powering the ROC
Annual Report
2009-2010
the future
is bright
contents
Financial Highlights
Chairman’s Letter to Shareholders
It’s Time to Bring in Business Optimization - Sudeesh Yezhuvath
The New - Age Communications Service Provider - Mark Nicholson
Product Innovation at Subex - Anuradha
Tough Times Don’t Last, Tough People Do - Monisha Tambay
Subexian Pride Award Winners & Subex Charitable Trust
Board of Directors & Management Team
Directors’ Report
Corporate Governance
01
02
04
06
08
10
12
13
16
23
29 Management Discussion & Analysis
Financial Review - Standalone
39
Financial Review - Consolidated
64
Shareholders’ Information
85
ABOUT SUBEX LIMITED
Subex Limited is a leading global provider of Operations and Business Sup-
port Systems (OSS/BSS) that empowers Communications Service Providers
(CSPs) to achieve competitive advantage through Business Optimization
and Service Agility - thereby enabling them to better operational efficiency
to deliver enhanced service experiences to subscribers.
The company pioneered the concept of a Revenue Operations Center (ROC)
– a centralized approach that sustains profitable growth and financial
health through coordinated operational control. Subex’s customers include
36 of the world’s 72 biggest telecommunications service providers.
The company has more than 300 installations across 70 countries.
powering the ROC
financial
highlights
Particulars (Consolidated)
Total Income
Export Sales
Operating Profits (EBITDA) Before Exceptional Items
Depreciation & Amortization
Profit/(Loss) Before Tax and Exceptional Items
Profit/(Loss) After Tax & Exceptional Items
Share Capital
Reserves & Surplus
Net Worth
Gross Fixed Assets
Net Fixed Assets
Total Assets
Figures in Rs. Million
Except Key Indicators
4,747.81
1,732.32
947.23
163.58
309.49
1,002.96
579.83
2,093.05
2,730.00
1,605.11
195.75
9,217.97
Key Indicators
Earnings Per Share (Year End) (Rs.)
Cash Earnings Per Share (Year End) (Rs.)
Book Value Per Share (Rs.)
Debt (Including Working Capital) Equity Ratio
EBITDA/Sales (%)
Net Profit Margin (%)
Return On Year End Net Worth (%)
Return On Year End Capital Employed (%)
25.87
7.87
47.08
2.32
20.46
21.66
36.74
11.06
FY10 proved we
are here to stay
WWW.SUBEXWORLD.COM
01
Chairman’s Letter to Shareholders
dear shareholders
Adversity, I had written last year, is a great
opportunity to introspect and improve. Your
company did exactly that during the just concluded
financial year FY10. Despite the de-growth in
revenue, we improved our margin quite significantly.
On the whole, the year turned out to be quite
satisfying. Let us take a look at the numbers.
Product business, which has been improving over the past 24 months, recorded
Rs. 943.06 million as EBITDA – 23.8% on revenue. In keeping with the global
scenario, product revenue was lower at Rs.3946.46 million as compared to FY09.
The contribution of products to the total revenue stood at 83% and the company
made a net profit (excluding Exceptional Items) of Rs. 208.24 million.
The Year That Was – A Snapshot
Financial year ended 31st March, 2010 was remarkable in more ways than one. Apart from
making a strong come back on the profit front, we gained commendable traction with our
Revenue Operations Centre (ROC) offering. While ensuring that we bring the company back to
a sound financial footing, we were focused on growth opportunities in the future. That resulted
in the launch of two new products and significant investment in ROC. Further, we stepped up
our efforts in Managed Services. Just as all these efforts were progressing on the business
front, we took a key step towards improvement of the balance sheet through the reduction of
debt – FCCB Restructuring. On the whole, FY10 was quite eventful. The movement in revenue
and EBITDA over the past several years has been captured in the graph given below. As can
be seen, the company has turned around fully during FY10.
powering the ROC
41%
5000
4000
3000
2000
1000
1167
4385
3618
3946
23.8%
2288
16%
11.5%
0
-1000
-2000
-3000
FY06
FY07
FY08
FY09
FY10
-22%
Revenue in Rs. Mln.
EBITDA
50%
40%
30%
20%
10%
0
-10%
-20%
-30%
Way Forward
The company has once again become profitable
at both EBITDA and PAT levels. The next step is
revenue growth. Given the non linearity of the
business model, any growth in revenue will flow
through to the bottomline. Your company slipped
and fell. But Subexians are a tough lot and we
got going when the going got tough. We thought
through the issues and took all the appropriate
steps to bring your company back from the brink.
Now that we are back, it is once again growth and
superior performance in the future. 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. Dear Shareholders, Abraham Lincoln
once said that the best way to predict the future is
to create it. Each and every Subexian stays duty
bound and committed to create a glorious future
for your company.
Subash Menon
Founder Chairman, Managing
Director & CEO
We expect this strategy to propel our growth in
the coming years. Evidence has already been
seen in the form of an improving pipeline with
an increasing slant on managed services. Most
of the contracts won during FY10 were for ROC
for one or more applications. In short, we feel
fully prepared to take advantage of the changing
global landscape which has resulted in higher
growth in Business Optimization sector. Given the
global leadership that we enjoy in the space and
the three pronged strategy that is fast proving to
be successful, we are quite confident of not only
maintaining our leadership position, but also wid-
ening the gap with our competitors by increasing
our market share.
FCCB Restructuring
Your company had contracted US$ 180 million
of quasi debt in the form of Foreign Currency
Convertible Bonds (FCCBs) in March 2007 with a
tenor of 5 years. With the high level of erosion in
share price, conversion of these FCCBs to equity
did not seem a possibility thereby converting them
into pure debt repayable in March 2012. As the
quantum of repayment would be quite high, the
company would naturally find it a herculean task to
repay in March 2012. So, a decision was taken to
restructure the bonds to the extent possible. US$
141 million worth of bonds were restructured by
applying a discount of 30% to the face value and
reducing the conversion price from Rs. 656.20 to
Rs. 80.31. This has now improved the possibility
of conversion phenomenally thereby reducing the
potential redemption amount to an easily manage-
able quantum. It is heartening to note that almost
one third of the restructured bonds have been
converted to equity as of 31st March, 2010. With
performance improving with every passing quarter,
we are confident that all the restructured bonds
will be converted prior to the date of maturity
thereby removing the debt overhang completely.
Business Strategy
At the end of every global recession, the world
experiences an upswing in the global economy.
Most of the companies fail to see this opportunity
and consequently, turn very shortsighted during
the recession resulting in them being totally
unprepared to take advantage of the upswing,
thereby losing out to competition. Being cognizant
of this reality, Subex had taken adequate care to
ensure that long term prospects are not sacrificed
at the altar of short term gains. Towards this end,
we have been working on a three pronged strategy
– problem, solution and delivery.
The first element of the strategy concerns the
problems being faced by telcos. Your company
has identified specific issues that need to be
addressed. This involves issues like operational
efficiency, margin management, cost manage-
ment, revenue leakage etc. The next element,
‘solution’, looks at the packaging and presentation
of the solutions to address the identified problems.
The platform ROC underpins this strategy. Subex
has been investing heavily in ROC right through
the difficult period and that has resulted in overall
acceptance of the platform by a variety of telcos.
ROC, a unique concept pioneered by Subex, lends
a very desirable differentiation to our offering while
extending an attractive road map to the telcos. This
road map ensures that the investments made now
by the telcos are future proofed and also provides
a long term vision for the evolution of higher mar-
gin and better customer service. The final element
is the manner in which ROC is delivered. Apart
from the conventional license model of delivery,
Subex has been focusing on managed services.
This model, which has found favour with both
large and small telcos alike, enables the telcos
to stay focused on their core operations while
transferring the non-core activities to us. Given the
deep domain expertise and the global exposure
at Subex, we are in a position to use the products
in a better manner on behalf of the telcos and
help them gain from their investments like never
before. Telcos need not invest in building domain
expertise and in constantly scaling up. They
can now obtain service level commitments from
us and need only monitor to ensure that those
commitments are met. This model of engagement
results in a deep relationship between every telco
and us with both sides finding value in making it
an ever lasting one.
WWW.SUBEXWORLD.COM
03
Sudeesh Yezhuvath, Chief Operating Officer & Wholetime Director
it’s time to bring in
business optimization
powering the ROC
The overarching theme that is
emerging now is a need to do more with
less, but as we can see from the above, the
challenge is very significant.
Telecommunications has been a high growth
industry since its inception and is now matur-
ing. Markets are entering into their next
phase of evolution and that means the pace
of growth is starting to come down after a
scorching start. The developed markets are
all saturated with market penetration well
in excess of 100% in most markets. With
population stagnating, growth by way of new
subscriber addition is not a real possibility.
To add insult to injury, telecom – as a business –
is getting commoditized. The holy grail for growth
in the past few years was 3G and adoption of data
based services. Data adoption has really taken off
in the developed markets with the arrival of smart-
phones like the iPhone but this is now presenting
a new problem to telecom operators. While such
phones cause a significant increase in data traffic
by way of application and video downloads, shar-
ing etc., they seldom generate much extra revenue
for the operator. The cost of carrying such traffic is
high as these are bandwidth hungry services and
the operator needs to spend money on network
equipment to maintain acceptable quality of
services. However, the additional revenue from
these services is not at all commensurate with the
extra investment needed in network equipment.
Thus, in developed markets, the telecom operator
is faced with the reality of a slow growth model.
In developing markets such as India, there is still
high growth from subscriber addition but here, the
challenge comes from hyper-competition. Price
points are under constant pressure and profit mak-
ing is extremely difficult.
Both these situations are indicative of telecom
business coming into maturity. Telecom is a rela-
tively young industry with a history of about thirty
years only. As the business matures, operators are
finding that they have to go back to old business
commonsense practices such as running efficient
operations. In the days of heady growth and thus
guaranteed profits, efficiency was not on top of the
agenda for a telecom executive. Now, profits can
be made only if the cost can be managed and that
can be achieved only through improved efficiency.
Thus far, cost reduction programs largely hinged
on manpower reduction but that has also run its
course. The ‘low hanging fruit’ is gone and not
much more can be achieved by way of margin by
reducing manpower costs – what needs to come
down is the overall operational cost. Hence, the
need is to look squarely at operations and figure
out what best can be done to improve there.
Strange as it may sound, this is not something
that telcos are used to. This requires a change in
approach and mentality for them. Various surveys
have repeatedly found that telco leaks amount
to more than 10% of their revenue, but there has
never been concerted and clear action to address
those. Of course, the telco environment is very,
very complex and hence extremely difficult to
manage well. They are made up of operational
silos (enterprise, retail, mobile, ISP, wireline,
video etc.) and these silos do not interact well
and thus cause operational inefficiencies. For
instance, a telco that provides wireline, mobile
and TV services to a customer cannot – more
often than not – make out what margin they make
from that particular customer. On top of this, add
the tremendous volumes of data that telcos have
to deal with (a tier-1 operator will have billions
of transactions a day) and you have the perfect
recipe for huge leakages and inefficiencies. The
overarching theme that is emerging now is a need
to do more with less but as we can see from the
above, the challenge is very significant.
What is now required is a methodology to achieve
this objective and telcos are waking up to the
potential of Business Optimization as a means
to towards this end. Business Optimization is all
about improving efficiencies within the telco and
is based on three themes - prevention of leakage,
cost management and operational efficiency.
Traditionally, these have been addressed through
‘point’ solutions that further increased the prob-
lems due to siloed approach. These three areas
touch upon the lifeline of the telco, the revenue
chain. Revenue chain can be defined as the series
of business processes and activities that happen
in a telco from the moment they have a sales lead
to the time the lead turns into a customer, gets
activated, starts using the services and finally pays
cash. This lead-to-cash operation is the revenue
chain for the telco and to achieve efficiencies in
operations and thus profits, the revenue chain
needs to be managed proactively and holistically.
Subex has been a proponent of this approach and
has invested heavily into readying itself to be able
to provide such support to telcos. We pioneered
the concept of ROC as a pragmatic approach to
manage the revenue and that has been accepted
well in the market. All our products impact the
revenue chain and we see great potential for our
products and solutions in these times of chal-
lenge. It is not just with products that we support
the telcos as their need goes beyond that. There is
an increased relevance for support on operations
with Managed Services and Subex is well posi-
tioned in that as well. Overall, we see tremendous
opportunity for our solutions and services as the
telecom market matures and we are well posi-
tioned to take advantage of the scenario.
Sudeesh Yezhuvath
Chief Operating Officer & Wholetime Director
WWW.SUBEXWORLD.COM
05
Mark Nicholson, Chief Technology Officer
the new-age
communications
service provider
powering the ROC
For many Communication Service Provid-
ers (CSPs), significant parts of their next
generation networks are already in-place
and continue to evolve rapidly. Where car-
riers continue to lag behind, however, is in
the evolution of their business processes
and support systems (BSS/OSS) that enable
providers to run those networks and accom-
panying services effectively and profitably.
Today’s communications networks are about
the logistics and distribution of digital con-
tent including voice, video, information, and
machine-to-machine data.
Given the current economic and competitive reali-
ties of the communications industry, CSPs need
to focus on product innovation and operational
excellence. However the reality is that most CSPs
have the same network. It is the automation of
their business processes and their choice of sup-
porting BSS and OSS systems that will be one of
their key differentiators.
The move towards more dynamic service offer-
ings means significant changes to traditional
billing approaches. Customers will increasingly
expect the flexibility to try, subscribe and cancel
services via online self-service portals. This
also means up-to-the-second access to billing/
usage information and multiple payment models,
including pre-pay and any-pay.
Fulfillment also becomes much more dynamic.
The changes transforming service fulfillment stem
largely from a shift toward increasing customer
control – specifically, toward customer or device
self-provisioning. Self-provisioned services,
and the networks that support them, present a
completely different operations model than that
required for traditional services.
Revenue and cost assurance have emerged
in recent years to become an increasingly
critical component in the transformation of
telecommunications operations
Customers are also increasingly expecting to be
able to try, subscribe and cancel services via
online self-service portals. They expect real-time
service fulfillment, which means zero-touch,
flow-through ordering, provisioning and activa-
tion. This also means up-to-the-second access to
billing/usage information and multiple payment
models, including pre-pay and any-pay. So before,
during and after delivery of a given service, the
OSS/BSS must be able to compute how much it
costs and provide an account balance that reflects
any promotion or other credits that should be
applied. Thirty-day posting will not meet customer
expectations.
The move to converged IP networks and Ethernet
as an underlying technology has also significantly
empowered both enterprise and residential cus-
tomers. In the traditional communications world,
customers bought very complex communications
pipes and were, to a large extent, unaware as to
how it worked. With the move toward converged IP
networks and Ethernet infrastructures, however, the
tide has turned. Customers have been deploying
these technologies and are well versed in them.
In the new world, enlightened customers know
exactly what they want and are now focused on
‘content’ rather than ‘pipes’.
With these changes, revenue and cost assur-
ance have emerged in recent years to become an
increasingly critical component in the transforma-
tion of telecommunications operations. In our
competitive era, it is of paramount importance
to capture all revenues that are generated by
the utilization of a service provider’s resources.
Operating in a less efficient manner is not a viable
option any longer.
Customers who call with billing errors often have a
higher propensity to churn, which further increases
costs and creates additional pressure on margin.
As operators begin to turn-up content-based serv-
ices, the careful management of revenue chains
and control over cost drivers and a better focus on
the customer experience will become increasingly
critical to the success of these new offerings and
the enterprise’s overall profitability.
From that basis, it is only a very short step to
using the same basic functionality to extract,
analyze and monitor the data associated with any
operational process or group of processes. In fact,
the innovations introduced through the maturity
of revenue assurance can be brought into service
for a more generalized ‘operational assurance’
enterprise function. This concept calls for the
measuring and monitoring of any operational pro-
cess that potentially has an impact on revenue or
is a cost driver. In effect, operational assurance is
about enabling the service provider to understand
in real-time how operations are affecting profit.
The results are, significantly enhanced visibility
and clarity into how the enterprise is performing
and much better intelligence for decision making.
Operational Assurance could be described as the
convergence of operations management, revenue
management and business intelligence.
This extension of revenue management techniques
becomes most evident in the Revenue Operations
Center (ROC), a concept now being pursued in
various forms by service providers around the
industry. A ROC is a collection of systems and
processes that are oriented around collecting,
analyzing and monitoring the Key Performance
Indicators (KPIs) that are deemed essential for the
enterprise to meet its goals.
Service providers are already taking the important
first steps down this path. As they begin to treat
revenue assurance proactively, they are factoring
the principles of process integrity and metric-
oriented management into their product planning.
As these projects extend and adapt the principles
developed in the maturing revenue management
functions, these service providers are laying the
foundation for a transformation to lean operations
and sustainable profit.
Mark Nicholson
Chief Technology Officer
WWW.SUBEXWORLD.COM
07
Anuradha, Senior Vice President - Engineering
product innovation
at Subex
powering the ROC
Technical innovation is the back
bone of a products company and
many such initiatives were rolled
out in Subex last year
Engineering has a prime role to play in evolving
the building blocks of our products. We need to
keep pace with the new technologies by evaluat-
ing their fitment into our products, proactively
reducing the total cost of ownership and ensuring
that the platforms remain robust and extendable
to accommodate the increasing processing loads
owing to the world becoming flat and communica-
tion playing an important role in the same.
In the last year, Engineering has been involved in
technical innovations and coming out with new
products and solutions.
Some of these innovations are:
1. RocForms
During the course of the development of a new
web enabled version of Spark, we have developed
a generic software framework for the generation of
user interface components (screens the customer
sees in our products) dynamically. This will help
in ensuring a consistent behavior and screen
appeal in all products that use the framework.
Some of the tasks involving designing a UI screen
can now be done by generated by a script. This
framework has been developed using Google’s
technology in web development.
This has been used in all web enablement of exist-
ing products and also for our new offerings like
Vector which is our new offering in Fulfillment and
activation space.
2. Cost Modeling
One of the innovations from the performance
benchmarking team has been to arrive at an ap-
proach to analyze the space/time cost complexity
by modeling the behavior of various algorithms
/ data structures that we use. This addresses the
important question: Given a basic problem defini-
tion, how do you choose the ‘best’ solution? Best
could be the simplest, best performance, easiest
to extend, etc. However the neatness of the solu-
tion lies in the ability to estimate performance of a
system design without actually having to build it.
Apart from time / space complexity, the cost
modeling also considers the behaviors of the
servers / storage (e.g. how CPUs schedule jobs,
how are instruction / data pipelines built, behavior
of onboard CPU caches, page faults etc.) This is a
proactive approach rather than a reactive approach.
These techniques have been applied in the design
and improvement of several features in ROC FM
already.
3. New Platform
Several of our products are built on a reusable
software platform called Spark. The platform
has a rich set of reusable features used by the
products. Some examples of these features are
access control, data collection and management
(ETL), data base interactions, scheduling of tasks
/ processes etc.
We have undertaken an activity to build a new
framework to use the latest software innovations in
the industry and extract the maximum performance
gains that could be attained by the new genera-
tion of servers/ storage and also new software
paradigms / tools. This activity will start actively
in the FY 10 - 11. The goal of the new framework
would be to build:
• distributed and scalable architecture
• resilience
• high performance
• simpler programmable interfaces to the product
development teams
• modular software architecture
4. Support for alternate database
technologies
Subex has invested in supporting multiple data-
base technologies both traditional DB vendors and
also non-traditional databases. The achievements
in this regard have been as below:
• Integration of Dataupia: There is a huge explo-
sion in the volume of data in telecom operators
due to introduction of new services, growth
in subscriber volumes etc. Dataupia is a non
traditional data warehouse appliance that scales
to very large volumes and can work in business
optimization scenarios.
• IBM DB2 partnerships: The engineering team
has finished the integration of ROC RA product
with DB2. Benchmark tests are in progress.
We will take up similar work with the next RMS
product ROC FMS. The intent or goal is to broad
base our database offerings and also to venture
into strategic business relationships with IBM
for newer opportunities.
• NetP’s new version can support the Oracle
database and has improved architecture for
Layer 3 support.
5. DICE (Dynamic Intuitive Cube
Engine)
This new module has been introduced into the
ROC RA product to enhance the analysis of rev-
enue leaks. This brings in the capabilities of OLAP
based data analysis in RA. This feature enables an
RA business analyst to slice and dice information
dynamically from multiple dimensions/business
scenarios. The analyst can easily locate anomalies
and revenue leaks easily through an intuitive UI
driven screen. This has been delivered to some
customers already and the feedback has been
extremely good.
6. Predictive Analytics
This program evaluates various techniques to
ensure that the results obtained by our products
are more qualified and enhance the productivity of
the analysts as well as provide more meaningful
results. The algorithms developed under this pro-
gram are tuned to give the most optimum results.
Some of these investigations will play an
important role in the CEM (Customer Experience
Management) space.
7. Change Catalyst
Other than the above programs, a program
‘Change Catalyst’ has been launched which is
focused on work life innovations. This program
encourages every Subexian in Engineering organi-
zation to find ways and means to improve the work
space by coming out with small innovative ideas.
The Subexians prepare a business case for their
ideas and once accepted, implement the same.
The ideas help increase productivity and help add
new delta features to the products.
Anuradha
Senior Vice President - Engineering
WWW.SUBEXWORLD.COM
09
Monisha Tambay, Vice President & Global Head of HR
tough times don’t last,
tough people do
powering the ROC
So what helped your company get back on
track from an internal perspective? What
were some effective strategies that were
commissioned to re-energize the workforce?
Subex cares
Extensive Subexian reach-out campaigns were
launched with everyone on the leadership team
starting with Subash, meeting with Subexians
individually and in groups to talk about work
demands and priorities and to genuinely listen to
their inputs on what improvements could be made
in the department to boost morale and productiv-
ity. Planned and spontaneous reach-out sessions
help establish strong connect and pull the team
together.
Cheer them on
Acknowledging the team’s contributions was really
important. Recognizing those who had accepted
additional responsibilities or increased workloads
and those who had made exceptional achieve-
ments was the need of the hour. We launched
a new Reward and Recognition Program called
STARs to assist in this endeavor. The launch was
accompanied by celebration of an ‘Appreciation
Week’ globally that culminated in parties/give
aways in various locations around the world.
By confronting the situation head-on and making
adjustments proactively, we were able to emerge
relatively unscathed.
Monisha Tambay
Monisha Tambay, Vice President & Global Head
of HR
Allowing down time
Say it’s okay to go away. It’s counter-intuitive,
but during busy periods it’s necessary for team
members to take some time off. Planned events
like a Sports Day and an Annual Day as well as
smaller unplanned events like team breaks, leav-
ing the office early one day or going out for lunch,
were encouraged. From a policy perspective, we
launched a Global Sabbatical policy as well as a
Work from Home Policy to allow teams some time
to get away or to allow them flexibility in planning
their time. This had a huge positive impact that
helped Subexians return to the office refreshed and
better prepared to take on the challenges ahead.
Support Subexian careers
Another valuable way we used to re-energize our
team was by helping employees advance their
professional knowledge. Developing new skills
and staying on top of technological trends not only
renewed their enthusiasm for their careers, but
also increased their contributions. We ran special
training programs globally to demonstrate to
Subexians that their careers were important to us
and that we would be ready to invest in them. The
engineering teams launched new technical career
paths that showed Subexians what their options
were.
Tough times test the true mettle of any entity.
At Subex we faced this test over the past two
years. Not only was the sustainability of the
organization at risk due to financial concerns,
we also had to contend with pockets of loss
of faith within the team. In this environment
of diminished morale, it took a lot more than
pep talk to get everyone back on track.
So what helped your company get back on track
from an internal perspective? What were some
effective strategies that were commissioned to
re-energize the workforce?
First, a leader who kept the faith
in the organization and the value that it adds,
in himself and his team and in all stakehold-
ers – investors, shareholders, bond holders and
customers. Subash led by example and his ‘never
say die’ attitude was the shot of adrenalin that we
needed!
A steadfast commitment to
our Core Values
The leadership team and the entire Subex family
consistently exhibited all the things that we at
Subex stand for – our values of Commitment, In-
novation and Fairness! This was what we all rallied
around and what brought us together.
Build a plan and communicate it
Subash had a concrete plan to navigate Subex
out of choppy waters. There was extensive and
repeated communication of the plan and the help
that was required from every Subexian as well as
periodic updates on progress against the plan
were done. On achievement of key milestones on
the plan, we celebrated – shared small successes
with the teams with cake and a smile! The end
result – we built alignment – ensuring that the
strategy was brought in to and each Subexian
knew the part that they had to play. We built a tool
to cascade goals/KRAs down to drive alignment.
WWW.SUBEXWORLD.COM
11
Subexian Pride Award Winners & Subex Charitable Trust
subexian pride award
winners
John Myers
Presales(P)
Vinay M A
Legal(P)
Srinivas M R
Engineering(P)
Rajesh Abraham
PSO(P)
Krishnoji Rao S
Facilities & Administration
Vishwanath B V
Engineering(P)
Vijay Raghunathan
PSO(P)
Sylvan Sam Sugen S Engineering(P)
Arun Kumar K
Engineering(P)
Bhagyalaxmi H C
Engineering(P)
John Brooks
Presales(P)
Jiju George
HR(P)
Ravi Kumar Chakka
Engineering(P)
John Myers
Presales(P)
Sandeep Jain
Engineering(P)
Madhu K U
Engineering(P)
Thomas Walker
Presales(P)
Tintu Joseph
PSO(P)
Vijay Shankar H S
Engineering(P)
Meredith Milshtein
PSO(P)
Sunil Kumar
Engineering(P)
Saifullah Talut Rothin PSO(P)
Meredith Milshtein
PSO(P)
Amit Kumar Gupta
Engineering(P)
Vijayakumar Vallipi
Engineering(P)
Mohit Gupta
Engineering(P)
Manoj Kumar P
Engineering(P)
Sankara Rao Ballari
Engineering(P)
Anees Ahmed A Mulla Engineering(P)
Sreekanth Ramadas
Engineering(P)
Subhadip Duttagupta PSO(P)
Sumit Ahuja
Engineering(P)
Shrikanth D
Engineering(P)
Lakshmikanth RG
Finance(P)
David Gibson
Product Management(P)
Prasad K S
Engineering(P)
G Vijay
Finance(P)
Sekharan Y Menon
Corporate(P)
Subex charitable trust
another busy year
1. Sponsored 100 school bag kits for needy
4. Extended support to build 3 toilets in Ananda
7. Provided relief to flood victims in North Karna-
students through Youth for Seva
Marga school, Kolar district
taka and Andhra Pradesh
2. Provided educational support to 35 students
5. Sponsored water and electricity for Prerana
8. Sponsored Speech and Physical therapy kits for
through Nurture merit program
resource center
Gerizim Integrated Home and School For the
3. Provided educational support to children in
6. Supported Swanthana, a center for physically
Handicapped
Ananda Marga school, Kolar district
and mentally challenged girls
powering the ROC
board of directors
Subash Menon
Founder Chairman, Managing Director & CEO
V. Balaji Bhat
Independent Director
Sudeesh Yezhuvath
Chief Operating Officer & Wholetime Director
Vinod R. Sethi
Independent Director
Harry Berry
Independent Director
Andrew Garman
Independent Director
management team
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer & Wholetime Director
Mark Nicholson
Chief Technology Officer
Greg Le Neveu
President – Americas
Paul Skillen
President – EMEA
Raj Kumar
Vinod Kumar
Group President
Anuradha
Senior Vice President – Engineering
Monisha Tambay
Vice President & Global Head of HR
Sekharan Y Menon
President – Asia Pacific
Vice President - Legal & Company Secretary
Ramanathan J
Vice President – Finance
WWW.SUBEXWORLD.COM
13
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general review &
accountability
subex annual report 09-10
15
DIRECTORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED
Your Directors have pleasure in presenting the 16th Annual Report of the
Company on the business and operations together with the audited results
for the year ended March 31, 2010.
