notice to the shareholders - bombay stock exchangeannual report 2012-13 1 notice to the shareholders...

Annual Report 2012-13 1

NOTICE TO THE SHAREHOLDERS

NOTICE is hereby given that the 16th Annual General Meeting (AGM) of the Members of the Company will be held on Thursday, July 18, 2013, at 2.30 p.m. IST at Jai Hind College Hall, 23-24, Backbay Reclamation, ‘A’ Road, Churchgate, Mumbai - 400 020, Maharashtra, India, to transact the following business:

Ordinary Business:

1. To receive, consider and adopt the Directors’ Report, the Audited Balance Sheet as at March 31, 2013, the Profit and Loss Account for the financial year ended as at that date and the Auditors’ Report thereon.

2. To declare a dividend.

3. To appoint a Director in place of Mr. Suresh Talwar, who retires by rotation and, being eligible, seeks re-appointment.

4. To appoint a Director in place of Dr. Prakash Hebalkar, who retires by rotation and, being eligible, seeks re-appointment.

5. To appoint Auditors of the Company to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting. M/s Walker, Chandiok and Co., Chartered Accountants, retiring Statutory Auditors of the Company are eligible for re-appointment.

Special Business

6. To extend the term of office of Mr. Sunil Bhatia, the Chief Executive Officer and Managing Director of the Company, to revise the compensation paid to him and to consider and if thought fit, to pass the following Resolution as a Special Resolution:

“RESOLVED THAT in terms of Regulations of the Articles of Association of the Company and pursuant to provisions of Sections 198, 269, 309, 310, 311 and 317 read with Schedule XIII (including any statutory modification or re-enactment thereof for the time being in force), and all other applicable provisions, if any, of the Companies Act, 1956 and such sanctions as may be necessary of the Central Government, approval of the Company be and is hereby given to extend the term of office of Mr. Sunil Bhatia, the Chief Executive Officer and Managing Director of the Company till March 31, 2016 and to revise the compensation of Mr. Sunil Bhatia, for the said tenure of his present term with effect from April 1, 2013 on the remuneration and variable incentive as mentioned in the explanatory statement annexed to the notice which is hereby specifically approved with authority to the Board of Directors (which term shall include the Remuneration Committee constituted by the Board of Directors).

RESOLVED FURTHER THAT Mr. V Sudarshan, the Chief Financial Officer and Company Secretary of the Company be and is hereby authorised to take such steps as may be necessary for obtaining necessary approvals in relation to the above and to settle all matters arising out of and incidental thereto and sign and execute all applications, documents and writings that may be required, for and on behalf of the Company and generally to do all such acts, deeds and things as may be necessary, proper, expedient or incidental for the purpose of giving effect to the aforesaid Resolution.”

7. To amend the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) of the Company and to consider and if thought fit, to pass the following Resolution as a Special Resolution:

The Company had approved the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) in the Annual General Meeting held by the Company on July 19, 2011. Post approval of the Scheme, the Securities and Exchange Board of India (SEBI) has come up with notifications pursuant to ESOP Schemes held by the Companies. In order to comply with the notifications the said Scheme, as approved on July 19, 2011, is required to be amended. The following resolution(s) will supersede the resolutions passed on July 19, 2011.

(a) “RESOLVED THAT in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as amended and other applicable provisions,

Blue Star Infotech LimitedRegistered Office:The Great Oasis, 8th Floor, Plot No. D-13, MIDC, Andheri (East), Mumbai - 400 093

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Blue Star Infotech Limited2

if any, and subject to such consent, approval, permission, as may be required, the approval of the Company be and is hereby given for modification of the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011).

FURTHER RESOLVED THAT the equity shares to be issued and allotted pursuant to the exercise of the Options shall rank pari passu in all respects with the then existing equity shares of the Company.

FURTHER RESOLVED THAT the Board of Directors of the Company (hereinafter referred to as the “Board”, which term shall be deemed to include the Compensation and Remuneration Committee or any other Committee which the Board may constitute to exercise its powers, including the powers conferred by this resolution) be and is hereby authorised on behalf of the Company to do all such things, deeds and acts and to execute and deliver all such instruments, documents, directions and writings and perform such other things as may be necessary, desirable or useful for the purpose of giving effect to the foregoing resolution, including but not limited to, amending the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) (Revised 2013) and making any filings with the stock exchanges and/or applicable regulatory authorities.

FURTHER RESOLVED THAT the maximum number of options to be granted to each Eligible Employee shall not exceed 10% of the issued equity capital of the company on the date of grant.

FURTHER RESOLVED THAT all other remaining features of the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) (Revised 2013) will remain the same, except as modified vide these resolutions.

FURTHER RESOLVED THAT the amendments made by the shareholders to the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) be and is hereby modified and superseded by the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) (Revised 2013).”

(b) “RESOLVED THAT the benefits of the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) (Revised 2013) contained in Resolution no. 7 (a) above is hereby extended to the eligible employees of the subsidiary company(ies) of the Company on such terms and conditions as may be decided by the Remuneration and Compensation Committee.”

NOTES:

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE IN THE MEETING AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. THE PROXY FORM SHOULD BE DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING.

2. Members/ proxies should bring duly filled Attendance Slips sent herewith to attend the meeting.

3. The Register of Members and the Share Transfer Books of the Company will remain closed from Monday, July 8, 2013 to Thursday, July 18, 2013 (both days inclusive). The dividend as recommended by the Board of Directors, if declared at the Annual General Meeting will be paid on or after Tuesday, July 23, 2013, only to those Members whose names appear on the Company’s Register of Members as on July 18, 2013.

4. The shares of the Company are listed on the Bombay Stock Exchange Ltd., Mumbai and The National Stock Exchange Ltd. The annual listing fee for the year 2013-2014 has been paid in time to both exchanges.

5. Members are requested to note that all correspondence relating to share transfers, nomination forms and other related issues should be addressed directly to the Registrar and Transfer Agents, M/s. Link Intime India Pvt. Ltd., C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West), Mumbai – 400 078. Members are also requested to quote their Registered Folio No. and/or DP and Client Identity Numbers in all their correspondence.

6. Members holding shares in the dematerialised mode are requested to intimate all changes with respect to their bank details, NECS mandate, nomination, power of attorney, address, name, etc., to their depository participant (DP). These changes will be automatically reflected in Company’s records, which will help the Company to provide efficient and better service to the Members. Members holding shares in physical form are requested to intimate the changes to the Share Transfer Agents of the Company.


7. Members wishing to claim dividends, which remain unclaimed, are requested to correspond with the Investor Relations Department / Office of the Company Secretary at the Registered Office address of the Company. Members are requested to note that dividends not encashed or claimed within seven years from the date of transfer to the Company’s Unpaid Dividend Account, will, as per section 205 A of the Companies Act, 1956, be transferred to Investor Education and Protection Fund. Unclaimed Dividend on equity shares for the financial year 2005-2006 will fall due for transfer to the said Fund on October 03, 2013. It may be kindly noted that once the unclaimed dividend is transferred to the aforesaid Fund of the Central Government, no claim shall lie against the Company in respect thereof.

By Order of the Board of Directors,

V. SudarshanPlace : Mumbai, Chief Financial Officer and Date : 9 May 2013 Company Secretary

A. Explanatory Statement (Pursuant to section 173 (2) of the Companies Act, 1956)

I. Item no. 3 of the notice

Mr. Suresh Talwar

Suresh N Talwar is a graduate in Commerce and Law, a Solicitor and a Partner of M/s Talwar, Thakore and Associates, Mumbai. Prior to April 2007, he was a Senior Partner of M/s. Crawford Bayley and Company, a leading solicitor’s firm. Besides his vast legal experience, he is on the Board of several leading companies. He joined the Board of Blue Star Infotech Limited in 2000. He is a member of the Audit, Remuneration and Compensation Committees of the Company.

Details of Mr. Talwar’s other Directorships/Membership of Committees are given below:

Sr. No. Name of the company Directorship Committee Membership1 PZ Cussons India Private Ltd. Chairman & Alternate

Director-

2 FCI OEN Connectors Ltd. Chairman & Alternate Director

Audit Committee(Chairman)

3 Transwarranty Finance Ltd. Chairman & Alternate Director

Compensation Committee

4 Armstrong World Industries (India) Pvt. Limited. Chairman -5 Merck Ltd. Chairman Audit Committee

(Chairman)6 Sidham Finance& Investments Pvt Ltd. Chairman -7 Samson Maritime Ltd. Chairman -8 SunShield Chemical Ltd. Chairman -9 Biocon Ltd. Director Audit Committee10 Birla Sun Life Insurance Co. Ltd. Director -11 Birla Sun Life Trustee Company Pvt. Ltd. Director Audit Committee12 Blue Star Ltd. Director Audit Committee

(Chairman)13 Chowgule & Company Private Ltd. Director -14 Chowgule Ports and Infrastructure Private Ltd. Director -15 Decagon Investments Pvt. Ltd. Director -16 ELANTAS Beck India Limited. Director Audit Committee17 Epitome Global Services Pvt. Ltd. Director -


Sr. No. Name of the company Directorship Committee Membership18 ESAB India Ltd. Director -19 Greaves Cotton Ltd. Director Audit Committee20 India Value Fund Trustee Co. Pvt. Ltd. Director -21 IVF Trustee Company Private Ltd. Director -22 IVF (Mauritius) PCC. Director -23 IVF (Mauritius) Ltd. Director -24 Indium III (Mauritius) Holding Ltd. Director -25 Indium III (Mauritius) Ltd. Director -26 Indium IV (Mauritius) Holding Ltd. Director -27 Indium IV (Mauritius) Ltd. Director -28 John Fowler (India) Pvt. Ltd. Director -29 Larsen & Toubro Ltd. Director Nomination cum

Compensation Committee

30 L & T Metro Rail (Hyderabad) Ltd. Director -31 Phillips Capital India Pvt. Ltd. Director -32 Morgan Stanley India Capital Pvt. Ltd. Director Audit Committee33 Rediffusion-Dentsu, Young & Rubicam Pvt. Ltd. Director -34 Sandvik Asia Ltd. Director Audit Committee

(Chairman)35 Shrenuj & Co Ltd. Director -36 Snowcem Paints Pvt. Ltd. Director -37 Sonata Software Ltd. Director -38 Swiss Re Shared Services (India) Pvt. Ltd. Director -39 TTK Healthcare TPA Private Limited Director -40 Warner Bros Pictures (India) Pvt. Ltd Director -41 Rhodia Speciality Chemicals India Ltd. Alternate Director -42 Johnson & Johnson Ltd. Alternate Director -43 UHDE India Pvt. Ltd Alternate Director -

Mr. Suresh N Talwar holds 15,075 shares in the Company as on March 31, 2013.

No other Director, except Mr. Suresh Talwar, is concerned or interested in this item.

II. Item no. 4 of the notice

Dr. Prakash G. Hebalkar

Dr. Prakash G. Hebalkar is a Doctor of Science in Computer Science and Economics from the Massachusetts Institute of Technology, USA. He has worked with IBM, USA and thereafter with Tata Unisys as Senior Vice President. He was instrumental in forming and building up the joint venture of Tata and Unisys as a successful software and consultancy services activity. He is also associated with several leading venture finance organisations and financial institutions. He joined the Board of Blue Star Infotech Limited in 2000.

Sr. No. Name of the Company Nature of Interest Committee Membership1 Mahindra Life Space Developers

LimitedDirector Member of Shareholders’ Grievances

Committee/Member of large Format Developments Committee

Dr. Prakash G Hebalkar does not hold any shares in the Company.

No other Director except Dr. Prakash Hebalkar, is concerned or interested in this item.


III. Item no. 5 of the notice

In terms of Section 224(1) of the Companies Act, 1956, approval of the Company is required to re appoint the Statutory Auditors M/s. Walker, Chandiok and Co., Chartered Accountants, to hold office till the conclusion of the ensuing Annual General Meeting of the Company. Further, the consent of the Company is required to authorise the Board of Directors to determine the compensation to the Statutory Auditors in consultation with them.

IV. Item no. 6 of the notice

Mr. Sunil Bhatia was appointed as the Chief Executive Officer and Managing Director (“CEO and MD”) for a period of three years on and from April 15, 2011 on such remuneration as recommended by the Remuneration Committee, with the approval of the members and the Central Government.

The Board of Directors of the Company (“Board”) at its meeting held on May 9, 2013 had, subject to the approval of the Members and the Central Government, decided to extend the term of office of Mr. Sunil Bhatia and revise his compensation with effect from April 1, 2013. The Board, in congruence with the Remuneration Committee has agreed to revise his compensation and seek the shareholders’ approval for the same.

As required under section 302 of the Companies Act, 1956, (the Act) the revised abstract of the main terms and conditions of the appointment of Mr. Bhatia as the CEO and MD together with the memorandum of concern or interest is as set out below:

1. Tenure of re-appointment: April 15, 2014 to March 31, 2016 (“Term”)

2. Revision in the terms of remuneration: April 1, 2013 to March 31, 2016

3. Nature of Duties: The CEO and MD shall be responsible for the substantial management and administration of the company comprising primarily of contributing in high levels business development, networking, business guidance, business visibility, administration, finance, policy and decision making, in accordance with the directions of the Board. The CEO and MD shall also accept and discharge those duties which may be assigned to him by the Board from time to time and which can be reasonably expected of him in consideration of his position as the CEO and MD. The discharge of duties by Mr. Bhatia shall be subject to the superintendence, control and direction of the Board.

4. Remuneration:

(a) Fixed Compensation:

i) April 1, 2013 – March 31, 2014 - US $ 4,00,000

ii) April 1, 2014 – March 31, 2015 - US $ 4,00,000

iii) April 1, 2015 – March 31, 2016 - US $ 4,50,000

(b) Variable incentives, which would be a % of the fixed compensation, based upon achievement of targets in relation to each of Revenue and Profit after tax on the criteria to be laid down by the Board.

(c) Reimbursement of expenses: All authorised expenses incurred on the Company’s business shall be reimbursed as per the Company’s policy.

(d) Health insurance: As per the Scheme in force in the Company/ subsidiary where he is located.

(e) Transportation expenses. Company will bear all the official expenses on travel and transportation.

(f ) Employee Stock Options (ESOP): Hitherto, Mr. Bhatia was entitled to 515,000 equity shares in the company by way of ESOP’s. The company proposes to issue an additional 235,000 equity shares in the company by way of ESOP’s during the extended tenure of service. This issue is subject to the approval of the Reserve Bank of India (RBI) and other statutory authorities. Mr. Bhatia will be entitled to these additional Stock options under the Company’s ESOP Scheme which will vest based on the achievement of Revenue and Profit after Tax (PAT) targets for the financial years 2014 through 2016. In the absence of RBI or statutory approvals, an alternative mode will be determined and shareholder’s approval sought at the appropriate juncture.


(g) Minimum Remuneration: Notwithstanding anything to the contrary herein contained where in any financial year the Company has no profits or its profits are inadequate during the currency of the tenure of the CEO and MD, the Company will continue to pay the CEO and MD, remuneration by way of the fixed compensation and variable incentives, subject to the satisfaction of the Key performance indicators and as may be decided by the Board / Committee thereof from time to time.

(h) Mode of Payment - The Chief Executive Officer and Managing Director will be paid compensation, either directly by the company or by one of the company’s overseas subsidiaries or partly by a combination of both. The cost to be accounted by each entity shall be based on the time or efforts relating to a particular geography by the Chief Executive Officer and Managing Director. At a notional exchange rate of Rs.60/- per USD, the cash compensation cost is expected to be in the vicinity of a minimum sum of Rs.2.40 Crores and up to a maximum sum of Rs.5.40 Crores per annum.

5. Other terms of appointment:

During the Term, the CEO and MD: - is required to devote sufficient time and attention to the affairs and business of the Company and

will have no other engagement or employment in any enterprise or business in any capacity for remuneration or otherwise which would cause him to divert substantial time and attention from this Company to such other enterprise, without the prior written consent of the Board or except to the extent with any subsidiary/affiliate of the Company or involvement in any non-profit activities or speaking engagements;

The terms of appointment also include appropriate clauses for:

- Adherence with the Code of conduct and maintenance of confidentiality.

During the Term, either Party may terminate the appointment at any time by giving 30 days’ notice or compensation of salary for the notice period in lieu thereof. on the following terms:

In the event of any board meeting in which the agenda is to decide upon the termination of the Agreement, Mr. Sunil Bhatia shall not have the right to vote in such resolution in the capacity of a Director of the Company.

- Notwithstanding anything mentioned above, the Company will have the right, after due inquiry and opportunity to the CEO and MD of being heard, to terminate the employment with immediate effect in the event it is proved that the CEO and MD is guilty of (a) misappropriation of funds,(b) serious violation of applicable laws, the Company’s Articles of Association which result in significant loss to the Company;(c) serious violation of any of his duties which result in significant loss or damage to the Company; (d) repeated or continuing breach or non-observance by the CEO and MD of the Boards directives which result in significant loss or damage to the Company; (e) abuse of confidential information for his own purposes; and (f ) undisclosed serious violation of the non-compete covenant. In such event, the Company would not be required to pay the CEO and MD any remuneration from the date of termination.

This Agreement shall replace and supersede the Agreement entered prior to this; and all rights, obligations and liabilities of the parties under the previous agreement are terminated and will cease with effect from the date of the Agreement.

Mr. Bhatia is appointed as a Director by virtue of his employment in the Company and his appointment shall be subject to the provisions of section283(1) (l) and other applicable provisions of the Act. The terms of his termination are elucidated in the CEO and MD Agreement.

Mr. Bhatia is a citizen of Singapore and a person of Indian origin.

Mr Bhatia holds 4,34,264 equity shares in the Company in his personal and beneficiary capacity as on March 31, 2013.

Mr. Bhatia is not a Director of any other Company except Blue Star Infotech Ltd.

No other Director except Mr. Bhatia is concerned or interested in this item.


V. Item no. 7 of the notice

With the objective of adopting effective measures to attract and retain talent and remain competitive in the challenging global market, to encourage and reward the performance of its Key Employees who are the drivers of company’s growth and to retain them for ensuring stable growth by providing opportunities to such executives to own equity shares of the company, the members of the Company passed a special resolution in the 16th Annual General Meeting of the Company to reward certain eligible employees by offering them options under the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011). Pursuant to Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011), the Board was authorized to grant, to the eligible employees, stock options to purchase equity shares of the Company.

In light of SEBI regulations post July 2011, it is proposed to make alterations to the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) vide resolutions passed by the members in their Annual General Meeting held on July 22, 2011. The amendments made by the members at the current Annual General Meeting of the company shall supersede and be applicable. The salient features of the modifications in the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) (Revised 2013) are as under:

Exercise Price

The Options granted to the Employees under this Plan shall carry an Exercise Price, which may be such discounted price to the Market Price of the Shares of the Company as may be determined by the Committee. However the Exercise Price shall not be less than the par value of the Shares of the Company.

Vesting Period

The continuation of the employee in the service of the Company shall be a primary requirement of the vesting. The vesting period shall be such period as may be determined by the Board which shall not be less than one year and shall not be more than five years.

Exercise Period

The options shall be exercisable within a period of one to three years from the date of vesting of options. The options can be exercised during such periods as may be prescribed from time to time.

The aforesaid changes shall apply to the options which are granted or yet to be granted by the Company under this scheme. The details of options under the Scheme as on March 31, 2013 are as under:

(i) Total number of options under the ESOP scheme 10,00,000

(ii) Total number of options granted (excluding lapsed / forfeited options) 6,85,000

(iii) Total number of unvested options 6,20,000

(iv) Total number of un-granted options (including lapsed / forfeited options) 3,15,000

Except above, all other features and terms and conditions of the Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) shall remain same.

Except Mr. Sunil Bhatia, none of the other Directors of the Company are concerned or interested in these resolutions except to the extent of options which are likely to be granted to them pursuant to this Scheme.

By Order of the Board of Directors,

V. SudarshanPlace : Mumbai Chief Financial Officer andDate : 9 May 2013 Company Secretary


FOR THE ATTENTION OF SHAREHOLDERS

1. Shareholders are requested to forward their queries on Accounts for the financial year ended March 31, 2013 to the office of the Company Secretary at the Registered Office of the Company in advance so as to reach the Company at least 7 days prior to the date of the Annual General Meeting, to enable the company to keep the information ready at the Meeting.

2. The Annual Reports and Attendance Slips will not be distributed at the Annual General Meeting. Shareholders attending the Meeting are requested to bring the same along with them.

3. A copy of the Annual Report along with the notice to the Annual General Meeting is available in soft copy format on the company’s website www.bsil.com.

4. Shareholders having shareholding in physical form are requested to dematerialise their holdings and also provide their e-mail ID’s to the depository participant to avail speedier investor services.

5. The registered office of the company is open on all working days (Monday – Friday) between 8.30 a.m. to 6.00 p.m.

6. Shareholder Inquiries - Questions concerning folio, share certificates, dividend, address changes, consolidation of certificates and related matters should be addressed to Blue Star Infotech Limited, at its Registered office or to its share transfer agents at the below mentioned addresses:

Blue Star Infotech LimitedAttn: The Investor Relations Cell / The Company SecretaryThe Great Oasis, 8th FloorPlot No.D-13, MIDC, Andheri (East)Mumbai – 400 093Tel: +91-22-66956969Fax: +91-22-66973866www.bsil.com

E-mail:Investor Relations : [email protected] Secretary : [email protected]

Registrar and Transfer AgentsLink Intime India Pvt. Ltd.Unit: Blue Star Infotech LimitedC-13 Pannalal Silk Mills Compound,LBS Marg, Bhandup West, Mumbai 400078Tel.:91-22-25946970Fax: 91- 22-25946969E-mail: [email protected]

Blue Star Infotech lImIted AnnuAl RepoRt 2012-13

Gaining Momentum

Letter from the Chairman and Managing Director 02Ten Year Financials (Consolidated) 06Board of Directors 08About Blue Star Infotech Ltd. 10Corporate Information 12Global Presence 13Blue Star Infotech in the News 14Management Discussion and Analysis 15Directors’ Report 26Corporate Governance 31

FINANCIAL STATEMENTS 2012-13STANDALONEIndependent Auditors’ Report 48Balance Sheet 52Statement of Profit and Loss 53Cash Flow Statement 54Notes annexed to and forming part of theFinancial Statements 55

CONSOLIDATEDIndependent Auditors’ Report 73Balance Sheet 74Statement of Profit and Loss 75Cash Flow Statement 76Notes annexed to and forming part of theConsolidated Financial Statements 77Statement u/s 212 93

Forward-looking StatementIn our report we have disclosed forward-looking information so that investors can comprehend the Company’s prospects and make informed investment decisions. This annual report and other written and oral statements that we make periodically contain such forward-looking statements that set out anticipated results based on the Management’s plans and assumptions. We have tried, wherever possible, to qualify such statements by using words such as ‘anticipates’, ‘estimates’, ‘expects’, ‘projects’, ‘intends’, ‘plans’, ‘believes’ and words and terms of similar substance in connection with any discussion of future operating or financial performance.We do not guarantee that any forward-looking statement will be realised, although we believe we have been diligent and prudent in our plan and assumptions. The achievement of future results is subject to risk, uncertainties and validity of inaccurate assumptions. Should known or unknown risks or uncertainties materialise, or should underlying assumptions prove inaccurate, our actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.Note: Blue Star Infotech Ltd. is referred to as ‘‘Blue Star Infotech’’ or ‘‘BSIL’’ in this report.

Contents


The key drivers of technology consumption and growth over the coming years are expected to be significantly different from what was seen in the last decade. Disruptive technologies such as cloud computing and mobility have gained prominence, as these are accelerating technology adoption and enabling enterprise automation with lower capital investments. Clients increasingly are expecting IT vendors to play advisory roles and provide them with best-in-class solutions to counter their own competitive and economic pressures.

Against this background, the Indian IT industry has also evolved significantly – in terms of new markets, new verticals, new business models and new services. In the process, it has transformed itself from being a service provider to becoming a strategic business partner with strong vertical and domain capabilities, providing a wider range of solutions and business outcomes.

The last two years have seen Blue Star Infotech embark on a process of realignment to adapt to this changing scenario, and ensure that it stays relevant during the expected cyclical recovery, and continues to create value for all its stakeholders. The theme of this annual report, Gaining Momentum, reflects our increasing strength, depth and visibility as a global organization.

These transformational changes are penetrating all facets of the organization – strategies, leadership, client delivery and management, alliances, solutioning, sales and marketing, human capital, infrastructure and quality. The Company has been making substantial investments in enhancing its capabilities; recruiting top talent; strengthening processes; building tools, frameworks and solutions; setting up nearshore delivery centres; and developing business alliances.

These investments are now showing encouraging results and have enabled Blue Star Infotech to clock an above-industry growth rate of 47% in fiscal 2013 despite a volatile and challenging economic environment. This fiscal produced the highest revenue since inception, and the highest year-on-year revenue growth as well. The Company pursued both organic and inorganic routes to put into place the desired elements to achieve its strategic objectives. The results have shown positive trends in key business measures such as revenue, headcount, utilization, average deal size and number of clients, and attests to the fact that Blue Star Infotech is unlocking its potential and gaining momentum in the IT industry.

Gaining Momentum at a time of great change


Dear Shareholders,

As we look back into the last year, we see fiscal 2013 as a landmark year for us, during which we outperformed the industry and achieved record revenue, our highest since our inception in December 1983. This noteworthy performance in our 30th year, especially in the face of cautious markets, was primarily due to the strategic changes initiated two years back, and to the steadfast support of key partners such as Hewlett-Packard.

Since 1970, the Hewlett-Packard Products Division of our parent, Blue Star Ltd., was a growing business distributing and maintaining Hewlett-Packard’s computer hardware and other electronic equipment. Our relationship and business with Hewlett-Packard was an important component of our parent company’s business. During this period, we started seeing a string of incipient opportunities in the software services area. Hewlett-Packard encouraged us to tap into this new business opportunity, and we started our software services export business in December 1983. Today, after 30 years, Hewlett-Packard continues to be our primary customer and partner. We are indeed deeply indebted to Hewlett-Packard. Such value-adding partnerships now form a key pillar of our growth strategy.

Global economic growth remained sluggish and slowed further to 3.2% in the year 2012 after slowing to 4.0% in the year 2011 from 5.3% in the year 2010. During fiscal 2013, the total Indian IT software and services sector grew by 8% to USD 95 billion, while the export revenues component grew by 10.2% to USD 75.8 billion.

Letter from the Chairman & Managing Director

Sunil BhatiaChief Executive Officer and Managing Director

Suneel M AdvaniChairman and Managing Director

Annual Report 2012-13

Business Overview Management Discussion & Analysis | Statutory Reports | Financial Statements

3

In our last year’s Annual Report, we had indicated that we plan to beat the sector’s growth forecast in fiscal 2013. Accordingly, against an industry growth of 8%, your Company recorded a consolidated Sales Revenue of `188.5 Crore, an increase of 47% over that registered for the year ending March 31, 2012. Domestic income for the full year rose by 5% to `38.1 Crore. Consolidated net profit for the year stood at `5.0 Crore, an increase of 39%.

Further, we are happy to report that, for the quarter ended March 31, 2013, we reported our highest ever consolidated income of `51.02 Crore, a 27% jump over the same quarter of 2012. However, consolidated net profit for the quarter fell to `0.61 Crore compared to `1.56 Crore for the same quarter of last year.

Foreign Exchange Volatility

During the course of the year 2012-13, the rupee weakened from `51.16 per dollar in April, 2012 to `54.13 in March, 2013. We normally use forward contracts to hedge our exposure. However, due to high volatility in exchange rates and the continuous weakening of the rupee, we adopted a more conservative approach by discontinuing further hedging and allowing our earlier contracts to expire. During fiscal 2013, we incurred a foreign exchange loss of `5.39 Crore as compared to a foreign exchange gain of `1.83 Crore in the previous year.

