SPANCO - Moneycontrol.com · Spanco’s transformation into a tougher, sharper, larger and more well-defined organisation is an ongoing process. the year 2008-2009 had set the tone

Annual Report 2009-10

The Transformation Continues...

SPANCO

Spanco Limited

Board of Directors

Kapil Puri

Deepak Bhagchandaney

Adarsh Bagaria

Vijay Kumar Gupta

Prem Iyer

Chairman and Managing Director

Deputy Managing Director

Whole Time Director

(resigned w.e.f. August 1, 2009)

(resigned w.e.f. October 7, 2009)

(resigned w.e.f. April, 30, 2010)

Company Secretary

Ramesh Sharma

Prakash Desai

Sanjay Kukreja

Deepak Vasdev

Sunil Sarin

Subroto Chaudhury

Ketan Chokshi

Registered office

Registrar and Share Transfer Agents

Auditors

B-22, Krishna Bhuvan, B.S. Deoshi Marg, Deonar, Mumbai - 400 008

Bigshare Services Pvt. Ltd.E-2 & 3, Ansa Industrial Estate,Saki-Vihar Road, Sakinaka.Andheri (E), Mumbai - 400 072

M/S Khandelwal Jain & Co.,Chartered Accountants,Mumbai

Contents

Chairman's Statement Directors' Report Management Discussion and Analysis Corporate Governance Auditors' Report Balance Sheet Profit and Loss Account Cash Flow Statement Schedules and Notes to Accounts Consolidated Financial Statements

1 4 8 2333 I 36 I 37 I 38 I

40 I 75

I I I I

Bankers

Bank of India

Bank of Baroda

Barclays Bank

HSBC

ICICI Bank

IndusInd Bank

Karur Vysya Bank

Lakshmi Vilas Bank

Punjab National Bank

State Bank of Hyderabad

State Bank of India

State Bank of Indore

State Bank of Mysore

Yes Bank

CORPORATE INFORMATION


1Spanco Limited

Letter from the CmD

Dear ShareholDerS,

this last year has, indeed, been a very significant one, as the Company successfully reinforced the Spanco name, making its presence felt as a credible, reliable brand in a market where only the very best could survive.

the process of transformation that began two years ago is already showing marked results at all levels of the company. organisational restructuring, strong strategic thinking, clear and focused goals, greater fiscal discipline, vigorous implementation of new and existing businesses, and a sense of motivation that cuts across the organisation, down to the junior most employee… all this and more has not only energised the organisation but also paved the way for greater value to the shareholder. the goal is to ‘Think Big, execute Well, and Create Value’. the message has percolated down to all Spanco employees across India and elsewhere.

A formidable force in the creation of technology Infrastructure, Spanco’s metamorphosis rests squarely on four key components cutting through all levels and all verticals of the organisation.

• Differentiation

• Innovation

• A Strong Corporate Identity

• A Unique Business model

Differentiation

Spanco’s role in technology Infrastructure creation ensures that the Company has a core function and a high-impact positioning in clients’ projects, which are invariably long-term ones. Large-scale government transformation programmes, for instance, have lengthy gestation and implementation periods for complete effectiveness and the fact that Spanco plays a major role in their success ensures value for the client as well as steady revenues for the Company year on year. Spanco’s Systems Integration work is a critical part of the client’s high-value infrastructure and Spanco’s involvement spans both its set-up and providing the maintenance and support required, making partnership with the Company a crucial factor in the client’s own success. for Spanco, a company-client relationship is usually a lifelong one.

Innovation

In a global environment, where costs are constantly on the rise, organisations are on the lookout for services that offer quality at competitive rates. Among Spanco’s strengths is the

fact that it has a strong focus on services innovation, which helps to increase efficiency and minimise costs.

for over a decade, the Company has focused on using innovation at every level to work on projects that directly and strongly impact customers across the board. through service innovation, long-term sustainability is made possible and Spanco has evolved into a transformation Services Provider offering end-to-end solutions that impact the entire value chain. With its vast experience and growing client base, Spanco’s innovation also allows for economies of scale.

for it to be truly effective, the innovation must be backed by true replicability in different locations. Spanco has proved its capabilities time and again in this sphere with an organisational strategy that revolves around creating a road map for future projects, the restructured Accelerated Power Development reforms Program (r-APDrP), State Data Centres (SDC), each of these are very large multi year contacts running into several hundred crores. our strategy revolves around doing it in multiple states so that to gain maximum in terms of efficiency and effectiveness.

a Strong Corporate Identity

Spanco has been ranked in the et500 amongst the outstanding companies of India Inc – and with very good reason. As a technology Infrastructure creator, Spanco’s growth has been intrinsically linked to the modernisation of key sectors within India. this is a major thrust area in the Indian economy, both in the private sector and at the governmental level, presenting a slew of new opportunities for a company like Spanco.

the Company, which has its global headquarters in mumbai sees itself as a strong domestic player with a footprint that spans the globe; much before the global downturn, Spanco was among the first to recognise the value of the domestic opportunities within a rapidly transforming post-liberalisation India. Now it has made its presence felt not only within the country, but also in the United Kingdom, middle east and United States, even as it explores new opportunities in upcoming markets such as Africa.

Spanco’s wide geographical presence has built its corporate identity as a strong domestic and global player with multiple strengths, far-sighted vision, quick adaptability, an enthusiastic ability to zoom in on new opportunities and profit from them – even as it maintains its underlying values of honesty and integrity at all times.

a Unique Business Model

the Company recognises that in today’s increasingly complex world, domain expertise is crucial and Spanco goes all out to ensure that such skills are continually honed at all levels within the organisation.

2

Spanco’s unique business model encompasses:

Ø Creating World Class technology Infrastructure to drive governance efficiency

Ø full service partnering capabilities

Ø A rapidly Scalable Implementation model

Ø A regional, National and International Presence

Ø Process and operational excellence

Ø highly skilled infrastructure management

Ø A reliable and secured information system and processes (ISo 9001:2008 and ISo 27001 certified).

Spanco’s Key Business areas

Spanco’s business essentially spans across - Government, Power, telecom Service Provider and BPo services. In the year under review, all of these have seen significant growth despite all the challenges of the global downturn taking consolidated revenue from rs. 80,990.63 Lacs (fY 2008-09) to rs. 137,083.02 Lacs (fY 2009-10).

Government

In the world of business, government is invariably the biggest spender and there is no doubt that especially during difficult economic times, this spending increases because it is even more important to ensure people’s welfare at such times. Spanco has more than a decade long experience working within this sector and we have partnered with Govt. in various implementations.

Spanco’s Government business strategy revolves around technology Infrastructure creation across various sector modernization initiatives. Spanco’s focused ICt services team delivers solutions for State and Central Govt., PSUs, Indian railways, Indian Defence and transport sector. Its dedicated Government transformation Services unit utilises proprietary services to help various state and Central government arms become more efficient through It. Spanco is also an active participant in the UID rollout program.

Power

the country’s rapid urbanization and industrialization has left India reeling under massive power shortages and a great deal of the inefficiency in the system is a result of distribution losses. In addition, as the consumer base grows, it has become necessary to streamline and manage a host of functions from new connections to billing and energy audits.

restructured – Accelerated Power Development reform Program (r-APDrP) is a pioneering reform aimed at reducing distribution losses. It is a 50,000 crore outlay and Part A of this program focuses on usage of Information technology to increase efficiency of Power distribution. We have secured

a contract with Punjab State electricity Board (PSeB) to help them modernize their distribution operations. there are other allied opportunities which will come up as part of Power Sector reforms. Spanco is focussed on opportunities in transmission, Distribution franchise, SCADA and similar areas where there is scope of using technology as an enabler to drive effectiveness.

Telecom Service Provider

the telecom sector in the last one year has been marred by several controversies viz. licenses, security issues, BSNL GSm tender etc. which has delayed implementation schedules of several tSP’s especially the Govt. owned. these seem to be over now and with the 3G and BWA auctions complete, we see a huge window of new infrastructure deployments within this year. As India gets broadband ready, Spanco will play a role in the execution of several large projects. Apart from infrastructure deployments, Spanco will also have a renewed focus on offering telecom Integration Services to operators directly or through Network equipment Providers (NeP’s).

BPo

Spanco has been present in the BPo business since as far back as the year 2000. Spanco BPo Ventures Limited (SBVL), the BPo arm of Spanco Limited, caters to global clients across four continents with operations in India, middle east, US and europe. SBVL is now aggressively pursuing its growth strategy in Africa, with plans to target BfSI, manufacturing and telecom verticals.

In 2009-10, BPo business consolidated revenue was rs. 18,196.56 Lacs and it is expected to grow at a CAGr of 50% over the next three years. there has been strong growth across all BPo subsidiaries viz Spanco BPo, Spanco respondez and Spanco GKS.

Future opportunity areas

We see transport and Infrastructure sectors offering good growth potential. these sectors have undergone huge transition in the last few years and we believe that It will play an important role in driving efficiency. We are looking at Ports, Airports, road and Border Check post as Key opportunity areas and are currently working on forging strategic partnerships and devising innovative solutions to take them to our customers within this fiscal.

Some Fundamentals

over this last year, several internal changes have taken place to make Spanco a stronger and more profitable company, capable of creating increased value for shareholders. We came across several challenges in the form of Dwindling customer confidence, finance, quality of output, training and skills upgrade etc. which were met with appropriate measures by creating a sense of ownership and positive attitude at all levels within the organisation.


3Spanco Limited

Spanco’s determination to establish itself as a leader in the industry was reflected right down the line, the management recognised that even as strong leadership began at the top, employees could only give their best if they felt truly empowered – a mindset that Spanco actively encouraged. Spanco is aware that its biggest asset is its people.

a reliable, Credible Brand

Spanco’s transformation into a tougher, sharper, larger and more well-defined organisation is an ongoing process. the year 2008-2009 had set the tone for 2009-2010, and this process has continued into 2010-2011. much has been achieved, more remains to be done. Some areas are now seeing consolidation and others are being fine-tuned. It is a step-by-step procedure that will have long-lasting results and

Spanco recognises that in an increasingly competitive world, where only the strongest will survive. Spanco today is well positioned as a technology Infrastructure creator to help drive governance efficiency across Key sectors.

on behalf of the Board, I want to thank all our strategic partners, bankers, institutions, customers and employees for their continued commitment and all stakeholders for their faith and support. We have set our sights on becoming the best are determined to reach our goals.

thank you,

Kapil Puri Chairman and managing Director

4

DIreCtorS’ rePort

to,

the Shareholders,

Your Directors have pleasure in presenting to you this 27th Annual report of your Company together with the Audited Accounts for the year ended march 31, 2010.

FINaNCIal reSUlTS:

Your Company’s financial performance for the year under review has been encouraging and is summarized below:

(amount rs. in lacs)

Particulars Year endedMarch 31, 2010 March 31, 2009

Income from operations and other income 120,972.94 67,938.71Profit before interest & finance charges, depreciation & taxation 17,294.42 7,878.68Less: Depreciation 1,731.04 1,208.41Less: Interest & finance charges 5,534.71 3,512.28Profit before taxation 10,028.67 3,157.98Less: Provision for tax – Current 2,878.30 1,435.00 – Deferred 641.41 (367.30) – fringe benefits tax - 59.60 – Wealth tax 1.80 1.90Less: taxation for earlier years 319.88 68.01Profit after tax 6,187.28 1,960.77Add: Balance of Profit & Loss Account brought forward 13.90 4,217.30Amount available for appropriations 6,201.18 6,178.08Proposed Dividend 280.65 140.33tax on Proposed Dividend 47.70 23.85transfer to Debenture redemption reserve 850.00 6,000.00Balance carried to Balance Sheet 5,022.83 13.90

reVIeW oF oPeraTIoNS

During the year under review, the Company’s income from operations with other income stood at rs. 120,972.94 Lacs as compared to rs. 67,938.71 Lacs in the previous year registering a growth of about 78%. Profit before interest & finance charges, depreciation & taxation stood at rs. 17,294.42 Lacs as against rs. 7,878.68 Lacs in the previous year, thereby registering a growth of about 120%. Profit after tax registered a growth of about 216% and stood at rs. 6,187.28 Lacs as compared to rs. 1,960.77 Lacs in the previous year.

DIVIDeND

Keeping in mind the capital requirement for future growth of the Company and to conserve higher resources for operations of the Company, your Directors recommend for approval of members a dividend of re. 1.00/- per share on the Capital of 2,80,65,000 equity shares for the financial year 2009-10. the

dividend on the equity shares, if declared as above, would involve an outflow of rs. 280.65 Lacs towards dividend and rs.47.70 Lacs towards dividend tax, resulting in a total outgo of rs. 328.35 Lacs.

MaNaGeMeNT DISCUSSIoN aND aNalYSIS rePorT

A report on management Discussion and Analysis, as stipulated under Clause 49 of the Listing Agreement is covered under separate section and forming part of the Annual report.

DIreCTorS

During the year under review, mr. ramesh Sharma, mr. Deepak Vasdev and mr. Ketan Chokshi have resigned from Directorship of the Company with effect from August 1, 2009, october 7, 2009 and April 30, 2010 respectively. the Board places on record its appreciation for their valuable contribution during their tenure as Directors of the Company.


5Spanco Limited

the Board of Directors of the Company have re-appointed mr. Kapil Puri as a Chairman and managing Director and mr. Adarsh Bagaria as a Whole time Director of the Company for another period of five years w.e.f. January 21, 2010 subject to approval of members at the ensuing Annual General meeting of the Company.

mr. Sunil Sarin, mr. Subroto Chaudhury and mr. Vijay Kumar Gupta were appointed as Additional Directors of the Company by the Board effective January 27, 2010, march 29, 2010 and April 12, 2010 respectively. they hold office upto the ensuing Annual General meeting of the Company. the Company has received notices under Section 257 of the Companies Act 1956, in respect of these Additional Directors proposing their appointments as Directors of the Company, along with the requisite deposits. resolutions seeking approval of the shareholders for their appointments have been incorporated in the Notice of the ensuing Annual General meeting.

mr. Adarsh Bagaria, Whole time Director and mr. Deepak Bhagchandaney, Deputy managing Director of the Company, retire by rotation at the ensuing Annual General meeting and being eligible, offer themselves for re-appointment.

Brief resume of the Directors proposed to be appointed/re-appointed as stipulated under clause 49 of the Listing Agreement with Bombay Stock exchange Limited are given in the Notice convening this Annual General meeting.

DIreCTorS’ reSPoNSIBIlITY STaTeMeNT

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956 with respect to the Directors responsibility Statement, your Directors state that:

• in the preparation of the Annual Accounts for the year ended march 31, 2010 the applicable accounting standards have been followed and there are no material departures from the same;

• the selected accounting policies were applied consistently and the Directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at march 31, 2010 and of the profit of the Company for the year ended as on that date;

• proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 to safeguard the assets of the Company and to prevent and detect fraud and other irregularities;

• the annual accounts have been prepared on a going concern basis.

aUDITorS

m/s Khandelwal Jain & Co., Chartered Accountants, the Statutory Auditors of your Company, will retire at the ensuing Annual General meeting and are eligible for re-appointment. the Company has received a letter from them to the effect that their appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Your Directors recommend their appointment as Statutory Auditors of the Company for the financial Year 2010-2011 and to hold office upto the conclusion of the next Annual General meeting of the Company.

the comments/observations of the Auditors, if any, are self explanatory and do not call for any further explanation or clarification except in respect of following observation of auditors:

i) Under clause No. (vii) of the annexure to the Auditors’ report, it is hereby clarified that considering the growth, the scope and coverage of internal audit system also has evolved and has been enlarged and strengthened from time to time to make it more effective. the company is continuously growing in terms of its operations and exploring various new opportunities in its sector. this is a continuous process and the management is committed to adopt the best practices to ensure the same.

ii) Under clause No. (ix)(a) of the annexure to the Auditors’ report, it is clarified that delay in few cases in depositing statutory dues, arose on account of transactional complexity primarily arising from the lack of timely receipt of information from far off places due to geographical spread of our business operations, which were all subsequently rectified.

iii) Under clause No. (xi) of the annexure to the Auditors’ report in respect of auditors observation regarding certain delays in repayment of dues to financial institutions, banks and debenture holders, it is clarified that the delay in payment of dues was temporary in nature arising from mismatches in cash – flows which are attributable to delay in timely realization of receivables from our customers and our investment in growth areas. As at march 31, 2010, there were no delays and all previous delays were duly rectified.

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SUBSIDIarY CoMPaNIeS/JoINT VeNTUreS

During the year under review, the Company disposed off its two wholly owned subsidiaries viz. Spanco respondez Services Ltd. and Spanco International Pte. Limited, Singapore in the best interest of the Company as no business could be commenced in these Companies and these were in-operative since their incorporation.

the ministry of Corporate Affairs vide its Letter No. 47/459/2010-CL-III dated June 7, 2010 have granted exemption to the Company from attaching to its Balance Sheet, the individual Annual report of its subsidiary companies for the year ended march 31, 2010 in terms of Section 212 (8) of the Companies Act, 1956. As per the terms of exemption Letter, a statement containing brief financial details of the company’s subsidiaries for the year ended march 31, 2010 is included in the Annual report. further these documents will be made available upon request to any member of the Company interested in obtaining the same and are also available for inspection during business hours at the registered office of the Company and that of the respective subsidiary companies. the Consolidated financial Statements presented by the Company include financial results of its subsidiary companies.

CoNSolIDaTeD FINaNCIal STaTeMeNTS

In accordance with the Accounting Standard AS-21 on Consolidated financial Statement and AS-27 on financial reporting of Interest in Joint Ventures, the Audited Consolidated financial Statements are provided in this Annual report.

CreDIT raTING

During the year under review, your Company’s rating has been revised to Pr3 (Pr three) with credit watch by Credit Analysis and research Ltd. (CAre) for issue of Commercial Paper / Short term Debentures of rs.50 Crores and also for issue of Commercial papers/Short term Debentures of rs.50 Crores (carved out of working capital limits). Later on during the year under review, CAre has revised these ratings to Pr3 (Pr three).

During the year under review, your Company’s rating has been revised to CAre BBB [triple B] with credit watch by CAre for long term facilities and for Non-convertible debentures having tenure of more than one year. Later on during the current year, CAre has revised these ratings to CAre BBB [triple B].

ISSUe oF reDeeMaBle DeBeNTUreS

During the year 2008-09, your Company has issued & allotted 5,00,000 Partly Secured redeemable Non Convertible Debentures (NCD) of rs.1000/- each amounting to rs. 500,000,000/- on private placement basis to LIC mutual fund Assets management Company Limited (LICmf) for a period of 364 days. these NCDs were restructured and rolled over by LICmf so as to redeem the same in full upto June 30, 2010.

out of these NCDs, 300,000 NCDs of rs.1000/- each amounting to rs. 300,000,000/- have been redeemed upto march 31, 2010.

ISSUe oF eqUITY ShareS oN PreFereNTIal BaSIS

During the year under review, the Company had issued and allotted 7,415,000 fully paid equity shares of rs. 10/- per share at price of rs. 40/- per share on preferential basis to Promoters, fVCI and fIIs. Consequent to this, the paid up share capital of the Company increased from rs. 206,500,000/- (divided into 20,650,000 equity shares of rs. 10/- per share) to rs. 280,650,000 (divided into 28,065,000 equity shares of rs. 10/- per share). the total proceeds of rs. 29.66 crores were utilized for the purpose of working capital requirements of the Company during 2009 - 10 itself.

CorPoraTe GoVerNaNCe

Pursuant to Clause 49 of the Listing Agreement, a detailed report on corporate governance duly certified by manish Ghia and Associates, Practising Company Secretaries is separately attached to this Annual report.

PerSoNNel

the employer employee relations remained cordial throughout the year. the Board places on record its sincere appreciation for the valuable contribution made by employees across all levels of the organization.

In accordance with the provisions of Section 217(2A) read with Companies (Particulars of employees) rules, 1975, the names and other particulars of employees are to be set out in the Director’s report as an addendum thereto. however, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the report and accounts as set out therein are being sent to all members of the Company excluding the aforesaid information about the employees. Any member, who is interested in obtaining such particulars about employees, may write to the Company Secretary at the registered office and the same will be provided by the Company.


7Spanco Limited

ParTICUlarS oF CoNSerVaTIoN oF eNerGY, TeChNoloGY aBSorPTIoN aND ForeIGN eXChaNGe earNINGS aND oUTGo.

(a) CoNSerVaTIoN oF eNerGY

the Company’s operations are not energy-intensive. however, significant measures are taken to reduce energy consumption by using energy-efficient computers and purchasing energy-efficient equipment. During the year, the Company has taken some measures for optimal utilization of electricity by stringent control by re-scheduling of working hours of air-conditioning & lighting during the off working hours. the Company constantly evaluates new technologies and invests to make its infrastructure more energy-efficient. Air-conditioners with energy-efficient screw compressors for central air-conditioning and with split air-conditioning for localized areas are used. As energy costs comprise a very small part of the total expenses, the financial impact of these measures is not material.

(B) TeChNoloGY aBSorPTIoN, reSearCh aND DeVeloPMeNT

With an object to obtain and deliver the best, your Company successfully deployed a growing and diverse team of r&D specialists who have expertise in hardware, networking systems software, database and application software. this helped the Company to access to the latest technologies and deploy/absorb these latest technologies wherever feasible, relevant and appropriate. the Company has not maintained separate record of the expenditure incurred on r&D.

(C) ForeIGN eXChaNGe earNINGS & oUTGo

(Amount rs. in Lacs)

Particulars 2009-10 2008-09foreign exchange earned 33.59 1,368.90CIf value of imports 4,881.25 2,113.89expenditure in foreign currency

281.32 741.68

aCKNoWleDGeMeNTS

Your Directors wish to express their sincere gratitude to the Union Government and the Government of Various States, as also to all the Government agencies, banks, financial institutions, customers, vendors and other related organizations, who, through their continued support and co-operation, have contributed towards company’s growth and progress during the year under review. Your Directors also wish to place on record their deep sense of appreciation for investors, shareholders and employees of the Company for their continued support towards conduct and operations of the Company.

For and on behalf of the Board


Gurgaon August 27, 2010

8

mANAGemeNt DISCUSSIoN AND ANALYSIS

a. Technology Infrastructure

Ia. Industry Structure and Developments

As India moves into a new decade, emerging stronger, the Indian economy is expected to clock a growth rate of about 9% opening up a host of new opportunities. A 1.2 billion strong population, a growing, aspirational middle-class, a domestic savings rate of over 30%, its competitive advantage in information technology that is being used to enhance productivity in Industries…all this and more significantly impacts the business models of several industries – none perhaps as much as the It industry.

According to latest figures from Nasscom, India’s technology and business services revenues accounted for 6.1% of GDP in 2010, up from 1.2% in 1998. this was despite the fact that earlier Nasscom had downgraded its growth projections for the domestic It sector as a result of the global economic crisis. major public sector It projects, such as UID, Key Sector modernization initiatives like Power Sector reforms, NeGP, railways and Airport modernization are also transforming the sector, even as private entities such as banks, telecoms, retail and manufacturing are driving growth in a maturing economy.

While many competitors only turned to the domestic markets after global markets dried up post the economic downturn, Spanco had recognised the opportunities within India more than a decade ago. over these years, it has steadily made its presence felt, both in India and in other continents. Spanco’s capabilities extends to Government, eGovernance, Power, telecom Service Provider, transport, Security and Surveillance and Business Process outsourcing. the massive growth of the Indian economy will continue to produce a huge number of opportunities which Spanco, given its technical expertise, domain knowledge, project management skills and experience is well poised to exploit.

While the opportunities are huge, however, the fact remains that various other parameters must co-exist – cost-effectiveness, scalability and innovation. Without these, in a fiercely competitive post-liberalisation environment, this potential could be lost.

much of Spanco’s strength comes from the fact that it is intrinsically involved with the modernisation of key sectors within India. It also has the capacity to rapidly shift gears and transform its capabilities to meet new demands, offering flexibility and value to a growing number of clients.

In recent times, it has undertaken a process of transformation at all levels, in order to deal with market shifts. the metamorphosis can be seen in its technological expertise across a wide range of offerings and its ability

and willingness to meet the challenges of a tough business environment. the change has been taking place, right at the heart of the organisation, impacting even the management style and mindsets of the 9,000-plus Spanco family.

Spanco is engaged in creating large scale technology infrastructure to help drive governance efficiency across key sectors.

Spanco has three major business units. these are:

Ø Government

Ø Power

Ø telecom Service Provider

Spanco registered revenue of about rs. 118,292.73 Lacs on a standalone basis for fY 2009-10.

IIa. opportunities and Threats

opportunities

1. Government Business Unit

Background:

In any business environment, the government is invariably one of the biggest spenders across sectors. Spanco helps create infrastructure and aids in driving innovative services across following areas:

Ø e-governance

Ø Public Sector Units

Ø railways

Ø Defence

Ø transport (road and Airport Infrastructure)

the management believes that the Company’s resources, expertise and experience are better attuned to provide value in these sectors. Spanco’s Government Business unit contributes to about 50% of the overall revenues.

(i) e-governance

Background:

As Information technology began to transform the way India lived and worked, the Indian government began to recognize the importance and value of electronic services in order to reach out to the common citizen. the ambitious National e-Governance Plan (NeGP) launched in 2006 became a major thrust area. the NeGP seeks to lay the foundation and provide the impetus for long-term growth of e-Governance within the country, create the right governance and institutional mechanisms, set up the core infrastructure and policies and implement a number of mission mode Projects at the center, state and integrated service levels to create a citizen-centric and business-centric environment for governance. the stated vision of the e-Governance program is to “make all


9Spanco Limited

Government services accessible to the common man in his locality, through common service delivery outlets and ensure efficiency, transparency, and reliability of such services at affordable costs to realise the basic needs of the common man”.

the wide range of activities envisaged involves streamlining data available in various government offices in physical form and converting it into an electronic format. this alone is a humungous task, but it is just the beginning. for at the heart of this gigantic exercise is the average citizen who interacts with government representatives at every level for essential documentation, ranging from birth and death certificates to passports and ration cards, among other things. As many as 27 mission mode Programmes were envisaged ranging from integrated databases for Income tax, Passport and Visa, A National Citizens’ Database, National Unique Identification to integrating and e-enabling various records like land records, court records, property and vehicle registration etc. this involved creating the right technology and communication environments to implement Government-to-Government (G2G), Government-to-Business (G2B) and Government-to-Citizen (G2C) services. the programme is designed to impact citizens of both urban and rural areas.

The e-Governance structure

the Core Infrastructure that finally brings these services to the common man has been set in motion by setting up State Data Centres (SDCs), State Wide Area Networks (SWANs), and Common Services Centres (CSCs). Around 27 mission mode projects will ride on this core infrastructure.

State Data Centres

SDC scheme spans 35 states/Union territories in order to consolidate infrastructure, services and application to provide efficient electronic delivery of G2G, G2C and G2B services. the estimated outlay for the scheme is around rs.1623.20 Crore. Spanco was awarded the Orissa and Rajasthan SDC project under NeGP scheme.

State Wide area Networks

Under NeGP, the government has approved a scheme for establishing State Wide Area Networks (SWANs) across the country at a total outlay of rs. 3334 crore. the aim is to connect all state and Union territory headquarters up to the Block level via district and sub-divisional headquarters with a minimum bandwidth capacity of 2mbps per link. Spanco was awarded the Maharashtra and Orissa SWAN projects for a five-year duration each and has proved its capabilities in this sphere.

Common Services Centres (CSCs)

the CSC programme is one of the core ICt enabled initiatives of the Government of India (GoI) under NeGP,

being rolled out across the country as Public-Private-Partnership (PPP) at an estimated cost of rs. 5742 Crore. the services being offered span G2C, B2C and B2B. Spanco limited is deploying 3689 CSCs across 10 districts of Maharashtra.

Mission Mode Projects (MMP)

NeGP comprises of 27 mission mode Projects (mmPs) encompassing 9 Central mmPs, 11 State mmPs and 7 Integrated mmPs spanning multiple ministries/ Departments. every State has the flexibility of identifying up to 5 additional State-specific mmPs (relevant for economic development within the State).

opportunity Size and Scope

• the total It spending in the eGovernance space is expected to be in the region of $5.1 billion by 2011, a compounded annual growth rate of over 19% during the period 2007-11

o over 70% of this spending is likely to come from the central government and 20% from the states and 10% from the local government

o Spanco has devised a clear, focused strategy to tap the opportunities from this sector. the strategy is based on three values that are fundamental to Spanco – Customer focus, Innovation and Superior execution.

• With 28 states, seven Union territories, 626 districts, 600,000 villages and 270,000 panchayats in India, the opportunities are truly tremendous.

o there is a need for e-Governance for 1.1 billion people in India, across a wide spectrum of sectors.

• the UID project would impact every Indian citizen providing identity proof through thumb and fingerprints and the irises of the eyes.

o Spanco is empanelled to collect physical data in 19 Indian states and is currently focusing its attention on maharashtra and Gujarat and mP in the West, haryana, Punjab, rajasthan and Delhi in the North, Andhra Pradesh, Karnataka and tamil Nadu in the South and orissa, Bihar in the east – regions across the country where the Company already has a strong presence. It is also empanelled to collect data in the North-east of India.

o Collection of this data would pave the way for several other e-Governance programmes in which Spanco is already making its presence felt – for instance: e-municipality, National rural employment Guarantee Act (NreGA), Public Distribution System.

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In FY 2009-10 Spanco won several key contracts in the e-Governance space which contributed to about 30% share in Government vertical. It won the contracts for the first SDCs for the state of orissa followed by rajasthan. The year also saw the successful rollout of SWaNs for the state of Maharashtra and orissa as well as timely rollouts for transformational government projects in the states of Bihar, andhra Pradesh, haryana, Punjab and Madhya Pradesh.

(ii) Public Sector Units

Background

the public sector has played a key role in the Indian economy, particularly after Independence, when the predominantly agrarian country faced a variety of problems such as inequalities in income and low levels of employment, regional imbalances in economic development and lack of trained manpower. the country’s industrial base was weak, savings were low, investments inadequate and infrastructure facilities negligible. the government then drew up a road map for the development of the public sector as an instrument for self-reliant economic growth. the year 1991 heralded the liberalization of the Indian economy, encouraging participation of private players, but even today, the Public Sector plays a key role, often partnering with the private sector to achieve ambitious national goals.


• there are about 246 centrally owned Public Sector Undertakings in India

o the aggregate income of the top 121 PSUs in fY 2008 stood little over rs. 14,675 billion which represents 16.8% year on year growth.

o the aggregate total income of these companies amounts to approximately 31% of the GDP at current prices for fY 2008.

• PSU’s are also amongst the biggest spenders in It due to the need of modernization of every department.

o the list of 500 highest It spenders in the country is dominated by PSU.

o In 2009-10, PSU’s spent more than 6 billion USD on It Infrastructure and Services.

o oNGC which is the highest spender on It in India is followed by other PSUs in the top 100 list which includes IoCL, GAIL, BPCL, SAIL, BheL, NtPC and hPCL.

• We work with a variety of public sector units such as oNGC, GAIL, NtPC, SBI, SAIL and eIL

o our offerings include infrastructure creation, Networking Solutions, Voice Solutions – IP

telephony, Audio and Video Solutions, telecom Backbone Network – SDh, Physical Security and Data Centre activity.

PSU’s are the key drivers for growth and employment across India. PSU’s have always been in the forefront of using IT to increase efficiency. Spanco is participating aggressively in helping modernize several areas within PSU’s. During 2009-10, Spanco executed several projects in the area of creating Technology Infrastructure for PSU’s which contributed to about 40% to our overall Government vertical revenues.

(iii) railways

Background

A railway network of over 63,000 kms, covering over 6,900 stations and carrying 20 million passengers and two million tons of freight daily -- by all accounts Indian railways is among the biggest and most complex networks in the world. Indian railways has been on the forefront of using technology to help drive efficiency across various areas. Apart from streamlining operations, massive investments have gone in deriving process efficiency in procurement, project execution, signal management, wagon and goods tracking etc.

Spanco already has a long history of working with the Indian railways, especially in the BPo space. this experience and knowledge of specialized requirements coupled with its technical expertise makes it one of the strongest players in this segment. It has also created SI platforms for the railways in the past, winning several accolades. the huge volumes that Spanco can manage can be seen from just a single example; the railway enquiry number 139 handles as many as eight to ten lakh calls in a single day; this is possible only because of Spanco’s technological expertise. the project is operated in collaboration with Spice BPo. Spanco has also set up the Customer Interface technology platform for IrCtC.


• ICt is being used extensively in integrated traffic planning, management of automatic checking and ticketing, modernization of terminals and inspection services.

• Modernization of signals, construction of privatefreight terminals and multi-modal logistic parks etc. is also being driven aggressively and will use It and system integration.

