research by the American Banker and Financial Insights, an IDC the Company. The Company firmly believes that the allegations are false,
company, resulted in i-flex receiving the FinTech citation at the unwarranted and without merit and will vigorously oppose the claims
BAI-RDS conference in Las Vegas, USA, for best fiscal results. The made by PortfolioScope. The Company has filed a motion to dismiss
FinTech 100 evaluates IT services companies on fiscal year-end PortfolioScope’s complaint in its entirety and has instructed the legal
revenues and the percentage attributed to the financial services advisers to take all appropriate actions to protect the interests of the
industry. Company and its customers. The said motion to dismiss was granted
in part and that discovery is proceeding on the limited issue of whether
– Forbes Asia ranked i-flex No. 12 in its ‘Best under Billion List’
PortfolioScope’s claims were timely filed.
– i-flex received the Certificate of Excellence in IT Exports for the
year 2005-2006 by the Software Technology Parks of India [STPI], Corporate governance
Government of India, and Department of Information Technology (IT)
and Bio-technology (BT), Government of Karnataka, India. The Company has taken appropriate steps and measures to comply
with all the applicable provisions of Clause 49 and Section 292A of the
– i-flex won the Best Export Award, Product Category: IT and BT - Companies Act, 1956.
Non SSI Gold, from the Department of Industries and Commerce,
Government of Karnataka, for the year 2005-2006. Your Company has constituted three separate committees for Audit,
Compensation and Protection of Member’s interest. A separate report
– i-flex presented with the EPCES Export Award for 2004-05 for best on Corporate Governance, along with a certificate of Statutory Auditors of
SEZ (non-SSI) for EOUs & SEZ Units from The Export Promotion the Company, is annexed herewith.
Council, New Delhi, India.
A certificate from the Managing Director and CFO of the Company
– FLEXCUBE retained its position as the world’s No.1 selling banking confirming internal controls and checks pertaining to financial statements
solution for the fifth consecutive year in the ‘International Banking for the year ended March 31, 2007 was placed before the Board of
Systems’ (IBS) Annual Sales League Table for 2006, leading all Directors and the Board has noted the same.
other products across all categories in the number of new wins for
the year. A list of the committees of the Board and names of their members is
given below. The scope of each of these committees and other related
– Reveleus and the Reveleus’ Basel II Solution were ‘Highly information is detailed in the enclosed Corporate Governance Report.
Commended’ by The Banker magazine and The Financial Times
in the Compliance Initiative Innovation category of The Banker
Audit committee
Technology Awards 2006. The awards recognize the innovation
and excellence of technical applications and services for the front-, Mr. Y M Kale
middle-, and back-office functions in financial services companies Mr. Sam Bharucha
and the strategies used by these companies to use technology Mr. William T Comfort, Jr.
effectively. Ms. Tarjani Vakil
– PrimeSourcingTM, i-flex’s IT Services division, awarded the Gold

Rating for 2006 for compliance to policies and standards by a Compensation committee
leading investment bank in the SmartSourcing IT Services Provider Mr. William T Comfort Jr.
category for the second year in a row. Mr. Y M Kale
– A survey administered by the Brown-Wilson Group, authors of Mr. Charles Phillips
the best-selling book, The Black Book of Outsourcing, ranked
Equinox, an i-flex company, as the top outsourcing vendor to the Shareholders’ grievances committee
Mortgage Banking Industry in 2006. Survey participants rated
Equinox’s mortgage process outsourcing services as number one Ms. Tarjani Vakil
in the industry, ahead of those provided by India-based outsourcing Mr. Deepak Ghaisas
competitors as well as suppliers from the USA.

Allotment of ESOP shares Had compensation cost for the Company’s ESOP been determined based
on fair value at the grant dates, Company’s net income and earnings per
The members of the Company had approved the Employees Stock Option
share would have been reduced to pro forma amounts indicated below:
Scheme (ESOP) of the Company in its Annual General Meeting of 2001.
According to the said scheme, the Company has granted shares to eligible
Directors/employees from time to time. The details are given below. March 31, 2007
Net income as reported 3,546,739

Total number of Options granted Add: Compensation expense
included in reported income –
2001-02 4,548,920 Add: Compensation expense
2002-03 80,000 determined using fair value of
2003-04 36,000 options (115,596)
2004-05 60,000 Pro forma net income 3,431,143
2005-06 10,000 Basic income per share
2006-07 373,000 As reported 44.82
Total 5,107,920 Pro forma 43.36
Pricing formula At the fair market value Diluted income per share
as on the date of grant As reported 43.60
Pro forma 42.20
Options vested 112,985
Options exercised during 2006-07 (2,552,795) The fair value of options was determined using the Black-Scholes model
Total number of shares arising with the following assumptions:
as a result of exercise of
options during 2006-07 (2,552,795)
Options lapsed March 31, 2007
2002-03 129,520
2003-04 112,500 Dividend yield 0.39 %
2004-05 82,200 Expected volatility 37 %
2005-06 87,600 Risk-free interest rates 6%
2006-07 46,600 Expected life 6.5 years
Total 458,420
Variation of terms of options None Details of options issued during FY 2006-07:
Money realized by exercise of
options Rs. 688,823,187 Options were issued at market price on May 5, 2006.
Total number of options in force 530,485 Number of options issued 373,000
Weighted average exercise price of these options Rs. 1290.85
Employee-wise details of options granted to: Weighted average fair value of these options
per Black & Scholes model Rs. 596
Number of Options
Human resources
i. Director Nil
ii. Any other employee who receives grant in any one Employees are the key assets of the Company and the Company has
year of option amounting to 5% or more of option created a healthy and productive work environment which encourages
granted during that year Nil excellence. Your Company continuously invests in training staff in the
iii. Identified employees who were granted option, latest technology trends and in various sub-verticals within the financial
during any one year, equal to or exceeding 1% of services domain.
the issued capital (excluding outstanding warrants
and conversions) of the Company at the time of
grant Nil To deal with the major market opportunities, the Company has invested in
increasing the manpower strength in the product business by 45%, from
iv. Diluted Earnings Per Share (EPS) pursuant to the
issue of shares on exercise of option calculated in 2,018 at end of March 2006 to 2,931 at the end of March 2007. Overall,
accordance with accounting standard 20 ‘Earnings on a gross basis, it added 3,291 employees in the software and services
Per Share’ issued by the Institute of Chartered business in the financial year. The KPO business of the Company is in an
Accountants of India Rs. 43.60 investment mode and has grown significantly too. Your Company nearly
doubled the strength in this business line to 1,034 from 534 at the end
of March 2006.

Directors’ responsibility statement Chairmanship of Board Committees, as stipulated under the Listing
Agreement with the Stock Exchanges are provided in the Notice forming
As required under Section 217 of the Companies Act, the Directors
part of the Annual Report.
hereby confirm that:
i. In preparation of the annual accounts, the applicable accounting Auditors

standards have been followed along with proper explanation relating
to material departures; M/s S. R. Batliboi & Associates, the present Statutory Auditors of the
Company, retire at the ensuing Annual General Meeting and have confirmed
ii. The Directors have selected such accounting policies and applied their eligibility and willingness to accept office, if re-appointed.
them consistently and made judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the
Conservation of energy, technology absorption and foreign
state of affairs of the Company at the end of the financial year and
exchange earnings and outgo
of the profit of the Company for that period;
The particulars as prescribed under sub-section (1)(e) of Section 217 of
iii. The Directors have taken proper and sufficient care for the the Companies Act, 1956 read with Companies (Disclosure of particulars
maintenance of adequate accounting records in accordance with in the Report of Board of Directors) Rules, 1988, the relevant data
the provisions of this act for safeguarding the assets of the Company pertaining to conservation of energy, technology absorption and foreign
and for preventing and detecting fraud and other irregularities; exchange earnings and outgo are furnished hereunder:
iv. The Directors have prepared the annual accounts on a ‘going
concern’ basis. a. Conservation of energy
The operations of the Company are not energy-intensive. The Company,
Directors however, takes measures to reduce and optimize energy consumption by
using energy efficient computers, CFL bulbs and ballast-based lighting.
Mr. Rajesh Hukku and Mr. William T Comfort, Jr. retire by rotation at the Further, offices have been designed to maximize the use of ambient
ensuing Annual General Meeting, and being eligible, offer themselves for lighting while conserving the air conditioning. The expense on power in
re-appointment. relation to income is nominal and under control.
Pursuant to Section 260 of the Companies Act, 1956,
Mr. N R Kothandaraman (N R K Raman), Mr. Deepak Ghaisas, b. Technology absorption
Mr. R Ravisankar and Mr. Derek Williams were appointed as additional Since businesses and technologies are changing constantly, investment
Directors of the Company on May 1, 2007. They would hold office up in research and development activities is of paramount importance. Your
to the date of the ensuing Annual General Meeting. The Company has Company lays a great emphasis on knowledge management and has
received notices in writing from members proposing their candidatures an institutionalized process for absorption of new technologies. Your
for the office of Director. Company continued its focus on quality up-gradation of the software
development process and software product enhancements.
At the Board Meeting of the Company held on May 1, 2007,
Mr. Rajesh Hukku ceased to be the Managing Director of the Company
and continues as a Director and the Chairman of the Board of Directors. At c. Foreign exchange earnings and outgo:
that meeting, Mr. N R Kothandaraman (N R K Raman) has been appointed
the Managing Director of the Company, subject to the approval of the
members of the Company and other regulatory authorities, if any.
Foreign Exchange Earnings* 14,952
The Board recommends to the members the resolutions for Foreign Exchange Outgo (net of recovery) 4,732
(Including capital goods & other expenditure)
re-appointment of Mr. William T Comfort, Jr. and Mr. Rajesh Hukku
and appointment of Mr. N R Kothandaraman (N R K Raman),
*Excluding reimbursement of traveling expenses and interest income
Mr. Deepak Ghaisas, Mr. R Ravisankar and Mr. Derek Williams as
Directors/Managing Director.
Prospects
Brief resume of the Directors proposed to be appointed/re-appointed,
nature of their expertise in specific functional areas and names The global financial services industry traditionally is the largest purchaser
of companies in which they hold Directorships and Membership/ of information technology and views technology as a major success

factor to drive business growth. The demand for software and services Acknowledgements
is very positive and financial institutions across the world are investing
Your Directors take this opportunity to thank the Company’s customers,
substantially to meet the increased competition, address consolidation,
members, vendors and bankers for their continued support during the
and comply with demanding regulatory requirements. The need for
year. Your Directors also wish to thank the Government of India and its
replacing core transaction systems is strong and investments in the
various agencies, Department of Electronics, the Software Technology
risk and governance area are increasing. Financial institutions are also
Parks – Bangalore, Mumbai, Chennai and Pune, the Santacruz Electronics
embracing the latest technology trends driven by the Service Oriented
Export Processing Zone, the Customs and Excise department, Ministry of
Architecture (SOA) and modern Internet-based systems.
Commerce, Ministry of Finance, Ministry of External Affairs, Department
Your Company is well positioned in the global financial services market of Telecommunication, the Reserve Bank of India, the State Governments
with its comprehensive solutions stack and is further expanding its of Maharashtra, Karnataka, Haryana and Tamil Nadu and other local
portfolio to meet some of the unique opportunities, especially in the Government Bodies for their support, and look forward to their continued
developed market. Notably, your Company vastly expanded its business support in the future.
solutions portfolio; acquired Mantas to lead its governance solution
Your Directors also place on record their appreciation for the excellent
footprint; and invested in the development of Islamic Banking to claim
contribution made by all employees of i-flex through their commitment,
leadership in this market over the year. The alliance network has been
competence, co-operation and diligence to duty in achieving consistent
strengthened by signing a unique three-party agreement with IBM and
growth for the Company.
Oracle. The partnership with Oracle brings a great advantage and your
Company is working more intensively with the global Oracle network and For and on behalf of the Board,
sales force to open further business opportunities.
Employee particulars Rajesh Hukku

Information pursuant to Section 217(2A) of the Companies Act, 1956, Chairman
read with the Companies (Particulars of Employees) Rules, 1975, and
July 4, 2007
under Section 217 (1)(e) of the said Act, read with the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988
to the extent applicable are set out in the Annexure hereto.

Statement of particulars of employees pursuant to Section 217(2a) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Amendment Rules, 1975 and forming part of the Directors’ Report for the year ending
March 31, 2007 Employed for whole of the year
Sr. Name Designation & nature of duties Qualification Age Date of joining Experience Remuneration Previous
no. (as at March 31, 2007) (Yrs) (Yrs.) received (Rs.) employer
Annual Report 2006-2007_B & W.indd 17

1 Alexander Vijay Senior Manager M.Phil. (History) 47 February 1, 2000 21 2,970,787 ANZ Grindlays Bank Ltd.
2 Alva Jai Prakash Senior Manager B.A. 54 May 17, 1993 30 2,591,851 Tandan Group
3 Arunachalam Sriram Senior Manager B.A. (Eco.), A.C.A., M.M.S. 44 July 19, 2005 18 2,412,039 Satyam Computer Services Ltd.
4 Bajaj Sanjay Senior Manager B.E. (Electrical) 40 June 8, 1998 18 2,591,664 CS Ltd.
5 Balachandran Laura Senior Manager B.Sc. (PCM), B.E. ( Electrical & Electronics) 42 November 15, 1996 17 2,965,354 PSI Data Systems
6 Bhatia Mohan Senior Principal Consultant, i-flex Consulting M.Sc., AICWA, PGDST (NCST), FRM (GARP) 44 March 8, 2001 19 3,055,443 Infosys Technologies Ltd.
7 Bhatt Amish B Senior Manager B.E. (Electronics), DMM 38 August 2, 2004 16 2,558,070 Majesco Software Inc
8 Cheriyan Mona Senior Manager B.A. HSM 43 June 15, 1993 23 2,843,640 Essars Ltd.
9 Dandekar Rajeev M # Senior Manager B.Sc., B.Sc. (Tech), Grad CWA 43 March 12, 2007 20 299,543 Avaya Inc., USA
10 Davis K K Senior Manager B.Com. PGD PM & IR 48 May 19, 2004 24 2,903,719 DSL Software Ltd.
11 Deshpande Sanjay V Senior Manager M.Sc., M.B.A. 45 May 17, 2005 23 3,274,121 iSmart Solutions Ltd.
12 Dhavale Vivek Vitthal Senior Manager B.E., PDGST 34 August 4, 1993 13 2,521,062 –
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14 Gayathri K H Senior Manager B.S. COMM 40 July 1, 1991 18 2,926,624 Wipro Infotech
15 Ghaisas Deepak K CEO – India Operations, CFO and Company Secretary A.C.A, F.C.S, A.I.C.W.A 49 July 7, 1993 26 17,712,543 Tata Unisys Ltd.
16 Ghosh Sanjay Kumar Senior Manager B.Tech. 35 September 1, 1994 13 3,236,509 –
17 Ghosh Arunabha Senior Manager B.E. (Electronics) 36 September 1, 1994 13 2,914,521 –
18 Govilkar Vivek Sr. Vice President, Human Resources and Training M.Tech. 51 April 12, 1994 26 4,896,872 Tata Unisys Ltd.
19 Govindan Gopinath Vice President, Corporate HR PGDM 42 December 19, 1994 19 3,029,728 Brooke Bond – Lipton
20 Gupta Atul Sr. Vice President, Process & Quality Management Group B.Tech., PGDM 46 April 1, 1994 25 5,021,617 Citicorp Overseas Software Ltd.
21 Gupta Bimal Senior Manager B.E. (Hon.) 47 August 10, 1992 24 2,830,668 TVS Suzuki Ltd.
22 Gupta Das Buddhadeb Senior Manager B.Sc. 43 February 11, 1998 19 2,823,388 Tata Steel Ltd.
23 Gupta Kapil Vice President, FLEXCUBE Development M.Tech. 43 March 21, 1991 16 4,537,623 Citicorp Overseas Software Ltd.
24 Gupta Vikram Vice President, Private Wealth Management B.E. 43 April 1, 1996 20 4,620,291 T S B Bank
25 Guruprasad D Senior Manager B.E. (Hon.) Electrical and Electronics 36 August 3, 1992 14 3,060,594 –
26 Hampihallikar Vinayak Senior Manager PGDM 39 May 20, 2002 20 3,857,063 Home Trade Ltd.
27 Handigol Ravi Senior Consultant MPM & PGDM 58 October 16, 2000 32 3,767,626 Infrasoft
28 Hariharan S Sr. Vice President, Infrastructure Services M.E. 52 October 3, 1988 29 4,934,000 Citicorp Overseas Software Ltd.
29 Hukku Rajesh * Chairman & Managing Director B.E. 49 May 4, 1987 28 353,760 Citicorp Overseas Software Ltd.
30 Iyer Meenakshy Vice President, Reveleus Development M.Sc. 42 March 10, 1993 19 4,274,306 Telco
31 Jairaj Thyagaraj Senior Manager A.C.A. Grad C.W.A. 42 April 15, 2003 16 2,787,551 American Express Bank Ltd.
32 John Joseph Executive Vice President, Banking Products B.E. 50 December 15, 1988 25 5,847,446 Citicorp Overseas Software Ltd.
33 Joseph Mathew Senior Manager M.B.A. 46 February 17, 1998 18 2,579,512 Wipro
34 Kale Vivek S $ Senior Manager MPHIL 49 July 12, 2004 29 613,366 EITL
35 Kamath Rajani Senior Manager B.E. (E&C) 42 June 1, 1992 18 2,976,174 L&T Computer Center
36 Kanekar Amlesh Bhalchandra Senior Manager B.E. (Electrical Engineering) 42 August 30, 2004 20 2,588,848 Unisys Corporation
37 Kapoor Madhukar Harbanslal Senior Manager B.E. ( E&C) 45 April 21, 2004 22 2,986,044 GTL Limited
38 Ketkar Avadhut D Chief Accounting Officer A.C.A., L.L.B. 40 June 3, 1991 16 3,218,771 Citicorp Overseas Software Ltd.
39 Kini Dinakar Kuntadi Senior Manager B.E., PGDIE (NITIE) 44 July 26, 1999 20 2,993,576 Logica Inc.
40 N R Kothandaraman Chief Operating Officer M.Sc. 49 October 7, 1985 27 9,346,566 Datamatics Consultant
(N R K Raman)
7/27/2007 3:32:21 PM
41 Kulkarni Dilip R Chief Compliance Officer MFM 53 December 1, 1993 33 3,974,416 Citicorp Overseas Software Ltd.
42 Kulkarni Gurunath Senior Manager M.E. 43 June 4, 2001 19 2,657,721 Datamatics Limited
43 Kulkarni Mandar Digambar $ Senior Manager B.E. 36 August 4, 1993 14 2,806,991 –
44 Kulkarni Manmath Sr. Vice President & Chief Architect, M.Sc. 41 July 16, 1987 19 4,851,456 Citicorp Overseas Software Ltd.
Retail Banking Products

45 Kulkarni Manoj N Senior Manager B.E. 40 February 6, 1995 18 3,030,782 L&T
46 Kulkarni Nandkumar Sr. Vice President, Retail Banking Products B.Tech, PGDM 54 October 13, 2000 25 4,538,993 Opus Software Pvt. Ltd.
47 Kumar M Ravi Vice President, Facilities Management B.Sc. 39 June 18, 1990 20 3,852,711 Comstruct Software Private Ltd.
48 Kumar Sampath Senior Manager MMS 39 February 12, 1996 18 3,245,547 Stock Holiding Corp. Of India Ltd.
49 Kumar Satish G Senior Manager B.E. (Electronics) 46 June 27, 2001 18 2,613,972 Computer Associates India Limited.
50 Mahadevan Padma Senior Manager M.A. Economics 52 August 25, 2003 28 2,473,148 Polaris Software Lab Ltd.
51 Mahadevan Ravi Senior Manager M.Sc., AICWA, PGDST (NCST), FRM (GARP) 42 July 1, 1998 19 2,966,712 LIC Hsg. Finance Ltd.
52 Mahadevan V Senior Manager B.Sc. (Mathematics), M.C.A. 41 October 11, 1996 17 2,556,875 First American Bank of Kenya Ltd.
53 Mahesh R $ Vice President, PrimeSourcing – Business B.E., PGDM 44 May 13, 1991 23 1,441,260 Citicorp Overseas Software Ltd.
Intelligence Group
54 Makhija Rajesh Senior Consultant B.E. (Electronics) 37 October 1, 1992 17 3,261,638 Godrej and Boyce Ltd.
55 Mathew Thomas Vice President, Product Management & M.B.A. 51 August 2, 1989 27 3,846,428 Citicorp Overseas Software Ltd.
Knowledge Management
56 Mehta Bharat Senior Manager B.Com., L.L.B. 34 January 15, 1997 14 2,686,356 Seshan Subramanian & Associates
57 Mitra Rajeev # Senior Manager MS (Comp. Sc.) 40 April 17, 2006 19 1,933,084 AXA Financial
58 Mondal Pinaki Senior Manager B.Tech., PGDM 39 November 15, 2001 16 2,679,426 Citibank N.A.
59 Moonim Mustafa Senior Manager M.B.A. 40 November 10, 1998 17 3,279,944 Informix International Ltd.
60 Muralidhar Mini S Senior Manager M.Sc., PGDIM 45 February 2, 2004 19 2,480,783 DSL Software
61 Murthy Sunil Krishna Senior Manager B.E. (Mechanical), Master of Science 44 August 12, 2005 19 2,640,073 Juniper Networks, Inc.
(Computer Information Sciences)
62 Nair Rajkumar V Senior Manager PGDM 44 June 1, 1989 18 3,420,502 Citicorp Overseas Software Ltd.
63 Narasimhan G Vice President, Customer Fulfilment – Europe & Africa CAIIB 44 March 11, 1993 19 3,944,640 State Bank Of India
64 Narasimhan R Vice President, Customer Fulfilment – Asia Pacific, MFM 45 September 1, 1993 22 4,430,685 Canara Bank
India & Middle East
65 Natarajan Kiran Senior Manager B.E. (Information Engineering), M.B.A 37 February 14, 2005 14 2,821,162 TREMA
66 Natarajan P V Jambu Vice President, Software Quality Assurance B.E., M.P.I.B 43 September 1, 1997 19 3,716,902 National Bank of Oman, Oman
67 Natarajan S Senior Manager M.B.A. 36 May 24, 1999 14 2,407,590 Stock Holding Corporation of India Ltd.
68 Ohrie Sheenam Senior Manager B.E. (ELEC) 38 September 1, 1992 14 3,133,617 –
69 Padalkar Makarand S Chief of Staff and Investor Relations M.Tech. 48 August 16, 1994 23 4,923,041 Tata Unisys Ltd.
70 Padmanabhan Sridhar Vice President – Enterprise Automation Master Of Engineering (IISc) 51 June 23, 1999 26 3,532,652 KPMG India Pvt Ltd.
71 Pattamada Medapa Ayanna Senior Manager M.B.A. (Finance), B.Sc (PCM) 42 August 23, 2004 17 2,724,991 Providus Risk Management Solutions
72 Perez Gratian Vice President, Corporate Accounts CAIIB 51 April 5, 1993 30 4,241,474 University of North Texas, USA
73 Pingaley Arun Senior Manager B.Com (Hons), Grad CWA 40 July 30, 1997 18 3,037,201 ANZ Grindlays Bank
74 Ponnath Gopalan Sathyan Senior Manager B.E. (Electronics) 41 July 17, 2002 18 3,124,892 Computer Associates
75 Potdar Rajendra Senior Manager B.E. 37 August 3, 1992 15 2,924,568 Citicorp Overseas Software Ltd.
76 Prasad R Karthick Senior Manager B.E.(Hons.) Computer Science 35 September 1, 1994 14 3,043,915 People.com Consultants Inc., USA
77 Rai Anil Senior Manager B.E. (Electronics & Telecommunications) 49 May 3, 2002 26 3,483,528 Deutsche Software Ltd.
78 Rajagopal Raghu $ Senior Manager B.E. 39 June 6, 2005 16 887,152 –
7/27/2007 3:32:21 PM
79 Rajan Sundar R Senior Manager B.E. (E E) 35 June 2, 1993 14 2,726,228 –

80 Rajashekhar H S Senior Manager M.Com., CAIIB, CFA, PGDBM (NIBM), FRM 44 January 3, 2000 23 3,126,585 Centurion Bank Ltd.

(GARP), CISA
81 Rajpal Varun Senior Manager B.E. (Comp Tech) 39 August 1, 1994 15 3,045,381 Inchcape System
82 Ramakrishna Saloni P Senior Manager B.Sc., M.A., M.B.A. (Finance), CAIIB 49 April 26, 2000 24 2,446,420 Vysya Bank
83 Ramakrishnan Ganesh Senior Manager B.E., MMS 41 November 12, 1996 17 2,579,497 BAARNS Consulting
84 Ramamurthi R Vice President, Universal Banking Products A.C.A. 51 July 28, 1989 24 3,886,709 Citicorp Overseas Software Ltd.
85 Ranjan Puneet Senior Manager B.Tech., M.B.A. 40 April 27, 1998 15 2,741,644 Apple Credit Corporation
86 Rao Kishore Senior Manager B.E. (Electrical Engg), M.B.A. (Finance) 49 April 25, 1994 27 2,735,558 Tata Unisys Ltd.
87 Rao Mahesh # CEO – i-flex Processing Services Ltd A.C.A. 54 November 1, 2006 29 1,830,000 Infosys BPO Ltd.
88 Rao Sanjeet Prakash Senior Manager B.E. (Mechanical) 35 September 1, 1994 13 3,079,753 –
89 Ravikumar V Senior Manager M.Sc., M.B.A. 42 October 19, 1995 13 3,515,649 Bharat Overseas Bank Ltd.
90 Ravisankar R * CEO – International Operations and Business Development B. Tech., PGDM 48 June 2, 1987 26 573,584 Citicorp Overseas Software Ltd.
91 Ravoori Prabhakar Venkata Vice President, Software Engineering and Process Group M.Tech. 46 January 24, 2002 22 3,324,259 SIFY
92 Ray Abhik Senior Consultant B.Tech. (Electronics) 44 November 3, 1997 20 3,276,003 Tata Infotech Ltd.
93 Reddy V Rajashekhar Senior Manager B.Tech. (Hons) 35 September 1, 1994 12 2,861,977 –
94 Sadarangani Harish Gopichand Senior Manager B.Sc., DSM 46 December 2, 2002 20 2,575,235 ICICI Infotech Ltd.
95 Sampathkumar V Senior Manager B.Sc., CAIIB 46 August 26, 1996 26 2,960,739 Canara Bank
96 Samy Sharmila Senior Manager B.Sc. 36 May 8, 2000 15 2,454,333 Standard Chartered Bank
97 Savanur Nagaraj Senior Consultant B.E. (Elect. Engg.) 38 September 1, 1992 16 3,402,933 Triveni Engineering Works Ltd.
98 Seth Samir K Senior Manager B.Tech.(Comp.Sc) 41 October 19, 1994 18 3,074,256 Unysis Austria
99 Sethuramalingam P Senior Manager B.Sc., M.A., ACWAI, CAIIB 44 October 11, 2000 22 2,525,892 Fuji Bank
100 Shankar H V Senior Manager B.Sc. (Maths) 50 May 10, 2002 28 2,637,519 KPMG Pvt Ltd.
101 Shankar V Executive Vice President, PrimeSourcing M.Sc., M.B.A 44 May 15, 1985 22 5,598,772 Citicorp Overseas Software Ltd.
102 Shanker Lakshmanan Senior Manager B.E. (Mechanical) 42 June 11, 1996 19 2,502,132 National Bank of Oman
103 Sharma Vijay Sr. Vice President, i-flex Consulting & System Integration B.Tech., PGDM 50 March 1, 1994 25 4,656,455 Price Waterhouse Associates
104 Shelat Birad A Senior Manager B.E. 34 September 1, 1994 12 2,645,071 –
105 Sheshadri K B Senior Consultant M.Sc., M.B.A. 46 March 1, 1996 22 3,489,515 Industrial Development Bank of India
106 Shetty D V Vice President, Administration L.L.B. 48 March 1, 1988 26 4,408,259 Citicorp Overseas Software Ltd.
107 Shukla Surendra V Senior Consultant M.Sc. 39 August 3, 1992 17 2,925,141 Tata Institute of Fundamental Research
108 Sinha Rakesh Senior Manager B.A., CAIIB 45 June 5, 2000 20 2,487,627 Bank of India
109 Sivaramakrishnan G R Senior Manager M.S. (Software Systems) 39 September 13, 1996 19 2,866,742 Experts Sofware Consultants Ltd.
110 Soman Milind Vice President, i-flex Consulting B.Sc. (Mech. Engg), MMS (Marketing) 44 November 1, 1999 20 3,251,260 Mega Ace Consultancy (I) Ltd.
111 Sridhar R Senior Consultant B.Sc. 46 September 27, 2000 24 3,723,501 National Bank of Dubai, Dubai, UAE
112 Srihari B Senior Manager M.Sc.(Tech.) 34 September 1, 1994 13 2,791,429 –
113 Srikanth T Senior Manager PGDM 42 January 2, 1992 17 3,042,701 State Bank Of India
114 Srinivasan A Vice President, Latin America and Caribbean Sales A.C.A., A.I.C.W.A. 45 August 3, 1992 19 4,593,680 Citicorp Overseas Software Ltd.
115 Srinivasan Ramesh $ Senior Consultant B.Sc., P.G.D.B.A (IIM Calcutta) 38 June 1, 1992 15 1,828,933 –
116 Srinivasan Swati Vice President, Software Quality Assurance B.Tech. 46 July 26, 1988 24 4,177,736 Citicorp Overseas Software Ltd.
117 Srinivasan V Vice President, Corporate Development B.Sc. 45 December 13, 1988 22 4,186,572 Citicorp Overseas Software Ltd.
118 Srivatsan V Senior Manager A.C.A., PGDM 38 February 19, 1999 13 2,643,826 ICICI Ltd.
119 Subramaniam Venkata Vice President, Customer Fulfillment – Retail Banking CAIIB 48 November 20, 1992 24 4,443,199 Citicorp Overseas Software Ltd.
120 Subramanian Ganesh Senior Manager B.Sc., MCA 39 September 11, 1993 16 2,688,421 CMC Ltd.
7/27/2007 3:32:22 PM
121 Sundararajan S Sr. Vice President, Customer Fulfillment M.Sc.(Maths) 43 October 23, 1990 21 5,303,118 Ashok Leyland
122 Suresh Kumar P Senior Manager M.Sc. (Hons), MMS 39 February 3, 1999 18 3,094,440 Stock Holding Corporation of India Ltd.
123 Suresha R Senior Manager M.Sc., CAIIB, CAMS, PMP 52 February 17, 2000 31 2,630,542 Canbank Investment Management
Services Ltd.
124 Thampi P Prasannavadanan Vice President, Customer Fulfillment, Africa and M.Sc., M.B.A., CAIIB 52 July 9, 1996 29 3,886,924 Federal Bank

Middle East
125 Vaidyanath Ramaswamy $ Senior Manager PGDM 43 May 24, 2004 23 2,403,764 BSE
126 Venkatachalam G Senior Manager B.Tech. (Chemical) 35 September 1, 1994 13 2,988,228 –
127 Venkateshwaran S Senior Manager M.Sc. (Hons.), B.E. (Hons.), PGDM 37 January 8, 1999 13 2,422,109 ICICI Ltd.
128 Venkatraman K R Senior Manager B.E. (Mechanical) 36 September 27, 1999 12 2,693,119 Robert Bosch India Limited
129 Vivekananthan S Senior Manager M.C.A. 35 June 1, 1994 12 2,633,242 –
130 Yorke Peter # Vice President – Marketing & Communications B.A., Diploma in Journalism 41 March 1, 2007 19 464,171 Symphony Services
131 Zacharia Tony $ Senior Manager B.E. 39 March 19, 2003 16 2,738,055 ANZ Information Technology
Notes:
1) Gross Remuneration comprises salary, allowances, monetary value of perquisites, commission to Directors and the Company’s contribution to Provident and superannuation funds, but excludes provision for retiring gratuity for which separate figures are not
available.
2) The nature of employment in case of all employees is contractual.
3) None of the employees mentioned above is a relative of any Director of the Company.
4) * As at March 31, 2007 Mr. Rajesh Hukku and Mr. R Ravisankar were deputed to USA as Chairman and CEO of i-flex solutions inc., respectively. Their Gross compensation comprising fixed salary and variable performance based remuneration from i-flex solutions inc.
for the financial year 2006-07 was USD 952,800 and USD 686,500 respectively. In addition, Mr. Hukku and Mr. R Ravisankar served as Chairman and Managing Director, and CEO International Operations and Business Development for i-flex solutions ltd, for which
they were paid a salary of Rs. 353,760, and Rs. 573,584, as in the table above.
5) The Ministry of Company Affairs has amended the Companies (Particulars of Employees) rules, 1975 to the effect that particulars of employees of companies engaged in the Information Technology Sector posted and working outside India, not being directors or their
relatives, drawing more than Rs. 2,400,000/- per financial or Rs. 200,000/- per month, as the case may be, need not be included in the statement. Hence remuneration paid to such employees is not included in the above statement.
6) # Includes the period of continuity of employment.
7) $ Stands for part of the year.
8) None of the employees own more than 2% of the outstanding shares of the Company as on March 31, 2007.
For and on behalf of the Board
Rajesh Hukku
Chairman
July 4, 2007
7/27/2007 3:32:22 PM
Corporate governance report
The detailed report on Corporate Governance for the financial year understands and respects its fiduciary role and responsibility to the
April 1, 2006 to March 31, 2007 as per the format prescribed by SEBI members and strives hard to meet their expectations.
under Clause 49 of the Listing Agreement is set out below:
2. Board of Directors
1. Company’s philosophy on code of governance
2.1 Composition and category
The Company believes in adopting and adhering to all the globally
The composition of the Board of the Company as of March 31, 2007,
recognized corporate governance practices and continuously
was as given below:
benchmarking itself against each such practice. The Company
Name Designation Category Directorships Chairpersonship Membership

in other of Committees of Committees
Companies of Boards of Boards
of other of other
Companies Companies
Mr. Rajesh Hukku Chairman and Executive, Non-Independent Director
Managing Director 3 Nil Nil
Mr. S P Bharucha Director Non-Executive, Independent Director 1 Nil Nil
Mr. William T Comfort, Jr. Director Non-Executive, Independent Director 3 Nil Nil
Mr. Y M Kale Director Non-Executive, Independent Director 2 Nil Nil
Mr. Charles Phillips Director Non-Executive, Non-Independent Director 3 Nil 1
Ms. Tarjani Vakil Director Non-Executive, Independent Director 7 3 2
Consequent to the induction of Mr. Deepak Ghaisas, Mr. R Ravisankar, Mr. N R Kothandaraman (N R K Raman) and Mr. Derek Williams on the Board of
the Company on May 1, 2007, the newly constituted Board of the Company is as under:
Name Designation Category
Mr. Rajesh Hukku* Chairman Non-Executive, Non-Independent Director

Mr. R Ravisankar** Vice Chairman Executive, Non-Independent Director
Mr. Deepak Ghaisas*** Vice Chairman Executive, Non-Independent Director
Mr. N R Kothandaraman (N R K Raman)**** Managing Director Executive, Non-Independent Director
Mr. Derek Williams***** Director Non-Executive, Non-Independent Director
Mr. S P Bharucha Director Non-Executive, Independent Director
Mr. William T Comfort, Jr. Director Non-Executive, Independent Director
Mr. Y M Kale Director Non-Executive, Independent Director
Mr. Charles Phillips Director Non-Executive, Non-Independent Director
Ms. Tarjani Vakil Director Non-Executive, Independent Director
* As of May 1, 2007, Mr. Rajesh Hukku has ceased to be the Managing Director of the Company and continues as the Non-Executive Chairman of the Company.
** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. R Ravisankar as an Additional Director and Vice Chairman of the
Company.
*** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. Deepak Ghaisas as an Additional Director and Vice Chairman of the
Company.
**** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. N R Kothandaraman (N R K Raman) as an Additional Director and
Managing Director of the Company.
***** The Board of Directors of the Company, in their meeting held on May 1, 2007, has appointed Mr. Derek Williams as an Additional Director of the Company.
2.2 Attendance of each Director at the Board Meetings and the The attendance of the Directors at the Board Meetings and the
last Annual General Meeting Annual General Meeting of the Company held during the financial year
2006-2007 was as given below:
The Company holds regular Board Meetings. The detailed agenda along
with the explanatory notes is circulated in advance. The Directors can
suggest inclusion of any item(s) in the agenda at the Board Meeting. Name of the Director Number Number of Board Last AGM
of Board Meetings attended Attended
The Independent Directors actively participate in the Board Meetings Meetings
and contribute significantly by expressing their opinions, views and attended
suggestions in the decision process. In person On phone/
video
During the Financial Year 2006-2007, 9 Board Meetings were held on conference
the following dates:
Mr. Rajesh Hukku 9 7 2 Yes
May 5, 2006, July 6, 2006, July 28, 2006, August 10, 2006, Mr. S P Bharucha 8 8 0 Yes
August 14, 2006, September 14, 2006, October 20, 2006, Mr. William T
Comfort, Jr. 8 3 5 Yes
November 9, 2006 and January 19, 2007. Mr. Y M Kale 9 9 0 Yes
Mr. Charles Phillips 9 3 6 Yes
Ms. Tarjani Vakil 9 9 0 Yes

2.3 Details of other directorships 2.5 Brief resume of Directors who will be retiring by rotation at
the ensuing Annual General Meeting of the Company and, being
Details of the Directorships of the Company’s Directors in other companies
eligible, offer themselves for re-appointment
as on March 31, 2007 are given below:
Mr. Rajesh Hukku
Other directorships held as on
Name of the Director March 31, 2007 Mr. Rajesh Hukku is the Chairman of i-flex® solutions. Rajesh is head of
Oracle’s Financial Services Global Business Unit (FSGBU), headquartered
Mr. Rajesh Hukku i-flex solutions inc.
in New York. The FSGBU will draw on Oracle’s global footprint and i-flex’s
i-flex America inc.
i-flex Processing Services Limited comprehensive portfolio solutions and domain expertise in the financial
services industry, to provide integrated solutions to financial institutions
Mr. S P Bharucha Press Trust of India Ltd. around the world.
Mr. William T Comfort, Jr. 399 Venture Partners Inc. Since donning the mantle of Chief Executive Officer – i-flex solutions, in
Citigroup Venture Capital Ltd. 1992, Mr. Hukku has architected the success story of the company-from
Court Square Capital Ltd. a player primarily in the emerging markets, to India’s first global software
product Company and the leading IT solutions provider to the financial
Mr. Y M Kale Ashok Leyland Ltd. (Alternate Director) services industry in the world today. In 2000, Rajesh was appointed
Ennore Foundries Ltd. (Alternate Director) Chairman and Managing Director of i-flex solutions. Under his leadership,
i-flex became the only organization in the Indian IT industry to place itself
Mr. Charles Phillips Oracle Corporation on the global map with a ‘Made in India’ brand.
Viacom Inc.
Morgan Stanley FLEXCUBE’s consistent ranking as the No.1 banking solution in the world
by IBS (International Banking Systems), UK, for five consecutive years,
Ms. Tarjani Vakil Asian Paints Ltd. bears a strong testimony to the company’s leadership stature in the
Alkyl Amines Chemicals Ltd. industry. In addition, i-flex has built a comprehensive portfolio of products
Aditya Birla Nuvo Ltd. and service offerings that include the highly acclaimed Reveleus™ suite
Mahindra Intertrade Ltd. for Basel II and Operational Risk, PrimeSourcing™, and i-flex Consulting™
D S P Merrill Lynch Trustee Co. Pvt. Ltd. that are geared towards the banking and financial services industry.
Idea Cellular Ltd.
Idea Mobile Communications Ltd. Transformation has been the leitmotif of Rajesh’s contribution to the Indian
IT industry. His relentless pursuit of creating the first product success on
2.4 Details of memberships of Board Committees the global center-stage has created a sharp distinction amidst a crowd
of traditional IT services providers. He also piloted i-flex to a thought
None of the Directors of the Company holds memberships of more leadership stature and mentored a host of small and medium companies
than ten committees nor is any Director a Chairperson of more than who aspired to create new products and emulate i-flex’s proven business
five Committees of the Boards of the Companies where he/she holds model.
directorship. For this purpose, “Committees” comprise of Audit
Committee, Compensation Committee and Shareholders’ Grievances For his role in scripting i-flex’s growth, Mr. Hukku was conferred the
Committee of a company. prestigious Ernst & Young ‘Entrepreneur of the Year Award 2002’ in the
Information Technology, Communications and Entertainment category.
The details of the memberships of the Company’s Directors in the He is also the recipient of the renowned International Stevie Award in
abovementioned committees of all the Companies of which they are the ‘Best Chairman’ category. More recently, he was recognized as one
members as on March 31, 2007 are given below: among the Outstanding 50 Asian Americans in Business by the Asian
American Business Development Center.
Name of the Audit Compensation Shareholders’
Director Committee Committee Grievances Rajesh received the Government of India’s most prestigious IT award - ‘The
Committee Dewang Mehta award for innovation in IT’ in 2003. He also received the
2004 Global Entrepolis Award, an honor bestowed on Asia’s emerging
Member Chair- Member Chair- Member Chair- technopreneurs. For his contribution to IT transformation in Chile, he was
person person person awarded the highest civilian honor bestowed on a foreign national - the
Mr. Rajesh ‘Order Bernardo O Higgins - Great Official’ by the Government of Chile
Hukku Nil Nil Nil Nil Nil Nil
in 2004.
Mr. S P
Bharucha 1 Nil Nil Nil Nil Nil
Rajesh has championed India Inc.’s expansion into new geographies
Mr. William T
Comfort, Jr. 1 Nil Nil 1 Nil Nil and service lines, and served on the NASSCOM (National Association of
Mr. Y M Kale Nil 1 1 Nil Nil Nil Software and Service Companies, India) Executive Committee. Recognized
Mr. Charles as a visionary entrepreneur, he has spoken at the World Economic Forum
Phillips 1 Nil 1 Nil Nil Nil
Ms. Tarjani
Vakil 3 3 1 Nil Nil 1

Summit, the Asia-Pacific Leadership Summit, Harvard Business School He enjoys teaching and exchanging ideas on banking and technology and
and various prestigious banking forums, including the World Congress of has presented i-flex’s global product software success story in various
Bankers in Jamaica and the Latin American Business Convention. industry forums like NASSCOM and CII. Leading media organizations
such as CNBC, NDTV, The Economic Times, The Times of India, Business
i-flex’s unique business model and Rajesh’s vision for the financial Today, and a host of other publications, have also profiled Shanx.
services industry have been lauded and written about in many leading
publications like The Economist, The Wall Street Journal, The Far Eastern Mr. R Ravisankar holds 366,400 equity shares of face value of Rs. 5/- of
Economic Review, and Knowledge@Wharton. the Company as on date.
Mr. Hukku holds 676,524 equity shares of the face value of Rs. 5/- of Mr. Deepak Ghaisas
the Company as on date.
Mr. Ghaisas is Vice-Chairman, i-flex solutions, and a part of the
Mr. William T Comfort, Jr. leadership team of Oracle’s newly formed Financial Services Global
Business Unit (FSGBU). In his new role, he will provide the unit with
Mr. William T Comfort, Jr. has been Chairman of Citigroup Venture his in-depth knowledge, commitment, and experience. Mr. Ghaisas’s
Capital, the private equity arm of Citigroup specializing in leveraged expertise spans areas such as business management and management
buy-outs, since 1979. He is also a Citigroup representative on the accounting; techno-legal-commercial areas of information technology,
investment committee of Stirling Square Capital Partners. Mr. Comfort risk management, corporate governance, legal affairs, and contract
joined Citigroup in 1973 and has been the Executive Director of Citicorp negotiations. Mr. Ghaisas’s ability, which transformed and shaped
International Bank, Ltd. in London and Head of Corporate Finance at i-flex’s successful financial performance, will now guide the FSGBU to a
Citibank, N.A. high level of growth and recognition.
Mr. Comfort received his B.A. and LL.B. at the University of Oklahoma As Chief Executive Officer (India operations) and Chief Financial Officer
and an LL.M. at New York University Law School. He is a trustee of from 1997 to April, 2007, Mr. Ghaisas was credited for playing a
the New York University Law Center Foundation, the John A. Hartford large role in creating, selling, and driving the organization’s strategy.
Foundation, Inc., and was an adjunct professor at the Columbia Business As a spokesperson for the organization in its early years, Mr. Ghaisas
School. demonstrated a deep confidence in i-flex’s potential for the global
market, and provided the organization with a focus and clarity of direction
Mr. Comfort does not hold any equity shares of the Company as on
that it needed.
date.
Recently, Mr. Ghaisas was elected for the third time to the executive
2.6 Brief resume of new Directors proposed to be appointed at the council of NASSCOM. He is also the chairman of the IT Committee of
ensuing Annual General Meeting of the Company Confederation of Indian Industry (CII); and, a member of the Committee of
Mr. R Ravisankar the Indian Institute of Bankers - constituted for the purpose of drafting the
curriculum for Information System Audit course for bankers.
Mr. R Ravisankar is Vice-Chairman, i-flex® solutions, and a part of the
leadership team of Oracle’s newly formed Financial Services Global Another measure of his visionary strategy and evangelistic style is
Business Unit (FSGBU). showcased in his role as Vice-President of the Maharashtra Economic
Development Corporation (MEDC), a governing body which actively
Shanx, as he is popularly known, is a founding member of i-flex, and participates in the decision-making process for the economic development
has over 23 years of experience in management consulting, information of Maharashtra, India. He is also a member of the Internet Banking
technology and business management. He has led i-flex’s products Committee of the Reserve Bank of India - the body that formulated
and services business, technology and architecture, global sales and guidelines on Internet banking and security in India.
marketing and corporate development functions, including new lines of
business, over the past two decades. Mr. Ghaisas holds 456,269 equity shares of face value of Rs. 5/- of the
Company as on date.
Beginning his career at i-flex in 1993 (originally COSL/CITIL, where he
Mr. N R Kothandaraman (N R K Raman)
executed a number of assignments, primarily, for Citibank, since 1987)
he headed the IT Services business, conceptualizing, strategizing and Mr. Raman is the Managing Director and Chief Executive Officer,
winning customers, while helping the business grow rapidly over the i-flex solutions. As CEO, he is not only responsible for advancing i-flex’s
years. mission of being the leading IT solutions provider to the financial
In 1997, he took over as the Chief Executive Officer of the Company services industry worldwide, but is also the focal point for providing the
and was instrumental in transforming i-flex into a fast-growing, highly organization with focus and clarity of direction to employees. As global
successful products and services Company, winning customers around markets get more competitive, and growth of technology faster-paced,
the globe. As part of the Executive Management Office at i-flex solutions, the requirements to meet success and the risks are greater than before;
Shanx is credited with envisioning i-flex’s technology leadership, it is Mr. Raman’s responsibility to maintain and implement corporate
branding and alliances, overseas expansion and M&A strategies. He objectives as established by i-flex’s Board. In short, Mr. Raman functions
relocated to the USA in 2000 as Chief Executive Officer (International as the main link between Board members and the various levels of the
Operations and Technology), with the responsibility of managing i-flex’s organization.
products and services businesses, the subsidiaries abroad, and new
Mr. Raman has held various positions in i-flex since he joined the Company
business acquisitions in the USA. He later managed the business
in 1985. He most recently was Chief Operating Officer responsible for
development portfolio while continuing to execute his responsibilities as
the development strategy and global delivery of i-flex’s products and
CEO - i-flex solutions inc.
services divisions. He managed all aspects of operations, including

human resource development, process, and quality management, and 3. Approval of payment to statutory auditors for any other services
served as one of the key leaders in directing technology strategies and rendered by the statutory auditors.
goals for strategic business units in the Company. Earlier, as Senior 4. Reviewing, with the management, the annual financial statements
Vice-President - Global Sales, he was responsible for the entire gamut of before submission to the Board for approval, with particular
sales operations across five regions. reference to:
a. Matters required to be included in the Director’s Responsibility
Mr. Raman holds a master’s degree in Physics, with a specialization Statement to be included in the Board’s report in terms of
in Electronics. He is also a certified Citicorp Finance Professional. clause (2AA) of Section 217 of the Companies Act, 1956
Recently in June 2006, he completed an executive education program b. Changes, if any, in accounting policies and practices and
on ‘Strategy: Building and Sustaining Competitive Advantage’ at Harvard reasons for the same
Business School. c. Major accounting entries involving estimates based on the
exercise of judgment by management
Mr. Raman is a recognized speaker at various IT discussions; and has been
d. Significant adjustments made in the financial statements arising
part of many panels, including ‘IT in India: a Social Audit’, ‘IT Innovation
out of audit findings
in India’ and ‘Strategy to Accelerate Growth of Indian IT Industry’. He has
e. Compliance with listing and other legal requirements relating to
also spoken at the Forum for Science and Development, and at the Bank
financial statements
of America-hosted, ‘Perspectives - The Evolving Landscape’. Recently,
f. Disclosure of any related party transactions
he was part of the prestigious ‘CII Governance Series’, organized by the
g. Qualifications in the draft audit report.
Government of Karnataka, India.
Mr. Raman holds 114,000 equity shares of face value of Rs. 5/- of the 5. Reviewing, with management, the quarterly financial statements
Company as on date. before submission to the Board for approval.
6. Reviewing, with management, the performance of statutory and
Mr. Derek Williams internal auditors and the adequacy of the internal control systems.
7. Reviewing the adequacy of the internal audit function including the
Derek Williams is the Chairman and Executive Vice-President of Oracle structure of the internal audit department, staffing and seniority of
Corporation, Asia Pacific and Japan. Mr. Williams has been at the helm the official heading the department, reporting structure coverage
of Oracle’s Asia Pacific and Japan operations since it was established and frequency of internal audit.
in 1991. 8. Discussion with internal auditors regarding any significant findings
and any follow-up required.
He also played a pivotal role in building a strong presence throughout
9. Reviewing the findings of any internal investigations by the internal
Asia by adopting a strategy of partnering closely with local companies
auditors into matters where there is suspected fraud or irregularity
and providing software and support for companies of all sizes. Among his
or a failure of internal control systems of a material nature and
key accomplishments is the development of Oracle’s presence in China
reporting the matter to the Board.
and India.
10. Discussion with statutory auditors, before the audit commences,
Mr. Derek Williams does not hold any equity shares of the Company as about the nature and scope of the audit as well as post-audit
on date. discussion to determine any area of concern.
11. To determine the reasons for any substantial defaults in the payment
to depositors, debenture holders, members (in case of non payment
3. Audit committee of declared dividends) and creditors.
3.1 Primary objectives and powers of the audit committee 12. To review the functioning of the Whistle Blower function.
13. Carrying out any other function as is mentioned in the terms of
The primary objective of Audit Committee is to monitor and provide reference of the Audit Committee.
effective supervision of the management’s financial reporting process
and to ensure accurate, timely and proper disclosures and transparency,
3.3 Composition of the committee
integrity and quality of financial reporting. The powers of the Audit
Committee include the following: The Composition of Audit Committee as on March 31, 2007 was as
follows:
1. To investigate any activity within its terms of reference.
2. To seek information from any employee. Mr. Y M Kale Chairman, Non-Executive,
3. To obtain outside legal or other professional advice. Independent Director
4. To secure attendance of outsiders with relevant expertise, if it Mr. S P Bharucha Member, Non-Executive,
considers necessary. Independent Director
Mr. William T Comfort, Jr. Member, Non-Executive,
Independent Director
3.2 Broad terms of reference Ms. Tarjani Vakil Member, Non-Executive,
The terms of reference of the Audit Committee are as follows: Independent Director
1. Oversight of the Company’s financial reporting process and the 3.4 Meetings and attendance
disclosure of its financial information to ensure that the financial
statement is correct, sufficient and credible. During the Financial Year 2006-2007, six meetings of the Committee
2. Recommending to the Board, the appointment, re-appointment and, were held on April 25, 2006, May 4, 2006, July 26, 2006,
if required, the replacement or removal of the statutory auditor and August 10, 2006, October 18, 2006 and January 19, 2007.
the fixation of audit fees.

