AFTEK INFOSYS LIMITEDaftek.com/pdf/ar04-05.pdfAFTEK INFOSYS LIMITED ANNUAL REPORT 2004 - 2005 AFTEK...

AFTEK INFOSYS LIMITED

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2004 - 2005

Mr. Ranjit Dhuru Chairman

Mr. Nitin Shukla Executive Director

Mr. Mahesh Vaidya Executive Director

Mr. Sunil Desai Executive Director

Mr. Promod Broota Executive Director

Dr. S.S.S.P. Rao Non-Executive Director

Mr. Shrikant Inamdar Non-Executive Director

Mr. V. J. Masurekar Non-Executive Director

Mr. Mahesh Naik Non-Executive Director

Mr. Sandip Save Non-Executive Director

M A N A G E M E N T T E A M

Mr. Ranjit Dhuru CEO

Mr. Nitin Shukla CFO

Mr. Mahesh Vaidya CTO

Mr. Sunil Desai Ex Director - Centre for Excellence

Mr. Promod Broota Ex Director - Planning

Mr. Ashutosh V. Humnabadkar Sr Vice President - Products

Mr. Charuhas V. Khopkar Sr Vice President - Quality

Mr. Ravindranath U. Malekar Sr Vice President - Support

Mr. Mukul S. Dalal Sr Vice President - Smart Products

C O M P A N Y S E C R E T A R Y

Mr. C.G. Deshmukh

R E G I S T E R E D O F F I C E

Aftek House, 265 Veer Savarkar Marg, Shivaji Park,

Dadar, Mumbai 400 028

BANKERS

Bank of India

Gohil House, L. J. Road,

Mumbai 400 026.

The Hongkong and Shanghai

Banking Corpn. Ltd.,

Asha Mahal,

46/B Dr. G. Deshmukh Marg,

Mumbai 400 026.

AUDITORS

M/s. V.D. Joshi & Co.,

Chartered Accountants,

2 Jai Ashirwad, Y.R. Tawde Road,

Dahisar (West), Mumbai 400 068.

REGISTRARS & TRANSFER AGENTS

M/s. Bigshare Services Pvt. Ltd.

E-2/3, Ansa Industrial Estate,

Sakivihar Road, Andheri (East),

Mumbai 400 072.

BOARD OF DIRECTORSB O A R D O F D I R E C T O R S

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Message fromthe Chairman and CEO Dear Shareholder,

Last year your Company turned in a sterling performance

yet again, keeping the growth pace above 42 per cent. Your

Company is now in the Rs. 200 crore region (USD 45.5 million).

In this, the good news is not just that we have landed fish; the

good news is that we have mastered the art of fishing. This

consistent growth and scaling up of operations is neither magic

nor happenstance but a result of your Company’s evolved

business model and sound business strategy.

On the global canvas, western economies, particularly

US and Europe, are finally crawling out of economic slowdown.

The corporate world in the West has acknowledged the

imperative reality of outsourcing as a means of cost-cutting.

As a consequence, India Inc. stands to benefit as the world’s

preferred destination for IT outsourcing. Several recent

western publications (Business Week and Fortune among them)

validate the emergence of India Inc. as a global IT outsourcing

base. Simultaneously, we find IT spearheading economic

growth back home in India. This has positioned India as a

strong competitor to China in the Asian economic zone.

The huge opportunity proffered by globalization

continues to draw a large number of players to the IT industry

and, in the years to come, we are likely to witness the inevitable

impact of the forces of demand and supply. Indian IT

companies that purely leverage the cost benefit as a USP are

likely to be squeezed between wafer thin margins (due to a

dwindling dollar coupled with escalating service cost) and

the migration of business to more cost efficient countries.

Thus, there is a strong need to innovate a business model

where the differentiator is not cost alone but tangible value

addition. The business model thus evolved should be based

on the strengths and capabilities of individual organizations.

Thinking differentlyYour Company’s niche is high-end technology and as such

technology leveraging has to be the pivot of Aftek’s business

model. Your Company’s business model was created not by

accident but by a thought process that was simultaneously

meticulous, evolving and lateral. At Aftek we call this the

‘Thinking Out Of The Box’ concept. In other words, we believe

that following the hoof-prints of the herd can often lead one

to the edge of the precipice.

We believe that

following the

hoofprints of the herd

can often lead one

to the edge of the

precipice.

Ranjit Dhuru

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Thinking Out of The Box is not only intellectually

simulating but commercially imperative to stay relevant in

today’s competitive market. Think differently or drown in

anonymity, that is the single most important learning from

the intense jostling in the global marketplace. Fortunately

for Aftek, it has always ridden the ‘technology’ horse rather

than the ‘lower-cost’ mare. Leveraging of technology and IPRs

has bestowed a special capability on Aftek vis-à-vis its

competitors while delivering solutions to its clients. Aftek’s

business model thus evolved has proven so efficient and

scalable that in the last five years it has powered a

phenomenal growth of over 46 per cent CAGR.

A vindication of the success of your Company’s

business model comes from yet another source. Red Herring,

a highly acclaimed US based global technology publication,

has selected your Company amongst small-cap companies

(USD 300 million – 1 billion) for the ‘Red Herring Small Cap 100

Awards’. According to Red Herring, these unheralded

companies are the barometers for new opportunities and

challenges in the global economy, possessing innovative

technology and smart business models that can drive them

to the next level of competition. You will be glad to know

that yours is the only Indian company to have featured in the

200 short listed companies world-wide (you may read more

about this at www.redherring.com).

Early in its life, along with becoming technology savvy

Aftek became debt-free too. Aftek’s financial strength was not

only the excess cash it had accumulated but also as its capability

for raising more. When you have been growing steadily for the

past five years, you need to consolidate and manage growth.

You need to chart out your route to further growth. One

approach is organic, calling for vertical and horizontal scaling.

The other approach is inorganic where you acquire or invest in

companies that could become spokes to your hub.

With this in mind and with an appetite for increasing

the stakeholders’ value, Aftek evolved a concept of the

‘Inorganic Ring’ or ‘Value Ring’. On this outer ring sit Aftek’s

invested companies who need independent management

and business plans to bring efficiency and growth in their

respective markets. These companies are either in Aftek’s focus

area or are in the process of monetizing its IPRs.

For instance when Aftek acquired Arexera in 2003, the

objective was limited: to gain a strong entry into European

markets for software professional services. On closer look,

Aftek’s management sensed a new opportunity that could be

exploited by monetizing the acquired IP not only in the

enterprise space but also in the internet space. Hence, even

as Arexera was empowered to address the enterprise market,

a new company was created - which we now call ‘Seekport’ -

to address the internet markets.

Seekport’s potentialToday, both the companies are on a strong growth path.

Seekport particularly has, in a short span, established itself

amongst the leading search engines in Europe. In fact, it

would be flattering when Seekport is considered as a serious

threat for Google in Europe.

With ‘Baidu’, a relatively unknown search-engine from

China (operating only in China and Chinese speaking areas)

getting phenomenal valuation (over USD 4 billion) on listing

at NASDAQ, it is felt that a similar opportunity exists for

Seekport in Europe. This is how the Aftek business model,

with its inorganic ring of companies, creates larger stakeholder

value and wealth.

The recent investment in V-soft Inc. (www.v-softinc.com)

has enhanced your Company’s footprint in the software

professional services arena in USA. V-soft now sits on Aftek’s

inorganic ring of invested companies with a possibility of fully

integrating with your Company in future. New and large clients

especially from the telecommunications, engineering and

security area have been added to Aftek’s list of customers. This

marketing and front-end engine is expected to spearhead

strong growth in the United States for the next few years.

With its meticulously thought-out and carefully

executed business strategy Aftek is now poised to grow at an

even stronger pace aiming at realization of more wealth and

stakeholder value.

Yours truly,

Ranjit Dhuru

‘Think differently or

drown in anonymity’,

is the single most

important learning from

the global marketplace.

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Management

Discussion & Analysis

Industry Structure & Developments

For the past five years Information Technology has been

the prime force driving India Inc. It was the IT industry

that earned India global recognition and it was from its

success that young Indians got energized. However, today it

is not the IT sector alone that is booming; all sectors of the

economy are poised to grow at a pace that would have been

unimaginable in the near past. As India’s IT industry matures,

companies are moving up the value chain. IT enabled services

too are blossoming. The growth of the IT industry is far

outpacing all other industries and it is estimated that by 2010

it will be the largest contributor to India’s exports. Different

IT companies have different strategies beginning with a call

center at the lowest end to cutting-edge technology creators

at the top end. The IT Industry is growing on a CAGR of 28%

and exports are expected to touch USD 87 billion in 2008.

Opportunities & Threats

Aftek is positioned in the cutting-edge technology creator

arena where very few India companies exist. However, with

the success of this pioneering group of companies the

industry is bound to see several other Indian companies

heading in this direction in the future. The bulk of companies

who refuse to graduate from a ‘cost-only advantage’ model

to either a ‘technology creator’ or a consulting model are

unlikely to extend their existence into the next decade. The

cost of doing business, particularly the remuneration of

knowledge-based worker, is going up. (According to press

reports, India has the highest salary revision percentage in

comparison to its Asian neighbors). This situation creates a

low-margin and near-zero profit situation for companies that

survive on the cost-only advantage. This is the biggest threat

faced by the IT industry.

On one hand is the high attrition rate in the industry, with

professional mobility increasing with acquired experience;

on the other hand is a striking scarcity of trained manpower.

Hence the huge opportunity created by the large demand for

outsourcing to India co-exists with the threat as mentioned

above. Like other nations (Israel, for instance) who

metamorphosed from being outsourcing IT destinations to

cutting-edge technology creators, India too needs to hone

its strategy for converting this huge outsourced opportunity.

Aftek has successfully transformed itself into a cutting-edge

technology company and, leveraging its financial muscle, has

taken a strong position in western technology companies

particularly in Europe where Aftek is a proud owner of a

cutting-edge German IT company in the Enterprise Search

Space. Aftek has not only managed and integrated its

acquisition but has spun out an exciting company, Seekport,

which is making huge waves in the search engine arena. In

fact, it is the only European engine to compete with the likes

of Google and Yahoo. Today, reputed financial publications

like Euro have singled out Seekport along with MSN and Yahoo

as serious threats to Google in Europe. This is the enviable

status that Aftek enjoys.

Business Review

Aftek’s revenues from the software services

business has gone up by 57.88% from Rs

1073 million during FY04 to Rs 1694 million

in FY05. The Company’s revenues from its

software services out of Europe have been

to the tune of 40.85% and the revenue from

US and Japan were 59.15%.

Business MixFor the year ended June 2005 while revenues from Products

business contributed 10.71% of the revenues, Services

contributed 86.75% and the balance came from Smart Products

Group. It should be remembered that the contribution of

Smart Products Group (2.54%) is a segment of a larger pie in

the year 2005 as compared to the year 2004.

Nitin ShuklaNitin ShuklaNitin ShuklaNitin ShuklaNitin ShuklaCFO

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� Design and Implementation of

Operations Support Systems come

within its purview.

� It drives Technology

Certifications, Partnerships and

Standards Compliance within Aftek.

� Aftek values and respects the

potential of Academic Institutions in

research and the CTO’s office very

carefully nurtures these

relationships.

� As Aftek’s Technical mouthpiece,

the CTO’s office directs Market

Communications.

In recent years, Aftek has focused

on the fast-growing Wireless

Networking & Tele-communications

domain and has developed several

Intellectual Properties (IPs) based on

technologies like Bluetooth, WiFi,

VoIP etc. As we continue to excel and

keep pace with the changes in these

segments, we have identified

emerging technologies like UWB,

WiMax etc. for further IP

development this year. We are

consolidating our Switching and

Routing expertise into reusable IPs.

We remain strongly committed to

Open Source technologies like Linux

and Java. In the Search domain, we

are developing products in the areas

of Performance-based Advertising,

Desktop and Local Search, as well as

Collaboration. You will see all these

technologies powering Aftek’s

Products, Solutions and Services -

and cumulatively they will make a

big difference!

Mahesh VaidyaDIRECTOR AND CHIEF TECHNOLOGY OFFICER

Intellectual Property forms

the very core of Aftek’s

business model. And,

much like the sun’s core, it

burns Intellectual Fuel to

promote Aftek’s health and wealth.

Over the years, it has helped Aftek

maintain its cutting edge in

Technology and Business, a fact

recently acknowledged by Red

Herring too. Aftek’s commitment to

technology is vindicated by its

continued and significant

investments of time, effort and

money towards development of

Intellectual Property. Aftek is one of

very few Indian companies

recognizing the need for Chief

Technology Officer’s position and

office. Aftek’s out-of-the-box

approach to Technological

supremacy has returned rich

dividends.

The CTO’s office acts as the focal

point for Aftek’s technology drive.

� It prepares technology roadmaps,

manages development and/or

acquisition, dissemination and

implementation of technologies for

developing cutting-edge technology

solutions. Here, it works very closely

with the Centre of Excellence for

incubating new ideas and research.

� It leads the development of

flagship products.

� It oversees the publication of

technical literature like Whitepapers,

Presentations, etc.

� It coordinates the filing of

Trademarks, Copyrights and Patents.

� It is responsible for Knowledge

Management and Technology

Training as well as Mentoring within

Aftek.

Expenditure

Cost of Revenue and Employee

Cost

Cost of Revenues include raw material

cost, salary and other benefits to

employees and Directors and direct cost

of software development, installation

and testing cost, including that paid to

consultants. Total cost of revenue in the

year ended June 2005 stood at Rs 1022.34

million, an increase of 42% over the

previous year. The cost of revenue

represented 52% of total revenues for

the year ended 2005 as against 51% in

the previous year. Software

development, testing, installation and

other charges grew by 41% to Rs 889.36

million in June 2005. The increase is in

line with the increased services and

product sales.

T E C H N O L O G Y

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Sunil DesaiDIRECTOR - ENGINEERING

At Aftek, we have always

worked on cutting edge

technologies hand in hand

with MCS and engineering

colleges of Pune and

Shivaji universities. Most of our talent

is gleaned from these colleges as part

of our strategy of ‘Technology

Research through University

Association’ and our social

commitment to ‘Quality in Education’.

This has consistently helped us stay

laps ahead of the competition on the

technology front. The world’s first

‘Dual Mode’ phone, developed by

Aftek, is the result of our Centre of

Excellence (COE) strategy.

Inspired by the success of this

strategy and our need for fast

growth, we now have a dedicated

COE whose mandate covers:

� Technology Management

� Competency Development

� University association

� IP Creation, Patents

� Process enhancement

� Technology consultancy

The single most important factor

driving success in the IT industry

today is human resources – both in

terms of knowledge skills and

approach to work. In other words, a

bright aptitude backed with the right

attitude. Aftek’s experience has been

that in a high-obsolescence-prone

sector like IT, a nimble young team is

at par with an experienced one as its

members can be easily motivated

and are eager to absorb new

technologies and changes.

Aftek’s focus on talent farming in

Pune is a result of its out-of-the-box

thinking. Pune is known as India’s

Educational Capital. It boasts of the

country’s oldest engineering college,

offers a wide spectrum of

educational options and attracts the

largest number of foreign students.

There are over 25 excellent colleges

in Pune city which provide talented

manpower for IT.

Our strategy to work with these

colleges helps us create technology

savvy, passionate resources who out-

perform experienced professionals

from the IT industry. Our association

with Pune University/Shivaji

University in their ‘Industry

Association Program’ helps bridge

the gap between industry and

academics. Our participation -

ranging from sponsoring projects to

students and setting examination

papers to assisting in syllabus

determination and as examiners - is

in sync with our ‘Quality in

Education’ strategy. With this, we can

identify and access the finest talent

from these colleges and then, when

these students work with us on

projects, we assist them imbibe our

vision, mission and values.

If you study any technology, it

follows the familiar cycle:

Research – High Risk, Highest

Investment, Low Value

Acceptance – Medium Risk, High

Investment, High Value

Maturity – Low Risk, Low Investment,

Low Value

Maintenance – High Risk, Low

Investment, High Value

Typically Adoption is the time when

emerging standards start becoming

available and resource demand starts

increasing, so the value we get for this

technology is high. Risk is also

considerably lower as compared to the

Research phase but the investment is

still high. With very few senior experts

from COE and talented college students

we bring down this cost and still achieve

the desired result of bringing in new

technology skills to Aftek. This out-of-

the-box approach keeps our Research

costs way below industry levels.

COE not only helps students quickly train

and get oriented to industry demands

but also helps our senior experts get

trained on soft skills. Every year, as part

of a Knowledge Management initiative,

all senior resources from the

Development team are put through COE’s

rotation program. This helps them

upgrade their skills in new technologies

and methodologies. This program has

been very effective in boosting employee

satisfaction as it keeps the value of their

skillsets very high. On its part, Aftek gets

itself a constant pool of resources ready

to tackle new technology challenges

much before the competition for our

customers.

C E N T R E F O R E X C E L L E N C E

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Selling, General and AdministrationSelling, General and Administration expenses consist of

expenses relating to marketing, travel, communication, rents,

legal expenses, sales tax, insurance and other general and

administration expenses. The total selling, general and

administration expenses increased from Rs 59.32 million to

Rs 169.48 million.

Operating MarginsOperating Profit for the year ended June 2005 has been at

Rs 788.16 million compared to that in the year ended June

2004 at Rs 625.55 million.

Other IncomeThe other income during the last year increased from Rs 15.60

million to Rs 27.51 million.

Depreciation & Tax ProvisionsDepreciation rose to Rs 180.21 million in the year ended June

2005 from Rs 148.30 during the last year. This is due to

purchase of IPRs and amortization of IPRs.

Provision for taxation also increased to Rs 9.94 million in the

year under review from Rs 0.53 million in the last year.

Net ProfitAftek registered a net profit of Rs 597.92

million for the year ended June 2005

registering an increase of 26.38% as

against Rs 473.12 million for the last

fiscal.

DividendThe Company proposes to declare a

dividend of 50% for the year ended June

2005 and has made a provision of Rs 85.28

million for the payout. This also takes care

of the dividend payable on equity

shares resulting from the conversion of

Foreign Currency Convertible Bonds

(FCCBs) in the current year. The Company

has also made a provision of Rs 11.14

million for tax on dividend.

Balance Sheet

Equity Capital

The paid up equity share capital of the

Company is Rs 150 million as at June 30,

Dhananjay KulkarniGLOBAL DELIVERY HEAD

Aftek aims at converting its

high-quality, process-

driven delivery mechanism

into a consistent

repeatable software

factory. Aftek delivers products and

services based on latest technologies

in hardware and software including

WiFi, Bluetooth, WiMax, UWB,

Zigbee, power line communication

etc. It is imperative for us to invest

sizable amount in training our

delivery teams on cutting edge

technologies. In addition, we are

working on building lean processes

which will be suitable for teams

consisting of hardware, firmware

D E L I V E R Y M E C H A N I S M

and software engineers. Our

continuous interest and

contribution in various Standards

bodies help us remain ahead of the

pack. We are investing significant

resources into building a Knowledge

Management System which will be

used as a repository of best practices,

lessons learnt, and technical know-

how. With help of these, we create

an ability to quickly ramp-up the

team, cross-train team members, and

be highly responsive to client needs.

2005 after taking into account the bonus issue made on

January 31, 2005 in proportion of one equity share for every

two equity shares held.

Reserves and Surplus

Reserves and Surplus rose to Rs 3134.07 million at the end of

June 2005 from Rs 2701.82 million reported in June 2004.

Investments

Investment marginally increased from Rs 591.76 million to

Rs 594.89 million in the year ended June 2005. It may be

noted that major investments for consolidation of Arexera

holding and investments in V-Soft will be reflected in the

next financial year.

Debtors

Debtors at the end of June 2005 were Rs 471.38 million as

compared to Rs 326.86 million of previous fiscal. Debtors

amount to 24% as compared to last year’s 23% of total turnover.

Liabilities

Current liabilities which included sundry creditor, advance

from customers and provisions for tax, dividend and other

adjustments were at Rs 243.94 million.

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Outlook

The annual growth rate of India’s software exports has

been consistently over 50 per cent since 1991. According

to a NASSCOM-McKinsey report, annual revenue

projections for India’s IT industry in 2008 are USD 87 billion

and market openings are emerging across four broad

sectors - IT services, software products, IT enabled services,

and e-businesses - thus creating a number of opportunities

for Indian companies. In addition to the export market,

all of these segments have a domestic market component

as well.

Aftek, through its business model which is carefully charted

out on the basis of its experience and vision, has well

positioned itself to adequately address the future business

demands. With its technological skills, effective business

strategy and strategic alliances, Aftek is confident of

meeting its growth targets.

Promod BrootaDIRECTOR - PLANNING

Aftek is a company driven

by change.

This has been the

Company’s tagline and it

has vigorously lived up to

it. Aftek maintains an extremely keen

vigil of the environment so that it

can identify opportunities even as

they arise and then convert them to

business. This process has been the

hallmark of the company since

inception. For instance, one of the

company’s earliest decisions was to

take its expertise in embedded

technology to the international

market once it sensed that, with the

internet opening up, it could use the

level playing field to its advantage.

Along the line Aftek evolved a

business model to grow the company

by not only using its technology

strengths, leveraging its Intellectual

Properties developed over the years

for various projects, but also by either

acquiring a strategic stake in a

company or by mere investing in

companies that would help the

company reap a committed business

opportunity.

If one looks at the Company ’s

evolved Business Model (see figure on

page 12) one would realise that the

management has, with careful

planning and impeccable

implementation, created a value ring

around the core company which

would assist the Company grow

inorganically and proffer it the

potential to grow exponentially by

monetizing some of its valuable IPs.

P L A N N I N G

Risks and Concerns

� If the Company is unable to manage

its growth, its business would be

disrupted.

� The Company’s service and product

offerings may become outdated and

not be compatible with industry

standards and requirements in the

future which may hurt its profits.

� The success of the Company ’s

business is substantially dependent on

the services of key personnel whose loss

of services would have a material adverse

effect on Company’s business and

financial condition.

� Numerous factors, including the

following, may cause the Company’s

results of operations to fluctuate in the

future:

� the size, timing and profitability of

significant projects;

� the accuracy of estimates of resources

and time required to complete ongoing

projects, particularly projects performed

under fixed-price, fixed-time frame

contracts;

� a change in the mix of services

provided to the Company’s clients or in

the relative proportion of services and

product revenues;

� the availability of tax holidays and other Government

incentives;

� the time required to train and productively utilize

employees;

� the cost, size and timing of facilities expansion;

� unanticipated increases in wage rates;

� success in expanding its sales and marketing programs; and

� currency exchange rate fluctuations and other general

economic factors.

� Risks related to Intellectual Property Rights such as the

misappropriation or duplication thereof, expensive litigation

and damages if any resulting therefrom and inability of

Company to develop non-infringing technology or obtaining

a license may adversely affect the Company.

� A significant portion of the Company’s business is subject

to fixed-price contracts, any of which could prove to be

unprofitable for the Company.

