Annual Report 2010-11 · 1. We have audited the attached Balance Sheet of TCS e-Serve International...

TCS e-Serve International LimitedRegistered Office: Tower A, 2nd Floor, Building 6, W Block, DLF Phase III, Gurgaon – 122002

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TCS e-Serve International Limited

Annual Report 2010-11

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The Board of Directors

Mr.Abid Ali Neemuchwala Chairman

Mr. Dinanath Kholkar Chief Executive Officer & Managing Director

Mr.Debashis Poddar Director

Mr.Bawa Grover Director

Mr.Prashid Gupta Director & Chief Financial Officer

Mr.Shirish Damle Director

Directors’ Report 03

Auditors’ Report 07

Accounts 10

Statement under Section 212 of the Companies Act, 1956 relating to subsidiary company 40

Directors’ Report of Subsidiary Company 41

Accounts of Subsidiary Company 44

Contents

3

To the Members,

The Directors have pleasure in presenting the fourth Annual Report of the Company together with the

audited statement of accounts for the year ended March 31, 2011.

FINANCIAL RESULTS

Summary of the financial performance of the Company during the year is as follows –

(Rupees in lakh)

Year ended March 31,

2011

Year ended

March 31,

2010

Total Income for the year 26360.90 15040.09

Profit before Taxes 9736.39 4516.79

Profit after Taxes 9747.19 4495.64

Balance Brought forward from Previous Year 1777.49 (2718.15)

Amount Available for Appropriation 11524.68 1777.49

Balance carried to Balance Sheet 11524.68 1777.49

DIVIDEND

In order to conserve resources for the rapid growth, Your Directors do not recommend any dividend for the

financial year ended March 31, 2011.

OPERATIONS & BUSINESS REVIEW

During the year 2010-11, the Company recorded total income at ` 263.61 crore, which was higher by

75% as compared with previous year’s income of `150.40 crore. Of this, the operating income constituted

` 250.06 crore, which was higher by 67% over previous year figure of ` 149.29 crore. The Profit after Tax

for the year increased to ` 97.47 crore, as compared to ` 44.95 crore in the previous year, recording an

impressive increase of 117%.

The SEZ units of the Company have retained the status of “Net Foreign Exchange earner” within the meaning

of the Special Economic Zones, Act, 2005.

During the current year, the Company augmented capacity by further expanding its operations in Chennai

and setting up a new SEZ at Kolkata as a part of its overall strategy of offering services from multiple

locations.

SUBSIDIARY COMPANY

TCS e-Serve America, Inc.:

TCS e-Serve America, Inc., wholly-owned subsidiary of TCS e-Serve International Limited has reported a total

income of ` 18.96 Crore (USD 4252.06 thousand) in the second year of its operations, as compared to ` 8.82

crore (USD 1978 thousand) in the previous year and a net profit of ` 2.20 Crore (USD 493.77 thousand) as

against the previous year profit of ` 35.25 lakh (USD 79 thousand). The increased revenue and profits are

due to full year operations during the current year as compared to only part of the year in the previous year.

The Statement pursuant to Section 212 of the Companies Act, 1956 containing details of the subsidiary

company is attached. The financial statements of TCS e-Serve America, Inc. together with the Report of the

Directors and the Auditors thereon are also attached to this Annual Report.

DIRECTORS’ REPORT

TCS e-Serve Limited Annual Report 2010 - 2011


DIRECTORS

Mr.Rajiv Vaid, Director of the Company resigned with effect from June 24, 2011. Your Directors place on record their appreciation of his valuable services to the Company.

Mr.Debashis Poddar was appointed as an Additional Director effective from July 28, 2011 and will hold office up to the conclusion of the forthcoming Annual General Meeting. As per the provisions of Section 260 of the Companies Act, 1956, he holds office up to the date of the forthcoming Annual General Meeting of the Company and is eligible for appointment as Director. The Company has received a notice under Section 257 of the Companies Act, 1956, proposing the candidature of Mr.Debashis Poddar for the office of Director. Resolution seeking his appointment has been incorporated in the Notice of the ensuing Annual General Meeting. Your Directors recommend his appointment.

Mr.Bawa Grover and Mr.AbidAli Neemuchwala, Directors retire by rotation and being eligible have offered themselves for re-appointment.

DIRECTORS’ RESPONSIBILITY STATEMENTIn accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, your Directors confirm that in preparation of financial statements for the year ended March 31, 2011, they have-

• followed the applicable accounting standards along with proper explanation relating to materialdepartures, wherever applicable;

• selectedsuchaccountingpoliciesandappliedthemconsistentlyandmadejudgmentsandestimatesthat are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial period and of the profit of the Company for that period;

• takenproperandsufficientcareforthemaintenanceofadequateaccountingrecords,inaccordancewith the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

• preparedtheannualaccountsonagoingconcernbasis.

PUBLIC DEPOSITS

Your Company has not accepted any deposits and no amount of principal or interest was outstanding on the date of the Balance Sheet.

AUDITORSM/s. Deloitte Haskins & Sells, Statutory Auditors of the Company, hold office up to the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Directors recommend their appointment.

DISCLOSURE OF PARTICULARSs

The particulars as prescribed under Sub-Section (1)(e) of Section 217 of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988, are set out in an annexure – I tothisreport.TheinformationrequiredunderSection217(2A)oftheCompaniesAct,1956andtherulesmade there under are given in the annexure – II appended hereto and forms part of this report.

ACKNOWLEDGEMENTS

The Board takes this opportunity to thank its employees, shareholders, clients, bankers, vendors and others for the continued support.

On behalf of the Board of Directors, Abid Ali Neemuchwala

Chairman

Mumbai, August 22, 2011

5

ANNEXURE- I TO THE DIRECTORS’ REPORT

Particulars pursuant to the Companies (Disclosure of particulars in the report of Board of Directors) Rules,

1988, are furnished hereunder:

((a) Conservation of Energy: Continuous steps are taken to use the energy conservatively, by (i) installing

energysavingdeviceswherevernecessaryand(ii)preventiveupkeepofalltheequipment.

(b) Technology Absorption: Technology is an essential and integral part of delivery to your customers.

Your Company strives to remain abreast of state-of-the-art systems and has used tested, proven &

appropriate technology to minimize time to delivery and improve maintainability.

As an ongoing process, your Company is strengthening itself in getting appropriate tools for Information

& Network Management to ensure that it remains in the forefront of technology delivery.