States, Canada, UK, UAE, India, Singapore and Australia. Subex is the
global leader in Business Optimization for communications service
providers.
FINANCIAL RESULTS
Total revenue
Profit/(Loss) before
Interest, Depreciation,
Tax & Amortization
Interest, Depreciation
& Amortization
Profit/(Loss) before
Exceptional items & tax
Exceptional Items
Profit/(Loss) before tax
Provision for taxes
Profit/(Loss) after tax
APPROPRIATIONS
Interim Dividend
Preference Dividend
Dividend proposed on
equity shares
Provision for tax on
Dividends
Transfer to General
Reserve
Surplus/(Deficit) carried
to Balance Sheet
Amount in Rs. million
Consolidated
Standalone
2009-10
2008-09
2009-10
2008-09
4,630.78
5,584.89
3,201.44
3,011.05
947.23 662.06
999.19 559.16
637.74 663.64
510.05 489.03
309.49
794.72
1,104.21
(1.58)
(1,717.59)
(1,719.17)
101.25 164.46
(1,883.63)
1,002.96
489.14
891.66
1,380.80
70.13
(1,819.97)
(1,749.84)
12.19 32.27
(1,782.11)
1,368.61
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,002.96
(1,883.63)
1,368.61
(1,782.11)
RESULTS OF OPERATIONS
During the financial year ended March 31, 2010, the total revenue on a
consolidated basis stood at Rs.4,630.78 million. The Company has
made a profit of Rs.1,002.96 million for the financial year 2009-10 as
against the loss of Rs.1,883.63 million in the previous year.
Telecom operators are facing a difficult situation globally as their business
has commoditized. Further, subscribers are expecting telcos to keep
rolling out newer and more attractive services. Thus telcos are being
pushed from both the cost side and the competitive side. Given this
situation, telcos need to take adequate steps to protect their margins
and improve operational efficiency. Subex’s solutions help them on
these fronts. Our well accepted platform, the Revenue Operations Centre
(ROC) brings together business intelligence, domain knowledge and
workflow support. ROC acts as the underpinning solution on which
telcos can build their processes to achieve several objectives like,
lower cost, higher margin, higher revenue etc.
CHANGES IN SHARE CAPITAL
The Authorised share capital of the Company was increased pursuant to
the approval of the members at the Extraordinary General Meeting held
on October 20, 2009. Presently, the authorised share capital of the
Company is Rs.1,300,000,000 (Rupees One Thousand Three Hundred
Million only) divided into 128,040,000 (One Hundred and Twenty Eight
Million and Forty Thousand) equity shares of Rs.10 (Rupees Ten only)
each and 200,000 (Two Hundred Thousand) Preference Shares of Rs.98
(Rupees Ninety Eight only) each.
During the year, your Company has allotted 23,136,050 equity shares,
out of which:
(cid:127) 19,133,637 equity shares were allotted upon conversion of
FCCBs aggregating to principal amount of US$ 31.9 million, out
of its US$ 98.7 million 5% Convertible Unsecured Bonds.
(cid:127) 1,203 equity shares were allotted under its ESOP 2005 scheme
and 1,210 equity shares were allotted under its ESOP 2000
scheme, consequent to exercise of stock options.
(cid:127) 4,000,000 equity shares were allotted on a preferential basis to
M/s Woodbridge Consultants, an entity belonging to Promoters/
Promoter group.
As at March 31, 2010, the paid-up share capital of the Company
stood at Rs.579,831,390/- comprising 57,983,139 equity shares of
Rs.10/- each.
On a standalone basis, the total revenue stood at Rs.3,201.44 million.
The net profit for the financial year 2009-10 was Rs.1,368.61 million.
SUBSIDIARIES
BUSINESS
Your Company is a provider of solutions in the Business Support Systems
(BSS) and Operations Support Systems (OSS) areas for telecom
applications. The key sub-areas in BSS and OSS are Revenue
Maximization or Business Optimization, Billing Systems, Mediation,
Service Fulfillment and Service Assurance. The Company operates in
Business Optimization and Service Fulfillment areas. While Business
Optimization 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
SUBEX TECHNOLOGIES LIMITED
For the year ended March 31, 2010, Subex Technologies Limited earned
an income of Rs.801.35 million, on a consolidated basis, as against
Rs.1,200.08 million last year, and had a net loss of Rs.5.73 million as
against a net profit of Rs.68.54 million last year.
Pursuant to the demerger in 2007-08, Subex Technologies Inc became a
direct subsidiary of Subex Technologies Limited.
SUBEX (UK) LIMITED
For the year ended March 31, 2010, the consolidated income of Subex (UK)
Limited was Rs.2,892.44 million and the net profit was Rs.37.82 million.
Subex (Asia Pacific) Pte Limited and Subex Inc are direct subsidiaries of
Subex (UK) Limited.
16
subex annual report 09-10
SUBEX AMERICAS INC
For the year ended March 31, 2010, the consolidated income of Subex
Americas Inc was Rs.984.77 million and net loss was Rs.389.87
million.
During the year, the following dormant subsidiaries of Subex Americas
Inc were closed down -2101874 Ontario Inc, Subex Azure (GB) Limited
and Subex Azure (Ireland) Limited. Also, Subex Azure (US) Inc and Subex
Azure (Delaware) Inc, the two subsidiaries of Subex Azure Holdings Inc,
were merged to its holding Company.
Presently, Subex Americas Inc has 2 subsidiaries viz. Subex Azure
Holdings Inc and Syndesis Development India Private Limited.
The petition seeking approval of the reduction was approved by the
Hon’ble High Court of Karnataka vide its order dated April 21, 2010.
The copy of the said order and the minute confirming the reduction was
registered by the Registrar of Companies, Karnataka at Bangalore vide
its certificate dated May 11, 2010.
The details of the implementation of the reduction as aforesaid have
been elaborated in the financial statements.
EMPLOYEE STOCK OPTIONS 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.
COMPLIANCE UNDER SECTION 212
EMPLOYEE STOCK OPTION PLAN-1999 (ESOP – I)
Ministry of Corporate Affairs, Government of India, vide order No. 47/
119/2010-CL-III dated April 20, 2010, has granted approval under section
212(8) of the Companies Act, 1956 stating that the requirement to
attach various documents in respect of subsidiary companies, as set out
in sub-section (1) of Section 212 of the Companies Act, 1956, shall
not apply to the Company for the financial year ended March 31, 2010.
Accordingly, the Balance Sheet, Profit and Loss Account and other
documents of the subsidiary companies are not being attached with the
Balance Sheet of the Company. Financial information of the subsidiary
companies, as required by the said order, is disclosed under Annexure I
to this report. The Company will make available the annual accounts of
the subsidiary companies and the related information to any investor of
the Company who may be interested in obtaining the same. The annual
accounts of the subsidiary companies will also be kept open for
inspection by any investor at the registered office of the Company.
The consolidated financial statements presented by the Company include
financial results of its subsidiary companies.
RESTRUCTURING OF FCCBs
During the financial year, your Company launched a cashless exchange
offer for the holders of its US$ 180 million 2% Coupon Convertible
Unsecured Bonds (“Original FCCBs”) to exchange the Original FCCBs
for new FCCBs. Pursuant to the cashless exchange offer, Original FCCBs
worth US$ 141 million out of US$ 180 million have been cancelled and
US$ 98.7 million 5% Convertible Unsecured Bonds (“Restructured
FCCBs”) in satisfaction of the same have been issued.
As at March 31, 2010, a principal amount of US$ 39 million was
outstanding under the Original FCCBs.
During the financial year, Restructured FCCBs aggregating to principal
amount of US$ 31.9 million were converted into 19,133,637 equity
shares in accordance with the terms and conditions thereof. As at March
31, 2010, a principal amount of US$ 66.8 million was outstanding
under the Restructured FCCBs.
REDUCTION OF SECURITIES PREMIUM
A proposal for reduction and utilization of Securities Premium and Capital
Reserve under the provisions of section 78 read with section 100 to
104 of the Companies Act, 1956 was approved pursuant to the resolution
passed by the Board of Directors on February 8, 2010 and special
resolution passed by the members at the Extraordinary General Meeting
held on March 4, 2010. The reduction, as aforesaid, envisages transfer
of certain amounts from the Securities Premium and Capital Reserves
as on April 1, 2009 and thereafter, to a Business Restructuring Reserve
(BRR) to be utilized from or after April 1, 2009 for certain Permitted
Utilizations as mentioned in the explanatory statement to the notice of
the Extraordinary General Meeting held on March 4, 2010.
This scheme was instituted during 1999 and managed by Subex Foundation
with a corpus of 120,000 equity shares initially. Since the scheme was
formulated prior to the promulgation of Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999, the Company has discontinued the scheme.
EMPLOYEE STOCK OPTION PLAN-2000 (ESOP- II)
During 1999-2000, your Company established the Employee Stock
Option Plan 2000, under which options have been allocated for grant to
the employees of the Company and its subsidiaries. The Company has
obtained in-principle approval for listing up to a maximum of 883,750
equity shares to be allotted pursuant to exercise of options granted under
the scheme. This scheme has been formulated in accordance with the
Securities and Exchange Board of India (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines, 1999.
In accordance with the scheme, a Compensation Committee has been
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 equity shares during the 15 trading days preceding
the date of grant on the stock exchange where there is highest trading
volume during this period. Unless otherwise resolved, the options granted
vest over a period of 1 to 4 years and can be exercised over a period of
3 years from the date of vesting.
During the year 2008-09, the Company amended the ESOP 2000 scheme
by inclusion of provisions allowing employees to voluntarily surrender
their vested/unvested options at any time during their employment with
the Company.
EMPLOYEE STOCK OPTION PLAN-2005 (ESOP-III)
Under this scheme, a corpus of 500,000 options was created for grant
to the eligible employees, with each option convertible into one fully
paid-up equity share of Rs.10/-. This scheme has been formulated in
accordance with the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999. The corpus of the scheme was further enhanced by 1,500,000
options during the financial year 2007-08. The Company has obtained
the requisite in-principle approvals from the stock exchanges for the
purpose of listing of equity shares arising out of exercise of options
granted under the scheme.
The Compensation Committee grants options to the eligible employees
in accordance with the provisions of the scheme. The options are granted
at a price, which is not less than 85% of the average of the closing price
of the equity shares during the 15 trading days preceding the date of
grant on the stock exchange where there is highest trading volume during
this period. Unless otherwise resolved, the options granted vest over a
subex annual report 09-10
17
period of 1 to 4 years and can be exercised over a period of 3 years from
the date of vesting.
During the year 2008-09, the Company amended the ESOP 2005 scheme
by inclusion of provisions allowing employees to voluntarily surrender
their vested/unvested options at any time during their employment with
the Company. Pursuant to this, 31,500 options were surrendered by 7
employees during the financial year ended March 31, 2010.
EMPLOYEE STOCK OPTION PLAN-2008 (ESOP-IV)
During 2008-09, your Company instituted the Employee Stock Option
Plan-2008, vide approval of shareholders through the postal ballot
mechanism. A corpus of 2,000,000 options has been created for grant
to the eligible employees under the scheme. The Scheme has been
formulated in accordance with the Securities and Exchange Board of
India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999. The Company has obtained the requisite in-
principle approvals from the stock exchanges for the purpose of listing of
equity shares arising out of exercise of options granted under the scheme.
The Compensation Committee grants options to the eligible employees
in accordance with the provisions of the scheme. The options are granted
at a price, which is not less than 85% of the average of the closing price
of the equity shares during the 15 trading days preceding the date of
grant on the stock exchange where there is highest trading volume during
this period. Unless otherwise resolved, 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.
Additional information as at March 31, 2010 required to be disclosed
as per Securities and Exchange Board of India (Employee Stock Option
Scheme and Stock Purchase Scheme) Guidelines, 1999 is given as
Annexure II to this report.
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. Your Company is committed to
maintaining 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 Clause 49
of the listing agreement of the Stock Exchanges, as amended from time
to time. The Auditor’s certificate on compliance with Clause 49 is
included elsewhere in the Annual 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 has been provided as a part of this report.
AUDIT COMMITTEE
The Audit Committee presently has 5 Directors as its members viz. Mr.
V. Balaji Bhat, Mr. Vinod R Sethi, Mr. Andrew Garman, Mr. Harry Berry
and Mr. Subash Menon. Except for Mr. Subash Menon, all other members
of the Audit Committee are Independent Directors. Mr. V 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 section 292A of the Companies Act, 1956 and Clause
49 of the Listing Agreement. Further details of the Audit Committee
have been provided in the report on Corporate Governance forming part
of this annual report.
AUDITORS
M/s. Deloitte Haskins & Sells (ICAI registration number 008072S), the
Statutory Auditors of the Company retire at the ensuing Annual General
Meeting and have confirmed their eligibility as per Section 224(1B) of the
Companies Act, 1956 and their willingness to accept office, if re-appointed.
There were no qualifications observed in the Auditor’s report for the
financial year 2009-10.
DIRECTORS
As per Article 87 of the Articles of Association of the Company read with
section 255 and 256 of the Companies Act, 1956, atleast two-third of
the Directors shall be subject to retirement by rotation. One-third of
such Directors must retire from office at each Annual General Meeting
of the shareholders and a retiring director is eligible for re-election.
Mr. Vinod R Sethi and Mr. Andrew Garman retire by rotation and being
eligible offer themselves for re-appointment at the ensuing Annual General
Meeting.
During the financial year 2009-10, Mr. P. P. Prabhu and Mr. K. Bala
Chandran resigned from the Board of Directors of your Company. The
Board places on record their immense contributions to the Company.
FIXED DEPOSITS
Your Company has not accepted any 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 at Annexure III
appended hereto 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 Vice President-
Legal & Company Secretary at the registered office of the Company.
INFORMATION UNDER SECTION 217 (1)(e) OF THE COMPANIES ACT,
1956 READ WITH COMPANIES (DISCLOSURE 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
several 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 continuous basis. These expenses are charged to revenue under the
respective heads and are not segregated and accounted separately.
18
subex annual report 09-10
Company as at March 31, 2010 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
Companies Act, 1956 for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities.
d) that the accounts for the year ended March 31, 2010 have been
prepared on a going concern basis.
APPRECIATION/ACKNOWLEDGEMENTS
We thank our clients, vendors, investors and bankers for their 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 SEZ authorities, 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.
Place : Bangalore
Date : July 29, 2010
For and on behalf of the Board
Subash Menon
Founder Chairman,
Managing Director & CEO
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 2009-10, total
foreign exchange inflow and outflow was as follows:
i)
Foreign Exchange earnings
ii) Foreign Exchange outgo:
Travelling expenses
Interest expense
Rs.2,910.89 Million
(previous year
Rs.2,975.37 Million)
Rs.50.41 Million (previous
year Rs.37.60 Million)
Rs.178.53 Million (previous
year Rs.173.15 Million)
Product marketing expense
and other expenditure incurred
overseas for software
development
Rs.19.15 Million (previous
year: Rs.85.21 Million)
SOCIAL RESPONSIBILITIES - SUBEX CHARITABLE TRUST
The trust was set up to provide for welfare activities for under privileged
and the needy in the society. The trust is managed by Trustees elected
amongst the employees of the Company. 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
The Human Resource function constantly endeavours to uphold the Subex
Vision of “Deliver Value to Excel and Lead”. The passion, excitement,
hard work and the involvement of the Subex family has ensured that your
Company constantly upholds the Subex vision.
During the year ended March 31, 2010, your Company successfully
reinvented itself through streamlining its HR processes and identifying
strategic HR initiatives. Motivation of Subexians was the critical focus
area. To that end your Company launched an online Reward and
Recognition Program and platform called STARs. Your Company also put
a renewed emphasis on training and alignment. Communication within
the Company was stepped up. Alignment, renewal, re-energizing and
rewards were the critical focus areas.
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 annual accounts for the year ended
March 31, 2010, the applicable accounting standards have been
followed. Pursuant to, and in accordance with, the approval of the members
and the Hon’ble High Court of Karnataka to a proposal for reduction of
securities premium and capital reserve as described earlier, the Company
has utilised the Business Restructuring Reserve for adjustment of certain
expenses/impairments. Such adjustment being at variance with applicable
accounting standards, necessary disclosure has been made in the Notes
to the accounts in standalone and consolidated financial statements.
b) that the accounting policies have been selected and applied
consistently and it has 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
subex annual report 09-10
19
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subex annual report 09-10
21
ANNEXURE - II
ADDITIONAL INFORMATION AS AT MARCH 31, 2010 AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (EMPLOYEE STOCK
OPTION SCHEME AND EMPLOYEE STOCK PURCHASE SCHEME) GUIDELINES, 1999
SL.NO
PARTICULARS
1
2
3
4
5
6
7
8
9
Net options granted as on March 31, 2010
Options granted during the year
Pricing formula
Options vested but not exercised as on March 31, 2010
Options exercised as on March 31, 2010
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, 2010
Options lapsed/cancelled/surrendered as on March 31, 2010
Options lapsed/cancelled/surrendered during the year
Variation of terms of options
No. of employees covered
10
Employee wise details of options granted during the year under review to:
(i)
Senior managerial personnel
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mark Nicholson
Greg LeNeveu
Paul Skillen
Raj Kumar C
Ramanathan J
Sekharan Y Menon
Vinod Kumar P
Ms.
Anuradha
Ms. Monisha Tambay
(ii)
(iii)
other employee receiving a grant in the year of options amounting to
5% or more of options granted during that year
identified employees who were granted options, 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
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:
11
12
13
14
i.
ii.
iii.
iv.
v.
risk-free interest rate
expected life
expected volatility
expected dividends, and
market price on grant date
Place : Bangalore
Date : July 29, 2010
22
subex annual report 09-10
ESOP 2000
669,188
-
ESOP 2005
ESOP 2008
1,590,558
131,300
598,954
598,954
As mentioned
earlier in the report
As mentioned
earlier in the report
As mentioned
earlier in the report
161,663
236,443
1,210
81,070
1,210
936,768
56,059
None
624
-
-
-
-
-
-
-
-
-
NIL
NIL
468,088
7,927
1,203
80,601
1,203
2,430,019
341,991
None
1,618
-
-
-
-
2,500
-
-
-
8,000
NIL
NIL
-
-
-
-
-
-
-
None
272
10,000
12,000
12,000
12,000
15,000
15,000
20,000
15,000
-
NIL
NIL
Rs.8.44
Losses would have been higher by
Rs.25,502,015
Basic EPS would have been lower by Rs.0.66 and
Diluted EPS would have been lower by Rs.0.36
Weighted
average exercise
price is Rs.53.34
Weighted
average exercise
price is Rs.48.45
Black Scholes
method of valuation
8.00%
3 Years
34.267%
0.71%
Rs.65.99
For and on behalf of the Board
Subash Menon
Founder Chairman,
Managing Director & CEO
REPORT ON CORPORATE GOVERNANCE
REPORT ON CORPORATE GOVERNANCE
REPORT ON CORPORATE GOVERNANCE
REPORT ON CORPORATE GOVERNANCE
REPORT ON CORPORATE GOVERNANCE
I. COMPANY’S PHILOSOPHY ON CODE OF 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 investors’ 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.
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 ensure, 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) in its meeting
held on January 25, 2000 and amendments made thereto, from time
to time.
II. BOARD OF DIRECTORS
The Board of Directors of Subex Limited comprises 6 Directors out of
which 2 are Executive Directors and 4 are 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 July 29, 2010
3. Communicate externally, in a truthful manner, about how the Company
Category
No. of Directors
%
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
Independent Directors
Promoter and Executive Directors
Other Executive Directors
Total
4
1
1
6
66.66%
16.67%
16.67%
100.00%
B. Attendance of Directors at the Board Meetings and the last AGM and details about Directorships and Memberships in Committees as on
March 31, 2010
Director
Position
No. of
Board
meetings
held
No. of
Board
meetings
attended
Last AGM
attendance
No. of
Directorships
in other
companies ▲
No. of
No. of
Committees Committees
in which the
in which the
Director is
Director is a
Chairman ■ Member ■
Mr. Subash Menon
Mr. Sudeesh Yezhuvath
Founder Chairman,
Managing Director & CEO
Chief Operating Officer
& Wholetime Director
Mr. V. Balaji Bhat
Independent Director
Mr. Vinod R. Sethi
Independent Director
Mr. Harry Berry
Independent Director
Mr. Andrew Garman
Independent Director
Mr. K. Bala Chandran**
Independent Director
Mr. P P. Prabhu(cid:1)
Independent Director
4
4
4
4
4
4
4
4
4
2
4
1
3
- *
1
-
Yes
Yes
Yes
No
No
No
No
N A
1
1
4
11
-
-
1
3
-
-
4
-
-
-
1
1
1
1
4
8
1
1
3
2
▲ Excluding private limited companies & overseas companies.
■ Includes only Audit Committee and Shareholder’s Grievance Committee. Memberships in Committees in Subex Limited are included.
* Participated through tele-conference at the Board meeting held on October 20, 2009.
** Ceased to be the Director of the Company consequent to resignation during the financial year 2009-10. The details of Directorships and
Committee memberships stated reflect the position prior to his resignation.
(cid:1) Mr. P P Prabhu resigned from the Board of Directors of the Company on May 26, 2009. The details of Directorships and Committee memberships
stated reflect the position as at March 31, 2009.
subex annual report 09-10
23
C. Number and Dates of Board Meetings
4 (Four) Board meetings were held during the financial year
2009-10. The dates on which meetings were held are as follows:
May 26, 2009; July 29, 2009; October 20, 2009; January 19, 2010.
D. Brief Details of Directors Seeking Re-appointment
Mr. Vinod R. Sethi
Mr. 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 US$ 2.4 billion of investments in India.
As on the date of this report, Mr. Vinod R. Sethi does not hold any equity
shares of the Company.
Mr. Andrew Garman
Mr. 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.
Mr. Andrew Garman does not hold any equity shares of the Company.
III. AUDIT COMMITTEE
A.
Terms of Reference
The Audit Committee has, inter alia, the following mandate:
(cid:127) Overseeing the Company’s financial reporting process and disclosure
of its financial information to ensure that the financial statements
are correct, sufficient and credible;
(cid:127) Recommendation of appointment and removal of external auditor,
fixation of audit fee and also approval for payment for any other
services;
(cid:127) Reviewing, with the management, the quarterly financial statements
before submission to the Board for approval;
(cid:127) Review of annual financial statements before submission to the Board;
(cid:127) Review of adequacy of internal control systems;
(cid:127) Review of adequacy of internal audit function, including the reporting
structure, coverage and frequency of internal audit; and
(cid:127) Review of the Company’s financial and risk management policies.
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
Category
Mr. V. Balaji Bhat, Chairman
Mr. Vinod R. Sethi
Mr. Andrew Garman
Mr. Harry Berry*
Mr. Subash Menon
Independent Director
Independent Director
Independent Director
Independent Director
Founder Chairman,
Managing Director & CEO
*Appointed as a member of the Audit Committee at the meeting of the Board of Directors held
on January 19, 2010.
Mr. Raj Kumar, Vice President-Legal & Company Secretary, is the
Secretary of the Audit Committee.
C. Meetings and Attendance During the Year
During the Financial Year 2009-10, four Audit Committee meetings
were held on May 26, 2009, July 29, 2009, October 20, 2009, and
January 18, 2010. The unaudited financial results for the quarter ended
March 31, 2010 were taken on record at the meeting held on April 29,
2010. The audited financial results for the financial year ended March
31, 2010 were taken on record at the meeting held on June 10, 2010.
The quarterly results for the quarters April-June 2009, July-September
2009 and October-December 2009 were taken on record on July 29,
2009, October 20, 2009, and January 18, 2010 respectively.
Attendance of Committee Members at the Audit Committee Meetings Held During the Financial Year 2009-10:
Member
Mr. V. Balaji Bhat
Mr. Vinod R. Sethi
Mr. Andrew Garman
Mr. Harry Berry
Mr. Subash Menon
Mr. K. Bala Chandran*
No. of Audit Committee Meetings Held
No. of Audit Committee Meetings Attended
4
4
4
4
4
4
4
2
- ▲
N A(cid:1)
4
2
▲ Participated through tele-conference at the Audit Committee meeting held on October 20, 2009
(cid:1) Appointed as a member of the Audit Committee at the meeting of the Board of Directors held on January 19, 2010
* Ceased to be the Director of the Company consequent to his resignation during the financial year 2009-10
24
subex annual report 09-10
IV.
A.
REMUNERATION COMMITTEE
Composition of the Committee
Composition
Mr. Vinod R. Sethi - Chairman
Mr. V. Balaji Bhat
Mr. Harry Berry
B.
Details of Remuneration to Directors
Category
Independent Director
Independent Director
Independent Director
The Committee considers the performance of the Company as well as
general industry trends while fixing the remuneration of Executive
Directors. There were no meetings of the Committee held during the
financial year.
Amount in Rs.