Business Environment

Fiscal 2013 can be broadly segregated into two halves. The first half, on the back of concerns on Euro zone stability and decelerating growth momentum in most regions, was a bit volatile and uncertain. The second half, backed by both ECB’s commitment to do whatever it takes to preserve the Euro and the US Fed’s open-ended third round of quantitative easing, was much more stable.

Amongst our key focus markets, there was a continued, albeit slow recovery in the economic growth of the US, further contraction in Europe and a continuing slowdown in the Asia-Pacific region. However, the ASEAN region that includes Singapore and Malaysia achieved better than expected growth.

On the domestic front, the Indian economy grew 5% in fiscal 2013, compared to a 6.2% expansion in the previous year. It has slowed sharply owing to a number of factors such as high interest rates, high inflation, slowing global economy, slowing industrial growth and declining business sentiment.

Business Model Realignment for Gaining Momentum

Incremental growth of the IT industry is related to the growth in global discretionary spend, and thereby to the growth of the global economy. Rapid technological advancements over the last few years, alongside the uncertain and volatile growth environment, have created a paradigm shift in the way most businesses are leveraging IT today. Increasing demand for the emerging SMAC technologies (Social Media, Mobility, Analytics and Cloud) and increasing usage of IT in the front-end of the organisation have ensured a strong demand for IT products and services despite reluctance to commit large capital investments.

The situation is made more complex by politically driven protectionist policies in several geographies, despite the willingness of individual organisations to evaluate outsourcing benefits, which hitherto were not very open to outsourcing. High currency volatility and increasing competition from other low cost destinations are some of the other challenges that the Indian IT industry is grappling with.

We realigned our business model two years back to address the above challenges and position ourselves for higher growth. This helped bring some stability to a volatile environment, and a firm sense of direction to grow our organisation both from within and outside.

Becoming a Solution-centric Organisation

Moving up the value chain and becoming a solution-focused player became a key goal. To facilitate this, we adopted a new Software Solutions and Products process, and established an Advanced Technology Group that successfully put this into practice, applying it for a number of solutions that we invested in. One such solution is a mobile travel planning application christened Mobile Vacation Planner (MVP). MVP addresses the current market gap in the experiential and envisioning phase of the consumer travel planning process prior to the actual booking, in which customers visualise


their next vacation or travel experience. Along with MVP, we launched a SmartTravel solution that intelligently caters to the needs of hotels, online agencies and tour operators enabling them to create quickly and enhance their online presence. This solution is built using the latest technologies and includes a mobility interface, an advanced analytics engine, and a loyalty management module. By virtue of using a solution-centric approach, many of our new projects are based on an outcome- based model instead of the traditional T&M model or fixed price model.

Further, our global alliances with leading product companies such as SAS, QlikView, DSI, Infogix, LPS and Netbiscuits enabled us to significantly enhance our solution portfolio and also expand our sales reach, resulting in the addition of new customer logos and expansion of existing accounts.

Unlocking Value for our Customers

Another initiative to meet changing customer needs was to deepen our niche focus areas and create a pool of highly satisfied clients through our high-touch, high-speed and high-flexibility service offerings. Through our in-depth understanding of legacy systems as well as modern technologies, and our strong industry expertise, we are able to help our clients optimally leverage the benefits of emerging technologies by utilizing their existing IT infrastructure without ripping-and-replacing it completely. This has enabled us to engage and participate in multi-year and multi-million dollar deals, and acquire noteworthy brands such as American Express, Thomas Cook and Preferred Hotel Groups as our clients.

Enhancing Customer Experience

From a client acquisition and account penetration perspective, we retain our focus on the US, Europe, Asia-Pacific and India. We have opened onshore delivery centres in the Midwest of US and in Singapore, locating our senior management closer to our clients. This has enabled us to increase our touch points with clients and provide them with an enhanced experience.

We have also identified strategic accounts with high potential to generate large annuity income. To grow such accounts, we have established dedicated cross-functional teams to engage, identify and fulfil new opportunities.

Accelerating Revenue Growth

During the year, we added 39 new logos and our average deal size in fiscal 2013 was almost twice that of the previous year. We currently have 102 active clients. One of our largest wins during the year was a multi-year, multi-million dollar strategic development and sales partnership with Loyalty Partner Solutions (LPS). LPS develops and manages a series of professional CRM and customer loyalty programs for retail and travel/transportation industries.

Our new logos include leading companies such as Accenture, 3 Wire, Heartland Food Group, Northwest Telephone, Arbor Capital, Lewis and Rocca, Televerde, Surmodics, Network 18, Berg and Schmidt India Ltd., Eenadu Television and AVTEC Ltd. These accounts have significant potential for cross selling our mainstream services. In addition to focusing on acquiring new logos, we have been able to grow some of our existing strategic accounts significantly and expand our annuity business. We now have eight accounts with over USD 1 million revenues each, including two accounts with annual revenues of over USD 4 million each.

Acquiring Scale, Reach and Skills through Inorganic Growth

In continuation of our inorganic growth strategy, during the year, we acquired a Singapore based IT company, Infostack Solutions, that specialises in providing value chain management solutions. This acquisition provided us a footprint into the growing Asia-Pacific market, and access to customers in the healthcare and financial services domains. Singapore is itself an attractive growth market for us, and a key hub for accessing the Asia-Pacific and Australian markets.

More recently, we formed a strategic alliance and invested in the equity of Activecubes, a global firm operating in the Decision Management space. Activecubes is a provider of Business Intelligence and Analytics solutions, and has been awarded multiple industry awards such as Red Herring Global Top 100, India Innovation Award and Karnataka STPI Award. This alliance enables us to better address the USD13.8 billion growing Business Intelligence and Analytics market, and will help our clients to derive business efficiencies and competitive advantage through the combined offerings of both organisations.



5

Managing a Global and Diverse Talent Pool

Delivering services to high-value clients requires a highly qualified talent pool. Our new delivery centres in the US and Singapore have resulted in our Company having a multi-cultural and diverse employee base. This has brought in major changes in the way we operate across different geographies. We created our Facebook presence to enable our employees to leverage social media for seamless communication and collaboration, and for brand building. In our endeavour to continuously improve and harness best-in-class tools and technologies, and to create an aligned and integrated global workforce, we have been investing in our processes and systems. During the year, we were successfully assessed at CMMi Level 5, the highest standard in quality software delivery.

Industry Recognition

Our efforts have been well recognised by the industry. We were featured as a Global Services 100 provider in a survey conducted by Global Services in association with Neo Group, a global advisory firm.

Zinnov Management Consulting, a leading globalisation advisory firm focusing on the engineering space, also recognised us as one of the leading R&D service providers to global ISVs as well as to the Healthcare vertical.

Business Momentum

All of the above has resulted in growth of our key service lines and across geographies. While our Strategic Accounts business doubled during the year, our Business Intelligence/Analytics business grew by 53% and our Travel & Hospitality by 34%. From a geographic standpoint, our US business grew by 24% and Asia-Pacific by 48%. In addition, in spite of stiff pricing conditions, we were able to increase revenue per employee by 14%. Our employee utilisation remained steady around 85% throughout the year. We have launched a series of steps to further enhance our productivity and optimise our cost structure in order to increase our bottom-line growth over the next few quarters.

In Conclusion

The business environment remains challenging. The economic slowdown dented business sentiments and so, the recovery, at best, is expected to be gradual. In fiscal 2014, IMF expects the global growth momentum to be marginally better. The growing acceptance of emerging technologies across client organisations will sustain IT growth momentum. For fiscal 2014, NASSCOM expects Indian IT services to grow by 13-15%, of which exports are expected to grow by 12-14%.

The gradual recovery of our focus sectors will help us gain further momentum. We have introduced a number of initiatives to improve profitability in the coming months. This, coupled with the investments we have made over the last two years, makes us confident of maintaining our growth momentum and delivering higher value for all our stakeholders in the coming years.

We look forward to your continued support.

Sincerely,

Suneel M Advani Sunil BhatiaChairman and Managing Director Chief Executive Officer and Managing Director

Place: MumbaiDate: 10 June, 2013


( All figures in ` Crore except figures under Other Information and Performance Indicators)

2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04

OPERATING RESULTS

Total Income 195.16 134.43 129.12 136.17 156.74 145.69 120.83 93.35 106.97 109.71

Export Sales 150.40 89.93 90.55 105.61 130.40 113.03 96.57 73.65 91.37 89.47

Operating profit (PBIDT) 10.26 9.81 15.35 17.35 19.12 7.57 13.41 8.44 15.20 25.76

Profit after Tax 4.99 3.57 8.40 13.78 15.55 4.91 9.07 4.16 9.46 19.90

Dividend (incl. tax) 2.43 2.41 3.49 5.85 5.85 2.93 4.62 2.28 5.70 10.15

Retained Profit 2.56 1.16 4.91 7.93 9.70 1.98 4.45 1.88 3.76 9.75

FINANCIAL POSITION

Paid-up Capital 10.39 10.39 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00

Reserves 78.85 71.87 74.45 69.72 57.32 50.29 48.31 43.87 41.98 38.23

Shareholders’ Funds 89.24 82.26 84.45 79.72 67.32 60.29 58.31 53.87 51.98 48.23

Short-term Investments (Liquid)

1.13 5.55 17.22 27.51 11.64 - - 2.51 10.75 20.14

Cash and Cash Equivalents 28.67 22.81 10.65 10.13 11.07 16.40 7.36 4.80 5.00 7.64

Market Capitalisation 58.73 74.98 100.85 112.90 47.95 60.65 93.65 107.00 132.83 168.75

OTHER INFORMATION

Number of Shareholders 13,439 14,153 14,470 15,213 15,281 15,557 16,379 17,655 18,025 18,377

Number of Employees 741 818 821 795 858 901 828 583 589 797

Office Space (Sq. Ft.) 64,000 55,000 55,000 65,000 65,000 65,000 65,000 65,000 95,000 62,000

PERFORMANCE INDICATORS

Earnings Per Share (Rs.) 4.80 3.49 8.40 13.78 15.55 4.91 9.06 4.16 9.46 19.90

Dividend Per Share (Rs.) 2.00 2.00 3.00 5.00 5.00 2.50 4.00 2.00 5.00 9.00

Book Value per equity Share

85.93 79.21 84.45 79.72 67.32 60.29 58.31 53.87 51.98 48.23

Return On Shareholders’ Funds

5.59% 4.34% 9.94% 17.29% 23.11% 8.14% 15.55% 7.73% 18.19% 41.26%

Return On Average Capital Employed

5.82% 4.28% 10.23% 18.74% 24.39% 8.28% 16.17% 7.87% 18.88% 45.81%

Ten Year Financials (Consolidated)



7


Suneel M Advani is a double graduate in Electrical Engineering and Economics from the Massachusetts Institute of Technology, USA. He also holds a degree in Law from Mumbai University. Mr. Advani joined Blue Star Limited in March 1969 as a Management Trainee. He held various responsible positions in Blue Star Limited before joining its Board in 1983 as an Executive Director. He was then elevated to the position of President and Vice Chairman of Blue Star Limited in 1984 and was re-designated as Vice Chairman and Managing Director in 2005. He is currently the Executive Vice Chairman from April 2012.

Mr. Advani set up the Software Exports Division in Blue Star Limited in 1983 and oversaw its operations from inception. This Division was later spun off and incorporated as Blue Star Infotech Limited where he was appointed as the Chairman of the Company in 1998 and re-appointed as its Chairman and Managing Director in June 2005.

(Member of Shareholders’ Grievance Committee)

Sanjay N Vaswani holds an MBA from the Wharton School of Business at the University of Pennsylvania and a BBA summa cum laude from the University of Texas at Austin. He has worked for Intel Corporation and as an associate in McKinsey and Company, Inc. in Los Angeles. Mr. Vaswani is highly knowledgeable about the IT industry and has set up his own consulting firm in 1990. The firm provides consultancy and advisory services to hi-tech companies in the USA. He is also on the board of Brocade Communications Systems, Inc., USA.

Mr. Vaswani joined the Board of Blue Star Infotech Limited in 2000.

Sunil Bhatia has over 24 years’ experience in the Information Technology industry across the globe. He has held leadership positions at global giants such as IBM, Accenture and Satyam, in the US and Asia, where he has managed large businesses and led global teams. Prior to Blue Star Infotech, he served as a Partner with Accenture in USA, and earlier in Accenture Consulting Practice in India, where he has advised several large Indian corporations on globalization, expansion and strategic reviews. At IBM Singapore, he has spent over seven years building the business and strategic relationships in the Financial Services and worked across 10 Asian Countries. At Satyam, he led and managed global strategic accounts in US.

He holds an MBA from Mumbai University. His professional qualifications include executive programs at Wharton and INSEAD. He is a charter member of TiE at Silicon Valley.

Mr. Bhatia was appointed on the Board in April 2011.

Ashok M Advani is an MBA from the Harvard Graduate School of Business Administration, an Electrical Engineer from the Massachusetts Institute of Technology, USA and B.Sc. Honours from Mumbai University. He joined Blue Star Limited in 1969 after working for three years in the USA. He held a variety of senior positions in manufacturing and finance in Blue Star Limited before becoming a Director in 1979. He was appointed President & Vice Chairman in 1981 and took over as Chairman & Chief Executive of Blue Star Limited in 1984. He was re-designated as the Chairman and Managing Director in 2005, then the Executive Chairman in 2009 and is currently the Chairman from April 2012.

He has been a member of the Local Advisory Board of The Chase Manhattan Bank and a past President of the Bombay Chamber of Commerce and Industry.

Mr. Advani was appointed as Vice Chairman of Blue Star Infotech Limited in 1998.

(Chairman of Shareholders’ Grievance Committee)

Suneel M AdvaniChairman and Managing

Director

Ashok M AdvaniVice Chairman


Sanjay N VaswaniDirector

Board of Directors



9

Dr. Prakash G Hebalkar is a Doctor of Science in Computer Science and Economics from the Massachusetts Institute of Technology, USA. He has worked with IBM, USA and thereafter with Tata Burroughs / Unisys as Senior Vice President. He was instrumental in forming and building up the joint venture of Tata and Unisys as a successful software and consultancy services activity. He has been associated with several leading venture finance organizations and financial institutions and has served on the board of two Mahindra Group companies as an Independent Director.

Dr. Hebalkar joined the Board of Blue Star Infotech Limited in 2000.

(Member of Shareholders’ Grievance Committee and Audit Committee)

K P T Kutty is a practising Company Secretary and has over three decades of experience in the profession. He held various responsible positions in Blue Star Ltd.’s Legal & Secretarial Department since 1980 before taking over as the Company Secretary in 1994. Mr. Kutty has also worked with Forbes Forbes Campbell & Co. Limited and Reserve Bank of India prior to joining Blue Star Limited. He has earlier been a Director of Blue Star Infotech Limited from 8th May 1998 to 21st January 2000.

Mr. Kutty was re-appointed on the Board of Blue Star Infotech Limited in April 2011.

Naresh K Malhotra is a Commerce graduate from St. Xavier’s College, University of Kolkata and a Chartered Accountant. His functional expertise is in systems, corporate finance, mergers and acquisitions, marketing and facilitating start-ups. He started his career with Blue Star Limited in 1971 and thereafter worked overseas for 15 years with ICI, Unilever Group, Colgate Palmolive and Bukhatir Investments.

Mr. Malhotra was the President and a member of the Supervisory Board of the U B Group during 1986 –1992. In 1993 Mr. Malhotra joined KPMG as one of their Founding Partners and was the Managing Director, Corporate Finance and practice leader of the Real Estate, Hospitality and Retail businesses. Former CEO of Amalgamated Bean Coffee Trading Company (Cafe’ Coffee Day), Mr. Malhotra is also on the board of Royal Orchid Hotels, Onmobile and several other companies. He was also an advisor to GIV Management Inc., a Washington based venture capital company and was an Operating Partner with Sequoia Capital India.

Mr. Malhotra joined the Board of Blue Star Infotech Limited in 2003.

(Chairman of Audit Committee)

Suresh N Talwar is a Commerce and Law graduate and specializes in areas of corporate law and related fields. He is a legal counsel to various Indian and multinational corporations and banks. Before setting up his firm M/s Talwar, Thakore and Associates in 2007, he was the Senior Partner of Crawford Bayley and Company.

He joined the board of Blue Star Limited in June 1986. He is also on the board of several leading companies such as Merck, Larsen & Toubro, Greaves Cotton, Sanvik Asia, Esab India and Biocon amongst others.

Mr. Talwar has been on the Board of Blue Star Infotech Limited since 2000.

(Member of Audit Committee)

Dr. Prakash G HebalkarIndependent Director

Suresh N TalwarIndependent Director

Naresh K MalhotraIndependent Director

K P T KuttyIndependent Director


The Company

Blue Star Infotech, a technology consulting and services company, combines the best of engineering, creativity and technology to deliver the next generation of software solutions to its global customers and enable them to be future-ready.

Part of the well-known Blue Star Group, Blue Star Infotech Ltd. is a listed company with its global headquarters in Mumbai, India, and with operations in USA, UK, Europe, Japan, Singapore, and India. The Company is focused on delivering value-added and future-proofed software solutions by leveraging emerging technologies and trends while preserving existing investments for gaining competitive advantages. Teams comprising of engineers, designers and consultants across the globe work in conjunction with our labs and partners to deliver a superlative customer experience and best-in-class software solutions.

Blue Star Infotech caters to the IT and software R&D needs of enterprises globally, and offers a broad spectrum of services ranging from Application Development and Management, Product Engineering, Package Implementation and Testing to emerging areas such as Analytics/ Business Intelligence, Mobility and Cloud Computing.

Blue Star Infotech

! Has more than 1000 professionals developing solutions and managing the IT assets for companies ranging from Fortune 100 organisations to start-ups

! Has a Global Delivery Network spanning India, US and Singapore

! Was ranked by Zinnov, a leading management consulting firm in the area of Offshore Advisory to Fortune 1000 companies, in their 2009, 2011 and 2012 list of top service providers for the Offshore Software Product Development industry

! Was named in the 2012 Global Services 100 list of IT outsourcing service providers

! Has been repeatedly recognised by Microsoft and Oracle for vertical and customer excellence

Blue Star Infotech has successfully completed more than 800 major IT projects on a wide range of hardware and software platforms. It has delivered more than 1600 product releases for its technology customers worldwide. Its technology labs for Mobility, Cloud Computing, Analytics and Usability Engineering incubate and propagate new methodologies, standards, tools and solutions. This, coupled with its CMMi Level 5 and ISO 9001:2000 assessed Quality Assurance processes, assures world-class standards for all its deliverables.

Focused Approach

The Company focuses on a few chosen segments to deliver business-impacting solutions and develop a competitive edge. Over the last three decades, it has gained extensive experience in delivering cutting edge solutions to customers in select verticals such as Manufacturing, Travel and Hospitality, Hi-tech, Media & Entertainment, and Healthcare. Additionally, the company has been actively using the inorganic route to expand reach, skills and scale.

In early 2012, it formed a joint venture with Trisept Technology to create a Travel & Hospitality Technology Centre of Excellence in Milwaukee, WI. In mid-2012, it acquired Infostack Solutions Pte Ltd., a Singapore-based IT professional services company. More recently, it made a strategic investment in Activecubes, a company specializing in the Decision Management space.

Solution-centric Delivery

At Blue Star Infotech, project delivery teams are backed by a strong repository of solutions, accelerators, frameworks and reusable code bases that the Company has developed over the years. These are further complemented by the solution

About Blue Star Infotech



11

offerings of its various partners. This enables the Company to adopt a solution-led approach for solving business issues of its clients. Such an approach results in faster implementation, adoption of best practices and quicker realisation of business benefits.

Strong R&D Capabilities

To gain insights and establish thought leadership in its focus areas, the Company has invested in establishing labs and Communities of Practice in areas such as Mobility, Cloud Computing, Analytics and Testing. These help the Company to keep track of both present-day technologies and disruptive advancements, and examine the application of these to various business scenarios. The Company has also set up a dedicated Advanced Technology Group for the creation of new software solutions and products.

Customer-focused Organisation

In order to enhance customer value and bring agility and accountability, Blue Star Infotech’s Sales, Solutioning and Global Delivery functions as a single integrated unit when interacting with client organisations. This enables an enhanced focus on driving customer-facing processes and aligning client relationship, delivery, revenue and profitability more closely with key service lines.

Strong Partnerships with Leading Technology & Product Companies

Blue Star Infotech has developed strategic partnership with industry leaders, which allows it to expand its service offerings and distribution reach, and gain deeper insights in its focus areas. It also helps it to expose its consultants to industry best practices, ensure that they remain abreast of contemporary tools and technologies, and undergo the requisite certification processes in order to ensure top-quality services to its customers.

Global Delivery Model

Through its state-of-the-art software development and support centres in India, USA and Singapore, Blue Star Infotech is able to provide the right mix of onshore, nearshore and offshore delivery capabilities and therefore, address projects at an optimum price point without compromising on capabilities. A strong communication infrastructure ensures seamless integration between these centres and allows the company to provide round the clock support to its clients.

Select Clients

Hewlett-Packard, Trisept Solutions, American Express, Thomas Cook, Planview, Infogix, Conde Nast India Pvt. Ltd., Cipla, Blue Star Ltd., Hitachi Medical Corporation, Loyalty Partner Solutions, Preferred Hotel Group, Grassroots, SAS, Indoco Remedies

Strategic Partners

Microsoft, Oracle, SAS, QlikTech, Hewlett-Packard, IBM , DSI, Netbiscuits, Amazon Web Services, Virtual Ark

Note : ‘‘Blue Star Infotech’’ refers collectively to ‘‘Blue Star Infotech Ltd.’’ (A Company registered and listed with Stock Exchanges in India) and its overseas subsidiaries.


BOARD OF DIRECTORS


Ashok M AdvaniVice Chairman


Sanjay N VaswaniDirector

Dr. Prakash G HebalkarDirector

Suresh N TalwarDirector

Naresh K MalhotraDirector

K P T KuttyDirector

COMPANy SECRETARy

V. SudarshanChief Financial Officer and Company Secretary

EXECUTIVE COMMITTEE



Ramesh SubramanianGlobal Delivery Head

Suresh IyerExecutive Vice President - Marketing

Douglas GrayChief Solutions Officer

V. SudarshanChief Financial Officer and Company Secretary

Sanjeev SethiBlue Star Infotech America, Inc.

Satish GaonkarVice President - Consulting Services

Keyuri SinghVice President - Human Resources

BANKERSBank of America Merrill LynchCorporation BankHDFC Bank Ltd.ICICI Bank Ltd.The Hong Kong and ShanghaiBanking Corporation Ltd.The Royal Bank of Scotland N.V.

AUDITORSWalker, Chandiok & Co., Chartered Accountants

REGISTERED OFFICE & CORPORATEHEADQUARTERSThe Great Oasis,8th Floor, Plot No. D -13MIDC, Andheri (East)Mumbai 400 093Tel: 91-22-6695 6969Fax: 91-22-6697 3866

DEVELOPMENT CENTRESSEEPZ - SEZUnit 74, SDF IIIUnit 150, SDF VUnit 181, SDF VIUnit 188, SDF VIMIDC, SEEPz-SEz, Andheri (East),Mumbai 400 096, India.

BANGALORE#7, 18th Main Road,Koramangala Industrial Layout,Bangalore 560 095, India.

MUMBAIThe Great Oasis,3rd and 8th Floor, Plot No. D -13MIDC, Andheri (East)Mumbai 400 093, India.

USA777 W Glencoe Place,Bayside, WI 53217, USA.

SINGAPORE3 Shenton Way, #12-12 Shenton House, Singapore 068805

REGISTRAR & SHARE TRANSFER AGENTSLink Intime India Pvt. Ltd. C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (W), Mumbai 400 078, India.

Tel: 91-22-25946970Fax: 91-22-25946969

Corporate Information



13

Global Presence

Headquarters

The Great Oasis, 8th Floor, Plot No. D -13, MIDC, Andheri (East), Mumbai 400 093.Tel : 91-22-6695 6969; Fax : 91-22-6697 3866

Sales Offices

Santa Clara, CA, USA

Princeton, NJ, USA

Austin, TX, USA

Milwaukee, WI, USA

London, UK

Delhi, India

Chennai, India

Mumbai, India

Bengaluru, India

Singapore

Software Development Centres

Mumbai, India

Bengaluru, India

Milwaukee, WI, USA

Singapore

Business Partners

San Jose, CA, USA

Belmont, CA, USA

Germany


Blue Star Infotech in the News

Use of data analytcs inhospitality & travel industry

Business Overview Management Discussion & Analysis Statutory Reports | Financial Statements


Global Economic ScenarioThe global economy is still striving to shrug off the effects of the crisis of 2008-2009. Global growth dropped to almost 3% in 2012. With fiscal cliffs hovering over America and a chronic crisis in Europe, this slowing trend is expected to continue for the near term. While mature economies are still recovering, emerging markets, which picked up the slack in prior years, failed to do so in 2012 and is not expected to do so in the near future.

China managed growth of just 7.7% in the first quarter. Japan’s economy seems to be rebounding primarily due to the stimulus provided by its current government policies. America’s economy is expected to accelerate in the second half of the year. Euro-zone leaders believe they need more time to meet fiscal goals. In 2012, according to IMF data, the sum of the growth rates of China and India stood at its lowest level in just over 20 years. In India, high interest rates and policy uncertainties have impacted corporate sentiments and the overall investment climate in the country.

However, there are signs of improvement in Americas, UK and parts of Latin America as well. Germany showed some signs of revival during the early part of 2013. The IMF’s latest forecast has scaled down projections of global growth this year, but nonetheless predicted a better performance than in 2012.

Information Technology Industry ScenarioAccording to the NASSCOM Strategic Review 2013 report, the Indian IT-BPO industry touched USD 108 billion mark in fiscal 2013 compared to USD 100 billion in 2011. 2012 recorded a steady growth for technology and related services sector, with worldwide spending of USD 1.9 trillion, a growth rate of 4.8% over 2011. IT Services and Packaged Software each grew by 3.3%. IT, BPM services and software products continued to lead, accounting for over USD 1 trillion – 58 % of the total IT spend.

The Indian IT market continues to be one of the fastest growing markets. Well supported by a large consumer base of over 1.2 billion and the world’s second largest market of SMBs, the domestic IT-BPO revenue grew by 14.1% during fiscal 2013, despite a weak investment and economic growth environment. Increasing adoption of IT by the government and public sector has caused the Indian IT industry to maintain its growth momentum.

Export income from Engineering R&D (ER&D), Offshore Software Product Development (OSPD) and software products segments are estimated to have grown by 9% to USD 14.1 billion against USD 13 billion in fiscal 2012. Technologies such as mobility, analytics, social media and cloud computing are growing at a faster pace. Analytics is one of the fastest growing segments and CRISIL GR&A estimates it to grow at a CAGR of 45% to USD 25 billion by 2015 from USD 5.3 billion in 2011. As per CRISIL estimates, the global enterprise mobility market opportunity is expected to grow at a CAGR of 15% to USD 140 billion by the year 2020.

Within the travel and hospitality segment, the online travel market is expected to maintain its high growth momentum. Riding on its inherent advantages of low cost, focused attention and high data availability, the industry has been able to maintain a good growth momentum despite weak industry growth. According to PhoCusWright, a US based research firm, the online travel market increased to USD 385 billion in the year 2012. As a percentage of total travel spending, the online travel market increased to 40% up from 32% in the year 2008 and will increase further to over 46% by the year 2016.

According to NASSCOM, the Indian IT industry today is at a crossroad – while the past showed an era of exponential growth and global recognition, the future looks markedly different. The first USD 100 billion was largely a labour arbitrage play; the next USD 100 billion will be a combination of higher value services and increasingly non-linear play, in addition to a further extension of the cost proposition.