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Shrikant InamdarTECHNOLOGY/PROCESS CONSULTANT

There always has been a

healthy debate in Aftek on

the relevance of quality

frameworks, like CMM and

ISO in development of

Intellectual Property (IP) in general

and Generic (Shrink Wrapped)

Software Products in particular.

Opinions vary from one extreme of

“conformance to a framework kills

creativity” to the other extreme of

“conform first and modify later”.

Interestingly, convincing arguments

exist for every distinct position and

the intelligent debate has helped

your company take a practical,

effective and optimum approach.

There are no compromises with

conformance to quality standards,

processes and procedures as far as

ultimate client deliverables are

concerned. In case of IP and product

development however, not all Key

Process Areas (KPAs) of a typical

quality standard are found to be

relevant.

The objective of a service package

delivery to a client is straightforward:

total compliance with the customer’s

explicit and implicit requirements

within the customer’s time line. The

quality and cycle time in these cases

are an outcome of the rigor with

which the company’s processes are

applied. Fortunately, your

organization has strived to apply and

to comply with the highest maturity

processes currently known. That is

how Aftek has always kept the post-

release defects at a very low level with

the help of matured and effective

risk management processes. The

generic software process of Aftek is

rarely applied unaltered to all types

of projects. Normally, the exact

process that is used is a tailored

version of the generic process,

tailored taking into account project-

and client-specific needs and

constraints and more importantly,

risk analysis. For example, a

maintenance project may undergo

a simple Test-Analyze-Fix-Review-

Baseline treatment whereas a

custom product development

project follows a full Level 3 process.

In case of IP and products

development however, some

fundamental objectives are

different. Time to market, for

example, is of paramount

importance in case of new products

or new features incorporated in the

existing products. This mandates

that IP and product development do

not follow a waterfall life cycle. We

use more suitable life cycle models

like principal segmentation model

or rapid prototyping model. In case

of core IP development, sometimes

completely new ideas, approaches

and unconventional algorithmic

developments are necessary. These

activities do not have a

predetermined or predictable

outcome. The standard processes

dictated by quality frameworks, like

reviews for example, are not much

relevant here as there are no

reference points for disposition

determination.

It is here that your company has

deployed only a carefully chosen

subset of KPAs. Some of the KPAs

rigorously followed in IP and

products development are

Requirement Management and

Development, Technical Solution,

Integration, Verification and

Validation, Risk Management,

Configuration Management and

Causal Analysis. But the rigor does not

stop here. There are additional

processes that are deployed to

provide a cutting edge advantage.

Formal technology forecasting is

regularly carried out. Competitive

analysis, technology scanning and

evaluation, benchmarking are some

of the additional process areas

religiously followed. Ideation is a very

important activity. IP management

too receives a very careful attention

in Aftek. Reuse is also routinely

deployed in all IP activities.

Your company has always

distinguished itself through IP based

solutions. To do that, innovation and

creativity are the non-negotiable

requirements. Innovation does not

happen in too restrictive an

environment and an out-of-the-box

flexible but practical approach to

quality balances out the need for

quality output with the demands of

ever compressing cycle times for new

technology deployment.

Q U A L I T Y A S S U R A N C E

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� The Company’s revenues are highly dependent on

customers located in the United States and Europe and

customers concentrated in certain industries, and economic

slowdowns or factors that affect those regions or industries

may affect its business.

� The Company faces intense competition in the IT services

market which could prevent the Company from attracting

and retaining customers and could reduce revenues.

� The Company may engage in acquisitions, strategic

investments, strategic partnerships or alliances or other

ventures that may or may not be successful.

Internal Control SystemThe Company maintains adequate internal control systems,

which provide, among other things, reasonable assurance of

recording the transactions of its operations in all material

respects and of providing protection against significant

misuse or loss of Company’s assets.

The Company’s internal control systems are supplemented

by an internal audit program and periodic review by the

management. The system of internal control of the Company

is adequate considering the size and complexity of its

business.

Material Developments in Human

Resource / Industrial Relations front,

including number of people employed

The total strength of employees, including consultants of the

Company for the year 2003-2004 was 325. This number rose

to 410 for the year 2004-2005. The Company encourages its

personnel to upgrade their skills by participating in

educational seminars, pursuing courses of study and training.

The Company is in the process of constructing its corporate

premises at Software Development Park at Hinjawadi in Pune

where, besides a software development centre and

recreational facilities, a Center for Excellence will be housed.

The Employee relations at various Works and Establishments

of the Company continue to be cordial. The active co-

operation of employees at various locations in an important

contributory factor for the cordial relations.

The Aftek MantraThe Aftek mantra for growth and stakeholder prosperity is

simple: maximize, Maximize, MAXIMIZE.

Aftek must maximize its financial strength, its accumulated

cash and its ability to raise more funds to scale up, invest,

acquire and to grow - both organically and inorganically. It

must maximize returns by fully monetizing the IPs it owns. It

must maximize the advantage offered by its technology edge.

It must maximize the impact of its presence in geographical

markets by extending reach and influence. It must become

business opportunistic and maximize forays into segments

that extend from its core competencies. Finally, it must fully

maximize the flexibility of its business model whose ‘inorganic’

ring allows for growing satellite businesses to appropriate

size before integrating them into the hub at the appropriate

time.

C A U T I O N A R Y S T A T E M E N T

SSSSStatements in the Management Discussion and Analysis

describing the Company’s objectives, projections, estimates,

expectations may be “forward-looking statements” within

the meaning of applicable securities laws and regulations.

Actual results could differ materially from those expressed or

implied. Important factors that could make a difference to

the Company’s operations include economic conditions

affecting demand/supply and price conditions in the

domestic and overseas markets in which the Company

operates, changes in the Government regulations, tax laws

and other statues and other incidental factors.

The commitment of Aftek’s key personnel to this business

model is amply reflected through their views given alongside.

With its efficient business model and business strategy

supported by innovative and adaptable technology skills,

Aftek will truly prove to be a company driven by change.

xii

Board of Directors i

Financial Snapshot ii

Message from the Chairman and CEO iii

Management Discussion & Analysis iv

Notice 1

Directors’ Report 5

Corporate Governance 11

Auditors’ Report 20

Balance Sheet 23

Profit and Loss Account 24

Cash Flow Statement 25

Schedules 26-40

Subsidiaries

Aftek Sales And Services Pvt. Ltd. 41-47

Mihir Properties Pvt. Ltd. 48-59

Opdex Inc. 60-65

Consolidated Statment 66-82

C O N T E N T SCONTENTS


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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

NOTICE

NOTICE is hereby given that the 18th Annual General Meeting

of the Members of Aftek Infosys Limited will be held at

10.30 a.m. on Friday, the 30th Decmber 2005 at the Queeni

Captain Auditorium, The Nab-Workshop for the Blind, Dr.

Annie Besant Road, Prabhadevi, Mumbai -400 025 to transact

the following business.

Ordinary Business:

1. To receive, consider and adopt the Balance Sheet as

at 30th June 2005 and the Profit & Loss Account for

the year ended on that date together with the Reports

of Directors and Auditors thereon.

2. To declare Dividend on equity shares of the Company.

3. To appoint a Director in place of Dr. S.S.S.P. Rao who

retires by rotation, and being eligible, offers himself

for reappointment.

4. To appoint a Director in place of Mr. Shrikant Inamdar

who retires by rotation, and being eligible, offers

himself for reappointment.

5. To appoint a Director in place of Mr. Promod Broota

who retires by rotation, and being eligible, offers

himself for reappointment.

6. To consider and if thought fit, to pass with or without

modification(s), the following as an Ordinary

Resolution:

“RESOLVED THAT M/s. V.D. JOSHI & CO., Chartered

Accountants, Mumbai, be and are hereby

re-appointed as Auditors of the Company, to hold

office from the conclusion of this meeting until the

conclusion of the next Annual General Meeting of the

Company on such remuneration as may be mutually

agreed upon between the Board of Directors of the

Company and the Auditors, plus reimbursement of

service tax, out-of-pocket and travelling expenses

actually incurred by them in connection with the

Audit.”

Special Business:

7. To consider and if thought fit, to pass, with or withoutmodification(s), the following as a Special Resolution:

“RESOLVED THAT pursuant to the provisions of theForiegn Exchange Management Act, 1999 (includingany statutory modification(s), or re-enactments thereoffor the time being in force or as may be enactedhereafter), any Regulations and Guidelines therunderor any Rules, Regulations or Guidelines issued by theReserve Bank of India from time to time, and subjectto such consents, sanctions and permissions as maybe requied from appropriate authorities, consent ofthe Company be and is hereby accorded for investmentby Foreign Institutional Investors [FII(s)] includingtheir sub-accounts in the ordinary share capital of theCompany, by purchase or otherwise under any Schemeupto 40% of the Ordinary Share Capital of the Company.

RESOLVED THAT the Board be and is hereby authorisedto do all such acts, deeds, matters and things andexecute all documents or writings as may be necessary,proper or expedient for the purpose of giving effect tothis resolution and for matters connected therewithor incidental thereto”

8. To consider and if thought fit, to pass, with or withoutmodification(s), the following as a Special Resolution:

“RESOLVED that pursuant to the provisions of Sections198, 309(4), Schedule XIII and other applicableprovisions, if any, of the Companies Act, 1956 (“theAct”), approval be and is hereby accorded to thepayment of commission of Rs. 1500000/- for the yearended 30th June, 2005 to Mr. Shrikant Inamdar, non-executive director of the Company, which amount ofcommission does not exceed one per cent of the netprofits of the Company for the year ended 30th June,2005, computed in the manner laid down in Section198(1) of the Act”

9. To consider and if though fit to pass the following asa Special Resolution:

“RESOLVED that pursuant to the provisions of Sections198, 309(4), Schedule XIII and other applicableprovisions, if any, of the Companies Act,1956 (“Act”),approval be and is hereby accorded to the payment

NOTICE

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

of commission to Mr. Shrikant Inamdar, non-executivedirector of the Company at the rate not exceedingone per cent of the net profits of the Company,computed in the manner laid down in Section 198(1)of the Act, for a period of four years commencingfrom 1st July 2005, as may be decided by the Board ofDirectors of the Company from time to time.”

By Order of the Board of Directors

C G Deshmukh

Company Secretary

Registered Office :

“AFTEK HOUSE”, 265,Veer Savarkar Marg, Shivaji Park,Dadar, Mumbai – 400 028.November 30, 2005

NOTES :

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE

MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND

AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED

NOT BE A MEMBER OF THE COMPANY. PROXIES, IN

ORDER TO BE EFFECTIVE, MUST BE RECEIVED BY THE

COMPANY AT ITS REGISTERED OFFICE NOT LESS THAN

48 HOURS BEFORE THE MEETING.

2. The relevant Explanatory Statement pursuant to Section

173 (2) of the Companies Act, 1956 in respect of the

special business is annexed hereto and forms part of

the Notice of the Annual General Meeting.

3. The Register of Members and Share Transfer Books of

the Company will remain closed from Friday, the 23rd

December, 2005 to Friday, the 30th December 2005

(both days inclusive).

4. The dividend, as recommended by the Board, if

sanctioned at the meeting, will be paid to those

shareholders whose names appear (i) as Members in

the Register of Members of the Company after giving

effect to all valid share transfers in physical form lodged

with the Company or its Registrars on or before 22nd

December, 2005 and (ii) as Beneficial Owners as at the

end of the business hours on 22nd December, 2005 as

per the list to be furnished by National Securities

Depository Limited and Central Depository Services

(India) Limited in respect of the shares held in electronic

form.

5. Members holding shares in physical form are requested

to notify immediately any change in their address with

PIN Code to the Company’s Share Transfer Agents M/s.

Bigshare Services Pvt. Ltd., E-2/3, Ansa Industrial Estate,

Sakivihar Road, Saki Naka, Andheri (East), Mumbai –

400 072, and in case they hold shares in demat form,

this information should be passed on directly to their

respective Depository Participants and not to the

Company.

6. Members are informed that in order to avoid fraudulent

encashment of dividend warrants they should send to

the Company under the signature of the Sole/First Joint

holder the information relating to Name and Address

of the Banker along with the Pin Code Number and

Bank Account Number to print on the Dividend

Warrants. Members holding shares in dematerialized

form and desirous to change or correct the bank

account details should send the same immediately to

the concerned Depository Participant.

7. Members desirous of availing the facility of Electronic

Credit of Dividend are requested to send ECS Form

attached to this Annual Report alongwith a photocopy

of cheque for verification of details to the Company or

to its Share Transfer Agents.

8. Pursuant to the provisions of Section 205A and Section

205C of the Companies Act, 1956, the amount of

dividend remaining unclaimed for a period of seven

years shall be transferred to the Investor Education

and Protection Fund. Members should note that no

claims can be made by the shareholders for the

unclaimed Dividends which are transferred to the credit

of The Investor Education & Protection Fund.

Therefore, members who have not yet encashed the

dividend warrants for the year ended 30th June,

1998 and/or subsequent dividend payments are

requested to make their claims to the Company.

9. Members who hold shares in the electronic form are

requested to bring their depository account number

for easy identification and attendance at the meeting.

10. Details under Clause 49 of the Listing Agreement with

the Stock Exchanges in respect of Directors seeking

reappointment at the ensuing Annual General Meeting,

are contained in the Annexure I hereto.

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EXPLANATORY STATEMENT ....

ITEM NO. 7

As per the present foreign investment policy of theGovernment, a Foreign Institutional Investor (“FII”) is permittedto invest upto 10% of the ordinary/equity share capital of thecompany and the overall FIIs investment including the sub-accounts, is restricted to 24%. The said overall limit may beincreased by passing a Board Resolution and a SpecialResolution by the Members of the Company in GeneralMeeting. In accordance with the special resolution passed atthe AGM held on 28 December 2004, this limit was raised to30% and now it is proposed to increase the same to 40%.Considering that the Company has raised funds by way ofissue of Foreign Currency Convertible Bonds, which are linkedto Ordinary Shares and that FIIs are considered to be prudentinvestors, it is desirable to increase the present FIIs’ investmentlimit to 40% of the Ordinary Share Capital of the Company.The Board, at its meeting held on 30 November 2005, approvedthe said increase.

The Board commends the resolution for acceptance bymembers. None of the Directors is in any way interested orconcerned in the Resolution at item no. 7 of the accompanyingNotice.

ITEM NOS. 8 & 9

Mr. Shrikant Inamdar, Non-Executive Director, 53 years, holdsan MSc Degree in Physics and Electronics from the Universityof Mumbai. He is currently a Director of Spryance Ltd. and hasover 25 years of experience in building Tele-communicationand Information Technology businesses for reputed Indianand multinational companies. He has held several responsiblepositions in leading multinational companies and hasexperience of setting up software centers in India, Australiaand Europe. He was Managing Director of Motorola’s Softwarebusiness in Australia and is credited with creating the first SEICMM level 5 entity outside of USA . Mr. Inamdar has deliveredscores of guest lectures on Software and Technologymanagement at CMU and at various International ManagementSchools and also has been on the advisory panel of some ofthe International Universities.

Mr Inamdar has been on the board of directors of yourCompany since the year 2002 and has been rendering expert

advice and guidance in the fields of Software to your Company.In view of this and also the need for Mr. Inamdar’s futureinvolvement in the activities of the Company, it is appropriatethat Mr. Inamdar is adequately compensated by means ofCommission. Accordingly, approval of the Members for theproposal for payment of commission to Mr. Inamdar is soughtas required pursuant to the provisions of Section 309(4) ofthe Companies Act, 1956 for the amount of commissionalready released to him for the year ended 30th June 2005 asalso for the next four years commencing 1st July 2005 asmentioned in the special resolutions proposed at item nos. 8and 9 of the Notice of Annual General Meeting.

Except Mr. Shrikant Inamdar, none of the Directors is eitherdirectly or indirectly concerned or interested in these specialresolutions.


C G Deshmukh

Company Secretary

Registered Office :

“AFTEK HOUSE”, 265,Veer Savarkar Marg, Shivaji Park,Dadar, Mumbai – 400 028.

November 30, 2005

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE

COMPANIES ACT, 1956.

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ANNEXURE

RELEVANT INFORMATION IN RESPECT OF DIRECTORS

SEEKING RE-APPOINTMENT AT THE ANNUAL

GENERAL MEETING AS REQUIRED UNDER CLAUSE 49

VI (A) OF THE LISTING AGREEMENT IS AS UNDER:

Dr. S.S.S.P. Rao, Non-Executive Director, 63 years old,Ph.D. (CS) from Dept. of Computer Science and Eng., IITBombay. Prof. Dr. Rao held the position of Head ofDepartment, Dept. of Computer Science and Engineering atIIT, Bombay from August 1985 to June 1991. Prof. Dr. Rao wason deputation to TIFR from IIT-Bombay to work on a defenseresearch project from 1972 to 1975. He was also one of theTechnical Members of the Dept. of Computer Science &Engineering who visited Yeravan, State of Armenia, USSR from1973 to 1974 to participate in the discussion of EC 1030 (IBM360 Compatible) system Architecture. In addition, Prof. Dr.Rao also has to his credit, a number of publications/conference papers in IT industry and is associated with variousinstitutions, universities, government departments andcommittees in various capacities. He was consultant to severalindustries in India and abroad and carried out number ofsponsored projects from government organizations andindustries in India and abroad. After serving IIT Bombay for41 years, Prof. Rao retired from the institute as Professor in2004 and is working as Chief Technology Officer at India DesignCentre-CMC set-up by Xilinx Inc., USA. He is also AdjunctProfessor at Computer Science and Engineering at IIT, Bombay.He is also a member of India Semiconductor Association.

Mr. Shrikant Inamdar, Non-Executive Director, 53 years,holds an MSc Degree in Physics and Electronics from theUniversity of Mumbai. He is currently a Director of SpryanceLtd. and has over 25 years of experience in building Tele-communication and Information Technology businesses forreputed Indian and multinational companies. He has heldseveral responsible positions in leading multinationalcompanies and has experience of setting up software centersin India, Australia and Europe. He was Managing Director ofMotorola’s Software business in Australia and is credited withcreating the first SEI CMM level 5 entity outside of USA . Mr.Inamdar has delivered scores of guest lectures on Softwareand Technology management at CMU and at variousInternational Management Schools and also has been on theadvisory panel of some of the International Universities.

Mr. Promod Broota, Executive Director, 44 years,graduated in Economics and Post-Graduated (Diploma) inSystem Analysis, has been associated with the computerindustry for the past 19 years. He has, over the years ofassociation with the Company, been responsible for marketinginitially Aftek’s special products and local software salesthereafter and has gone on to being involved in the Marketingof Aftek’s Powersafe in the international market. Currently,for the past few years Mr Broota has been involved in planningfor the Company by taking initiative in the Company’sEuropean ventures and other plans related to strategicinvestments or acquisition in the Company’s focus area. MrBroota also holds membership on the BOD of Company’ssubsidiaries namely, OPDEX Inc. and Mihir Properties Pvt Ltd.

ANNEXURE I

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DIRECTORS’ REPORT

To,

The Members,

Your Directors are pleased to present their 18th Annual Report

together with Audited Statement of Accounts for the year

ended 30th June 2005

Financial Performance

PARTICULARS (Amount Rs.

in lacs)

30/06/2005 30/06/2004

Turnover 19525 13894

Profit Before Depreciation 7881 6219

Less: Depreciation 1802 1483

Profit Before Tax 6079 4736

Less: Provision for Taxation 99 5

Profit After Tax 5980 4731

Transfer to General Reserve 1000 500

DividendYour Directors, for the year ended 30th June 2005, have

recommended a dividend of Re 1/- (Rupee one only)per equity

share of Rs 02/-. The bonus shares allotted during the year as

well as shares alloted/to be allotted on conversion of Foreign

Currency Convertible Bonds and on exercise of stock options

under Employee Stock Option Scheme before the Book Closure

for payment of dividend will be entitled to receive full

dividend.

In the last year your Company has grown at over 42% which

has outpaced the industry growth which continues at around

28%. The bottom line too was retained at 31% which too is

above the peers’ profitability. You are well aware that for the

last five years your Company has been growing at a CAGR of

46% which is difficult to maintain when the Company

graduates from being a small company to a larger company.

The growth is the result of the well thought out business

model which is scalable, efficient and suitable for our business

expansion, diversification and growth.

From geographical perspective your Company is adequately

de-risked by business of over 35% coming from Europe. USA

continues to be the largest contributor to the top-line

accounting for 562% of your Company’s revenue. Your

Company’s recent investment into V-soft Inc.- a US based

company, has resulted in enhancing our sales funnel and

very important and valuable clients (Fortune 500) from

communication, security and manufacturing have been

added. The marketing and sales footprint in US has expanded

due to our association with V-soft Inc.

In Europe the growth that was visible last year has not only

got consolidated but continues to grow at an even healthier

pace. Due to Arexera’s professional services new and important

clients specially from the automobile industry in Germany

have been added to Aftek’s client list. Work in cutting-edge

technology in Europe is currently being done at Aftek’s Pune

software development centers. Arexera’s core business in

Enterprise Search (Unstructured Data Management) has also

been adding flagship German companies in several verticals

like publishing, automobiles, consulting, health-care and

manufacturing amongst others. Arexera’s UDM technology is

largely enhanced and serviced through Aftek’s software center

at Pune. This has helped your Company gain insights into

new cutting-edge technologies whereby the skill-sets of

Aftek’s personnel get sharpened. Using Arexera’s powerful

search technology, Seekport is writing new chapeters in

internet search technology in Europe. Seekport is now in six

European countries namely, Germany, UK, France, Italy, Spain

and Austria. Patented vertical or topic search and the recent

addition of new search, blog search, reference search, image

search and product search have broadend the search offering

of the Seekport portal in Europe. Both B2B and B2C traffic is

on the rise. We see a very positive picture emerging for

Seekport due to recent valuation of search engine like Baidu

which, it is felt, will considerably enhance stakeholder value

in the foreseeable future.

Our foray in near shore countries like Mauritius, Seychelles

and Madagaskar continues with good sales for Aftek’s

transport and utility solutions. The market is seen to expand

not only in these countries but also in other Latin American

and European countries.

The future propsects of your Company look very positive due

to the road map and strategy your Company has carefully

DIRECTORS’ REPORT

Business Review & Future Prospects

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charted out. Strategic investments and acquisitions have seen

your Company consolidating itself and poised for a good

growth in the next few years. We see the energy sector

(electrical utility) with positive outlook. Our strategy in that

sector is already charted out and our initial work has begun.

We expect very strong growth in the coming years from this

sector.

FinanceAt the 17th Annual General Meeting (AGM) of the Company

held on 28th December 2004, Members had approved

resolution for increasing the Authorized Share Capital from

Rs.15,00,00,000/- (Rupees Fifteen Crores Only) to

Rs. 20,00,00,000/- (Rupees Twenty Crores Only) by creation

of additional 2,50,00,000 (Two Crores Fifty Lakhs) Equity shares

of Rs. 02/- (Rupees Two Only) each. Again, at the Extra-ordinary

General Meeting of the Company held on 09th November 2005

the Authorised Share Capital has been further increased to Rs

25,00,00,000/- (Rupees Twenty-five Crores Only) by creation of

additional 2,50,00,000 (Two Crores Fifty Lakhs) Equity shares

of Rs. 02/- (Rupees Two Only) each.