(c) Foreign Exchange Earnings: ` 235.31 crore (previous year : `149.30 crore)

Foreign Exchange Outgo : ` 14.62 crore (previous year : ` 7.45 crore )



ANNEXURE- II TO THE DIRECTORS’ REPORTInformation as per Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees)

Rules, 1975 and forming part of the Directors’ Report for the year ended March 31, 2011 is as under:

Statement showing the details of employees drawing remuneration @ ` 60 lakh per annum or ` 5 lakh per

month or more, where employed for part of the year

Name Educational

Qualification

Age Designation Total

Remuneration (Rs.)

Experience

(Years)

Date of

Joining

Last

Employer

Designation

Rajiv S

Gupta*

BE, MBA 47 Senior Vice

President

18,06,193 18 1-Apr-08 Citibank

N.A.

Vice

President

*indicates earnings for part of the year.

Notes:

1 Remuneration received includes salary, allowances, medical and leave travel expenses, monetary

value of perquisites as per Income-tax Rules and Company’s Contributions to Provident Fund and

Superannuation Fund.

2 None of the employee holds by himself or along with his spouse and dependent children more than

twopercentoftheEquitySharesoftheCompany.

3 The nature of employment in all cases is contractual.

On behalf of the Board of Directors,

Abid Ali Neemuchwala

Chairman

Mumbai, August 22, 2011

7

AUDITORS’ REPORT

TO THE MEMBERS OF TCS E-Serve International Limited

1. We have audited the attached Balance Sheet of TCS e-Serve International Limited (the “Company”) as at 31st March, 2011, the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor’s Report) Order, 2003 (“CARO” / the “Order”) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

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

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

(c) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956; and

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

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011;

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

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

5. On the basis of the written representations received from the Directors as on 31st March, 2011 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2011 from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956.

For DELOITTE HASKINS & SELLSChartered Accountants

(Registration No. 117366W)

Sanjiv V. PilgaonkarPartner

(Membership No. 39826)

Mumbai, 12th April, 2011


Having regard to the nature of the Company’s business/activities paragraph 4 (xiii) of CARO is not applicable.

(i) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the

fixed assets.

(b) The fixed assets were physically verified during the year by the Management in accordance with a regular programme

of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals.

According to the information and explanation given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of

the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

(ii) The Company being a service company, engaged primarily in rendering transaction processing services, does not hold any

physical inventories. Accordingly, the provisions of paragraph 4 (ii) of CARO are not applicable to the Company.

(iii) According to the information and explanations given to us, the Company has not granted or taken secured or unsecured loans

to or from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act,

1956. Consequently, the provisions of paragraph 4 (iii) (a) to (iii) (g) of CARO are not applicable.

(iv) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of

the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable

quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its

business with regard to purchases of fixed assets and the sale of services. The activities of the Company do not involve the

purchase of inventory and sale of goods. During the course of our audit, we have not observed any major weakness in such

internal control system.

(v) According to the information and explanations given to us, the Company has not entered into any contract or arrangement

with other parties, which needs to be entered in the register maintained under Section 301 of the Companies Act, 1956.

(vi) According to the information and explanations given to us, the Company has not accepted any deposits from the public and

no Order under sections 58A and 58AA of the Companies Act, 1956 has been passed by the Company Law Board or National

Company Law Tribunal or the Reserve Bank of India or any Court or other Tribunal in this respect in relation to the Company.

(vii) In our opinion, the internal audit functions carried out during the year by firm of Chartered Accountants appointed by the

Management have been commensurate with the size of the Company and the nature of its business.

(viii) According to the information and explanations given to us, the Central Government has not prescribed the maintenance of

cost records under Section 209 (1) (d) of the Companies Act, 1956, for any of the services to be rendered by the Company.

Accordingly, the provisions of paragraph 4 (viii) of CARO are not applicable.

(ix) According to the information and explanations given to us in respect of statutory dues:

(a) The Company has generally been regular in depositing with appropriate authorities undisputed statutory dues including

Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Customs Duty, Service Tax, Cess and other material

statutory dues applicable to it. There were no dues payables during the year in respect of Investor Education and

Protection Fund, Wealth Tax and Excise Duty.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income Tax, Sales

Tax, Customs Duty, Service Tax and Cess and other material statutory dues in arrears, as at 31st March, 2011 for a period

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

ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph 3 of our report)

9

ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph 3 of our report)

(c) There are no dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty and Cess which have not been

deposited with the appropriate authorities on account of any dispute.

(x) The Company has been incorporated on 10th September, 2007 and consequently, the Company has not been registered for

five years. Therefore, the provisions of paragraph 4 (x) of CARO are not applicable.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment

of dues to a bank. The Company has not borrowed any sum from financial institutions nor did the Company have outstanding

debentures during the year.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis

of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of paragraph 4 (xii) of CARO

are not applicable.

(xiii) In our opinion and according to the information and explanations given to us, the Company is not a dealer or a trader in shares,

securities, debentures and other investments. Therefore, the provisions of paragraph 4 (xiv) of CARO are not applicable.

(xiv) According to the information and explanations given to us, the Company has not given guarantee for loans taken by others

from banks or financial institutions.

(xv) According to the information and explanations given to us, the Company did not avail any term loan during the year.

(xvi) In our opinion and according to the information and explanations given to us, and on an overall examination of the Balance

Sheet of the Company, we report that no funds raised on short-term basis have been used during the year for long-term

investment.

(xvii) According to the information and explanations given to us, the Company has not made preferential allotment of shares during

the period covered by our audit.

(xviii) The Company did not have outstanding debentures during the year. Accordingly, the provisions of paragraph 4 (xix) of CARO

are not applicable.

(xix) During the year covered by our audit report, the Company has not raised any money by way of public issue.

(xx) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and

no material fraud on the Company has been noticed or reported during the year.