Building a future-ready Blue Star InfotechThe business environment is changing at a much faster pace than anticipated. In order to manage the uncertainties created by this volatile environment, organisations are striving to re-evaluate their own customer needs, re-align business models and improve efficiencies. Companies need to react with agility and accuracy in adapting to these changes and

Management Discussion & Analysis

Source : CSO


capitalising on new opportunities emerging from this. In addition, they also need to focus on innovation and growth plans to prepare for the future.

Technology plays a crucial role in enabling organisations to meet these requirements. Organisations are expecting more and more from their IT partners in helping them respond to their market dynamics with clinical precision and speed and in future-proofing their technology investments.

Business users are increasingly involved in the process of sourcing and provisioning of IT solutions. IT companies that have traditionally focused on cutting costs and managing IT infrastructure have to shift to higher-margin projects that focus on their client’s business growth. Emerging technologies such as mobility, analytics and cloud computing are driving technology spending and are expected to gain further momentum in the coming years.

Blue Star Infotech sensed these changes almost two years ago and initiated a comprehensive plan to realign itself to these shifting demands. The process of realignment covered four key aspects - customer focus, top talent induction, value-driven business alliances, and stakeholder value creation.

While the realignment process is still under way, the effects of these are becoming visible - in the form of above industry revenue growth, expanded market presence and delivery footprint, higher number of annuity customers, acquisition of leading brands as customers, participation in larger deals, richer IP and solutions inventory, higher customer satisfaction, higher brand visibility and improved utilisation. This has resulted in the emergence of a stronger and future-ready Blue Star Infotech that is well positioned and equipped to deal with the customer needs of today and tomorrow. This, in turn, will enable the Company to achieve its primary objectives of enhancing shareholder value and delivering consistent growth.

The strategic plan focused on the following strategic and operational areas: ! Enhancing customer engagement processes ! Building services and solutions around emerging technologies – organically as well as through partnerships and

alliances ! Creation of new solutions and IP ! Deepening our technology capabilities ! Expanding our delivery footprint ! Strengthening delivery processes and quality systems ! Enhancing our core assets - people

Focusing on our CustomersAt Blue Star Infotech, customer satisfaction is a function of three parameters: satisfaction index, loyalty index and advocacy. Each of these in turn assesses various aspects of the overall customer experience when dealing with Blue Star Infotech. A recent customer satisfaction survey conducted across its customer base has shown an improvement in overall customer satisfaction. In addition, there has been an increase in the number of annuity accounts, number of million dollar accounts and a significant improvement in the quality of accounts.

This is primarily due to the changes made in the customer engagement process. By virtue of its size, Blue Star Infotech is able to bring in agility, flexibility and top management involvement into its engagements. Customer relationships are developed and maintained at the highest level thereby providing an involvement at the decision-making levels within the client organisation. With proven expertise in both legacy and modern technologies and domain competencies, Blue Star Infotech is in a position to cater to both current and future technology needs of any organisation in its focus sectors.

Further, using a solution-centric approach and dedicated, cross-functional customer management teams, Blue Star Infotech is able to provide distinctive, relevant and customised solutions instead of a standard lift-and-shift solution. These solutions not only cover technology but also lead to a broader and far-reaching relationship that is mutually beneficial. This has enabled it to participate in multi-million and multi-year deals and compete with Tier 1 service providers and leading software product companies by providing a value proposition that is seen as different and value-added.

This is best exemplified by the words of Christian Hess, Managing Director of Loyalty Partner Solutions GmbH, a key customer and partner:



“We have chosen Blue Star Infotech to be our new strategic product development partner because they have convinced us in all criteria we considered important for our product development and growth strategy. Blue Star Infotech possesses vast experience in the development of standardised and innovative software product solutions. Moreover, Blue Star Infotech will help us to roll out our sales activities at an international level.”

SMAC – Emerging Enterprise TechnologiesAccording to various industry sources, the SMAC (social, mobility, analytics and cloud) market is expected to exceed USD 1 trillion in spending by 2020. In addition, by 2020, as many as 100 billion computing devices are expected to be connected to the Web. The usage of these technologies within enterprises varies, depending on the domain and target customers of the organisation. These technologies can be used for both internal processes as well as customer-facing processes.

The confluence of these technologies are enabling companies to leverage the digital ecosystem in order to identify new market opportunities, interact with customers, solicit feedback, improve responsiveness, increase brand visibility, manage risks and reduce costs. To unlock the potential offered, organisations need to adopt a systematic approach and integrate these technologies into their business and IT architecture.

Blue Star Infotech is in a position to enable organisations on this front and build a platform for the future – either singularly or collectively. Blue Star Infotech has invested in developing expertise and setting up labs and Communities of Practice that can accelerate implementation of these technologies within an enterprise. The Company has also developed an ecosystem of partners and consultants to complement these and provide a comprehensive suite of offerings and solutions for its customers.

On the Mobility front, Blue Star Infotech has formed business alliances with leading mobility solution providers such as Netbiscuits and Data Systems International. The Company has set up a highly-specialised Mobility Lab in its Mumbai Development Centre. This houses the requisite hardware and technology needed for researching new trends and developments in the mobility arena, developing state-of-the-art mobile and wireless applications and creating technology demos. It is fully equipped with a number of smartphone devices on the iOS, Android and Blackberry platforms. These are used for developing proof-of-concepts and solutions.

The Mobility Lab recently rolled out a tablet-based Mobile Vacation Planner (MVP). MVP is an experiential travel planning application that helps consumers plan a vacation using a combination of geographical, weather, location, attraction and social information. MVP focuses on providing the ultimate travel experience to the consumer unlike the traditional model that focus on the reservation process. MVP’s novel and innovative features include deployment on iPad using a dynamic and visually compelling graphical user interface, use of travel experience videos and a variety of media to educate, enlighten and excite travellers about the potential experiences at various destinations and points of interests available at those destinations.

Apart from these, Blue Star Infotech executed a number of projects in the mobility space. For a UK based Mobility Technology company, Blue Star Infotech designed and developed a Near Field Communications (NFC) application deployed on the Android operating system. For a leading US-based Tele-presence technology company, Blue Star Infotech created an iOS-based mobile application that brought video conferencing functionalities to the iPhone, enabling participants to join a conference from anywhere. Blue Star Infotech delivered a mobile application for providing secure, online access to credit card information to an UK-based enterprise software vendor providing performance management solutions.

In Analytics, Blue Star Infotech has partnered with SAS, the leader in business analytics software and the largest independent vendor in the business intelligence market and with QlikView, the leading business discovery platform that delivers user-driven business intelligence. On the QlikView platform, Blue Star Infotech has built a number of ready-to-use business intelligence solutions and is enabling companies such as 3 Wire, Conde Nast India Pvt. Ltd., Blue Star Ltd., Heartland Food Group, Northwest Telephone, Arbor Capital, Lewis and Rocca, Televerde and Surmodics to realise the power of analytics.

According to Vishandas Hardasani, Finance Director, Conde Nast India Pvt. Ltd., “Implementing ERP successfully is a tough process which was successfully managed by Blue Star Infotech along with our team. Next, we implemented Qlikview,


which is equally difficult and the 1st phase has nearly been completed and we are all set to start with the 2nd phase. The whole process has been pleasant and worthwhile.”

In order to address the growing Analytics market, Blue Star Infotech recently formed a strategic alliance and invested in the equity of Activecubes, a company specialising in the Decision Management space. This has brought into play a professional team with deep experience in delivering large-scale analytics solutions to global clients across Financial Services, Consumer Packaged Goods, Retail, Manufacturing, Tele communication and Healthcare.

Activecubes helps clients maximise efficiencies throughout the organisation by integrating large volumes of internal data that resides within the organisation with external syndicated data. Syndicated data can either be structured or unstructured data primarily provided by external sources / data providers.

The team comprises of analysts holding advanced degrees and with a proven track record of delivering simple to high-end solutions. It includes subject matter experts (including former EDs of Indian Banks, people who have headed Insurance practices and consulted for large Insurance firms, former senior bank & insurance employees), statisticians and econometricians, business intelligence architects and IT consultants.

This strategic alliance enables Blue Star Infotech to provide solutions that address key functional areas such as sales, marketing, supply chain, operations and risk management in various domains.

On the Cloud front, Blue Star Infotech has set up a Cloud Computing Lab to address the growing demand in this space. Blue Star Infotech was among the first Amazon Web Services partners to gain public designation as a Standard Consulting Partner. Blue Star Infotech is also a Cloud Accelerate partner for the Microsoft Windows Azure platform. It has also established an alliance with VirtualArk, a company that provides solutions for delivering applications through on-demand or SaaS models.

Blue Star Infotech’s Cloud Computing services cover feasibility analysis, platform recommendation, implementation and managed services, be it for a private, public or hybrid cloud. Its proprietary frameworks and solution assets help it to identify the right cloud solution for an enterprise. Microsoft successfully used Cloud Shelf Studio, a solution developed by the Cloud Computing Lab, for one of its customers. Cloud Shelf Studio is a state-of-the-art data migration solution that overcomes the practical challenges of data migration and provides customers a pay-per-use model. It frees up local storage in enterprises by uploading the on-premise content to the Microsoft Azure Cloud Storage platform. Enterprises can then browse the content and download on-demand.

During the year, Blue Star Infotech has helped a number of customers leverage the benefits of the cloud. It assisted a Danish-based software product company in moving their development, testing and production environments to the cloud through a Virtual Private Cloud (VPC) on Amazon Web Services (AWS). Using its custom framework, Launchpad, Blue Star Infotech developed a cloud-based survey application for a leading company that provides tools for organisations to identify and diagnose growth barriers.

Technology FocusBlue Star Infotech’s Advanced Technology Group (ATG), along with various in-house Labs and Practice Communities, is instrumental in keeping the company abreast of global technology trends and in providing strategic technological directions to its customers. As business dynamics changes and makes new demands on organisations, Blue Star Infotech’s R&D-centric approach provides the requisite technology blueprints, thereby ensuring that its customers leverage the best suitable options and are future-proofed in the process.

ATG focuses on keeping track of both present-day technologies and emerging, disruptive advancements and examines application of these to various business scenarios. This focus significantly enhances Blue Star Infotech’s ability to provide the most relevant solutions to its customers.

While ATG focuses on incubating new developments, Labs and Practice Communities, dedicated to specific areas, concentrate on developing and deepening capabilities in established and emerging technologies related to their focus areas. They develop expertise, best practices, build frameworks, evaluate various tools, create technology demonstrators and accelerators and provide troubleshooting support to customer-facing business units.



Blue Star Infotech has established dedicated practice communities for Mobility, Cloud Computing, Usability Engineering, Microsoft and Testing.

All test engineers in the organisation are centralised under the umbrella of a Global Testing Community of Practice (GTCoP). GTCoP serves as a virtual home for testers in the organisation and conducts training sessions, quizzes and workshops. During the year, GTCoP was responsible for creating innovative test services and delivering several complex independent testing projects. Using its rich and diverse experience from various projects, GTCoP has developed a number of test automation solutions and has recently filed a patent for EZTest, a selenium based script-less Test Automation Framework.

Solutions and IPIn 2012, Blue Star Infotech Ltd. formally embarked upon a journey to transform itself from an IT Services-only firm into a company offering Intellectual Property (IP)-led Services, enabled and augmented by proprietary Software Solutions and Products, in addition to traditional IT Services. The goals and objectives of this transformation were to:! Increase gross and net profit margins through licensing of IP-based Software Solutions & Products, which typically

offers gross margins in the 70-90% range! Increase thought leadership and competitive differentiation in the increasingly commoditised, offshore-centric IT

Services & Staff Augmentation marketplace! Respond more effectively to the heightened demands of clients from their IT Service Providers to deliver greater

value, more quickly and with less execution risk, than in the past! Increase sustainable competitive advantage through the creation of high economic value-added IP-based Software

Solutions & Products! Increase Blue Star Infotech Ltd.’s market capitalisation by creating a more predictable and more sustainable revenue

and profit growth

Blue Star Infotech currently has an inventory of over 100 uniquely identifiable software assets ranging from software products, such as iRoadGenie, to software product concepts under development, such as iMapGenie and to software frameworks, tools and methodologies, including the following:

! Accelerate+ & StarAgile Development Framework & Methodology! LaunchPad Microsoft Application Development Framework & Code Generator! Sharepoint Frameworks! Business Intelligence Frameworks for Manufacturing, Pharmaceutical and Travel & Hospitality Industries! EZTest– a Test Automation Framework that enables rapid automation of test scripts! Test Management Office Portal Framework to manage and coordinate the testing activities within an enterprise! SmartTravel Solution Portfolio consisting of a Web Booking Engine, a Mobile App and an Analytics dashboard for

the Travel & Hospitality industry vertical

In order to monetise the IP, customer facing teams are made aware of proven sales techniques and methods, including Solution Selling and Unselling, that focus on customer economic value creation by leveraging existing software IP-based frameworks, solutions and products. Delivery teams approach each client and project opportunity as a mechanism to create reusable and repeatable IP that can be leveraged on future engagements to both the benefit of the client and Blue Star Infotech.

A formal process was put into place and proactively implemented by ATG (Advanced Technology Group) for the creation of new Software Solutions and Products. This process was successfully put into practice and applied throughout the entire lifecycle for a new mobile travel planning application known as Mobile Vacation Planner (MVP). Using MVP as a model, ATG, working closely with Sales & Delivery teams, has created multiple Software Solution & Product Concept storyboards and working prototypes across multiple industry verticals and horizontal technologies, such as:

! SmartRetreat – storyboard for a mobile tablet computer-based concierge app for the hotel guest! SmartTravelHotel – a web-based hotel booking platform ! SmartTravelOTA – a web-based online travel agency (OTA) platform ! SmartDynaPrice – a conceptual design for a real-time market information-based and competitive pricing engine

applying mathematical optimisation and price elasticity of demand theory


! Customer Intelligence Architecture – a SAS/R & Qlikview-based Analytics SaaS platform architecture design for marketing analytics in the Travel & Hospitality industry

! Microsoft Windows 8 Phone mobile tablet computer-based app prototypes for the travel and healthcare segment ! Mobile Field Service - storyboard for a mobile tablet computer-based app for field service technician personnel

including dispatch and technical support

The transition to becoming a company capable of offering Intellectual Property (IP)-led Services, enabled and augmented by proprietary Software Solutions and Products, is presently underway and has started showing results.

Global Delivery via USA, India and SingaporeBlue Star Infotech leverages its global delivery footprint, spread across India, US and Singapore,for providing its customers with the best options possible in terms of quality, price and service delivery.

The Blue7 Solutions organisation in Milwaukee, WI is now a full-fledged and well-integrated delivery centre located in USA and has started delivering revenues for the company across various service lines. Blue Star Infotech now offers this centre as a part of an Integrated Global Delivery model incorporating an onsite, nearshore and offshore mix and also provides round-the-clock execution capabilities across multiple time zones.

In addition, Blue Star Infotech is also poised to leverage its centre in Singapore as a platform for higher value engagements in the ASEAN region. This is in line with its Global Delivery strategy and allows the company to service engagements with the most appropriate mix of talent from various timezones and geographies.

A number of operational initiatives were also rolled out during the year – these were to strengthen operational excellence, improve utilisation, enhance skills, increase competency depth and achieve higher process maturity. In addition, internal systems were tuned to meet key operational and business requirements. A knowledge management system is currently under implementation to enable the collection and search of explicit knowledge assets that can make deliveries more efficient.

Software Engineering Processes and Quality CertificationBlue Star Infotech utilises an extensive process framework that prescribes methodologies and best practices for the various kinds of projects it undertakes. These incorporate both industry standards as well as proprietary practices fine-tuned over the years. A dedicated team, comprising of Quality Assurance and Process consultants, manage this framework. This team is responsible for the maintenance and enhancement of the process repository, advising project teams on processes to adopt and conducting periodic quality audits. The process framework is enhanced and updated based on learning from various projects and quality audit findings.

Process compliance is tracked across all projects under execution and is also a key metric measured in the employee performance appraisal process. Statistical models and patterns are used to study project performance and determine organisational baselines on various project measures. The Quality Assurance team guides project teams in process definition and conducts periodic audits to ensure that processes are effective and providing the requisite results.

In the context of a Global Delivery Network, the process framework enables standardisation of software engineering processes and tools and therefore provides a consistent engagement experience for customers.

The Quality group constantly evaluates various software engineering and productivity tools to automate various manual processes, improve collaboration and elevate project quality.

During the fiscal, Blue Star Infotech was successfully assessed at CMMi Level 5. CMMi Level 5 is the highest maturity level rating and establishes a company’s credibility delivering high quality software services through continually optimising processes driven by business objectives and performance needs.

Since most of our projects involve global teams working together on a common development platform, Blue Star Infotech perfected a methodology called Distributed Agile. The Agile development methodology enables software products and applications to be developed in small work packets using shorter time cycles resulting in accelerated releases to market. Implementation and software adoption risks are mitigated as end-users see the final product earlier and provide feedback more regularly throughout the lifecycle. Distributed Agile is an enhanced version of this methodology in which the development and testing teams can be located anywhere in the world and still work together on the same project.



Using best practices and tools, distributed agile projects are found to be more successful than projects executed using waterfall or traditional methodologies.

At Blue Star Infotech, the Product Engineering group uses this methodology for developing software products for its customers. A dedicated website, www.agiledistributed.com, was launched to demonstrate Blue Star Infotech’s capabilities, best practices and experiences on Distributed Agile.

The effectiveness of this methodology and contribution of Blue Star Infotech is best described by Rob Reesor, Vice President – Development, Planview Inc. –

“Although the B2B nature of our business model meant that we could go to market with our code only when the project was finished, we always achieved shippable status for the codebase at the end of each sprint. This was possible because we enjoyed a very positive Distributed Agile engagement with Blue Star. The Blue Star team demonstrated remarkable application to adapt to the needs at hand.”

Talent Management – enriching our DNAGrowth across different stages of business cycles requires different approaches. A company’s culture, people and processes need to be continuously re-aligned to ensure that the business objectives are met and a consistent experience is delivered to its clients. In order to manage the resulting changes and align the employees to the internal transformation, the HR team focused on encouraging the right culture of openness and entrepreneurship required to effectively function in such a dynamic environment.

Blue Star Infotech’s joint venture in the US and the acquisition in Singapore during the last year resulted in a diversified global workforce that needed to be integrated within the Blue Star Infotech family and culture. To manage the change and integration between various offices across the world, the Company has invested in business process, soft skills and technology training through both classroom-based and online programs using both external and internal professionals. On the business process side, all managers went through a series of programs to develop business acumen, customer management and lateral thinking skills. The soft skills workshops included team building, communication skills and time management. During the year, workshops on various topics related to operations, customer management, solutioning, project estimation, engineering processes were conducted across all delivery centres.

The HR team initiated a series of approaches to ensure that every employee across locations was aware of the changes being implemented and participated in the process of transformation. This included regular CEO-led town hall meetings, management interaction workshops and newsletters. Through these, close interactions between employees and senior management could be fostered without any hierarchical boundaries. Social media technologies were utilised in this process as well. A Facebook presence was established and provided all employees the opportunity to collaborate and communicate at a social level. A CEO Blog was started to enable management to communicate with its employees and solicit their inputs on various aspects. This enabled the HR team to understand the pulse of the organisation and quickly react to address any situation.

All of these produced innovative business ideas and numerous organisational process improvements. The work environment is friendly and collaborative, with everyone aligned to a common goal. Employee goals are mapped to the Company goals through a very robust goal cascading process. Employees are explained the objective of what they need to do and then allowed the freedom to work without being shackled by boundaries. These goals are then tracked and measured through various metrics. The performance management process is based on achievement of these goals. This has led to a better engaged and more productive workforce. More importantly, a unified operational model was established and nurtured in the process.

OutlookThe business environment in 2013-14 is expected to show moderate growth and will be conducive for companies such as Blue Star Infotech. It has chosen to make investments in a number of areas that will create new engines for growth. Its active focus on customer value creation and IP-based service delivery will also enable it to derive new opportunities and provide a more comprehensive value proposition to its customers in a volatile business environment.

The Company is confident that the on-going transformation will enable it to gain further momentum and deliver long-term sustainable growth.


DISCUSSION ON FINANCIAL PERFORMANCE (Consolidated)

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in India. The management of Blue Star Infotech Ltd. accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect, in a true and fair manner, the form and substance of transactions and reasonably present the Company’s state of affairs and profits for the year.

1. Financial Conditiona. Share capital The Company has an authorised capital of 2 Crore equity shares of `10 each (in the previous year, it was 2 Crore

equity shares). As of year-end, the issued, subscribed and paid up capital of the Company is `10.385 Crore. The Company did not make any fresh issue of equity shares during the financial year 2012-13.

b. Reserves and surplus The reserves and surplus of the Company increased by `6.98 Crore to `78.85 Crore in the financial year 2012-13.

`0.53 Crore was transferred from Profit and Loss Account to General reserve. The increase is mainly on account of the profits made during the year.

c. Debt status During the financial year 2012-13, the Company has an outstanding unsecured debt to a bank in Singapore to the

extent of ̀ 0.12 Crore (previous year ̀ Nil). This amount relates to Infostack Solutions Pte. Ltd. (subsequently renamed to Blue Star Infostack Solutions Pte. Ltd.) that was acquired as a going concern by the Singapore subsidiary of the Company in June 2012. The Company continues to remain debt-free in its other businesses.

d. Fixed assets The Gross block of fixed assets for financial year 2012-13 was `42.65 Crore and cumulative depreciation amounted

to `20.77 Crore. Additions to fixed assets made during the year was of the order of `3.24 Crore mainly comprising of leasehold building improvements (`0.60 Crore), vehicles (`0.50 Crore), computers (`1.12 Crore), air conditioning equipment (`0.08 Crore), Office equipment (`0.07 Crore) and Computer Software (`0.78 Crore). During the year, the expenditure was mainly in relation to the company’s new unit in SEEPZ-SEZ, Mumbai and for technology enhancement of existing infrastructure.

e. Investments The Company invests its surplus funds in liquid fund schemes of reputed mutual fund institutions and with banks.

During the year, investments in mutual funds decreased from ̀ 5.55 Crore to ̀ 1.13 Crore on account of the company ploughing back its investments into business opportunities and bank deposits increased by `5.72 Crore. The Company invested `6.63 Crore in its newly formed subsidiary in Singapore i.e. Blue Star Infotech (Singapore) Pte.Ltd. and retained its profits in its US joint venture Blue7 Solutions LLC to the extent of ̀ 0.29 Crore In effect, sum total of investments in business and with banks and institutions is at a level marginally higher than the previous year.

f. Sundry debtors During the financial year, debtors increased from `28.53 to Crore `44.58 Crore. The increase is a consequence of

significant increase in revenue volumes during the latter half of the year. These debtors are considered good and realisable and provision has been made for all doubtful debts.



Days 2012-13 2011-12

` Crore % ` Crore %

0-30 26.18 59 23.38 87

31-60 9.31 21 0.35 4

61-90 2.18 5 0.19 1

More than 90 6.91 15 4.61 8

Total 44.58 100 28.53 100

g. Cash and bank balance The cash and bank balances at the year-end have gone up from `22.81 Crore to `28.67 Crore. The surplus non-

operational cash of the company is invested in liquid mutual funds and bank deposits as described under sections e) Investments above. Cash balances are either held in Rupee fixed deposits, current accounts or Export Earners Foreign Currency (EEFC) current accounts in India. The bank balances in EEFC accounts are generally used for (i) Meeting operational expenses, (ii) Meeting the remittance requirements of subsidiaries, (iii) Strategic investments and (iv) Import of technology assets.

The remaining cash and bank balances mainly represent bank balances in current accounts with banks in India and abroad i.e. in USA, UK, Singapore, Japan and Finland.

h. Loans and Advances Loans and Advance represent the amount paid by the Company in advance for value and services to be received in

future.

Long-term: `3.69 Crore in deposits for Rent and to utility companies, `2.42 Crore as MAT Credit entitlement and `11.78 Crore as Advance Tax net of Provisions.

Short-term: These mainly consist of prepaid expenses of `0.73 Crore and `2.85 Crore as advances recoverable in cash.

i. Other Non-current assets The Company has ̀ 0.46 Crore as Deferred Rent and ̀ 0.02 Crore in Deposits with maturity exceeding twelve months.

j. Current liabilities Sundry creditors represent amounts payable to vendors for supply of services and fixed assets purchases. There are

no amounts due to small scale units. Unclaimed dividends represent dividends paid but not realised by shareholders. Other liabilities include accrued liabilities and benefits payable to the staff (including leave encashment) and amounts accrued for various operational expenses. Unearned revenue represents payments received in advance from customers for services to be provided in future such as fees received against annual maintenance contracts. Hedging reserve on open forward contracts are potential liabilities (derived on methodology consistent with AS-30 issued by ASCII) on foreign exchange forward contracts which are primarily in the nature of cash flow hedges for future business, arising from contracted rate being lower than current spot rate.

k. Provisions Long-term Provision for leave encashment (compensated absences) was `0.85 Crore at the end of the year whereas

short-term provision for leave encashment (compensated absences) was `0.57 Crore.

These provisions are computed either on the basis of an actuarial valuation or estimates in accordance with the prescribed accounting standards.

The company has made a tax provision of `2.26 Crore during the year. There is a deferred tax liability on account of timing difference in depreciation for which a provision of `0.09 Crore is made during the year. The Company made provisions of `2.08 Crore and `0.35 Crore for Proposed Dividend and Corporate Dividend Tax respectively.


2. Results of Operationsa. Income The total income of the Company comprises income from operations and other incomes. In the financial year 2012-

13, Income from Operations (Sales and Software Services) was `188.53 Crore as compared to `126.39 Crore for the previous year. The income from other sources decreased from `8.04 Crore to `6.63 Crore. Other income was primarily from license fee received for leased office property, dividend and interest income from investments. While the license fee income increased from `3.70 Crore last year to `4.59 Crore this year, the other income decreased from `4.34 Crore last year to `2.04 Crore this year due to a reduction in returns, on account of a decrease in the investment corpus and the absence of gains on foreign exchange translation this year against `1.83 Crore last year.

b. Other expenses The total other operating and general expenses increased from `43.93 Crore to `81.74 Crore in the year under

review. The increase is chiefly on account of significant appreciation in the business volumes and in overseas operations during the year, which resulted in the company engaging much higher number of personnel on contract. The absolute cost increase is 30% and after discounting for inflationary increases and exchange rate differences, the increase is about 14% on an overall basis.

In ` Cr.OPERATING AND GENERAL EXPENSES Fy 2012-13 Fy 2011-12Cost of Technical and Other Manpower (Contract) 52.96 21.64 Travelling and conveyance 6.49 6.64 Loss on Exchange Translation 5.39 -Rent 5.35 4.74 Communication Expenses 2.61 2.10 Power 2.00 1.72 Repairs and maintenance 1.13 1.33 Professional charges 0.73 0.58 Rates and taxes 0.31 0.57 Payment to auditors 0.47 0.41 Recruitment charges 0.20 0.41 Provision for bad and doubtful debts 0.35 0.38 Cost of Software License and Tools 0.38 0.30 Security Charges 0.33 0.32 Various other expenses 3.04 2.79 Total 81.74 43.93

KEy RISKS AND CONCERNSRisk is intrinsic to commercial activities and it is important for organisations to identify and mitigate such risks that could pose a serious threat to business. With multiple points of operation, geographies and entities, new or increased risks emerge. The de-risking capabilities of the organisation are therefore paramount.

Blue Star Infotech has robust risk mitigation policies and strategies across the entities that it operates. On the revenue front, by having its customer spread in India and in outside geographies allows the company to balance its performance. Business segment concentration brings with it inherent risk potentials. The Company has continuously tried to diversify its offerings in product engineering services, travel and hospitality, business intelligence and analytics, enterprise application business segments to mitigate the concerns.