• Mega logistic hubs are being planned alongsidethe proposed eastern and western dedicated freight corridors and opportunities for It and system integration are ongoing

• TheUnionBudgetfor2009-10hasalsoproposedtheuse of optic fiber cable networks to bring It revolution to the doorsteps in remote areas.


11Spanco Limited

• UndertheXIthPlan,aroundRs.2,00,000Croreshasbeen set aside for modernization, capacity increase and completion of new projects.

Indian railways (Ir) are a very significant account for Spanco and we anticipate excellent growth this year as Ir gets ready to implement several of its Technology initiatives.

During 2009-10, Spanco executed several projects of creating Technology Infrastructure for Indian railways which contributed to about 15% to our overall Government vertical revenues.

(iv) Defence

Background

India has among the most sensitive defence situations in the world. It is a sub-continent sized country with hostile forces arrayed around its borders. In addition it has several internal insurgencies which demand direct or indirect involvement of its armed forces.

to meet these challenges India has among the largest standing armies in the world. Its armed forces are also recognized the world over for their sheer professionalism. It has been historically proved that the strength of any army is directly proportional to the security of its communication networks.


• India ranks among the top ten countries in the world in terms of military expenditure

o India’s defence budget allocation has increased from $ 15.7 billion in 2005-06 to $ 28.9 billion in 2009-10 at a CAGr of 16.5% for the same period.

• With an emphasis on modernisation and indigenisation, the Indian defence forces are investing over $3 billion on C4SI (Command, Control, Co-ordination, Communication, Surveillance and Intelligence).

• TheIndiangovernmenthasembarkedonamammothprogramme to secure the communication of the Indian armed forces through the world’s biggest dedicated, secure, closed user group network.

o Consisting of a state-of-the-art optical fibre network for the army, navy and air force, the government is planning to invest up to about rs. 10,000 crore ($2 billion) in the project.

• Spanco has played a major role in key defence units, including the Central Airmen Selection Board, manpower Planning Directorate, Deputy Director-General - It, Indian Army and hQ16 Corps – Indian Army.

o Deployment of a Defense optical fibre communication network;

o Implementation of mPLS VoIP - IP network supporting Voice, Data and Video.

o Supply and installation of Network equipment, exchange, switches and mux.

o Design and setting up of high security Data Centres.

o Information/ Cyber Security solutions/ devices.

o Access control systems.

Secure and Sustainable technology from a company which is Indian and has deep rooted experience in large scale execution is the ideal partner for Defence. Spanco is well poised to gain maximum from the modernization spending within Defence. During 2009-10, Spanco executed several projects of creating Technology Infrastructure for Indian Defense which contributed to about 15% to our overall Government vertical revenues.

(v) Transport/ Integrated Check posts

Background

Infrastructure Sector development is the top priority of any government as it has a direct bearing on the Nations growth and productivity. In a recent article it was published that India is committed to spend more than 100 billion USD on Infrastructure projects over the next 10 years. these opportunities will be mostly spread over road Infra, Port Infra, Airport Infra and other allied Infra corridors.

Airport and Ports account for a lions share in investment and their modernization will attract equally large investment in It and telecom systems. We see a huge upside for Spanco as we are closely working within these segments and our solutions are focussed in creating efficient governance systems.

In November 2008, the union cabinet approved the setting up of integrated check posts at 13 identified entry points on land borders at a total cost of rs. 6.35 billion. the check posts will be sanitized zones with dedicated passenger and cargo terminals comprising adequate customs and immigration facilities. In addition, security and scanning equipment, health and quarantine facilities, passenger amenities like waiting areas, restaurants, rest rooms, duty-free shops and parking warehousing are also envisaged. the check posts are designed to curb illegal transportation, increase revenue for the state government, check vehicles, validate goods, and check for bombs, narcotics and weapons, among other things. Several departments are involved in their formation including Dept of Commercial tax, transport and State excise, Dept. of mines and forests, Dept. of Agriculture, Agriculture marketing Board, Department of home, Police, Security, and BfA Drug Controller.

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opportunity Size and Scope:

• every State will come up with Border Check Post modernization opportunity in the rage of rs. 1000 to 1500 crore and the technology infrastructure part in that will be close to rs. 300 crore per state

o Spanco anticipates that it is well placed to garner atleast 3 orders of this nature in the next 2 years. our focus states are Punjab, rajasthan, mP, tamilnadu and orissa.

• AAI is expected to bring a total investment of rs. 40,000 crore for modernisation of the airport infrastructure.

• The Government of India has taken up a USD 22billion ‘Sagarmala’ project to develop the port and shipping sector under public and private partnership.

Transport and allied Infrastructure is the critical backbone of any country and plays a pivotal role in its development. Spanco’s experience in sector modernization will help it to contribute successfully across the various opportunities within this space.

2. Power Business Unit

Background:

According to a Whitepaper on e-Governance in the Power Sector produced by Spanco in association with Assocham, India’s energy requirement by 2030 is projected to be nearly six times more than it is today. According to current estimates, as mentioned in the Whitepaper, India will need 315 - 335 GW by 2017 and 800 GW of power by 2030. A lack of focus on the Distribution side over the years has resulted in energy losses as high as 35% in several states whereas the world average is about 10%. the report also recognizes that the growth of the Power industry bears a strong correlation with the growth of the economy, and that for a target GDP growth rate of 8 – 10%, the Power industry needs to grow by nearly a similar margin.

to tackle this issue of t&D losses, in August 2008, the Government of India launched an ambitious program called re-structured Accelerated Power Development and reforms Program (r-APDrP). this program seeks to make an actual demonstrable difference in terms of sustained loss reduction through strengthening and up-gradation of sub transmission and distribution network and adoption of Information technology for establishment of baseline data and fixation of accountability. the objective of the program is reduction of At&C losses to 15% in project areas.

our offerings

for companies like Spanco, which specialize in technology Infrastructure creation and Services, this

provides an exciting new opportunity. Spanco Ltd. has set up a specialised domain practice for the Power Sector as part of its SI business. our offerings for this sector span the following areas:

• technology Infrastructure

o establishment of LAN, mPLS VPN and Distribution Automation

o Networking, Asset Inventory Installation, meter Installation

o Centralized Customer Care Services and outage management Systems (omS)

o Identity and Access management System

o establishment of DC and Dr sites

• Services

o energy Accounting, Integrated Billing System and mIS

o BPo, Crm and e-business Solutions

o Load and Demand Side management

o Supply Chain System

o Asset and Work management

o Business Process re-engineering

opportunity Scope and Size:

• r-APDrP is a rs. 50,000 crore opportunity and has two parts associated with it.

o Part-A includes projects for establishment of baseline data and It applications like meter Data Acquisition, meter reading, Billing, Collections, GIS, mIS, energy Audit, New Connection, Disconnection, Customer Care Services, Web self service, etc. to get verified baseline At&C losses, which is to the tune of rs. 10,000 crore

o Part-B includes distribution strengthening projects covering the System strengthening, Improvement and augmentation of distribution system capacity is to the tune of around rs. 40,000 Crore

• Spanco is empanelled as a Systems Integrator, Network Solutions Provider (NSP) and as a Geographical Information Systems Solutions Provider (GSP) by Power finance Corporation (PfC) for the prestigious r-APDrP projects.

• Apart from R-APDRP, there are several alliedmodernization initiatives in the areas of Distribution franchise, SCADA, GIS, transmission etc. which we will evaluate keenly to participate.

During fY2009-10, in a major win the Company secured the It modernization project of the Punjab State electricity


13Spanco Limited

Board (PSeB), beating some of the biggest names in the business to do so. this project is under the larger restructured Accelerated Power Development reforms Program (r-APDrP). the size of the current order for Punjab is about rs. 284 crores.

Within r-aPDrP, Spanco anticipates to bag two more orders in the range of rs. 150 to 300 crores. In addition to this Spanco has also developed a suite of services to cater to the IT in Power segment and has deployed several key resources to develop infrastructure solutions for the same. as per estimates, the IT in power is about a $ 3 billion opportunity in India for the year 2010-11 and Spanco expects to garner a substantial share of the same.

Distribution Franchise (DF):

Background

Df business requires services providers to manage the entire distribution end to end. the idea to involve private companies is to help the State electricity Boards (SeB) become more efficient. for all round growth and nation’s conducive development of electricity supply industry is essential, which can come only through competition and this competition in turn also protects the interest of the consumers.

Scope of Work

the business model is for 15 years, where State electricity Boards shall select a franchisee from the competitors having adequate technical competency to execute, experience of managing distribution business and has bided highest offer to purchase input energy over and above the bench mark rates set by the utility.

the franchisee shall be essentially responsible for mBC (metering, Billing and Collection) activities for the entire area as awarded by the utility. the franchisee shall remit input energy cost to the utility on the basis of summation of energy recorded by all the meters on the feeders from sub-station feeding the franchisee area. the key scope of work under the targeted business of ‘Input Based Distribution franchisee’ model is as follows:

• Collection from all the consumers in the franchisee area as per guidelines

• responsible for maintaining the electricity distribution network

• Deliver quality power (without fluctuation and interruption) to the consumers

• Consumer relation management

o Devise mechanism to address the Consumer Grievances

o Increase consumer satisfaction level

o hassle free modalities of releasing new service connection

• facility management

• energy accounting across the periphery of the designated utility area

• Distribution transformer indexing in reference to feeders (GIS)

• Consumer Indexing with reference to distribution transformer and GIS

opportunity Size

• rapid success has been witnessed in privatization of Distribution franchisee business model, the phenomenal intensification towards delivering quality, well-monitored and uninterrupted power supply have motivated the policy makers.

• After the triumph of various models in the state of orissa-complete privatization, Delhi-n JV model, Bhiwandi (maharashtra) – Df model, several utilities are looking forward to invite bids through franchisee format.

• Df is expected to be a 45,000 crore opportunity.

• We envisage the following opportunities in states

o AP: hyderabad, Visakhapatnam, Vijayawada

o Gujarat: Vadodara, rajkot

o haryana: Gurgaon, faridabad

o Karnataka: Bangalore

o mP: Indore, Bhopal, Jabalpur

o rajasthan: Jaipur

o UP: Kanpur, Lucknow, Agra, Varanasi, meerut, Allahabad, Ghaziabad

o WB: Asansol

Spanco is well equipped with its decade plus Technology expertise, Infrastructure Management skills, Customer Service excellence, execution ability and quality of people to handle such a large 15 year long engagement with great results. Spanco expects to win and execute three such opportunities within this fiscal

3. Telecom Service Provider Business Unit

Background:

for a country to be competitive in the global markets, telecommunication services of world-class quality are essential. recognizing this in a post-liberalization scenario, the Government of India gave the highest priority to the development of telecom services and the National telecom Policy 1994 was launched with the objective of ensuring telecommunication for all. Barely a decade later the telecom industry in India had seen

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phenomenal growth, with a favorable regulatory climate, aggressive investments and cheap handsets.

Between 2006-2010, the industry had seen approximately 56% CAGr, but as India moves into a new decade, there is still much more to be done. With rural penetration of less than 15%, there is much untapped potential in the wireless industry. rapid changes in technology trends and constant shift in customer demands are leading to numerous challenges for service providers, but for quick-thinking and fast-moving companies like Spanco, there is a world of opportunity waiting to be grasped.

emerging Trends

(i) Push for value-added services

As the cost of voice telephony falls to an all-time low, telcos have little choice but to push value-added services to generate revenues. these revenues will have to come from increased use of data, video and other similar services. the seriousness with which telcos are looking at this business opportunity is evident from the fact that the industry as a whole has paid the Government of India upwards of rs. 100,000 crore ($ 20 billion) for 3G and Broadband Wireless spectrum.

In developed countries Internet and data access has been driven by PC-based systems. most analysts believe that India is likely to skip a technology generation and high-speed Internet and data access in India will be driven by wireless telephony. Presently broadband access in India, which depends on last mile land-based connectivity, is less than one per cent. It is expected that the advent of wireless broadband will change this significantly.

(ii) Penetrating the rural markets

the urban telecom markets have now become saturated. most analysts believe that the future growth of telecom in India will come from the rural markets. this means that most telcos will have to invest significant amounts to penetrate and service these markets. According to trAI figures telcos will have to invest in setting up a shared network of about 40,000 towers over the next couple of years if they are to achieve their targets of increasing rural penetration to about 25% from the present 15%.

(iii) Third-Generation Systems (3G)

mobile telephony has moved into the third generation (3G), with 3G systems designed to allow simultaneous use of speech and data services and provide peak data rates of at least 200 kbit/s under International mobile telecommunications-2000 (Imt—2000) specifications. the new technology marks a significant shift from the first generation, which began in the early ‘80s and the second generation, which emerged in the ‘90s.

With telcos setting up Next Generation Networks and Broadband networks, a significant amount of capex will

be devoted to a shift to IP-based technology requiring building up of IP based platforms which is a strong capability enjoyed by Spanco. opportunities in the BSS/oSS segments will also increase as telcos expand their reach and penetrate wider.

Spanco’s expertise in areas as diverse as SI, network rollout services, flexible billing and customer care initiatives, coupled with the fact that the Company has worked with virtually all major public and private sector telcos, means Spanco is well poised to benefit from these opportunities.

our offerings

In an environment that is seeing rapid shifts in the convergence of applications, networks and content, Spanco’s telecom Service Provider group provides integrated solutions and services spanning It/oSS/BSS networks and operations. In catering to the SI requirements of telecom service providers, Spanco focuses on Public carriers, Private carriers and Network equipment Providers (NeP).

our areas of engagement covers:

• technology Infrastructure

o Application and infrastructure management

o Network infrastructure solutions for turnkey systems

o Backbone networks for telecom companies

o Broadband wireless networks based on Lte (Long term evolution)

o Data centre infrastructure and Applications such as oSS, BSS

o Subscriber Provisioning and fraud management

o 2G and 3G networks

o Next generation VoIP networks and transmission systems

o Passive telecom Infrastructure

• Services

o Wireless Services: rf planning, transmission planning, site surveys, drive tests, rf optimisation, installation and commissioning, rAN Audits and emf measurements.

o managed Services: Advanced Network Support, Program management, enterprise CPe management and rf Support Services.

Spanco’s clients in these segments span service providers, PSU/ Utility Companies and enterprise Networks and Call Centres. It also has alliances with IBm, microsoft, oracle and several others.

Spanco is currently providing a host of services to tata Communications, railtel, BSNL, mtNL, Alcatel Lucent


15Spanco Limited

and huawei. Spanco provides services both on a turnkey basis, with the Company acting at the front-end, or as a value services partner providing additional capabilities wherever required. We have an ASP agreement with ericsson, a tSP agreement with reliance, tata, Idea, Shyam, AtC, WttIL and Zte; a supply agreement with Shyam, AtC. It is also working with Vodafone, Airtel, Quippo and essar.


• the Indian telecom sector has the second largest mobile network in the world with more than 600 million wireless subscribers.

• there are plans to achieve 40% rural teledensity by 2012 – an addition of over 160 million connections in rural India over the next two years. 3-G is also expected to open up immense business opportunities.

• Broadbandservicesarealsoexpandingrapidly o there were 9 million broadband subscribers at

the end of April 2010, of which a near 5% were in rural area. the Government had set a target of 20 million subscribers by 2010 as a part of the broadband policy 2004. the requirement for broadband infrastructure is tremendous.

• As per CrISIL, incremental investment to the tune of 40,000 crores is expected in the areas of Passive Infrastructure deployment between fY11 to fY14

• total market Size for Network equipment and Services is expected to be around 15 billion USD by 2012

• total market Size for telecom Software and Services for the Indian market will be approx. 2billion USD.

As the industry evolves, it will move in the direction of managed services and capacity. operators would increasingly want to outsource operational services to professional partners and a company like Spanco is well poised to benefit from this trend. Spanco is making a shift into a strong services outfit with core competencies and capability to address the needs of this evolution. Its key strengths are execution of large turnkey projects, coupled with strong customer relations. It is also diversifying its capabilities across technologies and ensuring that it has the project management capabilities to deliver in a timely fashion. Spanco is proficient in multiple wireless technologies and can easily adapt and deliver on upcoming ones; its expertise extends from WiMAXNetworks, to CDmA, GSm, 3G and Point-to-multipoint BWA Networks.

Spanco with its rich legacy and superior execution skills is well placed to garner a lions share in this increasing Telecom Infrastructure and Services segment. With all these engagements being long-term ones, there are also serious ramp-up plans, to cope with the shift from rs. 100 crore orders to rs. 4,000 crore projects.

Threats

Government Policy

Spanco’s technology Infrastructure business – is significantly dependent upon favourable government policies. It is the government’s thrust on areas like e-governance and e-enabling services like power and sectors like defence that has opened up significant opportunities for companies like Spanco. Similarly it is the government’s policies on increased competition in the telecom sector that has led to its explosive growth thereby opening up newer areas of opportunities.

While it is highly unlikely that any of these policies will be reversed, none the less it has to be noted that these opportunities exist because of favourable government policies.

Competition

While India is a well-acknowledged software superpower, traditionally most Indian It companies were concentrating on the opportunities available overseas. this allowed companies like Spanco to concentrate on the Indian market and build significant expertise and relationships.

however the global financial meltdown and the consequent reduction in growth rates, coupled with the exploding size of the domestic It space has meant that several large Indian It companies have now turned their attention to the domestic market. In addition, the size of the opportunity is also attracting several global players to set up shop in India and compete for domestic It projects – something they considered unviable till recently.

Spanco’s domain knowledge, cost competitiveness, niche specialization in the telecom system integration and network domain coupled with its strong pre-sales and post-sales capabilities and excellent project management skills means Spanco is well placed to address these challenges. the company has further strengthened its mIS and built superior cost and revenue mapping tools to ensure that the organization continues to be focused on profitability.

IIIa. rISKS aND CoNCerNS

1. Funding

risk: the Company predominantly works in Public Sector space. Size of opportunities in this space is significantly large and requires quick access to funds for faster execution. Although, the profitability and repeat opportunity of such projects is large, Spanco has to organize large amount of funds. We either go for Project based funding or use internal accruals for the same. Also, since we participate in several tenders, each tender requires either a Bank Guarantee or an emD.

risk mitigation: Spanco has always believed in having a judicious mix of small and medium term projects

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where the billing is on a time and material basis and the turnaround time is fast along with longer-term PPP projects. this ensures that funding requirements for any of the PPP projects are such as those that can be managed well.

In addition, the Company has funding lines from banks and financial institutions open and has sufficient funds for developing ongoing projects. As the Company is building long-term assets through PPP projects and can showcase future revenue visibility, it is confident of raising adequate funds for these projects.

further the Company is also exploring innovative models to manage funding requirement. one of these is where the company has adopted a franchisee model so that funds can be raised based on per centre deployment. At the same time, the Company may, if required, even float SPVs or may explore JVs for raising project specific funding.

2. Time and cost overruns

risk: Any significant time and cost overruns can impact the Company’s revenue projects.

risk mitigation: the Company has over a decade-plus of experience of working with the government sector to gauge ahead of time the areas that would be future roadblocks. Besides, all projects have inbuilt cost and time related clause in contracts.

3. Manpower capabilities

risk: As Spanco expands its operations across the country, enhancing manpower capabilities will be imperative to success.

risk mitigation: As the Company scales the growth curve, which is a part of its strategic planning, special initiatives are undertaken to ensure that adequate manpower resources, both at the pre-project and post-project levels are allocated for each project. Special dedicated teams for each domain already exist.

oUTlooK

Spanco’s growth is intrinsically linked with the growth of India. We believe that we are in the right sectors and need to execute well to create long term sustainability.

In addition, its strong management thrust, clear strategic direction, focused action, right manpower capabilities, pan-India presence, ability to manage and be ahead of technology changes and customize precise solutions for diverse clientele, within robust, systematic processes mean that company is well-poised to benefit from the emerging opportunities.

Across all our business lines viz. Government, Power, telecom Service providers, we see sustainable growth and will work hard to increase our share to gain maximum out of the spending in Infrastructure creation and services.

B. BUSINeSS ProCeSS oUTSoUrCING

IB. Industry Structure and Developments

the BPo industry in India has recorded explosive growth over the last decade and currently the sector clocks in annual revenues of about $ 11 billion in 2008. It has expanded its geographic reach, added new service lines and continued to acquire and service clients from around the world.

two mega-trends are expected to fuel this growth further. the world has witnessed an unprecedented economic volatility in the past 2 years. 2009-10 has seen the world economy slowly starting to get back on track and some markets have fully recovered from the onslaught. the overall consumer spending has improved and industries like retail and banks have reported stability which is a vey positive sign. this movement will aid in the growth of all businesses and thus outsourcing as a whole. the Indian BPo industry is ideally suited to benefit from this trend.

the second mega-trend is the emergence of the domestic BPo opportunity. As markets within India become ultra-competitive – telecom is a good example – Indian enterprises as well as government departments and Public Sector Units are discovering the importance of hiving off their non-core functions to outsourced providers in order to save costs. As India continues to clock 9% growth over the next decade or so, this trend is only going to intensify and the domestic opportunity to become bigger.

Spanco with its diversified range of BPo assets is well poised to benefit from both these mega trends. Spanco’s presence across geographies allows it to deliver GLoCAL (Global+Local) solutions. the integration of support function which includes hr, finance & Accounts and Quality, will not only reduce wastage in the system but also create synergistic benefit for the organization. on the other hand, operations team independent to geographies will be capable of delivering client focused solution resulting greater customer satisfaction, repeat business, increased business opportunities from new clients and sustainable growth of the organization.

the changing market dynamics in recent times has resulted in a consolidation period for the industry as a whole. organisations with larger portfolios of service offerings and the capacity to deliver high-end solutions will emerge as competitive. In keeping with this trend, Spanco has decided to energise its operations through an integrated structure, with a view to sustaining existing growth and seizing new opportunities.

Spanco BPo Ventures Limited is the integrated BPo entity which houses following businesses:

a) Domestic(India): operations are focused to address the outsourcing need of domestic clients for variety


17Spanco Limited

of application across various industry segments like telecom, BfSI, Government etc.

b) International (US and europe): operations are focused to address the outsourcing needs of USA and european customers where the calls are originated there but answered in India. Some of the key focuses business vertical here are Debt Collection, retail, Gaming etc.

c) Middle east operations: Is operated out of two centers in middle east Viz., Qatar & oman. this is focused to address the various outsourcing requirements of middle east population in local Arabic language.

d) african operations: Proposed presence in Nigeria catering to BfSI and telecom Segments within the African region. We anticipate to start operations by end of third Quarter fY11.

our Presence

India

• mumbai, Gurgaon, Kolkata, Dehradun, Coimbatore

Middle east

• Qatar, oman

africa (Will start operations by q3 FY11)

• Nigeria, tanzania,

europe and North america

• Poland, UK, USA

Background

India Domestic BPo Business

Spanco is a pioneer in identifying the potential of the domestic BPo business in India. the Company is present in the domestic BPo business segment since 2002 and has since grown to a market leadership position servicing top tSP’s, Banks and retailers. Spanco is the first Company to set up a Call Center for Government enterprises, such as BSNL and mtNL. It is to Spanco’s credit that it has been awarded (in consortium) a 10-year prestigious contract to manage call center services across the country for the Indian railways (Bharat BPo).

Spanco’s domestic India business is spread over 5 cities and has an infrastructure of more than 5000 seats and around 6500 employees. the Company’s business in the domestic space is carried out by Spanco BPo Services Ltd., which provides world-class end-to-end business outsourcing services to the Indian market.

International BPo Business

the International BPo space has seen a significant shift both in customer’s expectations and also in value offering by BPo providers in India. outsourcing business started

because of costs, gained foothold because of quality and will continue only if companies display operational excellence. It is no longer about cost arbitrage but more about talent arbitrage. the Company’s business in the International space is carried out by Spanco respondez BPo Pvt. Ltd.

respondez has been following this ethos right from its inception and has emerged as the most profitable entity in the entire Spanco family. International operations comprises of about 1200 employees; has a judicious mix of onshore and offshore operations. It has forged strong partnerships with its clients and has developed a deep understanding of their businesses and needs. this has resulted in several long-standing relationships with clients.

respondez has carved a niche for itself in the highly competitive collections domain and has become a vendor of choice for several fortune 500 banks and financials institutions across U.S. and U.K. It has forged the right partnerships which has helped it to gain larger share of the collections outsourcing pie. It has used both offshore and onsite mix to gain foothold and beat down any outsourcing backlash by creating jobs in U.K.

Middle east Domestic Business

Spanco enjoys a first mover advantage in the middle east North Africa (meNA) region specifically in Qatar and oman. the Company’s business in the middle east is carried out by Spanco GKS. Spanco GKS is a 51:49 joint venture with Golden Key Solutions LLC (the global, technology and telecom services division) of the Al-Bahja group, oman.

the Company has scaled the learning curve rapidly due to its past experience in the international and domestic outsourcing space. Spanco GKS is focused on the telecom, BfSI, media and entertainment segments and services renowned brands in the region. Spanco GKS has emerged as the largest outsourcing player in the middle east. the Company has made significant gains even in tough market conditions and acquired new clients and entered new domains.

africa Beckons

While Spanco has now made its presence felt across the world – the US, UK, middle east and within India – it continues to explore new opportunities. In the last few decades, the global growth story has shifted to Asian countries. Going forward, however, it is Africa that is expected to gain prominence. Africa is today being seen at the same tipping point that India was at in the 1990s. the industrial landscape in Africa is currently similar to that of India’s in the last decade and the BPo industry here is certainly expected to see phenomenal growth.

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to tap this potential, Spanco Limited has put a plan in place to take its service portfolio to Africa eyeing opportunities in both east and West Africa, Nigeria and tanzania, which have attracted maximum investments among African nations, are the first targets. Spanco is currently evaluating partnership options with local companies in sectors that span BfSI, telecom and It. this foray is expected to represent a major leap forward for Spanco. operations are expected to commence by third quarter of next fiscal.

IIB. opportunities and Threats

oPPorTUNITIeS

India Domestic BPo Business

Unlike the international BPo business, labour or cost arbitrage alone does not drive the domestic BPo market. It is strategic factors, such as the ability to scale rapidly, focus on core competencies, enhanced productivity and reduce time to market, that are driving the domestic demand. research indicates that the domestic BPo industry stands at an inflection point, with the growing scale of Indian buyers (organizations adopting the BPo services) as well as the emergence of significant vendors with greater capabilities.

Specific growth triggers for increasing outsourcing preference differ across verticals. While de-regulation, massive growth and entry of new players drive outsourcing amongst telecom operators, severe competition and widespread adoption of It are enabling growth in the banking sector. however, India’s steady economic and industrial growth, coupled with aggressive adoption of It by Indian companies will remain as compelling drivers for outsourcing across all segments. further, policy reform or de-regulation, especially in markets like banking, retail or government, could provide significant growth opportunities.

opportunity size and scope

• research firm Avendus has forecasted a CAGr of 35 percent for the Indian domestic BPo industry for the next four years and projected that the sector will be a $ 6 billion industry by 2012, up from $ 1.8 billion in 2008.

• There is huge untapped growth opportunity in thebanking, financial services and insurance (BfSI), telecom, media, retail and government verticals. telecom and the BfSI sectors currently account for over 80% of domestic BPo revenues. these sectors are expected to grow at double digit rates over the next two to three years.

• DomesticserviceproviderswouldmovetotierIIandIII cities to tap additional resources at low cost to serve domestic clients. Notwithstanding lower profit margins of 30-50% compared to the international

market, the net margins in the domestic BPo market are predicted to increase gradually from around 9% 2008 to 11-12% in 2012.

Spanco today with a portfolio of top telecom services providers, large multinational banks and largest retailers is amongst the top 5 Domestic BPo companies in India.

International BPo Business

the BPo market has existed for several years now in India and servicing the BPo market from India has evolved to the next level. Vendors now actively work on process improvement, quality-driven growth and are gaining Subject matter expertise (Sme) to be able to provide clients additional indirect but tangible services over and above what they pay for. this increases the confidence level of clients and helps in gaining expertise in multiple verticals. With the improvements in processes, technology and global communication via broadband, the stage appears to be set for rapid growth in BPo in India.

Indian BPo providers have witnessed maximum success servicing english-speaking requirements from North America and the UK. North America has been the most successful sales location for Indian BPo providers. Indian BPo industry is expected to continue its growth momentum due to its high acceptance and ability to deliver reliable services.

According to NASSCom, the offshore market opportunity has barely been penetrated, with market share of about $ 35-37 billion in fY 08 representing roughly 16% penetration of the current addressable market of $ 220 billion. With the improving scenario, IDC has forecast worldwide BPo industry growth at a 12% CAGr in 2008-2012.

Spanco’s International BPo operation focuses on select segments which continue to offer promising opportunities. the focus areas encompass Debt Collections (Accounts receivable management), Gaming (technical Support, Gaming tech Support for Console and PC), Internet retail and Direct response television (DrtV). the opportunities offered by these segments are as follows:


• Due to the slowdown, debt collections will continue to witness an upswing. the market size for debt collections in the U.S is estimated to touch $ 31.2 billion by 2011.

• The Interactive Entertainment i.e.Gaming Industry,is one of the fastest growing industries in the world today. the global gaming market was estimated at $ 19 billion in 2005, and is expected to increase to $ 42 billion by 2010, representing a CAGr of 17 % for the period 2005-10.

• Direct Response Television (DRTV) is a specific


19Spanco Limited

method of television advertising that involves presenting a product and requesting that customers respond via the product’s website or by dialing the desired call centre number.

• Withinternetretailshoppingbeingthenewshoppingdestination, it offers opportunities worth $ 124 billion.

Spanco’s International operations is highly profitable and caters to Fortune 500 customers. It has world class technology infrastructure and highly efficient operations. It is poised to the next level of growth and is expected to add more customers and experience about 30% growth in the next fiscal.

Middle east Domestic Business

over the past few years, the middle east has gained importance as a new offshore outsourcing hub. the region enjoys an edge with a favorable time zone that roughly straddles three of the world’s biggest economies -- North America, europe and Asia. thus, opportunities in the middle east are two-fold: opportunity for servicing clients in the middle east countries and also servicing global businesses. Spanco is focused on the first option.

Spanco’s middle east BPo operation is focused on the telecom, BfSI, media and entertainment segments.


• While the current global scenario has impacted operations in the middle east, the long-term opportunity potential remains strong.

• Processes like customer care in banking, telecom, travel, marketing of retail telecom products are slowly and steadily gaining acceptability, representing an attractive proposition.

Spanco GKS is the biggest BPo success stories within Middle east. It enjoys a virtual monopoly in the two countries it operates and has been bestowed by the coveted Insights awards for the largest and Best outsourcing Service Provider in the Middle east for 2 years in a row.

Threats

(i) residual effects of recession

While the world continues to debate on whether recession is over or not, we were not impacted initially and will not be worried about the after effects of the slowing worldwide economy. the Company is building a strong and unmatched value proposition for its business in specific, focused and niche segments.

Spanco has clients in sectors which have continued to grow even in recent times.

• Internet retail / DrtV. the poor economic conditions saw more people turn to the internet for their

purchasing and to get the best deals. further, retailers are also moving to the internet to cut down on staffing / location / inventory costs.

• Debt collections have seen a spurt in growth as more financial institutions rely on specialized agencies to deal with increased workloads.

• In India, the telecom industry is growing at a rapid pace. even in the middle east, core infrastructure sectors, including telecom, continue to grow at a brisk pace. telecom industry in the middle east is akin to the Indian telecom industry in the last decade

(ii) Growing competition from peers (domestic & international)

As the economy becomes more globally integrated, Indian business houses are witnessing fierce competition from global players, thus requiring Indian companies to deliver world-class levels of products and services. entry of international players has added a new twist to the home market story. Due to the rising value of the rupee vis-a-vis the dollar, and the problems involved with the manageability of complex operations in the night, coupled with the high attrition rate, the companies doing offshore customer interaction services are finding the domestic market lucrative. this emerging phenomenon has heralded a new wave of competition in the domestic sector.

Spanco enjoys an early mover advantage in the segment, as we have a headstart in working with various companies and industry verticals. We have been through the learning curve over the years and actively incorporate our learning and best practices for both existing and newer clients.

III B. risks and concerns

1. attrition

risk: Attrition is a known bane of the industry. Some reasons leading to attrition encompass: lack of promotion/ growth opportunity, higher salary expectations, aspirations of higher education, misguidance by the Company, non-conducive policies and procedures, lack of personal space, physical exertion, strained relationship with peers or managers, to name a few.

risk mitigation: Spanco believes that the only way to minimize the impact of this risk is to build a successful world-class organization with a challenging and fun environment for the employees; this in turn also helps attract quality personnel. At Spanco, incorporating focused hr practices in conjunction with Quality-driven processes enables it to attract, train, and retain talent. the average tenure of the staff and the management team in particular, is above the industry standard. this has also helped in building a stable team that has weathered every market trend over the last few years.

