C M Y K
SUBEX LIMITED
ANNUAL REPORT
2007-2008
C M Y K
C M Y K
powering the ROC
contents
01 highlights 2007-2008
03 key financials & indicators
05 chairman’s letter to shareholders
about Subex Limited
06 products & solutions
09 product innovation
11 the Subex ROC: catalyst for communications innovation
13 innovation in engineering
15 Subexian pride award winners
17 Subex charitable trust
18 board of directors
19 management team
general review & accountability
22 directors’ report
28 report on corporate governance
34 management’s discussion & analysis
financials
45 financial review - subex limited (standalone)
68 financial review - subex limited (consolidated)
87 shareholders’ information
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highlights 2007-2008
(cid:129) completed acquisition of Syndesis
(cid:129) honoured by AT&T as outstanding supplier
(cid:129) won ISV partner of the year award from Sun
Microsystems
(cid:129) changed name to Subex Limited
(cid:129) won award from UKTI for successful listing at the
London Stock Exchange
(cid:129) made it to the Deloitte Technology Fast 50 India
listing for the third year running
(cid:129) Subash Menon appointed as chairman of the
NASSCOM product forum
(cid:129) consolidated all offices to a single location in
Bangalore
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“
committing to seeing things
differently to produce the best value
in all fairness - the Subex way.
”
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key financials & indicators
PARTICULARS (Consolidated)
Total income
Export Sales
Operating Profits (EBDITA)
Depreciation & Amortization
Profit before Tax
Profit after Tax
Share Capital
Reserves & Surplus
Net Worth
Gross Fixed Assets
Net Fixed Assets
Total Assets
powering the ROC
Year ended March 31, 2008
FIGURES IN RS.
MILLION EXCEPT
KEY INDICATORS
5408.9
4836.94
-107.54
184.04
-617.05
-680.72
348.47
7050.66
6792.52
1505.82
388.77
18463.32
-19.52
-31.01
194.92
1.36
-2.21
-14.02
-10.02
-0.67
Key Indicators
Earning per Share (Year end)
Cash Earning per Share (Year end)
Book Value per Share
Debt (including working capital) Equity Ratio
EBDITA / Sales - %
Net Profit Margin - %
Return on year end Net Worth %
Return on year end Capital Employed %
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“
we are confident that all the
initiatives of the past 12 months
and the progress achieved so far
will help us gain our target.
”
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chairman’s letter to the shareholders
powering the ROC
Dear Shareholder,
Financial year 2008 was quite turbulent and tumultuous. Two main elements
buffeted us during the year and wreaked havoc with the financials. The first
one was the level of complexity that we experienced while integrating
Syndesis (the company that we acquired in April 2007) with our company
and the other was the postponement of contracts by customers. Let me
take a quick look at the figures before delving into the details of these
issues.
While the total revenue of the company increased by 42% to reach
Rs.4855.91 million, product revenue recorded a growth of 58%.
The contribution of products to the total revenue stood at 75% and
the company made a net loss of Rs.680.72 million.
Acquisition of Syndesis
We acquired Syndesis at a total cost of US$ 180 million in April 2007. The
rationale behind the acquisition was two fold. While we wanted to become
an even more significant partner to the telcos by offering a wider and well
integrated portfolio of products, we also aimed to expand our addressable
market opportunity by entering an adjacent space. By March 2006, we had
already achieved market leadership in the Revenue Maximization space
and continuing growth seemed to be at risk. The solution was to enter a
new, but adjacent area that would open up more opportunities. This
strategy was supportive of the approach to address a new trend that was
emerging. Most of the telcos, particularly the large ones, were demanding
platforms that could handle multiple tasks in the OSS stream. Thus, an
acquisition in the Service Fulfillment space seemed to help us to meet the
twin objectives.
Any move into a new space is fraught with risk owing to the complexities
resulting from lack of familiarity with the space. Keeping this in mind, we had
conducted an extensive due diligence to assess the risks and to prepare
for the same. However, the true complexity that we experienced was more
than what was estimated by us. Clearly we were ill equipped. This resulted
in reduced revenue while the costs had not come down adequately leading
to operational loss. To this was added the issue of a customer delaying
contracts. Quite naturally, that delay also led to reduced revenue further
increasing the operational loss. These two issues resulted in an operational
loss of about US$ 20 million on revenue of US$ 91 million from products.
Solution
Your company is used to posting stellar performance and is not the sort
that was posted in FY08. With the performance going downhill, it was
imperative to get to the root cause of the issues and set them right at the
earliest. A thorough study was conducted and the underlying problems
were ascertained. The final solution had three components – completion of
integration at the earliest, reduction of cost and faster conversion of
backlog and orders booked to revenue. The company then went about
implementing the solution.
Implementing the Solution – Integration
Integration was originally planned for completion by Jan 2008. Owing to
the complexity, this period was at risk. Additional manpower was deployed
to ensure that integration was completed as originally planned. I am glad
to report that the same was achieved and all aspects of integration –
transition of technology, merging of teams, functional training, redundancy
etc. – were completed by January 2008.
Implementing the Solution – Cost Reduction
Software products business is very non-linear and so, the variability in
expenses is very limited. Consequently, even when revenue reduces, the
cost remains without much reduction. While this is a very positive feature
when revenue is on the rise, it is extremely negative when the reverse
happens. With the completion of the integration, the originally expected
cost reduction of about US$ 12 million (for a full year) was achieved. It was
required to reduce the cost further. The company has taken several
measures to meet this objective. The result is expected to be a reduction
of about 10% in the overall cost per Subexian per annum from the level in
FY08.
Implementing the Solution – Conversion to Revenue
The revenue chain of the company has several links namely, pipeline, order
intake, execution of projects and conversion to revenue. With the
completion of integration, execution of the projects became quite smooth.
Further, several initiatives were taken to improve the efficiency of delivery.
These improvements, coupled with better execution, has brought about a
significant progress in the rate of conversion of orders booked to revenue.
We expect the revenue per Subexian per annum to increase by about 30%
from the level in FY08.
The combined effect of reduction in cost and increase in revenue earned
per Subexian will have a salutary effect on profitability. And that is the focus
for the current financial year FY09.
Way Forward
Your company has always posted financial results that demonstrated
superior operational excellence. This was not true in FY08. Our key objective
in FY09 is to turn the tide and post financial results that are in line with your
expectations. We are confident that all the initiatives of the past 12 months
and the progress achieved so far will help us to gain that target. Let me
sign off for now by thanking every one of you for the support and for the faith
reposed in me and my colleagues during these trying times. Dear
shareholders, we will not leave any stone unturned in our efforts to meet
your expectations. We will not fail you.
SUBASH MENON
FOUNDER CHAIRMAN,
MANAGING DIRECTOR & CEO
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products & solutions
Revenue Maximization solutions
Moneta™ Revenue Assurance System is a first-of-its-kind, complete
RA solution, designed to tackle critical revenue assurance challenges
across the entire revenue chain. It offers a set of pre-configured solution
templates to address RA challenges inherent to individual service
verticals – Wireless, Fixed, Cable, MSPs & MVNOs.
Nikira™ Fraud Management System is a state-of-the-art solution built
to deliver on a 3-step philosophy of Detect-Investigate-Protect. Nikira
detects known fraud types and patterns of unusual behaviour; helps
investigate these unusual pattern for potential fraud and uses the
knowledge thus generated to upgrade and protect against the future.
Prevea™ Risk Management System empowers operators
to
continuously assess and mitigate risk presented by subscribers
throughout their lifecycle, by tracking risk in realtime during subscriber
acquisition, ongoing usage and collections & recovery.
Concilia™ Interconnect Billing System allows operators to quickly and
accurately settle charges with their network partners. It provides
operators with the ability to manage these major costs & revenues on a
day-to-day, hour-to- hour basis.
Symphona™ Interparty Management System enables operators to bill
their customers and settle with their partners on a single modular
platform. The system is able to support multiple business models and
multiple currency transactions within a single implementation through
seamless addition of necessary modules.
Optima™ Route Optimization System is designed to provide operators
with the tools to manage network cost information. The system is
capable of taking into account factors such as call quality rate
information, capacity and network costs in calculating the optimum
choice of operators.
Subex Cost Assurance Solution protects and enhances operator
margins by having a complete view of the profit equation. The Solution
collects, collates and correlates the information from Switch, Inventory,
Billing, Partner Invoices, and Financial systems to provide deeper
insights about the cost aspects in an easier to understand format
through Dashboards & Reports. The Solution focuses on Circuit
assurance, Carrier to Carrier compensation assurance, Access
assurance, Payment assurance, Accruals & Dispute management.”
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Fulfillment and Assurance solutions
Syndesis Adaptive Resource Manager® is the industry's only ‘live’
inventory management solution which offers service providers a low-
risk path to operational transformation and highly accurate inventory
management.
Syndesis Application Configuration Manager® automates the
configuration, management, and detailed discovery of applications,
policy servers, subscriber databases, and other service delivery
platforms, making self-service a reality for the mass market.
Syndesis Controller® offers pre-integrated, best-in-class Order
Management, Service Catalog Management and Technical Workflow
solution, providing the basis for the automation of the complete order-
to-bill cycle and enhancing scalability and visibility for the entire
fulfillment process.
Syndesis Express® provides complete subscriber-centric fulfillment
for IPTV, VoIP, Business Ethernet and other targeted advanced service
offerings from a wholly integrated architecture, enabling rapid service
definition; integrated service design and activation across connectivity
and applications; and real-time subscriber self-management.
Syndesis NetOptimizer® takes the risk, time and effort out of the
toughest service migrations through service-aware automation,
transforming over-engineered network into right-sized networks.
Syndesis NetProvision® increases your revenues and drives down
your time-to-market and operations costs by automating the design and
activation of complex, application-aware connectivity, enabling flow-
through provisioning of next-gen data and IP services across multi-
vendor, multi-technology networks.
Syndesis TrueSource® employs an operations-wide approach to
solving data integrity problems, combining three powerful data integrity
functions: multi-layer network and service discovery, data reconciliation,
and discrepancy analytics.
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“
telecommunications service
providers have experienced
enormous changes in the past few
years. But these changes are only
the beginning as the voice and
connectivity providers of yesterday
re-invent themselves as the content
providers and aggregators of
tomorrow.
”
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product innovation in a time of change
Innovation is the ability to see change as an opportunity - not a threat
powering the ROC
Telecommunications service providers have experienced enormous
changes in the past few years. But these changes are only the
beginning as the voice and connectivity providers of yesterday re-invent
themselves as the content providers and aggregators of tomorrow.
From the wholesale replacement of networks to the transformation of
OSS and BSS systems, service providers are making huge investments
to offer mass-market content and applications along with traditional
connectivity and voice services. The stakes are high and the competition
is formidable as Internet Innovators (such as Google and MSN) also
bring applications and content to subscribers globally over the Internet.
For communications providers, future success depends not only on
offering new, must-have services but also on profitably delivering these
services to subscribers. And achieving these goals depends on
investing and substantially changing
their existing software
infrastructure.
Subex sees service provider business transformation as an enormous
opportunity. Through continued concentration on and innovation in the
following three areas, we will continue to have the right products to
enable service providers realize their transformation objectives.
1. We focus on providing our customers operational dexterity, the ability
to immediately launch new product bundles while maximizing
margins through automated and error-free fulfillment and elimination
of revenue leakage.
2. We leverage our market position, domain knowledge, and customer
experience to productize industry best practices, thus ensuring our
solutions solve next-generation problems and are faster to deploy
with a lower total cost-of-ownership.
3. We ensure that our products and solutions solve real customer
problems and that our customers achieve value for their investment
and therefore become our strongest reference.
Subex will help service providers achieve operational dexterity through
innovation in each of our product areas briefly described below.
Fulfillment and Assurance Suite
OSS was originally designed to support human operators managing
custom processes. To enable content-based services, providers need
to transform this OSS to reduce both reliance on manual steps and
human error. With Subex’s FAS suite, providers can realize immediate,
always-on, no-touch service fulfillment. They can achieve total
automation without error due to our foundation of data accuracy.
Providers can profit from convenient impulse buying – any time,
anywhere, using any device available – because, with our solutions,
service fulfillment configuration can be completed in seconds, allowing
instant consumer gratification. The FAS suite also replaces custom
processes with standards-based service and resource catalogues that
enable rapid new service and product introduction. A new generation of
OSS is required for content-based services, and Subex has the
innovative fulfillment solutions to enable this transformation.
Revenue Management Suite
Service provider business transformation brings many new challenges
that our RMS suite is ideally suited to resolve. A vastly growing number
of content and application providers, as well as new types of
interconnect partners, brings new settlement and route optimization
challenges. More than ever before, service providers will be spending
billions per year on these third parties, and invoice inaccuracy will prove
to be a major cause of reduced margins. Subex’s innovative cost
assurance offering, partner settlement, and route optimization products
will drive down service provider costs and help grow margins. At the
same time, fraudsters are getting smarter, and next-generation networks
enable new types of fraud (such as bypass fraud) as well as new
avenues for content-based, premium-rate, and revenue-share fraud.
Our fraud management leadership position and innovation has allowed
Subex to stay ahead of the curve and productize pre-packaged, next-
generation fraud management solutions.
Revenue Operations Center
Nowhere is Subex’s product innovation more clearly demonstrated than
with our Revenue Operations Center, an industry first that has the
potential to transform the way service providers manage their business.
For content-based service providers, having real-time, summarized
visibility into the revenue and operational chains is essential. Knowing
not only which services are gaining traction but which are profitable
(factoring in network and operational costs) gives service provider
executives the tools necessary to grow their businesses. Visibility across
the delivery and assurance chains also helps service providers
proactively monitor the customer experience and the propensity for
customer churn due to operational challenges. Subex is uniquely
positioned to provide timely access to both the revenue and operational
chains by leveraging both our RMS and FAS portfolios.
In summary, the transformations happening in the telecommunications
industry are a major opportunity for Subex. We will continue to innovate
and advance our product portfolio to capitalize on the investment that
service providers need to make to succeed in this new digital economy.
STEPHEN COOPER
VICE PRESIDENT –
PRODUCT MANAGEMENT
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“
this wave of innovation reaches a
pinnacle in the form of the Revenue
Operations Center (ROC), a
strategic concept that Subex
pioneered and which began gaining
important adherents in the industry...
”
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the Subex ROC
catalyst for communications innovation
A revolution of innovation swept the manufacturing sector around the
world some years ago. Spurred by dramatic rises in competition as the
first stages of advanced globalization took hold, the revolution centered
on the introduction of lean manufacturing and efficient operating
principles. This crucible of competition-driven change forged new, highly
competitive businesses that could continually create dramatically more
value with ever fewer resources.
A similar revolution is sweeping today’s communications industry, with
similar effects. Communications service providers
face rising
competition as they seek to bring new, innovative services to market
and capture a portion of the dramatically rising worldwide spend on
communications services. A host of different types of companies are
now engaged in a battle for “share of wallet” – looking to win consumer
and enterprise spending on services such as television content,
converged communications, gaming, social networking, news and the
like. Today’s traditional telecommunications operator is competing not
only against other operators to win subscribers. They are also
competing against DVD rental shops, Internet-based video distribution
networks, and voice-over-IP providers, all seeking to win a share of
consumer spend on entertainment and communications.
this backdrop of
Against
intense, wide-ranging competition,
communications service providers are gaining a new appreciation for
the principles of lean operations and high efficiency service delivery,
and how these innovations can spur more competitive business
practices. In fact, many are turning to Subex for advice and expertise in
the techniques and best practices of lean operations, from automating
mission critical processes to ensuring all due revenue is captured and
costs are contained.
This wave of innovation reaches a pinnacle in the form of the Revenue
Operations Center (ROC), a strategic concept that Subex pioneered
and which began gaining important adherents in the industry in fiscal
year 2007-2008.
A ROC could be described as “mission control” for a communications
service provider. It is a collection of systems that monitor and analyze
the impact of operations on revenues, costs and, ultimately, profits. A
chief benefit of a ROC is that it helps the operator to understand the
health of the enterprise at virtually any level, from an executive-level
standpoint, to an operational view, to a marketing and planning
perspective. Subex’s products are underlying systems that can be
brought together to create a ROC platform, helping to streamline and
integrate the processes associated with revenue management,
resource management, fulfillment and the like.
As the ROC concept has gained increasing market acceptance, it has
evolved to become a central component of transformational initiatives
for communications service providers seeking to achieve lean
operations and adopt more nimble competitive stances.
When Subex first began promoting the concept of the ROC some years
ago, it was essentially an extension of the revenue assurance and fraud
management solutions for which the company is known as the market
leader. However, as Subex worked closely with communications service
providers on their transformational projects, it became clear that the
ROC could serve as a central platform for the gathering of data related
to the performance of essential systems and processes. In effect, the
ROC becomes a central monitoring and control point for understanding
how the service provider enterprise is operating in relation to Key
Performance Indicators, such as process throughput, revenue leakage
rates and even service and subscriber profitability metrics.
As fiscal year 2007-2008 drew to a close, Subex had achieved several
important developments in the evolution of the ROC:
(cid:129) The acquisition of Syndesis further strengthened the ROC concept
and hastened its evolution. The Syndesis fulfillment products, which
are now part of Subex’s Fulfillment & Assurance Business Unit, are
production-proven systems for automating key operating processes,
giving Subex even greater domain expertise in lean operations
techniques and even better tools for enabling a ROC platform.
(cid:129) The ROC was accepted by the OSS industry’s largest standards and
collaboration body, the TeleManagement Form, for integration into a
broad-ranging and definitive on-going demonstration of best
practices for delivery of content-based services, such as IPTV, VoIP,
and mobile video distribution.
(cid:129) Several major customers began ROC-oriented projects, including one
that was announced at Romtelecom in Romania not long after the
close of the fiscal year.
Emerging from these developments is the clear message that the ROC
can serve as a tool for transformation. As communications service
providers translate the lean operating principles from the world of
manufacturing into the world of communications, a ROC can be a
catalyst and an enabling platform, a focal point of process efficiency
efforts. Because of its experience and expertise in this realm, Subex is
now positioned as a trusted supplier to these communications service
providers, who in turn are poised be achieve new gains in
competitiveness, operational dexterity, and sustainable profitability.
ADAM BOONE
VICE PRESIDENT - MARKETING
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“
a holistic approach to innovation is
essential to maintain our leadership
and deliver superior experience
consistently to all our customers.
We therefore have different innovation
initiatives running in parallel; each
initiative focused on achieving the
desired objectives.
”
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innovation in engineering
powering the ROC
1. GENERAL INTRODUCTION
“There are, of course, innovations that spring from a flash of genius. Most
innovations, however, especially the successful ones, result from a
conscious, purposeful search for innovation opportunities, which are
found only in a few situations.” – Peter F. Drucker
CONCEPTUALIZATION
Innovation typically involves creativity, but is not identical to it: innovation
involves acting on the creative ideas to make some specific and tangible
difference in the domain in which the innovation occurs. For example,
Amabile et al (1996) propose:
The Subex engineering organization consciously looks out for innovation
opportunities in all its endeavors. A holistic approach to innovation is
essential to maintain our leadership and deliver superior experience
consistently to all our customers. We therefore have different innovation
initiatives running in parallel; each initiative focused on achieving the
desired objectives.
2. INNOVATION IN THE ORGANIZATION
In the organizational context, innovation may be linked to performance
and growth through improvements in efficiency, productivity, quality,
competitive positioning, market share etc. In a product development
company like Subex, innovation can and will be applied during various
stages of a product life cycle viz. Conceptualization, Growth, Maturity
and Decline.
Introduction
(cid:129) Creativity
(cid:129) New idea
generation
(cid:129) Know-how
growth
(cid:129) Disruptive
innovation
Growth
(cid:129) Productization
(cid:129) Process and
Predictability
(cid:129) Standardization
(cid:129) Incremental
innovation
Maturity
(cid:129) Operational
efficiency
(cid:129) Reduce cost of
development
(cid:129) Process
innovation
Decline
(cid:129) Technology
refresh
(cid:129) Extend
longevity of the
product
(cid:129) Experiential
innovation
"All innovation begins with creative ideas . . . We define innovation as the
successful implementation of creative ideas within an organization. In this
view, creativity by individuals and teams is a starting point for innovation; the
first is necessary but not sufficient condition for the second".
introduced where an
In Subex creative thinking and a solution centric approach has been
encouraged among the employees. A concept called ‘Innovation Days’
was
teams
demonstrate some of their creative ideas that help in the introduction of
a new product, re-engineering of existing products and in general help
in the betterment of the products. Such initiatives have led to filing of
three patents at the US Patent and Trademark Office:
individual employee and/or
Adaptive Fraud detection – Automatic way of reconfiguring rules and
thresholds that relies on statistical analysis of past data and the effectiveness
of these rules/thresholds on that data over a period of time.
Intelligent alarm qualifier - method (which relies on statistical analysis
and is implemented as a self-learning time-dependent neural network)
whereby the alarms raised by the rules/thresholds are prioritised into
alarms based on the probability of the alarm being fraud. This
consistently helps to detect about 80% of fraud by focussing only on
about 20% of the alarms.
Subscriber Pre-checks - The best way to get over fraud is to prevent
it from happening - and the best way to do so is to prevent suspected
fraudsters from getting a network connection. Subex Precheck feature
detects possible fraudsters when they apply for a network connection -
- it does so by statistical analysis of the demographics of the subscribers
who wish to apply for a network connection, based on the demographics
of the locality and other aspects of the subscriber
is
ideas
though
innovative
‘knowledge
Another source of
mining/management’ (KM). At Subex KM activities have been facilitated
in various ways. While the project teams host various sessions
pertaining to their activities on a regular basis, there are several technical
seminars being held to promote knowledge sharing across technical
groups. There is SubexWiki, an online portal that facilitates knowledge
sharing on an ongoing basis. This is picking up among the technical
community within Subex.
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GROWTH
During the growth phase of the life cycle of a product, the innovative
ideas are more focused in the areas of product betterment.
(cid:129) Evaluation of new tools and technologies that assists in productization
of features.
(cid:129) New product features being rolled out.
‘Breakthrough innovations’ are done through regular R&D but
incremental
through practice, exchange of
innovation comes
information. An example would be:
Improving the performance of our products: Nikira product has
been re-engineered so that it performs faster on a given platform. The
performance benefit achieved by software design changes is more than
two times the existing processing speed. Similar changes in architectural
changes have been done in Moneta – parse / load performance were
improved one and half times. In Concilia, the speed for performing rating
of interconnect records has been improved. All these translate as
benefits directly to the customer by bringing down the cost of ownership
(capex costs). It is important to note that the cost of ownership is on one
of the important criteria for a customer to select a particular product.
At Subex there is a technical forum presented by the CTO on a regular
basis to address the growth aspects in technologies and domain.
Product board meetings with stakeholders from across the globe
discuss the region-specific interests and trends that help in defining a
vision for products. An example would be
New generation of products: Several new features have been
developed in our products. These products help the user to achieve his
objectives much faster and more easily. Some examples are listed below:
In revenue assurance, typically the RA analyst has to go through large
volumes of data and identify / analyze reasons for revenue leaks. This
cumbersome process has been simplified to perform root cause analysis
using a graphical representation of traffic trends. Similar trends are
available for historic data and can be compared against current traffic
situation.
Configuration of data sources: The data sources (adaptors) are now
configured using an intuitive GUI based tool. This has reduced the time
for development of data adaptors
Reuse of existing products in new domain areas: We have replaced
one costly third party component at our customer with our internal
product. This product was developed originally as an ETL tool. However,
the same product was deployed in a completely different business
scenario. This also gave the customer better performance (four times
the performance improvement compared to the 3rd party product). We
avoided the license cost to this 3rd party vendor due to this innovation
MATURITY
“Innovation, like many business functions, is a management process that
requires specific tools, rules, and discipline.” Davila et al(2006)
At the time when the product is maturing, innovation is seen more in
reducing cost of operations by focusing on tools, technologies and
processes that will help in productivity improvements. At Subex
continuous process improvement is one of the key objectives discussed
during quality review meetings where cross team statistics are shared
and best practices emerge.
Use of open source tools, automation of routine tasks is another focus
area during this phase. Yet another focus area is providing support to
the products deployed at customer locations. (Pro-active) Support in
product companies is a very important function. Subex has developed
a proactive support/monitoring product Early Alert Monitor. This product
monitors the health of the system and generates warnings and alerts in
case of malfunctions. This avoids continuous manual monitoring of our
installations.
DECLINE
The focus during this phase would be to identify innovation that would
stretch the longevity and relevance of the product line. One such
initiative is ‘CAP’ - Cognitive Analytics Program, which is a framework
(service offering) for doing periodic statistical analysis of fraud in order
to proactively detect the changing parameters and take action. CAP is
a blend of Statistical Analysis and Neural techniques (artificial
intelligence) with insights that Subex has gained on fraud by virtue of
being a front-runner in FMS product offerings - and is also designed
with the aim of customizing it for operator specific data, since fraud and
its manifestations not only change with time, but also change from
operator to operator.
3. THE WAY FORWARD
Programs of organizational innovation are tightly linked to organizational
goals and objectives, to the business plan, and to market competitive
positioning. For example, one driver for innovation programs in
corporations is to achieve growth objectives. As Davila et al (2006) note,
"Companies cannot grow through cost reduction and reengineering
alone . . . Innovation is the key element in providing aggressive top-line
growth, and for increasing bottom-line results" (p.6)
At Subex innovation would continue to part and parcel of daily life, new
programs and initiatives would need to be continuously devised to
address the following:
(cid:129) Increasing demands of customers
(cid:129) Beating competition by introduction of new value added features
(cid:129) Operation efficiency
ANURADHA
SENIOR VICE PRESIDENT –
ENGINEERING
14
A N N U A L R E P O R T 0 7 - 0 8
S u b e x L i m i t e d
C M Y K
C M Y K
Subexian pride award winners
NAME
Achintya Kumar G
Ajitha B.G
Ajmal Yusuf
Alexander Thengumpalli
Amar Vadher
Aniruddh Munoli
Arun Murali
Arun R
Arun Kumar K
Arunava Sinha
Arvind P
Arvind R
Ashley Hill
Ashok Parhate
Ashwin Menon
Avatar Singh Thakur
Babu K
Bala Gangadhar Sabbavarapu
Bernie Ingrams
Bhagyalaxmi H C
Binu K
Blaze Thomas
Boobathi P
Brahim Bah
Chandan P
Chandre Gowda CA
Chaodong He
Chetana R
Cigy Mathen
Damian Hasak
David Williams
Dennis (Charlie) Foster
Dipak Kumar Mondal
Don Michael Morrill
Doug Duke
Eng-Teck Lee
Gareth Deacon
Girish Suresh Uttarkar
Gordon Ide
Graham Ellis
Hari Sudhan V
Harish H S
Howard Miller
Jaideep Gopinath
James MacEwan
Jayant Kashyap
Jayaseelan G
Jeff Canning
Jerome Imhof
Jinghua Du
Jithu Thomas
John Richardson
John Cyriac Abraham
Jubin David
Julia Davis
Kishore Kumar S
Krishnoji Rao S
Kumar M D
Lihui Wang
Lukas Brogli
Mahesh V
Manjunath G
Manohar S S
Martin Heathcote
Matthew Francart
Mohammed Muzammil
Mohammed K A Aehthesham
Muralidhar I M
Nandagopal R
Nataraja Prathab D
Neville Collins
Nikhil Naik
Nitesh Namdeo Shende
Norman Yanofsky
Om Prakash Agrawal
Pavan Kumar GV
Poornima N S
DIVISION
Engineering
Engineering
PSO
Engineering
IT
Engineering
Engineering
Engineering
Engineering
Engineering
Engineering
PSO
BT
Engineering
Presales
Engineering
Facilities & Administration
Engineering
BT
Engineering
Engineering
PSO
Engineering
Engineering
Engineering
Engineering
PSO
Engineering
PSO
Product Management
PSO
Pre Sales
IT
PSO
Pre Sales
Engineering
PSO
Engineering
PSO
BT
Engineering
IT
BT
Marketing
PSO
IT
Facilities & Administration
Engineering
PSO
PSO
Engineering
BT
Engineering
Engineering
PSO
PSO
Facilities & Administration
Facilities & Administration
PSO
PSO
Engineering
Engineering
IT
BT
PSO
Engineering
Engineering
Finance
IT
Engineering
PSO
Engineering
Engineering
Engineering
IT
PSO
PSO
LOCATION
Bangalore
Bangalore
Colorado
Bangalore
London
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Dubai
London
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
London
Bangalore
Bangalore
Bangalore
Bangalore
Ontario
Bangalore
Bangalore
Ontario
Bangalore
Bangalore
Pittsburgh
London
Home Office
Bangalore
Colorado
Melbourne
Ottawa
London
Bangalore
London
London
Bangalore
Bangalore
London
Bangalore
London
Ontario
Bangalore
Ontario
London
Ontario
Bangalore
London
Bangalore
Bangalore
Colorado
Bangalore
Bangalore
Bangalore
Ontario
London
Bangalore
Bangalore
Bangalore
Ipswich
Pittsburgh
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
London
Bangalore
Bangalore
Ontario
Bangalore
Bangalore
Bangalore
NAME
Prabhu H
Prajay Shah
Pramod K P
Prasad Kamat
Prasanna Kumar G
Pratik Gaurang Shah
Praveen Kumar KS
Prema Menon
Priyadarshini B
Pynadath Cherian George
Raghavendra M V
Raghu Mitra S V
Rahul Joseph Alexander
Raj Kumar K V
Rajendra Shankar Kulkarni
Rajesh Abraham
Rajkumar C
Ram Prasad A S
Ranit Sinha
Ranjini H. C.
Ravi Kumar S
Reji Kumar R.V.
Renji George
Rohan Dattatry Rendalkar
Rohit Maheshwari
Roji Varghese Abraham
Ryan Boydston
Sabu Wahab
Sagar Kumar Padhy
Saktheesh Kumar Raja B
Sandeep Singh
Sandeep P S
Sandesh Karanth K V
Sanjeev Chirakattu
Santhosh Srinivasaiah
Santosh Rao
Santosh S
Sathyabodh V Mudhol
Savio Joe
Shaik Mujeeb
Shilpa M Joshi
Shiva Prakasha L
Shivakumar Gowda K
Siddalingeshwar Patil
Simon Coates
Sirisha Alluri
Sivabalan K
Sreedhanya R
Sreejith Sreekumaran
Srihari U S A
Srikanth Nayak
Sriram S
Stephen Ashish
Stuart Barnes
Subha Chakraborty
Subhadip Duttagupta
Subhasis Nayak
Sudha Yeramati
Sujatha Chitti
Sumith Varghese
Suneet T Sugunan
Sunil Kumar
Surej Anwar
Syed Nayeemuddin
Syed Rehan Sajjad
Thilakh Jacob Chacko
Thomas Walker
Thyagarajan Krishnamurthy
Troy Rowe
Tushar Gopinath Shenvi
Vasanth P E
Veeral Bhatt
Veeresh Kanavalli
Venkateswaralu V
Vijay Raghunathan
Will Richards
DIVISION
Facilities & Administration
BT
Engineering
IT
Engineering
Engineering
Facilities & Administration
Facilities & Administration
Engineering
Engineering
Finance
Engineering
IT
Engineering
Engineering
PSO
Legal
Engineering
Engineering
Facilities & Administration
IT
Engineering
PSO
Engineering
PSO
PSO
PSO
Legal
IT
Engineering
PSO
Engineering
Engineering
IT
Engineering
Engineering
Engineering
Engineering
Engineering
Engineering
Engineering
Engineering
IT
Engineering
Engineering
Pre Sales
Engineering
Facilities & Administration
Engineering
Engineering
Finance
Engineering
Facilities & Administration
BT
BT
PSO
Engineering
PSO
Facilities & Administration
Engineering
Engineering
Engineering
Engineering
Engineering
Engineering
Engineering
Pre Sales
Finance
PSO
Engineering
Facilities & Administration
IT
Engineering
Facilities & Administration
PSO
BT
powering the ROC
LOCATION
Bangalore
London
Bangalore
London
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Colorado
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Ipswich
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Home Office
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Ipswich
London
Bangalore
Bangalore
Colorado
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Bangalore
Colorado
Bangalore
Home Office
Bangalore
Bangalore
London
Bangalore
Bangalore
Bangalore
London
15
A N N U A L R E P O R T 0 7 - 0 8
S u b e x L i m i t e d
C M Y K
C M Y K
powering the ROC
“
how wonderful it is that nobody need
wait a single moment before starting
to improve the world...