Name
Designation
Salary
Commission
Total
Mr. Subash Menon
Mr. Sudeesh Yezhuvath
Founder Chairman, Managing Director & CEO
Chief Operating Officer & Wholetime Director
25,468,803
22,458,087
-
-
25,468,803
22,458,087
Note: Further details have been disclosed in Note II.9 under Schedule P to the standalone financial statements and Note II.8 under Schedule O to
the consolidated financial statements.
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 Options vested and exercised
as on March 31, 2010
Mr. V. Balaji Bhat
Mr. Vinod R. Sethi
Independent Director
Independent Director
7,500
7,500
7,500
7,500
The above stock options were granted on the terms and conditions mentioned in the Employee Stock Option Plan-2000 of the Company.
During the financial year under review, no additional stock options were granted to any of the Directors of the Company.
DETAILS OF SHAREHOLDING OF NON- EXECUTIVE DIRECTORS
In terms of Clause 49(IV)(E)(iv) of the Listing Agreement, the details
of shares held by Non- Executive Directors are as under:
Name
Mr. V. Balaji Bhat
Mr. Vinod R. Sethi
Mr. Andrew Garman
Mr. Harry Berry
No. of shares held
as at March 31, 2010
31,000
21,200
NIL
NIL
Some of 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 calendar months. In
case of severance from the Company, Mr. Subash Menon is eligible for
compensation of not less than twenty times and Mr. Sudeesh Yezhuvath
is eligible for compensation of not less than fifteen times of their total
remuneration for the preceding 12 months from the date of the notice.
Subject to approval of the members of the Company and other applicable
provisions of the Companies Act, 1956, 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.
The Non-Executive Directors are also eligible for grant of 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
Composition
Category
Mr. Sudeesh Yezhuvath, Chairman
Mr. Subash Menon
Chief Operating Officer
& Wholetime Director
Founder Chairman,
Managing Director & CEO
Authorised Representative of Share Transfer Agents.
B. Meetings During the Year
The Company holds Share Transfer Committee Meetings on a periodical
basis, as may be required, for approving, inter alia, the transfers/
transmissions/rematerialisation of equity shares. The Company has
appointed M/s. Canbank Computer Services Limited, a SEBI registered
transfer agent, as its Share Transfer Agent with effect from November 6,
2001. The Share Transfer Committee has met four times during the
financial year 2009-10 on the following dates:
subex annual report 09-10
25
Date of the meeting
July 15, 2009
October 15, 2009
December 24, 2009
No. of transfer
deeds received
Shares pursuant to
the deeds
Rematerialisation
requests received
Equity Shares
involved
1
-
-
300
-
-
-
1
1
-
2
600
At its meeting held on December 22, 2009, the Share Transfer Committee approved the issuance of duplicate share certificates pertaining to 200
equity shares.
The Company ensures that the share transfers are effected within one month of the receipt of request for transfer.
VI. INVESTOR GRIEVANCE COMMITTEE
B. Location and Time of the Last Three EGMs
A. Composition of the Committee
Composition
Category
Mr. V. Balaji Bhat, Chairman*
Independent Director
Mr. Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
* Consequent to resignation of Mr. K Bala Chandran, Mr. V Balaji Bhat was appointed as the
Chairman of the Committee at the meeting of the Board of Directors held on January 19, 2010.
Mr. Raj Kumar, Vice President-Legal & Company Secretary, is the
Compliance Officer of the Company.
The Committee is responsible for addressing the investor complaints
and grievances. The Committee meets on a periodic basis to address the
investor complaints like transfer of shares, non-receipt of balance sheet,
non-receipt of declared dividends etc. Details of grievances of the
investors are provided in the “Shareholders’ Information” section of this
Annual Report.
VII. ESOP COMMITTEE (COMPENSATION COMMITTEE)
The Company has instituted Employee Stock Option Schemes in line
with the Securities and Exchange Board of India (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The
Committee grants and administers options under the stock schemes to
eligible employees.
A. Composition of the Committee
Composition
Category
Mr. V. Balaji Bhat, Chairman
Independent Director
Mr. Vinod R. Sethi*
Mr. Subash Menon
Independent Director
Founder Chairman,
Managing Director & CEO
* Consequent to resignation of Mr. K Bala Chandran, Mr. Vinod R Sethi was appointed as the
Member of the Committee at the meeting of the Board of Directors held on January 19, 2010.
The Committee meets on a periodic basis to administer the ESOP schemes
of the Company.
VIII. GENERAL BODY MEETINGS
A. Location and Time of the Last Three AGMs
Year
Date of AGM
Venue
2006-2007
July 26, 2007
2007-2008
September 23, 2008
2008-2009
July 29, 2009
Le Meridien
Bangalore
Registered
Office
Registered
Office
26
subex annual report 09-10
Time
4:00 p.m.
4:00 p.m.
Year
Date of EGM
Venue
Time
2007-08 November 26, 2007
2009-10 October 20, 2009
2009-10 March 4, 2010
Corporate office
Registered office
Registered office
4:00 p.m.
10:30 a.m.
3:00 p.m.
IX. DISCLOSURES
A. There are no 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. 7 under Schedule P to the standalone
financial statements and Note II. 8 under Schedule O to the consolidated
financial statements in the Annual Report.
B. A proposal for reduction and utilization of Securities Premium and
Capital Reserve under the provisions of section 78 read with section 100
to 104 of the Companies Act, 1956 was approved pursuant to the resolution
passed by the Board of Directors on February 8, 2010 and special resolution
passed by the members at the Extraordinary General Meeting held on
March 4, 2010. The reduction, as aforesaid, envisages transfer of certain
amounts from the Securities Premium and Capital Reserves as on April 1,
2009 and thereafter, to a Business Restructuring Reserve (BRR) to be
utilized from or after April 1, 2009 for certain Permitted Utilizations as
mentioned in the explanatory statement to the notice of the Extraordinary
General Meeting held on March 4, 2010. The petition seeking approval of
the reduction was approved by the Hon’ble High Court of Karnataka vide
its order dated April 21, 2010. In accordance with the reduction, as
aforesaid, the BRR has been utilised for adjustment of certain expenses/
impairments. Such adjustment being at variance with applicable accounting
standards, necessary disclosure has been made in the Notes to the accounts
in standalone and consolidated financial statements. Also, refer to Note
II.1 under Schedule P to the standalone financial statements and Note II.1
under Schedule O to the consolidated financial statements.
C. 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.
D. The Company has complied with the listing conditions laid down in
the Listing Agreement of the Stock Exchanges where the shares of the
Company are listed.
X. MEANS OF COMMUNICATION
3:00 p.m.
A. Annual/Half Yearly and Quarterly results
The annual/half yearly/quarterly audited/un-audited results are generally
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 view the
time and attention devoted by them for the Company. While doing so, the
Company evaluates the performance of the Non-Executive Directors using
various parameters. However the Company is yet to formalize this evaluation
by peer group comprising entire Board of Directors, excluding the Director
being evaluated.
G. Whistle Blower Policy
The Company has established a mechanism for employees to report
concerns about unethical behaviours, actual or suspected fraud or violation
of the 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. The employees are informed of this policy through
appropriate internal communications. None of the employees have been
denied access to this facility.
Place : Bangalore
Date : July 29, 2010
For Subex Limited
Subash Menon
Founder Chairman,
Managing Director & CEO
published in all editions of Financial Express and Udayavani/Vijay
Karnataka. 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 has been separately
dealt with in the Annual Report.
XI. General shareholder information is provided in the “Shareholders’
Information” section of this Annual Report.
XII. Auditors’ Certificate with regard to 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. The Company
has complied with the following non-mandatory requirements:
A. The Board
The Company has an Executive Chairman and as such disclosures on
maintenance of office by a Non-Executive Chairman does not arise. The
Company ensures that the persons appointed as Independent Directors
have the requisite qualifications and experience which would be of use
to the Company and which would enable them to contribute effectively
to the Company in their capacity as Independent Directors.
B. Remuneration Committee
The Company has constituted a Remuneration Committee. A detailed
note on the Remuneration Committee has been provided earlier in the
report.
C. Shareholders’ Rights
The Company communicates with investors regularly through
e-mails, telephone and face-to-face meetings like investor conferences,
earnings calls, company visits and on road shows. The Company
announces 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 on the Company’s website. However,
the Company has 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. The Company always endeavours 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
subex annual report 09-10
27
DECLARATION BY THE CEO UNDER CLAUSE 49(I)(D) OF THE LISTING AGREEMENT REGARDING
DECLARATION BY THE CEO UNDER CLAUSE 49(I)(D) OF THE LISTING AGREEMENT REGARDING
DECLARATION BY THE CEO UNDER CLAUSE 49(I)(D) OF THE LISTING AGREEMENT REGARDING
DECLARATION BY THE CEO UNDER CLAUSE 49(I)(D) OF THE LISTING AGREEMENT REGARDING
DECLARATION BY THE CEO UNDER CLAUSE 49(I)(D) OF THE LISTING AGREEMENT REGARDING
ADHERENCE TO THE CODE OF CONDUCT
ADHERENCE TO THE CODE OF CONDUCT
ADHERENCE TO THE CODE OF CONDUCT
ADHERENCE TO THE CODE OF CONDUCT
ADHERENCE TO THE CODE OF CONDUCT
To,
The Members of Subex Limited
applicable for the financial year ended March 31, 2010.
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
Place : Bangalore
Date : June 10, 2010
For Subex Limited
Subash Menon
Founder Chairman,
Managing Director & CEO
AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE
AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE
AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE
AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE
AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE
1. We have examined the compliance of conditions of Corporate
Governance by Subex Limited [‘the Company’] for the year
ended March 31, 2010, as stipulated under Clause 49 of the
Listing Agreement of the 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.
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.
For Deloitte Haskins & Sells
Chartered Accountants
(Registration No. 008072S)
V. Balaji
Partner
Membership No. 203685
3.
In our opinion and to the best of our information and according
to the explanations given to us and the representations made
by the Directors and the management, we certify that the
Place : Bangalore
Date : July 29, 2010
28
subex annual report 09-10
MANAGEMENT DISCUSSION & ANALYSISYSISYSISYSISYSIS
MANAGEMENT DISCUSSION & ANAL
MANAGEMENT DISCUSSION & ANAL
MANAGEMENT DISCUSSION & ANAL
MANAGEMENT DISCUSSION & ANAL
OVERVIEW
Subex Limited (“Subex” or “the Company”) has its Equity shares listed
on the National Stock Exchange of India Limited (NSE) and the Bombay
Stock Exchange Limited (BSE). The Global Depositary Receipts are
listed on the London Stock Exchange (LSE). The Foreign Currency
Convertible Bonds of the Company are listed on the London Stock Exchange
(LSE) and Singapore Exchange Securities Trading Limited (SGX).
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 of the Company 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 profits 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.
INDUSTRY
Your Company is a provider of solutions in the Business Support Systems
(BSS) and Operations Support Systems (OSS) areas for telecom
applications. The key sub-areas in BSS and OSS are Revenue Maximization
or Business Optimization, Billing Systems, Mediation, Service Fulfillment
and Service Assurance. The Company operates in Business Optimization
and Service Fulfillment areas. While Business Optimization 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, Singapore
and Australia. Subex is the global leader in Business Optimization for
communications service providers.
Telecom operators are facing a difficult situation globally as their business
has commoditized. Further, subscribers are expecting telcos to keep
rolling out newer and more attractive services. Thus telcos are being
pushed from both the cost side and the competitive side. Given this
situation, telcos need to take adequate steps to protect their margins
and improve operational efficiency. Subex’s solutions help them on
these fronts. Our well accepted platform, the Revenue Operations Centre
(ROC) brings together business intelligence, domain knowledge and
workflow support. ROC acts as the underpinning solution on which
telcos can build their processes to achieve several objectives like,
lower cost, higher margin, higher revenue etc.
2. OPPORTUNITIES AND THREATS
Strategy
Subex has always been quite strategic. The key elements of the strategy
are our offering, positioning and customer acquisition and retention.
We have always been at the leading edge of technology and have evolved
new concepts to enable our customers to keep pace with changing
scenarios. Using our products, we have structured several solutions that
address and solve key problems faced by our customers. The next step
has been to offer these solutions as a well integrated platform called
ROC. Also, we offer ROC in the form of Managed Services thereby
ensuring that our customers gain significantly from our solutions.
This three pronged strategy has helped us to weather the storm over the
past couple of years.
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 is being 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
7 9
8 3
7 5
6 7
6 4
6 7
6 4
5 5
4 5
5 4
4 6
3 6
3 3
3 6
3 3
2 5
2 1
1 7
90
80
70
60
50
40
30
20
10
0
e
g
a
t
n
e
c
r
e
P
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
Revenue from Products
Revenue from Services
3.2 Telecom Software Products
Solutions for Business Optimization
Subex offers the ROC Solution Suite for Business Optimization, which has
solutions for Revenue Assurance, Fraud Management, Cost Management,
Partner Settlement, Credit Risk Management and Route Optimization.
Revenue Operations Centre (ROC)
ROC functions as a financial command and control centre for the telcos by,
(cid:127)
(cid:127)
(cid:127)
delivering real-time and actionable insights to effectively monitor
and control the operational and tactical response
providing an integrated platform that sits on top of all Subex OSS/
BSS products or 3rd party systems
linking service provider operations directly to financial health
ROC allows for the correlation of data across business systems, creating
an end-to-end view of the customer based on products, services, revenues,
margins, costs, and more. ROC also enables service providers to define
subex annual report 09-10
29
key cross-domain metrics and KPIs, specific to their business strategy,
that can be monitored and tracked.
ROC Fraud Management
The ROC Fraud Management solution is the next generation fraud
management solution built to deliver on a 3-step philosophy of Detect-
Investigate-Protect. It 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. It is built to drive fraud prevention by eliminating
known frauds, reducing free run time, augmenting internal controls and
through continuous Fraud Management process improvement.
ROC Fraud Management 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.
The solution's high flexibility allows operators of different sizes to
customize rules to suit unique network and business requirements.
Moreover, seamless visual alarm linking using third party visualization
software reduces investigation efforts, thus decreasing case turnover
time. The solution 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, and M-commerce.
Using these solution templates, operators can dramatically reduce the
time required to implement or extend the coverage of their revenue
assurance practice. Moreover, operators can easily reconfigure
or remodel existing templates to accommodate changing
business requirements.
ROC Cost Management
ROC Cost Management is a state-of-the-art
revenue management offering from Subex,
which helps service providers effectively
monitor and manage the cost of services. It
enables operators to efficiently manage
the process of identification, collection
and comparison of cost related data across
multiple sources such as partner invoices,
inventory, orders, and call detail records.
It ensures the profit margins and
operational agility through reduction of
service delivery costs. It is built on a highly
integrated platform using components-based technology to
provide striking performance, scalability, interoperability and reliability.
The solution collects, collates and correlates the information from
switches, inventory, billing, partner invoices, and financial systems to
provide deeper insights about the cost aspects in an easier to understand
format through dashboards & reports. It enhances margins by optimizing
leased circuit costs, reducing interconnect costs, assuring access costs
and by automating invoice verification process.
ROC Credit Risk Management
The ROC Credit Risk Management solution empowers operators to
continuously assess and mitigate risk presented by subscribers throughout
their lifecycle. It tracks risk in near real-time during:
(cid:127)
(cid:127)
(cid:127)
Subscriber acquisitioning
Ongoing usage
Collections and recovery
The solution provides the operator with a holistic view that helps in
understanding subscriber risk profile and thereby aids its management.
Further, it 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 the solution 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.
ROC Revenue Assurance
ROC Partner Settlement
ROC Revenue Assurance is a first-of-its-kind, comprehensive revenue
assurance solution, designed to tackle critical revenue assurance
challenges across the entire revenue chain. It offers a set of pre-configured
solution templates to address revenue assurance 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 fulfillment, 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
Control points & interfaces to extract data
Reports & dashboards to present results, and
(cid:127)
(cid:127)
(cid:127)
(cid:127) Workflow to monitor, action & close cases
The ROC Partner Settlement solution allows operators to quickly and
accurately settle charges with their interconnect, network and content
partners on a single, modular platform. Shrinking margins have highlighted
the increased need for visibility of each deal’s impact on the operator’s
bottom line. For agreements with domestic and international partners,
it provides the ability to manage these major costs and revenues on a
day-to-day, hour-to-hour basis. 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.
ROC Partner Settlement is able to support multiple business models
within a single implementation through seamless addition of necessary
modules. Examples of such modules include Retail, Wholesale and
Satellite. The solution has been designed to evolve with minimal impact
to ongoing operations.
30
subex annual report 09-10
ROC Route Optimization
The ROC Route Optimization solution 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.
ROC Route Optimization ensures that the entire end-to-end process
from dial code/destination operator rate imports to switch updates is
controllable and auditable. The solution 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.
Solutions for Service Fulfillment
Vector
Operators these days are constantly fighting over decreasing ARPU and
increasing churn. In order to stay competitive and profitable in such a
scenario, operators have to constantly come out with new and innovative
services which increase customer involvement and help in reducing
churn. Creation of new services is a very complex and time consuming
process. Vector helps in simplifying the above for operators by automating
the service creation process and reducing the time to market for these
services from months to just a few days. Through its unique Service
Creation Environment, operators can easily create new service definitions
and workflows. Moreover the service catalog helps in reusing existing
processes and service building blocks, which helps in bringing
consistency and reliability in the service fulfillment process. It also has
pre-defined “service accelerators” which capture the industry best
practices and service definitions out-of-the-box. Based on production-
proven, best-in-breed fulfillment solutions from Subex, Vector’s catalog-
driven service fulfillment approach helps operators to adapt quickly to
changing requirements, bring new and differentiated service to the market
rapidly, better serve customers with on-demand offerings and support,
and drive costs out of their business through greater automation.
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. 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.
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. 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.
3.3 Customer Base
Subex today serves over 200 customers spread across 70 countries.
This includes 36 of the top 72 telcos globally. A partial list of customers
is given below:
Americas
AT&T
Bell Canada
Claro
Comcast
Embarq
Global Crossing
Level 3
Qwest
Sprint
Telefonica
Telmex
Telus
Time Warner Cable
T-Mobile
Verizon
APAC
Aircel
Airtel
BSNL
CAT
DTAC
Idea
Indosat
Maxis
MTNL
Reliance
Communications
StarHub
Tata Teleservices Ltd
Telstra
Uninor
Vodafone India
EMEA
Avea
BT
Cable & Wireless
CellC
COLT
Du
MTN
O2
Orange
Romtelecom
STC
Swisscom
Telecom Italia
Telekom Slovenije
Telenor
TeliaSonera
Umniah
UPC
Vodafone
Wind Telecom
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.
Further, we also have a fourth stream of revenue namely, customization.
While these four streams are directly related to the license model, we
also have embarked on two additional streams of revenue namely
Managed Services and SaaS. These two streams are detailed below.
subex annual report 09-10
31
Managed Services
Recognizing the strategic imperative of outsourcing in today’s
environment, Subex offers a flexible and scalable Managed Services
program that enables service providers to successfully meet the ever-
changing business, technology and customer requirements. Subex
Managed Services offering is designed to offer true competitive advantage
by focusing on strategic, operational and cost benefits that address
service providers’ current and future challenges and risks.
Subex Managed Services program is designed to add both strategic and
tactical value to service providers’ operations and enable better customer
experience while also enhancing their operational efficiency, service
agility and profitability. With Subex at the helm of its operations, service
providers can redirect critical resources at core business functions
generating more revenue and saving costs.
Subex understands that no two service provider requirements are alike
and hence offers the flexibility to pick and choose services based on:
(cid:127)
(cid:127)
Scope of Operations: Ranging from standard operations to large
scale transformational programs
BSS / OSS Domains: Drawing from Subex’s established expertise
on various BSS / OSS domains
(cid:127)
On-Site Support: High caliber, experienced resources to ensure
functional continuity and high resource efficiency
On-demand, Software-as-a-Service (SaaS) – ROCcloud
Small and medium telcos have Business Support System (BSS)
needs that are very different from those of larger telcos. In the same
vein, most BSS products are developed to address the needs of large
telcos. They are loaded with a host of standard features, not all of
which are relevant to smaller organizations, and necessitate a
substantial investment in licenses and resources. Quite naturally, it
is difficult to justify this investment in most small and medium
organizations.
ROCcloud brings Subex’s proven Revenue Operations Center (ROC) to
small and medium telcos. It is an on-demand business support system
(BSS) ideally suited for small and medium telcos. ROCcloud employs
a monthly subscription based usage model and is delivered over the
web in a completely secure environment. It utilizes shared infrastructure
at various locations across the globe. It is a pre-configured service
with minimal customization needed and no implementation services
required. ROCcloud is currently available for fraud management;
addressing all common fraud threats.
The following graph gives the revenue from each of the stream during the
past several years:
Revenue Composition
2
10
5
13
18
9
5
19
2
9
6
26
3
8
10
30
1
11
7
25
2
10
7
27
88
64
67
57
49
56
54
e
g
a
t
n
e
c
r
e
P
100
90
80
70
60
50
40
30
20
10
0
FY04
FY05
FY06
FY07
FY08
FY09
FY10
License & Addl. License
Support
3.5 Geographical Mix
We have a dominant presence in both developing and developed markets.
This is quite evident from the geographical mix given below.
e
g
a
t
n
e
c
r
e
P
100
90
80
70
60
50
40
30
20
10
0
9
36
14
34
23
23
Geographical Mix
49
8
15
35
37
27
36
17
40
54
52
55
37
50
55
43
FY04
FY05
FY06
FY07
FY08
FY09
FY10
Customization
Managed Services
Third Party
EMEA
Americas
APAC
32
subex annual report 09-10
4. RISKS AND CONCERNS
Every business has several risks 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 spending 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.
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.
4.2 Technology and Personnel
4.5 Variability of Quarterly Operating Results
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, the Company 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
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.
4.6 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.
4.7 Environmental Matters
Software development, being a pollution free industry, is not subject to
any environmental regulations.
4.8 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.
4.9 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.
subex annual report 09-10
33
4.10 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.
4.11 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.
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
Amount in Rs million, except key indicators
Financial Highlights
Year ending March 31
Total Income
Export Sales
Operating Profits (EBITDA) Before
Exceptional Items
Depreciation & Amortization
Profit/(Loss) Before Tax and
Exceptional Items
Profit/(Loss) After Tax and
Exceptional Items
Equity Dividend %
Share Capital
Reserves & Surplus
Net Worth
Gross Fixed Assets
Net Fixed Assets
Total Assets
Key Indicators
2010
2009
2008
Consolidated Standalone Consolidated Standalone Consolidated
Standalone
4,747.81
1,732.32
3,239.50
1,298.90
5,725.56
2,233.06
3,025.63
1,282.16
4,859.58
3,799.38
1,440.46
1,080.40
947.23
163.58
999.19
88.15
662.06
228.83
559.16
136.46
(730.20)
(251.60)
184.04
121.55
309.49
489.14
(1.58)
70.13
(1,219.04)
(652.12)
1,002.96
1,368.61
(1,883.63)
(1,782.11)
(680.71)
(61.88)
Nil
579.83
2,093.05
2,730.00
1,605.11
195.75
Nil
579.83
2,932.02
3,568.98
708.83
97.53
Nil
Nil
348.47
348.47
3,464.34
4,167.89
3,844.51
4,562.67
1,746.33
306.65
764.23
163.34
Nil
348.47
6,348.96
6,875.17
1,507.51
388.77
Nil
348.47
6,539.30
7,097.98
742.71
265.97
9,217.97
9,753.02
15,902.45
15,830.78
16,185.94
15,957.34
Earnings Per Share (Year End) (Rs.)
Cash Earnings Per Share (Year End) (Rs.)
Book Value Per Share (Rs.)
Debt (Including Working Capital)
Equity Ratio
EBITDA / Sales - %
Net Profit Margin - %
Return on Year End Net Worth %
Return on Year End Capital Employed %
25.87
7.87
47.08
2.32
20.46%
21.66%
36.74%
11.06%
35.30
(2.06)
61.55
1.73
31.21%
42.75%
38.35%
14.03%
(54.05)
23.62
110.33
(51.14)
12.61
130.93
2.83
2.28
11.85%
18.57%
(33.73)%
(59.19)%
(49.00)%
(39.06)%
(12.78)%
(11.92)%
(19.49)
(28.53)
197.30
1.35
(15.04%)
(14.02%)
(9.90%)
(4.22%)
(1.77)
(14.68)
203.69
1.25
(17.49%)
(4.30%)
(0.87%)
(0.39%)
Note: Earnings per share, Cash Earnings per share and book value of share are in Rupees.
34
subex annual report 09-10
7.
COMMENTARY ON FINANCIAL STATEMENTS
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.
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
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 per share
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 During 2009-10, the Company issued 1,203 equity shares of
Rs.10/- each under its ESOP 2005 scheme and 1,210 equity shares of
Rs.10/- each under its ESOP 2000 scheme to various Employees on
exercise of Stock Options.
7.1.5 During 2009-10, the Company issued 4,000,000 equity shares of
Rs. 10/- each, on a preferential basis, to M/s Woodbridge Consultants, an entity
belonging to Promoters/Promoter group, at an issue price of Rs 80/- per share.
7.1.6 During 2009-10, the Company issued 19,133,637 equity shares
allotted upon conversion of FCCBs aggregating to principal amount of
US$ 31.9 Million, out of its US$ 98.7 Million 5% Convertible Unsecured
Bonds, in accordance with the terms and conditions thereof.
7.1.7 There are no calls in arrears.
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.
During the year 2009-10, additions to capital reserve due to restructuring
of FCCBs net of expenses amounted to Rs.1,786.54 Million, reductions
due to transfer to Business Restructuring Reserve amounted to Rs.1,700
Million and deferred interest on restructured FCCBs amounted to
Rs. 203.05 Million.
7.2.2 Securities Premium Account represents the premium collected on:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
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. /- 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
253,328 (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.
19,133,637 equity shares were allotted upon conversion of FCCBs
aggregating to principal amount of US$ 31.9 Million, out of its
US$ 98.7 Million 5% Convertible Unsecured Bonds, in accordance
with the terms and conditions thereof
4,000,000 equity shares were allotted, on a preferential basis, to
M/s Woodbridge Consultants, an entity belonging to Promoters/
Promoter group, at an issue price of Rs 80 per share including a
premium of Rs.70 per share
During the year 2009-10, Rs.5,000 Million and Rs.1,700 Million were
transferred to Business Restructuring Reserve from securities premium
and capital reserve respectively. Out of the said amount, Rs.6,499.79
Million were utilised (as explained in Note II.1 of Schedule P and
Schedule O to the standalone and consolidated financial statements
respectively) and consequently, the balance in Business Restructuring
Reserve as of March 31, 2010 was Rs.200.21 Million.