For DELOITTE HASKINS & SELLS

Chartered Accountants


Sanjiv V. Pilgaonkar

Partner

(Membership No. 39826)

Mumbai, 12th April, 2011



BALANCE SHEET

AS AT MARCH 31, 2011

(` in thousand)

Schedule As at March 31, 2011 As at March 31, 2010

SHAREHOLDERS' FUNDS

Share Capital A 100,000 100,000

Reserves and Surplus B 1,244,566 290,424

LOAN FUNDS

Unsecured Loans C 114,421 725,946

TOTAL FUNDS EMPLOYED 1,458,987 1,116,370

APPLICATION OF FUNDS:

FIXED ASSETS D

Gross Block 901,701 480,358

Less :- Accumulated Depreciation 320,719 135,880

Net Block 580,982 344,478

Capital Work-in-Progress 44,024 100,243

625,006 444,721

INVESTMENTS E 255,252 263,866

CURRENT ASSETS, LOANS AND ADVANCES

Unbilled Revenues 123,002 135,782

Sundry Debtors F 445,648 250,709

Cash and Bank Balances G 134,450 39,521

Other current assets - Interest accrued on fixed deposits 90 24

Loans and Advances H 373,307 274,822

1,076,497 700,858

CURRENT LIABILITIES AND PROVISIONS

Current Liabilities I 464,638 273,532

Provisions J 33,130 19,543

497,768 293,075

NET CURRENT ASSETS 578,729 407,783

TOTAL ASSETS (NET) 1,458,987 1,116,370

NOTES TO THE ACCOUNTS N

In terms of our report attached

For Deloitte Haskins & Sells on behalf of Board of DirectorsChartered Accountants

Sanjiv V. Pilgaonkar Abid Ali Neemuchwala Dinanath Kholkar Partner Chairman CEO & Managing Director

Prashid Gupta Bawa Grover Director & Chief Financial Officer Director

M Vidya Mumbai, April 12, 2011 Company Secretary

11


PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED MARCH 31, 2011

(` in thousand)

Schedules For year ended March 31, 2011

For year ended March 31, 2010

INCOME

Transaction processing and other services (Tax deducted at source ` 9,722 thousand; previous year ` NIL)

2,500,634 1,492,956

Other income (net) K 135,456 11,053

2,636,090 1,504,009

EXPENDITURE

Employee costs L 694,884 431,088

Operation and Other expenses M 745,973 453,747

1,440,857 884,835

PROFIT / (LOSS) BEFORE INTEREST, DEPRECIATION AND TAXES 1,195,233 619,174

Interest 36,580 66,896

Depreciation D 185,014 100,599

PROFIT / (LOSS) BEFORE TAXES 973,639 451,679

PROVISION FOR TAXES

Current tax (writeback for earlier years ` 1,080 thousand; previous year includes charge of ` 672 thousand)

(1,080) 1,752

Fringe benefit Tax (for earlier years ` NIL; previous year ` 363 thousand) - 363

NET PROFIT / (LOSS) FOR THE YEAR 974,719 449,564

Balance brought forward from previous year 177,749 (271,815)

AMOUNT AVAILABLE FOR APPROPRIATION 1,152,468 177,749

APPROPRIATIONS

Balance carried to Balance Sheet 1,152,468 177,749

1,152,468 177,749

NOTES TO THE ACCOUNTS N

Earnings per share

Basic and Diluted (Nominal value per equity share ` 100) (Refer Note 5 of Schedule N)

974.72 449.56







(` in thousand)



Cash flow from operating activities:

Net Profit / (Loss) before tax 973,639 451,679

Adjusted for:

Depreciation 185,014 100,599

Profit on Redemption of Mutual Funds (9,878) (894)

Provision for doubtful advances 1,054 -

Interest expense 36,580 66,896

(Profit) / Loss on sale / discard of fixed assets (174) 38

Unrealised gain on Foreign exchange (14,292) 5,224

Provision for doubtful debts 337 -

Dividend from other investments (7,665) (3,033)

Interest income (467) (2,775)

Unclaimed balances written back (1,927) (4,351)

Operating profit before working capital changes 1,162,221 613,383

(Increase)/Decrease in trade and other receivables (229,359) (164,118)

Increase/(Decrease) in trade payables 110,191 99,121

Cash generated from operations 1,043,053 548,386

Income tax paid (including fringe benefit tax) (21,853) (2,737)

Net cash provided by operating activities (a) 1,021,200 545,649

Cash flow from investing activities:

Purchase of fixed assets (including capital work-in-progress) (270,041) (198,929)

Proceeds from sale of fixed assets 1,343 -

Loans to Subsidiary given (400) (45,638)

Investments in Subsidiary - (12,903)

Loans to Subsidiary recovered 9,374 -

Purchase of investments (2,324,510) (1,549,580)

Proceeds from sale of investments 2,343,002 1,299,563

Advance towards purchase of Mutual Funds (45,000) -

Dividend from other investments 7,665 3,033

Interest received on fixed deposits 1 2,771

Interest received on loan to subsidiary 400 (9)

Fixed deposits with banks (net) having maturity over three months

(60,000) -

Net cash used by investing activities (b) (338,166) (501,692)


CASH FLOW STATEMENT


13

(` in thousand)



Cash flow from financing activities:

Inter Corporate Deposits received 139,925 44,410

Inter Corporate Deposits repaid (751,450) (103,103)

Interest paid (36,580) (66,896)

Deposit pledged under lien with Citibank - (262)

Net cash used by financing activities (c) (648,106) (125,851)

Net decrease in cash and cash equivalents ( a + b + c ) 34,929 (81,894)

Cash and cash equivalents at the beginning of the year:

Cash and cash equivelents at the beginning of the year 39,059 120,953

Cash and cash equivalents as at the end of the year:

Balances with scheduled banks on current accounts 73,988 39,059

In Deposit account 60,000 -

Add: Deposits pledged as collateral against cash credit facility 462 462

Total Cash and Bank Balance as per Schedule G 134,450 39,521

Note :

Figures in the brackets are outflows/deductions.


CASH FLOW STATEMENT









SCHEDULES FORMING PART OF BALANCE SHEET

(` in thousand)

As at March 31, 2011 As at March 31, 2010

SCHEDULE ‘A’

SHARE CAPITAL

Authorised :

Equity:

2,500,000 equity shares of ` 100 each 250,000 250,000

(Previous Year 2,500,000 equity shares of ` 100 each)

250,000 250,000

Issued, Subscribed and Paid up:

1,000,000 equity shares of ` 100 each 100,000 100,000

(Previous Year 1,000,000 equity shares of ` 100 each)

100,000 100,000

Note:

1,000,000 (Previous Year 1,000,000) equity shares of ` 100/- each are held by TCS e-Serve Limited, the holding company and its nominees.Tata Sons limited is the ultimate holding company.