The member’s attendance at the Committee Meetings was as given the compensation of key managerial personnel and other employees of
below: the Company. The Compensation Committee also approves, allocates and
administers the Employee Stock Option Plan 2002, reviews performance
Name Number of meetings attended appraisal criteria and sets norms for ESOP allocation.
In person On phone
4.2 The composition of compensation committee as on
Mr. Y M Kale 6 – March 31, 2007 is as follows:
Mr. S P Bharucha 4 –
Mr. William T Comfort, Jr. 2 1 Mr. William T Comfort, Jr. Chairman, Non-Executive,
Ms. Tarjani Vakil 6 – Independent Director
Mr. Y M Kale Member, Non-Executive,
The auditors of the Company were also invited for the meetings. Independent Director
Mr. Charles Phillips Member, Non-Executive,
Non-Independent Director
3.5 Audit committee’s recommendations:
The Committee reviewed the financial results of the Company prepared in
4.3 Meeting and attendance
accordance with Indian GAAP (including consolidated results) and US GAAP
as at and for the periods ended June 30, 2006, September 30, 2006, The Committee met once during the year and the meeting was attended
December 31, 2006 and March 31, 2007 and recommended the same by all the members.
to the Board of Directors for their adoption.
4.4 Compensation policy
The Committee recommended to the Board of Directors the re-appointment
of M/s S. R. Batliboi & Associates, Chartered Accountants, as statutory The Compensation Committee determines and recommends to the Board
auditors of the Company for the financial year 2007-2008. the compensation payable to the Directors. The limit for the commission
to be paid to the Board members and the remuneration payable to the
The Committee also recommended the re-appointment of internal Managing Director of the Company are approved by the members of the
auditors to conduct the internal audit for the financial year 2007-2008. Company. The annual compensation of the Non-Executive Directors is
approved by the Compensation Committee, within the parameters set by
The Committee reviewed Internal Auditors’ reports and related reports
the members at the members’ meetings.
on actions taken, utilization of IPO proceeds, risk management policies,
compliance with the Clause 49 of the Listing Agreement, etc. from time The Committee also has the mandate to review and recommend
to time. compensation payable to the Senior Executives of the Company. It also
sets norms for ESOP allocation.
4. Compensation committee
4.1 Brief description of terms of reference
The scope of Compensation Committee is to determine the compensation
of the Executive Management Officers (EMOs). The EMOs in turn, decide
4.5 Details of remuneration paid to the Directors during the financial year 2006-07 are as follows:
Name of Director ESOPs granted Commission Salary Contribution to Total Amount

under ESOP paid (Rs. ‘000) (Rs. ‘000) PF (Rs. ‘000) paid (Rs. ‘000)
Plan
Mr. Rajesh Hukku* Nil Nil 330 24 354

Mr. S P Bharucha Nil 800 Nil Nil 800
Mr. William T Comfort, Jr. Nil Nil Nil Nil Nil
Mr. Y M Kale Nil 1,200 Nil Nil 1,200
Mr. Charles Phillips Nil Nil Nil Nil Nil
Ms. Tarjani Vakil Nil 900 Nil Nil 900
Total Nil 2,900 330 24 3,254
* Mr. Rajesh Hukku is deputed to i-flex solutions inc., USA. His gross compensation comprising of fixed salary and variable performance based remuneration from
i-flex solutions inc. for the financial year 2006-07 was USD 952,800. In addition, Mr. Hukku was paid a salary as mentioned in the table above for his services as the
Managing Director of the Company.
There were no sitting fees and/or perquisites applicable and paid to the Directors during the financial year 2006-2007 except as stated above.

The terms of Employee Stock Purchase Scheme grants made to the Directors are given below.
Name of Director Scheme # of offered shares Offered shares Grant price (Rs.) Expiry Date
outstanding exercised during
as at the year
March 31, 2007
Mr. Rajesh Hukku ESPS 1998 Nil 132,724 25.00 December 31, 2008
Mr. Rajesh Hukku ESPS 2000 Nil 134,400 112.50 December 31, 2010
The above shares were offered at Fair Market Value on the dates of grant. The Director becomes entitled to purchase the shares in a phased manner over
a period of 5 years from the date of grant based on continued Directorship/employment with the Company.
The terms of Employee Stock Options granted to the Directors are given During the year the Committee held four meetings on April 20, 2006,
below. August 10, 2006, October 12, 2006 and February 28, 2007 which were
attended by both the members of the Committee.
Name of Director # of options Options Grant Expiry Date
outstanding exercised price 5.3 Company secretary
as on during (Rs.)
March 31, 2007 the year
Name of Company Secretary Mr. Deepak Ghaisas
Mr. Rajesh Hukku Nil 409,400 265.00 March 3, 2012 Address i-flex solutions ltd
Mr. S P Bharucha 8,000 2,000 708.65 June 13, 2015 i-flex Center
Mr. Y M Kale 2,000 4,000 418.92 February 17, 2013 399, Subhash Road
Ms. Tarjani Vakil 6,000 2,000 559.60 August 17, 2014 Vile Parle (East)
Mumbai 400 057
The above options were issued at Fair Market Value on the dates of grant. Tel +91-22-6718 5000
The options vest over a period of 5 years from the date of grant and are Fax +91-22-2832 3374
subject to continued Directorship/employment with the Company.
5.4 Compliance officer
During the financial year 2006-07, the Executive Director of the
Company was paid a compensation within the limits envisaged in the Name of Compliance Officer Mr. Avadhut (Vinay) Ketkar
Companies Act, 1956. Non-Executive, Independent Directors of the Address i-flex solutions ltd
Company were paid remuneration by way of commission as approved by i-flex Center
the Board of Directors/members of the Company subject however to the 399, Subhash Road
condition that the commission should not exceed 1% of the net profits Vile Parle (East)
of the Company for all the Non-Executive Directors in aggregate in one Mumbai 400 057
financial year. Tel + 91-22-6718 5000
Fax + 91-22-2832 3374
e-mail vinay.ketkar@iflexsolutions.com
5. Shareholders’ grievances committee
5.1 Composition of the Committee 5.5 Details of shareholders’ complaints received, resolved
during the year 2006-2007 and pending share transfers as on
The composition of Shareholders’ Grievances Committee as on
March 31, 2007.
March 31, 2007 was as follows:
Nature of complaints Opening Received Cleared Pending
Chairperson, Non-Executive, balance
Ms. Tarjani Vakil Independent Director
CEO – India Operations, CFO and Non receipt of warrant 1 23 24 0
Mr. Deepak Ghaisas* Company Secretary
Non receipt of certificate 0 6 6 0
*On May 1, 2007, Mr. Ghaisas was appointed as Vice Chairman of the Board of Non receipt of demat credit/rej. 0 56 56 0
Directors of the Company. Sebi/stock exchange/MCA 0 14 14 0
Legal 0 1 1 0
5.2 Scope of shareholders’ grievances committee’s activities Others 0 4 4 0
The scope of the Shareholders’ Grievances Committee is to review and Number of pending share transfers as on March 31, 2007 – One.
address the grievances of the members in respect of share transfers,
transmission, dematerialization and rematerialization of shares and other
share related activities.

6. General body meetings e. In accordance with SEBI’s Regulations on prevention of Insider
Trading, the Company has laid down the policy and procedures for
6.1 Location, date and time where last three Annual General
prevention of Insider Trading for its designated employees.
Meetings were held
Financial Year Venue Date Time 8. Means of communication

8.1 The quarterly, half yearly and annual results of the Company were
2005-2006 The Leela Kempinski, August 10, 2006 3.00 p.m.
Sahar, Andheri (East) published in English and Marathi newspapers.
Mumbai 400 059
2004-2005 Le Royal Meridian, August 12, 2005 3.00 p.m. 8.2 Company organized investor conference calls to discuss its financial
Sahar Airport Road results every quarter where the investor queries were answered by
Andheri (East) Mumbai the Executive Management Officers of the Company.
400 059
2003-2004 The Leela, Near Sahar August 19, 2004 3.00 p.m. 8.3 Company’s periodic financial results, press releases and transcripts
Airport, Andheri (East), of the investor conference calls are posted on the Company’s
Mumbai 400 059
website www.iflexsolutions.com.
6.2 There were no matters requiring approval of the members 8.4 Detailed Management Discussion and Analysis Reports covering
through Postal Ballot in any of the previous three Annual General Indian GAAP and US GAAP financials have been included in this
Meetings of the Company. Annual Report.
8.5 The Company has also posted information relating to its financial
7. Disclosures results and Distribution of shareholding on a quarterly basis on
a. All the relevant information in respect of materially significant Electronic Data Information Filing and Retrieval System (EDIFAR)
related party transactions, i.e., transactions of the Company of http://sebiedifar.nic.in.
material nature with its promoters, directors or management or their
relatives, subsidiaries of the Company, etc. has been disclosed in
9. General shareholder information
the respective financial statements presented in the Annual Report.
The Company did not undertake any transaction with any related Annual General Meeting
party having potential conflict with the interest of the Company at Date August 24, 2007
large. Time 3.00 p.m.
Venue InterContinental
b. The Company has complied with statutory compliances and The Grand Mumbai,
no penalty or stricture is imposed on the Company by the Stock Sahar Airport Road,
Exchanges or Securities and Exchange Board of India (SEBI) or any Mumbai 400 059
other statutory authority on any matter related to the capital markets
during the last three years. Financial Year April 1 to March 31
c. The Company has a Whistle Blower Policy which provides an Date of Book Closure August 20, 2007 to
avenue for employees to raise concerns of any violations of Code of August 24, 2007
(both days inclusive)
Conduct, incorrect or misrepresentation of any financial statements
and reports, unethical behavior, etc. The policy provides adequate Listing on Stock Exchanges at Bombay Stock Exchange
safeguards to employees reporting such violations to the Company. Limited (BSE); and
No employee has been denied access to the Audit Committee. National Stock
Exchange of India Ltd.
d. The Board has laid down Codes of Conduct for the Board of (NSE)
Directors and Senior Management Personnel of the Company.
These Codes have been posted on the Company’s website Stock Code
www.iflexsolutions.com. Bombay Stock Exchange Ltd (BSE) 532466
National Stock Exchange of India Ltd. (NSE) I-FLEX

10. Market price data
Monthly high/low of the shares of the Company from April 1, 2006 to March 31, 2007 are given below:
Month and Year High (Rs.) Low (Rs.) Volume of Shares High (Rs.) Low (Rs.) Volume of Shares
BSE NSE
April 2006 1,475.00 1,123.00 3,294,136 1,456.90 1,132.00 5,092,121

May 2006 1,395.00 950.00 772,201 1,350.00 950.00 3,163,093
June 2006 1,170.00 840.00 424,718 1,185.00 832.00 1,638,747
July 2006 1,380.00 1,040.45 1,811,221 1,372.95 1,100.00 5,164,832
August 2006 1,473.85 1,243.05 1,329,865 1,543.40 1,260.00 5,266,673
September 2006 1,480.00 1,405.05 272,057 1,469.90 1,375.30 1,366,077
October 2006 1,580.55 1,425.00 827,274 1,580.00 1,425.50 3,283,035
November 2006 1,660.00 1,413.95 701,354 1,659.90 1,479.00 3,032,472
December 2006 2,068.90 1,603.05 3,421,262 2,090.00 1,601.00 11,518,813
January 2007 2,174.00 1,880.00 270,730 2,170.00 1,930.15 1,197,399
February 2007 2,015.00 1,880.00 111,087 2,224.30 1,760.00 779,746
March 2007 2,090.00 1,820.00 147,431 2,099.00 1,801.00 605,337

+VOFø "QSJM 'FCSVBSZ %FDFNCFS 0DUPCFS "VHVTU +VMZ
#4& JnFY
Relative movement chart 12. Share transfer system

The chart above gives the relative movement of the closing prices of The Registrar and Transfer Agent (“the Registrar”), on receipt of transfer
the Company’s share and BSE Sensex relative to the closing prices. The deed with respective share certificate(s), scrutinizes the same and
period covered is June 28, 2002 to July, 4 2007. verifies signature(s) of transferor(s) on the transfer deed with specimen
signature(s) registered with the Company. A list of such transfers is
prepared and checked thoroughly and a transfer register is prepared.
11. Registrars and transfer agent
The transfer register is placed before the Transfer Committee Meeting
for approval, which meets at regular intervals.
Name Intime Spectrum Registry Limited
During the last financial year 107,200 equity shares were transferred in
Address C-13, Pannalal Silk Mills Compound L. B. S.
Marg, Bhandup (West), Mumbai 400 078 physical mode.
Tel +91-22- 2596 3838
Fax +91-22- 2596 2691
e-mail isrl@vsnl.com
Branch 203, Davar House, 197/199 D. N. Road, Fort,
Mumbai 400 001
Tel +91-22- 2269 4127

13. Distribution of shareholding as on March 31, 2007
Shares of nominal value of (Rs.) Number of Shareholders % Share amount (Rs.) % to Equity
UPTO 2,500 12,675 87.25 3,154,020 0.75

2,501 – 5,000 405 2.79 1,596,360 0.38
5,001 – 10,000 397 2.73 3,056,120 0.74
10,001 – 20,000 369 2.54 5,667,920 1.36
20,001 – 30,000 153 1.05 3,875,470 0.93
30,001 – 40,000 133 0.92 4,673,070 1.12
40,001 – 50,000 73 0.50 3,395,125 0.82
50,001 – 100,000 171 1.18 12,159,880 2.92
100,001 & ABOVE 151 1.04 378,864,935 90.98
Total 14,527 100.00 416,442,900 100.00
14. Shareholding per category as on March 31, 2007
Category Category of shareholder Number of Total Number of Total As a

Code shareholders number of shares held in number of percentage
Physical dematerialized shares of (A + B)
shares form
(A) Shareholding of Promoter and Promoter Group

[1] Indian – – – – –
[a] Individuals/Hindu Undivided Family – – – – –
[b] Central Government/State Government(s) – – – – –
[c] Bodies Corporate – – – – –
[d] Financial Institutions/Banks – – – – –
[e] Any other (specify) – – – – –
Sub-Total (A)(1) – – – – –
[2] Foreign
[a] Individuals (Non-Resident Individuals/Foreign Individuals) – – – – –
[b] Bodies Corporate Oracle Global (Mauritius) Ltd. 2 76,200 67,405,498 67,481,698 81.02
[c] Institutions – – – – –
[d] Any other (specify) – – – – –
Sub-Total (A)(2) 2 76,200 67,405,498 67,481,698 81.02
Total Shareholding of Promoter and Promoter Group
(A)=(A)(1)+(A)(2) 2 76,200 67,405,498 67,481,698 81.02
(B) Public Shareholding
[1] Institutions
[a] Mutual Funds/UTI 21 – 471,073 471,073 0.57
[b] Financial Institutions/Banks – – – – –
[c] Central Government/State Government(s) – – – – –
[d] Venture Capital Funds – – – – –
[e] Insurance Companies 1 – 25,000 25,000 0.03
[f] Foreign Institutional Investors 8 – 161,898 161,898 0.19
[g] Foreign Venture Capital Investors – – – – –
[h] Any other (specify) Foreign Mutual Funds 23 – 551,782 551,782 0.66
Sub-Total (B)[1] 53 – 1,209,753 1,209,753 1.45
[2] Non-institutions
[a] Bodies Corporate 361 – 438,394 438,394 0.53
[b] Individuals-
(i) Individual shareholders holding nominal share capital upto
Rs. 1 Lakh. 13,268 928,094 5,192,922 6,121,016 7.35
(ii) Individual shareholders holding nominal share capital in
excess of Rs. 1 Lakh. 99 715,600 3,347,166 4,062,766 4.88

Category Category of shareholder Number of Total Number of Total As a
Code shareholders number of shares held in number of percentage
Physical dematerialized shares of (A + B)
shares form
[c] Any other (specify)

Clearing Member 89 – 40,998 40,998 0.05
Foreign Company – – – – –
Market Maker 25 – 1,573 1,573 0.00
Foreign Nationals 3 – 59,000 59,000 0.07
NRI (Repatriate) 256 – 935,011 935,011 1.12
NRI (Non-Repatriate) 198 196,800 1,536,008 1,732,808 2.08
Overseas Corporate Bodies 1 – 800 800 0.00
Directors 5 – 686,524 686,524 0.82
Trust 2 – 497,374 497,374 0.60
HUF 165 – 20,865 20,865 0.03
Sub-Total (B) [2] 14,472 1,840,494 12,756,635 14,597,129 17.53
Total Public Shareholding (B)= (B)(1) +(B)(2) 14,525 1,840,494 13,966,388 15,806,882 18.98
Total (A)+(B) 14,527 1,916,694 81,371,886 83,288,580 100.00
During the financial year 2006-07:
1. The Company issued and allotted 2,552,795 equity shares to its Directors/employees who exercised their ESOPs during the year.
2. The Company also issued and allotted 4,447,418 equity shares on a preferential basis to Oracle Global (Mauritius) Limited, the Promoter of the
Company.
3. The Company has not issued any ADR/GDR.
15. Dematerialization of shares and liquidity As on March 31, 2007, the Company also had following branch offices in
the states of Maharashtra, Karnataka and Tamil Nadu.
The shares of the Company are under compulsory demat mode. Under
the Depository System, the International Securities Identification Number
(ISIN) allotted to the Company’s shares is INE881D01027. i-flex Park i-flex Center of Learning
Nirlon Compound Plot No. 13, Doddanekundi
Western Express Highway Industrial Area, Phase II
As on March 31, 2007, 97.69% of the shares of the Company were in Goregaon (East) Whitefield Road
demat mode. Mumbai 400 059 Mahadevapura Post
India Bangalore 560 048
India
16. Address for correspondence
i-flex Annexe Pride Silicon Plaza, 2nd Floor
Registered Office Corporate office Nirlon Compound Next to Chatushringi
Western Express Highway Senapati Bapat Road
i-flex solutions ltd i-flex solutions ltd Goregaon (East) Pune 411 053
Mumbai 400 063 India
Unit 10-11, i-flex Center India
SDF-1, SEEPZ, 399, Subhash Road
Andheri (East) Vile Parle (East) Corporate Centre A i-flex Center
Mumbai 400 096 Mumbai 400 057 Andheri Kurla Road Block 9A, Ambrosia II
India India Andheri (East) Bavdhan Khurd
Tel +91-22- 5676 2000 Tel +91-22- 6718 5000 Mumbai 400 059 Taluka Mulshi
Fax +91-22- 2829 2767 Fax +91-22- 2832 3374 India Pune 411 021
e-mail: investors@iflexsolutions.com India
Marchon House, 2nd Floor i-flex Heights

J B Nagar Lohia Jain IT Park
Andheri-Kurla Road Paud Road
Andheri (East) Kothrud
Mumbai 400 059 Pune 411029
India India
i-flex Park 143/1 Uttamar Gandhi Salai

C/o Embassy Business Park Nungambakkam
C V Raman Nagar Chennai 600 034
Bangalore 560 093 India
India
i-flex Center
# 333, Kundalahalli Road
Brookefields
Bangalore 560 037
India

Annexure to Directors’ report
To
The Board of Directors
i-flex solutions limited
Mumbai
This is to certify that: (i) Significant changes in internal controls during the period, if
any;
(a) We have reviewed financial statements and the cash flow statement
of i-flex solutions ltd (“the Company”) for the quarter and year ended (ii) Significant changes in accounting policies during the period, if
March 31, 2007 and that to the best of our knowledge and belief: any; and that the same have been disclosed in the notes to the
financial statements; and
(i) These statements do not contain any materially untrue
statement or omit any material fact or contain statements that (iii) instances of significant fraud of which we have become aware
might be misleading; of and the involvement therein, if any, of the management or
an employee having a significant role in the Company’s internal
(ii) These statements together present a true and fair view of control system.
the Company’s affairs and are in compliance with existing
accounting standards, applicable laws and regulations. (e) We further declare that all Board members and Senior Management
Personnel have affirmed compliance with Codes of Conduct for the
(b) There are, to the best of our knowledge and belief, no transactions year ended March 31, 2007.
entered into by the Company during the period which are fraudulent,
illegal or violative of the Company’s code of conduct. For i-flex solutions limited
(c) We accept responsibility for establishing and maintaining internal

controls and have evaluated the effectiveness of the internal control
systems of the Company, and have disclosed to the auditors and the Rajesh Hukku Deepak Ghaisas
Audit Committee, deficiencies in the design or operation of internal Managing Director Chief Financial Officer
controls, if any, of which we are aware of and the steps we have
taken or propose to take to rectify these deficiencies.
May 1, 2007
(d) We have indicated to the auditors and the Audit Committee:

Auditors’ certificate
To We further state that such compliance is neither an assurance as to the

The Members of i-flex Solutions Limited future viability of the Company nor the efficiency or effectiveness with
which the management has conducted the affairs of the Company.
We have examined the compliance of conditions of corporate governance
by i-flex Solutions Limited (‘the Company’), for the year ended on
March 31, 2007, as stipulated in Clause 49 of the Listing Agreement of For S. R. Batliboi & Associates
the said Company with stock exchange(s). Chartered Accountants
The compliance of conditions of corporate governance is the responsibility

of the management. Our examination was limited to procedures and per Sunil Bhumralkar
implementation thereof, adopted by the Company for ensuring the Partner
compliance of the conditions of the Corporate Governance. It is neither Membership No.: 35141
an audit nor an expression of opinion on the financial statements of the
Company.
Mumbai, India
In our opinion and to the best of our information and according to the July 4, 2007
explanations given to us, we certify that the Company has complied
with the conditions of Corporate Governance as stipulated in the above
mentioned Listing Agreement.

Creating Value
i-flex solutions ltd

Financial statements for the year ended
March 31, 2007 prepared in accordance with
Indian Generally Accepted Accounting Principles
(Indian GAAP) (Unconsolidated).

Management’s discussion and analysis
of financial condition and results of operations
The following discussion is based on our audited unconsolidated financial We are organized by region and business segment. We have two
statements, which have been prepared in accordance with Accounting major business segments - the Products Business (comprising product
Standards referred to in Section 211 (3C) of the Companies Act 1956. licensing, customization, implementation and support) and the Services
Business (providing customized software and consulting services). We
You should read the following discussion of our financial condition and have also recently launched Knowledge Process Outsourcing Services
results of operations together with the detailed unconsolidated Indian (value-added knowledge outsourcing). These segments are described in
GAAP financial statements and the notes to those statements. Our fiscal greater detail below:
year ends on March 31 of each year.
Products
Information technology in the financial services industry
The i-flex portfolio includes FLEXCUBE®, a complete banking product
The financial services industry is undergoing transformation, both in how suite for retail, consumer, corporate, investment and internet banking,
it addresses its customers, and in how it runs its operations. The entry of and asset management and investor servicing. Since its launch in 1997,
non-traditional players, global mergers and acquisitions, ever increasing more than 300 financial institutions in over 105 countries have chosen
demands from customers to deliver a ubiquitous and next generation FLEXCUBE. The product suite has been ranked the world’s No. 1 selling
customer experience, a demanding regulatory environment, and the core banking solution for five consecutive years--2002, 2003, 2004,
emergence of new customer interaction channels have contributed to 2005 and 2006--by the UK-based International Banking Systems (IBS).
this shift.
The product suite’s portfolio was further enriched last year by adding
Governance, risk and compliance has emerged as a strategic priority products targeted at Islamic Banking. With the new FLEXCUBE SWIFTNet
for financial institutions. The post 9/11 environment has seen financial Services Integrator suite, banks are able to leverage the SWIFTNet
institutions grappling with the challenges of increasing regulatory (SWIFT’s IP-based messaging solution) environment for increased
complexity and also an emerging convergence of the areas of governance business value. Increased delivery capacity, and improved functionality
driven by regulations such as Sarbanes-Oxley, risk management through our association with Oracle made this the best ever year for
with regulations in Basel II, and compliance driven by regulations as FLEXCUBE.
anti-money laundering, the Patriot Act, data privacy, etc.
The ReveleusTM suite of analytical applications for the financial services
In the core transaction processing area, increasing number of financial industry is focused in the areas of risk management, customer insight,
institutions are getting more and more receptive to the value proposition and enterprise-wide financial performance. Reveleus Risk Analytics
and the benefits of core banking transformation, and the Company is solves the most complex global challenges facing the financial industry
taking concrete steps in that direction. today, including multi-jurisdictional Basel II compliance and operational
risk management. Reveleus was ‘Highly Commended’ for its Compliance
Information Technology (IT) plays a major role in such a scenario – acting as Initiative Innovation in The Banker Technology Awards for 2006.
an enabler of a new customer-centric outlook, and a means to improving
operational efficiency, while driving compliance to new regulatory norms, Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior
reducing costs and achieving competitive differentiation. Detection PlatformTM is the industry’s most comprehensive solution
for detecting risk, enhancing customer relationships, and addressing
In conjunction with Oracle Global (Mauritius) Limited (“Oracle”), i-flex has regulatory requirements in the anti-money laundering, trading and broker
a very clearly articulated value proposition and strategy, which is centered compliance areas. Mantas, along with Reveleus, offer a single, unified
around the business priorities and challenges of financial institutions in platform for governance, risk and compliance. Waters Magazine ranked
the market today. Our approach is centered on addressing the 4Cs that Mantas for Best Anti-Money Laundering solution for 2004, 2005 and
are affecting financial institutions today: Competitive differentiation, Cost 2007 and Best Compliance solution for 2003.
reduction, Customer intimacy and Compliance and risk management.
i-flex has organized its entire range of offerings and value propositions to DaybreakTM is a comprehensive consumer lending system that automates
align with these priorities. all aspects of financing from origination, to servicing and collections for
installment loans; consumer leases, revolving products and home equity
lines of credit. It empowers financial services organizations to improve
Overview
productivity, enhance customer service and manage risks.
i-flex® solutions is in the business of providing comprehensive IT
solutions to the financial services industry worldwide. Playing the role of Together with Castek® Software Inc., a majority-owned subsidiary, i-flex
a specialized IT partner to financial services institutions worldwide, our offers strategic business software and services for the global Property
approach is balanced with a wide range of products, custom solutions and Casualty insurance market. Castek provides insurance carriers
and consulting services. with a suite of core business processing systems for insurance product
and process configuration, policy processing, customer billing, claims
Our solutions portfolio includes packaged applications, custom application management and services.
software development, deployment, maintenance and support services,
business and IT consulting services, technology deployment and Our solution portfolio rests on SOA, enabling interoperability, extensibility
management services and the knowledge process outsourcing in the and standardization. Encompassing cash management, trade, treasury,
financial services domain. payments, lending deposits, private wealth management, asset
management, among others, it helps financial institutions become
As of March 31, 2007, the Group cumulatively serviced 750 customers ‘model enterprises’, reduces costs, improves efficiency, and increases
in 125 countries through its portfolio of products and services. their addressable market and asset size.

Services Business metrics
PrimeSourcingTM, i-flex’s global IT services division, provides customized Our total revenues in fiscal 2007 were Rs. 15,523.4 million, representing
software solutions exclusively for the financial services industry an increase of 35% from Rs. 11,538.2 million in fiscal 2006. The net
worldwide, with a dedicated focus on delivering solutions through domain income in fiscal 2007 was Rs. 3,547 million, against Rs. 2,408 million
specialization. While at a broad level this domain specialization focuses in fiscal 2006. Our net income margins were 23% and 21% in fiscal
on corporate, investment, private and retail banking, and the insurance years 2007 and 2006 respectively. We define net income margins for
domains, each of these domains are further segmented into relevant a particular period as the ratio of net income to total revenues during
practice lines and Centers of Excellence. These solutions are supported such period. We had 7,631 employees as on March 31, 2007 as against
by a comprehensive pool of proprietary methodologies, best practices, 6,044 at the end of the previous year in India.
and backed by SEI-CMMi Level 5 compliant processes.
Products business
PrimeSourcing’s Oracle practice group caters to specialized practices
in Business Intelligence, Fusion Middleware (SOA), and Oracle (All amounts in millions of Indian Rupees)
Apps implementation. The division also leverages well-established Year ended
CoBIT-compliant global infrastructure and development centers to deliver March 31
services in an optimized onsite-near-shore-offshore model. 2007 2006
The i-flex ConsultingTM division offers an end-to-end consulting Products revenue 8,909.5 6,540.6
partnership, providing comprehensive business and technology solutions Cost of products revenue (3,864.2) (2,550.0)
that enable financial services enterprises to improve process efficiencies; Sales and marketing expenses (553.7) (591.7)
optimize costs; meet risk and compliance requirements; define IT General and administrative
architecture; and, manage the transformation process. Consulting expenses (518.2) (281.9)
services are offered in the areas of business transformation, risk and Depreciation and amortization (255.1) (141.6)
compliance, program management, IT architecture, IT governance and Income from operations 3,718.3 2,975.4
process improvement. i-flex’s solution approach for financial services Operating margin* 42% 45%
institutions is process-driven and rests on the i-flex Process Framework
for Banking (iPFBTM), a tool for transforming banking operations. It is a Products revenue
process repository created by drawing on i-flex’s domain expertise and
Our products revenue represented 57% of the total revenues for
best practices.
both fiscal years ended 2007 and 2006. Our products revenue were
i-flex’s Technology Deployment & Management Services (TDMS) Rs. 8,909.5 million during the fiscal year ended March 31, 2007; an
division specializes in conceptualizing, designing, deploying and increase of 36% from Rs. 6,540.6 million during the fiscal year ended
managing IT Infrastructure. The i-RIMS (i-flex Remote Infrastructure March 31, 2006.
Management Services) Center manages IT infrastructure remotely from Products revenue comprise license fees, professional fees for
India on a 24 x 7 basis through its on-site-offshore model. TDMS services implementation and enhancement services and annual maintenance
are based on best practices such as ITIL (IT Infrastructure Library), COBIT contract (Post Contract Support - PCS) fees for our products.
(Control Objectives for Information and related Technology) model, a
globally accepted standard for IT management and control framework,
License fee
and BS7799 (ISO17799).
Our standard licensing arrangement for our products provides the user
i-flex Processing Services is a 100% owned subsidiary of i-flex solutions, a perpetual right to use the product for a pre-defined number of users
with consultants experienced in various functions in the asset and sites upon payment of a license fee. The license fee is a function
management space, financial modeling and valuation KPO. The services of a variety of quantitative and qualitative factors, including the number
provided encompass IT software, consulting, KPO and infrastructure. of copies sold, the number of concurrent users supported, the number
Equinox Corporation, a wholly owned subsidiary of i-flex, excels in and combination of the modules sold, and the number of sites and
providing cost-effective and high-quality knowledge process outsourcing geographical locations supported. The licenses are non-exclusive,
services (KPO) to the financial services industry. Equinox was selected personal, non-transferable and royalty free.
in the Leaders Category for the ‘2007 Global Outsourcing 100’ by The
International Association of Outsourcing Professionals (IAOP). The Global Implementation fee
Outsourcing 100 defines the standard for excellence in outsourcing
service delivery. It was also recognized among the ‘Top 50 Global After products are licensed to these customers, we provide services
Outsourcers & Top 30 Global Offshore Vendors’ by the International related to the implementation of these products at customer sites,
Association of Outsourcing Professionals (IAOP). integration with other customer systems, and enhancement of products
to address specific requirements of customers. The customer is typically
charged a service fee either on a fixed-price basis or a time and
Corporate development materials basis. Implementation and enhancement services comprise
During the year, Oracle purchased equity shares of i-flex solutions ltd functional enhancements, interface building, implementation planning,
(“i-flex” or the “Company”) from OrbiTech Ltd., the then major shareholder data conversion, training and product walkthroughs, and are provided to
of the Company and through an open offer and, also from the stock customers who enter into licensing arrangements with us.
market, taking its shareholding to 81.02% as on March 31, 2007.

Annual maintenance contracts fees Services revenue
We also earn fees relating to annual maintenance contracts after Our services revenue represented 43% of the total revenues for both
the implementation of a product and following the expiration of the the fiscal years ended March 31, 2007 and 2006. The services revenue
warranty period. Under these agreements, we provide technical were Rs. 6,613.9 million in the fiscal year ended March 31, 2007;
support, maintenance, problem solving and upgrades of the licensed an increase of 32% from Rs. 4,997.6 million in the fiscal year ended
products. These support agreements are typically entered for a period of March 31, 2006.
12 months.
The contracts relating to the services business are either time or material
As the revenues from license fees and implementation and enhancement contracts or fixed price contracts. The percentage of total services revenue
services rendered by us depend on the number of new customers we add from time and material contracts was 87% in fiscal 2007 and 76% in
and the implementation project life cycle, these revenues typically vary fiscal 2006, with the remainder of the services revenue attributable to
from year to year. The annual maintenance contracts generate steady fixed price contracts.
revenues and would grow to the extent of new customers coming under
the PCS. The percentages of our revenue from these streams are as We provide our services through offshore centers located in India, on-site
follows: teams operating at customers’ premises and our development centers
located in other parts of the world. Offshore services revenue consist
Fiscal Year Ended of revenues from work conducted at our development centers in India
March 31 on behalf of foreign customers while on-site revenue comprises work
2007 2006 conducted at customers’ premises outside India. Revenue from India
represents work done for Indian customers at their locations and at
License fees 30% 39% our development centers in India. The composition of our on-site and
Implementation and offshore revenue is determined by the project life cycle. Typically, the
customization fees 52% 42% work involving the design of new systems or relating to a system roll-out
PCS arrangements 18% 19%
would be conducted on-site, while the core software development,
Total 100% 100%
maintenance and support activity may be conducted offshore. We
received 62% of our services revenue from on-site work and 38% from
Cost of products revenue and operating expenses offshore work during the fiscal year 2007 as against 59% and 41%,
The cost of our products revenue consists of costs attributable to respectively in fiscal year 2006.
the implementation, enhancement, maintenance and continued
Our services revenue and profits are also affected by the rate at which
development, including research and development efforts, of our core
our software professionals are utilized. The utilization rate is calculated
product offerings - the FLEXCUBE suite of products, Reveleus and other
as the percentage billed for our personnel in a particular period to the
products. These costs primarily consist of compensation expenses for
average number of staff that is considered billable in that same period.
all our IT professionals working in the products business, project-related
For the purpose of calculating the number of billable staff, we exclude
travel expenses, professional fees paid to software services vendors and
personnel that are engaged in management, administration, marketing
the cost of application software for internal use.
support, initial training (six months for personnel without any prior
Research and development costs are treated as expenses incurred. work experience and three months for personnel with over two years
Software development costs are also treated as expenses incurred until experience) and personnel allocated to the approved internal investment
technological feasibility is established. Software product development projects. Our on-site personnel deployment on projects is based on
cost incurred subsequent to the achievement of technological feasibility project needs and therefore such personnel are fully utilized. Utilization
is not material and is taken as incurred. rates for our services business were 71% and 73% for fiscal 2007 and
2006 respectively. We have been able to restrict the drop in the operating
Operating expenses include selling and marketing expenses, general margins to only 73 basis points despite the additional staff costs due to
and administrative expenses that consist of commissions payable to wage hikes and lower utilization.
our partners, product advertising, marketing expenses, and allocated
overhead expenses associated with support and monitoring functions Cost of services revenue and operating expenses
such as human resources, facilities and infrastructure expenses, quality
assurance and finance. The cost of revenues for services consists primarily of compensation
expenses for our software professionals; cost of application software
for internal use, travel expenses and professional fees paid to software
Services business
services vendors. We recognize these costs as incurred. Our operating
expenses include selling, general and administrative expenses and
Year ended allocated overhead expenses associated with human resources, corporate
March 31 marketing, management information systems, quality assurance and
2007 2006 finance.
Services revenue 6,613.9 4,997.6

Cost of services revenue (5,020.3) (3,965.3)
Sales and marketing expenses (97.7) (10.6)
General and administrative
expenses (424.7) (345.1)
Depreciation and amortization (236.1) (165.9)
Income from operations 835.1 510.7
Operating margin* 13% 10%

Geographic breakup of revenues
In line with the Company’s strategy to increase penetration in the advanced markets, the contribution in products revenue from Europe has increased
by 4% as compared to the previous year, while the overall revenues are well diversified. The following table represents the percentage breakup of our
revenues for products and services business by region:

March 31, 2007 March 31, 2006
Products Services Total Products Services Total
Revenues Revenues Revenues Revenues Revenues Revenues
USA 17% 58% 35% 22% 66% 42%

Europe 38% 18% 29% 34% 14% 25%
Asia Pacific 20% 18% 19% 17% 16% 16%
Middle East, India and Africa 24% 6% 16% 25% 3% 16%
Latin America and Caribbean 1% 0% 1% 2% 1% 1%
Total 100% 100% 100% 100% 100% 100%
Customer concentration receivable, customer relationship and history of the client. The following
table presents the age profile of our sundry debtors:
Our operations and business depend on our relationships with a number
of large customers. Revenues from the top-ten customers for fiscal 2007
and 2006 were 26% and 22%, respectively, as a percentage of the total Year ended
March 31
revenues. The top-ten customers in the services business contributed
to 38% of the total services revenue, while the top-ten customers in Period in days 2007 2006
the products business contributed to 37% of the total products revenue
during fiscal 2007. 0-180 68% 70%
More than 180 32% 30%
The percentage of total revenues during the fiscal years 2007 and 2006 Total 100% 100%
that we derived from our largest customer, largest-five customers and
largest-ten customers is provided in the accompanying table. In the
Foreign currency and treasury operations
table, various affiliates of Citigroup are classified as separate customers,
and the last row sets forth the percentage of total revenues we earned A substantial portion of our revenues is generated in foreign currencies
from the various affiliates from Citigroup with respect to our products and while a majority of our expenses are incurred in Indian Rupees, with the
services business individually, and with respect to our business taken as remaining expenses incurred in US Dollars and European currencies.
a whole.
We follow a conservative philosophy of treasury operations, and the policy
is to invest funds substantially in time deposits with well-known, sound
Products Services Total Revenues
Revenue Revenue Indian and foreign banks. The Company has ensured adequate controls
2007 2006 2007 2006 2007 2006 over asset management, including cash management operations, credit
management, and debt collection operations.
Top customer 6% 8% 8% 9% 3% 4%
Top 5 customer 24% 22% 24% 26% 15% 15% The Company also balances funds in USD accounts or INR deposits
Top 10 customer 37% 32% 38% 40% 26% 24% based on the comparative interest rates and currency requirements. The
Citigroup and its Company books forward covers from time to time, in line with its treasury
affiliates 18% 16% 46% 0% 30% 10% management philosophy.
Trade receivables Income taxes

Trade receivables as of March 31, 2007 and March 31, 2006 were Currently, we benefit from the tax holidays the Government of India
Rs. 10,419 and Rs. 7,458 million respectively. Our days sales outstanding provides to software products and IT services exporters from specially
(which is the ratio of sundry debtors to total sales in a particular year designated Software Technology Parks in India. As a result of these
multiplied by 365) for both fiscal 2007 and 2006 was approximately incentives, our operations have been subject to relatively lower tax
245 and 236 respectively. The Company periodically reviews its account liabilities in India. These tax incentives currently include a 10-year tax
receivables outstanding as well as the aging quality of the account holiday from Indian corporate income-taxes for the operations of seven

of our Indian facilities. The Finance Act, 2000, restricts the ten-year tax employees of all listed Companies. In accordance with these guidelines,
holiday available from the fiscal year in which the undertaking begins the excess of market price of the underlying equity shares on the date of
to manufacture or produce, or until fiscal 2009, whichever is earlier. grant of the stock options over the exercise price of the options is to be
Accordingly, facilities set up after fiscal 2000 will enjoy the benefit of the recognized in the books of account and amortized over the vesting period.
tax holiday only until fiscal 2009. For eight of our facilities, these benefits However, no compensation cost has been recorded as the scheme terms
expire in stages through 2009. Income taxes also include foreign taxes are fixed and the exercise price equals the market price of the underlying
representing income taxes payable overseas by us in various countries. stock on the grant date.
A summary of the activity in the Company’s ESPS is as follows:

Employee Stock Purchase Scheme (‘ESPS’)
The Company has adopted the ESPS administered through a Trust (Number of
(“the Trust”) to provide equity-based incentives to key employees of shares)
the Company. The Trust purchases shares of the Company from the Year ended
March 31
market using the proceeds of loans obtained from the Company. Such 2007 2006
shares are offered by the Trust to employees at an exercise price, which
approximates the fair value on the date of the grant. The employees Opening balance of unallocated shares 120,888 70,606
can purchase the shares in a phased manner over a period of five years Shares forfeited during the year 21,228 50,282
based on continued employment, until which, the Trust holds the shares Closing balance of unallocated shares 142,116 120,888
for the benefit of the employee. The employee will be entitled to receive
dividends, bonus, etc., that may be declared by the Company from time Opening balance of allocated shares 2,080,546 3,393,936
to time for the entire portion of shares held by the Trust on behalf of the Shares exercised during the year (1,704,106) (1,263,108)
employees. Shares forfeited during the year (21,228) (50,282)
Closing balance of allocated shares 355,212 2,080,546
On the acceptance of the offer, the selected employee shall undertake to
pay within ten years from the date of acceptance of the offer the cost of Shares eligible for exercise 164,712 1,830,774
the shares incurred by the Trust including repayment of the loan relatable Shares not eligible for exercise 190,500 249,772
thereto. The repayment of the loan by the Trust to the Company would Total allocated shares 355,212 2,080,546
be dependent on employee repaying the amount to the Trust. In case
the employee resigns from employment, the rights relating to shares,
Employee Stock Option Plan (‘ESOP’)
which are eligible for exercise, may be purchased by payment of the
exercise price whereas, the balance shares shall be forfeited in favor of Pursuant to the ESOP scheme approved by the shareholders of
the Trust. The Trustees have the right of recourse against the employee the Company held on August 14, 2001, the Board of Directors, on
for any amounts that may remain unpaid on the shares accepted by the March 4, 2002 approved the Employees Stock Option Scheme (‘the
employee. The shares that an employee is eligible to exercise during the Scheme’) for issue of 4,753,600 options to the employees and directors
initial five-year period merely go to determine the amount and scheduling of the Company and its subsidiaries. According to the Scheme, the
of the loan to be repaid on exercise by the employee. The Trust shall Company has granted 4,598,920 options prior to the IPO and 559,000
repay the loan obtained from the Company on receipt of payments from options at various dates after the IPO. As per the scheme, each of the
employees against shares exercised or otherwise. 20% of the total options granted will vest to the eligible employees and
directors on completion of 12, 24, 36, 48 and 60 months and is subject to
The Securities and Exchange Board of India (‘SEBI’) has issued the the continued employment of the employee or director with the company
Employee Stock Option Scheme and Stock Purchase Guidelines, 1999 or its subsidiaries. Options have an exercise period of 10 years.
(‘SEBI guidelines’), which are applicable to stock purchase schemes for
A summary of the activity in the Company’s ESOP is as follows:

March 31, 2007 March 31, 2006
Shares arising Weighted average Shares arising Weighted average
from options exercise price from options exercise price
Outstanding at beginning of the year 2,756,880 280 4,151,850 274

Granted 373,000 1,291 10,000 709
Exercised (2,552,795) (270) (1,317,370) (266)
Forfeited (46,600) (826) (87,600) (282)
Outstanding at end of the year 530,485 989 2,756,880 280

The details of options unvested and options vested and exercisable as on Cost of revenues and operating expenses
March 31, 2007 are as follows:
Cost of revenue
Range of Shares Weighted Weighted Our cost of revenue in the fiscal year ended March 31, 2007, was
exercise average average Rs. 8,884.5 million, an increase of 36% over cost of revenue of
prices exercise remaining Rs. 6,515.3 million in the fiscal year ended March 31, 2006. Our cost
price (Rs) contractual
life (Years) of revenue as a percentage of total revenue was 57% in the fiscal
year ended March 31, 2007 and fiscal year ended March 31, 2006.
We invest significantly both in our products and services businesses to
Options unvested 419-560 62,000 520 6.9
meet emerging market requirements, and create the foundation for the
709-709 8,000 709 8.2
1,291-1,291 347,500 1,291 9.1 growth in future. In the financial year 2006-07, we invested in enhancing
Options vested the product suite to new requirements from countries in Europe, Asia,
and exercisable 265-265 77,982 265 4.9 USA and Latin America. We also enhanced our offerings in the risk and
419-560 35,003 505 6.8 compliance area.
530,485 989 8.1
Our cost of products revenue in the fiscal year ended March 31, 2007,
The weighted average share price for stock options granted during the was Rs. 3,864.2 million, an increase of 52% over cost of products
year, on the date of grant was Rs. 1,291 and the estimated weighted revenue of Rs. 2,550 million in the fiscal year ended March 31, 2006.
average fair value of options granted during the year is Rs. 596. Our cost of products revenue as a percentage of products revenue was
43% in the fiscal year ended March 31, 2007, compared to 39% in the
fiscal year ended March 31, 2006. This increase, as stated above was
Analysis of our financial results largely attributable to the higher investments in the product business.
Comparison of fiscal 2007 with fiscal 2006
Our cost of services revenue in the fiscal year ended March 31, 2007,
Revenues was Rs. 5,020.3 million, an increase of 27% over cost of services
revenue of Rs. 3,965.3 million in the fiscal year ended March 31, 2006.
Our total revenues in the fiscal year ended March 31, 2007, were
Our cost of services revenue as a percentage of services revenue was
Rs. 15,523.4 million, an increase of 35% over total revenue of
76% in the fiscal year ended March 31, 2007, compared to 79% in the
Rs. 11,538.2 million in the fiscal year ended March 31, 2006. The
fiscal year ended March 31, 2006. The primary reason for the increase
increase in revenue was attributable to a 36% increase in the revenue
in costs during this year as stated above was higher employee costs
from the products business and a 32% increase in the revenue from the
needed for investments in creating new competencies.
services business.
Sales and marketing expenses

Products revenue
Our sales and marketing expenses in the fiscal year ended
Our products revenue in the fiscal year ended March 31, 2007, were
March 31, 2007, were Rs. 651.4 million, an increase of 8% over sales
Rs. 8,909.5 million, an increase of 36% over our products revenue of
and marketing expenses of Rs. 602.3 million in the fiscal year ended
Rs. 6,540.6 million in the fiscal year ended March 31, 2006 on the
March 31, 2006. Our sales and marketing expenses as a percentage of
strength of strong and large customer wins. The revenue from license
total revenue for the fiscal year ended March 31, 2007, remained steady
fees comprised 30% of the revenue, implementation fees comprised
at 5% like in the fiscal year ended March 31, 2006.
52%, and annual maintenance contracts comprised 18% of the revenue
for the fiscal 2007. Our sales and marketing expenses for the products business in the fiscal
year ended March 31, 2007, were Rs. 553.7 million, a decrease of 7%
Services revenue as compared to sales and marketing expenses for the products business
of Rs. 591.7 million in the fiscal year ended March 31, 2006. Sales
Our services revenue in the fiscal year ended March 31, 2007, were
and marketing expenses for our products business as a percentage of
Rs. 6,613.9 million, an increase of 32% over our services revenue of
products revenue remains at 6% in the fiscal year ended March 31, 2007
Rs. 4,997.6 million in the fiscal year ended March 31, 2006. Revenue
and 9% in the fiscal year ended March 31, 2006.
from time and material contracts comprised 87% of the revenue, and
fixed price contracts comprised 13% for the fiscal 2007. Our sales and marketing expenses for our services business in the fiscal
year ended March 31, 2007 were Rs. 97.7 million, as against Rs. 10.6
Interest and other income million in the fiscal year ended March 31, 2006. Sales and marketing
expenses for our services business as a percentage of services revenue
Interest and Other income in the fiscal year ended March 31, 2007,
remained steady at around 1%.
amounted to Rs. 348.3 million. Interest received from bank deposits
increased from Rs. 268.7 million to Rs. 328.6 million. There was also
an exchange loss of Rs. 18 million and a loss on sale of fixed assets General and administrative expenses
of Rs. 4.6 million. Effective treasury management and hedging of the Our general and administrative expenses in the fiscal year ended
forex risk ensured that exchange loss was reduced to Rs. 18 million as March 31, 2007 were Rs. 1,959.9 million, an increase of 36% over our
compared to Rs. 22 million in the fiscal year ended March 31, 2006, in general and administrative expenses of Rs. 1,436.9 million in the fiscal
a volatile exchange regime.

year ended March 31, 2006. In the financial year, we expanded our Human capital
facilities to meet the growth requirements and created new development
We recruit graduates from leading engineering and management
facilities during the year for our services business in Bangalore, Chennai
institutions. We also hire functional experts from the banking industry.
and Mumbai. Our general and administrative expenses as a percentage of
We had a net addition of 1,587 employees during the fiscal year taking
total revenue however was 13% in the fiscal year ended March 31, 2007
our employee strength to 7,631 employees as on March 31, 2007. The
and 12% in the fiscal year ended March 31, 2006.
blend of functional knowledge and technical expertise, coupled with i-flex
General and administrative expenses for our products business in the training and experience make our employees unique.
fiscal year ended March 31, 2007, were Rs. 518.2 million, an increase
We enjoy cordial relationships with our employees and endeavor to
of 84% over general and administrative expenses for our products
give them an excellent, professionally rewarding, and enriching work
business of Rs. 281.9 million in the fiscal year ended March 31, 2006
environment. We operate an effective performance management system
caused by increased rent, power and communication costs. These
with a focus on employee development. This measures key result
expenses as a percentage of products revenue were 6% in the fiscal
areas, competencies and training needs, ensuring all-round employee
year ended March 31, 2007, compared to 4% in the fiscal year ended
development.
March 31, 2006.
General and administrative expenses for our services business in the Risks and concerns
fiscal year ended March 31, 2007, were Rs. 424.7 million, an increase
of 23% over our general and administrative expenses for our Services Quantitative and qualitative disclosures about risk
business of Rs. 345.1 million in the fiscal year ended March 31, 2006. Our primary risk exposures are due to the following:
This increase is due to new development centers becoming operational
for the services business. Our general and administrative expenses for – foreign exchange rate fluctuations, principally relating to the
our services business as a percentage of services revenue was 6% in fluctuation of the US Dollar to the Indian Rupee;
the fiscal year ended March 31, 2007, compared to 7% in the fiscal year
ended March 31, 2006. – fluctuations in interest rates; and
– fluctuations in the value of our investments.