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2. Securing data, protecting privacy

risk: Data security and privacy protection is crucial.

risk mitigation: the Company has invested in the correct technology to build a secure environment. At the same time, Spanco undertakes adequate security measures before recruiting employees; invests in training (and monitoring) to maintain data security and ensures compliance with security policies and procedures.

the Company’s BPo centers comply with BS7799 / ISo 27001 standards. further, the Company is also working towards being an ISo 27001-certified company through its robust Information Security management System (ISmS). the ISmS team manages sensitive and vital corporate, customer information, reporting to the Board, thus ensuring confidentiality, integrity and availability.

3. rising costs

risk: Pricing pressure, both in the international and domestic segments, is high, making margins thin, especially in the short and medium term.

risk mitigation: Spanco, with its tight operational and cost efficiency aided by sophisticated mIS systems is equipped to tide this risk. the Company’s solutions combine domain knowledge, process management and technology to deliver increased operational efficiency, better customer management and improved quality through the ability to add significant value to clients in terms of functional excellence, on time and rapid transition, and transformational benefits over the lifecycle of the engagement.

IVB. Segment wise performance

BPo operations at Spanco

In the last fiscal, all BPo operations, from domestic to international and middle east operations, confidently surged ahead and have reported strong, positive revenue figures.

Domestic (Spanco BPo Services limited):

the total revenue for the 12-month period ended march 31, 2010 was rs. 7,026.98 Lacs. this is growth of 97.9 % over the previous year.

International (Spanco respondez BPo Pvt ltd. and Spanco europe ltd. both branded as ‘respondez’):

the total revenue for the 12-month period ended 31st march 2010 was rs. 8,744.24 Lacs an increase of 16.51% over previous fiscal.

Middle east (Spanco Golden Key Solutions; branded as Spanco GKS):

the total revenue for the 12-month period ended 31st December 2009 was rs. 5,310.19 Lacs. Spanco’s share in this revenue was rs. 2,189.69 Lacs.

VB. outlook

India is expected to remain the prime destination for outsourcing/offshoring. A study by NASSCom and everest India on the Indian BPo sector states that India is at the forefront of the rapidly evolving BPo market having established itself as a destination of choice. there is significant headroom in the addressable BPo opportunity for buyers and providers, and there are sizeable untapped areas across a wide spectrum of segments.

Going forward, the Indian BPo sector, at its current momentum, can reach around $ 30 billion in export revenues by 2012. furthermore, the domestic BPo market (in verticals such as, banking, retail, insurance, media, telecom and government) provides an additional $ 15-20 billion opportunity for the sector.

In the Domestic BPo section, the Company is now focused on the telecom sector, and by providing marketing support services to help increase the subscriber base and incremental sales of value-added services, is confident of strong growth, moving forward.

In the International operations (U.S. & U.K.), with its enviable position of being present in sectors which are enjoying increased demand, the Company is confident of continued growth.

In the middle east too, the Company has already acquired new clients and entered new segments and expects continued growth in the coming years.

VI a and B. Internal control systems

the Company is equipped with adequate internal control systems for its business processes which determine the efficiency of its operations, strengths in financial reporting and ensure compliance with applicable laws and regulations. the internal control systems are supplemented by extensive audits conducted by internal auditors. moreover, regular internal audits and checks ensure that responsibilities are executed effectively across the organisation. the Audit Committee of the Board of Directors reviews the adequacy and effectiveness of the internal control systems and also suggests improvements for strengthening the same.

VII a and B. human resources

Spanco recognizes the important role played by people in fuelling growth. the Company makes a conscious effort to nurture and empower its people as a part of its human resource strategy. the Company, through its participative work environment, skill development activities and promoting values of commitment, integrity, passion, seamlessness and speed, ensures a healthy relationship with its employees. the employee strength continues to grow substantially in line with the Company’s growth. As on march 31, 2010, Spanco Limited, along


21Spanco Limited

with its subsidiaries, has a staff strength of around 8000 members.

VIII a and B. Financials in brief 2009-10

Share capital

During the year under review, the Authorized Share Capital of the Company remained unchanged to rs. 5,000.00 Lacs divided into 47,000,000 (previous year 47,000,000) equity Shares of rs. 10/- each and 3,000,000 (previous year 3,000,000) redeemable Preference Shares of rs. 10/- each.

During the year under review, the Company had issued and allotted 7,415,000 fully paid equity shares of rs. 10/- per share at price of rs. 40/- per share on preferential basis to Promoters, fVCI and fIIs. Consequent to this the Paid-up Share Capital of the Company had increased from rs. 2,065.00 Lacs (divided into 20,650,000 equity shares of rs. 10/- per share) to rs. 2,806.50 Lacs (divided into 28,065,000 equity shares of rs. 10/- per share).

reserves and surplus

the Company’s reserves and surplus increased to rs. 41,957.31 Lacs as on march 31, 2010 as compared to rs. 30,676.05 Lacs as at march 31, 2009. As a result, the Company’s net worth increased to rs. 44,763.81 Lacs as on march 31, 2010 from rs. 32,741.05 Lacs as on march 31, 2009. the increase is mainly on account of the net profits earned during the year and the revaluation reserves of rs. 3,197.83 Lacs during the year 2009-10.

Secured loans

During the year under review, the Company’s secured loans were at rs. 5,8651.40 Lacs compared to rs. 56,086.57 Lacs in the previous year. the marginal increase is due to the working capital increase from rs. 30,924.91 Lacs as compared to last year to rs. 35,432.08 Lacs on account of growth in the business. further there was part repayment of debentures to the tune of rs. 3,000.00 Lacs during the year under review.

Unsecured loans

During the year under review, unsecured loans have increased to rs. 5,538.16 Lacs as compared to rs. 3,703.04 Lacs in the previous year. the increase is due to the certain equipments purchased on finance lease basis for the long term projects in hand.

Fixed assets

the gross block increased to rs. 19,499.78 Lacs as compared to rs. 12,472.73 Lacs in the previous year due to capitalization of project fixed assets and increase in Building value by rs. 3,322.53 Lacs on account of revaluation during the year under review.

Capital work-in-progress

During the year under review, the Capital WIP increased to rs.14,729.01 Lacs compared to rs. 10,046.08 Lacs in the previous year. this increase is mainly due to capital expenditure on various long term asset based projects carried out during the year.

Investments

During the year under review, the Company’s investments stood at rs. 10,188.38 Lacs compared to rs. 11,545.91 Lacs in the previous year. the decrease is due to the non-availing of shares of Abbey Infra Projects Ltd. for which share application money refund is due. No further investments has been made in any subsidiaries / joint ventures in 2009 – 10.

Inventory

the Company’s inventory stood at rs.19,051.83 Lacs as on march 31, 2010 as compared to rs. 7,060.01 Lacs in the previous year. the substantial increase was mainly due to the stock in hand for various milestone based projects where billing is pending based on the contract terms.

Sundry debtors

the sundry debtors of the Company increased to rs.61,593.30 Lacs from rs. 47,075.65 Lacs in the previous year. the debtor days have significantly come down from 258 days in 2008-09 to 190 days in the year under review. this is due to the strong collection efforts by the Company. the current debtor days correspond to the nature of the business, the Company operates into.

loans and advances

the Company’s loans and advances increased to rs. 48,624.36 Lacs as on march 31, 2010 from rs. 40,314.62 Lacs in the previous year due to increased business activities and Company’s lending to its subsidiaries for their growth.

Current liabilities

Spanco’s current liabilities increased to rs. 71,389.25 Lacs as on march 31, 2010 from rs. 42,532.08 Lacs in the previous year. this was mainly due to increase in purchases on credit from the vendors which also corresponds to the increased the inventory levels.

Net current assets

Alongwith the growth in the Company’s business, the net current assets have also increased to rs. 68,215.08 Lacs as on march 31, 2010 from rs. 60,179.93 Lacs in the previous year.

revenues

the total revenue of the Company stood at rs. 118,292.73 Lacs as compared to rs. 66,714.36 Lacs

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in the previous year thereby registering a growth of 77.31%. this is mostly due to the increase in revenues from Govt (including PSU) and telecom Service Provider verticals.

Personnel cost

Personnel cost of the Company stood at rs. 3,033.68 Lacs as compared to rs. 3,389.53 Lacs in the previous year. the decrease in the cost is due to cost reduction exercise taken by the Company by stream lining certain processes and bringing efficiencies with less manpower.

operating and other expenses

the operating and other expenses of the Company have decreased to rs. 3,443.34 Lacs as compared to rs. 8,782.05 Lacs in the previous year. the huge gap is mainly due to foreign exchange fluctuation loss and provision made for doubtful debts made in the corresponding previous year aggregating to rs. 4,746.81 Lacs. further the Company during the year under review has significantly reduced its cost overheads by various cost-cutting measures.

Interest and finance charges

the interest and finance charges of the Company have gone up to rs. 5,534.71 Lacs as compared to rs. 3,512.28 Lacs in the previous year mainly due to increase in the growth capital in the form of working capital loans of the Company for the year under review.

Depreciation

the depreciation for the year under review was rs. 1,731.04 Lacs as compared to rs. 1,208.41 Lacs in the previous year. this has increased due to increase in the gross block of fixed assets of the Company from rs. 12,472.73 Lacs to rs. 19,499.78 Lacs.

Profit before tax

Profit before tax of the Company stood at rs. 10,028.67 Lacs as compared to rs. 3,157.98 Lacs in the previous year. the substantial increase is due to the provision for foreign exchange fluctuation loss and provision made for doubtful debts made in the corresponding previous year and the growth in the current year coupled with cost reduction in other operating expenses and staff costs.

Post-tax profit

Profit after tax of the Company stood at rs. 6,187.28 Lacs as compared to rs. 1,960.77 Lacs in the previous year registering a growth of about 216% as compared to previous year.

Cautionary / Forward-looking Statement

In this annual report we have disclosed forward looking information to enable investors to comprehend our prospects and take informed investment decisions. this report and other statements, written and oral, that we periodically make contain forward looking statements that set out anticipated results based on the managements plan and assumptions. We have tried wherever possible to identify such statements by using words such as anticipate, estimate, expects, project, intends, plans, believes and words of similar substance in connection with any discussion of future performance. We cannot guarantee that these forward-looking statements will be realized, although we believe we have been prudent in assumptions. the achievement of results is subject to risks, uncertainties and even inaccurate assumptions. Should known or unknown risks or uncertainties materialise or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. readers should bear this in mind.


23Spanco Limited

CorPorAte GoVerNANCe rePort for the fINANCIAL YeAr 2009-10(As required under Clause 49 of the Listing Agreement entered into with the Stock Exchange)

1. CoMPaNY’S PhIloSoPhY oN CorPoraTe GoVerNaNCe Corporate Governance is not merely compliance – it involves leveraging the Company’s resources and aligning its activities

to consumer needs, shareholders’ benefits and employees’ growth, thereby delighting all its stakeholders while minimizing risk.

the Company believes that to succeed, an organization must maintain global standards of corporate conduct towards all its stakeholders. the Company believes that it is rewarding to be better managed and governed and to identify and align its activities with the national interest. to that end, we as a Company, have always focused on good corporate governance - a key driver of sustainable corporate growth and long-term value creation.

the Company has and will continue to focus its resources, strength and strategies in order to achieve this commitment, while upholding the core values of transparency, integrity, honesty and accountability that are fundamental to the Company.

our commitment to efficient company management, protection of stakeholders’ interests and the transparency of corporate communications is vital for gaining and retaining the trust of investors, partners, employees, customers and communities in which we work and do business.

2. BoarD oF DIreCTorS

Composition

the Company has a broad based Board and had a fair representation of executive, Non executive and Independent Directors during the year 2009-10. As on march 31, 2010, the Board of Directors of the Company consisted of eight Directors, three of whom are executive Directors. the remaining five directors are Non-executive Directors, with four being Independent Directors. the Directors possesses experience in various fields that encompasses telesystems, networking, communication, BPo call centre, accounts, finance and law.

Board Procedure

In advance of each meeting, the Board is provided with relevant information on various matters related to working of the Company. the agenda is prepared in consultation with the Chairman of the Board. the agenda for the meetings of the Board together with the appropriate supporting documents are circulated well in advance of the meeting. Among other matters Board discussions generally relate to Company’s business, financial results, review of the reports of the Audit Committee and compliance with their recommendation(s), suggestion(s), non compliance of any regulation, statutory or listing requirements etc.

except, mr. Kapil Puri, Chairman and managing Director and mr. Sanjay Kukreja, Non-executive Director, all other Directors are liable to retire by rotation

Board Meetings

the Board of Directors met nine (9) times during the financial year 2009-10 on April 23, 2009, June 6, 2009, July 10, 2009, July 31, 2009, August 31, 2009, october 30, 2009, December 14, 2009, January 27, 2010, march 29, 2010. As stipulated, the gap between two board meetings did not exceed four months.

the Board’s composition, attendance and their directorships/ committee membership, chairmanship in other companies as on march 31, 2010 is given below:

Name of Director Category attendance at Directorship in Companies, Membership /Chairmanship in Board Committees

Board Meeting

last aGM

other Directorships1

CommitteeMembership 2

CommitteeChairmanship 2

mr. Kapil Puri Promoter, Chairman and managing Director

9 Yes 4 - -

mr. Deepak Bhagchandaney

executive, Deputy managing Director

9 Yes 2 - -

mr. Adarsh Bagaria executive, Whole-time Director

9 Yes 3 - -

mr. ramesh Sharma 3 Non executive, Independent Director

3 No - - -

mr. Prakash Desai Non executive, Independent Director

4 No - - -

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Name of Director Category attendance at Directorship in Companies, Membership /Chairmanship in Board Committees

Board Meeting

last aGM

other Directorships1

CommitteeMembership 2

CommitteeChairmanship 2

mr. Deepak Vasdev 4 Non executive, Independent Director

3 No - - -

mr. Sanjay Kukreja Non executive Director 1 No 1 - -mr. Ketan Chokshi 5 Non executive,

Independent Director4 Yes 3 - 1

mr. Sunil Sarin 6 Non executive, Independent Director

Nil N.A - - -

mr. Subroto Chaudhury 7 Non executive, Independent Director

Nil N.A - - -

Notes:

1. Directorships in respect of private limited companies, section 25 companies and foreign companies have not been included.

2. Position in Audit Committee and Shareholders’ Grievance Committee are considered for the purpose. 3. resigned from directorship of the Company w.e.f. August 1, 2009. 4. resigned from directorship of the Company w.e.f. october 7, 2009. 5. resigned from directorship of the Company w.e.f. April 30, 2010. 6. Appointed as an Additional Director w. e. f. January 27, 2010. 7. Appointed as an Additional Director w. e. f. march 29, 2010.

Apart from above mr. Vijay Kumar Gupta has been appointed as an Additional Director of the Company w. e. f. April 12, 2010.

None of the Director is a member of more than 10 committees and chairman of more than 5 committees (as specified in clause 49) across all the Companies in which he is a Director.

3. aUDIT CoMMITTee

Composition and attendance:

the current Audit Committee consists of three Non-executive Independent Directors. the Company Secretary acted as secretary of the Audit Committee. the necessary quorum was present at all the meetings. During the year under review, the Audit Committee met six (6) times on April 21, 2009, July 10, 2009, July 31, 2009, August 31, 2009, october 30, 2009 and January 27, 2009. As stipulated, the gap between two committee meetings did not exceed four months.

Name Designation No. of Meeting held during their tenure attended

mr. Prakash Desai Chairman 6 5mr. ramesh Sharma 1 member 3 2mr. Deepak Vasdev 2 member 4 2mr. Ketan Chokshi 3 member 3 3mr. Deepak Bhagchandaney 4 member 1 1mr. Sunil Sarin 5 member - -mr. Subroto Chaudhury 5 member - -

Notes: 1. Upon resignation from directorship of the Company, ceased to be member of Audit Committee w.e.f. August 1, 2009 2. Upon resignation from directorship of the Company, ceased to be member of Audit Committee w.e.f. october 7, 2009. 3. Appointed as a member of Audit Committee w.e.f. July 31, 2009 and upon resignation from directorship of the Company,

ceased to be member of Audit Committee w.e.f. April 30, 2010. 4. Appointed as a member of Audit Committee w.e.f. october 30, 2009 and ceased to be a member of Audit Committee

w.e.f. may 4, 2010. 5. Appointed as members of Audit Committee w.e.f. may 4, 2010.


25Spanco Limited

Brief description of Terms of reference

the terms of reference of Audit Committee includes the matters specified in section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement and broadly comprise as under:

1. overview of the Company’s financial reporting process and disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible;

2. recommend the appointment/re-appointment /replacement or removal of the statutory auditor and the fixation of audit fees and payment for any other services to external auditors;

3. reviewing with the management, the quarterly/half yearly and annual financial statements before submission to the Board focusing primarily on:

a) Any change in the accounting policies and practices;

b) matters required to be included in the Directors’ responsibility Statement to be included in the Board’s report in terms of section 217(2AA) of the Companies Act, 1956;

c) major accounting entries involving estimates based on the exercise of judgment by management;

d) Significant adjustments made in the financial statements arising out of audit findings;

e) Compliance with accounting standards;

f) Compliance with listing and other legal requirements relating to financial statements;

g) Disclosure of any related party transactions;

h) Qualifications in the draft audit report;

4. reviewing the Company’s financial and risk management policies;

5. review with the management, the statement of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice and the report submitted by the monitoring agency about the utilization of proceeds of a public or rights issue and making appropriate recommendations to the Board to take up steps in this matter;

6. review with the management, performance of statutory and internal auditors, and adequacy of the internal control systems;

7. review of the adequacy of internal audit function including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit;

8. Discussion with internal auditors any significant findings and follow up there on;

9. reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board;

10. Discussion with statutory auditors about the scope of audit including observation of auditors (post-audit) to ascertain any area of concern;

11. Look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors;

12. reviewing the functioning of the Whistle Blower mechanism, in case the same is existing;

Powers of audit Committee

the Audit Committee has the following powers:

i) to investigate any activity within its terms of reference;

ii) to seek any information from any employee;

iii) to obtain outside legal or other professional advice;

iv) to secure attendance of outsiders with relevant expertise, if it considers necessary;

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4. reMUNeraTIoN CoMMITTee

Composition

the remuneration Committee has been constituted by the Board of Directors to review and / or to determine the remuneration package of the executive and Non executive Directors in accordance with the guidelines laid out by statute and the listing agreement with the Stock exchange. the Company Secretary acted as secretary of the remuneration Committee.

the present composition of remuneration Committee is as follows:

Name Designationmr. Prakash Desai Chairmanmr. ramesh Sharma1 member mr. Deepak Vasdev 2 member mr. Ketan Chokshi 3 membermr Sunil Sarin 4 membermr. Subroto Chaudhury 5 member

Notes:

1. Upon resignation from directorship of the Company, ceased to be member of remuneration Committee w.e.f. August 1, 2009.

2. Upon resignation from directorship of the Company, ceased to be member of remuneration Committee w.e.f. october 7, 2009

3. Appointed as a member of remuneration Committee w.e.f. July 31, 2009. Upon resignation from directorship of the Company, ceased to be member of remuneration Committee w.e.f. April 30, 2010.

4. Appointed as member of remuneration Committee w.e.f. January 27, 2010.

5. Appointed as member of remuneration Committee w.e.f. may 4, 2010.

remuneration Policy the remuneration policy of the Company is to remain competitive in the industry to attract and retain talent and appropriately

reward them. the Company while deciding the remuneration package takes into consideration the following:

a) remuneration package of the industry.

b) remuneration package of managerial talent of other industries.

c) employment scenario

Details of remuneration paid to executive/ Non executive Directors are as follows: (Amount in rs.)

Name Salary & Perquisites

Commission Sitting Fees Total

mr. Kapil Puri 32,433,282 Nil N.A 32,433,282mr. Deepak Bhagchandaney 5,074,990 Nil N.A 5,074,990mr. Adarsh Bagaria 5,257,271 Nil N.A 5,257,271mr. ramesh Sharma N.A 1,600,000 Nil 1,600,000mr. Prakash Desai N.A Nil 30,000 30,000mr. Ketan Chokshi N.A Nil 22,500 22,500mr. Deepak Vasdev N.A Nil 7,500 7,500

Number of equity Shares held by the Directors as on March 31, 2010

Name Designation No. of shares heldmr. Kapil Puri Chairman and managing Director 9,537,576mr. Deepak Bhagchandaney Deputy managing Director 223,771mr. Adarsh Bagaria Whole-time Director 43,767

• the Company does not have any Stock option Scheme.


27Spanco Limited

5. ShareholDerS’ / INVeSTorS’ GrIeVaNCe CoMMITTee

the Company has constituted a Shareholders’/Investors’ Grievance Committee to look into among other functions, redressing shareholders complaints like transfer of shares, non-receipt of Annual report, delay in transfer of shares, non-receipt of declared dividends etc.

During the financial year 2009-10, the Shareholders’/Investors’ Grievance Committee met four (4) times on April 15, 2009, July 15, 2009, october 15, 2009 and January 15, 2010. the Company Secretary acted as secretary of the Shareholders’/Investors’ Grievance Committee.

the present composition of Shareholders’/Investors’ Grievance Committee is as follows:

Name Designation No. of Meeting

held during their tenure attended

mr. ramesh Sharma 1 Chairman 2 2

mr. Kapil Puri member 4 4

mr. Adarsh Bagaria member 4 4

mr. Ketan Chokshi 2 member 2 -

mr. Prakash Desai 3 member - -

Notes:

1. Upon resignation from directorship of the Company, ceased to be a member of Shareholders’/Investors’ Grievance Committee w.e.f. August 1, 2009.

2. Appointed as a member of Shareholders’/Investors’ Grievance Committee w.e.f. on July 31, 2009. Upon resignation from directorship of the Company, ceased to be member of Shareholders’/Investors’ Grievance Committee w.e.f. April 30, 2010.

3. Appointed as a member of Shareholders’/Investors’ Grievance Committee w.e.f. may 4, 2010.

Status of investors’ Complaints

at the beginning of the year received during the year resolved during the year PendingNil 7 7 Nil

Name and designation of Compliance officer:

mr. Prem Iyer Company Secretary

6. GeNeral BoDY MeeTINGS

a) the details of last three Annual General meetings of the Company are as follows:

Date Time Meetings Venue of Meeting

September 29, 2009 9.30 a.m. Annual General meeting

mumbai Cricket Association, rG-2, G-Block, Bandra Kurla Complex, Bandra (east), mumbai-400051.

September 19, 2008 11.30 a.m. Annual General meeting

Walchand hirachand hall(Indian merchant Chamber)4th floor, Indian merchant Chamber marg, Churchgate, mumbai-400020.

September 29, 2007 3.30 p.m. Annual General meeting

Kilachand Conference hall(Indian merchant Chamber)2nd floor, Indian merchant Chamber marg, Churchgate, mumbai-400020.

28

b) Details of special resolutions passed in the previous three Annual General meetings are as under:

Date Purpose of Special resolutionSeptember 29, 2009 Alteration of Articles of Association.September 19, 2008 Change of the name of the Company from Spanco telesystems and Solutions Limited to

“Spanco Limited”.September 29, 2007 Alteration of Articles of Association.

c) the details of extra-ordinary General meetings held during 2009-10 is as follows:

Date & Time Purpose of Meeting Venue of Meetingmay 23, 2009, 11.30 a.m 1. Issue of 7,415,000 equity shares of the

Company at rs. 40/- per share (including premium of rs. 30/- per share) on preferential basis to Promoters, fVCI, fIIs.

2. Consent to invest by fIIs upto 49% in the share capital of the Company by purchase or acquisition from the market under the Portfolio Investment Scheme under femA or in any other manner.

m. C. Ghia hall, 2nd floorBhogilal hargovindas Building,18/20, K. Dubash marg, Kala Ghoda, mumbai- 400001.

d) No Postal Ballot was conducted during the year.

e) No Special resolution is proposed through the Postal Ballot at the ensuing Annual General meeting.

7. DISCloSUreS:

• related party transactions

During the year under review, besides the transactions reported in Notes to Accounts to the Balance Sheet as at march 31, 2010, there were no other related party transactions with its promoters, directors, management and subsidiaries that had a potential conflict of interest of the Company at large.

• Disclosure of accounting treatment

the Company has followed all relevant Accounting Standards while preparing the financial statements.

• Code of Conduct

the Board of Directors has adopted a Code of Conduct for the Board of Directors and Senior management Personnel of the Company. the said code of conduct is available on the Company’s website www.spancotele.com. All Board members and senior management personnel have affirmed compliance with the Code of Conduct. A declaration by the Chairman and managing Director of the Company affirming the compliance of the same in respect of the financial year ended on march 31, 2010 by the members of the Board and senior management personnel, as applicable to them, is also annexed separately in this Annual report.

• Proceeds from public issues, right issues, preferential issues etc.

During the financial year 2009-10, the Company had issued and allotted 7,415,000 equity shares at rs. 40/- per share (including premium of rs. 30 per share) on preferential allotment basis to Promoters, fVCI and fIIs and raised rs. 29.66 Crores. entire proceeds have been utilized for the purpose for which it was raised.

• Disclosure of risk Management

the Company has the risk assessment and mitigation procedures in place and the same has been laid before the Board members from time to time.

• Details of non-compliance.

No penalties and strictures have been imposed by SeBI or the Stock exchange or any Statutory Authorities on matters relating to capital markets during the last three years.


29Spanco Limited

• Ceo/CFo Certification

A Ceo/Cfo certification in terms of Clause 49(v) of the listing agreement, from mr. Kapil Puri, Chairman and managing Director and mr. Adarsh Bagaria, Whole time Director and heading finance function of the company, in respect of financial year 2009-10 was placed before the Board.

• Details of compliance with mandatory requirements and adoption of the non-mandatory requirements of this clause.

the Company has complied with all the mandatory requirements of this clause. As regards the non-mandatory requirements the extent has been stated in this report against each such item.

8. MeaNS oF CoMMUNICaTIoN

the Company’s quarterly / half yearly results are published in news papers viz. free Press Journal, economic times and Nav Shakti. half yearly reports are not being sent to each household of shareholders. these results are also displayed on the Company’s website: www.spancotele.com under investor section. Presentation made to Analyst is also displayed on the website of the Company.

management Discussion and Analysis is a part of this Annual report.

9. GeNeral INForMaTIoN For ShareholDerS

A Annual General meeting

Date and time September 24, 2010 & 9.30 A.m.

Venue mumbai Cricket Association rG-2, G-Block, Bandra Kurla Complex, Bandra (e), mumbai 400 051

B financial Calendar April 1, 2010 to march 31, 2011

results for : first quarter By second week of August, 2010

Second quarter By second week of November, 2010

third quarter By second week of february, 2011

fourth quarter By second week of may, 2011

C Date of Book Closure September 21, 2010 to September 24, 2010 (both days inclusive)

D Date of payment of dividend on or before october 23, 2010

e Listing on Stock exchanges Bombay Stock exchange Limited, mumbai(Listing fees, as applicable, has been paid in time)

f registered office B-22, Krishna BhuvanB. S. Deoshi marg, Deonarmumbai- 400 088

G registrar and transfer Agent Bigshare Services Pvt. Ltd.e-2 & 3, Ansa Industrial estate,Saki-Vihar road, Sakinaka.Andheri(e), mumbai - 400 072.tel: 91-22-2847 0652 | 40430200| 2847 0653 fax: 91-22-2847 5207 e-mail : [email protected]

h Stock Code 508976

I ISIN for NSDL and CDSL INe360B01026

30

J market Price data monthly high and low quotation of shares traded on Bombay Stock exchange Limited for the year 2009-10.

Month high Price (rs.)

low Price (rs.)

Apr-09 32.40 27.00may-09 61.90 29.25Jun-09 60.10 45.00Jul-09 48.00 37.40Aug-09 72.20 46.05Sep-09 71.80 59.95oct-09 64.40 51.00Nov-09 62.00 50.05Dec-09 62.90 50.40Jan-10 76.50 56.70feb-10 91.85 66.80mar-10 91.10 76.50

K Performance of the share price of the Company in comparison to the BSe Sensex: *

*Source: www.bseindia.com

L Shareholding Pattern as on march 31, 2010

a) Distribution of equity shareholding as on march 31, 2010:

No. of Shares No. of shareholders % of shareholders holding of Shares % of shareholding1-5,000 6,712 97.88 1,947,248 6.945,001 –10,000 53 0.77 401,239 1.4310,001-20,000 31 0.45 449,758 1.6020,001-30,000 16 0.23 410,691 1.4630,001-40,000 6 0.09 215,268 0.7740,001-50,000 8 0.12 372,232 1.3350,001-100,000 10 0.15 715,920 2.55100,001 and above 21 0.31 23,552,644 83.92total 6,857 100.00 28,065,000 100.00


31Spanco Limited

b) Category of equity shareholders as on march 31, 2010:

Sr. No Category of holders No. of Shares held % of Shares held1 Promoters and Promoter group 10,590,242 37.732 mutual funds/UtI 178,115 0.633 Banks/financial Institutions/ Insurance Companies (Central/ State

Govt. Institutions/ Non Govt. Institutions)- -

4 foreign Venture Capital funds 5,586,326 19.905 foreign Institutional Investors 3,077,482 10.976 Bodies Corporate 3,760,377 13.407 Individuals 3,546,513 12.648 Clearing member 24,637 0.099 NrI/oCBs 205,185 0.7310 trust 1,096,123 3.9111 foreign Corporate Bodies - - totAL 28,065,000 100.00

m Share Transfer System

All matters pertaining to transfer of shares are being handled by Bigshare Services Private Limited, the registrar and Share transfer Agents of the Company. the share transfer requests received are processed by them and a memorandum of transfer is sent to the Company for approval by the Committee. the average time taken for processing share transfer requests including dispatch of share certificates is 15 days, while it takes a minimum of 10-12 days for processing dematerialization requests. the Company regularly monitors and supervises the functioning of the systems so as to ensure that there are no delays or lapses in the systems.

Dematerialization of shares and liquidity:

the Company’s shares are compulsorily traded in dematerialized form and 94.98% shares are in dematerialized form as on march 31, 2010.

N outstanding aDr/ GDr/Warrants or any convertible instrument

No ADr/GDr/Warrants or any other convertible instruments are outstanding as on march 31, 2010.

o Investor Correspondence

Share transfer Agents for General queriesBigshare Services Pvt. Ltd.e-2 & 3, Ansa Industrial estate,Saki-Vihar road, Sakinaka. Andheri(e), mumbai - 400 072tel: 91-22-2847 0652 | 4043 0200| 2847 0653 fax: 91-22-2847 5207 e-mail : [email protected]

the Company SecretarySpanco LimitedB-22, Krishna Bhuvan, B. S. Deoshi marg, Deonar, mumbai - 400 088tel: 022-6797 5566fax: 022-2555 3535email : [email protected]

32

to the members ofSPANCo LImIteD

We have examined the records concerning Compliance of the conditions of Corporate Governance by SPANCo LImIteD for the year ended march 31, 2010 as stipulated in clause 49 of the Listing Agreement of the said company with the Bombay Stock exchange Limited.

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

In our opinion and based on the information and explanations given to us and the representations made by management and to the best of our knowledge and belief, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the Clause 49 of said listing agreement. the Chairman of Audit Committee of the Company did not attend the Annual General meeting held on September 29, 2009.

We state that in respect of investor grievances received, generally no investor grievances are pending for a period exceeding one month against the company as per records maintained by the Investors Grievance Committee.

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 MaNISh GhIa & aSSoCIaTeSCompany Secretaries

MaNISh l GhIaPartnermembership No.: fCS 6252C.P. No.:3531

mumbaiAugust 27, 2010

CertIfICAte oN CorPorAte GoVerNANCe

DeCLArAtIoN reGArDING ComPLIANCe of CoDe of CoNDUCtI, Kapil Puri, Chairman and managing Director of the Company, hereby declare that all the Directors and Senior management Personnel have confirmed compliance with Code of Conduct as adopted by the Company for the financial year ended march 31, 2010.


Gurgaon August 27, 2010


33Spanco Limited

AUDItorS’ rePort

To

The Members of Spanco limited

1. We have audited the attached Balance Sheet of Spanco Limited (‘the Company’) as at march 31, 2010 and also the Profit and Loss Account and the Cash flow Statement for the year ended on that date annexed thereto (all together referred to as the ‘financial statements’). these financial statements are the responsibility of the Company’s management. our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor’s report) order, 2003 (as amended) (‘the order’) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. further to our comments in the Annexure referred to above, we report that:

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

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

iii. the Balance Sheet, Profit and Loss Account and Cash flow Statement dealt with by this report are in agreement with the books of account;

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

v. on the basis of the written representations received from the directors, as on march 31, 2010, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on march 31,

2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

a) in the case of the Balance Sheet, of the state of affairs of the Company as at march 31, 2010;

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

c) in the case of the Cash flow Statement, of the cash flows for the year ended on that date.

for KhaNDelWal JaIN & Co.Chartered accountants Firm registration No. 105049W

(ShIVraTaN aGarWal)ParTNer Membership No. 104180

Place: mumbaiDate : August 27, 2010.

