$118$/ 5(3257static.net4.com/common/docs/AnnualReport2008-2009.pdfCORPORATE OFFICE D-25, Sector 3, Noida, Uttar Pradesh - 201301 INDIA Tel: +91 120 4323500 Fax: +91 120 4323520 02.

ANNUAL REPORT

2008-09

WEB SERVICES

DATA CENTER SERVICES

VOICE SERVICES

NETWORK & SYSTEM INTEGRATION

NET 4 INDIA

ANNUAL REPORT 2008-2009

TABLE OF CONTENTS

Board of Directors

MD’s Note

Directors’ Report

Annexure to the Directors’ Report

Report on Corporate Governance

Auditor’s Certificate on Corporate Governance

Management Discussions and Analysis

Auditor’s Reports

Annexure Referred to Auditor’s Reports

Balance Sheet as on 31st March, 2009

Profit & Loss Account as on 31st March, 2009

Cash Flow Statement as on 31st March, 2009

Schedules to the Balance Sheet

Balance Sheet Abstract and Company’s General Business Profile

Statement Pursuant to Section 212 of the Companies Act, 1956,

relating to Subsidiary Companies

Details of Subsidiary Companies

Consolidated Financial Statements and Notes

1

3

4

10

12

31

32

35

36

39

40

41

43

57

58

59

60


NET 4 INDIA

BOARD OF DIRECTORS

Jasjit Singh Sawhney

CHAIRMAN AND MANAGING DIRECTOR

Amarjit Singh Sawhney

WHOLE-TIME DIRECTOR

Sandip K. Ghosh

Bharat Chawla

Manish Wadhavan

NON-EXECUTIVE DIRECTORS

M/s Sandy Associates

Chartered Accountants

AUDITORS

Desi S. Valli

Brijesh Mathur

Biba Sawhney

K.K Lahiri, Advocate

LEGAL ADVISOR

Swagata Roy

FINANCIAL CONTROLLER

Krishan Kumar

COMPANY SECRETARY

01

NET 4 INDIA


REGISTERED OFFICE

AB-11, Community Centre,

Safdarjung Enclave,

New Delhi - 110029

INDIA

Tel: +91 11 26711150/ 54

Fax: +91 11 41653217

OFFICES

MCS Limited

F-65, Okhla Industrial Area,

Phase-I, New Delhi-110020

Tel.: 011-41406149, 51, 52

Fax: 011-41709881

Email: [email protected], [email protected]

URL: www.mcsdel.com

REGISTRAR AND TRANSFER AGENTS

State Bank of India,

South Extn. Part-I,

New Delhi-110049

BANKERS

CORPORATE OFFICE

D-25, Sector 3,

Noida,

Uttar Pradesh - 201301

INDIA

Tel: +91 120 4323500

Fax: +91 120 4323520

02


NET 4 INDIA

MD’S NOTE

Dear Shareholders,

During a period that was mostly marred with widespread economic panic and severe

liquidity squeeze and dooms day scenarios being painted across industries and

economies all over the world, your company has still managed to grow its business.

Your company reported a consolidated revenue of Rs. 160.6 cr, an increase of 18.8%

from Rs. 135.1 cr in the previous year. The Net Profit after Tax stood at Rs. 8.4 cr, a

decrease of 11.34 % from Rs. 9.48 cr in the previous year.

Whilst we remain rock solid behind our strategy of only profitable growth, last year was one where short

term deviations from long term strategies had to be made. We therefore, chose to stick by our customers in

a tough liquidity environment and had to compromise on margins in certain areas, in order to keep up the

minimum flow of customer acquisition, necessary for our long term growth prospects.

This year we looked heavily inward and relentlessly went behind further improving operational efficiencies

across all departments. We also continued to invest in our back end infrastructure in order meet existing

and anticipated demand in the next financial year.

Although bandwidth prices dropped, in most cases customers increased capacities, keeping revenue from

existing customers fairly constant. The general trend that we see emerging is one of outsourcing the hosting/

maintaining of applications and a shift in mindset of customers towards not having to control the physical

location and equipment where their data and applications reside.

We remain hopeful that the government will soon sort out the issues surrounding 3G and Wimax auctions

and that will give an increase to the overall internet usage, penetration and content in India, Being an

integral part of the internet and ip communications ecosystem we stand to benefit significantly from the

overall industry growth in the medium and long term.

The last two quarters of the year gone by have been very gloomy indeed and the general market outlook

over the coming year is at best ”cautious”. We, however, feel that it won’t be as bad in the coming year,

especially since our services are ; productivity enhancing, shifting capex to opex and above all a real need

and not a want in today’s business environment. We strongly feel by the middle of the coming year we

should be back on track with our profitable growth.

Sincerely,

Jasjit Singh Sawhney

CMD

03

NET 4 INDIA


Dear Members,

On behalf of the Board of Directors of your Company, it is my privilege to present the 23rd Annual Report

along with Audited Statement of Accounts for the financial year ended March 31, 2009 and Auditor’s Report

thereon.

Results of Operations

Year Ended March 31st

Particulars

Operating Income

Depreciation & Amortization

Interest & Finance Charges

Other Expenditure

Net Profit before Tax

Provision for Taxation (including

Deferred Tax)

Net Profit after Tax/ Amount

available for Appropriation

Dividend

Tax on Dividend

Amount Transferred to General

Reserve

Balance retained in Profit & Loss A/c

Earning Per Share-Basic & Diluted

Consolidated

13516

1435

578

10338

1411

463

948

167.50

38

41

701

5.80

Standalone

8580

781

402

6780

999

351

649

167.50

28

16

437

3.97

Consolidated

16067

1707

628

12642

1307

467

840

167.50

28

15

630

5.02

(Rs. in lacs, except per share data)

Standalone

9790

924

415

7934

906

311

595

167.50

28

15

384

3.55

DIRECTORS’ REPORT

042009 2008


NET 4 INDIA

PerformanceThe year under review witnessed an improved Turnover as compared to the previous year figure. But the

Profit after tax and consequently EPS of the Company has been decreased as compared to previous year

figure. Even though the previous year was extremely difficult for businesses the world over, your Company

has shown an increase in sales. A brief comparison year on year (YoY) is as under:

Consolidated Results

Total income for the year ended March 31, 2009 was Rs.16284.89 lacs as compared to Rs. 13763.10 lacs

recorded during the previous fiscal, an increase of 18.5%. Profit after Tax reduced to Rs. 840.42 lacs against

Rs. 948.09 lacs in the previous year; a decrease of 11% . Earnings per share reduced to Rs.5.02, 13% down as

compared to last year’s Rs. 5.80.

Standalone Results

Total income for the year ended March 31, 2009 was Rs. 10179 lacs as compared to Rs. 8847 lacs recorded

during the previous fiscal, an increase of 15%. Profit after Tax reduced to Rs. 595.32 lacs against Rs. 648.81lacs

in the previous year; a decrease of 8.98%. Earnings per share reduced to Rs. 3.55, a decrease of 11.8% as

compared to last year’s Rs. 3.97.

05

NET 4 INDIA


Business OverviewYour Company achieved important mile stones during the year 2008-09. A detailed discussion on the same

and future opportunities is provided in the management discussion and analysis.

SubsidiariesYour Company has two wholly owned subsidiaries namely Net 4 Singapore Pte Ltd and Net 4 Communications

Limited.

Net 4 Singapore Pte Limited

Net 4 Singapore Pte Ltd. was incorporated in 2007 primarily to setup the Companies’ International wholesale

VoIP business and VPN Voice/data network services. The Company has been awarded with the Service

Based Operator (SBO) license in Singapore. Under the license, the Company will now be able to provide a

range of enhanced retail and wholesale VoIP (Voice over Internet Protocol) services.

Net 4 Communications Limited

Net 4 Communications Limited was incorporated in the year 2005 having its Registered Office at Kolkata.

During the year under review, Total income of the Company increased to Rs. 62.36 Cr. from 50.62 Cr., at a

growth rate of 23%. The Profit after Tax reduced to Rs. 297.32 lacs against Rs. 332.72 lacs, a decrease of 11%.

We are expecting our expanded and improved Data centers at Chennai and Mumbai to be operational this

year. These locations will provide us the space ammunition to bring in enterprise and corporate clients with

higher capacity requirements.

PARTICULARS UNDER SECTION 212 OF THE COMPANIES ACT, 1956

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors’ Report, Balance

Sheet, and Profit and Loss Account of our subsidiaries to the Balance Sheet of the Company. As per the

requirement of Section 212 (1) of the Companies Act, 1956 the required documents of the Subsidiary

Companies has been attached to the Balance Sheet of M/s Net 4 India Limited. These documents will also

be available for inspection during business hours at our registered office and also at the registered office of

the concerned subsidiary.

Consolidated Financial StatementsIn accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting

Standard AS-23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements

are provided in the Annual Report.

DividendThe Board of Directors of your Company have recommended dividend @ 10% (Rupee 1 per Share) for the

year 2008-2009 (previous year 10%) to shareholders other than promoters and promoter group, subject to

approval of members in their ensuing Annual General Meeting.

DirectorsIn accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company,

Mr. Bharat Chawla and Mr. Manish Wadhawan, Directors are retiring by rotation at the forthcoming Annual

General Meeting and being eligible, offer themselves for re-appointment. The Board recommends the

appointment of the above Directors.

06


NET 4 INDIA

Managing Director and Whole Time DirectorMr. Jasjit Singh Sawhney, Managing Director of the Company, whose term expired on 28th February, 2009,

has been re-appointed as the Managing Director of the Company w.e.f. 01st March, 2009 by the Board of

Directors.

Mr. Amarjit Singh Sawhney, Whole Time Director of the Company, whose term expired on 31st March, 2009,

has been re-appointed as the Whole Time Director of the Company w.e.f. 01st April, 2009 by the Board of

Directors.

The appointment of Managing Director and Whole Time Director by the Board of Directors is subject to the

approval of the Shareholders in General Meeting. The resolution has been set in the Annual General Meeting

notice. The Board recommends to pass the resolution to approve the above said appointments.

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 that:

in the preparation of the Annual Accounts, the applicable accounting standards had been followed

and wherever required, proper explanations relating to material departures have been given;

the Directors have 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 as at 31st March 2009 and of the profit of the Company for the year

ended on that date;

the Directors have taken proper and sufficient care for 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; and

the Directors have prepared the annual accounts of the Company on a “going concern” basis.

Human ResourceNet4 is an equal opportunity employer and ensures that all employment decisions and personnel policies

are made without regard to factors such as race, sex, color, creed, religion, national origin, citizenship, age,

marital status, sexual preference or orientation,.

Net4 offers several types of diversity training. New employees learn of Net4’s environment of inclusion

through the New Hire Orientation program and there are other training programs offered for continuous

learning.

We have created a favorable work environment that encourages innovation and meritocracy. Every employee

is encouraged to optimize his/her full potential by availing of opportunities that exist across multiple

functions, disciplines as well as geographies. We have also set up a scalable recruitment and human

resources management process, which enables us to attract and retain high caliber employees.

(i)

(ii)

(iii)

(iv)

07

NET 4 INDIA


Fixed DepositDuring the year under review your Company has not accepted any deposits within the meaning of Section

58 A of the Companies Act, 1956. As such, no amount of principal or interest was outstanding as on the

Balance Sheet date.

Corporate GovernanceYour Company is committed to maintain the highest standards of Corporate Governance. The Company

adheres to the requirements set out by the Securities and Exchange Board of India’s Corporate Governance

practices and the requirements of the Listing Agreement and have implemented all mandatory stipulations

prescribed there under. Report on Corporate Governance for the year ended 31st March 2009 in terms of

Clause 49 of the Listing Agreements entered into with the Stock Exchanges in India forms part of the Annual

Report. Certificate from the Auditors of the Company, M/s. Sandy Associates, confirming compliance of

conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is attached to this Report.

Management Discussion and Analysis StatementManagement Discussion and Analysis Statement on the Company’s performance, industry trends and other

material changes with respect to the Company and its subsidiaries, wherever applicable is attached to this

report.

Code of ConductIn terms of Clause 49 of the Listing Agreement the Company has formulated a Code of Conduct for the

Directors and Senior Managerial Personnel. All the Board members and senior managerial persons have

given their consent to adhere to the Code of Conduct to the Compliance Officer. As per requirement of

Listing Agreement, the code of conduct is also available on Company’s website www.net4.in.

The Company has also formulated a ‘Code of Internal Procedures and conduct for prevention of Insider

trading in shares of the Company’ as per the provisions of SEBI (Prevention of Insider Trading Regulations)

2000, as amended from time to time, providing guidelines to the designated employees while dealing in

shares of the Company.

Listing InformationYour Company is listed on the Bombay Stock Exchange (Scrip Code: 532912) and Delhi Stock Exchange (Scrip

Code: 113089). The listing fee for the year 2009-2010 has been paid to the Bombay Stock Exchange and Delhi

Stock Exchange.

Auditors and Auditors’ ReportThe Auditors, M/s. Sandy Associates, Chartered Accountants, Statutory Auditors, retire at the ensuing Annual

General Meeting and have confirmed their eligibility and willingness to accept office, if re-appointed. The

Auditors’ Report and Notes on Accounts referred to in the Auditors’ Report are self-explanatory and

therefore do not call for any further comments.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings & OutgoInformation as required under the Companies (Disclosure of particulars in the report of Board of Directors)

Rules, 1988 in respect of energy conservation, Technology absorption and Foreign Exchange earnings and

outgo is given in Annexure-I to this report.

08


NET 4 INDIA

Particulars of the EmployeesIn terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars

of Employees) Rules, 1975 as amended, the names and other particulars of the employees are given in

Annexure I to the Directors’ Report. Mr. Jasjit Singh Sawhney, Chairman & Managing Director, Mr. Amarjit

Singh Sawhney, Whole-time Director and Ms. Biba Sawhney, Director are relatives, particulars thereof are

given in corporate Governance Report. None of other employee is relative of any of the Directors.

AcknowledgementsYour Directors would like to express their grateful appreciation for assistance and co-operation received

from the Banks, Government Authorities, Customers, Vendors and Members during the year under review.

Your Directors also wish to place on record their deep sense of appreciation for the committed services of

the all employees of the Company.

For and on behalf of the Board of Directors

Sd/-

Place: New Delhi JASJIT SINGH SAWHNEY

Dated: 30th June, 2009 Chairman & Managing Director

09

NET 4 INDIA


ANNEXURE-I

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

& FOREIGN EXCHANGE EARNINGS AND OUTGO

The Statement pursuant to Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure

of Particulars in the Report of the Board of Directors) Rules, 1988 is as under:

A. Conservation of EnergyThe operations of your Company are not energy conservative. We have a focused strategy to optimize

energy consumption. We purchase PCs and laptops that meet environmental standards, replace old hardware

with latest and more energy-efficient hardware, and are decreasing the amount of equipment to further

reduce our energy consumption. The Company is on a constant look out for efficient energy conservations

technologies and introduces them at required places.

B. Research and Development (R & D)

Specific areas in which R & D is carried out by the Company are as under:

The core business of the Company i.e. Internet and Related Services require continuous research

and development, adoption of new and more efficient technologies and innovation. Your Company

has been making sincere efforts to build competence and improve its services in its area of

operations by carrying out continuous research and development activities.

Benefits derived as a result of the above R & D:

Your Company has been able to develop processes and methodologies that have resulted in constant

improvement in quality of the products and services and overall productivity of the Company.

Future plan of action:

The Company intends to develop its own R & D division in near future.

Expenditure on R & D

(a) Capital

(b) Recurring

(c) Total

(d) Total R & D expenditure as a percentage of total turnover.

Since there is no separate R & D division, as such and no separate allocation of funds being made for

R & D, therefore, the exact amount spent on research and development is not ascertainable.

C. Technology Absorption, Adaptation and Innovation

Efforts in brief, made towards technology absorption, adaptation and innovation.

Since the core business of the Company requires adoption and absorption of emerging technologies

the Company is making continuous efforts in absorbing and deploying the new technologies.

Benefits derived as a result of the above efforts e.g. product improvement, cost reduction,

product development, import substitution, etc.

The adoption and development of new technologies has resulted in the improvement in quality of

its products and services and productivity of the Company.

1.

2.

3.

4.

1.

2.

10


NET 4 INDIA

In case of imported technology (imported during the last 5 years reckoned from the beginning of

the financial year), following information may be furnished:

(a) Technology imported-NIL

(b) Year of import-N.A

(c) Has technology been fully absorbed-N.A

(d) If not fully absorbed, areas where this has not taken place, reasons therefore and future plans

of action-N.A

D. Foreign Exchange Earnings & OutgoYour Company has taken the various initiatives taken to increase exports, developments of new export

markets for the services. Establishment of overseas subsidiary at Singapore and making arrangements with

International call carriers are some of the steps taken to increase the Export in the near future. The particulars

regarding foreign exchange earnings during the period under review of Rs. 3,87,72,000 appearing in the

Note No. v of the Notes to the Accounts (Schedule ‘S’). The particulars regarding foreign exchange

expenditure of Rs. 5,23,74,000 during the period are appearing in Note No. vi of the Notes to the Accounts.