15



(` in thousand)


SCHEDULE ‘B’

RESERVES AND SURPLUS

Balance in Profit & Loss Account 1,152,468 177,749

Hedging reserve account (Refer note 13 of schedule N)

92,098 112,675

Total 1,244,566 290,424

(` in thousand)


SCHEDULE ‘C’

UNSECURED LOANS

From entities other than Banks Other than short term loan

TCS e-Serve Limited, the holding company 114,421 725,946

(Repayable on demand on or before the end of 3 years from 31st March, 2011)

Total 114,421 725,946


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(` in thousand)

As at March 31, 2011


SCHEDULE ‘E’

INVESTMENTS

(A) Long term investments (at cost)

Trade Investments (Unquoted)

Subsidiary Company

27,600 (Previous year 27,600) Equity shares of USD 10 each fully paid up of TCS e-Serve America Inc.

12,955 12,955

(B) Current Investments (at lower of cost or market value)

Investment in Mutual Funds (Unquoted) 242,297 250,911

(Refer Schedule attached)

255,252 263,866

Book value of quoted investment 255,252 263,866

NAV of Mutual Funds 242,888 251,036


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(` in thousand)


SCHEDULE ‘G’

CASH AND BANK BALANCES

Bank Balances

with Scheduled Banks

(i) In Current Account 13,403 38,276

(ii) In Deposit account (Refer note below) 120,462 462

with Foreign banks

In Current Account

Citibank NA, West Virginia 59 78

Citibank NA, Alaska 59 79

Citibank NA, Wisconsin 58 79

Citibank NA, New York 344 448

Citibank NA, Arizona 51 78

Common wealth Bank of Australia, Tasmania 14 21

134,450 39,521

Maximum amount outstanding during the year - Foreign Banks :

Citibank NA, West Virginia 78 78

Citibank NA, Alaska 79 79

Citibank NA, Wisconsin 79 79

Citibank NA, New York 448 448

Citibank NA, Arizona 88 78

Common wealth Bank of Australia, Tasmania 21 21

Note :

Deposit agregating to ` 462 thousand (previous year ` 462 thousand) kept under lien with a certain bank for guarantees issued.

(` in thousand)


SCHEDULE ‘F’

SUNDRY DEBTORS

Over six months (Unsecured)

(i) Considered good - -

(ii) Considered doubtful 337 -

337 -

Others (Unsecured)

(i) Considered good 445,648 250,709

(ii) Considered doubtful - -

445,648 250,709

Less: Provision for doubtful debts (337) -

445,648 250,709


(` in thousand)


SCHEDULE ‘H’

LOANS AND ADVANCES (Unsecured)

Considered good

Loan given to subsidiary company (Refer Note below) 34,637 43,932

Loans and Advances to employees 658 223

Advances recoverable in cash or kind or for value to be received 27,690 2,885

Advance Tax (net) 32,297 9,363

Fringe Benefit Tax (net) 44 44

Foreign exchange forward and currency option contracts 105,194 114,471

Advance towards purchase of Mutual Funds 45,000 -

Deposits 127,787 103,904

373,307 274,822

Considered doubtful

Advances recoverable in cash or kind or for value to be received 1,054 -

1,054 -

Less: Provision for doubtful advances (1,054) -

373,307 274,822

Note:

Dues from the companies under Same Management

TCS e-Serve America Inc. 34,637 43,932

Maximum Balance outstanding during the year

TCS e-Serve America Inc. 46,221 45,753



21



(` in thousand)


SCHEDULE ‘I’

CURRENT LIABILITIES

Sundry Creditors (Refer note 16 of Schedule N)

Dues of Micro Enerprises and Small Enterprises - -

Dues of other creditors 427,034 261,260

Advances from customers 28 28

Others 37,576 12,244

464,638 273,532

(` in thousand)


SCHEDULE ‘J’

PROVISIONS

Employee Benefits 33,130 19,543

33,130 19,543



SCHEDULES FORMING PART OF PROFIT AND LOSS ACCOUNT

(` in thousand)



SCHEDULE ‘K’

OTHER INCOME

Interest from Fixed Deposit (Tax deducted at source ` Nil; previous year ` 278 thousand)

67 2,631

Interest on Loan to Subsidiary (Tax deducted at source ` 56 thousand; previous year ` 9 thousand)

400 144

Dividend from Mutual Funds 7,665 3,033

Profit on sale of fixed assets (net) 174 -

Profit on Redemption of Mutual Funds 9,878 894

Exchange Gain (net) (includes gain of ` 98,683 thousand : previous year ` Nil on foreign exchange forward contracts and currency option contracts which have been designated as Cash Flow Hedges)

115,345 -

Unclaimed balances written back 1,927 4,351

135,456 11,053

23

(` in thousand)



SCHEDULE ‘L’

EMPLOYEE COSTS (Refer note 17 of Schedule N)

Salaries and Incentives 623,367 388,094

Contribution to -

(i) Provident Fund and Superannuation 23,038 13,406

(ii) Group Gratuity 718 4,573

Staff welfare expenses 47,761 25,015

694,884 431,088






(` in thousand)



SCHEDULE ‘M’

OPERATION AND OTHER EXPENSES (Refer note 17 of Schedule N)

Overseas business expenses -Travel Related 2,502 6,620

Overseas business expenses -Employee 10,954 1,295

Overseas business expenses -Others 1,153 143

Services rendered by business associates and others 209,111 88,800

Cost of software licences 3,559 10,892

Communication expenses 59,885 43,062

Travelling and conveyance expenses 59,301 48,445

Rent 230,713 123,647

Legal and professional fees 5,310 10,818

Repairs & Maintenance - Buildings 85,015 41,139

Repairs & Maintenance - Others 492 2,541

Repairs & Maintenance - Plant & equipments 10,485 3,351

Electricity expenses 20,543 12,556

Bad Debts written off - 1,429

Provision for doubtful debts 337 (1,429)

Provision for doubtful advances 1,054 -

Recruitment and training expenses 9,313 7,564

Printing and stationery 6,585 7,017

Insurance 1,063 1,545

Rates and taxes 1,827 6,544

Entertainment 465 246

Payment to auditors (Refer note 8 of Schedule N) 3,849 1,002

Bank Charges 984 889

Periodicals & journals 16 -

Freight and carriage 279 -

Advertisement and Publicity 93 -

Tata Brand Equity contribution 241 3,738

Loss on sale / discard of assets - 38

Exchange Loss (Net) (includes gain of ` NIL : previous year ` 3,140 thousands on foreign exchange forward contracts and currency option contracts which have been designated as Cash Flow Hedges)

- 16,117

Other expenses 20,844 15,738

745,973 453,747

25


SCHEDULE N - NOTES FORMING PART OF BALANCE SHEET & PROFIT AND LOSS ACCOUNT

1. Background and principal activities

TCS e-Serve International Limited is engaged in the business of providing Information Technology - Enabled Services (ITES)/ Business Processing Outsourcing (BPO) services, primarily to Citigroup entities globally.