34

annexure referred to in paragraph 3 of our report of even date re: Spanco limited (‘the Company’)

(i) a) the Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Certain fixed assets were physically verified by the management during the year in accordance with a planned programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification.

c) During the year, the Company has disposed off a substantial part of the fixed asset leased to its subsidiary. Based on the information and explanation given by the management and on the basis of audit procedure performed by us, we are of the opinion that the sale of the said part of fixed assets has not affected the going concern status of the Company.

(ii) a) the management has conducted physical verification of inventory at reasonable intervals during the year.

b) the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) the Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification carried out during the year.

(iii) a) the Company has granted loan to one company covered in the register maintained under section 301 of the Companies Act, 1956. the maximum amount involved during the year was rs. 40,237,112 and the year- end balance is rs. Nil.

b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan is prima facie not prejudicial to the interest of the Company.

c) the loan granted was re-payable on demand. As informed, the Company has not demanded repayment of any such loan during the year, thus, there has been no default on the part of the party to whom the money has been lent.

d) the outstanding balance of the loan granted to Company covered in the register maintained under section 301 of the Companies Act, 1956 is Nil and therefore the question of overdue does not arise.

e) the Company has taken interest free loan from one company covered in the register maintained under section 301 of the Companies Act, 1956. the

maximum amount involved during the year was rs. 48,18,602 and the year- end balance is rs. 4,818,602.

f) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loan are prima facie not prejudicial to the interest of the Company.

g) the loan taken is repayable on demand. As informed, the lender has not demanded repayment of such loan during the year, thus, there has been no default on the part of the Company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(v) a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under section 301 have been so entered.

b) According to the information and explanation provided by the management, we are of the opinion that the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 aggregating during the year to 5.00 lacs (rupees five Lacs only) or more in respect of a party has been made at price which is reasonable having regard to the prevailing market prices at the relevant time.

(vi) the Company has not accepted any deposits from the public.

(vii) the Company has an internal audit system, the scope and coverage of which, in our opinion, requires to be enlarged to be commensurate with the size and nature of its business.

(viii) to the best of our knowledge and as explained, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 for the products of the Company.

(ix) a) Undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it have generally been regularly deposited with


35Spanco Limited

the appropriate authorities. Delays in few cases are observed in the deposit of income tax, sales tax and service tax.

b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

c) According to the information and explanation given to us, there are no dues of income tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute.

(x) the Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has defaulted in repayment of dues (principal and interest) to financial institutions, banks or debenture holders. The summary of the same is as given below;

Name of the financial institution, bank or debenture holder

Maximum amount of

default (rs.)

Maximum period

of default(in days)

LIC mutual fund 52,723,288 59hDfC Bank 23,617,834 65Allahabad Bank 100,000,000 56State Bank of hyderabad 2,800,000 55hSBC Bank 15,000,000 88ICICI Bank 20,500,155 51Lakshmi Vilas Bank 3,325,847 24SIDBI 30,884,000 53

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. therefore, the provisions of clause 4(xiii) of the order are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the order are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has given guarantees for loans taken by others from bank or financial institutions, the terms and conditions whereof in our opinion are not prima-facie prejudicial to the interest of the Company.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) the Company has made preferential allotment of shares to parties covered in the register maintained under section 301 of the Companies Act, 1956. the price at which shares have been issued is not prejudicial to the interest of the Company.

(xix) the Company has not issued any debentures during the year under audit. the Company has created security or charge in respect of debentures issued in previous years.

(xx) During the year the Company has not raised money by way of public issue. however the Company has issued shares on preferential basis and the proceeds are utilized for the purpose for which the money has been raised.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

for KhaNDelWal JaIN & Co.Chartered accountants Firm registration No. 105049W

(ShIVraTaN aGarWal)ParTNer Membership No. 104180

Place: mumbaiDate : August 27, 2010.

36

Balance Sheet aS at March 31, 2010

(Amount in Rupees)

Schedule No.

March 31, 2010

March 31, 2009

SOURCES OF FUNDS Shareholders' Funds Share Capital A 280,650,000 206,500,000 Reserves and Surplus B 4,195,730,609 3,067,604,963

4,476,380,609 3,274,104,963 Loan Funds Secured Loans C 5,865,139,775 5,608,656,913 Unsecured Loans D 553,815,592 370,304,122

6,418,955,367 5,978,961,035 Deferred Tax Liability (Net) 39,629,491 - (Refer Note 13 to Schedule "W")

TOTAL 10,934,965,467 9,253,065,998 APPLICATION OF FUNDS Fixed Assets E Gross Block 1,949,978,099 1,247,273,234 Less : Accumulated Depreciation and Amortisation 327,817,242 261,154,388 Net Block 1,622,160,857 986,118,846 Capital Work-in-Progress including Capital Advances (Refer Note 2 (c), 6 and 7 to Schedule "W")

1,472,901,060 1,004,607,606

Investments F 1,018,838,177 1,154,591,204 Foreign Currency Monetary Item Translation Difference Account G (442,812) 65,243,500 Deferred Tax Asset (Net) - 24,511,519 Current Assets, Loans and Advances Inventories H 1,905,183,338 706,000,938 Sundry Debtors I 6,159,329,688 4,707,565,314 Cash and Bank Balances J 552,572,576 462,957,683 Other Current Assets K 555,096,765 390,799,115 Loans and Advances L 4,862,436,093 4,031,462,277

(A) 14,034,618,460 10,298,785,327 Less : Current Liabilities and Provisions Current Liabilities M 7,138,925,334 4,253,207,628 Provisions N 74,184,941 27,584,376

(B) 7,213,110,275 4,280,792,004 Net Current Assets (A - B) 6,821,508,185 6,017,993,323

TOTAL 10,934,965,467 9,253,065,998 Notes to Accounts W

The schedules referred to above and notes to accounts form an integral part of the Balance Sheet.

As per our report of even date For and on behalf of the Board of Directors of Spanco limitedFor Khandelwal Jain & co. Chartered Accountants

Shivratan agarwal Kapil Puri Deepak BhagchandaneyPartner Chairman and Managing Director Deputy Managing Director Membership No. 104180

Prem Iyer Company Secretary

Place : Mumbai Place : Gurgaon Date : August 27, 2010 Date : August 27, 2010


37Spanco Limited

ProFIt anD loSS account For the year enDeD March 31, 2010

(Amount in Rupees)

Schedule No.

March 31,2010

March 31,2009

INCOME Sales and Services O 11,829,273,374 6,671,436,375 Other Income P 268,020,574 122,435,100 Increase / (Decrease) in Inventories Q 1,163,273,665 198,614,550

TOTAL 13,260,567,613 6,992,486,025 EXPENDITURE Raw Materials Consumed R 1,613,800 18,134,485 Purchase and Direct Expenses S 10,881,809,235 4,969,326,177 Personnel Cost T 303,368,031 338,952,886 Operating and Other Expenses U 344,334,375 878,204,851 Interest and Finance Expense / Income (Net) V 553,471,329 351,228,048 Depreciation and Amortisation E & F 185,575,062 Less : Transferred from Revaluation Reserve 12,470,880 173,104,182 120,841,232 (Refer Note 8 to Schedule "W")

TOTAL 12,257,700,952 6,676,687,679 Profit Before Tax 1,002,866,661 315,798,346 Less : Provision for Tax Current Tax 287,830,000 143,500,000 Deferred Tax 64,141,010 (36,729,835)Fringe Benefit Tax - 5,960,000 Wealth Tax 180,000 190,000 Total Tax Expense 352,151,010 112,920,165 Profit After Tax But Before Adjustment of earlier year 650,715,651 202,878,181 Less : Taxation of earlier year 31,987,862 6,800,943 Profit After Tax 618,727,789 196,077,238 Balance in Profit and Loss Account brought forward 1,390,319 421,730,404 Profit Available for Appropriation 620,118,108 617,807,642 Appropriations : Proposed Dividend 28,065,000 14,032,500 Tax on Proposed Dividend 4,769,647 2,384,823 Transfer to Debenture Redemption Reserve 85,000,000 600,000,000

117,834,647 616,417,323 Surplus carried to Balance Sheet 502,283,461 1,390,319 Earnings per share - Basic and Diluted (Refer Note 12 to Schedule "W") - Basic [Nominal value of shares Rs. 10 each (P. Y. Rs. 10)] 23.15 9.50 - Diluted [Nominal value of shares Rs. 10 each (P. Y. Rs. 10)] 23.15 9.50 Notes to Accounts W

The schedules referred to above and notes to accounts form an integral part of the Profit & Loss Account.





38

caSh Flow StateMent For the year enDeD March 31, 2010

(Amount in Rupees)

For the Year ended March 31, 2010


CASH FLOW FROM OPERATING ACTIVITIESNet Profit After Taxation and Extraordinary Items 618,727,789 196,077,238

Adjustments for :

Provision of Tax (earlier year) 31,987,862 6,800,943

Depreciation / Amortisation 173,104,182 120,841,232

Provision for Income Tax 287,830,000 143,500,000

Provision for Deferred Tax 64,141,010 (36,729,835)

Provision for Fringe Benefit Tax - 5,960,000

Provision for Wealth Tax 180,000 190,000

Interest Income (264,777,215) (322,225,414)

Loss / (Profit) on Sale of Assets (17,096,664) 1,035,073

Interest and Finance Expense 818,248,543 673,453,461

Loss / (Profit) on Sale of Investment / Gain on Current Investment (Net)

(268,000) (25,673,000)

Amortisation of Foreign Exchange Loss 24,699,683 32,621,749

Amortisation of Softwares Developed Cost 42,499,862 17,472,481

Sundry Balances Written Off (Net) 22,606,780 (1,821,032)

Provision for Doubtful Debts / (Written Back) (38,428,200) 271,607,835

1,144,727,843 887,033,493

Operating Profit Before Working Capital Change 1,763,455,632 1,083,110,731

Increase In Margin Money kept against Letter of Credit

278,120,307 (62,254,626)

(Increase) / Decrease in Inventories (1,241,682,262) (273,732,239)

(Increase) / Decrease in Loans and Advances (992,275,184) (1,300,762,824)

(Increase) / Decrease in Other Current Assets (244,088,366) (307,397,115)

(Increase) / Decrease in Sundry Debtors (1,421,563,643) (1,341,418,616)

(Decrease) / Increase in Current Liabilities and Provisions 2,908,973,182 2,393,579,910

(712,515,966) (891,985,510)

Cash Generated from Operations 1,050,939,666 191,125,221 Income Tax Paid Net of Refund (142,857,958) (296,810,134)Net Cash (used) / Generated from Operating Activities 908,081,708 (105,684,913)

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets including Capital Work-in-Progress (1,181,790,027) (825,083,458)

Purchase of Investments (4,555,000) (613,043,383)

Sale of Investments 135,361,054 10,000,000

Interest Received 344,567,931 299,228,071

Proceeds from Sale of Fixed Assets 422,042,455 2,119,199

Net Cash (used) / Generated in Investing Activities (284,373,587) (1,126,779,571)


39Spanco Limited

caSh Flow StateMent For the year enDeD March 31, 2010 (contd.



CASH FLOW FROM FINANCING ACTIVITIES

Dividend paid during the year (16,417,323) (48,318,935)

Issue of Shares 296,600,000 -

Long Term Secured Loans Repaid (1,025,523,293) (1,065,989,283)

Long Term Secured Loans Received 832,765,741 2,131,081,113

Increase / (Decrease) in Short Term Secured Loans 450,716,827 1,264,806,118

Decrease in Balance of Escrow Account 663 3,916

Increase / (Decrease) in Short Term Unsecured Loans 38,241,833 (500,877,321)

Interest Paid (832,356,707) (618,548,141)

Net Cash (used) / Generated in Financing Activities (255,972,259) 1,162,157,467

Net Increase / (Decrease) in Cash and Cash Equivalents 367,735,862 (70,307,017)

Cash and Equivalents at beginning of the period 83,359,458 153,666,475

Cash and Equivalents at end of the period 451,095,320 83,359,458

Components of Cash and Cash Equivalents

Cash on Hand 814,611 687,046

Cheques on Hand 44,199,986 -

Cash with Banks

- in Current Accounts 389,806,716 83,099,067

- Margin Money in Fixed Deposits 101,041,263 379,161,570

- Other Fixed Deposits 16,710,000 10,000

Cash and Bank Balance as per Balance sheet 552,572,576 462,957,683

Less : Balance kept in Escrow Account 435,993 436,655

Less : Margin Money in Fixed Deposits 101,041,263 379,161,570

Cash and Equivalents at end of the period 451,095,320 83,359,458

Note: Cash and cash equivalents include balance in Unpaid Dividend account of Rs. 380,328 (P.Y. Rs. 300,382) which is not available for use.





(Amount in Rupees)

40

ScheDuleS annexeD to anD ForMIng Part oF Balance Sheet aS on March 31, 2010

(Amount in Rupees)

March 31, 2010

March 31, 2009

Schedule A : Share Capital

Authorised

47,000,000 (P.Y. 47,000,000) Equity Shares of Rs. 10/- each and

3,000,000 (P.Y. 3,000,000) Redeemable Preference Shares of Rs. 10/- each 500,000,000 500,000,000

Issued, Subscribed and Paid up

28,065,000 (P.Y. 20,650,000) Equity Shares of Rs 10/- each fully paid up 280,650,000 206,500,000

280,650,000 206,500,000

Schedule B : Reserves and Surplus

Investment Allowance Reserve (utilised) :

Opening Balance 32,302 32,302

Less : Transfer to General Reserve 32,302 -

Closing Balance - 32,302

Capital Reserve :

Opening Balance 60,586,500 -

Add : Share Warrants forfeited - 60,586,500

Closing Balance 60,586,500 60,586,500

Securities Premium Account :

Opening Balance 1,771,963,645 1,771,963,645

Add : On issue of Equity Shares 222,450,000 -

Closing Balance 1,994,413,645 1,771,963,645

General Reserve :

Opening Balance 895,995,197 398,774,016

Less :

a) Exchange differences of earlier years transferred to the "Foreign Currency - 3,945,143

Monetary Item Translation Difference Account"

Add :

a) Exchange differences of earlier year transferred to Capital Work-in-Progress - 1,166,324

b) Transfer from Debenture Redemption Reserve 150,000,000 500,000,000

c) Transfer from Investment Allowance Reserve (utilised) 32,302 -

Closing Balance 1,046,027,499 895,995,197

Debenture Redemption Reserve :

Opening Balance 337,637,000 237,637,000

Add : Transfer from Profit & Loss Account 85,000,000 600,000,000

Less : Transfer to General Reserve 150,000,000 500,000,000

Closing Balance (Refer Note 4 to Schedule “W”)

272,637,000 337,637,000


41Spanco Limited


(Amount in Rupees)

March 31, 2010

March 31, 2009

Revaluation Reserve :

Opening Balance - -

Addition during the year 332,253,384 -

Deduction on Account of Depreciation on Revalued Amount 12,470,880 -

Closing Balance (Refer Note 8 to Schedule “W”)

319,782,504 -

[Cumulative amount withdrawn Rs. 12,470,880 (P.Y. Nil)]

Profit and Loss Account 502,283,461 1,390,319

4,195,730,609 3,067,604,963

Schedule C : Secured Loans

Redeemable Non Convertible Debentures 1,120,000,000 1,420,000,000

200,000 (P.Y. 500,000) Debentures of Rs. 1,000 /- each (P.Y. Rs.1,000 /- each)

20 (P.Y. 20) Debentures of Rs. 1,000,000 /- each (P.Y. Rs. 1,000,000 /- each)



(Refer Note 3 (a) & 4 to Schedule "W")

1,120,000,000 1,420,000,000

Term Loans :

From Banks

- Rupee Loan 961,831,514 483,872,478

- Foreign Currency Loan (Refer Note 3 (b) (i) to Schedule “W”)

176,805,197 602,915,844

From Others (Refer Note 3 (b) (ii) to Schedule “W”)

56,997,174 -

Vehicle Loan 6,298,301 9,377,830

(Refer Note 3 (c) to Schedule "W") 1,201,932,186 1,096,166,152

Working Capital Loans from Banks :

- Rupee Loan 3,472,897,017 3,007,015,172

- Foreign Currency Loan 70,310,572 85,475,589

(Refer Note 3 (d) to Schedule "W") 3,543,207,589 3,092,490,761

5,865,139,775 5,608,656,913

Schedule D : Unsecured Loans

Short Term Loan from Banks 138,241,833 100,000,000

Finance Lease Obligation 415,573,759 270,304,123

Repayable within one year Rs. 224,604,871 (P.Y. Rs. 126,169,591)

Personal Guarantee given by a Director of the Company Rs. 138,241,779 (P.Y. Rs. 100,000,000)

553,815,592 370,304,123

42


Sch

edul

e E

: Fi

xed

Ass

ets

(Am

ount

in R

upee

s) A

sset

Des

crip

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Gro

ss B

lock

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epre

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/ Am

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atio

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artic

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s at

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durin

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ar

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the

year

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, 201

0 A

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46

Not

es :

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Pla

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ass

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for

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s. 8

30,8

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P.Y.

Rs.

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216,

600)

Net

Boo

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lue

Rs.

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,952

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(P.

Y. R

s. 5

6,87

0,95

6)

2)

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:

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Net

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(P.

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Add

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to B

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incl

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:

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Ass

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Gro

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men

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N

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2,9

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and

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ures

N

il 2

5,99

5,38

6 N

il 2

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N

il 2

3,64

9,24

9

Leas

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prov

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Nil

27,

141,

588

Nil

2,7

44,3

16

Nil

24,

397,

272

Elec

trica

l Ins

talla

tion

Nil

18,

928,

610

Nil

1,3

12,8

78

Nil

17,

615,

732

Softw

ares

N

il 2

2,68

5,74

7 N

il 2

,224

,614

N

il 2

0,46

1,13

3

Gra

nd T

otal

3

0,28

9,80

0 4

95,3

90,6

58

4,3

82,2

51

49,

782,

076

25,

907,

549

445

,608

,582


43Spanco Limited


(Amount in Rupees)

March 31, 2010

March 31, 2009

Schedule F : InvestmentsLong Term Investments (at cost) :A Investment Properties:

Gross Block 116,300,129 116,300,129 Opening Accumulated Depreciation 12,000,659 6,511,214 Add : Depreciation for the year 5,214,973 5,489,445 Less : Accumulated Depreciation 17,215,632 12,000,659 Net Block [Mortgaged with HDFC Bank]

99,084,497 104,299,470

B Unquoted - Trade Investments :In Joint Ventures :Bharat BPO Services Limited5,000,000 (P.Y. 5,000,000) equity shares of Rs.10/- each, fully paid up 50,000,000 50,000,000 Share application money pending allotment 198,483,980 198,483,980 In Subsidiary Companies :Spanco Limited, Dubai UAE7,294,711 (P.Y. 7,294,711) equity shares of 1 AED each, fully paid up 85,443,383 85,443,383 Share application money pending allotment 151,757,690 147,202,690 Spanco Europe Limited, U.K.1,200,000 (P.Y. 1,200,000) equity shares of 1 GBP each, fully paid up 176,822,896 176,822,896 [Pledged with ICICI Bank Term Loan]Spanco (S) Pte., Limited, Singapore156,508 (P.Y. 156,508) equity shares of 1 SGD each, fully paid up 22,112,110 22,112,110 Global Respondez Inc., U.S.A.2,040 (P.Y. 2,040) equity shares (without par value) fully paid up 240,850 240,850 Skandsoft Technologies Private Limited10,304 (P.Y. 10,304) equity shares of Rs.10/- each, fully paid up 56,252,771 56,252,771 Spanco Global Solutions Private Limited5,010,000 (P.Y. 5,010,000) equity shares of Rs.10/- each, fully paid up 50,100,000 50,100,000 Spanco Great IT Private Limited3,010,000 (P.Y. 3,010,000) equity shares of Rs.10/- each, fully paid up 120,100,000 120,100,000 Spanco BPO Ventures Limited50,000 (P.Y. 50,000) equity shares of Rs.10/- each, fully paid up 500,000 500,000 Spanco Respondez Services Limited.Nil (P.Y. 50,000) equity shares of Rs.10/- each, fully paid up - 500,000 Spanco International Pte., Limited, SingaporeNil (P.Y. 2) equity shares of SGD 1 each, fully paid up - 54 New Delhi Teletech Private Limited10,000 (P.Y. 10,000) equity shares of Rs.10/- each, fully paid up 100,000 100,000 Spanco CSC Limited (Formerly known as New Delhi Tele Ventures Limited)50,000 (P.Y. 50,000) equity shares of Rs.10/- each, fully paid up 500,000 500,000

March 31, 2010

March 31, 2009

44


Schedule G: Foreign Currency Monetary Item Translation Difference Account

Opening Balance 65,243,500 -

Add : Exchange Loss / (Profit) arising during the year (40,986,629) 97,865,249

(Refer Note 2(l)(iii) to Schedule "W")

Less : Amortised during the year 24,699,683 32,621,749

Closing Balance (442,812) 65,243,500

Schedule H : Inventories (at lower of cost and net realisable value) Raw Materials - 1,093,029

Finished Goods :

- Traded Goods 1,578,142,881 386,331,404

- Manufactured Goods - 1,945,576

- Goods in Bonded Warehouse 49,627,799 49,627,799

Softwares :

- Softwares Developed 138,182,267 136,383,963

- Softwares Under Development 65,621,129 25,435,067

Work-in-progress 63,125,609 89,717,845

Consumables 10,483,653 15,466,255

1,905,183,338 706,000,938

(Amount in Rupees)

March 31, 2010

March 31, 2009

Spanco Infratel Private Limited10,000 (P.Y. 10,000) equity shares of Rs.10/- each , fully paid up 100,000 100,000 Spanco IT Infrastructure Private Limited

10,000 (P.Y. 10,000) equity shares of Rs.10/- each , fully paid up 100,000 100,000 Others :Global Respondez Services Limited 614,000 (P.Y. 614,000) equity shares of Rs.10/- each, fully paid up 6,140,000 6,140,000 Abbey Infraproject Private LimitedShare application money pending allotment - 135,000,000

Total Unquoted - Trade Investments : 918,753,680 1,049,698,734 Current Investments (at lower of cost and market value)A Unquoted - Non - Trade Investment :

Mutual FundsUTI India Lifestyle Fund (100,000 units of Rs.10 each) 1,000,000 593,000 (P.Y. 100,000 units of Rs.10 each)

Total Unquoted - Non - Trade Investment : 1,000,000 593,000 TOTAL INVESTMENTS : 1,018,838,177 1,154,591,204


45Spanco Limited


(Amount in Rupees)

March 31, 2010

March 31, 2009

Schedule I : Sundry Debtors (Refer Note 10, 18 and 19 to Schedule "W") Debts Outstanding for a Period Exceeding Six Months Unsecured, Considered Good 1,873,913,121 2,080,336,255 Unsecured, Considered Doubtful - 270,085,035 Others, Unsecured Considered Good 4,285,416,567 2,627,229,059

6,159,329,688 4,977,650,349 Less: Provision for Doubtful Debts - 270,085,035

6,159,329,688 4,707,565,314

Schedule J : Cash and Bank Balances Cash on Hand 814,611 687,046 Cheques on Hand 44,199,986 - Balances with Scheduled Banks : - in Current Accounts* 389,806,716 83,099,067 - as Margin Money in Fixed Deposits 101,041,263 379,161,570 - Other Fixed Deposits 16,710,000 10,000

552,572,576 462,957,683 * includes balance in Unclaimed Dividend account Rs. 380,328 (P.Y. Rs. 300,382) and balance in Escrow Account Rs. 435,993 (P.Y. Rs. 436,655)

Schedule K : Other Current Assets

Unbilled Revenue 13,365,320 1,701,698 Receivable against Sale of Investments 250,970,000 250,970,000 Interest accrued on Fixed Deposits 4,200,675 67,902,000 Receivable against Lease Rent (from Subsidiary Company) (Refer Note 10 and 20 to Schedule "W")

151,560,770 70,225,417

Share Application Money receivable 135,000,000 - 555,096,765 390,799,115

Schedule L : Loans and Advances (Refer Note 10, 18 and 21 to Schedule "W") Unsecured, Considered Good : Amount due from Subsidiaries 2,442,625,625 793,093,191 Amount due from Other Company under the Same Management - 40,237,112 Amount due from Joint Ventures 4,513,993 5,675,032 Advances recoverable in cash or in kind or for the value to be received 2,289,852,107 2,775,136,154 Advance Income Tax (Net) - 150,055,033 Fringe Benefit Tax (Net of provision for taxation C.Y. Rs Nil, P.Y. Rs. 5,960,000) 1,370,662 1,216,225 Inter Corporate Deposits 41,300,354 165,321,748 Other Deposits 82,773,352 100,727,782 Unsecured, Considered Doubtful :Advances recoverable in cash or in kind or for the value to be received - 1,522,800

4,862,436,093 4,032,985,077 Less: Provision for Doubtful Advance - 1,522,800

4,862,436,093 4,031,462,277

46


(Amount in Rupees)March 31,

2010March 31,

2009Schedule M : Current Liabilities

Acceptances

- For Capital Goods 1,017,456,789 871,404,330

- For Traded Goods 1,463,625,378 1,150,826,077

Sundry Creditors : (Refer Note 18 to Schedule "W") (a) Total outstanding dues of Micro and Small Enterprises* - -

(b) Total outstanding dues other than Micro and Small Enterprises :

For Capital Goods 48,857,901 85,637,187

For Traded Goods 3,512,377,835 1,116,572,081

For Traded Goods (Escrow) 206,310,280 306,787,927

For Services 143,851,037 130,383,119

Advances from Customers 137,980,354 9,751,169

Amount due to Subsidiary (Refer Note 10 to Schedule "W")

7,344,245 359,939

Amount due to other company under the same management (Refer Note 10 to Schedule "W")

4,818,602 4,087,769

Investor Education and Protection Fund shall be Credited by the following

amounts (as and when due) :

- Unclaimed share application money received for allotment of shares and due for refund 435,993 436,655

- Unclaimed dividend 380,328 300,382

Other Liabilities** 523,612,689 490,678,926

Interest accrued but not due on loans 71,873,903 85,982,067

7,138,925,334 4,253,207,628

* The Company does not have any dues payable to any Micro and Small Enterprises as at the year end. The identification of Micro and Small Enterprises is based on management's knowledge of their status. The Company has not received any intimation from suppliers regarding their status under the MSMED Act, 2006. Hence, disclosures, if any, relating to amounts unpaid as at the year end, together with interest paid / payable as required under the said Act have not been given.

** Other Liabilities include Security Deposits amounting to Rs. 88,034,931 which are repayable after one year.

Schedule N : Provisions Provision for Income Tax (Net) 27,233,960 - Provision for Gratuity 2,618,073 3,771,922 Provision for Compensated Leave Balances 11,277,913 7,180,131 Provision for Wealth Tax 220,348 215,000 Proposed Dividend 28,065,000 14,032,500 Tax on Proposed Dividend 4,769,647 2,384,823

74,184,941 27,584,376


47Spanco Limited

ScheDuleS annexeD to anD ForMIng Part oF ProFIt anD loSS account For the year enDeD March 31, 2010

(Amount in Rupees)

March 31,2010

March 31,2009

Schedule O : Sales and Services

Sale of Manufactured Goods 2,506,061 25,561,019

Less : Excise Duty (210,161) (3,335,887)

Sale - Network Integration / Other Traded Goods 10,737,177,524 4,542,535,162

Service Income - Network Integration and Others 370,566,324 435,092,048

Sale of Developed Softwares / Services 416,722,618 1,090,656,500

Service Income - Network Engineering Services 302,511,008 580,927,533

11,829,273,374 6,671,436,375

Schedule P : Other Income

Foreign Exchange Fluctuation (Net) 55,635,354 -

Rent Income :

On Lease of Properties / Premises [Tax Deducted at Source Rs. 12,660,552 (P.Y. Rs. 7,439,406)]

75,984,612 33,999,512

On Lease of Assets [Tax Deducted at Source Rs. 6,359,679 (P.Y. Rs. 6,846,041)] 78,615,389 58,100,000

Sundry Balance Written Back (Net) - 1,821,032

Profit on Sale of Investments - 25,955,000

Profit on Sale of Fixed Assets (Net) 17,096,664 -

Provision for Doubtful Debts Written Back 38,428,200 -

Miscellaneous Income 2,260,355 2,559,556

268,020,574 122,435,100

Schedule Q : Increase / (Decrease) in Inventories

Opening Stock

- Finished Goods 437,904,779 195,924,770

- Work-in-Progress 89,717,845 133,083,304

527,622,624 329,008,074

Closing Stock

- Finished Goods 1,627,770,680 437,904,779

- Work-in-Progress 63,125,609 89,717,845

1,690,896,289 527,622,624

1,163,273,665 198,614,550

Schedule R : Raw Materials Consumed

Opening Stock 1,093,029 -

Add : Purchases 520,771 19,227,514

Less : Closing Stock - 1,093,029

1,613,800 18,134,485

48


(Amount in Rupees)

March 31,2010

March 31,2009

Schedule S : Purchase and Direct Expenses

Purchases 10,050,356,565 4,326,833,639 On Conversion of Fixed Assets into Inventory 358,402,898 - Freight and Forwarding 8,307,776 38,103,450 Amortisation of Softwares Developed Cost 42,499,862 17,472,481 Cost of Materials Consumed - Network Engineering Division 104,075,011 120,656,837 Other Direct Expenses 318,167,123 466,259,770

10,881,809,235 4,969,326,177

Schedule T : Personnel Cost (Refer Note 7 to Schedule "W") Salaries, Wages and Bonus 275,364,601 310,118,992

Company's Contribution to : - Provident Fund 11,517,184 10,044,113 - Other Funds 1,206,053 1,556,140 Gratuity 2,500,824 3,771,922 Privilege Leave 8,718,690 6,354,914 Placement and Training Cost 1,201,214 3,203,763 Staff Welfare Expenses 2,859,465 3,903,042

303,368,031 338,952,886

Schedule U : Operating Expenses (Refer Note 7 to Schedule "W") Electricity Charges 8,907,937 12,779,179 Vehicle Hire Charges 2,561,164 2,808,337 Hire Charges - 150,000 Lease Line Charges 1,286,803 1,416,112 Sales and Business Promotion 7,019,682 4,300,749 Repairs and Maintenance - On Building 665,226 844,301 - On Plant and Machinery 561,532 - - On Others 8,815,457 12,714,523 Office Establishment Expenses 6,723,321 6,835,976 Payment to Auditor - Statutory Audit Fees 1,500,000 1,500,000 - Tax Audit Fees 550,000 - - Limited Review 1,700,000 950,000 - Out-of-Pocket Expenses 91,542 6,723


49Spanco Limited


(Amount in Rupees)

March 31,2010

March 31,2009

Rent Expenses

- On Lease of Properties / Premises 81,116,548 70,065,911

- On Lease of Assets 31,344,020 15,584,945

(Refer Note 11 to Schedule "W")

Legal, Professional and Consultancy Charges 36,736,156 66,632,457

Travelling and Conveyance 42,082,034 54,929,093

Rates and Taxes 6,342,862 37,076,278

Communication Expenses 9,390,662 19,535,220

Insurance 8,047,576 6,181,625

Motor Car Expenses 5,167,006 4,670,366

Printing Charges 7,763,352 7,066,424

Advertisement Expenses 1,103,450 1,612,022


Dimunition in Value of Current Investment - 282,000

Security Charges 1,652,910 2,616,701

Loss on Sale of Investment 139,000 -

Provision for Doubtful Debts and Advances - 271,607,835

Sundry Balances Written Off (Net) 22,606,780 -

Foreign Exchange Fluctuation (Net) - 203,073,474

Loss on Sale of Fixed Assets (Net) - 1,035,073

Miscellaneous Expenses 25,759,672 39,307,778

344,334,375 878,204,851

Schedule V : Interest and Finance Expense / Income (Net)

(Refer Note 6 and 7 to Schedule "W")

Interest Expense

- on Fixed Period Loans 122,616,194 116,996,892

- on Cash Credit / Overdraft Facilities 378,916,846 314,658,005

- on Debentures 166,258,218 129,484,109 - Others 80,150,296 55,323,524

Less : Interest Income (Tax Deducted at Source Rs. 33,300,605 [P.Y Rs. 68,574,692])

- on Fixed Deposits 41,868,956 51,353,566

- on Inter Corporate Deposits 31,391,932 53,342,143 - from Subsidiaries 187,180,509 217,529,704

- Others 4,335,818 -

Bank and Finance Charges 70,306,990 56,990,931

553,471,329 351,228,048

50

ScheduleS annexed to and forming part of accountS for the year ended march 31, 2010

SCHEDULE “W”

NOTES TO ACCOUNTS

1) Nature of Operations

Spanco Limited (‘Spanco’ or ‘the Company’) is a leading Technology Infrastructure Company with dedicated Telecom, System Integration and BPO arms. Spanco is SEI CMM Level 3 and ISO 9001-2008 certified.