STATEMENT PURSUANT TO SECTION 217 (2A) OF THE COMPANIES ACT, 1956 AND THE

COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975

Remuneration recieved includes Basic Salary, Dearness Allowance, Overtime, Ex-Gratia/Compensation Payments,

Commission, Bonus, Company’s Contribution to Provident Fund, and monetary value of Perquisites.

Nature of Employement is contractual or as per agreement wherever applicaple. Other terms and conditions

applicable to them are as per Company’s Rules.

3.

11

Mr. Jasjit Singh Sawhney

Chairman & Managing Director

Rs. 32,89,560/- p.a.

Looks after the entireoperations

B. A.(H) having more than 12years of experience

5th Jan, 2000

36 years

Director (Operations) in O-Net

0.00%

Mr. Amarjit Singh Sawhney

Whole-time Director

Rs. 22,82,520/- p.a.

Looks after the entire finance& legal functions

B.A. Economics having morethan 40 years experience

5th Jan ,2000

69 years

Business

4.78%

Name

Designation

Remuneration received

Nature of duties

Qualifications and experience

Date of commencement ofemployment

Age of the employee

Last employment

Percentage of equity shares held bythe employee in the company withinthe meaning of sub-clause (iii) ofclause (a) of sub-section (2A) ofsection 217 of the Act

Notes:

(2)

(1)


Sd/-

Place: New Delhi JASJIT SINGH SAWHNEY

Dated: 30th June, 2009 Chairman & Managing Director

NET 4 INDIA


REPORT ON CORPORATE GOVERNANCE

STATEMENT OF CORPORATE GOVERNANCE PHILOSOPHY

Corporate Governance encompasses the internal policies and practices by which Net4 is operated and

controlled on behalf of its shareholders. The advantages of sound Corporate Governance include having a

strong Board of Directors that is accountable to the Company and its owners. A good system of Corporate

Governance also helps Net4 maintain the confidence of investors, which allows the Company to raise

capital efficiently.

Net4 is committed to establish good governance practices and there is a constant endeavour to follow the

spirit of good governance than mere compliance with the conditions specified by regulatory authorities

and in line with domestic and international developments. Net4 understands and respects its fiduciary role

and responsibility to shareholders and strive hard to meet their expectations. Net4 believes that best

board practices, transparent disclosures and shareholder empowerment are necessary for creating

shareholder value.

Net4’s philosophy on Corporate Governance is based on the universally recognised principles of transparency,

disclosures and fairness in corporate actions.

In our commitment to practice sound governance principles, we are guided by the following core principles:

TransparencyTo maintain utmost transparency in our interactions, dealings and day to day affairs.

DisclosuresTo ensure timely dissemination of price sensitive information and other matters concerning our

stakeholders.

Stakeholders’ interestsTo promote the interests of all stakeholders including customers, shareholders, employees, lenders, vendors

and the community.

CompliancesTo comply with all the laws and regulations as applicable to the Company.

1. Company’s Philosophy on Code of GovernanceThe Company endeavors to comply Corporate Governance by adherence with utmost transparency,

disclosures and fairness in the business operations. Good Corporate Governance is an ongoing process.

Corporate Governance entails and ensures accountability of the persons in charge of the Company on the

one hand and develops benefits to Investors, Customers, Vendors and the Society at large on the other

hand. The Company believes that good Corporate Governance practice is an excellent tool to secure the

corporate excellence. The Company has and will continue to focus its resources, strengths and strategies, in

order to achieve this Vision, while upholding the core values of transparency, integrity, honesty and

accountability.

2. Board of DirectorsThe role of the Board of Directors is to effectively govern the affairs of the Company for the benefit of its

shareholders. The Board strives to ensure the success and continuity of the Company's business through

the election of qualified management. It is also responsible for ensuring that the Company's activities are

conducted in a responsible and ethical manner.

12


NET 4 INDIA

A. Composition of BoardThe Board of Directors consists of an optimum combination of Executive, Non-Executive and Independent

Directors. The functional (Whole time) Directors have core expertise in their functional area of operations

in the Company and have enriched and varied experience.

The back ground of Non-Executive/Independent Directors is similar to the Whole Time Directors but

nevertheless they are also in a position to view the transactions from a different perspective thus adding

value to the decisions taken and thereby contributing to the overall growth of the organisation.

The Board of Directors consists of 8 Directors, comprising 2 Whole-Time Directors including the Chairman

and Managing Director, 6 Non-Executive Directors out of which 4 are independent directors. The composition

of the Board of Directors is as follow:

Director

Executive Directors



Non Executive Directors

Ms. Biba Sawhney

Mr. Sandip K. Ghosh

Mr. Bharat Chawla

Mr. Manish Wadhavan

Mr. Desi S. Valli

Mr. Brijesh Chand Mathur

No. of

Directorships in

other

Companies (*)

1

1

-

1

-

1

1

-

No. of Memberships/

Chairmanships of Board

Commitees in other

Companies (**)

2

2

-

-

-

-

-

-

Category of Director

Promoter Director/Chairman &

Managing Director

Promoter Director/Wholetime

Director

P r o m o t e r / N o n - E x e c u t i v e

Director

Non-Executive

Independent Director

Non-Executive

Independent Director

Non-Executive Independent

Director

Non-Executive Director

Non-Executive Independent

Director

*Excludes Directorships in Indian Private Limited Companies, Foreign Companies, Companies of Section 25 of the

Companies Act, 1956, memberships of Managing Committees of various Chambers/Bodies and Alternate Directorships.

**Represents Memberships / Chairmanships of Audit Committee, Shareholders & Investors Grievance Committee of all

Indian Public Limited Companies.

B. Attendance of the Directors at Board Meeting, Last Annual General Meeting and Extra

Ordinary General Meetings held during the Year

(i) Board Meetings

In the year 2008-2009, 4 meetings of the Board were held on 13.05.2008, 31.07.2008, 31.10.2008 and 31.01.2009.

The periodicity between two Board Meetings was within the maximum time gap as prescribed in the Listing

Agreement / Companies Act, 1956.

13

NET 4 INDIA


Attendance of Directors in the aforesaid meetings is as under:

Name of Director



Mr. Desi S. Valli

Ms. Biba Sawhney

Mr. Sandip K. Ghosh

Mr. Manish Wadhavan

Mr. Bharat Chawla


No. of Board Meetings Attended

4

4

3

2*

4

3

4

4

* Through Video/ Teleconferencing.

(ii) Annual General Meeting

The Last Annual General Meeting was held on 30.09.2008. Attendance of Directors in the aforesaid

meeting is as under:

Name of Director



Mr. Desi S. Valli

Ms. Biba Sawhney

Mr. Sandip K. Ghosh

Mr. Manish Wadhavan

Mr. Bharat Chawla


Attendence of last AGM held on 30.09.2008

Present

Present

Absent

Absent

Present

Absent

Absent

Absent

(iii) Extra Ordinary General Meetings:

During the year no Extra Ordinary General Meeting was held.

14


NET 4 INDIA

C. Retirement / Appointment and Re-appointment of Directors / Whole Time Directors /

Managing DirectorMr. Bharat Chawla and Mr. Manish Wadhwan are Directors who being liable to retire by rotation and being

eligible offer themselves for reappointment. The Board recommends their appointment.

Mr. Jasjit Singh Sawhney, Managing Director, whose term expired on 28.02.2009 and Mr. Amarjit Singh

Sawhney, Whole Time Director, whose term also expired on 31st March, 2009 were being re-appointed in

their respective designations by the Board of Directors. The approval of the same is being sought from the

Members in the ensuing Annual General Meeting.

D. Relationship amongst Directors and their RelativesMr. Jasjit Singh Sawhney, Chairman & Managing Director is the son of Mr. Amarjit Singh Sawhney, Whole

Time Director. Ms. Biba Sawhney, Non Executive Director, is the daughter of Mr. Amarjit Singh Sawhney.

Apart from the above relation, none of the other directors have any of their relatives in employment of the

Company or on the Board.

E. Loans to DirectorsNo loans have been given to/or outstanding from any of the Directors of the Company.

3. Board CommitteesTo give utmost priority to important functional areas which require specialized attention, various Committees

of the Board are constituted.

Name of the Committee

Audit Committee

Shareholders’/Investors’

Grievance Committee

Remuneration Committee

Management Committee

Chairman/ Member

Chairman

Member

Member

Chairman

Member

Member

Chairman

Member

Member

Chairman

Member

Member

Member

Name of Director

Mr. Sandip K. Ghosh

Mr. Manish Wadhawan

Mr. Bharat Chawla

Mr. Sandip K. Ghosh

Mr. Manish Wadhawan

Mr. Bharat Chawla

Mr. Sandip K. Ghosh

Mr. Manish Wadhawan

Mr. Bharat Chawla



Mr. Desi S. Valli

Mr. Sandip K. Ghosh

15

NET 4 INDIA


Committees of the Board are constituted in compliance with the provisions of the Companies Act, 1956 and

Listing Agreement entered into with the Stock Exchanges.

The Board may, from time to time, constitute one or more Functional Committees delegating thereto

powers and duties with respect to specific purposes. Meetings of such Committees are held as and when

the need arises. Time schedule for holding the meetings of such Functional Committees are finalised in

consultation with the Committee members. The Committee(s) so constituted act in accordance with their

terms of reference and / or with respect to the functions assigned or the powers delegated by the Board of

Directors.

The minutes of all the Committee meetings, approved and signed by the Chairmen of respective Committees

are placed in the next meeting of the Board of Directors for noting.

Any decision taken in the Committee meeting which is outside its scope / powers and/ or its terms of

reference may be subsequently ratified by the Board of Directors and shall have effect as if they were

originally decided by the Committee within their terms of reference / powers and scope and the decision

shall have effect accordingly.

A brief on the terms of reference, meetings held during the year and attendance of members in these

meetings is as under:

A. Audit CommitteeThe main function of the Committee is to continuously monitor and effectively supervise the Company’s

financial reporting process with a view to provide accurate, timely and proper disclosures and to maintain

the integrity and quality of the financial reporting. The terms of reference of the Audit Committee are in

accordance with Section 292A of the Companies Act, 1956 and the guidelines set out in the Listing Agreement.

The Committee is headed under the stewardship of Mr. Sandip K. Ghosh, an Independent Non- Executive

Director. Mr. Sandip K. Ghosh, a Chartered Accountant by profession has vast, varied and multifarious

experience in financial management, corporate affairs and accounting matters.

The Committee during the year 2008-2009 met 4 times and all the members attended all the Meetings.

Representative of the Statutory Auditors and Financial Controller, were invited to be present at the meetings.

All the members of the Committee are Independent Directors.

B. Shareholders’ & Investors’ Grievance CommitteeThe terms of reference include giving approval for issue of duplicate certificates, to oversee and review all

matters connected with transfer of securities of the Company, to continuously monitor and give directions

for prompt resolution of Shareholders’/Investors’ complaints like transfer of shares, non-receipt of the

balance sheet, non-receipt of dividend, etc. The Committee also supervises the working of Registrar and

Share Transfer Agents of the Company and recommends measures for overall improvement in the quality

of investor services. The Committee during the year 2008-2009 met 8 times and Mr. Bharat Chawla and Mr.

Manish Wadhavan both attended 6 meetings and Mr. Sandip K. ghosh attended all the meetings. In order to

expedite the process of share transfers, the Committee has delegated the power of share transfer to

Company Secretary who shall attend to share transfer formalities at least once in a fortnight. The Company

has received 17 complaints for non- receipt of Annual Report, non – receipt of Dividend warrant for the year

2007-08 and updation in contact details and all the complaints have been resolved promptly. Outstanding

complaints as on 31.3.2009 were nil.

16


NET 4 INDIA

C. Remuneration CommitteeThe terms of reference include to consider, recommend and review the remuneration of Executive Directorsand Senior Management based on their performance and defined assessment criteria. The Committeeduring the year 2008-2009 met once and all the members attended the Meeting.

The Non-Executive Directors have no pecuniary relationship or transactions with the Company in theirpersonal capacity except sitting fees (as mentioned below). The Company has not granted any stock optionto its Directors.

D. Management CommitteeThe terms of reference include (i) deciding on borrowing, loan, advances, overdrafts from banks, financialinstitutions, individuals, foreign institutions, etc, (ii) to decide investment to be made in the joint venture,acquisition, collaboration, and/or incorporation of a new company and other tasks entrusted, delegatedby the Board of Directors from time to time.

The Committee during the year 2008-09 met 10 times and Mr. Desi S. Valli attended 7 meeting, Mr. AmarjitSingh Sawhney attended 8 meetings and Mr. Jasjit Singh Sawhney & Mr. Sandip K. Ghosh both attended 7meetings.

4. Remuneration of DirectorsDetails of remuneration of the Directors for the financial year ended 31st March, 2009 are as under:

Director



Mr. Desi S. Valli

Ms. Biba Sawhney

Mr. Sandip K. Ghosh

Mr. Manish Wadhavan

Mr. Bharat Chawla

Mr. Brijesh Mathur

TOTAL

Salary#

20,16,000/-

23,88,000/-

-

-

-

-

-

-

Relationship with

other Director

Father of Mr. Jasjit

Singh Sawhney &

Ms. Biba Sawhney

Son of Mr. Amarjit

Singh Sawhney and

Brother of

Ms. Biba Sawhney

-

Daughter of

Mr. Amarjit Singh

Sawhney and sister

of Mr. Jasjit Singh

Sawhney

-

-

-

-

Sitting

Fees

-

-

2,500/-

500/-

7,750/-

4,250/-

3,250/-

1,000/-

Perquisites &

Other benefits##

2,66,520/-

9,01,560/-

-

-

-

-

-

-

Total

22,82,520/-

32,89,560/-

2,500/-

500/-

5,750/-

3,250/-

3,500/-

1,000/-

55,91,330/-

17

# Salary also includes Performance Pay.## Perquisites and other benefits include allowances, contribution to Provident and other funds but exclude company’scontribution to Gratuity Fund.

NET 4 INDIA


The appointment of Whole Time /Executive Directors is subject to termination by three months notice in

writing by either side and is guided by the standard terms and conditions of the appointment as applicable

to employees.

5. Management Discussion and Analysis Statement“Management Discussion and Analysis Statement” is appended with this report.

6. Brief Profile of the Directors proposed to be re-appointedAs a matter of good corporate practice your Board has decided that at the time of introduction of the

Directors to the Shareholders, a brief profile of the Director shall be given:

(i) Mr. Bharat Chawla

Mr. Bharat Chawla, Graduate by qualification is a successful businessman with a good knowledge of business

administration and management. He joined the Board of Net 4 India Ltd. w.e.f. 28th September, 2001 as Non

Executive Director. He does not have the Directorship and the membership of Committee of Board in any

other Company.

Your Company has benefited a lot by the knowledge and experience of Mr. Bharat Chawla. His tenure is

liable to retire by rotation at the ensuing Annual General Meeting of the Company. Mr. Bharat Chawla being

eligible offers himself for re-appointment. The Board of Directors has already recommended his

appointment.

Companies in which Mr. Bharat Chawla holds Directorship and Committee Memberships:

He does not hold any Directorship / Committee membership in any other Company.

Shareholding in the Company:

Mr. Bharat Chawla do not hold any share of Net 4 India Ltd.

(ii) Mr. Manish Wadhawan

Mr. Manish Wadhavan, Graduate by qualification is a successful entrepreneur. He joined the Board of Net 4

India Ltd. w.e.f. 23rd October, 1999 as Non Executive Director.

Your Company has benefited a lot by the knowledge and experience of Mr. Manish Wadhavan. His tenure is

liable to retire by rotation at the ensuing Annual General Meeting of the Company. Mr. Manish Wadhavan

being eligible offer himself for re-appointment. The Board of Directors has already recommended his

appointment.

Companies in which Mr. Manish Wadhawan holds Directorship and Committee Memberships:

Name of

Company

Net 4

Communications

Ltd.

Audit

Committe

No

Nature of

Interest

Director

Investor Grievance

Committe

No

Remuneration

Committe

No

18


NET 4 INDIA


Mr. Manish Wadhawan do not hold any share of Net 4 India Ltd.

(iii) Mr. Amarjit Singh Sawhney

Mr. Amarjit Singh Sawhney is an entrepreneur with more than 40 years of experience in business operations.

He had established and operated businesses in Iran and United Kingdom across several industries including

apparel manufacturing, realty and steel trading. The Company benefits from his rich experience in business

and finance. He was appointed to the Board on 5th Jan, 2000 and was appointed as Whole Time Director on

April 01, 2003 for three years and further re- appointed as Whole Time Director w.e.f. 1st April, 2006.

Your Company has benefited a lot by the knowledge and experience of Mr. Amarjit Singh Sawhney. The

Board has again re-appointed him as the Whole-time Director w.e.f. 01st April, 2009.