7.3
Employee Stock Options
In accordance with the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999, the Company amortizes 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 net
amount carried in respect of stock options outstanding at March 31,
2010 amounts to Rs.57.12 Million (Previous Year: Rs.46.31 Million).
7.4 Deferred Tax
In accordance with the generally accepted accounting principles in India
on Accounting for Direct Taxes, Deferred Taxes has been restated to
Rs. 12.18 Million on a standalone and consolidated basis.
7.5 Secured Loans
On consolidated basis, the secured loan of Rs.1,588.88 Million (Previous
Year: Rs.980.04 Million) and on stand alone basis, the secured loan of
Rs.1,433.62 Million (Previous Year: Rs.479.16 Million) outstanding
in the books as at March 31, 2010 consists of Rs.17.74 Million
pertaining to motor cars financed by the Company through Hire purchase
scheme with the financiers and is secured by hypothecation of the
vehicles and Rs.706.95 Million pertaining to the working capital loan
from Axis Bank Ltd and State Bank of India secured by Fixed Assets and
subex annual report 09-10
35
Receivables, and Rs.708.93 Million relating to long term loan from
State Bank of India secured by second charge on Current Assets and
pledge of portion of share of promoters.
The Company’s net block of fixed assets was Rs.195.75 Million
(Previous year Rs.284.28 Million) on consolidated basis and Rs.97.53
Million (Previous year Rs.163.34 Million) on standalone basis.
7.6 Unsecured Loans
7.8
Investments
On a consolidated basis, the unsecured loan outstanding in the books as
at March 31, 2010 consists of :
Rs.1,751.10 Million (Previous Year: Rs.9,129.60 Million) relating
a.
to Foreign Currency Convertible Bonds issued in fiscal 2006-07.
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 Securities Market of London Stock
Exchange. The premium payable on these bonds is accrued over the life
of the bonds and is carried under Current Liabilities & Provisions.
b.
Rs.2,999.32 Million (Previous Year: Rs. Nil Million) relating to
Foreign Currency Convertible Bonds issued in fiscal 2009-10 as a
result of restructuring existing bonds mentioned in (a) above. The bonds
carry interest of 5% per annum and are redeemable by March 9, 2012 if
not converted into equity shares as per terms of issue. These bonds are
listed on the Singapore Exchange Securities Trading Limited. The premium
payable on these bonds is accrued over the life of the bonds and is
carried under Current Liabilities & Provisions.
Rs. Nil (Previous Year: Rs.29.11 Million) relates to short term
c.
working capital loan from Deutsche Bank.
d. Rs. 2.24 Million (Previous Year : Rs. 5.07 Million) relates to an
unsecured loan
e.
Rs. Nil (Previous Year: Rs.749.86 Million) relates to long term
working capital loan from State Bank of India, now being structured as
long term secured loan.
On a standalone basis, the unsecured loan outstanding in the books as
at March 31, 2010 consists of :
a.
Rs.1,751.10 Million (Previous Year: Rs.9,129.60 Million) relating
to Foreign Currency Convertible Bonds issued in fiscal 2006-07. 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 Securities Market of London Stock
Exchange. The premium payable on these bonds is accrued over the life
of the bonds and is carried under Current Liabilities & Provisions.
b.
Rs.2,999.32 Million (Previous Year: Rs. Nil Million) relating to
Foreign Currency Convertible Bonds issued in fiscal 2009-10 as a
result of restructuring existing bonds mentioned in (a) above. The bonds
carry interest of 5% 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 Singapore Exchange Securies Trading Limited. The premium
payable on these bonds is accrued over the life of the bonds and is
carried under Current Liabilities & Provisions.
Rs. Nil (Previous Year: Rs.29.11 Million) relates to short term
c.
working capital loan from Deutsche Bank.
d.
Rs. Nil (Previous Year: Rs.749.86 Million) relates to long term
working capital loan from State Bank of India, now being structured as
long term secured loan.
7.7
Fixed Assets
7.7.1 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.
7.7.2 During the year, the Company added Rs.66.60 Million on
consolidated basis and Rs.23.41 Million on standalone basis, to its
gross block. The Company disposed off certain assets no longer required.
7.8.1 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.” During 2007-08, the Company
filed an application with Hon’ble High Court of Karnataka to transfer the
Services Business Division (which included the investment in Subex
Technologies Inc.) 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.
7.8.2 On June 23, 2006, the Company acquired the entire share holding
of Azure Solutions Ltd, UK. The consideration was discharged by issue 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.
7.8.3 During the year 2007-08, the Company completed the acquisition
of Syndesis Ltd, Canada, a company engaged in Service Assurance and
fulfillment space in the Telecom service industry. Pursuant to the acquisition,
Syndesis Limited has been renamed as Subex Americas Inc.
7.8.4 During the year 2009-10, the Company recognized an amount of
Rs. 5,000 Million as diminution in carrying value of investment in Subex
Americas Inc. Consequently, the investment carrying value as of March
31, 2010 is Rs.2,749.57 Million.
7.9
Sundry Debtors
7.9.1 During the year, on a standalone basis the Company has securitized
a portion of its receivables amounting to Rs.286.65 Million (Previous
year: Rs.401.04 Million) with Axis Bank Ltd and on consolidated basis
Rs.957.87 Million (Previous Year: Rs.582.81 Million).
7.9.2 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.
7.9.3 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.
7.9.4 Sundry Debtors as a percentage of total revenue is 10% as
against 11% in the previous year, on a consolidated basis.
7.9.5 The age profile on consolidated basis is as given below:es
Period in days
March 31, 2010
Value
%
Amount in Rs. million
March 31, 2009
Value
%
Less than 180 days
More than 180 days
446.84
32.37
93.25
6.75
622.31
-
100.00
-
Total
479.21
100.00
622.31
100.00
36
subex annual report 09-10
The age profile on a standalone basis is as given below:
Period in days
March 31, 2010
Amount in Rs. million
March 31, 2009
Rs.500 Million (Previous Year: Rs.731.85 Million). The subsidiaries
had utilized such facilities to the extent of Rs.155.26 Million.
7.14 Profit & Loss Account
Value
%
Value
%
7.14.1 Income
Less than 180 days
More than 180 days
1,241.01
11.04
99.12
0.88
1,110.08
-
100.00
-
Total
1,252.05
100.00
1,110.08
100.00
7.9.6 The management believes that the overall composition and
condition of sundry debtors is satisfactory. The provision for doubtful
debts stands at Rs.105.98 Million (Previous Year: Rs.290.77 Million)
on consolidated basis and Rs.92.09 Million (Previous Year: Rs.162.21
Million) on standalone basis.
7.10 Cash and Bank Balances
The bank balances in India includes both rupee accounts and foreign
currency accounts. The fixed deposit of Rs.25.97 Million on consolidated
basis and standalone basis is the margin money with the bankers for
establishing bank guarantee/ issuing corporate credit cards.
7.11 Loans and Advances
7.11.1 Advances recoverable in cash, kind or value to be received are
primarily towards pre-payments for value to be received. Advance income
tax, net of provision for taxation, represents payments made towards tax
liability pending assessment and refunds due.
7.11.2 Deposits represent rent deposit, electricity deposit, telephone
deposits and advances of like nature.
7.11.3 Loans Due From Group Companies (Standalone Basis)
Amount in Rs. million
2009-10
2008-09
0.50
45.98
312.89
(0.04)
168.46
310.83
-
181.56
114.40
166.94
Subex (UK) Limited
Subex (Asia Pacific) Pte Ltd
Subex Americas Inc
Subex Inc
Subex Technologies Ltd
7.12 Provisions
Provisions for taxation represent income tax, dividend tax and wealth tax
liability. The provision would be set off upon payment of tax.
Provision also includes redemption premium accrued on Foreign Currency
Convertible bonds – Rs.612.71 Million (Previous Year – Rs. 1361.92
Million), Provision for Other Long Term Employee Benefits Rs. 628.60
Million (Previous Year: Rs. Nil), and Differential Interest on Restructured
FCCBs Rs. 203.05 Million (Previous Year: Rs. Nil).
7.13 Other Matters
7.13.1 Letters of Credit
The Company has an outstanding Letters of credit amounting to Rs.23.25
Million (Previous Year: Rs.32.95 Million) on a consolidated and
standalone basis. These letters of credit are in the nature of procurement
of capex.
7.13.2 Guarantees
On Standalone Basis
The Company has provided Corporate Guarantees to Banks for credit
facilities availed by its wholly owned subsidiaries to the amount of
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
2009-10
2008-09
Value
%
Value
%
Software Products
Software Services
3,829.43
801.35
82.70 4,384.81
17.30 1,200.08
78.51
21.49
Total
4,630.78
100.00 5,584.89 100.00
7.14.2 Geographically, the Company earns income from export of
software services to USA and software products to most of the countries.
7.15 Other Income
7.15.1 Non Operating income consists of income derived by the
Company from, bad debts recoveries, reversal of provision for doubtful
debts and profit on sale of fixed assets
7.16
Expenditure
7.16.1 The staff cost decreased to Rs.2,968.34 Million (Previous year:
Rs.3,866.80 Million) on consolidated basis and decreased to Rs.658.48
Million (Previous year: Rs.798.28 Million) on standalone basis.
7.16.2 The Company incurred administration and other expenses at
15.04% of its total Income during the year as compared to 18.74%
during the previous year on consolidated basis and 48.14% of its total
income during the year as compared to 53.90% during the previous year
on a standalone basis.
7.17 Operating Profits
During the year, on consolidated basis, the Company earned an Operating
Profit/(Loss) before Interest, depreciation, tax and exceptional items of
Rs.947.23 Million being 19.95% of total income as against Rs.662.06
Million at 11.56% during the previous year. On a standalone basis, the
Company earned Operating Profit/(Loss) before Interest, depreciation, tax
and exceptional items of Rs.999.19 Million being 30.84% of total income
as against Rs.559.16 Million at 18.48% during the previous year.
7.18
Interest & Bank Charges
The Company incurred an expenditure of Rs.474.16 Million (Previous
year: Rs.434.81 Million) on consolidated basis and Rs.421.90 Million
(Previous year: Rs.352.57 Million) on standalone basis. The interest
paid is related to temporary overdrawls and securitized receivables.
The interest on FCCBs provided alone amounted to Rs.156.31
Million(Previous Year: Rs.180.76 Million).
7.19 Depreciation
7.19.1 The provision for depreciation for the year amounted to Rs.148.23
Million (Previous year: Rs.212.88 Million) on consolidated basis and Rs.88.15
Million (Previous year: Rs.136.46 Million) on standalone basis.
7.19.2 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.50.85 Million (Previous
year: Rs.82.23 Million) has been charged towards depreciation.
subex annual report 09-10
37
7.20
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.
7.21 Net Profit
On consolidated basis, the net profit of the Company amounted to
Rs.1,002.96 Million, as against a net loss of Rs.1,883.63 Million
during the previous year. On standalone basis, the net profit of the
Company amounted to Rs.1,368.61 Million as against a net loss of Rs.
1,782.11 Million during the previous year.
7.22 Earnings Per Share
Earnings/(Loss) per share computed on the basis of number of common
stock outstanding, as on the Balance Sheet date was Rs.25.87 per share
(Previous year: Rs.(54.05) per share) on consolidated basis and Rs.35.30
per share [Previous year: Rs.(51.14) per share] on standalone basis.
8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL
RELATIONS, INCLUDING NUMBER OF PEOPLE EMPLOYED
Subexians
Our greatest assets are our people - Subexians! As a products Company,
our team becomes our biggest differentiator and how we define our
capability requirements, training needs and retention strategies becomes
crucial. The Subex work culture nurtures initiative and creativity, bringing
out the best of every Subexian. Empowering people, offering greater
challenges along with more development opportunities forms the essence
of Subex. We know that when Subexians realize their full potential, we can
achieve our broader business goals. The Subex population is spread across
the globe in our multiple offices. The larger centers are our offices in
Bangalore, London, Toronto and Denver. As of March 31, 2010, we had
over 978 Subexians on our rolls.
Human Resources at Subex is centralized at our corporate headquarters in
Bangalore, with regional HR teams providing local support aligned to the
global HR strategy. The HR team provides a competitive edge to the business
by enabling and supporting a very unique business model of value delivery
based on global product development and delivery capabilities. HR at Subex
consistently strives to adopt leading best practices in designing and deploying
HR process and programs across various areas like recruitment, total rewards
management, talent management, organizational development, performance
management, change management, learning and development, mergers and
acquisitions etc.
Recruitment
During the year, the recruitment team had to execute a well thought out
manpower planning and analysis exercise, adopt global recruitment best
practices to fulfill the organization's talent requirements. The team created
and implemented high quality, repeatable recruiting practices and
procedures (like “Coffee with the Hiring Manager”, "Post-offer feedback",
"Mapping of potential talent" in the industry using Subexian referral program,
partner feedback, interviewer feedback etc.) to help Subex to attract and
hire the best talent in the industry in a cost effective and efficient manner.
The main sources for hires were referrals from Subexians (the best bring
the best!), campus recruitments, placement consultants, website postings
and walk-ins. Our selection criteria are stringent and we hire for strength
in both technology as well as the telecom domain. The entire recruitment
process is managed through an internally developed tool called “Poodle”.
One of the key focus areas for the recruitment team was to attract high
quality resources into Subex. For this, we had to create recognition of the
Subex brand on campuses. Our theme was "Refuse to be Ordinary" -
aligned to the spirit of Subex! Our rigorous campus interview and selection
process (multiple rounds of assessment starting with technical tests
(objective and programming), followed by three rounds of competency
based technical interviews and a detailed HR round), reaffirmed our theme.
On the hiring of laterals or experienced resources, the recruitment team
experimented with new models like the Recruitment Process Outsourcing
(RPO) model to manage the dynamic growth of the business and ramp up
for anticipated growth.
Induction & Training
There is enough research that proves that the quality of induction that new
hires go through determines how successful they are in the Company and
has a huge impact on retention. Each new Subexian undergoes a mandatory
induction program when they join Subex. The induction program is split
into in three phases.
The First Day Induction is primarily a HR function and is aimed at
completion of required paperwork as well as a familiarization with the
Company, values, benefits and facilities. This is the followed by Phase 2
which comprises a Functional Induction wherein various department heads
explain the activities within their departments. Phase 3 is the Management
Induction which is organized within a month of joining. This provides the
new hires with a platform for direct interaction with senior management of
Subex and helps them understand the vision, culture, and current and
future goals of the organization.
New or recent graduates must also attend additional training programs
that are tailored to their area of technology. In addition, we also have
training programs for all Subexians to improve their technical and
behavioural skills. We launched a Sabbatical Policy intended to support
continuing education of Subexians. We also sponsor special programs for
Subexians at leading educational institutions.
Subex is also in the initial stages of launching Subex Academy - a global
Learning and Development Platform (supporting instructor led training, on
the job learning, as well as e-learning) that would enable a role based
curriculum led approach to learning, while streamlining the training process
as well as ensuring global reach and appropriateness of content. This
automated platform would add significant value to training identification,
design, delivery and evaluation.
Performance Management System
Subex continues to keep abreast of the latest developments in the HR
arena. One such initiative has been to implement cascading Key Result
Areas (KRAs) to drive alignment across the organization. Cascading KRAs
help in aligning the individuals' KRAs to the corporate, functional and
departmental KRAs. We have also introduced a new competency model
which comprises four categories of competencies - F.E.L.T.
Foundation Competencies are the basic Values based competencies required
by all in Subex. Excel competencies are those that are required to do your
current job really well. Lead Competencies focus on the future needs and
are the skills required to succeed in leadership roles. Technical
Competencies take care of the core areas of the role - knowledge about
our products, the various technologies and domains. These, along with the
KRAs help build and reinforce the performance oriented culture at Subex.
Compensation
Compensation at Subex is multi-dimensional and consists of salary,
benefits, stock options, health and disability insurance. The Company
benchmarks its compensation package against industry data and strives
to achieve a balanced position. The Company provides robust and
comprehensive cash compensation and benefits as per industry trends.
We also arrive at the salary bands for Subexians by doing comprehensive
job matching, data validation and quality audits. Subex also introduced a
new Rewards and Recognition program called STARs. STARs is an online
reward and recognition platform that will simplify the process of rewarding
Subexians globally and give Subexians the choice of selecting their rewards
through redeemable vouchers of major stores selected globally.
38
subex annual report 09-10
financial review
subex limited (standalone)
subex annual report 09-10
39
AUDITORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED (formerly Subex Azure Limited)
AUDITORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED (formerly Subex Azure Limited)
AUDITORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED (formerly Subex Azure Limited)
AUDITORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED (formerly Subex Azure Limited)
AUDITORS’ REPORT TO THE MEMBERS OF SUBEX LIMITED (formerly Subex Azure Limited)
1. We have audited the attached Balance Sheet of Subex Limited (“the
Company”), as at March 31, 2010, the Profit and Loss Account and the
Cash Flow Statement of the Company for the year ended on that date,
both annexed thereto. These financial statements are the responsibility
of the Company’s Management. Our responsibility is to express an
opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards
generally accepted in India. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements. An
audit includes examining, on a test basis, evidence supporting the
amounts and the disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the
significant estimates made by the Management, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
3. Without qualifying our report, we draw attention to Note II.1 of
Schedule P. As more fully explained therein, the Company has in
accordance with the Proposal approved by the Hon’ble High Court of
Karnataka credited the surplus of Rs. 1,583,488,419 arising on
account of the restructuring of the Foreign Currency Convertible
Bonds to Capital Reserve Account and debited expenses and
diminution in value of investments amounting to Rs. 6,499,792,468
to the Business Restructuring Reserve instead of recording the same
in the Profit and Loss Account as required by Accounting Standard 5
‘Net Profit or Loss for the Period, Prior Period Items’.
4. We draw attention to Note II.9.b of Schedule P regarding the excess
managerial remuneration of earlier years in respect of which the
Company’s application is pending with the Central Government.
5. As required by the Companies (Auditor’s Report) Order, 2003 (CARO)
issued by the Central Government 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.
6. Further to our comments in the Annexure referred to in paragraph 5
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 purposes of
our audit;
(b) in our opinion, proper books of account as required by law have been
kept by the Company so far as it appears from our examination of
those books;
(c) the Balance Sheet, the Profit and Loss Account and the Cash Flow
Statement dealt with by this report are in agreement with the books
of account;
(d) in our opinion, the Balance Sheet, the Profit and Loss Account and
the 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, except to the extent indicated in paragraph 3
above for the reasons stated therein;
(e) 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 and our comments in paragraph 3 above, 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, 2010;
(ii) in the case of the Profit and Loss Account, of the profit of the
Company for the year ended on that date; and
(iii) in the case of the Cash Flow Statement, of the cash flows of the
Company for the year ended on that date.
7. On the basis of the written representations received from the Directors
as on March 31, 2010 taken on record by the Board of Directors,
none of the Directors is disqualified as on March 31, 2010 from
being appointed as a director in terms of Section 274(1)(g) of the
Companies Act, 1956.
For Deloitte Haskins & Sells
Chartered Accountants
(Registration No. 008072S)
V. Balaji
Partner
M. No. 203685
Place: Bangalore
Date: June 10, 2010
ANNEXURE TO THE AUDITORS’ REPORT (Referred to in Paragraph 5 of our report of even date)
1. Having regard to the nature of the Company’s business/activities/
result, clauses iii (b) to (d), iii (f), iii (g), viii, xii, xiii, xiv, xix and
xx of CARO are not applicable.
2.
In respect of its fixed assets:
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of the fixed assets.
(b) Some of the fixed assets were physically verified during the year by
the Management in accordance with a regular programme of
verification which, in our opinion, provides for physical verification
of all the fixed assets at reasonable intervals. According to the
information and explanation given to us, no material discrepancies
were noticed on such verification.
(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.
3.
In respect of its inventory:
(a) As explained to us, the inventories were physically verified during
the year by the Management at reasonable intervals.
(b) In our opinion and according to the information and explanation
given to us, the procedures of physical verification of inventories
followed by the Management were reasonable and adequate in relation
to the size of the Company and the nature of its business.
(c) In our opinion and according to the information and explanations
given to us, the Company has maintained proper records of its
inventories and no material discrepancies were noticed on physical
verification.
40
subex annual report 09-10
4. According to the information and explanations given to us, the
Company has neither granted nor taken any loans, secured or
unsecured, to/from companies, firms or other parties listed in the
Register maintained under Section 301 of the Companies Act, 1956.
5.
In our opinion and according to the information and explanations
given to us, having regard to the explanation that some of the
Company’s transactions of (a) purchase of goods and services and
(b) services rendered, are of special nature and suitable alternative
sources are not readily available for obtaining comparable quotations,
there is an adequate internal control system commensurate with the
size of the Company and the nature of its business with regard to
purchases of inventory and fixed assets and for the sale of goods
and services. During the course of our audit, we have not observed
any major weakness in such internal control system.
6.
In respect of contracts or 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:
(a) The particulars of contracts or arrangements referred to Section 301
that needed to be entered in the Register maintained under the said
Section have been so entered.
(b) Where each of such transactions is in excess of Rs.5 lakhs in respect
of any party, such transactions relate to preferential allotment of
shares reported under paragraph 15 below.
7. According to the information and explanations given to us, the Company
has not accepted any deposit from the public during the year.
8.
In our opinion, the internal audit functions carried out during the year
by a firm of Chartered Accountants appointed by the Management
have been commensurate with the size of the Company and the
nature of its business.
9. According to the information and explanations given to us in respect
of statutory dues:
(a) The Company has generally been regular in depositing undisputed
statutory dues, including Provident Fund, Investor Education and
Protection Fund, Employees’ State Insurance, Income-tax, Sales
Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and
other material statutory dues applicable to it with the appropriate
authorities.
(b) There were no undisputed amounts payable in respect of Provident
Fund, Investor Education and Protection Fund, Employees’ State
Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom
Duty, Excise Duty, Cess and other material statutory dues in arrears
as at March 31, 2010 for a period of more than six months from the
date they became payable.
(c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax,
Custom Duty, Excise Duty and Cess which have not been deposited
as on March 31, 2010 on account of disputes are given below:
Statute
Nature of the dues
Forum where dispute is pending
Period to which
the amount relates
Amount (Rs.)
Income Tax Act, 1961
Income Tax Act, 1961
Income Tax Act, 1961
Income Tax Act, 1961
Income Tax Act, 1961
Income Tax
(Incl. Interest)
Income Tax
(Incl. Interest)
Income Tax
(Incl. Interest)
Income Tax
(Incl. Interest)
Income Tax
(Incl. Interest)
Commissioner of
Income tax (appeals)
Deputy Commissioner of
Income tax (appeals)
Deputy Commissioner of
Income tax (appeals)
2001-02
2002-03
2003-04
5,859,380
1,467,549
5,557,745
Income Tax Appellate Tribunal
2004-05
22,734,060
Commissioner of
Income Tax (Appeals)
2005-06
17,875,862
10. The Company did not have accumulated losses at March 31, 2010.
The Company has not incurred cash losses during the year ended
March 31, 2010. The Company incurred cash losses in the
immediately preceding year.
11. 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 banks and financial institutions.
12. In our opinion and according to the information and explanations
given to us, having regard to the explanation that the Company has
provided certain guarantees to financial institutions for loans taken
by the subsidiaries of the Company in order to support the
subsidiaries’ operations, the terms of such guarantees are not prima
facie prejudicial to the interests of the Company.
13. In our opinion and according to the information and explanations
given to us, the term loans have been applied for the purposes for
which they were obtained, other than temporary deployment pending
application.
14. In our opinion and according to the information and explanations
given to us and on an overall examination of the Balance Sheet, we
report that funds raised on short-term basis have not been used
during the year for long- term investment.
15. According to the information and explanations given to us, the
Company has made preferential allotment of shares to parties and
companies covered in the Register maintained under Section 301 of
the Companies Act, 1956 at a price which is prima facie not
prejudicial to the interests of the Company.
16. To the best of our knowledge and according to the information and
explanations given to us, no fraud on or by the Company has been
noticed or reported during the year.
For Deloitte Haskins & Sells
Chartered Accountants
(Registration No. 008072S)
V. Balaji
Partner
M. No. 203685
Place: Bangalore
Date: June 10, 2010
subex annual report 09-10
41
BALANCE SHEET AS AT
BALANCE SHEET AS AT
BALANCE SHEET AS AT
BALANCE SHEET AS AT
BALANCE SHEET AS AT
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS :
Share Capital
Employees Stock Options Outstanding account
Reserves and Surplus
LOAN FUNDS :
Secured Loans
Unsecured Loans
TOTAL
APPLICATION OF FUNDS
FIXED ASSETS & INTANGIBLES :
Gross Block
Less : Depreciation
Net Block
INVESTMENTS :
DEFERRED TAX ASSET
CURRENT ASSETS, LOANS & ADVANCES :
Sundry Debtors
Cash & Bank balances
Loans & Advances
Unbilled Revenue
Less: Current liabilities & Provisions
Current liabilities
Provisions
Schedule
March 31, 2010
March 31, 2009
Amount in Rs.
A
B
C
579,831,390
348,470,890
57,121,999
2,932,024,900
3,568,978,289
46,306,062
5,048,272,223
5,443,049,175
D 1,433,624,881
E 4,750,420,000
479,161,493
6,184,044,881
9,908,570,246 10,387,731,739
9,753,023,170
15,830,780,914
F
G
H
IIIII
J
K
708,830,172
611,296,782
97,533,390
764,230,507
600,888,201
163,342,306
9,263,443,608
12,175,962
14,263,443,608
24,176,009
1,252,057,185
29,488,397
919,470,100
156,420,930
2,357,436,612
418,416,788
1,559,149,614
1,977,566,402
1,110,083,973
53,041,678
1,193,050,991
141,527,765
2,497,704,407
422,324,717
1,575,940,535
1,998,265,252
Net Current Assets
PROFIT AND LOSS ACCOUNT
Less : Transfer from General Reserve as per Contra
TOTAL
379,870,210
499,439,155
-
-
1,058,355,416
177,975,580
-
9,753,023,170
880,379,836
15,830,780,914
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
For and on behalf of the Board
V. Balaji
Partner
Bangalore
June 10, 2010
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
V. Balaji Bhat
Independent Director &
Chairman of Audit Committee
Raj Kumar C
Vice President-Legal & Company Secretary
Ramanathan J
Vice President-Finance
42
subex annual report 09-10
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
Schedule
March 31, 2010
March 31, 2009
Amount in Rs.