Pursuant to the special resolution passed at the aforesaid

AGM, the Board allotted 2,50,00,000 numbers of bonus shares

on 31st January 2005 in proportion of 1 equit share for every 2

equity shares held. Further, your Company raised US$ 34.5

millions through an issue of 3000 numbers of 1% Foreign

Currency Convertible Bonds Due 2010 of US$ 10,000 each

(Bonds) in June 2005 followed with 450 numbers of additional

Bonds in July 2005 on account of exercise of greenshoe option

of 15%. The Bonds bear interest @ 1% per annum with

redemption at 128.25% of their principal amount. At the

option of the Bondholders the Bonds are convertible into

Shares/Global Depository Receipts at an initial conversion

price of Rs 94/- per share. These Bonds are listed at

Luxembourg Stock Exchange. As at 30th June 2005 no

conversion of Bonds took place and from 1st July 2005 till 29th

November 2005 (i.e. one day prior to the date of approval of

Annual Accounts, 1,01,52,040 numbers of equity shares have

been issued and allotted by conversion of 2190 number of

Bonds.

Your Company has also allotted 34,052 and 59,469 numbers

of shares to employees and directors on October 10, 2005

and November 30, 2005 respectively, on account of exercise

of stock options granted under Aftek Employee Stock Option

Scheme 2004.

Pursuant to the special resolution passed at the Extra-ordinary

General Meeting of the Company held on 9th November ,

2005 your Company allotted 39,69,200 numbers of Warrants

on November 23, 2005 to Promoters’ Group on Preferential

basis at a price of Rs 120.60 per Warrant. Each Warrant is

convertible into one equity share within a period of 18 months

from the date of allotment and has a lock in period of three

years. The lock-in on the shares allotted on conversion of

Warrants will be reduced to the extent Warrants have already

been locked in.

Software Development FacilitiesYour Directors have pleasure to inform you that the Company

has taken possession of land admeasuring 9340 sq. mtr. At

the Pune Information Technology Park, Hinjawadi from

Mahrashtra Industrial Development Corporation for the

development of software facilities. The Company is now in

the process of constructing state-of-the-art facilities

comprising Software Research and Development Center and

Center for Excellence.

DirectorateIn accordance with the provisions of Companies Act, 1956

Dr. SSSP Rao, Mr. Shrikant Inamdar and Mr. Promod Broota

retire by rotation and being eligible, offer themselves for

reappointment.

Directors’ Responsibility StatementPursuant to the requirement under Section 217(2AA) of the

Companies Act,1956,with respect to Directors’ Responsibility

Statement, it is hereby confirmed:

i) that in the preparation of the annual accounts for

the year ended 30th June, 2005, the applicable

accounting standards had been followed along with

proper explanation relating to material departures;

ii) that the directors had selected such accounting

policies and applied them consistently and made

judgments and estimates that are reasonable and

prudent so as to give a true and fair view of the

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state of affairs of the Company at the end of the

financial year ended 30th June, 2005 and of the

profit of the Company for that period;

iii) that the directors had taken proper and sufficient

care for the maintenance of adequate accounting

records in accordance with the provisions of the

Companies Act, 1956, for safeguarding the assets

of the Company and for preventing and detecting

fraud and other irregularities;

iv) that the directors had prepared the annual accounts

for the year ended 30th June, 2005, on a ‘going

concern’ basis.

Fixed DepositsThe Company has not accepted any Fixed Deposits from the

Public.

Subsidiary CompaniesYour Company’s wholly-owned US subsidiary Opdex Inc is

currently undergoing a profile change. Opdex, till recently,

addressed marketing of ‘Powersafe’ to the enterprise market

namely, large US and global corporates. With Aftek aggressively

pursing the electrical energy segment it has become

mandatory, keeping in view the sensitiveness of the electrical

and power generation government agencies, to have a local

US based company interacting with them. Opdex being a US

corporate would be the appropriate partner for dealing with

these US agencies. Opdex still continues only as an invested

company with expenses sans revenue reflecting a loss in its

Balance Sheet.

The other subsidiary companies, namely, Aftek Sales & Services

Pvt Ltd and Mihir Properties Pvt Ltd have not carried out any

business during the year under review

AuditorsM/s V. D. Joshi & Co., Chartered Accountants, Mumbai, retire

at the ensuing Annual General Meeting and being eligible,

offer themselves for re-appointment.The Company has

received a certificate from the Auditors under Section 224 (1B)

of the Companies Act, 1956 to the effect that their re-

appointment, if made, will be within the statutory limits.

Particulars of EmployeesDetails of remunaeration paid to emloyees, as required by

Section 217(2A) of the Companies Act, 1956, are set out in a

seprate statement attached hereto as Annexure “A” and the

same forms part of this Report.

Conservation of Energy Etc.Your Company endeavours to ensure conversation of energy.

However, considering the nature of your Company’s activities,

the particulars prescribed under the Companies (Disclosure

of Particulars in the Report of Board of Directors) Rules, 1988

are not applicable. Further, the Foreign Exchange Earnings

and Outgo are per Para Nos. 9 & 8 of Schedules M of the

Notes on Accounts.

Other DisclosuresThe disclosures required to be made under the Securities

and Exchange Board of India (Employee Stock Option Scheme

and Employee Stock Purchase Scheme) Guidelines, 1999,

together with a certificate obtained from the Statutory

Auditors confirming compliance, is given in Annexure “B”.

Pursuant to clause 49 of the listing agreement entered into

with the Stock Exchanges, while a Management Discussion

and Analysis, is given elsewhere in the Annual Report the

Corporate Governance Report and Auditors’ Certificate

confirming compliance, are given in Annexure “C” and “D”.

AcknowledgementYour Directors would like to place on record their sincere

appreciation of the continued co-operation, support and

assistance given by shareholders, customers, vendors,

bankers, service providers, suppliers and employees at all

levels.

For and on Behalf of the Board

Ranjit Dhuru

Chairman & Mg. Director

Place : Mumbai

Dated : November 30, 2005

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ANNEXURE “A” TO ....

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules,

1975, as amended, and forming part of the Directors’ Report for the year ended 30th June 2005.

Name Designation Qualification Date Experience Gross Previous

& Age of Remuneration Employment

Employee Rs.

Mr. Ranjit Chairman B.Com 25/03/1986 24 years 7,502,496 Self-

Dhuru & Managing & LL.M. employed

53 years Director

Mr. Nitin Director B.Com 25/03/1986 24 years 2,993,472 Self-

Shukla Finance . employed

48 years

Mr. Mahesh Director M. Tech 10/05/1995 10 years 2,993,472 Self-

Vaidya Technical employed

43 years Software

Mr. Sunil Director B.E 10/05/995 10 years 2,993,472 Self-

Desai Engineering employed

43 years

Mr. Promod Director B.Com 06/02/1992 13 years 2,993,472 Self-

Broota Planning. employed

44 years

Notes:

1. Gross Remuneration received includes Basic Salary, Performance Bonus, House Rent Allowance, Medical Expenses,

Leave Travel Allowance, Ex-gratia, Entertainment Allowance, and Monetary Value of Perquisites.

2. The above appointment is contractual.

3. The above employee is not a relative of any Director or Manager of the Company.

4. There is no employee drawing salary in excess of that drawn by the Managing Director or Whole-time Director and

holding, either by himself or along with spouse and dependent children, not less than two percent of the equity share

of the Company

For and on Behalf of the Board

Ranjit Dhuru

Chairman & Mg. Director

Place : Mumbai

Dated : November 30, 2005

ANNEXURE “A” TO THE DIRECTORS’ REPORT

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ANNEXURE “A” TO ....

Information required to be disclosed under SEBI (ESOS & ESPS ) Guidelines, 1999 as amended

Sr No. Particulars ESOP 2004

a Options Granted 6,40,990

b The pricing formula Price determined on discounting by 20% the average of

weekly high and low of the closing prices for the

Company’s equity shares on the BSE during the 26 weeks

period prior to Grant Date or the closing price for the

Company’s shares on the BSE on Grant Date whichever is

low. Accordingly, exercise price*worked out for grant date

August 25, 2004 – Rs 56/- per share and for grant date

October 28, 2004 – Rs 70/- per share.

c Options vested NIL

d Options exercised NIL

e Total number of shares arising as a result of NIL

exercise of Options

f Options lapsed 33,530

g Variation of terms of Option NIL

h Money realised by exercise of Options NIL

i Total number of Options in force 5,07,460

j Employee-wise details of Options granted to:-

i) Senior Managerial Personnel:

Mr Mahesh Vaidya 59,490

Mr Sunil Desai 57,205

Dr SSSP Rao 25,000

Mr Shrikant Inamdar 25,000

Mr V J Masurekar 25,000

Mr Mahesh Naik 25,000

ii) Any other employee who receives a grant in any NIL

one year of Options amounting to 5% or more of

Options granted during that year.

iii) Identified employees who were granted Options, NIL

during any one year, equal to or exceeding 1% of the

issued capital (excluding outstanding warrants and

conversions) of the Company at the time of grant

ANNEXURE “B” TO THE DIRECTORS’ REPORT

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

k Diluted Earnings per Share (EPS) (as on 30th June NIL

2004) pursuant to issue of shares on exercise of

Options calculated in accordance with Accounting

Standard (AS) 20

l The difference between employee compensation The Company has calculated the employoee compensation

cost using intrinsic value method and the fair value cost using the fair value of the stock options.

of the Options and impact of this difference on

profits and on EPS

m (i) Weighted average exercise price of options Rs. 58.29

(ii) weighted average fair value of options Rs. 52.09

n Method and significant assumptions used to Method

estimate the fair value of Options The fair value of Options has been computed under Black

and Scholes Method.

Significant Assumptions: (weighted average basis)

a) Exercise price : Rs. 58.29

b) Expected life of Option : 3.26 yrs

c) Stock Price : Rs. 83.12

d) Expected Volatility : 81.84%

e) Expected Dividend yield : 1.24%

f) Risk free rate of return : 6.09%

* Exercise Prices revised at Rs. 26/- and Rs.40/- for grant dates 25/08/2004 and 28/10/2004 respectively on account of bonus

issue adjustment.

Auditors’ Certificate on Employee Stock Option Scheme

WE have examined the books of accounts and other relevant records and based on the information and explanations given

to us, cerify that in our opinion, the Company has implemented the Employee Stock Option Scheme in accordance with

SEBI(Employee Stock Options Scheme and Employees Stock Purchase Scheme) Gudelines, 1999 and the resolutions of the

Company in General Meetings held on 29th December 2000,

V D Joshi & Co.,

Chartered Accountants,

V D Joshi

Proprietor

Mumbai, 25th, November, 2005

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Company ’s philosophy on corporate code of governance

The Company has always aimed to protect the interest of its shareholders, creditors, and employees. The management of the

Company believes that the importance of corporate code of governance lies in its contribution both to the business prosperity

and to the accountability.

A. BOARD OF DIRECTORS

( i ) Composition of the Board and changes since the date of last Annual General Meeting

The Board of Directors of the Company comprises of 10 Directors with optimum combination of executive and non-

executive and independent directors. 50% of the Board of Directors are non-executive directors. Since the Company has

an executive chairman, majority of the Board of Directors are independent directors. During the year, no changes in the

constitution of the Board have occurred since the date of last Annual General Meeting held on 28.12.2004

(ii) No. of Board Meetings:

The Board of Directors met 7 times during the year under review. The meetings of the Board of Directors were held on

various dates as follows: 22.07.2004, 28.10.2004, 27.11.2004, 31.01.2005, 21.02.2005,29.04.2005 and 23.06.2005 The maximum

interval between two board meetings was 97 days.

(iii) Directors’ attendance and directorships held as on 30/06/2005.

Name of Director Category No. of Board Attendance at Directorship No. of other CommitteeMeeting AGM held on of other membership ChairmanshipAttended 28.12.2004 Company

Ranjit Dhuru CMD 6 Yes 3 NIL NILDr. S.S.S.P. Rao NE 4 Yes 0 NIL NILShrikant Inamdar NE 5 Yes 1 NIL NILV J Masurekar NE 7 Yes 3 3 NILMahesh Naik NE 7 Yes 0 NIL NILSandip Save NE 7 Yes 1 NIL NILMahesh Vaidya ED 7 Yes 2 NIL NILSunil Desai ED 6 Yes 2 NIL NILNitin Shukla ED 5 Yes 2 NIL NILPromod Broota ED 5 Yes 2 NIL NIL

NOTE :

CMD Chairman & Managing DirectorED Executive DirectorNE Non-Executive Director

None of the Directors is a member of more than 10 committees or acts as Chairman of more than five committees across all

companies in which he is a director.

CORPORATE GOVERNANCECORPORATE GOVERNANCE

ANNEXURE “C” TO THE DIRECTORS’ REPORT

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B. AUDIT COMMITTEE:

The Audit Committee comprises of 3 directors, namely, Mr V J Masurekar, Mr. Sandip Save and Mr Mahesh Naik, all being

Independent non-executive directors. Mr. C.G. Deshmukh, Company Secretary of the Company functions as Secretary of the

Audit Committee. During the year under review 5 meetings of the Audit Committee were held out of which Mr. V J Masurekar

attended 4 meetings.

The terms of reference of the Audit Committee are as follows:

1. Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the

financial statement is correct, sufficient and credible.

2. Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment for

any other services.

3. Reviewing with management the annual financial statements before submission to the board, focusing primarily on :

a. Any changes in accounting policies and practices

b. Major accounting entries based on exercise of judgment by management

c. Qualifications in draft audit report.

d. Significant adjustments arising out of audit

e. The going concern assumption.

f. Compliance with stock exchange and legal requirements concerning financial statements.

g. Any related party transactions i.e. transactions of the Company of material nature, with promoters or the management,

their subsidiaries or relatives etc. that may have potential conflict with the interests of Company at large.

4. Reviewing with the management, external and internal auditors, the adequacy of internal control systems.

5. Reviewing 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.

6. Discussion with internal auditors on significant findings and follow up thereon.

7. Reviewing the findings of any internal investigations by the internal auditors into matters where there i suspected fraud

or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board.

9. Discussion with external auditors before the audit commences nature and scope of audit as well as have post-audit

discussion to ascertain any area of concern.

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10. Reviewing the Company’s financial and risk management policies.

11. To look into the reasons for substantial defaults in the payment to the depositors, debentureholders, shareholders (in

case of non-payment of declared dividends) and creditors.

C . REMUNERATION OF DIRECTORS :

Matters relating to review and approval of remuneration payable to the Executive and Non Executive Directors are

considered by the Board within the overall limits approved by the Members. Given below are the details of remuneration

paid to Directors during the financial year ended 30th June 2005.

Name of Director Remuneration Element Salary & Allowances ( Rs. )

Mr. Ranjit Dhuru Salary & Allowances 8,654,319

Dr. S.S.S.P. Rao Sitting Fees 20,000

Mr. Shrikant Inamdar Commission 1,500,000

Mr. V J Masurekar Sitting Fees 115,000

Mr. Mahesh Naik Sitting Fees 120,000

Mr. Mahesh Vaidya Salary & Allowances 3,317,715

Mr. Sunil Desai Salary & Allowances 3,358,077

Mr. Nitin Shukla Salary & Allowances 3,258,852

Mr. Promod Broota Salary & Allowances 3,660,969

Mr. Sandip Save Commission 1,785,875

D. SHAREHOLDERS’ GRIEVANCE COMMITTEE

The Share Transfer cum Investors’ Grievance Committee consists of 3 directors, majority of them being non-executive

directors. Mr. V J Masurekar is the Non-Executive Director and Chairman of the Committee. Mr. C.G. Deshmukh, Company

Secretary, has been designated as the Compliance Officer. The Company received 103 complaints during the year under

review from the shareholders and all the complaints were disposed off to their satisfaction. No share transfers were pending

as on 30th June 2005.

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E. GENERAL BODY MEETINGS:

Details of General Meetings held during the last three years:

Year Venue Date Time

2001-2002 EGM The Queenie Captain Auditorium, The NAB -Workshop April 15, 2002 10.30 am

for the Blind, Dr. Annie Besant Road, Prabhadevi,

Mumbai 400 025.

2001-2002 AGM The Queenie Captain Auditorium, The NAB -Workshop December 30, 2002 10.30 am


Mumbai 400 025.



Mumbai 400 025.



Mumbai 400 025.

2004-2005 EGM The Queenie Captain Auditorium, The NAB -Workshop November 09, 2005 10.30 am


Mumbai 400 025.

All the matters as set out in the respective notices of the above mentioned General Meetings were passed by the Shareholders.

No resolution was required to be passed through postal ballot.

F. DISCLOSURES:

a. There were no transaction with any of the related parties that was in conflict with the interest of the Company.

b. The company has complied with the requirements of the Stock Exchanges/SEBI and Statutory Authority on matters

related to capital markets during the last three years. There are no penalties or strictures imposed on the company by

any of the aforesaid authorities relating to the above.

G. MEANS OF COMMUNICATION

1. The quarterly financial results of the Company are published in Business Standrad, and Sakal.

2. A Report on Management Discussion and Analysis forms part of the annual report.

3. The Company has its own web site and all the vital information relating to the Company and its products are displayed

on the web site. Address of the web site is www.aftek.com

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H. GENERAL SHAREHOLDER INFORMATION

AGM date, time and place : Friday, the 30th December 2005, at 10.30 a.m at The Queenie Captain

Auditorium, The NAB-Workshop for the Blind, Dr. Annie Besant Road,

Prabhadevi, Mumbai- 400 025

Financial Calendar : Year ending - 30th June AGM – December

Date of Book Closure : From Friday, the 23rd December 2005 to Friday, the 30th December 2005

(both days inclusive)

Dividend payment : Within statutory period.

Listing on Stock Exchanges: a) The Equity Shares of the Company are at present listed with the following

stock exchanges.

1. Bombay Stock Exchange Ltd., Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai-

400001.

2. National Stock Exchange of India Limited, “Exchange Plaza”, Bandra–Kurla

Complex, Bandra (E), Mumbai – 400 051.

b) The Global Depositary Receipts issued in Feb 2003 and 1% Foreign Currancy

Convertible Bonds Due 2010 issued in June/July 2005 have been listed on

Luxembourg Stock Exchange at following address:

Societe de la Bourse de Luxembourg Avenue de la Porte Neuve L-22011-*

Luxembourg B.P 165

The Company is regular in payment of listing fee.

Stock Code : BSE : 530707 NSE : AFTEKINFO

ISIN : INE796A01023

GDR Code : Common Code : 016077470

ISIN : US00831M1062

CUSIP : 00831M10 6

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Market Price Data :

Monthly High and Low quotations of Shares traded on Bombay Stock Exchange Ltd during the financial year ended30th June 2005.

Month High L o w

July, 2004 90.50 66.50August, 2004 98.40 73.60September, 2004 121.25 92.10October, 2004 127.00 109.00November, 2004 148.00 116.50December, 2004 139.50 121.60January, 2005 129.60 75.10February, 2005 85.70 70.35March, 2005 99.00 70.50April, 2005 83.90 66.50May, 2005 74.20 65.25June, 2005 97.70 68.70

( Source: BSE website)

Monthly High and Low quotations of Shares traded on National Stock Exchange Ltd during the financial year ended 30th June2005.

Month High L o w

July, 2004 90.90 66.50August, 2004 98.40 73.40September, 2004 121.25 92.70October, 2004 127.00 109.00November, 2004 155.00 116.40December, 2004 141.50 115.55January, 2005 128.70 72.50February, 2005 89.00 70.20March, 2005 99.00 70.50April, 2005 83.90 66.50May, 2005 74.40 65.20June, 2005 97.30 68.70

( Source: NSE website)

Registrars & : M/s Bigshare Services Pvt Ltd., E-2/3, Ansa Industrial Estate,Transfer Agents Sakivihar Road, Saki Naka, Andheri (East), Mumbai 400 072

Tel : 2847 3474 / 2847 0652 / 2847 0653 Fax : 2847 5207Share Transfer : In case of shares held in physical form, Share Transfer Deeds are processed by the Share

Transfer Agents and Share Transfer Register is sent to the Company for approval. TheCommittee for Share Transfers called Share Transfer cum Investors’ Grievance Committeecomprising of Directors considers and approves the same. Thereafter, necessaryendorsements on the Share Certificates are done and Share Certificates are dispatchedto the transferees

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Distribution of Shareholding as on 30th June 2005

Range (In Rs) No of % of Total Total Holding % of Total

Holders Holders in Rupees Capital

1 - 5000 18,093 94.86 1,23,20,362.00 8.21

5001 - 10000 460 2.41 33,01,674.00 2.20

10001 - 20000 217 1.14 31,70,918.00 2.11

20001 - 30000 72 0.38 18,40,700.00 1.23

30001 - 40000 35 0.18 12,74,266.00 0.85

40001 - 50000 27 0.14 12,21,350.00 0.81

50001 - 100000 60 0.31 44,37,524.00 2.96

100001 and above 110 0.58 12,24,33,206.00 81.63

Total : 19,074 100.00 15,00,00,000.00 100.00

Shareholding Pattern as on 30th June 2005

Sr No. Category No of shares Percentage

held of Holding

A . PROMOTERS’ HOLDING

1 Promoters 9396057 12.53

Indian Promoters

Foreign Promoters

2 Persons acting in Concert

Aftek Employees’ Welfare Trust 862500 1.15

Sub Total 10258557 13.68

B. NON-PROMOTERS HOLDING

3 Institutional Investors

a) Mutual Funds and UTI (Administrator of the specified

Undertaking of the Unit Trust of India,Unit Scheme 1964) 750 0.00

b) Banks,Financial Institutions, Insurance Companies (Central/

State Govt. institution/ Non-Government Institution) 905100 1.21

c) FIIs 8012271 10.68

Sub Total 8918121 11.89

4 Others

a) Private Corporate Bodies 24174130 32.23

b) Indian Public 14248602 19.00

c) NRI/OCBs 422472 0.56

d) Any Other :

Shares in Transit 428618 0.57

Deutsche Bank Trust Comapany Americas as Depository 16549500 22.07

Sub Total 55823322 74.43

GRAND TOTAL 75000000 100.00

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Dematerlisation of shares : The Company’s 7,04,99,914 equity shares i.e. 94% of the

share capital were held in dematerlised form as on 30th June,

2005.

Outstading GDRs/ADRs/Warrants or any Convertiible : Company issued 13,33,100 GDRs on 07th February

Instrument, Conversion Date and likely impact on : 2003, each representing 3 equity shares of Rs.10/- each equity

Pursuant to Special Resolution passed at the Annual General

Meeting held on 29th December 2003, equity shares of Rs.10/ -

each were sub-divided into smaller denomination of Rs.02/ -

for which Company had fixed 29th January 2004 as the Record

Date . Corresponding increase was made to the number of

GDRs from one to five to maintain the GDR to Equity proportion

of 1: 3. Further, pursuant to the special resolution passed at

the Annual General Meeting held on 28th December 2004,

bonus shares in the proportion of one equity share for every

two equity shares held on the record date of 28 January 2005

were allotted on 31st January 2005 resulting in further

corresponding increase in the number of GDRs. The number

of outstanding GDRs as on 30th June 2005 was 5516500

Works : Muttha Symphony, Survey No. 129-D, Plot No. 69/4, Law

College Road,Erandawana, Pune-411 004.