Companies in which Mr. Amarjit Singh Sawhney holds Directorship and Committee Memberships:


Mr. Amarjit Singh Sawhney holds 8,00,000 (4.78%) equity shares of the Company.

(iv) Mr. Jasjit Singh Sawhney

Mr. Jasjit Singh Sawhney was appointed as Managing Director in the Board meeting held on March 01, 2001

and re-appointed as Managing Director on March, 01, 2003 and again on March 01, 2006. He is considered

among the youngest entrepreneurs in India. He had schooled at Welhalms’ School, Dehradun, and graduated

in Economics & Law from University of London. He started his professional career as a foreign currency

trader in London bourses. Thereafter he worked as a consultant with O-net, a premier London based ISP,

where he subsequently became Director of Operations.

The Ministry of Communications & Information Technology has appointed him to the Board of National

Internet Exchange of India. He is also a key member of the Committees on Telecom and IT at CII and FICCI.

Your Company has benefited a lot by the knowledge and experience of Mr. Jasjit Singh Sawhney. The Board

has again re-appointed him as the Managing Director w.e.f. March 01, 2009.

Companies in which Mr. Jasjti Singh Sawhney holds Directorship and Committee Memberships:


Mr. Jasjit Singh Sawhney holds NIL (0.00%) equity shares of the Company.

Name of

Company

Net 4

Communications

Ltd.

Audit

Committe

No

Nature of

Interest

Director

Investor Grievance

Committe

No

Remuneration

Committe

Yes

Name of

Company

Net 4

Communications

Ltd.

Audit

Committe

No

Nature of

Interest

Director

Investor Grievance

Committe

No

Remuneration

Committe

Yes

19

NET 4 INDIA


8. ChairmanMr. Jasjit Singh Sawhney has been appointed as Chairman of the Board of Directors of the Company.

9. Related party transactionsThere have been no significant material related party transactions. Disclosure in relation to all material,

financial and commercial transactions, where directors have personal interest have been reported and

those transactions are disclosed in Note No. S (xvi) to the Accounts in Annual Report.

10. Code of ConductAs a part of Net4’s constant endeavour to set a high standard of conduct for its employees, it has formulated

‘The Code of Conduct for Board Members and Senior Management Personnel’ in compliance with the

provisions of Clause 49 of the Listing Agreement. The Code lays down guidelines and advises the Board and

Senior Managerial Persons on procedures to be followed, disclosures to be made and to follow ethics as per

rules of the Company. The purpose of this Code is to ensure an ethical and transparent process in managing

the affairs of the Company and promote ethical conduct. The Code has been circulated to all the members

of the Board and Senior Management Personnel and the compliance of the same is affirmed by them

annually. The Company Secretary has been appointed as the Compliance Officer under this Code. The Code

of Conduct is also available on Company’s website www.net4.in.

11. Insider Trading RegulationsIn terms of the provisions of SEBI (Prevention of Insider Trading Regulations) 2000, as amended, the Company

has formulated a “Code of Internal Procedures and Conduct for Prevention of Insider Trading in shares of

the Company”. The objective of the code is to prevent misuse of Price Sensitive Information and purchase

and/or sale of shares of the Company by an insider on the basis of Unpublished Price Sensitive Information.

The Code lays down guidelines and advises the Directors, Officers and Designated Employees on procedures

to be followed and disclosures to be made, while dealing in the shares of the Company. The Company

Secretary has been appointed as the compliance office under this Code.

12. Publication of Unaudited/Audited Financial ResultsThe Unaudited/ Audited Financial Results have been published in a Hindi National Newspaper and an

English National Newspaper. The results were sent to Stock Exchanges on quarterly basis. Detail of publication

of Financial Results is given below:

Period

Audited Financial Results for the Year

Ended 31.3.2009

Unaudited Financial Results for the Qtr.

ended on 31.12.2008


ended on 30.9.2008


ended on 30.06.2008

Name of Newspaper

Business Standard (English) & Business Standard (Hindi)

Financial Express (English) & Jansatta (Hindi)

Economic Times (English) & Navbarat (Hindi)

Economic Times (English) & Navbarat (Hindi)

The audited yearly / unaudited quarterly results of the Company are also displayed on the website of the

Company i.e. www.net4.in.

20


NET 4 INDIA

13. General Body Meetings(a) Location and time where last three Annual General Meetings were held:

(b) Special Resolutions Passed

In the AGM of year 2008, 2007 and 2006, No special resolutions were passed.

(c) Resolutions passed through Postal Ballot

During the year 2008-09, three resolutions were passed through Postal Ballot, and the result of the Postal

Ballot was declared on 05th September, 2008. Details of the resolution passed and other details are as

under:

1. As Ordinary Resolution: Alteration in the Authorised Share Capital clause i.e. Clause V of

Memorandum of Association of the Company.

2. As Special Resolution: Alteration in the Articles of Association consequent to alteration in the Authorised

Share Capital clause of the Company and substitution of Article 6 of the Articles of Association of the

Company.

3. As Special Resolution: Preferential Allotment of shares.

Details of voting pattern:

For Ordinary Resolution No.1

For Special Resolution No. 2

Year

2006

2007

2008

Time

2.30 P.M.

11.00 A.M.

10.30 A.M.

Date

30.9.2006

24.9.2007

30.9.2008

Venue

AB-11, Community Centre, Safdarjung Enclave, New Delhi – 110 029

AB-11, Community Centre, Safdarjung Enclave, New Delhi – 110 029

Hotel Centrum, D-984 New Friends Colony, New Delhi – 110 065

Category

Favour

Against

Total Valid Votes

Invalid Votes

Share

13037207

60800

13098007

25680

Votes

94

7

101

9

Percentage

99.5

0.5

100

Category

Favour

Against

Total Valid Votes

Invalid Votes

Share

13035802

62205

13098007

25680

Votes

95

6

101

9

Percentage

99.5

0.5

100

21

NET 4 INDIA


Postal Ballot in the ensuing Annual General Meeting

At the ensuing Annual General Meeting, there is no resolution proposed to be passed by postal ballot.

14(a). Disclosures on materially significant related party transactions i.e. transactions of the

Company of material nature, with its Promoters, the Directors or the Management, their

Subsidiaries or Relatives, etc. that may have potential conflict with the interests of the Company

at large.

The Board has received disclosures from the Key Managerial Personnel relating to the transactions entered

into with Companies where they and/or their relatives have interest.

The Company’s major related party transactions are generally with its Subsidiaries and Associate Companies

and were in the normal course of business .During the year ended 31st March 2009, there were no materially

significant related party transactions with its Promoters, the Directors or the Management, their Subsidiaries

or Relatives etc. which may have potential conflict with the interests of the Company at large.

The Related Party Transactions during the year are disclosed at Note no. S (xvi) to the Notes to Accounts of

the Annual Report for the year ended 31st March 2009.

14(b). Details of non-compliance by the Company, penalties, strictures imposed on the

Company by Stock Exchanges or SEBI, or any statutory authority, on any matter related to

capital markets, during the last three years.

During the last three years, there have been no instances of non compliance by the Company, no penalties

or strictures were imposed on the Company by any Stock Exchange, Securities and Exchange Board of India

(SEBI) or any other statutory authority on any matter relating to the capital markets.

14(c). Whistle Blower policy and affirmation that no personnel have been denied access to

the Audit Committee.

The Company promotes ethical behavior in all its business activities and has put in place mechanism of

reporting illegal or unethical behaviour. Employees are free to report violations of laws, rules, regulations

or unethical conduct to their immediate supervisor or the Company Secretary. The reports received from

any employee will be reviewed by the Audit Committee. The Directors and Management Personnel are

obligated to maintain confidentiality of such reportings and ensure that the whistle blowers are not

subjected to any discriminatory practices. Any employee, if he/she so desires, have free access to meet

Senior Level Management and Report any matter of concern. No employee of the Company is denied

access to the Audit Committee to make any representation. During the year, no personnel had approached

Category

Favour

Against

Total Valid Votes

Invalid Votes

Share

13077702

20305

13098007

25680

Votes

96

5

101

9

Percentage

99.84

0.16

100

22

For Special Resolution No. 3


NET 4 INDIA

the Audit Committee.

14(d). Compliance with Code of Corporate Governance

The Company is regularly complying with the mandatory requirements of Code of Corporate Governance as

indicated in Clause 49 of Listing Agreement.

Clause 49 further states that the non-mandatory requirements may be implemented as per the discretion

of the Company. The Company has implemented the following non-mandatory requirement:

(i) Remuneration Committee

The Company has set up a Remuneration Committee to approve specific aspects of the remuneration

of Directors and Senior Management Persons.

(ii) Audit Qualification

The Company is in the regime of unqualified financial statements.

(iii) Training of Board Members

New members on the Board of Directors are apprised about the operations, policies and procedures

of the Company. They are further informed about the duties and liabilities of a Director in the

course of discharging his duties on the Board and are also apprised about the laws, rules and

regulations which they should be aware of as a Director. Executive Brief of relevant statutory changes

and landmark pronouncements encompassing important laws such as the Companies Act, 1956,

SEBI Act, FEMA etc. is circulated to all the directors of the Company, every quarter.

14(e). Accounting Standards

The Company has been following Accounting Standards laid down by the Institute of Chartered Accountants

of India in the preparation of the financial statements of the Company.

14(f). Subsidiary Company

The Company has two wholly owned subsidiaries viz. Net 4 Communications Limited and Net 4 Singapore

Pte. Ltd.

The Subsidiary Companies are Board managed with their Boards having the rights and obligations to manage

such Companies. All minutes of the meetings of the unlisted Subsidiary Companies are placed before the

Company’s Board regularly.

14(g). Risk Management

The Audit Committee and the management regularly review the risk management strategy of the company

to ensure the effectiveness of risk management policies and procedures.

14(h). Certification

Chairman & Managing Director and the Whole Time Director of the Company have furnished the requisite

certificates to the Board of Directors under clause 49V of the Listing Agreement with the stock exchanges

certifying that:

23

NET 4 INDIA


They have reviewed the financial statements and the cash flow statement for the year ended

31.3.2009 and the same does not contain any materially untrue statement or omit any material fact

or contain any misleading statement.

The financial statements present a true and fair view of the company’s affairs and are in compliances

with the existing accounting standards, applicable laws and regulations and no transactions entered

into by the company during the year were fraudulent, illegal or violative of company’s code of

conduct.

They accepted the responsibility for establishing and maintaining internal controls and their

effectiveness, and they have disclosed the deficiencies, if any in the design and operation of internal

controls, significant changes in the accounting policies or in the internal control or the instances of

significant fraud, if any of which they have aware to the auditors and the audit committee and the

steps they have taken to rectify those deficiencies.

15. Means of Communication

Quarterly Results: Quarterly Results published in leading financial dailies in English and Hindi

News Release, Presentation etc.: Official news, releases are displayed on the Company website.

Annual Report: Annual Report containing, inter alia, Audited Annual Accounts, Consolidated Financial

Statements, Directors’ Report, Auditor’s Report, and other important information is circulated to members

and others entitled thereto.

Designated E-mail ID: The Company has designated the following E-mail ID exclusively for investor servicing:

[email protected].

16. General Information

(a) Annual General Meeting

Day, Date & Time: Wednesday, 30th day of September, 2009 at 11:00 A.M.

Venue: Ikon Residency, D-823, New Friends Colony,New Delhi : 110065

Book Closure: 25th September 2009 to 29th September, 2009 (both days inclusive)

(b) Dividend Payment History

The Company has paid dividend in the last three years. The details of the dividend paid are as

follows:

S.No.

1

2

3

Total Amount

(Rs. Thousands)

16250

16250

16750

Year Ended

31.03.2006

31.03.2007

31.03.2008

Date of AGM in which

dividend was declared

30.09.2006

24.09.2007

30.09.2008

Rate of Dividend

10%

10%

10%

(a)

(b)

(c) 24


NET 4 INDIA

(c) Registrar & Transfer Agent

As per the provisions of Listing Agreements entered with the Stock Exchanges, the Company has

appointed M/s MCS Limited, as the Common Registrar and Share Transfer Agents for the shares of

the Company held in both physical and electronic modes. All correspondence with regard to share

transfers and matters related therewith may directly be addressed to the Share Registrar and Transfer

Agents at the address given below:

MCS Ltd.

F-65, Okhla Industrial Area, Phase - I, New Delhi – 110020

Tel.: 011-41406149, 51, 52

Fax: 011-41709881

Email: [email protected]; [email protected]

(d) Share Transfer System

The Share Transfer System of the Company in the physical segment consists of activities like receipt

of share certificates along with transfer deeds, its verification and approval of transfers by

Shareholders and Investors Grievance Committee and dispatch of certificates to respective

transferees. To expedite the process of Share Transfers the Board has delegated the authority for

transfer/transmission of shares to the Shareholders and Investors Grievance Committee.

Majority of share transfer requests are processed and the share certificates are returned within a

period of 15 days from the date of receipt, subject to the documents being valid and complete in all

respects.

Shares held in the Dematerialised form are electronically traded in the Depository and R & T Agent

periodically receive from the depository the beneficiary holdings so as to enable them to update

their records.

The Company obtains from a Company Secretary in Practice half-yearly certificate of compliance

with the share transfer formalities as required under Clause 47(c) of the Listing Agreement with the

Stock Exchanges and files a copy of the certificate with the Stock Exchanges.

(e) Outstanding GDRs/ADRs/Warrants or any convertible instruments

There are no outstanding ADR/ GDR/Warrants or any convertible instruments as at 31st March, 2009.

(f) Financial Calendar: 1st April to 31st March

Financial reporting for the quarter ending

- June 2008 : July, 2008

- September 2008 : October, 2008

- December 2008: : January, 2009

- March 2009 : Latest by June, 2009

(g) Listing on Stock Exchanges and Stock Code

The shares of the Company are listed at Bombay Stock Exchange and Delhi Stock Exchange. The

details regarding the Stock Exchanges and stock codes are as follows:

25

NET 4 INDIA


Name of Stock Exchange

1. The Bombay Stock Exchange Limited (BSE), P.J. Towers, Dalal Street, Mumbai-400001

2. The Delhi Stock Exchange Association Ltd. (DSE), 3/1, Asaf Ali Road, New Delhi-110 003

Stock Code

532912

113089

(h) Demat ISIN Number in NSDL & CDSL for Equity Shares: INE553E01012

Capital structure as on 31.3.2009

Issued capital

Listed capital with DSE & BSE

Held in demat form in NSDL & CDSL

Held in physical form

Percentage

100.00

100.00

97.83

2.17

No. of shares

16750000

16750000

16386195

363805

26


NET 4 INDIA

(i) Shareholding Pattern as on 31st March 2009

Sr. No.

A.

B.

a.

b.

c.

d.

No. of Shares

73,28,058

43,00,000

11628058

23,51,677

26,13,721

97,226

59,318

51,21,942

1,67,50,000

Category

Promoter’s Holding

- Indian Promoters

- Foreign Promoters

Sub-Total

Non Promoter Holding

- Private corporate Bodies

- Indian Public

- NRIs / OCBs

- Any Other(Mutual fund/UTI)

Sub-Total

GRAND TOTAL

% of Holding

43.75

25.68

69.43

14.04

15.60

0.58

0.35

30.57

100.00

(j) Market Price data

The High, low share price of the Company on the Bombay Stock Exchange (BSE), vis-à-vis BSE Sensex,

Number of shares traded and Net turnover, during the period from April 2008 to March 2009 are as

under:

27

NET 4 INDIA


Month

Low

49.95

66.90

52.00

55.00

65.55

63.75

48.15

38.20

39.35

35.25

30.70

25.00

High

84.25

86.95

70.40

75.40

76.70

83.40

84.90

56.80

53.75

54.70

42.70

46.70

No. of Shares

Traded

Share Prices BSE Sensex

Low

15297.96

16196.02

13405.54

12514.02

14002.43

12153.55

7697.39

8316.39

8467.43

8631.60

8619.22

8047.17

High

17480.74

17735.70

16632.72

15130.09

15579.78

15107.01

13203.86

10945.41

10188.54

10469.72

9724.87

10127.09

506019

486397

669661

560285

592399

483101

700526

577530

413005

184131

231995

233053

April 2008

May 2008

June 2008

July 2008

August 2008

September 2008

October 2008

November 2008

December 2008

January 2009

February 2009

March 2009

Net Turnover (Rs.

in Thousands)

35020487

39050627

39036683

36897546

42382712

36432734

47166683

27527754

18451341

8529738

8065072

7910247

*Source: www.bseindia.com

28


NET 4 INDIA

The monthly market data relating to the closing price of the shares of the Company vis-à-vis BSE Sensex is

as under:

Month

April 2008

May 2008

June 2008

July 2008

August 2008

September 2008

October 2008

November 2008

December 2008

January 2009

February 2009

March 2009

Closing BSE Sensex

17287.31

16415.57

13461.60

14355.75

14564.53

12860.43

9788.06

9092.72

9647.31

9424.24

8891.61

9708.50

Closing Share Price of Net4

82.00

69.00

57.75

70.30

71.85

74.35

51.45

43.65

45.30

39.10

37.75

40.25

29

NET 4 INDIA


(k) Dematerialisation of shares and liquidity

In accordance with the directions of the Securities & Exchange Board of India (SEBI) trading in the

shares of the Company by all categories of investors in demat form has been made compulsory

w.e.f. 5th April 1999. Company has executed agreement with both the depositories of the country

i.e. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited

(CDSL) for admission of its securities under demat mode. As on 31st March, 2009, 97.83% of the total

equity share capital of the Company has been dematerilised by the shareholders and held in the

name of the NSDL / CDSL.