INCOME :
Sales & Services
Other Income
Total
EXPENDITURE :
Cost of Hardware, Software and Support Charges
Personnel Costs
Other Operating, Selling and
Administrative Expenses
Financial Costs (Net)
Depreciation & Amortisation
Total
LLLLL
M
N
O
FFFFF
3,201,436,756
38,065,026
3,239,501,782
22,293,397
658,478,298
1,559,546,166
421,898,565
88,153,818
2,750,370,244
3,011,047,937
14,585,436
3,025,633,373
37,469,453
798,276,040
1,630,725,366
352,574,093
136,458,814
2,955,503,766
Profit/(Loss) Before Taxation and Exceptional Items
489,131,538
70,129,607
918,812,565
(1,929,600,000)
(27,153,560)
891,659,005
1,380,790,543
109,633,809
(1,819,966,191)
(1,749,836,584)
135,348
-
49,971
12,000,000
12,185,319
1,368,605,224
(1,058,355,416)
310,249,808
6,976,548
21,170,731
4,121,669
-
32,268,948
(1,782,105,532)
723,750,116
(1,058,355,416)
35.30
8.44
(51.14)
(51.14)
Exceptional Items
Exchange Gain/(Loss) on Restatement of FCCBs
Exchange Gain/(Loss) on intra-group foreign
currency loans and advances
Profit/(Loss) Before Tax
Provision for taxation includes
- Current tax (including Wealth Tax)
- MAT Credit writen off
- Fringe Benefit Tax
- Deferred tax
Profit/(Loss) After Taxation
Balance brought forward from Previous year
Surplus/(Deficit) carried to Balance Sheet
Earnings/(Loss) Per Share (Face value of Rs.10/- each)
(Refer Note II.8 of Schedule P)
- Basic
- Diluted
Significant Accounting Policies & Notes to the Accounts
The Schedules referred to above form an integral part
of the Profit and Loss account
P
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
For and on behalf of the Board
V. Balaji
Partner
Bangalore
June 10, 2010
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
V. Balaji Bhat
Independent Director &
Chairman of Audit Committee
Raj Kumar C
Vice President-Legal & Company Secretary
Ramanathan J
Vice President-Finance
subex annual report 09-10
43
CASH FLOW STATEMENT FOR THE YEAR ENDED
CASH FLOW STATEMENT FOR THE YEAR ENDED
CASH FLOW STATEMENT FOR THE YEAR ENDED
CASH FLOW STATEMENT FOR THE YEAR ENDED
CASH FLOW STATEMENT FOR THE YEAR ENDED
Cash flow from operating activities
Net Profit before Tax
Adjustments for :
a) Depreciation and amortization
b) Interest income
c) Interest and bank charges
d) Profit on sale of assets (net)
e) Employee stock compensation expenses
f) Provision for doubtful debts written off/(back)
g) Unrealised exchange fluctuations
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
a) Direct Taxes paid and Others (Refer Note II.14.3, Schedule P)
Net Cash provided by operating activities
Cash Flow from Investing activities
a) Purchase of Fixed Assets
b) Sale / disposal of fixed assets
c) Interest received
d) Loans (given to)/repaid by Subsidiaries (Net)
Net Cash from Investing Activities
Cash Flow from Financing Activities
a) Proceeds/(Utilisation) from issue of shares/warrants/options
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
Interest and bank charges paid
f)
g) Expenditure incurred on restructuring of FCCBs
Net Cash from Financing Activities
A
B
C
Net increase in Cash or Cash equivalents [A + B + C]
Effect of Exchange Differences on restatement of foreign currency cash and cash equivalents
Cash or Cash equivalents at the start of the year
Cash or Cash equivalents at the close of the year*
* Refer Note II.14.3, Schedule P
Significant Accounting policies & Notes to the accounts
P
The Schedule referred to above forms an integral part of the Cash flow statement
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
For and on behalf of the Board
March 31, 2010
March 31, 2009
Amount in Rs.
1,380,790,543
(1,749,836,584)
88,153,818
(23,875,720)
445,774,285
(383,281)
4,568,733
(33,465,038)
(928,819,161)
932,744,179
(722,793,281)
(141,586,343)
(99,840,148)
(31,475,593)
(87,697,872)
(119,173,465)
(23,874,819)
1,452,837
22,287,191
245,760,917
245,626,126
320,240,524
224,146,137
-
(48,652,995)
(109,617)
(492,223,952)
(153,484,275)
(150,084,178)
(23,631,517)
78,236
53,041,678
29,488,397
136,458,814
(51,107,777)
403,681,870
(172,727)
(11,786,616)
59,115,796
1,758,633,473
544,986,249
(261,678,543)
94,130,420
96,619,094
474,057,220
(34,765,054)
439,292,166
(38,328,461)
4,674,685
1,696,744
370,693,961
338,736,929
-
(421,248,627)
10,640,937
(7,334,336)
(53,154)
(402,301,382)
-
(820,296,562)
(42,267,467)
2,434,586
92,874,559
53,041,678
V. Balaji
Partner
Bangalore
June 10, 2010
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
V. Balaji Bhat
Independent Director &
Chairman of Audit Committee
Raj Kumar C
Vice President-Legal & Company Secretary
Ramanathan J
Vice President-Finance
44
subex annual report 09-10
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
SCHEDULE - A :
SHARE CAPITAL :
AUTHORISED :
128,040,000 Equity Shares of Rs.10/- each
(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 :
57,983,139 Equity Shares of Rs.10/- each
(Previous Year: 34,847,089 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 Ltd
Total
SCHEDULE - B :
EMPLOYEES STOCK OPTIONS OUTSTANDING ACCOUNT :
Employees Stock Options Outstanding
Less: Deferred Employees Compensation Expenses
Total
SCHEDULE - C :
RESERVES AND SURPLUS :
Capital Reserve
Opening Balance
Add : Forfeiture of amount received towards warrants
[Refer Note II.4, Schedule P]
Add : Additions due to restructuring of FCCBs net of
expenses [Refer Note II. 1, Schedule P]
Less : Transferred to Business Restructuring Reserve
[Refer Note II. 1, Schedule P]
General Reserve
Opening Balance
Less: Transfer to Profit & Loss Account as per contra
Securities Premium Account
Opening Balance
Add: Additions due to conversion of FCCBs, ESOP and
preferential placement of equity shares
Add : Write back from/(accrual for) redemption premium on FCCBs (Net)
Less:
[Refer Note II. 3, Schedule P]
Transferred to Business Restructuring Reserve
[Refer Note II. 1, Schedule P]
Business Restructuring Reserve [Refer Note II.1 Schedule P]
Opening Balance
Transferred from Securities Premium/Capital Reserve
Less: Amounts utilised for Permitted Utilisations
Profit & Loss Account
Total
1,280,400,000
19,600,000
1,300,000,000
480,400,000
19,600,000
500,000,000
579,831,390
348,470,890
579,831,390
348,470,890
74,399,900
17,277,901
57,121,999
85,899,999
39,593,937
46,306,062
153,566,050
-
1,583,488,419
1,700,000,000
37,054,469
13,006,920
140,559,130
-
-
153,566,050
177,975,580
-
177,975,580
177,975,580
177,975,580
-
4,894,706,173
5,624,568,228
1,562,627,960
-
749,203,378
(729,862,055)
5,000,000,000
2,206,537,511
- 4,894,706,173
-
6,700,000,000
6,499,792,468
200,207,532
310,249,808
2,932,024,900
-
-
-
-
-
5,048,272,223
subex annual report 09-10
45
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULE - D :
SECURED LOANS :
Short Term:
Working Capital Loans from Banks
(Secured by charge on Fixed Assets and Receivables)
Long Term:
March 31, 2010
March 31, 2009
Amount in Rs.
706,953,065
453,695,887
Loans from Banks [Refer Note II. 14.6, Schedule P]
708,929,933
-
(Secured by second charge on Current Assets and Pledge of portion of
shares of Promoters)
[Amount repayable within one year: Rs. 708,929,933,
Previous Year: Rs. Nil]
Loans from Banks
(Secured by hypothecation of assets financed by these loans)
[Amount repayable within one year: Rs. 6,946,089,
Previous Year: Rs. 8,887,190]
Total
SCHEDULE - E :
UNSECURED LOANS :
Short Term:
Working Capital Loans from Banks
Long Term:
Loans from Banks [Refer Note II. 14.6, Schedule P]
[Amount repayable within one year: Rs. Nil,
Previous Year: Rs. 749,859,205]
Foreign Currency Convertible Bonds (Refer Note II.3, Schedule P)
Total
17,741,883
25,465,606
1,433,624,881
479,161,493
-
-
29,111,041
749,859,205
4,750,420,000
4,750,420,000
9,129,600,000
9,908,570,246
46
subex annual report 09-10
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subex annual report 09-10
47
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
SCHEDULE - G :
INVESTMENTS :
(Long term, trade, unquoted)
In wholly owned subsidiaries
Subex Technologies Ltd., India
[3,999,994 Equity shares fully paid up, at par value Rs.10/- each]
Subex (UK) Ltd., UK (5,039,565,245 Equity shares fully paid,
Par value of GBP 0.00001 each)
Subex Americas Inc, Canada
(100 equity shares fully paid; No par value )
Less: Provision for dimunition in the value of investment
[Refer Note II.1, Schedule P]
Total
SCHEDULE - H :
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 - I :
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. 9,779,
Previous Year : 2,495,032)
in Checking Account with Wachovia Bank, New Jersey
(Maximum outstanding during the year Rs. 91,359,
Previous Year : 191,387,569)
- ABN Amro Bank - Dubai
-
-
(Maximum outstanding during the year Rs. 2,528,236,
Previous Year : 7,742,720)
in Bank of China - RMB account - China
(Maximum outstanding during the year Rs.378,053,
Previous Year : 3,339,752)
in HSBC Bank - Paris
(Maximum outstanding during the year Rs.9,911,398
Previous Year : 9,911,398)
- HSBC Bank - Dubai
(Maximum outstanding during the year Rs.1,173,575,
Previous Year : 2,084,748)
- Societe Generale Bank - London
(Maximum outstanding during the year Rs.5,069,907,
Previous Year : 147,283,805)
39,999,940
39,999,940
6,473,868,240
6,473,868,240
7,749,575,428
7,749,575,428
5,000,000,000
2,749,575,428
-
7,749,575,428
9,263,443,608
14,263,443,608
11,043,444
92,087,569
1,241,013,741
-
-
98,343,424
103,131,013
98,343,424
1,110,083,973
63,866,112
1,241,013,741
1,344,144,754
92,087,569
1,252,057,185
1
2,691,926
25,969,391
225,503
-
-
55,282
-
-
1,173,950,085
1,272,293,509
162,209,536
1,110,083,973
8,028
4,161,946
31,907,441
328,727
-
9,779
91,359
1,465
378,053
546,294
9,911,398
-
1,173,575
-
5,069,907
Total
29,488,397
53,041,678
48
subex annual report 09-10
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO ACCOUNTS FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
SCHEDULE - J :
LOANS & ADVANCES :
(Unsecured, considered good)
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
Other Deposits
Total
SCHEDULE - K :
CURRENT LIABILITIES & PROVISIONS :
Sundry Creditors
- Due to Micro & Small Enterprises
[Refer Note II.14.10 of Schedule P]
- Due to Others
Advance received from Customers
Deferred Income
Duties & Taxes
Interest Accrued but not due
Unclaimed Dividends
PROVISIONS :
Taxation
Employee Benefits
Warranty
Others (Note II.14.4, Schedule P)
Total
215,837,809
527,796,478
104,205,428
71,630,385
919,470,100
207,452,357
773,557,395
140,187,791
71,853,448
1,193,050,991
-
192,521,142
57,781,788
98,116,711
58,050,085
11,304,819
642,243
-
214,960,438
49,005,023
111,618,598
34,830,550
11,158,248
751,860
418,416,788
422,324,717
75,852,939
33,749,401
4,228,718
1,445,318,556
75,788,235
31,275,842
4,228,718
1,559,149,614 1,464,647,740
1,977,566,402
1,575,940,535
1,998,265,252
subex annual report 09-10
49
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
SCHEDULE - L :
OTHER INCOME :
Provision for Doubtful Debts written back
Other income
Profit on sale of Fixed Assets (Net)
Exchange Fluctuation gain (Net)
Total
SCHEDULE - M :
PERSONNEL COSTS:
Salaries, Wages & Allowances
Contribution to Provident Fund and Other Funds
Other staff related costs
Total
SCHEDULE - N :
OTHER OPERATING, SELLING AND
ADMINISTRATIVE EXPENSES:
Software Purchases
Rent
Power, Fuel and Water Charges
Repairs & Maintenance
Insurance
Communication Costs
Printing & Stationery
Travelling & Conveyance
Rates & Taxes Including Filing Fees
Advertisement & Business Promotion (including Consultancy charges)
Marketing & Allied Service Charges
Provision for Doubtful Debts
Exchange Fluctuation Loss (Net)
Miscellaneous Expenses
Directors sitting fees
Total
SCHEDULE - O :
FINANCIAL COSTS :
Interest on FCCB and other term loans
Other Interest & Bank Charges
Interest on deposit accounts from banks
(Gross of TDS of Rs. 185,548, Previous Year Rs. 347,894)
Interest on Inter Company loans
Total
33,465,038
4,216,707
383,281
-
38,065,026
615,536,309
29,166,874
13,775,115
658,478,298
6,058,801
95,344,518
22,358,081
25,816,004
11,630,388
14,671,497
3,254,113
81,456,491
8,493,171
52,266,619
1,201,387,219
-
36,347,099
457,165
5,000
1,559,546,166
-
1,213,774
172,727
13,198,935
14,585,436
746,809,285
29,153,941
22,312,814
798,276,040
4,377,670
94,686,746
19,423,524
25,224,576
5,870,080
16,383,076
4,246,913
94,122,949
4,330,783
84,217,428
1,215,943,412
59,115,796
-
2,762,413
20,000
1,630,725,366
244,165,609
201,608,676
445,774,285
(2,038,300)
(21,837,420)
(23,875,720)
421,898,565
268,359,550
135,322,320
(1,696,744)
(49,411,033)
403,681,870
(51,107,777)
352,574,093
50
subex annual report 09-10
SCHEDULE – P :
Significant Accounting Policies and Notes to Accounts
I.
SIGNIFICANT ACCOUNTING POLICIES
I.1. Basis for Preparation of Financial Statements
The financial statements have been prepared under the historical cost
convention on accrual basis except for certain financial and other assets
and liabilities which are measured on historical cost basis as permitted
by the Accounting Standards or as per the Proposal approved by the
Honourable High Court of Karnataka.
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 license includes fees for
transfer of licenses, 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 of such licenses.
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.
Maintenance and service income is recognised on time proportion basis.
Interest on investments and deposits are booked on a time proportion
basis taking into account the amount invested and the rate of interest.
I.4. Fixed Assets and Intangibles
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.
Acquired Intangibles are stated at cost inclusive of duties and taxes.
Costs incurred on self generated intangibles are expensed as incurred.
I.5. Depreciation and Amortisation
Fixed assets and Intangibles are depreciated/amortised 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/amortisation adopted are as under:
Particulars
Depreciation/Amortisation Rates %
Computers (including Software)
Furniture & Fixtures
Vehicles
Office equipments
Intellectual Property Rights
Goodwill
25
20
20
20
20
20
Individual assets costing less than Rs. 5,000 are depreciated in full, in
the year of purchase.
I.6.
Employee Stock Option Plans
Employee Stock Options 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 exercise
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 determined under the projected credit unit method, carried out at
the end of the financial year. Actuarial gains/losses are recognized in full
in the profit and loss account. 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. Other short term employee benefits like medical, leave travel
etc are accrued based on the terms of employment on a time proportion basis
The company has introduced long term employee compensation plans
under which certain employees are eligible for retention and performance
linked payouts. These payouts are accrued as the services are rendered
and/or when the specific criteria are met.
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 restated 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
subex annual report 09-10
51
the Balance Sheet date. Fixed Assets of foreign branches are carried 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.
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.
I.10.
Investments
Long term Investments are stated at cost less diminution in the value of
investments that is other than temporary.
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 and Contingencies
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. Contingent liabilities
are not provided for but disclosed in the notes to the financial statements.
I.15 Impairment of Fixed Assets
At each balance sheet date, the Company reviews the carrying amounts
of its fixed assets and intangibles 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
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. Business Restructuring Reserve
The shareholders of the Company approved the Board’s Proposal
(hereinafter referred to as ‘the Proposal’) for transferring amounts from
the Securities premium and Capital Reserves as on or arising after April
1, 2009 (upto March 31, 2012), to a Business Restructuring Reserve
(BRR) to be utilized from or after April 1, 2009 for certain Permitted
Utilizations as mentioned in the Proposal.
The Company’s petition seeking the approval of the above Proposal from
the Hon’ble High Court of Karnataka was filed with the Court on March
12, 2010. The Company has received the order of the Hon’ble High
Court approving the Proposal on May 4, 2010 and has registered the
same with the Registrar of Companies on May 11, 2010, thereby
completing all the requirements for the order to be effective.
In accordance with the Proposal, the Board of Directors of the Company
have thus approved the following:
(cid:127)
(cid:127)
transfer of amounts standing to the credit of Securities premium
and Capital reserve (including the Profit of Rs.1,583,488,419
arising out of reduction in liability to the Foreign currency convertible
bond holders pursuant to the Restructuring of the US$ 180 Million
Foreign currency convertible bonds. Refer Note II.3.A below) to
the extent of Rs. 6,700,000,000 to the BRR.
Utilisation of the BRR for certain Permitted utilisations to the tune
of Rs.6,499,792,468.
Consequently the Company carries a balance of Rs.200,207,532 in the
BRR as at March 31, 2010 which shall be used for such Permitted
utilizations in the future as the Board may deem fit. Had the Proposal not
provided for (a) transferring Profits arising out of restructuring of US$ 180
Million FCCBs (refer Note II.3.A of Schedule P) into the BRR and (b)
utilisation of the BRR for Permitted utilisations as defined in the Proposal,
the effect of accounting under the Accounting Standards referred in to
Section 211(3C) of the Companies Act, 1956 would have been as under:
In the Profit & Loss Account for year
ended March 31, 2010
The Loss under Exceptional Items would
have been higher as follows:
- One time non recurring Long term
Rs.
Rs.
Retention benefit plan
628,600,000
- One time non recurring expenses
including restructuring fees, advisory
fees, specialised marketing expenses
and unrealizable advances, etc
871,192,468
52
subex annual report 09-10
- One time non recurring Profit on
account of restructuring of FCCBs
(1,583,488,419)
Diminution in carrying value of
investments
5,000,000,000
Profit after Tax would have been lower by
4,916,304,049
Basic and Diluted Earnings/(Loss) per
share would have been
II.2. Contingent Liabilities
(91.50)
Receivables factored: Current Year - Rs.286,654,667, Previous year -
Rs.401,044,585.
Claims against the Company not acknowledged as debt – Rs.69,065,359
(Previous year - Rs.54,272,325). These claims relate to Indian Income
Tax demands which are being contested by the Company.
The Company has provided Corporate Guarantees to Banks for credit
facilities availed by its wholly owned subsidiaries to the amount of
Rs.500,000,000 (Previous Year- Rs.731,850,000) at the year end.
These facilities were utilized to the extent of Rs.155,264,299 (Previous
Year Rs.657,229,872) by the subsidiaries.
II.3. A. Foreign Currency Convertible Bonds (FCCBs)
During the year 2006-07, the company issued Foreign Currency
Convertible Bonds (the Old FCCBs) aggregating to US$ 180 Million to
Institutional Investors. The bonds carry an initial interest rate of 2% per
annum and were redeemable by March 9, 2012, if not converted in to
equity shares as per terms of issue.
During the year 2009-10, the Company restructured the Old FCCBs by
offering in exchange new FCCBs having a face value of US$ 126 Million.
Pursuant to the offer, Old FCCBs with a face value of US$ 141 Million
were exchanged for new FCCBs with a face value of US$ 98.7 Million.
The remaining bondholders holding US$ 39 Million worth of Old FCCBs
(out of the original bondholders holding US$ 180 Million) didn’t chose
the option for restructuring and are thus outstanding at March 31, 2010.
Liability in respect of the US$ 39 Million FCCBs at March 31, 2010
amounts to Rs.1,751,100,000 (included in Long term Unsecured loans
in Schedule E, under the head Foreign currency convertible bonds).
Consequent to the exchange of the bonds as referred above, the reduction
in liability (net of issue expenses and incremental interest payable on
the new FCCBs vis-à-vis the old FCCBs) of Rs.1,583,488,419 has
been credited to the Capital reserve during the year ended March 31
2010. The said amount has been transferred to Business Restructuring
Reserve, in accordance with the Proposal approved by the shareholders
of the Company and confirmed by the Honourable Judge of High Court of
Karnataka. [Refer Note II.1 above].
The terms and conditions governing the US$ 39 Million FCCBs
outstanding at March 31, 2010 are as follows:
a)
b)
c)
d)
e)
Conversion of the bonds into equity shares at the option of the
bond holders at any time after April 18, 2007
Conversion Price – Rs.656.20 per share
Exchange Rate for purpose of conversion - 1 US$ = Rs.44.08
Interest of 2% per annum payable semi-annually in arrears
Redemption with yield to maturity guaranteed return of 8% per
annum, calculated on semi-annual basis
f)
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, 2012, 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 and is charged to Securities Premium over the life of the bonds.
B. New Foreign Currency Convertible Bonds (New FCCBs)
During the year 2009-10, in terms of the company’s offer to exchange
and restructure its outstanding Old FCCBs, the company received Old
FCCBs with a face value of US$ 141 Million for issue of New FCCBs
with a face value of US$ 98.7 Million. The new bonds carry an initial
interest rate of 5% 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 new FCCBs are as follows:
a)
b)
c)
d)
e)
f)
Conversion of the bonds into equity shares at the option of the
bond holders at any time after November 2, 2009.
Conversion Price – Rs.80.31 per share.
Exchange Rate for purpose of conversion - 1 US$ = Rs.48.17.
Compensating the bond holders for the reduction in principal amount
by providing an increased interest element in the New FCCBs of
5% per annum payable semi-annually in arrears.
Redemption with yield to maturity guaranteed return of 20% 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, 2012, subject to appropriate approvals at a price
determined on the terms defined in the offer document.
g)
Listing on the Singapore Exchange Securities Trading Limited.
The difference between the yield to maturity guaranteed rate of return
of 20% and the coupon rate of 5% represents the premium payable on
redemption and is charged to Securities Premium over the life of the bonds.
Out of the US$ 98.7 Million new FCCBs, bonds having a face value of
US$ 31.9 Million have been converted into equity shares as of March
31, 2010. Consequently new FCCBs outstanding at March 31, 2010
amount to US$ 66.8 Million (Rs.2,999,320,000 and is included in
Long term Unsecured loans in Schedule E, under the head Foreign currency
convertible bonds).
II.4. Monies Received Pending Allotment
During financial year 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
has received 10% of the total consideration amounting to
Rs.140,559,130. To obtain the underlying equity shares, the balance
90% was to be paid within 18 months from the date of allotment of the
warrants in one or more tranches.
During financial year 2008-09, the warrants issued, lapsed and were
forfeited and the money was transferred to Capital Reserve. The money
received by the Company has been utilized for long term working capital
requirements.
subex annual report 09-10
53
II.5. Operating Leases
ESOP – III
The Company has entered into operating lease arrangements for its
office facilities. These leases are for periods ranging from 1 to 5 years
with an option to the Company for renewing at the end of the initial term.
Rental expenses for operating leases included in the Profit and Loss
account for the year is Rs.95,344,518 (Previous year Rs.94,686,746)
The future minimum lease payments for non-cancelable operating leases
were:
Within one year
Due in a period between
one year and five years
Due after five years
Amount in Rs.
March 31, 2010 March 31, 2009
90,728,870
86,881,548
159,254,801
253,011,623
-
-
The lease agreement for the above non-cancellable lease provides for
escalation of rentals at the end of 3 years of the lease, which has been
factored in the future minimum rentals disclosed above.
II.6. Employees Stock Option Plan (ESOP)
ESOP – II
During 1999-2000, the Company established the Employee Stock Option
Scheme 2000 (“ESOP 2000”) under which options have been allocated
for grant to the employees of the Company and its subsidiaries. The
Company has obtained in-principle approval for listing upto a maximum
of 883,750 shares to be allotted pursuant to exercise of options granted
under the scheme. Each option comprises 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
Securities and Exchange Board of India (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines, 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.
During 2008-09, the Company amended the ESOP 2000 scheme by
inclusion of provisions allowing employees to voluntarily surrender their
vested/unvested options at any time during their employment with the
Company. Pursuant to this, 156,211 options were surrendered by 122
employees during 2008-09. Due to this, Rs.6,611,773, being the
previously recognized ESOP compensation cost on these options, was
reversed and credited to personnel costs in 2008-09.
During the year, the Company has allotted 1,210 equity shares under its
ESOP 2000 scheme to the option holders upon exercise of stock options.
Under this scheme 669,188 (net) options have been granted to 624
employees as at March 31, 2010. Out of the above 161,663 options
are vested and exercisable. 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 charge of Rs.2,118,869 (Previous
Year: Rs.1,759,270) to the Profit & Loss Account during the year.
During 2005-2006, the Company established the Employee Stock Option
Scheme 2005 (“ESOP 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. The Company has obtained in-
principle approval for listing upto a maximum of 2,000,000 shares
pursuant to exercise of options granted under the scheme. Each option
comprises one underlying 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 Employee Stock
Purchase Scheme) Guidelines, 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 traded volume is the highest 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.
During 2008-09, the Company amended the ESOP 2005 scheme by
inclusion of provisions allowing employees to voluntarily surrender their
vested/unvested options at any time during their employment with the
Company. Pursuant to this, 1,069,407 options were surrendered by
538 employees during 2008-09. Due to this, Rs.41,876,574, being
the previously recognized ESOP compensation cost on these options,
was reversed and credited to personnel costs in 2008-09.
During the year, the Company has allotted 1,203 equity shares under its
ESOP 2005 scheme to the option holders upon exercise of stock options.