Currency exchange rate risks arising from extreme volatility of exchange rates in international currencies is a major issue of concern for the company, due to its exports and billing in foreign currency and the multiple markets that it operates in. Generally, the Company has been trying to address this issue by hedging part of its foreign exchange exposures suitably



from time to time, reducing the cycle time for international exposures and also by having a diversified billing currency basket.

Significant and continued inflationary pressures in India lead to constant cost increases predominantly in employee cost and fixed overheads, which acts as a serious deterrent to growth and expansion to the entire Indian industry today. The Company tries to address this risk by optimising the use of its infrastructure and tries to maintain a high level of productivity. Maintaining an optimal mix of resources on its projects and a robust recruitment plan that systematically inducts and grooms fresh engineers into its delivery organisation is expected to address these risks to some extent. The company has taken cost optimisation and control measures to ensure that expenditure is need based and commensurate with the growth and profitability of business.

Receivables that are overdue or all posing collection difficulties are risks that have to be avoided by any business. The Company has addressed this by having a robust process to review the receivables, coupled with continuous customer connect to ensure that collections are not unduly delayed or pose a collection risk or result in a financial loss.

Investment risk, involves risks of sub-optimal returns on the money invested as also loss of capital. The company has implemented a balanced investment policy for investing its surplus cash funds where safety of principal is supreme and competitive returns being the principal objective.

Political instability, project execution risks, country policy risks, withdrawal of incentives, consistency in managing change, capability and consistency in top management to take timely remedial measures, change in tax rates, inconsistent or retrograde government action, loss of fiscal / tax incentives and reduced margins due to competitive pricing are some of the other risks which affect our business.

INTERNAL CONTROL SySTEMS AND THEIR ADEQUACyBusiness relevant internal control systems are extremely important to business enterprises. The company has well-defined operational and other Budgets for its Business Units and empowered personnel appropriately based on their work specifications to take decisions. The company remains steadfast in upholding internal control, efficiency of operations and security which meets or exceeds industry standard. The current systems and procedures provide reasonable assurance in the maintenance of appropriate accounting records, reliability of financial information, protection of resources and safeguarding of assets against unauthorised use. Compliance with well-established systems, policies and procedures are regularly monitored by your company’s internal audit process both at the unit as well as the corporate level, both internally and by a team of external auditors.

The Audit committee of Directors comprising Mr. Naresh Malhotra (Chairman), Mr. Suresh Talwar and Dr. Prakash Hebalkar meet at least four times a year to review the internal control systems and financial disclosures by the company.

The top management continuously monitors various controls and systems within the organisation for consistency and makes assurances or provides areas for risk mitigation with a plan thereof to the audit committee at least once every quarter.


Directors’ Report

Dear Members,

Your Directors present herewith the Sixteenth Annual Report on the business and operations of the Company together

with the Audited Financial Statements for the year ended March 31, 2013.

1. FINANCIAL RESULTS

The Company’s operating performance during the year ended March 31, 2013 as compared to the previous year is

indicated in brief below:(` in Lakhs)

2012-13 2011-12Total income 10,902 10,771Profit before interest, depreciation and taxation 987 1,103Depreciation 281 296Profit before taxation 706 807Provision for taxation 172 253Profit after taxation 534 554Balance brought forward 5,521 5,262Profits available for appropriation 6,055 5,816Less: Transfer to General reserve 53 55 Dividend (Proposed) 208 208 Corporate dividend tax 35 34Add: Excess Provision for Dividend Distribution Tax written back

- 2

Balance carried forward 5,759 5,521

2. DIVIDEND

Your Directors are pleased to recommend payment of a dividend of `2/- per equity share of `10/- each during the

year subject to the approval of the shareholders (Previous year `2/- per share of `10/- each).

3. OPERATING RESULTS AND BUSINESS

During the year under review, total income of the Company was ̀ 109 Crore as compared to ̀ 108 Crore in the previous

financial year, i.e. an increase of 1%. On a consolidated basis, total income increased from `134 Crore to `195 Crore,

which is the highest ever for your Company till date.

The effects of the global recession continued to dominate the economic scenario for IT companies as well as other

industries for a large part of FY 12-13. Despite a robust increase in sales volumes, your company had to invest

significantly in business expansion which had an effect on the overall profitability growth. Tight control over costs

and continued insistence on higher manpower productivity and other operational efficiencies ensured that the

business was profitable. The net profit after tax on a consolidated basis for the year ended March 31, 2013 was `4.99

Crore as compared to `3.57 Crore for the previous financial year.

4. LIQUID INVESTMENTS

The Company invests its surplus funds in debt based mutual funds and fixed deposits with banks, which are

considered safe. As on March 31, 2013 about `1.13 Crore were invested in liquid debt mutual fund schemes and

` 6.74 Crore in bank deposits.

5. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

The Company at present has the following subsidiary companies:

a) Blue Star Infotech America, Inc. (BSIA)

A 100% wholly owned subsidiary of the Company, Blue Star Infotech America, Inc. posted a total income of USD

16,324,379 (equivalent of ̀ 88.77 Crore) for the financial year ending March 31, 2013 as compared to USD 13,084,898


Business Overview | Management Discussion & Analysis Statutory Reports Financial Statements

27

(equivalent of `65.86 Crore) for the previous year. The Company reported net loss of USD 309,399 (equivalent of `1.68 Crore) this year compared to a net loss of USD 413,674 (equivalent of `2.07 Crore) for the previous year.

As at the year end, there has been further erosion in the net worth of Blue Star Infotech America Inc. which is reflected in the reduced net worth of the subsidiary. The management is of the view that this business loss is a temporary phenomenon arising due to strategic investments in substantially expanding the overseas sales teams and associated sales costs. Hence, no impairment of the investment in the subsidiary is deemed necessary at this time.

The company’s Joint Venture in the US titled Blue7 Solutions LLC with Trisept Technology LLC based in Milwaukee, State of Wisconsin provides expertise in travel services domain. The performance of the joint venture was satisfactory.

b) Blue Star Infotech (UK) Ltd.

The total income of this wholly owned subsidiary of the Company was £2,549,538 (equivalent of ̀ 20.93 Crore) for the financial year ended March 31, 2013 as compared to £2,760,596 (equivalent of `22.00 Crore) for the previous year. It registered a net profit of £145,520 (equivalent of `1.19 Crore) for the financial year ending on March 31, 2013 compared to net profit of £13,807 (equivalent of `0.11 Crore) for the previous year.

c) Blue Star Infotech (Singapore) Pte. Limited

A 100% wholly owned subsidiary of the Company, was incorporated in Singapore as on 27th January 2012 to cater to the needs of our existing global clients in the Asia Pacific Region.

The total income of this wholly owned subsidiary of the Company was SGD 1,409,152 (equivalent of `6.16 Crore) (Previous Year of SGD Nil) for the financial year ending March 31, 2013. It registered a net profit of SGD 195,875 (equivalent of `0.86 Crore) for the financial year ending on March 31, 2013 compared to net profit of SGD Nil for the previous year.

The Company has a wholly owned subsidiary in Singapore titled Blue Star Infostack Solutions Pte. Ltd. which caters to the Banking, Financial Services and Insurance sector in Singapore and Malaysia. The performance of the subsidiary is satisfactory.

The Company has also setup a wholly owned subsidiary named Blue Star Infostack Malaysia Sdn. Bhd. in 2013 for catering to Malaysian clients.

Publication of results of subsidiary companies

Section 212(8) of the Companies Act, 1956 exempts the holding company from attaching the Balance Sheet and Profit and Loss Account of its subsidiaries. The Ministry of Corporate Affairs vide its circular No. 2/2011 dated 8th February, 2011 granted, subject to certain terms and conditions, permission on a general basis, to the Board of Directors of the holding company to allow for publication of the Annual Report without the subsidiary company’s financials. Accordingly, the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the subsidiary companies have not been attached with the Balance Sheet of the Company. The Company will make available these documents/details upon request by any member of the Company interested in obtaining the same. However, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial information of its subsidiaries.

6. DIRECTORS

In accordance with the provisions of the Companies Act, 1956, two of the Directors, Mr. Suresh N. Talwar and Dr. Prakash G. Hebalkar retire by rotation and being eligible, offer themselves for reappointment at the ensuing Annual General Meeting. Brief profiles of these Directors are given in the notes to the notice of the ensuing AGM.

7. EMPLOYEES STOCK OPTION PLAN (ESOP)

Disclosures required to be made under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ESOP are given in note no. 2.1 of Notes to the Financial Statements, forming part of the Accounts.


8. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors would like to inform the members that the Audited Accounts for the financial year ended March 31, 2013 are in full conformity with the requirement of the Companies Act, 1956. The Directors hereby confirm that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed.

b) For recognising exchange gains or loss on foreign exchange, the Institute of Chartered Accountants of India has announced and recommended new accounting standard AS30 to be adopted. Your Directors have thought that it is prudent and appropriate to adopt this standard with effect from April 1, 2008 although it is yet to become mandatory. In accordance with this standard, foreign exchange gains or losses not related to the operations for the period are transferred to an account called Hedging Reserve in the Balance Sheet.

c) The accounting policies are consistently applied, and reasonable, prudent judgments and estimates are made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year, and of the profits of the Company for that period.

d) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company, and for providing and detecting frauds and other irregularities.

e) The Directors have prepared the annual accounts on a going concern basis.

9. AUDITORS

The Statutory Auditors M/s Walker, Chandiok & Co, Chartered Accountants, Mumbai, who retire at the conclusion of the ensuing Annual General Meeting, being eligible, offer themselves for re-appointment. A written certificate from the proposed Auditors has been obtained by the Company to the effect that the re-appointment, if made, would be in accordance with the limits specified under Section 224(1B) of the Companies Act, 1956.

10. CORPORATE GOVERNANCE

The Company has complied with all the recommendations of the Corporate Governance code as provided in clause 49 of the Listing Agreement with the stock exchanges.

A separate section on Corporate Governance, together with a certificate from the Company’s Auditors confirming compliance, is set out separately, forming part of this Report.

11. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

As required by clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report is attached separately in the Annual Report, and forms part of the Directors’ Report.

12. PARTICULARS OF EMPLOYEES

Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1) (b) (iv) of the Companies Act, 1956, this report is being sent to all the shareholders of the Company excluding the aforesaid information. The said particulars will be made available on request, and also made available for inspection at the Registered Office of the Company. Members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

13. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as per Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, relating to the conservation of energy, technology, absorption, foreign exchange earnings and outgoings respectively, is annexed and forms part of this report.



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14. GREEN INTIATIVE IN THE CORPORATE GOVERNANCE

Pursuant to the “Green Initiative in Corporate Governance” by the Ministry of Corporate Affairs in allowing paperless

compliances, the Company has implemented the policy of sending the Notice with Balance Sheet, Profit and Loss

Account, Auditor’s Report, Director’s Report and Explanatory Statement etc. through email after obtaining consent

of the shareholders who are willing to receive the aforementioned document through electronic mode.

15. ACKNOWLEDGEMENT

The Board wishes to place on record its appreciation of the sincere efforts put in by the employees of the Company,

in helping it reach its current growth levels.

Your Directors appreciate the continued support of employees, clients, investors, business associates, bankers,

vendors, regulatory authorities and other stakeholders.

For and on behalf of the Board of Directors

of Blue Star Infotech Limited

Place: Mumbai Suneel M Advani

Date: 9 May 2013 Chairman and Managing Director


Annexure to Directors’ ReportParticulars pursuant to Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988

Conservation of Energy

The nature of the Company’s operations entails a very low level of energy consumption. Adequate measures have, however, been taken to conserve energy by using energy efficient computing devices, regulating the air conditioning and by use of energy saving lights.

Research & Development

The Company has an Advanced Technology Group which is working on several products in the Travel and Hospitality domain. Research and Development activities are on to develop applications such as iRoadGenie, iMapGenie, Mobile Vacation Planner, SmartTravel etc. These software products are being developed by teams from our existing delivery setup. The company believes that it will benefit from developing unique product offerings in the near future.

Technology Absorption

The Company did not import any technology during the year under review.

Foreign Exchange Earnings and Outgo

a. Activities relating to exports; initiatives taken to increase exports; development of new export markets for products and services and export plans

Over the years, we have established a direct marketing network around the world, including North America and Europe. These offices are staffed with the Company personnel, who sell the Company’s Services to client.

We serve our global clientele through offices in Santa Clara (CA) and New Jersey (NJ) in North America, London in Europe and Singapore and Malaysia in Asia Pacific. We also have business associates in USA and Continental Europe.

b. Total foreign exchange earned and used

The details of Foreign Exchange Earnings and Outgo are disclosed in note 2.23 of the Notes to the Financials Statement, forming part of the Accounts.

c. Forex management Policy.

To hedge against volatility on the forex market, your company has adopted a balanced hedging policy which combines forward exchange contracts with options up to certain levels. This policy is expected to minimise risks arising from foreign exchange fluctuations.



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Corporate GovernanceCorporate Governance is about commitment to ethical business conduct and is the system by which Companies are directed and controlled by the management in the best interest of its stakeholders. Corporate Governance guidelines and best practices have evolved over a period of time. It is about how an organization is managed. This includes its corporate and other structures, its culture, policies and the manner in which it deals with various stakeholders. Accordingly, timely and accurate disclosure of information regarding the financial situation, performance, ownership and governance of the Company is an important part of Corporate Governance. Application of best management practices, compliance of laws, rules, regulations and adherence to standards to achieve the objectives of the Company, enhance shareholder value and discharging social responsibility are part of Corporate Governance. Good Corporate Governance practice lies at the foundation of the Company.

Our Company does not view Corporate Governance principles as a set of binding obligations, but believes in using it as a framework to be followed in spirit. This is reflected in the Company’s philosophy on Corporate Governance.

I. COMPANY’S PHILOSOPHY ON CODE OF GOVERNANCE

The Company’s priority is to steadily increase corporate value over the long term. Further, the Company’s fundamental management philosophy is to remain a trusted corporate citizen in the local and international society through open and fair business activities that honour the language and spirit of the law of every nation. In order to put that philosophy into practice, the Company builds favourable relationships with all of its stakeholders, including shareholders, customers, business partners, local communities, and employees.

The Company is convinced that providing products and services that fully cater to customer needs is essential to achieve stable, long-term growth. The Company is working to enhance Corporate Governance through a variety of measures designed to further increase its competitiveness as a global company.

The Company has set a goal for attaining the highest standard of good governance, to meticulously pursue it and thereby maximize value for its shareholders, customers, employees and public at large. The Company recognises that transparency, disclosure, financial controls and accountability are the pillars of any good system of Corporate Governance. In this direction, the Company is committed to ensure that the Company’s Board of Directors continue to be constituted as per the prescribed norms, meet regularly as per the prescribed frequency, provide effective leadership, exercise control over the management, monitor executive performance and ensure appropriate disclosure.

In compliance with the disclosure requirements of Clause 49 of the Listing Agreement executed with the stock exchanges, the details are set out below:

II. BOARD OF DIRECTORS

a) The Board

The Board critically evaluates strategic direction of the Company, management policies and their effectiveness. The day-to-day management of the Company is entrusted to its key personnel led by Mr. Sunil Bhatia, the Chief Executive Officer (CEO) and Managing Director, who operates under the superintendence, direction and control of the Board. The Board members possess requisite skills, experience and expertise required to take decisions, which are in the best interest of the Company. While appointing the Directors, the Board considers their educational qualifications, skills, experience, commitment and background, in the context of the requirements of the Board at that point in time.

b) Composition of the Board of Directors

The Board comprises an optimum combination of Executive and Non-Executive Directors and is in conformity with the Board composition requirements of clause 49 of the Listing Agreement entered between the Company and the Stock Exchanges, where the ordinary shares of the Company are listed. The Board comprises eight Directors, of which one is the Chairman and Managing Director, another is Chief Executive Officer and Managing Director and Six Non-Executive Directors. Since the Chairman of the Board is also the Managing Director, half of


the Board is composed of Independent Directors as defined in Clause 49 of the Listing Agreement with the Stock Exchanges.

c) Board Meetings

During the financial year 2012-13, the Board met four times on May 3, 2012, July 19, 2012, October 17, 2012 and January 31, 2013. The details of Board of Directors and their attendance in Board Meetings during the year and the last AGM along with number of other directorships are given below:

Details of Directors and other particulars:

Name Category DesignationSuneel M Advani Promoter - Executive Director Chairman and

Managing DirectorSunil Bhatia# Executive Director Chief Executive Officer and Managing DirectorAshok M Advani Promoter – Non Executive Director Vice ChairmanSanjay N Vaswani## Promoter – Non Executive Director DirectorSuresh N Talwar Independent Director DirectorDr. Prakash G Hebalkar Independent Director DirectorNaresh K Malhotra Independent Director DirectorK.P.T Kutty Independent Director Director

# Mr. Sunil Bhatia spends considerable time between Singapore, United States of America and India

## Mr. Sanjay N Vaswani resides in the United States of America

Details of Directors’ attendance and other particulars:

Four Board meetings were held during the financial year 2012-13:

Director

Number of Board Meetings

attended

Last AGM Attendance

(yes/No)

Number of Directorships on the Board

of other Public Companies

Number of committee positions in all Public Companies

Chairman Member

Suneel M Advani 4 Yes 2 - 2

Sunil Bhatia 4 Yes - - -

Ashok M Advani 4 Yes 1 - 1

Sanjay N Vaswani 2 Yes - - -

Suresh N Talwar 4 Yes 13 2 5

Dr.Prakash G Hebalkar 4 Yes 1 - 3

Naresh K Malhotra 4 Yes 1 3 -

K.P.T Kutty 3 Yes - - -

• LeaveofAbsencewasgrantedtotheDirectorswhocouldnotattendmeetings.

• AlternateDirectorships,Directorshipsinprivatecompanies,foreigncompanies,companiesundersection25ofthe Companies Act, 1956 and Memberships in governing councils, chambers and other bodies are excluded. Memberships in public companies, listed and unlisted, alone have been considered.

• NoneoftheDirectorsholddirectorshipsinmorethan15companies.

• NoneoftheDirectorsisamemberofmorethan10committees,orisChairmanofmorethanfivecommitteesacross all companies in which he is acting as a Director. For the purpose of reckoning the aforesaid limit, Chairmanships/Memberships of the Audit Committee and the Shareholders’ Grievances Committee alone are considered.



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III. AUDIT COMMITTEE

In compliance with clause 49 of the Listing Agreement with the Stock Exchanges, the Company has a qualified and Independent Audit Committee comprising three Non–Executive Independent Directors, having adequate financial and accounting knowledge.

The Audit Committee specifically reviews and recommends the un-audited quarterly financial results before they are submitted to the Board for approval. Minutes of each Audit Committee meeting are placed before the Board for information.

The detailed scope of the activities of the Audit Committee is as set out in Clause 49 of the Listing Agreement with the Stock Exchanges in India read with Section 292A of the Companies Act, 1956.

Terms of Reference

The Audit Committee has inter-alia the following mandate:

• ReviewoftheCompany’sfinancialreportingprocessandthedisclosureofitsfinancialinformationtoensurethatthe financial statements reflect a true and fair position and that sufficient and credible information is disclosed.

• Recommendingtheappointmentandremovalofexternalauditors,fixationofauditfeeandalsoapprovalforpayment for any other services.

• Reviewingthefinancialstatementsanddraftauditreport,includingquarterly/halfyearlyfinancialinformation.

• Reviewingwithmanagement,theannualfinancialstatementsbeforesubmissiontotheBoard.

• ReviewingtheCompany’sfinancialandriskmanagementpolicies.

• Reviewingwiththemanagement,externalandinternalauditors,theadequacyofinternalcontrolsystems.

• Reviewing management discussion and analysis of financial condition, statement of significant related partytransactions, management letter / letters of internal control weaknesses and appointment, removal and terms of remuneration of the Internal Auditor.

CompositionThe constitution, powers, duties and responsibilities of the Audit Committee are in line with Clause 49 of the Listing Agreement with the Stock Exchanges in India.

Naresh K Malhotra ChairmanSuresh N Talwar MemberDr. Prakash G Hebalkar Member

SecretaryV. Sudarshan Chief Financial Officer and Company Secretary

Meetings and Attendance during the yearDuring the financial year 2012-13, Audit Committee Meetings were held on May 3, 2012, July 19, 2012, October 17, 2012 and January 31, 2013. The necessary quorum was present at the meetings.

Members Meetings Held Meetings AttendedNaresh K Malhotra 4 4Suresh N Talwar 4 4Dr. Prakash G Hebalkar 4 4

IV. REMUNERATION COMMITTEE

The Remuneration Committee consists of independent directors and is a non-mandatory requirement of Clause 49 of the Listing Agreement with the Stock Exchanges. The Company has constituted the same in accordance with its philosophy of voluntary transparency in operations. The members, constituting the committee, are decided by the Board of Directors of the Company.


Terms of Reference

The scope of the committee has been defined by the Board of Directors in accordance with clause 49 of the Listing Agreement with the Stock Exchanges, which among others, includes key issues referred by the Board, aspects relating to the remuneration of Directors; bonuses, promotions, benefits and performance targets of top management executives.

The Company’s remuneration policy is driven by the success and performance of the senior management and the Company. Through its compensation programme, the Company endeavours to attract, retain, develop and motivate a high performance workforce. The Company follows a compensation mix of fixed pay, benefits and performance based variable pay. Individual performance pay is determined by business performance and the performance of the individuals measured through the annual appraisal process.

Composition

Dr. Prakash G Hebalkar ChairmanSuresh N Talwar MemberNaresh K Malhotra Member

Secretary

V. Sudarshan Chief Financial Officer and Company Secretary

Meetings and Attendance during the year

During the financial year 2012-13, Remuneration Committee meeting was held on October 17, 2012. The necessary quorum was present for the meeting.

Members Meetings Held Meetings AttendedDr. Prakash G Hebalkar 1 1

Suresh N Talwar 1 1

Naresh K Malhotra 1 1

V. SHAREHOLDERS’ GRIEVANCE COMMITTEE

The Company has constituted a Shareholders’/Investors’ Grievance Committee of Directors to look into the effective redressal of complaints of investors such as transfer or credit of shares, non-receipt of dividend/notices/annual reports, etc. The committee meets once a year or more if required to review all investor grievances and to ensure that these are redressed by the Compliance Officer and/ or the Registrar and Transfer Agents of the Company, within a period of 7-10 days from the date of receipt of complaint, except those that are constrained by legal impediments/procedural issues. The Company Secretary is the Compliance Officer for the Company.

Composition

Ashok M Advani Chairman

Suneel M Advani Member

Dr. Prakash G Hebalkar Member

Secretary



Members Meetings Held Meetings AttendedAshok M Advani 1 1

Suneel M Advani 1 1

Dr. Prakash G Hebalkar 1 1



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The constitution, duties and responsibilities of the Shareholders’ Grievance Committee are in line with Clause 49 of the Listing Agreement with the Stock Exchanges. During the financial year 2012-13, the Committee met on January 30, 2013.

The total number of shareholders’ complaints received and responded to by the Registrar to the satisfaction of shareholders during the year under review was 26. All complaints of shareholders were satisfactorily resolved. No requests were pending as at March 31, 2013.

Nature of ComplaintsFinancial year ended March 31

2013 2012Received Attended Received Attended

Non-receipt of Dividend 17 17 20 20Issues with share certificates / Demat account / share transfers

6 6 15 15

Non-receipt of annual report 3 3 3 3Total for the year 26 26 38 38

Quarter-wise Comparative Break-up of Investor Grievances:

Quarter endingFinancial year ended March 31

2013 2012Received Attended Received Attended

June 30 5 5 7 7September 30 8 8 8 8December 31 8 8 16 16March 31 5 5 7 7Total for the year 26 26 38 38

VI. Compensation Committee

The Compensation Committee considers and recommends the compensation of selected senior management employees of the Company as also the allotment/devolution of Employee Stock Options (ESOP) under approved ESOP Scheme 2003 (Amended 2011). During the financial year, the meetings of this committee were held on August 31, 2012 and March 29, 2013 for the purpose of further grant of ESOP to the employees of the Company and its subsidiaries, as approved by the shareholders of the Company in the Annual General Meeting held on July 22, 2011.

Composition

Suneel M Advani ChairmanSuresh N. Talwar MemberDr. Prakash G Hebalkar Member

Secretary



Members Meetings Held Meetings AttendedSuneel M Advani 2 2Suresh N. Talwar 2 2Dr. Prakash G Hebalkar 2 2


VII. GENERAL BODY MEETINGS

Details of the last three Annual General Meetings (AGMs) of the Company are given below:

Financial year ended

Date and Time

Venue Special resolution passed

March 31, 2012 July 19, 2012 at 2.30 p.m.

Jai Hind College Hall, 23-24, Back bay Reclamation, ‘A’ Road, Churchgate, Mumbai –400 020.

None

March 31, 2011 July 22, 2011 at 2.30 p.m.


i) Appointment of Mr. Sunil Bhatia as the Chief Executive Officer and Managing Director (“CEO and MD”) of the Company

ii) Alteration of Articles of Association for increase in authorised share capital from 11,00,00,000/- (Rupees Eleven Crore) divided into 1,10,00,000 (One Crore Ten Lakhs) equity shares of `10/- (Rupees Ten only) to `20,00,00,000/- (Rupees Twenty Crore Only) divided into 2,00,00,000 (Two Crore only) Equity Shares of `10/- each

iii) Approval of Blue Star Infotech Employees Stock Option Scheme, 2003 (Amended 2011) to issue upto 10,00,000 equity shares of the face value of `10/- each.

iv) Issue of 3,85,000 fresh equity shares on preferential basis to Mr. Sunil Bhatia.

March 31, 2010 July 30, 2010 at 2.30 p.m.


None

There was no special resolution passed through postal ballot in the last three years and none is proposed to be passed through postal ballot this year.

VIII. REMUNERATION TO DIRECTORS

The remuneration of the Non-executive Directors is recommended by the Board of Directors and approved by the shareholders. Non-executive Directors are paid commission, based on the net profit of the Company, partly by way of fixed amount and partly based on the number of Board and Audit Committee meetings attended by them. They are paid sitting fees of `20,000 each, for each Board and Audit Committee meeting attended by them.

The Chairman and Managing Director is also the Executive Vice Chairman in Blue Star Limited.



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Details of remuneration paid/payable to Directors for financial year 2012-13 are as follows:(` in Lakhs)

Name of the Director Salary and Perquisites (Net

of recoveries, if any)

Reimbursement of CEO and MD’s

Remuneration

Commission (3% of profits)

Sitting fees Total

Suneel M Advani (CMD) 44.40 44.40Sunil Bhatia (CEO and MD) 160.56 160.56Ashok M Advani 4.26 0.80 5.06Sanjay N Vaswani 3.36 0.40 3.76Suresh N Talwar 5.46 1.60 7.06Dr. Prakash G Hebalkar 5.46 1.60 7.06Naresh Malhotra 5.46 1.60 7.06K.P.T. Kutty 3.36 0.60 3.96Total 44.40 160.56 27.36 6.60 238.92

(a) The CMD and the CEO and MD are not paid sitting fees and commission.

(b) Effective November 01, 2008 (` Lakhs) 2.20 per month is paid as salary to the CMD. The cost of the accommodation provided by the Company to the CMD amounts to (` Lakhs) 1.50 per month (net). This arrangement is approved by the shareholders at the AGM of the Company held on July 30, 2009. He was re-appointed as the CMD w.e.f June 7, 2011 on the same arrangement as approved by the shareholders at the AGM of the Company held on July 22, 2011.

(c) The CEO and MD is paid salary by the Singapore Subsidiary of the Company viz., Blue Star Infotech Singapore Pte.Ltd. A sum of (` Lakhs) 160.56 is reimbursed to the subsidiary company towards value of the services rendered by the Chief Executive Officer and Managing Director to the Company.