The shares of the Company are available for trading system of both National Securities Depository

Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The Company submits the

Secretarial Audit Report for reconciliation of share capital of the company obtained from a Practising

Company Secretary to the Stock Exchanges within the prescribed period.

(l) Address for Correspondence

The shareholders may address their communication/ suggestions/ grievances/ queries to the

Registrar and Share Transfer Agents at their address mentioned above or to:

The Company Secretary,

Net 4 India Ltd.

Registered Office: AB-11, Community Centre, 1st & 2nd Floor, Safdarjung Enclave, New Delhi- 110 029,

Corporate Office: D-25, Sector 3, NOIDA-201301, (U.P.), E-Mail: [email protected]


Sd/-

Place: New Delhi Jasjit Singh Sawhney

Dated: 30-06-2009 Chairman & Managing Director

30


NET 4 INDIA

To the Members of

M/s. Net 4 India Limited

We have examined the compliance of conditions of corporate governance by Net 4 India Limited (“the

Company”), for the year ended on March 31, 2009, as stipulated in clause 49 of the Listing Agreement of the

said Company with the Bombay Stock Exchange and Delhi Stock Exchange.

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, we certify

that the Company has complied with the conditions of Corporate Governance as stipulated in the

abovementioned Listing Agreement.

We state that no investor grievance is pending for a period exceeding one month against the Company as

per the records maintained by the Shareholders’/ Investors’ Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor

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

AUDITOR’S CERTIFICATE ON CORPORATE GOVERNANCE

For Sandy Associates


Sd/-

(Sandeep Gupta)

Place: New Delhi Proprietor

Date: June 30, 2009 Membership No.: 86069

31

NET 4 INDIA


MANAGEMENT DISCUSSION AND ANALYSIS

The overall business environment was extremely tough this last year, especially in the second half of the

financial year. Whilst this largely did not affect the lower ticket items in our service portfolio, it certainly

had an impact on our higher value services. One positive broad trend out of this subdued economic

environment has been that businesses have looked even deeper into their operations with a view to

outsource most non core activities. This has been a shift in thought process till date and will translate into

increased business in the near future under certain specific service areas for us.

Web Services

Data Center Services

The abovementioned change in thought process to outsource non core activities is most relevant to

the Data Centre services. Medium and even large sized companies are coming to terms with the fact

that they need not and should not manage their data in their own physical locations, i.e. server

rooms/severs/backups etc. We saw this trend with an increased number of enquiries in the last

quarter, which, we are confident will translate into increased Data Centre business in the coming

year. Our expanded data centres and a phased shift of our own servers towards a virtualised

infrastructure has given us a decent amount of space to sell during the coming year. Commercial

real estate prices have remained and are likely to remain subdued and we see no imminent hurry

to invest in larger space, at least till the second half of FY 09/10.

Corporate Mailing Solutions

Our timing for working on the Hosted messaging services model could not have been better. Here

too the concept of outsourced versus internal played out to our advantage. This was especially so

since the hosted model is primarily targeted at Small and Medium enterprises, who were as reluctant

as large enterprises to make capital expenditure on upfront license fees, hardware and costs

associated with network availability and reliability.

We stand by our stance that leadership in this service will ideally position us to serve UC (Unified

Communications) customers in the coming times. The deployment typically starts at the larger

enterprises and trickles down to medium and small enterprises. The same rationale is also true to

a certain extent for the most other hosted business applications. Much like the chain from domain

registration to hosting to corporate email, this chain will begin from corporate email and move

towards UC services and Hosted Applications.

Given the above, Messaging solutions remain a vital strategic component of our overall services

portfolio. We are also engaging in a market study to identify potential international markets that

we can enter in this and other web services segments. These would require little capital expenditure

to start with as our base infrastructure would support it in initial stages. The backend management

would always be done by our team in India, giving us obvious cost advantages in the long run.

32


NET 4 INDIA

Web Hosting & Domain Registartion

New and renewal business remained robust and largely unaffected by the slowdown. This can be

attributed to web hosting and domain registration being relatively lower ticket items and the larger

concentration of direct customers vis-a-vis resellers in our customer mix. Our bundling strategies

paid off and we were able to cushion the impact of a depreciating INR on our margins.

The opening up of further gtls, based on auction bids, by ICANN has been a topic of intense debate,

especially on finalising the process itself. It is likely to take some more time and likely only to

happen by the end of the next financial year. We eagerly await this opportunity and would like to

bid for our own chosen extension as a registry.

Towards the end of FY 09/10, we are likely to see an increase in business on the domain registration

business, as it would be the completion of 5 years from 2005 when .IN domains were opened to

general public and 5 year registrations were mandatory. Our focus would be to ensure the highest

possible renewals during this period.

Security Solutions

Your Company has become the first IP communication services company in India to tie up with

Verisign for Security Token system, named as VIP services. This enhances the security feature of our

clients both in the CRN login and as well as Email login. The earlier generations of these tokens

were in the form of hardware and plastic cards. But with the advantage of mobile phone penetrations

our clients can opt for Soft tokens in their handsets free of cost and pay only for the service. By this

way clients can reduce the initial cost drastically. This security system protects the clients 100%

from any sort of password hacking.

VOIP SOLUTIONS

Whilst we added significant number of customers in the last year, there was further price erosion

for international calling. Our added traffic to key routes ensured that we were able to mitigate the

impact of a fall in price, on our margins, by a near proportionate reduction in rates to the key

destinations.

The customer pipeline remains very strong especially from Software companies and BPOs who had

reduced IPLC capacities in order to contain costs. Small and medium businesses with broadband

connectivity have also begun to embrace the technology as the quality is near PSTN/Mobile. We do

not anticipate further price erosion going forward as it is already a relatively low margin business

for operators.

In spite of TRAI recommending for a second time, that Internet telephony be opened up for domestic

traffic also, the same has not happened on account of near policy freeze from the government.

Whilst of negligible direct impact to our revenues, it’s something that has been unnecessarily held

back on account of incumbents’ fearing cannibalisation of their existing revenues. Its important

from enterprise customer perspective as they would essentially enable least cost routing on their

PBXs and save money on all their calls. We can only hope that this policy will see the light of the day

in the coming year.

33

NET 4 INDIA


NETWORK AND SYSTEM INTEGRATION

We saw a fairly normal business trend in this line of business in the first half of the year. However,

it fell steeply during the second half of the year, making it extremely difficult to generate our

targeted top lines, even with lower bottom lines. Companies of all sizes deferred capital expenditure

and there was a virtual freeze in new office builds. We took a call on doing a lower level of business

at lower margins, but resisted the temptation of doing business with negligible profits.

The coming year is again likely to be tough in this segment. However, we feel that there cant be an

endless freeze to such business spending. After all its an integral part of any IT strategy and at the

heart of that is efficiency and productivity. There is also likely going to be increased spending in this

area from Medium and to a lesser extent from small sized businesses. Given our already large

customer base in this segment, we are ideally positioned to capitalize on this opportunity.

In this Annual Report, we have disclosed forward-looking information to enable investors to

comprehend our prospects and take informed investment decisions. This report and other

statements - written and oral - that we periodically make contain forward looking statements that

set out anticipated results based on the management's plans and assumptions. We cannot guarantee

that these forward-looking statements will be realised, although we believe we have been prudent

in assumptions. The achievement of results is subject to risks, uncertainties and even inaccurate

assumptions. Should known or unknown risks or uncertainties materialize, or should underlying

assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated

or projected.

34

FORWARD - LOOKING STATEMENT


NET 4 INDIA

The Members

M/s. NET 4 INDIA LTD

We have audited the attached Balance Sheet of M/s. NET 4 INDIA LTD. as at March 31, 2009, the

Profit and Loss Account and also 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.

We conducted our audit in accordance with auditing standards generally accepted in India. Those

Standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by management,

as well as evaluating the overall financial statement presentation. We believe that our audit

provides a reasonable basis for our opinion.

As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies

(Auditor’s Report) (Amendment) Order,2004, issued by the Central Government of India in terms

of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a

statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

We have obtained all the information and explanations, which to the best of our knowledge

and belief were necessary for the purposes of our audit;

In our opinion, proper books of account as required by law have been kept by the company

so far as appears from our examination of those books and proper returns adequate for the

purposes of our audit have been received from the branches not visited by us;

The Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this

report are in agreement with the books of account;

In our opinion, the Balance Sheet and Profit and Loss Account and Cash Flow Statement

dealt with by this report comply with the accounting standards referred to in sub-section

(3C) of section 211 of the Companies Act, 1956;

On the basis of written representations received from the directors, as on March 31, 2009

and taken on record by the Board of Directors, we report that none of the directors of the

Company is disqualified as on March 31, 2009 from being appointed as a director in terms of

clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

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

to us, the said accounts give the information required by the Companies Act, 1956, in the

manner so required and give a true and fair view in conformity with the accounting

principles generally accepted in India:

in the case of the Balance Sheet, of the state of affairs of the Company as at 31st

March, 2009; and

in the case of the Profit and Loss Account, of the profit for the year ended on that

date.

in the case of the Cash Flow Statement, of the cash flows for the year ended on that

date.


Chartered Accountants Sd/-

(Sandeep Gupta)


Date: June 30, 2009 Membership No : 86069

AUDITORS’ REPORT

1.

2.

3.

4.

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(a)

(b)

(c)

35

NET 4 INDIA


ANNEXURE REFERRED TO AUDITORS REPORT

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF THE AUDITORS' REPORT TO

THE MEMBERS OF M/S NET 4 INDIA LTD. ON THEIR ACCOUNTS FOR THE

YEAR ENDED MARCH 31, 2009

The Company has maintained proper records showing full particulars, including quantitative details

and situation of fixed assets.

All the assets have not been physically verified by the management during the year but there is a

regular programme of verification which, in our opinion, is reasonable having regard to the size of

the company and the nature of its assets. No material discrepancies were noticed on such

verification.

Fixed assets disposed off during the year were not substantial, and therefore, do not affect the

going concern assumption.

As explained to us, inventory (excluding stock with third parties) have been physically verified by

the management at regular intervals during the year. In our opinion, the frequency of verification is

reasonable having regard to the size of the Company and the nature of its business.

In our opinion and according to the information and explanation given to us, the procedures of

physical verification of inventories followed by the management are reasonable and adequate in

relation to the size of the Company and the nature of its business.

The company is maintaining proper records of inventory. No material discrepancies have been

noticed by the management on verification between the physical stocks and the book records.

In our opinion, the valuation of stocks is fair and proper in accordance with the normally accepted

accounting principles and is on the same basis as in the preceding year.

The Company has taken interest free unsecured loan from director listed in the register maintained

under section 301 of the Companies Act, 1956, (maximum amount Rs. 285 lakhs) the terms and

conditions of which are prima facie not prejudicial to the interests of the Company.

The Company has neither granted nor taken any loan, secured or unsecured, to companies, firms or

other parties covered in the register maintained under section 301 of the Companies Act, 1956.

The company has given interest free advances in the nature of loans to the employees of the

company, the repayment in respect of which is regular and as stipulated, where such stipulations

exist.

In our opinion and according to the information and explanations given to us, there are adequate

internal control procedures commensurate with the size of the company and the nature of its

business for the purchase of finished goods, fixed assets and for the sale of goods. During the

course of our audit, no major weakness has been noticed in the internal controls system in respect

of these areas.

In our opinion, and according to the information and explanations given to us, the transactions

that need to be entered in the register in pursuance of section 301 of the Act have been entered,

1.

2.

3.

4.

5.

36


NET 4 INDIA

and the transactions have been made at prices which are reasonable with regard to the prevailing

market prices at the relevant time.

The Company has not accepted any deposits from the public and consequently, the directives

issued by the Reserve Bank of India, the provisions of Sections 58A and 58AA of the Companies Act,

1956 and the rules framed there under are not applicable.

In our opinion, the Company has an internal audit system commensurate with its size and nature of

its business.

The Central Government has not prescribed maintenance of Cost records under section 209(1) (d)

of the Companies Act, 1956 in respect to the company.

According to the information and explanations given to us, and on the basis of our examination of

the books of account, the Company has generally been regular in depositing with appropriate

authorities undisputed statutory dues including Provident Fund, Income Tax, Wealth tax, Sales-tax,

Customs duty, Investor Education and Protection Fund and any other material statutory dues

applicable to it. Interest has been deposited wherever applicable.

According to the information and explanations given to us, no undisputed dues payable in respect

of Provident Fund, Investor Education and Protection Fund, Income tax, Wealth tax, Sales tax,

Customs duty, Cess and other material statutory dues were outstanding at March 31, 2009 for a

period of more than six months from the date they become payable.

According to the information and explanations given to us, there are no dues in respect of Sales tax,

Income tax, Wealth tax, Customs duty and Cess which have not been deposited with the appropriate

authorities on account of any dispute.

The Company does not have any accumulated losses at the end of the financial year and has not

incurred cash losses in the financial year and in the financial year immediately proceeding such

financial year. Accordingly, clause 4(x) of the order is not applicable.

In our opinion and according to the information and explanations given to us, the Company has not

defaulted in repayment of dues to any bank or financial institution. The Company has not issued

any debentures.

The Company has not granted loans and advances on the basis of security by way of pledge of

shares, debentures and other securities. Accordingly, clause 4(xii) of the order is not applicable.

The Company is not a chit fund, mutual benefit fund or a society. Accordingly, clause 4(xiii) of the

order is not applicable.

According to the information and explanations given to us, the Company is not dealing or trading in

shares, securities, debentures and other investments. Accordingly, clause 4(xiv) of the order is not

applicable.

In our opinion and according to the information and explanations given to us, the terms and conditions

on which the Company has given guarantee for loans taken by others from banks or financial

institutions are not prima-facie prejudicial to the interests of the Company.

6.

8.

9.

10.

7.

11.

12.

13.

14.

15.

37

NET 4 INDIA


In our opinion, the term loans have been applied for the purpose for which they were raised.

According to the Cash Flow Statement and records examined by us and according to the information

and explanations given to us, on overall basis, funds raised on short term basis have not been used

during the year for long term investment and vice versa.

The Company has not made any preferential allotment to parties and companies covered in the

register maintained under section 301 of the Act. Accordingly, clause 4(xviii) of the order is not

applicable.

The Company has not issued any debentures. Accordingly, clause 4(xix) of the order is not applicable.

The Company has not raised any money by public issues during the year. Accordingly, clause 4(xx) of

the order is not applicable.

To the best of our knowledge and belief and according to the information and explanations given to

us, no fraud on or by the Company was noticed or reported during the year.



Sd/-

(Sandeep Gupta)


Date: June 30th, 2009 Membership No: 86069

16.

17.

18.

19.

20.

21.

38


NET 4 INDIA

BALANCE SHEET AS AT 31st MARCH 2009

(in Rs.’000)

SOURCES OF FUNDS

SHAREHOLDERS' FUND

Share Capital

Reserves & Surplus

LOAN FUNDS

Secured Loans

Unsecured Loans

Deferred Tax Liability

APPLICATION OF FUNDS

FIXED ASSETS

Gross Block

Less:Depreciation and amortization

Net Block

Add :Capital work-in-progress

INVESTMENTS

CURRENT ASSETS , LOANS & ADVANCES

Inventories

Sundry Debtors

Cash and Bank Balances

Other Current Assets

Loans and Advances

Less: CURRENT LIABILITIES & PROVISIONS

Current Liabilities

Provisions

NET CURRENT ASSETS

MISCELLANEOUS EXPENDITURE

(to the extent not written off or adjusted)

Significant Accounting Policies

Notes to Accounts

As per our report of even date attached,For Sandy Associates For and on behalf of the Board of DirectorsChartered Accountants,Sd/- Sd/- Sd/-Sandeep Gupta Amarjit S. Sawhney Jasjit S.SawhneyProprietor Director CMDMembership No : 86069 Sd/- Sd/-Place: New Delhi Desi S.Valli Krishan KumarDate: June 30, 2009 Director Company Secretary

Schedule

A

B

C

D

E

F

G

H

I

J

K

L

R

S

601,145

299,574

301,571

-

182,697

251,708

36,720

20,772

145,363

637,260

144,707

131,406

276,113

March 31, 2009

167,500

306,633

206,769

142,511

50,292

873,705

301,571

210,787

361,147

200

873,705

March 31, 2008

528,128

228,490

299,638

228

113,316

214,655

24,699

18,815

118,617

490,102

139,373

101,997

241,370

167,500

266,698

231,122

46,294

48,021

759,635

299,866

210,787

248,732

250

759,635

39

NET 4 INDIA


PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2009

(in Rs.’000)

Income from Sales & Services

Operating Income

Domestic

Overseas

Cost of Sales & Services

Gross Profit

Personnel Cost

General and Administrative Expenses

Selling and Marketing Expenses

Operating Profit before interest, depreciation and amortization

Interest and Finance Charges

Depreciation

Gross Block

Amortization on intangible assets

Operating Profit after interest, depreciation and amortization

Other Income

Net Profit before tax

Provision for Taxation

Income Tax

Wealth Tax

Fringe Benefit Tax

Deferred Tax

Net Profit after tax

Amount available for appropriation

Proposed Dividend

Tax on Dividend

Amount transferred to General Reserve

Balance retained in Profit & Loss Account

Earning per Equity Share - Basic and Diluted (Rs.)