Under this scheme 1,590,558 (net) options have been granted to
1,618 employees as at March 31, 2010. Out of the above 468,088
options are vested and exercisable. 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 charge of Rs.8,238,058
(Previous Year: credit of Rs.25,098,927) to the Profit & Loss Account
during the year.
ESOP – IV
During 2008-2009, the Company established the Employee Stock
Option Scheme 2008 (“ESOP 2008”) under which 2,000,000 options
have been allocated for grant to the employees. The Company has
obtained in-principle approval for listing upto a maximum of 2,000,000
shares pursuant to exercise of options granted under the scheme. Each
option comprises one underlying 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 Employee
Stock Purchase Scheme) Guidelines, 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 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.
54
subex annual report 09-10
Under this scheme 598,954 (net) options have been granted to 272
employees as at March 31, 2010. 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 credit of Rs.537,915
(Previous Year : Nil) to the Profit & Loss Account during the year.
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.
Employees’ stock options details as on the balance sheet date are:
Particulars
Options outstanding at the beginning of the year
2009-10
2008-09
Options (Nos) Weighted average
exercise price per
stock options (Rs.)
Options (Nos)
Weighted average
exercise price per
stock options (Rs.)
ESOP – II
ESOP – III
ESOP – IV
Granted during the year
ESOP – II
ESOP – III
ESOP – IV
Exercised during the year
ESOP – II
ESOP – III
ESOP – IV
Cancelled, Surrendered & Lapsed during the year
ESOP – II
ESOP – III
ESOP – IV
Options outstanding at the end of the year
ESOP – II
ESOP – III
ESOP – IV
Options exercisable at the end of the year
ESOP – II
ESOP – III
ESOP – IV
358,117
1,794,382
-
-
131,300
598,954
1,210
1,203
-
56,059
341,991
-
300,848
1,582,488
598,954
161,663
468,088
N.A
75.47
127.49
-
-
48.45
53.34
-
-
-
-
-
-
74.04
113.72
53.34
-
-
-
214,038
1,718,245
-
362,072
1,764,397
-
-
-
-
217,993
1,688,260
-
427.48
366.67
-
66.75
74.80
-
-
-
-
-
-
-
358,117
75.47
1,794,382
-
9,930
62,100
-
127.49
-
-
-
-
[Weighted average remaining contractual life (considering vesting and exercise period)]
ESOP – II
At March 31 2009 : 4.05 Years
ESOP – III
At March 31, 2009 : 4.48 Years
ESOP – IV
At March 31, 2009 : N. A.
At March 31 2010 : 3.02 Years
At March 31, 2010 : 3.53 Years
At March 31, 2010 : 5.79 Years
subex annual report 09-10
55
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.
volatility of share: 34.267% and expected dividend yield: 0.71%.
The variables detailed herein represent the average of the assumptions
during the pendency of the grant dates.
The key assumptions used in Black-Scholes model for calculating fair
value is: risk-free interest rate of 8%, expected life: 3 years, expected
The impact on the EPS of the Company if fair value method is adopted is
given below:
Particulars
Net Profit/(loss) for the year (as reported)
Amount in Rs.
March 31, 2010
March 31, 2009
1,368,605,224
(1,782,105,532)
Add : Stock-based employee compensation relating to grants after April 1, 2006
4,568,733
(11,786,616)
Less : Stock-based compensation expenses determined under fair value based method
for the above grants
30,070,748
110,032,092
1,343,103,209
(1,903,924,240)
35.30
(51.14)
34.64
(54.64)
8.44
(51.14)
8.08
(54.64)
Enterprises Over Which Some of the Directors Exercise Significant
Influence
Kivar Holdings Private Limited (formerly Subex Holdings Private Limited)
and its subsidiaries
Key Management Personnel
Subash Menon, Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath, Chief Operating Officer & Wholetime Director
Note – Related parties are as identified by the Company based on
information available and relied upon by auditors.
Net Profit/(Loss) (proforma)
Basic earnings per share (as reported)
Basic earning per share (proforma)
Diluted earning per share (as reported)
Diluted earnings per share (proforma)
II.7. Related Party Information
A) Related Parties
Wholly Owned Subsidiaries
Subex Americas Inc
Subex (UK) Limited
Subex Technologies Limited
Syndesis Development India Private Limited
Subex Azure Holdings Inc
Subex (Asia Pacific) Pte Ltd
Subex Inc
Subex Technologies Inc
56
subex annual report 09-10
B) Details of the Transactions With the Related Parties:
Particulars
Subsidiaries
Enterprises Over Which
Some of the Directors
Exercise Significant Infulence
Amount in Rs.
Key Management
Personnel
2009-10
2008-09
2009-10
2008-09
2009-10
2008-09
a) Marketing and allied Service Charges and
reimbursement :
i) Subex (UK) Ltd
ii) Subex Inc
iii) Subex Americas Inc
iv) Subex (Asia Pacific) Pte Ltd
b) Income from Software Development
and Services:
i) Subex (UK) Ltd
ii) Subex Inc.,
iii) Subex (Asia Pacific) Pte Ltd
iv) Subex Americas Inc
c) Reimbursement of expenses incurred
on behalf of
i) Subex Technologies Inc
d) Salary, Perquisites & Commission
(Refer Note: II.9, Schedule P)
e) Amount due as at year end from/(to)
i) Subex UK Ltd
ii) Subex Inc
iii) Subex (Asia Pacific) Pte Ltd
iv) Subex Americas Inc,
f) Loans outstanding as at year end from/(to)
i) Subex UK Limited
ii) Subex (Asia Pacific) Pte Ltd
iii) Subex Americas Inc
iv) Subex Inc
v) Subex Technologies Ltd
vi) Key Management Personnel
(Refer Note: II.9, Schedule P)
g) Interest received on Inter Company Loans
i) Subex UK Limited
ii) Subex Americas Inc
iii) Subex Inc
iv) Subex (Asia Pacific) Pte Ltd
h) Expenses allocated to/(from):
i) Subex (UK) Ltd
ii) Subex, Inc
iii) Subex (Asia Pacific) Pte Ltd
iv) Subex Americas Inc
i) Corporate Guarantee provided by Company
to financial institutions in respect of
finances availed by Subsidiaries
j) Preferential allotment to M/s Woodbridge
Consultants (Subsidiary of Kivar Holdings)
(4,000,000 shares at a premium of
Rs.70 per share)
705,188,610 567,342,865
590,642,394 511,488,177
18,692,414
560,818,089
81,710,231 131,982,385
540,625,886
572,403,327
188,352,987
567,713,849
568,786,957
385,143,872
161,183,829
577,084,741
16,710,645
-
-
-
(157,574,380)
71,513,704
688,575,595 166,569,999
253,163,346
42,978,002
149,041,823 829,022,267
503,829
45,981,735
312,891,373
(44,900)
168,464,441
-
310,839,094
-
181,563,344
114,402,069
166,944,566
-
565,981
18,196,980
1,136,494
1,937,965
29,590,381
10,515,559
9,305,093
-
2,621,342
1,097,204
269,073
2,338,490
(3,436,959)
3,818,853
8,382,513
2,788,635
155,264,299 731,850,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
320,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 47,926,890 39,750,760
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 57,684,666 57,684,666
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
subex annual report 09-10
57
II.8. Earnings/(Loss) Per Share (EPS):
Profit/(Loss) after Tax attributable to shareholders (A)
Add : FCCB Interest
Less : Exchange Fluctuation on FCCB
Adjusted Profits after Tax for Diluted EPS (B)
Weighted Average Number of Shares for Basic EPS (C)
Effect of Existence of Dilutive Instruments (FCCBs and ESOPs)
Weighted Average Number of Shares for Diluted EPS (D)
Earning per Share – Basic [(A)/(C)]
Earning per Share - Diluted [(B)/(D)]
Face value of shares : Rs.10 each
Amount in Rs.
2009-10
2008-09
1,368,605,224
(1,782,105,532)
155,878,882
918,812,565
#-
#-
605,671,541
(1,782,105,532)
38,771,899
32,993,593
71,765,492
35.30
8.44
34,847,089
-
34,847,089
(51.14)
(51.14)
# FCCBs and ESOPs are anti-dilutive for FY 2008-09. Hence, the reconciliation between (i) A and B and (ii) C and D in the above table hasn’t
been given.
II.9. a) Managerial Remuneration to Managing Director and Whole-time Director
Amount in Rs.
A.
Remuneration to Whole-time directors
Salary and allowances (including perqusites)
Contribution to Provident Fund
Total (A)
B.
Remuneration to Non-Executive directors
Sitting fees paid to Non-executive directors
Commision paid to Non-executive directors
Total (A+B)
2009-10
2008-09
45,346,890
2,580,000
37,170,760
2,580,000
47,926,890
39,750,760
5,000
-
20,000
-
47,931,890
39,770,760
Note: a) Contribution to PF represents the amounts paid by the company to the PF Authorities.
b) Computation of Net Profit in accordance with Section 349 of the Companies Act, 1956 as per legal advice received by the Company
Particulars
2009-10
Amount in Rs.
2008-09
Profit/(Loss) before tax as per the Profit & Loss Account
1,380,790,543
(1,749,836,584)
Remuneration to Directors (Including Commission & Sitting Fees) charged to Profit & Loss Account
47,931,890
12,200,000
Exchange Fluctuation on FCCB
(Surplus)/Loss on sale of Fixed Assets (Net)
Net Profit/(Loss) U/s 349 of the Companies Act, 1956
(918,812,565)
1,929,600,000
(383,281)
(172,727)
509,526,587
191,790,689
Maximum Remuneration of Whole-time Directors under provisions of the Companies Act.*
50,952,659
19,179,069
Remuneration paid to Whole-time Directors (including Commission Rs. Nil, Previous Year : Nil)
Maximum Commission to Non-Executive Directors under the Companies Act, 1956
Commission Paid
47,926,890
5,095,266
Nil
39,750,760
1,917,907
Nil
*The Company’s application for approving the excess remuneration paid to the directors in 2007-08 and 2008-09 respectively is pending with the Central
Government. Pending the Central government’s approval, such excess is treated as monies due from the directors being held by them in trust for the
Company and is included under Loans and advances (Schedule: J to the financial statements). Accordingly, the director’s remuneration (including sitting
fees) charged to Profit and Loss account for the year ended March 31, 2009 is Rs.12,200,000.
58
subex annual report 09-10
II.10. Auditors Remuneration
Audit Fees (including fees for audit of certain subsidiaries consolidated
accounts & issuance of report on the corporate governance
and tax audit) – excluding service tax as applicable
For Tax Matters (excluding service tax as applicable)
Other Matters (excluding service tax as applicable)
Reimbursement of expenses (excluding service Tax as applicable)
II.11. Details of Warranty
2009-10
6,500,000
150,000
1,000,000
178,435
Amount in Rs.
2008-09
5,500,000
150,000
300,000
121,897
Amount in Rs.
Year
2009-10
Opening Balance
Additions during the year
Utilisation/(reversal) during the year
Closing Balance
4,228,718
-
-
4,228,718
Probable period of outflow in case of warranty is 3 months.
II.12. Other Information Pursuant to Schedule VI of the Companies Act, 1956.
CIF Value of Imports:
Import of systems and solutions
Capital goods
Expenditure in foreign currency (on payment basis)
Traveling expenses
Interest expense
Product marketing expense and other expenditure incurred overseas for software development
Earnings in foreign exchange (on accrual basis)
Income from software development services and product.
Year Ended
March 31, 2010
5,629,681
14,449,388
50,412,543
178,530,111
19,154,500
Amount in Rs.
Year Ended
March 31, 2009
27,950,455
9,692,680
37,602,115
173,150,299
85,208,551
2,910,886,850
2,975,368,356
II.13. Deferred Tax
a) The deferred tax asset recognised, comprises of the tax impact arising from timing differences on account of the following:
Particulars
Depreciation & other items
(Claimable in Indian Tax Jurisdiction)
II.14. Others
1. Estimated amount of contracts, remaining to be executed on capital
account and not provided for (net of advances paid) Rs.6,048,373
(Previous year: Rs.981,108)
2. Unclaimed dividend of Rs. 642,243 as at March 31, 2010 (Previous
Year: Rs.751,860) represent dividends not claimed for the period
from 2002-2008. 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’.
During the current year, the Company has transferred Rs.105,835
(Previous Year: Rs.52,514) to Investor Protection Fund.
3. Cash & Cash Equivalents include balance with Scheduled Banks on
Dividend Account of Rs.642,243 (Previous Year: Rs.751,860), fixed
deposit of Rs.25,969,391 (Previous Year: Rs.31,907,440) which
are not available for use by the Company. The breakup of Cash and
Cash Equivalents are given in Schedule I of financial statements.
Direct taxes paid and Others in the Cash Flow Statement includes
outflows on account of permitted utilisations from the BRR of
Rs.43,559,667 (Previous Year: Nil) and Direct Taxes of
Rs.44,138,205 (Previous Year: Rs.34,765,054).
4. Other Provisions comprise of -
Redemption Reserve on FCCB - Rs.612,713,322
(Previous Year: Rs.1,361,916,700)
As at March 31, 2010
As at March 31, 2009
12,175,962
24,176,009
Provision for Other Long Term - Rs.628,600,000
Employee Benefits
(Previous Year: Rs. Nil)
Differential Interest on
Restructured FCCBs
MTM Losses on Option
Contracts
- Rs.203,050,568
(Previous Year: Rs. Nil)
- Rs.954,666
(Previous Year: Rs.102,731,040)
5. Personnel Cost for the year includes expenditure on Research and
Development of Rs.85,139,573 (Previous year: Rs.70,461,643).
This is as certified by the management and relied upon by the auditors.
6. A director of the Company has provided a personal guarantee in
respect of long term loans from Banks included in Schedule D (For
Current Year) and Schedule E (For Previous Year) of the financial
statements. Further, portion of promoters’ shares have also been
pledged towards portion of these loans.
7. As per the 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.954,666 (Previous Year:
Rs.102,731,040) on outstanding option contracts.
8. The Company has entered into the following derivative instruments
for the purposes of hedging the risks associated with foreign exchange
exposures:
subex annual report 09-10
59
(a) Forward contracts to hedge foreign currency risk on export receivables:
Particulars
Forward contracts
- USD contracts
- GBP contracts
(b) Option contracts outstanding:
March 31, 2010
March 31, 2009
Foreign Currency Buy/Sell
Amount (INR) Foreign Currency
Buy/Sell
Amount (INR)
$ 25,400,075
£ 4,000,000
Sell
Sell
1,231,492,119
318,400,000
$ 7,300,000
-
Sell
-
363,846,250
-
Particulars
Option contracts
Foreign Currency Buy/Sell
Amount (INR) Foreign Currency
Buy/Sell
Amount (INR)
$ 200,000
Sell
8,540,000
$ 4,600,000
Sell
192,040,000
(c) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:
March 31, 2010
March 31, 2009
Particulars
Receivable towards Export of
Goods & Services (including
Receivable from wholly owned
subsidiaries - net)
Loans to wholly owned
subsidiaries
March 31, 2010
March 31, 2009
Rs.
Foreign currency
Rs.
Foreign currency
11,896,703,905
473,114,548
211,610,922
20,374,303
34,781,163
15,736,659
5,290,624
3,645,025
12,586
208,490
503,829
42,732,252
45,981,735
270,114,221
USD 44,265,487
GBP 7,647,632
SGD 6,596,855
AUD 494,972
EUR 575,982
AED 1,287,257
CHF 125,000
CAD 82,504
MYR 914
CNY 31,646
AED 41,213
CAD 967,231
SGD 1,433,456
USD 6,015,901
468,324,252
85,144,228
27,422,308
14,376,508
3,911,696
USD 9,109,647
GBP 1,174,565
SGD 822,257
AUD 410,433
Other Currencies
505,124
39,197,447
62,516,082
504,394,176
AED 36,577
CAD 967,231
GBP 862,410
USD 9,943,681
Other amounts payable in foreign currency on account of:
Particulars
Import of Goods & Services
Capital imports
[including intangibles]
Towards Interest on Foreign
Currency Convertible Bonds
Differential Interest on restructured FCCBs
Towards Foreign Currency
Convertible Bonds
Redemption Premium accrued on FCCBs
Marketing and allied service charges
payable to wholly owned subsidiaries (net)
March 31, 2010
March 31, 2009
Rs.
Foreign currency
Rs.
Foreign currency
47,924,359
2,357,648
64,953
1,091,132
460,361
USD 1,067,358
EUR 39,000
THB 46,812
GBP 16,057
GBP 6,774
3,683,500
2,630,160
USD 72,624
EUR 39,000
-
-
11,304,819
USD 251,778
11,158,248
USD 219,997
203,050,568
4,750,420,000
USD 4,522,273
USD 105,800,000
-
9,129,600,000
-
USD 180,000,000
612,713,322
USD 13,646,176
1,361,916,700
USD 26,851,670
877,712
2,370,396
4,553,323
208,490
119,195
953,198,885
12,586
87,835,047
1,746,410,703
AED 71,798
AUD 57,586
CAD 103,063
CNY 31,646
EUR 1,972
GBP 14,026,919
MYR 914
SGD 2,738,210
USD 38,895,524
60
subex annual report 09-10
9.
The following table sets out the funded status of the defined Benefit Schemes and the amount recognized in the financial Statements:
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 March 31, 2010
Actual benefit payments
Actual Contributions
Net asset/(liability) recognized in Balance Sheet as at March 31, 2010
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, 2010
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, 2010
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 Rs.
Gratuity
March 31, 2010
March 31, 2009
5,355,140
1,167,950
(283,770)
4,662,610
856,520
(110,440)
-
-
-
-
-
-
(1,068,580)
5,170,740
1,458,320
4,755,310
381,560
5,790,250
899,960
1,168,390
19,323,820
5,084,380
15,328,540
1,504,530
(14,239,440)
(13,824,010)
-
-
(14,239,440)
(13,824,010)
15,328,540
5,355,140
1,167,950
10,295,070
4,662,610
856,520
-
-
-
-
-
-
-
-
(1,069,490)
(1,458,320)
19,323,820
414,300
(899,960)
15,328,540
1,504,530
1,092,920
-
283,770
(910)
4,755,310
(1,458,320)
5,084,380
8.30%
8.60%
6.00%
5.00%
-
110,440
32,740
1,168,390
(899,960)
1,504,530
8.00%
9.00%
6.00%
5.00%
(cid:127) The composition of the plan assets held under the funds managed by the Insurer is not provided, since the information is not available.
(cid:127) Payments to Provident fund, a defined contribution plan Rs.26,147,258 (Previous Year Rs.25,332,138)
subex annual report 09-10
61
10. The dues to Micro and Small enterprises as defined in The Micro,
Small & Medium Enterprises Development Act, 2006, are identified
by the Company based on inquiries with the parties and information
available with the Company. This has been relied upon by the auditors.
11. Since the Company prepares consolidated financial statements, no
segment information is disclosed in these financial statements.
12. Revenue is net of Rs.23,872,350/- (Previous Year: Rs.46,562,941)
being reversal of Unbilled Revenues written-off or provided.
13. The Company purchases hardware and software to fulfill its
obligations under contracts for sale of its Products. There were no
inventory of such hardware/software at the beginning and end of the
year. No quantitative information of purchases of hardware/software
items have been disclosed since none of the individual items of
such purchases constitute more than 10% of the total value of
Purchases of hardware and / software.
14. The Company has ‘International transactions’ with ‘Associated
Enterprises which are subject to Transfer Pricing regulations in India.
The Management of the Company, is of the opinion that such
transactions with Associated Enterprises are at arm’s length and
hence in compliance with the aforesaid legislation. Consequently,
this will not have any impact on the financials statements, particularly
on account of tax expense and that of provision for taxation.
15. Current Taxes include Foreign Taxes of Rs. Nil (Previous Year:
Rs.6,976,548)
16. Previous year’s figures have been regrouped to conform to the
classifications for the current year.
62
subex annual report 09-10
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
COMPANY: SUBEX LIMITED
I.
Registration Details
Registration No.
Balance sheet date
3
1
-
0 3
1
-
6
2
6
0
6
1
II.
Capital Raised During the Year (Rupees in Thousands)
Public issue
Bonus issue
3
0
-
-
State code
Rights issues
Private placements
Preferential offer of shares under Employee Stock Option Plan* - Equity
III.
Position of the Mobilisation and Deployment of Funds (Rupees in Thousands)
YEAR : 2009-2010
0
8
-
0 0
0 0
0
0
4
2
0
4
0 0 0
.
1 3
Total liabilities
0
9 7
5
3
0
2
3
Total assets
0
9
7
5
3
0
2
3
Source of Funds
Paid up capital
Secured loans
Advance for share capital
Application of Funds
Net fixed assets
Net current assets
Miscellaneous expenditure
0
0
0 5
1 4
7
3
9
3
8
6
3
2
0
0
0 3
9
7
7
9
5
8
3
7
IV.
Performance of Company (Rupees in Thousands)
Turnover
Profit before tax
Earning per share from
ordinary activities (basic) (Rs.)
0
0
0
3 2
1 3
0 0
0
8
3
1
0
5
4
7
.
3
9
3
1
5
-
3
0
-
7
1
0
Unsecured loans
Deferred tax liability
Reserves & surplus
Investments
Deferred tax assets
Accumulated lossess
Total expenditure
Profit after tax
Earning per share from
ordinary activities (diluted) (Rs.)
4
7
5
0
4
2
0
2
9
8
9
1
4
0
0
0
0
0
9
0
2
0
6
1
3
2
4
1
4
7
1
1
0
8
3
0
5
6
0
8
8
8
7
6
.
1
0
4
0
-
7
4
6
-
1
5
4
V.
Generic Name of Three Principal Products/ services of the Company (as per Monetary Terms)
Product
ITC code no.
8
5
/
2
4
Description
C O M P U T
E R
S O F
T W A R E
* Issue of shares arising out of exercise of stock options granted to employees under the Company’s ESOP II and ESOP III scheme.
For and on behalf of the Board
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
V. Balaji Bhat
Independent Director &
Chairman of Audit Committee
Bangalore
June 10, 2010
Raj Kumar C
Vice President-Legal & Company Secretary
Ramanathan J
Vice President-Finance
subex annual report 09-10
63
financial review
subex limited (consolidated)
64
subex annual report 09-10
AUDITORS’ REPORT TO THE BOARD DIRECTORS OF SUBEX LIMITED
AUDITORS’ REPORT TO THE BOARD DIRECTORS OF SUBEX LIMITED
AUDITORS’ REPORT TO THE BOARD DIRECTORS OF SUBEX LIMITED
AUDITORS’ REPORT TO THE BOARD DIRECTORS OF SUBEX LIMITED
AUDITORS’ REPORT TO THE BOARD DIRECTORS OF SUBEX LIMITED
5. We draw attention to Note II.11.6 of Schedule O regarding the
excess managerial remuneration of earlier years in respect of which
the Company’s application is pending with the Central Government.
6. We report that the Consolidated Financial Statements have been
prepared by the Company in accordance with the requirements of
Accounting Standard 21 (Consolidated Financial Statements), as
notified under the Companies (Accounting Standards) Rules, 2006.
7. Based on our audit and on consideration of the separate audit reports
on individual financial statements of the Company and its aforesaid
subsidiaries, to the best of our information and according to the
explanations given to us and read with our comments in paragraph 4
above, in our opinion, the Consolidated Financial Statements, read
with the notes thereon, give a true and fair view in conformity with
the accounting principles generally accepted in India:
(i)
in the case of the Consolidated Balance Sheet, of the state of affairs
of the Group as at 31st March, 2010;
(ii) in the case of the Consolidated Profit and Loss Account, of the profit
of the Group for the year ended on that date; and
(iii) in the case of the Consolidated Cash Flow Statement, of the cash
flows of the Group for the year ended on that date.
For Deloitte Haskins & Sells
Chartered Accountants
(Registration No. 008072S)
V. Balaji
Partner
M. No. 203685
Place : Bangalore
Date : June 10, 2010
1. We have audited the attached Consolidated Balance Sheet of Subex
Limited (“the Company”), its subsidiaries (the Company and its
subsidiaries constitute “the Group”) as at 31st March, 2010 the
Consolidated Profit and Loss Account and the Consolidated Cash
Flow Statement of the Group for the year ended on that date, both
annexed thereto. These financial statements are the responsibility
of the Company’s Management and have been prepared on the basis
of the separate financial statements and other financial information
regarding components. Our responsibility is to express an opinion
on these Consolidated Financial Statements based on our audit.
2. We conducted our audit in accordance with the auditing standards
generally accepted in India. Those Standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatements.
An audit includes examining, on a test basis, evidence supporting
the amounts and the disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
the significant estimates made by the Management, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
3. We did not audit the financial statements of the subsidiaries, whose
financial statements reflect total assets of Rs.151,100,796 as at
31st March, 2010, total revenues of Rs.803,785,156 and net cash
outflows amounting to Rs.56,367,535 for the year ended on that
date as considered in the Consolidated Financial Statements. These
financial statements have been audited by other auditors whose
reports have been furnished to us, and our opinion, in so far as it
relates to the amounts included in respect of these subsidiaries is
based solely on the reports of the other auditors.
4. Without qualifying our report, we draw attention to Note II.1 of
Schedule O. As more fully explained therein, the Company has in
accordance with the Proposal approved by the Hon’ble High Court of
Karnataka credited the surplus of Rs.1,583,488,419 arising on
account of the restructuring of the Foreign Currency Convertible
Bonds to Capital Reserve Account and debited expenses and
diminution in value of Goodwill amounting to Rs.6,499,792,468 to
the Business Restructuring Reserve instead of recording the same
in the Profit and Loss Account as required by Accounting Standard 5
‘Net Profit or Loss for the Period, Prior Period Items’.
subex annual report 09-10
65
CONSOLIDATED BALANCE SHEET AS AT
CONSOLIDATED BALANCE SHEET AS AT
CONSOLIDATED BALANCE SHEET AS AT
CONSOLIDATED BALANCE SHEET AS AT
CONSOLIDATED BALANCE SHEET AS AT
Schedule
March 31, 2010
March 31, 2009
Amount in Rs.