The Company’s operations broadly comprise of transaction processing and technical services. Transaction processing includes the broad spectrum of activities involving the processing, collections, customer care and payments in relation to the services offered by Citigroup to its corporate and retail clients. Technical services involve software testing, verification and validation of software at the time of implementation and data centre management activities.

2. Significant accounting policies

2.1 Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention and the requirements of the Companies Act, 1956.

2.2 Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon the management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognised prospectively in current and future periods. Examples of such estimates include unbilled revenue, provision for doubtful debts, provision for income taxes and the useful life of depreciable fixed assets.

2.3 Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset.

Depreciation is provided on the straight-line method. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter than that envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation on the fixed assets, has been provided at the following rates, which are higher than the corresponding rates prescribed in Schedule XIV to the Companies Act, 1956:

Class of asset Rate of depreciation

Improvement to leasehold premises

- where lease period is less than 10 years At rates computed on the basis of the lease periods

- where lease period is 10 years or more 10 %

Office equipment 25 %

Computer equipment 33.33 %

Software licenses 50 %

Furniture and fixtures 20 %

Electrical fittings 20 %

Vehicles 20 %

All fixed assets individually costing less than ` 5,000 are fully depreciated in the year of purchase.

The Company provides pro-rata depreciation from the month the asset is put to use and for any asset sold, up to the month of sale.


2.4 Impairment of assets:

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical costs and the reversal of impairment loss is recognised immediately as income in the profit and loss account.

2.5 Leases

Lease arrangements where the risks and rewards incident to ownership of an asset substantially vest with the lessor, are recognised as operating leases. The lease agreements contain rent escalation clause. Lease rental expenses including escalations for operating leases are recognised in the Profit and Loss Account on a straight-line basis over the minimum lease term.

2.6 Investments

Long-term investments are stated at cost, less provision for other than temporary diminution in value. Current investments comprising investments in mutual funds are stated at the lower of cost and market value, determined on a portfolio basis.

2.7 Cash and Cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short term highly liquid investment, which have duration of up to three months from the date of acquisition.

2.8 Employee benefits

The Company has both defined contribution and defined benefit plans of which some have assets in special funds or similar securities. The plans are financed by the Company and in case of defined contribution plans, by the Company along with its employees.

Post-employment benefit plans

Gratuity

The Company’s gratuity benefit scheme is a defined benefit plan. The Company’s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognised immediately in the profit and loss account.

Provident fund, family pension fund and Superannuation fund

These are plans in which the Company pays pre-defined amounts to separate funds and does not have any legal or informal obligation to pay additional funds. The Company’s contributions to these funds are reported as expenses during the period in which the employees perform services that the payment covers.



27

Short-term benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employees renders the service. These benefits include compensated absences such as annual paid leave and performance incentives.

Long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as an actuarially determined liability at the present value of the defined benefit obligation at the balance sheet date

2.9 Revenue recognition

Revenues from Business Process Outsourcing (BPO) services are recognised on time and material and unit priced contracts. Revenues from contracts priced on a time and material basis are recognised when services are rendered and related costs are incurred. Revenue on unit priced contracts is recognised as the related services are rendered. Reimbursement of out of pocket expenses are recognised as revenue.

Revenue in excess of billings is recognised as unbilled revenues in the balance sheet.

Interest income is recognised on time proportionate basis.

Dividend income is recognised when the right to receive the dividend is established.

2.10 Foreign currency transactions

Income and expenses in foreign currencies are converted at exchange rates prevailing on the date of the transaction.

Foreign currency monetary assets and liabilities other than net investments in non-integral foreign operations are translated at the exchange rate prevailing on the balance sheet date. Exchange difference arising on a monetary item that, in substance, forms part of an enterprise’s net investments in a non-integral foreign operation is accumulated in a foreign currency translation reserve.

Premium or discount on forward exchange contracts are amortised and recognised in the profit and loss account over the period of the contract. Forward exchange contracts outstanding at the balance sheet date are stated at fair values and any gains or losses are recognised in the profit and loss account.

2.11 Taxation

Current income tax expense comprises taxes on income from operations in India. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961.

Deferred tax expense or benefit is recognised on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

In the event of unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient taxable income will be available to realise such assets. In other situations, deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realise these assets.

Advance taxes and provisions for current income taxes are presented in the Balance sheet after off-setting advance taxes paid and income tax provisions arising in the same tax jurisdiction, provided the Company has a legally enforceable right to set off the recognised amounts.

The Company offsets deferred tax assets and deferred tax liabilities relating to taxes on income levied by the same governing taxation laws.




2.12 Provision and contingencies

A provision is recognised when there is a present obligation as a result of a past event that and it is probable that an outflow of resources will be required to settle the obligation and the reliable estimate can be made. Present obligations which has a possibility of outflow of resources to settle the obligation are disclosed as contingent liability. Present obligation in respect of which the likely hood of outflow of resources is remote are neither provided nor disclosed as contingent liability.

Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.

Contingent assets are neither recognised nor disclosed in the financial statements.

2.13 Earnings per share

The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders by weighted average number of equity shares outstanding during the reporting year.

Number of equity shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving basic earnings per share and also weighted average number of equity shares which would have been issued on the conversion of all dilutive potential shares. In computing diluted earnings per share only potential equity shares that are dilutive are included.

2.14 Derivative instruments and hedge accounting

The Company uses foreign currency forward contracts and currency options to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 “Financial Instruments: Recognition and Measurement” (AS-30).

The use of hedging instruments is governed by the Company’s policies approved by the board of directors, which provide written principles on the use of such financial derivatives consistent with the Company’s risk management strategy.