Notes to Accounts

As per our report of even date attached,

For Sandy Associates For and on behalf of the Board of Directors

Chartered Accountants,

Sd/- Sd/- Sd/-

Sandeep Gupta Amarjit S. Sawhney Jasjit S.Sawhney

Proprietor Director CMD

Membership No : 86069

Sd/- Sd/-

Place: New Delhi Desi S.Valli Krishan Kumar

Date: June 30, 2009 Director Company Secretary

Schedule

M

N

O

P

E

E

Q

R

S

2008-09

926,496

52,504

979,000

535,911

443,089

125,052

116,714

15,740

257,506

185,583

41,463

84,212

8,236

133,911

51,672

38,943

90,615

27,100

-

1,712

2,271

59,532

59,532

16,750

2,847

1,490

38,445

3.55

2007-08

846,591

11,426

858,017

457,859

400,158

108,063

99,391

12,706

220,160

179,998

40,238

69,853

8,236

118,327

61,671

38,264

99,935

29,200

-

1,792

4,062

64,881

64,881

16,750

2,847

1,620

43,664

3.97

40


NET 4 INDIA

(in Rs.’000)

2008-2009 2007-2008

CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before Tax and Extraordinary items

Adjustments for :

Depreciation

Amortisation of intangible assets

Assets discarded/ (Profit)/Loss on sale of fixed assets

Bad debts

Interest and finance charges

Interest and dividend income

Preliminary Exp written off

Operating Profit before Working Capital Changes

Adjustments for :

Sundry Debtors

Inventories

Current Assets, Loans and Advances

Provision for retirement benefits

Current Liabilities

Cash generated from Operations

Tax paid

NET CASH GENERATED BY OPERATING ACTIVITIES

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets and change in capital work in progress

Proceeds on disposal of fixed assets

Investment in subsidiaries

Investments in securities

Interest and dividend income

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of share capital

Proceeds from securities premium

Proceeds from secured loans

Proceeds from unsecured loans

Dividends paid during the period

Dividend tax paid during the period

Preliminary expenses on increase in authorised capital


NET CASH USED FROM FINANCING ACTIVITIES

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (A) + (B) + (C )

CASH AND CASH EQUIVALENTS, beginning of period (Refer Note)

CASH AND CASH EQUIVALENTS, end of the year (Refer Note)

89,229

(88,012

10,804

12,021

24,699

36,720

99,310

(99,981

2,917

2,246

22,453

24,699

90,615

84,212

8,236

2,877

157

41,463

(9,018

50

218,592

(37,210

(69,381

10,362

2,252

5,334

129,949

(40,720

(97,030

-

-

-

9,018

-

-

(24,353

96,217

(16,750

(2,847

(41,463

99,935

69,853

8,236

2,402

864

40,238

(4,589

216,939

25,026

(18,148

(67,269

1,820

(34,359

124,009

(24,699

(101,982

350

(2,738

(200

4,589

5,000

45,000

(10,804

23,221

(16,250

(2,762

(250

(40,238

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2009

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

A.

B.

C.

D.

)

41

NET 4 INDIA


The above Cash Flow Statement has been prepared under the "Indirect Method" as set out in the Accounting

Standard -3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India.

Previous year's figures have been regrouped wherever necessary.


Sd/- Sd/-

Amarjit S.Sawhney Jasjit S.Sawhney

Director CMD

Sd/- Sd/-



AUDITORS' CERTIFICATE

We have verified the above Cash Flow Statement of Net 4 India Ltd derived from the audited financial statements for

the year ended March 31, 2009, and found the same to be drawn in accordance therewith and also with the requirements

of Clause 32 of the listing agreement with stock exchange.



Sd/-

Sandeep Gupta

Proprietor Place: New Delhi

Membership No : 86069 Date: June 30, 2009

Notes : (1)

(2)

42


NET 4 INDIA

SCHEDULES TO THE BALANCE SHEET AS AT

(in Rs.’000)

March 31, 2009 March 31, 2008

SCHEDULE ‘A’

SHARE CAPITAL

Authorised

24,000,000 (P.Y.25,000,000) Equity Shares of Rs.10 each

10,00,000 (P.Y.NIL) Preference Shares of Rs.10 each

Issued, Subscribed and Paid-up

16,750,000 (P.Y.16,750,000) Equity Shares of Rs.10 each fully paid up

April 1, 2009 Additions March 31, 2009

SCHEDULE ‘B’

RESERVES & SURPLUS

Share Premium

General Reserve

Profit and Loss Account

SCHEDULE ‘C’

SECURED LOANS

Loans and advances from Banks

- As Working Capital Loan

(Secured against hypothecation of stock,debtors,

movable assets and personal guarantee of director)

- As Term Loan

(Secured by first charge on all present and future

fixed assets of the company)

- As Vehicle Loans

(Secured against hypothecation of vehicles)

SCHEDULE ‘D’

UNSECURED LOANS

Short Term Loans

- From Banks

Temporary overdraft in cash credit account

Loans and advances

- From Directors

- From Others

2,40,000

10,000

2,50,000

167,500

167,500

130,000

42,190

94,508

266,698

170,000

27,000

9,769

206,769

75,064

28,464

38,983

142,511

2,50,000

-

2,50,000

167,500

167,500

130,000

43,680

132,953

306,633

165,262

54,000

11,860

231,122

-

29,458

16,836

46,294

1,490

38,445

39,935

43

NET 4 INDIA


SC

HE

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LE ‘

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FIX

ED

AS

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(in

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‘0

00

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gin

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iza

tio

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ck

As

at

01

.04

.08

6,0

23

37

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1

1,0

90

29

4,1

84

30

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0

28

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5

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6

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6,3

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4,5

49

75

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6,5

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du

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he

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42

7

97

6

88

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97

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8

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1,9

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le/

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just

me

nts

- - - 24

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6,0

23

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66

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8,5

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3

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8

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9

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9,3

46

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81

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54

2

2,1

45

51

,40

1

30

1,5

71

29

9,8

66

Tan

gib

les

Lan

d

Bu

ild

ing

Lea

seh

old

Im

pro

ve

me

nts

Co

mp

ute

rs

Off

ice

Eq

uip

me

nt

Fu

rnit

ure

& F

ixtu

res

Ve

hic

les

Su

b T

ota

l

Inta

ng

ible

s

Go

od

wil

l

Tra

de

ma

rks

Ho

stin

g P

latf

orm

Tech

no

log

y

Su

b T

ota

l

Ca

pit

al

wo

rk I

n p

rog

ress

Gra

nd

To

tal

Pre

vio

us

Yea

r

Na

me

As

at

31

.03

.08

6,0

23

33

,16

3

91

2

15

7,2

04

18

,13

9

12

,82

1

11

,73

9

24

0,0

01

1,6

69

51

,25

0

1,3

54

5,3

64

59

,63

7

22

8

29

9,8

66

-

As

at

31.0

3.09

- 6,4

62

43

3

18

9,2

10

15

,37

7

17

,62

5

10

,06

9

23

9,1

76

3,3

35

27

,50

0

5,9

58

23

,60

5

60

,39

8

29

9,5

74

22

8,4

90

SCHEDULES TO THE BALANCE SHEET AS AT 31.03.09

44


NET 4 INDIA


(in Rs.’000)

March 31st, 2009 March 31st, 2008

SCHEDULE ‘F’

INVESTMENTS

(a) LONG TERM INVESTMENTS (UNQUOTED) AT COST

Non Trade

In subsidiary companies

2,805,000 (P.Y.2,805,000) shares of Rs.10 each fully paid

up of Net 4 Communications Ltd, a wholly owned subsidiary

100,000 (P.Y.1,00,000) shares of SGD 1 each fully paid up

of Net 4 Singapore Pte Ltd, a wholly owned subsidiary

In other companies

9,900 (P.Y. 9,900) shares of Rs.10 each fully paid up

of Net 4 Technology Ltd

70,500 (P.Y. 70,500) shares of Rs.100 each fully

paid up of Net 4 Barter Pvt Ltd

(b) CURRENT INVESTMENTS

SBI Infrastructure Fund - Series I

20,000 (P.Y. 20,000) units of Rs. 10 each

Market Value of quoted investments

SCHEDULE `G`

SUNDRY DEBTORS

(UNSECURED)

Debts Exceeding 6 months

- Considered Good

- Considered Doubtful

Less : Provisions for Doubtful Debts

Other debts

SCHEDULE `H`

CASH AND BANK BALANCES

Cash in hand

Cheques in hand and Remittances in transit

With scheduled banks in:

Current Accounts

Margin money accounts

Unclaimed dividend accounts

200,700

2,738

99

7,050

200

210,787

113

16,420

235,288

251,708

173

470

15,886

20,174

17

36,720

16,420

-

16,420

-

200,700

2,738

99

7,050

200

210,787

215

538

214,117

214,655

288

1,981

6,776

15,637

17

24,699

538

-

538

-

45

NET 4 INDIA



(in Rs.’000)


SCHEDULE ‘I’

OTHER CURRENT ASSETS

Deposits

Prepaid expenses

SCHEDULE ‘J’

LOANS AND ADVANCES

(Unsecured, considered good)

Advance income tax

Advance fringe benefit tax

Advances recoverable in cash or in kind or for value to be received*

*Includes Rs. 2,117.56 (P.Y. Rs. 514.29 ) due from Net 4 Singapore Pte Ltd, a wholly owned subsidiary.

SCHEDULE ‘K’

CURRENT LIABILITIES AND PROVISIONS

A) Current Liabilities

Sundry creditors

Advances from customers

Accrued salaries and benefits

Expenses payable

Withholding and other taxes payable

Unearned revenue

Unclaimed dividend*

Other liabilities**

*Not due for deposit to Investor Education and Protection Fund

**Includes Rs 16 (P.Y. 20) dues to directors as sitting fees payable

**Includes Rs. 4,326.73 (P.Y. NIL) due to Net 4 Communication Ltd, a wholly owned subsidiary.

B) Provisions

Retirement benefits

Income tax

Fringe benefit tax

Wealth tax (net)

Dividend

Tax on dividend

SCHEDULE ‘L’



Balance brought forward

Less: Written off during the period

18,777

1,995

20,772

92,402

3,816

49,145

145,363

109,175

5,479

8,607

4,625

7,635

2,694

16

6,476

144,707

8,937

98,100

4,772

-

16,750

2,847

131,406

276,113

250

50

200

14,910

3,905

18,815

53,909

3,244

61,464

118,617

106,152

6,406

8,689

5,537

7,272

2,890

16

2,411

139,373

6,685

71,000

4,333

382

16,750

2,847

101,997

241,370

250

-

250

Total (A + B)

46


NET 4 INDIA

SCHEDULES TO THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED

(in Rs.’000)

2008-2009 2007-2008SCHEDULE ‘M’COST OF SALES AND SERVICES(Increase)/decrease in stockPurchases and other direct costs

SCHEDULE ‘N’PERSONNEL COSTSalaries, wages and bonusContribution to provident and other fundsStaff welfare, staff training and recruitment

SCHEDULE ‘O’GENERAL AND ADMINISTRATIVE EXPENSESRentElectricity and water chargesCommunicationTravelling and conveyanceRepair, maintenance and office expensesProfessional chargesBank chargesSecurity & support staffLease rentalsMembership and subscriptionPrinting and stationeryAssets discardedInsurance premiumAuditors remunerationBad debts written offDirectors’ sitting feesConferences & meetingsMiscellaneous expensesPreliminary expenses written offExchange differences

SCHEDULE ‘P’SELLING AND MARKETING EXPENSESAdvertising and marketingEntertainment and business promotionSales commission and incentivesExhibition expenses

SCHEDULE ‘Q’OTHER INCOMESale of shared services including facilities and personnelDividend from subsidiary companyBalances written backInterest receivedExchange differencesProfit on sale of fixed assetsMiscellaneous incomeIncome from Infrastructure and support services

(69,382605,293535,911

111,09810,417

3,537125,052

22,73321,115

7,46413,10717,324

7,4969,8594,5614,783

5541,4152,877

815195157

16872341

50980

116,714

11,7642,803

903270

15,740

12,2175,6101,3933,408--

56515,75038,943

(18,147476,006457,859

96,2418,5123,310

108,063

18,63717,446

7,75013,75413,544

8,4458,0292,2901,6831,4401,4202,529

934183864

20383

40--

99,391

9,1292,175

853549

12,706

9,9243,740

613849466127

4,54518,00038,264

) )

47

NET 4 INDIA


SCHDULE ‘R’ - SIGNIFICANT ACCOUNTING POLICIES

(i) Basis of AccountingThe financial statements are prepared in accordance with Indian Generally Accepted Accounting principles

(“GAAP”) under the historical cost convention on an accrual basis. GAAP comprises mandatory Accounting

Standards issued by the Institute of Chartered Accountants of India (“ICAI”), the provisions of the Companies

Act, 1956, and guidelines issued by the Securities and Exchange Board of India. Accounting policies have

been consistently applied except where a newly issued accounting standard is initially adopted or a revision

to an existing accounting standard requires a change in the accounting policy hitherto in use.

The Management evaluates all recently issued or revised accounting standards on an ongoing basis.

(ii) Use of EstimatesThe preparation of the financial statements in conformity with GAAP requires the management to make

estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating

to contingent assets and liabilities as at the date of the financial statements and reported amounts of

income and expenses during the period. Examples of such estimates include provisions for doubtful debts,

future obligations under employee retirement benefit plans, income taxes and the useful lives of fixed

assets and intangible assets.

The management periodically assesses using, external and internal sources, whether there is an indication

that an asset may be impaired. Impairment occurs where the carrying value exceeds the present value of

future cash flows expected to arise from the continuing use of the asset and its eventual disposal. The

impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the

asset’s net sales price or present value as determined above. Contingencies are recorded when it is probable

that a liability will be incurred, and the amount can be reasonably estimated. Where no reliable estimate

can be made; a disclosure is made as contingent liability. Actual results could differ from those estimates.

(iii) Fixed Assets and Depreciation a) Tangible Assets: Fixed assets are stated at cost, less accumulated depreciation. Costs directly

attributable to the purchase of fixed assets are capitalized until fixed assets are ready for use. Capital

work-in-progress comprises of advances paid to acquire fixed assets, and the cost of fixed assets that are

not yet ready for their intended use before the balance sheet date.

All assets discarded/ dismantled are written off assuming that the scrap value for the same is Nil. If and

when such discarded assets are disposed off partially or fully, the amounts realized during the year are

credited to the profit and loss account of that year.

b) Depreciation: Depreciation of Fixed Assets is provided on a pro-rata basis on the written down

value method at the rates prescribed under Schedule XIV to the Companies Act, 1956, on all assets, except

for the following:

Leasehold improvements are depreciated over the remaining period of lease or 10 years whichever is

lesser.

Individual low cost assets (acquired for less than Rs.5,000/-) are depreciated within a year of acquisition.

c) Intangible Assets and amortization: Intangible assets are amortized over their respective individual

estimated useful lives on a straight line basis, commencing from the date the asset is available to the

company for its use. Management, using reasonable and supportable assumptions, has estimated the

useful lives for the intangible assets as follows:

48


NET 4 INDIA

Hosting platform 8 years

Technology 8 years

Trademarks 20 years

Goodwill 10 years

Trademarks represent the brand image of the company and constitute an asset with no limited useful life.

Based on advice received by the management and as per the provisions of the Trade Marks and Merchandise

Act of 1999, the company can retain the ownership and registration of the trademarks perpetually by

renewing the registration at the end of every ten years, leading to the view that the useful life of its

trademarks are unlimited.

However, as a matter of abandon precaution, the cost of the Trademarks is being amortized over a period

of 20 years.

(iv) InvestmentTrade investments are the investments made to enhance the company’s business interests. Investments

are either classified as current or long-term based on the management’s intention at the time of purchase.