”- Anne Frank
16
A N N U A L R E P O R T 0 7 - 0 8
S u b e x L i m i t e d
C M Y K
C M Y K
Subex charitable trust
powering the ROC
Prerana Resource Center
Prerana Resource Center is an organization for the rehabilitation of
physically challenged girls. SCT’s support to Prerana has been an
ongoing activity.
Inmates of Prerana
Resource Centre
Salem Project
In Salem, Tamil Nadu, SCT helped 11 school going children to continue
their education by paying their fees and buying them school accessories
such as uniforms and books. A little girl shied away from school
because of a hearing impairment. SCT donated a hearing aid to this
child so she could go back to school. In all, a sum of Rs. 12000/- was
spent on the Salem project. These children are either hapless orphans
or hail from impoverished families. SCT hopes to continue its support to
these children in the years ahead.
SCT members along with Youth
for Seva in their School kit
distribution program
For the smooth running of this organization, SCT has paid their monthly
water and electricity bills.
Based on periodic needs, SCT also provides kitchen utensils, iron box,
food processors, old computers, printers, etc. to the inmates.
Youth for Seva
Youth
is an
for Seva
organization involved in the
rehabilitation of orphans and
slum children.
Belaku Vruddhashram
Belaku Vruddhashram is a home for senior citizens. SCT financially
supports this institution by paying the water and electricity bills. SCT
also pitches in by bearing the cost of the medical bills of the inmates.
Education of these children is at the forefront of their activities. Their
School Kit Sponsorship Program aims at providing school kits to these
financially challenged children. SCT funded for the procurement of these
kits.
nurture merit
SCT handing over the cheque
to Vidya Poshak, a registered
NGO which carries the Nurture
Merit program.
SCT members along with Youth
for Seva in their School kit
distribution program
Subex Charitable Trust joined hands with Vidya Poshak, a registered
NGO, to extend their Nurture Merit program to deserving students with
socio-economic compulsions.
SCT also invited nomination from Subexians for sponsoring meritorious
students whom they referred. A total of 13 students were sponsored
under this scheme.
Under the Nurture Merit scheme, profiles of meritorious students
are screened to determine the veracity of their financial needs. Short-
listed students are then awarded with scholarships to enable them to
pursue higher education of their choice. The performance of these
students is routinely monitored and support is subject to satisfactory
results.
Totally 24 students have been sponsored by SCT under this scheme.
17
A N N U A L R E P O R T 0 7 - 0 8
S u b e x L i m i t e d
C M Y K
C M Y K
powering the ROC
board of directors
SUBASH MENON
Founder Chairman, Managing Director & CEO
SUDEESH YEZHUVATH
Chief Operating Officer
V. BALAJI BHAT
Director
K. BALA CHANDRAN
Director
VINOD R. SETHI
Director
P.P. PRABHU
Director
HARRY BERRY
Director
ANDREW GARMAN
Director
18
A N N U A L R E P O R T 0 7 - 0 8
S u b e x L i m i t e d
C M Y K
C M Y K
management team
powering the ROC
MARK NICHOLSON
Chief Technology Officer
GREG LENEVEU
President – Americas
PAUL SKILLEN
President - BT Business Unit
VINOD KUMAR
President - Revenue
Maximization Solutions
Business Unit
SAUL NURTMAN
President – EMEA
SEKHARAN Y MENON
Senior Vice President –
Professional Services
Organization
SANJAY PAUL ANTONY
Senior Vice President – Human
Resources
SUBASH MENON
Founder Chairman, Managing
Director & CEO
ADAM BOONE
Vice President – Marketing
ANURADHA
Senior Vice President –
Engineering
DEAN SMITH
President – APAC
SUDEESH YEZHUVATH
Chief Operating Officer
STEPHEN COOPER
Vice President – Product
Management
COLIN HALES
Vice President – Global
Alliances
RAJ KUMAR
Chief Counsel & Company
Secretary
19
A N N U A L R E P O R T 0 7 - 0 8
S u b e x L i m i t e d
C M Y K
C M Y K
This page is intentionally left blank
C M Y K
GENERAL REVIEW &
ACCOUNTABLITY
A N N U A L R E P O R T
2007 - 2008
21
DIRECTORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED
Your directors have pleasure in presenting the 14th Annual Report
of the Company on the business and operations together with the
audited results for the year ended March 31, 2008.
FINANCIAL RESULTS
Consolidated
Amount in Rs. million
Standalone
2007-08 2006-07 2007-08 2006-07
5408.90 3710.92 2004.59 2361.84
(107.54)
812.46
369.08
447.83
509.51
(617.05)
63.66
(680.72)
235.85
576.61
(99.05)
675.66
419.20
(50.13)
11.76
(61.89)
188.74
259.09
50.95
208.14
1238.02
741.14
785.67
756.30
-
-
-
-
-
52.13
69.63
-
-
-
-
-
52.11
69.63
20.95
0.03
12.88
23.20
-
23.20
557.27 1238.02
723.75
785.67
Total revenue
Profit before Interest,
Depreciation &
Amortization
Interest, Depreciation
& Amortization
Profit before tax
Provision for taxes
Profit after tax
Balance brought
forward from previous
year
Appropriations
Interim dividend
Preference dividend
Dividend proposed on
equity shares
Provision for tax on
dividends
Dividend including tax
thereon
Transfer to general
reserve
Surplus carried to
balance sheet
RESULTS OF OPERATIONS
During the financial year ended March 31, 2008, the total revenue
on a consolidated basis grew by 45.76 % to reach Rs. 5408.90
million. The company has incurred a loss of Rs. 680.72 million for
the financial year 2007-08 as against the Profit After Tax of
Rs. 675.66 million on the previous year. The revenue composition
was 75 % from products and 25 % from services.
On stand-alone basis, the total revenue is Rs.2004.59 million.
The net loss for the financial year 2007-08 was Rs. 61.89 million.
Products business, our focus area, is continuing to contribute a
higher proportion to revenue with every passing year. Over the past
6 years, software products have increased their contribution in the
overall revenue from a low figure of 7% in FY01 to 75 % in FY08.
BUSINESS
Your company is a provider of solutions in the Operations Support
Systems area for telecom applications. This area can broadly be
22
A N N U A L R E P O R T
2007 - 2008
classified into Service Fulfillment, Service Assurance and Revenue
Maximization. The company operates in Revenue Maximization
and Service Fulfillment areas. While Revenue Maximization solutions
improve the revenues and profits of the communications service
providers through identification and elimination of leakages in their
revenue chain, Service Fulfillment solutions enable the carriers to
fulfill the needs of their subscribers through provisioning and
activation of services. Subex conceptualizes and develops software
products at its facilities in Bangalore and is focused on the telecom
business segment. Subex has sales and support offices in the
United States, Canada, UK, UAE, India and Australia. Subex is the
global leader in revenue maximization for communications service
providers.
Carriers today are facing a variety of challenges. The key among
them are (a) the competitive requirement to provide high quality
services faster and cheaper and (b) the operational requirement
to have a well integrated Operations Support System (OSS) to
meet the competitive requirement. Subex provides software solutions
to meet these critical requirements. Carriers have been building
the support structure by acquiring disparate pieces of software
and that has resulted in stove pipes getting built over time. Our well
integrated platform called Revenue Operations Center (ROC)
addresses this issue of a solid structure within their networks. The
solutions that form part of the ROC enable the customers to achieve
Operational Dexterity which is a combination of Operational
Efficiency and Service Agility. While the former ensures that cost
of operation is maintained at a low enough level, the latter ensures
adequate service levels are achieved.
INTEGRATION
The company concluded the integration of Syndesis Limited with
itself in January 2008. In line with the original expectation, the
integration lasted 10 months. The process was divided into a few
phases. The first one was integration of the sale teams. This was
done within four weeks of closure of the transaction to ensure
minimal disruption in the marketplace. The second phase was
integration of the support departments namely, HR, Finance,
Facilities etc. The last and longest phase was for the transition of
technology and processes with regard to developments for
customers, road map and professional services. This lasted about
eight months and was also done ensuring that customer
commitments were not impacted. Yet another element of the
integration, which lasted throughout all the three phases, was
cultural integration through joint exercises, out bound learning
programs and standardization of policies and practices.
CHANGE OF NAME
During the year, your Company has changed its name from
Subex Azure Limited to Subex Limited vide resolution passed
in the Extraordinary General Meeting of the members held on
November 26, 2007. The change of name was approved by the
Registrar of Companies vide fresh Certificate of Incorporation dated
November 30, 2007.
DELISTING FROM BANGALORE STOCK EXCHANGE LIMITED
During the year, your Company had in terms of Securities
Exchange Board of India (Delisting of Securities) Guidelines
2003, voluntarily delisted its shares from the Bangalore Stock
Exchange Limited vide a Special Resolution passed in the
Extraordinary General Meeting of the members held on
November 26, 2007.
CHANGES IN THE SHARE CAPITAL
ESOP SHARES
During the year, your Company has allotted 30,927 equity shares
under its ESOP 2000 scheme and 437 equity shares under its
ESOP 2005 scheme to the option holders on their exercise of stock
options.
SUBSIDIARIES
SUBEX TECHNOLOGIES LIMITED
For the year ended March 31, 2008, Subex Technologies Limited
earned an income of Rs. 713.47 million as against Rs. 41.75 million
last year and a net profit of Rs. 27.55 million as against Rs. 2.72
million last year. During the financial year, the services business of
Subex Limited including the investments in Subex Technologies Inc
were transferred to Subex Technologies Limited, a wholly owned
subsidiary of Subex Limited through a Scheme of Arrangement
approved by the Hon’ble High Court of Karnataka. Subex
Technologies Inc is a wholly owned subsidiary of Subex
Technologies Limited.
SUBEX (UK) LIMITED
The name of the Company was changed from Subex Azure (UK)
Limited to Subex (UK) Limited with effect from December 12, 2007.
For the year ended March 31, 2008, the consolidated income of
Subex (UK) Limited is Rs. 1521.27 million and the net loss is Rs.
314.76 million.
Subex (Asia Pacific) Pte Limited and Subex Inc are subsidiaries of
Subex (UK) Limited.
SUBEX AMERICAS INC
On April 1, 2007, the Company acquired Syndesis Limited, Canada.
Subsequently the name was changed to Subex Azure Americas
Inc which was further changed to Subex Americas Inc with effect
from November 30, 2007. For the year ended March 31, 2008, the
consolidated income of Subex Americas Inc is Rs. 1525.76 million
and net loss is Rs. 338.72 million.
Subex Azure Holdings Inc, Subex Azure (GB) Limited, 2101874
Ontario Inc and Syndesis Development India Private Limited are
the subsidiaries of Subex Americas Inc. Subex Azure (US) Inc and
Subex Azure (Delaware) Inc are subsidiaries of Subex Azure
Holdings Inc. Subex Azure (Ireland) Limited is the subsidiary of
Subex Azure (GB) Limited. Syndesis IP Holdings Limited Partnership
is the subsidiary of 2101874 Ontario Inc.
EMPLOYEE STOCK OPTION SCHEMES
Your company has introduced various Stock Option plans for its
employees. Details of these, including grants to directors and
senior management issued during the year are given below.
EMPLOYEES STOCK OPTION PLAN-1999 (ESOP – I)
This scheme was instituted during 1999 and managed by Subex
Foundation with a corpus of 1,20,000 equity shares initially. Since
the scheme was formulated prior to the promulgation of SEBI
guidelines on ESOP dated June 19, 1999, the Company has
discontinued the scheme.
EMPLOYEES STOCK OPTION PLAN-2000 (ESOP- II)
Under this scheme, a corpus of 5,00,000 options were created for
grant to the eligible employees. Each option is convertible into one
fully paid-up equity share of Rs.10/- each. This scheme has been
formulated in accordance with the Securities and Exchange Board
of India (Employee Stock Option Scheme and Stock Purchase
Scheme) Guidelines, 1999.
The corpus of the scheme was enhanced by another 3,87,125
options in order to accommodate the effect and benefit of the
bonus issue made by the company during the financial year
2005-06.
As per the scheme, a Compensation Committee is formed, which
grants options to the eligible employees. The options are granted
at a price, which is not less than 85% of the average of the closing
price of the shares during the 15 trading days preceding the date
of grant on the stock exchange where there is highest trading
volume during this period. The options granted vests over a period
of 1 to 4 years and can be exercised over a period of 3 years from
the date of vesting. As on March 31, 2008, 50,729 options were
available in this scheme for further grants.
EMPLOYEE STOCK OPTION PLAN -2005 (ESOP-III)
Under this scheme a corpus of 500,000 options were created for
grant to the eligible employees. Each option is convertible into one
fully paid-up equity share of Rs.10/- each. This scheme has been
formulated in accordance with the Securities and Exchange Board
of India (Employee Stock Option Scheme and Stock purchase
scheme) Guidelines, 1999 and amendments thereto.
The corpus of the scheme was enhanced by another 15,00,000
options during the financial year 2007-08.
As per the scheme the Compensation Committee grants options to
the eligible employees. The options are granted at a price, which is
not less than 85% of the average of the closing price of the shares
during the 15 trading days preceding the date of grant on the
stock exchange where there is highest trading volume during this
period. The options granted vests over a period of 1 to 4 years
and can be exercised over a period of 3 years from the date of
vesting. As on March 31, 2008, 2,75,031 options were available in
this scheme for further grants.
A N N U A L R E P O R T
2007 - 2008
23
2
3
4
5
6
7
8
9
10
11
12
13
14
ADDITIONAL INFORMATION AS ON MARCH 31, 2008 PER SEBI GUIDELINES
SL.NO
1
PARTICULARS
Net options granted as on March 31, 2008
Options granted during the year
Pricing formula
Options vested but not exercised as on March 31, 2008
Options exercised as on March 31, 2008
Options exercised during the year
Money realized by exercise of options during the year
The total number of shares arising as a result of exercise of options
as on March 31, 2008
Options lapsed /cancelled as on March 31, 2008
Options lapsed /cancelled during the year
Variation of terms of options
No. of employees covered
Employee wise details of options granted during the year under review to:
(i) Senior managerial personnel
Mr. Saul Nurtman
Mr. Mark Nicholson
Mr. Dean Smith
Mr. Greg LeNeveu
Mr. Paul Skillen
Mr. Adam Boone
Mr. Stephen Cooper
Ms. Colin Hales
Ms. Sudha Madhavan
(ii) other employee who receives a grant in any one year of option amounting to
5% or more of option granted during that year
identified employees who were granted option, during any one year, equal to
or exceeding 1% of the issued capital (excluding outstanding warrants and
conversions) of the Company at the time of grant
(iii)
ESOP 2000
4,49,271
Nil
As mentioned
above
73,798
2,35,233
30,927
53,57,904
30,927
4,25,229
16,237
None
540
ESOP 2005
17,24,969
16,71,700
As mentioned
above
1,05,539
6,724
437
1,89,142
437
3,99,911
3,75,551
None
1253
-
-
-
-
-
-
-
-
-
NIL
NIL
36,000
35,000
36,000
36,000
36,000
6,000
9,000
9,000
10,000
NIL
NIL
Diluted Earning per Share (EPS) pursuant to issue of shares on exercise of option
calculated in accordance with Accounting Standard (AS) 20 ‘Earning per Share’
Where the Company has calculated the employee compensation cost using
the intrinsic value of the stock options, the difference between the employee
compensation cost so computed and the employee compensation cost that shall
have been recognized if it had used the fair value of the options. The impact of
this difference on profits and on EPS of the Company is
Weighted-average exercise prices and weighted-average fair values of options
separately for options whose exercise price either equals or exceeds or is less
than the market price of the stock
Description of the method used during the year to estimate the fair values of
options, including the following weighted-average information:
risk-free interest rate
1
expected life
2
expected volatility
3
4
expected dividends and
5 market price on grant date
Rs (1.77)
Rs (1.77)
Losses would have been higher by
Rs.39, 248, 238. Basic and Diluted
EPS would have been lower by Rs.1.13
Weighted
- average exercise
price is Rs 380.31
Black Scholes
method of valuation
6.50%
3 Years
63.92%
0.28%
424.14
Your Company has amended the ESOP Schemes viz., ESOP 2000 and ESOP 2005 with effct from July 9, 2008, to enable the employees to
surrender their outstanding stock options.
24
A N N U A L R E P O R T
2007 - 2008
In addition to the present ESOP Schemes, your Company has
instituted a new Employee Stock Option Plan – ESOP 2008, the
details of which are given below:
EMPLOYEE STOCK OPTION PLAN -2008 (ESOP-IV)
Under this Scheme, a corpus of 20,00,000 options is created for
grant to the eligible employees. This Scheme has been formulated
in accordance with the Securities and Exchange Board of India
(Employee Stock Option Scheme and Stock Purchase Scheme)
Guidelines, 1999. The Company is in the process of making
applications to the Stock Exchanges for obtaining requisite in
principal approvals.
TRANSFER OF SERVICES BUSINESS
During the year, the company has transferred the services business
of the company to Subex Technologies Limited, a wholly owned
subsidiary, through a Scheme of Arrangement approved by the
Hon’ble High Court of Karnataka. The consideration paid for the
transfer was Rs. 31 Crores discharged by issue of equity shares of
Rs. 3 Crores and unsecured loans repayable on demand of Rs. 28
Crores. The Scheme of Arrangement approved by the Hon’ble
High Court of Karnataka is effective from September 01, 2007.
CORPORATE GOVERNANCE
Your Company strongly believes that the spirit of Corporate
Governance goes beyond the statutory form. Sound Corporate
Governance is a key driver of sustainable corporate growth and
long-term value creation for the stakeholders and protection of
their interests. Your Company endeavors to meet the growing
aspirations of all stakeholders including shareholders, employees
and customers. The Company is committed to maintain the highest
level of transparency, accountability and equity in its operations.
Your Company always strives to follow the path of good Governance
through a broad framework of various processes.
Your company has complied with all the requirements as per new
Clause 49 of the listing agreement of the Stock Exchange. The
auditor’s certificate on compliance with Clause 49 is annexed to
this report. In addition, your Company has documented its internal
policies in line with the corporate governance guidelines. The
Management Discussion & Analysis of the financial position of the
company is provided in this annual report and is mentioned hereby
for reference.
AUDITORS’ REPORT
There were no qualifications observed in the auditor’s report for
the Financial Year 2007-08.
AUDIT COMMITTEE
The audit committee presently has 5 directors as members viz.
Mr. V. Balaji Bhat, Mr. K.Bala Chandran, Mr. Vinod R Sethi,
Mr. Subash Menon, and Mr. Andrew Garman. Except Mr. Subash
Menon, all other members of the audit committee are non - executive
independent directors. Mr. Balaji Bhat is the Chairman of the Audit
Committee. The role, terms of reference, the authority and power
of the Audit Committee are in conformity with the requirements of
the Companies Act, 1956 and Clause 49 of the listing agreement.
More details of the audit committee are provided in the report on
Corporate Governance attached to this annual report.
AUDITORS
M/s. Deloitte Haskins & Sells, the statutory auditors of the company
retire at the ensuing Annual General Meeting and have confirmed
their eligibility as per Sec 224 of the Companies Act, 1956 and their
willingness to accept office, if re-appointed.
DIRECTORS
Mr. S. N. Rajesh, a Nominee Director of UTI Venture Funds, has
resigned from the Board of the Company with effect from
September 5, 2007. The Board places on record, its appreciation
for the services rendered by him during his tenure.
As per Article 87 of the Articles of Association of the Company,
atleast two-third of your directors shall be subject to retirement by
rotation. One-third of these retiring directors must retire from office
at each Annual General Meeting of the shareholders. A retiring
director is eligible for re-election. Mr. Andrew Garman and
Mr. Vinod R. Sethi retire by rotation and being eligible offer
themselves for re-appoinment at this Annual General Meeting.
FIXED DEPOSITS
Your company has not accepted any fixed deposits from the public.
PARTICULARS OF EMPLOYEES
The particulars of employees required under Section 217(2A) of
the Companies Act, 1956 and the rules made thereunder, are
given in the annexure appended hereto (Annexure-1) and forming
part of this report. In terms of Section 219(1)(b)(iv) of the Act, the
Report and Accounts are being sent to the shareholders excluding
the aforesaid annexure. Any shareholder interested in obtaining a
copy of the said annexure may write to the Company Secretary at
the Registered Office of the Company.
INFORMATION UNDER SECTION 217 (1)(e) OF THE COMPANIES
ACT, 1956 READ WITH COMPANIES (DISCLOSURES OF
PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS)
RULES, 1988
A CONSERVATION OF ENERGY
The operations of your company are not energy-intensive.
However, significant measures are taken to reduce energy
consumption by using energy-efficient computers and by the
purchase of energy-efficient equipment. Your company constantly
evaluates new technologies and invests to make its infrastructure
more energy-efficient. Currently your company uses CFL fittings
and electronic ballasts to reduce the power consumption of
fluorescent tubes. Air conditioners with energy efficient screw
compressors for central air conditioning and air conditioners with
split air conditioning for localized areas are used.
B TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION
Your company has a strong R&D Division responsible for developing
technologies for its products in the telecom domain. The company
holds many patents for its technological innovations. The
telecommunications domain, in which your company operates, is
subject to high level of obsolescence and rapid technological
changes. Your company has developed inherent skills to keep
pace with these changes. Since software products are the
significant line of business of your company, the company incurs
expenses on product related Research & Development on a
A N N U A L R E P O R T
2007 - 2008
25
continuous basis. These expenses are charged to revenue under
the respective heads and are not segregated and accounted
separately.
C FOREIGN EXCHANGE EARNINGS AND OUTGO
Your company has over the years shifted its focus from software
services to software products. This has resulted in substantial
foreign exchange earnings as compared to previous years. During
the year 2007-08 total foreign exchange inflow and outflow is as
follows:
i)
Foreign Exchange earnings Rs. 1489.21 Million (previous year
Rs. 1825.73 Million)
ii) Foreign Exchange outgo is as below:
Travelling expenses
Interest expense
Rs. 49.99 Million (previous
year Rs. 49.43 Million)
Rs. 147.89 Million
Rs. 194.84 Million (previous
year Rs. 1456.33 Million)
Consideration for acquired assets Rs. 0.67 Million
Product marketing expense and
other expenditure incurred
overseas for software
development
SOCIAL RESPONSIBILITIES - SUBEX CHARITABLE TRUST
The trust was set up to provide for welfare activities for
underprivileged and the needy in the society. The trust is
managed by Trustees elected amongst the Subexians. During
the year the Trust has provided active support for education of
economically challenged meritorious students, financial
assistance to old age homes and to individuals who needed
medical help.
HUMAN RESOURCE MANAGEMENT QUALITY
2008 was an interesting and challenging year for Subex. HR too
had its challenges, most importantly, in areas related to acquisition.
Most important was the effort to bring the two organizations into
one entity- in the areas of benefits, job leveling, culture, norms and
so on. This was done through a series of integration camps,
consistent communication channels like open house, lunch with
CEO, integration blogs, internal newsletter and numerous meetings.
The year also witnessed Subex moving to a more robust appraisal
system, a move towards a model aligned to latest thinking in the
area of performance appraisals. We now have a robust system
and to use the two words used to evaluate a performance appraisal
system- an efficient and effective system. We have a system based
on Key Result Areas and Competencies. We have also rolled out
an online appraisal system for all locations, across the globe.
Another milestone for HR this year had been its launch of an
Oracle HRMS (Human Resource Management System).
Recruitment also bought in its challenges as we had to hire
professionals with exposure to a heterogeneous, multi-technology,
multi-vendor telecom domain.
During the forthcoming year, as our company grows bigger, the
most important asset will be the uniqueness of the Subexians for
their technical and domain expertise and our culture and
commitment which we exhibit.
CHANGE IN REGISTERED OFFICE OF THE COMPANY
During the year the company has moved to an integrated office
situated at the outer ring road area of Bangalore. The new office
building has a built up area of approx 125,000 sq.ft. The registered
office of the Company was shifted to the new office located
at Adarsh Tech Park, Outer Ring Road, Devarabisanahalli,
Bangalore – 560 037 with effect from December 7, 2007.
DIRECTORS’ RESPONSIBILITY STATEMENT
In accordance with the provision of Section 217(2AA) of the
Companies Act 1956, the Board of Directors affirms:
a)
that in the preparation of the accounts for the year ending
March 31, 2008, the applicable accounting standards have been
followed and there are no material departures there from.
that the accounting policies have been selected and applied
b)
consistently and made judgments and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the company as at March 31, 2008 and of the profit of the
company for the year ended on that date.
c)
that proper and sufficient care has been taken for the
maintenance of adequate accounting records in accordance with
the provision of the Act for safeguarding the assets of the company
and for preventing and detecting fraud and other irregularities.
d)
been prepared on a going concern basis.
APPRECIATION / ACKNOWLEDGEMENTS
We thank our clients, vendors, investors and bankers for the
continued support during the year. We place on record our
appreciation for the co-operation and assistance provided by the
Central and State Government authorities particularly software
technology park- Bangalore, Customs and Central Excise
Authorities, Registrar of Companies, Karnataka, the Income Tax
department, Reserve Bank of India and various authorities under
the Government of Karnataka.
Your directors also wish to place on record their deep appreciation
to Subexians at all levels for their hard work, solidarity, co-operation
and support, as they are instrumental in your company scaling
new heights, year after year.
that the accounts for the year ended March 31, 2008 has
Place : Bangalore
Date : July 29, 2008
for and on behalf of the Board
Subash Menon
Founder Chairman,
Managing Director & CEO
26
A N N U A L R E P O R T
2007 - 2008
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A N N U A L R E P O R T
2007 - 2008
27
REPORT ON CORPORATE GOVERNANCE
I. COMPANY’S PHILOSOPHY ON CORPORATE GOVERNANCE
Corporate governance is about commitment to values and ethical
business conduct. It is about how an organization is managed.
Therefore situation, performance, ownership and governance of
the company are equally important as regards to the structure,
activities and policies of the organization. Consequently, the
organization is able to attract investors, and enhance the trust and
confidence of the stakeholders.
Subex Limited’s compliance with the corporate governance
guidelines as stipulated by the stock exchanges is described in this
section. The company believes that sound corporate governance
is critical to enhance and retain investor’s trust. Subex respects
minority rights in its business decisions.
The company’s corporate governance philosophy is based on the
following principles:
1. Satisfy the spirit of the law and not just the letter of the law.
2. Be transparent and maintain high degree of disclosure levels.
3. Communicate externally, in a truthful manner, about how the
company is run internally.
4. Comply with the laws in all the countries in which the company
operates.
Subex is committed to good Corporate Governance practices.
Consistent with this commitment, Subex seeks to achieve a high
level of responsibility and accountability in its internal systems and
policies. Subex respects the inalienable rights of the shareholders to
information on the performance of the Company. The Company’s
Corporate Governance policies ensures, among others, the
accountability of the Board of Directors and the importance of its
decisions to all its participants viz., customers, employees, investors,
regulatory bodies etc. Subex Code of Corporate Governance has
been drafted in compliance with the code of “Corporate Governance”
as promulgated by the Securities and Exchange Board of India (SEBI)
on January 25, 2000 and amendments made thereto.
II. BOARD OF DIRECTORS
The Board of Directors of Subex Limited comprises 8 Directors out
of which 2 are executive directors and 6 are non-executive
independent directors.
Details of the composition of the Board of Directors and their
attendance and other particulars are given below:
A. Composition and category of directors as on June 30, 2008
%
Category
12.50%
Promoter directors
75.00%
Non-executive Independent directors
12.50%
Other executive directors
100%
Total
No. of directors
1
6
1
8
B. Attendance of directors at the Board Meetings and the last AGM and details about directorships and memberships in committees as on
March 31, 2008.
Director
Position
No. of
Board
meetings
held
No. of
Board
meetings
attended
Last AGM
attendance
No. of
directorships
in other
companies ▲
No. of
committees
in which the
director is
Chairman ■
No. of
committees
in which the
director is a
member ■
Mr. Subash Menon
Mr. Sudeesh Yezhuvath
Mr. V. Balaji Bhat
Mr. Vinod R.Sethi
Mr. K. Bala Chandran
Mr. S N Rajesh(cid:1)
Mr. P.P.Prabhu
Mr. Harry Berry
Mr. Andrew Garman
Founder, Chairman
Managing Director & CEO
Chief Operating Officer
and Executive Director
Non Executive
Independent Director
Non Executive
Independent Director
Non Executive
Independent Director
Non Executive
Independent Director
Non Executive
Independent Director
Non Executive
Independent Director
Non Executive
Independent Director
4
4
4
4
4
2
4
4
4
4
3
4
2
2
2
4
2
2
Yes
Yes
Yes
No
No
No
Yes
No
No
1
1
5
10
1
1
2
-
-
-
-
3
-
-
-
1
-
-
1
1
3
3
4
-
2
-
1
Excluding private limited companies & overseas companies.
Includes only audit committee and shareholder’s grievance committee. Memberships in committees in Subex Ltd are included.
(cid:1) Mr. S N Rajesh ceased to be a member consequent to his resignation from the Board of Directors on September 05, 2007.
28
A N N U A L R E P O R T
2007 - 2008
▲
■
C. Number and dates of Board meetings
4 (four) Board meetings were held during the financial year
2007-08. The dates on which meetings were held are as follows:
April 30, 2007; July 26, 2007; October 23, 2007; January 29, 2008.
D. Brief details of directors seeking re-appointment
Mr. Vinod R Sethi
Vinod R. Sethi is a member of the Board of Directors since 2000.
He is a graduate in Chemical Engineering and also holds a degree
in B.Tech from IIT, Mumbai and an MBA in Finance from Stern
School of Business, New York University.
His earlier assignments include working with Morgan Stanley as
Chief Investment Officer and Portfolio Manager of Morgan Stanley
Asset Management managing over USD 2.4 billion of investments
in India.
Mr. Andrew Garman
Andrew Garman is a member of the Board of Directors since
2006. He is a managing partner at New Venture Partners LLC
where he focuses on the firm’s software, services, networking
and communications investment areas. Mr. Garman joined
Lucent’s New Ventures Group in 1999. Before Lucent,
Mr. Garman was a managing director of BT Ventures at Bankers
Trust Company, where he created and managed a portfolio of
internally generated corporate spin-outs in information
technology. Prior to joining BT Ventures in 1996, Mr. Garman
was the Vice President of Strategy and Business Development
for Xerox’s New Enterprise Group. At Xerox, he helped expand
the firm’s internal venture portfolio by developing eleven
companies based upon technology innovations, primarily derived
from the Xerox Palo Alto Research Centre. From 1985 to 1991,
Mr. Garman was a general partner at CommTech International
Inc., an incubator and venture capital firm with exclusive rights
to commercialise the technology of SRI International, a non-
profit research institution. Mr. Garman was formerly a director of
AcuPrint, Amati Communications, Celiant, Certco, ColoRep,
Document Forum, dpiX, InXight Software, Lucent Public Safety
Systems (now Intrado), Placeware, Microwave Photonics, Vidus
Ltd. and Visual Insights.