Spanco has a dedicated System Integration (SI) unit which ranks amongst the best in the country and caters to very large SI projects across Government, Power and Telecom Service Provider’s space. The Company provides high quality, cost effective scalable SI solutions. Spanco Limited also has a formidable presence in the BPO space spread over four continents and catering to India, US, Europe and Middle East.

Within the SI Business, the Company has dedicated teams addressing opportunities in e-Governance, Power Sector, Transport, Telecom Service Provider and PSUs. Spanco has a dedicated unit “Government Transformation Services” which utilises its propriety services to help central and various state governments become more efficient by the use of information technology.

The Company’s Service Provider Business Unit caters to carriers in India providing solutions to meet the networking infrastructure requirements using cutting-edge technologies.

The Company’s offerings within the Power space revolve around utilising information technology to increase the efficiency of power distribution. Spanco is empanelled as a SI with Power Finance Corporation (PFC) and aggressively participating in modernisation programs like R-APDRP and Distribution Franchise.

2) Statement of Significant Accounting Policies

a. Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 ‘As amended’ and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of Building which is revalued or provision for impairment is made. The accounting policies applied by the Company are consistent with those used in the previous year.

b. Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. The difference between the actual result and estimate are recognised in the period in which results are known or materialised.

c. Fixed Assets and Capital Work-in-Progress

Fixed assets are stated at cost except for building which is stated at revalued amount, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

In respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.

Capital Work-in-Progress is carried at cost comprising of direct cost, attributable interest and related incidental expenditure. The advances given for acquiring fixed assets are shown under Capital Work-in-Progress.

d. Depreciation / Amortisation

Depreciation is provided on fixed assets (other than assets for the Build-Own-Operate-Transfer (BOOT) project, leasehold improvements and intangible assets) on written down value method at the rates and in the manner prescribed under Schedule XIV to the Companies Act, 1956, which is also in accordance with the management’s estimates of useful life of the assets.

Type of AssetsRate of Depreciation as per Schedule XIV

W.D.V.BuildingGuest HouseInvestment Property

5.00%

Plant and MachineryOffice EquipmentElectrical Installation

13.91%

Furniture and Fittings 18.10%Computers 40.00%Motor Vehicles 25.89%


51Spanco Limited

Plant and Machinery acquired for BOOT projects is amortised over the life of projects. Leasehold Improvements are amortised over the un-expired period of leasehold premises on a straight-line basis.

e. Impairment

i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

ii. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

f. Intangible Assets

Goodwill

Goodwill is amortised on a straight-line basis over a period of ten years.

Patent

Costs relating to patents, which are acquired, are capitalised and amortised on a straight-line basis over a period of five years (useful life as assessed by the management).

Software

Software is capitalised where it is expected to provide future enduring economic benefits. Capitalisation costs include license fees and costs of implementation / system integration services. The management estimates the useful lives of intangible assets to be five years and expects to derive economic benefits from such assets evenly over the period of its useful life. Accordingly, software is amortised over a period of five years on a straight- line basis.

g. Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.

If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss account on a straight-line basis over the lease term.

Assets subject to operating leases have been included under the head ‘Investment Property’ and ‘Fixed Assets’. Lease income is recognised in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account.

h. Borrowing Cost

Borrowing Cost that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. A qualifying asset is one that necessary takes substantial period of time to get ready for intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred.

i. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. Investment property is amortised at the rate of 5% p.a. on written down value.

j. Inventories

Inventories of Raw Materials and Consumables:

Inventories are ascertained on First-in-First-out method, and are valued at lower of cost and net realisable value.

Inventories of Manufactured Finished Goods:

Inventories are valued at lower of cost and net realisable value. Cost includes cost of conversion of raw material into finished goods.

Inventories of Traded Goods:

Inventories are ascertained on the specific identification of cost method, and are valued at lower of cost and net

52

realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

Software Developed and held for Sale:

Software products developed / under development are stated at lower of cost and net realisable value.

Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Software development costs incurred on products ready for marketing are amortised equally over a period of four years or earlier, based on Management’s evaluation of expected sales volumes and duration of the products life cycles.

Work-in-progress of NED division:

The work in process in case of network engineering services is valued based on the percentage of completion of work under respective contracts.

k. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of Goods:

Revenue is recognised on delivery / dispatch of goods when the significant risks and rewards of ownership of the goods have passed to the buyer. Excise Duty, Sales Tax and VAT included in the amount of turnover are deducted from turnover (gross).

Income from Services:

Revenues from maintenance contracts / network integration services are recognised pro-rata over the period of the contract as and when services are rendered. Revenue and costs associated with network engineering services are recognised as revenue and expenses respectively by reference to the stage of completion of the project at the balance sheet date.

Software Sales:

Software sales are recognised on customers’ acceptance of delivery.

Interest:

Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

l. Foreign Currency Translation

(i) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate prevailing between the reporting currency and the foreign currency on the date of the transaction.

(ii) Conversion

Foreign currency monetary items are reported using the rate prevailing at the year end.

(iii) Exchange Differences

Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a “Foreign Currency Monetary Item Translation Difference Account” in the enterprise’s financial statements and amortised over the balance period of such long-term asset / liability but not beyond accounting period ending on or before 31st March, 2011.

Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise.

(iv) Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.

The Company does not enter into forward exchange contracts for trading or speculation purposes.

m. Employee Benefits

Short Term Employee Benefits

Short term employee benefits are recognised as expenses at the undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.


53Spanco Limited

Retirement Benefits

i. Provident Fund is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due.

ii. Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method made at the end of each year. The gratuity liability is funded through group gratuity insurance scheme of Life Insurance Corporation of India.

iii. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method at the end of each year.

iv. Actuarial gains / losses are immediately taken to Profit and Loss Account.

n. Accounting for Taxes on Income

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits.

At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-down is reversed to the extent

that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

o. Expenditure on New Projects (including arrangements on BOOT basis)

Expenditure directly relating to setting up of projects is capitalised. Indirect expenditure incurred during setting-up period is capitalised as part of the indirect setting-up cost to the extent to which the expenditure is directly related to construction or is incidental thereto. Other indirect expenditure incurred during the setting-up period which is not related to the setting-up activity nor is incidental thereto is charged to the Profit and Loss Account. Income earned during setting-up phase is deducted from the total of the indirect expenditure.

p. Earnings Per Share (‘EPS’)

Basic EPS is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted EPS, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

q. Provisions / Contingent Liabilities and Contingent Asset

A provision is recognised 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 disclosed by way of Notes to Accounts. Contingent Assets are not recognised in the Financial Statements.

r. Cash and Cash Equivalents

Cash and Cash Equivalents in the balance sheet comprise cash at bank and in hand.

s. Prior Period Items

Prior Period Items are included in the respected heads of accounts and material items are disclosed by way of Notes to Accounts.

t. Other Accounting Policies

These are consistent with the Generally Accepted Accounting Principles.

54

3) Particulars of security provided and other details of Secured Loans

a. The debentures of Rs. 200,000,000 (P. Y. Rs. 500,000,000) are secured by a legal mortgage in English form in favour of the trustees on all the Company’s properties situated at C01 / 5008, 5th Row, Ground Floor, A wing, City Mall situated at Plot No 4, Sector 19, Vashi Navi Mumbai, Maharashtra.

The debentures of Rs. 920,000,000 (P. Y. Rs. 920,000,000) are secured by a legal mortgage in English form in favour of the trustees on all the Company’s properties situated at C01 / 5008, 5th Row, Ground Floor, A wing, City Mall situated at plot No 4, Sector 19, Vashi Navi Mumbai, Maharashtra.

The debentures of Rs. 920,000,000 are further secured by way of first charge, ranking pari passu, on all the fixed assets (moveable and immoveable) except all assets having exclusive charge in favour of respective lenders. It is also secured by way of first charge, ranking pari passu, on all the fixed assets (moveable and immoveable) of Spanco BPO Services Limited and Spanco Respondez BPO Private Limited, subsidiaries of the Company. The charge on the assets of the subsidiaries has been subsequently released on August 05, 2010.

b. i) Term loans from banks are secured by first mortgage / equitable mortgage and charges on immovable properties including investment property, second pari passu charge on all moveable assets of the Company and also by way of personal guarantee of a director and pledge of equity shares held by the Company in one of the wholly owned subsidiary.

ii) Term loans from others are secured by respective assets taken on loan.

c. Vehicle Loans are secured by way of hypothecation of vehicles acquired out of the said loans.

d. Working capital facilities from banks are secured by way of first charge on all the movable fixed assets, stock, entire book debts, receivables and other current assets of the Company both present and future ranking pari passu with all banks and also by way of personal guarantee of a director.

e. Amount of secured loans repayable within one year Rs.1,387,457,663 [P.Y. Rs.2,416,356,761].

4) Issue of Debentures

During the year 2008-09 the Company had issued 500,000 secured redeemable non-convertible debentures of Rs. 1,000 each amounting to Rs. 500,000,000 carrying

an interest at MIBOR plus 800 BPS (floor 13.95% & CAP 14% p.a.) on a private placement basis. During the year, the tenure of debentures amounting Rs. 400,000,000 was restructured by the debenture holder so as to redeem the same in eight equal instalments starting from December 28, 2009 upto June 30, 2010. Out of the restructured debentures, debentures of Rs. 200,000,000 were redeemed during the year along with interest thereon.

The Company had issued 20 secured redeemable non- convertible debentures of Rs.1,000,000 each amounting to Rs. 20,000,000 on a private placement basis during the year 2008-09 carrying an interest at 11% payable half yearly and the same are due for redemption in two equal instalments on 3rd July 2012 and 2013.

The Company had issued 200 secured redeemable non- convertible debentures of Rs. 1,000,000 each amounting to Rs. 200,000,000 on a private placement basis during the year 2008-09 carrying an interest at 11.25% payable monthly and the same are due for redemption in two equal instalments on 3rd July, 2012 and 2013.

The Company had issued 700 secured redeemable non- convertible debentures of Rs. 1,000,000 each amounting to Rs. 700,000,000 on a private placement basis during the year 2008-09 carrying an interest at 11.25% payable half yearly and the same are due for redemption in two equal instalments on 10th July 2012 and 2013.

The Company has created debenture redemption reserve in accordance with the provisions of section 117C (1) of the Companies Act, 1956.

5) Issue of Equity Shares

During the year, the Company has issued and allotted 7,415,000 equity shares of Rs. 10/- each at a premium of Rs. 30/- per share to the promoters and other financial institutional investors through preferential issue and raised money to tune of Rs. 296,600,000/- as per details given below:

(Amount in Rupees)Sr. No.

Name of Allotees Number of Shares

Nominal value of

Share

Subscription Price per

Share including Premium

Total Amount

1 Mr. Kapil Puri 3,140,000 10 40 125,600,000

2 Mrs. Kavita Puri 370,000 10 40 14,800,000

3 M/s. Monet Limited 1,105,000 10 40 44,200,000

4 M/s. Elara India Opportunities Fund Limited

1,400,000 10 40 56,000,000

5 M/s. Ares Diversified 1,400,000 10 40 56,000,000

Total 7,415,000 296,600,000


55Spanco Limited

The Company has fully utilised the proceeds of the preferential issue of equity shares, received during the year, for the purpose for which the money was raised.

6) Borrowing Costs Capitalised during the year

(Amount in Rupees)

Particulars For the year ended

March 31, 2010

For the year ended

March 31, 2009Interest 151,415,777 45,759,967Total 151,415,777 45,759,967

7) Expenditure on New Projects

The Company has five BOOT projects underway pertaining to telecom systems integration. The expenses capitalised under these projects and carried forward under capital work-in-progress are as follows:

(Amount in Rupees)

ParticularsAs at

March 31, 2010

As at March 31,

2009Cost of Material 726,928,130 447,795,175 Salary 87,201,484 62,044,543Travelling and Conveyance 10,612,180 10,468,604Borrowing Cost 79,482,161 28,935,921Other Expenses 17,997,446 11,446,585Total 922,221,401 560,690,828

8) Revaluation of Fixed Assets

On July 01, 2009 the Company has, based on the report of an independent valuer, revalued its Building by an amount of Rs. 332,253,384/- to disclose its true and fair value and an equivalent amount is credited to Revaluation Reserve Account. Consequent to the said revaluation there is an additional charge of depreciation amounting to Rs. 12,470,880/- and an equivalent amount has been withdrawn from Revaluation Reserve Account and credited to Profit and Loss Account. This has no impact on profit for the year.

9) Segment Information

The Company is operating in a single segment i.e. ‘System Integration’. Further as stated in paragraph 4 of Accounting Standard 17 – Segment Reporting, the Company has disclosed segment information in its Consolidated Financial Statements and hence it is not disclosed in these financial statements.

10) Related party disclosures under Accounting Standard 18 issued by the Institute of Chartered Accountants of India

a. The following are the names of related parties and description of relationship :

I) Where control exists, irrespective of whether transactions have occurred or not :

i. Subsidiaries

a. Spanco BPO Ventures Limited

b. Spanco BPO Services Limited *

c. Spanco Respondez BPO Private Limited *

d. Spanco Europe Limited, U.K.

e. Spanco Limited, Dubai U.A.E.

f. Spanco (S) Pte. Limited, Singapore

g. Global Respondez Inc., U.S.A.

h. Spanco Global Solutions Private Limited

i. Spanco Great IT Private Limited

j. Skandsoft Technologies Private Limited

k. Spanco Holdings Inc.,U.S.A.*

l. Spanco Infratel Private Limited

m. Spanco IT Infrastructure Private Limited

n. New Delhi Teletech Private Limited

o. Spanco CSC Limited (formerly known as New Delhi Tele-Ventures Limited)

p. Spanco International Pte. Limited, Singapore (upto March 30, 2010)

q. Spanco Respondez Services Limited (upto March 30, 2010)

r. Spanco ( Mauritius) Limited ** (Upto June 30, 2009)

* These companies are the wholly owned subsidiaries of Spanco BPO Ventures Limited.

** This company is wholly owned subsidiary of Spanco (S) Pte., Limited.

ii. Joint Ventures

a. Bharat BPO Services Limited

b. Spanco Golden Key Solutions LLC ***

c. Spanco Golden Key Solutions WLL ***

*** These companies are the joint ventures of Spanco Limited, Dubai U.A.E.

II) Names of related parties with whom transactions have taken place during the year

i. Subsidiaries

a. Spanco BPO Ventures Limited

b. Spanco BPO Services Limited *

c. Spanco Respondez BPO Private Limited *

56

d. Spanco Europe Limited, U.K.

e. Spanco Limited, Dubai U.A.E.

f. Spanco (S) Pte. Limited, Singapore

g. Global Respondez Inc., U.S.A.

h. Spanco Global Solutions Private Limited

i. Spanco Great IT Private Limited

j. Skandsoft Technologies Private Limited

k. Spanco Infratel Private Limited

l. Spanco IT Infrastructure Private Limited

m. New Delhi Teletech Private Limited

n. Spanco CSC Limited (formerly known as New Delhi Tele-Ventures Limited)

o. Spanco Respondez Services Limited

* These companies are the wholly owned subsidiaries of Spanco BPO Ventures Limited

ii. Joint Ventures


b. Spanco Golden Key Solutions LLC **

c. Spanco Golden Key Solutions WLL **

** These companies are the joint ventures of Spanco Limited, Dubai UAE

iii. Key Management Personnel

a. Mr. Kapil Puri (Chairman and Managing Director)

b. Mr. Deepak Bhagchandaney (Deputy Managing Director)

c. Mr. Adarsh Bagaria (Whole Time Director)

III) Other related parties

i. Relatives of Key Management Personnel

a. Mrs. Kavita Kapil Puri

b. Mrs. Geeta Deepak Bhagchandaney

c. Mrs. Sarika Adarsh Bagaria

ii. Enterprise owned or significantly influenced by group of individuals or their relatives

a. Percept Trading Private Limited

b. Steady Growth Properties Private Limited

c. Global Respondez Services Limited


57Spanco Limited

b. The following are the volume of transactions with related parties during the year and outstanding balances as at the year end disclosed in aggregate by type of related party:

(Amount in Rupees)Sr.No

Nature of transactions Key Management

Personnel

Relatives of Key

Manage-ment

Personnel

Subsidiaries Joint Venture

Enterpriseswhere KMP

exercise sig.Influence *

Total

1 Remunerations (inclusive of Perquisites)

44,365,543 Nil Nil Nil Nil 44,365,543 (40,481,340) (Nil) (Nil) (Nil) (Nil) (40,481,340)

2 Forfeiture of Convertible Warrants

Nil Nil Nil Nil Nil Nil(28,350,000) (Nil) (Nil) (Nil) (Nil) (28,350,000)

3 Inter Corporate Deposit Refund

Nil Nil 2,724,292 Nil 41,266,496 43,990,788 (Nil) (Nil) (418,396,625) (Nil) (11,259,408) (429,656,033)

4 Inter Corporate Deposit Given

Nil Nil 27,466,000 Nil Nil 27,466,000

(Nil) (Nil) (26,150,000) (Nil) (Nil) (26,150,000)5 Investments made in

Subsidiaries / Joint VenturesNil Nil Nil Nil Nil Nil

(Nil) (Nil) (800,000) (Nil) (Nil) (800,000)6 Investments made in

Subsidiaries / Joint Venture towards Share Application Money

Nil Nil 4,555,000 Nil Nil 4,555,000

(Nil) (Nil) (53,744,403) (198,483,980) (Nil) (252,228,383)

7 Sale of Investment in Subsidiaries / Joint Venture

Nil Nil 500,054 Nil Nil 500,054 (Nil) (Nil) (Nil) (Nil) (Nil) (Nil)

8 Sale of Traded Goods Nil Nil 4,742,908 Nil Nil 4,742,908

(Nil) (Nil) (16,093,456) (Nil) (Nil) (16,093,456)9 Sale of Services Nil Nil 8,913,094 12,739,799 Nil 21,652,893

(Nil) (Nil) (11,820,175) (50,323,143) (Nil) (62,143,318)

10 Rent Expenses : Premises Nil Nil Nil Nil Nil Nil(Nil) (Nil) (198,108,689) (Nil) (Nil) (198,108,689)

11 Rental Income : Leased Plant & Machinery

Nil Nil 8,280,000 Nil Nil 8,280,000 (Nil) (Nil) (356,129) (Nil) (Nil) (356,129)

12 Rental Income : Owned Plant & Machinery

Nil Nil 73,932,166 Nil Nil 73,932,166 (Nil) (Nil) (58,100,000) (Nil) (Nil) (58,100,000)

13 Rental Income : Owned Property

Nil Nil Nil Nil Nil Nil(Nil) (Nil) (4,096,080) (Nil) (Nil) (4,096,080)

14 Rental Income : Leased Property


15 Interest Income from Subsidiaries / Joint Ventures

Nil Nil 187,625,077 -444,567 Nil 187,180,509

(Nil) (Nil) (217,085,137) (444,567) (Nil) (217,529,704)16 ICD Interest Nil Nil 16,881,641 Nil 1,029,384 17,911,025

(Nil) (Nil) (11,972,051) (Nil) (6,113,630) (18,085,681)

17 Purchase of Traded Goods Nil Nil Nil Nil Nil Nil

(Nil) (Nil) (236,770,946) (Nil) (Nil) (236,770,946)18 Debit Note for

Services TakenNil Nil Nil Nil Nil Nil

(Nil) (Nil) (1,395,488) (Nil) (Nil) (1,395,488)19 Purchase of Fixed Assets Nil Nil Nil Nil Nil Nil

(Nil) (Nil) (291,994,857) (Nil) (Nil) (291,994,857)

58

Sr.No

Nature of transactions Key Management

Personnel

Relatives of Key

Manage-ment

Personnel

Subsidiaries Joint Venture

Enterpriseswhere KMP

exercise sig.Influence *

Total

20 Sale of Fixed Assets Nil Nil Nil 63,289 Nil 63,289 (Nil) (Nil) (Nil) (Nil) (Nil) (Nil)

21 Loans / Advance given Nil Nil 2,149,688,278 Nil 2,469,167 2,152,157,445 (Nil) (Nil) (2,036,029,279) (99,586,256) (4,460,000) (2,140,075,535)

22 Loans / Advance refund Nil Nil 710,746,317 716,472 3,200,000 714,662,789 (Nil) (Nil) (2,335,606,690) (Nil) (2,600,000) (2,338,206,690)

23 Reimbursement of Expenses from

Nil Nil 17,530,974 Nil Nil 17,530,974 (Nil) (Nil) (Nil) (Nil) (Nil) (Nil)

24 Reimbursement of Expenses to

Nil Nil 43,226,342 Nil Nil 43,226,342 (Nil) (Nil) (Nil) (Nil) (Nil) (Nil)

25 Sundry Balances written off


26 Assets given on Lease (Net Book Value)


27 Closing Debtors Nil Nil 26,849,370 37,732,525 Nil 64,581,895 (Nil) (Nil) (19,438,830) (29,346,619) (Nil) (48,785,449)

28 Outstanding debit balance-Loans and Advance

Nil Nil 2,305,239,268 4,513,993 Nil 2,309,753,261 (Nil) (Nil) (697,330,183) (5,675,032) (Nil) (703,005,215)

29 Outstanding credit balance-Loans and Advance

Nil Nil 7,344,245 Nil 4,818,602 12,162,847 (Nil) (Nil) (359,939) (Nil) (4,087,769) (4,447,708)

30 Investment Closing Balance Nil Nil 512,372,010 50,000,000 6,140,000 568,512,010

(Nil) (Nil) (512,872,064) (50,000,000) (6,140,000) (569,012,064)31 Investment towards share

application money closingbalance

Nil Nil 151,757,690 198,483,980 Nil 350,241,670

(Nil) (Nil) (147,202,690) (198,483,980) (Nil) (345,686,670)

32 ICD Closing Balance Nil Nil 137,386,357 Nil Nil 137,386,357 (Nil) (Nil) (95,763,008) (Nil) (40,237,112) (136,000,120)

33 Other Current assets Closing Balance


Figures in brackets indicate previous year numbers.1. Corporate guarantee of Rs. 455,800,000 (USD 10.00 Millions) [P.Y. Rs. 517,601,300 (USD 10.00 Millions)] given in favor of

ICICI Bank, Singapore for providing working capital facility to wholly owned subsidiary Spanco (S) Pte. Limited2. Corporate guarantee of Rs. 520,000,000 [P.Y. Rs. 520,000,000] given in favor of Cisco Systems Capital India Private Limited

on behalf of wholly owned subsidiary New Delhi Teletech Private Limited3. Corporate guarantee and undertaking given to One North East, NY for making an offer of grant to wholly owned subsidiary

Spanco Europe Limited of Rs. 6,204,600 (90,000 pounds) [P.Y. Rs. 6,618,998 (90,000 pounds)]4. Corporate guarantee of Rs. 9,456,000 given in favor of Rentworks India Private Ltd. for availing operating lease on behalf of

wholly owned subsidiary Spanco BPO Services Limited5. Corporate guarantee of Rs. 100,000,000 given in favor of IDBI Bank for providing cash credit facility on behalf of wholly

owned subsidiary Spanco BPO Services Limited6. Corporate guarantee of Rs. 120,000,000 given in favor of Bank of Maharashtra for obtaining cash credit facility on behalf of

wholly owned subsidiary Spanco Respondez BPO Private Limited7. Corporate guarantee of Rs. 374,559,108 given in favor of SREI Equipment Finance Private Limited for availing operating

lease assistances / facilities on behalf of wholly owned subsidiary Spanco BPO Services Limited

(Amount in Rupees)


59Spanco Limited

Note: The following transactions constitute more than 10 % of the total related party transactions of the same type:

(Amount in Rupees)Type of Transaction Party Year Ended

March 31, 2010Year Ended

March 31, 2009

Inter Corporate Deposit Refund Global Respondez Services Limited 41,266,496 11,259,408

Skandsoft Technologies Private Limited - 4,051,108

Inter Corporate Deposit Given Skandsoft Technologies Private Limited 27,466,000 26,150,000

Interest on Inter Corporate Deposits Global Respondez Services Limited 1,029,384 6,113,630

Skandsoft Technologies Private Limited 16,881,641 11,972,051

Investment made in Subsidiaries Spanco Infratel Private Limited - 100,000

New Delhi Teletech Private Limited - 100,000

Spanco CSC Limited (formerly known as New Delhi Tele-Ventures Limited)

- 500,000

Spanco IT Infrastructure Private Limited - 100,000

Sale of Investment in Subsidiaries / Joint Venture

Spanco Respondez Services Limited 500,000 -

Towards Share Application Money Spanco Limited - Dubai 4,555,000 53,744,403

Bharat BPO Services Limited - 198,483,980

Sale of Traded Goods Spanco Singapore Pte. Limited - 1,674,969

Spanco BPO Services Limited 4,622,753 10,267,885

Spanco Europe Limited - 3,057,948

Sale of Services Bharat BPO Services Limited 10,270,000 48,649,046

Spanco BPO Services Limited 4,932,457 -

Spanco Respondez BPO Private Limited 3,980,637 7,884,279

Spanco Golden Key Solution WLL 2,425,121 -

Rent Expenses - Premises Spanco BPO Services Limited - 19,108,689

Rental Income : Owned Plant & Machinery Spanco BPO Services Limited 73,932,166 58,100,000Rental Income : Lease Plant & Machinery Spanco BPO Services Limited 8,280,000 356,129

Rental Income : Owned Property Spanco Global Solutions Private Limited - 1,396,080Skandsoft Technologies Private Limited - 2,700,000

Rental Income : Lease Property Spanco CSC Limited (formerly known as New Delhi Tele-Ventures Limited)

10,000 -

Interest Income From Subsidiaries Spanco BPO Services Limited 39,023,836 60,784,060Spanco BPO Ventures Limited 59,114,017 92,100,927

Spanco Great IT Private Limited 30,398,349 26,104,706Spanco Respondez BPO Private Limited 28,231,342 -

Purchase of Traded Goods Spanco BPO Services Limited - 236,770,946

Debit Note for Services Taken Global Respondez Inc., U.S.A. - 1,395,488

Sale of Fixed Assets Spanco Golden Key Solutions LLC 63,289 -

Purchase of Fixed Assets Spanco BPO Services Limited - 291,994,857

Loan / Advance Given Spanco BPO Services Limited 1,126,507,039 818,186,376

Spanco BPO Ventures Limited 561,382,007 616,970,828


Loan / Advance Refund Spanco BPO Services Limited 271,407,426 646,719,134

Spanco BPO Ventures Limited - 1,063,370,070

Spanco Europe Limited 88,835,855 -


60

(Amount in Rupees)Type of Transaction Party Year Ended

March 31, 2010Year Ended

March 31, 2009

Reimbursement of Expenses from Spanco Global Solutions Private Limited 17,530,974 -

Reimbursement of Expenses to Spanco Respondez BPO Private Limited 42,872,039 -

Sundry Balances written off Spanco International Pte. Limited 312,225 -

Closing Debtors Balance Spanco (S) Pte. Limited 14,270,294 16,535,304


Spanco Golden Key Solution LLC 21,875,999 25,607,949

Bharat BPO Services Limited 12,977,513 -

Outstanding Debit Balance - Loans and Advances

Spanco Great IT Private Limited 252,255,844 219,253,018

Spanco BPO Ventures Limited 648,014,068 -


Spanco Europe Limited - 71,183,450

Spanco Respondez BPO Private Limited - 175,524,416

Spanco (S) Pte. Limited - 106,110,183

Outstanding Credit Balance - Loans and Advances

Spanco Europe Limited 7,172,595 -

Global Respondez Services Limited 4,818,602 4,087,769

Investments Closing Balance Spanco Europe Limited 176,822,896 176,822,896

Spanco Limited - Dubai 85,443,383 85,443,383

Spanco Great IT Private Limited 120,100,000 120,100,000

Investment towards Share Application Money Closing Balance

Bharat BPO Services Limited 198,483,980 198,483,980

Spanco Limited, Dubai 151,757,690 147,202,690

Inter Corporate Deposit Closing Balance

Skandsoft Technologies Private Limited 137,386,357 95,763,008

Global Respondez Services Limited - 40,237,112

Other Current Assets Closing Balance Spanco BPO Services Limited 151,560,770 70,225,417

11) Particulars of assets acquired / given under lease

Operating leases

Office premise and Plant & Machinery are obtained on operating lease. The lease term for different agreements are from 11 months to 36 months and renewable for further period at the option of the Company. Out of the several contracts three of the contracts contain an escalation clause, two of which with 15% after 3 years and the balance one with 6% after every 11 months. There are no restrictions imposed by lease arrangements. There are no subleases.

(Amount in Rupees)

Particulars For the year ended

March 31, 2010

For the year ended

March 31, 2009Operating lease payments recognised in the statement of profit and loss during the year as per accounting policy referred in Note 2(h) above: 85,461,346 21,534,042

Minimum lease paymentsTotal of future minimum lease payments payable by the Company:

- Not later than 1 year 57,535,624 37,551,778- Later than 1 year but not later than 5 years 79,927,495 54,862,795- Later than 5 years Nil NilTotal of future minimum lease payments under operating lease 137,463,119 92,414,573


61Spanco Limited

Finance leases

Plant & Machinery and Capital Work-in-Progress includes machinery / equipments obtained on finance lease. Lease term is for 36 to 60 months after which legal title is passed to lessee. There is no escalation clause in the lease agreement. There are no restrictions imposed by lease arrangements. There are no subleases.

(Amount in Rupees)

ParticularsFor the year ended

March 31, 2010For the year ended

March 31, 2009Finance lease payments recognised in the statement of profit and loss during the year as per accounting policy referred in Note 2(h) above:

6,144,499 580,642

Total future minimum lease payments payable by the Company: 381,290,952 253,512,235Less: Unamortised Finance Charges 72,564,076 57,850,322Present Values 308,726,876 195,661,913

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

MinimumLease Payments

Present Values Minimum Lease Payments

Present Values

Not later than 1 year 117,446,760 84,818,000 44,947,282 26,169,588Later than 1 year but not later than 5 years

263,844,192 223,908,876 208,564,953 169,492,325

Later than 5 years Nil Nil Nil Nil

Operating leases – assets given on lease

The Company has leased out premise, Plant & Machinery and Equipments etc. on operating lease. The lease term is for 36 to 60 months. There are escalation clauses in the certain lease agreement and the lease is renewable at the option of the lessee. There are no restrictions imposed by lease arrangement.

(Amount in Rupees)



March 31, 2009

There are no uncollectible minimum lease payment receivable as at balance sheet date (P.Y. : Nil) Operating lease Income recognised in the statement of profit and loss during the year as per accounting policy referred in Note 2(h) above:

158,196,778 88,359,561

Minimum lease receipts

Total of future minimum lease receipts receivable by the Company:

- Not later than 1 year 87,168,096 214,674,612- Later than 1 year but not later than 5 years 202,068,955 491,537,051- Later than 5 years Nil NilTotal of future minimum lease receipts under operating lease 289,237,051 706,211,663

12) Earnings Per Share (EPS) (Amount in Rupees)



March 31, 2009Net profit as per profit and loss account 618,727,789 196,077,238Net profit for calculation of basic & diluted EPS 618,727,789 196,077,238Weighted average number of equity shares in calculating basic EPS 26,724,206 20,650,000Nominal value of shares 10/- 10/-Earnings per share - Basic- Diluted

23.1523.15

9.509.50

62

13) Following are the major component of Deferred Tax Asset / (Liability) (Amount in Rupees)

ParticularsAs at

April 1, 2009Current year

charge / (credit)As at

March 31, 2010Difference between book and tax base of fixed assets

(38,467,066)[-15,333,407]

411,610[-23,133,659]

(38,055,456)[-38,467,066]

Privilege Leave Provision 2,440,526[1,684,216]

1,305,714[756,310]

3,746,240[2,440,526]

Property Tax 3,065,219[Nil]

(2,274,420)[3,065,219]

790,799[3,065,219]

Long Term Capital Loss 464,560[Nil]

178,636[464,560]

643,196 [464,560]

Differences due to deferment of exchange differences on long term foreign currency monetary items

(35,691,911)[Nil]

28,421,859[-35,691,911]

(7,270,052)[-35,691,911]

Preliminary Expenses (For Increase in Authorised Share Capital)

380,688[Nil]

(101,661) [380,688]

279,027[380,688]

Provision for Doubtful Debts and Advances 92,319,503[Nil]

(92,319,503)[92,319,503]

Nil[92,319,503]

Disallowance u/s 40(a) (ia) Nil[Nil]

236,755[Nil]

236,755[Nil]

Total 24,511,519[-13,649,191]

(64,141,010) [38,160,710]

(39,629,491) [24,511,519]

Figures in bracket [ ] indicate previous year numbers.