Current investments are carried at the lower of cost and fair value. Long Term Investments are stated at

cost. Provision for diminution in their value is made only if such a decline is other than temporary in the

opinion of the management.

(v) Revenue RecognitionThe Company recognizes revenue on accrual basis. Revenue from the sale of hardware/software products

is recognized when the sale is completed with the passing of title. Revenue from services is recognized in

the ratio of period expired over the total agreement period. Revenue from Fixed Price Contracts is

recognized proportionately over the period in which services are rendered.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the

difference between the sales price and the then carrying value of the investment. Lease rentals are

recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income

is recognized when the company’s right to receive dividend is established.

(vi) Foreign Currency TransactionsInvestments in foreign entities are recorded at the exchange rates prevailing on the date of making the

investments.

Expenditure in foreign currency is accounted at the exchange rate prevalent when such expenditure is

incurred. Exchange differences are recorded when the amount actually received on sales or actually paid

when expenditure is incurred, is converted into Indian Rupees. The exchange differences arising on foreign

currency transactions are recognized as income or expense in the period in which they arise except in

respect of liabilities for acquisition of fixed assets, where such exchange difference is adjusted in the

carrying cost of the respective fixed asset.

Monetary current assets and monetary current liabilities that are denominated in foreign currency are

translated at the exchange rate prevalent at the date of the balance sheet. The resulting gain or loss is also

recorded in the profit and loss account.

49

NET 4 INDIA


(vii) InventoriesInventory is valued at lower of cost (determined on First in First out basis) and estimated net realizable

value.

Cost is inclusive of all purchase costs and other costs incurred in bringing the inventories to their present

location and conditions.

(viii) Retirement BenefitsAll employees of the Company are entitled to receive benefits under the Provident Fund, which is a

defined contribution plan. Both the employee and the employer make monthly contributions to the plan

at a predetermined rate (presently 12.0%) of the employees' basic salary. These contributions are made to

the fund administered and managed by the Government of India. In addition, some employees of the

Company are covered under the employees' state insurance schemes, which are also defined contribution

schemes recognized and administered by the Government of India.

The Company's contributions to both these schemes are expensed in the Profit and Loss Account. The

Company has no further obligations under these plans beyond its monthly contributions.

Gratuity has been provided in the Profit and Loss Account as per the provisions of the Payment of Gratuity

Act, 1972. A lump sum payment is made to employees on retirement, death, incapacitation or termination

of employment, of an amount based on the respective employee’s salary and the tenure of employment.

Provision for Leave encashment is made on the basis of unutilized leave due to employees at the end of

the year.

(ix) Research and DevelopmentRevenue expenditure incurred on research and development is expensed as incurred. Capital expenditure

incurred on research and development is depreciated over the estimated useful lives of the related assets,

where management ascertains that costs incurred will be more than covered by resultant gains over a

specific period of time.

(x) Borrowing CostInterest and other costs in connection with the borrowing of funds to the extent related/attributed to the

acquisition/construction of qualifying fixed assets are capitalized upto the date when such assets are

ready for its intended use and other borrowing costs are charged to Profit & Loss Account.

(xi) LeasesLease rentals in respect of assets taken on ‘Operating Lease’ are charged to the profit & loss Account on

straight line basis over the lease term.

(xii) Earning Per ShareBasic earning per share (EPS) is calculated by dividing the net profit after tax for the year (including the

post-tax effect of extraordinary items, if any) attributable to equity shareholders by the weighted average

number of equity shares outstanding during the period. The weighted average number of equity shares

outstanding during the period is adjusted for events of bonus issue and share split.

50


NET 4 INDIA

(xiii) TaxationTax expense for the year comprises of current tax, deferred tax and fringe benefit tax.

Income tax is computed using the tax effect accounting method, where tax is accrued in the same period

the related revenue and expense arises. Provision is made for income tax annually based on the tax

liability computed, after considering tax allowances and exemptions.

The differences that result between the profit considered for income taxes and the profit as per the

financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded

for timing differences, namely the differences that originate in one accounting period and reverse in

another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on

the accumulated timing differences at the end of an accounting period based on prevailing enacted or

substantially enacted regulations. Deferred tax assets are recognized only if there is reasonable certainty

that they will be realized and are reviewed for the appropriateness of the respective carrying values at

each balance sheet date. The income tax provision for the interim period is made based on the best

estimate of the annual average tax rate expected to be applicable for the full fiscal year.

Consequent to the introduction of Fringe Benefit Tax (FBT) effective April 1, 2005, the Company has made

provision for FBT in accordance with applicable Income-tax laws.

(xiv) Cash Flow StatementCash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of

transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments.

The cash flows from regular revenue generating, financing, and investing activities of the company are

segregated.

(xv) Contingent LiabilitiesDepending on the facts of each case, and after evaluation of relevant legal aspects, the Company makes a

provision when there is a present obligation as a result of a past event where the outflow of economic

resources is probable and a relevant estimate of the amount of obligation can be made. The disclosure is

made for all possible or present obligations that may but probably will not require outflow of resources as

contingent liability in the financial statement.

51

NET 4 INDIA


SCHDULES ’S’ - NOTES TO ACCOUNT

(i) All amounts in the financial statements are presented in Rupees thousands, except for share data and

as otherwise stated.

(ii) Previous year’s figures have been regrouped, rearranged and reclassified, wherever necessary to

conform to current year’s classification.

(iii) Deferred Tax

Provision for deferred tax for the year ended March 31, 2009 has been made in accordance with the provisions

of Accounting Standard 22 on Accounting for Taxes on Income, issued by The Institute of Chartered

Accountants of India. The deferred tax charge of Rs. 2,271/- (Previous year - Rs. 4,062/-), for the current

year has been recognized in the Profit & Loss Account and comprises of the following:

Depreciation claimed as deduction under the Income Tax Act,

but chargeable in the financial statements in future years

Provisions charged in the financial statements but allowed as

a deduction under the Income Tax Act in future years

(to the extent considered realizable)

2008-2009

(Rs.)

3,598

1,327

2,271

2007-2008

(Rs.)

4,974

912

4,062

(iv) Value of Imports on CIF Basis (on payment basis)

Finished Goods

Capital Goods

2008-2009

(Rs.)

357

157

514

2007-2008

(Rs.)

502

206

708

(v) Earnings in Foreign Exchange (on receipt basis)

Income from sales and services

2008-2009

(Rs.)

38,772

2007-2008

(Rs.)

11,426

(vi) Expenditure in Foreign Currency (on payment basis)

Domains

Travelling

Consultancy

Membership and Subscription Charges

Others

2008-2009

(Rs.)

47,633

254

2,634

134

1,719

52,374

2007-2008

(Rs.)

34,742

261

2,628

236

1,336

39,203

52


NET 4 INDIA

(vii) Remuneration to Auditors

Statutory Audit Fees

Tax Audit Fees

For certification and consultation in other matters

Expenses reimbursed

2008-2009

(Rs.)

150

30

100

15

295

2007-2008

(Rs.)

150

30

111

3

294

(viii) Managerial Remuneration

Salary

Contributions to Provident and other funds

Sitting Fees

Total Remuneration

2008-2009

(Rs.)

5,044

528

16

5,588

2007-2008

(Rs.)

6,094

618

20

6,732

The computation of net profits in accordance with Section 309(5) read with section 349 of the Companies

Act, 1956, has not been given as the company does not envisage any payment of commission to directors.

(ix) Provision for Doubtful Debts

Periodically the company evaluates all customer dues to the company for collectability. The need for

provisions is assessed based on various factors including collectability of specific dues, risk perceptions of

the industry in which the customer operates, and general economic factors, which could affect the

customer’s ability to settle. As at March 31, 2009, the company has provided for doubtful debts of Rs. Nil (as

at March 31, 2008 Rs. Nil/-) on dues from customers. The company continues pursuing the parties for

recovery of the dues, in part or full.

The company has written off Rs. 157/- (P.Y. Rs. 864/-) as bad debts during the year.

(x) The company’s operations predominantly relate to providing IP Communications sales and services.

There is thus only one reportable business segment encompassing a comprehensive range of services,

including software development, packaged software integration, colocation, web hosting, web

development, web mailing solutions, internet telephony and sales and integration of related networking

equipment.

Secondary segmental reporting is performed on the basis of the geographical location of customers.

Geographical Segment (Rs. in lakhs)

Year Ended 31st March, 2009 Year Ended 31st March, 2008

Particulars

Revenues

Net Fixed Assets

Debtors

Current Assets (Other than Debtors)

Overseas

525.04

-

137.32

-

Domestic

9,264.96

3,015.71

2,379.76

3,855.52

Overseas

114.26

-

-

-

Domestic

8,465.91

2,998.66

2,146.55

2,754.46

53

NET 4 INDIA


(xi) Term Deposits aggregating to Rs. 20,174/- (P.Y.Rs. 15,637/-) have been pledged with Bank as a security

towards non-fund based facilities availed from Bank.

(xii) Remittance in Foreign Currency on account of Dividend

The Company has paid dividend in respect of shares held by Non–residents by way of credit to their Non-

Resident External Account (NRE A/c) or NRO A/c or otherwise by way of remittance in foreign currency.

The total amount remitted in this respect is given herein below:

a) Number of Non Resident Shareholders 14

b) Number of Equity Shares held by them 43,96,164

c) Amount of Dividend Paid (Rs. ‘000) 4,396

d) Year to which dividend relates 2007-08

e) Tax deducted at source Rs. Nil

(xiii) The Company is taking steps to ascertain the actuarial Gratuity liability and necessary adjustments

from the calculations done presently will be made on determination thereof. Meanwhile, the Company

has established a Gratuity Fund, called the “Net 4 India Ltd Employees Gratuity Fund”, under an irrevocable

Trust for making provisions of gratuity benefits to the employees of the Company.

(xiv) Sundry Creditors, to the extent to which they could be identified as small scale and ancillary

undertakings on the basis of information available with the Company, do not include amounts greater than

Rs. One Lakh outstanding for more than thirty days.

(xv) The Company’s leasing arrangements are in respect of operating leases for premises (residential,

office, stores etc). These leasing arrangements which are not non cancellable range between 11 months

and 3 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable

terms. The aggregate lease rentals payable are shown as Rent under Schedule ‘O’.

The Company also has leased facilities under non – cancellable operating leases for equipments for a

period of 4 to 5 years. The future lease payments in respect of these leases are as follows:

Obligations on non cancellable leases :

Not later than one year

Later than one year but not later than five years

Later than five years

Total

March 31st, 2009

4,797

9,133

-

13,930

(xvi) Related Party Disclosures as required by Accounting Standard-18:

List of Related Parties and Relationships

i) Holding Companies:

Nil

54


NET 4 INDIA

ii) Subsidiaries of the Company:

Domestic

Net 4 Communications Ltd

Overseas

Net 4 Singapore Pte Limited

iii) Entity having Significant Influence:Trak Online Net India Pvt Ltd.

Jiwan Financial Holdings Ltd.

iv) Key Management Personnel and relatives of such personnel:Executive Directors

Jasjit Sawhney

Amarjit S. Sawhney

Non Executive Directors

Desi S. Valli

Relative of DirectorPawanjot Kaur Sawhney

iv) Entity where relative of Key Management Personnel exercises significant influence

Sterling Capital Pvt Ltd

Significant Related Party Transactions

Nature of Transaction

Capital Transactions

Loans taken

Previous year

Loans repaid

Previous year

Revenue Transactions

Purchase of goods and services

Previous year

Sale of goods and services

Previous year

Sharing of costs and services

including facilities and personnel

Previous year

Dividend paid

Previous year

Dividend received

Previous year

Investments

Previous year

Balances at the end of the year

Unsecured Loan

Loans and advances

Current liabilities

(Rs. in lakhs)

Entity having

significant

influence

-

-

-

-

578

583

-

2

158

180

84

110

-

-

-

-

-

-

-

Key Management

Personnel and their

relatives

-

76

10

-

-

-

-

-

-

-

-

8

8

-

-

-

-

285

-

-

Others*

-

-

-

-

-

-

-

-

-

-

-

21

21

-

-

-

-

-

-

-

Total

-

76

10

-

-

578

583

1

126

898

381

113

139

56

37

-

27

285

21

43

Subsidiary

Company

-

-

-

-

-

-

1

124

740

201

-

-

56

37

-

27

-

21

43

55

NET 4 INDIA


(xvii) Basic Earnings Per Share

Numerator for basic earning per share

Profit before tax and prior period items

Adjustment for net earnings

Provision for Tax

Total

Denominator for basic earning per share

Weighted average number of shares

Basic earnings per share of Rs. 10/- each

2008-2009

(Rs.)

90,615

31,083

59,532

16,750,000

3.55

2007-2008

(Rs.)

99,935

35,054

64,881

16,350,000

3.97

The Company does not have any outstanding dilutive potential equity shares. Consequently, the basic and

diluted earnings per share of the company remain the same.

(xviii) Contingent Liabilities

Outstanding guarantees and counter guarantees to various banks, in respect of the guarantees given by

those banks in favour of various government authorities and others amounting to Rs. 2,772/- (Previous

year-Rs. 21,151/-) given by the Bankers in favor of various parties.

Guarantees to Banks against credit facilities extended to subsidiary amount to Rs. 358,300/- (Previous year

– Rs. 274,600/-)

Claims against the company, not acknowledged as debts amount to Rs. 256/- (Previous year-Rs. Rs. 261/-)

(xix) Estimated amount of unexecuted capital contracts (net of advance) - Rs. Nil (Previous year-Rs. Nil).

(xx) It is not possible to furnish details of the quantities, due to heterogeneity of the items involved. Also,

the Company is primarily engaged in the provision of services related to internet, which cannot be expressed

in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain information

as required under paragraph 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

(xxi) Schedule ‘A’ to ‘S’ form an integral part of the Balance Sheet and Profit and Loss Account.

Signatures to Schedule ‘A’ to ‘S’



Sd/- Sd/- Sd/-

Sandeep Gupta Amarjit S.Sawhney Jasjit S.Sawhney



Sd/- Sd/-

Place: New Delhi Desi S. Valli Krishan Kumar


• Details of remuneration paid to directors are given in note (vi) above.

*Entity where relative of key management personnel exercises significant influence.

56


NET 4 INDIA

BALANCE SHEET ABSTRACT & COMPANY'S GENERAL BUSINESS PROFILE

57

I. REGISTRATION DETAILS

CIN No. L 7 2 2 0 0 D L 1 9 8 5 P L C 0 2 2 6 4 9

State Code 5 5

Balance-Sheet Date 3 1 0 3 0 9

Date Month Year

II. CAPITAL RAISED DURING THE YEAR (AMOUNT IN Rs. ‘000)

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement/ Preferential Issue

N I L N I L

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (AMOUNT IN Rs. '000)

Total Liabilities Total Assets

1 1 4 9 8 1 8 1 1 4 9 8 1 8

SOURCES OF FUNDS

Paid-up Capital Reserves & Surplus

1 6 7 5 0 0 3 0 6 6 3 3

Secured Loans Unsecured Loans

2 0 6 7 6 9 1 4 2 5 1 1


5 0 2 9 2


Net Fixed Assets Investments

3 0 1 5 7 1 2 1 0 7 8 7

Net Current Assets Misc. Expenditure

3 6 1 1 4 7 2 0 0

Accumulated Losses

N I L

IV. PERFORMANCE OF THE COMPANY (AMOUNT IN Rs. '000)

Turnover Total Expenditure

9 7 9 0 0 0 8 8 8 3 8 5

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

+ 9 0 6 1 5 + 5 9 5 3 2

Earning per share in Rs.Dividend rate %

3 . 5 5 10

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF THE COMPANY

(as per monetary terms)

Item Code No. (ITC Code)

Product Description IP Communications Services Provider

For and on behalf of the Board of Directors Sd/- Sd/-

Amarjit S.Sawhney Jasjit S.Sawhney Director CMD

Sd/- Sd/-Place: New Delhi Desi S. Valli Krishan KumarDate: June 30, 2009 Director Company Secretary

57

NET 4 INDIA


STATEMENT PERSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956

STATEMENT PERSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956,

RELATING TO SUBSIDUARY COMPANIES

Name of Subsidiary Company

Financial year ended

Date from which it became Subsidiary

Company

Shares held by the holding company in the

Subsidiary at the end of the financial year

of the Subsidiary

Capital and Reserves of the Subsidiary at

the end of the financial year of the

Subsidiary

(i) Capital

(ii) Reserves and Surplus

Extent of interest of holding company at

the end of the financial year of the

Subsidiary companies

The net aggregate amount of profits or

losses of the Subsidiary so far as it concerns

the members of holding company

Not dealt with in the holding company's

accounts:

i) For the financial year ended 31st March

2009

ii) For the previous financial years

Dealt with in the holding company's

accounts:

i) For the financial year ended 31st March

2009

ii) For the previous financial years


31.03.2009

08.07.2005

28,05,000 equity shares of

Rs.10 each fully paid up

Rs. 280.50 lakhs

Rs. 2632.99 lakhs

100%

Rs. 297.32 lakhs

Rs. 719.70 lakhs

Nil

Nil

Net 4 Singapore PTE Limited

31.12.2008

08.12.2006

1,00,000 equity shares of

SGD 1 each fully paid up

SGD 1 lakh

Nil

100%

Loss : Rs. 7.24 lakhs

Loss : Rs. 0.28 lakhs

Nil

Nil

1.