Mr. Garman holds an AB in Engineering and Applied Physics from
Harvard College, an MS in Mechanical Engineering from Stanford
University and an MBA from Stanford University, where he was
named an Arjay Miller Scholar. He is a past president of the Stanford
Business School Alumni Association and member of the Board of
Advisers.
III. AUDIT COMMITTEE
Terms of Reference
A.
The Audit Committee has, interalia, the following mandate:
• Overseeing the Company’s financial reporting process and
disclosure of its financial information to ensure that the financial
statements are correct, sufficient and credible
• Recommendation of appointment and removal of external
auditor, fixation of audit fee and also approval for payment for
any other services
• Review of annual and quarterly financial statements before
submission to the Board
• Review of adequacy of internal control systems
• Review of adequacy of internal audit function, including the
reporting structure coverage and frequency of internal audit
• Review of the Company’s financial and risk management
policies
Mr.Vinod R Sethi
Mr. K.Bala Chandran
The current charter of the Audit Committee is in line with international
best practices and the regulatory changes formulated by SEBI
and the listing agreements with the Stock Exchanges on which
Subex is listed.
B. Composition of Audit Committee
Composition
Mr. V. Balaji Bhat, Chairman
Category
Non-Executive
Independent Director
Non-Executive
Independent Director
Non-Executive
Independent Director
Non-Executive
Independent Director
Founder Chairman,
Managing Director & CEO
The Company Secretary is the secretary of the Audit Committee.
C. Meetings and attendance during the year
During the financial year 2007-08, four audit committee meetings
were held. The unaudited financial results for the financial year
ended March 31, 2008 were taken on record at the meeting held
on April 29, 2008. The audited financial results for the year ended
March 31, 2008 were taken on record at the meeting held on
June 30, 2008.
Mr. Andrew Garman
Mr.Subash Menon
Attendance of committee members at the audit committee meetings held during the financial year 2007-08:
No. of audit committee meetings held
Member
4
Mr. V. Balaji Bhat
4
Mr. K. Bala Chandran
4
Mr. Vinod R. Sethi
2
Mr. S. N. Rajesh*
4
Mr. Andrew Garman
4
Mr. Subash Menon
* Mr. S N Rajesh ceased to be a member consequent to his resignation from the Board of Directors on September 05, 2007.
No. of audit committee meetings attended
4
2
2
2
2
4
A N N U A L R E P O R T
2007 - 2008
29
The committee considers the performance of the Company as well
as general industry trends while fixing the remuneration of executive
directors. During the year under review, the committee had one
meeting on April 30, 2007.
IV. REMUNERATION COMMITTEE
Composition of the committee
Mr. Vinod R. Sethi - Chairman
Mr. K. Bala Chandran
Mr. V. Balaji Bhat
Mr. Harry Berry
Details of remuneration to directors
Name
Designation
Salary
Commission
Amount in Rs.
Total
4,800,000
4,800,000
Mr. Subash Menon
Mr. Sudeesh Yezhuvath
Founder Chairman, Managing Director & CEO
Chief Operating Officer and Wholetime Director
4,800,000*
4,800,000*
-
-
* excludes contribution to Provident Fund
Note:During the year ended March 31, 2008, the Company has paid an amount of Rs. 38,285,906 to its Whole-time directors towards
remuneration and has applied to the Central government for approval of payments that are in excess of the maximum remuneration
payable under the Companies Act, 1956. Pending the Central government’s approval, such excess is treated as monies due from the
Whole-time directors being held by them in trust for the Company and is included under loans and advances.
The following directors have been allotted stock options under the employee stock options scheme of the Company.
Name
Designation
No. of options
granted
No. of shares vested and exercised
as on March 31, 2008
Mr. K. Bala Chandran
Mr. V. Balaji Bhat
Mr. Vinod R. Sethi
Mr. P. P. Prabhu
Non–Executive Independent Director
Non–Executive Independent Director
Non–Executive Independent Director
Non–Executive Independent Director
7,500
7,500
7,500
7,500
7,500
7,500
7,500
4,875
The above stock options were granted on the same terms and conditions as mentioned in the ESOP scheme - 2000 of the Company.
During the financial year under review, no additional stock options were granted to any of the Directors of the Company.
The Non-Executive Directors are paid sitting fees at the rate of
Rs. 2,500 for attendance in the board meetings.
The Remuneration Committee determines and recommends to the
Board, the compensation payable to the directors. All Board level
compensation is approved by the shareholders, and separately
disclosed in the financial statements. Remuneration of executive
directors consists of a fixed component and a performance based
commission. The compensation, however, shall be within the
parameters set by the shareholders meetings and the provisions
of the Companies Act, 1956. The executive directors have entered
into service contracts with the company. Both the executive
directors have 3 months notice period with the company if they
decide to terminate the contract. If the termination is from the
company, the notice period shall be 12 months. In case of
severance from the company, Mr. Subash Menon is eligible for
getting compensation of not less than twenty times and Mr. Sudeesh
Yezhuvath is eligible for getting compensation not less than fifteen
times of their total remuneration for the preceding 12 months from
the date of the notice. The non-executive directors are eligible for
commission not exceeding 0.5% of the profits of the company
subject to a maximum of Rs. 2 million in aggregate per year and
also stock options of the company subject to the terms of the stock
option schemes of the company.
V. SHARE TRANSFER COMMITTEE
A. Composition of the committee
Mr. Sudeesh Yezhuvath, Chairman
Mr. Subash Menon
Authorised Representative of Share Transfer Agents.
B. Meetings during the year
The Company holds Share Transfer Committee Meetings upto three
times a month, as may be required, for approving the transfers/
transmissions/rematerialisation of equity shares. The Company has
appointed M/s. Canbank Computer Services Limited, a SEBI
recognised transfer agent, as its Share Transfer Agent with effect
from 6th November 2001. The Share Transfer Committee has met
four times during the financial year 2007-08 on the following dates:
Date of the meeting
October 31, 2007
November 30, 2007
December 15, 2007
December 31, 2007
No. of transfer
deeds received
Shares pursuant to
the deeds
Rematerialisation
requests received
Shares involved
4
1
4
1
1600
400
400
400
-
-
-
-
-
-
-
-
The Company ensures that the share transfers are effected within one month of the receipt of request for transfer.
30
A N N U A L R E P O R T
2007 - 2008
INVESTOR GRIEVANCE COMMITTEE
VI.
A. Composition of the committee
The members of the company’s investor grievance committee
are:
Mr. K. Bala Chandran, Chairman
Mr. Sudeesh Yezhuvath
This committee is responsible for addressing the investors’ complaints
and grievances.
The Company secretary is the compliance officer of the
Company.
B. Meetings during the year
The committee met 4 (four) times during the current financial year
2007-08 on these dates:
April 30, 2007; July 26, 2007; October 23, 2007; January 29, 2008.
Details of grievances of the investors are provided in the
“Shareholders’ Information” section of this report.
VII. ESOP COMMITTEE (Compensation committee)
The Company has instituted employee stock option schemes in line
with the SEBI Guidelines. In order to grant options under the scheme to
eligible employees, a Compensation Committee has been formed.
A. Composition of the committee
The committee comprises the following directors:
Mr. V. Balaji Bhat, Chairman
Mr. K. Bala Chandran
Mr. Subash Menon
B. Meetings during the year
The committee met 8 (eight) times during the current financial year
2007-08 on the following dates:
April 18, 2007; June 01, 2007; July 13, 2007; September 06, 2007;
December 07, 2007; January 10, 2008; February 05, 2008;
March 24, 2008.
VIII. GENERAL BODY MEETINGS
A. Location and time of the last three AGMs
Venue
Date of AGM
Year
Le Meridien –
July 28, 2005
2005
Bangalore
Le Meridien –
Bangalore
Le Meridien –
Bangalore
Time
3:00 p.m.
August 28, 2006
July 26, 2007
4:00 p.m.
4:00 p.m.
2006
2007
Location and time of the last three EGMs held
Year Date of EGM
Venue
Time
Le Meridien - Bangalore 3:00 p.m.
2007 January 29, 2007
4:00 p.m.
2007 April 23, 2007
Corporate office
4:00 p.m.
2007 November 26, 2007 Corporate office
B. Postal ballot
No special resolutions were required to be passed under Section
192A of the Companies Act, 1956 during the financial year under
review.
IX. DISCLOSURES
A. There are no materially significant related party transactions
of the company of material nature, with the promoters, the directors
or the management, their subsidiaries or relatives etc that may
have potential conflict with the interests of the company at large.
Transactions with the related parties are disclosed in Note II.10
Schedule P to the financial statements in the Annual Report.
B. The Company has not been subjected to any penalties,
strictures by stock exchange (s) / SEBI or any statutory authorities
on any matter related to capital markets, during the last three
years.
C. The Company has complied with all the mandatory requirements
of Clause 49 of the Listing Agreement.
X. MEANS OF COMMUNICATION
A. Annual/ half yearly and quarterly results
The annual/half yearly/quarterly audited/un-audited results are
generally published in all editions of Business Standard or Financial
Express and Udayavani. The complete financial statements are
posted on the Company’s website www.subexworld.com. Subex
also regularly provides information to the Stock Exchanges as per
the requirements of the Listing Agreements and updates the website
periodically to include information on new developments and
business opportunities.
B. Management’s Discussion and Analysis section is part of the
Annual Report.
XI. General shareholder information is provided in the “Shareholders’
Information” section of the Annual Report.
XII. Auditors’ Certificate in respect of compliance of conditions of
corporate governance as per Clause 49 of the Listing Agreement
entered into with the Stock Exchanges forms part of this Annual
Report.
XIII. Compliance with non-mandatory requirements of Clause 49
of the Listing Agreement.
Clause 49 further states that the non-mandatory requirements
may be implemented as per the company’s discretion. However
the disclosures of compliance with mandatory requirements and
adoption (and compliance)/ non adoption of non-mandatory
requirements shall be made in the section on corporate governance
in the annual report. We comply with the following non-mandatory
requirements.
A. The Board
We have an Executive Chairman and as such maintenance of
office by a Non-Executive Chairman does not arise. None of our
independent directors have served for a tenure exceeding nine
years from the date when the new Clause 49 became effective.
B. Remuneration Committee
We have instituted a Remuneration Committee. A detailed note on
the Remuneration Committee is provided elsewhere in the report.
A N N U A L R E P O R T
2007 - 2008
31
view of the time and attention devoted by them for the company.
While doing so, we evaluate the performance of the non-executive
directors using various parameters. However we are yet to
formalize this evaluation by peer group comprising entire Board of
Directors, excluding the director being evaluated.
G. Whistle Blower Policy
We have established a mechanism for employees to report concerns
about unethical behaviours, actual or suspected fraud or violation
of our code of conduct. The mechanism also provides for adequate
safeguards against victimization of employees who avail of the
mechanism and also provide for direct access to the Chairman of
the Audit Committee in exceptional cases. Our employees are
informed of
internal
communications. None of our employees has been denied access
to this facility.
through appropriate
this policy
Place : Bangalore
Date : June 30, 2008
for Subex Limited
Subash Menon
Founder Chairman,
Managing Director & CEO
C. Shareholders’ rights
We communicate with investors regularly through emails,
telephones and face to face meetings like investor conferences,
earnings calls, company visits or on road shows. We announce
quarterly financial results within four weeks of the close of a quarter.
The company publishes the quarterly financial results in leading
business newspaper(s) as well as put on the company’s website.
However, we have not initiated sending half-yearly declaration of
financial performance to the household of shareholders so far.
D. Audit Qualifications
The company does not have any audit qualification for the year
under review. We always endeavour to move towards a regime of
un-qualified financial statements.
E. Training of Board Members
All new non-executive directors inducted into the Board are given
adequate orientation on the company’s businesses, group
structure, risk management strategy and policies.
F. Mechanism for evaluating non-executive Board Members
The company compensates non-executive directors keeping in
32
A N N U A L R E P O R T
2007 - 2008
COMPLIANCE CERTIFICATE TO THE MEMBERS OF SUBEX LIMITED
1. We have examined the compliance of conditions of corporate
Governance by Subex Limited (formerly Subex Azure Limited)
[‘the Company’] for the year ended March 31, 2008, as
stipulated in Clause 49 of the Listing Agreement of the said
company with the Stock Exchanges.
2. The compliance of conditions of Corporate Governance is the
responsibility of the management. Our examination has been
limited to a review of the procedures and implementations
thereof, adopted by the company for ensuring compliance
with the conditions of the corporate governance. It is neither
an audit nor an expression of opinion of the financial statements
of the company.
In our opinion and to the best of our information and according
to the explanations given to us and the representations made
3.
by the directors and the management, we certify that the
company has complied with the conditions of Corporate
Governance as stipulated in Clause 49 of the above-mentioned
Listing Agreement.
4. We further state that such compliance is neither an assurance
as to the future viability of the company nor the efficiency or
effectiveness with which the management has conducted the
affairs of the company.
Place : Bangalore
Date : June 30, 2008
for Deloitte Haskins & Sells
Chartered Accountants
V. Srikumar
Partner
Membership No. 84494
DECLARATION BY THE CEO UNDER CLAUSE 49 I (D) OF THE LISTING AGREEMENT REGARDING ADHERENCE TO THE
CODE OF CONDUCT
To,
The Members of Subex Limited
In accordance with Clause 49 I (D) of the Listing Agreement with
the Stock Exchanges, I hereby confirm that, all the Directors and
the Senior Management personnel including me, have affirmed
compliance to their respective Codes of Conduct, as applicable
for the Financial Year ended March 31, 2008.
Place : Bangalore
Date : June 30, 2008
for Subex Limited
Subash Menon
Founder Chairman,
Managing Director & CEO
A N N U A L R E P O R T
2007 - 2008
33
MANAGEMENT’S DISCUSSION AND ANALYSIS
OVERVIEW
Subex Limited (Subex) is listed on the National Stock Exchange of
India Limited (NSE) and the Bombay Stock Exchange Limited (BSE).
The Global Depositary Receipts and the Foreign Currency
Convertible Bonds of the company are listed on the London Stock
Exchange (LSE).
The management of Subex is committed to improving the levels of
transparency and disclosure. Keeping this in mind, an attempt has
been made to disclose hereunder, information about the company,
its business, operations, outlook, risks and financial condition.
The financial statements have been prepared in compliance with
the requirements of the Companies Act, 1956, and the Generally
Accepted Accounting Principles (GAAP) in India. The management
of Subex accepts responsibility for the integrity and objectivity of
these financial statements, as well as for various estimates and
judgments used therein. The estimates and judgments relating to
the financial statements have been made on a prudent and
reasonable basis, in order that the financial statements reflect the
form and substance of transactions in a true and fair manner, and
reasonably present the state of affairs and results for the year
under review.
In addition to the historical information contained herein, the
following discussion may include forward looking statements which
involve risks and uncertainties, including but not limited to the risks
inherent in the company’s growth strategy, dependency on certain
clients, dependency on availability of qualified technical personnel
and other factors discussed in this report
1.
1.1 Subex is a provider of solutions in the Operations Support
Systems area for telecom applications. This area can broadly be
classified into Service Fulfillment, Service Assurance and Revenue
Maximization. The company operates in Revenue Maximization
and Service Fulfillment areas. While Revenue Maximization solutions
improve the revenues and profits of the communications service
providers through identification and elimination of leakages in their
revenue chain, Service Fulfillment solutions enable the carriers to
fulfill the needs of their subscribers through provisioning and
activation of services. Subex conceptualizes and develops software
products at its facilities in Bangalore and is focused on the telecom
business segment. Subex has sales and support offices in the
United States, Canada, UK, UAE, India and Australia. Subex is the
global leader in revenue maximization for communications service
providers.
Carriers today are facing a variety of challenges. The key among
them are (a) the competitive requirement to provide high quality
services faster and cheaper and (b) the operational requirement
to have a well integrated Operations Support System (OSS) to
meet the competitive requirement. Subex provides software solutions
to meet these critical requirements. Carriers have been building
the support structure by acquiring disparate pieces of software
and that has resulted in stove pipes getting built over time. Our well
INDUSTRY
34
A N N U A L R E P O R T
2007 - 2008
OPPORTUNITIES AND THREATS
integrated platform called Revenue Operations Center (ROC)
addresses this issue of a siloed structure within their networks. The
solutions that form part of the ROC enable the customers to achieve
Operational Dexterity which is a combination of Operational
Efficiency and Service Agility. While the former ensures that cost
of operation is maintained at a low enough level, the latter ensures
adequate service levels are achieved.
2.
2.1 Strategy
Subex has always approached its’ business in a very strategic
manner. Over the past 6 years, we have been executing a well
thought out strategy. The innovative strategy that we adopted
was to blend organic growth with inorganic growth to achieve
leadership in a focused area. It is our belief that telcos around the
world will demand platform based solutions from an increasingly
lower number of partners in the years to come. In order to succeed
in such a transforming environment, companies need to expand
their offering on a continuous basis while ensuring synergy among
the different parts of the offering.
In keeping with this strategy, we have been embellishing our offering
– both through acquisitions and internal development – and have
developed an extensive platform spanning revenue maximization
and service fulfillment. We are now poised to take advantage of
the growth in the Telecom OSS industry globally.
2.2 Market Opportunity
We address an ever increasing market. The data on market size is
provided below.
2007-2010 CAGR: 15%
)
n
m
$
S
U
(
1, 543
370
336
355
266
216
2005
1, 745
420
390
410
300
225
2006
2, 300
550
510
555
420
265
2008
1, 995
480
445
480
350
240
2007
3, 050
700
690
760
600
300
2010
2, 632
622
590
640
500
280
2009
Fraud and Revenue Assurance
Inventory Management
Provisioning
Interconnect Billing
Activation
3. BUSINESS SEGMENTS AND INDUSTRY OUTLOOK
3.1 Business segments
Subex operates in two business segments – telecom software
products and telecom software services. The former is the key
focus area for the company and will be discussed in detail. The
latter is staff augmentation services for telcos in the United States
and is fast losing its’ significance as can be seen from the business
mix data provided herein.
Revenue Mix
55
54
45
46
67
64
33
36
80
70
60
50
40
30
20
10
0
t
e
g
a
n
e
c
r
e
P
75
67
64
Price set
by the
Market
Cost of
Service
Delivery
36
33
25
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Revenue from Products
Revenue from Services
3.2 Telecom software products
There is a fundamental shift in the telecom business’ economics.
Telecom operators have seen their margins shrink dramatically as
the business model has changed from a regulated market to a free
market. In a regulated market, operators could easily add their
desired or guaranteed margin to the cost and set the price. In
today’s free market, they need eke out their margin as the pricing
is fixed by the competitive environment. This situation has been
pictorially represented below.
Earlier: Regulated
Today: Free Market
Price
Approved
Cost
Plus
Price set by the
Market
Margin Earned
Competitive
Pricing
Cost of Service
Delivery
Margin Guaranteed
Cost of Service
Delivery
Telco’s Strategy
Grow ARPU
• Manage up revenue
Telco’s Strategy
Grow AMPU
• Manage up revenue
• Manage down cost
The key challenge therefore is build a strategic framework that
fosters sustained profitable growth. Telecom operators now need
to focus on the combination of:
Service agility
by reducing time-to- market for new service
•
•
achieving rapid service provisioning
• maintaining high quality of service delivery
and
Operational efficiency
•
reducing the cost of delivery of service
Enhanced Margins
Service Agility Gain-
Improved price realization for
services
Operational Efficiency Gain-
Reduced cost of service
delivery
We call this combination as Operational Dexterity.
Operational dexterity ultimately allows operators to reverse the
pressure on the margins by enjoying improved price realization
through better quality of service and reduced cost of service
through an efficient operation. Thus, we enable them to expand
their margin by increasing the revenue through service agility gain
and by reducing the cost of operation through operational efficiency
gain. In short, we help them gain operational dexterity by providing
two sets of solutions as detailed below.
Solutions for Operational Efficiency gains
There are six products in this solution category. They are Nikira,
Moneta, Prevea, Concilia, Symphona and Optima.
Nikira
Nikira™ Fraud Management System is the next generation fraud
management solution built to deliver on a 3-step philosophy of
Detect-Investigate-Protect. Nikira detects known fraud types and
patterns of unusual behaviour; helps investigate these unusual
patterns for potential fraud and uses the knowledge thus generated
to upgrade and protect against future intrusions.
Nikira is differentiated by its unique architecture that harnesses
the power of proven rules-based alarms and pattern matching
driven by advanced statistical techniques. Adding power to this
hybrid detection system is a set of strong case management tools.
These tools provide all relevant case data which are made easily
accessible through a single window in a fast web-based GUI.
Nikira’s high flexibility allows operators of different sizes to customize
rules to suit unique network and business requirements. Moreover,
seamless visual alarm linking using 3rd party visualization software
reduces investigation efforts, thus decreasing case turnover time.
Nikira has the ability to detect fraud types in all telecom environments
- Wireline (PSTN, ISP, VoIP), Wireless (2G, 2.5G, 3G) and across all
services - postpaid, prepaid, VAS, MMS, M-commerce
Moneta
Moneta™ Revenue Assurance System is a first-of-its kind, complete
RA solution, designed to tackle critical revenue assurance
challenges across the entire revenue chain. Moneta offers a set of
pre-configured solution templates to address RA challenges
inherent to individual service verticals - Wireless, Fixed, Cable
MSPs & MVNOs. These solution templates address revenue
assurance issues across multiple functional areas such as service
fulfilment, usage integrity, retail billing, interconnect/wholesale billing
and content settlement.
Each solution template is ready-to-use and includes:
Set of appropriate health checks to monitor
•
A N N U A L R E P O R T
2007 - 2008
35
Subscriber acquisitioning,
Ongoing usage
Collections and recovery
Control points & interfaces to extract data
Reports & dashboards to present results, and
•
•
• Workflow to monitor, action & close cases
Using these solution templates, operators can dramatically reduce
the time required to implement or extend the coverage of their RA
practice. Moreover, operators can easily reconfigure or remodel
existing templates to accommodate changing business requirements.
Prevea
The Prevea™ Risk Management System empowers operators to
continuously assess and mitigate risk presented by subscribers
throughout their lifecycle.
Prevea tracks risk in a near real-time during:
•
•
•
Prevea provides the operator with a holistic view that helps in
understanding subscriber risk profile and thereby aids its
management. Further, Prevea can quickly, and seamlessly,
accommodate new service information to provide an accurate
picture of the exposure at any point in time.
Allowing the operator to easily, and quickly, define various risk
indicators and controls enables Prevea to adapt to local cultural
and regulatory requirements. This also enables the operator to
stay agile in changing socio-economic conditions that affect the
overall level of risk in a region.
Concilia
Concilia™ Interconnect Billing System allows operators to quickly
and accurately settle charges with their network partners. Shrinking
margins have highlighted the increased need for visibility of each
deal’s impact on operator’s bottom line. For interconnect agreements
with domestic and international operators, Concilia provides with
the ability to manage these major costs and revenues on a day-to-
day, hour-to-hour basis.
New types of interconnect agreements, in areas such as IP and
SMS, require new system capabilities to ensure that operators
have accurate data available to assure revenues. Concilia’s
flexibility, scalability and ease of use empowers all types of operators
– fixed or mobile, a national PTT or a new entrant, giving them the
edge needed to survive and prosper in today’s market.
Symphona
The Symphona™ Interparty Management System enables
operators to bill their customers and settle with their partners on a
single modular platform. Symphona supports all operational and
management information needs. Its unique architecture allows
calculation of multiple charges for each transaction, and the
correlation of retail revenues with interconnect cost. As product
bundles and their related tariff plans become more complex, this
ability to see all revenues and related costs is vital to ensuring a
healthy bottom line.
Symphona is able to support multiple business models within a
single implementation through seamless addition of necessary
modules. Examples of such modules include Retail, Wholesale,
Satellite, IP and Inter-Company. The Symphona framework has
been designed to evolve with minimal impact to ongoing operations.
36
A N N U A L R E P O R T
2007 - 2008
Optima
Optima™ Route Optimization System is designed to provide
operators with the tools to manage network cost information supplied
by other operators. Additional analysis on the impact of current
operator tariffs as well as forecasts on potential future operator
tariffs is also featured. The system is capable of taking into account
factors such as call quality rate information, capacity and network
costs in calculating the optimum choice of operators.
Optima ensures that the entire end-to-end processes from dial
code/destination operator rate imports to switch updates is
controllable and auditable. Optima is fully supported by a
comprehensive list of reports, and when generating an optimized
routing table the system provides an integrated management of
the routing table changes across multiple business functions. The
automated routing management functionality converts the routing
table into MML script for either manual or automatic implementation
on the switch.
Solutions for Service Agility gains
Solutions in this category can be grouped into four categories as
given below.
Automated, Subscriber-centric Fulfillment
• Syndesis Application Configuration Manager
• Syndesis Express
• Syndesis NetProvision
Data Integrity Management
• Syndesis TrueSource
Inventory/Resource Management
• Syndesis Adaptive Resource Manager
New Service Creation, Order Management
• Syndesis Controller
Service & Network Migration & Optimization
• Syndesis NetOptimizer
Syndesis Application Configuration Manager
Syndesis Application Configuration Manager (ACM) automates
the configuration, management, and detailed discovery of
applications, policy servers, subscriber databases, and other
service delivery platforms, making self-service a reality for the
mass market. With its high-performance, event-driven bus
architecture, scalable J2EE platform, and high-volume activation
capabilities, ACM supports thousands of requests per second with
instantaneous response time. This enables subscribers to manage
their services 24 hours a day, 7 days a week and supports zero-
touch provisioning, self-care and multi-media impulse buying. ACM
validates service request attributes against pre-defined service
logic, generates application configurations based on service needs,
and activates affected control nodes or databases (e.g., IPTV
servers, Unified Messaging servers, HLRs, HSSs, softswitches,
VoIP feature servers, etc.) via Syndesis Application Modules. A
wide range of off-the-shelf, productized Application Modules is
available for market leading vendors such as Alcatel, Microsoft,
Nortel, Siemens, Sonus, Sylantro and others, speeding time-to-
market with innovative service offerings.
Syndesis Express
Recognizing the demands of the new communications environment,
Syndesis Express is a subscriber-centric fulfillment solution that
allows carriers to react quickly to ever-changing market conditions
and customer requirements. With Express, new services can be
defined and deployed within days, not weeks or months. Express is
a pre-integrated solution bundle that provides complete, off-the-
shelf, subscriber-centric fulfillment for IPTV, VoIP (for both Business
and Consumer), and other targeted advanced service offerings.
From the wholly integrated Syndesis Express architecture, providers
can quickly and easily create, roll-out, and deliver advanced
services to a broad customer base while achieving new levels of
subscriber control and customization. And because Express
coordinates both application and connectivity service components
from a unified platform, it simplifies and improves the efficiency of
next generation service delivery and management while decreasing
operations costs.
Syndesis NetProvision
In the world of converging and ubiquitous communications, effective
service fulfillment is all about meeting demand – satisfying increasing
order volumes, aggressive delivery schedules, diverse service
requirements, and customers’ heightened expectations. Traditional
approaches to service fulfillment are not equipped to keep pace
with the demands of evolving networks, services, and subscribers.
Manual and siloed service provisioning, in particular, is slow,
complicated, and error-prone, forming a significant barrier to both
revenue growth and customer satisfaction and retention. Syndesis
NetProvision automates the design and activation of complex,
application-aware connectivity services, enabling flow-through
provisioning of next-gen data and IP offerings across multi-vendor,
multi-technology networks. NetProvision uses the industry’s most
advanced and most widely deployed discovery engine, enabling
the system to perform design and assign based on the network
and logical resources as they really exist, not as an off-line database
thinks they might. This significantly reduces fallout rates and
decreases the time required to activate a service. NetProvision
also features productized Equipment Modules (i.e., device
interfaces); native support for the widest range of convergent IP/
data technologies; and a modular, extensible, and scalable design
– all of which speed time-to-market for new offerings while reducing
project risk and TCO.
Syndesis TrueSource
Without consistently accurate network and service information,
OSS and BSS implementations are delayed, their overall
effectiveness falters, asset tracking becomes a guessing game,
and revenue leaks abound. Syndesis TrueSource combats these
problems by providing the high levels of data integrity central to
OSS and BSS data reconciliation and essential for the network and
for business operations. TrueSource is the industry’s first Data
Integrity Management (DIM) solution for improving the quality of
data that drives key service provider processes, resulting in lower
costs and higher service profitability. TrueSource employs an
operations-wide approach to solving data integrity problems,
combining three powerful data integrity functions: multi-layer
network and service discovery, data reconciliation, and
discrepancy analytics. Leveraging inherent cross-domain
intelligence and extensive off-the-shelf network equipment support,
TrueSource discovers devices and logical services in complex
multi-layer, multi-vendor, multi-service environments and reconciles
this data with OSS/BSS on a continuous, controlled basis. The
result is consistent, relevant data throughout service provider
operations, enhancing the effectiveness and value of service
fulfillment, service assurance, and billing systems.
Syndesis Adaptive Resource Manager
Syndesis Adaptive Resource Manager (ARM), the industry’s only
“live” inventory management solution, offers service providers a
low-risk path to operational transformation and highly accurate
inventory management. By considering the complete deployment
and consumption life cycle of both the network and applications,
ARM provides more comprehensive intelligence and control over
the service provider enterprise.
Wholly integrated with the Syndesis Subscriber-Centric Fulfillment
Suite, ARM is a rapidly deployed resource management system
designed specifically to meet the rigorous demands of complex
next generation networks, services, and business environments.
ARM an speed new service introduction and delivery, accelerate
new equipment deployment and payback, and ease OSS
transformations while lowering total cost of ownership for next-gen
inventory.
Syndesis Controller
An extension of the Syndesis Subscriber-Centric Fulfillment Solution,
Syndesis Controller is a pre-integrated, best-in-class Order
Management, Service Catalog Management and Technical
Workflow solution. Based on industry-leading technology, Controller
simplifies the orchestration between Syndesis Fulfillment Solution
and other systems, including BSS systems and any manual
processes associated with mobile and wireline service turn-up.
Controller leverages pre-built integration and service workflow
templates based on the best practices for service delivery.
It provides the basis for the automation of the complete order-to-
bill cycle and enhances scalability and visibility for the entire
fulfillment process, an essential pre-requisite for customer self-
service. Controller decomposes orders into constituent parts,
enabling end-to-end service delivery process management and
operational process improvements.
Syndesis NetOptimizer
Network maintenance is an unavoidable cost of doing business.
The world’s largest networks continually evolve and change, as
Service Providers add bandwidth, replace defective hardware,
perform upgrades, introduce new network infrastructure, optimize
existing capacity and change technology providers. Because each
of these changes affects services offered, carriers must be able to
execute large scale changes quickly and accurately while
preserving service integrity and the customer experience. Syndesis
NetOptimizer is a high-performance, carrier-class service migration
and maintenance software tool that takes the risk, time and effort
out of the carriers’ toughest grooming operations and service
migrations. Based on accurate views of the network, NetOptimizer’s
automation of large scale reprovisioning activities enables carriers
to rapidly, safely and strategically redistribute their services to
optimize their existing resources and take advantage of new
equipment, technologies, and topologies.
3.3 Customer Base
The company today serves over 180 customers spread across 65
countries. Our wide customer base has enabled us to garner the
top slot in our traditional business of fraud and revenue assurance.
We have also been up-selling and cross-selling within this wide
base of customers.