14) Interest in Joint Ventures:

The Company has a 49.75% interest in assets, liabilities, expenses and income of Bharat BPO Services Limited, incorporated in India, which is involved in Domestic Call Centre services.

The aggregate of the Company’s share of the assets, liabilities, expenses and income of jointly controlled entity based on financial statements as at March 31, 2010 as at follows :

(Amount in Rupees)



March 31, 2009Net Fixed Assets 194,979,688 236,453,569Investments Nil NilNet Current Assets 15,982,556 21,209,201Loans / Borrowings 202,433,928 149,731,494Income 23,732,282 22,313,003Expenses (including depreciation and taxation) 121,299,229 162,672,426Loss after Tax (97,566,947) (140,359,423)Capital Commitments Nil NilContingent Liabilities Nil Nil


63Spanco Limited

15) Capital Commitments

Estimated amount of contracts remaining to be executed on capital account not provided for (net of advances) Rs. 512,385,767 [P.Y. Rs. 1,596,180,871]

16) Contingent Liabilities (Amount in Rupees)

Sr. No.

ParticularsAs at

March 31, 2010As at

March 31, 20091 Letters of Credit issued by bankers 181,190,310 105,217,4522 Guarantees given by banks on behalf of the Company 1,773,853,232 1,460,186,2853 Guarantees and counter guarantees given by the Company 1,595,531,456 2,417,226,0984 Income Tax Demand 40,103,944 Nil

17) Gratuity and other post employment plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

(Amount in Rupees)



March 31, 2009a) The details of the Company's defined benefit plans for its employees

are given below

Profit and Loss Account: i) Net employee benefit expense (recognised in employee cost)

for the year ended March 31, 2010 :

Current Service Cost 5,196,988 4,826,827 Interest on Defined Benefit Obligations 1,170,056 850,867 Expected Return on Plan Assets (1,022,446) (764,531) Net Actuarial (Gain) / Loss recognised in the year (2,843,774) (1,141,241) Net Gratuity and Other Cost 2,500,824 3,771,922 Actual Return on Plan Assets 737,501 692,297

Balance Sheet : Detail of provision of Gratuity Defined Benefit Obligation 11,868,196 10,350,594 Fair Value of the Plan Assets 9,250,123 6,578,672ii) Changes in the Present Value of the Defined Obligation are as

follows:

Opening Defined Benefit Obligation 10,350,594 6,578,672 Current Service Cost 5,196,988 4,826,827 Interest Cost 1,170,056 850,867 Actuarial (Gain) / Loss (3,949,265) (366,450) Benefits Paid (900,177) (1,539,322) Closing Defined Benefit Obligation 11,868,196 10,350,594

64



March 31, 2009iii) Change in Fair Value of Plan Assets: Opening Fair Value of the Plan Assets 6,578,672 5,568,140 Expected Return on Plan Assets 1,022,446 764,531 Contributions by the Employer 3,751,380 1,010,532 Transfer to Other Company (3,817,859) - Benefits Paid (900,177) (1,539,322) Actuarial Gain / (Loss) 2,615,661 774,791 Closing Fair Value of Plan Assets 9,250,123 6,578,672

Company's expected Contribution to Gratuity in 2010 - 11 2,618,073 3,771,922 Excess of (Obligation Over Plan Assets) / Plan Assets Over Obligation (2,618,073) (3,771,922) (Accrued Liability) / Prepaid Benefit (2,618,073) (3,771,922)

iv) Category of Plan Assets as a % of the Fair Value of the Total Plan Assets as at March 31, 2010:

Insurer Managed Funds 100% 100% Total 100% 100%

v) Assumptions used in Accounting for the Gratuity Plan: % % Discount Rate 8.00 7.75 Salary Escalation Rate 5.00 5.00 Expected Rate of Return on Plan Assets 8.00 8.00 Employee Attrition Rate 2.00 2.00

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

18) Unhedged Foreign Currency Exposure

Particulars CurrencyAmount in

Foreign CurrencyEquivalent

Amount (Rs.)

Sundry Debtors

USD 1,614,877

(3,400,904) 72,138,013

(176,031,200)

OMR 180,500

(185,105) 21,193,047

(24,811,120)

CHF 15,625 (7,225)

650,781 (325,477)

GBP35,765

(35,765)2,400,539

(2,630,308)

Sundry Creditors

USD15,820,768

(14,460,731)721,110,624

(754,473,436)

JPY78,860,790

(79,107,332)38,641,787

(42,433,964)

SEKNil

(-8,686)Nil

(-54,029)

(Amount in Rupees)


65Spanco Limited

Particulars CurrencyAmount in

Foreign CurrencyEquivalent

Amount (Rs.)

Bank Balances (EEFC Account) USD3,559

(3,559) 158,982

(184,215)

Cash Balances

USDNil

(4,938)Nil

(255,591)

GBPNil

(2,336)Nil

(171,800)

EURO1

(146)60

(9,979)

SGD2

(397)72

(13,521)

OMR20

(80)2,372

(10,696)

AEDNil

(70) Nil

(986)

HKD Nil

(50) Nil

(334)

QAR Nil

(13) Nil

(185)

SEK Nil

(300)Nil

(1,866)

LKR 1,000

(1,000)394

(449)

RIYAL41

(Nil) 4,826

(Nil)

Foreign Currency Loans USD5,421,583

(13,194,071)247,115,769

(688,391,436)

Loans and Advances Given

USD3,319,625

(2,205,306) 148,287,627

(114,540,650)

AED138,789

(121,458)1,654,369

(1,711,151)

SGDNil

(9,057)Nil

(308,264)

GBPNil

(967,897)Nil

(71,183,450)

Loans and Advances Taken GBP104,041

(Nil)7,172,595

(Nil)

Figures in bracket indicate previous year numbers.

19) Included in Sundry Debtors are amounts due from the companies under the same management (Amount in Rupees)

ParticularsAs at March

31, 2010As at March

31, 2009Global Respondez Inc 63,581 73,672Maximum Amount outstanding during the year Rs. 73,672 (P.Y. Rs. 73,672)

Spanco (S) Pte., Limited 14,270,294 16,535,304Maximum Amount outstanding during the year Rs.16,535,304 (P.Y. Rs. 21,637,401)

66

ParticularsAs at March

31, 2010As at March

31, 2009Bharat BPO Services Limited 12,977,513 3,212,738Maximum Amount outstanding during the year Rs. 13,165,023 (P.Y. Rs. 7,026,155) Spanco Golden Key Solution LLC 21,875,999 25,607,949Maximum Amount outstanding during the year Rs. 26,224,120 (P.Y. Rs. 25,607,949)Spanco Golden Key Solution WLL 2,879,013 525,933Maximum Amount outstanding during the year Rs. 2,894,661 (P.Y. Rs. 5,256,049) Spanco Europe Limited 2,400,539 2,630,308Maximum Amount outstanding during the year Rs. 2,814,697 (P.Y. Rs. 3,071,104) Spanco BPO Services Limited 7,375,759 199,546Maximum Amount outstanding during the year Rs. 9,578,163 (P.Y. Rs. 2,101,908)Spanco Respondez BPO Private Limited 2,739,198 NilMaximum Amount outstanding during the year Rs. 4,792,795 (P.Y. Rs. Nil)

Total 64,581,896 48,785,450

20) Included in Other Current Assets are amounts due from the companies under the same management (Amount in Rupees)

ParticularsAs at

March 31, 2010As at

March 31, 2009Spanco BPO Services Limited 151,560,770 70,225,417Maximum Amount outstanding during the year Rs. 157,571,860 (P.Y. Rs. 85,782,891)

Total 151,560,770 70,225,417

21) Details of Loans given to subsidiaries and associates and parties in which directors are interested

Amount due from Joint Ventures (Amount in Rupees)

ParticularsAs at

March 31, 2010As at

March 31, 2009 Spanco Golden Key Solutions WLL

Closing balance at the end of the year 4,513,993 5,675,032

Maximum balance at any time during the year 5,675,032 5,675,032

There is no repayment schedule in respect of this loan

Total 4,513,993 5,675,032

Amount due for Inter Corporate Deposits from Enterprises where KMP exercise significant influence (Amount in Rupees)

ParticularsAs at

March 31, 2010As at

March 31, 2009 Global Respondez Services Limited Closing balance at the end of the year Nil 40,237,112 Maximum balance at any time during the year 40,237,112 48,859,033 There is no repayment schedule in respect of this ICD

Total Nil 40,237,112

(Amount in Rupees)


67Spanco Limited

Amount due from Subsidiaries

(Amount in Rupees)

ParticularsAs at

March 31, 2010As at

March 31, 2009 Spanco (S) Pte. Limited

Closing balance at the end of the year 140,108,325 106,110,183 Maximum balance at any time during the year 141,821,279 106,110,183 There is no repayment schedule in respect of this loan

Spanco Global Solutions Private Limited


Spanco Great IT Private Limited


Spanco Limited, Dubai


Spanco Europe Limited

Closing balance at the end of the year - 71,183,450 Maximum balance at any time during the year 71,183,450 90,112,726 There is no repayment schedule in respect of this loan

Skandsoft Technologies Private Limited


Global Respondez Inc., U.S.A.


Spanco Respondez Services Limited

Closing balance at the end of the year - 49,941 Maximum balance at any time during the year 49,941 55,057 There is no repayment schedule in respect of this loan

Spanco Respondez BPO Private Limited


Spanco BPO Ventures Limited


68

(Amount in Rupees)

ParticularsAs at

March 31, 2010As at

March 31, 2009 Spanco BPO Services Limited


Spanco IT Infrastructure Private Limited

Closing balance at the end of the year 50,932 44,908 Maximum balance at any time during the year 51,901 44,908 There is no repayment schedule in respect of this loan

Spanco CSC Limited (formerly known as New Delhi Tele-Ventures Limited)


Spanco International Pte. Limited


Spanco Infratel Private Limited

Closing balance at the end of the year 9,903 -

Maximum balance at any time during the year 9,903 -


New Delhi Teletech Private Limited

Closing balance at the end of the year 134,948,881 -

Maximum balance at any time during the year 134,948,881 -


Total 2,442,625,625 793,093,191

22) Supplementary Statutory Information

a) Additional information pursuant to the provisions of paragraphs 3, 4, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956

Sales

ParticularsUnit Quantity Amount (Rs.)

2010 2009 2010 2009Tower Material and Fabricated items [including stock transfer of 8.63 M.T. (P.Y. 82.95 M.T.)]

M.T. 97.93 490.46 2,295,900 22,225,132

Consumption of Raw Materials


2010 2009 2010 2009Raw Material : Steel (Indigenous) M.T. 44.88 387.69 1,613,800 18,134,485Total 44.88 387.69 1,613,800 18,134,485


69Spanco Limited

Finished Goods - Manufactured


2010 2009 2010 2009Opening Stock M.T. 38.75 Nil 1,945,576 NilManufactured M.T. 59.18 529.21 2,272,473 25,857,389Closing Stock M.T. Nil 38.75 Nil 1,945,576

Class of GoodsUnit Installed Capacity * Actual Production

2010 2009 2010 2009Tower Material and Fabricated items M.T. 1,800 1,800 59.18 529.21

*(i) The Company is a delicensed industry; therefore the information regarding licensed capacity has not been given. (ii) The installed capacity is the annual capacity and is computed on the basis of maximum utilisation of Plant &

Machinery. Installed capacity, being a technical matter, is as certified by the Management and relied upon by the auditors.

b) Directors’ Remuneration (Amount in Rupees)



March 31, 2009Salaries and Allowances 26,106,375 22,153,260Commission to Non-Executive Directors 1,600,000 3,000,000Perquisites 16,631,088 15,300,000Contributions to Employees’ Provident Fund 28,080 28,080

Total 44,365,543 40,481,340

The above remuneration does not include contribution to gratuity fund and leave encashment as the actuarial valuation is done for the Company as a whole and the amount pertaining to directors is not ascertainable.

Computation of Net Profit in accordance with Section 198 (1) and Section 349 of the Companies Act, 1956:

ParticularsAmount in Rupees

For the year endedMarch 31, 2010


Profit before tax (as per Profit & Loss Account) 1,002,866,661 315,798,346Add : Managerial Remuneration and Commission paid to the Directors 44,365,543 40,481,340

(Add) / Less :Profit / (Loss) on disposal of investmentsProfit / (Loss) on sale of fixed assetsProvision for doubtful debts and advances / written back

(139,000)17,096,66438,428,200

25,955,000(1,035,073)

(271,607,835)

Net Profit as per Section 198 of the Companies Act, 1956 991,846,340 602,967,594At 1 % of net profit for Non Executive Directors is restricted to 9,918,463 6,029,676Commission paid to Non Executive Directors 1,600,000 3,000,000At 10% of Net Profit for Managing & Whole time Directors is restricted to 99,184,634 60,296,760Salary paid to Managing & Whole time Directors 42,765,543 37,481,340

70

c) Earnings in Foreign Currency (Accrual basis) (Amount in Rupees)



March 31, 2009Exports at F.O.B. Value 72,783 133,281,177 Income from Services 3,286,065 3,608,490

Total 3,358,848 136,889,667

d) Expenditure in Foreign Currency (Accrual basis) (Amount in Rupees)



March 31, 2009Travelling Expenses 1,321,214 4,101,171 Other Expenses 2,479,896 1,239,748 Interest 24,331,076 68,827,362

Total 28,132,186 74,168,281

e) Value of Imports calculated on CIF basis (Amount in Rupees)



March 31, 2009Traded Goods 16,583,356 204,475,384

Capital Goods 471,542,062 6,913,843

Total 488,125,418 211,389,227

23) Additional information pursuant to the provision of paragraph 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956 (Amount in Rupees)

ParticularsOpening stock Purchases Sales Closing stock

QtyUnits

ValueRs

QtyUnits

ValueRs

QtyUnits

ValueRs

Qtyunits

ValueRs

Communication Equipments

4,308 11,353,573 51,380 54,329,859 52,583 64,438,043 3,105 6,229,057

(482) (9,971,220) (21,967) (128,940,771) (18,141) (137,105,484) (4,308) (11,353,573)

Multiplexor with spares

1,531 67,327,617 35,796 2,085,057,774 21,759 1,744,799,499 15,568 462,546,351

(36) (10,179,727) (243,517) (1,066,439,868) (242,022) (1,052,393,822) (1,531) (67,327,617)

Computer with accessories

1,043 46,764,137 16,084 3,656,360,937 15,192 3,222,206,769 1,935 608,383,930

(797) (6,992,733) (15,058) (544,058,191) (14,812) (517,947,519) (1,043) (46,764,137)

Networking equipments

305,589 205,978,914 1,565,240 3,257,571,679 1,562,002 3,157,444,001 308,827 372,644,808

(3,069) (64,675,545) (404,842) (15,546,83,573) (102,322) (1,602,359,028) (305,589) (205,978,914)

Software 3,238 67,283,456 151,182 1,218,390,957 137,186 1,272,626,898 17,234 124,543,765

(6,133) (83,729,527) (56,373) (952,514,767) (59,268) (1,099,317,085) (3,238) ( 67,283,456)

Other Nil 39,197,082 Nil 89,518,598 Nil 257,597,624 Nil 53,422,770

(Nil) (20,321,130) (Nil) (136,781,764) (Nil) (130,156,871) (Nil) (39,197,083)

Total

315,709 437,904,779 1,819,682 10,361,229,804 1,788,722 9,719,112,834 346,669 1,627,770,681

(10,517) (195,869,882) (741,757) (4,383,418,935) (436,565) (4,539,279,809) (315,709) (437,904,780)

The relevant information regarding turnover, purchases, opening and closing stocks in respect of other spares’ traded /consumed is given only in value terms and no detailed quantitative break-up is given, as the items are too numerous to be conveniently grouped.


71Spanco Limited

Similarly, in case of networking equipment the quantity disclosed above pertains only to items quantifiable in units and not other materials.

The Company is also engaged in the development of Computer Software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and the information as required by paragraph 3, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956.

24) Previous Year Comparatives :

The figures of the previous year have been regrouped, rearranged and reclassified wherever necessary to conform to current year’s classification.

As per our report of even date for and on behalf of the Board of directors of Spanco limitedfor Khandelwal Jain & co. Chartered Accountants

Shivratan agarwal Kapil puri deepak BhagchandaneyPartner Chairman and Managing Director Deputy Managing Director Membership No. 104180

prem iyer Company Secretary


72

information required as per part iV of Schedule Vi of the companies act, 1956.

Balance Sheet aBStract and company’S general BuSineSS profile

i. registration details Registration No. 0 0 3 2 4 2 2 State Code : 1 1

Balance Sheet Date : 3 1 0 3 2 0 1 0

Date Month Yearii. capital raised during the year (amount in rs. thousands)

Public Issue : N I L Rights Issue : N I L

Bonus Issue : N I L Private Placement : 2 9 6 6 0 0

iii. position of mobilisation and deployment of funds (amounts in rs. thousands)Total Liabilities 1 8 1 4 8 0 7 6 Total Assets 1 8 1 4 8 0 7 6

Sources of FundsPaid-up Capital 2 8 0 6 5 0 Reserves & Surplus 4 1 9 5 7 3 1

Secured Loans 5 8 6 5 1 4 0 Unsecured Loans 5 5 3 8 1 6

Deferred Tax Liability 3 9 6 2 9

Application of FundsNet Fixed Assets 3 0 9 5 0 6 2 Investments 1 0 1 8 8 3 8

Net Current Assets 6 8 2 1 5 0 8 Misc. Expenditure N I L

Accumulated Losses N I L

iV. performance of company (amount in rs. thousands)

Total Revenue 1 3 2 6 0 5 6 8 Total Expenditure 1 2 2 5 7 7 0 1+ - + -

Profit / Loss before tax P 1 0 0 2 8 6 7 Profit / Loss After Tax P 6 1 8 7 2 8(Please tick appropriate box ‘+’ for profit ‘-’ for loss)

Earning per Share in Rs 2 3 . 1 5 Dividend Rate % 1 0

V. generic names of three principal products / Services of the company (as per monetary terms)Item Code No. (ITC Code) Product Description

8 5 1 7 6 2 7 0 M U L T I P L E X O R

Item Code No. (ITC Code) Product Description

N . A N E T W O R K I N G E Q U I P M E N T

for and on behalf of the Board of directors of Spanco limited Kapil puri deepak Bhagchandaney prem iyer Chairman and Managing Director Deputy Managing Director Company Secretary

Place : Gurgaon Date : August 27, 2010


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consolidated financial statements

Annual Report 2009 -10

75Spanco Limited

auditors’ report

To

The Board of Directors of Spanco Limited

1. We have audited the attached consolidated balance sheet of Spanco Limited (“the Company”) and its subsidiaries and joint ventures (together referred to as “the Group”), as at March 31, 2010 and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto together referred to as ‘the financial statements’. These financial statements are the responsibility of the Company’s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of the subsidiaries and joint ventures of the Company, whose financial statements reflect total assets of Rs. 54,454.22 Lacs as at March 31, 2010, total revenue of Rs. 19,202.71 Lacs and net cash flows amounting to Rs. 285.86 Lacs for the year then ended. These financial statements and other financial information have been audited by other auditors whose reports have been furnished to us, and our opinion is based solely on the report of other auditors.

4. We report that the consolidated financial statements have been prepared by the Group’s management in accordance with the requirements of Accounting Standards (AS) 21, Consolidated Financial Statements and Accounting Standard (AS) 27, Financial Reporting of Interests in Joint Ventures notified pursuant to the Companies (Accounting Standards) Rules, 2006, (as amended).

5. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financial information of the components, and

to the best of our information and according to the explanations given to us, we are of the opinion that the attached consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the consolidated balance sheet, of the state of affairs of the Group as at March 31, 2010;

(b) in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and

(c) in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.

For Khandelwal Jain & Co. Chartered Accountants Firm Registration No. : 105049W

(Shivratan Agarwal) Partner Membership No. 104180

Place: Mumbai Date : August 27, 2010

76

consolidated Balance sheet as at march 31, 2010

(Amount in Rupees) Schedule

No. March 31,

2010March 31,

2009SOURCES OF FUNDS Shareholders' Funds Share capital A 280,650,000 206,500,000 Share application money pending allotment - 6,768 Reserves and surplus B 4,056,162,475 3,113,378,992

4,336,812,475 3,319,885,760 Loan Funds Secured loans C 6,170,083,563 5,735,270,044Unsecured loans D 1,799,609,724 2,533,894,151

7,969,693,287 8,269,164,195 Minority Interests 16,595,088 15,120,125 Deferred tax liability 54,229,378 15,328,721 (Refer Note 13 to Schedule “X”)

TOTAL 12,377,330,228 11,619,498,801 APPLICATIONS OF FUNDS Fixed Assets E Gross Block 4,311,919,522 2,451,464,920 Less: Accumulated Depreciation and Amortisation 879,467,595 625,641,791 Net Block 3,432,451,927 1,825,823,129Capital Work-in-Progress including Capital Advances 2,750,623,921 2,726,836,946 (Refer Note 2 (c ), 6 and 7 to Schedule "X") Goodwill on Consolidation[Net off Capital Reserve of Rs. 105,806 (P.Y. Rs. 105,806)]

165,016,247 165,016,247

Investments F 199,137,582 338,942,960 Foreign Currency Monetary Item Translation Difference Account G (442,812) 65,243,500 Deferred Tax Asset 12,504 26,256,440 (Refer Note 13 to Schedule "X") Current Assets, Loans and Advances Inventories H 2,019,039,104 793,989,663 Sundry Debtors I 6,729,317,948 5,213,207,556 Cash and Bank Balances J 627,122,601 513,148,026 Other Current Assets K 418,034,690 426,721,708 Loans and Advances L 3,743,577,605 4,141,643,527

(A) 13,537,091,948 11,088,710,480Less: Current Liabilities and Provisions Current Liabilities M 7,627,731,037 4,651,441,076 Provisions N 80,583,520 40,683,940

(B) 7,708,314,557 4,692,125,016Net Current Assets (A - B) 5,828,777,391 6,396,585,464 Miscellaneous Expenditure (to the extent not written off or adjusted) Pre-Operative Expenditure O 1,753,466 1,707,955 (Refer Note 22 to Schedule "X") Debit Balance in Profit and Loss Account - 73,086,160

TOTAL 12,377,330,228 11,619,498,801 Notes to Accounts X

The schedules referred to above and notes to accounts form an integral part of the Consolidated Balance Sheet.

As per our report of even date for and on behalf of the Board of directors of spanco limitedfor Khandelwal Jain & co. Chartered Accountants

shivratan agarwal Kapil puri deepak BhagchandaneyPartner Chairman and Managing Director Deputy Managing Director Membership No. 104180


Place: Mumbai Place: Gurgaon Date: August 27, 2010 Date: August 27, 2010


77Spanco Limited

consolidated profit and loss account for the year ended march 31, 2010

The schedules referred to above and notes to accounts form an integral part of the Consolidated Profit and Loss Account.





(Amount in Rupees) Schedule

No. March 31,

2010March 31,

2009INCOME Sales and Services P 13,708,301,706 8,099,062,943 Other Income Q 144,989,680 125,241,389

Increase / (Decrease) in Inventories R 1,189,151,464 257,205,231 TOTAL 15,042,442,850 8,481,509,562

EXPENDITURE Raw Materials Consumed S 1,613,800 18,134,485 Purchase and Direct Expenses T 11,066,413,814 5,149,439,520 Personnel Cost U 1,093,181,772 1,013,676,262 Operating and Other Expenses V 875,301,512 1,333,420,470 Interest and Finance Expense / Income (Net) W 668,021,371 466,453,355 Depreciation and Amortisation E 380,505,290 259,210,045 Less : Transferred From Revaluation Reserves 12,470,880 368,034,409 (Refer Note 8 to Schedule "X") Preliminary / Pre-Operative Expenses Written Off O 19,825 2,853,977

TOTAL 14,072,586,503 8,243,188,115 Profit Before Tax 969,856,347 238,321,448 Less: Provision for Tax: Income Tax 288,162,222 145,098,035 Minimum Alternative Tax 12,685,962 1,100,930 Deferred Tax 65,144,594 (25,929,609)Fringe Benefit Tax - 8,794,257 Wealth Tax 180,000 190,000 Total Tax Expense 366,172,778 129,253,613 Profit After Tax But Before Adjustment for Taxation of Earlier Year 603,683,569 109,067,834 Less: Taxation of Earlier Year Income Tax 33,919,030 6,799,830 Minimum Alternative Tax 6,054,698 - Less: Prior Period Expenses / (Income) - 22,610 Profit After Tax 563,709,840 102,245,394 (Add) / Less: Minority Interest's Share in (Loss) / Profit of Subsidiary 1,474,963 1,570,083 Add / (Less): Share of Profit / (Loss) for the year of Associate Company - (139,914)Add / (Less):Profit / (Loss) on Disposal of Subsidiary (139,000) - Profit for the Year 562,095,877 100,535,397 Balance in Profit and Loss Account brought forward (73,086,160) 442,913,124 Profit Available for Appropriation 489,009,717 543,448,521 Appropriations: Proposed Dividend 28,065,000 14,032,500 Tax on Proposed Dividend 4,769,647 2,384,823 Transfer to Debenture Redemption Reserve 85,000,000 600,000,000 Transfer to Legal Reserve 1,686,322 117,358

119,520,969 616,534,681 Surplus carried to Balance Sheet 369,488,748 (73,086,160)Earnings per share - Basic and Diluted (Refer Note 12 to Schedule "X") Basic [Nominal value of shares Rs 10 each (P.Y. Rs. 10)] 21.03 4.87 Diluted [Nominal value of shares Rs 10 each (P.Y. Rs. 10)] 21.03 4.87 Notes to Accounts X

78

consolidated cash flow statement for the year ended march 31, 2010

(Amount in Rupees)



CASH FLOW FROM OPERATING ACTIVITIESNet Profit after Taxation and Extraordinary Items 562,095,877 100,535,397 Adjustments for:Short Provision of earlier year's Income Tax 33,919,030 6,799,830 Short Provision of earlier year's Minimum Alternative Tax 6,054,698 -Prior Period Adjustments - 22,610 Depreciation / Amortisation 368,034,409 259,210,045 Provision for Income Tax 288,162,222 146,198,965 Provision for Minimum Alternative Tax 12,685,962 - Provision for Deferred Tax 65,144,594 (27,355,036)Provision for Fringe Benefit Tax - 8,794,257 Provision for Wealth Tax 180,000 190,000 Interest Income (60,729,967) (100,237,211)Dividend Income (2,595) (9,190)Sundry Liabilities Written Back (1,372,831) (1,836,312)(Profit) / Loss on Sale of Assets (Net) (17,096,664) (58,203,703)Interest Expenses 728,751,338 566,690,566 Amortisation of Softwares Developed Cost 42,499,862 17,472,481 Amortisation of Foreign Exchange Loss 24,699,683 32,621,749 Preliminary Expenses Written Off - 2,853,977 Loss / (Profit) on Investments / Sale of Shares - (25,278,612)Loss / (Profit) on Sale of Investment / Gain on Current Investment (Net) (407,000) - Bad Debts Written Off / Provisions for Doubtful Debts and Advances 2,197,558 272,821,956 Foreign Currency Fluctuations (55,624,092) 58,523,567

1,437,096,207 1,159,279,938 Operating Profit Before Working Capital Change 1,999,192,084 1,259,815,335

(Increase) / Decrease in Margin Money kept against Letter of Credits (79,019,020) (559,248)(Increase) / Decrease in Inventories (1,267,549,303) (332,278,789)(Increase) / Decrease in Loans and Advances 244,993,148 (2,073,078,843)(Increase) / Decrease in Other Current Assets (55,014,523) (92,332,912)(Increase) / Decrease in Sundry Debtors (1,518,307,950) (1,879,078,512)(Decrease) / Increase in Provisions 22,672,088 6,905,829 (Decrease) / Increase in Current Liabilities 2,963,183,979 2,627,066,956

310,958,421 (1,743,355,519)Cash Generated from Operations 2,310,150,505 (483,540,185)Income Tax paid Net of Refund (170,701,646) (332,225,100)Net Cash (used) / Generated from Operating Activities 2,139,448,859 (815,765,285)

CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets including Capital Work-in-Progress (2,089,808,818) (2,212,543,392)Forex adjustment on Fixed Asset 9,691,584 (14,212,327)Purchase of Investments - (396,006,528)Sale proceeds of Investments 134,999,999 10,000,000 (Increase) / Decrease in Fixed Deposit 341,460,125 (1,227,860)Dividend received - 4,621 Interest received 124,431,508 67,673,784 (Increase) / Decrease in Miscellaneous Expenditure (45,512) (3,131,105)Proceeds from Sale of Fixed Asset & Capital Work-in-Progress 436,925,103 120,980,581 Net Cash (used) / Generated in Investing Activities (1,042,346,010) (2,428,462,228)


79Spanco Limited

cash flow statement for the year ended march 31, 2010 (contd.

(Amount in Rupees)



CASH FLOW FROM FINANCING ACTIVITIESIncrease in Share Capital (Including Share Premium) 296,600,000 - Decrease in Share Application Money (6,768) - Dividend paid during the year (16,417,323) (48,318,935)Increase in Capital Reserve - 60,586,500 Decrease in Convertible Warrants - (60,586,500)Increase in Secured Loans 462,636,234 2,561,608,566 Increase in Escrow Account 662 3,916 Increase / (Decrease) in Minority Interests 1,474,963 12,095,088 Increase / (Decrease) in Unsecured Loans (734,284,427) 1,186,247,213 Interest paid (730,689,849) (523,509,899)Net Cash (used) / Generated in Financing Activities (720,686,507) 3,188,125,950 Net Increase / (Decrease) in Cash and Cash Equivalents 376,416,342 (56,101,562)Cash and Cash Equivalents at beginning of the period 131,866,161 187,967,721 Cash and Cash Equivalents at end of the period 508,282,503 131,866,159

Component of Cash and Cash EquivalentsCash on hand 1,187,124 5,430,158 Cheques on hand 44,199,986 - Cash with Banks- in Current Accounts 463,331,386 126,872,658 - as Margin Money in Fixed Deposits 101,541,263 22,522,244 - Other Fixed Deposits 16,862,842 358,322,967 Cash and Bank balance as per Balance Sheet 627,122,601 513,148,026 Less: Balance kept in Escrow Account 435,993 436,655 Less: Margin Money in Fixed Deposits 101,541,263 22,522,244 Less: Other Fixed Deposits 16,862,842 358,322,967 Cash and Cash Equivalents at end of the period 508,282,503 131,866,161

Note: Cash and Cash Equivalents include Balance in Unpaid Dividend Account of Rs. 380,328 (P.Y. Rs. 300,382) which is not available for use.