DETAILS OF SHAREHOLDING OF NON-EXECUTIVE DIRECTORS AS AT MARCH 31, 2013

Sr. No.

Name of the Director Shareholding(No. of Shares)

1 Ashok M Advani 4,92,5132 Suresh N Talwar 15,0753 Sanjay N Vaswani 14,7504 K.P.T. Kutty 2,6505 Naresh K Malhotra 2506 Dr. Prakash G Hebalkar NIL

IX. DISCLOSURES

A. In respect of related party transactions, the Company does not have any transactions which may have potential conflict with the interest of the Company at large.

B. No penalties / strictures were imposed on the Company by the stock exchanges or SEBI or any statutory authority in any matters related to the capital markets during the last three years.

C. The Company remains committed to the cause of maintaining fair dealing in all its transactions. In furtherance of this philosophy, the Company has constantly ensured that any immoral or unethical activity could be reported by any of its employees directly to the members of the senior management or the Audit Committee, with adequate safeguards against victimising the whistle-blower. The Company affirms that no employee has been denied direct access to the Audit Committee.


D. Your Company recognises the role of prompt reporting of crimes – technological or otherwise – for moving towards transparent governance. Any suspicion of criminal activity should be reported promptly no matter how remote or minimal the damage. Towards this end, the Company declares that it has adequate technological fraud detection safeguards imbibed within its system, which are a combination of process controls and technological controls. The Company also declares that there have not been any known instances of technological frauds detected in the Company.

E. Your Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement, as applicable. Of the non-mandatory requirements of Clause 49, the Company has adopted the requirement of a Remuneration Committee (constituted on October 30, 2008) for reviewing and recommending Executive Directors’ remuneration. Your Company is committed towards complying with Clause 49 as a whole and will take suitable measures as and when possible.

F. Risks are an imminent part of business and the industry. Recognising this fact, your Company has in place a Risk Management Policy to deal with the uncertainties of the times, where risks have been categorised based on the following criteria:

• Nature of Risk: External, Operational and Financial

• Severity of Risk: Low, Medium and High

• Probability of Risk: Low, Medium and High

The Policy describes each risk in detail and analyses the risk mitigation strategy to counter every risk. The Policy is reviewed at regular intervals by the Risk Management Committee comprising of senior management personnel of the Company.

G. Your Company also has several other policies in place, the scope and content of which is reviewed by the Board and Audit Committee at regular intervals:

• Policyoninsuranceofassets

• Policyoninter-companytransactions

• Policyonelectroniccommunicationandassetusage

• Policyonpreventionofsexualharassment

• Policyonverificationoffixedassets

• Policyonprohibitionofinsidertrading

Every policy has a defined implementation mechanism.

H. Business is done with a measure of social accountability and the concept of giving back in fair measure to the society. Your Company has always been conscious of the developments in its environment and is taking small but effective steps towards fulfilling its Corporate Social Responsibility (CSR) initiatives such as cutting down wasteful expenditure, promoting green IT initiatives, an environmentally friendly working environment and encouraging innovation in all areas of operation.

I. Your Company has consistently maintained a regime of unqualified financial statements.

J. The Audit Committee reviews the consolidated financial statements of your Company and the investments made by its unlisted subsidiary companies. The minutes of the board meetings along with a report on significant developments of the unlisted subsidiary companies are periodically placed before the Board of Directors of the Company.

K. The Chief Executive Officer & Managing Director and the Chief Financial Officer have certified to the Board with regard to the financial statements and other matters as required by Clause 49 of the Listing Agreement with the Stock Exchanges. The Certificate is contained in this Annual Report.



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X. MEANS OF COMMUNICATION

The Company publishes its quarterly, half yearly and annual results in the prescribed form, within the prescribed time. The results are sent to the Stock Exchanges where the Company’s shares are listed and the same was published in Free Press Journal and Navshakti for the quarters ending June 30, 2012 (Q1), September 30, 2012 (Q2), December 31, 2012 (Q3) and March 31, 2013 (Q4) respectively. The financial results are also displayed on Corporate Filing and Dissemination System (CFDS) on SEBI’s website www.corpfiling.co.in and also on the Company’s website, www.bsil.com. The Company’s website displays the official news releases from time to time. The financial results are also available on the websites of the Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE).

As a transparency initiative, your Company has explained its business comprehensively in the Management Discussion and Analysis, which forms a part of this Annual Report.

Green Initiatives in Corporate Governance

The Ministry of Corporate Affairs have permitted companies to send electronic copies of Annual Report, notices, quarterly results, intimation about dividend etc., to the e-mail IDs of shareholders. Your Company had accordingly arranged to send E-COMMUNICATION REGISTRATION FORM which can be filled in by you and submitted to the Registrars M/s Link Intime India Pvt. Ltd. to receive soft copies of these documents on your e-mail IDS.

XI. SHAREHOLDERS’ INFORMATION

Annual General Meeting

The Company held its Annual General Meeting on July 19, 2012 for the financial year 2011-12.

For the Financial Year 2012-13, the Annual General Meeting is scheduled as follows:

Date : July 18, 2013

Time : 2.30 p.m.

Venue : Jai Hind College Hall, 23-24, Backbay Reclamation, Sitaram Deora Marg (‘A’ Road), Churchgate, Mumbai – 400 020.

Financial Calendar for the year 2013–14

Declaration of results for the quarter ending

Tentative date

June 30, 2013 Third week of July 2013September 30, 2013 Second week of October 2013December 31, 2013 Third week of January 2014

March 31, 2013 Second week of May 201417th Annual General Meeting Third week of July 2014

Dates of Book Closure: July 8, 2013 to July 18, 2013 (both days inclusive)

Recommended Dividend: ̀ 2/- per share of face value, ̀ 10 each (Previous year ̀ 2/- per share of face value ̀ 10 each).

Dividend Payment Date: If declared, dividend shall be paid / credited on or after July 23, 2013.

Listing on Stock Exchanges

• TheBombayStockExchangeLimited,Mumbai(BSE).Scrip code: 532346

• TheNationalStockExchangeofIndiaLimited(NSE).Stock Code: BLUESTINFO

ISIN No. for NSDL/CDSL: INE 504B01011


Dividend Payment History

Financial year Dividend (`) per share of face value `10

Dividend as a % of the face value of each equity share

2000-2001 3.00 30%2001-2002 6.00 60%2002-2003 7.50 75%

2003-2004 9.00 90%2004-2005 5.00 50%2005-2006 2.00 20%2006-2007* 4.00 40%2007- 2008 2.50 25%2008- 2009 5.00 50%2009-2010 5.00 50%2010-2011 3.00 30%2011-2012 2.00 20%2012-2013(Proposed – subject to member’s approval)

2.00 20%

*Represents Interim and Final Dividend of `2 each per share

Unclaimed Dividend

Shareholders who have not yet encashed their dividend warrants or in cases where the accounts could not be credited have been individually informed about the money due to them and the procedure to claim the same from the Company.

Unclaimed/Unpaid dividend till the financial year 2004-05 has been transferred to the Investors Education and Protection Fund (IEPF) on August 28, 2012 on the completion of the mandatory 7 (seven) year period. Shareholders are advised that no claims will lie against the Company or the IEPF in respect of the unclaimed amounts so transferred.

The Unclaimed/Unpaid Dividend in respect of the year 2005-06 is due for transfer to the IEPF on October 3, 2013, after which no claims shall lie against the Company for the same. Shareholders who have not yet encashed their dividend warrants are requested to forward their claims to the Company or Share Transfer Agents.

Nomination Facility

Shareholders who hold shares in the physical form and wish to make/change a nomination in respect of their shares in the Company, as permitted under Section 109A of the Companies Act, 1956, may submit the necessary forms/details to the Company’s Registrar and Transfer Agents, Link Intime India Pvt. Ltd., in the prescribed Form 2B. A soft copy of the Form can be downloaded from the Company’s website www.bsil.com. Shareholders with holdings in DEMAT accounts should contact their respective depository participants directly for this purpose.

Payment of Dividend by National Electronic Clearing Service (NECS)

In order to facilitate the shareholders, who wish to avail of the facility of direct credit of dividend amounts to their bank accounts, your Company, through its registrars Link Intime India Pvt. Ltd has sent out NECS mandate letters which can be filled in and submitted to the Registrars or you can also avail the NECS mandate form from the Company’s website www.bsil.com and follow the instructions mentioned on the form to the Company.

Disclaimer:

Any person becoming the shareholder of the Company on or after the record date i.e July 8, 2013, will not be eligible to receive dividends for the financial year 2012-2013.



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Annual High-Low price History

Market Price Data

Fiscal year BSE NSEHigh (`/share) Low (`/share) High (`/share) Low (`/share)

2008-09 86.60 32.60 88.60 31.952009-10 155.80 47.10 156.40 47.152010-11 139.90 90.15 139.00 92.602011-12 111.40 53.50 116.75 57.402012-13 78.90 55.00 74.70 54.55

Month–wise price History

Market Price Data

Month BSE NSEHigh (`/share) Low (`/share) High (`/share) Low (`/share)

April 2012 78.90 67.10 73.90 67.00May 2012 73.50 60.00 71.95 61.95June 2012 66.95 60.15 67.45 60.00July 2012 74.50 60.00 69.95 59.00August 2012 66.50 58.45 69.00 58.75September 2012 71.15 60.65 74.70 56.00October 2012 73.10 62.00 73.45 62.00November 2012 70.95 61.00 71.45 62.50December 2012 73.75 67.25 73.95 66.50January 2013 69.90 58.90 70.00 58.55February 2013 64.45 58.55 64.50 59.10March 2013 62.95 55.00 63.60 54.55

The performance comparison of Blue Star Infotech Limited’s closing share prices at the end of each month with BSE Sensex are presented as follows:

PERFORMANCE COMPARISON WITH BSE SENSEX

BSI

L Sh

are

Pric

e

BSE

Sen

sex

Clo

sin

g

80

70

60

50

40

30

20

10

0

25000

20000

15000

10000

5000

0

Ap

r-12

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan

-13

Feb

-13

Mar

-13

BSIL Share Price (`) BSE Sensex Closing

Months


The performance comparison of Blue Star Infotech Limited’s closing share prices at the end of each month with NSE – CNX Nifty is presented below:

Share Transfer System

The transfer of shares in physical form is processed and approved on a weekly basis and the certificates are returned to the shareholders within 30 days from the date of receipt (subject to the documents being valid and complete in all respects).

Distribution of Shareholding as at March 31, 2013

No. of Equity shares heldNo. of

shareholders% of

shareholdersTotal No. of Shares held

Total % of shares held

1 - 250 11,037 82.13 7,83,023 7.54251 - 500 1,304 9.70 4,98,631 4.80501 - 1,000 574 4.27 4,41,458 4.251,001 - 2,000 248 1.84 3,58,030 3.452,001 - 3,000 86 0.64 2,21,426 2.133,001 - 4,000 40 0.30 1,38,753 1.344,001 - 5,000 31 0.23 1,45,553 1.405,001 - 10,000 59 0.44 4,46,897 4.3010,001 & above 60 0.45 73,51,229 70.79Total 13,439 100.00 1,03,85,000 100.00

Categories of Shareholders as at March 31, 2013

Particulars of Shareholding as at March 31, 2013 No. of Shares %Indian Public 38,38,090 36.96Blue Star Limited (Promoter) 30,98,025 29.83Directors, their relatives and other Promoter Group Companies 25,09,724 24.17Insurance Companies (GIC and Subsidiaries) 3,55,897 3.43BSIL – Key Employees Stock Options Trust 1,74,563 1.68Other Corporates 3,01,273 2.90Foreign Holdings 1,07,428 1.03Total 1,03,85,000 100.00

BSIL Share Price (`) NSE S&P CNX Nifty Index Closing

PERFORMANCE COMPARISON WITH S&P CNX NIFTY

NSE

S&

P C

NX

Nift

y In

dex

Clo

sin

g

BSI

L Sh

are

Pric

e

Months

7000

6000

5000

4000

3000

2000

1000

0

Ap

r-12

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan

-13

Feb

-13

Mar

-13

80

70

60

50

40

30

20

10

0



43

BLUE STAR INFOTECH SHAREHOLDERS

As at March 31, 2013, the Company had 13,439 registered shareholders. 36.96% of the Company’s shares were held by the public. The promoters, including Blue Star Limited, hold 54 % of shares; the ESOP Trust holds 1.68% and 3.43%, 2.90% and 1.03% are held by insurance companies, other corporates and foreign parties respectively.

DEMATERIALISATION OF SHARES AND LIQUIDITy

97.18 % of the Company’s equity shares were dematerialised as at March 31, 2013. 36.96% of the equity shares are held by the public and the shares are traded daily on the BSE and NSE.

Office Locations

Registered Office: The Great Oasis, 8th Floor, Plot No. D -13, MIDC, Andheri (East), Mumbai 400 093.

Development Centres (In India)

The Great Oasis, 3rd and 8th Floor, Plot No. D -13, MIDC, Andheri (East), Mumbai 400 093.

Unit 74 at SDF III, Unit 150 at SDF V, Unit 181 and Unit 188 at SDF VI, MIDC, SEEPZ, Andheri (East), Mumbai 400 096.

#7, 18th Main Road, 7th Block Koramangala, Bengaluru 560 095.

24.17%

3.43%2.90%

1.03% 1.68%29.83%

Blue Star Limited

24.17%

3.43%

2.90%

1.03%

1.68%

29.83%

36.96%

36.96%

Indian Public

Directors, their relatives & other promoter group companies.

Insurance Companies (GIC and its Subsidiaries)Other Corporates

Foreign Holdings

BSIL-Key Employees Stock OptionScheme Trust

SHAREHOLDING DISTRIBUTION


Shareholder Inquiries

Questions concerning folio, share certificates, dividend, address changes, consolidation of certificates and related matters should be addressed to Blue Star Infotech Limited, at its Registered office or its share transfer agents at the below mentioned addresses:

Blue Star Infotech Limited

(Attn: The Investor Relations Department) The Great Oasis, 8th Floor, Plot No.D-13, MIDC, Andheri (East), Mumbai 400 093. Tel: +91-22-66956969 Fax: +91-22-66973866 www.bsil.com

E-mail:

Investor Relations: [email protected] Company Secretary: [email protected]

Registrar and Transfer Agents

Link Intime India Pvt. Ltd. Unit: Blue Star Infotech Limited C-13 Pannalal Silk Mills Compound, LBS Marg, Bhandup West, Mumbai 400078. Tel.: +91-22-25946970 Fax: +91- 22-25946969 E-mail: [email protected]



45

CODE OF CONDUCT DECLARATION

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND

SENIOR MANAGEMENT PERSONNEL WITH THE COMPANY’S CODE OF CONDUCT

To

The Members of Blue Star Infotech Limited

Pursuant to Clause 49 I (D) of the Listing Agreement entered into with the Stock Exchanges, I hereby declare that the Company has obtained affirmative compliance with the Code of Conduct from all the Board Members and Senior Management personnel of the Company for the financial year ended March 31, 2013.


Place: MumbaiDate: 9 May 2013

Auditor’s Certificate on Compliance of Conditions of Corporate Governance

To

The Members of Blue Star Infotech Limited

We have examined the compliance of the conditions of Corporate Governance by Blue Star Infotech Limited for the year ended March 31, 2013, as stipulated in clause 49 of the Listing Agreements of the said Company with Stock Exchanges in India.

The compliance of the conditions of Corporate Governance is the responsibility of the Company’s Management. Our examination was carried out in accordance with Guidance Note on Certification of Corporate Governance (As stipulated in Clause 49 of the Listing Agreement), issued by the Institute of Chartered Accountants of India and was limited to review of the procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of an 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 above mentioned Listing Agreements.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For Walker, Chandiok and CoChartered AccountantsFirm Registration No.: 001076 N

per Khushroo B PanthakyPartnerMembership No. F-42423

Place: MumbaiDate: 9 May 2013


Certificate of Chief Executive Officer and Chief Financial Officer on Corporate GovernanceTo,The Board of DirectorsBlue Star Infotech LtdMumbai

Dear Sirs,

We, Sunil Bhatia, Chief Executive Officer and Managing Director and V. Sudarshan, Chief Financial Officer and Company Secretary hereby certify that:-

(a) We have reviewed the financial statements and the cash flow statement for the year and that to the best of our knowledge and belief :

(i) These statements do not contain any materially untrue statement or omit any material fact or contain statement that might be misleading;

(ii) These statements together present a true and fair view of Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.

(b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violate the Company’s Code of Conduct.

(c) We accept responsibility for establishing and maintaining internal controls for financial reporting and we have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the Auditors and the Audit Committee deficiencies in the design or operation of internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.

(d) There have been no significant changes in the internal control over financial reporting or the accounting policies. There were no instances of significant fraud of which we have become aware.

This certificate is given by the undersigned with full knowledge that, on its faith and strength, reliance is placed by the Board of Directors of the Company.

Sunil Bhatia V. SudarshanChief Executive Officer and Chief Financial OfficerManaging Director and Company Secretary

Place : MumbaiDate: 9 May 2013

Financial Statements


Independent Auditors’ ReportTo the Members of Blue Star Infotech Limited

Report on the Financial Statements

1. We have audited the accompanying financial statements of Blue Star Infotech Limited, (“the Company”), which comprise the Balance Sheet as at 31 March 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

2. Management is responsible for the preparation of these financial statements, that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (“the Act”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

6. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2013;

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

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

Report on Other Legal and Regulatory Requirements

7. As required by the Companies (Auditor’s Report) Order, 2003 (‘‘the Order’’) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

8. As required by Section 227(3) of the Act, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;


Business Overview | Management Discussion & Analysis | Statutory Reports Financial Statements

49

b. 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;

c. the financial statements dealt with by this report are in agreement with the books of account;

d. in our opinion, the financial statements comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act; and

e. on the basis of written representations received from the directors, as at 31 March 2013 and taken on record by the Board of Directors, none of the directors is disqualified as at 31 March 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act.

For Walker, Chandiok & CoChartered AccountantsFirm Registration No: 001076N

per Khushroo B. Panthaky PartnerMembership No.: F-42423

Place : MumbaiDate : 9 May 2013


Annexure to the Independent Auditor’s Report of even date to the members of Blue Star Infotech Limited, on the financial statements for the year ended 31 March, 2013

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, we report that:

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

(b) The fixed assets have been physically verified by the management during the year and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification of the fixed assets is reasonable having regard to the size of the Company and the nature of its assets.

(c) In our opinion, a substantial part of fixed assets has not been disposed off during the year.

(ii) (a) The Company does not have any tangible inventory. Accordingly, the provisions of clause 4 (ii) of the Order are not applicable.

(iii) (a) The Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clauses 4 (iii) (b) to 4 (iii) (d) of the Order are not applicable.

(b) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clauses 4 (iii) (f ) and 4 (iii) (g) of the Order are not applicable.

(iv) Owing to the nature of its business, the Company does not maintain any physical inventories or sells any goods. Accordingly, clause 4 (iv) of the Order with respect to purchase of inventories and sale of goods is not applicable. In our opinion, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and for the sale of services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(v) (a) In our opinion, the particulars of all contracts or arrangements that need to be entered into the register maintained under Section 301 of the Act have been so entered.

(b) Owing to the unique and specialized nature of the items involved and in the absence of any comparable prices, we are unable to comment as to whether the transactions made in pursuance of such contracts or arrangements have been made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public within the meaning of sections 58A and 58AA of the Act and the Companies (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of clause 4 (vi) of the Order are not applicable.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

(viii) To the best of our knowledge and belief, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act, in respect of Company’s products / services. Accordingly, the provisions of clause 4 (viii) of the Order are not applicable.

(ix) (a) The Company is regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues, as applicable, with the appropriate authorities. Further, no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they become payable.

(b) There are no dues in respect of income tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess that have not been deposited with the appropriate authorities on account of any dispute.

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



51

(xi) The Company has no dues payable to a financial institution or a bank or debenture holders during the year. Accordingly, the provisions of clause 4 (xi) of the Order are not applicable.

(xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause 4 (xii) of the Order are not applicable.

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

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

(xv) The Company has not given any guarantees for loans taken by others from banks or financial institutions. Accordingly, the provisions of clause 4 (xv) of the Order are not applicable.

(xvi) The Company did not have any term loans outstanding during the year. Accordingly, the provisions of clause 4 (xvi) of the Order are not applicable.

(xvii) In our opinion, no funds raised on short-term basis have been used for long-term investment by the Company.

(xviii) During the year, the Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clause 4 (xviii) of the Order are not applicable.

(xix) The Company has neither issued nor had any outstanding debentures during the year. Accordingly, the provisions of clause 4 (xix) of the Order are not applicable.

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

(xxi) No fraud on or by the Company has been noticed or reported during the period covered by our audit.

For Walker, Chandiok & CoChartered AccountantsFirm Registration No.: 001076N

per Khushroo B. Panthaky PartnerMembership No.: F-42423

Place : MumbaiDate : 9 May 2013


Balance Sheet as at 31 March 2013

Notes As at

31 March 2013` in Lakhs

As at31 March 2012

` in LakhsEquity and liabilitiesShareholders' funds Share capital 2.1 1,038.50 1,038.50 Reserves and surplus 2.2 8,050.24 7,317.10

9,088.74 8,355.60 Non-current liabilitiesDeferred tax liabilities (net) 2.3 156.24 147.23 Other long-term liabilities 2.4 331.58 266.37 Long-term provisions 2.5 85.42 88.35

573.24 501.95 Current liabilities Trade payables 2.6 393.93 577.45 Other current liabilities 2.7 1,185.86 1,468.11 Short-term provisions 2.8 244.65 242.86

1,824.44 2,288.42 Total 11,486.42 11,145.97 AssetsNon-current assetsFixed assets Tangible assets 2.9 2,043.77 2,042.48 Intangible assets 2.9 123.01 115.95 Intangible assets under development 62.63 - Non-current investments 2.11 a) 1,555.21 892.56 Long-term loans and advances 2.12 1,838.53 2,660.15 Other non-current assets 2.13 47.77 40.31

5,670.92 5,751.45 Current assets Current investments 2.11 b) 112.94 555.34 Trade receivables 2.14 4,146.11 2,700.24 Cash and bank balances 2.15 1,356.27 1,856.78 Short-term loans and advances 2.16 130.80 163.81 Other current assets 2.17 69.38 118.35

5,815.50 5,394.52 Total 11,486.42 11,145.97 Significant Accounting Policies and Notes to the Financial Statements

1 to 2.32

This is the balance sheet referred to in our report of even date

For Walker, Chandiok & Co. For Blue Star Infotech Limited Chartered Accountants

per Khushroo B. Panthaky Suneel M Advani Sunil Bhatia V. SudarshanPartner Chairman and Chief Executive Officer and Chief Financial Officer and Managing Director Managing Director Company Secretary

Place : Mumbai Place : Mumbai Date : 9 May 2013 Date : 9 May 2013



53

Statement of Profit and Loss for the year ended 31 March 2013

Notes year ended

31 March 2013 ` in Lakhs

year ended 31 March 2012

` in Lakhs RevenueSales and software services 2.18

Exports 6,459.30 6,480.82

Domestic 3,813.17 3,645.97

10,272.47 10,126.79

Other income 2.19 629.23 644.52

Total 10,901.70 10,771.31 ExpensesPurchase of traded software licenses 393.54 540.99

Purchase of traded hardware 25.30 104.68

Employee benefit expenses 2.20 5,778.69 6,399.62

Depreciation and amortisation expense 280.85 295.98

Other expenses 2.21 3,716.94 2,622.80

Total expenses 10,195.32 9,964.07 Profit before tax 706.38 807.24 Tax expense

- Current tax 163.57 232.05

- Deferred tax 9.01 21.02

172.58 253.07 Net Profit 533.80 554.17 Earnings per equity share (Basic and diluted) - (`) 2.30 5.14 5.42

Face Value per Share - (`) 10.00 10.00

Significant Accounting Policies and Notes to the Financial Statements 1 to 2.32

This is the statement of profit and loss referred to in our report of even date





Cash Flow Statement for the year ended 31 March 2013

year Ended 31 March 2013` in Lakhs


[A] Cash Flows from operating activitiesNet profit before tax 706.38 807.24 Depreciation and amortisation expense 280.85 295.98 Unrealised foreign exchange (gains) / loss (net) 47.62 (4.20)Loss on disposal of fixed assets (net) 0.23 9.71 Bad debt written off 0.05 - Dividend income (51.55) (93.92)Provision for bad and doubtful debts 15.31 14.71 Interest income (38.84) (27.82)

253.67 194.46 Operating profit before working capital changes 960.05 1,001.70 Adjustment for:Trade and other receivables (1,429.84) 76.60 Trade payables and other liabilities 38.70 (174.41)

(1,391.14) (97.81)Cash generated from operations (431.09) 903.89 Direct taxes paid / refund received 673.45 (388.71)Net cash from operating activities 242.36 515.18

[B] Cash flows from investing activitiesPurchase of fixed assets (Including capital advances) (392.38) (168.80)Sale of fixed assets 11.59 21.11 Purchase of investments (3,759.73) (5,203.02)Sale of investments 4,253.68 6,463.72 Investment in subsidiary Company (662.65) (501.20)Dividend received 51.55 93.92 Dividend reinvested in mutual funds (51.55) (93.92)Interest received 33.28 - Fixed deposit with bank (483.83) (5.91)Net cash from investing activities (1,000.04) 605.90

[C] Cash flows from financing activitiesPreferential Issue of equity shares - 393.62 Dividend and tax thereon paid (241.40) (350.60)Net cash from / (used in) financing activities (241.40) 43.02 Net increase (decrease) in cash and cash equivalents (999.08) 1,164.10Cash and cash equivalents - opening balance 1,730.50 566.40Cash and cash equivalents - closing balance 731.42 1,730.50Cash and cash equivalents comprise of:Balances with banks in: - current accounts (including EEFC accounts) 697.45 977.71 - deposit accounts 21.84 740.37Cash and cash equivalents as per books 719.29 1,718.08Exchange difference on translation of foreign currency accounts/deposits

12.13 12.42

731.42 1,730.50

Note:Cash and cash equivalents include (` Lakhs) 20.03 (Previous Year (` Lakhs) 21.50) which is not available for use by the Company.This is the Cash flow statement referred to in our report of even date.






55

Notes annexed to and forming part of the Financial Statements for the year ended 31 March 2013

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTS

COMPANY OVERVIEW

Blue Star Infotech Limited (‘Blue Star’, ‘BSIL’ or the ‘Company’) along with its wholly owned, direct and controlled subsidiaries, Blue Star Infotech America,Inc., Blue Star Infotech (UK) Limited and Blue Star Infotech (Singapore) Pte. Limited is an Information technology and software services organisation. The Company provides technology, consultancy and outsourcing services.

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of accounting and preparation of financial statements

The financial statements which have been prepared under the historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act, 1956 (the ‘Act’) and comply in all material aspects with the Accounting Standards prescribed by the Central Government, in accordance with the Companies (Accounting Standards) Rules, 2006, to the extent applicable.

(b) Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Key estimates include estimate of useful life of fixed assets, unbilled revenue, income taxes, provision for bad and doubtful debts, estimated gain/loss on foreign exchange contracts and future obligations under employee retirement benefit plans. Actual results could differ from those estimates. Any revision to accounting estimates will be recognised prospectively in the current and future periods.

(c) Fixed assets, Capital work-in-progress and Depreciation

(i) Fixed assets are stated at cost less accumulated depreciation. Cost includes inward freight, taxes and expenses incidental to acquisition and installation, up to the point the asset is ready for its intended use.