1/2/3 Floors, “Pawan Complex”, Survey No. 323,

S.No. 45/8+9/b, Karve Road, Erandawana, Pune 411 004.

Plot No. A-19/2 MIDC, Chincholi, Solapur.

Address for correspondence : “ AFTEK HOUSE “, 265, Veer Savarkar Marg,

Shivaji Park , Dadar, Mumbai 400 028.

Tel : (022) 2445 4016 Fax : (022) 24446330

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ANNEXURE “D” TO ....

To

The Members,


We have examined the compliance of conditions of Corporate Governance by Aftek Infosys Limited (the Company) for the year

ended 30th June 2005, as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchange(s).

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited

to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of

Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, and the representation

made by the directors and the management, we certify that the Company has complied with the conditions of Corporate

Governance as stipulated in Clause 49 of the above mentioned Listing Agreement.

As required by the Guidance Note issued by the Institute of Charted Accountants of India, we have to state that while the

Shareholders/Investor Grievance Commitee has not maintained reccords to show the investor grievances pending for a period

of one month against the Company, the Registrars of the Company have maintained the records of invetor grievances and

certified that as at 30th June, 2005 there were no invetor grievances remaining unattended/pending.

We further state that such compliance is neither an assurances as to the further viability of the Company nor the efficiency or

effectiveness with which the management has conducted the affairs of the Company.

FOR V.D. Joshi & Co.

Chartered Accountant

V.D. Joshi

Proprietor

PLACE : MUMBAI

DATE : 25th November., 2005

AUDITORS’CERTIFICATE

ANNEXURE “D” TO THE DIRECTORS’ REPORT

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We have audited the attached Balance Sheet of AFTEK INFOSYS

LIMITED as at 30th June, 2005 and also the Profit and Loss

Account and the Cash Flow Statement for the year ended on

that date annexed thereto. These financial statements are

the responsibility of the company’s management. Our

responsibility is to express an opinion on these financial

statements based on our audit.

1. 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 from 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.

2. As required by the Companies (Auditor’s Report) Order

2003, 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 Paragraph 4 & 5 of the said order.

3. Further to our comments in the Annexure referred to

above, we report that:

a. We have obtained all the information and

explanations, which to the best of our knowledge

and belief were necessary for the purpose of our audit;

b. In our opinion, the company has kept proper books

of account as required by law so far as appears from

our examination of those books;

c. The Balance Sheet, the Profit & Loss Account and Cash

Flow Statement dealt with by this report are in

agreement with the books of account;

d. In our opinion, the Balance Sheet, the Profit & Loss

Account and Cash Flow Statement comply with the

accounting standards referred to in Sub-Section (3C)

of section 211 of the Companies Act, 1956.

e. According to information and explanations given to

us and on the basis of written representation received

from the directors, taken on record by the Board of

Directors of the company, no director is disqualified

as on 30th June, 2005 from being appointed as director

in terms of clause (g) of sub-section (1) to Section 274

of the Companies Act, 1956.

f. In our opinion and to the best of our information and

according to the explanations given to us, the said

accounts read with the notes contained in schedule-

M thereon, give the information required by the

Companies Act, 1956, in the manner so required and

give a true and fair view:-

i. in the case of Balance sheet, of the state of

affairs of the Company as at 30th June, 2005

ii. in the case of Profit & Loss Account, of the profit

for the year ended on that date and,

iii. in the case of the Cash Flow Statement, of the cash

flows for the year ended on that date.

FOR V.D.Joshi & Co.

Chartered Accountants

V.D.Joshi

Proprietor

Membership No.043340

Mumbai, 30th November, 2005

AUDITORS’ REPORT ....AUDITORS’ REPORT to the Members of Aftek

Infosys Ltd.

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

1. (a) The Company has maintained proper records

showing full particulars including quantitative

details and situation of Fixed Assets.

(b) There is a regular program of physical verification,

which in our opinion is reasonable, having regard

to the size of the Company and nature of fixed

assets. No material discrepancies have been

noticed in respect of the assets physically verified

during the year.

(c) The Company has not disposed off substantial

part of fixed assets during the year.

2. (a) Inventories have been physically verified during

the year by the management . In our opinion the

frequency of the verification is reasonable.

(b) The procedures of physical verification of stocks

followed by the management are adequate in

relation to the size of the Company and the nature

of its business.

(c) The Company is maintaining proper records of

inventory. The discrepancies noticed on

verification between the physical stocks and books

records were not material and have been properly

dealt with in the books of accounts.

3. The Company has not taken nor granted any loans from

and/or to parties covered in the register maintained under

Section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and

explanations given to us, there are adequate internal

control procedure commensurate with the size of the

company and nature of its business with regard to

purchase of stores, raw materials including components,

packing materials, plant and machinery, equipment and

other assets and with regard to sale of goods. There is

no major weakness in the internal control procedures.

5. (a) All the transactions with parties covered under

section 301 of the Companies Act, 1956 have been

properly entered in the register maintained under

section 301 of the Act.

(b) In our opinion, and according to the information

and explanations given to us, there are no

transactions of purchase of goods, materials, or

services, made in pursuance of contracts or

arrangements entered in the register maintained

under section 301 of the Companies Act, 1956

and aggregating during year to Rs.500,000 or more,

in respect of each party.

6. The company has not accepted any deposit from the

public, attracting the provisions of Section 58A and 58AA

of the Companies Act, 1956 and the Companies

(Acceptance of Deposits) Rules, 1975.

7. In our opinion, the Company has an internal audit system

commensurate with the size and nature of its business.

8. We are informed that the Central Government has not

prescribed maintenance of cost records under Section

209(1)(d) of the Companies Act, 1956 for the product

manufactured by the company.

9. (a) The company is generally regular in depositing

with appropriate authorities undisputed statutory

dues including Provident Fund, Income Tax, Sales

Tax, Custom Duty, Excise Duty, Cess and other

material statutory dues applicable to it.

(b) According to the information and explanations

given to us no undisputed amounts payable in

respect of Income –Tax, Wealth -Tax, Sales-Tax,

Custom Duty, Excise Duty and Cess were in arrears

ANNUXURE TO AUDITORS’ REPORTANNEXURE TO AUDITORS’ REPORT

(Referred to in paragraph 2 of the Auditors’ Report of even date to the members of Aftek Infosys Ltd. for

the year ended on 30th June, 2005.)

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

as at 30th

June, 2005, except Water Charges of

Rs.21,527/- payable to Mumbai Municipal

Corporation as at 30th

June, 2005, for a period of

more than 6 months from the date they become

payable and other material statutory dues

applicable to it.

(c) As per information and explanations given to us

no disputed amounts were payable outstanding

as on 30th

June, 2005.

10. The Company has not incurred cash loss in the current

year and in the immediately preceding financial year and

there are no accumulated losses in the Balance Sheet as

on 30th June, 2005.

11. The Company has not defaulted during the year in

repayment of dues to any financial institutions, banks or

debenture holders.


explanation given to us, no loans and advances have been

granted by the Company on the basis of security by way

of pledge of shares, debentures and other securities.

13. As the Company is not a chit fund, nidhi, mutual benefit

fund or society, the provision of clause 4(xiii) of the

Companies (Auditor’s Report) Order, 2003 is not applicable

to the Company.

14. As the Company is not dealing or trading in shares,

securities, debentures and other investments, the

provision of clause 4(xiv) of the Companies (Auditor’s

Report) Order, 2003 is not applicable to the Company.

15. In our opinion and according to information and

explanations given to us , the Company has not given any

guarantee for loans taken by others from Bank or Financial

Institutions.

16. The Company has not taken any term loan during the

year.

17. According to information and explanations given to us

and on an overall examination of the Balance Sheet and

Cash Flow Statement of the Company, we report that no

funds raised on short-term basis have been used for long-

term investment & vice-versa.

18. The Company has not made preferential allotment of

shares to parties and companies covered in the register

maintained under Section 301 of the Companies Act, 1956

and therefore the question of the price at which shares

have been issued is prejudicial to the interest of the

Company does not arise.

19. The Company has not issued debentures and therefore

the question of creation of security in respect debentures

does not arise.

20. The company has disclosed the details of money raised

by issue of Foreign Currency Convertible Bonds during

the year and utilization thereof by way of note no. 19 of

Schedule M.

21. According to the information and explanations given to

us no fraud on or by the Company has been noticed or

reported during the course of our audit.

For V.D.Joshi & Co.


V.D.Joshi

Mumbai, 30th

November,2005 Proprietor

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

BALANCE SHEET ....BALANCE SHEET as at 30th June 2005

As per our audit report of even date.

For V.D. Joshi & Co.


V.D. Joshi

Proprietor

30 th November 2005, Mumbai

For & On Behalf of Board of Directors

Ranjit Dhuru Nitin K. Shukla

Chairman & Managing Director Director – Finance

C .G. Deshmukh

Company Secretary



AS AT AS AT30TH JUNE ‘05 30TH JUNE’04

Rs . Rs .SCHEDULE

SOURCES OF FUNDSSHAREHOLDERS’ FUND

Share Capital A 150,000,000 100,000,000Reserves and Surplus B 3,134,067,110 2,701,817,916Employee Stock Options Outstanding 31,393,429Less: Deferred Employee Compensation 16,834,353 14,559,076

Expenses

LOAN FUNDSecured Loans C 334,983 -Unsecured Loans 1,295,400,000 -

1,295,734,983

TOTAL Rs. 4,594,361,169 2,801,817,916

APPLICATION OF FUNDS

FIXED ASSETS DGross Block 624,419,807 627,207,782Less: Depreciation 384,045,605 222,844,127Net Block 240,374,202 404,363,655

INVESTMENTS E 594,892,613 591,763,513

DEFERRED TAX ASSETS - 977,330

CURRENT ASSETS, LOANS & FADVANCES

Inventories 2,080,135 3,452,434Sundry Debtors 471,377,203 326,870,998Cash & Bank Balance 3,280,850,044 1,364,995,756Loans, Advances & Deposits 233,643,422 185,018,919

3,987,950,803 1,880,338,107LESS: CURRENT LIABILITIES & PROVISIONS G 243,935,104 96,879,295

Net Current Assets 3,744,015,699 1,783,458,812

Miscellaneous Expenditure H 15,078,655 21,254,606( To the extent not writtenoff or adjusted )

TOTAL Rs. 4,594,361,169 2,801,817,916

Notes on Accounts M

23


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

PROFIT & lOSS ACCOUNTPROFIT & LOSS ACCOUNT for the year ended

30th June 2005

2004 - 05 2003 - 04Rs . Rs .

SCHEDULEINCOME:

Sales I 1,952,474,828 1,389,381,837Other Income J 27,506,976 15,603,044

TOTAL INCOME Rs. 1,979,981,805 1,404,984,881

EXPENDITURE:Cost of Revenues & Employees Cost K 1,022,340,433 720,112,559Selling, Administrative & Other Expenses L 169,482,599 59,323,253Depreciation D 180,206,979 148,304,396

TOTAL EXPENDITURE Rs. 1,372,030,012 927,740,207Profit before Extra Ordinary Items, Prior PeriodAdjustments & Tax 607,951,793 477,244,674

Extraordinary Item-Provision for Doubtful Investment - 3,595,575

Profit before Prior Period Adjustments & Tax 607,951,793 473,649,099Provision for Current Tax 9,728,243 2,768,733Provision for Deferred Tax (Refer Note 10 Sch M) - (2,236,385)Fringe Benefit Tax 213,540

9,941,783 532,348

Profit before Prior Period Adjustment 598,010,010 473,116,751Less : Prior period adjustment 93,852 (12,203)

Profit After Tax 597,916,158 473,128,954Add: Balance Brought forward from Previous Year 1,258,611,849 891,573,022 (Short)/Excess Provision for Taxation of earlier years (18,265,041) (3,461,693) Excess provision for Doubtful Debts of earlier years - 3,777,817

Amount Available for Appropriation 1,838,262,966 1,365,018,099

Less: Proposed Dividend 85,279,613 50,000,000 Tax on Dividend 11,144,980 6,406,250 Trfd. to General Reserve 100,000,000 50,000,000

Profit transferred to Balance Sheet 1,641,838,373 1,258,611,849

Basic Earnings Per Share of Rs.2/- each 7.73 6.31

Diluted Earning Per Share of Rs.2/- each 7.68 6.31

(Refer Note 12 of Schedule M)

Notes on Accounts M




V.D. Joshi

Proprietor





C .G. Deshmukh

Company Secretary


24


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CASH FLOW STATEMENTCASH FLOW STATEMENT for the year ended

30th June 2005




V.D. Joshi

Proprietor





C .G. Deshmukh

Company Secretary


2004 - 2005 2003 - 2004Rs . Rs .

A . CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax, prior period adjustment and after extraordinary item 607,951,793 473,649,099Adjustments :

Depreciation 180,206,979 148,304,396Miscellaneous Expenditure Written Off 7,588,571 7,612,946Provision for employee benefits (Net) 239,299 709,964Employee Compensation (ESOP) 14,559,076 -Unrealised foreign exchange (gain)/loss 75,097,504 (3,787,265)Extra Ordinary Item - 3,595,575Loss on sale/discard of Fixed Assets 2,221 465,318Provision for Doubtful Debts / Advances 174,282 73,300Interest Income (25,437,875) (15,537,240)

Operating Profit Before Working Capital Changes 860 ,381 ,851 615 ,086 ,093Adjustments for (Increase)/Decrease in :Trade & other receivables (204,950,101) 26,666,759Inventories 1,372,299 789,982Trade Payables 99,006,271 (70,819,898)

755,810,321 571,722,937Prior Period Item (93,852) 12,203Direct taxes paid (Including Advance Tax and Net of Refund) (14,051,858) (34,829,565)

741,664,611 536,905,575Extra ordinary Items - -

Net Cash Generated From Operating Activities 741 ,664 ,611 536 ,905 ,575B . CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (16,220,948) (114,900,508)Sale of Fixed Assets 1,200 47,200Share investment in wholly owned subsidiary (3,129,100) (20,924,750)Puchase of units of mutual funds - (95,500,000)Sale of units of mutual funds - 125,500,000(Increase)/Decrease in Loans & Advances to Subsidiaries & Affiliates 453,547 551,520 Share Application Made - (1,706,165) Interest income & Mutual Fund Income 25,437,875 15,537,240Net Cash From Investing Activities 6,542,575 (91 ,395 ,464 )

C . CASH FLOW FROM FINANCING ACTIVITIESIssue of Foreign Currency Convertible Bonds 1,295,400,000 -FCCB Expenses (1,412,620) -Loan from ICICI Bank (Net) 334,983 -Dividend Paid (Incl Tax on Dividend) (55,915,529) (55,957,828)

Net Cash From Financing Activities 1,238,406,834 (55 ,957 ,828 )

D. Net increase/(Decrease) in Cash & Cash equivalents (A+B+C) 1 ,986 ,614 ,019 389 ,552 ,284

Cash & cash equivalents at the beginning of the year 1,364,995,756 976,695,990Cash & cash equivalents at the end of the year 3,351,609,776 1,366,248,274Add: Unrealised Foreign Exchange Loss on cash & Cash Equivalent (70,759,732) (1,252,517)Cash & cash equivalents at the end of the year as per Accounts 3,280,850,044 1,364 ,995 ,756

Notes to the Cash flow statement1 Figures in bracket represents outflow.2 Previous year’s figures have been regrouped wherever necessary.

25


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

SCHEDULES FORMING ....

AS AT AS AT30th June, 2005 30th June, 2004

Rs . Rs .

SCHEDULE A: SHARE CAPITAL

Authorised100,000,000 (PY75,000,000)Equity shares of Rs. 2/- each 200,000,000 150,000,000

Issued, Subscribed & Paid Up75,000,000 Eq.Shares of Rs.2/- each(PY50,000,000) 150,000,000 100,000,000

TOTAL Rs. 150,000,000 100,000,000

Notes :

1. Of the above equity shares :a) 26,750,000 equity shares (PY 1,750,000) have been alloted as fully paid bonus shares by capitalising General Reserve.b) 29,994,750 equity shares represent 9,998,250 Global Depository Receipts (“GDRs”). (Originaly 3,999,300 shares ofRs.10/- each, were issued underlying 1,333,100 GDRs by way of GDR offering in the year 2003 by the Company.)

SCHEDULE B : RESERVES & SURPLUS

General Reserve :Opening Balance 216,837,282 167,881,961Add : Addition 100,000,000 50,000,000

316,837,282 217,881,961Less : Issue of Bonus shares 50,000,000Less: Deferred Tax Adjustment 977,330 (1,044,679)

265,859,952 216,837,282Share Premium :

Opening Balance 1,226,032,575 1,226,032,575Add:Addition - 1,226,032,575 -

Capital Reserve 336,210 336,210

Profit & Loss Account 1,641,838,373 1,258,611,849

TOTAL Rs. 3,134,067,110 2,701,817,916

SCHEDULE C : LOAN FUND

SECURED LOANS -

ICICI Bank Car Loan 334,983 -(Secured against Motor Car) 334,983 -

UNSECURED LOANS1% Foreign Currency Convertible Bonds Due 2010 1,295,400,000 -

(1% FCCBs convertible into shares/GDR or due to be redeemed in 2010 ) 1,295,400,000 -

SCHEDULES FORMING PART OF

THE ACCOUNTS

26


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

SCHEDULES FORMING ....SCHEDULES FORMING PART

OF THE ACCOUNTS

SCHEDULE D : FIXED ASSETS

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27


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5



Rs . Rs .

SCHEDULE E : INVESTMENT

Unquoted - Trade Investments (At Cost)

In subsidiary Companies

Aftek Sales & Services Pvt. Ltd. 100,000 100,000

(1000 (PY 1000) Equity shares of Rs.100/-

each fully paid up.)

Opdex Inc.(formerly Aftek Infosys (USA) Inc.,)

(31,700,000(PY30,300,000) Eq.Shares of US$0.05 each 69,596,911 66,467,811

fully paid up.agg.to US $ 1.585 million(PY US$1.515 million))

Mihir Properties Private Ltd. 55,265,000 55,265,000

(145,000 (PY 145000)Equity shares each fully

paid up. FV Rs.100/-)

In Others

Arexera Information Technologies GmbH 469,930,703 469,930,703

(49.23% of the share capital of the company,

nominal vaule of which Euro 25600)

TOTAL Rs. 594,892,613 591,763,513

SCHEDULES FORMING PART OF

THE ACCOUNTS

28


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


Rs . Rs .

SCHEDULE F : CURRENT ASSETS, LOANS & ADVANCES

I InventoriesAs taken, valued & certified by the Management)

Raw Materials, Consumables 1,192,838 1,718,482Work-in-progress 570,832 1,560,549Finished Product 316,465 173,403

TOTAL Rs. 2,080,135 3,452,434I I Sundry Debtors

( Unsecured considered good except stated otherwise )(a) Outstanding for more than six months

Considered good 93,613,101 8,554,559Considered Doubtful 2,091,925 1,917,643

95,705,027 10,472,202Less: Provision for Doubtful Debts 2,091,925 1,917,643

93,613,101 8,554,559(b) Others (Considered Good) 377,764,101 318,316,438

471,377,203 326,870,998

TOTAL Rs. 471,377,203 326,870,998

I I I Cash & Bank BalancesCash in Hand 2,240,965 2,070,171With Scheduled Bank

-In Cash Credit Account 15,927,026 4,862,954-In Current Account 1,849,635 21,738-In Fixed Deposit 1,232,241,259 113,140,706-In Dividend Account 2,231,808 1,612,962-In Foreign Currency Current Account 36,497,008 278,991

With Others -Banco Efisa Current Accounts 973,310,862 17,051,581 (Maximum Balance Outstanding at any time during the year Rs.1,086,912,482(PY 352249904))

-Banco Efisa Deposit 1,016,551,481 1,225,956,654 (Maximum Balance Outstanding at any time during the year Rs.1,225,956,654(PY 1,363,783,514))

TOTAL Rs. 3,280,850,044 1,364,995,756

Note :

1. Balance in Foreign Currency Current accounts includes Rs.34543525/- (PY NIL) being unutilised money of FCCB issue.

2. Balance in Fixed Deposit accounts includes Rs.1209040000/- (PY NIL) being unutilised money of FCCB issue.

3. Balance in Banco Efisa Current Account includes Rs.14,635,553(PY 7,383,201) is unutilised money of the GDR issue.

4. Balance in Banco Efisa Deposit Account includes Rs.8,391,552(PY 142,843,906) is unutilised money of the GDR issue.

SCHEDULES FORMING ....SCHEDULES FORMING PART OF

THE ACCOUNTS

29


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


Rs . Rs .

SCHEDULE F : CURRENT ASSETS, LOANS & ADVANCES (cont ’d)

I V Loans, Advances & Deposits

( Unsecured considered good except stated otherwise )Advances recoverable in cash or in kind

Considered Good 60,897,289 14,249,966Considered Doubtful - 18,800

60,897,289 14,268,766Less : Provision for Doubtful Advances - 18,800

60,897,289 14,249,966

Advances for acquisition of shares 3,595,575 3,595,575

Less : Provision for Doubtful Advances 3,595,575 - 3,595,575

Loans & Advances - Affiliates 22,744,018 23,197,565Deposit with Body Corporates 145,598,630 145,598,630 (includes interest accrued )Deposits - others 4,292,430 1,539,266Interest Accrued 111,055 433,492

TOTAL Rs. 233,643,422 185,018,919

SCHEDULE G: CURRENT LIABILITIES & PROVISIONS

i ) Current Liabilities :Sundry Creditors 117,685,348 32,476,884Advance from Customers 7,432,168 239,105Unclaimed Dividend 2,230,549 1,611,703(Investor Protection & Education Fund shall be creditedby the amount when due)Others 6,792,815 1,485,747

i i ) Provisions :Provision for Tax 9,941,783 2,768,733Proposed Dividend (Incl. Dividend Tax) 96,424,593 56,406,250Provision for Employee Benefits 1,358,773 1,119,474Other Provisions 2,069,075 771,400

TOTAL Rs. 243,935,104 96,879,295

SCHEDULE H : MISCELLANEOUS EXPENDITURE

Preliminary Expenses 755,554 1,535,483

Less : Written Off 755,554 779,929 - 755,554

GDR Issue Expenses 20,499,052 27,332,069Less : Written off 6,833,017 13,666,035 6,833,017

20,499,052FCCB Expenses 1,412,620 -Less : Written off - 1,412,620

TOTAL Rs. 15,078,655 21,254,606


THE ACCOUNTS

30


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

2004-2005 2003-2004Rs . Rs .