80

schedules annexed to and forming part of consolidated Balance sheet as on march 31, 2010

(Amount in Rupees)

March 31, 2010

March 31, 2009

Schedule A : Share Capital Authorised 47,000,000 (P.Y. 47,000,000) equity shares of Rs. 10/- each and 3,000,000 (P.Y. 3,000,000) redeemable preference shares of Rs. 10/- each 500,000,000 500,000,000 Issued, Subscribed and Paid up 28,065,000 (P.Y. 20,650,000) equity shares of Rs 10/- each fully paid up (Refer Note 5 to Scheduled “X”)

280,650,000 206,500,000

280,650,000 206,500,000

Schedule B : Reserves and Surplus Investment Allowance Reserve (utilized) Opening Balance 32,302 32,302 Less: Transfer to General Reserve 32,302 - Closing Balance - 32,302 Capital Reserve : Opening Balance 60,586,500 - Add : Share Warrants Forfeited - 60,586,500 Closing Balance 60,586,500 60,586,500 Legal Reserve: Opening Balance 117,358 - Add: Transfer from Profit and Loss Account 1,686,322 117,358 Closing Balance 1,803,680 117,358 Securities Premium Account : Opening Balance 1,771,963,645 1,771,963,645 Add: During the year on issue of Equity Shares 222,450,000 - Closing Balance 1,994,413,645 1,771,963,645 General Reserve : Opening Balance 895,995,197 398,774,016 Less: a) Exchange differences of earlier years transferred to the "Foreign Currency Monetary Item Translation Difference Account"

- (3,945,143)

Add: a) Exchange differences of earlier year transferred to Capital Work-in-Progress - 1,166,324 b) Transfer from Debenture Redemption Reserve 150,000,000 500,000,000 c) Transfer from Investment Allowance Reserve (utilized) 32,302 - Closing Balance 1,046,027,499 895,995,197 Debenture Redemption Reserve : Opening Balance 337,637,000 237,637,000 Add: Transfer from Profit and Loss Account 85,000,000 600,000,000 Less: Transfer to General Reserve 150,000,000 500,000,000 Closing Balance (Refer Note 4 to Schedule “X”)

272,637,000 337,637,000

Revaluation Reserve: Opening Balance - - Addition during the year 332,253,384 - Deduction on account of depreciation on revalued amount 12,470,880 - Closing Balance (Refer Note 8 to Schedule “X”) [Cumulative amount withdrawn Rs. 12,470,880 (P.Y. Nil)]

319,782,504 -


81Spanco Limited


(Amount in Rupees)

March 31, 2010

March 31, 2009

Foreign Currency Translation Reserve :

Opening Balance 47,046,990 (11,476,577)

Less: Adjustments during the year (55,624,092) 58,523,567

Closing Balance (8,577,102) 47,046,990

(Refer Note 2 (1) (v) to Schedule "X")

Profit and Loss Account

Opening Balance - -

Balance brought from Balance Sheet 369,488,748 -

Add: Adjustments during the year - -

Closing Balance 369,488,748 -

4,056,162,475 3,113,378,992

Schedule C : Secured Loans

Redeemable Non Convertible Debentures 1,120,000,000 1,420,000,000

200,000 (P.Y. 500,000) Debentures of Rs. 1,000/- each (P.Y. Rs.1000/- each)

20 (P.Y. 20) Debentures of Rs 1,000,000/- each (P.Y. Rs. 1,000,000/- each)



(Refer Note 3 (a) and 4 to Schedule "X")

1,120,000,000 1,420,000,000

Term Loans :

From Banks

- Rupee Loan 961,831,514 489,600,168

- Foreign Currency Loan (Refer Note 3 (b)(i) to Schedule “X”)

193,353,958 634,730,714

From Others : 190,343,192 74,642,209

(Refer Note 3 (b)(ii) to Schedule "X")

Vehicle Loan 10,103,977 9,377,830

(Refer Note 3 (c) to Schedule "X") 1,355,632,641 1,208,350,920

Working Capital Loans from Banks:

- Rupee Loan 3,624,140,350 3,009,921,937

- Foreign Currency Loan 70,310,572 96,997,187

(Refer Note 3 (d) to Schedule "X") 3,694,450,922 3,106,919,124

6,170,083,563 5,735,270,044

Schedule D : Unsecured Loans

Short Term Loan from Banks 138,241,833 100,000,000

From Others

- Finance Lease Obligation 955,595,444 942,431,531

- Joint Venture Partners 111,151,359 71,762,620

- Short Term Loans 594,621,088 1,419,700,000

1,799,609,724 2,533,894,151

82


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5

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380

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45


83Spanco Limited


(Amount in Rupees)

March 31, 2010

March 31, 2009

Schedule F : Investments

Long Term Investments (at cost):

A Investment Properties:

Gross Block 116,300,129 116,300,129

Opening Accumulated Depreciation 12,000,659 6,511,214

Add : Depreciation for the year 5,214,973 5,489,445

Less : Accumulated Depreciation 17,215,632 12,000,659

Net Block 99,084,497 104,299,470

[ Mortgaged with HDFC Bank ]

Total Investment Properties: 99,084,497 104,299,470

B Unquoted Trade Investments:

Global Respondez Services Limited

614,000 (P.Y. 1,614,000) equity shares of Rs.10/- each, fully paid up 6,140,000 16,674,301

Add / Less: Profit (Loss) earned during the year - (139,913)

Less: Accumulated Profit earned from Associate - (800,809)

6,140,000 15,733,579

Add/ (Less): Capital Reserve on Consolidation - 406,421

Less: Sale of Investments - 10,000,000

6,140,000 6,140,000

In Others:

MRS BPO LLC, New Jersey

50 (P.Y. 50) Equity Shares fully paid up 47,240,100 47,240,100

One Touch India

245 (P.Y. 245) Equity Shares (without par value) fully paid up 3,256,327 3,256,327

Omania E-Commerce L.L.C.

225,000 (P.Y. 225,000) Equity Shares of RO 1 each, fully paid up 42,339,600 42,339,600

Abbey Infraproject Private Limited

Share Application Money Pending Allotment - 135,000,000

Total Non -Trade (Unquoted) Long Term Investments: 98,976,027 233,976,027

Current Investments (at lower of cost and market value)

A Unquoted Non-Trade Investments:

Mutual Funds

UTI India Lifestyle Fund (100,000 units of Rs.10 each) 1,000,000 593,000

(P.Y. 100,000 units of Rs.10 each)

Reliance Mutual Fund (7,201.835 units of Rs. 10 each) [Daily Dividend Re-Invest Plan] 77,058 74,463

(P.Y. 6,374.27 units of Rs. 10 each)

Total Non-Trade (Unquoted) Current Investment: 1,077,058 667,463

TOTAL INVESTMENTS: 199,137,582 338,942,960

84


(Amount in Rupees)

March 31, 2010

March 31, 2009

Schedule G : Foreign Currency Monetary Item Translation Difference Account

Opening balance 65,243,500 -

Add: Exchange loss difference arising during the year ( Net of Tax of Rs.33,264,398) (40,986,629) 97,865,249

(Refer Note 2(c) and (l)(iii) to Schedule "X")

Less: Amortised during the year (24,699,683) (32,621,749)

Closing Balance (442,812) 65,243,500

Schedule H : Inventories (at lower of cost and net realisable value)

Raw Materials - 1,093,029

Finished Goods:

Traded Goods 1,583,944,744 391,746,067

Manufactured Goods - 1,945,576

Goods in Bonded Warehouse 49,627,799 49,627,799

Softwares :

Softwares Developed 138,182,267 136,383,963

Softwares Under Development 80,621,129 40,435,067

Work-in-Progress 156,179,512 157,291,906

Consumables 10,483,653 15,466,255

2,019,039,104 793,989,663

Schedule I : Sundry Debtors

(Refer Note 10, 17 and 18 to Schedule "X")

Debts outstanding for a period exceeding six months

Unsecured, Considered Good 1,940,487,557 2,177,229,971

Unsecured, Considered Doubtful 1,957,328 270,085,035

Others, Unsecured Considered Good 4,788,830,391 3,035,977,585

6,731,275,276 5,483,292,591

Less : Provision for Doubtful Debts 1,957,328 270,085,035

6,729,317,948 5,213,207,556

Schedule J : Cash and Bank balances

Cash on Hand 1,187,124 5,430,158

Cheques on Hand 44,199,986 -

Balances with Scheduled Banks:

in Current Accounts* 463,331,386 126,872,658

as Margin Money in Fixed Deposits 101,541,263 22,522,244

Other Fixed Deposits (as cash collateral against Bank Guarantee) 16,862,842 358,322,967

627,122,601 513,148,026

* Includes Balance in Unclaimed Dividend Account Rs.380,328 (P.Y. Rs. 300,382) and Balance in Escrow Account Rs. 435,993 (P.Y. Rs. 436,655)


85Spanco Limited


March 31, 2010

March 31, 2009

Schedule K : Other Current Assets Unbilled Revenue 13,365,320 1,701,698 Receivable against Sale of Investment 250,970,000 250,970,000 Interest accrued on Fixed Deposits 4,217,255 67,918,796 Share Application Money receivable 149,482,115 -Others - 106,131,214

418,034,690 426,721,708

Schedule L : Loans and Advances (Refer Note 10, 17 and 19 to Schedule "X") Unsecured, Considered Good: Loans to Company under the Same Management - 40,237,112 Amount due from Joint Ventures (Net) 4,513,999 18,500,497 Advances Recoverable in Cash or in kind or for the Value to be Received 3,418,508,717 3,490,981,399 Advance Income Tax (Net) 26,274,824 179,502,036 Fringe Benefit Tax (Net of Provision for Taxation C.Y. Rs. Nil, P.Y. Rs. 5,960,000) 1,370,662 1,216,225 Due from Government Authorities 53,539,002 45,057,073 Inter Corporate Deposits 46,304,620 169,271,338 Security and Other Deposits 193,065,781 196,877,849 Unsecured, Considered Doubtful: Advances Recoverable in Cash or in kind or for the Value to be Received - 1,522,800

3,743,577,605 4,143,166,327Less : Provision for Doubtful Advance - 1,522,800

3,743,577,605 4,141,643,527

Schedule M : Current Liabilities Acceptances : For Capital Goods 1,018,409,577 871,404,330 For Traded Goods 1,481,966,894 1,150,826,077 Sundry Creditors : (Refer Note 17 to Schedule "X") (a) Total Outstanding Dues of Micro and Small Enterprises* (b) Total Outstanding Dues Creditors Other Than Micro and Small Enterprises: For Capital Goods 128,925,929 128,009,666 For Traded Goods 3,551,576,955 1,194,430,210 For Traded Goods ( Escrow ) 206,310,280 306,787,927 For Services 241,685,139 204,036,717 Advances from Customers 139,242,727 12,071,593 Amount Due to Other Company under the Same Management (Refer Note 10 to Schedule "X")

26,117,265 4,226,405

Investor Education and Protection Fund shall be credited by the following amounts (as and when due):- Unclaimed share application money received for allotment of shares and due for refund 435,993 436,655 - Unclaimed dividend 380,328 300,382 Other Liabilities** 747,661,244 689,310,300 Book Overdraft 13,144,803 15,788,401 Interest Accrued but not Due on Loans 71,873,903 73,812,414

7,627,731,037 4,651,441,076 * The Company does not have any dues payable to any Micro and Small Enterprises as at the year end. The identification of Micro and Small Enterprises is based on management’s knowledge of their status. The Company has not received any intimation from suppliers regarding their status under the MSMED Act, 2006. Hence, disclosures, if any, relating to amounts unpaid as at the year end, together with interest paid/ payable as required under the said Act have not been given.** Other Liabilities includes Security Deposits amounting to Rs. 88,034,931 which are repayable after one year.

(Amount in Rupees)

86


March 31, 2010

March 31, 2009

Schedule N : Provisions

Provision for Minimum Alternative Tax (Net) 18,740,660 1,100,930

Provision for Fringe Benefit Tax (Net) 3,500 421,086

Provision for Gratuity 8,250,444 7,998,032

Provision for Compensated Leave Balances 20,533,921 14,531,569

Provision for Wealth Tax 220,348 215,000

Proposed Dividend 28,065,000 14,032,500

Tax on Proposed Dividend 4,769,647 2,384,823

80,583,520 40,683,940

Schedule O : Pre-operative and Preliminary Expenditure

Pre-operative Expenditure (Refer Note 22 to Schedule "X")

Opening Balance 1,707,955 1,430,826

Add: Addition during the year 200,012 277,129

Less: Amortised / Deletion during the year 154,501 -

Closing Balance 1,753,466 1,707,955

Preliminary Expenditure

Opening Balance - -

Add: Addition during the year - 2,853,977

Less: Amortised during the year - 2,853,977

Closing Balance - -

1,753,466 1,707,955

(Amount in Rupees)


87Spanco Limited

schedules annexed to and forming part of consolidated profit and loss account for the year ended march 31, 2010

March 31, 2010

March 31, 2009

Schedule P : Sales and Services

Sale of Manufactured Goods 2,506,061 25,561,019

Less : Excise Duty (210,161) (3,335,887)

Sale - Network Integration / Other Traded Goods 10,811,565,064 4,756,358,205

Service Income - Network Integration and Others 355,551,519 435,092,048

Sale of Developed Softwares / Services 416,722,618 1,193,924,739

Service Income - BPO Operations 1,819,655,597 1,110,535,286

Service Income - Network Engineering Services 302,511,008 580,927,533

13,708,301,706 8,099,062,943

Schedule Q : Other Income

Rent Income :

On Lease of Properties / Premises [Tax Deducted at Source Rs. 12,660,552 (P.Y. Rs. 7,439,406)]

75,974,612 29,547,303

Dividend Income from Mutual Fund 2,595 9,190

Sundry Balance Written Back 1,372,831 1,836,312

Profit on Sale of Fixed Assets 17,096,664 59,281,192

Profit on Sale of Investments - 25,955,000

Provision for Bad Debts Written Back 38,428,200 -

Miscellaneous Income 12,114,778 8,612,392

144,989,680 125,241,389

Schedule R : Increase / (Decrease) in Inventories

Opening Stock :

Finished Goods 443,308,684 197,325,895

Work in Progress 157,291,906 146,069,464

600,600,590 343,395,359

Closing Stock :

Finished Goods 1,633,572,542 443,308,684

Work in Progress 156,179,512 157,291,906

1,789,752,054 600,600,590

1,189,151,464 257,205,231

Schedule S : Raw Materials Consumed

Opening Stock 1,093,029 -

Add: Purchases 520,771 19,227,514

Less: Closing Stock - 1,093,029

1,613,800 18,134,485

(Amount in Rupees)

88


March 31, 2010

March 31, 2009

Schedule T : Purchase and Direct Expenses

(Refer Note 7 to Schedule "X")

Purchases 10,176,169,603 4,473,079,914

On conversion of Fixed Assets into Inventory 358,402,898 -

Freight and Forwarding 8,323,201 40,745,170

Amortization of Softwares Developed Cost 42,499,862 17,472,481

Cost of Materials Consumed - Network Engineering Division 99,332,103 120,656,837

Warranty and Support Charges 15,326,787 10,917,116

Other Direct Expenses 366,359,360 486,568,003

11,066,413,814 5,149,439,520

Schedule U : Personnel Cost

(Refer Note 7 to Schedule "X")

Salaries, Wages and Bonus 1,005,968,138 938,782,182

Company's contribution to:

- Provident Fund 40,388,575 24,962,911

- Other Funds 3,308,730 3,118,220

Gratuity 5,325,472 7,033,604

Privilege Leave 11,045,331 10,080,328

Placement and Training Cost 13,472,875 19,406,165

Staff Welfare Expenses 13,672,651 10,292,852

1,093,181,772 1,013,676,262

Schedule V : Operating Expenses (Refer Note 7 to Schedule "X") Electricity Charges 51,213,257 45,692,663 Vehicle Hire Charges 61,104,266 57,466,069 Call Centre Charges 15,214,703 10,373,710 Hire Charges 1,058,180 276,533 Operational Cost 13,715,656 32,362,849 Lease Line Charges 52,802,384 49,621,089 Sales and Business Promotion 16,746,241 9,915,835 Repairs and Maintenance - On Building 1,226,758 844,301 - On Others 35,533,895 52,641,785

Office Establishment Expenses 18,775,483 13,199,227 Payment to Auditor - Statutory Audit Fees 2,791,808 3,034,483 - Other Matters 888,350 100,000 - Limited Review 1,700,000 950,000 - Out-of-Pocket Expenses 91,542 6,723

5,471,700 4,091,206

(Amount in Rupees)


89Spanco Limited


March 31, 2010

March 31, 2009

Rent Expenses :

- On Lease of Properties / Premises 153,595,803 146,776,509

- On Lease of Assets 83,368,183 16,519,381

Legal, Professional and Consultancy Charges 74,012,502 86,705,714

Travelling and Conveyance 57,148,671 80,895,384

Duties, Rates and Taxes 15,507,611 40,105,793

Communication Expenses 33,234,237 41,457,694

Insurance 15,756,286 10,785,674

Motor Car Expenses 5,911,990 7,713,374

Printing Charges 13,335,674 15,959,680

Advertisement Expenses 2,207,751 8,072,206


Dimunition in Value of Current Assets 1,275,892 282,000

Security Charges 7,790,938 11,580,495

Sales Commission 14,150 10,307,912

Provision for Doubtful Debts and Advances 2,197,558 272,821,956

Foreign Exchange Fluctuation (Net) 52,263,078 223,435,497

Loss on Sale of Fixed Assets (Net) - 1,077,489

Loss on Sale of Investment of Associate - 394,387

Miscellaneous Expenses 60,118,982 49,422,308

875,301,512 1,333,420,470

Schedule W : Interest and Finance Expense / Income (Net)

(Refer Note 6 and 7 to Schedule "X")

Interest Expense

- on Fixed Period Loans/ Finance Lease 146,169,004 103,484,609

- on Cash Credit / Overdraft Facilities 383,666,487 304,574,193

- on Debentures 44,793,444 36,163,019

- Others 80,673,393 60,587,353

Less : Interest Income (Tax Deducted at Source Rs. 33,300,605 [P.Y Rs. 68,574,692])

- on Fixed Deposits 41,871,941 51,621,522

- on Inter Corporate Deposits 14,510,291 47,870,093

- on Joint Venture - 444,567

- Others 4,347,735 301,028

Tax Deducted at Source Rs. 60,130,107 (P.Y Rs.18,393,130)

Bank and Finance Charges 73,449,010 61,881,392

668,021,371 466,453,355

(Amount in Rupees)

90

ScheduleS annexed to and forming part of conSolidated accountS for the year ended march 31, 2010

SCHEDULE “X”

NOTES TO ACCOUNTS

These consolidated financial statements relate to Spanco Limited (“the Company”) and its subsidiary companies and joint ventures. The Company along with its subsidiaries and joint venture constitutes “the Group”.

1) Nature of Operations

Spanco Limited along with its subsidiaries, joint venture companies (collectively known as ‘the Group’) is one of the leading Technology Infrastructure Company with dedicated System Integration and BPO arms. Spanco is SEI CMM Level 3 and ISO 9001-2008 certified.

Spanco has a dedicated Telecom, System Integration (SI) unit which ranks amongst the best in the country and caters to very large SI projects across Government, Power and Telecom Service Provider’s space. The Company provides high quality, cost effective scalable SI solutions. Spanco Limited also has a formidable presence in the BPO space spread over four continents and catering to India, US, Europe and Middle East.

Within the SI Business, the Company has dedicated teams addressing opportunities in e-Governance, Power Sector, Transport, Telecom Service Provider and PSUs. Spanco has a dedicated unit “Government Transformation Services” which utilizes its propriety services to help central and various state governments become more efficient by the use of information technology.

The Company’s Service Provider Business Unit caters to carriers in India providing solutions to meet the networking infrastructure requirements using cutting-edge technologies.

The Company’s offerings within the Power space revolve around utilizing information technology to increase the efficiency of power distribution. Spanco is empanelled as a SI with Power Finance Corporation (PFC) and aggressively participating in modernization programs like R-APDRP and Distribution Franchise.

In the Business Process Outsourcing services, the Group helps companies to achieve improved business performance. It brings together state-of-the art infrastructure, advanced technology, best people, and process excellence, to deliver services that create a real value impact on its clients businesses. The service portfolio includes inbound and outbound call management and back office operations support.

2) Statement of Significant Accounting policies

a. Basis of preparation and consolidation

These consolidated financial are prepared in accordance with accounting principles generally accepted in India under the historical cost convention except in case of building which is revalued, on the accrual basis of accounting, and complying in all material respects with the notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 ‘As amended’ and the relevant provisions of the Companies Act, 1956 (‘the Act’). The accounting

policies applied by the Group are consistent with those used in the previous years except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in accounting policy hitherto in use. The financial statements of all the subsidiaries and joint ventures are drawn upto the same reporting date as of the Company i.e. March 31, 2010 except in case of two joint ventures i.e. Spanco Golden Key Solutions LLC, Oman and Spanco Golden Key Solutions WLL, Qatar whereby the financials are drawn and considered upto December 31, 2009. There are no material significant events between the periods January 1, 2010 to March 31, 2010.

The consolidated financial statements are prepared in accordance with the principles and procedures required for the preparation and presentation of consolidated financial statements as laid down under AS 21, ‘Consolidated Financials Statements’, and AS 27, ‘Financial Reporting of Interest in Joint Venture’, issued by the Institute of Chartered Accountants of India (ICAI). The financial statements of the Company and its subsidiaries are consolidated on a line by line basis by adding together like items of assets, liabilities, income and expenses. The financial statements of the joint ventures have been consolidated in accordance with the proportionate consolidation method prescribed in AS 27. Any excess of the cost to the parent company of its investment in a subsidiary or joint venture and the parent company’s portion of equity of that entity at the date, at which such investment is made, is described as goodwill and recognized separately as an asset in the consolidated financial statements. When the cost to the parent of its investment in a subsidiary or joint venture is less than the parent’s portion of equity of that entity at the date at which such investment in the entity is made, the difference is treated as a capital reserve and is netted off against the goodwill on consolidation to the extent possible. All significant inter-company transactions, related unrealised profits / losses, and balances between the entities included in the consolidated financial statements have been eliminated.

Minority Interests in the net assets of consolidated subsidiaries consists of the amount of equity attributable to minority shareholders at the dates on which the investments are made by the Company in subsidiary companies and further movements in their share in the equity, subsequent to the dates of investments as stated above. If the losses applicable to the minority in a consolidated subsidiary exceed the minority interest in the equity of the subsidiary, the excess, and any further losses applicable to the minority, are adjusted against the majority interest except to the extent that the minority has a binding obligation to, and is able to, make good the losses. If the subsidiary subsequently reports profits, all such profits are allocated to the majority interest until the minority’s share of losses previously absorbed by the majority has been recovered.


91Spanco Limited

The significant accounting policies adopted by the Group, in respect of the consolidated financial statements are set out below.

i. The following subsidiary companies are considered in the consolidated financial statements:

Name of Subsidiary Country ofIncorporation

Ownership Interest

31-Mar-10 31-Mar-09

Spanco BPO Ventures Limited India 100.00% 100.00%

Spanco BPO Services Limited* India 100.00% 100.00%

Spanco Respondez BPO Private Limited * India 95.00% 95.00%

Spanco Europe Limited United Kingdom 100.00% 100.00%

Spanco Limited U.A.E. 100.00% 100.00%

Spanco (S) Pte. Limited Singapore 100.00% 100.00%

Global Respondez Inc. United States of America

100.00% 100.00%

Spanco Global Solutions Private Limited India 100.00% 100.00%

Spanco Great IT Private Limited India 100.00% 100.00%

Skandsoft Technologies Private Limited India 51.00% 51.00%

Spanco Holdings Inc.* United States of America

100.00% 100.00%

Spanco Infratel Private Limited India 100.00% 100.00%

Spanco IT Infrastructure Private Limited India 100.00% 100.00%

New Delhi Teletech Private Limited India 100.00% 100.00%

Spanco CSC Limited (formerly known as New Delhi Tele-Ventures Private Ltd)

India 100.00% 100.00%

Spanco International Pte. Limited (upto March 30, 2010)

Singapore Nil 100.00%

Spanco Respondez Services Limited (upto March 30, 2010)

India Nil 100.00%

Spanco (Mauritius) Limited**(upto June 30, 2009) Mauritius Nil 100.00%

* These companies are the subsidiaries of Spanco BPO Ventures Limited

** This company is the wholly owned subsidiary of Spanco (S) Pte. Limited

ii. The joint ventures considered in the consolidated financial statements are:

Name of Joint VentureCountry of

Incorporation

Ownership Interest

March 31, 2010 March 31, 2009

Spanco Golden Key Solutions LLC* Oman 50.00% 50.00%

Spanco Golden Key Solutions WLL* Qatar 40.00% 40.00%

Bharat BPO Services Limited India 49.75% 49.75%

* These companies are the joint ventures of Spanco Limited, Dubai U.A.E.

92

b. Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. The difference between the actual result and estimate are recognised in the period in which results are known or materialised.

c. Fixed Assets and Capital Work-in-Progress

Fixed assets including assets taken under finance lease arrangements are stated at cost except for Building which is stated at revalued amount, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

In respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.

Capital Work in Progress is carried at cost comprising of direct cost, attributable interest and related incidental expenditure. The advances given for acquiring fixed assets are shown under Capital Work-in-Progress.

d. Depreciation / Amortisation

Depreciation is provided on fixed assets (other than assets for the Build-Own-Operate-Transfer (BOOT) project, leasehold improvements and intangible assets)on written down value method except in case of foreign subsidiaries / joint ventures where depreciation is provided on straight line method. This exception constitutes 8.28 % (Previous year 9.75%) of the depreciation charge and 5.72 % (Previous year 4.39%) of the accumulated depreciation.

The rates of depreciation except in case of foreign subsidiaries / joint ventures are as provided under Schedule XIV to the Companies Act, 1956. In case of foreign subsidiaries / joint ventures, depreciation has been provided based on the rates prescribed by the laws applicable in the respective countries. The rates being applied as specified above are also in accordance with the management’s estimates of useful lives of the assets.

Type of Assets Rate of Depreciation as per Schedule XIV

W.D.V.BuildingGuest HouseInvestment Property

5.00%

Plant and MachineryOffice EquipmentElectrical Installation

13.91%

Furniture and Fittings 18.10%Computers 40.00%Motor Vehicles 25.89%

Plant and Machinery acquired for BOOT projects has been amortised over the life of projects. Leasehold Improvements are amortised over the un-expired period of leasehold premises on a straight-line basis.

e. Impairment

i. The carrying amount of Goodwill on consolidation is reviewed at each balance sheet date. The carrying amounts of other assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

ii. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

f. Intangible Assets

Goodwill

Goodwill (other than Goodwill on consolidation) is amortised on a straight-line basis over a period of ten years.

Patent

Costs relating to patents, which are acquired, are capitalised and amortised on a straight-line basis over a period of five years ( useful life as assessed by the management).

Software

Software is capitalised where it is expected to provide future enduring economic benefits. Capitalisation costs include license fees and costs of implementation / system integration services. The management estimates the useful lives of intangible assets to be five years and expects to derive economic benefits from such assets


93Spanco Limited

evenly over the period of its useful life. Accordingly, software is amortised over a period of five years on a straight- line basis.

g. Leases

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.

If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss account on a straight-line basis over the lease term.

Assets subject to operating leases have been included under the head ‘Investment Property’ and ‘Fixed Assets’. Lease income is recognised in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account.

h. Borrowing Cost

Borrowing Cost that are directly attributable to the acquisition, construction or production of an qualifying asset are capitalised as part of the cost of the asset. A qualifying asset is one that necessary takes substantial period of time to get ready for intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred.

i. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. Investment property is amortized at the rate of 5% p.a. on written down value.

j. Inventories

Inventories of raw materials and consumables:

Inventories are ascertained on First-in-First-out method, and are valued at lower of cost and net realisable value.

Inventories of manufactured finished goods:

Inventories are valued at lower of cost and net realisable value. Cost includes cost of conversion of raw material into finished goods.

Inventories of traded goods:

Inventories are ascertained on the specific identification of cost method, and are valued at lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

Software developed and held for sale:

Software products developed/under development are stated at cost. Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Software development costs incurred on products ready for marketing are amortised equally over a period of four years or earlier, based on Management’s evaluation of expected sales volumes and duration of the products life cycles.

Work-in-progress of NED division:

The work-in-progress in case of network engineering services is valued based on the percentage of completion of work completed under respective contracts.

k. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue recognised in excess of billing is classified as unbilled revenue.

Sale of Goods:

Revenue is recognised on delivery/dispatch of goods when the significant risks and rewards of ownership of the goods have passed to the buyer. Excise Duty, Sales Tax and VAT are deducted from the amount of turnover.

Income from Services:

Revenues from maintenance contracts / network integration services are recognised pro-rata over the period of the contract as and when services are rendered. Revenue and costs associated with network engineering services are recognised as revenue and expenses respectively by reference to the stage of completion of the project at the balance sheet date.

94

Revenue from call centre services rendered is recognised as the service is performed.

Revenue from rendering of services for facilitating 139 for IRCTC, Dial-a-Ticket, Dial-a-Package and Advertisement through jingles is recognised on accrual basis as per agreement with respective parties, where no significant uncertainty exists regarding realisation of the revenue.

Software Sales:

Software sales are recognised on customer’s acceptance of delivery.

Interest:

Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

l. Foreign Currency Translations

Foreign Currency Transactions:

(i) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

(ii) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

(iii) Exchange Differences

Exchange differences in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a “Foreign Currency Monetary Item Translation Difference Account” in the enterprise’s financial statements and amortised over the balance period of such long-term asset/liability but not beyond accounting period ending on or before 31st March, 2011.

Exchange differences arising on the settlement of monetary items not covered above, or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise.

(iv) Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts other than those relating to long term foreign currency monetary items are recognised in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.

The Group does not enter into forward exchange contracts for trading or speculation purposes.

(v) Translation of Integral and Non-integral foreign operation

The financial statements of an integral foreign operation are translated as if the transactions of the foreign operation have been those of the Company itself.

In translating the financial statements of a non-integral foreign operation for incorporation in financial statements, the assets and liabilities, both monetary and non-monetary, of the non-integral foreign operation are translated at the closing rate; income and expense items of the non-integral foreign operation are translated at exchange rates at the dates of the transactions; and all resulting exchange differences are accumulated in a foreign currency translation reserve until the disposal of the net investment.

On the disposal of a non-integral foreign operation, the cumulative amount of the exchange differences which have been deferred and which relate to that operation are recognised as income or as expenses in the same period in which the gain or loss on disposal is recognised.

When there is a change in the classification of a foreign operation, the translation procedures applicable to the revised classification are applied from the date of the change in the classification.


95Spanco Limited

m. Employee Benefits

Short Term Employee Benefits

Short term employees benefits are recognised as an expenses at the undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

Retirement Benefits

i. Provident Fund is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due.

ii. Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method made at the end of each year. The gratuity liability is funded through group gratuity insurance scheme of Life Insurance Corporation of India.

iii. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method at the end of each year.

iv. Actuarial gains/losses are immediately taken to profit and loss account.

v. The Group has made all the payments including taxes, insurance and other social security schemes for employees’ benefits in accordance with the relevant laws and regulations of the country of residence, applicable to the various companies in the Group. The same is charged to Profit and Loss Account on accrual basis. There are no obligations beyond the Company’s contribution.

n. Accounting for taxes on income

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities across various countries of operation are not set off against each other as the company does not have a legal right to do so. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Group has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits.

At each balance sheet date the Group re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Group writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

Minimum Alternative Tax (‘MAT’) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the (MAT) credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Group reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Group will pay normal Income Tax during the specified period.

o. Expenditure on new projects [including arrangements on BOOT basis]

Expenditure directly relating to setting up / development costs of projects are capitalised. Indirect expenditure incurred during setting-up period is capitalised as part of the indirect setting-up / development costs to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the setting-up period which is not related to the setting-up activity nor is incidental thereto is charged to the Profit and Loss Account. Income earned during setting-up phase is deducted from the total of the indirect expenditure.

p. Earnings Per Share (‘EPS’)

Basic EPS is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted EPS, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

96

q. Provisions/ Contingent Liabilities and Contingent Asset A provision is recognised 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 disclosed by way of Notes to Accounts. Contingent Assets are not recognised in the Financial Statements.

r. Cash and Cash Equivalents

Cash and cash equivalents in the cash flow comprise cash at bank and in hand and short term investment with an original maturity period of three months or less.

s. Prior Period Items

Prior Period Items are included in the respected heads of accounts and material items are disclosed by way of Notes to Accounts.

t. Pre-Operative Expenditure

Expenses incurred till the commencement of business are carried forward as preoperative expenditure and would be capitalised to the fixed assets / charged off to the profit and loss account, as appropriate, in the year of commencement of business.

u. Segment Reporting Policies

Identification of Segments:

The Group’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

The analysis of geographical segments is based on the countries in which the markets for the major operating divisions/ companies of the Group operate.

Inter Segment Transfers:

The Group generally accounts for inter-segment sales and transfers as if the sales or transfers were to third parties at current market prices.

Allocation of Common Costs:

Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.

Unallocated Items:

It includes general corporate income and expense items which are not allocated to any business segment.

Segments Policies:

The Company prepares its segment information in conformity with the accounting policies adopted for

preparing and presenting the financial statements of the Company as a whole.

3) particulars of security provided and other details of loans

a. The debentures of Rs.200,000,000 (P.Y. 500,000,000) are secured by a legal mortgage in English form in favour of the trustees on all the Company’s properties situated at C01/5008, 5th Row, Ground Floor, A wing, City Mall situated at Plot No 4, Sector 19, Vashi Navi Mumbai, Maharashtra.

The debentures of Rs.920,000,000 (P.Y. 920,000,000) are secured by a legal mortgage in English form in favour of the trustees on all the Company’s properties situated at C01/5008, 5th Row, Ground Floor, A wing, City Mall situated at plot No 4, Sector 19, Vashi Navi Mumbai, Maharashtra.

The above debentures of Rs.920, 000,000 are further secured by way of first charge, ranking pari passu, on all the fixed assets (moveable and immoveable) except all assets having exclusive charge in favour of respective lenders. It is also secured by way of first charge, ranking pari passu, on all the fixed assets (moveable and immoveable) of Spanco BPO Services Limited and Spanco Respondez BPO Private Limited, subsidiaries of the Company. The charge on the assets of the subsidiaries has been subsequently released on August 5, 2010.

b. i) Term loans from banks are secured by first mortgage/equitable mortgage and charges on immovable properties including investment property; second pari passu charge on all moveable assets of the Company and also by way of personal guarantee of a director and pledge of equity shares held by the Company in one of the wholly owned subsidiary.

ii) Term loans from others are secured by respective assets taken on loan.

c. Vehicle Loans are secured by way of hypothecation of vehicles acquired out of the said loans.

d. Working capital facilities from banks are secured by way of first charge on all the movable fixed assets, stock, entire book debts, receivables and other current assets of the Company both present and future ranking pari passu with all banks and also by way of personal guarantee of a director.

e. Amounts pertaining to term loans repayable within one year Rs.1,404,006,424 (Previous year Rs. 2444, 636,434).