2.

3.

4.

5.

a.

b.

c.

a.

b.


Sd/- Sd/-

Desi S. Valli Jasjit S.Sawhney

Director CMD

Sd/- Sd/-

Place: New Delhi Amarjit S.Sawhney Krishan Kumar


57

58


NET 4 INDIA

DETAILS OF SUBSIDIARY COMPANIES

Name of Subsidiary Company

Capital

Reserves

Total Assets

Total Liabilities

Investments

Total Income

Profit Before taxation

Provision for taxation

Profit After taxation

Proposed Dividend

Tax on dividend


28,050

263,299

562,907

562,907

-

623,570

45,342

15,610

29,732

NIL

NIL

Net 4 Singapore PTE Limited

2,738

-

4,798

4,798

-

-

(724

-

(724

-

-

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11..

12.


Sd/- Sd/-

Desi S. Valli Jasjit S.Sawhney

Director CMD

Sd/- Sd/-



(in Rs. ‘000)

)

)

59

NET 4 INDIA


CONSOLIDATED FINANCIAL

STATEMENT AND NOTES

60


NET 4 INDIA

To,

The Board of Directors of Net 4 India Ltd

We have audited the attached Consolidated Balance Sheet of M/s. Net 4 India Ltd Group, as at

March 31, 2009, the Consolidated Profit and Loss Account and also the Consolidated Cash Flow

Statement for the year ended on that date, annexed thereto. These financial statements are the

responsibility of the Company’s management and have been prepared by the management on the

basis of separate financial statements and other financial information regarding components. Our

responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those

Standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by management,

as well as evaluating the overall financial statement presentation. We believe that our audit

provides a reasonable basis for our opinion.

We did not audit the financial statements of the subsidiaries, whose financial statements reflect

total assets of Rs. 5,677.04 lakhs as at March 31, 2009 or December 31, 2008 and total revenues of Rs.

6,284.24 lakhs for the year then ended and cash outflows amounting to Rs. 3.64 lakhs for the year.

These financial statements and other financial information have been audited by other auditors

whose report have been furnished to us, and our opinion, is based solely on the report of such

other auditors. Financial statements of foreign subsidiary have been accounted based on unaudited

financial results.

We report that the consolidated financial statements have been prepared by the Company’s

management in accordance with the requirements of Accounting Standard (AS) 21, ‘Consolidated

Financial Statements’ issued by the Institute of Chartered Accountants of India. In our opinion and

to the best of the information and according to the explanations given to us, the consolidated

financial statements give a true and fair view in conformity with the accounting principles generally

accepted in India:

in the case of the Consolidated Balance Sheet, of the state of affairs of the Net 4 India Ltd

Group as at 31st March, 2009; and

in the case of the Consolidated Profit and Loss Account, of the profit of the Net 4 India

Group for the year ended on that date.

in the case of the Consolidated Cash Flow Statement, of the cash flows of the Net 4 India

Group for the year ended on that date.



Sd/-

(Sandeep Gupta)


Date: June 30, 2009 Membership No : 86069

AUDITORS’ REPORT (Net 4 India Ltd Consolidated)

1.

2.

3.

4.

(a)

(b)

(c)

61

NET 4 INDIA


CONSOLIDATED BALANCE SHEET AS AT 31st MARCH 2009

(in Rs.’000)

SOURCES OF FUNDS

SHAREHOLDERS' FUND

Share Capital

Reserves & Surplus

LOAN FUNDS

Secured Loans

Unsecured Loans



FIXED ASSETS

Gross Block

Less:Depreciation and amortization

Net Block

Add: Capital work-in-progress

INVESTMENTS

CURRENT ASSETS , LOANS & ADVANCES

Inventories

Sundry Debtors

Cash and Bank Balances

Other Current Assets

Loans and Advances

Less: CURRENT LIABILITIES & PROVISIONS

Current Liabilities

Provisions

NET CURRENT ASSETS




Notes to Accounts

As per our report of even date attached,For Sandy Associates For and on behalf of the Board of DirectorsChartered Accountants,Sd/- Sd/- Sd/-Sandeep Gupta Amarjit S. Sawhney Jasjit S.SawhneyProprietor Director CMDMembership No : 86069

Sd/- Sd/-Place: New Delhi Desi S.Valli Krishan KumarDate: June 30, 2009 Director Company Secretary

Schedule

A

B

C

D

E

F

G

H

I

J

K

L

R

S

1,066,325

595,572

470,753

-

261,741

435,246

54,025

22,162

253,582

1,026,756

166,288

160,887

327,175

March 31, 2009

167,500

399,347

366, 213

166,313

78,548

1,177,921

470,753

7,349

699,581

238

1,177,921

March 31, 2008

934,137

446,196

487,941

228

167,536

377,649

42,368

19,355

176,884

783,792

153,512

121,141

274,653

167,500

334,902

371,122

56,610

74,839

1,004,973

488,169

7,349

509,139

316

1,004,973

62


NET 4 INDIA

CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2009

(in Rs.’000)

Income from Sales & Services

Domestic

Overseas

Cost of Sales & Services

Gross Profit

Personnel Cost

General and Administrative Expenses

Selling and Marketing Expenses

Operating Profit before interest, depreciation and amortization

Interest and Finance Charges

Depreciation

Amortization on intangible assets

Operating Profit after interest, depreciation and amortization

Other Income

Profit before tax

Provision for Taxation

Income Tax

Fringe Benefit Tax

Deferred Tax

Net Profit after tax

Amount available for appropriation

Proposed Dividend

Tax on Dividend

Transfer to General Reserve

Surplus carried forward

Earning per Equity Share - Basic and Diluted (Rs.)


Notes to Accounts

As per our report of even date attached,



Sd/- Sd/- Sd/-

Sandeep Gupta Amarjit S. Sawhney Jasjit S.Sawhney



Sd/- Sd/-



Schedule

M

N

O

P

E

E

Q

R

S

2008-09

1,517,903

88,820

1,606,723

980,577

626,146

134,290

131,745

17,580

283,615

342,531

62,823

162,503

8,236

233,562

108,969

21,766

130,735

41,100

1,884

3,709

84,042

84,042

16,750

2,847

1,490

62,955

5.02

2007-08

1,340,213

11,426

1,351,639

795,699

555,940

114,829

109,619

13,673

238,121

317,819

57,843

135,267

8,236

201,346

116,473

24,671

141,144

38,360

1,999

5,976

94,809

94,809

16,750

3,800

4,120

70,139

5.80

63

NET 4 INDIA


(in Rs.’000)

2008-2009 2007-2008

CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before Tax and Extraordinary items

Adjustments for :

Depreciation

Amortisation of intangible assets

Assets discarded/ (Profit)/Loss on sale of fixed assets

Preliminary Exp written off

Bad debts


Interest income

Operating Profit before Working Capital Changes

Adjustments for :

Sundry Debtors

Inventories

Current Assets, Loans and Advances

Provision for retirement benefits

Current Liabilities

Cash generated from Operations

Direct Tax paid

NET CASH GENERATED BY OPERATING ACTIVITIES

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assets and change in capital work in progress

Proceeds on disposal of fixed assets

Investments in securities

Interest received

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from issue of share capital

Proceeds from securities premium

Proceeds from secured loans

Proceeds from unsecured loans

Preliminary expenses on increase in authorised share capital

Dividend paid during the period

Dividend tax paid during the period


NET CASH USED FROM FINANCING ACTIVITIES

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (A) + (B) + (C )

CASH AND CASH EQUIVALENTS, beginning of period (Refer Note)

CASH AND CASH EQUIVALENTS, end of the year (Refer Note)

142,382

(152,146

21,421

11,657

42,368

54,025

156,883

(175,908

32,083

13,058

29,310

42,368

130,735

162,503

8,236

2,877

78

157

62,823

(4,055

363,354

(57,754

(94,205

(17,741

2,303

12,776

2,08,733

(66,351

(156,201

-

-

4,055

-

-

(4,909

109,703

-

(16,750

(3,800

(62,823

141,144

135,267

8,236

2,402

28

864

57,843

(926

344,858

27,042

(40,394

(115,077

1,912

(29,291

189,050

(32,167

(176,984

350

(200

926

5,000

45,000

27,296

32,528

(250

(16,250

(3,398

(57,843

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2009

)

)

)

)

)

)

)

)

)

)

) )

)

)

)

)

)

)

)

)

)

)

)

A.

B.

C.

D.

64


NET 4 INDIA

Notes : (1)The above Cash Flow Statement has been prepared under the "Indirect Method" as set out in the

Accounting Standard - 3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India.

(2)Previous year's figures have been regrouped wherever necessary.


Sd/- Sd/-

Jasjit S.Sawhney Desi S.Valli

CMD Director

Sd/- Sd/-



AUDITORS' CERTIFICATE

We have verified the above Consolidated Cash Flow Statement of Net 4 India Ltd derived from the audited financial

statements for the year ended March 31, 2009, and found the same to be drawn in accordance therewith and also with the

requirements of Clause 32 of the listing agreement with stock exchange.



Sd/-

Sandeep Gupta

Proprietor Place: New Delhi

Membership No : 86069 Date: June 30, 2009

65

NET 4 INDIA


SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT

(in Rs.’000)

March 31, 2009 March 31, 2008

SCHEDULE ‘A’

SHARE CAPITAL

Authorised

24,000,000 (P.Y.25,000,000) Equity Shares of Rs.10 each

10,00,000 (P.Y.NIL) Preference Shares of Rs.10 each

Issued, Subscribed and Paid-up

16,750,000 (P.Y.16,750,000) Equity Shares of Rs.10 each fully paid up

SCHEDULE ‘B’

RESERVES & SURPLUS

Share Premium

As per last Balance Sheet

Add : On issue of shares

General Reserve

As per last Balance Sheet

Add : Transfer from Profit and Loss Account

Surplus in Profit and Loss Account

SCHEDULE ‘C’

SECURED LOANS

Loans and advances from Banks

- As Working Capital Loan(Secured against hypothecation of stock,debtors and movable assets and

personal guarantee of director)

- As Term Loan

(Secured by first charge on all present and future fixed assets of the company)

- As Other Loans

(Secured against hypothecation of vehicles)

SCHEDULE ‘D’

UNSECURED LOANS

Short Term Loans from Banks

- Temporary overdraft in cash credit account

Other Loans

- From Directors

- From Others

2,40,000

10,000

2,50,000

167,500

167,500

130,000

49,095

220,252

399,347

290,000

66,444

9,769

366,213

98,587

28,743

38,983

166,313

130,000

-

47,605

1,490

2,50,000

-

2,50,000

167,500

167,500

130,000

47,605

157,297

334,902

255,262

104,000

11,860

371,122

10,037

29,737

16,836

56,610

85,000

45,000

43,485

4,120

66


NET 4 INDIA

SC

HE

DU

LE ‘

E’

FIX

ED

AS

SE

TS

(in

Rs.

‘0

00

)

*re

pre

sen

ts b

uil

din

g a

t K

olk

ata

ta

ke

n o

n p

erp

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al

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gin

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ep

reci

ati

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an

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ort

iza

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Blo

ck V

alu

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at

01

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.08

6,0

23

56

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1

1,0

90

65

2,5

51

56

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9

30

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8

18

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6

82

2,3

38

4,5

49

75

,00

0

6,5

00

25

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0

11

1,7

99

-

93

4,1

37

82

4,9

86

Ad

dit

ion

s

du

rin

g t

he

ye

ar

-

42

7

97

6

14

7,6

20

5,4

70

42

3

1,5

13

15

6,4

29

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6,4

29

17

6,9

64

Sa

le/

Ad

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me

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- - - 24

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1

- - - 24

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1

67

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3

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31

.03

.09

6,0

23

57

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8

2,0

66

77

5,9

30

62

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9

31

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1

20

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9

95

4,5

26

4,5

49

75

,00

0

6,5

00

25

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0

11

1,7

99

1,0

66

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5

93

4,1

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at

01

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- 5,9

88

17

8

34

0,6

25

24

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4

16

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2

6,8

08

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4,0

35

2,8

80

23

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0

5,1

46

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6

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6,1

97

36

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53

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1,8

56

25

5

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9,4

11

5,0

77

2,6

42

3,2

62

16

2,5

03

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5

3,7

50

81

2

3,2

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36

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- - - 21

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31.0

3.09

6,0

23

49

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4

1,6

33

30

7,2

58

33

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8

12

,04

7

9,9

89

41

9,3

52

1,2

14

47

,50

0

54

2

2,1

45

51

,40

1

47

0,7

53

48

8,1

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les

Su

b T

ota

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ng

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s

Go

od

wil

l

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de

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latf

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no

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ota

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pit

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31

.03

.08

6,0

23

50

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3

91

2

31

1,9

26

32

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5

14

,26

6

11

,73

8

42

8,3

03

1,6

70

51

,25

0

1,3

54

5,3

64

59

,63

8

22

8

48

8,1

69

-

As

at

31.0

3.09

- 7,8

44

43

3

46

8,6

72

29

,14

1

19

,01

4

10

,07

0

53

5,1

74

3,3

35

27

,50

0

5,9

58

23

,60

5

60

,39

8

59

5,5

72

44

6,1

96


67

NET 4 INDIA



(in Rs.’000)


SCHEDULE ‘F’

INVESTMENTS

(a) LONG TERM INVESTMENTS (UNQUOTED) AT COST

Non Trade

9,900 (P.Y. 9,900) shares of Rs.10 each fully paid up of Net 4 Technology Ltd

70,500 (P.Y. 70,500) shares of Rs.100 each fully paid up of Net 4 Barter Pvt Ltd

(b) CURRENT INVESTMENTS

SBI Infrastructure Fund - Series I 20,000 (P.Y. 20,000) units of Rs. 10 each

Market Value of quoted investments

SCHEDULE `G`

SUNDRY DEBTORS

(UNSECURED)

Debts Exceeding 6 months

- Considered Good

- Considered Doubtful

Less : Provisions for Doubtful Debts

Other debts

SCHEDULE `H`

CASH AND BANK BALANCES

Cash in Hand

Cheques in hand and Remittances in transit

With scheduled banks in:

Current Accounts

Margin money accounts

Unclaimed dividend accounts

SCHEDULE `I`

OTHER CURRENT ASSETS

Deposits

Prepaid expenses

99

7,050

200

7,349

113

34,888

400,358

435,246

216

470

21,068

32,254

17

54,025

20,052

2,110

22,162

34,888

-

34,888

-

99

7,050

200

7,349

215

17,692

359,957

377,649

302

1,981

17,802

22,266

17

42,368

15,381

3,974

19,355

17,692

-

17,692

-

68


NET 4 INDIA


(in Rs.’000)


SCHEDULE ‘J’

LOANS AND ADVANCES

(Unsecured, considered good)

Advance income tax

Advance fringe benefit tax

Advances recoverable in cash or in kind or for value to be received

SCHEDULE ‘K’

CURRENT LIABILITIES AND PROVISIONS

A) Current Liabilities

Sundry creditors

Advances from customers

Accrued salaries and benefits

Provision for expenses

Withholding and other taxes payable

Unearned revenue

Unclaimed dividend*

Other liabilities**

*Not due for deposit to Investor Education and Protection Fund

**Includes Rs 22 (P.Y. 27) dues to directors as sitting fees payable

B) Provisions

Retirement Benefits

Income tax

Fringe Benefit Tax

Wealth Tax

Dividend

Tax on Dividend

Total (A + B)

SCHEDULE ‘L’


(To the extent not written off or adjusted)

Balance brought forward

Less: Written off during the period

Balance carried forward

125,255

4,241

124,086

253,582

132,409

5,479

9,316

4,680

9,370

2,694

16

2,324

166,288

9,144

126,820

5,326

-

16,750

2,847

160,887

327,175

316

78

238

64,261

3,471

109,152

176,884

123,246

6,406

9,343

5,610

3,581

2,890

16

2,420

153,512

6,841

88,646

4,722

382

16,750

3,800

121,141

274,653

344

28

316

69

NET 4 INDIA


SCHEDULES TO THE CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED

(in Rs.’000) 2008-2009 2007-2008

SCHEDULE ‘M’COST OF SALES AND SERVICES

(Increase)/decrease in stockPurchases and other direct costs

SCHEDULE ‘N’PERSONNEL COST

Salaries, wages and bonusContribution to provident and other fundsStaff welfare, staff training and recruitment

SCHEDULE ‘O’GENERAL AND ADMINISTRATIVE EXPENSES

RentElectricity and water chargesCommunicationTravelling and conveyanceRepair and maintenanceProfessional chargesBank chargesSecurity charges & Support StaffLease rentalsMembership and subscriptionPrinting and stationeryAssets DiscardedInsuranceAuditors remunerationBad debts Written offDirectors’ sitting feesConferences & MeetingsOther miscellaneous expensesPreliminary expenses written offExchange Differences

SCHEDULE ‘P’SELLING AND MARKETING EXPENSES

Advertising and marketingEntertainment and Business promotionSales Commission and incentivesExhibition expenses

SCHEDULE ‘Q’OTHER INCOME

Balances written backInterest receivedExchange differencesProfit on sale of fixed assetsIncome from Infrastucture and support servicesMiscellaneous income

(94,2051,074,782

980,577

119,29911,147

3,844134,290

24,17922,618

8,50514,67617,324

9,48213,276

4,6595,981

6931,6112,8771,242

279157

22872

2,61678

598131,745

13,3442,8111,155

27017,580

1,3934,055--

15,750568

21,766

(40,393836,092795,699

102,2008,9743,655

114,829

19,73517,908

8,61115,96213,544

9,5419,7442,4501,6831,6891,5522,5291,241

233864

27383

1,89528

-109,619

10,0902,181

853549

13,673

613926426127

18,0004,579

24,671

) )

70


NET 4 INDIA

(i) Basis of AccountingThe financial statements are prepared in accordance with Indian Generally Accepted Accounting principles

(“GAAP”) under the historical cost convention on an accrual basis. GAAP comprises mandatory Accounting

Standards issued by the Institute of Chartered Accountants of India (“ICAI”), the provisions of the Companies

Act, 1956, and guidelines issued by the Securities and Exchange Board of India. Accounting policies have

been consistently applied except where a newly issued accounting standard is initially adopted or a revision

to an existing accounting standard requires a change in the accounting policy hitherto in use.