Income taxes
Our provision for income taxes in the fiscal year ended March 31, 2007, As of March 31, 2007, we had cash and bank balances of Rs. 5,007.5
was Rs. 263.7 million, a decrease of 41% over our provision for income million, out of which Rs. 3,699.10 million is in interest-bearing bank
taxes of Rs. 447.6 million in the fiscal year ended March 31, 2006. Our deposits. Consequently, we face an exposure on account of fluctuation
effective tax rate was 15% in the fiscal year ended March 31, 2007 as in interest rates. These funds were invested in bank deposits of longer
compared to 20% in the fiscal year ended March 31, 2006. The decrease maturity (more than 90 days) to earn a higher rate of interest income.
in tax rate is attributable to the higher generation of revenue from units A substantial portion of our revenues is generated in foreign currencies,
availing tax holidays in India. while a majority of our expenses are incurred in Indian Rupees. Our
functional currency for Indian operations is the Indian Rupee. We
Income from operations and net income expect that the majority of our revenue will continue to be generated in
foreign currencies for the foreseeable future, and a significant portion
As a result of the foregoing factors, income from operations increased
of our expenses, including personnel costs and capital and operating
33% from Rs. 2,595.9 million in fiscal 2006 to Rs. 3,462.2 million in
expenditure, would continue to be incurred in Indian Rupees.
fiscal 2007 and net income increased 22% from Rs. 2,408 million in
fiscal 2006 against Rs. 3,546.7 million in fiscal 2007. We define net In addition, we face normal business risks such as global competition
income margins for a particular period as the ratio of net income to total and country risks pertaining to countries that we operate in.
revenue during such a period.
Integration of mergers and acquisitions

Liquidity and capital resources
i-flex has acquired a couple of companies in the past, i.e.,
Our capital requirements relate primarily to financing the growth of our SuperSolutions Corporation, USA, ISP Internet Mauritius Company,
business. We have historically financed the majority of our working Mauritius and Canada-based Castek Software Inc. (“Castek”). During
capital, capital expenditure and other requirements through our operating the year we acquired 100% of Mantas Inc., Virginia (“Mantas”) through
cash flow. During the fiscal 2007 we have utilized cash of Rs. 419.7 an investment in i-flex America inc. and these mergers and acquisitions
million for operations as against Rs. 1,130 million cash generated in involve inherent risks, including:
fiscal 2006.
– unforeseen contingent risks or latent liabilities relating to these
i-flex is a zero debt company. We expect that our primary financing business that may only become apparent after the merger or
requirements in the future will be capital expenditure and working acquisition is finalized;
capital requirements in connection with the expansion of our business.
We believe that cash generated from operations will be sufficient to – integration and management of the operations, sales and marketing,
satisfy our currently foreseeable capital expenditure and working capital personnel and systems;
requirements.

The company, as part of its policies, ensures that the companies acquired Outlook
are successfully integrated into the mainstream business.
i-flex solutions offers the most comprehensive footprint of solutions for
the financial services industry today. These solutions cover customer
SWOT analysis delivery across all customer touch points, core banking processing,
transaction processing across different verticals and different product
Strengths:
processes across consumer banking, corporate banking, investment,
– One of the most comprehensive solutions portfolio for the financial asset management, and analytics for measuring the performance of
services industry the business and providing insights to decision-making teams to enable
timely, mid-course corrections.
– Global client base and market reach
There are several key opportunities in the marketplace for i-flex.
– Strong backing of Oracle Large corporate and retail banking assignments, emerging areas
such as Islamic Banking, private wealth management, enterprise risk
– Solutions based on world-class technology backed by strong R&D management and compliance and IT outsourcing are some of the areas
– High-quality manpower resources, with deep domain expertise in where i-flex sees opportunities in the next few years. The company has
the financial industry been engineering a series of acquisitions to expand into software for risk
management, anti-money laundering, consumer lending, and property
and casualty insurance.
Weaknesses:
There is increased traction in large institutions looking to replace their
– Weakening of Indian Rupee against the US Dollar
core systems. Multi-country standardization opportunities also form
– Wage inflation pressure an integral part of the core banking replacement strategy for global
banks. Risk and compliance is the key priority area for banks and,
again, i-flex solutions’ GRC framework is a leading solution in this area.
Opportunities:
Outside i-flex’s traditional market of core banking, there are emerging
– Increasing investment momentum in core banking systems by large opportunities in other verticals within the financial services industry. i-flex
and global financial institutions recently entered the insurance vertical and it plans to continue to expand
the capability within the financial services domain.
– India as preferred outsourcing destination
– Compliance, Risk and Governance is on the top of the investment Internal control systems and their adequacy
agenda for financial institutions
The Company has in place adequate systems of internal control and
– Expanding solutions portfolio and entry into new market segments documented procedures covering all financial and operating functions.
such as consumer finance, business analytics, Basel II, anti-money These systems have been designed to provide reasonable assurance with
laundering regard to maintaining proper accounting controls, monitoring economy
and efficiency of operations, protecting assets from unauthorized use or
losses and ensuring reliability of financial and operational information.
Threats:
The Company continuously strives to align all its processes and controls
– Increasing competition with global best practices.
– Legislative and visa related travel restrictions

Reconciliation Statement of profit as per the Indian GAAP unconsolidated,
Indian GAAP consolidated with US GAAP
(All amounts in thousands of Indian Rupees)

March 31, 2007 March 31, 2006
Net income as per Indian GAAP unconsolidated profit and loss account 3,546,739 2,407,986
Add
Revenue of subsidiaries, net
i-flex solutions b.v. 846,648 444,049
i-flex solutions pte ltd – consolidated 635,994 406,082
i-flex America inc. – consolidated 3,164,578 2,181,974
ISP Internet Mauritius Company – consolidated 404,956 234,670
5,052,176 3,266,775
Other income from subsidiaries, net 11,166 (12,169)

5,063,342 3,254,606
Less
Expenses of subsidiaries, net
i-flex solutions b.v. (533,459) (450,815)
i-flex solutions pte ltd – consolidated (428,689) (240,137)
i-flex America inc. – consolidated (3,369,983) (2,190,748)
ISP Internet Mauritius Company – consolidated (564,315) (409,081)
166,896 (36,175)
Profit after consolidating subsidiaries 3,713,635 2,371,811

Add
Proportionate Revenue of joint venture, net 33,763 18,005
Proportionate Other income from joint venture, net 97 171
33,860 18,176
Less
Proportionate Expenses of joint ventures, net (32,321) (16,790)
(32,321) (16,790)
Profit on equity investment 7,622 3,328
Net income as per Indian GAAP consolidated profit and loss account 3,722,796 2,376,525
Unrealized loss on mark to market of forward contract (29,745) (9,097)

Amortization of intangible assets (187,729) (44,684)
Additional gratuity reversal of provision as per SFAS 87 31,733 26,131
(Provision) for vacation pay – (21,826)
Deferred revenue for post contract support, significant discounts, and SOP 81-1,net (520,184) (311,709)
Prior period item on account of forward contract – 48,230
Charge of options and warrant to IBM and GE, respectively (5,784) (8,199)
Profit on embedded derivatives (4,374) 17,749
Effect of SAB 104 – Revenue recognition for refund clause (74,194) 25,902
Effect of SOP 97.2 – Revenue deferral for warranty 2,906 38,363
Date based revenue recognition (42,264) –
Deferred compensation cost under SFAS 123(R) (195,831) –
Mark to market of available for sale securities 810 –
Acquisition cost of Mantas 45,865 –
Translation effect of foreign currency financial statements 24,051 52,984
Net income as per US GAAP consolidated profit and loss account 2,768,056 2,190,369

Auditors’ report
To
The Members of i-flex Solutions Limited
1. We have audited the attached balance sheet of i-flex Solutions iv) In our opinion, the balance sheet, profit and loss account and
Limited (‘the Company’) as at March 31, 2007 and also the profit cash flow statement dealt with by this report comply with
and loss account and the cash flow statement for the year ended the accounting standards referred to in sub-section (3C) of
on that date annexed thereto. These financial statements are the Section 211 of the Act.
responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our v) On the basis of the written representations received from the
audit. directors, as on March 31, 2007, and taken on record by
the Board of Directors, we report that none of the directors is
2. We conducted our audit in accordance with auditing standards disqualified as on March 31, 2007 from being appointed as a
generally accepted in India. Those standards require that we plan director in terms of clause (g) of sub-section (1) of Section 274
and perform the audit to obtain reasonable assurance about whether of the Act.
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the vi) In our opinion and to the best of our information and according
amounts and disclosures in the financial statements. An audit also to the explanations given to us, the said accounts give the
includes assessing the accounting principles used and significant information required by the Act, in the manner so required
estimates made by management, as well as evaluating the overall and give a true and fair view in conformity with the accounting
financial statement presentation. We believe that our audit provides principles generally accepted in India;
a reasonable basis for our opinion.
a) in the case of the balance sheet, of the state of affairs of
3. As required by the Companies (Auditors’ Report) Order, 2003 (as the Company as at March 31, 2007;
amended) (‘the Order’) issued by the Central Government of India
b) in the case of the profit and loss account, of the profit for
in terms of sub-section (4A) of Section 227 of the Companies Act,
the year ended on that date; and
1956 (‘the Act’), we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order. c) in the case of cash flow statement, of the cash flows for
the year ended on that date.
4. Further to our comments in the Annexure referred to above, we
report that: For S. R. Batliboi & Associates
Chartered Accountants
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;
per Sunil Bhumralkar
ii) In our opinion, proper books of account as required by law Partner
have been kept by the Company so far as appears from our Membership No.: 35141
examination of those books;
iii) The balance sheet, profit and loss account and cash flow Mumbai, India
statement dealt with by this report are in agreement with the May 1, 2007
books of account;

Annexure referred to in paragraph 3 of our report of even date
Re: i-flex Solutions Limited
(i) (a) The Company has maintained proper records showing full (c) According to the information and explanation given to us,
particulars, including quantitative details and situation of there are no dues of income tax, sales-tax, wealth tax,
fixed assets. service tax, custom duty, excise duty and cess which have
not been deposited on account of any dispute.
(b) Fixed assets have been physically verified by the
management during the year and as informed, no material (x) The Company has no accumulated losses at the end of the
discrepancies were identified on such verification. financial year and it has not incurred cash losses in the current
and immediately preceding financial year.
(c) There was no substantial disposal of fixed assets during
the year. (xi) The Company did not have any dues to any financial institution,
bank or debenture holder during the year.
(ii) Due to the nature of its business, clause (ii) of the Order,
relating to physical verification of inventory is not applicable to (xii) According to the information and explanations given to us and
the Company. based on the documents and records produced to us, the
Company has not granted loans and advances on the basis
(iii) (a) As informed, the Company has not granted any loans, of security by way of pledge of shares, debentures and other
secured or unsecured to companies, firms or other parties securities.
covered in the register maintained under section 301 of
the Act. (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
benefit fund/society. Therefore, the provisions of clause 4(xiii) of
(b) As informed, the Company has not taken any loans, secured the Order are not applicable to the Company.
or unsecured from companies, firms or other parties covered
in the register maintained under section 301 of the Act. (xiv) In our opinion, the Company is not dealing in or trading in shares,
securities, debentures and other investments. Accordingly, the
(iv) In our opinion and according to the information and explanations provisions of clause 4(xiv) of the Order are not applicable to the
given to us, there is an adequate internal control system Company.
commensurate with the size of the Company and the nature of
its business, for the purchase of fixed assets and for the sale of (xv) According to the information and explanations given to us, the
services. During the course of our audit, no major weakness has Company has not given any guarantee for loans taken by others
been noticed in the internal control system in respect of these from bank or financial institutions.
areas. Due to the nature of its business the Company does not
purchase any inventory. (xvi) The Company did not have any term loans outstanding during
the year.
(v) According to the information and explanations provided by the
management, we are of the opinion that there are no contracts (xvii) According to the information and explanations given to us and
and arrangements that need to be entered into the register on an overall examination of the balance sheet of the Company,
maintained under Section 301 of the Act. we report that no funds raised on short-term basis have been
used for long-term investment.
(vi) The Company has not accepted any deposits from the public.
(xviii) The Company has not made any preferential allotment of shares
(vii) In our opinion, the Company has an internal audit system to parties or companies covered in the register maintained
commensurate with the size and nature of its business. under Section 301 of the Act.
(viii) To the best of our knowledge and as explained, the Central (xix) The Company did not have any outstanding debentures during
Government has not prescribed maintenance of cost records the year.
under clause (d) of sub-section (1) of Section 209 of the Act for
the products of the Company. (xx) We have verified that the end use of money raised by public
issues is as disclosed in the notes to the financial statements.
(ix) (a) The Company is generally regular in depositing with
appropriate authorities undisputed statutory dues including (xxi) Based upon the audit procedures performed for the purpose of
provident fund, investor education and protection fund, or reporting the true and fair view of the financial statements and
employees’ state insurance, income-tax, sales-tax, wealth- as per the information and explanations given by management,
tax, service tax, customs duty, excise duty, cess and other we report that no fraud on or by the Company has been noticed
material statutory dues applicable to it. or reported during the course of our audit.
For S. R. Batliboi & Associates
(b) According to the information and explanations given to us,
Chartered Accountants
no undisputed amounts payable in respect of provident
fund, investor education and protection fund, employees’
state insurance, income-tax, wealth-tax, service tax, sales-
tax, customs duty, excise duty, cess and other undisputed per Sunil Bhumralkar
statutory dues were outstanding, at the year end, for a Partner
period of more than six months from the date they became Membership No.: 35141
payable.
Mumbai, India
May 1, 2007

Balance sheet
as at March 31
Schedules 2007 2006

Sources of funds
Shareholders’ funds
Share capital 1 416,443 381,442
Share application money pending allotment 401,679 10,309
Reserves and surplus 2 23,166,636 13,245,866
23,984,758 13,637,617
Application of funds
Fixed assets 3
Cost 3,232,748 2,818,892
Less: Accumulated depreciation and amortization 1,739,532 1,184,941
Net book value 1,493,216 1,633,951
Capital work-in-progress and advances 1,270,678 581,356
2,763,894 2,215,307
Investments 4 6,092,200 413,536
Deferred tax assets 5 131,351 70,762
Current assets, loans and advances 6

Sundry debtors 10,419,437 7,428,617
Cash and bank balances 5,007,470 5,579,881
Other current assets 987,275 257,437
Loans and advances 4,866,857 2,567,237
21,281,039 15,833,172
Less: Current liabilities and provisions 7
Current liabilities 5,930,401 4,326,091
Provisions 353,325 569,069
6,283,726 4,895,160
Net current assets 14,997,313 10,938,012
23,984,758 13,637,617
Notes to accounts 15
The schedules referred to above and notes to accounts form an integral part of the balance sheet.
As per our report of even date For and on behalf of the Board of Directors
For S. R. Batliboi & Associates Rajesh Hukku Y M Kale

Chartered Accountants Chairman Director
& Managing Director
per Sunil Bhumralkar Deepak Ghaisas Tarjani Vakil

Partner Company Secretary Director
Membership No.: 35141
Mumbai, India Mumbai, India

May 1, 2007 May 1, 2007

Profit and loss account
for the year ended March 31
(All amounts in thousands of Indian Rupees, except share and per share data)
Schedules 2007 2006
Revenue 8 15,523,444 11,538,224
Cost of revenue 9 (8,884,576) (6,515,333)

Gross profit 6,638,868 5,022,891
Operating expenses
Selling and marketing expenses 10 (651,438) (602,267)
General and administrative expenses 11 (1,959,900) (1,436,919)
Depreciation and amortization (565,351) (387,812)
Income from operations 3,462,179 2,595,893
Non-operating income (expenses)

Interest income 12 365,535 294,460
Other (expenses) income, net 13 (17,232) 4,748
Income before provision for taxes and prior period item 3,810,482 2,895,101
Provision for taxes

Current tax (Refer Note 13 of Schedule 15) (251,032) (462,120)
Deferred tax 60,589 69,554
Fringe benefit tax (73,300) (55,000)
Net income for the year before prior period item 3,546,739 2,447,535
Prior period item – (39,549)
Net income 3,546,739 2,407,986
Profit and loss account, beginning of the year 464,241 492,494

Amount available for appropriation 4,010,980 2,900,480
Appropriations:
Proposed dividend – (381,442)
Tax on Proposed dividend – (53,497)
Dividend paid on stock options exercised (1,237) (1,140)
Tax on dividend paid on stock options exercised (174) (160)
Transfer to general reserve – (2,000,000)
Surplus carried to Balance Sheet 4,009,569 464,241
Earnings per share of Rs. 5/- each (in Rs.) 14

Basic 44.82 31.87
Diluted 43.60 31.03
The schedules referred to above and notes to accounts form an integral part of the profit and loss account.

& Managing Director


May 1, 2007 May 1, 2007

Schedules annexed to and forming part of the accounts
2007 2006
Schedule 1: Share capital
Authorized:
100,000,000 (March 31, 2006 – 100,000,000) equity shares of Rs. 5/- each 500,000 500,000
Issued, subscribed and fully paid up:

a. Of the above, 67,481,698 (March 31, 2006 – 36,422,788) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).
The Company became subsidiary of Oracle on April 14, 2006.
b. Of the above, 62,121,800 (March 31, 2006 – 62,121,800) equity shares of Rs. 5/- each had been issued as fully paid up bonus shares by
capitalizing the securities premium account.
c. Refer Note 6 (b) of Schedule 15 for options granted for unissued equity shares.
Schedule 2: Reserves and surplus
Securities premium
Balance, beginning of the year 2,543,056 2,146,426
Received during the year 6,468,820 396,630
Balance, end of the year 9,011,876 2,543,056
General reserve
Transferred from profit and loss account – 2,000,000
Adjustment for employee benefits provision (Refer Note 2 (h) of Schedule 15) (93,378) –
Profit and loss account 4,009,569 464,241
23,166,636 13,245,866

Schedule 3: Fixed assets
Particulars Gross block Depreciation and amortization Net book value

As at Additions Sale/deletions As at As at For the year Sale/deletions As at As at As at
01.04.2006 31.03.2007 01.04.2006 31.03.2007 31.03.2007 31.03.2006

Tangible assets
Land 232,674 – – 232,674 – – – – 232,674 232,674
Improvement to leasehold premises 151,285 60,108 – 211,393 58,356 81,545 – 139,901 71,492 92,929
Buildings (See Note below) 253,340 – – 253,340 29,117 12,665 – 41,782 211,558 224,223
Computer equipments 992,414 193,223 10,505 1,175,132 671,183 206,157 5,937 871,403 303,729 321,231
Electrical and office equipments 409,521 105,818 51 515,288 136,508 101,981 26 238,463 276,825 273,013
Furniture and fixtures 329,744 62,687 2,154 390,277 125,710 59,163 2,154 182,719 207,558 204,034
Leased vehicles 37,765 9,133 4,403 42,495 13,864 8,348 2,643 19,569 22,926 23,901
Intangible assets
Goodwill on acquisition 197,473 – – 197,473 89,261 56,892 – 146,153 51,320 108,212
Customer contracts 22,290 – – 22,290 22,167 123 – 22,290 – 123
Product IPR 138,619 – – 138,619 35,191 27,724 – 62,915 75,704 103,428
PeopleSoft ERP 53,767 – – 53,767 3,584 10,753 – 14,337 39,430 50,183
Total 2,818,892 430,969 17,113 3,232,748 1,184,941 565,351 10,760 1,739,532 1,493,216 1,633,951
As at March 31, 2006 2,127,784 705,906 14,798 2,818,892 806,255 387,812 9,126 1,184,941

2,763,894 2,215,307
Note: Includes 10 (March 31, 2006 – 10) shares of Rs. 50/- each in Takshila Building No.9, Co-op Housing Society Limited, Mumbai.
7/27/2007 3:32:29 PM
As at As at
March 31, 2007 March 31, 2006
Schedule 4: Investments
a. Long term investments (at cost)
i. Trade (unquoted)
EBZ Online Private Limited
242,240 (March 31, 2006 – 242,240) equity shares of Rs. 10/- each, fully paid-up 45,000 45,000
Less: Provision for diminution in value of investment (45,000) (45,000)
– –
Flexcel International Private Limited

2,068,000 (March 31, 2006 – 2,068,000) equity shares of Rs. 10/- each, fully paid-up 20,680 20,680
– –
Login SA
33,000 (March 31, 2006 – 33,000) equity shares of EUR 2/- each, fully paid up 6,593 6,593
ii. Non trade (unquoted)

National Savings Certificate – VIII issue 131 131
iii. Non trade (quoted)

6.75% Tax Free US-64 Bonds
331,225 (March 31, 2006 – 331,225) Bonds of Rs. 100/- each, fully paid-up 33,123 33,123
iv. In wholly owned subsidiaries (unquoted)

i-flex solutions b.v.
5,185 (March 31, 2006 – 5,185) equity shares of EUR 100/- each, fully paid-up 25,119 25,119
i-flex solutions pte ltd

250,000 (March 31, 2006 – 250,000) equity shares of SDG 1/- each, fully paid up 6,626 6,626
i-flex America inc.

1 (March 31, 2006 – 1) equity shares of USD 0.01/- each, fully paid up 2,979,316 139,829
100 (March 31, 2006 – Nil) Series A Convertible Participating Preference shares of
USD 0.01 each, fully paid up 2,839,487 –
ISP Internet Mauritius Company

30,000 (March 31, 2006 – 30,000) equity shares of USD 1/- each, fully paid up 192,115 192,115
i-flex Processing Services Limited

50,000 (March 31, 2006 – Nil) equity shares of Rs. 10/- each, fully paid up 500 –
b. Current investment (cost or fair value whichever is lower)
Non trade (quoted)
9% Dhanalakshmi Bank Bonds Series VI (see note below)

10 (March 31, 2006 – 10) Bonds of Rs. 1,000,000 each, fully paid up 9,190 10,000
6,092,200 413,536
Aggregate cost of quoted investments 42,313 33,123

Aggregate market value of quoted investments 42,133 33,623
Aggregate cost of unquoted investments 6,049,887 380,413
Note: As at March 31, 2006, 9% Dhanalakshmi Bank Bonds Series VI was not listed and was classified as unquoted investment.

As at As at
March 31, 2007 March 31, 2006
Schedule 5: Deferred tax asset
Difference between book and tax depreciation 124,351 70,762

Provision for doubtful debts 7,000 –
131,351 70,762
Schedule 6: Current assets, loans and advances
a. Sundry debtors (unsecured)

Debts outstanding for a period exceeding six months:
Considered good 3,286,784 2,191,032
Considered doubtful 148,735 78,316
3,435,519 2,269,348
Other debts - considered good 7,132,653 5,237,585
10,568,172 7,506,933
Less: Provision for doubtful debts (148,735) (78,316)
10,419,437 7,428,617
Amount due from subsidiaries [Refer Note 9 of Schedule 15] 7,835,843 5,933,317
b. Cash and bank balances

Cash in hand 985 661
Cheques on hand – 86,975
Balances with scheduled banks:
Current accounts in foreign currency 463,916 428,269
Other current accounts 44,813 159,018
Deposit accounts 3,699,052 4,325,595
Deposit amount of
Unutilized IPO funds (Refer Note 11 of Schedule 15) 287,190 528,728
Preferential issue (Refer Note 12 of Schedule 15) 497,263 40,441
Margin money deposit 6,067 1,883
Unclaimed dividend accounts 2,065 2,027
Balances with non-scheduled banks:
Deposit account in foreign currency 380 389
5,007,470 5,579,881

Citibank, Dubai current account 2,850 666
Citibank, Dubai deposit account 380 389
Citibank, Moscow current accounts 2,889 5,229
Maximum balance held during the year:

Citibank, Dubai current account 5,028 3,461
Citibank, Dubai deposit account 422 389
Citibank, Moscow current accounts 13,437 15,467
c. Other current assets

Interest accrued on:
Bank deposits 71,013 51,674
Bonds 741 746
Loan to subsidiaries [Refer Note 9 of Schedule 15] 59,668 33,528
Unbilled revenue 771,243 171,489
Gross investment in lease 42,118 –
Contract work in progress 42,492 –
987,275 257,437
d. Loans and advances (unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received:
Loan to ESPS Trust [Refer Note 6 (a) and 9 of Schedule 15] – 4,925
Loan to subsidiaries [Refer Note 9 of Schedule 15] 864,788 738,475
Premises and other deposits 2,446,721 1,221,469

As at As at
March 31, 2007 March 31, 2006
Prepaid expenses 260,359 109,459

Advance tax, net of provision for taxes 769,037 275,199
Forward contract receivable 305,630 29,398
Other advances 220,322 188,312
4,866,857 2,567,237
Schedule 7: Current liabilities and provisions
a. Current liabilities
Amount due to subsidiaries [Refer Note 9 of Schedule 15] 2,759,670 1,990,501
Accrued expenses 1,271,190 1,043,422
Deferred revenues 1,576,427 969,921
Accounts payable 61,364 72,097
Advances from customers 19,832 21,553
Advance against warrants – 40,441
Investor Education and Protection Fund to be credited by unclaimed dividends* 2,065 2,027
Unearned finance income 16,234 –
Other current liabilities 223,619 186,129
5,930,401 4,326,091
Amounts due to Small Scale Industrial undertakings – –

(The identification of Small Scale Industrial undertaking is based on management’s
knowledge of their status)
* There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.
b. Provisions
Proposed dividend – 381,442
Tax on proposed dividend – 53,497
Provision for gratuity [Refer Note 2 (h) and 7 of Schedule 15] 127,013 79,991
Provision for compensated absence [Refer Note 2 (h) of Schedule 15] 226,312 54,139
353,325 569,069

March 31, 2007 March 31, 2006
Schedule 8: Revenue
Product licenses and related activities 8,909,532 6,540,633

IT solutions and consulting services 6,613,912 4,997,591
15,523,444 11,538,224
Schedule 9: Cost of revenue
Employee costs 6,258,717 4,529,748

Travel related expenses (net of recoveries) 1,629,208 1,301,120
Professional fees 535,618 349,105
Application software 461,033 335,360
8,884,576 6,515,333
Schedule 10: Selling and marketing expenses
Employee costs 217,214 153,632

Travelling expenses 137,520 117,041
Advertising expenses 55,075 62,127
Other expenses 93,164 82,613
651,438 602,267

March 31, 2007 March 31, 2006
Schedule 11: General and administrative expenses

Rent 294,944 156,880
Power 127,359 100,744
Communication expenses 135,864 111,484
Traveling expenses 77,686 60,218
1,959,900 1,436,919
Schedule 12: Interest income
Interest on:
[includes tax deducted at source of Rs. 74,589 (March 31, 2006 – Rs. 70,739)]
Bonds 3,639 4,330
[includes tax deducted at source of Rs. 212 (March 31, 2006 – Rs. 572)]
Loans to employees 197 230
Loan to subsidiaries 27,782 21,177
Lease assets 5,274 –
365,535 294,460
Schedule 13: Other (expenses) income
Reversal of provision for diminution in value of investment, net – 5,528

Loss on sale of investment – (4,785)
Foreign exchange loss, net (17,963) (21,964)
Profit (Loss) on sale of fixed assets, net (4,554) 314
Insurance claim – 21,530
Miscellaneous income 5,285 4,125
(17,232) 4,748
Schedule 14: Reconciliation of basic and diluted equity shares used in computing earnings per share
Number of shares
Weighted average shares outstanding for basic earnings per share 79,125,096 75,562,947
Add: Effect of dilutive stock options 2,230,666 2,046,096
Weighted average shares outstanding for diluted earnings per share 81,355,762 77,609,043
Schedule 15: Notes to accounts principles generally accepted in India and complying in all material
respects with the mandatory accounting standards issued by the Institute
1. Background and nature of operations
of Chartered Accountants of India and referred to in Section 211(3C) of
i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India the Companies Act, 1956 (‘the Act’). The accounting policies applied by
with limited liability on September 27, 1989. The Company is principally the Company are consistent with those used in the previous years except
engaged in the business of providing information technology solutions for early adoption of Accounting Standard 15 (Revised), ‘Employees
and business process outsourcing services to the financial services benefits’ issued by the Institute of Chartered Accountants of India. The
industry worldwide. i-flex has a suite of banking products, which caters financial statements are presented in the general format specified in
to the needs of corporate, retail, investment banking, treasury operations Schedule VI to the Act.
and data warehousing.
The significant accounting policies adopted by the Company, in respect
i-flex is a subsidiary of Oracle with Oracle having 81.02% ownership of the financial statements are set out as below:
interest in the Company as at March 31, 2007.
b. Use of estimates
2. Summary of significant accounting policies
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
a. Basis of presentation
estimates and assumptions that affect the reported amounts of assets
The financial statements are prepared under the historical cost convention, and liabilities and disclosure of contingent liabilities at the date of the
on the accrual basis of accounting, in conformity with accounting financial statements and the results of operations during the reporting

year end. Although these estimates are based upon management’s best e. Foreign currency transactions
knowledge of current events and actions, actual results could differ from
Foreign currency transactions during the year are recorded at the
these estimates.
exchange rates prevailing on the date of the transaction. Foreign
currency denominated monetary items are translated into Rupees
c. Fixed assets, depreciation and amortization at the closing rates of exchange prevailing at the date of the balance
Fixed assets including assets under finance lease arrangements are sheet. Non-monetary items, which are carried in terms of historical cost
stated at cost less accumulated depreciation. The Company capitalizes denominated in a foreign currency, are reported using the exchange rate
all direct costs relating to the acquisition and installation of fixed assets. at the date of the transaction. On reporting company’s monetary items,
Advances paid towards the acquisition of fixed assets outstanding at each rates different from those at which they were initially recorded or reported
balance sheet date and the cost of fixed assets not ready to use before in previous financial statements, are recognized as income or expenses
such date are disclosed under ‘Capital work-in-progress and advances’. in the year in which they arise.
Customer contracts and product IPRs are capitalized based on a fair
In respect of forward exchange contracts entered into by the Company
value. The Company records the difference between consideration paid
to hedge the foreign currency risk, the premium or discount arising at
to acquire these contracts and the fair value of assets and liabilities
the inception of forward exchange contracts is amortized as expense
acquired as goodwill.
or income over the life of the contract. Exchange differences on such
The Company purchases certain specific-use application software, which contracts are recognized in the statement of profit and loss in the
is in ready to use condition, for internal use. It is estimated that such year in which the exchange rates change. Any profit or loss arising on
software has a relatively short useful life, usually less than one year. cancellation or renewal of forward exchange contract is recognized as
The Company, therefore, charges to income the cost of acquiring such income or as expense for the year. The Company uses foreign currency
software. option contracts to hedge its exposure to movement in foreign exchange
rates. Any profit or loss arising on settlement or expiry of option contracts
Depreciation and amortization are computed using straight-line method, is recognized as income or expense for the year.
at the rates specified in Schedule XIV to the Act or based on the
estimated useful life of assets, whichever is higher. The estimated useful f. Revenue recognition
life considered for depreciation of fixed assets are as follows:
Revenue is recognized as follows:
Asset description Asset life (in years) Product licenses and related revenue:
– License fees are recognized, on delivery and subsequent milestone
Tangible assets
Improvement of leasehold Lesser of estimated useful schedule as per the terms of the contract with the end user.
premises life or lease term
Buildings 20 – Implementation/Enhancement services are recognized as services
Computer equipments 3 are provided, when arrangements are on a time and material
Electrical and office equipments 2–7 basis. Revenue for fixed price contracts are recognized using the
Furniture and fixtures 2–7 proportionate completion method to the extent of achievement of
Leased vehicles Lesser of estimated useful customer certified milestones.
life or lease term
Intangible assets – Product maintenance revenue is recognized, over the period of the
Goodwill on acquisition 3–5 maintenance contract.
Customer contract 5
Product IPR 5 IT solutions and consulting services
PeopleSoft ERP 5
Revenue from IT solutions and consulting services are recognized as
The carrying amounts of assets are reviewed at each balance sheet date services are provided when arrangements are on a time and material
if there is any indication of impairment based on internal/external factors. basis. Revenue from fixed price contracts are recognized using the
An impairment loss is recognized wherever the carrying amount of an proportionate completion method to the extent of achievement of customer
asset exceeds its recoverable amount. The recoverable amount is the certified milestones. Proportionate completion is measured based upon
greater of the assets net selling price and value in use. In assessing the efforts incurred to date in relation to the total estimated efforts to
value in use, the estimated future cash flows are discounted to their complete the contract. If the proportionate completion efforts are higher
present value at the weighted average cost of capital. After impairment, than the related contractual milestone requiring customer acceptance,
depreciation is provided on the revised carrying amount of the asset over revenue is recognized only to the extent customer acceptance has been
its remaining useful life. received.
The Company monitors estimates of total contract revenue and cost on

d. Investments a routine basis throughout the delivery period. The cumulative impact
Trade investments refer to the investments made with the aim of of any change in estimates of the contract revenue or costs is reflected
enhancing the Company’s business interests in providing information in the period in which the changes become known. In the event that a
technology solutions to the financial services industry worldwide. Long loss is anticipated on a particular contract, provision is made for the
term investments are stated at cost less provision for diminution on estimated loss.
account of other than temporary decline in the value of the investment.
Revenue in excess of billings is classified as unbilled revenue while billing
Current investments are stated at lower of cost and fair value determined in excess of earnings is classified as deferred revenue. Contractually
on an individual investment basis.

recoverable expenses are deferred while other costs are expensed off in Deferred tax assets are recognized and carried forward only to the extent
the year in which it is incurred. that there is a reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be realized.
Reimbursable expenses for projects are invoiced separately to customers Unrecognized deferred tax assets of earlier periods are re-assessed
and although reflected as sundry debtors to the extent outstanding as at
and recognized to the extent that it has become reasonably certain that
year end, are not included as revenue or expense.
future taxable income will be available against which deferred tax assets
can be realized. Deferred tax asset is recognized only on those timing
g. Research and development expenses for software products differences, which reverses in post tax free period, as Company enjoys
Research and development costs are expensed as incurred. Software exemption under Section 10A of Income Tax Act, 1961.
product development costs are expensed as incurred until technological
feasibility is established. Software product development costs incurred k. Earnings per share
subsequent to the achievement of technological feasibility are not
material and are expensed as incurred. The earnings considered in ascertaining the Company’s earnings per
share comprise the net profit after tax. The number of shares used in
h. Employee benefits computing basic earnings per share is the weighted average number
of shares outstanding during the year. The number of shares used in
The Company’s employee benefits primarily cover provident fund, computing diluted earnings per share comprises the weighted average
superannuation, gratuity and compensated absences. number of shares considered for deriving basic earnings per share, and
also the weighted average number of shares, if any which would have
Provident fund and Superannuation fund are defined contribution schemes
and the Company has no further obligation beyond the contributions been issued on the conversion of all dilutive potential equity shares. The
made to the fund. Contributions are charged to profit and loss account in number of shares and potentially dilutive equity shares are adjusted for
the year in which they accrue. the bonus shares and sub-division of shares.
Gratuity liability is a defined benefit obligation and is recorded based l. Share-based compensation/payments
on actuarial valuation made at the end of the year. The gratuity liability
and net periodic gratuity cost is actuarially determined after considering The Company uses the intrinsic value method of accounting for its
discount rates, expected long term return on plan assets and increase in employee share-based compensation plan and other share-based
compensation levels. All actuarial gain/loss are immediately recorded to arrangements. Under this method compensation expense is recorded
the profit and loss account and are not deferred. The Company makes over the vesting period of the option, if the fair market value of the
contributions to a fund administered and managed by the Life Insurance underlying stock exceeds the exercised price at the measurement date,
Corporation of India (LIC) to fund the gratuity liability. Under this scheme, which typically is the grant date.
the obligation to pay gratuity remains with the Company, although LIC
administers the scheme.
m. Provision and contingencies
Short term compensated absences are provided for based on estimates.
A provision is recognized when an enterprise has a present obligation as
Long term compensated absences are provided for based on actuarial
valuation. a result of past event and it is probable that an outflow of resources will
be required to settle the obligation, in respect of which a reliable estimate
Effective April 1, 2006 the Company has early adopted Accounting can be made. Provisions are not discounted to its present value and
Standard (AS) 15 (Revised), ‘Employee benefits’ issued by the Institute of are determined based on management estimate required to settle the
Chartered Accountants of India. Accordingly, the Company has recorded obligation at the balance sheet date. These are reviewed at each balance
charge for compensated absence of Rs. 96,328 for the year ended sheet date and adjusted to reflect the current management estimates.
March 31, 2007. Further in accordance with the transitional provision
of AS 15 (Revised), the compensated absence pertaining to years prior
3. Commitments and contingent liabilities
to April 1, 2006 amounting to Rs. 93,378 has been adjusted against
General reserve.
a. Capital commitments
i. Operating leases Contracts remaining to be executed on capital account and not provided
for (net of advances) aggregates to Rs. 1,875,264 (includes capital
Leases of assets under which all the risks and rewards of ownership are
commitment through issuance of letter of intents of Rs. 998,819) as at
effectively retained by the lessor are classified as operating leases. Lease
payments under operating leases are recognized as an expense on a March 31, 2007 (March 31, 2006 – Rs. 801,100).
straight-line basis over the lease term.
b. Contingent liabilities
j. Income-tax Financial bank guarantees given to banks on behalf of
Tax expense comprises of current, deferred and fringe benefit tax. subsidiaries, aggregates to Rs. 39,384 as at March 31, 2007
Current income tax and fringe benefit tax is measured at the amount (March 31, 2006 – Rs. 63,028).
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes are recognized for the c. Loan to Equinox Global Services Private Limited (‘Equinox’)
future tax consequences attributable to timing differences between the
financial statement determination of income and their recognition for tax Loan given to Equinox has conversion option in equity shares of Equinox.
purposes. The effect on deferred tax assets and liabilities of a change in In case of conversion, interest of 8% would not be payable by Equinox.
tax rates is recognized in income using the tax rates and tax laws that The Company intends to exercise the option of conversion and hence no
have been enacted or substantively enacted by the balance sheet date. interest has been accrued on the loan.

4. Leases 5. Derivatives
The Company enters into forward foreign exchange contracts and option
a. Where Company is lessee
contracts where the counter party is a bank. The Company purchases
Finance lease forward foreign exchange contracts and option contracts to mitigate the
risks of change in foreign exchange rate on receivables and payables
The Company takes vehicles under finance lease of upto five years. Future denominated in certain foreign currencies. The Company considers
minimum lease payments under finance lease as at March 31, 2007 and the risk of non-performance by the counter party as non-material. As
2006 are as follows: at March 31, 2007 and 2006 the Company has following outstanding
derivative instruments:
As at
March 31, 2007 March 31, 2007 March 31, 2006
Principal Interest Total Forward contracts – Sell
in USD 123,000 115,000
Not later than one
year 9,161 1,558 10,719 in EUR 3,500 6,250
Later than one year Option contracts – Sell
but not later than in USD 16,500 18,000
five years 15,399 1,598 16,997
Total minimum The Company has following foreign currency exposures which are not
payments 24,560 3,156 27,716 hedged as at March 31, 2007 and 2006.
As at March 31, 2007 March 31, 2006

March 31, 2006
Foreign currency receivables
Principal Interest Total In USD 78,511 27,886
In EUR 14,655 8,779
Not later than one In GBP 9,293 132
year 8,152 1,728 9,880 In SGD 4,848 –
Later than one year In AED 1,052 –
but not later than In CAD 836 –
five years 17,597 1,885 19,482 In MYR 5,435 –
Total minimum In JPY 272,631 –
payments 25,749 3,613 29,362 Foreign currency payables
In USD 58,338 37,097
Operating lease In EUR 4,175 2,844
In GBP 3,561 1,090
The Company has taken certain office premises and residential premises In SGD 4,622 4,312
for employees under operating lease, which expire at various dates In JPY 248,099 –
through year 2012. Gross rental expenses for year ended March 31, 2007 In CHF 97 –
aggregated to Rs. 288,521 (March 31, 2006 – Rs. 149,131). The In RUB 212 –
minimum rental payments to be made in future in respect of these leases
are as follows: 6. Share-based compensation/payments
March 31, 2007 March 31, 2006 a) Employee Stock Purchase Scheme (‘ESPS’)
Not later than one year 162,537 179,861 The Company has adopted the ESPS administered through a Trust
Later than one year but not (“the Trust”) to provide equity-based incentives to key employees of the
later than five years 272,838 295,149 Company. The Trust purchases shares of the Company from market
Later than five years 10,572 55,183 using the proceeds of loans obtained from the Company. Such shares
445,947 530,193 are offered by the Trust to employees at an exercise price, which
approximates the fair value on the date of the grant. The employees
b. Where Company is lessor can purchase the shares in a phased manner over a period of five years
based on continued employment, until which, the Trust holds the shares
The Company has given IT equipments under finance lease for a period for the benefit of the employee. The employee will be entitled to receive
of five years. Present value of minimum lease payments receivable under dividends, bonus, etc., that may be declared by the Company from time
this finance lease as at March 31, 2007 are as follows: to time for the entire portion of shares held by the Trust on behalf of the
employees.
As at March 31, 2007
On the acceptance of the offer, the selected employee shall undertake to
Not later than one year 13,422 pay within ten years from the date of acceptance of the offer the cost of
Later than one year but not later the shares incurred by the Trust including repayment of the loan relatable
than five years 23,221 thereto. The repayment of the loan by the Trust to the Company would
Total minimum payments
receivable 36,643

be dependent on employee repaying the amount to the Trust. In case A summary of the activity in the Company’s ESPS is as follows:
the employee resigns from employment, the rights relating to shares,
which are eligible for exercise, may be purchased by payment of the Year ended Year ended
exercise price whereas, the balance shares shall be forfeited in favor of March 31, 2007 March 31, 2006
the Trust. The Trustees have the right of recourse against the employee Number of shares
for any amounts that may remain unpaid on the shares accepted by the
employee. The shares that an employee is eligible to exercise during the Opening balance of
initial five-year period merely go to determine the amount and scheduling unallocated shares 120,888 70,606
of the loan to be repaid on exercise by the employee. The Trust shall Shares forfeited during the
repay the loan obtained from the Company on receipt of payments from year 21,228 50,282
Closing balance of unallocated
employees against shares exercised or otherwise. shares 142,116 120,888
Opening balance of allocated
The Securities and Exchange Board of India (‘SEBI’) has issued the shares 2,080,546 3,393,936
Employee Stock Option Scheme and Stock Purchase Guidelines, 1999 Shares exercised during the
(‘SEBI guidelines’), which are applicable to stock purchase schemes for year (1,704,106) (1,263,108)
employees of all listed Companies. In accordance with these guidelines, Shares forfeited during the
the excess of market price of the underlying equity shares on the date of year (21,228) (50,282)
grant of the stock options over the exercise price of the options is to be Closing balance of allocated
recognized in the books of account and amortized over the vesting period. shares 355,212 2,080,546
However, no compensation cost has been recorded as the scheme terms Shares eligible for exercise 164,712 1,830,774
Shares not eligible for exercise 190,500 249,772
are fixed and the exercise price equals the market price of the underlying
Total allocated shares 355,212 2,080,546
stock on the grant date.
b) Employee Stock Option Plan (‘ESOP’)

Pursuant to ESOP scheme approved by the shareholders of the Company held on August 14, 2001, the Board of Directors, on March 4, 2002 approved
the Employees Stock Option Scheme (‘the Scheme’) for issue of 4,753,600 options to the employees and directors of the Company and its subsidiaries.
According to the Scheme, the Company has granted 4,598,920 options prior to the IPO and 559,000 options at various dates after IPO. As per the
scheme, each of 20% of the total options granted will vest to the eligible employees and directors on completion of 12, 24, 36, 48 and 60 months and is
subject to continued employment of the employee or director with the company or its subsidiaries. Options have an exercise period of 10 years.