A N N U A L R E P O R T
2007 - 2008
37
3.4 Revenue Model
Subex licenses its software solutions on per subscriber or per
transaction basis for every service stream of our customers,
resulting in continuous growth in license revenues depending on
the growth of the networks where the solutions are installed. Another
sustainable revenue stream is the support revenue calculated as
a function of the license revenue. These three streams of revenue
– new license, additional license and support – are expected to
lend stability to the overall revenue of the company. Further, we
also have a fourth stream of revenue namely, customization. Finally,
we have a fifth stream called Bureau wherein we provide the
solutions as a service (similar to Software as a Service – SaaS)
through multi-million, multi-year contracts. The following graph gives
the revenue from each of the streams and from Third Party during
FY04, FY05, FY06, FY07 and FY08.
t
e
g
a
n
e
c
r
e
P
100
90
80
70
60
50
40
30
20
10
0
2
10
88
Revenue Composition
5
13
18
64
9
5
19
67
2
9
6
26
57
3
8
10
30
49
FY05
FY04
License & Addl. License
Customization
FY06
FY07
FY08
Support
Bureau
Third Party
A large portion of our revenue (38% in FY08) is annuity and that
provides a stable base. At the same time, license (a highly profitable
stream) continues to be significant indicating that the business is
not close to saturation.
3.5 Geographical Mix
Given the nature of our products and the challenges faced by
communications service providers in both developed and developing
countries, we have huge opportunities in all the geographies. This is
quite evident from the geographical mix given below.
t
e
g
a
n
e
c
r
e
P
100
90
80
70
60
50
40
30
20
10
0
Geographical Mix
23
23
54
14
34
52
9
36
55
15
35
50
27
36
37
FY04
FY05
FY06
FY07
FY08
EMEA
Americas
APAC
38
A N N U A L R E P O R T
2007 - 2008
3.6 Average Revenue Per Subexian
In the Products business, our Average Revenue Per Subexian
(ARPS), a key measure that leads to increased profitability, has
been growing steadily. The following graph shows the progression
on this front.
Average Revenue Per Subexian
120000
100000
80000
$
S
U
60000
53000
65000
108000
84000
75000
40000
20000
0
FY04
FY05
FY06
FY07
FY08
3.7 Quality
Subex is dedicated to maintain the highest levels of quality standards
throughout its operations. We are an ISO 9001:2000 certified
company.
4. RISKS AND CONCERNS
Any business has several risks related to that and ours is no different.
Following are the risks that we are cognizant of.
4.1 Market
The business model of communications service providers is highly
dependant on consumer behaviour and any reduction on spend
by consumers will negatively impact the fortunes of the telcos.
That will result in reduction of investment by the telcos and a
consequent contraction of market for our products. The
communications industry continues to experience consolidation
and an increased formation of alliances among communications
service providers and between communications service providers
and other entities. Should one of our significant customers
consolidate with a service provider using a competing product
and decide to discontinue the use of our product(s), this could
have a negative material impact on our business. These
consolidations and alliances may cause us to lose customers or
require us to reduce prices as a result of enhanced customer
leverage, which would have a material adverse effect on our
business. We may not be able to offset the effects of any price
reductions. We may not be able to expand our customer base to
make up any revenue declines if we lose customers.
Subex is fully dependant on the telecom industry. So, any vagaries
in the telecom business environment will considerably impact the
fortunes of the company.
4.2 Technology and Personnel
Our industry is characterized by rapid technological changes and
frequent new service offerings. Significant technological changes
could make our technology and services obsolete, less marketable
or less competitive. We must adapt to our rapidly changing market
by continually improving the features, functionality, reliability and
capability of our products to meet changing customer needs. We
may not be able to adapt to these challenges or respond successfully
or in a cost-effective way. Our failure to do so would adversely
affect our ability to compete and retain customers or market share.
Launching new products is a key element of our growth and an
inability to bring new products with high demand to the market in a
timely manner will reduce our growth and profitability.
Subex has set up processes and methodologies to address this
threat and to turn it into a strategic advantage by being in the
forefront of technological evolution. Regular skill upgradation
programs and training sessions that include attending global
conferences, employing specialized consultants etc. are
undertaken.
Retention of software personnel is another major risk being faced
by Subex. Towards this, it provides an empowered atmosphere
with extensive mentoring, career counseling and constant learning
opportunities in cutting edge and challenging technologies.
4.3 Intellectual Property
Our success depends to a significant degree upon the protection
of our software and other proprietary technology rights. We rely
on trade secret, copyright and trademark laws and confidentiality
agreements with Subexians and third parties, all of which offer only
limited protection. The steps we have taken to protect our
intellectual property may not prevent misappropriation of our
proprietary rights or the reverse engineering of our solutions. Legal
standards relating to the validity, enforceability and scope of
protection of intellectual property rights in several countries are
uncertain and may afford little or no effective protection of our
proprietary technology. Consequently, we may be unable to prevent
our proprietary technology from being exploited abroad, which
could require costly efforts to protect our technology. Policing the
unauthorized use of our products, trademarks and other proprietary
rights is expensive, difficult and, in some cases, impossible. Litigation
may be necessary in the future to enforce or defend our intellectual
property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Such litigation
could result in substantial costs and diversion of management
resources, either of which could harm our business. Accordingly,
despite our efforts, we may not be able to prevent third parties
from infringing upon or misappropriating our intellectual property.
4.4 Infringement
Third parties could claim that our current or future products or
technology infringe their proprietary rights. Any claim of infringement
by a third party, even those without merit, could cause us to incur
substantial costs defending against the claim, and could distract
our management from our business. Third parties may also assert
infringement claims against our customers. These claims may
require us to initiate or defend protracted and costly litigation on
behalf of our customers, regardless of the merits of these claims. If
any of these claims succeed, we may be forced to pay damages
on behalf of our customers. We also generally indemnify our
customers if our services infringe the proprietary rights of third
parties. If anyone asserts a claim against us relating to proprietary
technology or information, while we might seek to license their
intellectual property, we might not be able to obtain a license on
commercially reasonable terms or on any terms.
4.5 Client Concentration
Consequent to the acquisition of Azure Solutions, we now have
client concentration at BT plc (erstwhile British Telecom). However,
non-BT business is growing faster than BT business thereby
mitigating the risk.
4.6 Variability of Quarterly Operating Results
The quarterly operating results of the company have varied in the
past due to reasons like seasonal pattern of hardware and software
capital spending by customers, information technology investment
trends, achievement of milestones in the execution of projects,
hiring of additional staff and timing and integration of acquired
businesses. Hence, the past operating results and period to period
comparisons may not indicate future performance. The
management is attempting to mitigate this risk through expansion of
client base geographically and increase of steady annuity revenue.
Despite those efforts, variability could continue.
4.8 Statutory Obligations
Subex has registered with Special Economic Zone for software
development activities and has availed Customs Duties, Sales Tax
and Central Excise exemptions. The non-fulfillment of export
obligations may result in penalties as stipulated by the Government
and this may have an impact on future profitability.
4.9 Environmental Matter
Software development, being a pollutionfree industry, is not subject
to any environmental regulations.
4.10 Foreign Exchange
Subex has substantial exposure to foreign exchange related risks
on account of revenue from export of software and outstanding
liabilities. These are hedged with banks and risks mitigated to the
extent possible. Despite this, particularly given the volatility in the
foreign exchange market, there could be significant variations.
4.11 Taxation
Consequent to the end of STPI related tax benefits for Subex, we
have moved to a Special Economic Zone (SEZ). While tax protection
is expected to continue under the SEZ scheme, there is a significant
amount of uncertainty in the regulatory environment. This could
lead to incidence of higher tax.
4.12 Litigation
There is an increasing trend in litigation regarding intellectual
property rights, patents and copyrights in the software industry.
There also exist other corporate legal risks. Subex has no material
litigation pending against it in any court in India or abroad.
4.13 Contractual Obligation
In terms of the contract entered into by Subex with its customers in
the ordinary course of business, it is obliged to perform and act
according to the contractual terms and regulations. Failure to fulfill
the contractual obligations arising out of such contracts may expose
Subex to financial and other risks.
A N N U A L R E P O R T
2007 - 2008
39
The management has taken sufficient measures to cover all of its
contractual risks and does not foresee any major liability due to its
non fulfillment of any contractual terms and conditions.
5.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Management maintains internal control systems designed to provide
reasonable assurance that assets are safeguarded, transactions
are executed in accordance with management’s authorization and
properly recorded, and accounting records are adequate for
preparation of financial statements and other financial information.
The internal audit function also carries out Operations Review
Audits to improve the processes and strengthen control of the
existing processes. The Audit Committee periodically reviews the
functions of internal audit.
Pursuant to revised Clause 49 of the Listing Agreement, the CEO
/ CFO has to accept responsibility for establishing and maintaining
internal controls for financial reporting and that they have evaluated
the effectiveness of internal control systems of the company
pertaining to financial reporting and that they have disclosed to
the auditors and the Audit Committee, deficiencies in the design or
operation of such internal controls, if any, of which they are aware
and the steps they have taken or propose to take to rectify these
deficiencies.
The adequacy of the Company’s internal controls are tested from
time to time and control deficiencies, if any, identified during the
assessments are addressed appropriately.
6. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
6.1 Key financials and ratio analysis
Financial Highlights /
Year ending March 31
2008
2005
2006
2007
Amount in Rs million, except key indicators
2002
2004
2003
Consolidated
Standalone
Consolidated
Standalone
Standalone
Total income
Operating Profits (EBDITA)
Depreciation & Amortization
Profit before tax
Profit after tax
Equity Dividend %
Share Capital
Reserves & Surplus
Net Worth
Gross fixed Assets
Net Fixed Assets
Total Assets
Key Indicators
Earning per Share (Year end)
Cash Earning per Share (Year end)
Book value per Share
Debt (including Working capital)
Equity Ratio
EBDITA / Sales - %
Net Profit Margin - %
Return on year end Net Worth %
Return on year end Capital Employed %
5,408.90
(107.54)
184.04
(617.05)
(680.72)
Nil
348.47
7,050.66
6,792.52
1,505.82
388.77
18,463.32
(19.49)
(31.01)
194.92
1.36
-2.21%
-14.02%
-10.02%
-0.67%
2,004.59
369.08
123.10
(50.13)
(61.89)
Nil
348.47
7,241.00
7,015.32
742.71
265.97
17,119.66
(1.77)
(15.53)
201.32
1.26
0.26
-4.30%
-0.88%
2%
3,710.92
812.46
148.53
576.61
675.66
20%
348.16
8,059.12
8348.10
821.73
358.55
17787.98
19.41
12.74
239.78
1.01
23.83%
19.82%
8.09%
4.84%
2361.84
447.83
113.39
259.09
208.14
20%
348.16
7614.14
7949.89
662.67
306.44
17088.88
5.98
3.03
228.34
1.06
21.14%
10%
3%
3%
1,841.19
539.44
90.79
422.23
391.50
25%
217.58
1,597.75
1,816.20
653.06
391.61
2,159.76
17.99
22.17
83.47
0.01
29%
21%
22%
30%
1,172.35
356.74
71.43
261.10
253.03
30%
100.67
1,132.05
1,233.04
555.42
367.83
1,745.12
891.94
246.02
42.68
189.04
177.50
20%
73.54
540.94
799.39
209.61
89.66
1,085.76
25.13
32.23
122.48
24.14
29.94
108.70
0.23
30%
22%
21%
23%
0.21
28%
20%
22%
26%
706.41
162.19
37.98
101.75
96.12
10%
73.44
403.26
628.85
161.55
77.84
997.68
13.09
18.26
85.63
0.32
23%
14%
15%
20%
592.51
95.67
35.68
47.92
41.84
10%
71.23
458.01
367.11
163.81
109.53
896.16
5.87
10.88
51.54
0.46
16%
7%
11%
18%
Note: Earning per share, cash earning per share and book value of share are in Rupees.
40
A N N U A L R E P O R T
2007 - 2008
COMMENTARY ON FINANCIAL STATEMENTS
7.
7.1 Share capital
7.1.1 Of the equity paid-up capital, the company had issued the
following shares towards consideration other than cash.
115,000 shares of Rs.10/- each, towards the balances in the
current account of partners, Mr. Subash Menon and
Mr. Alex J. Puthenchira, on the takeover of Subex Systems,
a partnership firm, by the company during 1993-94.
4,626,940 Shares of Rs.10/- each to all eligible shareholders
as on March 31, 1999 in the ratio of 1:1 by capitalizing the
General Reserves.
12,840 shares of Rs.10/- each to the erstwhile owners of
M/s. IVth Generation Inc., towards part consideration of the
cost of acquisition of that company at Rs.1,023/- per share
during 1999-2000.
10,878,784 shares of Rs.10/- each to all eligible shareholders
as on January 6, 2006 in the ratio of 1:1 by capitalizing the
securities premium.
1,109,878 shares of Rs.10/- each to the GDR holders as on
April 7, 2006 @ Rs.400/-.
11,728,728 shares of Rs.10/- each to the GDR holders as on
June 22, 2006 towards consideration of the cost of acquisition
of Azure Solutions Ltd at Rs.532.24.
7.1.2 During 2006-07 the Company issued 219,551 (including
Bonus shares, wherever options are eligible) shares of Rs. 10/-
each to various employees on exercise of Stock Options granted
under the Employee Stock Option Plan (ESOP – II & III).
7.1.3 During 2007-08, the Company issued 31,364 (including
bonus shares, wherever options are eligible) shares of Rs. 10/-
each to various employees on exercise of Stock Options granted
under the Employee Stock Option Plan (ESOP – II & III).
7.1.4 There are no calls in arrears.
7.1.5 During 2007-08, the Company allotted 2,230,000 warrants
to promoters/ promoters group, entitling each holder to obtain
allotment of one equity share against each such warrant on a
preferential basis at a price of Rs. 630.31. Under the terms of
issue, the company received 10% of the total consideration
amounting to Rs. 140.55 Million.
7.2 Reserves And Surplus
7.2.1 Capital Reserve of Rs.13.00 Million was created by credit of
the notional premium on 12,840 equity shares of Rs.10/- each
valued at a price of Rs.1,023/- per share and issued to the owners
of IVth Generation Inc, USA as part consideration for the transfer
of their shareholding to Subex Systems Ltd.
7.2.2 Securities Premium Account represents the premium collected on:
971,000 equity shares issued at a premium of Rs.65/- per
share through an Initial Public Offer in 1999-2000.
330,800 equity shares issued at a premium of Rs.740/- per
share to Mutual Funds and Bodies Corporate on a preferential
basis during 1999-2000.
1,887,000 equity shares issued at a premium of Rs. 88/- per
share to holders of ROCCPS on conversion of preferential
shares of Rs 98/- each, namely Intel Capital, Toronto Dominion
Bank and UTI Venture Funds.
1,538,459 equity shares issued at a premium of Rs.290/- per
share to holders of FCCBs on conversion of the bonds at a
price of Rs.300/- per share.
1,109,878 equity shares issued at a premium of Rs.390/- per
share to holders of GDR at a price of Rs.400/-.
11,728,728 equity shares issued at a premium of Rs.522.24
per share to holders of GDR at price of Rs.532.24
250,915 (including Bonus shares, wherever options are
eligible) equity shares allotted to the employees under ESOP
II & III Scheme as per the provisions of the Scheme at various
premiums.
7.2.3 The Company has transferred Rs. Nil (previous year: Rs.23.2
million) to General Reserves during the year.
7.2.4 In accordance with the guidelines issued by the Institute of
Chartered Accountants of India on Accounting for Deferred Taxes,
a net gain / (charges) of Rs.7.26 million on stand alone basis and
Rs.(37.33) million on consolidated basis have been recorded in
the P&L A/c, due to recognition of deferred tax asset as at year
end amounting to Rs.124.08 million on consolidated basis and
Rs.24.18 million on stand alone basis.
7.2.5 In accordance with the guidelines issued by SEBI under the
ESOS & ESPS Scheme 1999, the Company has created a Reserve
towards the excess of market price of the underlying equity shares
as on the date of the grant of the option over the exercise price of
the option, to be adjusted over the period of vesting. The amount
adjusted and credited to reserves on a net basis as at March 31,
2008 is Rs.69.65 million (previous year: Rs.19.64 million).
7.3 Secured Loans
On consolidated basis, the secured loan of Rs. 1,150.16 million
(previous year: Rs.635.17 million) and on stand alone basis, the
secured loan of Rs.737.23 million (previous year: Rs.583.76 million)
outstanding in the books as at March 31, 2008 consists of Rs.22.16
million pertaining to motorcars financed by the Company through
hire purchase scheme with the financiers and is secured by
hypothecation of the vehicles and Rs.715.07 million pertaining to
the working capital loan from Axis Bank Ltd and State Bank of
India, which is secured by Receivables.
7.4 Unsecured Loans
The unsecured loan of Rs.7,200.00 million (previous year:
Rs. 7,807.50) outstanding in the books as at March 31, 2008
pertains to Foreign Currency Convertible Bonds issued during the
previous year. The bonds carry interest of 2% per annum and are
redeemable by March 9, 2012 if not converted into equity shares
as per terms of issue. These bonds are listed in the Professional
A N N U A L R E P O R T
2007 - 2008
41
●
●
●
●
●
●
●
●
●
●
●
●
●
Securities Market of London Stock Exchange. The movement in
the year relates to unrealised gains.
7.5 Fixed Assets
7.5.1 The value of intangible assets, based on the valuation report
by independent valuers, is being depreciated over 5 years in
accordance with the company’s assessment of useful life thereof.
7.5.2 During the year, the Company added Rs.152.80 million on
consolidated basis and Rs.89.74 million on stand alone basis, to its
gross block. The Company disposed off certain assets no longer required.
The Company has net assets worth Rs.388.77 million (previous year:
Rs. 358.55 million) on consolidated basis and Rs.265.97 million
(previous year: Rs. 306.44 million) on stand-alone basis.
7.6 Investments
7.6.1 During 1999, the Company had acquired the whole of the
outstanding common stocks numbering 3,000 of no par value of
IVth Generation, Inc., New Jersey, USA. Consequent to the
acquisition, IVth Generation Inc, a wholly owned subsidiary of the
Company, has been renamed as “Subex Technologies Inc.” The
investments are carried at cost, including advisory fees, brokerage
and syndication fees for facilitating the investment. During the
year, the Company filed an application with Hon’ble High Court of
Karnataka to transfer the Services Business Division to Subex
Technologies Ltd, a wholly owned subsidiary of Subex Ltd under a
scheme of arrangement. On obtaining the order from the Hon’ble
High Court of Karnataka, the Company has transferred the Services
business to Subex Technologies Ltd with effect from September 1,
2007 (appointed date) at an aggregate consideration of
Rs.310,000,000. In accordance with the order of the Hon’ble High
Court, the Company shall receive 3,000,000 shares of Subex
Technologies Ltd valued at Rs.30,000,000 in settlement of the
consideration with the balance Rs. 280,000,000 being treated as
unsecured loan taken by the subsidiary from the Company.
7.6.2 The Company has subscribed to the entire share capital of
Subex Technologies Ltd, a wholly owned subsidiary Company for
a cost of Rs 10 million and as mentioned in 7.6.1 above, is to
receive shares worth Rs. 30,000,000.
7.6.3 On June 23, 2006, the Company acquired the entire share
holding of Azure Solutions Ltd, UK. The consideration was
discharged by issued of 11,728,728 GDRs each representing one
equity share of Rs.10/- at a premium of Rs.522.24 per share and
cash of Rs.214.57 million.
7.6.4 During the year, the Company completed the acquisition of
Syndesis Ltd, Canada, a Company engaged in service assurance
and fulfillment space in the telecom service industry. The investment
carrying value of Rs. 7,749,575,428 includes the incidental costs
of acquisition. Pursuant to the acquisition, Syndesis Limited has
been renamed as Subex Americas Inc.
7.7 Sundry Debtors
7.7.1 At the year end, the Company has securitized a portion of its
receivables amounting to Rs. 133.36 million (previous year:
Rs.416.66 million) with Axis Bank Ltd.
42
A N N U A L R E P O R T
2007 - 2008
7.7.2 The major customers of the Company are the telecom and
cellular operators overseas and in India. The receivables are spread
over a large customer base. There is no significant concentration
of credit risk on a single customer, but for the majority of the
services business coming from AT&T, USA.
7.7.3 All the debtors are generally considered good and realizable
and necessary provision has been made for debts considered to
be bad and doubtful. The level of sundry debtors is normal and is
in tune with business trends requirements.
7.7.4 Sundry Debtors as a percentage of total revenue is 28% as
against 36% in the previous year.
7.7.5 The age profile on consolidated basis is as given below:ntages
Amount in Rs. million
2006-2007
%
Value
62.49
760.45
37.51
456.37
100.00 1,216.82 100.00
Value
1040.10
Less than 180 days
273.21
More than 180 days
Total
1,313.31
The age profile on stand-alone basis is as given below:
2007-2008
%
79
21
Particulars
Particulars
Value
324.96
15.71
340.67
Value
452.37
323.57
775.94
2007-2008
%
95.39
4.61
100.00
Amount in Rs. million
2006-2007
%
58.30
Less than 180 days
41.70
More than 180 days
Total
100.00
7.7.6 The management believes that the overall composition and
condition of sundry debtors is satisfactory. The Company has
made fresh provisions for doubtful debts during the year amounting
to Rs.290.35 million (previous year: Rs.150.62 million) on
consolidated basis and Rs.288.69 million (previous year:
Rs.150.00 million) on stand alone basis.
7.8 Cash and Bank Balances
7.8.1 The bank balances in India includes both rupee accounts
and foreign currency accounts. The fixed deposit of Rs.27.99
million on consolidated basis and Rs.17.42 million on standalone
basis is the margin money with the bankers for establishing bank
guarantee/ issuing corporate credit cards.
7.8.2 Cash and Bank balances constitute 1.38% of the total assets
(previous year: 5.36%) on consolidated basis and 0.56% of the
total assets (previous year: 4.9%) on stand alone basis.
7.9
7.9.1 Advances recoverable in cash, kind or value to be received
are primarily towards prepayments for value to be received.
Advance income tax, net of provision for taxation represents
payments made towards tax liability pending assessment and
refunds due.
7.9.2 Deposits represent rent deposit, electricity deposit, telephone
deposits and advances of like nature.
Loans and Advances
7.9.3 Dues from Companies under the same management
Rs.394.61 million from Subex Technologies Limited (previous
year: Rs.12.91 million), Rs.597.31 million (previous year:
Rs. 351.86 million) due from Subex (UK) Ltd, Rs.330.40 million
(previous year: Rs. 249.85 million) due from Subex Inc, Rs.39.76
million (previous year: Rs. 10.67 million) due from Subex (Asia
Pacific) Pte Ltd and Rs. 341.13 million (previous year: nil) due
from Subex Americas Inc.
7.10 Current Liabilities
7.10.1 Sundry creditors for capital goods represent amount
payable to vendors for supply of capital assets and to financiers
for supply of capital assets on hire purchase basis, amount
payable to vendors for supply of goods, creditors for operational
expenses, accrued salaries and benefits and advances received
from clients for delivery of future sales.
7.11 Provisions
Provisions for taxation represent income tax, dividend tax and
wealth tax liability. The provision would be set off upon payment of
tax.
7.12 Financial Instruments
7.12.1 Letters of Credit
The company has an outstanding Letters of credit amounting to
Rs.26.05 million (previous year: Rs.29.99 million) on consolidated
and standalone basis. These letters of credit are in the nature of
procurement of capex/ corporate credit card.
7.12.2 Guarantees
The company has outstanding guarantees amounting to Rs.22.41
million (previous year: Rs.5.24 million). These guarantees are in
the nature of performance guarantees and bid bonds and are
subject to the risk of performance by the Company.
The company has provided a Corporate Guarantee to ABN Amro
Bank, Bangalore to provide credit facilities to Subex Americas Inc.
Canada and Subex (UK) Ltd, London amounting to Rs. 500,000,000
(previous year: nil).
7.13 Profit & Loss Account
7.13.1 Income
The Company derives its income from providing Software
Development Services, and licensing of Software Products.
The segment wise break up of income on consolidated basis is
given below:
Amount in Rs. million except percentages
Particulars
2007-08
2006-07
Software Services
Software Products
Total
Value
1,237.43
3,618.48
4,855.91
%
%
Value
32.89
25.48 1,121.33
74.52
67.11
2,287.67
100.00 3,409.00 100.00
The segment wise break up of income on stand-alone basis is
given below:
Amount in Rs. million except percentages
Particulars
2007-08
2006-07
Software Services
Software Products
Total
Value
523.96
914.73
1,438.69
%
36.42
63.58
100.00
%
Value
52.68
1116.15
1002.47
47.32
1812.16 100.00
7.13.2 Geographically, the Company earns income from export of
software services to USA and software products to various
countries in EMEA and Americas.
7.14 Other income
7.14.1 Other income consists of income derived by the Company
from, interest on deposit with Bank, insurance claims received
towards damages of assets, VAT refund and exchange fluctuation
(including exchange gain on restatement of FCCB)
7.15 Expenditure
7.15.1 The staff cost increased to Rs.4,022.37 million (previous
year: Rs.2,079.88 million) on consolidated basis and decreased to
Rs.944.48 million (previous year: Rs.1,436.97 million) on stand
alone basis on account of integration of Syndesis Limited, Canada,
new recruitment, increments and increase in onsite consultancy
services in US.
7.15.2 The Company incurred administration and other expenses
at 26.06% of its total Income during the year as compared to
19.10% during the previous year on consolidated basis and 29.95%
of its total Income during the year as compared to 16.45 % during
the previous year on a stand-alone basis.
7.16 Operating Profits
During the year, on consolidated basis, the company earned an
Operating Profit/(Loss) (before interest, depreciation and tax) of
Rs.(107.54) million being 1.99% of total income as against Rs.812.46
million at 21.89% during the previous year. On a stand-alone basis,
the Company earned an Operating Profit (before interest,
depreciation and tax) of Rs.369.08 million being 18.41% of total
income as against Rs.447.83 million at 18.96% during the previous
year.
7.17 Interest & Bank Charges
The Company incurred an expenditure of Rs.325.47 million
(previous year: Rs.87.31million) on consolidated basis and
Rs.296.10 million (previous year: Rs.75.35 million) on stand-alone
basis. The interest paid is related to temporary overdrawals and
securitized receivables. The interest on FCCBs provided alone
amounted to Rs.160.77 million
7.18 Depreciation
7.18.1 The provision for depreciation for the year amounted to
A N N U A L R E P O R T
2007 - 2008
43
at providing a competitive edge to the business through a qualified
and motivated workforce by recruiting, developing and retaining
the best in the Industry. It consistently strives to drive and implement
Subex HR strategy in areas of recruitment, compensation benefits,
subexian relations, retention strategies, performance management
processes, M&A integration strategies, HR processes and policies.
Recruiting
Subex hires entry level graduates from the top engineering and
management universities in India. The company has created and
implemented high quality, repeatable recruiting practices and
procedures to attract the best talent. The main sources of its hires
come through Subexians referral programs, advertisements,
placement consultants, website postings and walk-ins. All jobs would
require a strong focus on both technology and domain in order to
analyze the customer requirements. They also get exposure to
Heterogeneous, Multi-technology, and Multi-vendor OSS/NMS/
EMS/FMS/RA domain as compared to Homogenous, Single-vendor,
and Single-vendor scenarios offered by most companies.
Training
Each of our new recruits must attend a compulsory induction
program when they begin working with us. New or recent graduates
must also attend additional training programs that are tailored to
their area of technology. We also have a training program for all
subexians to improve their technical as well as their soft skills. We
supplement continuing education program by sponsoring special
programs for Subexians at leading educational institutions, such as
the Birla Institute of Technology & Science, Pilani, to provide them
cutting-edge skill sets.
Performance Management System
Subexian Development System or Performance Management
System focuses on the evaluation of the key result area set for
Subexians at the start of the appraisal cycle and the competencies
they require to execute their tasks in a given role. The process
comprises a series of steps like self, peers and managers appraisals
and also involves normalization and moderation process to ensure
an unbiased appraisal system.
Compensation
Subex continually provides Subexians with competitive and
innovative compensation packages. The packages include a
combination of salary, stock options, health and disability insurance.
The company measures its compensation packages against industry
standards and strives to match or exceed the same.
Rs.172.32 million (previous year: Rs.125.56 million) on consolidated
basis and Rs.123.10 million (previous year: Rs.113.39 million) on
stand alone basis. The increase in provision on consolidated basis
is mainly on account of the depreciation on the assets of Syndesis
Group.
7.18.2 The intangible assets i.e. IPRs and goodwill are being
depreciated over 5 years in accordance with the company’s
assessment of useful life thereof. Accordingly, an amount of Rs.84.36
million (previous year: Rs.82.42 million) has been depreciated in
the financial year under review.
7.19 Provision for Tax
The Company has provided for its tax liability in India and overseas
after considering the exemptions for income from software services
and products under the various applicable tax enactments.
7.20 Net Profit
On consolidated basis, the net profit/(loss) of the Company
amounted to Rs.(680.72) million as against Rs. 675.66 million during
the previous year. On stand-alone basis, the net profit/(loss) of the
Company amounted to Rs.(61.89) million as against Rs. 208.14
million during the previous year.
7.21 Earning per Share
Earning/(loss) per share computed on the basis of number of
common stock outstanding, as on the Balance Sheet date was
Rs.(19.49) per share (previous year: Rs.21.1per share) on
consolidated basis and Rs.(1.77) per share (previous year:
Rs. 6.50 per share) on stand-alone basis. The diluted Earnings per
share for the year was Rs.(19.49) per share (previous year:
Rs. 21.02 per share) as on consolidated basis and Rs.(1.77) per
share (previous year: Rs. 6.48 per share) on stand-alone basis.
7.22 Foreign Exchange Difference
An amount of Rs.528.66 million has been accounted for as gain
during the current year compared to an amount of Rs.217.26
million during the previous year on consolidated basis and an
amount of Rs.547.00 million has been accounted for as gain during
the current year compared to an amount of Rs.207.20 million during
the previous year on stand alone basis, on account of foreign
exchange differences arising due to timing differences between
accrual of income / expense and receipt / payment of the same.
8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES /
INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF
PEOPLE EMPLOYED.
Subexians
As of March 31, 2008, we had over 1175 Subexians on our rolls.
They are highly trained and motivated people and are critical to
the success of our business. We focus on attracting and retaining
the best talent with us.
Our human resources department is centralized at our corporate
headquarters in Bangalore and oversees HR functions across all
the geographies where the company operates. The HR team aims
44
A N N U A L R E P O R T
2007 - 2008
Financial Review
Subex Limited (Standalone)
A N N U A L R E P O R T
2007 - 2008
45
AUDITORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED
1. We have audited the attached Balance Sheet of Subex Limited
(formerly Subex Azure Limited), as at March 31, 2008, the
Profit and Loss Account and the Cash Flow Statement of the
Company for the year ended on that date annexed thereto.
These financial statements are the responsibility of the
management of the Company. Our responsibility is to express
an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with generally
accepted auditing standards in India. These Standards require
that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free of material
misstatements. An audit includes, examining on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management as well as evaluating the overall financial
statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order, 2003
issued by the Government of India, in terms of Section 227
(4A) of the Companies Act 1956, we give in the Annexure, a
statement on the matters specified in paragraphs 4 and 5 of
the said Order to the extent applicable to this Company.
4. Further, to our comments in the Annexure referred to above,
we report that:
(a) we have obtained all the information and explanations, which
to the best of our knowledge and belief were necessary for the
purpose of our audit.
(b) in our opinion, proper books of account as required by law
have been kept by the Company, so far as it appears from our
examination of the books and proper returns adequate for the
purpose of our audit have been received from the Company’s
branch, in the United States of America (US Branch) not visited
by us.