SCHEDULE I : SALESSoftware, Software Driven Products & others 38,548,619 45,608,873Software - Exports - Products 209,047,413 262,597,745

Software - Exports - Services 1,693,816,906 1,072,880,282Other Exports 10,753,893 8,241,595

1,952,166,830 1,389,328,496Add: Duty Drawback 307,998 53,342

TOTAL Rs. 1,952,474,828 1,389,381,837

SCHEDULE J : OTHER INCOMEIncome from Mutual Fund - 469,019Interest Income (Net of Foerign Tax) 29,856,388 18,243,735[Incl. TDS Rs.1148095/- (PY Rs.1505586/-)]

Less :Interest Paid 4,418,512 3,175,514 25,437,875 15,068,221

Miscellaneous Income 2,069,101 65,804

TOTAL Rs. 27,506,976 15,603,044

SCHEDULE K : COST OF REVENUES & EMPLOYEES COSTConsumption of Raw Materials & ConsumablesOpening Stock 1,718,482 988,916Add: Purchases & Expenses 7,023,736 10,218,110

8,742,217 11,207,027Less: Closing Stock 1,192,838 1,718,482

7,549,379 9,488,545Cost of Software Sold (Trading)Opening Stock - 3,253,500Add: Purchases [Qty.1022 Nos. (PY1575Nos.)] 26,207,125 29,853,750

26,207,125 33,107,250Less: Closing Stock - -

26,207,125 33,107,250Add / (Less) :Decrease / (Increase) in finished & semi finished stocksOpening Stock 1,733,952 -

Closing Stock 887,297 1,733,952846,656 (1,733,952)

Payments to and Provisions for Employees (includingManagerial Remuneration)

Salaries, Wages, Bonus & others 78,843,423 44,608,314Contribution to Provident Fund & Gratuity Fund 2,760,762 1,576,292

Staff Welfare Expenses 2,218,816 1,309,239Employees Compensation 14,559,076 -

98,382,076 47,493,844Software Development, Installation &Testing Charges 889,355,197 631,756,872

631,756,872TOTAL Rs. 1,022,340,433 720,112,559


THE ACCOUNTS

31


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

2004-2005 2003-2004Rs . Rs .

SCHEDULE L:

SELLING, ADMINISTRATIVE & OTHER EXPENSES

Advertisement & Sales Promotion 1,929,142 679,004

Payment to Auditors 1,231,485 960,400

Bad Debts 630,622 798,033

Travelling & Conveyance 12,218,450 11,570,203

Professional Fees 5,511,230 9,363,081

Miscellaneous Expenses W/Off 7,588,571 7,612,946

Rent 5,701,834 2,567,248

Commission Paid 421,973 151,260

Electricity Expenses 2,170,212 1,682,333

Rates & Taxes 2,634,345 2,221,073

Provision for Doubtful Debts/Adv 194,782 73,300

Foreign Exchange Diff. 114,833,023 4,847,371

Telephone & Communication 2,841,794 2,993,502

Insurance Charges 145,147 153,224

Loss on sale of Fixed Assets 2,221 465,318

Repairs & Maintenance

Buildings 342,903 82,071

Computers 473,446 737,350

Others 570,794 191,590

Miscellaneous Expenses 10,040,625 12,173,946

TOTAL Rs. 169,482,599 59,323,253


THE ACCOUNTS

32


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

SCHEDULE M : NOTES ON ACCOUNT

1. SIGNIFICANT ACCOUNTING POLICIES

Basis for preparation of financial

statements

The financial statements are prepared in accordance with

the accounting principles generally accepted in India and

comply with the Accounting Standards specified by the

Institute of Chartered Accountants of India under section

211(3C) of the Companies Act, 1956.

Method of Accounting

The Company follows accrual basis of accounting.

Sales

Sales are stated net of returns and inclusive of excise duty

and sales tax, if any, and testing and installation charges

borne by the customer. Annual Maintenance contracts

receipts are accounted on the basis of bills raised

irrespective of its periods. After introduction of VAT from

1st April,2005, sales are stated net of VAT.

Foreign Currency Transactions

Transactions in foreign currencies pertaining to revenue

accounts are accounted at approximate exchange rate

prevalent on transaction date. Gains and losses arising

out of subsequent fluctuations are accounted for on actual

payment/realization in Profit & Loss Account. The amount

outstanding at the year end are translated at exchange

rate prevailing at year end and the profit/loss so

determined are recognized in the Profit & Loss Account.

Inventories

(i) Inventories are valued at lower of cost or net

realisable value.

(ii) In case of raw materials and consumables the cost

includes non refundable duties, taxes and freight

inward on FIFO basis.

(iii) Cost of finished product and work-in-progress

includes the cost of raw materials, consumables

and direct labour as applicable.

(iv) Traded goods are valued at cost on FIFO basis.

Fixed Assets & Depreciation

Fixed Assets are stated at cost of acquisition less

accumulated depreciation. Direct costs are capitalised until

the assets are ready for use and include inward freight,

non refundable duties, taxes and expenses incidental to

acquisition and installation.

Depreciation on Fixed Assets is provided on straight line

method over the Useful life of assets as estimated by the

management, on a pro-rata basis, except Leasehold land.

The useful lives estimated by the management for

amortisation/depreciation of the assets which are higher

than rates specified as per Schedule XIV of the Companies

Act, 1956, are as under :

Plant & Machinery* 5 years

Computers 3 years

Furniture & Fixtures 5 Years

Factory Building 15 Years

Intellectual property Right 3 Years

*(Plant & Machinery includes Office Equipments,

Electrical Fittings)

Investments

Long term investments are carried at Cost and Short term

investment are carried at the lower of cost or fair value.

Provision for diminution in the value of long term

investments is made only if such a decline is not temporary

in the opinion of the management.

Employee Stock Option Scheme

Accounting of Employee Stock Option Scheme is done as

per “Fair Value Method”. SEBI (Employee Stock Option

Scheme & Employee Stock Purchase Scheme) Guidelines,

1999 requires the amortization of fair value of the option

over the vesting period.

SCHEDULE FORMING ....SCHEDULE FORMING part of accounts for the year ended

30th June 2005

33


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

Employees’ Retirement Benefits

Company’s contribution to Provident Fund and Gratuity

Fund is charged to Profit and Loss account on accrual

basis. Liability for Leave Encashment benefits is charged

to Profit & Loss account on the basis of actuarial

valuation.

Research and Development

Capital expenditure if any, is shown under respective

head of fixed assets. Revenue expenses incurred are

included under the respective heads of expenses except

for purchase of components etc., which are included

under Research & Development Expenses.

Taxation

Provision for current tax is computed as per total income

returnable under the Income-tax, 1961 for relevant financial

year ending on 31st March, taking into account available

deductions and exemptions. Deferred tax is recognized

for all timing differences being the difference between

taxable incomes and accounting income that originate in

one period and are capable of reversal in one or more

subsequent periods.

2004-2005 2003-2004

2. Estimated amounts of contracts remaining to be executed

on capital account and not provided for NIL NIL

3. Contingent Liabilities in respect of:

Bank Guarantee 257629 99539010

Income-tax NIL* 18080562

*Income tax cases for Assessment Year 1996-97 and 2001-02 is pending

before Commissioner (Appeal) and Tribunal respectively. However their

outcome in terms of contingent liability is not ascertainable.

Interest on FCCB 277439 NIL

4. Payments to Directors:

Salaries 22249932 9290868

Contribution to Gratuity fund NIL 75276

Commission to Non Executive directors 3285875 1163041

5. Auditors’ Remuneration:

Tax Audit Fees 275500 220400

Statutory Audit Fees 606100 551000

Certification & others 349885 189000


30th June 2005

34


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

6. Quantitative and other information:2004-2005 2003-2004

i) Productions 1058 Pcs 1022 Pcs

ii) Particulars in respect of opening stock, closing stock & Turnover :

OP.STOCK CL.STOCK TURNOVER

Qty Value Qty Value Qty Value

Software —— —— —— —— —— 1903433144

(——) (——) (——) (——) (——) (1336297027)

Software Driven Products 35 173403 65 316465 1028 15931964

(——) (——) (35) (173403) (987) (15109376)

Software (Trading) —- —— —— —— 1022 28844282

(85) (3253500) (—) (——) (1660) (36787023)

Others —— —— —— —— —— 3957440

(Refer Note-b) (——) (——) (——) (——) (——) (1188411)

a. Figures in (Bracket) indicate previous year’s figures.

b. Others include receipt from Annual Maintenance Contracts and sale of miscellaneous consumables and accessories,

stock of which has been included in stock of Raw Materials and Consumables.

c. Software Driven Product sales includes Rs.251241/- (PY NIL) being products transferred to Fixed Assets.

iii) Value of imported & Indigenous Raw Materials consumed/traded and percentage of each to total

Consumption.

2004 – 2005 2003 – 2004Rs . % Rs . %

Raw Materials & Consumables :

Imported 1873572 24.82% 3498842 36.87%

Indigenous 5675807 75.18% 5989703 63.13%

7549379 100.00% 9488545 100.00%

Note : Quantities in respect of raw materials and consumables are not ascertainable due to multiplicity and

diverse nature of items and value of each such item is less than 10% of the total value.

7 C .I.F. VALUE OF IMPORTS

2004-2005 2003-2004

i) Raw Materials 1223416 2827098

ii) Software 217612189 166028521

iii) Capital Purchases 1443051 112931584

iv) Others 383422 33953


30th June 2005

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

8. EXPENDITURES IN FOREIGN CURRENCY 2004-2005 2003-2004Foreign Tour & Travelling 5165266 5826190Software Installations, testing, support and others 671642166 320551229Other expenses 1001625 9247267FCCBs Expenses 1412620 -

9 . EARNINGS IN FOREIGN CURRENCY 2004-2005 2003-2004Export Sales 1913618212 1343719622Interest (Net of tax) 24313896 10784996

10. DEFERRED TAX ASSETS / (LIABILITIES) :The Major components of Deferred tax assets / (liabilities) arising on account of timing differences are as follows:

As At As At30th June ‘05 30th June ’04

Related to Fixed Assets NIL 855264Disallowance under the Income-tax Act, 1961 NIL 115321Provision for Doubtful Advance NIL 6745

Provision for Deferred Tax Assets / (Liabilities) N IL 977330

Note : As per the provisions contained in paragraphs 15-18 of the AS 22 “Accounting for Taxes on Income” issued by theInstitute of Chartered Accountants of India, and consideration of prudence, the company has not recognized DeferredTax Asset arising during the year and has derecognized the Deferred Tax Assets recognized in the earlier year. Theadjustment of the Deferred Tax Assets of earlier year has been made to the General Reserve.

11. NET DIVIDEND REMITTED IN FOREIGN CURRENCY :

Final 2002-03 — — — 8 4800 24000

Final 2003-04 6 16500 16500 — — —

12. EARNINGS PER SHARE (EPS) : 2004 - 2005 2003 - 2004Rs . Rs .

BasicProfit After tax and Prior Period Adjustment 597,916,158 473,128,954Less/(Add):Short provision for taxation of earlier years 18,265,041 3,461,693Add: Excess provision for doubtful debts of earlier years 0 3,777,817Net Profit available for Equity Share Holders 579,651,117 473,445,077Weighted Average Number of equity shares subscribed 75000000 75000000Face value of Shares 2 2Basic Earnings per Equity Share 7.73 6.31DilutedNet Profit available for Equity Share Holders 579,651,117 473,445,077Weighted Average Number of equity shares subscribed 75000000 75000000Weighted Average Number of potential shares on accountof Employee Stock Options 149537 0Weighted Average Number of potential shares on account ofForeign Currency Convertible Bonds 306714 0Total Weighted Average Number shares outstanding 75456251 75000000Diluted Earning Per Share 7.68 6.31

2004 – 2005 2003 – 2004Period to which

it relatesNumber of

Non-resident

Shareholders

Number of

Equity Shares

Held

Dividend

Remitted

(Net of Tax) Rs.

Number of

Non-resident

Shareholders

Number of

Equity Shares

Held

Dividend

Remitted

(Net of Tax) Rs.


30th June 2005

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13. Details of Loans & Advances in the nature of loans recoverable from subsidiaries /Associates Concerns:

Name of the Subsidiary Outstanding Amount Maximum balance outstanding at any As at 30/06/2005 time during the year

Rs . Rs .

Mihir Properties Private Limited 118155 118155

(92590) (92590)

Aftek Sales & Services Private Limited 123745 123745(102725) (102725)

Figures in Bracket ( ) indicates previous year’s figures.14. Related Party Information

Name of the Related Parties Nature of Relation

Opdex Inc. (Formerly known as Aftek Infosys (USA) Inc.) SubsidiaryAftek Sales & Services Private Limited Subsidiary

Mihir Properties Private Limited SubsidiaryAftek Employees’ Welfare Trust ControlAftek Infosys Ltd. Employees Group Gratuity Scheme Control

Ranjit M. Dhuru Key Management PersonnelNitin K Shukla Key Management PersonnelMahesh B Vaidya Key Management Personnel

Sunil M. Desai Key Management PersonnelPromod V Broota Key Management Personnel

Aftek Digital System Private Limited Company Controlled by Directors

Nature of Transaction Amount Relation Amt outstanding as on Rs. 30.6.2005

Rs .

Loan/Advances Given(Net) 46585 Subsidiaries 241900(23480) (195315)

Loan/Advances Received.Back (net) 500132 Control 22502118(575000) (23002250)

Remunerations 22249932* Key managerial -(9290868)* Personnel -

Equity Contribution 3129100 Subsidiary NIL(23267811) (NIL)

Payment of Rent NIL Company controlled -(7250) by Directors -

Rent free use of Premises NIL Subsidiary -(NIL) -

Contribution to Aftek Infosys Ltd. 465197 Control - Employees Group Gratuity Scheme (286400)

Collateral & Guarantee Building OD facility Subsidiaryas collateral and corporate guarantee from Bank (Mihir Properties - for overdraft facility with 40000000 Pvt.Ltd.) Bank of India (40000000)

Figures in Bracket indicates previous year’s figures. * Remuneration is net of contribution to Gratuity Fund.


30th June 2005

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

15. Computation of net profit in accordance with Section 349 of the Companies Act, 1956 and calculationof commission payable to non-whole time directors

Computation of Profit in accordance with section 349 of the Companies Act, 1956.2004 - 2005 2003 - 2004

Net profit after tax 598,010,010 473,116,751Add:1. Whole-time directors remuneration 22,249,932 10,529,1852. Commission to non-whole time directors 3,285,875 1,163,0413. Provision for bad and doubtful debts/advances 194,782 73,3004. Loss on sale of fixed assets 2,221 465,3185. Provision on doubtful investments - 3,595,5756. Depreciation as per the books of account 180,206,979 148,304,3967. Provision for taxation 9,941,783 532,348

813,891,583 637,779,914Less:Depreciation as envisaged U/s.350 of the Companies Act* 180,206,979 148,304,396Profit on sale of fixed assets - -Net profit as per section 349 of the Companies Act, 1956 633,684,603 489,475,518

Maximum Commission Permissible to non-whole time director 6,336,846 4,894,755Commission paid to non whole time director 3,285,875 1,163,041

(*) The company depreciates fixed assets based on estimated useful life that are lower than those implicit in Schedule XIV ofthe Companies Act, 1956. Accordingly, the rates of depreciation used by the company are higher than the minimum ratesprescribed by Schedule XIV of the Companies Act, 1956.

16. Employee Stock Option SchemeIn terms of approval of the shareholders at the Annual General Meeting held on the 29th December 2000, the company hasestablished Employees Stock Option Scheme,2004. The options are vested over a period of one year to four years, subjectto fulfillment of certain conditions. Upon vesting, the grantees are eligible to apply for and secure the allotment of equityshares of the Company on payment of the exercise price.

Stock Options [ ESOP]1 Exercise Price per Share Rs. 56 * Rs. 70 * Rs. 56 *2 Grant Date 25.08.2004 28.10.2004 25.08.20043 Vesting commences on 25.08.2005 28.10.2005 25.08.20054 Vesting schedule 25% of grant each year commencing one year from the date of grant 100% on 25.08.2005Particulars ofNumbers of Options 2004-05 2003-04 2004-05 2003-04 2004-05 2003-045 Option outstanding at

The Beginning of the year - - - - - -6 Option granted during the year 436025 - 104965 - 100000 -7. Option exercised in respect of

which shares were allotted - - - - - -8. Option lapsed during

the year on separation 22795 - 10735 - - -9. Option outstanding at the end Of

the year 413230 - 94230 - 100000 -On which –Option vested - - - - - -Option Yet to vest 413230 94230 100000

* The company has revised the above exercise prices from Rs.56 and Rs.70 to Rs.26 and Rs.40 respectively, after the balance sheet date on

account of bonus issue adjustment.


30th June 2005

38


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

17. Aftek Employees’ Welfare Trust (unregistered) was created for the benefit of employees including Executive Directors. The

purpose of the trust inter alias is to purchase/invest in the shares or other securities including that of Aftek Infosys Ltd.

for the benefit of employees. As per the conditions of the trust deeds the company has provided an interest free loan

aggregating to Rs.22502118 (PY Rs. 23002250) (maximum balance outstanding at any time during the year Rs.23002250 (PY

Rs. 23577250)) and the same has been used for the purchase of Equity shares of Aftek Infosys Ltd.. These shares may be

allocated to the employees or the amount of profit earned on the sale of these shares may be distributed amongst the

employees..

18. As at 30th June, 2005, there is no outstanding amount payable to the Companies covered under Small Scale Industries.

19. During the year the Company issued 3000 1% Foreign Currency Convertible Bonds (FCCBs) of USD 10000/- each aggregating

to USD 30 Millions (Rs.129,54,00,000 at issue) with an option to convert these Bonds into equity shares of Rs.2/- each or

GDR within a period of 5 years from the date of issue of the FCCBs at a pre-defined conversion price of Rs.94/- per share.

The consideration for the aforesaid FCCBs was received in current account with Bank of India, London after deducting

advance towards Issue Expenses by the Manager to the issue.

The proceeds of the issue, after deducting Rs.51816000/- as advance for issue expenses and bank charges Rs.475/-, has

been kept with Bank of India, London in the following accounts

i) In current account Rs. 34543525/-

ii) In deposit account Rs.1209040000/-

And grouped under “Cash and Bank balances” (Schedule F)

20. Balances in Unclaimed Dividend Accounts are subject to reconciliation.

21. The company operates in a single segment.

22. Previous years’ figures have been regrouped / recast wherever necessary to make them comparable with the current years’

figure.

23. Figures are rounded off to nearest rupee.

24. Schedules- A to M form an integral part of the accounts and have been duly authenticated.


30th June 2005

39


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5




C .G. Deshmukh

Company Secretary


25. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

1. Registration Details:Registration No.: 39342 State Code: 11Balance Sheet Date: 30.06.2005

2. Capital raised during the year (Amount in Rs. Thousand):Public Issue NIL Right Issue: NILBonus Issue NIL Private Placement: NIL

3. Position of Mobilisation and Deployment of funds:Total Liabilities 4594361 Total Assets 4594361

SOURCES OF FUNDSPaid up Capital 150000 Reserves & Surplus 3148626

Including Employees Stock Option Rs. 14559 Thousand

Secured Loans 335 Unsecured Loans 1295400

APPLICATION OF FUNDSNet Fixed Assets 240374 Investments 594893Net Current Assets 3744015 MiscellaneousDeferred Tax Assets NIL Expenditure 15079Accumulated Losses NIL

4. Performance of Company (Amount in Rs. Thousand)Turnover 1952475 Total Expenditure 13072030Profit before Tax 607952 Profit after Tax 598010

Earnings Per Share in Rs. 7.73 Dividend Rate 50%

5. Generic Names of Principal Products/Services of Company:

Product Description : Computer Software Item Code No.: 85249009.10


30th June 2005

40

AFTEK SALES & SERVICES PVT. LTDA N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

NOTICE is hereby given that the Annual General Meeting of the Members of Aftek Sales And Services Private Limited will be

held at 10.30 a.m on Monday, the 10th October 2005 at the Registered Office of the Company at 366, Veer Savarkar Marg, Dadar,

Mumbai- 400 028 to transact the following business.

1. To receive, consider and adopt the Balance Sheet as at 30th June 2005 and the Profit & Loss Account for the year

ended on that date together with the Reports of Directors and Auditors thereon.

2. To appoint a Director in place of Mr Mukul Dalal who retires by rotation and, being eligible, offers himself for

re-appointment.

3. To consider and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary

Resolution:

“RESOLVED THAT M/s. J R Shah & Associates, Chartered Accountants, Mumbai, be and are hereby re- appointed as

Auditors of the Company , to hold office from the conclusion of this meeting until the conclusion of the next Annual

General Meeting of the Company on such remuneration as may be mutually agreed upon between the Board of

Directors of the Company and the Auditors, plus reimbursement of service tax, out-of-pocket and travelling expenses

actually incurred by them in connection with the Audit.”


Ravindranath Malekar

DIRECTOR

Registered Office :

366, Veer Savarkar Marg,

Dadar, Mumbai – 400 028

DATE :27th September, 2005

NOTE : A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE

INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES, IN ORDER TO BE EFFECTIVE, MUST

BE RECEIVED BY THE COMPANY AT ITS REGISTERED OFFICE NOT LESS THAN 48 HOURS BEFORE THE MEETING.

NOTICENOTICE

41

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

AFTEK SALES & SERVICES PVT. LTD

To,

The Members of

Aftek Sales & Services Pvt. Ltd.

Your Directors present their Annual Report together with the Audited Statement of Accounts for the year ended on 30th June

2005.

PERFORMANCE

Your Company did not carry out any busines activity during the year under review.

DIVIDEND

In view of the loss incurred by the Company the question of recommendation of any dividend for the year does not arise.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Responsibility

Statement, it is hereby confirmed :

(i) that in the preparation of the annual accounts for the year ended 30th June, 2005, the applicable accounting

standards have been followed along with proper explanations in case of material departures;

(ii) that the selected accounting policies were applied consistently and judgments and estimates that are reasonable

and prudent made so as to give a true and fair view of the state of affairs of the Company at the end of the financial

year ended 30th June, 2005 and of the profit of the Company for that period;

(iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance

with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and

detecting fraud and other irregularities;

(iv) that the annual accounts for the year ended 30th June, 2005 have been prepared on a ‘going concern’ basis.

PERSONNEL

There were no employees drawing remuneration in excess of the limits prescribed under Section 217(2A) of the Companies

Act, 1956 as amended.

INFORMATION UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

Considering the nature of your Company’s activities and the fact that no business activity was carried out, the particulars

prescribed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable.

There are no Foreign Exchange Earnings and Outgo during the year under review.

AUDITORS

M/s J.R. Shah & Associates, Chartered Accountants, Mumbai, the retiring Auditors of the company hold office until the

conclusion of the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment.