Hedging instruments are initially measured at fair value, and are remeasured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash flows are recognised directly in shareholder’s funds and the ineffective portion is recognised immediately in the Profit and Loss Account.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting is recognised in the Profit and Loss Account as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised or no longer qualifies for hedge accounting. At that time for forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in shareholder’s funds is retained there until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in shareholder’s funds is transferred to Profit and Loss Account for the period.

3. Capital commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for as at March 31, 2011 is ` 33,219 thousand (Previous year ` 17,587 thousand).

4. Contingent Liabilities

(` in thousand)

Particulars As at March 31, 2011


Guarantees given by the company 61,693 412



29

5. Earnings per share

The computation of earnings per share is set out below:

(` in thousand)

Particulars Year ended March 31, 2011

Year ended March 31, 2010

Profit after tax (A) - ` in thousands 974,719 449,564

Number of equity shares (B)

Weighted average number of shares at ` 100/- paid up per share equivalent

1,000,000 1,000,000

Nominal value of the equity Shares - Rs per share 100 100

Basic and diluted earnings per share of face value of Rs.100 for the year (A) / (B) - `

974.72 449.56

6. Related party disclosures:

I. Names of related parties and nature of relationship:

Enterprises that directly, or indirectly through one or more intermediaries, control or are under common control with the Company:

(a) Holding Company

Name of the Enterprise Nature of relationship

TCS e-Serve Limited (TESL) Holding Company

Tata Consultancy Services Limited (TCSL) Holding Company of TESL

Tata Sons Limited Holding Company of TCSL

(b) Subsidiary

Name of the Enterprise

TCS e-Serve America Inc. (TEAI)

(c) Fellow Subsidiaries with whom the Company has transactions


TATA America International Corporation (TAIC)

Tata Consultancy Services Canada Inc.

Diligenta Ltd.

(d) Key managerial personnel -

Mr. Dinanath Kholkar (Managing Director and Chairman)

There are no amounts paid/ payable to the key management personnel during the year.




II) Transactions with related parties: (` in thousand)

Nature of transactions Holding Company Subsidiary Company Fellow Subsidiaries / Associates

Year ended Year ended Year ended

March 31 2011

March 31 2010

March 31 2011

March 31 2010

March 31 2011

March 31 2010

Transaction processing services

Tata Consultancy Services Limited 135,686 - - - - -

TCS e-Serve Limited 12,239 - - - - -

TATA America International Corporation - - - - 553,672 107,274

Tata Consultancy Services Canada Inc. - - - - 5,026 -

Diligenta Ltd. - - - - 20,281 -

Interest Earned

TCS e-Serve America Inc. - - 400 144 - -

Interest expenses

TCS e-Serve Limited 36,256 66,454 - - - -

Services rendered by business Associates


Tata Consultancy Services Limited 120,075 3,630 - - - -

Cost of Licences

Tata Consultancy Services Limited 10,503 1,950 - - - -

Travel Expense Reimbursed

TATA Consultancy Services Limited 3,592 - - - - -

TATA America International Corporation - - - - 745 -

TATA Brand Royalty

Tata Sons Limited 4,459 3,737 - - - -

TATA Consultancy Services Limited (4,218) - - - - -

Investment in subsidiary company

TCS e-Serve America Inc. - - - 12,903 - -

Unsecured Loans taken


Unsecured Loans repaid


Loans given

TCS e-Serve America Inc. - - 79 43,687 - -

Loans repaid

TCS e-Serve America Inc. - - 9,374 9 - -

Purchase of Fixed Assets

TCS e-Serve Limited 1,117 - - - - -

Sale of Fixed Assets

TCS e-Serve Limited 27 - - - - -



31

III) Balances with related parties:

Nature of transactions Holding Company Subsidiary Company Fellow Subsidiaries / Associates

As at As at As at

March 31 2011

March 31 2010

March 31 2011

March 31 2010

March 31 2011

March 31 2010

Sundry Debtors

Tata Consultancy Services Limited 735 - - - - -

TATA America International Corporation - - - - 41,729 34,579

TCS Canada Inc. - - - - 502 -

Diligenta Ltd. - - - - 19,898 -

Unbilled Revenues

Tata Consultancy Services Limited 50,181 - - - - -

TATA America International Corporation - - - - 29,138 -

Loans and advances

TCS e-Serve America Inc. - - 34,637 43,932 - -

Unsecured Loans

TCS e-Serve Limited (114,421) (725,946) - - - -

Sundry creditors and Other current Liabilities

Tata Consultancy Services Limited (107,992) (5,580) - - - -

Tata Sons Limited (4,459) (3,737) - - - -

7. Segment information

The Company is engaged in Business Process Outsourcing (transaction processing) services to the Banking & Financial Services Industry (BFSI) and Travel, Tourism and Hospitality (TTH), which are considered as industry segment. Geographic segments of the Company are Americas, Europe and others.

Revenue and expense directly attributable to segments are reported under each reportable segment. Expenses incurred on behalf of segments and not directly identifiable to each reportable segment have been allocated to each segment on a reasonable basis. All other expenses, which are not attributable or allocable to segments, have been disclosed as unallocable expenses.

Assets and liabilities that are directly attributable to segments are disclosed under each reportable segment. Other assets and liabilities incurred on behalf of segments and not directly identifiable to each reportable segment have been allocated to each segment on a reasonable basis. All other assets and liabilities, which are not allocable are to segments have been disclosed as unallocable.




(` in thousand)

For the Year Ended March 31, 2011

Industry Segment

Particulars BFSI TTH Total

Revenue 2,311,663 188,970 2,500,634

1,385,682 107,274 1,492,956

Segment result 801,035 78,966 880,001

463,305 44,217 507,522

Unallocable expenses (net) 41,818

66,896

Operating Profit / (Loss) 838,183

440,626

Other income 135,456

11,053

Profit / (Loss) before income tax 973,639

451,679

Tax expense (1,080)

2,115

Net Profit / (Loss) 974,719

449,564

As of March 31, 2011

Industry Segment

Particulars BFSI TTH Total

Segment Assets 1,363,829 91,156 1,454,985

987,943 64,754 1,052,697

Unallocable Assets 501,770

356,748

Total Assets 1,956,755

1,409,445

Segment Liabilities 475,015 22,753 497,768

276,253 16,822 293,075

Unallocable Liabilities 114,421

725,946

Total Liabilities 612,189

1,019,021

Other Information

Other significant non-cash expenses 186,405

100,599



33

For the Year Ended March 31, 2011 Geographic Segment

Particulars Americas Europe Other Total

Revenue 1,957,442 373,514 169,678 2,500,634

1,215,494 239,298 38,164 1,492,956

As of March 31, 2011 Geographic Segment

Particulars Americas Europe Others Total

Segment Assets 417,150 95,588 55,912 568,650

311,389 66,021 9,081 386,491

Unallocable Assets 1,388,105

1,022,954

Total Assets 1,956,755

1,409,445

Figures in italics represent previous year numbers

8. Auditors’ remuneration

(` in thousand)



For services as auditors 3,200 600

For Tax Audit* 300 200

Other matters* 271 200

Reimbursement of out-of-pocket expenses 78 2

*includes Rs.253 thousand (Previous year Rs. NIL) being amounts paid to a firm in which some of the partners in the firm of statutory auditors are partners.