March 31, 2007 March 31, 2006
Shares arising Weighted average Shares arising Weighted average
from options exercise price from options exercise price
Outstanding at beginning of year 2,756,880 280 4,151,850 274

Granted 373,000 1,291 10,000 709
Exercised (2,552,795) (270) (1,317,370) (266)
Forfeited (46,600) (826) (87,600) (282)
Outstanding at end of year 530,485 989 2,756,880 280
The details of options unvested and options vested and exercisable as on March 31, 2007 are as follows:
Range of exercise prices Shares Weighted average Weighted average

exercise price (Rs.) remaining contractual
life (Years)

709-709 8,000 709 8.2
1,291-1,291 347,500 1,291 9.1
Options vested and exercisable 265-265 77,982 265 4.9
419-560 35,003 505 6.8
530,485 989 8.1
The weighted average share price for stock options granted during the year, on the date of grant was Rs. 1,291 and the estimated weighted average fair
value of options granted during the year is Rs. 596.

The fair value of options granted during the year under the ESOP was Changes in present value of defined benefit obligation representing
estimated on the date of the grant using the Black-Scholes model with reconciliation of opening and closing balances thereof are as follows:
the following assumptions:
Defined benefit obligation at beginning of the year 83,226
Dividend yield 0.39% Current service cost 21,408
Expected volatility 37% Interest cost 5,830
Risk-free rate of interest 6% Benefits paid (10,126)
Expected life 6.5 years Actuarial loss 31,059
Defined benefit obligation at end of the year 131,397
Had compensation cost been determined in a manner consistent with the
fair value approach, the Company’s net income and earnings per share Changes in the fair value of plan assets representing reconciliation of
as reported would have changed to the amounts indicated below: opening and closing balances thereof are as follows:
March 31, 2007 March 31, 2006 Fair value of plan assets at beginning of the year 1,818
Expected return on plan assets 136
Actuarial gains 10
Net income as reported 3,546,739 2,407,986
Contribution by employer 12,859
Add: Compensation expense Benefits paid (10,126)
included in reported income – –
Fair value of plan assets at end of the year 4,697
Less: Compensation expense
determined using fair value
of options (115,596) (70,728) The assumptions used in accounting for the gratuity plan are set out as
Proforma net income 3,431,143 2,337,258 below:
Basic earnings per share
As reported 44.82 31.87 Discount rate 8.00%
Proforma 43.36 30.93 Expected return on plan assets 7.50%
Diluted earnings per share Withdrawal rates
As reported 43.60 31.03 Age (Yrs) Rates
Proforma 42.20 30.13 21-30 25%
31-34 20%
35-44 15%
7. Employee benefit obligation 45-50 1%
51-59 1%
Defined contribution plans
During year ended March 31, 2007, the Company contributed following The estimates of future salary increase, considered in actuarial valuation,
amounts to defined contributions plans: take account of inflation, seniority, promotions and other relevant factors
such as supply and demand in the employment market.
Provident fund 133,753 The Company evaluates these assumptions annually based on its
Superannuation fund 43,676 long-term plans of growth and industry standards. The discount rates are
177,429 based on current market yields on government bonds consistent with the
currency and estimated term of the post employment benefits obligations.
Defined benefit plan – gratuity Plan assets are administered by the LIC and invested in lower risk assets,
The amounts recognized in the balance sheet are as follows: primarily debt securities. The Company’s contribution to the fund for the
year ended March 31, 2008 is expected to be Rs. 20,000. The expected
benefit payments from the fund as of March 31, 2007 are below:
Present value of funded obligations 131,397
Fair value of plan assets (4,697)
Net liability 126,700 Year ending March 31
Amounts in balance sheet
Liability 126,700 2008 23,307
Asset – 2009 24,155
Net liability 126,700 2010 29,167
2011 34,369
The amounts recognized in the profit and loss account for the year ended 2012 40,461
March 31, 2007 are as follows: 2013-2016 162,295
313,754
Current service cost 21,408 The Company has adopted AS 15 (Revised) from April 1, 2006 and this
Interest cost 5,830 being the first year of adoption of AS 15 (Revised) the Company has
Expected return on plan assets (136) not given disclosure for the following for previous four annual financial
Recognized net actuarial loss 31,049 years:
Total included in ‘employee benefit expense’ 58,151
Actual return on plan assets 146 1. the present value of the defined benefit obligation, the fair value of
the plan assets and the surplus or deficit in the plan; and
2. the experience adjustments arising on plan liabilities and plan
assets.

8. Segment information The business segments are the basis on which the Company reports
its primary segment information to management. Product licenses and
Business segments are defined as a distinguishable component of an related activities segment deals with banking software products like the
enterprise that is engaged in providing a group of related products or FLEXCUBE suite of products, Reveleus and MicroBanker which cater to
services and that is subject to differing risks and returns and about which needs of corporate, retail and investment banking as well as treasury
separate financial information is available. This information is reviewed operations and data warehousing requirements. The related activities
and evaluated regularly by the management in deciding how to allocate include enhancements, implementation and maintenance activities.
resources and in assessing the performance.
IT solutions and consulting services comprise of bespoke software
The Company is organized geographically and by business segment. development, provision of computer software solutions and related
consulting services arising from such activities. This segment is further
For management purposes the Company is primarily organized on a
sub-divided in the following sub-segments i.e., Business intelligence,
worldwide basis into two business segments:
Customer relationship management, Brokerage, e-commerce, Internet
services and IT and Business consulting.
a) Product licenses and related activities (‘Products’) and
b) IT solutions and consulting services (‘Services’). The Company does not track assets and liabilities geographically.
Year ended
March 31, 2007
Particulars Products Services Corporate Total
Revenue 8,909,532 6,613,912 – 15,523,444

Cost of revenue (3,864,229) (5,020,347) – (8,884,576)
Gross profit 5,045,303 1,593,565 – 6,638,868
Selling and marketing expenses (553,731) (97,707) – (651,438)
General and administrative expenses (518,221) (424,712) (1,016,967) (1,959,900)
Depreciation and amortization (255,130) (236,065) (74,156) (565,351)
Income from operations 3,718,221 835,081 (1,091,123) 3,462,179
Interest income 365,535
Other expenses, net (17,232)
Income before provision for taxes 3,810,482
Provision for taxes (263,743)
Net income 3,546,739
Other information
Capital expenditure by segment 226,932 153,112 50,925 430,969
Segment assets 8,051,748 8,202,353 14,014,383 30,268,484
Segment liabilities 3,547,580 2,481,813 254,333 6,283,726
Shareholders’ funds – – 23,984,758 23,984,758
Year ended
March 31, 2006
Particulars Products Services Corporate Total
Revenue 6,540,633 4,997,591 – 11,538,224

Cost of revenue (2,550,010) (3,965,323) – (6,515,333)
Gross profit 3,990,623 1,032,268 – 5,022,891
Selling and marketing expenses (591,683) (10,584) – (602,267)
General and administrative expenses (281,865) (345,068) (809,986) (1,436,919)
Depreciation and amortization (141,578) (165,884) (80,350) (387,812)
Income from operations 2,975,497 510,732 (890,336) 2,595,893
Other income, net 4,748
Net income for the year before prior period
item 2,447,535
Prior period item (39,549)
Other information
Capital expenditure by segment 303,208 316,908 85,790 705,906
Segment assets 5,174,648 5,656,021 7,702,108 18,532,777
Segment liabilities 1,436,437 463,504 2,995,219 4,895,160
Shareholders’ funds – – 13,637,617 13,637,617

Segment revenue and expense:
Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services.
The expenses which are not directly attributable to a business segment are shown as corporate expenses.
Segment assets and liabilities:

Segment assets include all operating assets used by a segment and consist principally of debtors, deposits for premises and fixed assets. Segment
liabilities primarily includes deferred revenues, finance lease obligation, advance from customer, accrued employee cost and other current liabilities.
While most such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly
by two or more segments is allocated to the segment on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are
shown as part of corporate assets.
Geographical segments
The following table shows the distribution of the Company’s sales by geographical market:

March 31, 2007 March 31, 2006
Regions % %
United States of America 5,333,405 34% 4,761,396 42%

Europe 4,541,764 30% 2,923,013 25%
Asia Pacific 3,002,966 19% 1,873,481 16%
Middle East, India and Africa 2,505,454 16% 1,827,933 16%
Latin America and Caribbean 139,855 1% 152,401 1%
15,523,444 100% 11,538,224 100%

9. Names of related parties and description of relationship:
Principal shareholder and its affiliates (“Oracle”) Oracle Global (Mauritius) Limited
(from November 18, 2005) Oracle (India) Private Limited
Oracle USA, Inc.
Oracle Corporation (Thailand) Co Limited
Promoter Company and its affiliates (“Citigroup”) OrbiTech Limited

(till November 17, 2005) Polaris Software Lab Limited
Citigroup Inc.
Citicorp Technology Holdings Inc., USA
Citibank branches
Citicorp Information Technology, Inc.
e-Serve International Limited
Subsidiaries i-flex solutions b.v.

i-flex solutions pte ltd
i-flex solutions inc.
i-flex America inc.
SuperSolutions Corporation
Castek Software Inc. and its subsidiaries
Mantas Inc. and its subsidiaries
ISP Internet Mauritius Company
Equinox Corporation
Equinox Global Services Pvt. Ltd.
i-flex Processing Services Limited
i-flex Consulting (Asia Pacific) pte ltd
Joint ventures Flexcel International Private Limited
Associates Login SA
Other entities where company has significant influence i-flex Employee Stock Purchase Scheme Trust
Key Managerial Personnel Rajesh Hukku – Chairman and Managing Director

R Ravisankar – Chief Executive Officer – International Operations and
Business Development
Deepak Ghaisas – Chief Executive Officer – India Operations, Chief
Financial Officer and Company Secretary
N R Kothandaraman (N R K Raman) – Chief Operating Officer – India
Operations
Makarand Padalkar – Chief of Staff and Investor Relations
Joseph John – Executive Vice President, Universal Banking Products
Division
V Shankar – Executive Vice President, PrimeSourcing
Olivier Trancart – Head Global Sales and Marketing
Nandkumar Kulkarni – Sr. Vice President, Retail Banking Products
Division
Atul Gupta – Sr. Vice President, Process and Quality Management Group
Vijay Sharma – Sr. Vice President, Consulting and System Integration
S Hariharan – Sr. Vice President, Infrastructure Services
Vivek Govilkar – Sr. Vice President, Human Resources

Transactions and balances outstanding with these parties are described below:
Transactions Amount receivable (payable)

Year ended Year ended Year ended Year ended
March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006
Revenue
Citigroup – 530,789 – –
Oracle 37,777 – 5,007 348
Subsidiaries
i-flex solutions b.v. 3,404,183 2,219,173 2,139,752 1,364,101
i-flex solutions inc. 4,683,722 4,104,936 3,997,048 3,743,513
i-flex solutions pte ltd 2,479,979 1,681,017 1,559,613 775,756
Equinox Global Services Pvt. Ltd. 22,597 – 26,558 6,786
ISP Internet Mauritius Company – 6,978 – –
SuperSolutions Corporation 72,947 42,863 112,872 43,161
Castek Software Inc. 19,298 – – –
Joint venture
Flexcel International Private Limited 45,085 7,878 46,272 6,119
Interest on bank deposit

Citigroup – 6,860 – –
Interest on loan
Subsidiaries
i-flex America inc. 26,264 19,688 56,332 31,630
ISP Internet Mauritius Company 1,518 1,489 3,336 1,898
Unbilled revenue
Subsidiaries
i-flex solutions b.v. – – 117,291 23,358
i-flex solutions inc. – – 267,767 114,640
i-flex solutions pte ltd – – 199,746 29,060
Equinox Global Services Pvt. Ltd. – – 2,603 –
Castek Software Inc. – – 19,205 –
Loan outstanding
Subsidiaries
i-flex America inc. – – 433,600 446,100
Equinox Global Services Pvt. Ltd. 140,000 – 390,000 250,000
ISP Internet Mauritius Company – – 41,188 42,375
Loan to trust and employees

Repayment of loan by ESPS Trust 4,925 – – 4,925
Other advances
Subsidiaries
i-flex Processing Services Limited 2,399 – 2,399 –
Equinox Global Services Pvt. Ltd. 30,000 – – 30,000
Rental deposit
Key managerial personnel 125 – 325 200
Advance rent
Key managerial personnel – – 56 114
Rent
Key managerial personnel 128 166 – –
Remuneration
Key managerial personnel 71,995 77,753 – –
Reimbursement of expenses
Subsidiaries
i-flex solutions b.v. 537,907 313,292 (277,490) (238,266)
i-flex solutions inc. 1,996,997 1,347,628 (2,173,480) (1,570,784)
i-flex solutions pte ltd 839,642 566,778 (219,532) (118,885)
i-flex America inc. 12,999 – 12,999 –

SuperSolutions Corporation 1,144 – (63,709) (62,566)

ISP Internet Mauritius Company 1,169 – 1,169 –
Joint venture
Flexcel International Private Limited 10,225 2,988 11,969 1,744
Cost of revenue
SuperSolutions Corporation 39,627 – (39,627) –
Purchase of software
Oracle 230,617 123,351 – –
Provision for doubtful debts

i-flex solutions b.v. 9,854 – 10,250 650
i-flex solutions inc. 15,529 13,290 28,320 13,408
i-flex solutions pte ltd 27,298 – 26,427 –
Other expenses
Oracle 1,411 1,106 – –
Citigroup – 633 – –
Professional fees
Oracle – 846 – –
Joint venture
Flexcel International Private Limited 30,508 6,850 – –
Deferred revenue
Oracle – – (4,245) –
Subsidiaries
i-flex solutions b.v. – – (455,084) (148,397)
i-flex solutions inc. – – (295,093) (241,725)
i-flex solutions pte ltd – – (191,543) (57,793)
Joint venture
Flexcel International Private Limited – – (1,163) (653)
Lease fees
Key managerial personnel 3,462 962 – –
Other transactions
Dividend paid
Citigroup – 161,180 – –
Oracle 200,742 – – –
ESPS Trust 9,670 14,634 – –
Key managerial personnel 8,265 7,914 – –
Capital contribution
i-flex America inc. 5,678,974 – – –
i-flex Processing Services Limited 500 – – –
Total 20,699,482 11,261,042 5,791,138 4,490,817
1. Balances as on March 31, 2007 and 2006 with promoters and affiliates have not been disclosed as they cease to be related party. Previous year
transactions with Citigroup have been disclosed till November 17, 2005.
2. Includes salary, bonus and perquisites.
3. Loan given to subsidiaries represents loan to i-flex America inc. amounting to Rs. 433,360 (interest LIBOR + 50 basis points) as at March 31, 2007
(March 31, 2006 – 446,100), ISP Internet Mauritius Company amounting to Rs. 41,188 (interest LIBOR + 50 basis points) as at March 31, 2007
(March 31, 2006 – 42,375).
Maximum balance outstanding during the period were as follows:
March 2007 March 2006

i-flex America inc. 465,300 446,100
ISP Internet Mauritius Company 44,199 42,375
Equinox Global Services Pvt. Ltd. 390,000 250,000

March 31, 2007 March 31, 2006
10. Supplementary information
a. Aggregate expenses
Following are the aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI to the Act:
Salaries and bonus 6,720,213 4,857,200

Staff welfare expenses 202,515 159,714
Contribution to provident and other funds 240,418 129,527
Rent 302,262 163,728
Power 130,131 103,783
Insurance 58,301 40,612
Repairs and maintenance:
Leasehold premises 11,995 7,184
Computer equipments 24,562 24,612
Others 26,627 17,761
Rates and taxes 24,847 13,013
Finance charge on leased assets 1,766 2,389
Provision for doubtful debts, net 74,063 45,743
Advances written off – 22,800
11,495,914 8,554,519
b. Managerial remuneration
Salary and incentives 330 330
Contribution to provident and other funds 24 24
Commission to non whole time directors 2,920 7,805
3,274 8,159
In addition to the above, the Managing Director of the Company has also been paid remuneration aggregating Rs. 41,313 (including bonus
of Rs. 15,884 which was provided as on March 31, 2006) for the year ended March 31, 2007 (March 31, 2006 – Rs. 44,881) from
i-flex solutions inc., a wholly owned subsidiary of the Company.
The Company accrues for gratuity benefit and bonus for all employees as a whole. It is not possible to ascertain the provision for individual
director and hence the same has not been disclosed above.
Computation of net profit for calculating commission payable to non-whole time directors in accordance with Section 198 of the Act .
Net income after tax and prior period item 3,546,739 2,407,986
Add
Managerial remuneration 354 354
Commission to non-wholetime Directors 2,920 7,805
Depreciation and amortization as per books of accounts 565,351 387,812
Donation 6,202 9,824
Provision for income taxes 263,743 447,566
4,385,309 3,261,347
Less
Profit on sale of investment – 743
Profit on sale of fixed assets, net – 314
Depreciation and amortization as per Section 350 of the Act (Note 1 below) 565,351 387,812
Net profit on which commission is payable 3,819,958 2,872,478
Commission payable to non-wholetime Director:

Maximum allowed as per Companies Act, 1956 (1 percent) 38,200 28,725
Maximum approved by the shareholders (1 percent) 38,200 28,725
Commission approved by the Board of Directors 2,920 7,805
Note 1: The Company depreciates fixed assets based on estimated useful lives of the assets. The rates of depreciation used by the Company are higher than the
minimum rates prescribed by Schedule XIV of the Act.

March 31, 2007 March 31, 2006
c. Payments to auditors
Statutory audits 5,107 4,377
Tax audit 561 561
Special reports 2,133 1,796
Certifications 392 563
Reimbursement of out-of-pocket expenses 750 580
8,943 7,877
d. Earnings in foreign currency (on accrual basis)

Product licenses and related revenue 8,382,073 6,080,537
Interest income 2,222 25,010
14,951,667 11,083,053
e. Expenditure in foreign currency (on accrual basis)

Travelling, net of recovery 1,004,727 940,608
Foreign taxes 64,307 46,850
Advertising 34,874 27,061
Representative office expenses 7,697 2,362
Seminar expenses 26,507 12,687
Others 129,578 109,646
4,640,469 3,486,998
f. Value of imports on CIF basis - capital goods 91,577 146,928
g. Remittance in foreign currencies for dividend

The Company has not remitted any amount in foreign currencies on account of dividends during the year to non-resident shareholders. The
particulars of dividends declared and paid to non-resident shareholders are as under:
Year of dividend payment 2006-07 2005-06
Year to which it relates 2005-06 2004-05
Number of non-resident shareholders 734 445
Number of equity shares held 56,128,427 5,281,299
Amount of dividend 280,642 26,406
As at As at
March 31, 2007 March 31, 2006
11. Utilization of IPO Funds
Proceeds from issue of shares 1,780,800 1,780,800

Less: Issue expenses (103,074) (103,074)
Net IPO Proceeds 1,677,726 1,677,726
Less: Utilization of funds
Bangalore Development Centre (554,753) (554,753)
Mumbai Development Centre (730,410) (488,872)
Investment in/loans to subsidiary companies
i-flex solutions b.v. (24,380) (24,380)
i-flex solutions pte ltd (6,626) (6,626)
i-flex solutions inc. (73,064) (73,064)
Setting up Dubai marketing office (1,303) (1,303)
Unutilized IPO funds 287,190 528,728

March 31, 2007 March 31, 2006
12. Preferential allotment
a. Allotment of shares to Oracle

Proceeds from issue of shares to Oracle 5,814,999 –
Less: Utilization of funds for investment in i-flex America inc. (5,678,974) –
Unutilized funds 136,025 –
b. Allotment of options to GE
Proceeds from issue of options to GE 401,679 40,441
Less: Utilization of funds for operations (40,441) –
Unutilized funds 361,238 40,441
13. During the year, the Company received income tax assessment order for financial year ended March 31, 2004. As per the order, the Company
has been allowed income tax relief in respect of foreign taxes to the extent of non 10A income earned by the Company from respective foreign
jurisdiction. Accordingly, the Company has recorded tax credit of Rs. 86,130 pertaining to periods till March 31, 2006.
14. Prior year comparatives
Prior year amounts have been reclassified, where necessary to confirm with current years presentation.

& Managing Director


May 1, 2007 May 1, 2007

Statement of cash flow
2007 2006
Cash flows from operating activities

Income before provision for taxes and prior period item 3,810,482 2,895,101
Adjustments to reconcile income before provision for taxes to

cash (used in) provided by operating activities:
Depreciation and amortization 565,351 387,812
Loss (Profit) on sale of fixed assets, net 4,554 (314)
Loss on sale of investment – 4,785
Reversal of provision for diminution in the value of investments, net – (5,528)
Marked to market of current investment 810 –
Interest income (365,535) (294,460)
Effect of exchange difference on cash and bank balances (4,301) (5,694)
Advances written off – 22,800
4,087,190 3,052,634
Changes in assets and liabilities, net of effect of acquisition
Increase in sundry debtors and unbilled revenue (3,664,637) (1,377,373)
Increase in loans and advances (1,788,456) (662,941)
Increase in current liabilities and provisions 1,764,374 793,259
Cash from operating activities 398,471 1,805,579
Payment of domestic and foreign taxes (818,170) (675,571)
Net cash (used in) provided by operating activities (419,699) 1,130,008
Cash flows from investing activities

Additions to fixed assets including capital work-in-progress (1,120,053) (1,099,422)
Net investment in lease (20,610) –
Acquisition of customer contracts and product intellectual property
rights (‘IPR’) – (43,009)
Investment in subsidiary company (5,679,474) –
Investment in Dhanalakshmi Bonds – (10,000)
Proceeds from sale of fixed assets 11,608 8,948
Bank fixed deposits having maturity of more than 90 days matured 7,679,391 7,579,352
Bank fixed deposits having maturity of more than 90 days booked (6,723,628) (8,122,931)
Proceeds from maturity of investments 20,000 2,621
Interest received 314,787 279,525
Net cash used in investing activities (5,517,979) (1,404,916)
Cash flows from financing activities

Issue of shares against Employee Stock Option scheme and options
to IBM 678,514 391,761
Issue of shares to Oracle Global Mauritius Limited 5,814,999 –
Share application money from GE 361,238 40,441
Advance against equity shares to be issued under ESOP scheme – 10,309
Repayment of loan by Employee Stock Purchase Scheme (‘ESPS’)
Trust 4,925 117,500
Loan to subsidiaries (96,313) (209,417)
Payment of dividend and tax thereon (436,350) (428,207)
Payment of lease obligations (10,322) (10,652)
Net cash provided by (used in) financing activities 6,316,691 (88,265)
Effect of exchange difference on cash and bank balances 4,301 5,694
Net increase (decrease) in cash and cash equivalents 383,314 (357,479)

Cash and cash equivalents at beginning of the year 795,736 1,153,215
Cash and cash equivalents at end of the year (Note 1) 1,179,050 795,736

Statement of cash flow (continued)
2007 2006
Note 1: Component of cash and cash equivalent

Cash in hand 985 661
Cheques on hand – 86,975
Balances with scheduled banks
Deposit amount
Preferential issue 497,263 –
Balances with non-scheduled banks
Deposit account in foreign currency 380 389
Total Cash and bank balances 5,007,470 5,579,881
Less
Bank deposits having maturity of more than 90 days (3,820,288) (4,780,235)
Margin money deposit (6,067) (1,883)
Unclaimed dividend accounts (2,065) (2,027)
Cash and cash equivalents at the end of the year 1,179,050 795,736

& Managing Director


May 1, 2007 May 1, 2007

Balance sheet abstract and company’s general business profile
I. Registration details
Registration number 5 3 6 6 6 State Code 1 1
Balance Sheet date 3 1 0 3 2 0 0 7

Date Month Year
II. Capital raised during the year (amount in Rs. thousands)

Public issue Rights issue
N I L N I L
Bonus issue Private placement
N I L N I L
III. Position of mobilization and deployment of funds (amount in Rs. thousands)

Total liabilities Total assets
3 0 2 6 8 4 8 4 3 0 2 6 8 4 8 4
Sources of funds Paid-up capital Reserves and surplus
4 1 6 4 4 3 2 3 1 6 6 6 3 6
Secured loans Unsecured loans
N I L N I L
Application of funds Net fixed assets Investments
2 7 6 3 8 9 4 6 0 9 2 2 0 0
Net current assets Miscellaneous expenditure

1 4 9 9 7 3 1 3 N I L
Accumulated losses
N I L
IV. Performance of company (amount in Rs. thousands)

Turnover Total expenditure
1 5 5 2 3 4 4 4 1 2 0 7 8 4 9 7
+/– Profit/loss before tax +/– Profit/loss after tax
+ 3 8 1 0 4 8 2 + 3 5 4 6 7 3 9
(Please tick appropriate box + for profit, – for loss)

Earning per share in Rs. Basic Dividend rate %
4 4 . 8 2 N I L
Earning per share in

Rs. Diluted
4 3 . 6 0
V. Generic names of three principal products/services of company

(as per monetary terms)
Item Code number
(ITC code) N . A .
Product description
S O F T W A R E D E V E L O P M E N T S E R V I C E S
S O F T W A R E P R O J E C T A S S I G N M E N T S
S O F T W A R E P R O D U C T M A N A G E M E N T

Statement pursuant to Section 212 of the Companies Act, 1956
relating to subsidiary companies

i-flex solutions b.v. i-flex solutions pte ltd i-flex Consulting i-flex America inc. i-flex solutions inc. SuperSolutions Castek Software Inc.
(Asia Pacific) pte ltd Corporation
The Financial Year of the Subsidiary March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Company ended on
Holding Company i-flex solutions ltd i-flex solutions ltd i-flex solutions pte ltd i-flex solutions ltd i-flex America inc. i-flex America inc. i-flex America inc.
Holding Company’s interest 100% 100% 100% 100% 100% held by 100% held by 76.79% held by
i-flex America inc. i-flex America inc. i-flex America inc.
Shares held by the Holding 5,185 equity shares 250,000 shares of 16,185,170 shares of 1 Equity shares of Nil Nil 528,138,676
Company in the Subsidiary of EUR 100 each, SGD 1 each SGD 1 each USD 0.01 each common shares of
fully paid-up fully paid-up fully paid-up fully paid-up CAD 0.0032583 per
share
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is not dealt with in the accounts of the Holding Company
a. for the financial year ended on

March 31, 2007 222,024 113,923 (20,189) (38,915) (28,160) (86,626) (153,228)
b. for the previous financial years of

the subsidiary since it became a
subsidiary (12,253) 334,396 – (37,275) 122,535 (86,378) (72,958)
Net aggregate of Profit/(losses) of the subsidiary so far as it concerns the Members of the Holding Company and is dealt with or provided for in the accounts of the Holding Company

March 31, 2007 N.A. N.A. N.A. N.A. N.A. N.A. N.A.

subsidiary N.A. N.A. N.A. N.A. N.A. N.A. N.A.
7/27/2007 3:32:34 PM
Statement pursuant to Section 212 of the Companies Act, 1956 (continued)

Castek Hungarian Castek Inc. Castek Software Castek RBG Inc. Mantas Inc. Mantas Ltd Sotas Inc
Holdings Inc. Factory Ltd.
Company ended on
Holding Company Castek Software Inc. Castek Software Inc. Castek Inc. Castek Inc. i-flex America inc. Mantas Inc. Mantas Inc.
Holding Company’s interest 100% held by 100% held by 100% held by 100% held by 100% held by 100% held by 100% held by
Castek Software Inc. Castek Software Inc. Castek Inc. Castek Inc. i-flex America inc. Mantas Inc. Mantas Inc.
Shares held by the Holding Company in the 100 common shares at 2,000 common shares 2,000 common shares 950 common shares 1 share of USD 0.01 par
Subsidiary CAD 1.00 per share at average price of at average price of at average price of value common stock at
USD 682.19 per share USD 682.19 per share USD 245.37 per share USD 1.00 Nil Nil

March 31, 2007 – (847) 2,248 (2,795) (35,394) (89,263) (125)

subsidiary 2 (9,948) (118) (9,077) – – –


7/27/2007 3:32:34 PM
Statement pursuant to Section 212 of the Companies Act, 1956 (continued)

Mantas Singapore Mantas (India) Sotas Ltd. ISP Internet Mauritius Equinox Corporation Equinox Global Services i-flex Processing
Pte Ltd Pvt. Ltd (Dissolved Company Pvt Ltd. Services Limited
March 13, 2007)
Company ended on
Holding Company ISP Internet ISP Internet i-flex solutions ltd
Mantas Inc. Sotas Inc. Sotas Inc. i-flex solutions ltd Mauritius Company Mauritius Company
Holding Company’s interest 100% 100% held by ISP 99.82 % held by ISP 100% held by
100% held by 100% held by 100% held by Internet Mauritius Internet i-flex solutions ltd
Mantas Inc. Sotas Inc. Sotas Inc. Company Mauritius Company
Shares held by the Holding Company in the 25200 Series A ordinary 20,000 common 5,808,660 equity shares 50,000 Equity shares
Subsidiary shares of No Par value stock of of Rs. 10/- each fully of Rs. 10/- each fully
4800 Series B ordinary USD 0.01 each paid-up paid-up
Nil Nil Nil shares of No Par value

March 31, 2007 (216) (375) – (1,980) (128,647) (37,232) (2,303)

subsidiary – – – (23,686) (82,094) (109,567) (547)


7/27/2007 3:32:35 PM
Statement pursuant to exemption received under Section 212(8) of the Companies Act, 1956

(All amounts in thousands of Indian Rupees )
Name of the Reporting Exchange Share Reserves Total Total Investment other Turnover Profit/(Loss) Provision for Profit after Proposed Country
subsidiary Company currency rate Capital assets liabilities than Investment before taxation taxation Taxation Dividend
in Subsidiary
i-flex solutions b.v. EUR 57.82 30,009 209,771 2,972,469 2,732,689 – 3,813,345 323,498 (101,474) 222,024 – Amsterdam
i-flex solutions pte ltd USD 43.36 5,920 428,130 2,959,932 2,525,882 – 2,895,389 239,521 (145,787) 93,734 – Singapore
i-flex America inc. USD 43.36 5,572,577 (526,913) 8,869,560 3,823,896 – 7,666,725 (431,469) (2,227) (433,696) – USA
ISP Internet Mauritius Company USD 43.36 139,372 (383,206) 353,624 597,458 – 428,344 (166,568) (1,291) (167,859) – Mauritius
i-flex Processing Services Limited INR 1.00 500 (2,850) 632 2,982 – – (2,292) (11) (2,303) – India
For and on behalf of the Board of Directors
Rajesh Hukku Y M Kale

Chairman Director
& Managing Director
Deepak Ghaisas Tarjani Vakil

Company Secretary Director
Mumbai, India
May 1, 2007
Since the Company presents audited consolidated financial statements under Indian GAAP and US GAAP in its Annual Report,
the Company had applied to the Central Government of India for an exemption from attaching the Directors’ Report, Balance
Sheet and Profit and Loss Account of its subsidiaries to the Annual Report. The Central Government has vide its letter no.
47/229/2007-CL-III dated July 6, 2007 granted the exemption for the year ended March 31, 2007. Accordingly, the financial
statements of the subsidiaries of the Company are not attached to the Annual Report of the Company.
7/27/2007 3:32:35 PM
Creating Value
i-flex solutions ltd

Indian Generally Accepted Accounting Principles
(Indian GAAP) (Consolidated).

Auditors’ report
To the Board of Directors of of Interests in Joint Ventures issued by the Institute of Chartered
i-flex Solutions Limited: Accountants of India.
1. We have audited the attached consolidated balance sheet of 4. In our opinion and to the best of our information and according to
i-flex Solutions Limited, its subsidiaries, associate company and joint the explanations given to us, the consolidated financial statements
venture (together referred to as ‘the Group’ as described in Note 1 of give a true and fair view in conformity with the accounting principles
schedule 15 to the financial statements) as at March 31, 2007 and generally accepted in India:
also the consolidated profit and loss account and the consolidated
cash flow statement for the year ended on that date annexed (a) in the case of the consolidated balance sheet, of the state of
thereto. These financial statements are the responsibility of the affairs of the Group as at March 31, 2007;
Group’s management and have been prepared by the management
(b) in the case of the consolidated profit and loss account, of the
on the basis of separate financial statements and other financial
profit of the Group for the year then ended; and
information regarding components. Our responsibility is to express
an opinion on these financial statements based on our audit. (c) in the case of the consolidated cash flow statement, of the cash
flows of the Group for the year then ended.
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 statements are free of material misstatements. An For S. R. Batliboi & Associates
audit includes, examining on a test basis, evidence supporting the Chartered Accountants
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 statements presentation. We believe that our audit provides
a reasonable basis for our opinion. per Sunil Bhumralkar
Partner
3. We report that the consolidated financial statements have been Membership No.: 35141
prepared by the Group’s management in accordance with the
requirements of Accounting Standard (AS) 21, Consolidated Financial Mumbai, India
Statements, AS 23, Accounting for Investments in Associates in July 2, 2007
Consolidated Financial Statements and AS 27, Financial Reporting

Consolidated balance sheet
as at March 31
Schedules 2007 2006
Sources of funds
Shareholders’ funds
Share capital 1 416,443 381,442
Share application money pending allotment 401,679 10,309
Reserves and surplus 2 23,202,085 13,415,421
Deferred tax liability 3 1,745 1,649
24,021,952 13,808,821
Application of funds
Fixed Assets 4
Cost 9,626,043 3,966,811
Less: Accumulated depreciation, amortization and impairment 2,030,937 1,389,133
Net book value 7,595,106 2,577,678
8,941,214 3,159,034
Investments 5 59,167 52,355
Deferred tax asset 3 141,483 70,762
Current assets, loans and advances 6

Sundry debtors 7,494,396 5,257,917
Cash and bank balances 7,197,754 6,869,435
Other current assets 1,194,592 309,124
Loans and advances 4,325,016 2,078,892
20,211,758 14,515,368
Less: Current liabilities and provisions 7
Current liabilities 4,910,518 3,308,784
Provisions 421,152 679,914
5,331,670 3,988,698
Net current assets 14,880,088 10,526,670
24,021,952 13,808,821
The schedules referred to above and notes to accounts form an integral part of the consolidated balance sheet.

& Managing Director


July 2, 2007 May 1, 2007

Consolidated profit and loss
Schedules 2007 2006
Revenue 8 20,609,382 14,823,003

Cost of revenue 9 (11,066,050) (7,794,099)
Gross profit 9,543,332 7,028,904
Operating expenses
Selling and marketing expenses 10 (2,656,196) (2,008,958)
General and administrative expenses 11 (2,462,635) (1,757,806)
Depreciation and amortization (653,023) (460,368)
Provision for impairment of goodwill – (57,958)
Income from operations 3,771,478 2,743,814
Non-operating income
Interest income 12 376,907 294,552
Other expenses, net 13 (17,253) (9,907)
Income before provision for taxes and prior period items 4,131,132 3,028,459
Provision for taxes

Current tax (Refer Note 12 of Schedule 15) (413,192) (574,971)
Deferred tax 70,625 69,554
Fringe benefit tax (73,391) (55,000)
Net income for the year before minority interest, share of profit of
associate company and prior period items 3,715,174 2,468,042
Minority interest – 2,564
Share of profit of associate company 7,622 3,328
Net income for the year before prior period items 3,722,796 2,473,934
Prior period items – (97,409)
Net income 3,722,796 2,376,525
Profit and loss account, beginning of the year 630,950 690,664

Amount available for appropriation 4,353,746 3,067,189
Appropriations:
Proposed dividend – (381,442)
Tax on Proposed dividend – (53,497)
Dividend paid on stock options exercised (1,237) (1,140)
Tax on dividend paid tax on stock options exercised (174) (160)
Transfer to general reserve – (2,000,000)
Surplus carried to balance sheet 4,352,335 630,950
Earnings per share of Rs. 5/- each (in Rs.) 14

Basic 47.05 31.45
Diluted 45.76 30.62
The schedules referred to above and notes to accounts form an integral part of the consolidated profit and loss account.

& Managing Director


July 2, 2007 May 1, 2007

Schedules annexed to and forming part of the accounts
As at As at
March 31, 2007 March 31, 2006
Schedule 1: Share capital
Authorized:
Issued, subscribed and fully paid-up:

a. Of the above, 67,481,698 (March 31, 2006 – 36,422,788) equity shares of Rs. 5/- each are held by Oracle Global (Mauritius) Limited (“Oracle”).
The Company became subsidiary of Oracle on April 14, 2006.
b. Of the above, 62,121,800 (March 31, 2006 – 62,121,800) equity shares of Rs. 5/- each had been issued as fully paid up bonus shares by
capitalizing the securities premium account.
c. Refer Note 6(b) of Schedule 15 for the options granted for unissued equity shares.
Schedule 2: Reserves and surplus
Securities premium
Received during the year 6,468,821 396,630
General reserve
Balance, beginning of year 10,238,569 8,238,569
Transferred from profit and loss account – 2,000,000
Adjustment for employee benefits provision [Refer note 2 (h) of Schedule 15] (93,378) –
Foreign currency translation reserve (310,164) –
Gain on dilution of equity investment in joint venture 2,536 2,536
Profit and loss account 4,352,335 630,950

23,202,085 13,415,421
Schedule 3: Deferred tax asset (liability)
Deferred tax asset

Difference between book and tax depreciation 124,351 70,762
Expenditure allowable on actual payment 10,132 –
Provision for doubtful debts 7,000 –
141,483 70,762
Deferred tax liability
Difference between book and tax depreciation (1,745) (1,649)
(1,745) (1,649)
139,738 69,113

Schedule 4: Fixed assets
Particulars Gross block Depreciation, amortization and impairment Net book value
As at Additions Sale/ Translation As at As at For the Sale/ Translation Impairment As at As at As at
April 1, 2006 deletions loss March 31, 2007 April 1, 2006 year deletions loss March 31, 2007 March 31, 2007 March 31, 2006

Tangible assets:
Land 232,674 – – – 232,674 – – – – – – 232,674 232,674
Improvement to leasehold premises 251,462 80,652 1,463 1,103 329,548 90,188 108,427 – 110 – 198,505 131,043 161,274
Buildings (See Note below) 253,340 – – – 253,340 29,117 12,665 – – – 41,782 211,558 224,223
Computer equipments
Owned 1,150,968 245,168 10,667 717 1,384,752 757,140 251,406 6,016 156 – 1,002,374 382,378 393,828
Leased 7,232 – – – 7,232 4,440 2,631 – – – 7,071 161 2,792
Electrical and office equipments 430,988 112,796 53 – 543,731 143,579 105,539 25 – – 249,093 294,638 287,409
Furniture and fixtures
Owned 367,661 89,033 2,154 591 453,949 140,361 68,196 2,154 115 – 206,288 247,661 227,300
Leased 3,369 – – – 3,369 2,283 319 – – – 2,602 767 1,086
Leased Vehicles 37,765 9,133 4,403 – 42,495 13,864 8,348 2,643 – – 19,569 22,926 23,901
Intangible assets:
Goodwill on consolidation
(Refer note 8 of Schedule 15) 819,203 5,448,337 – 304,736 5,962,804 57,958 – – – – 57,958 5,904,846 761,245
Goodwill on acquisition 197,473 – – – 197,473 89,261 56,892 – – – 146,153 51,320 108,212
Customer contracts 22,290 – – – 22,290 22,167 123 – – – 22,290 – 123
Product IPR 138,619 – – – 138,619 35,191 27,724 – – – 62,915 75,704 103,428
PeopleSoft ERP 53,767 – – – 53,767 3,584 10,753 – – – 14,337 39,430 50,183
Total 3,966,811 5,985,119 18,740 307,147 9,626,043 1,389,133 653,023 10,838 381 – 2,030,937 7,595,106 2,577,678
As at March 31, 2006 3,095,872 886,251 15,312 – 3,966,811 880,253 460,368 9,446 – 57,958 1,389,133

8,941,214 3,159,034
Note: Includes 10 (March 31, 2006 – 10) shares of Rs. 50/- each in Takshila Building No.9, Co-op Housing Society Ltd., Mumbai.
7/27/2007 3:32:36 PM
As at As at
March 31, 2007 March 31, 2006
Schedule 5: Investments
a. Long term investments (at cost)
i. Trade (unquoted)
EBZ Online Private Limited
242,240 (March 31, 2006 – 242,240) equity shares of Rs. 10/- each, fully paid-up 45,000 45,000
– –
Login SA
33,000 (March 31, 2006 – 33,000) equity shares of EUR 2/- each, fully paid up 9,101 5,773
Add: Share of profit of associate company 7,622 3,328
16,723 9,101
ii. Non trade (unquoted)
National Savings Certificate – VIII issue 131 131
iii. Non trade (quoted)

6.75% Tax Free US-64 Bonds
331,225 (March 31, 2006 – 331,225) Bonds of Rs. 100/- each, fully paid-up 33,123 33,123
b. Current Investment (cost or fair value, whichever is lower)
Non trade (quoted)

9% Dhanalakshmi Bank Bond Series VI (See note below)
10 (March 31, 2006 – 10) Bonds of Rs. 1,000,000/- each, fully paid up 9,190 10,000
59,167 52,355
Aggregate cost of quoted investments 42,313 33,123

Aggregate market value of quoted investments 42,133 33,623
Aggregate cost of unquoted investments 16,854 19,232
Note: As at March 31, 2006, 9% Dhanalakshmi Bank Bond Series VI was not listed and was classified as unquoted investment.
Schedule 6: Current assets, loan and advances
a. Sundry debtors (unsecured)

Debts outstanding for a period exceeding six months:
Considered good 939,161 715,927
Considered doubtful 182,208 99,439
1,121,369 815,366
Other debts-considered good 6,555,235 4,541,990
7,676,604 5,357,356
Less: Provision for doubtful debts (182,208) (99,439)
7,494,396 5,257,917
b. Cash and bank balances

Cash in hand 2,133 4,354
Cheques on hand 50,111 86,975
Balances with scheduled banks
Deposit amount of
Preferential issue 497,263 40,441
Balances with non-scheduled banks
Current accounts in foreign currency 1,743,342 1,275,534
Deposit account in foreign currency 332,516 16,476
7,197,754 6,869,435

As at As at
March 31, 2007 March 31, 2006
c. Other current assets

Interest accrued on:
Bonds 741 746
Unbilled revenue 1,038,228 256,690
Gross investment in lease 42,118 –
Contract work in progress 42,492 –
1,194,592 309,124
d. Loans and advances (unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received:
Loan to ESPS Trust [Refer note 6(a) of Schedule 15] – 4,925
Premises and other deposits 2,517,095 1,258,967
Prepaid expenses 363,051 149,268
Advance tax, net of provision for taxes 929,639 401,364
Forward contract receivable 305,630 29,398
Other advances 209,601 234,970
4,325,016 2,078,892
Schedule 7: Current liabilities and provisions
a. Current liabilities
Accrued expenses 1,872,843 1,540,006
Deferred revenues 2,079,018 1,183,257
Accounts payable 315,596 147,070
Advances from customers 19,832 134,772
Advance against warrants – 40,441
Investor Education and Protection Fund to be credited by unclaimed dividends* 2,065 2,027
Unearned finance income 16,234 –
Other current liabilities 604,930 261,211
4,910,518 3,308,784
*There is no amount due and outstanding as at balance sheet date to be credited to the Investor Education and Protection Fund.
b. Provisions
Proposed dividend – 381,442
Tax on Proposed dividend – 53,497
Provision for gratuity [Refer Note 2 (h) of Schedule 15] 129,487 81,346
Provision for compensated absence [Refer Note 2 (h) of Schedule 15] 291,665 94,982
Provision for taxation, net of advance tax – 68,647
421,152 679,914

March 31, 2007 March 31, 2006
Schedule 8: Revenue
Product licenses and related activities 11,193,090 7,637,364

Share of sales of joint venture company 51,717 21,148
20,609,382 14,823,003
Schedule 9: Cost of revenue
Employee costs 7,993,454 5,706,000

11,066,050 7,794,099

March 31, 2007 March 31, 2006
Schedule 10: Selling and marketing expenses
Employee costs 1,407,165 988,284

Rent 105,419 66,121
2,656,196 2,008,958
Schedule 11: General and administrative expenses

Rent 351,947 195,888
Power 128,016 101,257
2,462,635 1,757,806
Schedule 12: Interest income
Interest on
[includes tax deducted at source of Rs. 74,589 (March 31, 2006 – Rs. 70,739)]
Bonds 3,639 4,330
[includes tax deducted at source of Rs. 212 (March 31, 2006 – Rs. 572)]
Loans to employees 585 230
Lease assets 5,274 –
376,907 294,552
Schedule 13: Other expenses, net
Reversal of provision for diminution in value of investment, net – 5,528

Loss on sale of investment – (4,785)
Foreign exchange loss, net (22,623) (38,072)
(Loss) profit on sale of fixed assets, net (4,554) 314
Insurance claim – 21,530
Miscellaneous income 9,924 5,578
(17,253) (9,907)
Schedule 14: Reconciliation of basic and diluted shares used in computing earnings
per share
No of shares
Weighted average shares outstanding for basic earnings per share 79,125,096 75,562,947
Add: Effect of dilutive stock options 2,230,666 2,046,096
Weighted average shares outstanding for diluted earnings per share 81,355,762 77,609,043

Schedule 15: Notes to accounts
1. Background and nature of operations
i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India with limited liability on September 27, 1989. The Company along with its
subsidiaries and associates is principally engaged in the business of providing information technology solutions and business process outsourcing
services to the financial services industry worldwide. i-flex has a suite of banking products, which caters to the needs of corporate, retail, investment
banking, treasury operations and data warehousing.
i-flex is a subsidiary of Oracle with Oracle having 81.02% ownership interest as at March 31, 2007.
The Company has following subsidiaries, joint venture and associates:
Companies Country of Incorporation Voting Interest Relationship
Direct holding
i-flex solutions b.v. The Netherlands 100% Subsidiary
i-flex solutions pte ltd Singapore 100% Subsidiary
i-flex America inc. United States of America 100% Subsidiary
ISP Internet Mauritius Company Republic of Mauritius 100% Subsidiary
i-flex Processing Services Limited India 100% Subsidiary
Flexcel International Private Limited India 40% Joint Venture
Login SA France 33% Associate
Subsidiaries of i-flex America inc.
SuperSolutions Corporation United States of America 100% Subsidiary
i-flex solutions inc. United States of America 100% Subsidiary
Castek Software Inc. Canada 76.77% Subsidiary
Mantas Inc. United States of America 100% Subsidiary
Subsidiaries of Mantas Inc.
Mantas Ltd. United Kingdom 100% Subsidiary
Sotas Inc. United States of America 100% Subsidiary
Mantas Singapore Pte Ltd Singapore 100% Subsidiary
Mantas (India) Private Limited India 100% Subsidiary
Sotas Ltd. United Kingdom 100% Subsidiary
Subsidiaries of Castek Software Inc.
Castek Hungarian Holdings Inc. Canada 100% Subsidiary
Castek Inc. United States of America 100% Subsidiary
Castek Software Factory Ltd. United States of America 100% Subsidiary
Castek RBG Inc. United States of America 100% Subsidiary
Subsidiaries of ISP Internet Mauritius Company
Equinox Corporation United States of America 100% Subsidiary
Equinox Global Services Pvt. Ltd. India 99.83% Subsidiary
Subsidiaries of i-flex solutions pte ltd
i-flex Consulting (Asia Pacific) pte ltd Singapore 100% Subsidiary
2. Summary of significant accounting policies and AS 27, ‘Financial Reporting of Interest in Joint Venture’, issued
by the Institute of Chartered Accountants of India (ICAI). The financial
a. Basis of presentation and consolidation
statements of the Company and its subsidiaries are consolidated on
The consolidated financial statements includes the accounts of i-flex, its a line to line basis by adding together like items of assets, liabilities,
subsidiaries, associate company and joint venture company (hereinafter income and expenses. Any excess of the cost to the parent company
collectively referred as the “Group”) and are prepared in accordance with of its investment in a subsidiary and the parent company’s portion of
accounting principles generally accepted in India under the historical cost equity of subsidiary at the date, at which investment in the subsidiary is
convention on the accrual basis. The financial statements are presented made, is described as goodwill and recognized separately as an asset
in the general format specified in Schedule VI to the Companies Act 1956 in the consolidated financial statements. In respect of the joint venture
(‘the Act’). However, as these financial statements are not statutory company, the Group applies the proportionate consolidation method. All
financial statements, full compliance with the Act are not required significant inter-company transactions and balances between the entities
and hence these financial statements do not reflect all the disclosure included in the consolidated financial statements have been eliminated.
requirements of the Act. Investment in associate company is accounted under equity method in
consolidated financial statements.
The consolidated financial statements are prepared in accordance
with the principles and procedures required for the preparation and The accounting policies have been consistently applied by the Group and
presentation of consolidated financial statements as laid down under are consistent with those used in the previous years except for early
AS 21, ‘Consolidated Financials Statements’, AS 23, ‘Accounting adoption of Accounting Standard (AS) 15 (Revised), ‘Employee benefits’
for Investments in Associates in Consolidated Financial Statements’ issued by the ICAI. The significant accounting policies adopted by the