For and on behalf of the Board


Ravindranath Malekar

DIRECTOR

Place : Mumbai

DATE :27th September, 2005

DIRECTORS’ REPORTDIRECTORS’ REPORT

42


1. We have audited the attached Balance Sheet of Aftek

Sales & Services Private Limited as at 30th June,

2005 and also the Profit & Loss Account of the Company

for the year ended on that date annexed thereto. These

financial statements are the responsibility of the

Company’s management. Our responsibility is to express

an opinion on these financial statements based on our

audit.



required that we plan and perform the audit to obtain


statements are free of material misstatement. An audit



An audit includes assessing the accounting principles

used and significant estimates made by management,

as well as evaluating the overall financial statement



3. The Companies (Auditors’ Report) Order 2003, issued by

the Central Government of India in terms of section

227(4A) of the Companies Act, 1956, is not applicable to

the Company, as the Company is not covered by the order.

4. Further to our comments in the paragraph 3 above, we

report that:



and belief were necessary for the purpose of our audit.

b. In our opinion, proper books of accounts as required

by law have been kept by the company, so far as

appears from our examination of these books.

c. The Balance Sheet and the Profit & Loss Account dealt

with by this report are in agreement with the books

of accounts.

d. In our opinion the Balance Sheet and the Profit &

Loss Account comply with the Accounting Standards

referred to in sub-section (3c) of Section 211 of the

Companies Act, 1956.

e. On the basis of written representation received from

the directors and taken on record by the Board of

Directors, we report that none of the directors is

disqualified as on 30th June, 2005 from being

appointed as a director in terms of Section 274(1)(g)

of the Companies Act, 1956.

f. In our opinion and to the best of our information

and according to the explanations given to us, the

said Accounts read together with the Significant

Accounting Policies and other notes thereon give the

information as required by the Companies Act, 1956,

in the manner so required and give a true and fair

view:

i) in the case of the Balance Sheet, of the State of

affairs of the Company as at 30th June, 2005

ii) in the case of the Profit & Loss Account, of the

Loss for the year ended on that date.

For J.R.Shah & Associates


J.R.Shah

Proprietor

Mem.No.46598

27th September, 2005, Mumbai.

AUDITORS’ REPORT ....AUDITORS’ REPORT to the members of Aftek Sales &

Services Pvt.Ltd

43

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


BALANCE SHEET ....AS AT AS AT

30TH JUNE, 2005 30TH JUNE, 2004

Rs . Rs .

SOURCES OF FUNDS

SHAREHOLDERS’ FUND

AUTHORISED

1,000 Equity shares of Rs.100/- each 100,000 100,000

ISSUED, SUBSCRIBED & PAID UP

1,000 Equity Shares of Rs.100/- each 100,000 100,000

UNSECURED LOANS

From Holding Company 123,745 102,725

TOTAL Rs. 223,745 202,725

APPLICATION OF FUNDS

CURRENT ASSETS, LOANS & ADVANCE

Cash & Bank Balance 94,231 95,925

LESS: CURRENT LIABILITIES

& PROVISIONS

Provision for Audit Fees 7,714 7,714

Sundry Creditors - 8,550

7,714 16,264

Net Current Assets 86,517 79,661

Profit & Loss Account 137,228 123,064

TOTAL Rs. 223,745 202,725

Notes on Accounts Schedule A

BALANCE SHEET AS AT 30TH JUNE, 2005.

As per our report of even date

For J.R.Shah & Associates For & on Behalf of Board of Directors


J R Shah Mukul Dalal R.U. Malekar

Proprietor. Director Director

27th September, 2005, Mumbai 27th September, 2005, Mumbai

44


PROFIT & LOSS ....

2004-2005 2003-2004

Rs . Rs.

INCOME NIL NIL

EXPENDITURE

-Selling, Admn. & other Expenses

Audit Fees 7,714 7,714

Profession tax 5,000 2,500

Bank Charges 450 60

ROC filing fees 1,000 1,150

Conveyance Expneses - 637

TOTAL Rs. 14,164 12,061

Net Profit/(Loss) Before tax (14,164) (12,061)

Less: Provision for Tax - Current - -

- Deferred - -

Net Profit/(Loss) for the year (14,164) (12,061)

Balance brought forward (123,064) (111,003)

Add: Net Profit/(Loss) for the year (14,164) (12,061)

Balance carried to Balance Sheet (137,228) (123,064)

Notes on Accounts Schedule A

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED

3OTH JUNE, 2005.

As per our report of even date

For J.R.Shah & Associates For & on Behalf of Board of Directors


J R Shah Mukul Dalal R.U. Malekar

Proprietor. Director Director

27th September, 2005, Mumbai 27th September, 2005, Mumbai

45

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


SCHEDULE A

NOTES FORMING PART OF ACCOUNT AS AT 30TH JUNE, 2005

1. SIGNIFICANT ACCOUNTING POLICIES

General

(i) The accounts are prepared on historical cost basis and on the accounting principles of going concern.

(ii) The company generally adopts the accrual basis of accounting.

(iii) The accounting policies not specifically referred to otherwise is consistent and in consonance with generally

accepted accounting principles.

Current Year Previous Year

2. Auditors Remuneration:

(Inclusive of Service Tax)

Audit Fees Rs. 7714/- Rs. 7,714/-

3. Quantitative and other informations:

The company has not carried on any business activity during the year therefore no quantitative details have been

given.

4. C.I.F.Value of Imports: NIL NIL

5. Expenditure in Foreign Currency NIL NIL

6. Earnings in Foreign Currency NIL NIL

7. Out flow in Foreign Currency NIL NIL

8. There is no tax provision made as there is loss during the year. Since there is no business activity, no deferred tax

liability/asset has been provided for.

9 RELATED PARTY INFORMATION:

LIST OF RELATED PARTIES WHERE CONTROL EXIST.

Holding Company : Aftek Infosys Ltd.

Fellow Subsidiaries : Mihir Properties Pvt. Ltd. & Opdex Inc.,

Name of Related Description of Nature of Amount Amount outstanding Amounts written off

party relationship Transaction (Rs.) as on 30/06/2005 or written back

Aftek Infosys Taken Interest 21020 Rs. 123745. Rs.NIL

Ltd. 100% HoldingCo. Free Loan (PY 3510) (PY Rs. 102725) (PY Rs.NIL)

SCHEDULES FORMING .... SCHEDULES FORMING part of the accounts as at

30th June, 2005

46


10. BALANCE SHEET ABSTRACT & COMPANY’S GENERAL BUSINESS PROFILE

I Registration Details Registration No. 11-44828 State Code 11 Balance – Sheet 30 06 2005 Date Month Year

II Capital Raised during the year (Amount in Rs. Thousand).Public Issue Right Issue

NIL NILBonus Issue Private placement

NIL NIL

III Position of Mobilisation and Deployment of Funds (Amt.in thousands)Total Liabilities Total Assets

224 224

Sources of FundsPaid-up capital Reserve & Surplus

100 NIL Secured Loans Unsecured Loans

NIL 124

Application of FundsNet Fixed Assets Investments

NIL NILNet Current Assets Misc. Expenditure

87 NILAccumulated Losses

137 IV Performance of company (Amount in Rs.Thousand).

Turnover Total ExpenditureNIL 14

+/- Profit/Loss Before Tax +/- Profit/Loss After Tax -14 -14

Earning Per Share in Rs. (14.16) Dividend NIL

V Generic Names Principal Products/Services of Company as perMonetary Terms.

11. Previous years’ figures have been regrouped / recast wherever necessary .

For & On behalf of Board of Directors

Mukul Dalal R.U. Malekar

Director Director

27th September, 2005, Mumbai.

SCHEDULES FORMING .... SCHEDULES FORMING part of the accounts as at

30th June, 2005

47

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

MIHIR PROPERTIES PVT.LTD

NOTICE is hereby given that the Twelfth Annual General Meeting of the Members of Mihir Properties Private Limited will be

held at 10.30 a.m. on Friday, the 25th November, 2005 at the Registered Office of the Company at 265, Veer Savarkar Marg,

Cadell Road, Shivaji Park, Dadar, Mumbai-400 028 to transact the following business.

1. To receive, consider and adopt the Balance Sheet as at 30th June 2005 and the Profit & Loss Account for the year

ended on that date together with the Reports of Directors and Auditors thereon.

2. To appoint a Director in place of Mr. Promod Broota who retires by rotation and being eligible, offers himself for re-

appointment.

3. To pass the following as an Ordinary Resolution.

“RESOLVED THAT M/s. V.D. Joshi & Co., Chartered Accountants, Mumbai, be and are hereby re-appointed as Auditors

of the Company , to hold office from the conclusion of this meeting until the conclusion of the next Annual General

Meeting of the Company on such remuneration as may be mutually agreed upon between the Board of Directors of

the Company and the Auditors, plus reimbursement of service tax, out-of-pocket and travelling expenses actually

incurred by them in connection with the Audit.”


Nitin Shukla

Director

Registered Office :

265, Veer Savarkar Marg, Cadell Road,

Shivaji Park, Dadar,

Mumbai – 400 028

DATE : 10th October, 2005

NOTES :

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE

INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES, IN ORDER TO BE EFFECTIVE,

MUST BE RECEIVED BY THE COMPANY AT ITS REGISTERED OFFICE NOT LESS THAN 48 HOURS BEFORE THE MEETING.

NOTICENOTICE

48

MIHIR PROPERTIES PVT.LTDA N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

To,

The Members of

Mihir Properties Pvt. Ltd.

Your Directors are pleased to present their Twelfth Annual Report together with Audited Statement of Accounts for the year

ended on 30th June 2005.

1. PERFORMANCE

The Company did not carry out any business activities during the year 2004 - 2005.

2. DIVIDEND

In view of the loss incurred by the Company the question of recommendation of any dividend for the year does not arise.

3. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Responsibility

Statement, it is hereby confirmed :

(i) that in the preparation of the annual accounts for the year ended 30th June, 2005, the applicable accounting

standards had been followed along with proper explanation relating to material departures;

(ii) that the directors had selected such accounting policies and applied them consistently and made judgments

and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of

the Company at the end of the financial year ended 30th June, 2005and of the profit of the Company

for that period;

(iii) that the directors had taken proper and sufficient care for the maintenance of adequate accounting

records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the

Company and for preventing and detecting fraud and other irregularities;

(iv) that the directors had prepared the annual accounts for the year ended 30th June, 2005, on a ‘going

concern’ basis.

4. PERSONNEL

There were no employees drawing remuneration in excess of the limits prescribed under Section 217(2A) of the Companies

Act, 1956 as amended.

5. INFORMATION UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD

OF DIRECTORS) RULES, 1988

Considering the nature of your Company’s activities and the fact that no business activity was carried out, the particulars

prescribed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable.

There are no Foreign Exchange Earnings and Outgo during the year under review.

6. SECRETARIAL COMPLIANCE CERTIFICATE

Pursuant to the provisions of Section 383A of the Companies Act, 1956 the necessary Secretarial Compliance Certificate is given

in Annexure “A” to this report.

7. AUDITORS

M/s. V D Joshi & Co., Chartered Accountants, Mumbai, the retiring Auditors of the Company hold office until the conclusion

of the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment.

For and on behalf of the Board

Nitin Shukla

Director

PLACE : MUMBAI

DATED : 10th October, 2005

DIRECTORS’ REPORTDIRECTORS’ REPORT

49

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


To

The Members,

MIHIR PROPERTIES PRIVATE LIMITED

Mumbai.

I have examined the registers, records, books and papers of MIHIR PROPERTIES PRIVATE LIMITED having its registered office

at 265, Veer Savarkar Marg, Cadell Road, Dadar, Mumbai 400 028 as required to be maintained under the Companies Act, 1956,

(the Act) and the rules made thereunder and also the provisions contained in the Memorandum and Articles of Association

of the company for the financial year ended on 30th June, 2005. In my opinion and to the best of my information and

according to the examinations carried out by me and explanations furnished to me by the company, its officers and agents,

We certify that in respect of the aforesaid financial year :

1. the company has kept and maintained all registers as stated in Annexure “A” to this certificate as per the provisions and

the rules made thereunder and all entries therein have been duly recorded.

2. the company has duly filed the forms and returns as stated in Annexure “B” to this certificate with the Registrar of

Companies, Maharashtra, Mumbai within the time prescribed under the Act and the rules made thereunder except as

specified in the said Annexure ‘B”.

3. the company being private limited company has the minimum prescribed paid-up capital and its maximum number

of members during the said financial year was 2 excluding its present and past employees and the company during the

year under scrutiny:

(i) has not invited public to subscribe for its shares or debentures; and

(ii) has not invited or accepted any deposits from persons other than its members, directors or their

relatives.

4. the Board of Directors duly met Five times in respect of which meetings proper notices were given and the proceedings

were properly recorded and signed in the Minutes Book maintained for the purpose.

5. the company was not required to close its Register of Members during the financial year under scrutiny.

6. the Annual General Meeting for the financial year ended on 30th June, 2004 was held on 24th November, 2004 after

giving due notice to the members of the company and the resolutions passed thereat were duly recorded in the

Minutes Book maintained for the purpose.

7. no extra ordinary general meeting was held during the financial year under scrutiny.

8. the company being a private company, provisions of Section 295 of the Act are not applicable during the year under

scrutiny.

9. no contracts were entered during the year attracting the provisions of Section 297 of the Act.

10. the company has made necessary entries in the register maintained under Section 301 of the Act.

AMMEXURE “A” ....ANNEXURE “A” TO DIRECTORS’ REPORT.

COMPLIANCE CERTIFICATE

(Under Proviso to Sub-Section (1) of Section 383 A)

50


11. as there were no instances falling within the purview of Section 314 of the Act, the company has not obtained any

approvals from the Board of Directors, members or Central Government.

12. the company has not issued any duplicate share certificates during the financial year under scrutiny.

13. the company has :

1. not made any allotment/transfer/transmission of securities during the financial year.

2. not deposited any amount in a separate Bank Account as no dividend was declared during the financial year.

3. not posted warrants to any member of the company as no dividend was declared during the financial year.

4. no amounts unpaid in dividend account, application money due for refund, matured deposits, matured

debentures and the interest accrued thereon which have remained unclaimed or unpaid for a period of seven

years and hence the question of transferring of the same to the Investor Education and Protection Fund does

not arise.

5. duly complied with the requirements of Section 217 of the Act.

14. the Board of Directors of the company is duly constituted and there was no appointment of directors, additional

directors, alternate directors and directors to fill casual vacancy during the financial year under scrutiny.

15. the company being a private company, provisions of Section 269 of the Act with regard to appointment of Managing

Director and Whole-time Director are not applicable during the financial year under scrutiny.

16. the company has not appointed any sole-selling agents during the financial year under scrutiny.

17. the company was not required to obtain any approvals of the Central Government, Company Law Board, Regional

Director, Registrar of Companies and/or such other authorities prescribed under the various provisions of the Act.

18. the Directors have disclosed their interest in other companies to the Board of Directors pursuant to the provisions

of the Act and the rules made thereunder.

19. the company has not issued any shares/ debentures/ other securities during the financial year under scrutiny.

20. the company has not bought back any shares during the financial year under scrutiny.

21. the company has not issued any preference shares/debentures and hence there is no question of redemption of the

same.

22. during the year there was no need for the company to keep in abeyance rights to dividend, rights shares and bonus

shares.

23. the company has not invited/accepted any deposits falling within the purview of Section 58A during the financial

year under scrutiny.

24. the company being a private company, the borrowings made from a Bank during the financial year do not attract

the provisions of Section 293(1)(d) of the Act.

25. the company has not made any loans or investments, or given guarantees or provided securities to other bodies

corporate and consequently no entries have been made in the register kept for the purpose.

26. the company has not altered the provisions of the Memorandum of Association with respect to situation of the

company’s registered office from one state to another during the year under scrutiny.

51

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


27. the company has not altered the provisions of the Memorandum of Association with respect to the objects of the

company during the year under scrutiny.

28. the company has not altered the provisions of the Memorandum of Association with respect to name of the


29. the company has not altered the provisions of the Memorandum of Association with respect to share capital of the


30. the company has not altered its Articles of Association during the year under scrutiny.

31. there was no prosecution initiated against or show cause notice received by the company and no fines or penalties

or any other punishment was imposed on the company during the financial year, for the offences under the Act.

32. the company has not received any sum as security from its employees during the year under scrutiny.

33. the provisions of Section 418 of the Act are not applicable to the company during the year under scrutiny.

For V V Chakradeo

Company Secretary

s /d

V V Chakradeo

C.P. NO. : 1705

PLACE : MUMBAI

DATE : 10th October, 2005

Annexure A

Registers as maintained by the Company

1. Register of Members U/S. 150.

2. Minutes Books of General Meetings and Board Meetings U/S. 193.

3. Register of Contracts U/S. 301.

4. Register of Directors U/S. 303.

5. Register of Directors Shareholding U/S. 307.

Annexure B

Forms and Returns as filed by the company with the Registrar of Companies, Maharashtra, Mumbai during the financial year

ended on 30st June, 2005.

1. Balance Sheet for the year ended 30/06/04 filed u/s 220 on 04/02/2005

2. Compliance Certificate for the year ended 30/06/2004 filed u/s 383 on 04/02/2005

3. Annual Return for AGM held on 24/11/2004 filed u/s on 159 on 04/02/2005

52


AUDITORS’ REPORT ....

We have audited the attached Balance Sheet of Mihir

Properties Pvt. Ltd. as at 30th June 2005 and also the

Profit and Loss Account for the year ended on that date

annexed thereto. These financial statements are the

responsibility of the company’s management. Our







statements are free from material misstatement. An audit



An audit also includes assessing the accounting principles

used and significant estimates made by management, as

well as evaluating the overall financial statement



2. As required by the Companies (Auditor’s Report) Order

2003, 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 Paragraph 4 & 5 of the said order.

3. Further to our comments in the Annexure referred to

above, we report that:



and belief were necessary for the purpose of our audit;

b. In our opinion, the company has kept proper books

of account as required by law so far as appears from

our examination of those books;

c. The Balance Sheet and Profit & Loss Account dealt

with by this report are in agreement with the books

of account;

d. In our opinion, the Profit & Loss Account and the

Balance Sheet comply with the accounting standards

referred to in Sub-Section (3c) of section 211 of the

Companies Act, 1956;

e. According to information and explanations given to

us and on the basis of written representation received

from the directors, taken on record by the Board of

Directors of the company, no director is disqualified

as on 30th June 2005 from being appointed as director

in terms of clause (g) of sub-section (1) to Section 274

of the Companies Act, 1956;

f. In our opinion and to the best of our information

and according to the explanations given to us, the

said accounts read with the notes contained in

Schedule A thereon, give the information required

by the Companies Act, 1956, in the manner so required

and give a true and fair view:-

i. in the case of Balance sheet, of the state of affairs

of the Company as at 30th June, 2005

ii. in the case of Profit & Loss Account, of the loss for

the year ended on that date.

FOR V.D.Joshi & Co.


V.D.Joshi

Proprietor

Membership No.:043340

10th October, 2005, Mumbai.

AUDITORS’ REPORT to the members of

Mihir Properties Pvt. Ltd.

53

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


ANNEXURE TO AUDITORS’

1. (a) The Company has maintained proper records

showing full particulars including quantitative

details and situation of Fixed Assets.

(b) There is a regular program of physical verification,

which in our opinion is reasonable, having regard

to the size of the Company and nature of fixed

assets. No material discrepancies have been noticed

in respect of the assets physically verified during

the year.

(c) The Company has not disposed off substantial part

of fixed assets during the year.

2. There is no opening or closing stock in trade nor any

inventories so no question of physical verification or

maintaining proper record arises.

3. The Company has not taken nor granted any loan from /

to parties covered in the register maintained under Section

301 of the Companies Act, 1956.

4. There is no business or manufacturing activity during the

year and hence there is no question of internal control

system arises.

5. There are no transactions with the parties covered under

section 301 of the Companies Act, 1956.

6. The company has not accepted any deposit from the

public, attracting the provisions of Section 58A and 58AA

of the Companies Act, 1956 and the Companies

(Acceptance of Deposits) Rules, 1975.

7. The Company has no internal audit system. As per

explanations and information given by the management,

in absence of any business activity, internal audit system

is not required.

8. We are informed that the Central Government has not

prescribed maintenance of cost records under Section

209(1)(d) of the Companies Act, 1956 for the product

manufactured by the company.

9. (a) The company is regular in depositing with appropriate

authorities undisputed statutory dues including

Provident Fund, Income Tax, Sales Tax, Custom Duty,

Excise Duty, Cess and other material statutory dues

applicable to it.

(b) According to the information and explanations given

to us no undisputed amounts payable in respect of

Income –Tax, Wealth -Tax, Sales-Tax, Custom Duty,

Excise Duty and Cess were in arrears, as at 30th June,

2005 for a period of more than 6 months from the

date they become payable .

(c) According to information and explanations given to

us, there are no dues of Sales-tax, income-tax, Custom

Duty, Excise Duty, Cess which have not been deposited

on account of any dispute.

10. The Company has incurred cash loss in the current year

and also in the immediately preceding financial year and

accumulated losses in the Balance Sheet as on 30th June,

2005 are less than 50% of the net worth of the company.

11. The Company has not defaulted during the year in

repayment of dues to any financial institutions, banks or

debenture holders.


explanation given to us, no loans and advances have been

granted by the Company on the basis of security by way

of pledge of shares, debentures and other securities.

ANNEXURE TO AUDITORS’ REPORT

(Referred to in paragraph 2 of the Auditors’ Report of even date to the members of Mihir Properties Pvt. Ltd. for the

year ended on 30th June, 2005.)

54


13. As the Company is not a chit fund, nidhi, mutual benefit

fund or society, the provision of clause 4(xiii) of the

Companies (Auditor’s Report) Order, 2003 is not applicable

to the Company.

14. As the Company is not dealing or trading in shares,

securities, debentures and other investments, the

provision of clause 4(xiv) of the Companies (Auditor’s

Report) Order, 2003 is not applicable to the Company.

15. In our opinion and according to information and

explanations given to us, the Company has not given

guarantee for loans taken by others from Bank or Financial

Institutions.

16. The Company has not taken any term loan during the

year.


us, the Company has not applied short term borrowings

for long term use and vice versa.

18. The Company has not made preferential allotment of

shares to parties and companies covered in the register

maintained under Section 301 of the Companies Act, 1956

and therefore the question of the price at which shares

have been issued is prejudicial to the interest of the

Company does not arise.

19. The Company has not issued debentures and therefore

the question of creation of security in respect debentures

does not arise.

20. The Company has not raised money by public issues

during the year and therefore the question of disclosure

and verification of end use of such money does not arise.


us no fraud on or by the Company has been noticed or

reported during the course of our audit.

FOR V.D.Joshi & Co.


V.D.Joshi

Proprietor

10th October, 2005, Mumbai.

55

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


BALANCE SHEET ....

As at 30.6.2005 As at 30.6.2004Rs . Rs.