A
B
C
D
E
F
G
H
I
J
SOURCES OF FUNDS :
SHAREHOLDERS’ FUNDS
Share Capital
Employees Stock Options Outstanding account
Reserves and Surplus
LOAN FUNDS
Secured Loans
Unsecured Loans
DEFERRED TAX LIABILITY
TOTAL
APPLICATION OF FUNDS :
FIXED ASSETS & INTANGIBLES :
Gross Block
Less: Depreciation
Net Block
Capital work in progress
GOODWILL ON CONSOLIDATION
DEFERRED TAX ASSET
CURRENT ASSETS, LOANS & ADVANCES
Sundry Debtors
Cash & Bank balances
Loans & Advances
Unbilled Revenue
Less: Current liabilities & Provisions
Current liabilities
Provisions
Net Current Assets
Miscellaneous expenditure
(To the extent not written off or adjusted)
(Refer Note II.11.10, Schedule O)
PROFIT AND LOSS ACCOUNT
Less : Transfer from General Reserve as per Contra
579,831,390
57,121,999
2,238,462,522
1,588,884,707
4,752,665,000
1,605,110,910
1,409,356,712
195,754,198
-
479,214,046
72,389,980
538,950,340
438,065,920
1,528,620,286
1,334,487,151
1,695,868,676
3,030,355,827
348,470,890
46,306,062
4,612,714,441
5,007,491,393
2,875,415,911
6,341,549,707
999,872
9,217,965,490
980,044,543
9,913,642,246 10,893,686,789
1,268,432
15,902,446,614
195,754,198
10,366,358,775
12,175,812
306,645,794
15,366,358,775
42,545,532
1,723,966,193
1,439,683,959
284,282,234
22,363,560
622,310,844
187,410,632
604,637,455
683,206,791
2,097,565,722
1,307,609,931
1,766,041,861
3,073,651,792
(1,501,735,541)
-
(976,086,070)
14,606,462
323,387,826
177,975,580
1,326,351,701
145,412,246 177,975,580
1,148,376,121
15,902,446,614
TOTAL
9,217,965,490
Significant Accounting Policies & Notes to the Accounts
OOOOO
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
For and on behalf of the Board
V. Balaji
Partner
Bangalore
June 10, 2010
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
V. Balaji Bhat
Independent Director &
Chairman of Audit Committee
Raj Kumar C
Vice President-Legal & Company Secretary
Ramanathan J
Vice President-Finance
66
subex annual report 09-10
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
Schedule
March 31, 2010
March 31, 2009
Amount in Rs.
K
L
M
N
F
INCOME :
Sales & Services
Other Income
Total
EXPENDITURE :
Cost of Hardware, Software and Support Charges
Personnel Costs
Other Operating, Selling and
Administrative Expenses
Financial Costs (Net)
Miscellaneous Expenses amortised
Depreciation & Amortisation
Total
Profit/(Loss) Before Taxation and Exceptional Items
Exceptional Items
Exchange Gain/(Loss) on Restatement of FCCBs
Exchange Gain/(Loss) on intra group
foreign currency loans and advances
Profit/(Loss) Before Tax
Provision for taxation
- Current tax (including Wealth Tax)
- MAT Credit writen off
- Fringe Benefit Tax
- Deferred tax
Profit/(Loss) After Taxation
Add: Balance brought forward from Previous year
Surplus/(Deficit) carried to Balance Sheet
Earnings/(Loss) Per Share (Face value of Rs.10/- each)
(Refer Note II.9, Schedule O)
- Basic
- Diluted
4,630,779,130
117,029,534
4,747,808,664
118,063,478
2,968,335,402
714,180,191
474,156,210
15,353,671
148,226,752
4,438,315,704
309,492,960
5,584,894,844
140,662,164
5,725,557,008
123,896,305
3,866,803,529
1,072,790,888
434,812,830
15,944,201
212,882,602
5,727,130,355
(1,573,347)
918,812,565
(1,929,600,000)
(124,091,356)
794,721,209
212,006,989
(1,717,593,011)
1,104,214,169
(1,719,166,358)
69,891,085
-
49,971
31,309,238
60,037,612
21,170,731
4,121,669
79,130,000
164,460,012
(1,883,626,370)
557,274,669
(1,326,351,701)
101,250,294
1,002,963,875
(1,326,351,701)
(323,387,826)
25.87
3.34
(54.05)
(54.05)
Significant Accounting Policies & Notes to the Accounts
The Schedules referred to above form an integral part of the profit and loss account
O
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
For and on behalf of the Board
V. Balaji
Partner
Bangalore
June 10, 2010
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
V. Balaji Bhat
Independent Director &
Chairman of Audit Committee
Raj Kumar C
Vice President-Legal & Company Secretary
Ramanathan J
Vice President-Finance
subex annual report 09-10
67
OW STATEMENT FOR THE YEAR ENDED
OW STATEMENT FOR THE YEAR ENDED
CONSOLIDATED CASH FL
CONSOLIDATED CASH FL
OW STATEMENT FOR THE YEAR ENDED
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED
OW STATEMENT FOR THE YEAR ENDED
CONSOLIDATED CASH FL
CONSOLIDATED CASH FL
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) Profit on sale of assets
e) Employee stock compensation expenses
f) Provision for doubtful debts written off/(back)
g) Unrealised exchange fluctuations
Operating Profit before Working Capital Changes
Adjustments for :
a) Sundry Debtors
b) Loans and advances
c) Trade and other payables
Cash generated from operations
a) Direct Taxes paid and Others [Refer Note II.11.3 Schedule O]
Net Cash provided by operating activities
Cash Flow from Investing activities
a) Purchase of Fixed Assets
b) Sale / disposal of fixed assets
c) Interest received
Net Cash from Investing Activities
Cash Flow from Financing Activities
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) Expenditure incurred on restructuring of FCCBs
Net Cash from Financing Activities
Net increase in Cash or Cash equivalents [A + B + C]
Effect of Exchange Differences on restatement of foreign currency
cash and cash equivalents
Cash or Cash equivalents at the start of the year
Cash or Cash equivalents at the close of the year *
* Refer Note II.11.3, Schedule O
Significant Accounting policies & Notes to the accounts
A
B
C
O
The Schedule referred to above forms an integral part of the Cash flow statement
In terms of our report of even date
for Deloitte Haskins & Sells
Chartered Accountants
For and on behalf of the Board
March 31, 2010
March 31, 2009
Amount in Rs.
1,104,214,169
(1,719,166,358)
162,833,214
(2,205,361)
476,361,571
(383,281)
10,815,937
(107,195,967)
(752,538,905)
891,901,377
191,352,100
46,544,415
10,088,859
1,139,886,751
(683,359,873)
456,526,878
(49,469,362)
1,452,837
616,832
(47,399,693)
320,240,524
(90,153,351)
-
(51,040,230)
(109,617)
(522,811,238)
(153,484,275)
(497,358,187)
(88,231,002)
(26,789,650)
187,410,632
72,389,980
228,826,803
(3,950,282)
438,763,112
(536,706)
(23,339,657)
195,931,919
1,968,866,010
1,085,394,841
562,191,565
(656,399,678)
(61,991,228)
929,195,500
(106,137,912)
823,057,588
(127,462,604)
8,725,885
3,950,282
(114,786,437)
-
(331,831,098)
10,240,330
(9,339,136)
(53,154)
(437,382,624)
-
(768,365,682)
(60,094,531)
16,319,817
231,185,346
187,410,632
V. Balaji
Partner
Bangalore
June 10, 2010
Subash Menon
Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath
Chief Operating Officer
& Wholetime Director
V. Balaji Bhat
Independent Director &
Chairman of Audit Committee
Raj Kumar C
Vice President-Legal & Company Secretary
Ramanathan J
Vice President-Finance
68
subex annual report 09-10
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
SCHEDULE - A :
SHARE CAPITAL :
AUTHORISED :
128,040,000 Equity Shares of Rs. 10/- each
(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 :
57,983,139 Equity Shares of Rs. 10/- each
(Previous Year: 34,847,089 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 Ltd.
Total
SCHEDULE - B :
Employees Stock Options Outstanding
Less: Deferred Employees Compensation Expenses
Total
SCHEDULE - C :
RESERVES AND SURPLUS :
Capital Reserve
Opening Balance
Add : Forfeiture of amount received towards warrants
[Refer Note II.5, Schedule O]
1,280,400,000
19,600,000
1,300,000,000
480,400,000
19,600,000
500,000,000
579,831,390
348,470,890
579,831,390
348,470,890
74,399,900
17,277,901
57,121,999
85,899,999
39,593,937
46,306,062
153,566,050
-
13,006,920
140,559,130
Add : Additions due to restructuring of FCCBs net of expenses
1,583,488,419
[Refer Note II.1, Schedule O]
Less : Transferred to Business Restructuring Reserve
1,700,000,000
37,054,469
-
-
153,566,050
[Refer Note II.1, Schedule O]
General Reserve
Opening Balance
Less : Transfer from Profit & Loss Account as per contra
Securities Premium Account
Opening Balance
Add : Additions due to conversion of FCCBs, ESOP and
preferential placement of equity shares
Add : Write back from/(accrual for) redemption premium on
FCCBs (Net) [Refer Note II.4, Schedule O]
Less: Transferred to Business Restructuring Reserve
177,975,580
177,975,580
4,894,706,184
1,562,627,960
177,975,580
177,975,580
-
5,624,568,228
-
-
749,203,378
(729,862,044)
[Refer Note II.1, Schedule O]
5,000,000,000
2,206,537,522
- 4,894,706,184
Business Restructuring Reserve [Refer Note II.1, Schedule O]
Opening Balance
Transferred from Securities Premium/Capital Reserve
Less : Amounts utilised for Permitted Utilisations
Exchange Reserve on Consolidation
-
6,700,000,000
6,499,792,468
Total
200,207,532
(205,337,001)
2,238,462,522
-
-
-
-
(435,557,793)
4,612,714,441
subex annual report 09-10
69
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
SCHEDULE - D :
SECURED LOANS :
Short Term:
Working Capital Loans from Banks
(Secured by charge on Receivables and fixed assets)
Long Term:
Loans from Banks [Refer Note II.11.14, Schedule O]
(Secured by second charge on current assets and pledge of
portion of share of promoters)
[Amount repayable within one year: Rs. 708,929,333,
Previous Year: Rs. Nil]
Loans from Banks
(Secured by Hypothecation of Assets financed by these loans)
[Amount repayable within one year: Rs. 6,946,089,
Previous Year: Rs. 8,887,190]
862,212,891
954,578,937
708,929,933
-
17,741,883
25,465,606
Total
1,588,884,707
980,044,543
SCHEDULE - E :
UNSECURED LOANS :
Short Term:
Working Capital Loans from Banks
Long Term:
Loans from Banks [Refer Note II.11.14, Schedule O]
[Amount repayable within one year: Rs. 2,245,000,
Previous Year: Rs. 752,395,205]
Foreign Currency Convertible Bonds [Refer Note II.4, Schedule O]
Total
-
29,111,041
2,245,000
754,931,205
4,750,420,000
4,752,665,000
9,129,600,000
9,913,642,246
70
subex annual report 09-10
.
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2
subex annual report 09-10
71
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
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)
Loans and advances recoverable in cash
or in kind or for value to be received
Advance Income Tax including TDS
Other Deposits
Total
SCHEDULE - J :
CURRENT LIABILITIES & PROVISIONS :
SUNDRY CREDITORS :
Sundry Creditors
- Due to Micro & Small Enterprises
[Refer Note II.11.11 of Schedule O]
- Due to Others
Advance received from Customers
Deferred Income
Duties & Taxes
Interest Accrued but not due
Unclaimed Dividends
PROVISIONS :
Taxation
Employee Benefits
Warranty
Others [Refer Note II.11.4, Schedule O]
Total
72
subex annual report 09-10
32,367,773
105,985,338
446,846,268
-
-
226,905,108
138,353,111
226,905,108
622,310,844
63,866,112
446,846,268
585,199,379
105,985,333
479,214,046
62,661
2,781,093
37,459,445
225,503
31,861,278
72,389,980
266,430,373
192,754,042
79,765,925
538,950,340
686,176,956
913,082,064
290,771,220
622,310,844
66,738
4,543,475
32,735,679
328,727
149,736,013
187,410,632
276,833,622
237,047,277
90,756,556
604,637,455
-
694,057,089
203,777,220
287,194,956
137,510,824
11,304,819
642,243
136,701,373
109,620,029
4,228,718
1,445,318,556
-
722,818,031
61,194,713
408,442,681
103,244,398
11,158,248
1,334,487,151
751,860 1,307,609,931
155,481,618
141,683,786
4,228,718
1,695,868,676
1,464,647,739 1,766,041,861
3,030,355,827
3,073,651,792
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
SCHEDULES TO CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
March 31, 2010
March 31, 2009
Amount in Rs.
SCHEDULE - K :
OTHER INCOME :
Provision for Doubtful Debts written back
Other income
Profit on sale of Fixed Assets (Net)
Exchange Fluctuation gain (Net)
Total
SCHEDULE - L :
PERSONNEL COSTS :
Salaries, Wages & Allowances
Contribution to Provident Fund and Other Funds
Other staff related costs
Sub Contract Charges
Total
SCHEDULE - M :
OTHER OPERATING, SELLING AND
ADMINISTRATIVE 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
Advertisement & Business Promotion (including Consultancy charges)
Bad Debts Written Off
Provision for Doubtful Debts
Commission on Sales
Exchange Fluctuation Loss (Net)
Miscellaneous Expenses
Total
SCHEDULE - N :
FINANCIAL COSTS :
Interest on FCCBs and other term loans
Interest & Bank Charges
Less : Interest Income
Total
107,195,967
9,450,286
383,281
-
117,029,534
2,544,815,837
104,693,561
128,600,935
190,225,069
2,968,335,402
13,055,162
192,094,519
37,145,027
81,782,945
17,844,743
71,127,466
7,039,654
215,902,627
5,000
14,740,405
5,195,997
-
-
18,751,861
29,664,691
9,830,094
714,180,191
476,361,571
(2,205,361)
474,156,210
-
2,546,032
536,706
137,579,426
140,662,164
3,326,685,814
157,847,594
121,354,630
260,915,491
3,866,803,529
17,845,672
199,641,694
31,119,962
85,786,037
11,226,273
79,766,835
9,130,054
249,071,892
20,000
10,218,303
167,209,604
110,250
195,821,669
9,368,199
-
6,454,444
1,072,790,888
268,359,550
170,403,562
438,763,112
(3,950,282)
434,812,830
247,027,007
229,334,564
subex annual report 09-10
73
SCHEDULE – O :
Significant Accounting Policies and Notes to Accounts
I. SIGNIFICANT ACCOUNTING POLICIES
I.1.
Basis for Preparation of Consolidated Financial Statements
The financial statements have been prepared under the historical cost
convention on accrual basis except for certain financial and other assets
and liabilities which are measured on historical cost basis as permitted
by the Accounting Standards or as per the Proposal approved by the
Honourable High Court of Karnataka.
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
% of
ownership ownership
held at
March 31, March 31,
2010
held at
2009
Subex (UK) Limited
United Kingdom 100
100
100
United
States of
America
India
100
100
United
States of
America
100
100
100
Singapore
100
100
Subex
Technologies Inc.
(Wholly owned
subsidiary of Subex
Technologies Ltd.,
India)
Subex Technologies
Ltd India
Subex Inc.
(wholly owned
subsidiary of Subex
(UK) Ltd.)
Subex (Asia Pacific)
Pte. Ltd, (wholly
owned subsidiary of
Subex (UK) Ltd.)
1
2
3
4
5
6
7
Subex Americas Inc
Canada
Subex Azure Holdings United
Inc (wholly owned
subsidiary of Subex
Americas Inc)
States of
America
100
100
100
100
India
100
100
8
Syndesis Development
India Private Ltd
(wholly owned
subsidiary of Subex
Americas Inc)
9
Subex Azure (US) Inc # United
10
Subex Azure
(Delawere) Inc #
11
2101874 Ontario Inc*
States of
America
United
States of
America
United
States of
America
-
-
-
12
13
Subex Azure (GB) Ltd* United Kingdom -
Subex Azure
(Ireland) Ltd*
Ireland
-
100
100
100
100
100
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.
# Merged with Subex Azure Holdings Inc
* Closed during FY 2009-10
I.4.
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 of such licenses.
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.
Maintenance and service income is recognised on accrual basis.
Interest on investments and deposits are booked on a time proportion
basis taking into account the amount invested and the rate of interest.
I.5.
Fixed Assets and Intangibles
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.
Acquired intangibles are stated at cost inclusive of duties and taxes.
Cost incurred on self – generated intangibles are expensed as incurred.
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.
74
subex annual report 09-10
The rates of depreciation/amortisation adopted are as under ;
Particulars
Depreciation/Amortisation Rates %
Leasehold improvements
Computers (including Software)
Furniture & Fixtures
Vehicles
Office equipments
Intellectual Property Rights
Goodwill
Over the lease term
25
20
20
20
20
20
Individual assets costing less than Rs.5,000 are depreciated in full,
in the year of purchase.
I.7.
Employee Stock Option
Employee Stock Options 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.
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,
(cid:127)
(cid:127)
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 these translations are included in ‘Exchange Reserve
on consolidation’ 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.
I.8.
Employee Benefits
I.11. Income Taxes
The Company’s contribution to provident fund, a defined contribution
scheme, is charged to the profit and loss account on accrual basis.
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.
The company has introduced long term employee compensation plans
under which certain employees are eligible for retention and
performance linked payouts. These payouts are accrued as the services
are rendered and/or when the specific criteria are met.
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 &
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 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.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 & Contingencies
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
subex annual report 09-10
75
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.
Contingent liabilities are not provided for, but disclosed in the notes
to the financial statements.
I.15 Impairment of Fixed Assets
At each balance sheet date, the Company reviews the carrying amounts
of its fixed assets and intangibles 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.
NOTES TO ACCOUNTS
II.1. Business Restructuring Reserve
The shareholders of the Company approved the Board’s Proposal
(hereinafter referred to as ‘the Proposal’) for transferring amounts from
the Securities premium and Capital Reserves as on or arising after
April 1, 2009 (upto March 31, 2012), to a Business Restructuring
Reserve (BRR) to be utilized from or after April 1, 2009 for certain
Permitted Utilizations as mentioned in the Proposal.
The Company’s petition seeking the approval of the above Proposal from
the Hon’ble High Court of Karnataka was filed with the Court on March
12, 2010. The Company has received the order of the Hon’ble High
Court approving the Proposal on May 4, 2010 and has registered the
same with the Registrar of Companies on May 11, 2010, thereby
completing all the requirements for the order to be effective.
In accordance with the Proposal, the Board of Directors of the Company
have thus approved the following:
(cid:127)
(cid:127)
transfer of amounts standing to the credit of Securities premium
and Capital reserve (including the Profit of Rs.1,583,488,419
arising out of reduction in liability to the Foreign currency
convertible bond holders pursuant to the Restructuring of the
US$ 180 Million Foreign currency convertible bonds. Refer Note
II.4.A below) to the extent of Rs.6,700,000,000 to the BRR.
Utilisation of the BRR for certain Permitted utilisations to the
tune of Rs.6,499,792,468.
Consequently the Company carries a balance of Rs.200,207,532 in
the BRR as at March 31, 2010 which shall be used for such Permitted
utilizations in the future as the Board may deem fit. Had the Proposal
not provided for (a) transferring Profits arising out of restructuring of
US$ 180 Million FCCBs (refer Note II.4.A of Schedule O) into the BRR
and (b) utilisation of the BRR for Permitted utilisations as defined in
the Proposal, the effect of accounting under the Accounting Standards
referred in to Section 211(3C) of the Companies Act, 1956 would
have been as under:
In the Profit & Loss Account for year
ended March 31, 2010
The Loss under Exceptional Items would
have been higher as follows:
- One time non recurring Long term
Rs.
Rs.
Retention benefit plan
628,600,000
- One time non recurring expenses
including restructuring fees, advisory
fees, specialised marketing expenses
and unrealizable advances, etc
- One time non recurring Profit on
871,192,468
account of restructuring of FCCBs
(1,583,488,419)
Diminution in carrying value of
Goodwill
5,000,000,000
Profit after Tax would have been lower by
4,916,304,049
Basic and diluted Earnings/(Loss)
per share would have been
II.2. Deferred Income Taxes
(100.93)
a) The deferred tax asset/(liability) as at March 31, 2010 comprises the
tax impact arising from timing differences on account of:
Particulars
- Depreciation
- Business loss
Deferred Tax Asset
Deferred tax liability on
depreciation
Amount in Rs.
As at
March 31, 2010 March 31, 2009
As at
12,175,812*
-
12,175,812
24,176,006*
18,369,526#
42,545,532
(999,872)
(1,268,432)
* These differences are on account of depreciation, which are claimable
in the India tax jurisdiction.
# Deferred tax assets recognized on unabsorbed tax losses at March
31, 2009, 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.3. Contingent Liabilities
Receivables
Rs.582,810,763)
factored – Rs.957,872,591 (Previous year:
Claims against the Company not acknowledged as debts:
a) Rs.69,065,359 (Previous year: Rs.54,272,325). These claims relate
to Indian income Tax demands which are being contested by the Company.
b) Claim made by a vendor of a subsidiary of an acquired entity Rs. Nil
(Previous Year: Rs.121,728,000)
c) Others – Rs.Nil (Previous year: Rs.50,000,000)
II.4.
A. Foreign Currency Convertible Bonds (FCCBs)
During the year 2006-07, the company issued Foreign Currency Convertible
Bonds (the Old FCCBs) aggregating to US$ 180 Million to Institutional
Investors. The bonds carry an initial interest rate of 2% per annum and
were redeemable by March 9, 2012, if not converted in to equity shares
as per terms of issue.
76
subex annual report 09-10
During the year 2009-10, the Company restructured the Old FCCBs by
offering in exchange new FCCBs having a face value of US$ 126 Million.
Pursuant to the offer, Old FCCBs with a face value of US$ 141 Million
were exchanged for new FCCBs with a face value of US$ 98.7 Million.
The remaining bondholders holding US$ 39 Million worth of Old FCCBs
(out of the original bondholders holding US$ 180 Million) didn’t chose
the option for restructuring and are thus outstanding at March 31, 2010.
Liability in respect of the US$ 39 Million FCCBs at March 31, 2010
amounts to Rs.1,751,100,000 (included in Long term Unsecured loans
in Schedule E, under the head Foreign currency convertible bonds).
Consequent to the exchange of the bonds as referred above, the reduction
in liability (net of issue expenses and incremental interest payable on the
new FCCBs vis-à-vis the old FCCBs) of Rs.1,583,488,419 has been
credited to the Capital reserve during the year ended March 31 2010.
The said amount has been transferred to Business Restructuring Reserve,
in accordance with the Proposal approved by the shareholders of the
Company and confirmed by the Honourable Judge of High Court of
Karnataka. [Refer Note II.1 above].
The terms and conditions governing the US$ 39 Million FCCBs outstanding
at March 31, 2010 are as follows:
a)
b)
c)
d)
e)
f)
g)
Conversion of the bonds into equity shares at the option of the
bond holders at any time after April 18, 2007.
Conversion Price – Rs.656.20 per share.
Exchange Rate for purpose of conversion - 1 US$ = Rs.44.08.
Interest of 2% per annum payable semi-annually in arrears.
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, 2012, subject to appropriate approvals at a price determined
on the terms defined in the offer document.
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
and is charged to Securities Premium over the life of the bonds.
B. New Foreign Currency Convertible Bonds (New FCCBs)
During the year 2009-10, in terms of the company’s offer to exchange and
restructure its outstanding Old FCCBs, the company received Old FCCBs
with a face value of US$ 141 Million for issue of New FCCBs with a face
value of US$ 98.7 Million. The new bonds carry an initial interest rate of
5% 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 new FCCBs are as follows:
a)
b)
c)
d)
e)
Conversion of the bonds into equity shares at the option of the bond
holders at any time after November 2, 2009.
Conversion Price – Rs.80.31per share.
Exchange Rate for purpose of conversion - 1 US$ = Rs.48.17.
Compensating the bond holders for the reduction in principal amount
by providing an increased interest element in the New FCCBs of
5% per annum payable semi-annually in arrears.
Redemption with yield to maturity guaranteed return of 20% per
annum, calculated on semi-annual basis.
f)
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, 2012, subject to appropriate approvals at a price determined
on the terms defined in the offer document.
g)
Listing on the Singapore Exchange Securities Trading Limited.
The difference between the yield to maturity guaranteed rate of return of
20% and the coupon rate of 5% represents the premium payable on
redemption and is charged to Securities Premium over the life of the
bonds.
Out of the US$ 98.7 Million new FCCBs, bonds having a face value of
US$ 31.9 Million have been converted into equity shares as of March 31,
2010. Consequently new FCCBs outstanding at March 31, 2010 amount
to US$ 66.8 Million (Rs.2,999,320,000 and is included in Long term
Unsecured loans in Schedule E, under the head Foreign currency convertible
bonds).
II.5
Monies Received Pending Allotment
During financial year 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 has received
10% of the total consideration amounting to Rs.140,559,130. To obtain
the underlying equity shares, the balance 90% was to be paid within 18
months from the date of allotment of the warrants in one or more tranches.
During financial year 2008-09, the warrants issued, lapsed and were
forfeited and the money was transferred to Capital Reserve. The money
received by the Company has been utilized for long term working capital
requirements
II.6.
Operating Leases
The Group has entered into operating lease arrangements for its office
facilities. These leases are for periods ranging from 1 to 5 years with an
option to the Group for renewing at the end of the initial term. Rental
expenses for operating leases included in the Profit and Loss account for
the year is Rs.192,094,519 (Previous year, Rs.199,641,694).
The future minimum lease payments for non-cancelable operating leases
were:
Particulars
Within one year
Due in a period between
one year and five years
Due after five years
Amount In Rs.
March 31, 2010 March 31, 2009
141,938,102
163,972,720
286,649,419
345,290,473
-
-
II.7. Employee Stock Option Plan (ESOP)
ESOP – II
During 1999-2000, the Company established the Employee Stock Option
Scheme 2000 (“ESOP 2000”) under which options have been allocated
for grant to the employees of the Company and its subsidiaries. The
Company has obtained in-principle approval for listing upto a maximum
of 883,750 shares to be allotted pursuant to exercise of options granted
under the scheme. Each option comprises 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
Securities and Exchange Board of India (Employee Stock Option Scheme
and Employee Stock Purchase Scheme) Guidelines, 1999. As per the
subex annual report 09-10
77
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 credit of Rs. 8,238,058 (Previous
Year: charge of Rs. 25,098,927) to the Profit & Loss Account during the
year.