Group, in respect of the consolidated financial statements are set out present value at the weighted average cost of capital. After impairment,
below. depreciation is provided on a revised carrying amount of assets over its
remaining useful life.
b. Use of estimates
d. Investments
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make Trade investments refer to the investments made with the aim of
estimates and assumptions that affect the reported amounts of assets enhancing the Group’s business interests in providing information
and liabilities and disclosure of contingent liabilities at the date of the technology solutions to the financial services industry worldwide. Long
financial statements and the results of operations during the reporting term investments are stated at cost less provision for diminution on
year end. Although these estimates are based upon management’s best account of other than temporary decline in the value of the investment.
knowledge of current events and actions, actual results could differ from
these estimates. Current investments are stated at lower of cost and fair value determined
on an individual investment basis.
c. Fixed assets, depreciation and amortization
e. Foreign currency transactions
Fixed assets including assets under finance lease arrangements are
stated at cost less accumulated depreciation. The Group capitalizes all Foreign currency transactions during the year are recorded at the
direct costs relating to the acquisition and installation of fixed assets. exchange rates prevailing on the date of the transaction. Foreign currency
Advances paid towards the acquisition of fixed assets outstanding at denominated monetary items is translated into reporting currency at the
each balance sheet date and the cost of fixed assets not ready to use closing rates of exchange prevailing at the date of the balance sheet.
before such date are disclosed under ‘Capital work-in-progress and Non-monetary items, which are carried in terms of historical cost
advances’. Customer contracts and product IPRs are capitalized based denominated in a foreign currency, are reported using the exchange
on a fair value. The Group records the difference between considerations rate at the date of the transaction. Exchange differences arising on the
paid to acquire these contracts and the fair value of assets and liabilities settlement of monetary items or on reporting company’s monetary items
acquired as goodwill. at rates different from those at which they were initially recorded or
reported in previous financial statement, are recognized as income or as
The Group purchases certain specific use application software, which is in expenses in the year in which they arise.
ready to use condition, for internal use. It is estimated that such software
has a relatively short useful life, usually less than one year. The Group, In respect of forward exchange contracts entered into by the Group
therefore, charges to income the cost of acquiring such software. to hedge the foreign currency risk, the premium or discount arising at
the inception of forward exchange contracts is amortized as expense
The Company computes, depreciation and amortization using straight-line or income over the life of the contract. Exchange differences on such
method, at the rates specified in Schedule XIV to the Act or based on contracts are recognized in the statement of profit and loss in the
the estimated useful life of assets, whichever is higher. All other entities year in which the exchange rates change. Any profit or loss arising on
in the group including joint venture company and associate compute cancellation or renewal of forward exchange contract is recognized as
depreciation and amortization using straight line method based on income or as expense for the year. The Group uses foreign currency
estimated useful life of the assets. The estimated useful life considered option contracts to hedge its exposure to movement in foreign exchange
for depreciation of fixed assets is as follows: rates. Any profit or loss arising on settlement or expiry of option contracts
is recognized as income or expense for the year.
Asset description Asset life (in years)
Foreign operations of the group are classified under integral and non
Tangible assets integral foreign operations. The financial statements of integral foreign
Improvement of leasehold Lesser of estimated useful operations are translated as if the transactions of foreign operations
premises life or lease term have been those of the company itself. In translating the financial
Buildings 20 statements of a non-integral foreign operation for incorporation in
Computer equipments 3 financial statements the assets and liabilities, both monetary and
Electrical and office equipments 2-7 non-monetary are translated at closing rate. Income and expenses items
Furniture and fixtures 2-7 of the non-integral foreign operation are translated at the exchange rate
Leased assets Lesser of estimated useful at the date of the transactions; all the resulting exchange differences are
life or lease term
accumulated in foreign currency translation reserve until the disposal of
Intangible assets
the net investment.
Goodwill on acquisition 3-5
Customer contract 5
Product IPR 5 f. Revenue recognition
PeopleSoft ERP 5
Revenue is recognized as follows:
Goodwill arising on consolidation is evaluated for impairment annually.
Product licenses and related revenue:
The carrying amounts of assets are reviewed at each balance sheet date
– License fees are recognized, on delivery and subsequent milestone
if there is any indication of impairment based on internal/external factors.
schedule as per the terms of the contract with the end user.
An impairment loss is recognized wherever the carrying amount of an
asset exceeds its recoverable amount. The recoverable amount is the – Implementation/Enhancement services are recognized as services
greater of the assets net selling price and value in use. In assessing are provided when arrangements are on a time and material
value in use, the estimated future cash flows are discounted to their

basis. Revenue for fixed price contracts are recognized using the Short term compensated absences are provided for based on estimates.
proportionate Completion method to the extent of achievement of Long term compensated absences are provided for based on actuarial
customer certified milestones. valuation.
– Product maintenance revenue is recognized, over the period of the Effective April 1, 2006 the Group has early adopted Accounting Standard
maintenance contract. (AS) 15 (Revised), ‘Employee benefits’ issued by the Institute of Chartered
Accountants of India. Accordingly, the Group has recorded charge for
IT solutions and consulting services: compensated absence of Rs. 138,345 for year ended March 31, 2007.
Further in accordance with the transitional provision of AS 15 (Revised),
Revenue from IT solutions and consulting services are recognized as the compensated absence pertaining to years prior to April 1, 2006
services are provided when arrangements are on a time and material amounting to Rs. 93,378 has been adjusted against general reserve.
basis. Revenue from fixed price contracts are recognized using the
proportionate completion method to the extent of achievement of customer
certified milestones. Proportionate completion is measured based upon i. Operating leases
the efforts incurred to date in relation to the total estimated efforts to Leases of assets under which all the risks and rewards of ownership are
complete the contract. If the proportionate completion efforts are higher effectively retained by the lessor are classified as operating leases. Lease
than the related contractual milestone requiring customer acceptance, payments under operating leases are recognized as an expense on a
revenue is recognized only to the extent customer acceptance has been straight-line basis over the lease term.
received.
The Group monitors estimates of total contract revenue and cost on a j. Income-tax
routine basis throughout the delivery period. The cumulative impact of Tax expense comprises of current, deferred and fringe benefit tax.
any change in estimates of the contract revenue or costs is reflected Current income tax and fringe benefit tax is measured at the amount
in the period in which the changes become known. In the event that expected to be paid to the tax authorities in accordance with the Indian
a loss is anticipated on a particular contract, provision is made for the Income Tax Act. Deferred income taxes are recognized for the future tax
estimated loss. consequences attributable to timing differences between the financial
statement determination of income and their recognition for tax purposes.
Revenue in excess of billings is classified as unbilled revenue while billing
The effect on deferred tax assets and liabilities of a change in tax rates
in excess of earnings is classified as deferred revenue. Contractually
is recognized in income using the tax rates and tax laws that have been
recoverable expenses are deferred while other costs are expensed of in
enacted or substantively enacted by the balance sheet date. Deferred tax
the year in which it is incurred.
assets are recognized and carried forward only to the extent that there is a
Reimbursable expenses for projects are invoiced separately to customers reasonable certainty that sufficient future taxable income will be available
and although reflected as sundry debtors to the extent outstanding as at against which such deferred tax assets can be realized. In situations
period-end, are not included as revenue or expense. where there are carry forward losses, deferred tax asset is recognized
only if there is virtual certainty supported by convincing evidence that
future taxable income will be available against which deferred tax asset
g. Research and development expenses for software products can be realized. Unrecognized deferred tax assets of earlier years are
Research and development costs are expensed as incurred. Software re-assessed and recognized to the extent that it has become reasonably
product development costs are expensed as incurred until technological certain or virtually certain that future taxable income will be available
feasibility is established. Software product development costs incurred against which deferred tax assets can be realized. Deferred tax asset is
subsequent to the achievement of technological feasibility are not recognized only on those timing differences, which reverses in post tax
material and are expensed as incurred. free period, as company enjoys exemption under Section 10A of Income
Tax Act, 1961.
h. Employee benefits Tax expense relating to overseas operations is determined in accordance
The Group’s employee benefits primarily cover provident fund, with tax laws applicable in countries where such operations are domiciled.
superannuation, gratuity and compensated absences. Advance taxes and provisions for current income taxes are presented in
the balance sheet after off-setting advance taxes paid and income tax
Provident fund and superannuation fund are defined contribution schemes provisions arising in the same tax jurisdiction and enterprise.
and the Group has no further obligation beyond the contributions made to
the fund. Contributions are charged to profit and loss account in the year k. Earnings per share
in which they accrue.
The earnings considered in ascertaining the Group’s earnings per
Gratuity liability is defined benefit obligation and recorded based on share comprise the net profit after tax. The number of shares used in
actuarial valuation made at the end of the year. The gratuity liability computing basic earnings per share is the weighted average number
and net periodic gratuity cost is actuarially determined after considering of shares outstanding during the year. The number of shares used in
discount rates, expected long term return on plan assets and increases computing diluted earnings per share comprises the weighted average
in compensation levels. All actuarial gain/loss are immediately recorded number of shares considered for deriving basic earnings per share, and
to the profit and loss account and are not deferred. The Company makes also the weighted average number of shares, if any which would have
contributions to a fund administered and managed by the Life Insurance been issued on the conversion of all dilutive potential equity shares. The
Corporation of India (LIC) to fund the gratuity liability. Under this scheme, number of shares and potentially dilutive equity shares are adjusted for
the obligation to pay gratuity remains with the Company, although LIC the bonus shares and sub-division of shares.
administers the scheme.

l. Share-based compensation/payments Operating lease
The Group uses the intrinsic value method of accounting for its employee The Group has taken certain office premises and residential premises for
share-based compensation plan and other share-based arrangements. employees under operating lease, which expire at various dates through
Under this method compensation expense is recorded over the vesting year 2012. Gross rental expenses for the year ended March 31, 2007
period of the option, if the fair value of the underlying stock exceeds the aggregated to Rs. 425,610 (March 31, 2006 – Rs. 249,429). The
exercised price at the measurement date, which typically is the grant minimum rental payments to be made in future in respect of these leases
date. are as follows:
m. Provision and contingencies March 31, 2007 March 31, 2006
A provision is recognized when an enterprise has a present obligation as Not later than one year 337,542 275,051
a result of past event and it is probable that an outflow of resources will Later than one year but not
be required to settle the obligation, in respect of which a reliable estimate later than five years 633,324 537,641
can be made. Provisions are not discounted to its present value and Later than five years 17,631 82,603
are determined based on management estimate required to settle the 988,497 895,295
obligation at the balance sheet date. These are reviewed at each balance
sheet date and adjusted to reflect the current management estimates. b. Where Company is lessor
The Company has given IT equipments under finance lease for a period
3. Commitments and contingent liabilities
of five years. Present value of minimum lease payments receivable under
a. Capital commitments this finance lease as at March 31, 2007 are as follows:
Contracts remaining to be executed on capital account and not provided
for (net of advances) aggregates to Rs. 1,955,320 (includes capital As at
March 31, 2007
commitment through issuance of letter of intents of Rs. 998,819) as at
March 31, 2007 (March 31, 2006 – Rs. 801,100). Not later than one year 13,422
Later than one year but not later than five years 23,221
b. Contingent Liabilities Total minimum payments receivable 36,643
Financial bank guarantees given to banks aggregates to Rs. 39,384 as at
March 31, 2007 (March 31, 2006 – Rs. 11,111) 5. Derivatives
The Group enters into forward foreign exchange contracts and option
4. Leases contracts where the counter party is a bank. The Group purchases
forward foreign exchange contracts and option contracts to mitigate
a. Where Company is lessee
the risks of change in foreign exchange rate on receivable and payables
Finance lease denominated in certain foreign currencies. The Group considers the
risk of non-performance by the counter party as immaterial. As at
The Group takes vehicles, furniture and fixture and computer equipments March 31, 2007 and 2006 the Group has following outstanding derivative
under finance lease of upto five years. Future minimum lease payments instruments:
under finance lease as at March 31, 2007 and 2006 are as follows:
March 31, 2007 March 31, 2006
As at
March 31, 2007 Forward contracts – Sell
Principal Interest Total in USD 123,000 115,000
Not later than one year 10,842 1,687 12,529 in EUR 3,500 6,250
Later than one year but not later Option contracts – Sell
than five years 15,537 1,601 17,138 in USD 16,500 18,000
Total minimum payments 26,379 3,288 29,667
As at
March 31, 2006
Not later than one year 10,371 2,064 12,435
Later than one year but not later
than five years 19,653 1,932 21,585
Total minimum payments 30,024 3,996 34,020

The Group has following foreign currency exposures which are not of the loan to be repaid on exercise by the employee. The Trust shall
hedged as at March 31, 2007 and 2006. repay the loan obtained from the Company on receipt of payments from
employees against shares exercised or otherwise.
March 31, 2007 March 31, 2006
The Securities and Exchange Board of India (‘SEBI’) has issued the
Foreign currency receivables Employee Stock Option Scheme and Stock Purchase Guidelines, 1999
in USD 103,130 37,700 (‘SEBI guidelines’), which are applicable to stock purchase schemes for
in EUR 35,614 8,779 employees of all listed Companies. In accordance with these guidelines,
in GBP 14,601 166 the excess of market price of the underlying equity shares on the date
in JPY 446,547 – of grant of the stock options over the exercise price of the options is to
in CAD 836 – be recognized in the books of account and amortized over the vesting
in CHF 1 – period. However, no compensation cost would need to be recorded as
in Korean Won – 34,097 the scheme terms are fixed and the exercise price equals the market
in SGD 14,699 5,709 price of the underlying stock on the grant date.
in AED 1,217 –
in MYR 13,658 – A summary of the activity in the Company’s ESPS is as follows:
Foreign currency payables
in USD 128,980 55,024 Year ended Year ended
in EUR 34,695 2,844 March 31, 2007 March 31, 2006
in GBP 14,586 1,090 Number of shares
in SGD 9,446 4,581
in RUB 212 – Opening balance of
in MYR 5,435 – unallocated shares 120,888 70,606
in JPY 293,569 – Shares forfeited during
the year 21,228 50,282
Closing balance of
6. Share-based compensation/payments unallocated shares 142,116 120,888
a. Employee Stock Purchase Scheme (‘ESPS’)
Opening balance of
The Company has adopted the ESPS administered through a Trust allocated shares 2,080,546 3,393,936
(“the Trust”) to provide equity-based incentives to key employees of the Shares exercised during
Company. The Trust purchases shares of the Company from market the year (1,704,106) (1,263,108)
using the proceeds of loans obtained from the Company. Such shares Shares forfeited during
the year (21,228) (50,282)
are offered by the Trust to employees at an exercise price, which
Closing balance of
approximates the fair value on the date of the grant. The employees allocated shares 355,212 2,080,546
can purchase the shares in a phased manner over a period of five years
based on continued employment, until which, the Trust holds the shares Shares eligible for
for the benefit of the employee. The employee will be entitled to receive exercise 164,712 1,830,774
dividends, bonus, etc., that may be declared by the Company from time Shares not eligible for
to time for the entire portion of shares held by the Trust on behalf of the exercise 190,500 249,772
employees. Total allocated shares 355,212 2,080,546
On the acceptance of the offer, the selected employee shall undertake to b. Employee Stock Option Plan (‘ESOP’)
pay within ten years from the date of acceptance of the offer the cost of
the shares incurred by the Trust including repayment of the loan relatable Pursuant to ESOP scheme approved by the shareholders of the Company
thereto. The repayment of the loan by the Trust to the Company would held on August 14, 2001, the Board of Directors, on March 4, 2002
be dependent on employee repaying the amount to the Trust. In case approved the Employees Stock Option Scheme (‘the Scheme’) for issue
the employee resigns from employment, the rights relating to shares, of 4,753,600 options to the employees and directors of the Company
which are eligible for exercise, may be purchased by payment of the and its subsidiaries. According to the Scheme, the Company has granted
exercise price whereas, the balance shares shall be forfeited in favour of 4,598,920 options prior to the IPO and 559,000 options at various dates
the Trust. The Trustees have the right of recourse against the employee after IPO. As per the scheme, each of 20% of the total options granted
for any amounts that may remain unpaid on the shares accepted by the will vest to the eligible employees and directors on completion of 12, 24,
employee. The shares that an employee is eligible to exercise during the 36, 48 and 60 months and is subject to continued employment of the
initial five-year period merely go to determine the amount and scheduling employee or director with the company or its subsidiaries. Options have
exercise period of 10 years.


Shares arising from Weighted average Shares arising from Weighted average
options exercise price options exercise price
Outstanding at beginning of year 2,756,880 280 4,151,850 274

Granted 373,000 1,291 10,000 709
Exercised (2,552,795) (270) (1,317,370) (266)
Forfeited (46,600) (826) (87,600) (282)
Outstanding at end of year 530,485 989 2,756,880 280
The details of options unvested and options vested and exercisable as on March 31, 2007 are as follows:
Range of exercise prices Shares Weighted average Weighted average

exercise price (Rs.) remaining contractual
life (Years)
709-709 8,000 709 8.2
1,291-1,291 347,500 1,291 9.1
Options vested and 265-265 77,982 265 4.9
Exercisable 419-560 35,003 505 6.8
530,485 989 8.1
The weighted average share price for stock options granted during the 7. Employee benefits
year, on the date of grant was Rs. 1,291 and the estimated weighted
average fair value of options granted during the year is Rs. 596. Defined contribution plans
The fair value of options granted during the period under the ESOP was During the year ended March 31, 2007, the Group contributed following
estimated on the date of the grant using the Black-Scholes model with amounts to defined contributions plans:
the following assumptions:
Provident fund 133,753
Dividend yield 0.39% Superannuation fund 43,676
Expected volatility 37% 177,429
Risk-free rate of interest 6%
Expected life 6.5 years Defined benefit plan-gratuity
Had compensation cost been determined in a manner consistent with the The amounts recognized in the balance sheet are as follows:
fair value approach, the Group’s net income and earnings per share as
reported would have changed to the amounts indicated below: Present value of funded obligations 131,397
Fair value of plan assets (4,697)
March 31, 2007 March 31, 2006 Present value of unfunded obligations 2,787
Unrecognized past service cost –
Net income as reported 3,722,796 2,376,525 Net liability 129,487
Add: Compensation expense
included in reported income – – Amounts in balance sheet:
Less: Compensation expense Liability 129,487
determined using fair value Asset –
of options (115,596) (70,728) Net liability 129,487
Proforma net income 3,607,200 2,305,797
Basic earnings per share The amounts recognized in the profit and loss account are as follows:
As reported 47.05 31.45
Proforma 45.59 30.51 Current service cost 22,147
Diluted earnings per share Interest cost 5,928
As reported 45.76 30.62 Expected return on plan assets (136)
Proforma 44.37 29.72 Recognized net actuarial loss 31,644
Total, included in ‘employee benefit expense’ 59,583
Actual return on plan assets 146

Changes in present value of defined benefit obligation representing The Group has adopted AS 15 (Revised) from April 1, 2006 and this being
reconciliation of opening and closing balances thereof are as follows: the first year of adoption of AS 15 (Revised) the Group has not given
disclosure for the following for previous four annual financial years:
Defined benefit obligation at
beginning of the period 84,581 1. the present value of the defined benefit obligation, the fair value of
Current service cost 22,147 the plan assets and the surplus or deficit in the plan; and
Interest cost 5,928
Benefits paid (10,126) 2. the experience adjustments arising on plan liabilities and plan
Actuarial loss 31,654 assets.
Defined benefit obligation
at end of the period 134,184 8. Acquisition of companies
Changes in the fair value of plan assets representing reconciliation of
a. Mantas Inc. (“Mantas”)
opening and closing balances thereof are as follows:
On October 2, 2006, the Company through its subsidiaries
Fair value of plan assets at i-flex America inc., acquired 100% ownership in Mantas for a total
beginning of the period 1,818 consideration of USD 126,431 (Rs. 5,806,963) including transactions
Expected return on plan assets 136 cost of USD 5,002 (Rs. 229,761). The Company completed all the closing
Actuarial gain 10 formalities related to the acquisition and remitted cash to the erstwhile
Contributions by Employer 12,859 shareholders of Mantas on October 2, 2006.
Benefits paid (10,126)
Fair value of plan assets at Mantas together with its subsidiaries, provides of anti-money laundering
end of the period 4,697 and compliance solutions to customer in the financial service industry.
It is headquartered in Herndon, Virginia, United States. Mantas has
The assumptions used in accounting for the gratuity plan are set out as
Behavior Detection Platform which addresses regulatory compliance, loss
below:
prevention and revenue generation through its suite of risk management,
anti-money laundering, fraud, employee surveillances and broker and
Discount rate 8.00% trading compliance monitoring applications.
Expected return on plan assets 7.50%
Withdrawal rates The net assets of the acquired business comprise of the following:
Age (Yrs) Rates
21-30 25%
Cash 317,760
31-34 20%
Current assets 553,748
35-44 15%
Current liabilities (533,522)
45-50 1%
Fixed assets 58,964
51-59 1%
Goodwill 5,410,013
Purchase Consideration 5,806,963
The estimates of future salary increase considered in actuarial valuation
take account of inflation, seniority, promotions and other relevant factors Subsequent to acquisition i.e. October 2, 2006, the Company has
such as supply and demand in the employment market. consolidated the results of Mantas in its consolidated financial
The Group evaluates these assumptions annually based on its long-term statements.
plans of growth and industry standards. The discount rates are based on
current market yields on government bonds consistent with the currency b. i-flex Consulting (Asia Pacific) pte ltd
and estimated term of the post employment benefits obligations. Plan
On January 3, 2007, the Company through its subsidiaries
assets are administered by the LIC and invested in lower risk assets,
i-flex solutions pte ltd, acquired 100% ownership in
primarily debt securities. The Group’s contribution to the fund for the
i-flex Consulting (Asia Pacific) pte ltd erstwhile known as The Capital
year ended March 31, 2008 is expected to be Rs. 20,018 The expected
Markets Company Pte. Ltd (‘CAPCO’) for a total consideration of
benefit payments from the fund as of March 31, 2007 are below:
USD 1,050 (Rs. 46,366). The Company completed all the closing
formalities related to the acquisition and remitted cash to the erstwhile
Year ending March 31 shareholders of CAPCO on January 3, 2007.
2008 23,325 The net assets of the acquired business comprise of the following:
2009 24,564
2010 29,819 Cash 14,729
2011 35,311 Current assets 21,728
2012 42,177 Current liabilities (28,643)
2013-2017 168,660 Tangible assets 228
323,856 Goodwill 38,324
Purchase consideration 46,366
Subsequent to acquisition i.e. January 3, 2007, the Company has

consolidated the results of i-flex Consulting in its consolidated financial
statements.

9. Segment information treasury operations and data warehousing requirements. The related
activities include enhancements, implementation and maintenance
Business segments are defined as components of an enterprise about
activities. Product segment further comprises of casualty insurance
which separate financial information is available. This information is
carriers which include insurance product and process configuration, policy
reviewed and evaluated regularly by the management, in deciding how to
administration, customer management, billing and claims management.
allocate resources and in assessing the performance.
Anti-money laundering and compliance solutions are the new additions
The Group is organized geographically and by business segment. For to product segment on acquisition of Mantas.
management purposes the Group is primarily organized on a worldwide
IT solutions and consulting services comprise of bespoke software
basis into three business segments:
development, provision of computer software solutions and related
a. Product licenses and related activities (‘Products’) and consulting services arising from such activities. This segment is further
b. IT solutions and consulting services (‘Services’) sub-divided in the following sub-segments i.e. Business intelligence,
c. Knowledge Processing Services (‘KPO-Services’) Customer relationship management, Brokerage, e-commerce, Internet
services and IT and Business consulting.
The business segments are the basis on which the Group reports its
primary operational information to management. Product licenses and KPO-Services comprises of knowledge process outsourcing services to
related activities segment deals with banking software products like the the mortgage banking industry.
FLEXCUBE suite of products, Reveleus, MicroBanker and Daybreak which
The activities of the joint venture are disclosed as a separate segment.
cater to needs of corporate, retail and investment banking as well as
Year ended
March 31, 2007
Particulars Products Services KPO- Joint Corporate Eliminations Total
Services ventures
Revenue
External revenue 11,193,090 8,919,800 444,775 51,717 – – 20,609,382
Inter-segment revenue 17,953 – – – – (17,953) –
Total revenue 11,211,043 8,919,800 444,775 51,717 – (17,953) 20,609,382
Cost of revenue (4,350,515) (6,391,068) (298,432) (26,035) – – (11,066,050)
Gross profit 6,860,528 2,528,732 146,343 25,682 – (17,953) 9,543,332
Selling and marketing expenses (2,172,446) (371,270) (111,339) (1,141) – – (2,656,196)
General and administrative expenses (866,690) (424,709) (126,313) 631 (1,045,554) – (2,462,635)
Depreciation and amortization (307,078) (241,485) (24,624) (5,685) (74,151) – (653,023)
Inter segment expense – – – (17,953) – 17,953 –
Income (loss) from operations 3,514,314 1,491,268 (115,933) 1,534 (1,119,705) – 3,771,478

Net income for the year before share of
profit of associate company 3,715,174
Share of profit of associate company 7,622
Other information
Capital expenditure by segment 5,686,716 191,662 13,100 7,857 85,784 – 5,985,119
Segment assets 12,999,204 5,732,294 336,175 36,378 10,249,571 – 29,353,622
Segment liabilities 3,118,195 930,957 115,417 8,129 1,160,717 – 5,333,415
Shareholders‘ funds – – – – 24,020,207 – 24,020,207

Year ended
March 31, 2006
Particulars Products Services KPO- Joint Corporate Eliminations Total
Services ventures
Revenue
External revenue 7,637,364 6,929,821 234,670 21,148 – – 14,823,003
Inter-segment revenue 3,143 – – – – (3,143) –
Total revenue 7,640,507 6,929,821 234,670 21,148 – (3,143) 14,823,003
Cost of revenue (2,733,299) (4,904,950) (150,239) (5,611) – – (7,794,099)
Gross profit 4,907,208 2,024,871 84,431 15,537 – (3,143) 7,028,904
Selling and marketing expenses (1,623,237) (312,837) (70,855) (2,029) – – (2,008,958)
General and administrative expenses (424,170) (345,069) (159,870) (6,644) (822,053) – (1,757,806)
Depreciation and amortization (179,197) (173,576) (24,741) (2,506) (80,348) – (460,368)
Provision for impairment of goodwill – – – – (57,958) – (57,958)
Inter segment expense – – – (3,143) – 3,143 –
Income (loss) from operations 2,680,604 1,193,389 (171,035) 1,215 (960,359) – 2,743,814

Net income for the year before minority
interest, share of profit of associate
company 2,468,042
Minority interest 2,564
Share of profit of associate company 3,328
Net income for the year before prior
period items 2,473,934
Prior period items, net of taxes (97,409)
Other information
Capital expenditure by segment 304,199 316,215 78,695 5,963 181,179 – 886,251
Segment assets 4,634,950 4,036,178 385,410 14,236 8,726,745 – 17,797,519
Segment liabilities 1,580,865 498,704 76,303 7,723 1,826,752 – 3,990,347
Shareholders’ funds – – – – 13,807,172 – 13,807,172
Segment revenue and expense

Revenue is generated through licensing of software products as well as by providing software solutions to the customers including consulting services and
knowledge process outsourcing services. The expenses which are not directly attributable to a business segment are shown as corporate expenses.
Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist principally of debtors, deposits for premises and fixed assets. Segment
liabilities primarily includes deferred revenues, finance lease obligation, advance from customer, Accrued employee cost and other current liabilities.
While most such assets and liabilities can be directly attributed to individual segments, the carrying amount of certain assets and liabilities used jointly by
two or more segments is allocated to segments on a reasonable basis. Assets and liabilities that cannot be allocated between the segments are shown
as part of corporate assets and liabilities.
The following table shows the distribution of the group’s consolidated sales by geographical market:
Year Ended Year Ended

March 31, 2007 March 31, 2006
Regions % %
United States of America 8,145,729 39% 6,943,534 47%

Europe 5,699,472 28% 3,364,672 23%
Asia Pacific 3,639,511 18% 2,279,064 15%
Middle East, India and Africa 2,984,815 14% 2,083,105 14%
Latin America and Caribbean 139,855 1% 152,628 1%
20,609,382 100% 14,823,003 100%

10. Related party transactions
Names of Related Parties and description of relationship:
Relationship Names of related parties

Principal shareholder and its affiliates (“Oracle”) Oracle Global (Mauritius) Limited
(from November 18, 2005) Oracle (India) Private Limited
Oracle USA, Inc.
Oracle Corporation (Thailand) Co Ltd
Promoter Company and it’s affiliates (“Citigroup”) OrbiTech Limited

(till November 17, 2005) Polaris Software Lab Limited
Citigroup Inc.
Citibank branches
Joint Venture Flexcel International Private Limited
Key Managerial Personnel Rajesh Hukku – Chairman and Managing Director

R Ravisankar – Chief Executive Officer – International Operations and
Business Development
Deepak Ghaisas – Chief Executive Officer – India Operations, Chief
Financial Officer and Company Secretary
N R Kothandaraman (N R K Raman) – Chief Operating Officer – India
Operations
Makarand Padalkar – Chief of Staff and Investor Relations
Joseph John – Executive Vice President, Universal Banking Products
Division
V Shankar – Executive Vice President, PrimeSourcing
Olivier Trancart – Head Global Sales and Marketing
Nandkumar Kulkarni – Sr. Vice President, Retail Banking Products
Division
Atul Gupta – Sr. Vice President, Process and Quality Management Group
Vijay Sharma – Sr. Vice President, Consulting and System Integration
S Hariharan – Sr. Vice President, Infrastructure Services
Vivek Govilkar – Sr. Vice President, Human Resources
V Senthil Kumar – Chief Marketing Officer, i-flex solutions b.v.
Kishore Kapoor – CEO i-flex solutions pte ltd
Cafo Boga – COO – i-flex solutions inc.
Sajal Mukherjee – CEO SuperSolutions Corporation & Vice President
North America Sales
Sanjib Ganguly – CEO – Equinox Corporation
Yung Wu – CEO – Castek Software Inc.
S Ramakrishnan – CEO – Mantas Inc.


Oracle
Revenue 252,984 26,313 223,032 28,066
Purchase of Software 238,561 123,351 – –
Professional fees 1,197 846 – –
Other expenses 6,095 1,106 (2,917) (7,394)
Reimbursement of Expenses – 722 – –
Referral fees – 7,353 – –
Deferred revenue – – (160,688) (5,998)
Dividend paid 200,742 – – –
Citigroup (Note 1)
Revenue – 2,649,667 – –
Reimbursement of Expenses – 27,116 – –
Bank charges – 2,415 – –
Dividend paid – 161,180 – –
Interest on bank deposits – 6,860 – –
Flexcel International Private Limited

Revenue 49,929 10,626 – 6,119
Deferred revenue 3,662 – (3,662) (653)
Key managerial personnel

Rent 128 166 – 114
Rental deposit 125 – 325 200
Remuneration (Note 2) 235,336 216,109 – –
Lease fees 3,462 – – –
Dividend paid 8,441 8,097 – –
Total 1,000,662 3,241,927 56,090 20,454
Notes:
1. Balances as on March 31, 2007 and 2006 with promoters and affiliates have not been disclosed as they cease to be related party. Previous years transactions with
Citigroup have been disclosed till November 17, 2005.
2. Includes salary, bonus and perquisites.

11. Aggregate expenses

March 31, 2007 March 31, 2006

Staff welfare expenses 266,086 208,356
Contribution to provident and other funds 234,175 144,040
Professional fees 1,383,748 977,181
Rent 457,366 262,009
Power 138,783 106,763
Rates and taxes 26,342 15,052
Repairs and maintenance:
Leasehold premises 15,420 8,698
Computer equipments 40,518 44,068
Others 28,365 22,410
Insurance 60,156 43,637
Advances written off 8,351 22,800
16,184,881 11,560,863
12. During the year, the Company received income tax assessment order for financial year ended March 31, 2004. As per the order, the Company
has been allowed income tax relief in respect of foreign taxes to the extent of non 10A income earned by the Company from respective foreign
jurisdiction. Accordingly, the Company has recorded tax credit of Rs. 86,130 pertaining to periods till March 31, 2006.
13. Prior year comparatives

Prior year amounts have been reclassified, where necessary to conform with current year presentation.

& Managing Director


July 2, 2007 May 1, 2007

Consolidated statement of cash flow
2007 2006

Income before provision for taxes and prior period items 4,131,132 3,028,459
Adjustments to reconcile income before provision for taxes to cash provided by operating
activities:
Depreciation and amortization 653,023 460,368
Deferred compensation expense 33,451 –
Loss (Profit) on sale of fixed assets, net 4,554 (314)
Reversal of provision for diminution in value of investments, net – (5,528)
Loss on sale of investments – 4,785
Advances written off 8,351 22,800
Marked to market of current investment 810 –
Interest income (376,907) (294,552)
Effect of exchange difference on cash and bank balances 10,102 (34,347)
Provision for impairment of goodwill – 57,958
4,557,411 3,294,829
Changes in assets and liabilities, net of effect of acquisition
Increase in sundry debtors and unbilled revenue (2,645,095) (1,691,184)
Increase in loans and advances (1,690,241) (705,842)
Increase in current liabilities and provisions 1,190,875 1,133,689
Cash from operating activities 1,412,950 2,031,492
Payment of domestic and foreign taxes (1,083,505) (952,397)
Net cash provided by operating activities 329,445 1,079,095

Additions to fixed assets including capital work in progress (1,242,105) (1,220,372)
Net investment in lease (20,610) –
Acquisition of customer contract and product intellectual property rights (‘IPR’) – (43,009)
Acquisition of companies, net of cash acquired (5,520,840) (34,962)
Investment in Dhanalakshmi Bonds – (10,000)
Proceeds from sale of fixed assets 13,157 8,948
Bank fixed deposits having maturity of more than 90 days matured 7,679,391 7,600,014
Bank fixed deposits having maturity of more than 90 days booked (6,741,189) (8,122,931)
Proceeds from sale of investments 20,000 2,621
Interest received 352,312 301,072
Net cash used in investing activities (5,459,884) (1,518,619)

Issue of shares against Employee Stock Option Plan (‘ESOP’) scheme and options to IBM 678,514 391,761
Issue of shares to Oracle Global Mauritius Limited 5,814,999 –
Share application money from GE 361,238 40,441
Advance against equity shares to be issued under ESOP Scheme – 10,309
Repayment of loan by Employee Stock Purchase Scheme (‘ESPS’) Trust 4,925 117,500
Payment of dividend and tax thereon (436,350) (428,207)
Payment of lease obligations (16,302) (14,834)
Net cash provided by financing activities 6,407,024 116,970
Effect of exchange difference on cash and bank balances (10,102) 34,347
Net increase (decrease) in cash and cash equivalents 1,266,483 (288,207)

Cash and cash equivalents at beginning of the year 2,085,290 2,373,497
Cash and cash equivalents at end of the year (Note 1) 3,351,773 2,085,290

Consolidated statement of cash flow (continued)
2007 2006
Note 1: Component of cash and cash equivalent

Cash in hand 2,133 4,354
Cheques on hand 50,111 86,975
Balances with scheduled banks:
Deposit amount of
Preferential issue 497,263 –
Unclaimed dividend amount 2,065 2,027
Current accounts in foreign currency 1,743,342 1,275,534
Deposit account in foreign currency 332,516 389
Total cash and bank balances 7,197,754 6,869,435
Less:
Bank deposits having maturity of more than 90 days (3,824,624) (4,780,235)
Margin money deposit (19,292) (1,883)
Unclaimed dividend accounts (2,065) (2,027)
Cash and cash equivalents at end of the year 3,351,773 2,085,290

& Managing Director


July 2, 2007 May 1, 2007

Creating Value
i-flex solutions ltd and Subsidiaries

United States Generally Accepted Accounting
Principles (US GAAP).

Management’s discussion and analysis
of financial condition and results of operations
The following discussion is based on our audited consolidated financial Our solutions portfolio includes packaged applications, custom application
statements, which have been prepared in accordance with US GAAP. software development, deployment, maintenance and support services,
business and IT consulting services, technology deployment and
The financial statements are consolidated for i-flex (“the Group”) that management services and the knowledge process outsourcing in the
includes i-flex solutions ltd and its subsidiaries, i.e., i-flex solutions pte ltd., financial services domain.
i-flex America inc., i-flex solutions inc., SuperSolutions Corporation,
Castek Software Inc., Mantas Inc., i-flex Consulting (Asia Pacific) pte ltd., As of March 31, 2007, the Group cumulatively serviced 753 customers
i-flex Processing Services Limited and ISP Internet Mauritius Company. in 128 countries through its portfolio of products and services.
Investments in joint venture company, Flexcel International Private Limited,
and in associate company, Login SA, have been accounted for using We are organized by region and business segment. We have two
the equity method, since we exert significant influence over their major business segments - the Products Business (comprising product
operations. licensing, customization, implementation and support) and the Services
Business (providing customized software and consulting services). We
You should read the following discussion of our financial conditions and have also recently launched Knowledge Process Outsourcing Services
results of operations together with the detailed consolidated US GAAP (value-added knowledge outsourcing). These segments are described in
financial statements and the appended notes to those statements. Our greater detail below:
fiscal year ends on March 31 of each year.
Products
Information technology in the financial services industry The i-flex portfolio includes FLEXCUBE®, a complete banking product
The financial services industry is undergoing transformation, both in how suite for retail, consumer, corporate, investment and internet banking,
it addresses its customers, and in how it runs its operations. The entry of and asset management and investor servicing. Since its launch in 1997,
non-traditional players, global mergers and acquisitions, ever increasing more than 315 financial institutions in over 105 countries have chosen
demands from customers to deliver a ubiquitous and next generation FLEXCUBE. The product suite has been ranked the world’s No. 1 selling
customer experience, a demanding regulatory environment, and the core banking solution for five consecutive years--2002, 2003, 2004
emergence of new customer interaction channels have contributed to 2005 and 2006--by the UK-based International Banking Systems (IBS).
this shift.
The product suite’s portfolio was further enriched last year by adding
Governance, risk and compliance has emerged as a strategic priority products targeted at Islamic Banking. With the new FLEXCUBE SWIFTNet
for financial institutions. The post 9/11 environment has seen financial Services Integrator suite, banks are able to leverage the SWIFTNet
institutions grappling with the challenges of increasing regulatory (SWIFT’s IP-based messaging solution) environment for increased
complexity and also an emerging convergence of the areas of governance business value. Increased delivery capacity, and improved functionality
driven by regulations such as Sarbanes-Oxley, risk management through our association with Oracle made this the best ever year for
with regulations in Basel II, and compliance driven by regulations as FLEXCUBE.
anti-money laundering, the Patriot Act, data privacy, etc.
The ReveleusTM suite of analytical applications for the financial services
In the core transaction processing area, increasing number of financial industry is focused in the areas of risk management, customer insight,
institutions are getting more and more receptive to the value proposition and enterprise-wide financial performance. Reveleus’ Risk Analytics
and benefits of core banking transformation, and are taking concrete solves the most complex global challenges facing the financial industry
steps in that direction. today, including multi-jurisdictional Basel II compliance and operational
risk management. Reveleus was ‘Highly Commended’ for its Compliance
Information Technology (IT) plays a major role in such a scenario – acting as Initiative Innovation in The Banker Technology Awards for 2006.
an enabler of a new customer-centric outlook, and a means to improving
operational efficiency, while driving compliance to new regulatory norms, Mantas® is a wholly owned subsidiary of i-flex. Mantas’ Behavior
reducing costs and achieving competitive differentiation. Detection PlatformTM is the industry’s most comprehensive solution
for detecting risk, enhancing customer relationships, and addressing
In conjunction with the Oracle, i-flex has a very clearly articulated value regulatory requirements in the anti-money laundering, trading and broker
proposition and strategy, which is centered around the business priorities compliance areas. Mantas, along with Reveleus, offers a single, unified
and challenges of financial institutions in the market today. Our approach platform for governance, risk and compliance. Waters Magazine ranked
is centered on addressing the 4Cs that are affecting financial institutions Mantas for Best Anti-Money Laundering Solution for 2004, 2005 and
today: Competitive differentiation, Cost reduction, Customer intimacy and 2007 and Best Compliance Solution for 2003.
Compliance and risk management. i-flex has organized the entire range
of offerings and value propositions to align with these priorities. DaybreakTM is a comprehensive consumer lending system that automates
all aspects of financing from origination, to servicing and collections for
installment loans; consumer leases, revolving products and home equity
Overview lines of credit. It empowers financial services organizations to improve
i-flex® solutions is in the business of providing comprehensive IT productivity, enhance customer service and manage risks.
solutions to the financial services industry worldwide. Playing the role of
Together with Castek® Software Inc., a majority-owned subsidiary, i-flex
a specialized IT partner to financial services institutions worldwide, our
offers strategic business software and services for the global Property
approach is balanced with a wide range of products, custom solutions
and Casualty insurance market. Castek provides insurance carriers
and consulting services.
with a suite of core business processing systems for insurance product

and process configuration, policy processing, customer billing, claims Outsourcers & Top 30 Global Offshore Vendors’ by the International
management and services. Association of Outsourcing Professionals (IAOP).
Our solution portfolio rests on SOA, enabling interoperability, extensibility

and standardization. Encompassing cash management, trade, treasury, Corporate developments
payments, lending deposits, private wealth management, asset During the year, Oracle Global (Mauritius) Limited (“Oracle”) acquired
management, among others, it helps financial institutions become further ownership interest in the Company taking its overall ownership
‘model enterprises’, reduce costs, improve efficiency, and increases their holding to 81.02% as on March 31, 2007.
addressable market and asset size.
i-flex acquired Mantas, Inc., USA in August 2006. This acquisition was
Services done through the Company’s wholly owned subsidiary i-flex America inc.,
USA.
PrimeSourcingTM, i-flex’s global IT services division, provides customized
software solutions exclusively for the financial services industry i-flex acquired Capital Market Company Pte Limited (“CAPCO”),Singapore
worldwide, with a dedicated focus on delivering solutions through domain in January 2007. This acquisition was done through the company’s
specialization. While at a broad level this domain specialization focuses wholly owned subsidiary i-flex solutions pte ltd, Singapore.
on corporate, investment, private and retail banking, and the insurance
domains, each of these domains are further segmented into relevant
Business metrics
practice lines and Centers of Excellence. These solutions are supported
by a comprehensive pool of proprietary methodologies, best practices, Our total revenues in fiscal 2007 were Rs. 20,381.1 million, representing
and backed by SEI-CMMi Level 5 compliant processes. an increase of 37% from Rs. 14,835.2 million in fiscal 2006 and a CAGR
of 36% since fiscal 2004. The net income in fiscal 2007 was Rs. 2,768.1
PrimeSourcing’s Oracle practice group caters to specialized practices million, as against Rs. 2,190.4 million in fiscal 2006 and a CAGR of 16%
in Business Intelligence, Fusion Middleware (SOA), and Oracle since fiscal 2004. Our net income margins are 14% and 15% for the
Apps implementation. The division also leverages well-established fiscal years 2007 and 2006 respectively. We define net income margins
CoBIT-compliant global infrastructure and development centers to deliver for a particular period as the ratio of net income to total revenues during
services in an optimized onsite-near-shore-offshore model. such period. We had 9,068 employees as on March 31, 2007 against
6,858 at the end of the previous year.
The i-flex ConsultingTM division offers an end-to-end consulting
partnership, providing comprehensive business and technology solutions
that enable financial services enterprises to improve process efficiencies; Products business
optimize costs; meet risk and compliance requirements; define IT
Architecture; and, manage the transformation process. Consulting
Year ended
services are offered in the areas of business transformation, risk and March 31
compliance, program management, IT architecture, IT governance and 2007 2006
process improvement. i-flex’s solution approach for financial services
institutions is process-driven and rests on the i-flex Process Framework Products revenue 10,966.2 7,570.9
for Banking (iPFBTM), a tool for transforming banking operations. It is a Cost of products revenue (4,855.6) (2,978.7)
process repository created by drawing on i-flex’s domain expertise and Sales and marketing expenses (2,210.3) (1,672.0)
best practices. General and administrative
expenses (823.0) (427.5)
i-flex’s Technology Deployment & Management Services (TDMS) Depreciation and amortization (483.4) (209.8)
division specializes in conceptualizing, designing, deploying and Income from operations 2,593.9 2,282.9
managing IT Infrastructure. The i-RIMS (i-flex Remote Infrastructure Operating margin* 24% 30%
Management Services) Center manages IT infrastructure remotely from
India on a 24 x 7 basis through its on-site-offshore model. TDMS services *Operating margin is defined as income from operations from the
are based on best practices such as ITIL (IT Infrastructure Library), COBIT Products Business (excluding corporate expenses) as a percentage of
(Control Objectives for Information and related Technology) model, a total products revenue.
globally accepted standard for IT management and control framework,
and BS7799 (ISO17799). Products revenue
i-flex Processing Services is a 100% owned subsidiary of i-flex solutions, As of March 31, 2007, our products included the FLEXCUBE suite,
with consultants experienced in various functions in the asset Reveleus, Daybreak Lending Suite and Mantas Behavior Detection
management space, financial modeling and valuation KPO. The services Platform. Our products revenue represented 54% and 51% of our
provided encompass IT software, consulting, KPO and infrastructure. total revenues for fiscal years ended 2007 and 2006, respectively. Our
Equinox Corporation, a wholly owned subsidiary of i-flex, excels in products revenue were Rs. 10,966.2 million during the fiscal year ended
providing cost-effective and high-quality knowledge process outsourcing March 31, 2007, an increase of 45% from Rs. 7,570.9 million during the
services (KPO) to the financial services industry. Equinox was selected fiscal year ended March 31, 2006. In the Fiscal 2007, the license fees
in the Leaders Category for the ‘2007 Global Outsourcing 100’ by The recognition has been lower based on milestones and project completion
International Association of Outsourcing Professionals (IAOP). The Global as compared to Fiscal 2006 from 35% to 25%. Further, the amortization
Outsourcing 100 defines the standard for excellence in outsourcing cost (Rs. 185 million) because of the acquisitions in Fiscal 2007 have
service delivery. It was also recognized among the ‘Top 50 Global contributed to registered losses, this has contributed to the reduction in