(c) the report on the accounts of the US Branch audited by the
Branch Auditors’ has been forwarded to us and has been
dealt with by us in preparing this report.
(d) in our opinion, the Balance Sheet, Profit and Loss Account and
Cash Flow Statement dealt with by this report are in compliance
with the Accounting Standards referred to in Section 211(3C)
of the Companies Act, 1956.
(e) the Balance Sheet, Profit and Loss Account and Cash Flow
Statement dealt with by this report are in agreement with the
books of account and the audited branch returns.
(f) on the basis of written representations received from the
directors of the Company, as at March 31, 2008 and taken on
record by the Board of Directors, we report that none of the
directors is disqualified as on March 31, 2008 from being
appointed as a director in terms of clause (g) of sub-section
(1) of Section 274 of the Companies Act 1956.
(g) in our opinion and to the best of our information and according
to the explanations given to us, the said accounts read together
with the notes thereon, give the information required by the
Companies Act 1956, in the manner so required and give a
true and fair view in conformity with the accounting principles
generally accepted in India,
(i)
in the case of the Balance Sheet, of the state of affairs of
the Company as at March 31, 2008; and
in the case of the Profit and Loss Account of the loss for
the year ended on that date,
(ii)
(iii) in the case of the Cash Flow Statement, of the cash flows
for the year ended on that date.
For Deloitte Haskins & Sells
Chartered Accountants
V.Srikumar
Partner
M. No. 84494
Place: Bangalore
Date: June 30, 2008
ANNEXURE TO THE AUDITORS’ REPORT (REFERRED TO IN OUR REPORT OF EVEN DATE TO THE MEMBERS OF
SUBEX LIMITED)
1. The provisions of clauses ii, iii (d) to (g), (viii), (x), (xii), (xiii),
(xiv), (xv), (xviii), (xix), (xx) as contained in para 4 and 5 of the
Companies (Auditors’ Report) Order, 2003, are not applicable
to the Company for the current year.
In respect of its fixed assets:
(c) The fixed assets disposed off during the year, in our opinion,
do not constitute a substantial part of the fixed assets of the
Company and such disposal has, in our opinion, not affected
the going concern status of the Company.
In respect of loans, secured or unsecured, granted or taken
by the Company to or from companies, firms or other parties
covered in the register maintained under section 301 of the
Companies Act, 1956, according to the information and
explanations given to us:
2.
(a) The Company has maintained proper records showing full
particulars, including quantitative details and situation of fixed
assets.
3.
(a) the Company has granted loans to four parties. At the year
end, the outstanding balances of such loans granted
aggregated to Rs. 1,603,737,888 and the maximum amount
involved during the year was Rs. 1,603,737,888.
(b) The fixed assets were physically verified during the year by
the management in accordance with a programme of
verification, which in our opinion provides for physical
verification of all the fixed assets at reasonable intervals.
According to the information and explanations given to us no
material discrepancies were noticed on such verification.
46
A N N U A L R E P O R T
2007 - 2008
(b) in our opinion, having regard to the explanation that the
loans are granted to wholly owned subsidiaries with an
intention of providing financial support, the terms and
conditions of the interest free loans are, prima facie,
prejudicial to the interest of the Company.
under paragraph 3 above), made in pursuance of contracts
or arrangements, is in excess of Rs. 5 lakhs in respect of any
party, the transactions have been made at prices which are,
prima facie, reasonable having regard to the prevailing market
prices at the relevant time.
(c) in terms of the loans granted, no principal was due for
4.
5.
repayment during the year ending.
In our opinion and according to the information and explanations
given to us, having regard to the explanations that some of the
Company’s transactions of (a) purchases of goods and
services and (b) services rendered, are of a specialized nature
for which comparable quotations are not available, there are
adequate internal control procedures commensurate with the
size of the Company and the nature of its business with regard
to the purchase of fixed assets and for the sale of goods and
services and we have not observed any continuing failure to
correct major weaknesses in such internal controls.
In respect of contracts and arrangements entered in the register
maintained in pursuance of section 301 of the Companies Act
1956, to the best of our knowledge and belief, and according
to the information and explanations given to us:
6. The Company has not accepted deposits from the public.
7.
In our opinion, the internal audit functions carried out during
the year by a firm of Chartered Accountants appointed by the
management has been commensurate with the size of the
Company and the nature of its business.
In respect of Statutory dues:
8.
(a) according to the information and explanations given to us, the
Company has been generally regular in depositing undisputed
statutory dues including Provident Fund, Employees’ State
Insurance, Investor Education and Protection Fund, Income Tax,
Wealth Tax, Service Tax, Excise Duty, Customs Duty, Sales Tax,
cess and any other material statutory dues with the appropriate
authorities during the year and there were no such dues that
were outstanding at March 31, 2008 for a period of more than six
months from the date they became payable.
(a) the particulars of contracts or arrangements referred to in
Section 301 that needed to be entered into the register,
maintained under the said section have been so entered.
(b) where each of such transactions (excluding loans reported
(b) according to the information and explanations given to us,
details of disputed sales tax, income tax, customs duty, wealth
tax, service tax, excise duty and cess which have not been
deposited as on March 31, 2008, on account of any dispute
are given below:
Name of statute
Nature of the dues
Amount (Rs.)
Income Tax Act, 1961
Income tax
5,357,900
Period to which
the amount relates
2003-04
Forum where dispute is pending
Income Tax Appelate Tribunal
9.
In our opinion and according to the information and explanations
given to us, the Company has not defaulted in the (re)payment
of dues to financial institutions and banks.
14. To the best of our knowledge and belief and according to the
information and explanations given to us, no fraud on or by the
Company was noticed or reported during the year.
For Deloitte Haskins & Sells
Chartered Accountants
V.Srikumar
Partner
M. No. 84494
Place: Bangalore
Date: June 30, 2008
10. In our opinion and according to the information and explanations
given to us, the term and conditions of the guarantees given
by the Company to financial institutions for loans taken by its
subsidiaries are not, prima facie, prejudicial to the interests of
the Company.
11. To the best of our knowledge and belief and according to the
information and explanations given to us, in our opinion, term
loans availed by the Company were, prima facie, applied by
the Company during the year for the purposes for which the
loans were obtained, other than temporary deployment pending
application.
12. According to the information and explanations given to us and
on an overall examination of the balance sheet of the Company,
funds raised on short term basis have, prima facie, not been
used during the year for long term investment.
13. According to the information and explanations given to us, the
price at which the Company has made preferential allotment
of warrants to parties and companies covered in the Register
maintained under Section 301 of the Companies Act, 1956 is
not prima facie prejudicial to the interest of the Company.
A N N U A L R E P O R T
2007 - 2008
47
BALANCE SHEET AS AT
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share Capital
Monies received pending allotment
[Refer Note II.7, Schedule P]
Reserves and Surplus
LOAN FUNDS
Secured Loans
Unsecured Loans
Total
APPLICATION OF FUNDS
FIXED ASSETS
Gross Block
Less : Depreciation
Net Block
Capital work in progress
INVESTMENTS
DEFERRED TAX ASSET (Net)
CURRENT ASSETS, LOANS & ADVANCES
Sundry Debtors
Cash & Bank balances
Loans & Advances
Unbilled Revenue
Less: Current Liabilities & Provisions
Current liabilities
Provisions
Net Current Assets
Total
Schedule
March 31, 2008
March 31, 2007
Amount in Rs.
A
B
C
D
E
F
G
H
I
J
348,470,890
140,559,130
348,157,250
-
7,241,001,219
7,730,031,239
7,614,743,935
7,962,901,185
737,232,874
8,114,824,891
8,852,057,765
16,582,089,004
583,759,501
7,807,500,000
8,391,259,501
16,354,160,686
742,708,202
476,733,586
265,974,616
-
340,670,191
92,874,559
1,980,223,013
152,302,809
2,566,070,572
425,292,788
112,283,015
537,575,803
265,974,616
14,263,443,608
24,176,011
306,441,130
14,195,582,212
16,917,000
662,665,154
360,261,651
302,403,503
4,037,627
775,941,945
801,158,095
768,268,999
224,571,526
2,569,940,565
538,913,980
195,806,241
734,720,221
2,028,494,769
16,582,089,004
1,835,220,344
16,354,160,686
Significant Accounting policies & Notes to the accounts P
The Schedules referred to above form an integral part of the Balance Sheet
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
V. Srikumar
Partner
Membership No. 84494
Bangalore
June 30, 2008
48
A N N U A L R E P O R T
2007 - 2008
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
V. Balaji Bhat
Director
Raj Kumar
Chief Counsel & Company Secretary
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
Schedule
March 31, 2008
Amount in Rs.
March 31, 2007
Income
Sales & Services
Other Income
Total
EXPENDITURE :
Direct Cost
Personnel Costs
Other Operating, Selling and Administrative Expenses
Financial Costs
Depreciation
Total
Profit/(Loss) Before Taxation
Provision for taxation for continuing operations
- Current
- MAT Credit carried forward
- Fringe Benefit Tax
- Deferred
Profit/(Loss) After Taxation
Profit/(Loss) before tax from continuing operations
Tax Expenses
Profit/(Loss) before tax from discontinued operations
[Refer Note II.5 & II.14 and Schedule P]
Provision for Current Taxes
Profit/(Loss) After Taxation
Balance brought forward from Previous year
Profit Available for Appropriation
APPROPRIATION :
Transfer to General Reserve
Dividend
- Equity Shares - Proposed Final Dividend 2006-07
- Equity Shares - Interim Dividend 2006-07
- Equity Shares - Final Dividend 2005-06
- Equity Shares - Final Dividend 2006-07
Tax on distributed profits
Surplus carried to Balance Sheet
Earnings/(Loss) Per Share (Face value of Rs.10/- each)
- Basic
- Diluted
K
L
M
N
O
E
1,438,684,166
565,904,838
2,004,589,004
90,691,643
944,484,923
600,336,524
296,098,176
123,103,856
2,054,715,122
(50,126,118)
17,129,780
(10,042,000)
11,930,660
(7,259,005)
-
-
-
26,412
66,195,845
(11,128,731)
4,887,171
(9,005,000)
69,631,450
52,113,210
12,883,222
-
11,759,435
(61,885,553)
(76,648,345)
4,756,955
(81,405,300)
26,522,227
7,002,480
19,519,747
(61,885,553)
785,666,570
723,781,017
-
26,412
4,489
723,750,116
723,781,017
(1.77)
(1.77)
2,118,612,682
243,226,341
2,361,839,023
88,596,558
1,436,970,428
388,438,521
75,345,976
113,394,684
2,102,746,167
259,092,856
50,949,285
208,143,571
158,797,599
7,957,397
150,840,202
100,295,257
42,991,888
57,303,369
208,143,571
756,300,496
964,444,067
23,200,000
134,627,882
20,949,615
785,666,570
964,444,067
6.50
6.48
Significant Accounting policies & Notes to the accounts P
The Schedules referred to above form an integral part of the Profit and Loss account
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
V. Srikumar
Partner
Membership No. 84494
Bangalore
June 30, 2008
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
V. Balaji Bhat
Director
Raj Kumar
Chief Counsel & Company Secretary
A N N U A L R E P O R T
2007 - 2008
49
CASH FLOW STATEMENT FOR THE YEAR ENDED
March 31, 2008
Amount in Rs.
March 31, 2007
259,092,856
(50,126,118)
(482,878,101)
314,435,696
277,466,684
102,269,262
113,394,684
(33,843,931)
75,345,976
3,761,806
(463,514)
10,760,906
150,000,000
(208,784,608)
(39,652,428)
329,611,747
123,103,856
(17,129,916)
296,098,176
-
(1,096,373)
50,005,707
288,690,000
(595,294,231)
(101,006,118)
(6,755,017)
Cash flow from operating activities
Net Profit/(Loss) before Tax
Adjustments for :
a) Depreciation and amortization
b) Interest
c) Interest and bank charges
d) Assets written off / Loss on sale
e) Profit on sale of assets
f) Employee compensation Expenses
g) Provision for doubtful debts
h) Unrealised exchange fluctuations
i) Direct Taxes paid
Operating Profit before Working Capital Changes
Adjustments for :
a) Sundry Debtors
b) Loans and advances
c) Trade and other payables
Cash generated from/(used in) operations
Cash Flow from Investing activities
a) Purchase of Fixed Assets
b) Sale / disposal of fixed assets
c) Cash flows on acqusitions of subsidiaries
d) Interest received
e) Loans to Subsidiaries
Net Cash from Investing Activities
Cash Flow from Financing Activities
457,173,808
a) Proceeds/(Utilisation) from issue of Share Capital/ Options/Warrants
570,247,932
b) Proceeds from/(repayment) of short term borrowings - Net
8,049,544,180
c) Proceeds from Long term borrowings
(4,752,531)
d) Repayment of Long term borrowings
(98,720,943)
e) Dividends & Dividend tax paid
(75,345,976)
f)
Interest and bank charges paid
(616,265,172)
g) Incidental expenses on issue of FCCB & GDR, (incurred)/refunded
8,281,881,298
Net Cash from Financing Activities
395,480,152
Net increase in Cash or Cash equivalents [A + B + C]
405,677,943
Cash or Cash equivalents at the start of the year
Cash or Cash equivalents at the close of the year
801,158,095
Note : Cash & Cash Equivalents include balance with Scheduled Banks on Dividend Account of Rs.702,822 (PY : Rs.839,784), fixed deposit
of Rs.17,424,597 (PY : Rs.320,425,029) which are not available for use by the Company.
Significant Accounting policies & Notes to the accounts
145,225,998
304,409,517
764,496,174
-
(81,503,996)
(296,098,176)
38,374,819
874,904,336
(708,283,536)
801,158,095
92,874,559
(40,389,091)
8,864,512
(7,635,103,606)
33,843,931
(615,260,873)
(8,248,045,127)
(87,261,489)
5,720,518
(345,879,403)
17,129,916
(1,275,166,676)
(1,685,457,134)
7,989,734
(265,278,984)
289,321,484
361,643,981
P
C
A
B
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
V. Srikumar
Partner
Membership No. 84494
Bangalore
June 30, 2008
50
A N N U A L R E P O R T
2007 - 2008
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
V. Balaji Bhat
Director
Raj Kumar
Chief Counsel & Company Secretary
SCHEDULES TO THE BALANCE SHEET AS AT
Schedule - A
Share capital
Authorised
48,040,000 (previous year, 48,040,000) equity shares of Rs. 10 each
200,000 Redeemable Optionally Convertible Cumulative Preference Shares
(ROCCPS) of Rs. 98 each
Total
Issued, subscribed and paid up
Equity
34,847,089 (previous year, 34,815,725) equity shares of Rs.10 each
Of the above
a) 115,000 shares of Rs. 10 each were allotted for
consideration other than for cash;
b) 4,626,940 shares of Rs. 10 each are allotted as Bonus
shares by capitalisation of General Reserve;
c) 12,840 shares of Rs. 10 each are allotted in part
settlement of cost of acquisition of subsidiary
d) 10,878,784 shares of Rs. 10 each are
allotted as bonus shares by capitalisation of securities premium;
e) 11,728,728 shares (GDRs) of Rs. 10 each are allotted in full
settlement of cost of acquisition of Azure Solutions (UK) Ltd
Total
Schedule - B
Reserves & Surplus
Capital Reserve
General Reserve - opening balance
Add : Additions during the year
Less : Adjustment in pursuance of transitional provisions of
Accounting Standard-15 [Refer Note II.16.7]
Securities premium account - opening balance
Add : Additions during the year
Add/(Less) : Reversal of/(Utilised towards) incidental costs of
issue of FCCBs & GDRs (Refer Note II.6, Schedule P)
Less : Redemption premium on FCCBs [Refer Note II.6, Schedule P]
Less: Adjustments on account of Demerger Scheme
[Refer Note II.5, Schedule P]
Employees Stock Options outstanding
Less: Deferred employees compensation expenses
FCCB Redemption reserve - opening balance
Add : Additions during the year
[Refer Note II.6, Schedule P]
Profit & Loss Account
Total
Schedule - C
Secured loans
Short Term
Working capital loans from banks
(Secured by charge on fixed assets and receivables)
Other loans from banks
(Secured by hypothecation of assets financed by these loans)
[Amount repayable within one year: Rs.7,334,336/-,
Previous year, Rs.4,335,771)
Total
Schedule - D
Unsecured loans
Short Term
Working capital loans from banks
Other loans from banks
[Amount repayable within one year: NIL, PY : NIL]
(Refer Note II.16.10, Schedule P)
Foreign Currency Convertible Bonds
(Note II.6, Schedule P)
Total
March 31, 2008
March 31, 2007
Amount in Rs.
177,975,580
-
-
6,576,304,853
4,353,213
38,374,819
589,904,656
404,560,001
162,476,740
92,831,021
42,150,000
589,904,656
480,400,000
19,600,000
500,000,000
348,470,890
348,470,890
13,006,920
177,975,580
5,624,568,228
69,645,719
632,054,656
723,750,116
7,241,001,219
715,073,869
22,159,005
480,400,000
19,600,000
500,000,000
348,157,250
348,157,250
13,006,920
177,975,580
6,576,304,853
19,640,012
42,150,000
785,666,570
7,614,743,935
570,247,932
13,511,569
163,302,608
23,200,000
8,527,028
656,262,011
6,578,458,014
(616,265,172)
42,150,000
-
52,775,309
33,135,297
737,232,874
583,759,501
158,976,153
755,848,738
7,200,000,000
8,114,824,891
-
-
7,807,500,000
7,807,500,000
A N N U A L R E P O R T
2007 - 2008
51
-
-
2
2
6
,
3
6
8
,
1
4
8
7
7
,
0
5
4
,
5
4
9
1
4
,
7
7
9
,
5
2
1
1
7
5
,
3
1
5
,
5
2
1
0
,
6
5
2
,
2
0
3
0
,
9
5
2
,
3
2
4
7
6
,
4
5
4
,
2
6
0
0
3
,
3
9
9
,
3
3
1
7
,
7
4
3
,
7
-
-
-
4
3
6
,
1
9
1
,
3
2
5
8
7
,
5
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52
A N N U A L R E P O R T
2007 - 2008
SCHEDULES TO THE BALANCE SHEET AS AT
Schedule - F
Investments
(Long term, trade, unquoted)
In wholly owned subsidiaries
Subex Technologies Inc
Current Year : NIL (Previous year-incorporated in U.S.A,
common stock 3,000 shares, fully paid up, of no par value)
[Refer Note II.5, Schedule P]
Subex Technologies Ltd
incorporated in India, common stock 999,994
(Previous year, 999,994 )shares, fully
paid up, at par value of Rs.10/- each)
Advance for Share Capital in Subex Technologies Ltd
[Refer Note II.5, Schedule P]
Subex (UK) Ltd
incorporated in UK, (common shares 5,039,565,245 fully paid,
at par value of GBP0.00001 each)
Subex Americas Inc
incorporated in Canada, (common stocks 100 shares fully paid,
at no par value )
[Refer II.4, Schedule P]
Advance for acquisition
Total
Schedule - G
Sundry debtors
(Unsecured)
Outstanding for more than six months
- Considered good
- Considered doubtful
Others
- Considered good
- Considered doubtful
Less: Provision for doubtful debts
Total (considered good)
Schedule - H
Cash & bank balances
Cash on hand
Balance with scheduled banks
in Current account in Indian Rupees
in Deposit account in Indian Rupees
in Exchange Earner’s Foreign Currency account
-
-
-
Balance with non-scheduled banks
- Deposit with Royal Bank of Canada
-
in Current account with Royal Bank of Canada, Canada
(Maximum outstanding during the year Rs. 1,182,120)
in Checking account with First Union Bank, New Jersey
(Maximum outstanding during the year Rs. 43,396,115)
-
- ABN Amro Bank - Dubai
-
-
(Maximum outstanding during the year Rs. 4,364,000)
in Bank of China - RMB account - China
(Maximum outstanding during the year Rs.2,180,181)
in HSBC Bank - PARIS
(Maximum outstanding during the year Rs.19,045,600)
(Maximum outstanding during the Year Rs. 360,362,605)
- Wachovia Bank, USA
- Wachovia Bank, USA
- HSBC Bank - Dubai
(Maximum outstanding during the year Rs.1,076,250)
(Maximum outstanding during the year Rs.5,272,524)
Total
March 31, 2008
March 31, 2007
Amount in Rs.
-
308,018,007
9,999,940
9,999,940
30,000,000
6,473,868,240
-
6,473,868,240
7,749,575,428
-
-
14,263,443,608
7,403,696,025
14,195,582,212
15,707,751
260,449,673
324,962,440
28,690,000
323,569,496
203,788,312
452,372,449
-
276,157,424
353,652,440
629,809,864
289,139,673
340,670,191
22,470
1,619,419
17,424,597
69,088,130
64
875,319
211,549
1,337,294
144,955
458,672
-
-
1,692,090
92,874,559
-
527,357,808
452,372,449
979,730,257
203,788,312
775,941,945
61,435
8,509,020
403,750,607
21,921,738
937,379
917,455
2,156,371
-
1,465,235
-
360,362,605
1,076,250
801,158,095
A N N U A L R E P O R T
2007 - 2008
53
March 31, 2008
March 31, 2007
Amount in Rs.
172,657,203
1,603,737,888
111,730,708
21,170,731
70,926,483
1,980,223,013
43,545,621
625,303,150
42,535,399
11,128,731
45,756,098
768,268,999
149,303,457
300,145,835
99,439,197
152,316,742
23,428,378
-
805,014
70,997,989
-
-
32,505,652
2,866,506
5,912,868
88,675,783
3,346,731
18,397,515
127,535,322
812,794
93,606,845
69,631,450
11,833,865
17,750,427
2,983,654
-
425,292,788
112,283,015
537,575,803
17,129,916
681,256
1,096,373
546,997,293
565,904,838
538,913,980
195,806,241
734,720,221
33,843,931
2,182,173
-
207,200,237
243,226,341
SCHEDULES TO THE BALANCE SHEET AS AT
Schedule - I
Loans & Advances
(Unsecured, considered good, subject to confirmation)
Loans and advances recoverable in cash
or in kind or for value to be received
Loans and advances to wholly owned subsidiaries
Advance Income Tax including TDS
MAT credit entitlement
Other Deposits
Total
Schedule - J
Current Liabilities & Provisions
Current Liabilities:
Sundry Creditors
(other than dues to Micro & Small Enterprises)
(Note II.16.8, Schedule P)
Advance received from Customers
Deferred Income
Duties & Taxes
Subex Technologies Inc. (Net) (Wholly owned Subsidiary)
Unclaimed Dividends
Provisions:
Taxation
Dividends
Tax on proposed dividends
Employee Benefits
Warranty
Others
Total
Schedule - K
Other income
Interest Income (Gross of TDS of Rs.3,329,016,
Previous year, Rs.3,794,118)
Other income
Profit on sale of Fixed Assets (Net)
Exchange Fluctuation gain (Net)
Total
54
A N N U A L R E P O R T
2007 - 2008
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
March 31, 2008
Amount in Rs.
March 31, 2007
Schedule - L
Direct cost
Purchased systems & solutions
Support expenses
Total
Schedule - M
Personnel costs
Salaries, wages & allowances
Contribution to provident fund and other funds
Other staff related costs
Sub contract charges
Total
Schedule - N
Other operating, selling and administration expenses
Software purchases
Rent
Power, fuel and water charges
Repairs & Maintenance
Insurance
Communication Costs
Printing & Stationery
Travelling & Conveyance
Directors sitting fees
Rates & Taxes including filing fees
Commission on sales
Advertisement & Business promotion
Consultancy charges
Provision for doubtful debts
Loss on sale of Assets & Assets written off (Net)
Miscellaneous expenses
Total
Schedule - O
Financial costs
Interest on FCCBs and other term loans
Other interest & bank charges
Total
35,868,381
54,823,262
90,691,643
90,691,643
444,550,710
22,156,844
50,141,769
427,635,600
944,484,923
6,812,885
48,113,674
7,829,648
19,425,600
4,551,036
19,452,011
3,195,818
105,148,445
22,500
18,568,491
4,841,236
50,372,193
17,990,158
288,690,000
-
5,322,829
600,336,524
179,306,882
116,791,294
296,098,176
52,187,455
36,409,103
88,596,558
88,596,558
396,828,475
13,751,205
26,451,102
999,939,646
1,436,970,428
4,767,391
30,639,977
7,048,363
8,099,126
3,713,714
14,804,483
2,759,106
106,177,110
42,500
2,749,911
22,267,351
16,860,387
9,026,377
150,000,000
3,298,292
6,184,433
388,438,521
11,566,667
63,779,309
75,345,976
A N N U A L R E P O R T
2007 - 2008
55
Schedule – P
SIGNIFICANT ACCOUNTING POLICIES
I.
I.1. Basis for preparation of financial statements
The financial statements have been prepared under the historical
cost convention in accordance with the applicable Accounting
Principles in India, the Accounting Standards issued under the
Companies (Accounting Standard) Rules 2006 and the relevant
provisions of the Companies Act, 1956, as adopted consistently
by the Company. Revenues are recognised and expenses
accounted on their accrual, including provisions / adjustments for
committed obligations and amounts determined as payable or
receivable during the year.
I.2. Use of Estimates
The preparation of the financial statements in conformity with
Indian GAAP requires that management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent liabilities as at the date of the
financial statements and the reported amounts of revenue and
expenses during the reported period. Actual results could differ
from those estimates.
I.3. Revenue recognition
Revenue from Contracts for software product licences includes
fees for transfer of licences, installation and commissioning. This
revenue is recognized under the percentage completion method
based on the extent of work determined to have been completed
as compared to the work involved in the overall scope of the
contract. In the event of any expected losses on a contract, the
entire amount is provided for in the accounting period in which
such losses are first anticipated.
Revenue from sale of additional software licences are recognized
on transfer.
Revenue from Software development is recognized on the basis of
chargeable time or achievement of prescribed milestones as relevant
to each contract.
Sale of hardware under reseller arrangements are recognized on
dispatch of goods to customers and are recorded net of discounts,
rebates for price adjustment, projections, shortage in transit, taxes
and duties.
Interest on investments and deposits are booked on a time
proportion basis taking into account the amount invested and the
rate of interest.
Maintenance and service income is recognised on accrual basis.
I.4. Fixed Assets
Fixed assets are stated at cost of acquisition inclusive of freight,
duties, taxes and interest on borrowed money allocated to and
utilised for fixed assets up to the date of capitalisation and other
direct expenditure incurred on ongoing projects. Assets acquired
on hire purchase are capitalised at gross value and interest thereon
is charged to revenue.
I.5. Depreciation
Fixed assets are depreciated using the straight-line method over
the useful lives of assets. Depreciation is charged on pro-rata
basis for assets purchased/sold during the year.
56
A N N U A L R E P O R T
2007 - 2008
Depreciation Rates %
25.00
20.00
20.00
20.00
20.00
20.00
The rates of depreciation adopted are as under:
Particulars
Computers (including Software)
Furniture & Fixtures
Vehicles
Office equipments
Intellectual Property Rights
Goodwill
Individual assets costing less than Rs. 5,000 are depreciated in
full, in the year of purchase.
I.6. Employee Stock Option Plans
For the shares granted /allocated under Employee Stock Option
Plan - I (ESOP-I), the Securities Exchange Board of India (SEBI)
guidelines are not followed, since the scheme was formulated prior
to the promulgation of the guidelines.
Employee Stock Option under Employees Stock Option Plan – II
and Plan-III (ESOP-II and ESOP-III) are accounted in accordance
with the guidelines stipulated by SEBI. The difference between the
market price of the shares underlying the options granted on the
date of grant of option and the option price is expensed as
“Employees Compensation” over the period of vesting.
I.7. Employee Benefits
The Company’s contribution to provident fund, a defined
contribution scheme, is charged to the profit and loss account on
accrual basis.
Liability for gratuity is funded with Life Insurance Corporation of India
(LIC). Gratuity expense for the year has been accounted based on
actuarial valuation carried out at the end of the financial year. The
retirement benefit obligation recognized in the balance sheet
represents the present value of the defined benefit obligations adjusted
for unrecognized past service cost and as reduced by the fair value
of scheme assets. Any asset resulting from this calculation is limited
to past service cost plus the present value of available refunds and
reduction in future contributions to the scheme.
Liability for encashment of leave considered to be long term liability
is accounted for on the basis of an actuarial valuation. Provision
for outstanding leave credits considered as short term liability is as
estimated by the management and accrued for based on last
month’s salary. Other short term employee benefits like medical,
leave travel etc are accrued based on the terms of employment on
a time proportion basis
I.8. Research and development
Expenses incurred on research and development is charged to
revenue in the same year. Fixed asset purchased for research
and development are capitalized and depreciated as per the
Company’s policy.
I.9. Foreign currency transactions and translation
Transactions denominated in foreign currencies are recorded at
the exchange rates prevailing on the date of the transaction.
Monetary items denominated in foreign currencies at year end are
translated at the exchange rate on the date of the Balance Sheet.
Non-monetary items denominated in foreign currencies are carried
at cost. Exchange differences on settlement or restatement are
adjusted in the Profit & Loss account. Premium or discount on
forward contracts is amortized over the life of such contract and is
recognized as income or expense, in the Profit and Loss account.
Any profit or loss arising on cancellation or renewal or retirement
of forward contract is recognized in profit and loss account .
Assets (other than fixed assets) and liabilities of the foreign branches
are translated into Indian rupees at the rate of exchange prevailing
as at the Balance Sheet date. Fixed Assets of foreign branches are
restated at the exchange rate prevailing on the date of transaction.
Revenue and expenses are translated into Indian rupees at average/
daily exchange rates prevailing during the year.
I.10. Investments
Long term Investments are stated at cost. Diminution in the value
of investments other than temporary in nature is provided for.
I.11. Income Taxes
Income Tax comprises the current tax provision under the tax
payable method and the net change in the deferred tax asset or
liability in the year. Deferred Tax Assets and liabilities are
recognized for the future tax consequences of temporary
differences between the carrying values of the assets and liabilities
and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the
temporary differences are expected to be received or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the income statement in the period of
enactment of the change.
Deferred tax assets are recognized and carried forward to the
extent that there is a reasonable / virtual certainty, as applicable,
that sufficient future taxable income will be available against which
such deferred tax assets can be realized.
Minimum alternative tax (MAT) paid in accordance to the tax laws,
which gives rise to future economic benefits in the form of adjustment
of future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax
after the tax holiday period. Accordingly, MAT is recognized as an
asset in the balance sheet when it is probable that the future
economic benefit associated with it will flow to the Company and
the asset can be measured reliably.
I.12. Cash Flow Statement
Cash flow statement has been prepared in accordance with the
indirect method prescribed in Accounting Standard 3, issued under
the Companies (Accounting Standard) Rules 2006.
I.13. Preliminary and Share issue expenses
Expenses incurred during the Initial Public Offer, follow on offer
and issue of Bonus Shares are amortised over 5 years. Other
issue expenses are charged to the securities premium account.
I.14. Provisions
A provision is recognized when an enterprise has a present
obligation as a result of past event; it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on best
estimate required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to
reflect the current best estimates.
I.15 Impairment Of Fixed Assets
At each balance sheet date, the Company reviews the carrying
amounts of its fixed assets to determine whether there is any
indication that those assets suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of impairment loss.
Recoverable amount is the higher of an asset’s net selling price
and value in use. In assessing value in use, the estimated future
cash flows expected from the continuing use of the asset and from
its disposal are discounted to their present value using a pre-tax
discount rate that reflects the current market assessments of time
value of money and the risks specific to the asset.