4) Issue of debentures

During the year 2008-09 the Company had issued 500,000 secured redeemable non-convertible debentures of Rs. 1,000 each amounting to Rs.500,000,000 carrying an interest at MIBOR plus 800 BPS (floor 13.95% & CAP 14% p.a.) on a private placement basis. During the year, the tenure of debentures amounting Rs.400,000,000


97Spanco Limited

was restructured by the debenture holder so as to redeem the same in eight equal instalments starting from 28th December 2009 upto June 30, 2010. Out of the restructured debentures, debentures of Rs. 200,000,000 were redeemed during the year along with interest thereon.

The Company had issued 20 secured redeemable non- convertible debentures of Rs.1,000,000 each amounting to Rs. 20,000,000 on a private placement basis during the year 2008-09 carrying an interest at 11% payable half yearly and the same are due for redemption in two equal installments on 3rd July 2012 and 2013.

The Company had issued 200 secured redeemable non- convertible debentures of Rs.1,000,000 each amounting to Rs. 200,000,000 on a private placement basis during the year 2008-09 carrying an interest at 11.25% payable monthly and the same are due for redemption in two equal installments on 3rd July, 2012 and 2013.

The Company had issued 700 secured redeemable non- convertible debentures of Rs.1,000,000 each amounting to Rs. 700,000,000 on a private placement basis during the year 2008-09 carrying an interest at 11.25% payable half yearly and the same are due for redemption in two equal installments on 10th July 2012 and 2013.

The Company has created debenture redemption reserve in accordance with the provisions of section 117C (1) of the Companies Act, 1956.

5) Issue of Equity Shares

During the year, the Company has issued and allotted 7,415,000 equity shares of Rs. 10/- each at a premium of Rs. 30/- per share to the promoters and other financial institutional investors through preferential issue and raised money to tune of Rs. 296,600,000/- as per details given below:

(Amount in Rupees)

Sr.No.

Name of Allotees Numberof Shares

Nominalvalue ofShare

Subscription Price per

Share Includingpremium

Total Amount

1 Mr. Kapil Puri 3,140,000 10 40 125,600,0002 Mrs. Kavita Puri 370,000 10 40 14,800,0003 M/s. Monet Limited 1,105,000 10 40 44,200,0004 M/s. Elara India

Opportunities Fund Limited

1,400,000 10 40 56,000,000

5 M/s. Ares Diversified 1,400,000 10 40 56,000,000Total 7,415,000 296,600,000

The Company has fully utilized the proceeds of the preferential issue of equity shares, received during the year, for the purpose for which the money was raised.

6) Borrowing costs capitalised during the year(Amount in Rupees)

particulars For the year ended

March 31, 2010

For the year ended

March 31, 2009Interest on Borrowed Funds, Finance Lease and Letter of Credit

302,341,403 183,482,889

Exchange Rate Adjustment Nil 10,549,733 Buyer's Credit Interest Nil 23,665,359 Total 302,341,403 217,697,981

7) Expenditure on new projects

The Company has five BOOT projects underway pertaining to telecom systems integration. The expenses capitalised under these projects and carried forward under capital work-in-progress are as follows:

(Amount in Rupees)particulars For the year

ended March 31, 2010

For the year ended March

31, 2009Cost of Material 726,928,130 447,795,175 Salary 87,201,484 62,044,543 Travelling and Conveyance 10,612,180 10,468,604 Borrowing cost 79,482,161 28,935,921 Other expenses 17,997,446 11,446,585Total 922,221,401 560,690,828

8) Revaluation of fixed assets

On July 01, 2009 the Company has, based on the report of an independent valuer, revalued its Building by an amount of Rs. 332,253,384/- to disclose its true and fair value and an equivalent amount is credited to Revaluation Reserve Account. Consequent to the said revaluation there is an additional charge of depreciation amounting to Rs.12,470,880/- and an equivalent amount has been withdrawn from Revaluation Reserve Account and credited to Profit and Loss Account. This has no impact on profit for the year.

9) Segment information

a. The Group’s risks and returns are predominantly affected by its operations in different business areas. The Group’s internal organizational and management structure and its system of financial reporting are also organized into different operating divisions. These divisions are the basis on which the Group is reporting its primary segment information. The dominant source of such risks and returns are categorized into two distinct business segments viz. System Integration and Business Process Outsourcing (‘BPO’) services. The composition of these segments is given below:

Business segments

Type of products and services

Telecom Range of solutions in the telecom system integration domain including network engineering services and software sales.

BPO Services International and Domestic call centre

98

b. Primary segment information

(Amount in Rupees)particulars Telecom BpO Total REVENUE External Sales 11,888,646,108 1,819,655,598 13,708,301,706

(6,353,746,048) (1,745,316,894) (8,099,062,942)Total Revenue 11,888,646,108 1,819,655,598 13,708,301,706

(6,353,746,048) (1,745,316,894) (8,099,062,942)RESULT Segment Result 1,424,825,886 67,923,151 1,492,888,037 (592,674,347) 12,742,148 (579,932,199)Operating Profit 1,492,888,037 (579,932,199)Interest Expenses Net off Interest Income 668,021,370 (466,453,355)Other Income 144,989,680 (125,241,388)Tax Expenses [including expenses of earlier years (net)] 406,146,506

(136,053,443)Net profit After Tax but before Extraordinary and prior period Items

563,709,841(102,272,402)

(Less)/Add : Prior Period (Expenses)/ Income - (27,011)Add/Less: Share of Profit/(Loss) of Associate Company/Loss on Sale of Subsidiaries

-139,000(139,914)

Less/(Add): Share of Minority Interest in Profit/(Loss) of Subsidiaries

1,474,964(1,570,078)

Net profit for the year 562,095,877(100,535,399)

OTHER INFORMATIONSegment Assets

16,046,160,078(12,675,293,594)

3,571,869,390(2,756,669,672)

19,618,029,468(15,431,963,266)

Unallocated Corporate Assets 465,861,850(807,253,103)

Total Assets 20,083,891,318(16,239,216,369)

Segment Liabilities 7,393,662,441 419,447,256 7,813,109,697 (4,383,241,456) (314,883,865) (4,698,125,321)Unallocated Corporate Liabilities 7,919,127,526

(8,407,725,764) Minority Interests 16,595,088 (15,120,125)Total Liabilities 15,748,832,311

(13,120,971,210) Closing W.D.V. of Segment Fixed Assets (including Capital Work-in-Progress and Advances)

4,279,647,513(2,103,410,268)

1,847,431,653(1,997,611,833)

6,127,079,166(4,101,022,100)


99Spanco Limited

(Amount in Rupees)particulars Telecom BpO Total Unallocated Corporate Fixed Assets (including Capital Work- in- Progress and Capital Advances)

55,996,683(451,637,974)

Total Fixed Assets

6,183,075,849(4,552,660,074)

Segment Capital Expenditure

1,931,172,713(1,048,812,085)

487,452,275(1,072,910,756)

2,418,624,987(2,121,722,842)

Unallocated Capital Expenditure

4,278,007(148,088,328)

Total Capital Expenditure

2,422,902,994(2,269,811,170)

Segment Depreciation and Amortization 169,755,384(65,413,957)

196,572,859(189,190,753)

366,328,244(254,604,710)

Unallocable Depreciation and Amortization 1,706,166(4,605,333)

Segment Non-Cash Expenses other than Depreciation

37,638,743(527,787,501)

110,714,513(21,600,988)

148,353,256(549,388,489)

Unallocated Non-Cash Expenses other than Depreciation

19,825(1,176,660)

i. Secondary segment information(Amount in Rupees)

particulars Revenue by geographical Market

Carrying Amount ofSegment Assets

CapitalExpenditure

India 12,538,591,807 19,297,457,847 2,349,683,094 (6,903,969,137) (15,160,119,711) (2,117,578,128)

USA 662,623,803 274,136,014 - (558,381,759) (172,183,480) (392,852)

UK 212,165,361 32,496,218 18,008,552 (176,494,388) (197,029,262) (8,456,614)

Middle East 294,388,043 280,031,575 17,698,821 (310,936,194) (483,935,720) (84,676,945)

Singapore -394,253 198,225,482 37,512,527 (139,810,098) (218,373,152) (58,706,630)

Others 926,945 1,544,181 - (9,471,367) (7,575,044) -

Total 13,708,301,706 20,083,891,318 2,422,902,994 (8,099,062,943) (16,239,216,368) (2,269,811,170)

b. Notes to Segment Informationi. Segment Revenue and Expenses Common revenues and expenses are allocated to the business segments on a reasonable basis. All other segment

revenue and expenses are directly attributable to the segments.ii. Segment Assets and Liabilities Segment assets include all operating assets used by a segment comprising of fixed assets, debtors, inventories and

loans and advances. While most assets can be directly attributable to individual segments, the carrying amount of certain assets used jointly is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities of the segment comprising of creditors and other liabilities.

iii. The segment capital expenditure includes addition to building of Rs.332,253,584 on account of revaluation.iv. Figures in bracket indicate previous year numbers.

100

10) Related party disclosures under Accounting Standard 18 issued by the Institute of Chartered Accountants of India

a. The following are the names of related parties and description of relationship:

i Key Management personnel

a. Mr. Kapil Puri (Chairman and Managing Director)

b. Mr. Deepak Bhagchandaney (Deputy Managing Director)

c. Mr. Adarsh Bagaria (Whole Time Director)

ii Relatives of Key Management personnel

a. Mrs. Kavita Kapil Puri

b. Mrs. Geeta Deepak Bhagchandaney

c. Mrs. Sarika Adarsh Bagaria

iii Joint Ventures


b. Spanco Golden Key Solutions LLC **

c. Spanco Golden Key Solutions WLL **

** These companies are the joint ventures of Spanco Limited, Dubai, U.A.E.

iv Enterprises Owned or Significantly Influenced by group of Individuals or Their Relatives

a. Percept Trading Private Limited

b. Steady Growth Properties Private Limited

c. Global Respondez Services Limited

b. The following are the volume of transactions with related parties during the year and outstanding balances as at the year end disclosed in aggregate by type of related party:

(Amount in Rupees)

Sr No

Nature of transactions KeyManagement

personnel

Joint Venture Enterprises whereKMp exercise Sig.

Influence

Total

1 Remuneration(inclusive of Perquisites)

44,365,543 Nil Nil 44,365,543

(40,481,340) (Nil) (Nil) (40,481,340)

2 Forfeiture of Convertible Warrants

Nil Nil Nil Nil

(28,350,000) (Nil) (Nil) (28,350,000)

3 Inter Corporate Deposit Refund Nil Nil 41,266,496 41,266,496

(Nil) (Nil) (11,259,408) (11,259,408)

4 Sale of Services Nil 6,638,087 Nil 6,638,087

(Nil) (24,446,146) (Nil) (24,446,146)

5 ICD Interest Nil Nil 1,029,384 1,029,384

(Nil) (Nil) (6,113,630) (6,113,630)

6 Loans/ Advance given

Nil Nil 2,469,167 2,469,167

(Nil) (99,586,256) (4,460,000) (104,046,256)

7 Loans/ Advance refund

Nil 716,472 3,200,000 3,916,472

(Nil) (Nil) (2,600,000) (2,600,000)


101Spanco Limited

(Amount in Rupees)

Sr No

Nature of transactions KeyManagement

personnel

Joint Venture Enterprises whereKMp exercise Sig.

Influence

Total

8 Closing Debtors Nil 19,186,608 Nil 19,186,608

(Nil) (29,346,620) (Nil) (29,346,620)

9 Outstanding Debit Balance-Loans and Advance

Nil 119,398,387 Nil 119,398,387

(Nil) (279,694,416) (Nil) (279,694,416)

10 Outstanding Credit Balance-Loans and Advance

Nil Nil 4,818,602 4,818,602

(Nil) (Nil) (4,087,769) (4,087,769)

11 Investment Closing Balance

Nil Nil 6,140,000 6,140,000

(Nil) (Nil) (6,140,000) (6,140,000)

12 ICD Closing Balance Nil Nil Nil Nil

(Nil) (Nil) (40,237,112) (40,237,112)

Figures in brackets indicate Previous year numbers.

Note - The Following transactions constitute more than 10% of the total related party transactions of the same type:

(Amount in Rupees)

Type of Transaction party Year EndedMarch 31, 2010

Year EndedMarch 31, 2009

Inter Corporate Deposit Refund Global Respondez Services Limited 41,266,496 11,259,408

Sale of Services Bharat BPO Services Limited 5,160,675 10,270,000

Sale of Traded Goods Bharat BPO Services Limited Nil Nil

Interest on Inter-Corporate Deposits Global Respondez Services Limited 1,029,384 6,113,630

Closing Debtors Balance Spanco Golden Key Solution LLC 10,937,999 25,607,949

Bharat BPO Services Limited 6,521,200 Nil

Outstanding Credit Balance- Loans and Advance


Outstanding Debit Balance- Loans and Advance

Spanco Golden Key Solutions LLC 116,689,991 274,019,384

Spanco Golden Key Solutions WLL 2,708,396 5,675,032

Investment Closing Balance Global Respondez Services Limited 6,140,000 6,140,000

Inter-Corporate Deposit Closing Balance Global Respondez Services Limited Nil 40,237,112

Loans / Advance given Bharat BPO Services Limited Nil 99,586,256


Loans / Advance refund Global Respondez Services Limited 3,200,000 2,600,000

102

11) particulars of assets acquired / given under lease

a) Operating leases

Office premise and Plant & Machinery are obtained on operating lease. The lease term for different agreements are from 11 months to 36 months and renewable for further period at the option of the Company. Out of the several contracts three of the contracts contain an escalation clause, two of which with 15% after 3 years and the balance one with 6% after every 11 months. There are no restrictions imposed by lease arrangements. There are no subleases.

(Amount in Rupees)

particulars For the year ended March 31, 2010

For the year ended March 31, 2009

Operating lease payments recognised in the statement of profit and loss during the year as per accounting policy referred in Note 2(h) above:

195,126,103 101,627,094

Minimum lease paymentsTotal of future minimum lease payments payable by the Group:- Not later than 1 year 419,961,214 222,016,219 - Later than 1 year but not later than 5 years 681,089,090 402,215,066 - Later than 5 years Nil NilTotal of future minimum lease payments under operating lease 1,101,050,304 624,231,285

b) Finance leases

Plant & Machinery and Capital Work-in-Progress includes machinery / equipments obtained on finance lease. Lease term is for 36 to 60 months after which legal title is passed to lessee. There is no escalation clause in the lease agreement. There are no restrictions imposed by lease arrangements. There are no subleases.

(Amount in Rupees)



Finance lease payments recognised in the statement of profit and loss during the year as per accounting policy referred in Note 2(h) above:

18,617,729 11,735,921

Total of future minimum lease payments payable by the Group: 1,186,001,147 1,081,530,140Less: Unamortised finance charges 203,906,567 189,961,162 Present value 982,094,580 891,568,979

(Amount in Rupees)

particulars For the year endedMarch 31, 2010


Minimum Lease payments

present Values

Minimum Lease payments

present values

Not later than 1 year 325,047,583 235,955,685 220,946,211 150,391,916Later than 1 year but not later than 5 years

860,953,564 746,138,895 860,583,929 741,177,063

Later than 5 years Nil Nil Nil Nil

Notes:

The following is the general description of significant clauses of above finance leasing arrangement by the Company:

a. During the period of lease the Company cannot create without prior written consent of the lender any other debt nor any mortgage, pledge, hypothecation, charge, lien or encumbrance upon or in respect of hypothecated assets or any part thereof in any manner whatsoever in favour of any person, firm, company or bank.


103Spanco Limited

b. The assets would belong to the Company solely and absolutely and would be free from any and all charges and encumbrances save and except that created in favour of the lender.

The aggregate carrying amount of assets acquired under lease after April 1, 2001, is Rs. 1,189,505,502 as at March 31, 2010 (March 31, 2009 Rs. 1,064,267,953). The details of asset category wise of which are given as below:

(Amount in Rupees)

Asset Category gross bookvalue as at

March 31, 2010

Net book value as at March

31, 2010

gross bookvalue as at

March 31, 2009

Net book valueas at March

31, 2009Tangible Asset Furniture and Fixtures 32,439,413 23,484,794 30,341,413 26,120,923 Plant and Machinery 351,571,902 307,345,007 180,771,117 159,765,258 Computers 125,365,133 72,666,750 101,411,411 81,450,887 Electrical installations 7,134,583 5,013,401 7,134,583 5,666,911 Intangible Assets Software/ Database 91,381,373 62,296,539 68,493,053 55,229,138 Capital Work-in-Progress 718,699,011 718,699,011 736,034,836 736,034,836 Total 1,326,591,415 1,189,505,502 1,124,186,413 1,064,267,953

c) Operating leases – assets given on lease

The Company has leased out premise, Plant & Machinery and Equipments etc. on operating lease. The lease term is for 36 to 60 months. There are escalation clauses in the certain lease agreement and the lease is renewable at the option of the lessee. There are no restrictions imposed by lease arrangement.

(Amount in Rupees)



There are no uncollectable minimum lease payments receivable as at balance sheet date (Previous year: Nil)

Operating lease Income recognised in the statement of profit and loss during the year as per accounting policy referred in Note 2(h) above:

79,581,389 29,903,432

Minimum lease receiptsTotal of future minimum lease receipts receivable by the Group:- Not later than 1 year 78,888,096 76,194,612 - Later than 1 year but not later than 5 years 185,508,955 273,033,180 - Later than 5 years Nil NilTotal of future minimum lease receipts under operating lease 264,397,051 349,227,792

The aggregate carrying amount of investment property given on lease after April 1, 2001 is Rs. 547,240,610 as at March 31, 2010 (March 31, 2009 Rs. 239,429,584).

12) Earnings per Share (EpS) (Amount in Rupees)



Net Profit as per profit and loss account. 562,095,877 100,535,397

Net Profit for calculation of basic & diluted EPS 562,095,877 100,535,397Weighted average number of equity shares in calculating basic EPS 26,724,206 20,650,000Nominal value of shares 10/- 10/-Earnings per share – Basic 21.03 4.87– Diluted 21.03 4.87

104

Against the share warrants outstanding, fair value of equity shares to be issued is less than the issue price and, therefore, are not dilutive.

13) Following are the Major Component of Deferred Tax Asset / (Liability)

(Amount in Rupees)

particulars As at April 1, 2009

Current yearcharge/(credit)

As at March 31, 2010

Difference between book and tax base of fixed assets (55,146,528) (44,534,101) (99,680,629) [-18,572,123] [-36,574,405] [-55,146,528]

Expenses disallowed as per section 43B 5,461,406 2,566,818 8,028,224 [2,041,121] [3,420,285] [5,461,406]

Property Tax 3,065,219 (2,274,420) 790,799 [Nil] [3,065,219] [3,065,219]

Brought Forward Long Term Capital Loss 464,560 42,877,190 43, 341,750 [Nil] [464,560] [464,560]

Differences due to deferment of exchange differences on long term foreign currency monetary items

(35,691,911) 28,421,859 (7,270,052)[Nil] [-35,691,911] [-35,691,911]

Preliminary expenses disallowed as per section 35D 455,471 (119,192) 336,279 [103,685] [351,583] [455,268]

Provision for doubtful debts and advances 92,319,503 (92,319,503) Nil [Nil] [92,319,503] [92,319,503]

Disallowance u/s 40(a)(ia) Nil 236,755 236,755 [Nil] [Nil] [Nil]

Total 10,927,720 (65,144,594) (54,216,874) [-16,427,317] [27,354,834] [10,927,720]

Figures in bracket [ ] indicate Previous year numbers.

14) Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 512,385,767 (Previous year Rs. 1,818,913,391).

15) Contingent Liabilities

(Amount in Rupees)

Sr.No.

particulars As at March 31, 2010


1 Letters of Credit issued by bankers 182,722,008 168,362,488 2 Guarantees given by banks on behalf of the Company 1,775,004,512 1,462,652,804 3 Guarantees and counter guarantees given by the Company 1,595,531,456 2,417,608,744 4 Income Tax Demand 40,103,944 -5 Factoring of Debtors - 2,614,958

Included in this Rs. 2,682,978 (Previous Year: Rs. 2,849,165) pertaining to Company’s share in Contingent liability in Joint Venture.

Notes:

1. Corporate guarantee of Rs.455,800,000 (USD 10.00 Millions) [Previous year Rs. 517,601,300 (USD 10.00 Millions)] given in favor of ICICI Bank, Singapore for providing working capital facility to wholly owned subsidiary Spanco (S) Pte. Limited

2. Corporate guarantee of Rs.520,000,000 [Previous year Rs. 520,000,000] given in favor of Cisco Systems Capital India Private Limited on behalf of wholly owned subsidiary New Delhi Teletech Private Limited


105Spanco Limited

3. Corporate guarantee and undertaking given to One North East, NY for making an offer of grant to wholly owned subsidiary Spanco Europe Limited of Rs.6,204,600 (90,000 pounds) [Previous year Rs. 6,618,998 (90,000 pounds)]

4. Corporate guarantee of Rs.9,456,000 given in favor of Rentworks India Private Ltd. for availing operating lease on behalf of wholly owned subsidiary Spanco BPO Services Limited.

5. Corporate guarantee of Rs.100,000,000 given in favor of IDBI Bank for providing cash credit facility on behalf of wholly owned subsidiary Spanco BPO Services Limited.

6. Corporate guarantee of Rs.120,000,000 given in favor of Bank of Maharashtra for obtaining cash credit facility on behalf of wholly owned subsidiary Spanco Respondez BPO Pvt. Limited.

7. Corporate guarantee of Rs.374,559,108 given in favor of Srei Equipment Finance Private Limited for availing operating lease assistances / facilities on behalf of wholly owned subsidiary Spanco BPO Services Limited.

16) gratuity and other post employment plans:

The Group, except for foreign companies, has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The Company’s scheme is funded with an insurance company in the form of a qualifying insurance policy.

(Amount in Rupees)

particulars For the year ended March

31,2010


31,2009


31,2008

a) The details of the Company's defined benefit plans for its employees are given below

profit and Loss Account:

i) Net employee benefit expense (recognised in employee cost) for the year ended March 31, 2010:

Current Service Cost 97,47,734 8,494,000 4,452,573

Interest on Defined Benefit Obligations 19,57,518 1,470,877 767,266

Expected Return on Plan Assets (1,083,725) (764,531) (427,802)

Net Actuarial (Gain)/ Loss recognised in the year (5,258,106) (2,160,318) (3,221,406)

Net gratuity and Other Cost 5,363,422 7,040,029 1,570,631

Actual Return on plan Assets 939,145 692,297 380,178

Balance Sheet:

Detail of provision of gratuity

Defined benefit obligation 22,046,952 18,148,602 11,108,573

Fair value of the plan assets 13,796,509 10,396,531 5,568,140

ii) Changes in the present value of the defined obligation are as follows:

Opening Defined Benefit Obligation 18,065,868 11,108,572 5,720,083

Current Service Cost 9,747,734 8,494,000 4,452,573

Interest Cost 1,957,518 1,470,877 767,266

Liability Transfer in - - 3,817,859

Actuarial (Gain)/ Loss (6,100,674) (1,385,527) (3,260,875)

Benefits Paid (1,623,495) (1,539,322) (388,333)

Closing Defined Benefit Obligation 22,046,952 18,148,602 11,108,573

106

(Amount in Rupees)

particulars For the year ended March

31,2010


31,2009


31,2008iii) Change in Fair Value of plan Assets: Opening Fair Value of the Plan Assets 10,396,531 5,568,140 3,223,540 Expected Return on Plan Assets 1,083,725 764,531 427,802 Contributions by the Employer 4,879,023 4,828,391 2,344,600

Transfer to Other Company (3,817,859) - - Benefits Paid (1,623,495) (1,539,322) (388,333) Actuarial Gain/ (Loss) 2,878,584 774,791 (39,469) Closing Fair Value of plan Assets 13,796,509 10,396,531 5,568,140 Company's expected contribution to gratuity in 2009-10 4,583,117 5,126,764 1,010,532

Excess of (Obligation over plan assets)/ plan assets over obligation

(8,250,443) (7,752,071) (5,540,433)

(Accrued Liability)/ prepaid benefit (8,250,443) (7,752,071) (5,540,433)iv) Category of plan Assets as a % of the fair value of the

total plan assets as at March 31, 2010: Insurer Managed Funds 100% 100% 100% Total 100% 100% 100%v)

Assumptions used in accounting for the gratuity plan:

% % Discount rate 8 7.75 8 Salary escalation rate 5 5 5 Expected rate of return on plan assets 8 8 8 Employee Attrition Rate 2 2 2

The current year being the third year of adoption of AS 15 (revised) by the Company, the comparative information for the last five years has not been furnished.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

17) Unhedged Foreign currency exposure

Particulars Currency Amount in foreign currency

Equivalent Amount (Rs)

Sundry Debtors

USD 6,878,745 309,103,825(7,716,188) (400,168,644)

GBP 275,039 18,447,482(829,732) (61,467,677)

OMR 180,500 21,193,047(251,613) (32,698,871)

QAR - -(1,957,078) (26,745,311)

SGD - -(550,449) (18,891,915)

CHF 15,625 650,781(7,225) (325,477)


107Spanco Limited



Sundry Creditors

USD 15,846,905 722,287,587(15,317,221) (799,160,210)

JPY 78,860,790 38,641,787(79,107,332) (42,433,964)

SEK - -(8,686) (54,029)

QAR - -(1,049,374) (14,340,682)

OMR - -(104,353) (13,561,338)

SGD - -(14,634) (502,236)

Bank balances EEFC A/C USD 3,559 158,982

(3,559) (184,215)USD USD - - (145,808) (7,607,446)GBP GBP - - (52,955) (3,927,034)Omani Riyal OMR - - (17,259) (2,242,863)Riyal Qatar QAR - - (1,065,266) (14,557,867)Arab Emirates Dirham AED - - (268,487) (3,814,675)Singapore Dollar SGD - - (122,886) (4,217,568)

Cash balances

USD 138 6,228(5,771) (298,981)

GBP 52 3,539(2,342) (172,242)

EURO 1 60(146) (9,979)

SGD 4 122(401) (13,631)

AED - -(70) (986)

OMR 20 2,372(2,994) (389,391)

HKD -(50)

-(334)

QAR -(13)

-(185)

SEK -(300)

-(1,866)

LKR 1,000(1,000)

394(449)

RiYAL 41(-)

4,826(-)

108



Loans Liability

FCNRB USD 5,421,583 247,115,769(13,194,071) (688,391,436)

Secured LoanOMR - -

(260,584) (33,864,715)

QAR - -(434,405) (5,936,555)

Unsecured LoanGBP - -

(5,791) (429,449)

QAR - -(3,576,601) (48,877,620)

Other Liabilities

SGD - -(127,902) (4,389,720)

USD - -(50,027) (2,610,144)

GBP - -(91,874) (6,813,187)

OMR - -(6,031) (783,774)

QAR - -(714,872) (9,769,392)

AED - -(10,000) (142,080)

Loans and Advances Given

USD - -(83,528) (3,547,106)

GBP - -(6,209) (460,447)

QAR - -(1,878,981) (25,678,045)

OMR - -(1,218,574) (158,362,222)

AED - -(60,929) (865,677)

SGD - -(1,320) (45,304)

Figures in bracket indicate Previous year numbers.

18) Included in Sundry Debtors are amounts due to Companies under the Same Management: (Amount in Rupees)

particulars As at March 31, 2010 As at March 31, 2009Bharat BpO Services Limited 6,521,200 1,614,400Maximum Amount outstanding during the year Rs. 13,161,371 (Previous year Rs. 7,026,155) Spanco golden Key Solution LLC 10,937,999 12,803,974Maximum Amount outstanding during the year Rs. 26,224,120 (Previous year Rs. 25,607,949 )Spanco golden Key Solution WLL 1,727,408 315,560Maximum Amount outstanding during the year Rs. 2,879,013 (Previous year Rs. 5,256,049) Total 19,186,607 14,733,934


109Spanco Limited

19) Details of Loans given to Joint Ventures and parties in which directors are interested:

Amount due from Joint Ventures (Amount in Rupees)



Spanco golden Key Solutions WLL




Spanco golden Key Solutions LLC




Total 119,398,387 140,414,711

Amount due for Inter Corporate Deposits from Enterprises where KMP exercise significant influence

(Amount in Rupees)



global Respondez Services Limited Closing balance at the end of the year Nil 40,237,112 Maximum balance at any time during the year 40,237,112 48,859,033There is no repayment schedule in respect of this loan

20) Spanco Great IT Private Limited, Spanco CSC Limited (formerly known as New Delhi Tele Ventures Limited), New Delhi Teletech Private Limited, Spanco IT Infrastructure Private Limited and Spanco Infratel Private Limited, companies incorporated in India, have not commenced business as at March 31, 2010 except New Delhi Teletech Private Limited. Accordingly, no profit and loss account has been prepared. The preoperative expenses incurred till the date of commencement of business will be capitalised to the fixed assets/charged off to the Profit and Loss account as appropriate.

Spanco Respondez Services Limited has been sold out during the year hence related preoperative expenses have been removed.

21) Following is the share of our assets, liabilities, income and expenses in the Joint Venture included in this consolidated accounts:

(Amount in Rupees)particulars As at

March 31, 2010As at

March 31, 2009 Balance Sheet Items Share Application Money Pending Allotment 197,698,530 198,483,980 Reserves and Surplus (249,494,334) (154,991,428) Secured Loans 137,111,601 166,647,764 Unsecured Loans 436,520,414 229,574,301 Fixed Assets Gross Block 402,913,848 384,668,356 Less : Depreciation 113,209,642 51,775,809 Net Block 289,704,206 332,892,548 Capital Work-in-Progress - - Investments 42,339,600 42,339,600

110

(Amount in Rupees)particulars As at

March 31, 2010As at

March 31, 2009 Inventories 2,265,436 159,457 Sundry Debtors 124,622,555 80,874,201 Cash and Bank Balances 5,996,676 18,594,524 Loans and Advances 213,322,070 206,702,006 Other Current Assets 116,058 1,156,312 Current Liabilities 94,731,527 79,204,640 Provisions 2,549,340 3,002,460 profit & Loss Items Sales and Services 316,878,606 267,971,047 Other Income 344,641 5,179,030 Increase / (Decrease) in Stock 2,116,736 24,783

Total 319,339,983 273,174,860 Purchase and Direct Expenses 109,342,724 169,252,075 Personnel Cost 155,370,756 102,410,065 Operating and Other Expenses 52,631,192 69,690,617 Interest and Finance Charges 19,726,292 14,436,186 Depreciation 63,647,719 49,698,315 Preliminary Expenses w/off - 2,845,921

Total 400,718,683 408,333,178 profit/(Loss) Before Tax (81,378,699) (135,158,318)Less: Provision for Tax - Current 2,092,000 - - Deferred - - - Wealth Tax - - - Fringe Benefit Tax - 420,446 profit/(Loss) After Tax (83,470,699) (135,578,765)

22) Details of pre-Operative Expenditure:

(Amount in Rupees)


Addition during

the year

Charged off/Deletion

during the year


Legal Costs645,694

(571,838)79,234

(73,856)(50,215)

-674,713

(645,694)

Salaries300,000

(300,000)--

--

300,000(300,000)

General Admin Expenses63,987

(210,190)38,042

(-146,203)(77,931)

-24,098

(63,987)

Travelling Expenses341,129

(341,129)--

--

341,129(341,129)

Tax7,669

(7,669)6,500

---

14,169(7,669)


111Spanco Limited

(Amount in Rupees)


Addition during

the year

Charged off/Deletion

during the year


Interest and Finance Charges97,888

-76,237

(97,888)(6530)

-167,595(97,888)

Addition on Acquisition of Subsidiary

251,588-

-(251,588)

(19,825)-

231,763(251,588)

Total1,707,955

(1,430,826)200,013

(277,129)(154,501)

-1,753,467

(1,707,955)

Figures in bracket represent previous year figures.

23) Goodwill arising on consolidation of subsidiary companies amounting to Rs. 165,016,247 has been tested for impairment as at March 31, 2010 and management has assessed that there is no impairment of Goodwill as at March 31, 2010.

25) previous Year Comparatives:

The figures of the previous year have been regrouped, rearranged and reclassified wherever necessary to conform to current year’s classification.

As per our report of even date for and on behalf of the Board of directors of Spanco limitedfor Khandelwal Jain & co. Chartered Accountants

Shivratan agarwal Kapil puri deepak BhagchandaneyPartner Chairman and Managing Director Deputy Managing Director Membership No. 104180



112

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www.spancotele.com www.spanco.in www.spancobpo.com www.respondez.com

Documents

SPANCO - Moneycontrol.com · Spanco’s transformation into a tougher, sharper, larger and more well-defined organisation is an ongoing process. the year 2008-2009 had set the tone