the margins as compared to Fiscal 2006. The deferred revenue at the Cost of products revenue and operating expenses
end of the Fiscal 2007 increased by 79% as compared to the figure at
The cost of our products revenue consists of costs attributable to
end of the Fiscal 2006.
the implementation, enhancement, maintenance and continued
Our products revenue comprise license fees, professional fees for development, including research and development efforts, of our core
implementation and enhancement services and annual maintenance product offerings - the FLEXCUBE suite of products, Reveleus and other
contract (Post Contract Support – ‘PCS’) fees for our products. products. These costs primarily consist of compensation expenses for all
of our IT professionals working in the products business, project-related
travel expenses, professional fees paid to software services vendors and
License fee
the cost of application software for internal use.
Our standard licensing arrangements for products provide the user a
perpetual right to use the product for a pre-defined number of users Research and development costs are expensed as incurred. Software
and sites upon payment of a license fee. The license fee is a function development costs are expensed as incurred until technological feasibility
of a variety of quantitative and qualitative factors including the number is established. Software product development cost incurred subsequent
of copies sold, the number of concurrent users supported, the number to the achievement of technological feasibility is not material and is
and combination of the modules sold, and the number of sites and expensed as incurred.
geographical locations supported. The licenses are non-exclusive,
Our operating expenses include selling and marketing expenses, general
personal, non-transferable and royalty free.
and administrative expenses that consist of commissions payable to
our partners, product advertising, marketing expenses and allocated
Implementation fee overhead expenses associated with support and monitoring functions
Along with licensing of products to these customers, we provide such as human resources, facilities and infrastructure expenses, quality
services related to the implementation of these products at customer assurance and financial control, and depreciation and amortization.
sites, integration with other customer systems and enhancement of
products to address specific requirements of customers. The customer Services business
is typically charged a service fee either on a fixed price basis or a time
and material basis. Implementation and enhancement services comprise (All amounts in millions of Indian Rupees)
functional enhancements, interface building, implementation planning, Year ended
March 31
data conversion, training and product walkthroughs and are provided to
2007 2006
customers who enter into licensing arrangements with us.
Services revenue 8,970.1 7,029.7
Annual maintenance contracts fees Cost of services revenue (6,485.9) (5,014.1)
Sales and marketing expenses (379.3) (327.6)
We also earn fees relating to annual maintenance contracts after General and administrative
the implementation of a product and following the expiration of the expenses (428.6) (349.4)
warranty period. Under these agreements, we provide technical Depreciation and amortization (247.4) (173.7)
support, maintenance, problem solving and upgrades of the licensed Income from operations 1,428.8 1,164.9
products. These support agreements are typically entered for a period of Operating margin* 16% 17%
12 months.
*Operating margin is defined as income from operations from the
As the revenues from license fees and implementation and enhancement Services business (excluding corporate expenses) as a percentage of
services rendered by us depend on the number of new customers we total services revenue.
add and the implementation project lifecycle, these revenues typically
vary from year to year. The annual maintenance contracts generate Services revenue
steady revenues and would grow to the extent of new customers coming
under Post Contract Support. The percentages of our revenue from these Our services revenue represented 44% and 47% of our total revenues for
streams are as follows: the fiscal year ended March 31, 2007 and 2006. Our services revenue
were Rs. 8,970.1 million in the fiscal year ended March 31, 2007,
Fiscal Year Ended an increase of 28% from Rs. 7,029.7 million in the fiscal year ended
March 31 March 31, 2006.
2007 2006
The contracts relating to the services business are either time and
License fees 25% 35% material contracts or fixed price contracts. The percentage of total
Implementation and services revenue from time and material contracts was 89% in fiscal
customization fees 58% 47% 2007 and 81% in fiscal 2006, with the remainder of our services revenue
PCS arrangements 17% 18% attributable to fixed price contracts.
Total 100% 100%
We provide our services through offshore centers located in India, on-site
The consistency, from one period to another, of the revenues recognized teams operating at customers’ premises and our development centers
from license fees and implementation and customization services located in other parts of the world. Offshore services revenue consists of
rendered by us, depends on the number of new customers, milestones revenue from work conducted at our development centers in India and
completion and timing of the related implementation. Our Post Contract for Indian customers at their locations. On-site revenues consist of work
Support arrangements, though, generate steady revenues that are conducted at customer premises outside India and our development
therefore more predictable. centers outside India. The composition of our on-site and offshore

revenue is determined by the project life cycle. Typically, the work Cost of Knowledge Process Outsourcing (KPO) services revenue and
involving the design of new systems or relating to a system roll-out would operating expenses
be conducted onsite, while the core software development, maintenance
The cost of revenues for KPO Services consists primarily of compensation
and support activity may be conducted offshore. We received 69% and
expenses for our professionals, travel expenses and professional fees
66% of our services revenue from on-site work and 31% and 34% from
paid to vendors. We recognize these costs as incurred. Our operating
off-shore work during the fiscal years 2007 and 2006 respectively.
expenses include selling, general and administrative expenses and
Our services revenue and profits are also affected by the rate at which allocated overhead expenses.
our software professionals are utilized. The utilization rate is calculated
as the percentage billed for our personnel in a particular period to the
Geographic breakup of revenues
average number of staff that is considered billable in that same period.
For the purpose of calculating the number of billable staff, we exclude Our overall revenues continue to be well diversified. The following table
personnel that are engaged in management, administration, marketing represents the percentage breakup of our revenues for our products and
support, initial training (six months for personnel without any prior services business by region:
work experience and three months for personnel with over two years
experience) and personnel allocated to the approved internal investment Year ended Year ended
projects. Our on-site personnel deployment on projects is based on March 31, 2007 March 31, 2006
project needs and therefore such personnel are fully utilized. Utilization Products Services Total Products Services Total
rates for our services business were 71% and 73% for fiscal 2007 and Revenue Revenue Revenues Revenue Revenue Revenues
2006 respectively. We have been able to restrict the drop in the operating
USA 21% 62% 40% 25% 70% 47%
margins to only 73 basis points despite the additional staff costs due to
Middle East,
wage hikes and lower utilization.
India and
Africa 20% 8% 15% 22% 5% 14%
Cost of services revenue and operating expenses Asia Pacific 20% 16% 18% 19% 13% 16%
The cost of revenues for services consists primarily of compensation Europe 38% 14% 26% 33% 11% 22%
expenses for our software professionals; cost of application software Latin
for internal use, travel expenses and professional fees paid to software America
services vendors. We recognize these costs as incurred. Our operating and
expenses include selling, general and administrative expenses and Caribbean 1% 0% 1% 1% 1% 1%
allocated overhead expenses associated with support and monitoring Total 100% 100% 100% 100% 100% 100%
functions such as human resources, corporate marketing, information
management systems, quality assurance and financial control, and Customer concentration
depreciation and amortization.
Our operations and business depend on our relationships with a number
of large customers. Our revenues from our top ten customers for fiscal
Knowledge Process Outsourcing (KPO) services business
2007 and 2006 were at 22% of our total revenues in both the years.
(All amounts in millions of Indian Rupees) The top ten customers in the services business contributed to 30% of
Year ended the total services revenue, and the top ten customers in our products
March 31 business, contributed to 33% of the total products revenue during
2007 2006 fiscal 2007.
Services revenue 444.8 234.7 The percentage of total revenues during fiscal years 2007 and 2006
Cost of services revenue (298.4) (153.8) that we derived from our largest customer, largest five customers and
Sales and marketing expenses (111.3) (67.3) largest ten customers is provided in the accompanying table. In the
General and administrative table, various affiliates of Citigroup are classified as separate customers,
expenses (126.3) (159.9) and the last row sets forth the percentage of total revenues we earned
Depreciation and amortization (31.0) (38.1) from the various affiliates of Citigroup with respect to our products and
Income from operations (122.3) (184.4)
services business individually and with respect to our business taken as
Operating margin* (28%) (79%)
a whole.
*Operating margin is defined as income from operations from the
Knowledge Process Outsourcing (KPO) services business (excluding Products Services Total
corporate expenses) as a percentage of total services revenue Revenue Revenue
2007 2006 2007 2006 2007 2006
Knowledge Process Outsourcing (KPO) services revenue Top customer 5% 6% 5% 6% 3% 3%
Our KPO services revenue represented 2.2% and 1.6% of our total Top 5 customers 20% 22% 18% 20% 12% 13%
revenues for the fiscal year ended March 31, 2007 and 2006. Our Top 10 customers 33% 33% 30% 33% 22% 22%
KPO services revenue were Rs. 444.8 million in the fiscal year ended Citigroup and its affiliates 16% 18% 44% 55% 29% 36%
March 31, 2007, an increase of 90% from Rs. 234.7 million in the
fiscal year ended March 31, 2006. This business line is currently in Trade receivables
investment phase, and in spite of these investments, due to aggressive
cost management, we were able to reduce the losses in the business Trade receivables as of fiscal March 31, 2007 and 2006 were Rs. 8,644.4
from 79% to 28%. and Rs. 5,655.4 million respectively. Our days sales outstanding (which

is the ratio of sundry debtors to total sales in a particular year multiplied the dividends on shares allocated to them by the Trust. The employee is
by 365) for fiscal 2007 and 2006 were approximately 115 and 121 allowed a period of ten years to pay the exercise price. The Trustees have
respectively. The Group periodically reviews its account receivables the right of recourse against the employee for any amounts that may
outstanding as well as the aging quality of the account receivables, remain unpaid on the shares accepted by the employee.
customer relationship and history of the client. The following table
presents the age profile of our debtors: No compensation cost was recorded if the exercise price equals the fair
value of the underlying stock on the grant date. The shares held by the
2007 2006 Trust have been considered as outstanding for basic EPS purposes, to
the extent these shares have been allocated to employees pursuant to
the above schemes and are eligible to be exercised by the employee.
Period in days For diluted EPS, shares not eligible for exercise are considered in
0-180 87% 86% determining weightage number of shares outstanding using the treasury
More than 180 13% 14%
stock method. The fair value of the unallocated shares held by the Trust
Total 100% 100%
is recorded as deferred share-based compensation.
Foreign currency and treasury operations

Employee Stock Option Plan (‘ESOP’)
A substantial portion of our revenues is generated in foreign currencies
At the Annual General Meeting of the shareholders of the Company
while a majority of our expenses are incurred in Indian Rupees with the
held on August 14, 2001, the Company introduced an additional ESOP,
remaining expenses incurring in US Dollars and European currencies.
pursuant to which equity shares not exceeding an additional 7.5% of
We follow a conservative philosophy of treasury operations and the policy the issued and paid-up equity share capital of the Company had been
is to invest funds substantially in time deposits with well-known and sound earmarked for grant, at any given time to present and future employees
Indian and foreign banks. The Company has ensured adequate controls and directors of the Company and its existing and future subsidiaries.
over asset management including cash management operations, credit Pursuant to the above resolution, the Board of Directors, at their meeting
management and debt collection. held on March 4, 2002 approved the Employees Stock Option Scheme
(the “Scheme”) for issue of 4,753,600 options to the employees and
The Group also balances funds in USD accounts or INR deposits directors of the Group. According to the ESOP, the Company has
based on the comparative exchange rates, interest rates and currency granted 4,548,920 options to the eligible employees and directors of
requirements. The Group books forward covers from time to time in line the Company and its subsidiaries, prior to the IPO, and 559,000 options
with its treasury management philosophy. thereafter. As per the terms of the Scheme, the exercise price would
equate the IPO price for the options granted prior to the IPO and at the
fair market value on the date of grant for options granted thereafter. 20%
Income taxes of the total options granted under the Scheme will vest to the eligible
Currently, we partially benefit from the tax holidays the Government employees and directors on the completion of 12, 24, 36, 48 and 60
of India provides to software products and IT services exporters from months and is subject to the continued employment of the employee or
specially designated software technology parks in India. As a result of director with the Company or its subsidiaries.
these incentives, our operations have been subject to relatively lower tax
A summary of the activity in the Group’s ESOP for year ended
liabilities in India. These tax incentives currently include a 10-year tax
March 31, 2007 is as follows:
holiday from Indian corporate income-taxes for the operation of seven
of our Indian facilities. As a result a substantial portion of our pre-tax
income has not been subject to tax in recent years. Shares Weighted Weighted Aggregate
arising average average intrinsic
The Finance Act, 2000 restricts the ten-year tax holiday available from from exercise remaining value
options price contractual (in
the fiscal year in which the undertaking begins to manufacture or produce life thousands)
or until fiscal 2009, whichever is earlier. Accordingly, facilities set up (in years)
after fiscal 2000 will enjoy the benefit of the tax holiday only until fiscal
2009. For eight of our facilities, these benefits expire in stages through Outstanding at
2009. Income taxes also include foreign taxes representing income taxes beginning of
payable overseas by us in various countries. year 2,756,880 280
Granted 373,000 1,291
Exercised (2,552,795) (270)
Employee Stock Purchase Scheme (‘ESPS’) Forfeited (46,600) (826)
Outstanding at
On March 29, 1998 the Company adopted the ESPS to provide end of year 530,485 989 8.1 579,634
equity-based incentives to key employees of the Company (“1998
Scheme”). Subsequently on April 1, 1999, April 1, 2000, April 1, 2001 Options
and June 1, 2004 the Company adopted other Stock based schemes expected to
(“1999 Scheme”, “2000 Scheme”, “2001 Scheme” and “2004 Scheme”). vest 417,500 1,165 8.8 382,701
These schemes, which have similar terms, are administered through a Options
Trust (the “Trust”). The Trust purchases shares of the Company using the vested and
exercisable 112,985 339 5.5 196,893
proceeds of loans obtained from the Company. Such shares are offered
by the Trust to employees at an exercise price, which approximates the Shares reserved as at March 31, 2007 for the future issuance of
fair value on the date of the grant. The right to purchase the shares vests options was 104,100. The -average fair value of options granted during
over a period determined at the grant date. Employees are entitled to

the year ended March 31, 2006 and 2007 was Rs. 334 and Rs. 596, in countries such as Russia, China, Latin America, and the USA and
respectively. enhanced the Reveleus Basel II suite. In our Services business, we invested
in creating a new Insurance line of business as well as in creating the
Oracle Competency Center. Further, our KPO business, which currently is
Analysis of our financial results
in investment phase, has also contributed to the reduction in the overall
Comparison of fiscal 2007 with fiscal 2006 gross margins as compared to the last financial year.
Revenues Our cost of products revenue in the fiscal year ended March 31, 2007
Our total revenues in the fiscal year ended March 31, 2007 were was Rs. 4,855.6 million, an increase of 63% over our cost of products
Rs. 20,381.1 million, an increase of 37% over our total revenues of revenue of Rs. 2,978.7 million in the fiscal year ended March 31, 2006.
Rs. 14,835.2 million in the fiscal year ended March 31, 2006. The Our cost of products revenue as a percentage of products revenue was
increase in revenues was attributable to a 45% increase in the revenues 44% in the fiscal year ended March 31, 2007, compared to 39% in the
from our products business and 28% increase in the revenues from the fiscal year ended March 31, 2006. This increase, as stated above, was
services business. largely attributable to the higher investments in the product business.
Our cost of services revenue in the fiscal year ended March 31, 2007
Products revenue was Rs. 6,485.9 million, an increase of 29% over our cost of services
Our products revenue in the fiscal year ended March 31, 2007 were revenue of Rs. 5,014.1 million in the fiscal year ended March 31, 2006.
Rs. 10,966.2 million, an increase of 45% over our products revenue The cost of services revenue as a percentage of services revenue was
of Rs. 7,570.9 million in the fiscal year ended March 31, 2006 on the 72% in the fiscal year ended March 31, 2007, compared to 71% in the
strength of strong and large customer wins. The revenues from license fiscal year ended March 31, 2006.
fees comprised 25% of the revenues, implementation fees comprised
58% and Annual Maintenance Contracts comprised 17% of the revenues Sales and marketing expenses
for the fiscal 2006.
Our sales and marketing expenses in the fiscal year ended March 31, 2007
were Rs. 2,701 million, an increase of 31% over our sales and marketing
Services revenue expenses of Rs. 2,066.9 million in the fiscal year ended March 31, 2006.
Our services revenue in the fiscal year ended March 31, 2007 were Our sales and marketing expenses as a percentage of total revenues
Rs. 8,970.1 million, an increase of 28% over our services revenue of was at 13% for the fiscal year ended March 31, 2007 compared to
Rs. 7,029.7 million in the fiscal year ended March 31, 2006. Revenues 14% for the fiscal year ended March 31, 2006. The decrease in sales
from time and material contracts comprised 89% of the revenues and and marketing expenses was principally due to operational synergies in
fixed price contracts comprised 11% for the fiscal 2007. international marketing efforts and reduction in referral fees this year.
Our sales and marketing expenses for our products business in the fiscal
Knowledge Process Outsourcing (KPO) revenue year ended March 31, 2007 were Rs. 2,210.3 million, an increase of
Our revenues from KPO Services in the fiscal year ended March 31, 2007 32% over our sales and marketing expenses for our products business
were Rs. 444.8 million, an increase of 90% over our revenues from KPO of Rs. 1,672 million in the fiscal year ended March 31, 2006. Sales
Services of Rs. 234.7 million in the fiscal year ended March 31, 2006. and marketing expenses for our products business as a percentage of
products revenue was 20% in the fiscal year ended March 31, 2007,
compared to 22% in the fiscal year ended March 31, 2006. The decrease
Interest and other income in sales and marketing expenses was largely due to reduction in referral
Our interest and other income in the fiscal year ended March 31, 2007 fees this year.
was Rs. 348.6 million, an increase of 14% over our interest and other
Our sales and marketing expenses for our services business in the fiscal
income of Rs. 305.7 million in the fiscal year ended March 31, 2006.
year ended March 31, 2007 were Rs. 379.3 million, an increase of 16%
The increase was mainly due to increase in interest from Bank Deposits
over our sales and marketing expenses for our services business of
of Rs. 77.2 million as compared to fiscal 2006, due to rise in interest
Rs. 327.6 million in the fiscal year ended March 31, 2006. Sales and
rates. This increase has been off set by foreign exchange loss amounting
marketing expenses for our services business as a percentage of services
to Rs. 30.3 million during the year mainly due to appreciation of 2.8%
revenue was 4% in the fiscal year ended March 31, 2007, compared to
in Dollar/Rupee.
5% in the fiscal year ended March 31, 2006.
Cost of revenues and operating expenses

General and administrative expenses
Cost of revenue
Our general and administrative expenses in the fiscal year ended
Our cost of revenues in the fiscal year ended March 31, 2007 was March 31, 2007 were Rs. 2,454.6 million, an increase of 47% over
Rs. 11,639.9 million, an increase of 43% over our cost of revenues our general and administrative expenses of Rs. 1,669.3 million in the
of Rs. 8,146.7 million in the fiscal year ended March 31, 2006. Our fiscal year ended March 31, 2006. In the financial year, we expanded
cost of revenues as a percentage of total revenue was 57% in the our facilities to meet the growth requirements and created new
fiscal year ended March 31, 2007, compared to 55% in the fiscal year development facilities in Bangalore, Chennai and Pune and their costs
ended March 31, 2006. We invest significantly both in our products and like rent, power and communication. Our general and administrative
services businesses to meet emerging market requirements, and create expenses as a percentage of total revenues was 12% in the fiscal year
the foundation for the growth in future. In the financial year 2006-07, ended March 31, 2007, compared to 11% in the fiscal year ended
we invested in enhancing the product suite to meet the requirements March 31, 2006.

General and administrative expenses for our products business in the Human capital
fiscal year ended March 31, 2007 were Rs. 823 million, an increase
We recruit graduates from leading engineering and management
of 93% over our general and administrative expenses for our products
institutions. We also hire functional experts from the banking industry.
business of Rs. 427.5 million in the fiscal year ended March 31, 2006.
We had a net addition of 2,210 employees during the fiscal year taking
The increase is attributable to G&A expenses of Mantas Inc. getting
our employee strength to 9,068 employees as on March 31, 2007. The
added this year as also increased rent, power and communication costs
blend of functional knowledge and technical expertise, coupled with i-flex
of the new office premises. Our general and administrative expenses for
training and experience make our employees unique.
our Products Business as a percentage of products revenue was 8% in
the fiscal year ended March 31, 2007, compared to 6% in the fiscal year We enjoy cordial relationships with our employees and endeavor to
ended March 31, 2006. give them an excellent, professionally rewarding and enriching work
environment. We operate an effective performance management system
General and administrative expenses for our services business in the
with a focus on employee development. This measures key result
fiscal year ended March 31, 2007 were Rs. 428.6 million, an increase
areas, competencies and training needs ensuring all-round employee
of 23% over our general and administrative expenses for our services
development.
business of Rs. 349.4 million in the fiscal year ended March 31, 2006.
Our general and administrative expenses for our services business as a
percentage of services revenue remained at 5% in the fiscal year ended Risks and concerns
March 31, 2007, and the fiscal year ended March 31, 2006.
Quantitative and qualitative disclosures about market risk
Income taxes Our primary market risk exposures are due to the following:
Our provision for income taxes in the fiscal year ended March 31, 2007 – foreign exchange rate fluctuations,.
was Rs. 342.5 million, a decrease of 34% over our provision for income
taxes of Rs. 515.2 million in the fiscal year ended March 31, 2006. Our – fluctuations in interest rates; and
effective tax rate was 11% in the fiscal year ended March 31, 2006
compared to 19% in the fiscal year ended March 31, 2006. The decrease – fluctuations in the value of our investments.
in tax rate is attributable to the higher generation of revenue from units As of March 31, 2007, we had Cash and Bank Balances of Rs. 7,182.2
availing tax holidays in India. million out of which Rs. 3,824.6 million was in interest–bearing bank
deposits. Consequently, we face an exposure on account of fluctuation
Income from operations and net income in interest rates. These funds were invested in bank deposits of longer
maturity (more than 90 days) to earn a higher rate of interest income.
As a result of the foregoing factors, income from operations increased
by 15% to Rs. 2,752.8 million in fiscal 2007 from Rs. 2,392.5 million A substantial portion of our revenues is generated in foreign currencies
in fiscal 2006, and net income increased by 26% to Rs. 2,768.1 million while a majority of our expenses are incurred in Indian Rupees and the
in fiscal 2007 from Rs. 2,190.4 million in fiscal 2006. In the current balance in US Dollars and European currencies. Our functional currency
financial year, our recent acquisitions contributed negatively to the tune for Indian operations and consolidated financials is the Indian Rupee.
of almost Rs. 502 million to the net income, while adding Rs. 1,324 We expect the majority of our revenues will continue to be generated
million to the top line, thus effectively resulting in negative contribution in foreign currencies for the foreseeable future and a significant portion
to the margins by 3%. These acquisitions are in the investment phase of our expenses, including personnel costs and capital and operating
and add strategic value to our business and growth prospects. Our net expenditure, to continue to be incurred in Indian Rupees.
margins decreased to 14% from 15% in fiscal 2006. We define net
income margins for a particular period as the ratio of net income to total In addition, we face normal business risks such as global competition
revenues during such period. and country risks pertaining to countries that we operate in.
Liquidity and capital resources Integration of mergers and acquisitions

Our capital requirement relate primarily to financing the growth of our i-flex has acquired companies in the past, i.e.,
business. We have historically financed the majority of our working capital, SuperSolutions Corporation, USA, ISP Internet Mauritius Company,
capital expenditure and other requirements through our operating cash Mauritius and Castek Software Inc., Canada. During the year, we
flow. During fiscal 2007 and 2006, we generated cash from operations acquired Mantas Inc., Virginia, and i-flex Consulting (Asia Pacific) pte ltd.,
of Rs. 820 million and Rs. 1,415.3 million respectively. Singapore in an all cash deal. These mergers and acquisitions involve
i-flex is a zero debt company. We expect that our primary financing inherent risks, including:
requirements in the future will be capital expenditure and working – unforeseen contingent risks or latent liabilities relating to these
capital requirements in connection with the expansion of our business. businesses that may only become apparent after the merger or
We believe that the cash generated from operations will be sufficient to acquisition is finalized;
satisfy our currently foreseeable capital expenditure and working capital
requirements. – integration and management of the operations, sales and marketing,
personnel and systems;

The company as part of its policies ensures that the companies acquired First, there is increased traction in large institutions looking to replace
are successfully integrated into the mainstream business. their core systems. Multi-country standardization opportunities also
form an integral part of the core banking replacement strategy for
global banks. i-flex is already well positioned in this market with its
Swot analysis
comprehensive solutions stack and is further expanding the portfolio to
Strengths meet unique opportunities, especially in the developed market. Second,
there are opportunities opening up in replacing older packages in banks.
– One of the most comprehensive solutions portfolio for the financial
While this was always a traditional market segment, the opportunities in
services industry
these areas are significantly increasing. Third, risk and compliance is the
– Global client base and market reach
key priority area for banks and, again, i-flex solutions’ GRC framework is
– Strong backing of Oracle
a leading solution in this area.
– Solutions based on world-class technology backed by strong R&D
– High-quality manpower resources, with deep domain expertise in Lastly, outside i-flex’s traditional market of core banking, there are
the financial industry emerging opportunities in other verticals within the financial services
industry. i-flex recently entered the insurance vertical and it plans to
Weaknesses continue to expand the capability within the financial services domain.
– Weakening of Indian Rupee against the US Dollar

– Wage inflation pressure Acquisitions
a. Mantas Inc. (“Mantas”)
Opportunities On October 2, 2006, i-flex, through its subsidiaries i-flex America inc.,
– Increasing investment momentum in core banking systems by large acquired 100% ownership in Mantas Inc. i-flex completed all the closing
and global financial institutions formalities related to the acquisition and remitted cash to the erstwhile
– India as preferred outsourcing destination stockholders of Mantas on October 2, 2006.
– Compliance, Risk and Governance is on the top of the investment
Mantas, together with its subsidiaries, provide anti-money laundering
agenda for financial institutions
and compliance solutions to customer in the financial service industry.
– Expanding solutions portfolio and entry into new market segments
It is headquartered in Herndon, Virginia, United States. Mantas’ Behavior
such as consumer finance, business analytics, Basel II, anti-money
Detection Platform addresses regulatory compliance, loss prevention and
laundering
revenue generation through its suite of risk management, anti-money
laundering, fraud, employee surveillances and broker and trading
Threats compliance monitoring applications.
– Increasing competition
– Legislative and visa related travel restrictions b. i-flex Consulting (Asia Pacific) pte ltd
On January 3, 2007, i-flex through its subsidiary i-flex solutions pte ltd,
Outlook
acquired 100% ownership in i-flex Consulting (Asia Pacific) pte ltd erstwhile
i-flex solutions offers the most comprehensive footprint of solutions for known as The Capital Markets Company Pte. Ltd. (“CAPCO”). The
the financial services industry today. These solutions cover customer Company completed all the closing formalities related to the acquisition
delivery across all customer touch points, core banking processing, and remitted cash to the erstwhile shareholders of CAPCO on
transaction processing across different verticals and different product January 3, 2007.
processes across consumer banking, corporate banking, investment,
asset management, and analytics for measuring the performance of This acquisition will strengthen i-flex Consulting’s ability to provide
the business and providing insights to decision-making teams to enable high end consulting to banks in the Asia Pacific region. The combined
timely, mid-course corrections. i-flex – CAPCO team provides a compelling pool of expertise to assist
banks in business transformation, management of large technology
There are several key opportunities in the market place for i-flex. implementations and addressing risk and compliance requirements.
Large corporate and retail banking assignments, emerging areas
such as Islamic Banking, private wealth management, enterprise risk
Internal control systems and their adequacy
management and compliance and IT outsourcing are some of the areas
where i-flex sees opportunities in the next few years. The group has i-flex group has in place adequate systems of internal controls and
been engineering a series of acquisitions to expand into software for risk documented procedures covering all financial and operating functions.
management, anti-money laundering, consumer lending, and property These systems have been designed to provide reasonable assurance with
and casualty insurance. regard to maintaining proper accounting controls, monitoring economy
and efficiency of operations, protecting assets from unauthorized use or
losses, and ensuring reliability of financial and operational information.
The Group continuously strives to align all its processes and controls with
global best practices.

Report of independent auditors
The Board of Directors and Shareholders of

i-flex Solutions Limited
We have audited the accompanying consolidated balance sheets of evaluating the overall financial statement presentation. We believe that
i-flex Solutions Limited (“the Company”) as of March 31, 2006 and 2007, our audits provide a reasonable basis for our opinion.
and the related consolidated statements of income, shareholders’ equity
and cash flows for the years then ended. These financial statements are In our opinion, the financial statements referred to above present
the responsibility of the Company’s management. Our responsibility is to fairly, in all material respects, the consolidated financial position
express an opinion on these financial statements based on our audits. of i-flex Solutions Limited at March 31, 2006 and 2007, and the
consolidated results of its operations and its cash flows for the years
We conducted our audits in accordance with auditing standards generally then ended, in conformity with accounting principles generally accepted
accepted in the United States. Those standards require that we plan in the United States.
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were As discussed in Note 2 to the consolidated financial statements, the
not engaged to perform an audit of the Company’s internal control over Company adopted the provisions of Statement of Financial Accounting
financial reporting. Our audits included consideration of internal control Standards (“SFAS”) No. 123(R) (revised 2004), Share-Based Payment,
over financial reporting as a basis for designing audit procedures that are effective April 1, 2006 and, SFAS No. 158, Employer’s Accounting
appropriate in the circumstances, but not for the purpose of expressing for Defined Benefit Pension and Other Postretirement Plans, effective
an opinion on the effectiveness of the Company’s internal control over March 31, 2007.
financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts
S. R. Batliboi & Associates
and disclosures in the financial statements, assessing the accounting
Mumbai, India
principles used and significant estimates made by management and
July 2, 2007

Consolidated balance sheets
as at March 31
(All amounts in thousands except share data)
2006 2007 2007

Rs. Rs. USD
Assets
Current assets
Cash and cash equivalents 2,082,098 3,338,320 77,455
Bank deposits 4,780,235 3,824,624 88,738
Accounts receivable, net of allowance of Rs. 99,439 and
Rs. 182,208 (USD 4,228), respectively 5,223,217 7,279,653 168,901
Accounts receivable – related parties 34,185 223,032 5,175
Unbilled revenue 398,023 1,141,738 26,491
Marketable securities 10,000 9,190 213
Prepaid income taxes 400,952 926,921 21,506
Rental deposit 38,045 819,306 19,010
Prepaid expenses 149,241 362,678 8,415
Deferred tax assets – 10,132 235
Other current assets 358,743 749,748 17,396
Total current assets 13,474,739 18,685,342 433,535
Goodwill 549,535 4,394,279 101,955

Intangible assets, net 343,265 1,407,435 32,655
Property and equipment, net 2,174,282 2,894,452 67,157
Investment in equity investees 15,616 24,777 575
Other investments 33,254 33,254 772
Rental deposits 1,206,553 1,675,221 38,868
Restricted bank deposits 1,883 19,292 448
Deferred tax assets 70,762 131,351 3,047
Total assets 17,869,889 29,265,403 679,012
Liabilities and shareholders’ equity

Current liabilities
Accounts payable 132,396 308,256 7,152
Accounts payable – related parties 7,394 2,917 68
Accrued employee costs 997,055 1,309,876 30,392
Deferred revenue – current 1,834,950 3,343,266 77,570
Obligation under capital leases – current 10,371 10,842 252
Other current liabilities 1,056,821 1,501,921 34,847
Total current liabilities 4,038,746 6,477,078 150,281
Deferred rent – 30,263 702

Deferred revenue – non current 131,838 43,021 998
Obligation under capital leases – non current 19,653 15,537 360
Deferred tax liabilities 1,649 1,745 40
Accrued pension liability 55,253 118,184 2,742
Commitments
Shareholders’ equity
Equity shares, Rs. 5 par value, authorized: 100,000,000 shares
Issued and outstanding: 76,288,367 and 83,288,580 shares,
respectively 381,442 416,443 9,662
Equity shares subscribed: 38,900 and 395,529 shares, respectively 10,309 401,679 9,320
Additional paid-in-capital 3,070,283 9,780,388 226,923
Deferred share-based compensation – Employees Share Purchase
Scheme (“ESPS”) trust (580,663) (13,472) (459,900)
Accumulated other comprehensive loss (74,920) (465,273) (10,795)
Retained earnings 10,695,295 13,027,001 302,251
Total shareholders’ equity 13,622,509 22,579,575 523,889
Total liabilities and shareholders’ equity 17,869,889 29,265,403 679,012
See accompanying notes.

Consolidated statements of income
(All amounts in thousands, except per share data)
2006 2007 2007

Rs. Rs. USD
Revenue
Third parties 12,116,411 20,154,888 467,632
Related parties 2,718,835 226,182 5,247
14,835,246 20,381,070 472,879
Cost of revenue (excluding depreciation and amortization) (a) (8,146,671) (11,639,948) (270,069)
Gross profit 6,688,575 8,741,122 202,810
Operating expenses
Selling and marketing expenses (a) (2,066,853) (2,700,960) (62,667)
General and administrative expenses (a) (1,669,277) (2,454,566) (56,951)
Depreciation and amortization (501,947) (832,782) (19,322)
Impairment of goodwill (57,958) – –
Operating income 2,392,540 2,752,814 63,870
Non-operating income (expense), net

Interest income (a) 294,381 371,603 8,622
Other income (expense), net 11,323 (23,051) (535)
Income before income taxes 2,698,244 3,101,366 71,957
Provision for income taxes (515,152) (342,471) (7,946)

Equity in net income of equity investees 4,713 9,161 213
Minority interest 2,564 – –
Net income 2,190,369 2,768,056 64,224
Earnings per share

Basic 29.13 35.13 0.82
Diluted 28,24 34.22 0.79
(a) Includes the following related party amounts:

Cost of revenue (excluding depreciation and amortization) 124,197 239,758 5,563
Selling and marketing expenses 7,353 – –
General and administrative expenses 3,521 6,095 141
Interest income 6,860 – –

Consolidated statements of cash flows
(All amounts in thousands)
2006 2007 2007

Rs. Rs. USD

Net income 2,190,369 2,768,056 64,224
Adjustments to reconcile net income to net cash

provided by operating activities:
Depreciation and amortization 501,947 832,782 19,322
Impairment of goodwill 57,958 – –
Provision for doubtful accounts, net 52,535 87,611 2,033
Advances written off 22,800 8,351 194
Share-based compensation cost 8,199 121,380 4,678
Deferred tax benefit (69,554) (70,625) (1,639)
(Profit) loss from sale of property and equipment, net (314) 4,554 106
Profit on sale of investment (743) – –
Deferred compensation cost – 33,451 776
Equity in net income of equity investee (4,713) (9,161) (213)
Minority interest (2,564) – –
Changes in operating assets and liabilities, net of effect of acquisitions

Accounts receivable and unbilled revenue (1,856,985) (2,683,200) (62,255)
Other current assets and other assets (896,308) (2,323,124) (53,901)
Current liabilities and other liabilities 1,412,681 2,050,014 45,703
Net cash provided by operating activities 1,415,308 820,089 19,028

Acquisition of companies, net of cash acquired (34,962) (5,523,827) (128,163)
Purchase of property and equipment including capital work-in-progress (1,214,086) (1,244,243) (28,869)
Acquisition of customer contracts and product intellectual property
rights (‘IPR’) (43,009) – –
Proceeds from sale of property and equipment 8,948 13,157 305
Proceeds from bank deposits 7,600,014 7,679,391 178,176
Investment in bank deposits (8,122,931) (6,741,189) (156,408)
Net investment in lease – (20,610) (478)
Investment in Dhanalakshmi Bond (10,000) – –
Proceeds from sale of investment 2,621 20,000 464
Net cash used in investing activities (1,813,405) (5,817,321) (134,973)

Shares subscribed but not issued 10,309 – –
Issue of shares to Oracle Global (Mauritius) Limited – 5,814,999 134,919
Exercise of warrants 40,441 361,238 8,381
Issue of shares against Employee Stock Option Plan (‘ESOP’) scheme
and options to IBM 391,761 678,514 15,743
Repayment of loan by Employee Stock Purchase Scheme (‘ESPS’) Trust 117,500 4,925 114
Capital lease payments (12,169) (3,441) (80)
Dividend and tax thereon (428,207) (436,350) (10,124)
Net cash provided by financing activities 119,635 6,419,885 148,953
Net (decrease) increase in cash and cash equivalents (278,462) 1,422,653 33,008
Effect of exchange rate changes on cash and cash equivalents (11,486) (166,431) (3,862)
Cash and cash equivalents at the beginning of the year 2,372,046 2,082,098 48,309
Cash and cash equivalents at the end of the year 2,082,098 3,338,320 77,455
Supplemental disclosure of cash flow information

Taxes paid 952,397 1,007,808 23,383
Accounts payable related to the purchase of property and equipment 54,832 45,937 1,066
Assets acquired under capital leases 13,431 9,133 212

Consolidated statements of shareholders’ equity
for the years ended March 31

(All amounts in Indian Rupees, except number of share)
Equity shares Equity shares Additional Deferred share Accumulated other Retained Total
Number Par Value subscribed paid-in-capital based compensation in comprehensive loss earnings shareholders’
respect of ESPS Trust equity
Balance at April 1, 2005 74,879,650 374,398 6,546 2,516,636 (478,208) (54,700) 8,933,133 11,297,805
Options exercised but not issued – – 10,309 – – – – 10,309

Shares issued for exercised options 1,317,370 6,587 (6,546) 343,423 – – – 343,464
Shares issued for options exercised by IBM 91,347 457 – 53,207 – – – 53,664
Fair value of options granted to GE – – – 57,825 – – – 57,825
Repayment of loan by the ESPS trust – – – − 117,500 – – 117,500
Deferreds share-based compensation - ESPS trust – – – 99,192 (99,192) – – –
Cash dividend – – – – – – (428,207) (428,207)
Comprehensive income (loss)
Net income – – – – – – 2,190,369 2,190,369
Foreign currency translation – – – – – (20,220) – (20,220)
Comprehensive income 2,170,149
Balance at March 31, 2006 76,288,367 381,442 10,309 3,070,283 (459,900) (74,920) 10,695,295 13,622,509
Warrants exercised but not issued – – 401,679 – – – – 401,679

Shares issued for exercised options 2,552,795 12,764 (10,309) 676,059 – – – 678,514
Shares issued to Oracle Global (Mauritius) Limited 4,447,418 22,237 – 5,792,762 – – – 5,814,999
Repayment of loan by the ESPS trust – – – − 4,925 – – 4,925
Deferred share-based compensation – ESPS trust – – – 125,688 (125,688) – – –
Share-based compensation – – – 115,596 – – – 115,596
Cash dividend – – – – – – (436,350) (436,350)
Cumulative effect of adoption of SFAS No. 158 – – – – – (47,942) – (47,942)
Comprehensive income (loss)
Net income – – – – – – 2,768,056 2,768,056
Changes in fair value of available for sale
securities – – – – – (810) – (810)
Foreign currency translation – – – – – (341,601) – (341,601)
Total Comprehensive income 2,425,645
Balance at March 31, 2007 83,288,580 416,443 401,679 9,780,388 (580,663) (465,273) 13,027,001 22,579,575
(All amounts in USD, except number of share)
Balance at March 31, 2007 83,288,580 9,662 9,320 226,923 (13,472) (10,795) 302,251 523,889
7/27/2007 3:32:43 PM
Notes to consolidated financial statements
for the year ended March 31, 2006 and 2007
(All amounts in thousands, except share data)
1. Organization and description of business 2.3. Foreign currency translation

i-flex solutions ltd (“i-flex” or the “Company”) was incorporated in India The Group’s foreign operations use their respective local currency as
with limited liability on September 27, 1989. The Company along with their functional currency. Accordingly, assets and liabilities of foreign
its subsidiaries is principally engaged in the business of providing subsidiaries are translated into Rs. at exchange rates in effect at the
information technology solutions and business process outsourcing balance sheet date, while revenue and expenses are translated at average
services to the financial services industry worldwide. i-flex has a suite exchange rates prevailing during the year. Translation adjustments are
of banking products, which caters to the needs of corporate, retail, reported as a component of accumulated other comprehensive income
investment banking, treasury operations and data warehousing. in shareholders’ equity.
i-flex is a subsidiary of Oracle Global Mauritius Limited (‘Oracle’) with Foreign currency denominated assets and liabilities are translated into
Oracle having an 81.02% ownership interest in the Company as at the functional currency at exchange rates in effect at balance sheet
March 31, 2007. date. Foreign currency transaction gains and losses are recorded in the
consolidated statements of income within other income.
2. Summary of significant accounting policies
2.4. Revenue recognition
2.1. Basis of preparation
The Group derives revenue from software licensing and related services
The accompanying consolidated financial statements include the and IT solutions and consulting services.
accounts of i-flex and its subsidiaries (hereinafter collectively referred
to as the “Group”) and are prepared in accordance with United States
Software licensing and related services
generally accepted accounting principles (“US GAAP”). All inter-company
balances and transactions have been eliminated upon consolidation. An The Group enters into agreements to generally convey a perpetual
acquired business is included in the Group’s consolidated statements of license to its customers and also provides implementation services and
income with effect from the date of the acquisition. customization services as required. Customers also have the option
to enter into a maintenance arrangement (Post Contract Support or
The Company uses the Indian Rupee (“Rs.”) as its reporting currency. “PCS”), which is generally an annual contract, and commences when the
For the convenience of readers, the consolidated financial statements implementation is complete and the warranty period has ended.
for the year ended March 31, 2007 have been translated into United
States Dollars (“USD”) at the noon buying rate in New York City on License revenue for perpetual licenses are recognized upon delivery,
March 31, 2007 for cable transfers in Indian Rupees, as certified when services that are required to be performed under the terms of
for customs purposes by the Federal Reserve Bank of New York of the arrangement with the customer are not considered essential to
1 USD = Rs. 43.10. The convenience translation should not be construed the functionality of the software and when persuasive evidence of
as a representation that the Indian Rupee amounts or the USD amounts an arrangement exists, delivery has occurred, the license fee is fixed
referred to in these consolidated financial statements have been, could and determinable and the collection of the fee is probable. License
have been, or could in the future be, converted into USD or Rs., as the revenue from arrangements, which contain extended payment terms
case may be, at this or at any other rate of exchange, or at all. is not considered to be fixed and determinable at the inception of the
arrangement and, accordingly, revenue is recognized as payments
The Group also separately presents its consolidated financial statements from customers become due, assuming all other conditions for revenue
for the same periods prepared in accordance with India generally accepted recognition have been satisfied.
accounting principles (“Indian GAAP”). Significant differences between
the Indian GAAP and US GAAP relate to the deferral of revenue pertaining In limited situations, the Group enters into time-based or term licenses
to post-contract support, accounting for share-based payments, for a specified period and the license fee and PCS revenue is recognized
accounting of employee benefit plans, accounting for acquisitions, foreign ratably over the period of the arrangement.
forward exchange contracts, option contracts, embedded derivatives and
amortization of intangibles. Services are not considered essential to the functionality of the software
when such services primarily consist of minor functional enhancements,
simple interfaces, implementation planning, data conversion, training
2.2. Use of estimates
and product walkthrough and the realisability of the license fees is not
The preparation of financial statements in accordance with US GAAP dependent on such services. When vendor specific objective evidence
requires management to make estimates and assumptions that affect (“VSOE”) of the fair value of the services, based on historical evidence
the amounts reported in the consolidated financial statements and of sales of similar services exists, revenue related to implementation
accompanying notes. The Company bases its estimates and judgments services are recognized as services are provided when arrangements
on historical experience and on various other assumptions that it believes are on a time and material basis. In the case of fixed price arrangements,
are reasonable under the circumstances. The amount of assets and subject to VSOE being established, revenue related to implementation
liabilities reported on the Company’s balance sheets and the amounts services is recognized using the proportional performance method of
of revenue and expenses reported for each of its years presented are accounting. Performance is measured based upon the efforts incurred
affected by estimates and assumptions, which are used for, but not to date in relation to the total estimated efforts to complete the contract.
limited to, the accounting for revenue recognition, allowance for doubtful If the realisability of the services fees are dependent on acceptance
accounts, income taxes, determining impairment on long-lived assets, conditions, revenue is recognized only when such acceptance conditions
intangibles and goodwill, share-based compensation and accounting for have been met.
defined benefit plans. Actual results could differ from those estimates.

When an arrangement provides for significant modification or realization 2.6. Research and development
on of the product or if services are essential to the functionality of the
Research and development costs are expensed as incurred. Software
product or the realization of the license fees is dependent on the services,
product development costs are expensed as incurred until technological
the revenue related to both the license and services is recognized using
feasibility is established. Software product development costs incurred
the percentage of completion method of accounting. Percentage of
subsequent to the achievement of technological feasibility are not
completion is measured based upon the efforts incurred to date in relation
material and have also been expensed. These costs primarily consist of
to the total estimated efforts to complete the contract. If the realisability
salaries and employee benefits and other related expenses. Research
of the services fees is dependent on acceptance conditions, revenue is
and development cost for the years ended March 31, 2006 and 2007
recognized only when such acceptance conditions have been met.
amounted to Rs. 188,908 and Rs. 288,756 (USD 6,700), respectively,
The Group enters into PCS arrangements, which are generally for a period and is included in cost of revenue.
of 12 months and renewable thereafter, to provide technical support,
maintenance, query solving and upgrades (on a when and if available 2.7. Cash and cash equivalents
basis) to its customers. PCS revenue is recognized ratably over the period
The Group considers all highly liquid investments with an initial maturity
of the PCS. When PCS is provided together with other elements, VSOE
of up to three months to be cash equivalents. Cash and cash equivalents
of PCS is based on the renewal rate for the PCS arrangement. When the
include Rs. 290,197 and Rs. 421,343 (USD 9,776) at March 31, 2006
arrangement includes a free maintenance period, including the implied
and 2007, respectively, related to the Company, that are in Indian banks
benefit to receive upgrades during the implementation and warranty
and are subject to local exchange control restrictions and can be remitted
period, a portion of the license fees based on the VSOE of PCS is deferred
overseas only with prior approval from relevant regulatory authority.
and recognized over the free PCS period.
If an up-front discount is provided in an arrangement, a proportionate 2.8. Bank deposits

portion of that discount is applied to each element in the arrangement
Bank deposits consist of term deposits with an original maturity of more
based on each element’s fair value.
than three months.
IT solutions and consulting services

2.9. Accounts receivable
The Group provides bespoke software development and other consulting
Accounts receivable represents trade receivables, net of an allowance for
services to customers primarily in banking and financial services.
doubtful accounts. The allowance for doubtful accounts represents the
Revenues from IT solutions and consulting services are recognized as Group’s best estimate of receivables that are doubtful of recovery based
services are provided when arrangements are on a time and material on a specific identification basis.
basis. Revenues for fixed price contracts are recognized based on a
The changes in the allowance for doubtful accounts for the years ended
proportional performance method. If the proportional performance is higher
March 31, 2006 and 2007 were as follows:
than a related contractual milestone requiring customer acceptance,
revenue is recognized only to the extent customer acceptance has been
received. The Group monitors estimates of total contract revenues and March 31
cost throughout the delivery period. The cumulative impact of any change 2006 2007 2007
Rs. Rs. USD
in estimates of the contract revenues or costs is reflected in the period in
which the changes become known. If a loss is anticipated on a particular Balance at the
contract, provision is made for the estimated loss. beginning of the year 45,152 99,439 2,307
Charged to operations 54,822 89,900 2,086
The Company issues invoices related to fixed price contracts based on Reversal on account
either the achievement of milestones during a project or other contractual of collections (2,287) (2,289) (53)
terms. Differences between the timing of billings and the recognition of Foreign currency translation 1,752 (4,842) (112)
revenue based upon the proportional performance method of accounting Balance at the end of the year 99,439 182,208 4,228
are recorded as deferred revenue. Deferred revenue also includes the
revenue remaining to be recognized on PCS arrangements. 2.10. Property and equipment
Property and equipment, which include amounts recorded under capital
Reimbursement for out-of-pocket expenses leases, are recorded at cost. Depreciation and amortization are computed
Reimbursements of out-of-pocket expenses amounting to Rs. 282,518 using the straight-line method over the estimated useful lives of the
and Rs. 495,941 (USD 11,507) for the years ended March 31, 2006 and assets, which are as follows:
2007, respectively are included in revenue in accordance with Emerging
Issues Task Force Consensus (“EITF”) 01-14 “Income Statement Asset description Asset life (in years)
Characterization of Reimbursement received for “Out of Pocket” expenses
incurred”. Building 20
Computer equipment 3
Electrical and office equipment 2-7
2.5. Cost of revenue Furniture and fixtures 2-7
Cost of revenue comprises of salaries, employee benefits, project related Leased assets Lesser of estimated useful
life or lease term
travel costs, application software costs and professional fees. Leasehold improvements Lesser of estimated useful
life or lease term
PeopleSoft ERP 5

Advances paid towards the acquisition of property and equipment and 2.12. Investments
the cost of property and equipment not put to use before the balance
Investments in marketable securities are classified as available for sale
sheet date are disclosed under the caption capital work-in-progress in
and are accounted for at fair value, which is determined by reference
Note 5.
to prevailing market prices. Changes in fair value are recorded, net of
Property and equipment are reviewed for impairment if indicators taxes as comprehensive income and reported in accumulated other
of impairment arise. The evaluation of impairment is based upon a comprehensive income, as a separate component of shareholders’
comparison of the carrying amount of the property and equipment to the equity. A decline in fair value below original cost is recorded in the income
estimated future undiscounted net cash flows expected to be generated statement when it is considered to be other than temporary.
by the property and equipment. If estimated future undiscounted cash Investments where the Group has between a 20% to 50% voting interest
flows are less than the carrying amount of the property and equipment, are accounted for using the equity method. Investments in unquoted
the asset is considered impaired. The impairment expense is determined equity securities where the Group owns less than 20% of the voting
by comparing the estimated fair value of the property and equipment interest are accounted for at cost. A decline in fair value below original
to its carrying value, with any shortfall from fair value recognized as an cost is recorded in the income statement when it is considered to be
expense in the current period. The fair value is determined based on other than temporary.
valuation techniques such as discounted cash flows or comparison to fair
values of similar assets. There were no impairment charges recognized
2.13. Income taxes
during the years ended March 31, 2006 and 2007.
The Group applies the asset and liability method of accounting for
2.11. Goodwill and intangibles assets income taxes as described in Statement of Financial Accounting
Standards (“SFAS”) No. 109, “Accounting for Income Taxes”. Under this
Goodwill is not amortized but is reviewed for impairment annually or more method, deferred tax assets and liabilities are recognized for future tax
frequently if indicators arise. The evaluation is based upon a comparison consequences attributable to differences between the financial statements
of the estimated fair value of the reporting unit to which the goodwill carrying amounts of existing assets and liabilities and their respective
has been assigned to the sum of the carrying value of the assets and tax bases and operating loss and tax credit carryforwards. Deferred tax
liabilities for that reporting unit. The fair values used in this evaluation assets and liabilities are measured using tax rates expected to apply to
are estimated based upon discounted future cash flow projections for taxable income in the years in which those temporary differences are
the reporting unit. These cash flow projections are based upon a number expected to be recovered or settled. The effect on deferred tax assets
of estimates and assumptions. The Company recorded an impairment and liabilities of a change in tax rates is recognized in income in the
charge provision of Rs. 57,958 during the year ended March 31, 2006. period that includes the enactment date. Valuation allowances are
recognized to reduce the deferred tax assets to an amount that is more
Intangible assets acquired in business combinations are initially valued at
likely than not to be realized. In assessing the likelihood of realization,
fair market value using generally accepted valuation methods appropriate
management considers estimates of future taxable income and the
for the type of intangible assets. Intangible assets with definite lives
effect of temporary differences. The Group evaluates potential exposures
are amortized over their estimated useful lives and are reviewed for
related to tax contingencies or claims made by the tax authorities in
impairment, if indicators of impairment arise. Intangible assets such as
various jurisdictions and determine if a reserve is required.
Trademarks are considered to have indefinite life and are reviewed for
impairment annually or more frequently if indicators arise. The evaluation
2.14. Dividends
of impairment is based upon a comparison of the carrying amount of
the intangible asset to the estimated future undiscounted net cash flows Dividends distributable to the shareholders are accounted upon the
expected to be generated by the asset. If estimated future undiscounted approval of the payment of the dividend by shareholders at their general
cash flows are less than the carrying amount of the asset, the asset meeting.
is considered impaired. The impairment expense is determined by
comparing the estimated fair value of the intangible asset to its carrying 2.15. Employee benefit plans
value, with any shortfall from fair value recognized as an expense in the
current period. As of March 31, 2007, no impairment had occurred. Defined contribution plans
Amortization of the Group’s definite lived intangible assets is computed Eligible employees of the Group in India receive benefits from a Provident
using the straight-line method over the estimated useful lives of the Fund, administered by the Government of India, which is a defined
assets, which are as follows: contribution plan. Both the employees and the Group make monthly
contributions to the Provident Fund equal to a specified percentage of
Asset description Asset life (in months) the eligible employees’ salary.
Eligible United States employees of the Group participate in a savings plan
Technologies/software 60
Customer relationship 36-60* (“the Plan”) under Section 401(k) of the United States Internal Revenue
Customer contracts and Code (“the Code”). The Plan allows for employees to defer a portion of
customer order backlog 12 their annual earnings on a pre-tax basis through voluntary contributions
Process know how 60 to the Plan. The Plan provides that the Group can make optional
Intellectual property right 60 contributions up to the maximum allowable limit under the Code.
Others 12-36#
Eligible employees of the Group in India receive benefits from a
* The weighted average amortization period from the date of purchase is Superannuation Plan, administered by Life Insurance Corporation of
53 months India (“LIC”), which is a defined contribution plan. The Company makes
#
The weighted average amortization period from the date of purchase is monthly contributions to the Superannuation fund equal to a specified
20 months percentage of the eligible employees’ salary.