Reversal of impairment losses recognized in prior years, if any, is
recorded when there is an indication that the impairment losses
recognized for the asset no longer exist or have decreased.
However, the increase in carrying amount of an asset due to
reversal of an impairment loss is recognized to the extent it does
not exceed the carrying amount that would have been determined
(net of depreciation) had no impairment loss been recognized for
the asset in prior years.
II.
II.1. Deferred income taxes
a) Provision for income taxes has been made in terms of Accounting
Standard 22 ‘Accounting for Taxes on Income’ issued by Institute
of Chartered Accountants of India.
NOTES TO ACCOUNTS
Amount in Rs.
2007-08
Movement in deferred tax asset (Liability)
Particulars
Net deferred tax asset
at beginning of the year
Add: Impact of timing
difference for the year
Net deferred tax asset
at end of the year
16,917,000
7,259,010
24,176,010
2006-07
7,912,000
9,005,000
16,917,000
b) The net deferred tax asset as at March 31, 2008 comprises the
tax impact arising from timing differences on account of:
Particulars
Depreciation
As at
March 31, 2008
24,176,010
Amount in Rs.
As at
March 31, 2007
16,917,000
II.2. Contingent liabilities
Receivables factored – Rs. 133,367,178 (previous year:
Rs. 416,664,307)
Claims against the Company not acknowledged as debt –
Rs. 24,365,085 (previous year: Rs. 39,136,631). These claims
relate to income tax demands pertaining to FY 2002-03 & 2003-04.
The demands are being contested by the Company.
The Company has provided a Corporate Guarantee to ABN Amro
Bank, Bangalore to provide credit facilities to Subex Americas Inc,
Canada and Subex (UK) Ltd, London – Rs. 500,000,000 (previous
year: Nil)
A N N U A L R E P O R T
2007 - 2008
57
II.3. The Company has made 2 issues of Global Depository receipts
(GDRs) in April 2006 and June 2006. The details of these issues are
as given below :
Sl No. Month of
Equivalent
Equity shares
1 of Rs. 10 each
1 of Rs. 10 each
Amount in Rs.
Issue price No. of GDRs
per GDR (Rs.)
400.00
532.24
Issue
April 2006
June 2006
issued
1,109,878
1
2
11,728,728
In addition, the Company has completed a programme of sponsored
GDR offerings, whereby an option has been offered to the existing
share holders of the Company to transfer their holdings in favour
of Institutional Investors.
All the above GDR’s are listed on the Professional Securities Market of
the London Stock Exchange.
II.4. Acquisition of Subex Americas Inc (formerly Syndesis Ltd,
Canada)
During the year, the Company completed the acquisition of Syndesis
Ltd, Canada, a Company engaged in Service Assurance and
fulfillment space in the Telecom service industry. The investment
carrying value of Rs. 7,749,575,428 includes the incidental costs
of acquisition. Pursuant to the acquisition, Syndesis Limited has
been renamed as Subex Americas Inc.
II.5. Scheme of Arrangement – Services Business
During the year, the Company filed an application with Hon’ble
High Court of Karnataka to transfer the Services Business Division
to Subex Technologies Ltd, a wholly owned subsidiary of Subex
Ltd under a scheme of arrangement. On obtaining the order from
the Hon’ble High Court of Karnataka, the Company has transferred
the Services business to Subex Technologies Ltd with effect from
1st September 2007 (appointed date) at an aggregate consideration
of Rs.310,000,000. In accordance with the order of the Hon’ble
High Court the Company shall receive 3,000,000 shares of Subex
Technologies Ltd valued at Rs.30,000,000 in settlement of the
consideration with the balance Rs. 280,000,000 being treated as
unsecured loan taken by the subsidiary from the Company. The
deficit arising out of the transfer amounting to Rs 404,560,001 as
detailed below has been charged to the Securities Premium
account, in accordance with the order of the Court.
Amount in Rs.
406,541,994
308,018,007
714,560,001
(310,000,000)
404,560,001
Particulars of assets and liabilities transferred
Net current assets
Investments in Subex Technologies Inc
Book value of assets transferred
Consideration received
Amount written off to Securities premium
Also refer Note II.14, Schedule P.
II.6. Foreign Currency Convertible Bonds (FCCB)
During the year 2006-07, the Company issued Foreign Currency
Convertible Bonds (FCCBs) aggregating to US$ 180 million to
Institutional Investors. The bonds carry an initial interest rate of
2% per annum and are redeemable by March 9, 2012, if not
converted in to equity shares as per terms of issue.
Other terms and conditions governing the bonds are as follows:
a) Conversion of the bonds into equity shares at the option of the
bond holders at any time after 18th April 2007
58
A N N U A L R E P O R T
2007 - 2008
b) Conversion Price – Rs.656.20 per share
c) Exchange Rate for purpose of conversion - 1 US$ = Rs.44.08
d)
Interest of 2% per annum payable semi-annually in arrears
e) Redemption with yield to maturity guaranteed return of 8% per
annum, calculated on semi-annual basis
The Company can exercise an option to redeem the bonds in
whole or in part on or any time after 9th March 2010, but prior
to 29th January 2011, subject to appropriate approvals at a
price determined on the terms defined in the offer document.
g) Listing on the Professional Securities Market of London Stock
f)
Exchange
The difference between the yield to maturity guaranteed rate of
return of 8% and the coupon rate of 2% represents the due premium
payable on redemption and is charged to Securities Premium over
the life of the bonds.
II.7. Monies received pending allotment
During the year, the company allotted 2,230,000 warrants to
promoters/ promoters group, entitling each holder to obtain allotment
of one equity share against each such warrant on a preferential
basis at a price of Rs.630.31. Under the terms of issue, the
Company has received 10% of the total consideration amounting
to Rs.140.55 Million. To obtain the underlying equity shares, the
balance 90% shall be paid within 18 months from the date of
allotment of the warrants in one or more tranches. The money
received by the Company has been utilized for long term working
capital requirements.
II.8. Operating leases
The Company has various operating leases for office facilities and
residential premises for employees which include leases that are
renewable on a yearly basis, cancelable at its option and other
long term leases. Rental expenses for operating leases included in
the Income statement for the year is Rs.48,113,674 (previous
year: Rs. 29,915,778)
As of March 31, 2008 future minimum lease payments for non-
cancelable operating leases for the next five fiscal years are:
Amount in Rs.
March 31, 2008 March 31, 2007
32,478,686
81,377,844
55,814,278
-
132,917,145
-
Within one year
Due in a period between
one year and five years
Due after five years
II.9. Employees Stock Option Plan (ESOP)
ESOP – II
During 1999-2000, the Company established a Stock Option Scheme
2000 under which 500,000 options have been allocated for grant to
the employees of the Company and its subsidiaries. Each option
comprises of one underlying equity share of Rs.10/- each and carries
an entitlement of bonus shares if and when declared. This scheme
has been formulated in accordance with the SEBI guidelines on
ESOP & ESPS dated June 19, 1999. As per the scheme, the
Compensation Committee grants the options to the employees deemed
eligible by the Advisory Board constituted for the purpose.
The options are granted at a price, which is not less than 85% of the
average market price of the underlying shares based on the quotation
on the Stock Exchange where the highest volume of shares are
traded for 15 days prior to the date of grant. The shares granted
vest over a period of 1 to 4 years and can be exercised over a
maximum period of 3 years from the date of vesting.
Under this scheme 449,271 net options have been granted to 540
employees as at March 31, 2008. Out of the above 73,798 options
have been vested. The difference between the market price of
the share underlying the options granted on the date of grant of
option and the exercise price of the option are expensed over the
vesting period as per the SEBI guidelines. The net impact of the
movement in option grants during the period resulted in a debit of
Rs.19,082,165 (Previous year: Debit of Rs. 2,238,027) to the Profit
& Loss account for the year.
ESOP – III
During 2005-2006, the Company established a new Stock Option
Scheme 2005 under which 500,000 options have been allocated
for grant to the employees. Subsequently, during the year 2006-
2007, the number of options allocated for grant to the employees
was increased to 2,000,000 options. Each option comprises of one
underlying equity share of Rs.10/- each. This scheme has been
formulated in accordance with the SEBI guidelines on ESOP &
ESPS dated June 19, 1999. As per the scheme, the compensatory
committee grants the options to the employees deemed eligible by
the Advisory Board constituted for the purpose. The options are
granted at a price, which is not less than 85% of the average
market price of the underlying shares based on the quotation on
the Stock Exchange where the traded volume is the highest for the
15 days prior to the date of grant. The shares granted vest over a
period of 1 to 4 years can be exercised over a maximum period of
3 years from the date of vesting.
As on March 31, 2008, 1,724,969 (net) options have been granted to
1,253 employees under this scheme. Out of the above 105,539
options have been vested. The difference between the market
price of the share underlying the options granted on the date of
grant of option and the exercise price of the option are expensed
over the vesting period as per the SEBI guidelines. The net impact
of the movement in option grants resulted in a debit of Rs.4,236,147
(Previous year: Debit of Rs. 11,981,639) to the Profit & Loss
account for the year.
Employee Stock Options details as on the balance sheet date are :
ESOP – II :
As at
March 31, 2008 March 31, 2007
As at
Options outstanding at
the beginning of the year
Granted during the year
Forfeited/ cancelled
Exercised
Balance at end of the year
ESOP – III :
Options outstanding at
the beginning of the year
Granted during the year
Forfeited/ cancelled
Exercised
Balance at end of the year
261,202
-
16,237
30,927
214,038
364,027
112,200
108,393
106,632
261,202
As at
March 31, 2008 March 31, 2007
As at
422,533
1,671,700
375,551
437
1,718,245
70,380
382,800
24,360
6,287
422,533
Method used for accounting for share based payment plan:
The Company has used intrinsic value method to account for the
compensation cost of stock option to employees of the Company.
Intrinsic value is the amount by which the quoted market price of
the underlying share exceeds the exercise price of the option.
Particulars
Options outstanding at the beginning of the year
ESOP – II
ESOP – III
Granted during the year
ESOP – II
ESOP – III
Exercised during the year
ESOP – II
ESOP – III
Cancelled & Lapsed during the year
ESOP – II
ESOP – III
Options outstanding at the end of the year
ESOP – II
ESOP – III
Options exercisable at the end of the year
ESOP – II
ESOP – III
2007-08
2006-07
Options (Nos)
Weighted average
exercise price per
stock options (Rs.)
Weighted average
exercise price per
stock options (Rs.)
Options (Nos)
261,202
422,533
-
1,671,700
30,927
437
16,237
375,551
408.57
429.37
364,027
70,380
284.25
342.55
-
112,200 522.32
380.31 382,800 442.38
106,632
6,287
108,393
24,360
214,038
1,718,245
427.48
261,202 408.57
366.67 422,533 429.37
73,798
105,539
24,634
2,963
A N N U A L R E P O R T
2007 - 2008
59
Fair value methodology
The fair value of options used to compute pro forma net income
and earnings per equity share have been estimated on the date of
grant using Black-Scholes model.
The key assumptions used in Black-Scholes model for calculating fair
value is : risk-free interest rate of 6.50%, expected life : 3 years,
expected volatility of share : 63.92% and expected dividend yield:
0.28%. The variables detailed herein represent the average of the
assumptions during the pendency of the grant dates.
The impact on the EPS of the Company if fair value method is
adopted is given below:
Particulars
Net profit/(loss) (as reported)
Add: Stock-based employee compensation relating to grants after April 1, 2006
Less: Stock based compensation expenses determined under fair value based
method for the above grants
Net Profit/(loss) (proforma)
Basic Earning per share (as reported)
Basic Earning per share (proforma)
Diluted Earning per share (as reported)
Diluted Earning per share (proforma)
March 31, 2008
Amount in Rs.
March 31, 2007
(61,885,553)
23,318,312
62,566,550
(101,133,791)
(1.77)
(2.90)
(1.77)
(2.90)
208,143,571
14,219,667
22,757,321
199,605,917
6.50
6.23
6.48
6.41
II.10. Related party information
A) Related parties
Wholly owned subsidiaries controlled by the company:
Subex Technologies Inc., USA
Subex Technologies Ltd, India
Subex (UK) Ltd
Subex Inc, USA
Subex (Asia Pacific) Pte Ltd
Subex America Inc.,
Subex Azure (U.S) Inc.
Subex Azure Holdings Inc
Subex Azure (Delaware) Inc
Syndesis Development India Private Ltd
Syndesis IP Holdings Limited, Canada
2101874 Ontario Inc
Subex Azure (GB) Ltd
Subex Azure (Ireland) Ltd
Enterprises over which some of the directors exercise significant
infulence
Cellcomm Solutions Ltd
Subex Holdings Private Limited (SHPL)
Key Management Personnel
Subash Menon, Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath, Whole Time Director
60
A N N U A L R E P O R T
2007 - 2008
B) Details of the transactions with the related parties other than employees who are related to the Directors of the company are as under:
Nature of Transaction
Subsidiaries
2007-08
2006-07
463,299,185
-
50,165,299
3,354,235
999,939,646
36,687,827
28,286,929
-
-
-
89,642,235
37,085,234
17,864,752
49,777,248
13,323,908
3,021,228
a) Purchase of services:
i)
STI*
ii) STL**
iii) Subex (UK) Ltd
iv) Subex Inc
b) Purchase of hardware from
Cellcomm Solutions Ltd
c) Sale of services:
Subex (UK) Ltd
i)
ii) Subex Inc
iii) Subex (Asia Pacific) Pte Ltd
d) Royalty Received from:
Subex (UK) Ltd
i)
ii) Subex Inc
iii) Subex (Asia Pacific) Pte Ltd
e) Salary, Perquisites, Commission etc.
(Refer Note: II.12, Schedule P)
f) Amount due as at year end from
STI*
i)
ii) STL**
iii) Subex (UK) Ltd
iv) Subex Inc
v) Subex (Asia Pacific) Pte Ltd
vi) Subex Americas Inc, Canada
55,597,295
155,426,129
939,972
-
-
394,612,450
597,305,795
330,403,496
39,759,581
341,125,764
g) Expenses incurred on behalf of
Subex Americas Inc, Canada (see Note 3)
h) Amount due as at year end to
STI*
i)
ii) Cellcomm Solutions Ltd
162,975,799
-
-
-
i) Sharing of expenses related to services
business (STL) see Note – 1
7,593,353
j) Expenses allocated to
Subex (UK) Ltd
i)
ii) Subex Inc
iii) Subex (Asia Pacific) Pte Ltd
iv) Subex Americas Inc
v) Subex Technologies Ltd (see Note 2)
k) Commission paid on service business
l) Transfer of Service Business to STL
Shares alloted from STL
i)
ii) Loan to STL
m) Money received against warrants
issued
n) Corporate Guarantee provided
by Company to financial institutions
in respect of finances availed
by Subsidiaries
27,326,167
10,574,251
3,725,496
61,645,149
35,663,585
-
30,000,000
280,000,000
-
500,000,000
-
-
-
-
144,231,174
12,911,455
351,862,273
249,856,467
10,672,956
-
-
-
271,766,496
-
5,616,032
20,302,150
17,636,896
3,413,161
-
-
1,405,562
-
-
-
-
Enterprises over which
some of the directors
exercise significant infulence
2006-07
2007-08
Amount in Rs.
Key Management
Personnel
2007-08
2006-07
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
113,455,800
-
-
-
-
-
693,243
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
330,496
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,180,000
-
-
-
24,946,139
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,103,330
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* STI = Subex Technologies, Inc.
** STL = Subex Technologies Ltd
Note-1 – Sharing of expenses is in relation to expenses borne by Subex Technologies Ltd towards software service business of Subex
Limited as agreed between both companies. These have been accounted under depreciation, personnel cost and various heads included
under Schedule-N
Note -2 – Sub Contract charges under schedule M is net of costs allocated to STL of Rs.35,663,585 (Previous year : Nil)
Note – 3- the Personnel costs under schedule M is net of recovery of costs of Rs.162,975,799 (Previous year : Nil) incurred on behalf of
Subex Americas Inc
A N N U A L R E P O R T
2007 - 2008
61
II.11. Earnings/(Loss) per share (EPS):
Profits after tax attributable to shareholders
Weighted average number of shares for basic EPS
Weighted average number of shares for diluted EPS
Earnings per share – basic
Earnings per share – diluted
2007-08
(61,885,553)
34,930,103
35,237,883
(1.77)
(1.77)
Amount in Rs.
2006-07
208,143,571
32,020,111
32,145,562
6.50
6.48
Face value of shares : Rs. 10 each
The difference in the number of shares information used for calculation of diluted EPS as compared to that used for computing Basic EPS
is due to outstanding stock options that are granted to employees.
The Company issued certain warrants during the year which are outstanding at the end of the year. Considering the issue price of these
warrants are higher than the fair value of the underlying shares at the end of the year, they are ignored for computing number of shares
for purpose of diluted earnings per share.
The options and warrants outstanding at March 31, 2008 are anti-dilutive at the date and hence ignored for purposes of computing Diluted EPS.
II.12. a) Remuneration to Directors;
A.
B.
Remuneration to Whole-time directors
Salary and allowances (including perqusites of Rs. 1,305,906
(2006-07 – Rs. 522,143)
Contribution to Provident Fund
Total (A)
Remuneration to Non-Executive directors
Sitting fees paid to Non-executive directors
Commision paid to Non-executive Directors
Total (B)
Total (A+B)
b) Computation of Net Profit in accordance with Section 198 / 349 of the Companies Act, 1956
Particulars
Profit / (Loss) before tax as per the Profit & Loss Account
Remuneration to Directors (Including Commission & Sitting fees) - See (a) above
Add/(Less): Surplus/(Loss) on sale of Fixed Assets (Net)
Net Profit / (Loss) u/s 198 / 349 of the Companies Act, 1956
Maximum Remuneration of Whole-time Directors under provisions of the Companies Act
Remuneration to Whole-time Directors included in the Profit and Loss account
(including Commission Rs. Nil, Previous Year : Nil)
Maximum Commission to Non-executive directors under the Companies Act
Commission Paid
Amount in Rs.
2007-08
2006-07
9,600,000
2,580,000
12,180,000
22,500
-
22,500
12,202,500
2007-08
(50,126,118)
12,202,500
1,096,373
(36,827,245)
9,600,000*
23,242,139
1,704,000
24,946,139
42,500
2,000,000
2,042,500
26,988,639
Amount in Rs.
2006-07
259,092,856
26,988,639
(3,298,292)
282,783,203
28,278,320
9,600,000
Nil
Nil
24,946,139
2,847,832
2,000,000
* In view of the inadequacy of profits in Year ending March 31, 2008, the maximum remuneration is based on Schedule XIII to the Companies
Act, 1956 and excludes Contribution to Provident Fund.
c) During the year ended March 31, 2008, the Company has paid an amount of Rs. 38,285,906 to its Whole-time directors towards
remuneration and has applied to the Central government for approval of payments that are in excess of the maximum remuneration
payable under the Companies Act, 1956. Pending the Central government’s approval, such excess is treated as monies due from the
Whole-time directors being held by them in trust for the Company and is included under Loans and advances (Schedule I to the financial
statements).
62
A N N U A L R E P O R T
2007 - 2008
II.13. Auditors remuneration
Audit fees (including fees for audit of consolidated account & issuance of report on the
corporate governance and tax audit) (including service tax as applicable)
For tax matters (including service tax as applicable)
Other services
Reimbursement of expenses
2007-08
2,150,000
200,000
-
-
Amount in Rs.
2006-07
2,413,160
224,480
7,888,654*
260,247*
* Represents fees and out of pocket expenses towards work done in connection with issue of FCCBs and GDRs. These amounts have been
debited to the securities premium.
II.14. Pursuant to court order, the Company has transferred Service business to its wholly-owned subsidiary, Subex Technologies Ltd.
The disclosure required under the Accounting Standard 24 “Discontinuing Operations”, with regard to the Service business are as follows:
Amount in Rs.
Particulars
Revenue from discontinued operations
Expenses from discontinued operations
Net Cash flow from operating activities
Net Cash flow from Investing activities
Net Cash flow from financing activities
The Service division was a separate business segment as per AS 17 segment reporting.
for the year ended
March 31, 2008
523,956,263
497,434,036
(139,400,000)
-
-
March 31, 2007
1,116,146,027
1,015,850,770
100,080,000
-
-
II.15. Details of warranty
Year
2007-08
2006-07
Probable period of outflow in case of warranty is 6-12 months.
Opening balance
2,983,654
3,157,312
Additions during the year
2,866,506
2,983,654
II.16. Others
1
The Company is availing non-fund based limits and overdrafts
against lien on the fixed deposits. Amount of such non-fund
based limits utilized as on March 31, 2008 is Rs.48,463,522
(previous year: Rs. 343,017,163)
2. Estimated amount of contracts, remaining to be executed on
capital account and not provided for (net of advances paid)
Rs.5,199,547 (previous year: Rs. 9,277,855)
3. Unclaimed dividend of Rs.805,014 represent dividends not
claimed for the period from 2001-2008. No part thereof has
remained unpaid or unclaimed for a period of seven years
from the date they become due for payment requiring a transfer
to the ‘Investor Education and Protection Fund’.
(i) Forward/Option Contracts (Also refer Note II.16.5, Schedule P)
Utilisation / (reversal) during the year
(2,983,654)
(3,157,312)
Amount in Rs.
Closing balance
2,866,506
2,983,654
4. Personnel Cost for the year includes expenditure on Research
and Development of Rs.66,755,179 (previous year:
Rs. 44,871,701). This is as certified by the management and
relied upon by the auditors.
5. As per the recent guidelines on accounting for Derivatives
issued by the Institute of Chartered Accountants of India, the
Company has provided for Mark to Market losses of
Rs. 5,912,868 (included in Other provisions under Schedule J)
in respect of the derivative contracts outstanding at the end of
the year.
6. The Company has entered into the following derivative
instruments for the purposes of hedging the risks associated
with foreign exchange exposures as at March 31, 2008:
Particulars
Forward contracts
Option contracts
March 31, 2008
Buy/Sell
Sell
Sell
Amount (INR)
55,987,000
202,244,000
US$
1,400,000
5,000,000
March 31, 2007
Buy/Sell
Sell
Nil
US$
800,000
Nil
Amount (INR)
37,238,000
Nil
A N N U A L R E P O R T
2007 - 2008
63
(ii) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:
March 31, 2008
Receivable towards
Export of Goods & Services
Net Receivable from wholly
owned subsidiaries
Rs.
4,581,770
71,011,476
77,350,790
3,393
2,246,915
597,305,795
671,529,260
39,759,581
Foreign currency
GBP 56,893
Euro 1,120,828
US$ 1,929,140
AED 311
AUD 60,874
GBP 7,415,031
USD 16,748,037
SGD 1,367,613
March 31, 2007
Rs.
9,972,165
47,465,366
862,864,309
1,502,028
Foreign currency
GBP 118,480
Euro 830,250
US$ 19,971,259
CAD 40,551
351,862,273
249,856,467
10,672,955
GBP 4,253,265
US$ 5,519,653
SGD 374,097
Amounts payable in foreign currency on account of:
Import of Goods & Services
Capital imports [including
intangibles]
Foreign Currency
Convertible Bonds
March 31, 2008
Rs.
19,697,427
-
305,021
355,359
Foreign currency
US$ 491,257
-
GBP 3,787
US$ 8,863
March 31, 2007
Rs.
137,695,655
2,263,268
-
2,160,075
Foreign currency
US$ 3,149,436
Euro 39,000
-
US$ 49,800
7,200,000,000
US$ 180,000,000
7,807,500,000
US$ 180,000,000
64
A N N U A L R E P O R T
2007 - 2008
7. The Company adopted the Revised Accounting Standard 15
on employee benefits with effect from April 1, 2006. The net
incremental liability towards leave salary and gratuity amounting
to Rs. 8,527,028 has been adjusted against the opening balance
of reserves at April 1, 2006.
The Company offers the following employee benefit schemes to it’s
employees. The following table sets out the funded status of the
defined Benefit Schemes and the amount recognized in the financial
statements as of March 31, 2008.
I
1
2
3
4
5
6
7
8
II
1
2
III
1
2
3
4
5
IV
1
2
3
4
5
6
7
8
9
10
V
1
2
3
4
5
6
7
VI
1
2
3
4
Components of employer expense
Current Service cost
Interest cost
Expected return on plan assets
Curtailment cost/(credit)
Settlement cost/(credit)
Past Service Cost
Actuarial Losses/(Gains)
Total expense recognized in the Statement of Profit & Loss Account
Actual Contribution and Benefit Payments for year ended 31 March 2008
Actual benefit payments
Actual Contributions
Net asset/(liability) recognized in Balance Sheet as at March 31, 2008
Present value of Defined Benefit Obligation (DBO)
Fair value of plan assets
Funded status [Surplus/(Deficit)]
Unrecognized Past Service Costs
Net asset/(liability) recognized in Balance Sheet
Change in Defined Benefit Obligations during the year ended March 31, 2008
Present Value of DBO at beginning of year
Current Service cost
Interest cost
Curtailment cost/(credit)
Settlement cost/(credit)
Plan amendments
Acquisitions
Actuarial (gains)/ losses
Benefits paid
Present Value of DBO at the end of year
Change in Fair Value of Assets during the year ended March 31, 2008
Plan assets at beginning of year
Acquisition Adjustment
Actual return on plan assets(estimated)
Actuarial Gain/(Loss)
Actual Company contributions(less risk premium, ST)
Benefits paid
Plan assets at the end of period
Actuarial Assumptions
Discount Rate
Expected Return on plan assets
Salary escalation
Attrition Rate
Amount in Rupees
Gratuity
March 31,2008
March 31,2007
2,487,700
529,720
(91,370)
-
-
-
1,221,020
4,147,070
3,426,895
333,852
98,418
-
-
-
(72,395)
3,786,772
1,215,060
1,102,330
632,474
366,658
10,295,070
1,092,920
(9,202,150)
-
(9,202,150)
7,229,036
1,062,832
(6,166,204)
-
(6,166,204)
7,229,036
2,487,700
529,720
-
-
-
-
1,263,670
(1,215,060)
10,295,070
1,062,832
-
91,370
51,440
1,102,330
(1,215,060)
1,092,920
8.70%
9.00%
5.00%
5.00%
4,173,156
3,426,895
333,852
-
-
-
-
(72,393)
(632,474)
7,229,036
1,230,230
-
98,418
-
366,658
(632,474)
1,062,832
8.00%
8.00%
5.00%
5.00%
A N N U A L R E P O R T
2007 - 2008
65
8. Based on information available with the Company there are no
dues to Small Scale Industries and Micro and Small enterprises as
defined in The Micro, Small & Medium Enterprises Development Act,
2006. This has not been verified by the auditors.
9. During the year, the Company revised its accounting policy
for accounting exchange gain/loss on liabilities incurred in acquiring
fixed assets. Exchange differences on settlement/payment of such
liabilities are being charged to profit and loss account pursuant to
the revised policy, in line with the Companies (Accounting
Standard) Rules 2006. Such differences were adjusted to the cost
of fixed assets in earlier years. The impact on the results for the
year on account of the change in the accounting policy was not
significant.
10. A director of the Company has provided a personal guarantee
in respect of long term loans from Banks of Rs.755,848,738 included
in schedule D of the financial statements. Further, the promoters’
shares have also been pledged towards these loans.
11. Since the Company prepares consolidated financial statements,
no segment information is disclosed in these financial statements.
12. Previous year’s figures have been regrouped to conform to
the classifications for the current year.
II.17. Other information pursuant to Schedule VI of the Companies Act, 1956.
Year ended
March 31, 2008
Amount in Rs.
Year ended
March 31, 2007
19,315,371
31,589,202
49,994,507
147,893,999
670,332
1,883,954
20,793,484
49,433,888
-
-
194,844,732
1,456,331,194
1,489,211,407
1,825,734,725
415,754
-
3
-
-
-
-
464,490
-
3
-
311,077
CIF value of imports :
Import of systems and solutions
Capital goods
Expenditure in foreign currency
Traveling expenses
Interest expenses
Consideration for acquired assets
Product marketing expense and other expenditure incurred overseas for
software development
Earnings in foreign exchange
Income from software development services and
products on receipt basis
Remittance in foreign currency on account of dividend
Amount remitted during the year in foreign currency on account of
dividends for the year
No. of non-resident shareholders for the year
Shares held by non-resident shareholders on which dividend was
due for the year
2006-07
2005-06
2007-08
2006-07
2007-08
2006-07
Signature to the Schedules A – R
Signature to the Schedules A – R
Signature to the Schedules A – R
Signature to the Schedules A – R
Signature to the Schedules A – R
Sudeesh Yezhuvath
Director
Director
Place : Bangalore
V. R. Suresh Rao
Date : 25th April, 2006
Legal Counsel
Accounts & Finance
66
A N N U A L R E P O R T
2007 - 2008
Subash Menon
V. Balaji Bhat
Chairman & Managing
Wholetime Director
Rajkumar C
Company Secretary &
General Manager -
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
COMPANY: SUBEX AZURE LIMITED
I.
II.
III.
Registration details
Registration No.
Balance sheet date
1 6 6 6 3
3 1 - 0 3 - 2 0 0 8
State code
Capital raised during the year (Rupees in thousands)
Public issue
Bonus issue
-
-
Rights issues
Private placements - Equity
- Preference
Preferential offer of shares under Employee Stock Option Plan scheme* - Equity
Position of the mobilisation and development of funds (Rupees in thousands)
Total liabilities
1 6 5 8 2 0 8 9 . 0 0
Total assets
YEAR : 2007-2008
0 8
-
-
-
3 1 3 . 6 4
1 6 5 8 2 0 8 9 . 0 0
Source of funds
Paid up capital
Secured loans
3 4 8 4 7 0 . 8 9
7 3 7 2 3 2 . 8 7
Share application money
Reserves & surplus
1 4 0 5 5 9 . 1 3
7 2 4 1 0 0 1 . 2 2
Unsecured loans
Deferred tax liability
8 1 1 4 8 2 4 . 8 9
-
Application of funds
Net fixed assets
Net current assets
Miscellaneous expenditure
2 6 5 9 7 4 . 6 2
2 0 2 8 4 9 4 . 7 7
-
Investments
Deferred tax assets
Accumulated lossess
1 4 2 6 3 4 4 3 . 6 1
2 4 1 7 6 . 0 1
-
IV. Performance of Company (Rupees in thousands)
2 0 0 4 5 8 9 . 0 0
( 5 0 1 2 6 . 1 2 )
( 1 . 7 7 )
Total expenditure
Profit/(loss) after tax
Earning per share from
ordinary activities (diluted) (Rs.)
2 0 5 4 7 1 5 . 1 2
( 6 1 8 8 5 . 5 5 )
( 1 . 7 7 )
Turnover
Profit/(Loss) before tax
Earning per share from
ordinary activities (basic) (Rs.)
Interim dividend rate %
Final dividend rate %
-
-
V.
Generic name of three principal products/ services of the Company (As per monetary terms)
Item code no.
(ITC code no.)