9. Value of imports calculated on C.I.F. basis

(` in thousand)



Capital goods 126,166 40,010

10. Expenditure, earnings and dividend remittances in foreign currency

(a) Expenditure in foreign currencies (on payment basis)

(` in thousand)



Travelling expenses 14,609 29,814

Legal and professional fees 5,456 4,684




(b) Earnings in foreign currency (on accrual basis)

(` In thousand)



Transaction processing charges 2,353,191 1,492,956

Interest Income 400 144

11. Transfer pricing

The Company has developed a system of maintaining of information and documents as required by the transfer pricing legislation under section 92-92F of the Income Tax Act, 1961. Management is of the opinion that its international transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

12. The year end foreign currency exposures that were not hedged by derivative instruments or otherwise are given below.

Amounts receivable / payable in foreign currency on account of following:-

Particulars As at

As at March 31 2011 As at March 31 2010

` in thousand Fx in thousand ` in thousand Fx in thousand

Receivable

Rendering of services - - 7,143 GBP 105

Unbilled Revenue - - 6,112 GBP 90

74,166 USD 1,663 129,671 USD 2,887

784 AUD 17 - -

Loans to subsidiary 34,637 USD 777 43,932 USD 978

Investment in subsidiary 12,955 USD 276 12,955 USD 276

Payable

Annual Maintenance Charges payable - - 9,891 USD 220

Import of Goods 2,308 USD 52 - -

Note: Fx= Foreign Currency; USD= US Dollar; GBP= British Pound; CAD = Canadian Dollar

13. Derivative Financial Instruments

The Company, in accordance with its risk management policies and procedures, enters into foreign currency forward contracts and currency option contracts to manage its exposure in foreign exchange rates. The counter party is generally a bank. The contracts are generally for a period ranging from one day and two years.



35

The Company has following outstanding derivative instruments as on March 31, 2011:

i) The following are outstanding foreign exchange forward contracts, which have been designated as Cash Flow Hedges, as on:

Foreign Currency As at March 31, 2011 As at March 31, 2010

No. of Contracts

Notional amount of Currency Forward contracts

Fair Value Gain / (Loss)

`

No. of Contracts

Notional amount of Currency Forward contracts


`

U.S.Dollar 26 35,960 67,790 16 21,620 43,947

Sterling Pound 19 2,920 1,726 - - -

ii) The following are outstanding Currency Option contracts, which have been designated as Cash Flow Hedges, as on:

Foreign Currency As at March 31, 2011 As at March 31, 2010

No. of Contracts

Notional amount of Currency Option

contracts


`

No. of Contracts

Notional amount of Currency Option

contracts


`

U.S.Dollar 20 27,900 28,348 17 30,820 68,728

Net Gain on derivative instruments of ` 75,533 thousand recognised in Hedging Reserve as at March 31, 2011, is expected to be reclassified to the profit and loss account by March 31, 2012.

The movement in Hedging Reserve during the period ended March 31, 2011, for derivatives designated as Cash Flow Hedges is as follows:

(` In thousand)

Year endedMarch 31, 2011

Year endedMarch 31, 2010

Balance at the beginning of the year 112,675 -

Gains/(losses) transferred to income statement on occurrence of forecasted hedge transaction

(86,249)

Changes in the fair value of effective portion of outstanding cash flow derivatives

65,672 112,675

Net derivative (losses) / gain related to a discontinued cash flow hedge

Balance at the end of the year 92,098 112,675

In addition to the above cash flow hedges, the Group has outstanding foreign exchange forward contracts and currency option contracts aggregating ` 375,182 thousands (March 31, 2010: ` 209,127 thousands) whose fair value showed a gain of ` 3,876 thousands as on March 31, 2011 (March 31, 2010 : ` 1,796 thousands). Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting and accordingly these are accounted as derivatives instruments at fair value with changes in fair value recorded in the profit and loss account. Exchange gain of ` 28,205 (Previous year: ` 6,897 thousands) on foreign exchange forward and currency option contracts have been recognised in the year ended March 31, 2011.




14. Operating leases

The Company has taken office premises on operating lease under non-cancellable lease arrangements. Lease payments recognised in the profit and loss account for the year is ` 157,355 thousand (Previous year: ` 123,647 thousand). Future minimum lease payments under non-cancellable operating leases are as below:

(` in thousand)

Particulars As at March 31, 2011 As at March 31, 2010

Not later than one year 221,399 105,808

Later than one year and not later than five years 948,148 497,289

Later than five years 821,536 438,136

Total 1,991,083 1,041,233

15. Disclosure pursuant to Accounting Standard – 15 (Revised) ‘Employee Benefits’

A. Defined contribution plans

The Company makes Provident Fund and Superannuation Fund contributions to defined contribution retirement benefit plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Provident Fund scheme additionally requires the Company to guarantee payment of interest at rates notified by the Central Government from time to time, for which shortfall has been provided for as at the Balance Sheet date.

The Company recognised ` 23,038 thousand (Previous year: ` 13,283 thousand) for provident fund contributions and ` NIL (Previous year: NIL) for superannuation contributions in the profit and loss account. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

B. Defined benefit plans

The Company offers its employees defined benefit in the form of gratuity for which the plan is not funded.

The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days basic salary per year of completed service. Vesting occurs upon completion of 5 years of service. The present value of defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method, with actuarial valuation being carried out at each balance sheet date.