The Management evaluates all recently issued or revised accounting standards on an ongoing basis.

(ii) Use of EstimatesThe preparation of the financial statements in conformity with GAAP requires the management to make

estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating

to contingent assets and liabilities as at the date of the financial statements and reported amounts of

income and expenses during the period. Examples of such estimates include provisions for doubtful debts,

future obligations under employee retirement benefit plans, income taxes and the useful lives of fixed

assets and intangible assets.

The management periodically assesses using, external and internal sources, whether there is an indication

that an asset may be impaired. An impairment occurs where the carrying value exceeds the present value

of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. The

impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the

asset’s net sales price or present value as determined above. Contingencies are recorded when it is probable

that a liability will be incurred, and the amount can be reasonably estimated. Where no reliable estimate

can be made; a disclosure is made as contingent liability. Actual results could differ from those estimates.

(iii) Principles of ConsolidationThe consolidated financial statements include the financial statements of the Net 4 India Ltd and it’s

subsidiaries and have been prepared in accordance with the principles and procedures required for the

preparation and presentation of consolidated financial statements as laid down under AS-21 - Consolidated

Financial Statements issued by The Institute of Chartered Accountants Of India.

The consolidated financial statements have been combined on a line-by-line basis by adding the book

values of like items of assets, liabilities, income and expenses after eliminating intra-group balances/

transactions and unrealized profits in full. The consolidated financial statements are prepared by applying

uniform accounting policies in use at the Group.

The consolidated financial statements are presented, to the extent possible, in the same format as that

adopted by Net 4 India Ltd for its separate financial statements.

(iv) Fixed Assets and Depreciation a) Tangible Assets: Fixed assets are stated at cost, less accumulated depreciation. Costs directly

attributable to the purchase of fixed assets are capitalized until fixed assets are ready for use. Capital work-

in-progress comprises of advances paid to acquire fixed assets, and the cost of fixed assets that are not yet

ready for their intended use before the balance sheet date.

All assets discarded or dismantled are written off assuming that the scrap value for the same is nil. If and

when such discarded assets are disposed off partially or fully, the amounts realized during the year are

credited to the profit and loss account of that year.

b) Depreciation: Depreciation of Fixed Assets is provided on a pro-rata basis on the written down value

SCHEDULE ‘R’ - SIGNIFICANT ACCOUNTING POLICIES

71

NET 4 INDIA


method at the rates prescribed under Schedule XIV to the Companies Act, 1956.

Cost of leasehold premises and structured improvements are depreciated over the period of lease.

Leasehold improvements are depreciated over the remaining period of lease or 10 years whichever is

lesser.

Individual low cost assets (acquired for less than Rs.5,000/-) are depreciated within a year of acquisition.

c) Intangible Assets and amortization: Intangible assets are amortized over their respective individual

estimated useful lives on a straight line basis, commencing from the date the asset is available to the

company for its use. Management, using reasonable and supportable assumptions, estimates the useful

lives for the intangible assets as follows:

Hosting platform 8 years

Technology 8 years

Trademarks 20 years

Goodwill 10 years

Trademarks represent the brand image of the company and constitute an asset with no limited useful life.

Based on advice received by the management and as per the provisions of the Trade Marks and Merchandise

Act of 1999, the company can retain the ownership and registration of the trademarks perpetually by

renewing the registration at the end of every ten years, leading to the view that the useful life of its

trademarks are unlimited.

However, as a matter of abandon precaution, the cost of the Trademarks is being amortized over a period

of 20 years.

(v) InvestmentTrade investments are the investments made to enhance the company’s business interests. Investments

are either classified as current or long-term based on the management’s intention at the time of purchase.

Current investments are carried at the lower of cost and fair value. Long Term Investments are stated at

cost. Provision for diminution in their value is made only if such a decline is other than temporary in the

opinion of the management.

(vi) Revenue RecognitionThe Company recognizes revenue on accrual basis. Revenue from the sale of hardware/software products

is recognized when the sale is completed with the passing of title. Revenue from services is recognized in

the ratio of period expired over the total agreement period. Revenue from Fixed Price Contracts is

recognized proportionately over the period in which services are rendered.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the

difference between the sales price and the then carrying value of the investment. Lease rentals are

recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income

is recognized when the company’s right to receive dividend is established.

(vii) Foreign Currency TransactionsInvestments in foreign entities are recorded at the exchange rates prevailing on the date of making the

investments.

Expenditure in foreign currency is accounted at the exchange rate prevalent when such expenditure is

incurred. Exchange differences are recorded when the amount actually received on sales or actually paid

72


NET 4 INDIA

when expenditure is incurred, is converted into Indian Rupees. The exchange differences arising on foreign

currency transactions are recognized as income or expense in the period in which they arise. Monetary

current assets and monetary current liabilities that are denominated in foreign currency are translated at

the exchange rate prevalent at the date of the balance sheet. The resulting gain or loss is also recorded in

the profit and loss account.

(viii) InventoriesInventory is valued at lower of cost (determined on First In First Out basis) and estimated net realisable

value.

Cost is inclusive of all purchase costs and other costs incurred in bringing the inventories to their present

location and conditions.

(ix) Retirement BenefitsThe company’s contributions towards recognized Provident Fund are charged periodically to revenue on

an accrual basis.

Gratuity has been provided in the Profit and Loss Account as per the provisions of the Payment of Gratuity

Act, 1972. A lump sum payment is made to employees at retirement, death, incapacitation or termination

of employment, of an amount based on the respective employee’s salary and the tenure of employment.

Provision for Leave encashment is made on the basis of unutilized leave due to employees at the end of

the year.

(x) Research and DevelopmentRevenue expenditure incurred on research and development is expensed as incurred. Capital expenditure

incurred on research and development is depreciated over the estimated useful lives of the related assets,

where management ascertains that costs incurred will be more than covered by resultant gains over a

specific period of time.

(xi) Borrowing CostInterest and other costs in connection with the borrowing of funds to the extent related/attributed to the

acquisition/construction of qualifying fixed assets are capitalized upto the date when such assets are

ready for its intended use and other borrowing costs are charged to Profit & Loss Account.

(xii) LeasesLease rentals in respect of assets taken on ‘Operating Lease’ are charged to the Profit & Loss Account on

straight line basis over the lease term.

(xiii) Earning Per ShareBasic earning per share (EPS) is calculated by dividing the net profit after tax for the year (including the

post-tax effect of extraordinary items, if any) attributable to equity shareholders by the weighted average

number of equity shares outstanding during the period. The weighted average numbers of equity shares

outstanding during the period are adjusted for events of bonus issue and share split.

73

NET 4 INDIA


(xiv) TaxationTax expense for the year comprises of current tax, deferred tax and fringe benefit tax.

Income tax is computed using the tax effect accounting method, where taxes are accrued in the same

period the related revenue and expenses arise. Provision for income tax is made annually, based on the

tax liability computed, after considering tax allowances and exemptions.

The differences that result between the profit considered for income taxes and the profit as per the

financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded

for timing differences, namely the differences that originate in one accounting period and reverse in

another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on

the accumulated timing differences at the end of an accounting period based on prevailing enacted or

substantially enacted regulations. Deferred tax assets are recognized only if there is reasonable certainty

that they will be realized and are reviewed for the appropriateness of the respective carrying values at

each balance sheet date. The income tax provision for the interim period is made based on the best

estimate of the annual average tax rate expected to be applicable for the full fiscal year.

Consequent to the introduction of Fringe Benefit Tax (FBT) effective April 1, 2005, the Company has made

provision for FBT in accordance with applicable Income-tax laws.

(xv) Cash Flow StatementCash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of

transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments.

The cash flows from regular revenue generating, financing, and investing activities of the company are

segregated.

(xvi) Contingent LiabilitiesDepending on the facts of each case, and after evaluation of relevant legal aspects, the Company makes a

provision when there is a present obligation as a result of a past event where the outflow of economic

resources is probable and a relevant estimate of the amount of obligation can be made. The disclosure is

made for all possible or present obligations that may but probably will not require outflow of resources as

contingent liability in the financial statement.

74


NET 4 INDIA

SCHEDULE ’S’ - NOTES TO ACCOUNT

(i) All amounts in the financial statements are presented in Rupees thousands, except for share data and

as otherwise stated.

(ii) Previous year’s figures have been regrouped, rearranged and reclassified, wherever necessary to

conform to current year’s classification.

(iii) The financial statements of the subsidiaries used in the consolidation are drawn upto the same

reporting date as that of the Company i.e. 31st March, 2009 except for Net 4 Singapore Pte Limited for which

financial statements as on reporting date are not available. These have been consolidated based on last

available financial statements as on 31st December, 2008, after which there have been no significant

transactions.

(iv) Deferred Tax

Provision for deferred tax for the year ended March 31, 2009 has been made in accordance with the provisions

of Accounting Standard 22 on Accounting for Taxes on Income, issued by The Institute of Chartered

Accountants of India. The deferred tax charge of Rs. 3,709/- (Previous year charge - Rs. 5,976/-), for the

current year has been recognized in the Profit & Loss Account and comprises of the following:

Depreciation claimed as deduction under the Income Tax Act,

but chargeable in the financial statements in future years

Provisions charged in the financial statements but allowed as

a deduction under the Income Tax Act in future years

(to the extent considered realizable)

2008-2009

(Rs.)

5,071

1,362

3,709

2007-2008

(Rs.)

6,941

965

5,976

(v) Remuneration to Auditors

Statutory Audit Fees

Tax Audit Fees

For certification and consultation in other matters

Expenses reimbursed

2008-2009

(Rs.)

185

45

134

15

379

2007-2008

(Rs.)

185

45

111

3

344

75

NET 4 INDIA


(vi) Managerial Remuneration

Salary

Contributions to Provident and other funds

Sitting Fees

Total Remuneration

2008-2009

(Rs.)

6,544

708

22

7,274

2007-2008

(Rs.)

6,856

708

28

7,592

The computation of net profits in accordance with Section 309(5) read with section 349 of the Companies

Act, 1956, has not been given as the company does not envisage any payment of commission to directors.

(vii) Provision for Doubtful Debts

Periodically the company evaluates all customer dues to the company for collectability. The need for

provisions is assessed based on various factors including collectability of specific dues, risk perceptions of

the industry in which the customer operates, and general economic factors, which could affect the

customer’s ability to settle. As at March 31, 2009, the company has provided for doubtful debts of Rs. Nil

(as at March 31, 2008- Rs. Nil ) on dues from customers. The company continues pursuing the parties for

recovery of the dues, in part or full.

The company has written off Rs. 157/- ( P.Y. Rs. 864/-) as bad debts during the year.

(viii) The company’s operations predominantly relate to providing IP Communications sales and services.

There is thus only one reportable business segment encompassing a comprehensive range of services,

including software development, packaged software integration, colocation, web hosting, web

development, web mailing solutions, internet telephony and sales and integration of related networking

equipment.

Secondary segmental reporting is performed on the basis of the geographical location of customers.

Geographical Segment

(Rs. in lakhs)

Year Ended 31st March, 2009 Year Ended 31st March, 2008

Particulars

Revenues

Net Fixed Assets

Debtors

Current Assets (Other than Debtors)

Overseas

888.20

-

493.54

6.37

Domestic

15,179.03

4,707.53

3,858.92

5,908.73

Overseas

114.26

-

-

-

Domestic

13,402.13

4,881.69

3,776.49

4,061.43

(ix) Term Deposits aggregating to Rs.32,254/- (P.Y.Rs.22,266/-) have been pledged with Banks as security

towards non-fund based facilities availed from Banks.

76


NET 4 INDIA

(x) The Company’s leasing arrangements are in respect of operating leases for premises (residential,

office, stores etc). These leasing arrangements which are not non cancellable range between 11 months

and 3 years generally, or longer, and are usually renewable by mutual consent on mutually agreeable

terms. The aggregate lease rentals payable are shown as Rent under Schedule ‘O’.

The Company also has leased facilities under non – cancellable operating leases for equipments for a

period of 4 to 5 years. The future lease payments in respect of these leases are as follows:

Obligations on non cancellable leases :

Not later than one year

Later than one year but not later than five years

Later than five years

Total

March 31st, 2009

4,797

9,133

-

13,930

(xi) Related Party Disclosures as required by Accounting Standard-18:

List of Related Parties and Relationships

i) Holding Companies:

Nil

ii) Entity having significant Influence:

Trak Online Net India Pvt Ltd.

Jiwan Financial Holdings Ltd

iii) Key Management Personnel and relatives of such personnel:

Executive Directors:

Jasjit Sawhney

Amarjit S. Sawhney

Desi S. Valli

Relative of Director

Pawanjot Kaur Sawhney

iv) Other related parties:

Sterling Capital Pvt Ltd

77

NET 4 INDIA


Significant Related Party Transactions

Nature of Transaction

Capital Transactions

Loans repaid

Previous year

Loans taken

Previous year

Revenue Transactions

Purchase of goods and services

Previous year

Sale of goods and services

Previous year

Sharing of costs and services

including facilities and personnel

Previous year

Dividend Paid

Previous year

Balances at the end of the year

Unsecured Loan

Loans and advances

(Rs. in lakhs)

Entity having

significant

influence

-

-

-

-

711

583

-

2

158

180

84

110

-

-

Key Management

Personnel and their

relatives

10

-

-

68

-

-

-

-

-

-

8

8

287

-

Others*

-

-

-

-

-

-

-

-

-

-

-

21

21

-

-

Total

10

-

-

68

711

583

-

2

158

180

113

139

287

-

• Details of remuneration paid to directors are given in note (vi) above.

* Entity where relative of key management personnel exercises significant influence.

(xii) Basic Earnings Per Share

Numerator for basic earning per share

Profit before tax and prior period items

Adjustment for net earnings

Provision for Tax

Total

Denominator for basic earning per share

Weighted average number of shares (in ‘000)

Basic earnings per share of Rs. 10/- each

2008-2009

(Rs.)

130,735

46,693

84,042

16,750

5.02

2007-2008

(Rs.)

141,144

46,335

94,809

16,350

5.80

The Company does not have any outstanding dilutive potential equity shares. Consequently, the basic and

diluted earnings per share of the company remain the same.

78


NET 4 INDIA

(xiii) Contingent Liabilities

Outstanding guarantees and counter guarantees to various banks, in respect of the guarantees given by

those banks in favour of various government authorities and others amounting to Rs.2,772/- (Previous

year-Rs. 21,151/-) given by the Bankers in favour of various parties.

Claims against the company, not acknowledged as debts amount to Rs. 256/- (Previous year-Rs. 261/-)

(xiv) Estimated amount of contracts remaining to be executed on capital accounts not provided for (net of

advance)-Rs. Nil (Previous year-Rs. Nil).

(xv) Schedule ‘A’ to ‘S’ form an integral part of the Balance Sheet and Profit and Loss Account.

Signatures to Schedule ‘A’ to ‘S’



Sd/- Sd/- Sd/-

Sandeep Gupta Amarjit S.Sawhney Jasjit S.Sawhney



Sd/- Sd/-

Place: New Delhi Desi S. Valli Krishan Kumar


79

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