Product
Description
8 5 / 2 4
C O M P U T E R
S O F T W A R E
*Issue of shares arising of the exercise of option granted to employees under the Company’s ESOP II (2000)
Subash Menon
Founder Chairman & Managing Director
Sudeesh Yezhuvath
Chief Operating Officer
V. Balaji Bhat
Director
Place : Bangalore
Date : June 30, 2008
Raj Kumar
Chief Counsel & Company Secretary
A N N U A L R E P O R T
2007 - 2008
67
Financial Review
Subex Limited (Consolidated)
68
A N N U A L R E P O R T
2007 - 2008
AUDITORS’ REPORT TO THE BOARD OF SUBEX LIMITED
1. We have audited the attached Consolidated Balance Sheet of
Subex Limited, formerly Subex Azure Limited, (“the Company”)
and it’s subsidiaries (the Company and its subsidiaries constitute
“the Group”) as at March 31, 2008, the Consolidated Profit
and Loss Account and the Consolidated Cash Flow Statement
for the year then ended, both annexed thereto. These financial
statements are the responsibility of the Company’s management
and have been prepared by the management on the basis of
separate financial statements and other financial information
regarding components. Our responsibility is to express an
opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with generally
accepted auditing standards in India. These Standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatements. An audit includes, examining on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management as well as evaluating the overall financial
statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. We did not audit the financial statements of the subsidiaries,
whose financial statements reflect gross total assets of
Rs. 4,968,761,974 as at March 31, 2008, total revenues of
Rs. 4,854,259,919 and net cash outflows of Rs. 79,565,647
for the year then ended and the financial statements of the
Company’s branch, in the United States of America (US
branch). These financial statements and other financial
information have been audited by other auditors and where
applicable, their conversion based on accounting principles
generally accepted in India have been reported on by other
accountants. These report/returns have been furnished to
us, and our opinion, in so far as it relates to the amounts
included in respect of the subsidiaries and the US branch, is
based solely on the report of the other auditors/accountants.
4. We report that the consolidated financial statements have been
prepared by the Company’s management in accordance with
the requirements of Accounting Standard (AS) 21,
‘Consolidated Financial Statements’, issued under the
Companies (Accounting Standard) Rules, 2006.
5. On the basis of the information and explanations given to us
and on the consideration of the separate audit and accountants
reports on individual financial statements and on the other
financial information of the components of Subex Limited and
its subsidiaries, we are of the opinion that the attached
consolidated financial statements give a true and fair view in
conformity with the accounting principles generally accepted
in India:
in the case of the Consolidated Balance Sheet, of the state of
affairs of the Group as at March 31, 2008;
in the case of the Consolidated Profit and Loss Account, of the
loss of the Group for the year then ended;
in the case of the consolidated Cash Flow Statement of the
cash flows of the Group for the year then ended.
c)
a)
b)
For Deloitte Haskins & Sells
Chartered Accountants
V Srikumar
Partner
M. No. 84494
Place : Bangalore
Date : June 30, 2008
A N N U A L R E P O R T
2007 - 2008
69
CONSOLIDATED BALANCE SHEET AS AT
Schedule
March 31, 2008
March 31, 2007
Amount in Rs.
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share Capital
Monies received pending allotment
[Refer Note II.7, Schedule P]
Reserves and Surplus
LOAN FUNDS
Secured Loans
Unsecured Loans
Total
APPLICATION OF FUNDS
Fixed assets
Gross Block
Less : Depreciation
Net Block
Capital work in progress
Investments
Goodwill
Deferred tax assets (Net)
Current assets, Loans & Advances
Sundry Debtors
Cash & Bank balances
Loans & Advances
Unbilled Revenue
Less: Current liabilities & Provisions
Current liabilities
Provisions
A
B
C
D
E
F
G
H
I
J
348,470,890
140,559,130
348,157,250
-
7,050,658,948
7,539,688,968 8,059,119,459 8,407,276,709
1,150,161,402
8,120,839,291
635,166,392
9,271,000,693 7,807,500,000 8,442,666,392
16,849,943,101
16,810,689,661
1,505,824,566
1,118,734,067
387,090,499
1,682,246
1,313,308,647
231,185,346
493,494,014
586,456,946
2,624,444,953
1,440,554,624
212,076,170
1,652,630,794
821,726,754
467,212,184
354,514,570
4,037,627
388,772,745
-
15,293,562,487
124,078,067
358,552,197
7,403,696,025
7,021,229,033
168,488,974
1,216,826,081
903,476,921
245,646,663
423,896,364
2,789,846,029
740,373,039
197,662,665
938,035,704
Net Current Assets
Miscellaneous expenditure
(To the extent not written off or adjusted)
[Refer Note II.13.7, Schedule P]
Total
Significant Accounting policies & Notes to the accounts P
The Schedules referred to above form an integral part of the Balance Sheet
971,814,159
1,851,810,325
32,462,203
16,810,689,661
46,166,547
16,849,943,101
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
V. Srikumar
Partner
Membership No. 84494
Bangalore
June 30, 2008
70
A N N U A L R E P O R T
2007 - 2008
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
V. Balaji Bhat
Director
Raj Kumar
Chief Counsel & Company Secretary
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
Schedule
March 31, 2008
March 31, 2007
Amount in Rs.
INCOME
Sales & Services
Other income
Total
EXPENDITURE
Direct cost
Personnel costs
Other operating, selling and
administrative expenses
Financial costs
Miscellaneous expenses amortised
Depreciation
Total
Profit / (Loss) before taxation
Provision for taxation
K
L
M
N
O
E
4,855,907,768
552,991,366
5,408,899,134
84,469,871
4,022,373,009
1,409,600,242
325,465,007
11,721,965
172,319,419
6,025,949,513
(617,050,379)
- Current
- MAT credit carried forward
- Fringe benefit tax
- Deferred
Profit / (Loss) after taxation
Add: Balance brought forward from previous year
Profit available for appropriation
APPROPRIATION
Transfer to general reserve
Dividend
- Equity shares - proposed final dividend 2006-07
- Equity shares - interim dividend 2006-07
- Equity shares - final dividend 2005-06
- Equity shares - final dividend 2006-07
Tax on distributed profits
Surplus carried to balance sheet
Earning / (Loss) Per Share (Face value of Rs.10 each)
- Basic
- Diluted
24,444,655
(10,042,000)
11,930,660
37,331,677
70,226,003
(11,128,731)
5,107,115
63,664,992 (163,255,141)
(680,715,371)
1,238,020,941
557,305,570
69,631,450
52,113,210
12,883,222
-
-
-
-
26,412
-
26,412
4,489
557,274,669
557,305,570
(19.49)
(19.49)
3,409,002,598
301,915,848
3,710,918,446
89,965,014
2,079,876,888
728,621,337
87,318,294
22,964,112
125,563,180
3,134,308,825
576,609,621
(99,050,754)
675,660,375
741,138,063
1,416,798,438
23,200,000
134,627,882
20,949,615
1,238,020,941
1,416,798,438
21.10
21.02
Significant Accounting policies & Notes to the accounts P
The Schedules referred to above form an integral part of the Profit and Loss account
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
V. Srikumar
Partner
Membership No. 84494
Bangalore
June 30, 2008
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
V. Balaji Bhat
Director
Raj Kumar
Chief Counsel & Company Secretary
A N N U A L R E P O R T
2007 - 2008
71
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED
March 31, 2008
March 31, 2007
Amount in Rs.
Cash flow from operating activities
Net Profit/(Loss) before Tax
Adjustments for :
a) Depreciation and amortization
b) Interest / Dividend Income
c) Interest and bank charges
d) Assets written off / Loss on sale
e) Profit on sale of assets
f) Employee compensation Expenses
g) Provision for doubtful debts & debts written off
h) Unrealised exchange fluctuations
i) Termination Benefits paid
j) Direct Taxes paid
Operating Profit before Working Capital Changes
Adjustments for :
a) Sundry Debtors
b) Loans and advances
c) Trade and other payables
Cash generated from operations
Cash Flow from Investing activities
a) Purchase of Fixed Assets
b) Sale / disposal of fixed assets
c) Cash flows on acquisitions of subsidiaries
d) Interest received
e) Adjustments on account of Demerger (Refer Note II.5, Schedule P)
B
Net Cash from Investing Activities
Cash Flow from Financing Activities
A
a) Proceeds from issue of Share Capital/Options/Warrants
b) Proceeds from/(repayment) of short term borrowings - Net
c) Proceeds from Long term borrowings
d) Repayment of Long term borrowings
e) Dividends & Dividend tax paid
f) Interest and bank charges
g) Incidental expenses on issue of FCCBs & GDR (incurred)/refunded
C
Net Cash from Financing Activities
Exchange fluctuation reserve on consolidation
Net increase/(decrease) in Cash or Cash equivalents [A + B + C]
Consolidation Adjustments
Cash or Cash equivalents at the start of the year
Cash or Cash equivalents at the close of the year
(617,050,379)
186,023,763
(20,661,716)
325,465,007
-
(1,096,373)
50,005,707
293,139,148
(621,437,873)
-
(140,247,795)
(545,860,511)
(50,412,652)
(16,606,390)
(565,912,690)
(1,178,792,243)
(146,208,824)
8,611,552
(275,884,850)
20,661,716
(404,560,001)
(797,380,407)
145,225,998
666,416,047
769,213,190
-
(81,503,996)
(325,465,007)
38,374,819
1,212,261,051
(15,887,977)
(763,911,599)
107,508,001
903,476,921
231,185,346
576,609,621
148,527,292
(35,339,870)
87,318,294
3,761,806
(463,514)
10,760,906
150,629,851
(208,784,608)
(69,130,659)
(42,560,496)
621,328,623
(340,619,544)
(447,547,258)
(3,608,669)
(170,446,848)
(73,393,930)
10,045,172
(7,664,757,570)
35,339,870
-
(7,692,766,458)
457,173,808
618,894,432
8,049,728,942
(4,752,531)
(98,720,943)
(87,318,294)
(616,265,172)
8,318,740,242
(18,075,084)
455,526,936
60,010,315
406,014,754
903,476,921
Note : Cash & Cash Equivalents include balance with Scheduled Banks on Dividend Account of Rs.702,822 (PY : Rs.692,487), and fixed
deposit of Rs. 17,424,597 (PY : Rs.320,425,029) which are not available for use by the Company.
Significant Accounting policies & Notes to the accounts
P
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
V. Srikumar
Partner
Membership No. 84494
Bangalore
June 30, 2008
72
A N N U A L R E P O R T
2007 - 2008
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
V. Balaji Bhat
Director
Raj Kumar
Chief Counsel & Company Secretary
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT
March 31, 2008
March 31, 2007
Amount in Rs.
Schedule - A
Share capital
Authorised :
48,040,000 (previous year, 48,040,000) Equity Shares of Rs. 10 each
200,000 Redeemable Optionally Convertible Cumulative
Preference Shares (ROCCPS) of Rs.98/- each
Total
Issued, subscibed and paid up:
Equity :
34,847,089 (previous year, 34,815,725) Equity Shares of Rs. 10 each
of the above:
a) 115,000 shares of Rs.10 each were allotted for
consideration other than for cash;
b) 4,626,940 shares of Rs.10 each are allotted as Bonus
shares by capitalisation of General Reserve;
c) 12,840 shares of Rs.10 each are allotted in part
settlement of cost of acquisition of Subsidiary
d) 10,878,784 (PY: Nil) shares of Rs.10 each are allotted as
Bonus shares by capitalisation of Securities premium;
e) 11,728,728 shares (GDRs) of Rs.10 each are allotted in full
settlement of cost of acquisition of Azure Solutions (UK) Ltd
Total
Schedule - B
Reserves & Surplus
Capital Reserve
General Reserve - Opening Balance
Add: Additions during the year
Less: Adjustment in pursuance of transitional provisions of
Accounting Standard-15 [Refer Note II.13.7, Schedule P]
Securities Premium Account - Opening Balance
Add : Additions during the year
Add/(Less) : Reversal of/(Utilised towards) incidental costs of
issue of FCCBs & GDRs(Refer Note II.6, Schedule P)
Less: Redemption premium on FCCBs [Refer Note II.6, Schedule P]
Less : Adjustments on account of Demerger Scheme
(Refer Note II.5, Schedule P)
Employees Stock Options Outstanding
Less: Deferred Employees Compensation Expenses
FCCB Redemption Reserve - Opening Balance
Add : Additions during the year
(Refer Note II.6, Schedule P)
Exchange Reserve on Consolidation
Profit & Loss Account
Total
Schedule - C
Secured Loans
Short Term:
Working Capital Loans from Banks
(Secured by charge on Receivables and fixed assets)
Other Loans from Banks
(Secured by Hypothecation of Assets financed by these loans)
[Amount repayable within one year: Rs.7,334,336/-
(Previous year, Rs.5,261,159/-)
Total
Schedule - D
Unsecured Loans
Short Term:
Working Capital Loans from Banks
Other Loans from Banks
[Amount repayable within one year: NIL, PY : NIL]
(Refer Note II.13.5, Schedule P)
Foreign Currency Convertible Bonds
(Refer Note II.6, Schedule P)
Total
480,400,000
19,600,000
500,000,000
348,470,890
348,470,890
13,006,920
177,975,580
5,624,568,228
69,645,719
632,054,656
(23,866,824)
557,274,669
7,050,658,948
1,126,539,390
23,622,012
177,975,580
-
-
6,576,304,853
4,353,213
38,374,819
589,904,656
404,560,001
162,476,740
92,831,021
42,150,000
589,904,656
480,400,000
19,600,000
500,000,000
348,157,250
348,157,250
13,006,920
177,975,580
163,302,608
23,200,000
8,527,028
656,262,011
6,578,458,014
(616,265,172)
42,150,000
52,775,309
33,135,297
- 6,576,304,853
19,640,012
-
42,150,000
(7,978,847)
1,238,020,941
8,059,119,459
618,894,432
16,271,960
1,150,161,402
635,166,392
158,976,153
761,863,138
7,200,000,000
8,120,839,291
-
-
7,807,500,000
7,807,500,000
A N N U A L R E P O R T
2007 - 2008
73
r
a
e
Y
e
h
t
r
o
F
1
9
0
,
3
2
6
,
7
5
3
7
1
,
6
5
6
,
0
1
1
6
8
,
2
9
9
,
5
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74
A N N U A L R E P O R T
2007 - 2008
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT
Schedule - F
Investments (Long term, trade)
Advance for Acquisition [Refer Note II.4, Schedule P]
Schedule - G
Sundry debtors
(Unsecured)
Outstanding for more than six months
- considered good
- considered doubtful
Others
- considered good
- considered doubtful
Less: Provision for Doubtful Debts
Total (considered good)
Schedule - H
Cash & Bank Balances
Cash on hand
Balance with Scheduled Banks
-
-
-
in Current Account in Indian Rupees
in Deposit Account in Indian Rupees
in Exchange Earner’s Foreign Currency account
Balance with Non Scheduled Banks
Total
Schedule - I
Loans & Advances
(Unsecured, considered good, subject to confirmation)
Loans and advances recoverable in cash
or in kind or for value to be received
Advance Income Tax including TDS
MAT credit entitlement
Other Deposits
Total
March 31, 2008
March 31, 2007
Amount in Rs.
-
-
7,403,696,025
7,403,696,025
273,209,491
280,451,408
1,040,099,156
28,690,000
456,366,957
203,788,312
760,459,124
-
660,155,269
760,459,124
1,420,614,393
203,788,312
1,216,826,081
61,435
110,750,716
403,815,607
21,933,868
366,915,295
903,476,921
80,808,673
44,601,158
11,128,731
109,108,101
245,646,663
553,660,899
1,068,789,156
1,622,450,055
309,141,408
1,313,308,647
38,939
3,048,916
27,992,954
69,100,260
131,004,277
231,185,346
182,363,905
195,166,695
21,170,731
94,792,683
493,494,014
A N N U A L R E P O R T
2007 - 2008
75
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT
March 31, 2008
March 31, 2007
Amount in Rs.
694,172,865
100,140,877
575,530,366
69,905,502
805,014
134,408,936
-
-
68,887,860
2,866,506
5,912,868
489,919,581
88,675,783
93,920,975
67,043,906
812,794
94,795,108
69,631,450
11,833,865
18,418,588
2,983,654
-
740,373,039
197,662,665
938,035,704
35,339,870
31,533,710
-
17,780,065
217,262,203
301,915,848
89,965,014
89,965,014
1,755,513,817
133,362,412
52,065,472
138,935,187
2,079,876,888
1,440,554,624
212,076,170
1,652,630,794
20,661,716
2,574,816
1,096,373
-
528,658,461
552,991,366
84,469,871
84,469,871
3,414,127,688
167,099,066
193,665,785
247,480,470
4,022,373,009
Schedule - J
Current Liabilities & Provisions
Sundry Creditors
Advance received from Customers
Deferred Income
Duties & Taxes
Unclaimed Dividends
Provisions :
Taxation
Dividends
Tax on proposed dividends
Employee Benefits
Warranty
Others
Total
Schedule - K
Other Income
Interest Income
Other income
Profit on sale of Fixed Assets (Net)
Provisions written back
Exchange Fluctuation account (net)
Total
Schedule - L
Direct costs
Purchased Systems & Solutions
Total
Schedule - M
Personnel costs
Salaries, Wages & Allowances
Contribution to Provident Fund and Other Funds
Other staff related costs
Sub Contract Charges
Total
76
A N N U A L R E P O R T
2007 - 2008
SCHEDULES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
March 31, 2008
March 31, 2007
Amount in Rs.
Schedule - N
OTHER OPERATING, SELLING AND
ADMINISTRATIVE EXPENSES :
Software Purchases
Rent
Power, Fuel and Water Charges
Repairs & Maintenance Others
Insurance
Communication Costs
Printing & Stationery
Travelling & Conveyance
Directors sitting fees
Rates & Taxes Including Filing Fees
Advertisement & Business Promotion
Consultancy Charges
Bad Debts Written Off
Provision for Doubtful Debts
Commission on Sales
Loss on sale of Assets & Assets Written Off (Net)
Miscellaneous Expenses
Total
Schedule - O
Financial costs
Interest on FCCBs and other term loans
Interest & Bank Charges
Total
16,645,747
185,993,051
32,437,542
88,153,952
13,896,389
117,545,832
11,582,357
356,019,968
22,500
26,591,206
95,665,156
108,735,957
2,785,990
290,353,158
13,997,278
-
49,174,159
1,409,600,242
294,331,303
31,133,704
325,465,007
27,604,255
91,352,573
7,745,824
16,060,108
17,631,573
46,644,945
8,781,492
191,080,568
42,500
7,605,983
35,403,762
62,857,794
24,983,956
150,629,851
22,272,447
3,337,815
14,585,891
728,621,337
11,566,667
75,751,627
87,318,294
A N N U A L R E P O R T
2007 - 2008
77
SCHEDULE – P
I. SIGNIFICANT ACCOUNTING POLICIES
I.1. Basis for preparation of consolidated financial statements
The consolidated financial statements relate to Subex Limited (the
Company) and its wholly owned subsidiaries.
The consolidated financial statements have been prepared under
the historical cost convention in accordance with the applicable
Accounting Principles in India, the Accounting Standards issued
under the Companies (Accounting Standard) Rules 2006 and the
relevant provisions of the Companies Act, 1956, as adopted
consistently by the Company. Revenues are recognised and
expenses accounted on their accrual, including provisions /
adjustments for committed obligations and amounts determined as
payable or receivable during the year.
I.2. Use of Estimates
The preparation of the financial statements in conformity with Indian
GAAP requires that management makes estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure
of contingent liabilities as at the date of the financial statements
and the reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates.
I.3. Principles of Consolidation
The financial statements of the Company and it’s wholly owned
subsidiaries have been combined on a line by line basis by adding
together like items of assets, liabilities, income and expense. The
intra-group balances and intra-group transactions are eliminated.
The excess of cost to the Company of its investments in the subsidiary
over it’s share of the equity of the subsidiary, at the date on which the
investments in the subsidiary company was made, is recognized as
‘goodwill’ being an asset in the consolidated financial statements.
The following entities are considered in the consolidated financial
statements.
Sl. Name of
entity
no.
Country of
incorporation
% of
ownership
held at
March 31,
2008
% of
ownership
held at
March 31,
2007
7
8
9
10
11
12
13
14
Subex Holdings
Inc (wholly owned
subsidiary of Subex
Americas Inc)
Subex (Delaware)
Inc (wholly owned
subsidiary of Subex
Americas Inc)
Syndesis
Development India
Pvt Ltd (wholly
owned subsidiary
of Subex
Americas Inc)
Syndesis IP
Holdings Ltd
(wholly owned
subsidiary of Subex
Americas Inc)
2101874 Ontario
Inc (wholly owned
subsidiary of Subex
Americas Inc)
Subex Americas
Inc
Subex (GB) Ltd
(wholly owned
subsidiary of Subex
Americas Inc)
Subex (Ireland) Ltd
(wholly owned
subsidiary of Subex
Americas Inc)
USA
USA
100
100
India
100
Canada
100
USA
Canada
UK
100
100
100
Ireland
100
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
The financial statements of the Company and its subsidiaries are
prepared under uniform accounting policies in accordance with the
generally accepted accounting principles in India.
During the year, the Company acquired Syndesis Ltd, Toronto,
Canada [Now known as Subex Americas Inc] and its subsidiaries.
The consolidated financial statements include the balances
disclosed in the table relating to the consolidated financial
statements of Syndesis Ltd at the Balance Sheet date.
U S A
India
UK
USA
100
100
100
100
100
100
100
100
Date of Acquisition
Liabilities
Current liabilities
Secured loans
Assets
Fixed assets
Net current assets
Revenue
Expenditure
Profit / (loss) after tax
Amount in Rs. million
March 31, 2008
706.80
336.07
47.87
692.30
1,525.76
1,864.49
(338.73)
Singapore
100
100
USA
100
Nil
Figures pertaining to subsidiaries were reclassified to bring them in
line with company’s financial statements.
I.4. Revenue recognition
Revenue from Contracts for software product licences includes
fees for transfer of licences, installation and commissioning.
1
2
3
4
5
6
Subex
Technologies Inc.
Subex
Technologies Ltd.
India
Subex (UK) Ltd.
Subex Inc.(wholly
owned subsidiary
of Subex (UK)
Ltd.)
Subex (Asia
Pacific) Pte. Ltd,
(wholly owned
subsidiary of
Subex (UK) Ltd.)
Subex Inc (wholly
owned subsidiary
of Subex
Americas Inc)
78
A N N U A L R E P O R T
2007 - 2008
This revenue is recognized under the percentage completion
method based on the extent of work determined to have been
completed as compared to the work involved in the overall scope
of the contract. In the event of any expected losses on a contract,
the entire amount is provided for in the accounting period in which
such losses are first anticipated.
Revenue from sale of additional software licences are recognized
on transfer.
Revenue from Software development is recognized on the basis of
chargeable time or achievement of prescribed milestones as relevant
to each contract.
Sale of hardware under reseller arrangements are recognized on
dispatch of goods to customers and are recorded net of discounts,
rebates for price adjustment, projections, shortage in transit, taxes
and duties.
Interest on investments and deposits are booked on a time
proportion basis taking into account the amount invested and the
rate of interest.
Maintenance and service income is recognised on accrual basis.
I.5. Fixed Assets
Fixed assets are stated at cost of acquisition inclusive of freight,
duties, taxes and interest on borrowed money allocated to and
utilised for fixed assets up to the date of capitalisation and other
direct expenditure incurred on ongoing projects. Assets acquired
on hire purchase are capitalised at gross value and interest thereon
is charged to revenue.
I.6. Depreciation
Fixed assets are depreciated using the straight-line method over
the useful lives of assets. Depreciation is charged on pro-rata
basis for assets purchased/sold during the year.
The rates of depreciation adopted are as under:
Depreciation Rates %
25.00
20.00
20.00
20.00
20.00
20.00
Particulars
Computers (including Software)
Furniture & Fixtures
Vehicles
Office equipments
Intellectual Property Rights
Goodwill
Individual assets costing less than Rs. 5,000 are depreciated in
full, in the year of purchase.
I.7. Employee Stock Option
Employee Stock Option under Employees Stock Option Plan – II
(ESOP-II) are accounted in accordance with the guidelines
stipulated by SEBI. The difference between the market price of the
shares underlying the options granted on the date of grant of
option and the option price is expensed as “Employees
Compensation” over the period of vesting.
Company has floated ESOP III in the financial year 2005-06, which
is on the same lines as ESOP II.
I.8. Employee Benefits
The company’s contribution to provident fund, a defined
contribution scheme, is charged to the profit and loss account on
accrual basis.
Liability for gratuity is funded with Life Insurance Corporation of
India (LIC). Gratuity expense for the year has been accounted
based on actuarial valuation carried out at the end of the financial
year. The retirement benefit obligation recognized in the balance
sheet represents the present value of the defined benefit obligations
adjusted for unrecognized past service cost and as reduced by
the fair value of scheme assets. Any asset resulting from this
calculation is limited to past service cost plus the present value of
available refunds and reduction in future contributions to the
scheme.
Liability for encashment of leave considered to be long term liability
is accounted for on the basis of an actuarial valuation. Provision
for outstanding leave credits considered are short term liability is
as estimated by the management and accrued for, based on last
month’s salary. Other short term employee benefits like medical,
leave travel etc are accrued based on the terms of employment on
a time proportion basis
Other companies in the group run defined contribution schemes,
the cost of which is fully provided for and charged to expenditure.
Accrued leave is accounted for fully and charged to the profit &
loss account.
I.9. Research and development
Expenses incurred on research and development is charged to
revenue in the same year. Fixed asset purchased for research
and development are capitalized and depreciated as per the
Company’s policy.
I.10. Foreign currency transactions and translation
Transactions denominated in foreign currencies are recorded at
the exchange rates prevailing on the date of the transaction.
Monetary items denominated in foreign currencies at year end are
translated at the exchange rate on the date of the Balance Sheet.
Non-monetary items denominated in foreign currencies are carried
at cost. Exchange differences on settlement or restatement are
adjusted in the profit & loss account Premium or discount on
forward contracts is amortized over the life of such contract and is
recognized as income or expense to the Profit and Loss account.
Any profit or loss arising on cancellation or renewal or retirement
of forward contract is recognized in profit and loss account as
appropriate.
On Consolidation,
•
In the case of non-integral operations, assets and liabilities are
translated at the exchange rate prevailing on the balance
sheet date. Revenue and expenses are translated at yearly
average exchange rates prevailing during the year. Exchange
differences arising out of theses translations are included in
‘Exchange Reserve’ under Reserves & Surplus.
In the case of integral operations, assets and liabilities (other
than non-monetary items), are translated at the exchange
rate prevailing on the balance sheet date. Non monetary
items are carried at historical cost. Revenue and expenses
are translated at yearly average exchange rates prevailing
during the year. Exchange differences arising out of these
translations have been charged to the Profit and Loss account.
•
A N N U A L R E P O R T
2007 - 2008
79
I.11. Investments
Long term Investments are stated at cost. Diminution in the value
of investments other than temporary in nature is provided for.
I.12. Income Taxes
Income tax comprises of the current tax provision under the tax
payable method and the net change in the deferred tax asset or
liability in the year. Deferred tax assets and liabilities are
recognized for the future tax consequences of temporary
differences between the carrying values of the assets and liabilities
and their respective tax bases. Deferred tax assets are recognized
and carried forward to the extent that there is a reasonable /
virtual certainty as applicable that sufficient future taxable income
will be available against which such deferred tax assets can be
realized.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which the
temporary differences are expected to be received or settled.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the income statement in the period of
enactment of the change.
Minimum alternative tax (MAT) paid in accordance to the tax laws,
which gives rise to future economic benefits in the form of adjustment
of future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax
after the tax holiday period. Accordingly, MAT is recognized as an
asset in the balance sheet when it is probable that the future
economic benefit associated with it will flow to the Company and
the asset can be measured reliably.
I.13. Cash Flow Statement
Cash flow statement has been prepared in accordance with the
indirect method prescribed in Accounting Standard 3, issued under
the Companies (Accounting Standard) Rules 2006.
I.14. Preliminary and Share issue expenses
Expenses incurred during the Initial Public Offer, follow on offer
and issue of Bonus Shares are amortised over 5 years. Other
issue expenses are charged to the securities premium account.
I.15. Provisions
A provision is recognized when an enterprise has a present
obligation as a result of past event; it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on best
estimate required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to
reflect the current best estimates.
I.16 Impairment Of Fixed Assets
At each balance sheet date, the Company reviews the carrying
amounts of its fixed assets to determine whether there is any
indication that those assets suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of impairment loss.
Recoverable amount is the higher of an asset’s net selling price
and value in use. In assessing value in use, the estimated future
cash flows expected from the continuing use of the asset and from
80
A N N U A L R E P O R T
2007 - 2008
its disposal are discounted to their present value using a pre-tax
discount rate that reflects the current market assessments of time
value of money and the risks specific to the asset.
Reversal of impairment losses recognized in prior years, if any, is
recorded when there is an indication that the impairment losses
recognized for the asset no longer exist or have decreased.
However, the increase in carrying amount of an asset due to
reversal of an impairment loss is recognized to the extent it does
not exceed the carrying amount that would have been determined
(net of depreciation) had no impairment loss been recognized for
the asset in prior years.
II. NOTES TO ACCOUNTS
II.1. Deferred income taxes
a) Provision for income taxes has been made in terms of Accounting
Standard 22 “Accounting for Taxes on Income” issued by Institute
of Chartered Accountants of India.
Movement in deferred tax asset (Liability)
Amount in Rs.
2006-07
2007-08
Net deferred tax asset
at the beginning
of the year
Add: Input of timing
differences for current year
Net deferred tax asset
at the end of the year
168,488,974
7,727,514
(44,410,906)
160,761,460
124,078,066
168,488,974
Particulars
b) The net deferred tax asset as at March 31, 2008 comprises
the tax impact arising from the timing differences on account of:
Amount in Rs.
As at
March 31, 2008 March 31, 2007
13,353,449
155,135,525
168,488,974
- Depreciation
- Business loss
Net deferred asset
23,111,851
100,966,217
124,078,068
As at
Deferred tax assets recognized on unabsorbed tax losses at
March 31, 2008, pertain to the company’s subsidiary, Subex (UK)
Ltd. The recognition is restricted to the extent that there is virtual
certainty of future taxable incomes arising and is supported by the
business achieved subsequent to the year end and on the basis of
confirmed orders on hand in the subsidiary.
II.2. Contingent liabilities
Receivables factored – Rs. 133,367,178 (previous year:
Rs. 416,664,307)
Claims against the company not acknowledged as debts:
Income tax matters under appeal – Rs. 24,365,085 (previous
year: Rs. 39,136,631)
Claim from erstwhile employees – approximately Rs. 48,000,000
(previous year: Rs. Nil)
Others – approximately Rs.50,000,000 (previous year: Rs. Nil)
II.3. The Company has made 2 issues of Global Depository
receipts (GDRs) in April 2006 and June 2006. The details of these
issues are as given below :
Sl
No.
Month of
issue
Equivalent
equity
shares
1 of Rs. 10 each
1 of Rs. 10 each
Amount in Rs.
Issue price No. of GDRs
per GDR
(Rs.)
400.00
532.24
issued
April 2006
June 2006
1,109,878
1
2
11,728,728
In addition, the company has completed a programme of sponsored
GDR offerings, whereby an option has been offered to the existing
share holders of the company to transfer their holdings in favour of
Institutional Investors.
All the above GDR’s are listed on the Professional Securities Market
of the London Stock Exchange
II.4. Acquisition of Subex Americas Inc (formerly Syndesis Ltd,
Canada)
During the year, the Company completed the acquisition of Syndesis
Ltd, Canada, a Company engaged in Service Assurance and
fulfillment space in the Telecom service industry. The acquisition
was effective April 1, 2007 and as at March 31, 2007, the Company
had incurred an amount of Rs. 7403.69 million (including advances
paid to erstwhile owners of Syndesis Limited). Syndesis Limited
has been renamed as Subex Americas Inc during the year.