The Company has no further obligation under defined contribution plans 2.18. Leases
beyond the contributions made to the plan. Contributions are charged
The Group classifies all leases at inception as either a capital lease or
to income in the year in which they are due and are included in the
an operating lease. A lease of assets under which there is a transfer
consolidated statements of income (see note 10).
of substantially all of the risk and rewards incident to ownership as
prescribed in SFAS No. 13, “Accounting for Leases” are classified as
Defined benefit plan capital leases and all other leases are classified as operating leases.
Employees in India are entitled to benefits under the Payment of Gratuity Assets under capital leases are capitalized and lease payments are
Act, 1972, a defined benefit retirement plan covering eligible employees appropriated towards the lease obligation and interest on the obligation
of the Group. The plan provides for a lump-sum payment to eligible amount. Lease payments under an operating lease are recognized as an
employees at retirement, death, incapacitation or on termination of expense on a straight-line basis over the lease term.
employment, of an amount based on the respective employee’s salary
and tenure of employment subject to a maximum of approximately 2.19. Earnings per share
Rs. 350 (USD 8) per employee.
Basic earnings per share is computed using the weighted-average
The Company makes contributions to a fund administered and managed number of equity shares outstanding during the year. Diluted earnings per
by the LIC to fund the gratuity liability. Under this scheme, the obligation share is computed by considering the impact of the potential issuance of
to pay gratuity remains with the Group, although LIC administers the equity shares, using the treasury stock method, on the weighted average
scheme. The gratuity liability and net periodic gratuity cost has been number of shares outstanding.
actuarially determined after considering discount rates, expected long
The following table sets forth the computation of basic and diluted
term return on plan assets and increases in compensation levels.
earnings per share:
Differences between the amount paid to LIC and the net periodic gratuity
cost is recorded as a prepaid (accrued) pension cost.
March 31, 2006 March 31, 2007
On March 31, 2007, the Group adopted the recognition, measurement Numerator
and disclosure provisions of SFAS No. 158, “Employer Accounting for Net income 2,190,369 2,768,056
Defined Benefit Pension and Other Post Retirement Plans, an amendment Denominator
of FASB Statements No. 87, 88, 106 and 132 (R)”. SFAS No. 158 requires Basic weighted average equity
shares outstanding 75,192,287 78,789,867
the Group to recognize the funded status (i.e., the difference between
Dilutive impact of stock options
the fair value of plan assets and the projected benefit obligations) of and stock purchase scheme 2,371,459 2,108,049
its pension plan in the balance sheet as of March 31, 2007, with a Diluted weighted average
corresponding adjustment to accumulated other comprehensive income. equity shares outstanding 77,563,746 80,897,916
The adjustment to accumulated other comprehensive income at adoption
represents the net unrecognized actuarial losses, which was previously 2.20. Fair value of financial instruments
netted against the plan’s funded status in the Group’s statement of
financial position pursuant to the provisions of SFAS No. 87 “Employers The carrying amounts reported in the balance sheet for cash and cash
Accounting for Pensions”. This amount will be subsequently recognized equivalents, accounts receivable, other current assets, accounts payable
as net periodic pension cost pursuant to the Group’s historical accounting and other current liabilities approximate their fair value due to the short
policy for amortizing such amounts. Further, actuarial gains and losses maturity of these items.
that arise in subsequent periods and are not recognized as net periodic
pension cost in the same periods will be recognized a component of other Restricted cash and cash equivalent of Rs. 19,292 (USD 448) represents
comprehensive income. Those amounts will be subsequently recognized margin money against bank guarantees issued for periods equal to or
as a component of net periodic pension cost on the same basis as the above five years. The Group receives interest on these deposits, which
amounts recognized in accumulated other comprehensive income at are at the rates offered by the bank on such transactions. Long-term
adoption of SFAS No. 158. The impact of adopting these provisions was rental deposits comprise of interest free deposits maintained for office
an increase in the accrued pension liability of Rs. 47,942 (USD 1,112) and residential premises taken on lease. Such deposits are recoverable
and a decrease in shareholders equity of Rs. 47,942 (USD 1,112). on termination of such lease agreements. Long-term rental deposit
amounted to Rs. 1,206,553 and Rs. 1,675,221 (USD 38,868) at
March 31, 2006 and 2007, respectively and the fair value determined
2.16. Compensated absence using market rates of interest as of March 31, 2006 and 2007 was
The Group’s compensated absence liability is accrued based on an Rs. 1,057,835 and Rs. 771,714 (USD 17,905), respectively.
estimate for leave encashment and availment by an employee out of
the total leave balance standing to the credit of an employee at the 2.21. Concentration of credit risk
period end. Short term compensated absences are provided for based
on estimates. Long term compensated absences are provided for based Financial instruments that potentially subject the Group to concentrations
on actuarial valuation. of credit risk consist principally of cash equivalents, account receivable
and bank deposits. By their nature, all such financial instruments involve
risk including the credit risk of non-performance by counter parties. The
2.17. Advertising cost Group’s cash equivalents, bank deposits and restricted cash are invested
Advertising costs are expensed as incurred and are included in selling with banks with high investment grade credit ratings. Account receivables
and marketing expenses. Advertising costs for the years ended are typically unsecured and are derived from revenue earned from
March 31, 2006 and 2007 were Rs. 135,373 and Rs. 150,368 customers in the financial service industry primarily in the United States
(USD 3,489), respectively. and Europe. The Group monitors the credit worthiness of its customers
to whom it grants credit terms in the normal course of business.

Management believes there is no significant risk of loss in the event of compensation for all new and unvested share-based awards that are
non-performance of the counter parties to these financial instruments, ultimately expected to vest as the requisite service is rendered beginning
other than the amounts already provided for in the consolidated financial April 1, 2006. Share-based compensation is measured based on the fair
statements. values of the share-based award on the dates of grant.
SFAS 123R requires the use of a valuation model to calculate the

2.22. Derivative instruments and hedging activities
fair value of share-based awards. The Group has elected to use the
The Group has entered into forward and option foreign exchange Black-Scholes-Merton pricing model to determine the fair value of
contracts where the counter party is a bank. The Group purchases share-based awards on the dates of grant, consistent with that used for
forward foreign exchange contracts to mitigate the risks of change in pro forma disclosures under SFAS No. 123, Accounting for Stock-Based
foreign exchange rates on accounts receivable and accounts payable Compensation.
denominated in certain foreign currencies. Although these contracts
are effective as hedges from an economic perspective, they do not The Group recognized share-based compensation using the straight-line
qualify for hedge accounting under SFAS No. 133, “Accounting for method for all share-based awards issued on or after April 1, 2006. For
Derivative Instruments and Hedging Activities” as amended. Under share-based awards issued prior to April 1, 2006, the Group continues
SFAS 133, the changes in the fair value of derivatives that are either to recognize share-based compensation using the accelerated expense
not designated as a hedge or is so designated but do not qualify for attribution method.
hedge accounting, is recognized in the income statement. As of
As a result of adopting SFAS No. 123(R) on April 1, 2006, the Group
March 31, 2006 and 2007, the Group held forward foreign exchange
has recognized share-based compensation expenses of Rs. 115,596
contracts for the sale of USD 115,000 and USD 123,000 respectively,
(USD 2,682) for the year ended March 31, 2007. If the Group had
EUR 6,250 and EUR 3,500 respectively and foreign exchange option
continued to account for share-based compensation in accordance with
contracts of USD 18,000 and USD 16,500 respectively. These contracts
APB Opinion No. 25, income before provision for income taxes and net
mature in between 1 to 12 months. The Group has recorded Rs. 8,273
income for the year ended March 31, 2007 would have been higher by
and Rs. 29,745 (USD 690) as forward foreign exchange loss for the
Rs. 115,596 (USD 2,682) and basic and diluted earnings per share for
years ended March 31, 2006 and 2007, respectively in respect of these
the year ended March 31, 2007 would have been higher by Rs. 1.47
contracts.
(USD 0.03) and Rs. 1.43 (USD 0.03), respectively.
Further, certain license arrangements entered into by the Group with its
The following table presents the effect on reported net income and
customers are denominated in a currency which is neither the functional
earnings per share if the Group had accounted for stock options under
currency of the Group or the customer, and thus qualify as embedded
the fair value method of accounting described in SFAS No. 123 for the
derivative instruments under SFAS No. 133. Accordingly, gains or losses
year ended March 31, 2006:
on such embedded derivative instruments are recognized in the Group’s
consolidated income statements based on the fair value of the embedded
derivative contracts at year end and the corresponding asset/liability is Net income as reported 2,190,369
recorded in the balance sheet under other current assets or other current Add: Stock based employee compensation
expense included in reported net income −
liabilities. The Group has recorded Rs. 17,749 as gain and Rs. 4,374 Less: Stock based employee compensation
(USD 101) as loss for the year ended March 31, 2006 and 2007, determined using fair value of the options (70,728)
respectively related to such embedded derivatives. Pro forma net income 2,119,641
Basic income per share
2.23. Share-based compensation As reported 29.13
Pro forma 28.19
In December 2004, the Financial Accounting Standards Board (“FASB”) Diluted income per share
issued SFAS No. 123 (revised 2004), “Share-Based Payment” As reported 28.24
(“SFAS No. 123(R)”) that addresses the accounting for share-based Pro forma 27.27
payment transactions in which an enterprise receives employee services
in exchange for equity instruments of the enterprise or liabilities that are 2.24. Reclassifications
based on the fair value of the enterprise’s equity instruments or that may be
settled by the issuance of such equity instruments. Prior to April 1, 2006, Certain amounts in the prior year’s financial statements and related notes
the Group accounted for its employee share-based compensation have been reclassified to conform to the current year’s presentation.
plan using the intrinsic value method of accounting prescribed by the
Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for 2.25. Recently issued accounting standards
Stock Issued to Employees” and related Interpretations, as permitted by
SFAS No. 123, “Accounting for Stock-Based Compensation”. Effective In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”),
April 1, 2006, the Group adopted SFAS No. 123(R), using the modified “Accounting for Uncertainty in Income Taxes”, an interpretation of
prospective transition method and accordingly, prior period financial SFAS No. 109, “Accounting for Income Taxes”, to create a single
statements have not been restated to reflect the impact of SFAS 123(R). model to address accounting for uncertainty in tax positions. FIN 48
Under this method, the Group is required to recognize share-based clarifies the accounting for income taxes by prescribing a minimum

recognition threshold that a tax position is required to meet before being of the total purchase price based on management estimates of the assets
recognized in the financial statements. FIN 48 also provides guidance acquired and liabilities assumed is as follows:
on de-recognition, measurement, classification, interest and penalties,
accounting in interim periods, disclosure and transition. A tax position Rs. USD
must be more-likely-than-not of realization to be recognized upon the
adoption of FIN 48 and in subsequent periods. FIN 48 is effective for Cash 317,760 6,918
fiscal year beginning April 1, 2007, and the provisions of FIN 48 will be Current assets 553,305 12,047
applied to all tax positions upon its initial adoption with the cumulative Current liabilities (555,997) (12,101)
effect of the change in accounting principle recognized as an adjustment Property and equipments 36,285 790
to opening retained earnings. The Group is currently evaluating the impact Intangible assets:
of the application of FIN 48 on its consolidated financial statements. Customer contracts 23,287 507
Customer relationship 267,129 5,816
In September 2006, the FASB issued SFAS No. 157, “Fair Value Intellectual property rights (IPR) 1,079,906 23,512
Measurements”. SFAS No. 157 defines “fair value” as the price that Goodwill 4,088,275 89,011
would be received to sell an asset or paid to transfer a liability in an Purchase consideration 5,809,950 126,500
orderly transaction between market participants at the measurement
date. SFAS No. 157 provides guidance for the determination of fair The valuation of intangible assets was based on an income based
value, and establishes a fair value hierarchy for assessing the sources of approach using projected cash flows and discounting them to arrive at
information used in fair value measurements. SFAS No. 157 is effective a present value. Customer contracts, customer relationship and IPR are
for fiscal years beginning after November 15, 2007. The Group is amortized over their useful life which has been estimated to be 1 year for
currently evaluating the impact of this pronouncement on its consolidated customer contracts and 5 years for customer relationships and IPR.
financial statements.
As a part of acquisition, the Company entered into bonus agreements
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option with certain employees of Mantas and agreed to pay bonuses amounting
for Financial Assets and Financial Liabilities” which permits entities to to USD 5,546 (Rs. 254,912). The Company paid bonuses of USD 3,991
choose to measure many financial instruments and certain other items (Rs. 183,720) on the date of acquisition and accounted the same as
at fair value that are not currently required to be measured at fair value. a cost of the business combination. The balance bonuses amounting
SFAS No. 159 will be effective for the Group on April 1, 2008. to USD 1,555 (Rs. 71,192) is linked to employment conditions and is
payable to employees only if employees serve Mantas for the period
of one year. The same is recorded as a liability for employee costs
3. Business combinations with a corresponding debit to deferred compensation. The deferred
Mantas Inc. (“Mantas”) compensation cost will be charged to the income statement over a
period of one year. For the year ended March 31, 2007, the Company
On October 2, 2006, the Group acquired a 100% ownership in Mantas has recorded Rs. 33,451 as a charge to employee cost.
for a total consideration of USD 126,500 (Rs. 5,809,950) including
transactions costs of USD 5,067 (Rs. 232,727). Closing formalities Pro-forma consolidated results of operation assuming the acquisition of
related to the acquisition were completed and cash was remitted to the Mantas at the beginning of the year is as follows:
erstwhile stockholders of Mantas on October 2, 2006.
Year ended March 31
Mantas, together with its subsidiaries, provide anti-money laundering 2006 2007 2007
and compliance solutions to customer in the financial services industry. Rs. Rs. USD
Mantas has a Behavior Detection Platform which addresses regulatory Revenue
compliance, loss prevention and revenue generation through its suite of As reported 14,835,246 20,381,070 472,879
risk management, anti-money laundering, fraud, employee surveillance Pro-forma (unaudited) 17,048,499 21,096,041 489,467
and broker and trading compliance monitoring applications. Net income
As reported 2,190,369 2,768,056 64,224
The acquisition was accounted for under the purchase method of Pro-forma (unaudited) 2,220,241 2,650,604 61,499
accounting in accordance with SFAS No. 141, “Business Combinations”. Basic earnings per share
As reported 29.13 35.13 0.82
The results of operations for Mantas have been included in the Group’s
Pro-forma (unaudited) 29.53 33.64 0.78
consolidated statements of income from October 2, 2006. The allocation Diluted earnings per share
As reported 28,62 34.22 0.79
Pro-forma (unaudited) 28,24 32.76 0.76

The Capital Market Company Pte Ltd (“CAPCO”)
March 31, 2007
On January 3, 2007, the Group acquired a 100% ownership in CAPCO Gross Accumulated Net
for a total consideration of USD 1,050 (Rs. 46,366). Closing formalities amortization
related to the acquisition were completed and cash was remitted to the USD USD USD
erstwhile shareholders of CAPCO on January 3, 2007. After the acquisition,
CAPCO’s name was changed to i-flex Consulting (Asia Pacific) pte ltd. Amortizable intangible assets:
CAPCO was incorporated in Singapore and is in the business of providing Technologies/software 2,716 1,743 973
software and technology consultancy services to financial institutions in Customer relationship 10,926 4,131 6,795
Far East Asia. Customer contracts 1,563 1,023 540
Process know how 336 145 191
These acquisitions were accounted for under the purchase method of Intellectual property right 28,073 4,200 23,873
accounting in accordance with SFAS No.141, “Business Combinations”. Others 175 175 −
The results of operations for CAPCO have been included in the Group’s Non-amortizable
consolidated statement of income from January 3, 2007. The fair value intangible assets:
Trademark 283 − 283
of identifiable intangible assets has been determined based on standard
44,072 11,417 32,655
valuation techniques. The Company has preliminarily recorded identifiable
intangible assets of Rs. 38,324 (USD 868) and net assets of Rs. 8,042 Amortization expense related to intangible assets amounted to Rs. 130,750
(USD 182) in connection with this acquisition. The proforma effect of this and Rs. 272,467 (USD 6,322) for the year ended March 31, 2006 and
acquisition was not significant to the consolidated results of operations 2007, respectively.
of the Group.
During the year ended March 31, 2006, the Group acquired a 76.77% The estimated annual amortization expense based on current amortizable
ownership interest in Castek Software Inc. (‘Castek’) and the operational intangible assets for fiscal years beginning April 1, 2007 is as follows:
risk solutions division of Capital Market N.V. for a total consideration of
Rs. 115,281. The Group recorded goodwill of Rs. 22,842, identifiable Year ending March 31
intangible assets of Rs. 87,144 and net assets of Rs. 5,255 in connection Rs. USD
with these acquisitions.
2008 1,279,209 29,680
2009 66,128 1,534
4. Goodwill and intangible assets 2010 36,881 856
The components of intangible assets are as follows: 2011 10,470 243
2012 2,563 59
1,395,251 32,372
March 31, 2006
Gross Accumulated Net The changes in carrying value of goodwill by segment (Refer to note 15)
amortization
Rs. Rs. Rs. were as follows:
Amortizable intangible assets: Product KPO Total

Technologies/software 120,753 53,247 67,506 Rs. Rs. Rs.
Customer relationship 197,093 96,007 101,086
Customer contracts 29,037 28,915 122 Balance at April 1, 2005 389,098 194,442 583,540
Process know how 14,601 3,650 10,951 Goodwill arising on acquisition 22,842 − 22,842
Intellectual property right 191,416 41,505 149,911 Foreign currency translation (2,711) 3,822 1,111
Others 7,614 6,460 1,154 Impairment during the year (57,958) − (57,958)
Non-amortizable Balance at March 31, 2006 351,271 198,264 549,535
intangible asset:
Goodwill arising on acquisition 4,088,295 − 4,088,295
Trademark 12,535 − 12,535
Foreign currency translation (237,996) (5,555) (243,551)
573,049 229,784 343,265
Balance at March 31, 2007 4,201,570 192,709 4,394,279
March 31, 2007 USD USD USD

Gross Accumulated Net
amortization Balance at March 31, 2007 97,484 4,471 101,955
Rs. Rs. Rs.
Amortizable intangible assets:

Technologies/software 117,072 75,121 41,951
Customer relationship 470,895 178,050 292,845
Customer contracts 67,375 44,072 23,303
Process know how 14,471 6,244 8,227
Intellectual property right 1,209,961 181,036 1,028,925
Others 7,559 7,559 −
Non-amortizable
intangible asset:
Trademark 12,184 − 12,184
1,899,517 492,082 1,407,435

5. Property and equipment
The major classes of property and equipment are as follows:
March 31
2006 2007 2007
Rs. Rs. USD
Land 232,674 232,674 5,399

Building 253,340 253,340 5,878
Computer equipment 1,147,088 1,385,323 32,142
Electrical and office equipment 430,056 542,710 12,592
Furniture and fixtures 369,534 453,224 10,516
Vehicles 37,765 42,496 986
Leasehold improvements 249,524 323,678 7,510
PeopleSoft ERP 53,767 53,767 1,247
Capital work-in-progress 581,356 1,345,804 31,225
3,355,104 4,633,016 107,495
Accumulated depreciation and
amortization (1,180,822) (1,738,564) (40,338)
Property and equipment, net 2,174,282 2,894,452 67,157
Depreciation and amortization expense, including amortization of assets recorded under capital leases, amounted to Rs. 371,197 and Rs. 560,315
(USD 13,000) for the year ended March 31, 2006 and 2007, respectively.
Assets held under capital leases included above are as follows: Investments in Equity Investees
The Group has a 40% investment in Flexcel International Private Limited
March 31 (“Flexcel”), a joint venture between HDFC Bank Limited and its affiliates,
2006 2007 2007 Lord Krishna Bank Limited and its affiliates and the Company. Flexcel
Rs. Rs. Rs. provides the Group’s products through an Application Service Provider
(“ASP”) model to various banks and financial institutions in India.
Computer equipment 7,367 7,161 166 Further, i-flex has a 33% equity stake in Login SA, a France based
Furniture and fixtures 3,420 3,324 77
treasury software specialists firm. Login SA is a front and mid office
Vehicles 37,765 42,495 986
treasury solution provider with its product, Login Acumen. The Group
48,552 52,980 1,229
Accumulated has accounted for this investment using the equity method of accounting
amortization (20,648) (28,995) (673) and recorded its share of profits of its equity investees of Rs. 4,713 and
27,904 23,985 556 Rs. 9,161 (USD 213) for the year ended March 31, 2006 and 2007,
respectively, in the consolidated statements of income.
6. Investments
Other investments
Marketable securities
March 31
The fair values of the available for sale securities are as follows:
2006 2007 2007
Rs. Rs. USD
March 31
2006 2007 2007 UTI US-64 – 6.75% Tax free
Rs. Rs. USD Bonds 33,123 33,123 769
National Saving
Opening carrying value – 10,000 232 Certificates - VIII issue 131 131 3
Add: Investment during the year 10,000 – – 33,254 33,254 772
Less: Unrealized loss during
the year – (810) (19) The Group holds 331,225 US-64 6.75 % Tax-free bonds. These bonds
Carrying value of the are redeemable at par on June 1, 2008. The fair value of these bonds as
investment 10,000 9,190 213 on March 31, 2007 was Rs. 32,944 (USD 764).
The above investment is in debt securities of 9% Dhanalakshmi Bank The Company also has a 19.5% ownership interest in EBZ online
Bond Series VI (allotted on March 30, 2006) and are non-convertible private limited (‘EBZ’). Management is of the view that the fair value
and redeemable at par at the end of 7 years 3 months from the date of of its investment in EBZ has declined permanently and hence, as of
allotment. March 31, 2005 management had made a provision of Rs. 45,000
(USD 1,044) towards the diminution in the value of its investment
in EBZ.

7. Income taxes Income (loss) before income taxes for the years ended March 31, 2006
and 2007 primarily arose in the following jurisdictions:
The Group’s provision for income taxes consists of the following:
Year ended
Year ended March 31
March 31
Jurisdiction 2006 2007 2007
2006 2007 2007
Rs. Rs. USD
Rs. Rs. USD
India 2,552,652 3,016,496 69,988
Current taxes
United States (110,597) (428,726) (9,947)
Domestic taxes (406,589) (182,725) (4,240)
Singapore 171,816 295,885 6,865
Foreign taxes (178,117) (230,371) (5,345)
The Netherlands 154,664 218,317 5,065
(584,706) (413,096) (9,585)
United Kingdom − 86,918 2,017
Deferred taxes
Others (70,291) (87,524) (2,031)
Domestic taxes 69,554 70,625 1,639
2,698,244 3,101,366 71,957
Foreign taxes − − −
69,554 70,625 1,639
(515,152) (342,471) (7,946)
The Group’s Indian operations are eligible to claim income-tax exemption with respect to profits earned from export revenue from an operating unit
registered under the Software Technology Parks of India. The benefit is available from the date of commencement of operations to March 31, 2009,
subject to a maximum of 10 years. The Company had seven such locations for the years ended March 31, 2006 and 2007. The benefits expire in stages
from April 1, 2006 to March 31, 2009.
The additional income tax expense at the statutory rate in India, if the tax exemption was not available, would have been approximately Rs. 665,944
and Rs. 1,217,074 (USD 28,238) for the years ended March 31, 2006 and 2007, respectively. The impact of such additional tax on basic and diluted
earnings per share would have been a reduction of earnings per share by Rs. 8.86 and Rs. 8.59, respectively, for the year ended March 31, 2006 and
Rs. 15.45 and Rs. 15.04, respectively, for the year ended March 31, 2007.
The following is a reconciliation of the Indian statutory income tax rate with the effective tax rate:
Year ended
March 31
2006 2007 2007
Rs. Rs. USD
Income before income taxes 2,698,244 3,101,366 71,957

Enacted tax rate in India 33.66% 33.66% 33.66%
Statutory income tax 908,229 1,043,919 24,221

Provision (benefit) due to
Tax effect on exempt income (680,409) (1,217,387) (28,246)
Differential foreign tax rate 46,156 8,171 190
Permanent differences 156,337 410,511 925
Net losses with no current benefits 76,108 98,656 2,289
Changes in valuation allowance 8,731 97,788 2,269
Tax relief of earlier year, net of
provision for tax − (99,187) (2,302)
Provision for income taxes 515,152 342,471 7,946

The components of the deferred tax assets and liabilities are as follows:
March 31
2006 2007 2007
Rs. Rs. USD
Deferred tax assets

Loss on sale of investment 25,083 25,083 582
Share of loss in equity investees 3,817 3,472 81
Net operating losses carried forward 151,835 1,106,656 25,677
Difference between book and tax depreciation 70,762 148,330 3,442
Diminution in value of investment 15,147 15,147 351
Provision for doubtful debts − 7,000 162
Others 15,974 102,251 2,372
Total deferred tax assets 282,618 1,407,939 32,667
Less: valuation allowance (185,534) (723,022) (16,775)
Deferred tax assets, net of valuation allowance 97,084 684,917 15,892
Deferred tax liabilities

Difference between book and tax depreciation (27,971) (545,179) (12,650)
Net deferred tax assets 69,113 139,738 3,242
The classification of deferred tax assets (liabilities) is as follows
March 31
2006 2007 2007
Rs. Rs. USD
Current
Deferred tax assets − 10,132 235
Deferred tax liabilities − − −
Net current deferred tax assets − 10,132 235
Non current
Deferred tax assets 256,296 854,373 19,822
Less: valuation allowance (185,534) (723,022) (16,775)
70,762 131,351 3,047
Deferred tax liabilities (1,649) (1,745) (40)
Net non current deferred tax assets 69,113 129,606 3,007
As at March 31, 2007, the Group had net operating loss carry forwards predicted with certainty, management currently believes that the final
aggregating to Rs. 2,599,388 (USD 59,949) in the US which expires outcome of such matters, in the aggregate, will not have a material
between 2024 and 2027, Rs. 206,778 (USD 4,769) in Canada which adverse effect on the financial position, results of operations or cash
expires in 2015, Rs. 58,629 (USD 1,352) in Japan which expires between flows of the Group.
2012 and 2013 and Rs. 17,589 (USD 406) in Germany which is can be
allowed to carry forward indefinitely. The Group has recorded a valuation Deferred income taxes on undistributed earnings of foreign subsidiaries
allowance, for the deferred tax asset related to net operating loss carry have not been provided as such earnings are deemed to be permanently
forwards, the loss on sale of investment and share of losses in equity reinvested.
investee. The loss on sale of investment and share of losses in equity
investee would be deductible for tax only when the investments are sold 8. Deferred revenue
and if the Group has offsetting capital gains. The change in valuation
allowance was primarily on account of recording a valuation allowance Deferred revenue comprises of:
for net operating losses with no current benefits.
March 31
In determining the tax provisions, the Group also provides for tax 2006 2007 2007
exposures based on the Group’s assessment of regulatory reviews. Such Rs. Rs. USD
accruals, which are recorded in income taxes payable, are management’s
estimates based on information currently available and, accordingly, Advance billings 1,238,071 2,435,467 56,507
are subject to revision if new information becomes available. The final Unexpired post
outcome is dependent upon the judgment of regulatory reviewers. contract support 593,945 923,580 21,429
Advances from
The Group is involved in income tax assessment proceedings in various customers 134,772 27,240 632
jurisdictions. While the resolution of these assessments cannot be 1,966,788 3,386,287 78,568

9. Other current liabilities 10. Employee benefit plans
Other current liabilities comprise payables in respect of: Defined contribution plans
During the years ended March 31, 2006 and 2007, the Group contributed
March 31 the following amounts to defined contributions plans:
2006 2007 2007
Rs. Rs. USD
Year ended
Referral fee/ 199,502 227,045 5,268 March 31
commission 2006 2007 2007
Professional fees 231,156 383,754 8,904 Rs. Rs. USD
Rates and taxes 173,563 310,463 7,203
Application software 71,770 79,396 1,842 Provident fund – India 95,847 133,753 3,103
Travelling expenses 87,366 113,422 2,631 Superannuation – India 10,641 43,676 1,013
Embedded 106,488 177,429 4,116
derivatives 9,281 13,655 317
Others 284,183 374,186 8,682
1,056,821 1,501,921 34,847
Defined benefit plan – gratuity

The reconciliation of the beginning and ending balances of the projected benefit obligation and the fair value of plans assets for the years ended
March 31, 2006 and 2007, and the accumulated benefit obligation at March 31, 2006 and 2007, are as follows:
Year ended
March 31
2006 2007 2007
Rs. Rs. USD
Change in projected benefit obligations

Obligation at beginning of the year 66,131 78,594 1,823
Service cost 15,785 20,415 474
Interest cost 4,722 5,974 139
Benefits paid (5,854) (10,126) (235)
Actuarial (loss) gain (2,190) 28,024 650
Benefit obligation at end of the year 78,594 122,881 2851
Change in plan assets

Plan assets at beginning of the year 5,922 1,818 42
Actual return 230 136 4
Actuarial loss 20 10 –
Actual contributions 1,500 12,859 298
Benefits paid (5,854) (10,126) (235)
Plan assets at end of the year 1,818 4,697 109
Funded status (76,776) (118,184) (2,742)

Unrecognized net loss 21,523 – –
Net amount recognized (55,253) (118,184) (2,742)
Accumulated benefit obligation at end of the year 52,494 88,153 2,045
The underfunded status of the plan of Rs. 55,253 and Rs. 118,184 The assumptions used in accounting for the gratuity plan are set out as
(USD 2,742) at March 31, 2006 and 2007, respectively, is recorded as below:
a long-term liability.
March 31
Year ended 2006 2007
March 31
2006 2007 2007 Discount rate 8.00% 9.40%
Rs. Rs. USD Expected return on plan assets 7.50% 7.50%
Rate of compensation increase 5.00% 8.00%
Net periodic gratuity cost
Service cost 15,785 20,415 474 The Group evaluates these assumptions annually based on its long-term
Interest cost 4,722 5,974 139 plans of growth and industry standards. The discount rates are based
Expected return on plan
assets (1,518) 82 2 on current market yields on high quality corporate bonds. Plan assets
Amortization 1,773 1,377 32 are administered by the LIC and invested in lower risk assets, primarily
Net periodic gratuity cost for debt securities. The Group’s contribution to the fund for the year ended
the year 20,762 27,848 647

March 31, 2008 is expected to be Rs. 20,018 (USD 464). The expected 12. Shareholders’ equity
benefit payments from the fund as of March 31, 2007 are as follows:
The Group has only one class of shares, equity shares. Each holder
of equity shares is entitled to one vote per share. Dividends proposed
Year ending March 31 by the Board of Directors are payable when formally approved by the
Rs. USD
shareholders, who have the right to decrease but not increase the amount
of the dividend recommended. The Company accrues for dividend upon
2008 23,325 541
obtaining shareholder approval. The company paid cash dividends of
2009 24,564 570
2010 29,819 692 Rs. 375,538 (Rs. 5.00 per share) and Rs. 382,679 (USD 8,879) (Rs. 5.00
2011 35,311 819 per share) and dividend tax amounting to Rs. 52,669 and Rs. 53,671
2012 42,177 979 (USD 1,245), during the years ended March 31, 2006 and 2007,
2013-2017 168,660 3,913 respectively. Under the Indian Companies Act, all Indian companies are
323,856 7,514 mandatorily required to transfer its current year’s earnings to a general
reserve, which is restricted for the purpose of distribution of dividend. As
The cumulative effect of adopting the provisions of SFAS No. 158 on the at March 31, 2007, the Company had a general reserve amounting to
Group’s statement of financial position at March 31, 2007 are presented Rs. 10,238,569 (USD 235,387) which is included in retained earnings.
in the following table:
13. Share-based compensation
At
March 31, 2007 Share-based compensation recognized during years ended
Prior to Effect of As reported at March 31, 2006 and 2007 (including awards accounted for as liability
adopting adopting March 31, 2007 awards) is as follows:
SFAS
Rs. Rs. Rs.
March 31
2006 2007 2007
Accrued pension 70,242 47,942 118,184
liability Rs. Rs. USD
Accumulated other
comprehensive loss 417,331 47,942 465,273 Cost of revenue Nil 147,321 3,418
Selling and marketing expenses Nil 21,016 488
The adoption of SFAS No. 158 had no effect on the Group’s consolidated General and administrative
expenses Nil 27,494 638
statement of income for the year ended March 31, 2007, or for any prior Nil 195,831 4,544
year presented, and it will not effect the Group’s operating results in
future periods. Included in accumulated other comprehensive income at
March 31, 2007 is the cumulative effect of adoption of SFAS No. 158 Employee Stock Purchase Scheme (“ESPS”)
amounting to Rs. 47,942 (USD 1,112) that has not yet been recognized On March 29, 1998 the Company adopted the ESPS to provide
in net periodic pension cost. The amount included in accumulated other equity-based incentives to key employees of the Company (“1998
comprehensive income and expected to be recognized in net periodic Scheme”). Subsequently on April 1, 1999, April 1, 2000, April 1, 2001
pension cost during the year ended March 31, 2008 is Rs. 6,737. No and June 1, 2004, the Company adopted additional share-based
plan assets are expected to be returned to the Company during the year schemes (“1999 Scheme”, “2000 Scheme”, “2001 Scheme” and “2004
ended March 31, 2008. Scheme”). These schemes, which have similar terms, are administered
through a Trust (the “Trust”). The Trust purchases shares of the Company
11. Accumulated other comprehensive loss using the proceeds of loans obtained from the Company. Such shares are
offered by the Trust to employees at an exercise price, which approximates
The changes within each classification of accumulated other the fair value on the date of the grant. The right to purchase the shares
comprehensive loss for the years ended March 31, 2006 and 2007 is vests over a period determined at the grant date. Employees are entitled
as follows: to the dividends on shares allocated to them by the Trust. The employee
is allowed a period of ten years to pay the exercise price. The Trustees
Cumulative Changes in Cumulative Total have the right of recourse against the employee for any amounts that
translation fair value effect of accumulated may remain unpaid on the shares accepted by the employee.
adjustment of available adoption other
for sale of SFAS comprehensive No compensation cost was recorded if the exercise price equals the fair
securities No. 158 loss
value of the underlying stock on the grant date. The shares held by the
Rs. Rs. Rs. Rs.
Balance at Trust have been considered as outstanding for basic EPS purposes, to
April 1, 2005 54,700 – – 54,700 the extent these shares have been allocated to employees pursuant to
Change during the above schemes and are eligible to be exercised by the employee.
the year 20,220 – – 20,220 For diluted EPS, shares not eligible for exercise are considered in
Balance at determining weightage number of shares outstanding using the treasury
March 31, 2006 74,920 – – 74,920
stock method. The fair value of the unallocated shares held by the Trust
Change during
the year 341,601 810 47,942 390,353 is recorded as deferred share-based compensation.
Balance at
March 31, 2007 416,521 810 47,942 465,273

A summary of the activity in the Company’s ESPS is as follows: As of March 31, 2007, there was Rs. 119,464 (USD 2,772) of
unrecognized compensation cost related to outstanding share options,
Year ended net of estimated forfeitures. This amount is expected to be recognized
March 31 over a weighted average period of 4.1 years. To the extent the forfeiture
2006 2007 rate is different than what the Company has anticipated, compensation
Number of shares expense related to these awards will be different from the Company’s
expectations.
Opening balance of unallocated shares 70,606 120,888
Shares forfeited during the year 50,282 21,228 The fair value of options granted during the year ended March 31, 2007
Closing balance of unallocated shares 120,888 142,116 was estimated on the date of grant using the Black-Scholes-Merton
Opening balance of allocated shares 3,393,936 2,080,546 option-pricing model with the following assumptions:
Shares exercised during the year (1,263,108) (1,704,106)
Shares forfeited during the year (50,282) (21,228)
Expected life 6.5 years
Closing balance of allocated shares 2,080,546 355,212
Risk free interest rates 6%
Shares eligible for exercise 1,830,774 164,712
Expected volatility 36.80%
Shares not eligible for exercise 249,772 190,500
Dividend yield 0.39%
Closing balance of allocated shares 2,080,546 355,212
The expected life is based on the midpoint of the vesting and the
As the shares granted to the employees vest upon the employee
contracted term of the option, the risk free interest rate is based on United
accepting the offer, the fair value of the shares granted to the employee
States Treasury instruments and the expected volatility was calculated
computed in accordance with SFAS 123 would not differ significantly
based on the historical volatility of the Company’s stock price. Forfeitures
from the intrinsic value of the shares as determined in accordance with
are estimates based on the Company’s historical analysis of actual stock
APB 25.
option forfeitures. The Company has paid cash dividends on its common
share @100% for past 3 years and, accordingly, the expected dividend
Employee Stock Option Plan (“ESOP”) yield is arrived considering a dividend rate of 100%. Shares reserved as
The Company has granted 4,753,600 options to the employees and at March 31, 2007 for the future issuance of options was 104,100. The
directors of the Group. As per the scheme, 20% of the total options weighted-average fair value of options granted during the year ended
granted under the Scheme will vest to the eligible employees and March 31, 2006 and 2007 was Rs. 334 and Rs. 596, respectively.
directors on the completion of 12, 24, 36, 48 and 60 months and is
subject to the continued employment of the employee or director with the Castek share-based options
Company or its subsidiaries.
On December 6, 2005, Castek, subsidiary company of i-flex, has adopted
A summary of option activity in the Company’s ESOP for year ended a stock-based compensation plan, called the 2005 Castek Share Option
March 31, 2007 is as follows: Plan (the 2005 CSOP). Under the terms of the 2005 CSOP, a total of
194,040,852 equity shares of Castek have been reserved for issuance
to the Castek’s employees, directors or other eligible peoples. As per the
Shares Weighted Weighted Aggregate
arising average average intrinsic 2005 CSOP, each stock option will have an exercise price equal to or
from exercise remaining value (in greater than fair market value of Castek’s shares on the date of the grant,
options price contractual thousands) the vesting period of three years from the date of grant and exercise
life (in years) period of five years.
Outstanding at Further, as per the terms of 2005 CSOP, while the Group holds at least
April 1, 2006 2,756,880 280
50% of the outstanding equity shares of Castek at the dates indicated
Granted 373,000 1,291
Exercise of below, then the Group will be required to purchase the indicated
options (2,552,795) (270) percentage of options from the employees (and the employees are
Forfeited (46,600) (826) required to sell to the Group such options). The price per equity share
Outstanding at of Castek for this purpose is based on Castek’s revenue for the relevant
March 31, 2007 530,485 989 8.1 579,634 fiscal year multiplied by a revenue multiplier, as set out below divided by
the number of equity shares issued and outstanding on the above date
Options expected
to vest 417,500 1,165 8.8 382,741 on a fully diluted basis.
Options vested
and exercisable 112,985 339 5.5 196,893 Year ending March 31 Repurchase % Revenue multiplier
The aggregate intrinsic value is calculated as the difference between the 2009 50% 2.50 times
exercise price of the underlying options and the closing share price of 2010 30% 2.75 times
Rs. 2,081.65 of the Company’s share on March 30, 2007 (last trading 2011 20% 3.00 times
day prior to March 31, 2007).
In accordance with SFAS No. 123(R) the Group recognises liabilities
The aggregate intrinsic value of options exercised during the years awards under share-based payment arrangements at fair value. At each
ended March 31, 2007 was Rs. 4,624,771 (USD 107,303). Total cash reporting date, the Group measures the amount of the liability under
received as a result of option exercises was approximately Rs. 688,823 these awards based on the above formula and such cost are recognized
(USD 15,982) for the year ended March 31, 2007. over the repurchase period. The accounting liability will be remeasured at

each balance sheet date based on an estimate by management of future Share-based transactions with non-employees
revenue over the relevant period. The Group has recognized share-based
Pursuant to a subscription agreement entered into between the Group and
compensation expenses of Rs. 80,235 (USD 1,850) for the year ended
GE Capital Mauritius Equity Investment, on August 23, 2005, the Company
March 31, 2007.
granted 395,529 warrants to GE at a fair market value of Rs. 1,015.55.
A summary of option activity in Castek’s 2005 CSOP for year ended GE is entitled to subscribe for these warrants in two tranches and after
March 31, 2007 is as follows: completion of and compliance with certain predetermined requirements.
As required by the Securities and Exchange Board of India (“SEBI”)
Guidelines 2003, GE has deposited Rs. 40,441 (USD 938), an amount
Shares arising Weighted Weighted
from options average average equivalent to 10% of the total consideration as a deposit. As per the
exercise remaining requirements of SFAS 123 and EITF 96-18, the fair value of the equity
price contractual instruments issued was used to measure the transaction as that value
life (in years) was more reliably measurable than the fair value of the services received.
The fair value of the warrants measured using the date of issue as the
Outstanding at 188,820,799 0.0212 measurement date aggregated Rs. 57,825 (USD 342). This amount has
April 1, 2006 been accounted for as a discount and a reduction of revenue with a
Cancelled (1,507,500) 1.82
corresponding credit to additional paid in capital over a period of 10
Outstanding at
March 31, 2007 187,313,299 0.0035 5.3 years. For the year ended March 31, 2006 and 2007 the Company has
recorded Rs. 3,374 and Rs. 5,784 (USD 134), respectively, as a discount
Options expected on revenue.
to vest 125,499,911 0.0035 2.7
Options vested and
exercisable 61,813,388 0.0035 2.0
14. Related party transactions
Relationship Names of the related parties
Principal Shareholder and its affiliates (“Oracle”) Oracle Global (Mauritius) Limited
(From November 18, 2005) Oracle (India) Private Limited
Oracle USA, Inc.
Oracle Corporation (Thailand) Co Ltd
Promoter Company and its affiliates (“Citigroup”) OrbiTech Limited
(Until November 17, 2005) Polaris Software Lab Limited
Citigroup Inc.
Citibank branches
Joint Ventures Flexcel International Private Limited
Transactions Receivable (payable)

Year ended At
March 31 March 31
2006 2007 2007 2006 2007 2007
Rs. Rs. USD Rs. Rs. USD
Citigroup
Revenue 2,681,174 − − − − −
Interest income 6,860 − − − − −
Bank charges 2,415 − − − − −
Oracle
Revenue 27,035 176,253 4,089 28,066 223,032 5,175
Professional fees 846 1,197 28 − − −
Application software 123,351 238,561 5,535 − − −
Referral fees 7,353 − − − − −
Other expenses 1,106 6,095 141 (7,394) (2,917) (68)
Deferred revenue − − − (5,998) (211,247) ( 4,901)
Flexcel
Revenue 10,626 49,929 1,158 6,119 − −
Deferred revenue − − − (653) (3,662) (85)

15. Segmental information Business intelligence, Customer relationship management, Brokerage,
e-commerce, Internet services and IT and business consulting. KPO
The Group has adopted SFAS No. 131, “Disclosures about Segments
comprises of business process outsourcing services for the mortgage
of an Enterprise and Related Information”, which requires reporting
industry.
information about operating segments in annual financial statements.
Operating segments are identified as components of an enterprise Expenses, which are not attributable to a business segment, are shown
that engage in business activities from which it may earn revenue and as corporate expenses. Cost of revenues comprise of all direct employee
incur expenses, whose operating results are regularly reviewed by the costs, travel cost of software professionals, professional fees to software
enterprises Chief Operating Decision Maker. Group is primarily organized vendors and application software cost used for internal use.
on a worldwide basis into three business segments:
General and administrative costs are costs, which primarily comprise
a) Product licenses and related activities (“Products”); of rent, power; communication, repairs and maintenance are initially
b) IT solutions and consulting services (“Services”) and allocated among Products, Services and others segment based on
c) Knowledge Processing Services (“KPO”) headcount. The other costs are allocated to Products and Services based
on the revenue. The Group allocates expenditure incurred on selling and
The Group reports operating performance of its business segments
marketing expenses in the ratio of the revenues between Products and
to management. The Product license segment comprises of banking
Services, or in the ratio of the efforts spent in marketing products and
products like the FLEXCUBE suite of products, MicroBanker and Daybreak
services. All other segment revenue and expense are directly attributable
which cater to needs of corporate, retail and investment banking as well
to the segments.
as treasury operations and data warehousing requirements. The related
activities include enhancements, implementation and maintenance Segment assets include all operating assets used by a segment and
activities. Product segment further comprises of casualty insurance consist principally of receivables, deposits for premises and property
carriers which include insurance product and process configuration, policy and equipment, net of allowances and provisions. Segment liabilities
administration, customer management, billing and claims management. primarily include deferred revenues, capital lease obligation, advances
Anti-money laundering and compliance solutions are the new additions from customers, accrued employee cost and other current liabilities.
to product segment after the acquisition of Mantas. Substantially all While most such assets and liabilities can be directly attributed to
of the product revenue relate to the FLEXCUBE product. IT solutions individual business segments, the carrying amount of certain assets and
and consulting services comprise of bespoke software development, liabilities used jointly by both segments is allocated to the segment on a
computer software solutions and related consulting services arising reasonable basis. Assets and liabilities that cannot be allocated between
from such activities. The services provided under this segment include the segments are shown as part of corporate assets.
Year ended
March 31, 2006
Products Services KPO Corporate Total
(All amounts in Indian Rupees)
Revenue 7,570,888 7,029,689 234,669 − 14,835,246

Cost of revenue (excluding depreciation and
amortization) (2,978,708) (5,014,128) (153,835) − (8,146,671)
Gross profit 4,592,180 2,015,561 80,834 − 6,688,575
Operating expenses
Selling and marketing expenses (1,672,032) (327,564) (67,257) − (2,066,853)
General and administrative expenses (427,495) (349,431) (159,870) (732,481) (1,669,277)
Depreciation and amortization (209,742) (173,707) (38,148) (80,350) (501,947)
Impairment of goodwill − − − (57,958) (57,958)
Operating profit 2,282,911 1,164,859 (184,441) (870,789) 2,392,540
Other income, net 11,323
Income before income taxes 2,698,244
Provision for income taxes (515,152)
Equity in net income of equity investees 4,713
Minority interest 2,564
Segment assets as at March 31, 2006 4,593,177 3,917,018 374,322 8,985,372 17,869,889
Segment liabilities as at March 31, 2006 1,461,707 499,811 75,766 2,210,096 4,247,380
Capital expenditure by segment 304,199 316,215 78,695 181,195 880,304

Year ended
March 31, 2007
(All amounts in Indian Rupees)
Revenue 10,966,178 8,970,117 444,775 – 20,381,070

amortization) (4,855,586) (6,485,929) (298,433) – (11,639,948)
Gross profit 6,110,592 2,484,188 146,342 – 8,741,122
Operating expenses
Selling and marketing expenses (2,210,278) (379,343) (111,339) – (2,700,960)
General and administrative expenses (822,972) (428,591) (126,315) (1,076,688) (2,454,566)
Depreciation and amortization (483,443) (247,417) (31,004) (70,918) (832,782)
Operating profit 2,593,899 1,428,837 (122,316) (1,147,606) 2,752,814
Other income, net (23,051)
Income before provision for income taxes 3,101,366
Equity in net income of equity investees 9,161
Segment assets as at March 31, 2007 12,954,812 5,644,892 396,457 10,269,242 29,265,403
Segment liabilities as at March 31, 2007 4,327,630 1,070,494 114,890 1,172,814 6,685,828
Capital expenditure by segment 5,737,762 191,662 13,100 83,344 6,025,868
(All amounts in USD)

Year ended
March 31, 2007
Revenue 254,436 208,123 10,320 – 472,879

amortization) (112,659) (150,486) (6,924) – (270,069)
Gross profit 141,777 57,637 3,396 – 202,810
Operating expenses
Selling and marketing expenses (51,283) (8,801) (2,583) – (62,667)
General and administrative expenses (19,094) (9,944) (2,931) (24,982) (56,951)
Depreciation and amortization (11,217) (5,741) (719) (1,645) (19,322)
Operating profit 60,183 33,151 (2,837) (26,627) 63,870
Other income, net (535)
Income before income taxes 71,957
Equity in net income of equity investees 213
Net income 64,224
Segment assets as at March 31, 2007 300,576 130,972 9,199 238,265 679,012
Segment liabilities as at March 31, 2007 100,409 24,837 2,666 27,211 155,123
Capital expenditure by segment 133,127 4,447 304 1,934 139,812

The following table shows the distribution of the Group’s consolidated revenue by geographical market based on the location of customers:
Year ended
March 31
2006 2007
Rs. % Rs. USD %
United States of America 6,938,469 47 8,123,253 188,475 40

Europe 3,275,487 22 5,419,170 125,735 26
Asia Pacific 2,363,380 16 3,654,502 84,791 18
Middle East, India and Africa 2,087,242 14 3,041,175 70,561 15
Latin America and Caribbean 170,668 1 142,970 3,317 1
14,835,246 100 20,381,070 472,879 100
The Group does not track its profits, assets and liabilities by region. The under capital leases and operating leases consisted of the following at
Group derives more than 10% of its revenues from Citigroup as follows: March 31, 2007:
Year ended Year ending

March 31 March 31
2006 2007 2007 Capital leases Operating leases
Rs. Rs. USD Rs. USD Rs. USD
Product segment 1,365,472 1,763,665 40,920 2008 12,529 291 337,542 7,832
related 2009 8,739 202 225,978 5,243
Service segment 2010 5,060 117 181,186 4,204
related 4,028,743 4,135,440 95,950 2011 2,274 53 139,586 3,239
5,394,215 5,899,105 136,870 2012 1,065 24 86,574 2,009
Thereafter till 2013 17,631 409
Total minimum payments 29,667 687 988,497 22,936
16. Other income (expense), net Amount representing interest (3,288) (75)
Other income (expense), net comprises of the following: Present value of minimum
lease payment 26,379 612
Year ended Obligation under capital leases

March 31 Long term 10,842 252
2006 2007 2007 Current 15,537 360
Rs. Rs. USD 26,379 612
Foreign exchange loss, net (16,838) (30,311) (703) Rental expenses for the years ended March 31, 2006 and 2007 was
Insurance claim 21,530 − − Rs. 249,429 and Rs. 423,448 (USD 9,825), respectively.
Profit on sale of investment 743 − −
Miscellaneous income 5,888 7,260 168
11,323 (23,051) (535) 18. Subsequent events
Acquisition
17. Commitments On April 20, 2007, i-flex solutions b.v., wholly owned subsidiary company
Capital Expenditure of i-flex, signed an investment agreement with Fourlis Holdings SA,
Athens Technology Centre (‘ATC’) and shareholders of ATC. Under the
As at March 31, 2006 and 2007, the Group had committed to spend terms of investment agreement, the Group alongwith Fourlis Holdings SA,
Rs. 801,100 and Rs. 1,955,320 (USD 45,367) (includes capital and shareholders of ATC has set up company called, i-flex solutions SA
commitments through the issuance of letters of intent of Rs. 998,819 (‘i-flex SA’) wherein the Group currently holds 35% ownership interest.
(USD 23,174)), respectively, under agreements to purchase property and The Group would acquire the remaining 65% of ownership interest in
equipment. i-flex SA over a period of 3 years in 4 tranches whereas i-flex SA would
acquire certain assets, employees and contracts from ATC. The Group
Leases would pay EUR 2 million to ATC, as a compensation for the termination
of existing business relationships, assignment of banking business
The Group has taken certain office premises, residential premises
contracts and for the acquisition of banking business clientele. In addition
and vehicles for employees under operating leases, which expire at
to this, the Group would pay EUR 9.7 million to Fourlis Holding SA and
various dates through year 2013. Future minimum lease payments
shareholders of ATC for the acquisition of a 55% stake in Joint Stock
Company. The Group is in the process of completing the acquisition
formalities.