SOURCES OF FUNDS:Shareholder’s fund

AUTHORISED150,000 (PY 150,000) Equity Shares of Rs.100/- each 15,000,000 15,000,000

ISSUED,SUBSCRIBED & PAID UP 14,500,000 14,500,000145,000 (PY145,000) Equity shares ofRs.100/- each fully paid up)

RESERVES & SURPLUSShare Premium 16,620,000 16,620,000

UNSECURED LOANSFrom Holding Company 118,155 92,590

Total Rs. 31,238,155 31,212,590

APPLICATION OF FUNDS:

FIXED ASSETSLand & Building 30,964,169 30,964,169Less: Depreciation 1,840,160 1,452,814

29,124,009 29,511,355CURRENT ASSETS,LOANS & ADVANCES

Cash & Bank Balance 37,142 30,780Deposits & Advances 15,590 15,590

52,732 46,370Less: Current Liabilities & Provisions 17,632 18,866

Net Current Assets 35,100 27,504

Miscellaneous Expenditure 3,972 10,036(To the extent not wriitten off or adjusted)

Profit & Loss Account 2,075,074 1,663,695

Total Rs. 31,238,155 31,212,590

Notes to Accounts Schedule A

The accompanying notes form an integral part of the Balance sheet.

BALANCE SHEET AS AT 30TH JUNE, 2005.

As per our Audit Report of even date

For V. D. Joshi & Co. For & on Behalf of Board of Directors


V. D. Joshi Nitin K Shukla Promod Broota

Proprietor Director Director

Mumbai, 10th October, 2005. Mumbai, 10th October, 2005.

56


PROFIT & LOSS ....

PARTICULARS 2004-2005 2003-2004

Rs . Rs.

Income - -

- -

Expenditure

Bank Charges 153 245

Filing fees 9,000 4,550

Audit Fees 8,816 14,216

Preliminary Expenses written off 6,064 6,064

Electricity expenses - 400

24,033 25,475

Profit before Depreciation & Tax (24,033) (25,475)

Less : Provision for Depreciation 387,346 388,408

Net Profit/(Loss) Before Tax (411,379) (413,883)

Less : Provision for Taxation - -

Net Profit/(Loss) for the year (411,379) (413,883)

Balance brought forward (1,663,695) (1,249,812)

Less/(Add) : Net Profit/(Loss) for the year (411,379) (413,883)

Balance carried to Balance Sheet (2,075,074) (1,663,695)

Notes to Accounts Schedule A

The accompanying notes form an integral part of the Balance sheet & Profit & Loss A/c.

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED

30TH JUNE, 2005.

As per our Audit Report of even date






57

A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5



SCHEDULE: A

NOTES FORMING PART OF ACCOUNTS AS AT 30TH JUNE 2005.

1. SIGNIFICANT ACCOUNTING POLICIES:

A) METHOD OF ACCOUNTING :

The company maintains its accounts on accrual basis.

B) FIXED ASSETS: Fixed assets have been shown at historical cost incurred to bring the assets at the existing condition.

C) DEPRECIATION: Depreciation on building has been calculated on straight line method as per rate prescribed in

schedule XIV of the Companies Act, 1956.

2. Contingent liability :- The Company has kept its building as security for availing OD facility with Scheduled Bank for Rs.400

Lacs (P.Y. Rs.400 Lacs), for its holding Company Aftek Infosys Ltd.

3. In our opinion, additional information as required vide Schedule VI of the Companies Act, 1956 are not applicable to the

company.

4. Payment to Auditors: 30-06-2005 30-06-2004

(Inclusive of Service Tax)

For Audit Fees 8,816.00 14,216.00

5. There are no tax expenses as there is loss during the year. Since there is no business activity, no deferred tax liability/asset

has been provided for.

6. Previous year’s figure have been re-grouped and rearranged wherever necessary.

7. RELATED PARTY INFORMATION:

LIST OF RELATED PARTIES WHERE CONTROL EXISTS:

Holding Company : Aftek Infosys Ltd.

Fellow Subsidiaries : Aftek Sales & Services Pvt. Ltd. &

Opdex Inc.

Name of Description of Nature of Amount Amount outstanding Amounts written

Related party relationship Transaction (Rs.) as on 30/06/2005 off or written back

Aftek Infosys Ltd. 100% Holding Co. Taken Interest 25565/- Rs.1,18,155/- Nil

Free Loan (PY 19970/-) (PY Rs.92,590/-)

Aftek Infosys Ltd. 100% Holding Co. Using our Land

& Building Rent

Free Nil Nil Nil

SCHEDULES FORMING part of the accounts as at

30th June, 2005

58


8. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE AS PER SCHEDULE VI PART (iv) OF THE COMPANIES ACT, 1956.i) REGISTRATION DETAILS

Registration No : 11-71510Balance Sheet date : 30th June, 2005.

ii) CAPITAL RAISED DURING THE YEAR (Amt.in Rs. ‘000)Public Issue Right Issue

Nil Nil

Bonus Issue Private PlacementNil Nil

iii) POSITION OF MOBILISATION & DEPLOYMENT OF FUNDS (Amt.in Rs. ‘000)Total Liabilities Total Assets

31238 31238SOURCES OF FUNDS (Amt.in Rs. ‘000)Paid up Capital Reserves & Surplus 14500 16620Secured Loans Unsecured Loans

Nil 118APPLICATION OF FUNDS (Amt.in Rs. ‘000)Net Fixed assets Investments

29124 NIL

Net Current Assets Misc.Expenditure35 4

Accumulated Losses2075

iv). PERFORMANCE OF COMPANY (Amt.in Rs. ‘000)Turnover Total Expenditure

Nil (411)Other Income Profit/(Loss) after Tax

Nil (411) Earning Per share in Rs. (2.84) Dividend NIL

v) GENERIC NAMES OF PRINCIPAL PRODUCTS/SERVICE Of COMPANY AS PERMONETARY TERMS. - NIL -

SCHEDULES FORMING ....Schedules forming part of the accounts as at

30th June, 2005






59

OPEDEX INC.A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

DIRECTORS’ REPORT

To The Members,

The Directors present here with the Annual Report together with the Audited Accounts for the year ended June 30, 200.

Performance

Due to operational expenses the net loss as at June 30, 2005 is $ 109985

Dividend

In view of the loss incurred during the year, your Directors could not consider any proposal for dividend.

Future Prospects

Barring unforeseen circumstances, your directors are confident of achieving better performance in the next year.

By Order of the Board

Ranjit Dhuru

Director

November 23, 2005.

DIRECTORS’ REPORT

60


AUDITORS’ REPORT ...

I have audited the accompanying balance sheet of Opdex Inc. as of June 30, 2005, and the related statements of operations,

retained earnings, and cash flows for the twelve months then ended. These financial statements are the responsibility of the

Company’s management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of

Opdex Inc. as of June 30, 2005, and the results of operations and its cash flows for the twelve months then ended in

conformity with generally accepted accounting principles.

Surender K.Jindal

Certified Public Accountant

Hayward, California

November 23, 2005

AUDITORS’ REPORT to the members of

Opdex Inc.

61


ASSETS (Amount in US $)Current Assets:

Cash 1,856

Prepaid franchise tax 800

Total Current Assets 2,656

Property and Equipment:

Property and equipment,

net of depreciation 1,637

Total Property and Equipment 1,637

Other Assets:

Licenses/permits,

net of amortization 641,913

Total Other Assets 641,913

Total Assets 646,206

LIABILITIES & SHAREHOLDER’S EQUITY

Current Liabilities:

Accounts payable 54,360

Total Current Liabilities 54,360

Shareholder’s Equity:

Common Stock, $0.05 par value;

authorized 100,000,000 shares;

issued and outstanding

31,700,000 shares 1,585,000

Retained earnings (993,154)

Total Shareholder’s Equity 591,846

Total Liabilities & Shareholder’s Equity 646,206

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

BALANCE SHEETBALANCE SHEET as at 30th June, 2005

62


STATEMENT OF OPERATIONS ....

Service Revenues -

Cost of Service Revenues -

Gross Profit -

Operating Expenses 109,185

Loss From Operations (109,185)

Provision For Income Taxes (800)

Net Loss (109,985)

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

STATEMENT of Operations for the year ended

30th June 2005

(Amount in US $)

63


STATEMENT OF RET ....

Retained Earnings - Beginning July 1, 2004(883,169)

Net Loss - Twelve months ended June 30, 2005(109,985)

Retained Earnings - Ending June 30, 2005(993,154)

STATEMENT of Retained Earnings for the year ended

30th June 2005

(Amount in US $)

Statement of Cash Flows for the year ended 30th June 2005

Cash Flows from operating Activities:

Net loss (109,985)

Adjustments to reconcile net loss

provided by operating activities:

Depreciation and amortization 75,025

Decrease in accrued expenses (50,000)

Net Cash Used By Operating Activities (84,960)

Cash Flows From Investing Activities

Purchase of Equipment -

Net Cash Used By Investing Activities -

Cash Flows From Financing Activities

Proceeds from the issuance of common stock 70,000

Net Cash Provided By Financing Activities 70,000

Net Decrease in Cash (14,960)

Cash at Beginning of Year 16,816

Cash at End of Year 1,856

The accompanying notes are an integral part of theses financial statements.

64


Summary of Significant Accounting Policies:

(a) Nature of Operations:

Opdex Inc. is set up as a 100% subsidiary of Aftek Infosys Ltd., India (Aftek India) with two primary objectives. First is to

act as a marketing arm for marketing software services of Aftek India and to install confidence and comfort level in the

client base. Second is to create and develop Software Products and Intellectual Property rights and to market software

products primarily created by Opdex Inc.

(b) Revenue of Loss Recognition:

The company utilizes the accrual method of accounting, whereby revenue is recognized when earned and expenses are

recognized when incurred.

(c) Property and Equipment:

Property and equipment owned are stated at cost. Depreciation for financial reporting purposes is computed using the

accelerated depreciation method over the estimated useful life of the related assets, which range from 5-7 years.

(d) Licenses/Permits:

Licenses/Permits are valued at cost. Licenses were acquired from the parent company Aftek Infosys Ltd., India, in lieu of

19 million shares of common stock.

Amortization is computed under the straight-line method over the estimated useful life of 15 years.

(e) Income Taxes:

The corporation has a net operating loss carryforward for tax purposes of $992,078, to offset against future tax liabilities.

(f) Lease Commitments:

None.

NOTES TO ....Notes To Financial Statements for the year ended

30th June 2005

65


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

AUDITORS’ REPORT

We have audited the attached Consolidated Balance Sheet

of AFTEK INFOSYS LIMITED (“the Company”) and its

subsidiaries (the Company and its subsidiaries constitute

“the Group”) as at 30th June, 2005 and also the Consolidated

Profit and Loss Account and the Consolidated Cash Flow

Statement for the year ended on that date annexed thereto.

The preparations of these financial statements are the

responsibility of the company’s management. Our



1. We conducted our audit in accordance with the auditing

standards generally accepted in India. These standards



statements are free from 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.

2. We did not audit the financial statements of certain

subsidiaries, whose financial statements reflect total

assets (net) of Rs.24534178 as at 30th June, 2005, total

revenue of Rs. NIL and net cash outflows amounting to

Rs.689539 for the year ended on that date. Those

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 reports of other auditors.

3. We report that the consolidated financial statements

have been prepared by the Company in accordance with

the requirements of Accounting Standard (AS-21)

“Consolidated Financial Statements”.

4. Based on our audit and on consideration of the reports

of other auditors on separate financial statements read

with notes 1 & 2 of schedule M Part B, 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

(i) In the case of Consolidated Balance sheet, of the

state of affairs of the Group as at 30th June, 2005,

(ii) in the case of the Consolidated Profit & Loss Account,

of the profit of the Group for the year ended on that

date and,

(iii) in the case of the Consolidated Cash Flow Statement,

of the cash flows of the Group for the year ended on

that date.

For V.D.Joshi & Co.


V.D.Joshi

Mumbai, 30th November, 2005, Proprietor

Membership No.043340

AUDITORS’ REPORT on Consolidated financial statement to

the members of Board of Directors of Aftek Infosys Ltd.

66


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATEDBALANCE SHEETCONSOLIDATED BALANCE SHEET as at

30th June 2005

AS AT AS AT30TH JUNE ‘05 30TH JUNE’04

Schedules Rs. Rs.SOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare Capital A 150,000,000 100,000,000Reserves and Surplus B 3,061,156,204 2,631,115,194Employee Stock Options Outstanding 31,393,429Less : Deferred Employee Compensation Expenses 16,834,353

14,559,076 -LOAN FUND CSecured Loans 334,983 -Unsecured Loans 1,295,400,000 -

1,295,734,983 -TOTAL 4,521,450,263 2,731,115,194

APPLICATION OF FUNDSFIXED ASSETS DGross Block 655,533,896 658,330,517Less: Depreciation 385,965,000 224,330,428

Net Block 269,568,896 434,000,089Goodwill 24,145,000 24,145,000

293,713,896 458,145,089INVESTMENTS E 469,930,703 469,930,703Deferred Tax Assets - 977,330CURRENT ASSETS, LOANS & FADVANCES

Inventories 2,080,135 3,452,434Sundry Debtors 470,541,238 325,986,826Cash & Bank Balance 3,281,061,558 1,365,890,448Loans, Advances & Deposits 233,451,656 184,875,730

3,987,134,587 1,880,205,438LESS: CURRENT LIABILITIES& PROVISIONS G 245,471,750 100,796,375Net Current Assets 3,741,662,837 1,779,409,063Miscellaneous Expenditure H 16,142,827 22,653,010( To the extent not writtenoff or adjusted )

TOTAL 4,521,450,263 2,731,115,194Notes on Accounts M




V.D. Joshi

Proprietor

30th November 2005, Mumbai




C.G. Deshmukh

Company Secretary


67


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED PROFIT & lOSS ....CONSOLIDATED PROFIT & LOSS ACCOUNT for the

year ended 30 June 2005

Schedules 2004 - 05 2003 - 04Rs. Rs.

INCOME:

Sales I 1,952,474,828 1,389,381,837Other Income J 27,506,977 15,603,044

1,979,981,805 1,404,984,881

EXPENDITURE:

Cost of Revenues & Employees Cost K 1,022,340,433 723,059,912Selling, Administrative & Other Expenses L 171,369,556 81,212,633Depreciation D 180,641,478 148,726,291

1,374,351,467 952,998,835

Profit before Extra Ordinary Items, Prior Period

Adjustments & Tax 605,603,338 451,986,046

Extraordinary Item-Provision for Doubtful Investment - 3,595,575

Profit before Prior Period Adjustments & Tax 605,630,338 448,390,471

Provision for Current Tax 9,763,659 2,804,789Provision for Deferred Tax (Refer Note 10 Sch M) - (2,236,385)Fringe Benefit Tax 213,540 -

9,977,199 568,404

Profit before Prior Period Adjustment 595,653,139 447,822,067

Less : Prior period adjustment 93,852 (12,203)

Profit After Tax 595,559,287 447,834,270

Add: Balance Brought forward from Previous Year 1,187,441,057 845,696,914 (Short)/Excess Provision for Taxation of earlier years (18,265,041) (3,461,693) Excess provision for Doubtful Debts of earlier years - 3,777,817

Amount Available for Appropriation 1,764,735,303 1,293,847,307

Less: Proposed Dividend 85,279,613 50,000,000 Tax on Dividend 11,144,980 6,406,250 Trfd. to General Reserve 100,000,000 196,424,593 50,000,000

Profit transferred to Balance Sheet 1,568,310,710 1,187,441,057

Basic Earnings Per Share of Rs.2/- each 7.70 5.98

Diluted Earning Per Share of Rs.2/- each 7.65 5.98

(Refer Note 8 of Schedule M Part B)

Notes on Accounts M




V.D. Joshi

Proprietor





C.G. Deshmukh

Company Secretary


68


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

Year Year2004 - 2005 2003 - 2004

Rs. Rs.

A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax, prior period adjustment and after extraordinary item 605,630,338 448,390,471Adjustments :Depreciation 180,641,478 148,726,291Miscellaneous Expenditure Written Off 7,931,087 7,961,542Provision for employee benefits (Net) 239,299 709,964Employee Compensation (ESOP) 14,559,076 -Unrealised foreign exchange (gain)/loss 75,097,504 (3,787,265)Extra Ordinary Item - 3,595,575Loss on sale/discard of Fixed Assets 2,221 465,318Provision for Doubtful Debts / Advances 174,282 73,300 Interest Income (25,437,875) (15,537,240)

Operating Profit Before Working Capital Changes 858,837,411 590,597,956Adjustments for (Increase)/Decrease in :Trade & other receivables (204,950,101) 30,353,215Inventories 1,372,299 789,982Trade Payables 96,837,487 (70,803,368)

752,097,096 550,937,785Prior Period Item (93,852) 12,203Direct taxes paid (Including Advance Tax and Net of Refund) (14,087,274) (34,865,621)

737,915,970 516,084,367Extra ordinary Items - -

Net Cash Generated From Operating Activities 737,915,970 516,084,367B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (16,220,948) (115,056,991)Sale of Fixed Assets 1,200 47,200Puchase of units of mutual funds - (95,500,000)Sale of units of mutual funds - 125,500,000(Increase)/Decrease in Loans & Advances to Subsidiaries & Affiliates 500,132 575,000 Share Application Made - (1,706,165) Interest income & Mutual Fund Income 25,437,875 15,537,240

Net Cash From Investing Activities 9,718,260 (70,603,716)C. CASH FLOW FROM FINANCING ACTIVITIES

Issue of Foreign Currency Convertible Bonds 1,295,400,000 -FCCB Expenses (1,412,620) -Loan from ICICI Bank (Net) 334,983 -Dividend Paid (Incl Tax on Dividend) (55,915,529) (55,957,828)

Net Cash From Financing Activities 1,238,406,834 (55,957,828)

D. Effect of Change in Exchange Rate (110,221) 526,279E. Net increase/(Decrease) in Cash & Cash equivalents (A+B+C+D) 1,985,930,843 390,049,103

Cash & cash equivalents at the beginning of the year 1,365,890,448 977,093,862Cash & cash equivalents at the end of the year 3,351,821,291 1,367,142,965Add: Unrealised Foreign Exchange Loss on cash & Cash Equivalent (70,759,732) (1,252,517)Cash & cash equivalents at the end of the year as per Accounts 3,281,061,558 1,365,890,448

Notes to the Cash flow statement1 Figures in bracket represents outflow.2 Previous year’s figures have been regrouped wherever necessary.

CONSOLIDATED CASH FLOWCONSOLIDATED Cash Flow Statement for the year ended

30th June 2005




V.D. Joshi

Proprietor





C.G. Deshmukh

Company Secretary


69


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

AS AT AS AT

30th June, 2005 30th June, 2004

Rs. Rs.

SCHEDULE A: SHARE CAPITAL

Authorised

100,000,000 (PY75,000,000)Equity shares of Rs. 2/- each 200,000,000 150,000,000

Issued, Subscribed & Paid Up

75,000,000 Eq.Shares of Rs.2/- each(PY50,000,000) 150,000,000 100,000,000

150,000,000 100,000,000

Notes :1. Of the above equity shares :

a) 26,750,000 equity shares (PY 1,750,000) have been alloted as fully paid bonus shares by capitalising General Reserve.b) 29,994,750 equity shares represent 9,998,250 Global Depository Receipts (“GDRs”). (Originaly 3,999,300 shares ofRs.10/- each, were issued underlying 1,333,100 GDRs by way of GDR offering in the year 2003 by the Company.)

SCHEDULE B : RESERVES & SURPLUS

General Reserve :

Opening Balance 216,837,282 167,881,961Add : Addition 100,000,000 50,000,000

316,837,282 217,881,961Add : Adjustment on Consolidation - 468,071 Less : Issue of Bonus shares 50,000,000 - Less: Deferred Tax Adjustment 977,330 (1,044,679)

265,859,952 216,837,282Share Premium :

Opening Balance 1,226,032,575 1,226,032,575Add:Addition - -

1,226,032,575 1,226,032,575Capital Reserve 336,210 336,210

Profit & Loss Account : 1,568,310,710 1,187,441,057

Foreign Currency Translation Reserve 616,757 -

3,061,156,204 2,630,647,124

SCHEDULE C : SECURED LOANS

SECURED LOANS -ICICI Bank Car Loan 334983(Secured against Motor Car)

334983 -UNSECURED LOANS

1% Foreign Currency Convertible Bonds Due 2010 1295400000 (1% FCCBs convertible into shares/GDR or due to be redeemed in 2010 )

1,295,400,000 -

CONSOLIDATED schedules forming part of the accounts

70


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

SCHEDULES FORMING ...SCHEDULES FORMING PART

OF THE ACCOUNTS

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71


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

AS AT AS AT

30th June, 2005 30th June, 2004

Rs. Rs.

SCHEDULE E : INVESTMENTS

Unquoted - Trade Investments (At Cost)Arexera Information Technologies GmbH 469,930,703 469,930,703(49.23% of the share capital of the company, nominal value of which Euro 25600) 469,930,703 469,930,703

SCHEDULE F : CURRENT ASSETS, LOANS & ADVANCESI Inventories

(As taken, valued & certified by the Management)Raw Materials, Consumables 1,192,838 1,718,482Work-in-progress 570,832 1,560,549

Finished Product 316,465 173,4032,080,135 3,452,434

II Sundry Debtors( Unsecured considered good except stated otherwise )(a) Outstanding for more than six months 92,777,137 7,670,388

Considered Doubtful 2,091,925 1,917,643 94,869,062 9,588,031

Less: Provision for Doubtful Debts 2,091,925 1,917,643 92,777,137 7,670,388

(b) Others (Considered Good) 377,764,101 318,316,438470,541,238 325,986,826

470,541,238 325,986,826

III Cash & Bank BalancesCash in Hand 2,350,651 2,947,844With Scheduled Bank

-In Cash Credit Account 15,927,026 4,862,954-In Current Account 1,951,464 38,757-In Fixed Deposit 1,232,241,259 113,140,706-In Dividend Account 2,231,808 1,612,962-In Foreign Currency Account 36,497,008 278,991

With Others -Banco Efisa Current Accounts 973,310,862 17,051,581(Maximum Balance Outstanding at any time during the year Rs.1086912482(PY 352249904))-Banco Efisa Deposit 1,016,551,481 1,225,956,654(Maximum Balance Outstanding at any time during the yearRs.1225956654(PY 1363783514))

3,281,061,558 1,365,890,448

Note :1. Balance in Foreign Currency Current accounts includes Rs.34543525/- (PY NIL) being unutilised money of FCCB issue.2. Balance in Fixed Deposit accounts includes Rs.1209040000/- (PY NIL) being unutilised money of FCCB issue.3. Balance in Banco Efisa Current Account includes Rs.14,635,553(PY 7,383,201) is unutilised money of the GDR issue.4. Balance in Banco Efisa Deposit Account includes Rs.8,391,552(PY 142,843,906) is unutilised money of the GDR issue.


72


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

AS AT AS AT

30th June, 2005 30th June, 2004

Rs. Rs.