(ii) Depreciation is provided on Building under the Straight-Line Method and on other fixed assets, other than Leasehold building improvements, under the Written down Value method. Depreciation is provided on a pro-rata basis at the rates and in the manner prescribed under Schedule XIV of the Companies Act, 1956, which also represent the useful life of fixed assets.

(iii) Leasehold building improvements are written off over the period of lease or their estimated useful life, whichever is earlier, on a straight-line basis.

(iv) Assets acquired but not ready for use or assets under construction are classified under Capital Work in Progress.

(v) Management evaluates at regular intervals, using external and internal sources, the need for impairment of any asset. 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 net realisable value on its eventual disposal. Any loss on account of impairment is expensed as the excess of the carrying amount over the higher of the asset’s net sales price or present value as determined.

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


A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

(d) Intangible assets

Costs relating to acquisition of computer software are capitalised as ‘Intangible assets’ and amortised on a straight line basis over a period of three years, which is the management’s estimate of the useful life of such software.

(e) Intangible assets under development

The company recognizes the cost of developing intellectual property which in its opinion would result in commercial benefits over several financial years.

The initial investment towards development or the cost of creation of the intellectual property rights is treated as capital expenditure. The same would be written/off over the commercial life of intellectual property so created.

(f) Investments

Investments are classified into long-term investments and current investments. Long-term investments are carried at cost. Provision for diminution in the value of long-term investments is not made unless it is considered other than temporary. Current investments are valued at lower of cost and net realisable value.

(g) Foreign currency transactions

(i) Initial Recognition - Transactions denominated in foreign currencies are recorded at the rates of exchange prevailing on the date of the transaction.

(ii) Conversion - Monetary assets and liabilities denominated in foreign currency are converted at the rate of exchange prevailing on the date of the Balance Sheet.

(iii) Exchange Differences - All exchange differences arising on settlement/conversion of foreign currency transactions are included in the Statement of Profit and Loss in the year in which they arise.

(iv) Forward Cover - The Company uses foreign exchange forward contracts and forward option contracts to hedge its exposure to foreign currency fluctuations. The premium or discount arising at the inception of forward option contracts and foreign exchange forward contracts is amortised as expense or income over the life of the contract. Any profit or loss arising on cancellation or renewal of foreign exchange forward contracts is recognised as income or expense for the year.

(v) Pursuant to the Announcement ‘Accounting for Derivatives’ by the Institute of Chartered Accountants of India, the Company has adopted Accounting Standard 30, Financial Instruments: Recognition and Measurement, prescribed by the Institute of Chartered Accountants of India, with effect from April 1, 2008. Consequently, outstanding forward contracts have been treated as highly probable forecast transactions based on historic trends. Accordingly, gains / losses arising on ‘mark to market’ of such open forward contracts have been accumulated in ‘Hedging Reserve Account’. The Company uses forward contracts as economic hedges and not for trading or speculative purposes.

(h) Staff benefits

(i) All short term employee benefits are accounted on undiscounted basis during the accounting period based on services rendered by employees.

(ii) The Company’s contribution to Provident Fund is remitted to a trust established for this purpose based on a fixed percentage of the eligible employees’ salary and charged to Statement of Profit and Loss. The Company has categorised its Provident Fund as a defined contribution plan since it has no further obligations beyond these contributions.



57

(iii) The Company’s contribution under a defined Superannuation Plan to the trust established for this purpose based on a specified percentage of salary of eligible employees is charged to Statement of Profit and Loss. The Company has categorised Superannuation Plan as a defined contribution plan since it has no further obligations beyond these contributions.

(iv) The Company’s liability towards gratuity and compensated absences, being defined benefit plans is accounted for on the basis of an independent actuarial valuation using the projected unit credit method, done at the year end and actuarial gains/losses are charged to the Statement of Profit and Loss. Gratuity liability is funded by payments to the trust established for the purpose.

(i) Revenue recognition

(i) Revenue from software development with respect to time and material contracts is recognised as related costs are incurred and services are performed in accordance with the terms of specific contracts.

(ii) Revenue from fixed price contracts are recognised based on the milestones achieved as specified in the contracts and for interim stages, until the next milestone is achieved, on the percentage of completion basis. Provisions for estimated losses on incomplete contracts are recorded in the period in which such losses become probable based on the current contracts.

(iii) Revenue from sale of traded software licenses and traded hardware is recognised on delivery to the customer.

(iv) Cost and earnings in excess of billings are classified as unbilled revenue while billings in excess of cost and earnings are classified as unearned revenue.

(v) Dividend income is recognized when the right to receive the dividend is established.

(vi) Interest income is recognized on time proportion basis.

(j) Lease rentals

Rent expense is recognised with reference to the terms of lease agreement and other consideration in respect of operating leases on a straight line basis. Assets given on operating lease are included under fixed assets of the Company. Lease income is recognised on straight line basis over the primary period of lease.

(k) Taxes on Income

The provision for current taxation is computed in accordance with the relevant tax regulations. Deferred tax is recognised on timing differences between the accounting and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as at the Balance Sheet date. Deferred tax assets in respect of unabsorbed depreciation and carry forward losses under tax laws are recognised and carried forward to the extent there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised in future. Other deferred tax assets are recognised only to the extent there is a reasonable certainty of realisation in future. Such assets are reviewed at each Balance Sheet date to reassess realisation.

Tax credit is recognized in respect of Minimum Alternate Tax (‘MAT’) as per the provisions of Section 115 JAA of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within statutory time frame and is reviewed at each Balance Sheet date.

(l) Provisions and contingent liabilities

Provisions are recognised in the financial statements in respect of present probable obligations, for amounts which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events, whose existence would be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.


2. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

All amounts in the financial statements are presented in Indian Rupees Lakhs (` in Lakhs) and two decimal places thereafter, except for per share data or as otherwise stated.

2.1 Share capital(` in Lakhs)

As at31 March 2013

As at31 March 2012

Authorised2,00,00,000 (31 March 2012: 2,00,00,000) Equity Shares of `10 each 2,000.00 2,000.00Issued, subscribed and paid up1,03,85,000 (31 March 2012: 1,03,85,000) Equity Shares of `10 each fully paid-up

1,038.50 1,038.50

1,038.50 1,038.50

The Company has only one class of shares referred as equity shares having a face value of ̀ 10/- each. Each shareholder is entitled to one vote per share.

The Company declares and pay dividends in Indian rupees. All dividends proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting.

During the year ended 31 March 2013, the amount of dividend recognized as distributions to equity shareholders was `2 per share. The total dividend appropriation for the year ended 31 March 2013 amounted to (` in Lakhs) 243.00 (Previous year (` in Lakhs) 241.40) including corporate dividend tax of (` in Lakhs) 35.30 (Previous year (` in Lakhs) 33.70).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholders.

The reconciliation of the number of shares outstanding and the amount of share capital as at 31 March 2013 and 31 March 2012 is set out below:

As at 31 March 2013 As at 31 March 2012Number Amount

(` In Lakhs)Number Amount

(` In Lakhs)Balance at the beginning of the year 1,03,85,000 1,038.50 1,00,00,000 1,000.00Add: Shares issued on preferential allotment basis - - 3,85,000 38.50Balance at the end of the year 1,03,85,000 1,038.50 1,03,85,000 1,038.50

Shareholders holding more than 5% Shares

As at 31 March 2013, Blue Star Limited holds 29.83% (30,98,025 shares) of the Company’s shares (29.83% (30,98,025 shares) as of 31 March 2012) and Mr. Ashok Mohan Advani holds 7.66% (7,95,165 shares) of the Company’s shares (7.69% (7,98,755 shares) as of 31 March 2012).

Stock Option Plan

1. The Company has implemented Employee Stock Option Plans for the key employees of the Company and its subsidiaries through the Blue Star Infotech Limited – Key Employee Stock Option Trust (the ‘Trust’) formed for the purpose. All the options issued by the Company are equity share based options which have to be settled in equity shares only. The shares to be allotted to employees under the Blue Star Infotech Limited – Key Employee Stock Option Scheme were purchased by the trust from the open market. Post 16 February, 2013, as per SEBI mandate the Company is required to issue fresh shares to the Trust for a consideration to meet its obligations under the ESOP scheme.The position of the Key Employee Stock Option Plans of the Company as at 31 March 2013 is as under:



59

S. No. Particulars ESOP Scheme 2003 (Amended 2011)1 Details of approval Compensation Committee resolution dated July 22, 20112 Implemented through Trust3 Total number of shares 10,00,000

4 Price per option Closing market price prevailing on the previous day prior to issue of options

5 Granted 6,85,0006 Vested 65,0006 Exercised -8 Lapsed/cancelled options -9 Vested and unexercised 65,000

10 Total number of options in force 6,85,00011 Money realised -12 Vesting Schedule

Designation Managerial EmployeesAll options 1) Vesting begins 1 to 3 years after grant.

2) All options were granted to managerial employees of which 65,000 shares are currently vested.

13 Senior Managerial Personnel Options Granted

OptionsVested

OptionsLapsed

Options Exercised

Balance

6,85,000 65,000 - - 6,85,00014 All options having an exercise period of 1 year after vesting period.

Notes:

a) The shareholders, in the Annual General Meeting held on 22 July 2011 had approved the grant of 10,00,000 employee stock options in accordance with ESOP Scheme 2003 (as amended in 2011), equivalent to 10% of the issued and paid up share capital of the Company as at 31 March 2011. The compensation committee granted 5,15,000 options on 31 August 2012 at ` 60 per share and a further 1,70,000 options on 29 March 2013 at ` 57 per share to the managerial employees of the Company and its subsidiaries. The grant price is based on the closing market price prevailing on the date prior to the date of grant on the Bombay Stock Exchange.

b) There is one employee of the group who has been granted options equal to or exceeding 1% of the Issued Capital.

c) The diluted earnings per share and earnings per share are the same, as the shares covered under vested options are already issued and allotted and are held by the Trust. The shares required by the Trust to meet the obligation towards options to be vested in future will be alloted by the Company to the Trust at the option grant price.

d) In the event of any further rights or bonus issue of equity shares after vesting but prior to exercise of the options, the Company/ Trust shall consider the grant of an appropriate number of additional options, at such price as may be determined by the Compensation Committee.

e) The Company accounts for ‘Employee Share Based Payments’ using the intrinsic value method. The intrinsic value of the stock options issued by the Company to its employees for services rendered by them is measured as the amount by which the quoted market price of the Company’s share as on the date of grant exceeds the exercise price of the stock option. Considering that the stock options have been issued with an exercise price that equals the quoted share price on the previous day, there is no compensation cost recorded in the financial statements using the intrinsic value method.

The date of grant of options, exercise price per share and the estimated fair value per option on the date of grant for options granted during the year is as follows:

S.No. Number of shares Date of grant Exercise price per share `

Estimated fair value per option `

1 65,000 31 August 2012 60 5.822 4,50,000 31 August 2012 60 15.523 1,70,000 29 March 2013 57 14.45


The movement of stock options during the year ended 31 March 2013 are summarized below:

Number of optionsOutstanding at the beginning of the year NilGranted during the year 6,85,000Forfeited during the year NilExercised during the year NilExpired during the year NilOutstanding at the end of the year 6,85,000Exercisable at the end of the year 6,85,000

The exercise price and expected remaining contractual life (comprising the vesting period and exercise period) of options outstanding as at 31 March 2013 is as follows:

Number of options Exercise price Expected remaining contractual life

65,000 60 5 months4,50,000 60 41 months1,70,000 57 48 months

For purposes of the proforma disclosures, the fair value of each option grant was estimated on the date of the grant using the Black Scholes Option Valuation model with following assumptions:

* dividend yield of 20%

* risk free interest rate of 8%

* expected volatility of 33.25% based on historical volatility; and

* expected option life of 3.5 years.

Proforma disclosures using fair value of options granted

year ended31 March 2013

` in Lakhs


` In LakhsProfit after taxation as per Statement of Profit and Loss 533.80 554.17Less: Amortised cost of fair value of options (net of tax) 13.11 NilProfit after taxation after amortisation of options cost 520.69 554.17Earnings Per Share- Basic and Diluted 5.01 5.42

2.2 Reserves and surplus

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsSecurities premium accountBalance at the beginning of the year 355.12 -Add: Receipts on Preferential Issue of Equity Shares (net of expenses for the issue)

- 355.12

Balance at the end of the year 355.12 355.12 General reserveBalance at the beginning of the year 2,021.05 1,965.55 Add: Transfer from Statement of Profit and Loss 53.40 55.50Balance at the end of the year 2,074.45 2,021.05Hedging reserve on forward contractsBalance at the beginning of the year (580.71) 150.05Add : Movement during the year 442.34 (730.76)Balance at the end of the year (138.37) (580.71)Surplus in the Statement of profit and lossBalance at the beginning of the year 5,521.64 5,262.44 Add: Transferred from Statement of Profit and Loss 533.80 554.17 Less : Proposed final dividend 207.70 207.70Less : Corporate dividend tax 35.30 33.70Less : Amount transferred to General Reserve 53.40 55.50Add: Excess provision for dividend distribution tax written back - 1.93Net surplus in the Statement of Profit and Loss 5,759.04 5,521.64Total Reserves and surplus 8,050.24 7,317.10



61

2.3 Deferred tax liability (net)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsA Deferred tax liability on: -

Depreciation 156.24 147.23 (A) 156.24 147.23

B Deferred tax asset on: -Unabsorbed depreciation - -

(B) - -Net Deferred tax liability (A)-(B) 156.24 147.23

Deferred tax assets and deferred tax liabilities have been offset wherever the Company has legally enforceable rights to set-off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities are in relation to such taxes which are levied by the same tax authority.

2.4 Other long-term liabilities

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsDeposits against leasehold premises 331.58 266.37

331.58 266.37

2.5 Long-term provisions

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsProvision for employee benefits (Also refer note 2.29)Gratuity - 20.55 Compensated absences 85.42 67.80

85.42 88.35

2.6 Trade payables

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsSundry creditors-for services (Also refer note 2.27) 393.93 577.45

393.93 577.45

2.7 Other current liabilities

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsAccrued expenses 842.21 679.54Unearned revenue 62.35 66.12 Unclaimed dividends* 20.03 21.50 Hedging reserve on open forward contracts 138.37 580.71 Statutory liabilities 122.90 120.24

1,185.86 1,468.11

* There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund.


2.8 Short-term provisions

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsFor employee benefit Compensated absences 1.30 1.46For others Proposed dividend 207.70 207.70 Corporate dividend tax 35.30 33.70 Wealth tax 0.35 -

244.65 242.86

2.9 Fixed assets(` in Lakhs)

Gross Block (at cost) Depreciation/Amortisation Net BlockDescription of assets

As at 1 April 2012

Additions /Transfers

duringApril 12

March 13

Deletions /Transfers

duringApril 12

March 13

As at 31 March 2013

As at1 April 2012

For the year

April 12 March 13

Withdraw-als during

April 12 March 13

As at 31 March 2013

As at 31 March

2013

As at 31 March

2012

Tangible assetsBuilding (leased out)

1,402.65 - - 1,402.65 167.37 23.37 - 190.74 1,211.91 1,235.28

Leasehold building improvements

591.57 60.14 27.13 624.58 211.51 54.66 24.84 241.33 383.25 380.06

Air conditioners

138.95 8.29 9.91 137.33 89.25 7.62 7.03 89.84 47.49 49.70

Computers 725.64 94.90 0.94 819.60 556.08 83.32 0.66 638.74 180.86 169.56

Furniture and fixtures

574.40 4.77 15.22 563.95 425.09 27.72 14.96 437.85 126.10 149.31

Office equipment

91.05 5.88 8.81 88.12 61.28 4.20 6.24 59.24 28.88 29.77

Vehicles 88.24 50.43 29.00 109.67 59.44 10.41 25.46 44.39 65.28 28.80

Total – A 3,612.50 224.41 91.01 3,745.90 1,570.02 211.30 79.19 1,702.13 2,043.77 2,042.48Intangible assets Computer software

356.46 76.61 - 433.07 240.51 69.55 - 310.06 123.01 115.95

Total – B 356.46 76.61 - 433.07 240.51 69.55 - 310.06 123.01 115.95TOTAL –(A+B) 3,968.96 301.02 91.01 4,178.97 1,810.53 280.85 79.19 2,012.19 2,166.78 2,158.43 Previous year 3,885.87 307.92 224.83 3,968.96 1,708.56 295.98 194.01 1,810.53 2,158.43 -

2.10 Operating lease obligations a. The Company has taken office/residential premises under cancellable operating lease agreements that

are renewable at the option of both the lessor and lessee. An amount of (` in Lakhs) 426.85 (Previous year (` in Lakhs) 416.92) is recognised as lease expenses in the Statement of profit and loss for the year ended 31 March 2013. The future guaranteed lease payments under non-cancellable portion of cancellable leases are:

i) less than one year – (` in Lakhs) 72.77 (Previous year (` in Lakhs) NIL)

ii) later than one year but not later than 5 years – (` in Lakhs) NIL (Previous year (` in Lakhs) NIL)

b. The Company has leased out office premises and furniture under non-cancellable operating lease agreements that are renewable at the option of both the lessor and lessee. An amount of (`in Lakhs) 458.79 (Previous year



63

(` in Lakhs) 369.91) is recognised as lease income in the Statement of profit and loss for the year ended 31 March 2013. The future guaranteed lease payments under non-cancellable leases are:

i) less than one year - (` in Lakhs) 484.14 (Previous year (` in Lakhs) NIL)

ii) later than one year but not later than 5 years - (` in Lakhs) 539.05 (Previous year (` in Lakhs) NIL).

2.11 a) Non-current investments Trade, unquoted (Valued at cost unless stated otherwise)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsInvestment in subsidiary companies 1,350,000 shares (common stock) of US$ 1 each in Blue Star Infotech America, Inc. (formerly USIN International, Inc.), fully paid-up (Previous year 1,350,000 shares of USD 1 each fully paid-up )

684.27 684.27

300,000 equity shares of GBP 1 each in Blue Star Infotech (UK) Limited, fully paid-up (Previous year 300,000 equity shares of GBP 1 each, fully paid-up)

208.29 208.29

1,500,000 equity shares of SGD 1 each in Blue Star Infotech (Singapore) Pte. Limited, fully paid-up (Previous year 10 equity shares of SGD 1 each, fully paid-up) (value `430)

662.65 -

Note : Aggregate book value of unquoted investments (` in Lakhs) 1,555.21 (Previous year (` in Lakhs) 892.56)

1,555.21 892.56

b) Current investments Unquoted (Valued at lower of cost and fair value)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsInvestment in Mutual FundsHDFC Cash Management Fund - Savings Plan - Daily Dividend Reinvestment - Nil units (Previous year – 28,27,803 units)

- 300.78

DWS Mutual Fund - Treasury Fund Cash - Institutional Plan - Daily Dividend - Nil units (Previous year - 1,50,747 units)

- 151.50

ICICI Prudential Regular Savings Fund Growth - 9,22,416 units (Previous year –9,22,416 units)

112.94 103.06

Note : Aggregate book value of unquoted investments (` in Lakhs) 112.94 (Previous year (` In Lakhs) 555.34)

112.94 555.34

2.12 Long-term loans and advances (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsCapital advances 28.73 -Deposit for Rent, Electricity and Water 345.65 358.98Corpus to Provident Fund Trust 0.25 0.25 Corpus to ESOP Trust 0.05 0.05 MAT credit entitlement 241.84 271.56Advance tax (net of provision) 1,222.01 2,029.31

1,838.53 2,660.15


2.13 Other non-current assets (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsDeferred rent 45.58 23.67Deposits with maturity exceeding twelve months 2.19 16.64

47.77 40.31

2.14 Trade receivables (Unsecured)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsOutstanding for a period exceeding six months from the date they are due for payment

- Considered good 37.32 38.38 - Considered doubtful 43.47 28.16

80.79 66.54Other debts - Considered good 4,108.79 2,661.86 - Considered doubtful - -

4,189.58 2,728.40 Less: Provision for bad and doubtful debts 43.47 28.16

4,146.11 2,700.24

Note: Trade receivables include due from Subsidiaries and Associates (` in Lakhs) 2,941.04 (Previous year (` in Lakhs) 1,937.95)

2.15 Cash and bank balances

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsCash and cash equivalentsCash on hand - Balances with banks in: - current accounts (including EEFC accounts) 697.45 977.71 - deposit accounts (with maturity up to 3 months) 21.84 740.37

719.29 1,718.08Other bank balances*Unclaimed dividend accounts 20.03 21.50 Deposits with maturity of more than 3 months but less than 12 months 616.95 117.20Bank deposits with maturity of more than 12 months 2.19 16.64

639.17 155.34Less: Amounts disclosed as other non-current assets (also refer note 2.13) (2.19) (16.64)

1,356.27 1,856.78

* Includes margin money with bank against bank guarantees(` In Lakhs) 60.09 (Previous year (` In Lakhs) 71.09).



65

2.16 Short-term loans and advances (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsAdvance payment to Gratuity trust 7.00 -Prepaid expenses 51.53 61.74 Other deposits 2.40 52.99Advances recoverable in cash or in kind or for value to be received (Including travel advances to employees (` In Lakhs) 43.02 (Previous year (` In Lakhs) 28.05)

67.00 49.08

Loans and advance to related party* 1.50 -Advance to ESOP trust 1.37 -

130.80 163.81

*Includes amount due from a director – (` in Lakhs) 1.50 (Previous year – (` in Lakhs) Nil).

2.17 Other current assets (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsUnbilled services 36.00 84.10 Interest accrued on bank deposits 33.38 27.82Deferred rent - 6.43

69.38 118.35

2.18 Sales and software services


` in Lakhs


` in LakhsIncome from software services 9,635.82 9,327.59 Income from sale of software licences / hardware 559.76 794.85 Reimbursement income 76.89 4.35

10,272.47 10,126.79

2.19 Other income


` in Lakhs


` in LakhsInterest on bank deposits 38.84 27.82 Interest on income tax refunds 61.45 -Interest on other deposits 16.56 -Dividend income from current investments 51.55 93.92 Gain on exchange translation - 152.13 License fee for office property 458.79 369.91 Miscellaneous income 2.04 0.74

629.23 644.52


2.20 Employee benefits expenses


` in Lakhs


` in LakhsSalaries and wages 5,097.14 5,050.57

Contribution to provident and other funds 200.76 288.42

Staff welfare 223.92 252.52

Overseas employee costs 256.87 808.11

5,778.69 6,399.62

2.21 Other expenses


` in Lakhs


` in LakhsTravelling and conveyance 445.79 529.28

Rent 426.85 416.92

Rates and taxes 12.03 41.30

Power 199.49 171.98

Communication expenses 199.69 172.84

Insurance 18.09 18.50

Repairs and maintenance

- Building / Leasehold premises 62.47 74.41

- Computers and Air conditioners 25.96 39.01

- Others 17.00 16.02

Payment to auditors

- Audit services 13.90 13.90

- Taxation matters 1.70 1.70

- Certification work 3.00 3.90

- Out of pocket expenses 0.61 0.22

Directors' fees 6.60 7.80

Commission to non-executive Directors 27.39 9.11

Reimbursement of CEO and Managing Directors' remuneration 160.56 25.70

Cost of technical and other manpower 1,249.91 797.17

Professional charges 43.58 31.06

Loss on disposal of fixed assets 0.23 9.71

Loss on exchange translation 576.64 -

Bad debts written off 0.05 -

Provision for bad and doubtful debts 15.30 14.71

Recruitment charges 17.85 33.19

Forward options cost - 4.37

Security charges 32.93 32.11

Cost of software licenses and tools 36.92 28.06

Miscellaneous expenses 122.40 129.83

3,716.94 2,622.80



67

2.22 Contingent liabilities and commitments (to the extent not provided for)

i) Contingent liability not provided in respect of:

• Demand(s) raised by the IncomeTax authorities for prior financial year(s) during the year aggregating

(` in Lakhs) 391.21 (Previous year (` in Lakhs) Nil) against which the Company has filed appeal(s) with the

Commissioner of Income Tax (Appeals).

• Appeal(s) filed with the Appellate Tribunal (India) towards income-tax demands amounting to

(` in Lakhs) 240.16 (Previous year (` in Lakhs) 175.50)

The Company is advised that it would get a favourable verdict and no demand would be eventually sustained

in any of the above matters. Accordingly, no provision is made in the books in respect of these contingent

liabilities.

ii) Guarantees given on behalf of the Company by banks (` in Lakhs) 60.09 (Previous year (` in Lakhs) 71.09).

2.23 Additional information pursuant to the provisions of Revised Schedule VI to the Companies Act, 1956

The Company is engaged in the development of computer software. Considering the nature of business, certain

details required under Revised Schedule VI to the Companies Act, 1956 are not applicable.


` in Lakhs


` in Lakhs

Value of imports on CIF basis (on accrual basis)

Capital goods - 56.00

Expenditure in foreign currency (on accrual basis):

Travel expenses 226.44 243.32

Service charges to overseas subsidiaries 296.54 871.76

Purchase of traded software licences 5.71 17.59

Reimbursement of Managing Director’s Remuneration 160.56 25.70

Reimbursement of other economic benefits 296.50 186.46

985.75 1,344.83

Earnings in foreign exchange (on accrual basis):

Income from services 7,035.85 6,746.08

2.24 Dividend remitted in foreign currency:



Number of non-resident shareholders 122 118

Number of shares held by them 112,780 95,778

Gross amount of dividend remitted (` in Lakhs) 2.25 2.87

The financial year to which it relates 2011-12 2010-11


2.25 Related party transactions

i) Blue Star Infotech (UK) Limited (BSIUK), the 100 % subsidiary of the Company has earned profits during the

year ended 31 March 2013 and also has a positive net worth, as at the year-end.

ii) Blue Star Infotech America, Inc. (BSIA), the 100 % subsidiary of the Company has incurred a loss during the

year ended 31 March 2013 but has a positive net worth as at the year-end. The management believes that the

business loss is a temporary phenomenon arising mainly due to reduced margins in turnover consequent to

transient adverse market conditions. Hence, no impairment of the investment in the subsidiary is currently

deemed necessary in the books of account.

iii) Blue Star Infotech (Singapore) Pte Limited (BSISG), the 100 % subsidiary of the Company has earned profits

during the year ended 31 March 2013 and also has a positive net worth, as at the year-end.

Related party disclosures:

Related party transactions are transfer of resources or obligations between related parties, regardless of

whether a price is charged. Parties are considered to be related, if one party has the ability, directly or indirectly,

to control the other party or exercise significant influence over the other party in making financial or operating

decisions. Parties are considered to be related if they are subject to common control or common significant

influence.