Annual Report 2006-2007_B & W.indd I 7/27/2007 3:32:48 PM
Annual Report 2006-2007_B & W.indd II 7/27/2007 3:32:48 PM
Notice to members
NOTICE is hereby given that the Eighteenth Annual General Meeting of 10. To consider and, if thought fit, to pass, with or without modification(s),
i-flex solutions limited will be held at InterContinental The Grand Mumbai, as an Ordinary Resolution the following:
Sahar Airport Road, Mumbai 400 059 on Friday, August 24, 2007 at
3.00 p.m. to transact the following business: “RESOLVED THAT in accordance with the provisions of
Sections 198, 269, 309, 310 read with Schedule XIII and other
applicable provisions, if any, of the Companies Act, 1956 (including
Ordinary Business: any statutory modification(s) or re-enactment(s) thereof, for the
1. To receive, consider and adopt the Audited Balance Sheet as on time being in force) and subject to such sanctions and approvals
March 31, 2007, the Profit and Loss Account for the year ended on as may be necessary, approval of the Company be and is hereby
that date, and the Reports of the Board of Directors and the Auditors accorded to the appointment and terms of remuneration of
thereon. Mr. N R Kothandaraman (N R K Raman) as the Managing Director of
the Company for a period of five years with effect from May 1, 2007
2. To appoint a Director in place of Mr. Rajesh Hukku, who retires by to April 30, 2012 as set out below:
rotation and, being eligible, offers himself for re-appointment.
1. Gross Salary: In the scale of Rs. 55 Lakh p.a. to Rs. 62 Lakh
3. To appoint a Director in place of Mr. William T Comfort, Jr., who retires p.a. inclusive of perquisites as mentioned below.
by rotation and, being eligible, offers himself for re-appointment.
2. Performance linked Bonus: Payable quarterly or at other
4. To appoint Auditors of the Company and to fix their remuneration. intervals, as may be decided by the Compensation Committee
and the Board.
Special Business: 3. Perquisites and allowances:
5. To consider and, if thought fit, to pass, with or without modification(s),
a. Housing: Furnished/unfurnished residential accommodation
as an Ordinary Resolution the following:
or house rent allowance up to 10% of the salary in lieu
“RESOLVED THAT pursuant to the provisions of Section 228 and thereof. The expenditure incurred by the Company on gas,
other applicable provisions, if any, of the Companies Act, 1956, the electricity, water and furnishings, if any, shall be valued as
Board of Directors of the Company be and is hereby authorized to per Income Tax Rules, 1962.
appoint Branch Auditors to conduct the audit of branch office(s) of
b. Medical reimbursement/allowance: Reimbursement of
the Company whether existing or which may be opened hereafter,
actual expenses for self and family and/or allowance will
in India or abroad, in consultation with the Company’s Statutory
be paid as decided by the Board from time to time.
Auditors, any person(s) qualified to act as Branch Auditors within the
meaning of Section 228 of the Act and to fix their remuneration.” c. Leave travel concession/allowance: For self and family once
in a year, as decided by the Compensation Committee and
the Board from time to time.
d. Club fees: Fees payable subject to a maximum of two
“RESOLVED THAT Mr. N R Kothandaraman (N R K Raman) be and
clubs.
is hereby appointed as a Director of the Company, liable to retire by
rotation.” e. Provision for driver/driver’s salary allowance: As per the
rules of the Company.
as an Ordinary Resolution the following: f. Personal accident insurance: As per the rules of the
Company.
“RESOLVED THAT Mr. Deepak Ghaisas be and is hereby appointed
as a Director of the Company, liable to retire by rotation.” 4. Other benefits:
8. To consider and, if thought fit, to pass, with or without modification(s), a. Earned/privilege leave: As per the rules of the Company.
b. Company’s contribution to provident fund and
“RESOLVED THAT Mr. R Ravisankar be and is hereby appointed as a superannuation fund: As per the rules of the Company.
Director of the Company, liable to retire by rotation.”
c. Gratuity: As per the rules of the Company.
as an Ordinary Resolution the following: d. Encashment of leave: As per the rules of the Company.
“RESOLVED THAT Mr. Derek Williams be and is hereby appointed e. Company car and telephone: Use of the Company’s car
as a Director of the Company, liable to retire by rotation.” and telephone at the residence for official purposes, as per
the rules of the Company.
i-flex annual report 2006-07 III
Annual Report 2006-2007_B & W.indd III 7/27/2007 3:32:48 PM

RESOLVED FURTHER THAT notwithstanding anything RESOLVED FURTHER THAT a draft Agreement containing the terms
stated herein above, wherein in any financial year closing and conditions of appointment of Mr. R Ravisankar submitted
on and after March 31, 2008, the Company incurs a loss to this meeting and initialed by the Chairman for the purpose of
or its profits are inadequate, the Company shall pay to identification thereof with the liberty to the Board of Directors to alter
Mr. N R Kothandaraman (N R K Raman) the remuneration as and vary the terms and conditions of the said appointment and/or
mentioned above as the minimum remuneration. Agreement in such manner as may be agreed to between the Board
of Directors and Mr. R Ravisankar.”
RESOLVED FURTHER THAT the terms and conditions and the
remuneration as mentioned above that forms part of the Agreement, 13. To consider and, if thought fit, to pass, with or without modification(s),
that is submitted to this meeting and for identification signed by as a Special Resolution the following:
the Chairman of the Company, is approved and that the Board
of Directors of the Company be and is hereby authorised to alter “RESOLVED THAT pursuant to Section 309 and other applicable
and vary the terms and conditions of the said appointment and/or provisions of the Companies Act, 1956, if any, and subject to such
Agreement in such manner as may be agreed to between the Board other statutory approvals as may be required, the consent of the
of Directors and Mr. N R Kothandaraman (N R K Raman).” members be and is hereby accorded to the payment of commission
to the Directors of the Company (excluding the Managing Director
and Whole-time Directors), not exceeding in the aggregate one per
cent per annum of the net profits of the Company, which shall be
“RESOLVED THAT in accordance with the provisions of Section 269, calculated in accordance with the provisions of Sections 198, 349
Schedule XIII and other applicable provisions of the Companies Act, and 350 of the Companies Act 1956, such payment to be in such
1956, (including any statutory modification(s) or re-enactment(s) amounts, or proportions and in such manner, as may be decided
thereof, for the time being in force) and subject to such other by the Board of Directors based on the attendance, participation
approvals as may be necessary in this regard the consent of and the contribution of the concerned Directors or on the basis of
the Company be and is hereby accorded to the appointment of such other criteria as may be laid down by the Board of Directors
Mr. Deepak Ghaisas as the Whole-time Director of the Company from time to time, and that such commission shall be paid by the
with effect from May 1, 2007. Company to such Directors for a period of five years commencing
from April 1, 2007, to March 31, 2012.”
RESOLVED FURTHER THAT Mr. Deepak Ghaisas as the Whole-time
Director will not draw any remuneration from the Company or be 14. To consider and, if thought fit, to pass, with or without modification(s),
entitle to any perquisites as are mentioned in Schedule XIII of the as a Special Resolution the following:
Act except reimbursement of expenses incurred while carrying out
his duties for the business of the Company. “RESOLVED THAT pursuant to Section 115 WKA of the Income
Tax Act, 1961 and the Securities and Exchange Board Of India
RESOLVED FURTHER THAT a draft agreement containing the terms (Employee Stock Option Scheme and Employee Stock Purchase
and conditions of appointment of Mr. Deepak Ghaisas submitted Scheme) Guidelines, 1999 and other applicable statutory provisions,
to this meeting and initialed by the Chairman for the purpose of if any, approval of the members of the Company be and is hereby
identification thereof with the liberty to the Board of Directors to alter accorded to the Board of Directors of the Company to carry out the
and vary the terms and conditions of the said appointment and/or following amendments to the ‘2002 EMPLOYEES STOCK OPTION
Agreement in such manner as may be agreed to between the Board PLAN’ (‘ESOP Plan’) of the Company which shall be effective from
of Directors and Mr. Deepak Ghaisas.” April 1, 2007.
as an Ordinary Resolution the following: Amendment to the 2002 EMPLOYEES STOCK OPTION PLAN of the
Company (“Plan”): In Clause 19 (d) of the Plan, the following shall
“RESOLVED THAT in accordance with the provisions of Section 269, be inserted at the end:
Schedule XIII and other applicable provisions of the Companies Act,
1956, (including any statutory modification(s) or re-enactment(s) “Notwithstanding anything to the contrary contained in the Plan or
thereof, for the time being in force) and subject to such other any agreement under the Plan, the Eligible Employee shall bear
approvals as may be necessary in this regard the consent of and pay or reimburse to the Company fringe benefit tax, including
the Company be and is hereby accorded to the appointment of related surcharge, cess, duty, or any other levy, to the extent to
Mr. R Ravisankar as the Whole-time Director of the Company with which the Company is liable to pay the fringe benefit tax in relation
effect from May 1, 2007. to the value of fringe benefits provided to the Eligible Employee and
determined under Clause (ba) of sub-section (1) of Section 115WC
RESOLVED FURTHER THAT Mr. R Ravisankar as the Whole-time of the Income tax Act, 1961. The Administrator is authorized to
Director will not draw any remuneration from the Company or be determine the amount of withholding, deduction or recovery, if any,
entitle to any perquisites as are mentioned in Schedule XIII of the of such tax from the Eligible Employee and also finalise the timing
Act except reimbursement of expenses incurred while carrying out and modalities for such recovery.”
his duties for the business of the Company.
Annual Report 2006-2007_B & W.indd IV 7/28/2007 1:52:21 PM

RESOLVED FURTHER THAT the above amendments shall also be h) The members seeking any information with regard to accounts are
applicable to the Options already granted or to be granted under the requested to write to the Company at an early date to enable the
Plan to the present and future employees of the Company. Management to keep the information ready.
RESOLVED FURTHER THAT the above amendments shall also be i) Pursuant to Sections 205A and 205C of the Companies Act, 1956,
applicable to the Options already granted or to be granted under the any money transferred to the unpaid dividend account which
Plan to the present and future employees of the present and future remains unpaid or unclaimed for a period of 7 years from the date
subsidiary companies of the Company. of such transfer is now required to be transferred to the ‘Investor
Education and Protection Fund’ set up by the Central Government.
RESOLVED FURTHER THAT except as stated above all other terms Accordingly, the amount of unclaimed dividend for the financial
and conditions of ESOP Plan already approved by the members of year ended March 31, 2000 will be transferred to the ‘Investor
the Company shall remain unaltered.” Education and Protection Fund’ in due course. Once the amount
is so transferred, no claim shall lie against the aforesaid fund or
By Order of the Board
the Company in respect of such dividend amount thereafter. The
members are requested to send to the Company their claims, if any,
Deepak Ghaisas
for the dividend for financial year 1999-2000 onwards before the
Vice Chairman & Company Secretary
amount becomes due for transfer to the above fund.
Registered Office:
Unit 10-11, SDF 1, SEEPZ, ADDITIONAL INFORMATION PURSUANT TO CLAUSE 49-VI OF THE
Andheri (East), LISTING AGREEMENT
Mumbai 400 096
July 4, 2007 DETAILS OF DIRECTORS SEEKING APPOINTMENT/
RE-APPOINTMENT AT THE FORTHCOMING ANNUAL GENERAL
Notes: MEETING:
a) An Explanatory Statement as required under Section 173 (2) of the

Mr. Rajesh Hukku
Companies Act, 1956 and the information as required under the
Listing Agreements with Stock Exchanges in respect of item nos. 5 Mr. Rajesh Hukku born on February 8, 1958, received a Bachelor’s
to 14 mentioned in the above Notice are annexed hereto. degree (B.E.) in Electrical and Electronics Engineering from the Birla
Institute of Technology and Science, India and undertook Post Graduate
b) The Register of Members and the Share Transfer Books of Research in LAN Technology at the University of Maryland, USA.
the Company will remain closed from August 20, 2007 to
August 24, 2007, both days inclusive. Mr. Hukku is the Chairman of i-flex solutions. He is the head of Oracle’s
Financial Services Global Business Unit (FSGBU), headquartered in
c) A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO New York. The FSGBU will draw on Oracle’s global footprint and i-flex’s
APPOINT A PROXY OR PROXIES TO ATTEND AND VOTE INSTEAD comprehensive portfolio solutions and domain expertise in the financial
OF HIMSELF ON A POLL ONLY AND THAT A PROXY NEED NOT BE A services industry, to provide integrated solutions to financial institutions
MEMBER. around the world.
d) The instrument appointing proxy should be deposited at the Since donning the mantle of Chief Executive Officer – i-flex solutions, in
Registered Office of the Company not less than 48 hours before the 1992, Mr. Hukku has architected the success story of the company-from
commencement of the meeting. a player primarily in the emerging markets to India’s first global software
product Company and the leading IT solutions provider to the financial
e) The members/proxies are requested to bring duly filled in Attendance
services industry in the world today. In 1999, Mr. Hukku was appointed
Slips sent herewith for attending the meeting.
Chairman and Managing Director of i-flex solutions. Under his leadership,
f) The documents referred to in the Explanatory Statement annexed i-flex became the only organization in the Indian IT industry to place itself
hereto are available for inspection by the members of the Company on the global map with a ‘Made in India’ brand.
at the Registered Office of the Company between 2.00 P.M. to
FLEXCUBE’s consistent ranking as the No.1 banking solution in the world
4.00 P.M. on any working day of the Company.
by IBS (International Banking Systems), UK, for five consecutive years,
g) The members who hold shares in physical form are requested to bears a strong testimony to the company’s leadership stature in the
notify promptly any change in their addresses to the Company’s industry. In addition, i-flex has built a comprehensive portfolio of products
Registrars and Transfer Agents. The members who hold shares in and service offerings that include the highly acclaimed Reveleus™ suite
demat mode are requested to notify promptly any change in their for Basel II and Operational Risk, PrimeSourcing™, and i-flex Consulting™
addresses to their Depository Participants. that are geared towards the banking and financial services industry.
i-flex annual report 2006-07 V
Annual Report 2006-2007_B & W.indd V 7/27/2007 5:17:27 PM

Transformation has been the leitmotif of Rajesh’s contribution to the Indian Mr. Hukku holds directorship and committee membership in the following
IT industry. His relentless pursuit of creating the first product success on Companies:
the global center-stage has created a sharp distinction amidst a crowd
of traditional IT services providers. He also piloted i-flex to a thought List of other Membership in Chairmanship in
leadership stature and mentored a host of small and medium companies Directorships Committees of Committees of
who aspired to create new products and emulate i-flex’s proven business held other companies other companies
model.
i-flex solutions inc. – –
For his role in scripting i-flex’s growth, Mr. Hukku was conferred the i-flex America inc. – –
prestigious Ernst & Young ‘Entrepreneur of the Year Award 2002’ in the i-flex Processing – –
Information Technology, Communications and Entertainment category. Services Ltd.
He is also the recipient of the renowned International Stevie Award in
the ‘Best Chairman’ category. More recently, he was recognized as one Mr. William T Comfort, Jr.
among the Outstanding 50 Asian Americans in Business by the Asian
American Business Development Center. Mr. William T Comfort, Jr. has been Chairman of Citigroup Venture
Capital, the private equity arm of Citigroup specializing in leveraged
Mr. Hukku received the Government of India’s most prestigious IT award - buy-outs, since 1979. He is also a Citigroup representative on the
‘The Dewang Mehta award for innovation in IT’ in 2003. He also received investment committee of Stirling Square Capital Partners. Mr. Comfort
the 2004 Global Entrepolis Award, an honor bestowed on Asia’s emerging joined Citigroup in 1973 and has been Executive Director of Citicorp
technopreneurs. For his contribution to IT transformation in Chile, he was International Bank, Ltd. in London and Head of Corporate Finance at
awarded the highest civilian honor bestowed on a foreign national - the Citibank, N.A.
‘Order Bernardo O Higgins - Great Official’ by the Government of Chile
in 2004. Mr. Comfort born on August 3, 1937, received his B.A. and LL.B. at the
University of Oklahoma and an LL.M. at New York University Law School.
Mr. Hukku has championed India Inc.’s expansion into new geographies He is a trustee of the New York University Law Center Foundation, the
and service lines, and served on the NASSCOM (National Association of John A. Hartford Foundation, Inc., and was an adjunct professor at the
Software and Service Companies, India) Executive Committee. Recognized Columbia Business School.
as a visionary entrepreneur, he has spoken at the World Economic Forum
Summit, the Asia-Pacific Leadership Summit, Harvard Business School Mr. Comfort has been a member of the Board of Directors of the Company
and various prestigious banking forums, including the World Congress of since February 27, 1998.
Bankers in Jamaica and the Latin American Business Convention.
Mr. Comfort as a Non-Executive Director of the Company will not draw
i-flex’s unique business model and Mr. Hukku’s vision for the financial any remuneration from the Company except reimbursement of expenses
services industry have been lauded and written about in many leading incurred for attending the meetings of the Company and expenses
publications like The Economist, The Wall Street Journal, The Far Eastern incidental thereto.
Economic Review, and Knowledge@Wharton.
Mr. Comfort does not hold any equity shares of the Company as on
Mr. Hukku holds 676,524 equity shares of the face value of Rs. 5/- of date.
Mr. Comfort holds directorship and committee membership in the
Mr. Hukku as a Non-Executive Director of the Company will not draw following Companies:
any remuneration from the Company except reimbursement of expenses
incurred for attending the meetings of the Company and expenses List of other Directorships Membership in Chairmanship in
incidental thereto. held Committees of Committees of
other companies other companies
399 Venture Partners Inc. – –

Citigroup Venture Capital Ltd. – –
Court Square Capital Ltd. – –
Annual Report 2006-2007_B & W.indd VI 7/27/2007 3:32:49 PM

Mr. N R Kothandaraman (N R K Raman) Mr. Raman holds directorship and committee membership in the
following Companies:
Mr. N R Kothandaraman (N R K Raman), born on September 17, 1958,
holds a master’s degree in Physics, with a specialization in Electronics. He
is also a certified Citicorp Finance Professional. Recently in June 2006, List of other Directorships Membership in Chairmanship in
held Committees of Committees of
he completed an executive education program on ‘Strategy: Building and other companies other companies
Sustaining Competitive Advantage’ at Harvard Business School.
i-flex Processing Services Ltd. – –
Mr. Raman is the Managing Director and Chief Executive Officer, ISP Internet Mauritius Company – –
i-flex solutions. As CEO, he is not only responsible for advancing Equinox Global Services Pvt. Ltd. – –
i-flex’s mission of being the leading IT solutions provider to the financial
services industry worldwide, but is also the focal point for providing the
organization with focus and clarity of direction to employees. As global Mr. Deepak Ghaisas
markets get more competitive, and growth of technology faster-paced,
Mr. Deepak Ghaisas, born on November 19, 1957, is a Chartered
the requirements to meet success and the risks are greater than before;
Accountant, Cost Accountant and Company Secretary.
it is Mr. Raman’s responsibility to maintain and implement corporate
objectives as established by i-flex’s Board. In short, Mr. Raman functions Mr. Ghaisas is Vice-Chairman, i-flex solutions, and a part of the
as the main link between Board members and the various levels of the leadership team of Oracle’s newly formed Financial Services Global
organization. Business Unit (FSGBU). In his new role, he will provide the unit with
his in-depth knowledge, commitment, and experience. Mr. Ghaisas’s
Mr. Raman has held various positions in i-flex since he joined the company
expertise spans areas such as business management and management
in 1985. He most recently was Chief Operating Officer responsible for
accounting; techno-legal-commercial areas of information technology,
the development strategy and global delivery of i-flex’s products and
risk management, corporate governance, legal affairs, and contract
services divisions. He managed all aspects of operations, including
negotiations. Mr. Ghaisas’s ability, which transformed and shaped
human resource development, process, and quality management, and
i-flex’s successful financial performance, will now guide the FSGBU to a
served as one of the key leaders in directing technology strategies and
high level of growth and recognition.
goals for strategic business units in the company. Earlier, as Senior
Vice-President - Global Sales, he was responsible for the entire gamut of As a Chief Executive Officer (India operations) and Chief Financial
sales operations across five regions. Officer from 1997 to April, 2007, Mr. Ghaisas was credited for playing
a large role in creating, selling and driving the organization’s strategy.
Mr. Raman is a recognized speaker at various IT discussions; and has been
As a spokesperson for the organization in its early years, Mr. Ghaisas
part of many panels, including ‘IT in India: a Social Audit’, ‘IT Innovation
demonstrated a deep confidence in i-flex’s potential for the global market
in India’ and ‘Strategy to Accelerate Growth of Indian IT Industry’. He has
and provided the organization with a focus and clarity of direction that it
also spoken at the Forum for Science and Development, and at the Bank
needed.
of America-hosted, ‘Perspectives - The Evolving Landscape’. Recently,
he was part of the prestigious ‘CII Governance Series’, organized by the Recently, Mr. Ghaisas was elected for the third time to the executive
Government of Karnataka, India. council of NASSCOM. He is also the chairman of the IT committee of
Confederation of Indian Industry (CII); and a member of the committee of
Mr. Raman holds 114,000 equity shares of the face value of Rs. 5/- of
the Indian Institute of Bankers - constituted for the purpose of drafting the
curriculum for Information System Audit course for bankers.
i-flex annual report 2006-07 VII
Annual Report 2006-2007_B & W.indd VII 7/27/2007 5:17:47 PM

Another measure of his visionary strategy and evangelistic style is technology and business management. He has led i-flex’s products
showcased in his role as Vice-President of the Maharashtra Economic and services business, technology and architecture, global sales and
Development Corporation (MEDC), a governing body which actively marketing and corporate development functions, including new lines of
participates in the decision-making process for the economic development business, over the past two decades.
of Maharashtra, India. He is also a member of the Internet Banking
Committee of the Reserve Bank of India - the body that formulated Beginning his career at i-flex in 1993 (originally COSL/CITIL, where he
guidelines on Internet banking and security in India. executed a number of assignments, primarily, for Citibank, since 1987)
he headed the IT Services business, conceptualizing, strategizing and
Mr. Ghaisas holds 456,269 equity shares of face value of Rs. 5/- of the winning customers, while helping the business grow rapidly over the
Company as on date. years.
Mr. Ghaisas holds directorship and committee membership in the In 1997, he took over as the Chief Executive Officer of the Company
following Companies: and was instrumental in transforming i-flex into a fast-growing, highly
successful products and services Company, winning customers around
List of other Directorships held Membership in Chairmanship in the globe. As part of the Executive Management Office at i-flex solutions,
Committees Committees Shanx is credited with envisioning i-flex’s technology leadership,
of other of other branding and alliances, overseas expansion and M&A strategies. He
companies companies relocated to the USA in 2000 as Chief Executive Officer (International
Operations and Technology), with the responsibility of managing i-flex’s
Shoppers Stop Ltd. – Shoppers Stop Ltd.
- Audit Committee products and services businesses, the subsidiaries abroad, and new
USV Ltd. – USV Ltd. - Audit business acquisitions in the USA. He later managed the business
Committee development portfolio while continuing to execute his responsibilities as
i-flex Processing Services Ltd. – – CEO – i-flex solutions inc.
i-flex solutions pte ltd – –
i-flex Consulting(Asia Pacific) – – He enjoys teaching and exchanging ideas on banking and technology and
pte ltd. has presented i-flex’s global product software success story in various
i-flex solutions inc. – – industry forums like NASSCOM and CII. Leading media organizations
i-flex America inc. – – such as CNBC, NDTV, The Economic Times, The Times of India, Business
SuperSolutions Corporation – – Today, and a host of other publications, have also profiled Shanx.
Flexcel International Pvt. Ltd. – –
ISP Internet Mauritius – – Shanx holds 366,400 equity shares of face value of Rs. 5/- of the
Company Company as on date.
Equinox Global Services – –
Pvt. Ltd. Shanx holds directorship and committee membership in the following
Bombay Chamber of – – Companies:
Commerce and Industry
List of other Directorships Membership in Chairmanship in

Mr. R Ravisankar held Committees of Committees of
other companies other companies
Mr. R Ravisankar, born on November 22, 1957, received his Bachelor’s
degree (B.Tech) and PGDM. i-flex solutions Inc. – –
i-flex America Inc. – –
Mr. R Ravisankar is Vice-Chairman, i-flex solutions, and a part of the SuperSolutions Corporation – –
leadership team of Oracle’s newly formed Financial Services Global Castek Software Inc. – –
Business Unit (FSGBU). Mantas Ltd. – –
i-flex Processing Services Ltd. – –
Shanx, as he is popularly known, is a founding member of i-flex, and
has over 23 years of experience in management consulting, information
Annual Report 2006-2007_B & W.indd VIII 7/27/2007 3:32:50 PM

Mr. Derek Williams He also played a pivotal role in building a strong presence throughout
Asia by adopting a strategy of partnering closely with local companies
Mr. Derek Williams, born on December 30, 1944, is the Chairman and
and providing software and support for companies of all sizes. Among his
Executive Vice-President of Oracle Corporation, Asia Pacific and Japan.
key accomplishments is the development of Oracle’s presence in China
In this role, he provides overall leadership in areas of strategic interest
and India.
to Oracle and serves as the Company’s top ambassador for industry,
Government and policy within the region. Mr. Williams has been at Mr. Williams was awarded an Honorary Professorship from Shanghai
the helm of Oracle’s Asia Pacific and Japan operations since it was Textile University in 1995.
established in 1991. He has grown the Company’s total revenues in Asia
Pacific and Japan to more than USD 2 billion in fiscal year 2006. Mr. Williams does not hold any equity shares of the Company as on
date.
Mr. Williams holds directorship and committee membership in the following Companies:
List of other Directorships held Membership in Committees Chairmanship in Committees

of other companies of other companies
Beijing Oracle Software Systems Co Limited – –

E-docs Asia-Pacific Pty Ltd. – –
Eontec Australia Pty Ltd. – –
Eontec Singapore Pte Ltd. – –
G-Log Pty Ltd. – –
G-Log Sdn Bhd Malaysia – –
JD Edwards Australia Pty Limited – –
JD Edwards WorldSolutions Co Pty Limited – –
Oracle (Philippines) Corporation – –
Oracle Corporation (Thailand) Company Limited – –
Oracle Corporation Australia Pty Limited – –
Oracle Corporation Japan – –
Oracle Corporation Malaysia Sdn. Bhd (fka Oracle Systems Malaysia – –
Sdn. Bhd)
Oracle Corporation Singapore Pte Ltd. – –
Oracle Korea Ltd. – –
Oracle New Zealand Limited – –
Oracle Research and Development – –
Center (Beijing) Co Limited – –
Oracle Research and Development – –
Center (Shenzhen) Co Limited – –
Oracle Systems Hong Kong Limited – –
Oracle Vietnam Pte Ltd. – –
PeopleSoft (Beijing) Software Co Limited – –
PeopleSoft Australia Pty Limited – –
PeopleSoft Hong Kong Limited – –
PeopleSoft India Private Limited – –
PeopleSoft Worldwide (M) Sdn Bhd – –
PT Oracle Indonesia – –
Siebel Systems Australia Pty Limited – –
Siebel Systems Hong Kong Limited – –
Siebel Systems Malaysia Sdn Bhd – –
Siebel Systems Software (India) Private Limited – –
SPL WorldGroup (Philippines) Inc. – –
Oracle India Pvt. Ltd. – –
Mr. Williams as a non-executive Director of the Company will not draw any remuneration from the Company except reimbursement of expenses incurred
for attending the meetings of the Company and expenses incidental thereto.
i-flex annual report 2006-07 IX
Annual Report 2006-2007_B & W.indd IX 7/27/2007 3:32:50 PM

Annexure to notice
Explanatory Statement as required by Section 173 (2) of the The Compensation Committee of the Company has recommended,
Companies Act, 1956. subject to the approval of the members of the Company, the remuneration
payable to Mr. N R Kothandaraman (N R K Raman) as set out in the
The following Explanatory Statement sets out all the material facts
resolution no. 10 of the Notice which is within the limits prescribed
relating to the special business mentioned in the accompanying Notice
under Schedule XIII and other applicable provisions of the Companies
dated July 4, 2007.
Act, 1956.
Item no. 5 The Draft Agreement to be entered into between the Company and
Mr. N R Kothandaraman (N R K Raman) is available for inspection by the
The Company has branch offices in India and abroad and may also open members of the Company at its Registered Office between 2.00 p.m. to
new branches in future. It may be necessary to appoint branch auditors 4.00 p.m. on any working day of the Company.
for conducting the audit of the books of accounts of the Company at such
branches. This may be treated as an abstract of the Draft Agreement between
the Company and Mr. N R Kothandaraman (N R K Raman) pursuant to
The Board of Directors of the Company seeks approval of the members Section 302 of the Companies Act, 1956.
for authorising the Board to appoint Branch Auditors and to fix their
remuneration in consultation with the Statutory Auditors of the Except Mr. N R Kothandaraman (N R K Raman), no other Director is
Company. concerned or interested in the resolution at Item no. 10 of the Notice.
No Director is in any way concerned or interested in the resolution no. 5 Your Directors recommend the resolution at Item no. 10 of the Notice to
of the Notice. the members.
The Board commends the resolution no. 5 for the acceptance by the
members. Item nos. 11 & 12
The Board of Directors at its meeting held on May 1, 2007, has pursuant
Item nos. 6 to 9 to the provisions of the Act and subject to the approval of the members
of the Company appointed Mr. Deepak Ghaisas and Mr. R Ravisankar as
Mr. N R Kothandaraman (N R K Raman), Mr. Deepak Ghaisas, Whole-time Directors of the Company with effect from May 1, 2007.
Mr. R Ravisankar and Mr. Derek Williams were respectively appointed
as the Additional Directors of the Company at the Board Meeting held on As per the Draft Agreement(s) to be entered into between Mr. Ghaisas and
May 1, 2007. Pursuant to and in accordance with the provisions of the Mr. R Ravisankar and the Company, Mr. Ghaisas and Mr. R Ravisankar,
Section 260 of the Companies Act, 1956, and Article 109 of the Articles as Whole-time Directors of the Company will not draw any remuneration
of Association of the Company, these Directors hold office up to the date from the Company or be entitled to any perquisites as are mentioned in
of this Annual General Meeting and are eligible for appointment(s). Schedule XIII to the Act except reimbursement of expenses incurred while
carrying out their duties for the business of the Company.
The Company has received notices under Section 257 of the Act,
proposing their appointment as Directors of the Company, along with the The Draft Agreement(s) to be entered into between the Company
requisite deposit. and Mr. Deepak Ghaisas and Mr. R Ravisankar respectively are available
for inspection by the members of the Company at its Registered Office
The details regarding the above proposed appointees as the Directors between 2.00 p.m. to 4.00 p.m. on any working day of the Company.
and their detailed resumes have been given in the annexure attached
This may be treated as an abstract of the Draft Agreement(s) between
to this Notice.
the Company and Mr. Deepak Ghaisas and Mr. R Ravisankar respectively
In view of the expertise, knowledge and experience of these appointees, pursuant to Section 302 of the Companies Act, 1956.
their appointment as the Directors of the Company is recommended.
Except Mr. Deepak Ghaisas and Mr. R Ravisankar, no other Director is
Mr. N R Kothandaraman (N R K Raman), Mr. Deepak Ghaisas, concerned or interested in the resolutions at Item nos. 11 and 12 of the
Mr. R Ravisankar and Mr. Derek Williams will retire by rotation. Notice.
Your Directors recommend the resolutions at Item nos. 11 and 12 of the

Except Mr. N R Kothandaraman (N R K Raman), Mr. Deepak Ghaisas,
Notice to the members.
Mr. R Ravisankar and Mr. Derek Williams none of the Directors is
concerned or interested in the resolutions at Item nos. 6 to 9 of the
Notice. Item no. 13
According to the provisions of Section 309 (4) of the Companies Act,
Item no. 10 1956, (“Act”) and Article 99 of the Articles of Association of the Company
a director who is neither in whole-time employment of the Company nor
Oracle Global (Mauritius) Ltd., the Promoter of the Company nominated
a managing director may be paid remuneration by way of commission
Mr. N R Kothandaraman (N R K Raman) as a Director on the Board of
if the members of the Company pass a special resolution authorizing
Directors of the Company. He was appointed as the Managing Director
such payment provided that the remuneration paid to all such directors
of the Company for a period of five years with effect from May 1, 2007,
together shall not exceed 1% of net profits of the Company.
on the remuneration, perquisites and other terms and conditions as
mentioned in the resolution no. 10 of this Notice, subject to the approval The Company has not been paying any fees to its Non-Executive Directors
of the members of the Company in the General Meeting. for attending meetings of the Board. The members, at the Annual General
Annual Report 2006-2007_B & W.indd X 7/27/2007 3:32:50 PM

Meeting of the Company held on September 6, 2002, had approved the the Clause 19 (d) of the ESOP Plan to enable the Company to recover the
payment of remuneration by way of commission, not exceeding 1% applicable FBT from the respective employees of the Company and to
of the net profits of the Company computed as per the provisions of grant necessary powers to the Administrator of the Plan for administrative
Section 198, 349 and 350 of the Act, to Non-Executive Directors of the convenience.
Company for a period of five years with effect from April 1, 2002.
Subject to the approval of members of the Company, the proposed
The Directors of the Company have significantly contributed to the amendment will be applicable to all the Directors/employees of the
Company’s progress during last couple of years. It is, therefore, Company and all the Directors/employees of the present and future
proposed to continue to pay remuneration by way of commission to subsidiary Companies of the Company who have exercised or shall
the Non-Executive Directors of the Company subject to the approval exercise their ESOPs on or after April 1, 2007. Due to this proposed
of the members in the General Meeting and such other statutory and amendment, such Directors/employees shall bear and pay or reimburse
government approvals as may be required, if any. The amount of to the Company the applicable FBT as mentioned above.
commission proposed to be paid to the Non-Executive Directors shall not
exceed 1% of the net profits of the Company which shall be computed as These changes have been approved by the Board of Directors and the
per the provisions of Section 198, 349 and 350 of the Act. Compensation Committee of the Company.
The resolution at Item no. 13 of the Notice seeks approval of the members A copy of the ESOP Plan duly modified is available for inspection at the
for authorizing the Board of Directors of the Company to decide the Registered Office of the Company between 2.00 p.m. to 4.00 p.m. on all
quantum and the manner of remuneration to the Non-Executive Directors working days of the Company.
of the Company for a period of five years with effect from April 1, 2007.
This resolution is in the interest of the Company and your Directors
Except Mr. S P Bharucha, Ms. Tarjani Vakil and Mr. Y M Kale no other recommend the resolution at item no. 14 of the Notice to the members.
Director of the Company is concerned or interested in the resolution at
Except Mr. Charles Phillips, Mr. Derek Williams and
Item no. 13 of the Notice.
Mr. William T Comfort Jr., Directors of the Company, who have not
been granted options under the ESOP Plan, all the other Directors of
Item no. 14 the Company have been granted options and may be deemed to be
concerned or interested in the resolution at item no. 14 of the Notice.
Fringe Benefit Tax (“FBT”) has been recently introduced on exercise of
Employee Stock Options (“ESOPs”) by an employee. The Finance Act,
2007 provides, inter alia, that when an employer allots or transfers, directly
or indirectly any shares or other specified security at a concessional rate By Order of the Board
to its employee, it will be treated as fringe benefit and taxed accordingly.
This amendment is effective from April 1, 2007.
The Finance Act, 2007, has also introduced Section 115 WKA in the Deepak Ghaisas
Income Tax Act, 1961, which allows modification of the ESOP schemes Vice Chairman and Company Secretary
to enable the employer to recover from the employee the FBT to the
extent to which the employer is liable to pay, in relation to the value of Registered Office:
fringe benefits provided to the employee. Unit 10-11, SDF 1, SEEPZ,
Andheri (East),
The Employees Stock Option Plan 2002 (“ESOP Plan”) of the Company Mumbai 400 096
was approved by the members of the Company at the Annual General
Meeting held on August 14, 2001. In view of the changes introduced in July 4, 2007
the Income Tax Act, 1961, as mentioned above, it is proposed to amend
i-flex annual report 2006-07 XI
Annual Report 2006-2007_B & W.indd XI 7/27/2007 3:32:50 PM

All Company or product names are trademarks or registered trademarks of their respective owners
Annual Report 2006-2007_B & W.indd XII 7/27/2007 3:32:51 PM

PROXY FORM
i-flex solutions ltd.

Registered Office: 10-11, SDF 1, SEEPZ,
Andheri (East), Mumbai 400 096.
I/We ...................................................................................................... of ........................................................................in the

district of ...................................................................................................... being a member/members of the above
named Company, hereby appoint ..............................................................................................................................
of ................................................. in district of .........................................................................................
or failing him/her ................................................................. of ...................................................................................... in the
district of ........................................................................... as my/our proxy to attend and vote for me/us and on my/our behalf at
the Annual General Meeting of the Company to be held on Friday, August 24, 2007 at 3.00 p.m. at InterContinental The Grand Mumbai,
Sahar Airport Road, Mumbai 400 059 and at any adjournment thereof.
Signed this ................................................. day of ................................................. 2007.
Signature/s .................................................
Ledger Folio No. ............................................... DPID ................................................ Client ID ..............................................
No. of Shares held ............................................................ Affix

Re. 1/-
Revenue
Stamp
Note: 1. The proxy need not be a member.
2. The proxy form duly signed across Re. 1/- revenue stamp should reach the Registered Office of the
Company not less than 48 hours before the time fixed for the meeting.
ATTENDANCE SLIP
i-flex solutions ltd.

Registered Office: 10-11, SDF 1, SEEPZ,
Andheri (East), Mumbai 400 096.
I hereby record my presence at the Eighteenth Annual General Meeting of the Company to be held on Friday,
August 24, 2007 at 3.00 p.m. at. InterContinental The Grand Mumbai, Sahar Airport Road, Mumbai 400 059.
Full name of the Member ..............................................................................................................................................................

(in block letters)
Ledger Folio No. ................................................ DPID ................................................ Client ID ................................................
Number of Shares held ..................................................................................................................................................................
Signature of Member or proxy attending ........................................................................................................................................
Full name of Proxy ........................................................................................................................................................................

(in block letters)
Please give full name of the 1st Joint Holder.
Mr./Mrs./Miss. ..............................................................................................................................................................................
Note: Please fill in the attendance slip and hand it over at the ENTRANCE OF THE HALL
i-flex annual report 2006-07 XIII
Annual Report 2006-2007_B & W.indd XIII 7/27/2007 3:32:51 PM

Annual Report 2006-2007_B & W.indd XIV 7/27/2007 3:32:51 PM
www.iflexsolutions.com

Iflex 2006-07

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i-ﬂex annual report 2006-07

Cover Page.indd 1 7/24/2007 6:01:38 PM

Cover Page.indd 2 7/24/2007 6:01:38 PM

Corporate Governance Report 21

Annual General Meeting (AGM) notice I

Attendance Slip & Proxy Form XIII

Annual Report 2006-2007_B & W.indd 1 7/27/2007 3:32:10 PM

Annual Report 2006-2007_B & W.indd 2 7/27/2007 3:32:10 PM

Recounting some glittering moments from i-ﬂex’s history

i-ﬂex annual report 2006-07 3

Annual Report 2006-2007_B & W.indd 3 7/27/2007 3:32:10 PM

N R K Raman – Managing Director

The Banker Magazine commends Reveleus™ for Innovation

Annual Report 2006-2007_B & W.indd 4 7/27/2007 3:32:10 PM

Industry in 2006. Survey participants rated Equinox’s mortgage process

i-ﬂex annual report 2006-07 5

Annual Report 2006-2007_B & W.indd 5 7/27/2007 3:32:12 PM

Key performance indicators 2006-2007

14000 2500.00 2,324.33 2,376.53

8000 7,881.29 1500.00

Earnings per share 44.70

30.00 27.91 28.53 210.00

25.00 180.00 165.65

10.00 8.32 60.00 56.58

Economic value added

Annual Report 2006-2007_B & W.indd 6 7/27/2007 3:32:13 PM

Expenditure breakup Revenue breakup

Customers serviced... ... across countries

Number of employees including those in subsidiaries

Annual Report 2006-2007_B & W.indd 7 7/27/2007 3:32:16 PM

Senior Management Company Secretary

Annual Report 2006-2007_B & W.indd 8 7/27/2007 3:32:18 PM

Marchon House 99, Venkatnarayana Road, T Nagar

i-ﬂex annual report 2006-07 9

Annual Report 2006-2007_B & W.indd 9 7/27/2007 3:32:19 PM

Level 10, Margaret Street i-ﬂex solutions inc.

Subsidiary Ofﬁce - Europe i-ﬂex solutions inc.

121, Meridian Place Castek Software Inc.

Annual Report 2006-2007_B & W.indd 10 7/27/2007 3:32:19 PM

Revenue, on the basis of consolidated financials is Rs. 20,609.38 million

(All amounts in millions of Indian Rupees)

i-ﬂex annual report 2006-07 11

Annual Report 2006-2007_B & W.indd 11 7/27/2007 3:32:19 PM

Annual Report 2006-2007_B & W.indd 12 7/27/2007 3:32:19 PM

– PrimeSourcingTM, i-flex’s IT Services division, awarded the Gold

i-ﬂex annual report 2006-07 13

Annual Report 2006-2007_B & W.indd 13 7/27/2007 3:32:20 PM

Net income as reported 3,546,739

Annual Report 2006-2007_B & W.indd 14 7/27/2007 3:32:20 PM

i. In preparation of the annual accounts, the applicable accounting Auditors

i-ﬂex annual report 2006-07 15

Annual Report 2006-2007_B & W.indd 15 7/27/2007 3:32:20 PM

Employee particulars Rajesh Hukku

Annual Report 2006-2007_B & W.indd 16 7/27/2007 3:32:20 PM

Annual Report 2006-2007_B & W.indd 17

i-ﬂex annual report 2006-07 17

Annual Report 2006-2007_B & W.indd 18

79 Rajan Sundar R Senior Manager B.E. (E E) 35 June 2, 1993 14 2,726,228 –

Annual Report 2006-2007_B & W.indd 19

i-ﬂex annual report 2006-07 19

Annual Report 2006-2007_B & W.indd 20

For and on behalf of the Board

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