ESOP – IV
During 2008-2009, the Company established the Employee Stock Option
Scheme 2008 (“ESOP 2008”) under which 2,000,000 options have
been allocated for grant to the employees.. The Company has obtained
in-principle approval for listing upto a maximum of 2,000,000 shares
pursuant to exercise of options granted under the scheme. Each option
comprises one underlying 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 Employee Stock
Purchase Scheme) Guidelines, 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 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.
Under this scheme 598,954 (net) options have been granted to 272
employees as at March 31, 2010. 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 credit of Rs.537,915
(Previous Year : Nil) to the Profit & Loss Account during the year.
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.
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.
During 2008-09, the Company amended the ESOP 2000 scheme by
inclusion of provisions allowing employees to voluntarily surrender their
vested/unvested options at any time during their employment with the
Company. Pursuant to this, 156,211 options were surrendered by 122
employees during 2008-09. Due to this, Rs.6,611,773, being the
previously recognized ESOP compensation cost on these options, was
reversed and credited to personnel costs in 2008-09.
During the year, the Company has allotted 1,210 equity shares under its
ESOP 2000 scheme to the option holders upon exercise of stock options.
Under this scheme 669,188 (net) options have been granted to 624
employees as at March 31, 2010. Out of the above 161,663 options
are vested and exercisable. 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 charge of Rs.2,118,869 (Previous
Year: Rs.1,759,270) to the Profit & Loss Account during the year.
ESOP – III
During 2005-2006, the Company established the Employee Stock Option
Scheme 2005 (“ESOP 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. The Company has obtained in-
principle approval for listing upto a maximum of 2,000,000 shares
pursuant to exercise of options granted under the scheme. Each option
comprises one underlying 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 Employee Stock
Purchase Scheme) Guidelines, 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 traded volume is the highest 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.
During 2008-09, the Company amended the ESOP 2005 scheme by
inclusion of provisions allowing employees to voluntarily surrender their
vested/unvested options at any time during their employment with the
Company. Pursuant to this, 1,069,407 options were surrendered by
538 employees during 2008-09. Due to this, Rs. 41,876,574, being
the previously recognized ESOP compensation cost on these options,
was reversed and credited to personnel costs in 2008-09.
During the year, the Company has allotted 1,203 equity shares under its
ESOP 2005 scheme to the option holders upon exercise of stock options
Under this scheme 1,590,558 (net) options have been granted to 1,618
employees as at March 31, 2010. Out of the above 468,088 options
are vested and exercisable. The difference between the market price of
78
subex annual report 09-10
Employees’ stock options details as on the balance sheet date are :
Particulars
Options (Nos)
Options outstanding at the beginning of the year
2009-10
2008-09
Weighted average
exercise price per
stock options (Rs.)
Options (Nos)
Weighted average
exercise price per
stock options (Rs.)
ESOP – II
ESOP – III
ESOP – IV
Granted during the year
ESOP – II
ESOP – III
ESOP – IV
Exercised during the year
ESOP – II
ESOP – III
ESOP – IV
Cancelled, Surrendered & Lapsed during the year
ESOP – II
ESOP – III
ESOP – IV
Options outstanding at the end of the year
ESOP – II
ESOP – III
ESOP – IV
Options exercisable at the end of the year
ESOP – II
ESOP – III
ESOP – IV
358,117
1,794,382
-
-
131,300
598,954
1,210
1,203
-
56,059
341,991
-
300,848
1,582,488
598,954
161,663
468,088
N.A
75.47
127.49
-
-
48.45
53.34
-
-
-
-
-
-
74.04
113.72
53.34
-
-
-
214,038
1,718,245
-
362,072
1,764,397
-
-
-
-
217,993
1,688,260
-
427.48
366.67
-
66.75
74.80
-
-
-
-
-
-
-
358,117 75.47
1,794,382
-
9,930
62,100
-
127.49
-
-
-
-
[Weighted average remaining contractual life (considering vesting and exercise period)]
ESOP – II
At March 31 2009 : 4.05 Years
ESOP – III
At March 31, 2009 : 4.48 Years
ESOP – IV
At March 31, 2009 : N. A.
At March 31 2010 : 3.02 Years
At March 31, 2010 : 3.53 Years
At March 31, 2010 : 5.79 Years
subex annual report 09-10
79
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 8%, expected life: 3 years, expected
volatility of share: 34.267% and expected dividend yield: 0.71%.
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:
Amounts in Rs.
Particulars
Net Profit/(Loss) [as reported]
Add : Stock-based employee compensation relating to grants after 1st April, 2008
Less : Stock-based compensation expenses determined under fair value based
method for the above grants
Net Profit (proforma)
Basic earnings/(loss) per share (as reported)
Basic earning/(loss) per share (proforma)
Diluted earning/(loss) per share (as reported)
Diluted Earning/(loss) per share (proforma)
II.8. Related Party Information
A) Related Parties
March 31, 2010
March 31, 2009
1,002,963,875
(1,883,626,370)
10,894,842
(23,339,657)
30,070,748
110,032,092
983,787,969
(2,016,998,119)
25.87
25.37
3.34
3.08
(54.05)
(57.88)
(54.05)
(57.88)
Enterprises Over Which Some of the Directors Exercise Significant
Influence
Kivar Holdings Private Limited (formerly Subex Holdings Private Limited)
and its subsidiaries
Key Management Personnel
Subash Menon, Founder Chairman, Managing Director & CEO
Sudeesh Yezhuvath, Chief Operating Officer & Wholetime Director
Note: Related parties are as identified by the Company and relied
upon by the auditors.
B) Details of the Transactions with the Related Parties are as under:
Particulars
a) Salary, Perquisites & Commission
b) Loans outstanding as at year end from
Key Management Personnel
(Refer Note: II.11.6, Schedule O)
c) Preferential allotment to M/s Woodbridge Consultants
(Subsidiary of Kivar Holdings) (4,000,000 shares at
a premium of Rs.70 per share)
II.9. Earnings Per Share (EPS)
Profit/(Loss) after Tax attributable to shareholders (A)
Add : FCCB Interest
Less : Exchange Fluctuation on FCCB
Adjusted Profits after Tax for Diluted EPS (B)
Weighted Average Number of Shares for Basic EPS (C)
Effect of Existence of Dilutive Instruments (FCCBs and ESOPs)
Weighted Average Number of Shares for Diluted EPS (D)
Earnings/loss per Share – Basic [(A)/(C)]
Earnings/loss per Share - Diluted [(B)/(D)]
Face value of shares : Rs. 10 each
Enterprises Over Which Some of the
Directors Exercise Significant Influence
Amounts in Rs.
Key Management Personnel
2009-10
-
2008-09
-
2009-10
2008-09
47,926,890
39,750,760
-
320,000,000
-
-
57,684,666
57,684,666
-
-
2009-10
Amount in Rs.
2008-09
1,002,963,875
(1,883,626,370)
155,878,882
918,812,565
#-
#-
240,030,192
(1,883,626,370)
38,771,899
32,993,593
71,765,492
25.87
3.34
34,847,089
-
34,847,089
(54.05)
(54.05)
# FCCBs and ESOPs are anti-dilutive for FY 2008-09. Hence, the reconciliation between (i) A and B and (ii) C and D in the above table hasn’t been given.
80
subex annual report 09-10
II.10. 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:
Amounts in Rs.
Particulars
Products
Services
Consolidated
2009-10
2008-09
2009-10
2008-09
2009-10
2008-09
Revenues
3,829,433,136
4,384,810,798
801,345,994 1,200,084,046 4,630,779,130
5,584,894,844
780,196,089
311,255,969
3,453,080
121,983,514
783,649,169
433,239,483
Segment results before
interest & taxes
Unallocable Income,
net of unallocable expense
Interest expense
Profit/(Loss) before tax
Provision for taxation:
Current
MAT credit written off/ carried
forward
Fringe benefit tax
Deferred
Profit/(Loss) After Tax
Particulars of Segment Assets & Liabilities:
794,721,210 (1,717,593,011)
(474,156,210)
(434,812,830)
1,104,214,169 (1,719,166,358)
69,891,085
60,037,612
-
21,170,731
49,971
4,121,669
31,309,238
79,130,000
1,002,963,875 (1,883,626,370)
Amounts in Rs.
Particulars
Products
Services
Consolidated
2009-10
2008-09
2009-10
2008-09
2009-10
2008-09
Segment Assets
11,551,369,143 17,136,599,207 346,610,074
396,923,807 11,897,979,217 17,533,523,014
Segment Liabilities
2,019,233,324
1,476,446,676
46,710,178
67,896,690
2,065,943,502
1,544,343,366
Unallocable Assets exclude
Advance Income Taxes
Deferred tax asset (Net)
Miscellaneous Expenditure
Total
Unallocable Liabilities exclude
Loans
Provisions for tax
Others
Total
Additions to Assets:
Amount in Rs.
Region
2009-10
2008-09
Product
Services
Product
Services
Americas
30,466,424
139,595
32,017,171
141,828
EMEA
APAC
12,575,616
23,414,458
-
-
35,601,651
39,020,640
-
-
192,754,042
237,047,277
11,175,939
-
41,277,100
14,606,462
203,929,981
292,930,839
6,341,549,707 10,893,686,789
136,701,373
155,481,618
827,710,952
1,373,826,808
7,305,962,032 12,422,995,215
subex annual report 09-10
81
Information About Secondary Business Segment
Revenue attributable to location of customers is:
Amount in Rs.
Products
Services
Consolidated
2009-10
2008-09
2009-10
2008-09
2009-10
2008-09
AMERICAS
1,521,860,102
1,853,064,486
801,345,994
1,200,084,046
2,323,206,096
3,053,148,532
EMEA
797,297,213
1,045,398,866
APAC, Etc
1,510,275,821
1,486,347,446
797,297,213
1,045,398,866
1,510,275,821
1,486,347,446
Total
3,829,433,136
4,384,810,798
801,345,994
1,200,084,046
4,630,779,130
5,584,894,844
Segment Assets Based on Their Location
Amount in Rs.
2009-10
2008-09
4,051,331,483
9,704,385,598
6,861,893,442
7,135,658,717
984,754,292
693,478,699
11,897,979,217 17,533,523,014
AMERICAS
EMEA
APAC, etc
Total
II.11. Others
1. Estimated amount of contracts, remaining to be executed on capital
account and not provided for (net of advances paid) Rs. 6,048,373
(Previous year: Rs 981,108).
2. Unclaimed dividend of Rs. 642,243 as at March 31, 2010 (Previous
Year: Rs. 751,860) represent dividends not claimed for the period
from 2002-2008. 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’. During the current year, the Company has transferred Rs
105,835 (Previous Year: Rs. 52,514) to Investor Protection Fund.
3. Cash & Cash Equivalents include balance with Scheduled Banks on
Dividend Account of Rs. 642,243 (Previous year: Rs. 751,860), fixed
deposit of Rs. 25,969,391 (Previous year: Rs.32,735,679) which are
not available for use by the Company. The breakup of Cash and Cash
Equivalents are given in Schedule H to the financial statements.
Direct taxes paid and Others in the Cash Flow Statement includes
outflows on account of permitted utilisations from the BRR of
Rs.557,712,246 (Previous Year: Nil) and Direct taxes Rs.125,647,627
(Previous Year: Rs.106,137,912).
4. Other Provisions comprise -
Redemption Reserve on FCCB - Rs.612,713,322
(Previous Year: Rs.1,361,916,700)
Provision for Other Long Term - Rs.628,600,000
Employee Benefits
(Previous Year: Rs. Nil)
Differential Interest on
Restructured FCCBs
- Rs.203,050,568
(Previous Year: Rs. Nil)
MTM Losses on Option
Contracts
- Rs.954,666
(Previous Year: Rs.102,731,040)
5. Personnel Cost for the year includes expenditure on Research
and Development of Rs.122,177,387 (Previous year, Rs.168,048,643).
This is as certified by the management and relied upon by the auditors.
6. The Company’s application for approving the excess remuneration
paid to the directors in 2007-08 and 2008-09 respectively is
pending with the Central Government. Pending the Central
government’s approval, such excess is treated as monies due
from the directors being held by them in trust for the Company and
is included under Loans and advances (Schedule: I to the financial
statements).
7. The following table sets out the funded status of the defined Benefit Schemes and the amount recognized in the financial statements.
I
1
2
3
4
5
6
7
8
II
1
2
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 March 31, 2010
Actual benefit payments
Actual Contributions
Amount in Rs.
Gratuity
March 31, 2010
March 31, 2009
5,355,140
1,167,950
(283,770)
-
-
-
(1,068,580)
5,170,740
1,458,320
4,755,310
4,662,610
856,520
(110,440)
-
-
-
381,560
5,790,250
899,960
1,168,390
82
subex annual report 09-10
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
Net asset/(liability) recognized in Balance Sheet as at March 31, 2010
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
19,323,820
5,084,380
15,328,540
1,504,530
(14,239,440)
(13,824,010)
-
-
(14,239,440)
(13,824,010)
Change in Defined Benefit Obligations during the year ended March 31, 2010
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, 2010
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
15,328,540
5,355,140
1,167,950
10,295,070
4,662,610
856,520
-
-
-
-
-
-
-
-
(1,069,490)
(1,458,320)
19,323,820
414,300
(899,960)
15,328,540
1,504,530
1,092,920
-
283,770
(910)
4,755,310
(1,458,320)
5,084,380
8.30%
8.60%
6.00%
5.00%
-
110,440
32,740
1,168,390
(899,960)
1,504,530
8.00%
9.00%
6.00%
5.00%
Note: Contributions under Defined Contribution Schemes Rs.35,133,385 (Previous Year: Rs.31,552,879)
8. The Company has entered into the following derivative instruments for the purposes of hedging the risks associated with foreign exchange exposures.
(i)
Forward contracts to hedge foreign currency risk on export receivables:
Amount in Rs.
Particulars
Forward contracts
- USD contracts
- GBP contracts
(ii) Option contracts outstanding:
March 31, 2010
March 31, 2009
Foreign Currency
Buy/Sell
Amount (INR)
Foreign Currency
Buy/Sell
Amount (INR)
$ 25,400,075
£ 4,000,000
Sell 1,231,492,119
318,400,000
Sell
$ 7,300,000
-
Sell
-
363,846,250
-
March 31, 2010
March 31, 2009
Amount in Rs.
Particulars
Option contracts
Foreign Currency
Buy/Sell
Amount (INR) Foreign Currency
Buy/Sell
Amount (INR)
$ 200,000
Sell
8,540,000
$ 4,600,000
Sell
192,040,000
As per the 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.954,666 (Previous Year Rs.102,731,040) on outstanding option contracts.
subex annual report 09-10
83
9. The year end foreign currency exposures that have not been hedged by derivative instruments or otherwise are given below.
Receivable at March 31, 2010 in
Receivables at March 31, 2009 in
Foreign Currency
Equivalent Rupees
Foreign Currency
Equivalent Rupees
EUR 1,341,949
AUD 120,557
CAD 31,000
AED 942,457
USD 14,944,295
THB 4,252,500
CHF 125,000
OMR 44,352
SGD 150,210
GBP 84,705
81,085,860
4,962,419
1,369,579
11,521,491
670,768,236
5,900,473
5,290,624
5,172,444
4,818,355
5,756,196
EUR 405,894
AUD 170,375
CAD 23,107
MYR 114,119
USD 882,141
29,423,236
8,641,399
1,171,963
3,805,874
39,441,613
Note: The above does not include exposure on intra-group balances, being eliminated on consolidation.
10. 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, are amortised over a period
from the time such costs were incurred till March 31, 2010, on a
pro-rata basis. As on March 31, 2010, there is no balance under
this head that is carried forward.
11. The dues to Micro and Small enterprises as defined in The Micro,
Small & Medium Enterprises Development Act, 2006, are identified
by the Company based on inquiries with the parties and information
available with the Company. This has been relied upon by the
auditors.
12. Revenue
includes Rs.79,855,991/-
(Previous Year:
108,277,625) being reversal of provision for Unbilled Revenues
no longer required.
13. The Company has ‘International transactions’ with ‘Associated
Enterprises which are subject to Transfer Pricing regulations in India.
The Management of the Company, is of the opinion that such
transactions with Associated Enterprises are at arm’s length and
hence in compliance with the aforesaid legislation. Consequently,
this will not have any impact on the financials statements, particularly
on account of tax expense and that of provision for taxation.
14. A director of the Company has provided a personal guarantee in
respect of long term loans from Banks included in Schedule D (For
Current Year) and Schedule E (For Previous Year) of the financial
statements. Further, portion of promoters’ shares have also been
pledged towards portion of these loans.
15. Previous year’s figures have been regrouped to conform to the
classifications for the current year.
84
subex annual report 09-10
SHAREHOLDERS’ INFORMATION
SHAREHOLDERS’ INFORMATION
SHAREHOLDERS’ INFORMATION
SHAREHOLDERS’ INFORMATION
SHAREHOLDERS’ INFORMATION
REGISTERED OFFICE
The Registered office of the Company is at Adarsh Tech Park, Outer Ring
Road, Devarabisanahalli, Bangalore – 560 037
DATE AND VENUE OF THE ANNUAL GENERAL MEETING (AGM)
Date
Venue
Time
:
:
:
September 13, 2010
Adarsh Tech Park, Outer Ring Road,
Devarabisanahalli, Bangalore – 560 037
3.00 P.M.
DATES OF BOOK CLOSURE
From September 8, 2010 to September 13, 2010 (both days inclusive)
BOARD MEETINGS AND FINANCIAL CALENDAR
Financial year
: April 1 to March 31
Calendar of Board Meetings to adopt the accounts (tentative and subject
to change):
For quarter ending June 30, 2010
For quarter ending September 30, 2010
For quarter ending December 31, 2010
For the year ending March 31, 2011
– on July 29, 2010
– on October 29, 2010
– on January 27, 2011
– on April 27, 2011
DIVIDEND
The Directors have not proposed any dividend to be paid for the financial
year 2009–10.
LISTING ON STOCK EXCHANGES
Equity Shares of the Company are quoted on the National Stock Exchange
of India Limited (NSE) since September 5, 2003 and on the Bombay
Stock Exchange Limited (BSE) since July 31, 2000. The Company has
paid listing fees for the year 2010-11 in accordance with the provisions
of the Listing Agreement with NSE and BSE.
The Global Depositary Receipts (GDRs) and the US$ 180 million 2%
Coupon Convertible Unsecured Bonds of the Company are listed on the
London Stock Exchange since March 9, 2007.
STOCK MARKET DATA RELATING TO EQUITY SHARES LISTED IN INDIA
The Company’s US$ 98.7 million 5% Convertible Unsecured Bonds,
issued pursuant to the restructuring of US$ 180 million 2% Coupon
Convertible Unsecured Bonds, have been listed on the Singapore Exchange
Securities Trading Limited since November 6, 2009.
The stock codes of the Company at the Stock Exchanges are as follows:
Name and address of the Stock Exchange
Stock code
National Stock Exchange of India Limited,
Exchange Plaza, Bandra Kurla Complex,
Mumbai- 400051
Bombay Stock Exchange Limited,
Phiroze Jeejeebhoy Towers
Dalal Street, Mumbai 400001
London Stock Exchange
10 Paternoster Square
London
EC4M 7LS
Singapore Exchange Securities Trading Limited
2 Shenton Way #19-00
SGX Centre 1, Singapore 068804
SUBEX
532348
SUBX
4AFB
The International Securities Identification Number (ISIN) for the Company’s
equity shares in dematerialized form is INE754A01014.
CUSTODIAL FEE
Pursuant to the Securities and Exchange Board of India (SEBI) Circular
No. MRD/DoP/SE/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. The said circular has been partially modified
vide SEBI’s Circular No MRD/DoP/SE/Dep/Cir-2/2009 dated February
10, 2009. The Company has, in accordance with the aforesaid circulars,
paid custodial fees for the year 2010-11 to NSDL and CDSL on the
basis of the number of beneficial accounts maintained by them as on
March 31, 2010.
Monthly high and low quotations during each month in the financial year 2009-10 as well as the volume of shares traded on NSE and BSE are as under:
Month
Apr ‘09
May ‘09
Jun ‘09
Jul ’ 09
Aug ‘09
Sep’ 09
Oct ‘09
Nov ‘09
Dec ‘09
Jan ‘10
Feb ‘10
Mar ‘10
High
Rs.
34.70
53.55
68.00
82.30
77.45
95.70
93.65
78.50
102.00
97.00
72.35
69.00
TOTAL
NSE
Low
Rs.
22.10
28.30
46.10
58.50
63.00
68.80
70.40
64.45
68.30
63.00
55.65
52.00
Volume
Nos.
1,823,622
3,387,703
2,207,756
3,191,203
2,184,915
8,344,425
1,996,575
1,044,684
9,858,193
17,699,823
25,388,791
11,377,437
88,505,127
High
Rs.
34.70
53.30
68.30
81.95
78.80
95.40
93.70
78.40
101.50
100.00
72.30
70.00
TOTAL
BSE
Low
Rs.
22.00
28.55
46.60
58.10
63.55
68.65
70.50
65.15
68.00
63.05
55.00
59.50
Volume
Nos.
1,399,810
2,316,734
2,149,063
2,635,205
1,693,521
5,346,405
2,016,688
1,000,838
6,847,991
10,209,967
14,550,831
6,024,651
56,191,704
subex annual report 09-10
85
SUBEX LIMITED SHARE PRICE VERSUS NSE S&P CNX NIFTY AND SENSEX
6000
4800
3600
2400
1200
0
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb Mar
125
100
75
50
25
0
20,000
16,000
12,000
8,000
4,000
0
120
90
60
30
0
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
S&P CNX NIFTYshare p
Subex
SENSEX
Subex
SHAREHOLDING PATTERN
Distribution of Shareholding:
No. of Equity shares held
As on March 31, 2010
As on March 31, 2009
No. of shareholders
% to total shareholders
No. of shareholders % to total shareholders
1
5001
10001
–
–
–
5000
10000
20000
20001
–
30000
30001
40001
-
-
40000
50000
50001
- 100000
100001 and above
39,526
3,146
1,465
485
202
190
233
267
86.84
6.91
3.22
1.07
0.44
0.42
0.51
0.59
26,342
1,423
749
220
116
79
121
140
90.24
4.87
2.57
0.75
0.40
0.27
0.41
0.49
Total
45,514
100.00
29,190
100.00
Categories of Shareholders:
As on March 31, 2010
As on March 31, 2009
Category
No. of share
holders
Voting
strength %
No. of shares
held
No. of share
holders
Voting
strength %
No. of shares
held
Public & Others
Companies/ Bodies Corporate
Core Promoters
Mutual Funds
ESOP- employee shareholders
FII
Total
44,346
1,091
3
5
54
15
33.26
21.53
13.97
3.31
0.25
27.68
19,283,242
12,483,894
8,101,801
1,920,482
146,410
16,047,310
28,390
712
2
6
60
20
30.41
6.92
11.56
4.36
0.49
10,594,315
2,411,949
4,028,700
1,520,832
170,458
46.26
16,120,835
45,514
100.00
57,983,139
29,190
100.00
34,847,089
86
subex annual report 09-10
R&T AGENTS AND SHARE TRANSFER SYSTEM
SHARES HELD IN PHYSICAL AND DEMATERIALISED FORM
Canbank Computers Services Limited, J P Royale, 1st Floor, No.218,
2nd Main, Sampige Road (Near 14th Cross), Malleswaram, Bangalore -
560 003, were appointed as ‘Registrar and Transfer Agent’ both in respect
of shares held in physical form and dematerialized form vide a tripartite
agreement dated December 5, 2001 in respect of shares held with NSDL
and a tripartite agreement dated November 27, 2001 in respect of shares
held with CDSL.
As on March 31, 2010, 99.88 % 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, 2010, 9,207,300 GDRs and Foreign Currency Convertible
Bonds aggregating to US$ 105.8 Million were outstanding.
Process for Transfer of Shares:
LEGAL PROCEEDINGS
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,
updation of records, etc. may be addressed to:
M/s Canbank Computer Services Limited,
J P Royale, 1st Floor,
No.218, 2nd Main,
Sampige Road (Near 14th Cross),
Malleswaram,
Bangalore - 560 003
Tel Nos. +91 80-23469661/62, 23469664/65
Fax Nos. +91 80-23469667/68
E-mail: canbankrta@ccsl.co.in
Website: www.canbankrta.com
There are no legal proceedings against the Company which are material in
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 M/s Canbank Computer Services Limited, 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
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Declared at the
AGM/Board
meeting held on
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
Final
Final
Final
Interim
Final
Interim
Final
Interim
Final
10
10
20
10
20
15
10
15
20
Due date for
transfer to the fund
See note below*
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 final dividend declared for the Financial Year 2001-02 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 the
unpaid dividend cannot be claimed from the Company after it has been
transferred to the said Fund.
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87
INVESTOR GRIEVANCES
Investor grievances received from April 1, 2009 to March 31, 2010:
Nature of complaints
Received
Cleared
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
2
-
-
-
-
2
2
-
-
-
-
2
During the year ended March 31, 2010, the Company has attended to all the investors’ grievances/correspondence within a period of 10 days from the
date of receipt of the same, if the requisite documents, if any, were clear and complete in all respects.
ADDRESS FOR CORRESPONDENCE
WEBSITE
For any queries, please write to:
Mr. Raj Kumar
Vice President–Legal & Company Secretary
Subex Limited, Adarsh Tech Park,
Outer Ring Road, Devarabisanahalli,
Bangalore – 560 037, India.
Telephone: 91 80 6659 8700
Fax: 91 80 6696 3333
Email: rajkumar.c@subexworld.com
investorrelations@subexworld.com
Company’s website www.subexworld.com contains comprehensive
information about the Company, products, press releases and investor
relations. It serves as a source of information to the shareholders by
providing key information like Board of Directors and the committees,
financial results, shareholding pattern, distribution of shareholding,
dividend etc.
88
subex annual report 09-10
SUBEX LIMITED, ADARSH TECH PARK, OUTER RING ROAD, DEVARABISANAHALLI, BANGALORE 560 037, INDIA
BROOMFIELD (cid:1) DUBAI (cid:1) IPSWICH (cid:1) LONDON (cid:1) MELBOURNE
OTTAWA (cid:1) PITTSBURGH (cid:1) SINGAPORE (cid:1) SYDNEY (cid:1) TORONTO
www.subexworld.com
subex annual report 09-10
89