(` in Lakhs)

Particulars Subsidiaries Associates Promoters Key Managerial Personnel

Total for the year

Rendering of Economic Benefits

- Blue Star Infotech America, Inc. 3,535.08 - - - 3,535.08

- Blue Star Infotech (UK) Limited 1,269.01 - - - 1,269.01

- Blue Star Infotech Singapore Pte. Limited 428.23 - - - 428.23

- Blue Star Limited - 1,035.05 - - 1,035.05

5,905.73 934.17 - - 6,839.90

Receiving of Economic Benefits

- Blue Star Infotech America, Inc. 626.00 - - - 626.00

- Blue Star Infotech (UK) Limited 39.37 - - - 39.37


- Blue Star Limited - 44.12 - - 44.12

1,095.56 41.56 - - 1,137.12

Reimbursement of expenses

- Blue Star Infotech America, Inc. 51.81 - - - 51.81

- Blue Star Infotech (UK) Limited 70.38 - - - 70.38



102.47 - - - 102.47

Purchase of capital goods


- 58.81 - - 58.81



69

(` in Lakhs)

Particulars Subsidiaries Associates Promoters Key Managerial Personnel

Total for the year

Capital advance given - Blue Star Limited - - - - -

- 2.90 - - 2.90

Sale of Capital Goods - Blue Star Limited - - - - -

- 2.40 - - 2.40

Director Sitting Fees - Mr. Ashok M. Advani - - 0.80 - 0.80

- - 1.00 - 1.00

Non - Executive Director commission - Mr. Ashok M. Advani - - 4.26 - 4.26

- - 1.45 - 1.45

Remuneration - Mr. Suneel M. Advani - - 44.40 - 44.40

- - 44.40 - 44.40

Outstanding BalanceDebit Balance 2,213.74 727.30 1.50 - 2942.54

1,339.82 598.12 - - 1937.94

Credit Balance 301.92 27.48 - - 329.40

483.19 40.79 - - 523.98

Rent Deposit - 100.00 - - 100.00

- 100.00 - - 100.00

Note: Figures in italics are of the previous year

Names of related parties and description of relationship

Subsidiaries and related interests (a) Blue Star Infotech America, Inc., USA (100% subsidiary)(b) Blue Star Infotech (UK) Limited, UK (100% subsidiary)(c) Blue Star Infotech (Singapore) Pte. Limited, Singapore (100% subsidi-

ary)(d) Blue Star Infostack Solutions Pte. Limited (100% subsidiary of Blue

Star Infotech (Singapore) Pte. Limited)(e) Blue Star Infostack (Malaysia) Sdn. Bhd. (100% subsidiary of Blue Star

Infotech (Singapore) Pte. Limited)(f ) Blue7 Solutions LLC, USA (60% shareholding of Blue Star Infotech

America, Inc. USA)

Associates Blue Star Limited (Holding 29.83% of the equity share capital of the Company)

Promoters Mr. Suneel M. Advani, Chairman and Managing DirectorMr. Ashok M. Advani, Vice Chairman

Key Managerial Personnel Mr. Sunil Bhatia, Chief Executive Officer and Managing Director


2.26 Remuneration to Managing Director included in the Statement of profit and loss is as follows :


` in Lakhs


` in Lakhs

Chairman and Managing Director’s remuneration 26.40 26.40

House rent (net) 18.00 18.00

Reimbursement of CEO and Managing Director’s remuneration 160.56 25.70

Total 204.96 70.10

2.27 Micro, Small and Medium Enterprises

There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more

than 45 days as at 31 March 2013. This information as required to be disclosed under the Micro, Small and Medium

Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis

of information available with the Company and has been relied upon by the statutory auditors of the Company.

2.28 Derivative instruments:

The Company has entered into the following derivative instruments:

(a) Forward Exchange Contracts and Foreign Exchange Options Contracts (being derivative instruments), which

are not intended for trading or speculative purposes, but for hedging purposes, to establish the amount of

reporting currency required or available at the settlement date of certain payables and receivables.

There are outstanding Forward Exchange Contracts and Foreign Exchange Options Contracts entered into by

the Company as at 31 March 2013 of USD 19,00,000 (Previous year USD 1,18,00,000).

(b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise

are given below:

Amounts receivable (net of payables) in foreign currency on account of the following:

Foreign Currency Exposure 2012-13(` in Lakhs)

2012-13 2011-12(` in Lakhs)

2011-12

Exports in US $ 1,024.30 $1,883,243 NIL NIL

Exports in UK £ 280.25 £340,434 278.48 £340,438

Exports in SGD $ 198.39 $452,743 NIL NIL

2.29 Staff benefits cost in accordance with Accounting Standard 15 (Revised 2005)

a) Defined contribution plans: The amount recognised as an expense during the year is (` in Lakhs) 200.76

(Previous year (` in Lakhs) 288.42)



71

b) Defined benefit plans:

Particulars 2012-13` in Lakhs

2011-12` in Lakhs

Change in defined benefit obligation:

Obligation as at the beginning of the year: 232.40 345.31

Service cost 78.18 75.72

Interest cost 16.50 23.23

Actuarial (gain) / loss (22.97) (101.93)

Benefits paid (52.21) (109.93)

Present value of defined benefit obligation as at year end (A) 251.90 232.40

Change in plan assets:

Opening plan assets, at fair value 142.59 153.90

Expected return on plan assets 12.27 11.46

Actuarial gain / (loss) (4.29) (1.44)

Contributions 73.83 88.60

Benefits paid (52.21) (109.93)

Fair value of plan assets as at year end (B) 172.19 142.59

Cost for the year

Service cost 78.18 75.72

Interest cost 16.50 23.23

Expected return on plan assets (12.27) (11.46)

Actuarial (gain) / loss (18.68) (100.49)

Total net cost recognised as employee remuneration 63.73 (13.00)

Reconciliation of benefit obligations &plan assets for the year:

Present value of defined benefit obligations as at year end (A) 251.90 232.40

Fair value of plan assets as at year end (B) 172.19 142.59

Net (asset) / liability as at year end recognised in Balance Sheet (A) – (B) 79.71 89.81

Investment details of plan assets:

The plan assets are invested in trust managed funds.

Assumptions:

Discount rate 8.00% 8.00%

Salary escalation rate 5.00% 5.00%

Estimated rate of return on plan assets 8.00% 8.00%

c) The Company has revised its Privilege leave salary policy wherein the maximum number of encashable

Privilege leave was reduced from 120 days to 55 days. As a consequence, there was reversal of leave salary

provision by ` 119.67 Lakhs in the previous year. There is no such reversal in the current year.

2.30 Earnings Per Share (EPS)

The amount considered in ascertaining the Company’s earnings per share constitute the net profit after tax and

exceptional item (and includes post tax effect of any extraordinary items). The number of shares used in computing


As per our report of even date attached




basic earnings per share is the weighted average number of shares outstanding during the year. The number of

shares used in computing diluted earnings per share comprise the weighted average number of shares considered

for deriving basic earnings per share and also the weighted average number of shares which could have been

issued on conversion of all dilutive potential shares.



i. Net Profit after tax (` in Lakhs) 533.80 554.17

ii. Basic (weighted average) number of Equity Shares 1,03,85,000 1,02,31,421

iii. Diluted (weighted average) numberof Equity Shares 1,03,85,000 1,02,31,421

iv. Earnings per share (EPS) in `- Basic and diluted 5.14 5.42

2.31 The company considers its entire business / geographical operations as a single segment. There are no separate

reportable segments as per Accounting Standard 17, Segment Reporting prescribed by the Central Government, in

accordance with Companies (Accounting Standards) Rules, 2006.

2.32 The previous year’s figures have been recast / regrouped / rearranged, wherever considered necessary.



73

Independent Auditors’ ReportTo the Board of Directors of Blue Star Infotech Limited 1. We have audited the accompanying consolidated financial statements of Blue Star Infotech Limited, (“the Company”)

and its subsidiaries, (hereinafter collectively referred to as the “Group”), which comprise the consolidated Balance Sheet as at 31 March 2013, and the consolidated Statement of Profit and Loss and consolidated Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements2. Management is responsible for the preparation of these consolidated financial statements that give a true and fair

view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group in accordance with accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility3. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We

conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and presentation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

6. In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of the report of the other auditor on the financial statements of the subsidiary as noted below, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the consolidated Balance Sheet, of the state of affairs of the Group as at 31 March 2013; ii) in the case of the consolidated Statement of Profit and Loss, of the profit for the year ended on that date; and iii) in the case of the consolidated Cash Flow Statement, of the cash flows for the year ended on that date.

Other Matter7. We did not audit the financial statements of a subsidiary included in the consolidated financial statements, whose

financial statements reflect total assets (after eliminating intra-group transactions) of `615.33 Lakhs as at 31 March 2013; total revenues (after eliminating intra-group transactions) of `2,127.34 Lakhs and net cash flows aggregating to `107.67 Lakhs for the year then ended. These financial statements have been audited by other auditor whose audit report has been furnished to us by the management, and our audit opinion on the consolidated financial statements of the Group for the year then ended to the extent they relate to the financial statements not audited by us as stated in this paragraph is based solely on the audit report of the other auditor. Our opinion is not qualified in respect of this matter.

For Walker, Chandiok & CoChartered AccountantsFirm Registration No.: 001076N

per Khushroo B. Panthaky PartnerMembership No. F-42423

Mumbai9 May 2013


Consolidated Balance Sheet as at 31 March 2013

Notes As at

31 March 2013` in Lakhs

As at31 March 2012

` in LakhsEquity and liabilitiesShareholders' funds Share capital 2.1 1,038.50 1,038.50 Reserves and surplus 2.2 7,885.20 7,187.02

8,923.70 8,225.52 Non-current liabilities Deferred tax liabilities 2.3 161.10 150.62 Other long-term liabilities 2.4 331.58 266.37 Long-term provisions 2.5 85.42 88.35

578.10 505.34 Current liabilities Trade payables 2.6 812.87 638.68 Other current liabilities 2.7 1,834.11 1,764.73 Short-term borrowings 2.8 11.93 - Short-term provisions 2.9 300.09 299.00

2,959.00 2,702.41 Total 12,460.80 11,433.27 AssetsNon-current assetsFixed assets Tangible assets 2.10 2,063.66 2,051.88 Intangible assets 2.10 123.87 116.03 Goodwill 158.45 - Software product under development 2.10 62.63 - Non-current investments 2.12 a) 243.68 215.18 Long-term loans and advances 2.13 1,818.18 2,687.65 Other non-current assets 2.14 47.77 41.75

4,518.24 5,112.49 Current assets Current investments 2.12 b) 112.94 555.34 Trade receivables 2.15 4,457.50 2,853.19 Cash and bank balances 2.16 2,867.35 2,280.50 Short-term loans and advances 2.17 369.76 347.15 Other current assets 2.18 135.01 284.60

7,942.56 6,320.78 Total 12,460.80 11,433.27 Significant Accounting Policies and Notes to the Consolidated Financial Statements

1 to 2.30

This is the balance sheet referred to in our report of even date






75

Consolidated Statement of Profit and Loss for the year ended 31 March 2013

Notes year ended

31 March 2013 ` in Lakhs

year ended 31 March 2012

` in Lakhs RevenueSales and software services 2.19 Exports 15,039.61 8,993.09 Domestic 3,813.17 3,645.96

18,852.78 12,639.05 Other income 2.20 663.40 803.98 Total 19,516.18 13,443.03 ExpensesPurchase of traded software licenses 611.59 540.99 Purchase of traded hardware 25.30 104.68 Employee benefit expenses 2.21 9,664.67 7,423.08 Finance costs (Interest Expense) 14.65 - Depreciation and amortisation expense 292.67 301.35 Other expenses 2.22 8,173.90 4,393.11 Total expenses 18,782.78 12,763.21 Profit before tax 733.40 679.82 Current tax - Indian Income Tax 163.57 232.05 - Foreign Tax 60.50 (3.81)Deferred tax expense 10.48 94.50 Total 234.55 322.74 Net Profit 498.85 357.08 Earnings per equity share (Basic and diluted) - (`) 2.27 4.80 3.49 Face Value per Share - (`) 10.00 10.00 Significant Accounting Policies and Notes to the Cosolidated Financial Statements

1 to 2.30

This is the statement of profit and loss referred to in our report of even date





Consolidated Cash Flow Statement for the year ended 31 March 2013



[A] Cash Flows from operating activitiesProfit before tax 733.40 679.82 Depreciation and amortisation expense 292.67 301.35 Unrealised foreign exchange (gains) / loss (net) 50.19 (41.82)Loss on disposal of fixed assets (net) 0.23 9.71 Provision for bad and doubtful debts 35.16 37.74 Share of profit in Joint Venture (28.50) (61.70)Dividend income (51.55) (93.92)Bad and doubtful debts written off / Sundry balances written back (net) (0.09) 0.14 Finance costs 14.65 -Interest income (39.30) (28.24)

273.46 123.26Operating profit before working capital changes 1,006.86 803.08Adjustment for:Trade and other receivables (987.50) (188.27)Trade payables and other liabilities 371.16 (35.55)

(616.34) (223.82)Cash generated from operations 390.52 579.26Direct taxes paid (refund received) 668.86 (398.90)Net cash from operating activities 1,059.38 180.36

[B] Cash flows from investing activitiesPurchase of fixed assets (Including capital advances) (407.73) (173.12)Consideration for acquisiton (184.86) -Sale of fixed assets 11.59 21.87 Purchase of investments (3,759.73) (5,203.02)Sale of investments 4,253.68 6,463.71 Investment in Joint Venture Company - (153.48)Dividend received 51.55 93.92 Dividend reinvested in Mutual Funds (51.55) (93.92)Interest received 5.92 28.24 Fixed deposit with bank (482.39) (7.35)Net cash from investing activities (563.52) 976.85

[C] Cash flows from financing activitiesRepayment of Short term borrowing (209.93) -Finance costs (14.65) -Preferential Issue of Equity Shares - 393.62 Dividend and tax thereon paid (241.40) (350.60)Net cash from/(used in) financing activities (465.98) 43.02 Net increase in cash and cash equivalents 29.88 1,200.23Cash and cash equivalents - opening balance 2,086.98 886.75Cash and cash equivalents - on acquisition of subsidiary 126.84 - Cash and cash equivalents - closing balance 2,243.70 2,086.98Cash and cash equivalents comprise of:Cash on Hand 0.17 - Balances with banks in: - current accounts (including EEFC accounts) 2,208.36 1,375.06 - deposit accounts 21.84 766.74 Cash and cash equivalents as per books 2,230.37 2,141.80Exchange difference on translation of foreign currency accounts/deposits

13.33 (54.82)

2,243.70 2,086.98Note:Cash and cash equivalents include (` Lakhs) 20.03 (Previous Year (` Lakhs) 21.50) which is not available for use by the Company.This is the Cash flow statement referred to in our report of even date.






77

Notes annexed to and forming part of the Consolidated Financial Statements for the year ended 31 March 2013

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Consolidation

(i) Basis of preparation

The consolidated financial statements are prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements prescribed by the Central Government, in accordance with the Companies (Accounting Standards) Rules, 2006.

(ii) Principles of consolidation

The consolidated financial statements present the financial statements of Blue Star Infotech Limited (the ‘Company’) and all of its subsidiaries, which are more than 50% owned, controlled and integral to the core business of the Group. All significant transactions and balances between the entities included in the consolidation have been eliminated.

The consolidated financial statements are prepared in accordance with the principles and procedures required for the preparation and presentation of consolidated financial statements as laid down under Accounting Standard 21 on Consolidated Financial Statements. The financial statements of the parent company, Blue Star Infotech Limited, its subsidiaries, Blue Star Infotech America, Inc., Blue Star Infotech (UK) Limited Blue Star Infotech (Singapore) Pte. Limited and Blue Star Infostack Solutions Pte. Ltd. (subsidiary of Blue Star Infotech (Singapore) Pte. Limited) (collectively the ‘Group’) have been combined on a line-by-line basis by adding together book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances and transactions and resulting unrealized gain / loss. The consolidated financial statements are prepared by applying uniform accounting policies in use at the Group.

(iii) Companies included in consolidation

Name of the Company Country of incorporation Proportion of ownership interestBlue Star Infotech America, Inc. United States of America (USA) 100% owned subsidiaryBlue Star Infotech (UK) Limited United Kingdom (UK) 100% owned subsidiaryBlue Star Infotech (Singapore) Pte. Limited

Singapore 100% owned subsidiary

Blue Star Infostack Solutions Pte. Limited.

Singapore 100% owned subsidiary of Blue Star Infotech Singapore Pte. Ltd.

Blue 7 Solutions LLC United States of America (USA) 60% Joint Venture of Blue Star Infotech America, Inc.

(b) Basis of accounting and preparation of financial statements

The financial statements which have been prepared under the historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act, 1956 (the ‘Act’) and comply in all material aspects with the Accounting Standards prescribed by the Central Government, in accordance with the Companies (Accounting Standards) Rules, 2006, to the extent applicable.

(c) Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Key estimates include estimate of useful life of fixed assets, unbilled revenue, income taxes, Provision for bad and doubtful debts estimated gain/loss on foreign exchange contracts and future obligations under employee retirement benefit plans. Actual results could differ from those estimates. Any revision to accounting estimates will be recognised prospectively in the current and future periods.


(d) Fixed assets, Capital work-in-progress and Depreciation

(i) Fixed assets are stated at cost less accumulated depreciation. Cost includes inward freight, taxes and expenses incidental to acquisition and installation, up to the point the asset is ready for its intended use.

(ii) Depreciation is provided on Building under the Straight-Line Method and on other fixed assets, other than Leasehold building improvements, under the Written down Value method. Depreciation is provided on a pro-rata basis prescribed under respective applicable accounting regulation, which also represents the useful life of fixed assets.

(iii) Leasehold building improvements are written off over the period of lease or their estimated useful life, whichever is earlier, on a straight-line basis.

(iv) Assets acquired but not ready for use or assets under construction are classified under Capital work in progress.

(v) Management evaluates at regular intervals, using external and internal sources, the need for impairment of any asset. 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 net realisable value on its eventual disposal. Any loss on account of impairment is expensed as the excess of the carrying amount over the higher of the asset’s net sales price or present value as determined.

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

A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

(e) Intangible assets

Costs relating to acquisition of computer software are capitalised as ‘Intangible Assets’ and amortised on a straight line basis over a period of three years, which is the management’s estimate of the useful life of such software.

(f) Goodwill on acquisition

The goodwill arising on acquisition of a business enterprise is not amortised and is tested for impairment if indicators of impairment exist.

(g) Intangible assets under development

The Company recognizes the cost of developing intellectual property which in its opinion would result in commercial benefits over several financial years.

The initial investment towards development or the cost of creation of the intellectual property rights is treated as capital expenditure. The same would be written/off over the commercial life of intellectual property so created.

(h) Investments

Investments are classified into long-term investments and current investments. Long-term investments are carried at cost. Provision for diminution in the value of long-term investments is not made unless it is considered other than temporary. Current investments are valued at lower of cost and net realisable value.



79

(i) Foreign currency transactions

(i) Initial recognition - Transactions denominated in foreign currencies are recorded at the rates of exchange prevailing on the date of the transaction.

(ii) Conversion - Monetary assets and liabilities denominated in foreign currency are converted at the rate of exchange prevailing on the date of the Balance Sheet.

(iii) Exchange differences - All exchange differences arising on settlement/conversion of foreign currency transactions are included in the Statement of Profit and Loss in the year in which they arise.

(iv) Forward cover - The Company uses foreign exchange forward contracts and forward option contracts to hedge its exposure to foreign currency fluctuations. The premium or discount arising at the inception of forward option contracts and foreign exchange forward contracts is amortised as expense or income over the life of the contract. Any profit or loss arising on cancellation or renewal of foreign exchange forward contracts is recognised as income or expense for the year.

(v) Pursuant to the Announcement ‘Accounting for Derivatives’ by the Institute of Chartered Accountants of India, the Company has adopted Accounting Standard 30, Financial Instruments: Recognition and Measurement, prescribed by the Institute of Chartered Accountants of India, with effect from April 1, 2008. Consequently, outstanding forward contracts have been treated as highly probable forecast transactions based on historic trends. Accordingly, gains / losses arising on ‘mark to market’ of such open forward contracts have been accumulated in ‘Hedging Reserve Account’. The Company uses forward contracts as economic hedges and not for trading or speculative purposes.

(j) Staff benefits

1. In respect of India: -

i. All short term employee benefits are accounted on undiscounted basis during the accounting period based on services rendered by employees.

ii. The Company’s contribution to Provident Fund is remitted to a trust established for this purpose based on a fixed percentage of the eligible employees’ salary and charged to Statement of Profit and Loss. The Company has categorised its Provident Fund as a defined contribution plan since it has no further obligations beyond these contributions.

iii. The Company’s contribution under a defined Superannuation Plan to the trust established for this purpose based on a specified percentage of salary of eligible employees is charged to Statement of Profit and Loss. The Company has categorised Superannuation Plan as a defined contribution plan since it has no further obligations beyond these contributions.

iv. The Company’s liability towards gratuity and compensated absences, being defined benefit plans is accounted for on the basis of an independent actuarial valuation using the projected unit credit method, done at the year end and actuarial gains/losses are charged to the Statement of Profit and Loss. Gratuity liability is funded by payments to the trust established for the purpose.

2. In respect of the subsidiaries in USA, UK and Singapore, no separate retirement benefit funds are created by the Group. However, all statutory contributions as required are paid regularly.

(k) Revenue recognition

(i) Revenue from software development with respect to time and material contracts is recognised as related costs are incurred and services are performed in accordance with the terms of specific contracts.


(ii) Revenue from fixed price contracts are recognised based on the milestones achieved as specified in the contracts and for interim stages, until the next milestone is achieved, on the percentage of completion basis. Provision for estimated losses on incomplete contracts are recorded in the period in which such losses become probable based on current contract.

(iii) Revenue from sale of traded software licenses and traded hardware is recognised on delivery to the customer.

(iv) Cost and earnings in excess of billings are classified as unbilled revenue while billings in excess of cost and earnings are classified as unearned revenue.

(v) Dividend income is recognized when the right to receive the dividend is established.

(vi) Interest income is recognized on time proportion basis.

(l) Lease rentals Rent expense is recognised with reference to the terms of lease agreement and other consideration in respect

of operating leases on a straight line basis. Assets given on operating lease are included under fixed assets of the Company. Lease income is recognised on straight line basis over the primary period of lease.

(m) Taxes on Income The provision for current taxation is computed in accordance with the relevant tax regulations. Deferred tax

is recognised on timing differences between the accounting and taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as at the Balance Sheet date. Deferred tax assets in respect of unabsorbed depreciation and carry forward losses under tax laws are recognised and carried forward to the extent there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised in future. Other deferred tax assets are recognised only to the extent there is a reasonable certainty of realisation in future. Such assets are reviewed at each Balance Sheet date to reassess realisation.

Tax credit is recognized in respect of Minimum Alternate Tax (‘MAT’) as per the provisions of Section 115 JAA of the Income Tax Act, 1961 of India based on convincing evidence that the Company will pay normal income tax within statutory time frame and is reviewed at each Balance Sheet date.

(n) Provisions and contingent liabilities Provisions are recognised in the financial statements in respect of present probable obligations, for amounts

which can be reliably estimated.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events, whose existence would be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

2. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

All amounts in the financial statements are presented in Indian Rupees Lakhs(` in Lakhs) and two decimal places thereafter, except for the per share data or as otherwise stated.

2.1 Share capital(` in Lakhs)

Particulars As at31 March 2013

As at31 March 2012

Authorised2,00,00,000 (31 March 2012: 2,00,00,000) Equity Shares of `10 each 2,000.00 2,000.00Issued, subscribed and paid up1,03,85,000 (31 March 2012: 1,03,85,000) Equity Shares of `10 each fully paid-up

1,038.50 1,038.50

1,038.50 1,038.50



81

The Company has only one class of shares referred as equity shares having a face value of `10/- each. Each shareholder is entitled to one vote per share.

The Company declares and pay dividends in Indian rupees. All dividends proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting.

During the year ended 31 March 2013, the amount of dividend recognized as distributions to equity shareholders was `2 per share. The total dividend appropriation for the year ended 31 March 2013 amounted to (` in Lakhs) 243.00 (Previous year (` in Lakhs) 241.40) including corporate dividend tax of (` in Lakhs) 35.30 (Previous year (` in Lakhs) 33.70).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholders.

The reconciliation of the number of shares outstanding and the amount of share capital as at 31 March 2013 and 31 March 2012 is set out below:

Particulars As at 31 March 2013 As at31 March 2012Number Amount

(` In Lakhs)Number Amount

(` In Lakhs)Balance at the beginning of the year 1,03,85,000 1,038.50 1,00,00,000 1,000.00Add: Shares issued on preferential allotment basis - - 3,85,000 38.50Balance at the end of the year 1,03,85,000 1,038.50 1,03,85,000 1,038.50

Shareholders holding more than 5% Shares

As at 31 March 2013, Blue Star Limited holds 29.83% (30,98,025 shares) of the Company’s shares (29.83% (30,98,025 shares) as of 31 March 2012) and Mr. Ashok Mohan Advani holds 7.66% (7,95,165 shares) of the Company’s shares (7.69% (7,98,755 shares) as of 31 March 2012).

Stock Option Plan

1. The Company has implemented Employee Stock Option Plans for the key employees of the Company and its subsidiaries through the Blue Star Infotech Limited – Key Employee Stock Option Trust (the ‘Trust’) formed for the purpose. All the options issued by the Company are equity share based options which have to be settled in equity shares only. The shares to be allotted to employees under the Blue Star Infotech Limited – Key Employee Stock Option Scheme were purchased by the trust from the open market. Post 16 February, 2013, as per SEBI mandate the Company is required to issue fresh shares to the Trust for a consideration to meet its obligations under the ESOP scheme.The position of the Key Employee Stock Option Plans of the Company as at 31 March 2013 is as under:

S. No. Particulars ESOP Scheme 2003 (Amended 2011)1 Details of approval Compensation Committee resolution dated July 22, 20112 Implemented through Trust3 Total number of shares 10,00,000

4 Price per option Closing market price prevailing on the previous day prior to issue of options

5 Granted 6,85,0006 Vested 65,0006 Exercised -8 Lapsed/cancelled options -9 Vested and unexercised 65,000

10 Total number of options in force 6,85,00011 Money realised -12 Vesting Schedule

Designation Managerial EmployeesAll options 1) Vesting begins 1 to 3 years after grant.

2) All options were granted to managerial employees of which 65,000 shares are currently vested.


13 Senior Managerial Personnel Options Granted

OptionsVested

OptionsLapsed

Options Exercised

Balance

6,85,000 65,000 - - 6,85,00014 All options having an exercise period of 1 year after vesting period.

Notes: a) The shareholders, in the Annual General Meeting held on 22 July 2011 had approved the grant of 10,00,000

employee stock options in accordance with ESOP Scheme 2003 (as amended in 2011), equivalent to 10% of the issued and paid up share capital of the Company as at 31 March 2011. The compensation committee granted 5,15,000 options on 31 August 2012 at ` 60 per share and a further 1,70,000 options on 29 March 2013 at ` 57 per share to the managerial employees of the Company and its subsidiaries. The grant price is based on the closing market price prevailing on the date prior to the date of grant on the Bombay Stock Exchange.

b) There is one employee of the group who has been granted options equal to or exceeding 1% of the Issued Capital. c) The diluted earnings per share and earnings per share are the same, as the shares covered under vested

options are already issued and allotted and are held by the Trust. The shares required by the Trust to meet the obligation towards options to be vested in future will be alloted by the Company to the Trust at the option grant price.

d) In the event of any further rights or bonus issue of equity shares after vesting but prior to exercise of the options, the Company/ Trust shall consider the grant of an appropriate number of additional options, at such price as may be determined by the Compensation Committee.

e) The Company accounts for ‘Employee Share Based Payments’ using the intrinsic value method. The intrinsic value of the stock options issued by the Company to its employees for services rendered by them is measured as the amount by which the quoted market price of the Company’s share as on the date of grant exceeds the exercise price of the stock option. Considering that the stock options have been issued with an exercise price that equals the quoted share price on the previous day, there is no compensation cost recorded in the financial statements using the intrinsic value method.

The date of grant of options, exercise price per share and the estimated fair value per option on the date of grant for options granted during the year is as follows:

S.No. Number of shares Date of grant Exercise price per share `

Estimated fair value per option `

1 65,000 31 August 2012 60 5.822 4,50,000 31 August 2012 60 15.523 1,70,000 29 March 2013 57 14.45

The movement of stock options during the year ended 31 March 2013 are summarized below:

Number of optionsOutstanding at the beginning of the year NilGranted during the year 6,85,000Forfeited during the year NilExercised during the year NilExpired during the year NilOutstanding at the end of the year 6,85,000Exercisable at the end of the year 6,85,000

The exercise price and expected remaining contractual life (comprising the vesting period and exercise period) of options outstanding as at 31 March 2013 is as follows:

Number of options Exercise price Expected remaining contractual life

65,000 60 5 months4,50,000 60 41 months1,70,000 57 48 months

For purposes of the proforma disclosures, the fair value of each option grant was estimated on the date of the grant using the Black Scholes Option Valuation model with following assumptions:

* dividend yield of 20% * risk free interest rate of 8% * expected volatility of 33.25% based on historical volatility; and * expected option life of 3.5 years.