II.5. Scheme of Arrangement – Services Business
During the year, the Company filed an application with Hon’ble
High Court of Karnataka to transfer the Services Business Division
to Subex Technologies Ltd, a wholly owned subsidiary of Subex
Ltd under a scheme of arrangement. On obtaining the order from
the Hon’ble High Court of Karnataka, the Company has transferred
the Services business to Subex Technologies Ltd with effect from
1st September 2007 (appointed date) at an aggregate consideration
of Rs.310,000,000. The deficit arising out of the transfer amounting
to Rs. 404,560,001 as detailed below has been charged to the Securities
Premium account, in accordance with the order of the Court.
Amount In Rs.
Amount (Rs.)
406,541,994
308,018,007
714,560,001
310,000,000
404,560,001
Particulars of assets and liabilities transferred
Net current assets
Investments in Subex Technologies Inc
Book value of assets transferred
Consideration received
Amount written off to Securities premium
II.6. Foreign Currency Convertible Bonds (FCCB)
During the year 2006-07, the Company issued Foreign Currency
Convertible Bonds (FCCBs) aggregating to US$ 180 million to
Institutional Investors. The bonds carry an initial interest rate of 2%
per annum and are redeemable by March 9, 2012, if not converted
into equity shares as per terms of issue.
Other terms and conditions governing the bonds are as follows:
a) Conversion of the bonds into equity shares at the option of the
bond holders at any time after April 18, 2007
b) Conversion price – Rs. 656.20 per share
c) Exchange rate for purpose of conversion - 1 US$ = Rs. 44.08
f)
d)
Interest of 2% per annum payable semi-annually in arrears
e) Redemption with yield to maturity guaranteed return of 8% per
annum, calculated on semi-annual basis
The Company can exercise an option to redeem the bonds in
whole or in part, on or any time after March 9, 2010, but prior
to January 29, 2011, subject to appropriate approvals at a
price determined on the terms defined in the offer document
g) Listing on the Professional Securities Market of London Stock
Exchange
The difference between the yield to maturity guaranteed rate of
return of 8% and the coupon rate of 2% represents the premium
payable on redemption for is charged to Securities Premium over
the life of the bonds.
II.7. Monies received pending allotment
During the year, the company allotted 2,230,000 warrants to
promoters/ promoters group, entitling each holder to obtain allotment
of one equity share against each such warrant on a preferential
basis at a price of Rs.630.31. Under the terms of issue, the
Company has received 10% of the total consideration amounting
to Rs.140.55 Million. To obtain the underlying equity share, the
balance 90% shall be paid within 18 months from the date of
allotment of the warrants in one or more tranches. The money
received by the Company has been utilized for long term working
capital requirements.
II.8. Operating leases
The Company has various operating leases for office facilities and
residential premises for employees which include leases that are
renewable on a yearly basis, cancelable at its option and other
long term leases. Rental expenses for operating leases included in
the Income statement for the year are Rs. 185,993,051 (previous
year: Rs.91,352,573)
As of March 31, 2008 future minimum lease payments for non-
cancelable operating leases for the next five fiscal years are:
Particulars
Within one year
Due in a period between
one year and five years
Due after five years
Amount In Rs.
March 31, 2008 March 31, 2007
104,428,881
175,042,669
320,237,727
12,796,360
140,026,532
-
II.9. Employee Stock Option Plan (ESOP)
ESOP – II
During 1999-2000, the Company established a Stock Option
Scheme 2000 under which 500,000 options have been allocated
for grant to the employees. Each option comprises of one
underlying equity share of Rs.10/- each and carries an entitlement
of bonus shares if and when declared. This scheme has been
formulated in accordance with the SEBI guidelines on ESOP &
ESPS dated June 19, 1999. As per the scheme, the Compensation
Committee grants the options to the employees deemed eligible by
the Advisory Board constituted for the purpose. The options are
granted at a price, which is not less than 85% of the average
market price of the underlying shares based on the quotation on
A N N U A L R E P O R T
2007 - 2008
81
the Stock Exchange where the highest volume of shares are traded
for 15 days prior to the date of grant. The shares granted vest
over a period of 1 to 4 years and can be exercised over a maximum
period of 3 years from the date of vesting.
Under this scheme 449,271 option have been granted to 538
employees as at March 31, 2008. Out of the above 73,798 options
have been vested. The difference between the market price of
the share underlying the options granted on the date of grant of
option and the exercise price of the option are expensed over the
vesting period as per the SEBI guidelines. The net impact of the
movement in option grants during the period resulted in a debit of
Rs.19,082,165 (Previous year: Debit of Rs. 2,238,027) to the Profit
& Loss account for the year.
ESOP – III
During 2005-2006, the Company established a new Stock Option
Scheme 2005 under which 5,00,000 options have been allocated
for grant to the employees. Subsequently, during the year 2006-
2007, the number of options allocated for grant to the employees
was increased to 2,000,000 options. Each option comprises of one
underlying equity share of Rs.10/- each. This scheme has been
formulated in accordance with the SEBI guidelines on ESOP &
ESPS dated June 19, 1999. As per the scheme, the compensatory
committee grants the options to the employees deemed eligible by
the Advisory Board constituted for the purpose. The options are
granted at a price, which is not less than 85% of the average
market price of the underlying shares based on the quotation on
the Stock Exchange where the traded volume is the highest for the
15 days prior to the date of grant. The shares granted vest over a
period of 1 to 4 years can be exercised over a maximum period of
3 years from the date of vesting.
As on March 31, 2008, 1,724,969 (net) options have been granted
to 989 employees under this scheme. Out of the above 105,539
options have been vested. The difference between the market
price of the share underlying the options granted on the date of
grant of option and the exercise price of the option are expensed
over the vesting period as per the SEBI guidelines. The net impact
of the movement in option grants resulted in a debit of Rs.4,236,147
(Previous year: Debit of Rs. 11,981,639) to the Profit & Loss
account for the year.
Employee Stock Options details as on the balance sheet date are ;
ESOP – I : Nil
ESOP – II :
Amount In Rs.
March 31, 2008 March 31, 2007
Options outstanding at
the beginning of the year
Granted during the year
Forfeited/ cancelled
Exercised
Balance at end of the year
ESOP – III
Options outstanding at
the beginning of the year
Granted during the year
Forfeited/ cancelled
Exercised
Balance at end of the year
261,202
-
16,237
30,927
214,038
364,027
112,200
108,393
106,632
261,202
March 31, 2008 March 31, 2007
422,533
1,671,700
375,551
437
1,718,245
70,380
382,800
24,360
6,287
422,533
Method used for accounting for share based payment plan:
The Company has used intrinsic value method to account for the
compensation cost of stock option to employees of the Company.
Intrinsic value is the amount by which the quoted market price of
the underlying share exceeds the exercise price of the option.
Particulars
Options outstanding at the beginning of the year
ESOP – II
ESOP – III
Granted during the year
ESOP – II
ESOP – III
Exercised during the year
ESOP – II
ESOP – III
Cancelled & Lapsed during the year
ESOP – II
ESOP – III
Options outstanding at the end of the year
ESOP – II
ESOP – III
Options exercisable at the end of the year
ESOP – II
ESOP – III
82
A N N U A L R E P O R T
2007 - 2008
2007-08
2006-07
Options (Nos)
Weighted average
exercise price per
stock option (Rs.)
Options (Nos)
Weighted average
exercise price per
stock option (Rs.)
261,202
422,533
408.57
429.37
364,027
70,380
-
1,671,700
-
112,200
380.31 382,800
284.25
342.55
522.32
442.38
30,927
437
16,237
375,551
106,632
6,287
108,393
24,360
214,038
1,718,245
427.48
261,202
366.67 422,533
408.57
429.37
73,798
105,539
24,634
2,963
Fair value methodology
The fair value of options used to compute pro forma net income
and earnings per equity share have been estimated on the date of
grant using Black-Scholes model.
The key assumptions used in Black-Scholes model for calculating
fair value is : risk-free interest rate of 6.50%, expected life :3 years,
expected volatility of share : 63.92% and expected dividend
yield : 0.63%. The variables detailed herein represent the average
of the assumptions during the pendency of the grant dates.
The impact on the EPS of the Company if fair value method is
adopted is given below:
Particulars
Net profit /(loss) (as reported)
Add: Stock-based employee compensation relating to grants after April 1, 2007
Less: Stock based compensation expenses determined under fair value based
method for the above grants
Net profit /(loss) (proforma)
Basic Earning /(loss) per share (as reported)
Basic Earning /(loss) per share (proforma)
Diluted Earning /(loss) per share (as reported)
Diluted Earning /(loss) per share (proforma)
March 31, 2008
(680,715,371)
23,318,312
62,566,550
(719,963,609)
(19.49)
(20.61)
(19.49)
(20.61)
Amounts in Rs.
March 31, 2007
675,660,375
14,219,667
22,757,321
667,122,721
21.10
20.83
21.02
20.75
II.10. Related party information
A) Related parties
Enterprises over which some of the directors exercise significant
influence: Cellcomm Solutions Ltd (formerly known as Subex
Cellcomm Ltd), Subex Holdings Private Limited (SHPL)
Key management personnel
Subash Menon, Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath, Whole Time Director
B) Details of the transactions with the related parties other than employees who are related to the directors of the company are as under:
Nature of Transaction
Enterprises over which some of the
directors exercise significant influence
Amounts in Rs.
Key management personnel
a) Salary, perquisites and commission etc.
b) Purchase of hardware from Cellcomm Solutions Limited
c) Amount due to Cellcomm Solutions Limited as at year end
d) Money recieved against warrants issued
* During the year ended March 31, 2008, the Company has paid
an amount of Rs. 38,285,906 to its Whole-time directors towards
remuneration and has applied to the Central government for
approval of payments that are in excess of the maximum
remuneration payable under the Companies Act, 1956. Pending
II.11. Earning per Share (EPS)
Profits /(loss) after tax attributable to shareholders
Weighted average number of shares for basic EPS
Weighted average number of shares for diluted EPS
Earning /(loss) per Share – basic
Earning /(loss) per Share – diluted
Face value of shares : Rs. 10 each
The difference in the number of shares information used for
calculation of diluted EPS as compared to that used for computing
Basic EPS is due to existence of stock options that are granted to
employees.
The Company issued certain warrants during the year which are
outstanding at the end of the year. Considering the issue price of
2007-08
-
-
-
113,455,800
2006-07
-
693,243
330,469
-
2007-08
12,180,000*
-
-
27,103,330
2006-07
24,946,139
-
-
-
the Central government’s approval, such excess is treated as
monies due from the Whole-time directors being held by them in
trust for the Company and is included under Loans and advances
(Schedule I to the financial statements).
2007-08
(680,715,371)
34,930,103
35,237,883
(19.49)
(19.49)
Amount in Rs.
2006-07
675,660,375
32,020,111
32,145,562
21.10
21.02
these warrants are higher than the fair value of the underlying
shares at the end of the year, they are ignored for computing
number of shares for purpose of diluted earnings per share.
The options and warrants outstanding at March 31, 2008 are anti-
dilutive at the date and hence ignored for purposes of computing
Diluted EPS.
A N N U A L R E P O R T
2007 - 2008
83
II.12. Segmental Reporting
The Group’s operation comprises of software development and
services. Primary segmental reporting comprises of products and
services segment. Secondary segments are identified based on
geographical location of customers. The accounting principles
consistently used in the preparation of the financial statements are
also consistently applied to record income and expenditure in
individual segments. These are as set out in the note on significant
accounting policies.
Information about primary business segment:
In primary segment, revenue and direct expenses, which relate to
particular segment and which are identifiable, are reported, while
certain expenses such as depreciation and interest, which form a
significant component of total expenses, are not specifically allo-
cable to specific segments as the underlying services are used
interchangeably. The company believes that it is not practical to
provide segment disclosures relating to those costs and expenses,
and accordingly these expenses are separately disclosed as
“unallocated” and directly charged against total income.
Amounts in Rs.
Particulars
Products
Services
Consolidated
Revenues
Segment results before
interest, depreciation & taxes
Add: Unallocable Income,
net of unallocable expense
Interest expense
Depreciation & Amortization
Profit before tax
Provision for taxation:
Current
MAT carried forward
Fringe benefit tax
Deferred
Profit after tax
2007-08
3,618,480,866
2006-07
2006-07
2,287,666,256 1,237,426,902 1,121,336,342
2007-08
2007-08
4,855,907,768
2006-07
3,409,002,598
(787,497,615)
453,574,552
72,453,627
123,980,655
(715,043,988)
577,555,207
607,500,000
325,465,007
184,041,384
(617,050,379)
234,900,000
87,318,294
148,527,292
576,609,621
24,444,655
(10,042,000)
11,930,660
37,331,677
(680,715,371)
70,226,003
(11,128,731)
5,107,115
(163,255,141)
675,660,375
Particulars of Segment Assets & Liabilities
Products
Services
Unallocable
2007-08
2006-07
918,285,409 1,451,945,892
843,240,596
1,518,221,858
2007-08
2006-07
1,602,065,947 1,245,949,317 297,699,646 394,773,128
2006-07
2007-08
Segment assets
Segment liabilities
Unallocable assets exclude
Goodwill
Investments
Advance income taxes
Deferred tax asset
Total
Unallocable liabilities exclude
Loans - secured
Loans – unsecured
Provisions
Total
84
A N N U A L R E P O R T
2007 - 2008
Amount in Rs.
Consolidated
2007-08
2,818,051,002
1,518,221,858
2006-07
3,092,668,337
843,240,596
15,293,562,487
-
195,166,695
124,078,066
7,021,229,033
7,403,696,025
55,729,889
168,488,974
15,612,807,248 14,649,143,921
1,150,161,402
8,120,839,291
134,408,936
9,405,409,629
635,166,392
7,807,500,000
94,795,108
8,537,461,500
Fixed assets used in the company’s business or liabilities contracted
have not been identified to any of the primary reportable segments,
as the fixed assets and services are used interchangeably between
segments. Significantly all the fixed assets of the Company are
Information about secondary business segment
Revenue attributable to location of customers is:
located in India. The Company believes that it is currently not
practicable to provide segment disclosures relating to total assets
and liabilities since a meaningful segregation of the available data
is onerous.
Amount in Rs.
Products
Services
Consolidated
APAC, etc
AMERICAS
EMEA
Total
2007-08
561,219,422
1,255,241,906
1,802,019,538
3,618,480,866
2006-07
440,139,320
591,977,963
1,255,548,973
2,287,666.256
2007-08
-
1,237,426,902
-
1,237,426,902
2006-07
-
1,121,336,342
-
1,121,336,342
2007-08
561,219,422
2,492,668,808
1,802,019,538
4,855,907,768
2006-07
437,522,649
1,715,930,976
1,255,548,973
3,409,002,598
Segment assets based on their location
APAC
AMERICAS
EMEA
Total
2007-08
908,543,276
1,075,479,416
834,028,310
2,818,051,002
Amount in Rs.
2006-07
1,341,346,632
780,896,007
970,425,698
3,092,668,337
II.13. Others
1.
The Company is availing non-fund based limits and overdrafts
against lien on the fixed deposits. Amount of such non-fund
based limits utilized as on the balance sheet date is Rs.
48,463,522 (Previous year: Rs. 343,017,163).
Estimated amount of contracts, remaining to be executed on
capital account and not provided for (net of advances paid)
Rs.5,199,547 (Previous year: Rs. 9,277,855)
2.
3. Unclaimed dividend of Rs.805,014 represent dividends not
claimed for the period from 2001-2008. No part thereof has
remained unpaid or unclaimed for a period of seven years
from the date they become due for payment requiring a
transfer to the ‘Investor Education and Protection Fund’.
Personnel Cost for the year includes expenditure on Research
and Development of Rs.66,755,179 (Previous year:
Rs. 44,871,701). This is as certified by the management and
relied upon by the auditors.
4.
6.
5. A director of the Company has provided a personal guarantee
in respect of long term loans from Banks of Rs.755,848,738
included in schedule D of the financial statements. Further, the
promoters’ shares have also been pledged towards these loans.
The Company has applied to the Central Government to
regularize the excess managerial remuneration paid to whole
time directors for the year ended March 31, 2008 amounting
to Rs. 28,685,906. [Pending Central Government’s approval,
such excess is treated as monies due from the wholetime
Directors held by them, in trust, for the Company and is
included under loans & advances (Schedule I to the financial
statements)].
The Company adopted the Accounting Standard 15 on
Employee Benefits with effect from April 1, 2006. In
accordance with the transitional provisions of the Standard.
The net Incremental Liability on account of gratuity and
•
leave salary amount to Rs.8,527,028 has been charged
to the balance of General Reserve at April 1, 2006.
Termination benefits (included under Miscellaneous
expenditure in the balance sheet) incurred in respect of
employees in Subex (UK) Limited in the financial year
2006-07 amounting to Rs.69,130,659 has been amortized
over a period from the time such costs were incurred till
March 31, 2010 on a prorata basis.
7.
•
8.
The Company offers the following employee benefit schemes
to it’s employees. The following table sets out the funded
status of the defined Benefit Schemes and the amount
recognized in the financial statements.
A N N U A L R E P O R T
2007 - 2008
85
I
1
2
3
4
5
6
7
8
II
1
2
III
1
2
3
4
5
IV
1
2
3
4
5
6
7
8
9
10
V
1
2
3
4
5
6
7
VI
1
2
3
4
Components of employer expense
Current Service cost
Interest cost
Expected return on plan assets
Curtailment cost/(credit)
Settlement cost/(credit)
Past Service Cost
Actuarial Losses/(Gains)
Total expense recognized in the Statement of Profit & Loss Account
Actual Contribution and Benefit Payments for year ended 31 March 2008
Actual benefit payments
Actual Contributions
Net asset/(liability) recognized in Balance Sheet as at March 31, 2008
Present value of Defined Benefit Obligation (DBO)
Fair value of plan assets
Funded status [Surplus/(Deficit)]
Unrecognized Past Service Costs
Net asset/(liability) recognized in Balance Sheet
Change in Defined Benefit Obligations during the year ended March 31, 2008
Present Value of DBO at beginning of year
Current Service cost
Interest cost
Curtailment cost/(credit)
Settlement cost/(credit)
Plan amendments
Acquisitions
Actuarial (gains)/ losses
Benefits paid
Present Value of DBO at the end of year
Change in Fair Value of Assets during the year ended March 31, 2008
Plan assets at beginning of year
Acquisition Adjustment
Actual return on plan assets(estimated)
Actuarial Gain/(Loss)
Actual Company contributions(less risk premium, ST)
Benefits paid
Plan assets at the end of period
Actuarial Assumptions
Discount Rate
Expected Return on plan assets
Salary escalation
Attrition Rate
March 31 2008
2,487,700
529,720
(91,370)
-
-
-
1,221,020
4,147,070
Amount in Rs.
March 31 2007
3,426,895
333,852
98,418
-
-
-
(72,395)
3,786,772
1,215,060
1,102,330
632,474
366,658
10,295,066
1,092,912
(9,202,154)
-
(9,202,154)
7,229,036
2,487,700
529,720
-
-
-
-
1,263,670
(1,215,060)
10,295,066
1,062,832
-
(91,370)
51,440
1,102,330
(1,215,060)
1,092,912
8.70%
9.00%
5.00%
5.00%
7,229,036
1,062,832
(6,166,204)
-
(6,166,204)
4,173,156
3,426,895
333,852
-
-
-
-
(72,393)
(632,474)
7,229,036
1,230,230
-
98,418
-
366,658
(632,474)
1,062,832
8.00%
8.00%
5.00%
5.00%
9.
The Company has entered into the following derivative instruments for the purposes of hedging the risks associated with foreign
exchange exposures as at March 31, 2008:
(i) Forward /Option Contracts:
Particulars
Forward contracts
Option contracts
March 31, 2008
Buy/Sell
Sell
Sell
Amount (INR)
55,987,000
202,244,000
US$
1,400,000
5,000,000
March 31, 2007
US$
800,000
Nil
Buy/Sell
Sell
Nil
Amount (INR)
37,238,000
Nil
Amount in Rs.
As per the recent guidelines on accounting for Derivatives issued by the Institute of Chartered Accountants of India, the Company has
provided for Mark to Market losses of Rs. 5,912,868 (included in Other provisions under Schedule J) in respect of the derivative contracts
outstanding at the end of the year.
10. Previous year’s figures have been regrouped to conform to the classifications for the current year.
86
A N N U A L R E P O R T
2007 - 2008
SHAREHOLDERS’ INFORMATION
:
REGISTERED AND CORPORATE OFFICE
The Registered office of the company is at Adarsh Tech Park,
Devarabisanahalli, Outer Ring Road, Bangalore – 560 037
DATE AND VENUE OF THE ANNUAL GENERAL MEETING (AGM)
Date
Venue
: September 23, 2008
: Adarsh Tech Park, Devarabisanahalli,
Outer Ring Road, Bangalore – 560 037
4.00 P.M.
Time
DATES OF BOOK CLOSURE
From September 22, 2008 to September 23, 2008 (both days
inclusive)
BOARD MEETINGS & FINANCIAL CALENDAR
Financial year
Calendar of board meetings to adopt the accounts (tentative and
subject to change):
For quarter ending June 30, 2008
For quarter ending September 30, 2008 – on October 29, 2008
For quarter ending December 31, 2008 – on January 29, 2009
For the year ending March 31, 2009
DIVIDEND
The Directors have not proposed any dividend to be paid for the
financial year 2007 – 2008.
LISTING ON STOCK EXCHANGES
Shares of the Company are quoted on National Stock Exchange of
India Limited (NSE) since September 5, 2003; on Bombay Stock
Exchange Limited (BSE) since July 31, 2000 and the Global
Depositary Receipts (GDRs) and Foreign Currency Convertible
: April 1 to March 31
– on April 29, 2009
– on July 29, 2008
Bonds (FCCBs) of the company are listed at London Stock
Exchange since March 9, 2007.
During the financial year 2007 – 2008, the company has voluntarily
delisted from the Bangalore Stock Exchange Limited.
Listing Fees have been paid to all the above Stock Exchanges for
2008-09.
The stock codes of the Company at the Stock Exchanges are as
follows:
Name and address of the stock exchange
National Stock Exchange of India Limited,
Exchange Plaza, 5th Floor,
Bandra Kurla Complex,
Mumbai- 400051
Bombay Stock Exchange Ltd,
Phiroze Jeejeebhoy Towers
Dalal Street, Fort, Mumbai 400023
London Stock Exchange
10 Paternoster Square
London
EC4M 7LS
Stock code
SUBEX
532348
SUBX
The International Securities Identification Number (ISIN) for the
company’s shares in dematerialized form is INE754A01014.
CUSTODIAL FEE
Pursuant to the Securities and Exchange Board of India (SEBI)
Circular No. MRD/DoP/Stock Exchange/DEP/CIR-4/2005 dated
January 28, 2005 issuer companies are required to pay custodial
fees to the depositories with effect from April 1, 2005. Accordingly,
the company has paid custodial fees for the year 2008-09 to
NSDL and CDSL on the basis of the number of beneficial accounts
maintained by them as on March 31, 2008.
STOCK MARKET DATA RELATING TO SHARES LISTED IN INDIA
Monthly high and low quotations during each month in last financial year as well as the volume of shares traded at National Stock Exchange
of India Limited and The Bombay Stock Exchange Limited are:
Month
Apr ‘07
May ‘07
Jun ‘07
Jul ’07
Aug ‘07
Sep’ 07
Oct ‘07
Nov ‘07
Dec ‘07
Jan ‘08
Feb ‘08
Mar ‘08
High
Rs.
670.00
675.00
687.00
644.00
600.00
612.00
448.70
353.00
370.00
378.00
328.00
269.90
TOTAL
NSE
Low
Rs.
520.00
556.00
577.05
575.25
505.00
415.00
321.05
273.00
292.25
230.00
248.00
138.00
Volume
Nos.
1149169
891712
775606
893932
500025
2814095
2555839
685313
1468454
1364787
333743
1421973
14854648
High
Rs.
629.90
675.00
646.00
644.00
600.00
610.00
450.00
357.95
365.00
379.00
324.00
270.00
TOTAL
BSE
Low
Rs.
520.00
575.05
578.00
538.70
440.00
415.10
320.00
273.00
292.55
234.00
245.00
139.20
Volume
Nos.
451256
489335
527022
546409
245720
1276892
2165870
379346
10166923
845169
154867
813161
18061970
A N N U A L R E P O R T
2007 - 2008
87
SUBEX LIMITED SHARE PRICE VERSUS NSE S&P CNX NIFTY AND SENSEX
7000
6000
5000
4000
3000
2000
1000
0
Apr
May
Aug
Jul
Jun
Subex share price
Sep
800
700
600
500
400
300
200
100
0
25000
20000
15000
10000
5000
0
800
700
600
500
400
300
200
100
0
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Subex
SENSEX
Oct
Nov
Dec
Jan
S&P CNX NIFTY
SHAREHOLDING PATTERN
Distribution of shareholding:
No. of Equity shares held
As on March 31, 2008
As on March 31, 2007
No. of shareholders
15,748
% of shareholders
91.86
No. of shareholders
9,735
% of shareholders
87.35
660
342
89
65
42
70
127
17,143
3.84
1.99
0.51
0.37
0.24
0.40
0.74
100
699
303
94
74
36
70
134
11,145
6.27
2.72
0.84
0.66
0.32
0.63
1.20
100
As on March 31, 2008
No. of share
holders
Voting
strength %
No. of shares
held
16,331
694
2
16
60
40
17,143
40.77
5.86
8.85
13.00
0.40
31.12
100.00
1,42,08,388
20,43,775
30,83,103
45,28,486
1,38,234
1,08,45,103
3,48,47,089
As on March 31, 2007
Voting
strength
No. of share
holders
No. of shares
held
10,312
685
2
32
77
37
11,145
18.93
3.87
8.73
14.59
0.52
53.35
100.00
65,91,762
13,46,948
30,40,960
50,79,842
1,81,885
1,85,74,328
3,48,15,725
1
5001
10001
–
–
–
5000
10000
20000
20001
–
30000
30001
40001
50001
-
-
40000
50000
- 100000
100001 and above
Categories of shareholders
Category
Public & Others
Companies
Core Promoters
Mutual Funds
ESOP
FII
TOTAL
88
A N N U A L R E P O R T
2007 - 2008
R&T AGENTS AND SHARE TRANSFER SYSTEM
By a tripartite agreement dated December 5, 2001 in respect of
shares held with NSDL and by a tripartite agreement dated
November 27, 2001 in respect of shares held with CDSL, Canbank
Computers Services Limited, R & T Centre, Naveen Complex,
4th Floor, 14 M G Road, Bangalore –560 001, were appointed as
‘Registrar and Transfer Agent’ both in respect of shares held in
physical form and dematerialized form.
Process for the transfer of shares:
Share transfers would be registered and returned within a period
of 20 days from the date of receipt, if the documents are clear in all
respects. The Company holds Share Transfer Committee Meetings
up to three times a month, as may be required, for approving the
transfers / transmissions of equity shares.
Share transfers and other communication regarding Share
certificates and change of address, etc., may be addressed to:
M/s Canbank Computer Services Ltd.,
R & T Centre
Naveen Complex, 4th Floor,
#14, M.G.Road,
Bangalore -560 001
Phone : 91-80-25320541 / 542 / 543
Fax : 91-80-25320544
Email : ccslrnt@vsnl.com
Website: www.canbankrta.com
SHARES HELD IN PHYSICAL AND DEMATERIALISED FORM
As on March 31, 2008, 99.80% of the company’s shares were held
in dematerialized form and the rest in physical form.
OUTSTANDING GDRs / ADRs / WARRANTS / CONVERTIBLE
INSTRUMENTS AND THEIR IMPACT ON EQUITY
As on March 31, 2008, 9,601,964 GDRs issued by the company
are outstanding. The company issued Foreign Currency
Convertible Bonds amounting to US $ 180 Million in March 2007,
which are outstanding as on March 31, 2008. The details of the
warrants issued during the financial year are disclosed in Note II.7
Schedule P to the financial statements in the Annual Report.
LEGAL PROCEEDINGS
There are no legal proceedings against the company which are of
material nature.
NOMINATION
Pursuant to the provisions of Section 109A of the Companies
Act, 1956, members may file nomination in respect of their
shareholdings. Any member willing to avail this facility may submit
to the Company the prescribed Form 2B (in duplicate), if not
already filed. Form 2B can be obtained with the help of the R&T
Agents. Members holding shares in electronic form are requested
to give the nomination request to their respective Depository
Participants directly.
PROCEDURE FOR CLAIMING UNPAID DIVIDEND
In terms of Section 205A (5) of the Companies Act, 1956, monies
transferred to the Unpaid Dividend Account of the Company, which
remain unpaid or unclaimed for a period of seven years from the
date of such transfer, shall be transferred by the Company to the
Investor Education and Protection Fund established by the Central
Government.
Brief particulars of dividend declared on the equity share capital
are given below:
Which year the
dividend pertains
to
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Declared at the
AGM / Board
meeting held on
March 17, 2000
June 19, 2000
July 13, 2001
November 15, 2002
September 9, 2003
August 24, 2004
January 27, 2005
July 28, 2005
October 28, 2005
August 28, 2006
January 29, 2007
July 26, 2007
Nature of dividend
% of dividend
Due date for
transfer to the fund
Interim
Final
Final
Final
Final
Final
Interim
Final
Interim
Final
Interim
Final
35
5
20
10
10
20
10
20
15
10
15
20
See note below*
See note below*
Before August 12, 2008
Before December14, 2009
Before October 8, 2010
Before September 23, 2011
Before February 26, 2012
Before August 27, 2012
Before November 27, 2012
Before September 27, 2013
Before February 28, 2014
Before September 25, 2014
The Company declared bonus at 1:1 in the years 2000-01 and 2005-06.
* The interim dividend and final dividend declared for the
FY 1999-00 which was unclaimed for 7 years from the date of
payment being due, was transferred to the Investor Education and
Protection Fund.
Members can claim the unpaid dividend from the Company before
transfer to the Investors Education and Protection Fund. It may be
noted that after the unpaid dividend is transferred to the said Fund,
the same cannot be claimed.
A N N U A L R E P O R T
2007 - 2008
89
INVESTOR GRIEVANCES
Investor grievances received from April 1, 2006 to March 31, 2007:
Nature of complaints
Non-receipt of share certificates/ refund orders/ call money
notice/allotment advice/ dividend warrant
Letters from NSDL, Banks etc.
Correction/ change of bank mandate of refund order, change of address
Postal returns of cancelled stock invests/ refund orders/ share
certificates/ dividend warrants
Other general query
Total
Received
Cleared
-
-
-
-
5
5
-
-
-
-
5
5
During the year ended March 31, 2008, the Company has attended to all the investors’ grievances / correspondence within a period of 10
days from the date of receipt of the same.
ADDRESS FOR CORRESPONDENCE
For any queries, please write to:
Raj Kumar
Chief Counsel & Company Secretary
Subex Limited, Adarsh Tech Park,
Devarabisanahalli, Outer Ring Road,
Bangalore – 560 037, India.
Telephone: 91 80 6659 8700
Fax: 91 80 6696 3333
Email: rajkumar.c@subexworld.com
investorrelations@subexworld.com
WEBSITE
Company’s website www.subexworld.com contains comprehensive
information about the company, products, press releases and
investor relations. It serves to inform the shareholders by providing
key information like Board of Directors and the committees, financial
results, shareholding pattern, distribution of shareholding, dividend
etc.
90
A N N U A L R E P O R T
2007 - 2008
C M Y K
SUBEX LIMITED, ADARSH TECH PARK , DEVARABISANAHALLI, OUTER RING ROAD, BANGALORE 560 037, INDIA
BROOMFIELD lDUBAI lLONDON lIPSWICH lMELB OURNE
ONTARIO lOT TAWA lPIT TSBURGH lSINGAPORE lSYDNEY
www.subexworld.com
Q
2
C M Y K