SCHEDULE F: Current Assets, Loans & Advances (Cont’d)

IV Loans, Advances & Deposits

( Unsecured considered good except stated otherwise )

Advances recoverable in cash or in kind

Considered Good 60,931,833 14,286,702

Considered Doubtful - 18,800

60,931,833 14,305,502

Less : Provision for Doubtful Advances - 18,800

60,931,833 14,286,702

Advances for acquistion of shares 3,595,575 3,595,575

Less : Provision for Doubtful Advances 3,595,575 3,595,575

- -

Loans & Advances - Affiliates 22,502,118 23,002,250

Deposit with Body Corporates 145,598,630 145,598,630

(includes interest accrued ) -

Deposits - others 4,308,020 1,554,856

Interest Accrued 111,055 433,292

233,451,656 192,066,879

SCHEDULE G: CURRENT LIABILITIES & PROVISIONS

i) Current Liabilities :

Sundry Creditors 119,196,648 36,375,934

Advance from Customers 7,432,168 239,105

Unclaimed Dividend 2,230,549 1,611,703

(Investor Protection & Education Fund shall be credited

by the amount when due)

Others 6,792,815 1,487,247

ii) Provisions :

Provision for Tax 9,941,783 2,768,733

Proposed Dividend (Incl. Dividend Tax if any) 96,424,593 56,406,250

Provision for Employee Benefits 1,358,773 1,119,474

Other Provisions 2,094,421 787,930

245,471,750 100,796,376

SCHEDULE H : MISCELLANEOUS EXPENDITURE

Miscellaneous Expenditure 22,653,010 30,619,112

Add : Additions 1,412,620

Less : Written off 7,922,803 7,966,102

16,142,827 22,653,010


73


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

Year Year

2004-05 2003-04

Rs. Rs.

SCHEDULE I : SALES

Software, Software Driven Products & others 38,548,619 45,608,873Software - Exports - Products 209,047,413 262,597,745Software - Exports - Services 1,693,816,906 1,072,880,282Other Exports 10,753,893 8,241,595

1,952,166,830 1,389,328,496Add: Duty Drawback 307,998 53,342

1,952,474,828 1,389,381,837

SCHEDULE J : OTHER INCOME

Income from Mutual Fund - 469,019

Interest Income (Net of Foerign Tax) 29,856,388 18,243,735[Incl. TDS Rs.1148095/- (PY Rs.1505586/-)]Less :Interest Paid 4,418,512 3,175,514

25,437,876 15,068,221Miscellaneous Income 2,069,101 65,804

27,506,977 15,603,044

SCHEDULE K : COST OF REVENUES & EMPLOYEES COSTConsumption of Raw Materials & Consumables

Opening Stock 1,718,482 988,916Add: Purchases & Expenses 7,023,736 10,218,110

8,742,217 11,207,027Less: Closing Stock 1,192,838 1,718,482

7,549,379 9,488,545Cost of Software Sold (Trading)

Opening Stock - 3,253,500Add: Purchases [Qty.1022 Nos. (PY1575 Nos.)] 26,207,125 29,853,750

26,207,125 33,107,250Less: Closing Stock - -

26,207,125 33,107,250Add / (Less) :Decrease / (Increase) in finished & semi finished stocks

Opening Stock 1,733,952 -Closing Stock 887,297 1,733,952

846,656 (1,733,952)Payments to and Provisions for Employees (includingManagerial Remuneration)Salaries, Wages, Bonus & others 78,843,423 47,555,667Contribution to Provident Fund & Gratuity Fund 2,760,762 1,576,292Staff Welfare Expenses 2,218,816 1,309,239Employees Compensation 14,559,076 -

98,382,076 50,441,197

Software Development, Installation &Testing Charges 889,355,197 631,756,872

1,022,340,433 723,059,912


74


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

Year Year

2004-2005 2003-2004

Rs. Rs.

SCHEDULE L:

SELLING, ADMINISTRATIVE & OTHER EXPENSES

Advertisement & Sales Promotion 1,929,142 721,865

Payment to Auditors 1,400,747 1,038,668

Bad Debts 630,622 798,033

Travelling & Conveyance 12,218,450 11,872,043

Professional Fees 6,509,076 28,700,455

Miscellaneous Expenses W/Off 7,931,087 7,961,542

Rent 5,919,642 3,151,265

Commission Paid 421,973 151,260

Electricity Expenses 2,170,212 1,682,733

Rates & Taxes 2,658,863 2,251,853

Provision for Doubtful Debts/Adv 194,782 73,300

Foreign Exchange Diff. 114,833,023 5,337,026

Telephone & Communication 2,974,604 3,294,074

Insurance Charges 145,147 175,669

Loss on sale of Fixed Assets 2,221 465,318

Repairs & Maintenance

Buildings 342,903 82,071

Computers 473,446 737,350

Others 570,794 191,590

Miscellaneous Expenses 10,042,822 12,526,518

171,369,556 81,212,633


75


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

SCHEDULE : M

A. SIGNIFICANT ACCOUNTING POLICIES

1. Basis for preparation of financial

statements

The financial statements have been prepared in

accordance with the accounting principles generally

accepted in India and comply with the Accounting

Standard (AS 21) on Consolidated Financial Statements

issued by the Institute of Chartered Accountants of India.

2 . Fixed Assets & Depreciation

Fixed Assets are stated at cost of acquisition less

accumulated depreciation. Direct costs are capitalised until

the assets are ready for use and include inward freight,

duties, taxes and expenses incidental to acquisition and

installation.

The Depreciation on Fixed Assets is provided on straight

line methods or other methods and rates permissible

under applicable local laws or at such rates so as to write

off the value of assets over their useful life.

3 . Method of Accounting

The Company follows accrual basis of accounting

4. Foreign Currency Transactions

Transactions in foreign currencies pertaining to revenue

accounts are accounted at approximate exchange rate

prevalent on transaction date. Gains and losses arising

out of subsequent fluctuations are accounted for on actual

payment/realization in Profit & Loss Account. The amount

outstanding at the year end are translated at exchange

rate prevailing at year end and the profit/loss so

determined are recognized in the Profit & Loss Account.

For the purpose of consolidation of accounts, in

translating the financial statements of a non-integral

foreign operation for incorporation in its financial

statements,

(a) the assets and liabilities, both monetary and non-

monetary, of the non-integral foreign operation

translated at the closing rate;

(b) income and expenses items of the non-integral foreign

operation translated at exchange rates at the dates of

the transactions; and

(c) all resulting exchange differences accumulated in a

foreign currency translation reserve.

5 . Inventories

(i) Inventories are valued at lower of cost or net realisable

value.

(ii) In case of raw materials and consumables the cost

includes duties, taxes and freight inward on FIFO basis.

(iii) Cost of finished product and work-in-progress includes

the cost of raw materials, consumables and direct

labour as applicable.

(iv) Traded goods are valued at cost on FIFO basis.

6. Investments

Long term investments are carried at Cost and Short term

investment are carried at the lower of cost or fair value.

Provision for diminution in the value of long term

investments is made only if such a decline is not temporary

in the opinion of the management.

7 . Employees’ Retirement Benefits

In respect of the holding company, Company’s contribution

to Provident Fund and Gratuity Fund is charged to Profit

and Loss account on accrual basis. Liability for Leave

Encashment benefits is charged to Profit & Loss account

on the basis of actuarial valuation

8 . Employee Stock Option Scheme

Accounting of Employee Stock Option Scheme is done as

per “Fair Value Method” SEBI (Employee Stock Option

Scheme & Employee Stock Purchase Scheme) Guidelines,

1999, requires the amortization of fair value of the option

over the vesting period .

CONSOLIDATED schedules forming part of the accounts for

the year ended 30th June 2005

76


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

9 . Taxat ion

In respect of holding company and Indian subsidiaries

provision for current tax is computed as per total income

returnable under the Income-tax Act, 1961 for relevant

financial year ending on 31st March, taking into account

available deductions and exemptions. Deferred tax is

recognized for all timing differences being the difference

between taxable incomes and accounting income that

originate in one period and are capable of reversal in one

or more subsequent periods. In case of foreign subsidiary,

taxes on income has been provided on the basis of local

applicable law.

SCHEDULE : M

B . NOTES TO THE ACCOUNTS

1. Principles of Consolidation

The consolidated financial statements relate to Aftek

Infosys Ltd. (“the Company”) and its subsidiaries. The

consolidated financial statements have been prepared

on the following basis.

(i) The financial statements of the Company and its

subsidiaries are combined on line by line basis by

adding together like items of assets, liabilities, incomes

and expenses, after fully eliminating intra-group

balances and intra group transactions in accordance

with Accounting Standard (AS 21) – “Consolidated

Financial Statements” issued by the Institute of

Chartered Accountants of India.

(ii) In case of foreign subsidiaries, revenue items are

consolidated at the average rate prevailing during the

year. All assets and liabilities are converted at rates

prevailing at end of the year. Any exchange difference

arising on consolidation is recognized in the Foreign

Currency Translation Reserve except in cases where

they relate to acquisition of fixed assets in which case

they are adjusted to the carrying cost of such assets.

(iii) As far as possible the consolidated financial

statements are prepared using uniform accounting

policies for like transactions and other events in similar

circumstances and are presented in the same manner

as the Company’s separate financial statements.

(iv) Excess of cost to the company, of its investment in the

subsidiary company over the Company’s portion of

equity is recognized in the financial statement as

Goodwill. The excess of the Company’s portion of

equity of the subsidiary on the acquisition date over

its cost of investment is treated as capital reserve.

(v) Intra group balances and intra group transactions and

resulting unrealised profits have been eliminated.

2. Details of subsidiaries whose financial statements have been consolidated are given below:

Name of the Subsidiary Country of Proportion ofIncorporation ownership Interest

Mihir Properties Pvt. Ltd. India 100%

Aftek Sales & Services Pvt. Ltd. India 100%

Opdex Inc.

(Formerly known as Aftek Infosys USA Inc.) USA 100%



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CONSOLIDATED ....

2004 - 05 2003 - 04

3 Estimated amounts of contracts remaining to be executed

on capital account and not provided for NIL NIL

4 Contingent Liabilities in respect of:

Bank Guarantee 257629 99539010

Income tax matters in dispute under appeal NIL* 18080562

*Income tax cases for Assessment Year 1996-97 and 2001-02 is pending

before Commissioner (Appeal) and Tribunal respectively. However their

outcome in terms of contingent liability is not ascertainable.

Interest on FCCB 277439 NIL

5 Payments to Directors:

Salaries 22249932 9290868

Contribution to Gratuity fund NIL 75276

Commission to Non Executive directors 3285875 1163041

6 Auditors’ Remuneration:

Tax Audit Fees 275500 220400

Statutory Audit Fees* 758472 629268

Certification & others 349885 189000

*Statutory audit fees includes fees paid to Auditor of Opdex Inc. USA for accounting services also

7. DEFERRED TAX ASSETS / (LIABILITIES) :

The Major components of Deferred tax assets / (liabilities) arising on account of timing differences are as follows:

As At As At

30th June ’05 30th June ’04

Related to Fixed Assets NIL 855264

Disallowance under the Income-tax Act, 1961 NIL 115321

Provision for Doubtful Advance NIL 6745

Provision for Deferred Tax Assets / (Liabilities) NIL 977330

Note : As per the provisions contained in paragraphs 15-18 of the AS 22 “Accounting for Taxes on Income” issued by the

Institute of Chartered Accountants of India, and consideration of prudence, the company has not recognized Deferred

Tax Asset arising during the year and has derecognized the Deferred Tax Assets recognized in the earlier year. The

adjustment of the Deferred Tax Assets of earlier year has been made to the General Reserve.



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8. EARNINGS PER SHARE (EPS) :

2004 - 2005 2003 - 2004Rs . Rs .

Basic Profit After tax and Prior Period Adjustment 595559287 447834270Less/(Add):Short/Excess provision for taxation of earlier years 18265041 3461693Add: Excess provision for doubtful debts of earlier years 0 3777817Net Profit available for Equity Share Holders 577294246 448150393Weighted Average Number of equity shares subscribed 75000000 75000000Face value of Shares 2 2Basic Earnings per Equity Share 7.70 5.98Diluted Net Profit available for Equity Share Holders 577294246 448150393Weighted Average Number of equity shares subscribed 75000000 75000000

Weighted Average Number of potential shares on account of

Employee Stock Options 149537 0

Weighted Average Number of potential shares on account of

Foreign Currency Convertible Bonds 306714 0

Total Weighted Average Number shares outstanding 75456251 75000000

Diluted Earning Per Share 7.65 5.98

9. Aftek Employees’ Welfare Trust (unregistered) was created for the benefit of employees including Executive Directors. Thepurpose of the trust inter alia is to purchase/invest in the shares or other securities including that of Aftek Infosys Ltd.for the benefit of employees. As per the conditions of the trust deeds the company has provided an interest free loanaggregating to Rs.22502118 (PY Rs. 23002250) (maximum balance outstanding at any time during the year Rs.23002250 (PYRs. 23577250)) and the same has been used for the purchase of Equity shares of Aftek Infosys Ltd.. These shares may beallocated to the employees or the amount of profit earned on the sale of these shares may be distributed amongst the

employees.

10. Related Party Information

Name of the Related Parties Nature of Relation

Opdex Inc. (Formerly known as Aftek Infosys (USA) Inc.) Subsidiary

Aftek Sales & Services Private Limited Subsidiary

Mihir Properties Private Limited Subsidiary

Aftek Employees’ Welfare Trust Control

Aftek Infosys Ltd. Employees Group Gratuity Scheme Control

Ranjit M. Dhuru Director

Nitin K Shukla Director

Mahesh B Vaidya Director

Sunil M. Desai Director

Promod V Broota Director

Aftek Digital System Private Limited Company Controlled by Directors

CONSOLIDATED ....CONSOLIDATED schedules forming part of the accounts for


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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

CONSOLIDATED ....

Nature of Transaction Amount Relation Amt outstanding as onRs . 30.6.2005

Rs.

Loan/Advances Given(Net) 46585 Subsidiaries 241900(23480) (195315)

Loan/Advances Received.Back (net) 500132 Control 22502118(575000) (23002250)

Remunerations 22249932 Key managerial Personnel -(9290868)

Payment of Rent NIL Company controlled -(7250) by Directors

Rent free use of Premises NIL Subsidiary -(NIL)

Contribution to Aftek Infosys Ltd. 465197 Control 465197

Employees Group Gratuity Scheme (286400) (286400)

11. Employee Sotck Option Scheme

In terms of approval of the shareholders at the Annual General Meeting held on the 29th December 2000, the company has

established Employees Stock Option Scheme,2004. The options are vested over a period of one year to four years, subject tofulfillment of certain conditions. Upon vesting, the grantees are eligible to apply for and secure the allotment of equity shares

of the Company on payment of the exercise price.

Stock Options [ ESOP]1 Exercise Price per Share* Rs. 56 Rs. 70 Rs. 562 Grant Date 25.08.2004 28.10.2004 25.08.20043 Vesting commences on 25.08.2005 28.10.2005 25.08.20054 Vesting schedule 25% of grant each year commencing 100% on

one year from the date of grant 25.08.2005Particulars ofNumbers of Options 2004-05 2003-04 2004-05 2003-04 2004-05 2003-045 Option outstanding at

The Beginning of the year - - - - - -6 Option granted during the year 4,36,025 - 1,04,965 - 1,00,000 -7. Option exercised in respect of which

shares were allotted - - - - - -8. Option lapsed during the year on

separation 22795 - 10735 - - -9. Option outstanding at the end Of

the year (5+6-7-8) 413230 - 94230 - 100000 -On which –Option vested - - - - - -Option Yet to vest 413230 94230 100000

* The company has revised the above exercise prices from Rs.56 and Rs.70 to Rs.26 and Rs.40 respectively, after thebalance sheet date on account of bonus issue adjustment.



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CONSOLIDATED ....

12.During the year the Company issued 3000 1% Foreign Currency Convertible Bonds (FCCBs) of USD 10000/- each aggregating

to USD 30 Millions (Rs.129,54,00,000 at issue) with an option to convert these Bonds into equity shares of Rs.2/- each or

GDR within a period of 5 years from the date of issue of the FCCBs at a pre-defined conversion price of Rs.94/- per share.

The consideration for the aforesaid FCCBs was received in current account with Bank of India, London after deducting

advance towards Issue Expenses by the Manager to the issue.

The proceeds of the issue, after deducting Rs.51816000/- as advance for issue expenses and bank charges Rs.475/-, has

been kept with Bank of India, London in the following accounts

i) In current account Rs.34543525/-

ii) In deposit account Rs.1209040000/-

And grouped under “Cash and Bank balances” (Schedule F)

13.The company operates in a single segment.

14. Previous years’ figures have been regrouped / recast wherever necessary to make them comparable with those of the

current year.

15. Figures are rounded off to nearest rupee.

16. Schedules- A to M forms an integral part of the accounts and have been duly authenticated.




C .G. Deshmukh

Company Secretary




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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

STATEMENT PURSUANT ....

Name of the Subsidiary Company Opdex Aftek Sales Mihir

Inc. & Services Properties

Pvt. Ltd. Pvt. Ltd.

1. Financial year of the Companies ended on 30/06/2005 30/06/2005 30/06/2005

2. Total Issued, Subscribed and Paid-up Capital of the 31,700,000 1000 equity 1,45,000 equity

Subsidiary Company: common stock shares of shares of

of US $. 0.05 Rs. 100/-each Rs. 100/- each

par value

3. Extent of Interest of Aftek Infosys Ltd. at the end of the 31,700,000 1000 equity 1,45,000 equity

financial year: common stock shares of shares of

of US $. 0.05 Rs. 100/- Rs. 100/-

par value each each

4. The net aggregate of Profits / (Loss) of the Subsidiary

Companies of the financial year, so far as they concern

the members of Aftek Infosys Ltd. were:

a) Dealt within the Accounts of Aftek Infosys Ltd. for

the year ended 30th June, 2005 Nil Nil Nil

b) Not dealt within the Accounts of Aftek Infosys Ltd.

for the year ended 30th June, 2005 ($109,985) (Rs.14,164) ( Rs.411,379)

Rs. 4,869,035

5. The net aggregate of Profits / (Loss) of the Subsidiary

Companies for the previous financial years since they

became subsidiaries so far as they concern the members

of Aftek Infosys Ltd. were:

a) Dealt with in the Accounts of Aftek Infosys Ltd.

for the year ended 30th June, 2005 Nil Nil Nil

b) Not dealt with in the Accounts of Aftek Infosys Ltd.

for the year ended 30th June, 2005 ($ 607,249) (Rs.12,061) (Rs.413,883)

Rs.27,368,712




C .G. Deshmukh

Company Secretary


STATEMENT PURSUANT TO SECTION 212 OF THE

COMPANIES ACT, 1956, RELATING TO THE SUBSIDIARY

COMPANIES

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


Registered Office : “ AFTEK HOUSE “, 265,Veer Savarkar Marg, Shivaji Park, Dadar,Mumbai 400 028

November 30, 2005

Dear Members,

Securities & Exchange Board of India (SEBI) has made it mandatory for all the Listed Companies to use the bank account details furnished by the depositories for distributing dividends

and other cash benefits, etc through Electronic Clearing System (ECS) to the investors, wherever ECS and bank details are available. In the absence of ECS facility, the Companies should

print the Bank Account details, if available, on the payment instrument, for the distribution of dividends and other cash benefits etc., to the investors.

Thus, in light of the above SEBI’s directive, the Company has initiated the process of ECS facility for the payment of dividend, if any, that may be declared by the Company to all those

Shareholders who are holding shares in dematerialized form, however, subject to the RBI Guidelines as regards ECS facility in different locations.

In case you are still holding the Shares in the physical form, we would request you to kindly consider the benefits of dematerialization and open a De-mat Account with the Depository

Participants to get your physical shares dematerlised. Till you are holding shares in physical form we also request you to send us the Bank Mandate by completing and returning the

perforated lower portion of this letter along with a photocopy of a blank cheque duly cancelled at the Registered office of the Company or to its Registrar and Share Transfer Agent

i.e. Bigshare Serives Private Limited, E-2/3, Ansa Industrial Estate, Sakivihar Road, Saki Naka, Andheri(E), Mumbai-400 072 latest by 20th December 2005.

However, if you prefer to get your dividend by way of physical warrants and not opt for ECS, please let us know the name, branch and account number of your Bank, if not provided

earlier. This will enable us to incorporate such particulars on the dividend warrant to avoid any fraudulent encashment. Your action in the above matter will help us in serving you

better.

Yours truly,

For AFTEK INFOSYS LIMITED

C G DESHMUKH

COMPANY SECRETARY


Registered Office : “ AFTEK HOUSE “, 265,Veer Savarkar Marg, Shivaji Park, Dadar,Mumbai 400 028

INFORMATION FOR ELECTRONIC CELARING SYSTEM OF DIVIDEND

Folio No :

Client ID :

DP ID :

I/We_______________________________________________________________________do hereby authorize Aftek Infosys Ltd to :· print the following details on my/our dividend warrant· credit my/our dividend amount directly to my Bank Account by ECS.

(*Strike out whichever is not applicable)

Bank Account No. :

Name of the Bank :

Name and address of Branch :

Type of Account : Saving / Current

9-Digit Code Number of Bank & Branchappearing on the MICR cheque

I/We hereby declare that the above particulars are complete and correct. If the transaction is delayed or is not effected at all due to incomplete

or incorrect information, I/We shall not hold the Company responsible.

Place : Signature of First Named Shareholder

Date :

Encl.: A photocopy of the blank cheque duly cancelled

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A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5


A N N U A L R E P ORT 2 0 0 4 - 2 0 0 5

_________________________________________________________


Regd. Office : “AFTEK HOUSE”, 265, Veer Savarkar Marg, Shivaji Park, Dadar, Mumbai – 400 028

Reg. Folio No ............................................ No. of Shares ............................................

DPID No. ...................................................

Client ID No ..............................................

PROXY FORM

I / We ..............................................................................................................................................................................................................

of ....................................................................................................................................................................................................................

............................................................................................................ being member/members of Aftek Infosys Limited hereby appoint

.................................................................... of ........................................................... or failing him ...........................................................

.................................................................... of ........................................................... or failing him ...........................................................

....................................................................................................................... of ................................. as my/our proxy to attend and vote

for me/us on my/our behalf at the Annual General Meeting of the Company to be held on 30th December 2005 and at any adjournment(s)

thereof.

As witness my/our hand(s) this .........day of .................................2005

Signed by the said ..........................................................................................................................................................................

Note : The proxy form must be deposited at the Registered Office of the Company not less than 48 hours before the

time of the Meeting.

ATTENDANCE SLIP

18th ANNUAL GENERAL MEETING

Name of the attending Member / Proxy ( in block letters)

Member’s Folio No. : No. of Shares held :

DPID No. :

Client ID No. :

I ...........................................................................................hereby record my presence at the 18th Annual General Meeting of Aftek

Infosys Limied to be held on 30th December, 2005.

Member’s / Proxy’s Signature

1. PLEASE BRING THIS ATTENDANCE SLIP TO THE MEETING AND HAND OVER AT THE ENTRANCE DULY FILLED IN.

2. Shareholders are requested to bring their copies of the Annual Report with them.

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