83

Proforma disclosures using fair value of options granted

year endedMarch 31, 2013

` inLakhs

year endedMarch 31, 2012

` In LakhsProfit after taxation as per Statement of Profit and Loss 498.85 357.08Less: Amortised cost of fair value of options (net of tax) 13.11 NilProfit after taxation after amortisation of options cost 485.74 357.08Earnings Per Share- Basic and Diluted 4.68 3.49

2.2 Reserves and surplus

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsCapital reserve 41.89 41.89Securities premium accountBalance at the beginning of the year 355.12 -Add: Receipts on preferential issue of Equity Shares (net of expenses for the issue) - 355.12 Balance at the end of the year 355.12 355.12 General reserveBalance at the beginning of the year 2,021.05 1,965.55Add: Transfer from Statement of profit and loss 53.40 55.50Balance at the end of the year 2,074.45 2,021.05Hedging reserve on forward contractsBalance at the beginning of the year (580.71) 150.05Add : Movement during the year 442.33 (730.76)Balance at the end of the year (138.38) (580.71)Surplus in the Statement of Profit and LossBalance at the beginning of the year 5,349.67 5,287.56Add: Transferred from Statement of Profit and Loss 498.85 357.08Less : Proposed final dividend 207.70 207.70Less : Corporate dividend tax 35.30 33.70Less : Amount transferred to General reserve 53.40 55.50Add: Excess provision for dividend distribution tax written back - 1.93Net surplus in the Statement of Profit and Loss 5,552.12 5,349.67Total Reserves and surplus 7,885.20 7,187.02

2.3 Deferred tax liabilities

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsA Deferred tax liability on: -

Depreciation 161.10 150.62 (A) 161.10 150.62

B Deferred tax asset on: -Unabsorbed Depreciation - -

(B) - -Net Deferred tax liability (A)-(B) 161.10 150.62

Deferred tax assets and deferred tax liabilities have been offset wherever the Company has legally enforceable rights to set-off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities are in relation to such taxes which are levied by the same tax authority.


2.4 Other long term liabilities

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsDeposits against leasehold premises 331.58 266.37

331.58 266.37

2.5 Long term provisions

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsProvision for employee benefits (Also refer note 2.26) Gratuity - 20.55 Compensated absences 85.42 67.80

85.42 88.35

2.6 Trade payables

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsSundry creditors-for services 812.87 638.68

812.87 638.68

2.7 Other current liabilities

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsAccrued expenses 1,220.58 897.95Unearned revenue 105.29 120.74Unclaimed dividends* 20.03 21.50 Hedging reserve on open forward contracts 138.38 580.71Dividend Payable 13.58 -Statutory liabilities 336.25 143.83

1,834.11 1,764.73

* There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund.

2.8 Short-term borrowings (Unsecured)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsTerm Loan from Bank (availed by Blue Star Infostack Pte. Ltd. Singapore) 11.93 -

Terms of repayment Loan is repayable in 36 monthly instalments of `85,186 each (SGD 1,944) excluding interest, commencing from

June 2011. The average rate of interest is 8.88% per annum. The loan is expected to be fully repaid on or before 31 March, 2014. The loan is guaranteed by directors and relatives of the directors of Blue Star Infostack Solutions Pte. Ltd.



85

2.9 Short-term provisions

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsFor employee benefitsCompensated absences 56.74 57.60For othersProposed dividend 207.70 207.70Corporate dividend tax 35.30 33.70Wealth tax 0.35 -

300.09 299.00

2.10 Fixed assets(` in Lakhs)

Gross Block (at cost) Depreciation/Amortisation Net BlockDescription of

assetsAs at 1 April 2012

Additions /Transfers

duringApril 12

March 13

Deletions /Transfers

duringApril 12

March 13

As at 31 March 2013

As at1 April 2012

For the year

April 12 March 13

Withdrawals during April 12 March 13

As at 31 March 2013

As at 31 March

2013

As at 31 March

2012

Tangible assetsBuilding (leased out)

1,402.65 - - 1,402.65 167.37 23.37 - 190.74 1,211.91 1,235.28

Leasehold building improvements

591.57 60.14 27.13 624.58 211.51 54.66 24.84 241.33 383.25 380.06

Airconditioners 138.95 8.29 9.91 137.33 89.27 7.62 7.03 89.86 47.47 49.68

Computers 766.31 112.05 .94 877.42 591.10 91.77 0.66 682.21 195.21 175.21

Furniture and fittings

590.02 8.24 15.22 583.04 437.98 29.89 14.96 452.91 130.13 152.04

Office equipment

97.29 6.93 8.81 95.41 66.48 4.76 6.24 65.00 30.41 30.81

Vehicles 88.26 50.43 29.00 109.69 59.46 10.41 25.46 44.41 65.28 28.80

Total - A 3,675.05 246.08 91.01 3,830.12 1,623.17 222.48 79.19 1,766.46 2,063.66 2,051.88Intangible assets Computer Software

356.59 78.03 - 434.62 240.56 70.19 - 310.75 123.87 116.03

Total - B 356.59 78.03 - 434.62 240.56 70.19 - 310.75 123.87 116.03TOTAL - (A+B) 4,031.64 324.11 91.01 4,264.74 1863.73 292.67 79.19 2,077.21 2,187.53 2,167.91Previous Year 3,944.99 312.23 225.58 4,031.64 1,756.38 301.35 194.00 1,863.73 2,167.91 -

2.11 Operating lease obligations a. The Company has taken office/residential premises under cancellable operating lease agreements that

are renewable at the option of both the lessor and lessee. An amount of (` in Lakhs) 534.63(Previous year (` in Lakhs) 474.10) is recognised as lease expenses in the Statement of Profit and Loss for the year ended 31 March 2013. The future guaranteed lease payments under non-cancellable are:

i) less than one year – (` in Lakhs) 125.76(Previous year (` in Lakhs) Nil)

ii) later than one year but not later than 5 years – (` in Lakhs) 16.15 (Previous year (` in Lakhs) Nil)


b. The Company has leased out office premises and furniture under non-cancellable operating lease agreements that are renewable at the option of both the lessor and lessee. An amount of (` in Lakhs) 458.79 (Previous year (` in Lakhs) 369.91) is recognised as lease income in the Statement of Profit and Loss for the year ended 31 March 2013. The future guaranteed lease payments under non-cancellable leases are:

i) less than one year (` in Lakhs) 484.14 (Previous year (` in Lakhs) Nil)

ii) later than one year but not later than 5 years - (` in Lakhs) 539.05 (Previous year (` in Lakhs) Nil)

2.12 a) Non-current investments Trade, unquoted (Valued at cost unless stated otherwise)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsInvestment in Joint VentureCompany 300,000 common stock of USD 1 each in Blue7 Solutions LLC., fully paid-up (Previous year 300,000 common stock of USD 1 each fully paid-up )

243.68 215.18

Note : Aggregate book value of unquoted investments (` in Lakhs) 243.68 (Previous year (` in Lakhs) 215.18)

243.68 215.18

b) Current investments, Unquoted (Valued at lower of cost and fair value)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsInvestment in Mutual Funds HDFC Cash Management Fund - Savings Plan - Daily Dividend Reinvestment -Nil units (Previous year –28,27,803 units)

- 300.78

DWS Mutual Fund - Treasury Fund Cash - Institutional Plan - Daily Dividend -Nil units (Previous year - 1,50,747 units)

- 151.50

ICICI Prudential Regular Savings Fund Growth - 9,22,416 units (Previous year –9,22,416 units)

112.94 103.06

Note : Aggregate book value of unquoted investments (` in Lakhs) 112.94 (Previous year (` in Lakhs) 555.34)

112.94 555.34

2.13 Long-term loans and advances (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsCapital advances 28.73 -Deposit for Rent, Electricity and Water 368.98 374.15Corpus to ESOP Trust 0.05 0.05 Corpus to Provident Fund Trust 0.25 0.25 Advance to Social Security Funds - 0.10MAT credit entitlement 241.84 271.56Advance tax (net of provision) 1,178.33 2,041.54

1,818.18 2,687.65

2.14 Other non-current assets (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsDeferred rent 45.58 23.67Deposits with maturity exceeding twelve months 2.19 18.08

47.77 41.75



87

2.15 Trade receivables (Unsecured)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsOutstanding for a period exceeding six months form the date they are due for payment

- Considered good 93.91 36.67 - Considered doubtful 90.06 101.97

183.97 138.64Other debts - Considered good 4,363.59 2,816.52 - Considered doubtful - 21.16

4,547.56 2,976.32Less: Provision for bad and doubtful debts 90.06 123.13

4,457.50 2,853.19

2.16 Cash and bank balances

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsCash and cash equivalentsCash on hand 0.17 - Balances with banks in: - current accounts (including EEFC accounts) 2,208.36 1,375.06- deposit accounts (including EEFC deposit accounts) 21.84 766.74

2,230.37 2,141.80Other bank balances*- unclaimed dividend accounts 20.03 21.50 Deposits with maturity more than 3 months but less than 12 months 616.95 117.20Bank deposits with maturity of more than 12 months 2.19 18.08

639.17 156.78Less : Amounts disclosed as other non-current assets (also refer note 2.14) (2.19) (18.08)Total 2,867.35 2,280.50

* Includes margin money with bank against bank guarantees (` In Lakhs) 60.09 (Previous year (` In Lakhs) 71.09).

2.17 Short-term loans and advances (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsAdvance payment to Gratuity Fund Trust 7.00 -Prepaid expenses 72.67 77.00Other deposits 2.40 54.33Advances recoverable in cash or in kind or for value to be received (Including travel advances to employees (` in Lakhs) 43.02 (Previous year (` in Lakhs) 28.05)

152.43 95.41

Loans and advances to related parties 133.89 120.41Advance to ESOP trust 1.37 -

369.76 347.15 Loans and advances include amount due from directors – (` in Lakhs) 133.89 (Previous year – (` in lakhs) 120.41).


2.18 Other current assets (Unsecured, considered good)

As at31 March 2013

` in Lakhs

As at31 March 2012

` in LakhsUnbilled services 101.63 278.17Interest accrued on bank deposits 33.38 -Deferred rent - 6.43

135.01 284.60

2.19 Sales and software services


` in Lakhs


` in LakhsIncome from software services 17,755.80 11,598.98Income from sale of software licences / hardware 803.22 794.85 Reimbursement income 293.76 245.22

18,852.78 12,639.05

2.20 Other income


` in Lakhs


` in LakhsInterest on bank deposits 39.30 28.24Interest on income tax refunds 61.45 -Interest on other deposits 16.56 -Dividend income from current investments 51.55 93.92 Gain on exchange translation - 183.03License fee for office property 458.79 369.91 Interest on loans granted 4.38 2.67Miscellaneous income (including share of profit in Joint Venture(` in Lakhs) 28.50 (previous year (` in Lakhs) 61.70)

31.37 126.21

663.40 803.98

2.21 Employee benefits expense


` in Lakhs


` in LakhsSalaries and wages 8,911.13 6,771.63Contribution to provident and other funds 413.04 354.54Staff welfare 340.50 296.91

9,664.67 7,423.08



89

2.22 Other expenses


` in Lakhs


` in LakhsTravelling and conveyance 648.98 663.81Rent 534.63 474.10Rates and taxes 31.22 57.37Power 200.16 171.98Communication expenses 261.12 210.34Insurance 22.25 22.10Repairs and maintenance - Building / Leasehold premises 67.35 76.77 - Computers and Airconditioners 28.93 40.54 - Others 17.02 16.08Payment to auditors - Audit services 36.18 26.95 - Taxation matters 7.49 9.45 - Certification work 3.00 3.90 - Out of pocket expenses 0.61 0.29Directors' fees 12.04 12.59Commission to non-executive directors 27.39 9.11 Cost of technical and other manpower 5,295.85 2,163.73Professional charges 72.69 57.87Loss on disposal of fixed assets 0.23 9.71 Loss on exchange translation 539.05 -Bad debts w/off - 0.14Provision for bad and doubtful debts 35.16 37.74 Recruitment charges 19.94 41.26Forward options cost - 4.37 Security charges 32.93 32.11 Cost of software licenses and tools 37.67 30.30Miscellaneous expenses 242.01 220.50

8,173.90 4,393.11

2.23 Contingent liabilities and commitments (to the extent not provided for)

i) Contingent liability not provided in respect of:

• Demand(s) raised by the IncomeTax authorities for prior financial year(s) during the year aggregating (` in Lakhs) 391.21 (Previous year (` in Lakhs) Nil) against which the Company has filed appeal(s) with the Commissioner of Income-tax (Appeals).

• Appeal(s)filedwiththeAppellateTribunal(India)towardsincome-taxdemandsamountingto(` in Lakhs) 240.16 (Previous year (` in Lakhs) 175.50).

The Company is advised that it would get a favourable verdict and no demand would be eventually sustained in any of the above matters. Accordingly, no provision is made in the books in respect of these contingent liabilities.

ii) Guarantees given on behalf of the Company by banks (` in Lakhs) 60.09 (Previous year (` in Lakhs) 71.09).


2.24 Related party disclosures Related party transactions are transfer of resources or obligations between related parties, regardless of whether a

price is charged. Parties are considered to be related, if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial or operating decisions. Parties are considered to be related if they are subject to common control or common significant influence.

(` in Lakhs)Particulars Associates Joint

VenturePromoters Company in

which promoters have significant

influence

Key Managerial Personnel

Total for the year

Rendering of Economic Benefits- Blue Star Limited- Blue7 Solution LLC

1,035.05-

936.57

-3,558.16

982.43

---

---

---

1,035.053,558.161,919.00

Receiving of Economic Benefits- Blue Star Limited- Blue Star Design Engineering Limited

44.12-

44.44

---

---

-19.0719.34

---

44.1219.0763.78

Reimbursement of expenses- Blue Star Limited- Blue Star Design Engineering Limited- Blue7 Solution LLC

2.80--

--

166.1676.92

--

---

1.92

----

2.80-

166.1678.84

Purchase of capital goods- Blue Star Limited 5.46

58.81--

--

--

--

5.4658.81

Director sitting fees- Mr. Ashok M. Advani -

---

0.801.00

--

--

0.801.00

Non - Executive Director commission- Mr. Ashok M. Advani -

---

4.261.45

--

--

4.261.45

Remuneration- Mr. Suneel M. Advani- Mr. Sunil Bhatia

---

---

44.40-

44.40

---

-160.56

44.99

44.40160.56

89.39Loans and Advances- Mr. Sunil Bhatia -

---

--

--

-120.41

-120.41

Interest on loans granted- Mr. Sunil Bhatia -

---

--

--

4.382.67

4.382.67

Capital advances - Blue Star Limited -

2.90--

--

--

--

-2.90

Sale of Capital Goods- Blue Star Limited - - - - - -

2.40 - - - - 2.40Outstanding BalanceDebit Balance 727.30

598.1291.7882.14

1.50-

0.154.77

--

820.73685.03

Credit Balance 27.4840.79

664.84672.58

--

10.4326.88

--

702.75740.25

Rent Deposit 100.00 - - - - 100.00100.00 - - - - 100.00

Loan balance - - - - 132.39 132.39- - - - 120.41 120.41

Note: Figures in italics are of the previous year



91

Names of related parties and description of relationship

Associates Blue Star Limited (Holding 29.83% of the equity share capital of the Company)Joint Venture Blue7 Solutions LLC (60% shareholding of Blue Star Infotech America Inc.)Promoters Mr. Suneel M. Advani, Chairman and Managing Director

Mr. Ashok M. Advani, Vice ChairmanCompany in which promoters have significant influence

Blue Star Design Engineering Limited. (BSDE)

Key Managerial Personnel Mr. Sunil Bhatia, Chief Executive Officer and Managing Director

2.25 Derivative instruments: The Company has entered into the following derivative instruments: (a) Forward Exchange Contracts and Foreign Exchange Options Contracts [being derivative instruments], which

are not intended for trading or speculative purposes, but for hedging purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

There are outstanding Forward Exchange Contracts and Foreign Exchange Options Contracts entered into by the Company as at 31 March 2013 of USD 19,00,000 (Previous year USD 1,18,00,000).

(b) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

Amounts receivable (net of payables) in foreign currency (including due to/from subsidiaries) on account of the following:

Foreign Currency Exposure

2012-2013(` in Lakhs)

2012-2013 2011-2012(` in Lakhs)

2011-2012

Exports in US $ 251.73 $ 4,62,825 NIL NILExports in UK £ 464.32 £ 5,64,044 494.39 £ 6,04,392Exports in EUR 262.84 377,919 50.50 73,892Exports in JPY ¥ 35.04 ¥ 60,65,781 36.51 ¥ 58,48,770

2.26 Staff benefits cost in accordance with Accounting Standard 15 (Revised 2005) a) Defined Contribution Plans: The amount recognised as an expense during the year is (` in Lakhs) 413.04

(Previous year (` in Lakhs) 354.54) b) Defined Benefit Plans(as applicable to employees of Blue Star Infotech Limited):


2011-12` in Lakhs

Change in defined benefit obligations :Obligation as at the beginning of the year: 232.40 345.31 Service cost 78.18 75.72 Interest cost 16.50 23.23 Actuarial (gain) / loss (22.97) (101.93)Benefits paid (52.21) (109.93)Present value of defined benefit obligation as at year end (A) 251.90 232.40 Change in plan assets :Opening plan assets, at fair value 142.59 153.90 Expected return on plan assets 12.27 11.46 Actuarial gain / (loss) (4.29) (1.44)Contributions 73.83 88.60 Benefits paid (52.21) (109.93)Fair value of plan assets as at year end (B) 172.19 142.59 Cost for the yearService cost 78.18 75.72 Interest cost 16.50 23.23 Expected return on plan assets (12.27) (11.46)Actuarial (gain) / loss (18.68) (100.49)Total net cost recognised as employee remuneration 63.73 (13.00)



2011-12` in Lakhs

Reconciliation of benefit obligations and plan assets for the year:Present value of defined benefit obligations as at year end (A) 251.90 232.40 Fair value of plan assets as at year end (B) 172.19 142.59 Net (asset) / liability as at year end recognised in Balance Sheet (A) – (B) 79.71 89.81 Investment details of plan assets:The plan assets are invested in trust managed fundsAssumptions:Discount rate 8.00% 8.00%Salary escalation rate 5.00% 5.00%Estimated rate of return on plan assets 8.00% 8.00%

c) The Company has revised its Privilege leave salary policy wherein the maximum number of encashable Privilege leave was reduced from 120 days to 55 days. As a consequence, there was reversal of leave salary provision by `119.67 lakhs in previous year. There is no such reversal in the current year.

2.27 Earnings Per Share (EPS) The amount considered in ascertaining the Company’s earnings per share constitute the net profit after tax and

exceptional item (and includes post tax effect of any extraordinary items). The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving basic earnings per share and also the weighted average number of shares which could have been issued on conversion of all dilutive potential shares.



i. Net Profit after tax (` in Lakhs) 498.85 357.08ii. Basic (weighted average) number of Equity Shares 1,03,85,000 1,02,31,421iii. Diluted (weighted average) number of Equity Shares 1,03,85,000 1,02,31,421iv. Earnings per share (EPS) in `- Basic and diluted 4.80 3.49

2.28 The company considers its entire business / geographical operations as a single segment. There are no separate

reportable segments as per Accounting Standard 17, Segment Reporting, prescribed by the Central Government,

in accordance with Companies (Accounting Standards) Rules, 2006.

2.29 The Ministry of Corporate Affairs, Government of India vide its General Circular No. 2/2011 (51/12/2007-CL-III) dated 08 February 2011 read with General Circular No. 3/2011 dated 21 February 2011 issued under section 212(8) of the Companies Act, 1956 has granted general exemption to companies from attaching the Balance Sheet and Statement of Profit and Loss of their subsidiaries under section 212(1) of the Companies Act, 1956 and clarified that this exemption is applicable for financial statements prepared on or after 31 March 2011.

2.30 The previous year’s figures have been recast / regrouped / rearranged wherever considered necessary

As per our report of even date attached






93

Statement Pursuant to Section 212 of the Companies Act, 1956

(` in ‘000)

1 Name of the Subsidiary Company Blue Star Infotech America, Inc.

Blue Star Infotech (UK) Limited

Blue Star Infotech (Singapore) Pte. Limited

2 Financial Year of Subsidiary Company March 31, 2013 March 31, 2013 March 31, 2013 3 (a) Number of shares held in Subsidiary Company on

the above date 13,50,000 shares (Common Stock) of USD 1 each

3,00,000 equity shares of GBP 1 each

15,00,000 equity shares of SGD 1 each

(b) Extent of Holding 100% 100% 100%(c) Capital 68,427 20,829 66,265 (d) Reserves / (Accumulated Losses) (63,778) 28,009 8,583 (e) Total assets 269,403 98,439 108,365 (f ) Total Liabilities (other than shareholders' funds) 264,753 49,601 33,516 (g) Details of Investments NIL NIL NIL (h) Turnover 887,720 209,317 61,622 (i) Profit /(Loss) before Taxation (16,105) 15,707 10,324 (j) Provision for Taxation / (Reversal) 720 3,519 1,758 (k) Profit after Taxation (16,825) 12,188 8,566 (l) Proposed Dividend NIL NIL NIL

4 The net aggregate of profits less losses of the Subsidiary Company as far as it concerns the members of the Holding Company

(i.) Not dealt with in the Holding Company's Accounts :(a) For the Financial Year of the Subsidiary (16,825) 12,188 8,566 (b) For the previous Financial Years, since it became Holding Company's Subsidiary

(37,082) 14,866 -

(ii) Dealt with in the Holding Company's Accounts :(a) For the Financial Year of the Subsidiary NIL NIL NIL (b) For the previous Financial Years, since it became Holding Company's Subsidiary

NIL NIL NIL

Average Rates as on March 31, 2013 54.38 82.10 43.73 5 Exchange Rates as on March 31, 2013 54.39 82.32 43.82

equivalent INR per USD

equivalent INR per GBP

equivalent INR per SGD

Note : a) Capital, Fixed Assets and Long-term liabilities are stated at cost, while all other assets and liabilities are translated at

Closing rates. Revenues and Expenses are translated at average rates during the year.

b) The Ministry of Corporate Affairs, Government of India vide its General Circular No. 2/2011 No. 51/12/2007-CL-III dated February 08, 2011read with General Circular No. 3/2011 dated February 21, 2011 issued under section 212(8) of the Companies Act, 1956 has granted general exemption to Companies from attaching the Balance Sheet and Profit and Loss Account of its Subsidiaries under section 212(1) of the Companies Act, 1956 and clarified that this exemption is applicable for accounts prepared on or after March 31, 2011.

c) USD : United States Dollar, GBP : British Pound Sterling, SGD : Singapore Dollar

For Blue Star Infotech Limited

Suneel M Advani Sunil Bhatia V. SudarshanChairman and Chief Executive Officer and Chief Financial Officer and Managing Director Managing Director Company Secretary Place: Mumbai Date: 9 May 2013

NOTES :

[!] BLUE STAR

BLUE STAR INFO TECH

Blue Star Infotech Limited Registered Office: The Great Oasis, 8th Floor, Plot No D-13,

MIDC, Andheri (East),

Mumbai - 400 093

Dear Shareholder,

Sub: Green Initiative in Corporate Governance

The Ministry of Corporate Affairs has taken up “Green Initiative in Corporate Governance” by allowing compliances by

Companies through electronic mode. Companies can now send notices and documents, including the Annual Report,

through electronic mode to the registered e-mail addresses of shareholders.

A large number of the shareholders of your Company have already become part of this initiative. To ensure faster

communication, the Company is requesting the remaining shareholders to consider receipt of the Annual Reports and

other communication of the Company in electronic form in lieu of the printed version.

Electronic dissemination of information is effective, fast, eco-friendly and helps conserve scarce natural resources. It also

enables the Company to communicate effectively with the shareholders.

We therefore invite you to contribute to the cause by filling up the form given below. Please send the form duly signed

to our share transfer agents. In case you have a DEMAT account, you can also have your e-mail ID updated with the

depository participant. You can also download the attached registration form from our website www.bsil.com.

By Order of the Board of Directors

V. SudarshanDate : 9 May 2013 Chief Financial Officer and Company Secretary

..............................................................................................................................................................................................................................................

E-COMMUNICATION REGISTRATION FORMTo,

Link Intime India Private Limited.

Unit: Blue Star Infotech Limited C-13, Pannalal Silk Mills Compound, L.B.S. Marg,

Bhandup (West), Mumbai 400 078

Dear Sir / Madam,

Please register my/our consent to receive information from the Company through electronic mode. In providing my/our

consent, I/we agree to:

• ReceivefutureAnnualReportsoftheCompanyviatheCompany’swebsitewww.bsil.comand/orbye-mailtomy/our

registered e-mail address.

• NotifytheCompanyofanychangesinmy/oure-mailaddress.

• TakeresponsibilitytodownloadandprintacopyoftheAnnualReportshouldI/wewantahardcopyoftheReport.

• Revokemy/ourconsentatanytimebysendingwrittennotification,inpaperorelectronicform,totheCompany.

Folio No /DP ID No. & Client ID No. (Asapplicable) .............................................................................................................................................

Name of First Holder ....................................................................................................................................................................................................

Name(s) of Joint Holder(s): .........................................................................................................................................................................................

..............................................................................................................................................................................................................................................

E-mail ID (to be registered): ........................................................................................................................................................................................

Date: ………………………….. Signature:……………………………………………….

Please affix

Revenue Stamp

BLUE STAR INFOTECH LIMITEDRegistered Office: The Great Oasis, 8th Floor, Plot No. D-13, MIDC, Andheri (East), Mumbai 400 093

PROXY FORMFolio No.: ..........................................................

DP ID No.: ......................................................... Client ID No.: ..........................................................

No. of Shares Held:........................................

I/We............................................................................................................................................................................................................................

of ...........................................................................................................................being member/s of Blue Star Infotech Limited, hereby

appoint ........................................................................of ................................................ or failing him / her, ..................................................

. of .............................................................................................................. as my/our proxy to attend and vote for me/us and on my/our behalf at the 16th Annual General Meeting to be held on Thursday, 18th day of July, 2013 at 2:30 p.m. and at any adjournment thereof.

Signed this............................................... day of ............................................. 2013. Signature.......................................................................

Note:1. The Proxy, to be effective, should be duly stamped, signed and deposited at the Registered Office of the Company at

the address mentioned above, at least 48 hours before the commencement of the aforesaid Meeting.

2. The Proxy need NOT be a member of the Company.

_____________________________________________________________________________________

BLUE STAR INFOTECH LIMITEDRegistered Office: The Great Oasis, 8th Floor, Plot No. D-13, MIDC, Andheri (East), Mumbai 400 093

ATTENDANCE SLIPMember(s)/Proxy (ies) are requested to bring the Attendance Slip duly filled-in and signed at the Meeting and hand it over at the entrance of the Meeting hall.

Folio No.: ..........................................................

DP ID No.: ......................................................... Client ID No.: ..........................................................

No. of Shares Held:........................................

I/ We ............................................................................................................................................................................ hereby record my/our

presence at the 16th Annual General Meeting of the Company held on Thursday, 18th day of July, 2013 at 2.30 p.m. at

the Jai Hind College Hall, 23-24, Backbay Reclamation, ‘A’ Road, Churchgate, Mumbai – 400 020.

...................................................................................... .........................................................................Signature of the MEMBER/PROXY Full Name of the MEMBER/

PROXY (BLOCK LETTERS)

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