The following table sets out the non-funded status of the gratuity plan and the amounts recognised in the Company’s financial statements as at March 31, 2011:

(` in thousand)


i) Change in benefit obligations:

Projected benefit obligation, beginning of the year 5,935 1,362

Service Cost 4,772 5,909

Interest Cost 804 545

Actuarial (gain)/ loss (4,858) (1,881)

Benefits paid - -

Projected benefit obligation, end of the year 6,653 5,935



37


ii) Change in plan assets:

Fair value of plan assets, beginning of the year - -

Expected return on plan assets - -

Employer’s contributions - -

Benefits paid - -

Actuarial gain/ (loss) - -

Fair value of plan assets, at the end of the year - -

Excess of obligation over plan assets 6,653 5,935

For the year ended March 31, 2011


iii) Net Gratuity cost:

Service cost 4,772 5,909

Interest cost 804 545

Expected return on plan assets - -

Net actuarial gain/ (loss) recognised in the year (4,858) (1,881)

Net Gratuity cost 718 4,573

Actual Return on Plan Assets - -

Key assumptions used to determine the net periodic gratuity cost and leave encashment at the valuation date are as follows:



Rate of discounting 8.00% 7.50%

Discount rate: The discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations. The rate is taken as per the deal rate as March 31, 2011 available on Reserve Bank of India website.

Attrition rate and Retirement Age

Attrition with employee age

Service Less than 5 years 26.00% 14.00%

Others 3.00% 3.00%

Retirement age 58 yrs 58 yrs

Salary escalation rate: The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.



Mortality table LIC(1994-96) ultimate LIC(1994-96) ultimate

Future salary rise

First 4 years 12.00% 12.00%

Next 5 years 11.00% 11.00%

Thereafter 10.00% 10.00%




The Company has not determined the amount to be contributed in the period beginning after the balance sheet date.

(` in thousand)

Experience Adjustments For the year ended March 31, 2011


Experience adjustment on liability (4,377) (1,614)

16. Dues to Micro and Small Enterprises

On the basis of the information and records available with the management, there are no dues to Micro and Small Enterprises, which have registered with the competent authorities.

17. Prior Period Item

During the financial year 2009-10, the company had charged ` 24,474 thousand (Net Debit) in profit and loss account in respect of certain items pertaining to the earlier financial years. These had been recorded under respective heads of expenditure as below:

(` in thousand)

Particulars For the year ended March 31, 2010

Bank Charges (177)

Communication 6

Entertainment 5

Insurance 1,344

Other Expenses (3,326)

Printing and stationery 2,405

Rates and taxes 445

Recruitment and training expenses 581

Rent 1,758

Repairs & Maintenance - Buildings (1,523)

Repairs & Maintenance - Others 794

Salaries, Wages and Bonus (4,733)

Services rendered by business associates and others 9,354

Staff welfare expenses 415

Travel Expense 17,126

Total 24,474

There are no such items in the current financial year.

18. Previous year figures have been regrouped / reclassified wherever necessary.

On behalf of Board of Directors

Abid Ali Neemuchwala Dinanath Kholkar Prashid GuptaChairman CEO & Managing Director Director & Chief Financial Officer

Bawa Grower M VidyaDirector Company Secretary

Mumbai, April 12, 2011



39

I. Registration detailsRegistration number 0 5 - 3 7 2 0 5

State Code 0 5

Balance Sheet date 3 1 0 3 2 0 1 1

Date Month Year

II. Capital raised during the year (Amount in ` thousand)

Public Issue Rights Issue

N I L N I L

Bonus Issue Private placement

N I L N I L

III. Position of mobilization and deployment of funds (Amount in ` thousand)

Total Liabilities Total Assets

1 4 5 8 9 8 7 1 4 5 8 9 8 7

Sources of funds

Paid-up capital Reserves & Surplus

1 0 0 0 0 0 1 2 4 4 5 6 6

Secured Loans Unsecured Loans

N I L 1 1 4 4 2 1

Application of funds

Net Fixed Assets Investments

6 2 5 0 0 6 2 5 5 2 5 2

Net Current Assets Miscellaneous expenditure

5 7 8 7 2 9 N I L

Accumulated losses Deferred tax asset

N I L N I L

IV. Performance of Company (Amount in ` thousand)

Turnover Total Expenditure

2 5 0 0 6 3 4 1 6 6 2 4 5 1

+ - Profit / (Loss) before Tax + - Profit / (Loss) after Tax

3 9 7 3 6 3 9 3 9 7 4 7 1 9

Earnings per share in ` Dividend Rate

9 7 4 . 7 2 N I L

V. Generic names of three principal products /services of Company (as per monetary terms)

Item Code No. (ITC code) NOT APPLICABLE

Product description TRANSACTION PROCESSING


Product description CUSTOMER CARE


BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

Information required vide Part IV of Schedule VI of the Companies Act, 1956


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41

To the Members,

Your Directors have pleasure in presenting the Third Annual Report of the Corporation with the audited

statement of accounts for the accounting year ended March 31, 2011.

PERFORMANCE

Summary of the financial performance during the year ended March 31, 2011 is as follows –

(In thousands)

Year ended

March 31, 2011

Year ended

March 31, 2010

USD INR* USD INR*

Total Income 4252.06 189599.22 1977.82 88191.40

Profit / (Loss) Before Taxes 701.58 31283.59 128.94 5749.57

Profit / (Loss) after Taxes 493.77 22017.25 79.05 3524.97

Balance Brought forward from Previous Year 78.08 3481.63 (0.97) (43.34)

Amount Available for Appropriation 571.85 25498.88 78.08 3481.63

Balance carried to Balance Sheet 571.85 25498.88 78.08 3481.63

*converted

DIVIDEND

In order to conserve resources for future expansion, the Directors do not recommend any dividend for the

financial year ended March 31, 2011.

OPERATIONS & BUSINESS REVIEW

During the year, the Corporation has recorded total income of ` 18.96 crore (USD 4252.06 thousand) against

the previous year income of ` 8.82 crore (USD 1978 thousand) and a net profit of ` 2.20 crore (USD 493.77

thousand) as against the previous year profit of ` 35.25 lakh (USD 79.05 thousand). The increased revenue

and profits are due to full year operations during the current year as compared to only part of the year in

the previous year. The Corporation continues to evaluate business opportunities and pursue the process of

seeking necessary licenses from respective authorities to expand its scope of operations in United States of

America

DIRECTORS

Mr. Abid Ali Neemuchwala, Mr. Satyanarayan Hegde and Mr. Dharmesh Gandhi continue as the Directors of

the Corporation.

DIRECTORS’ RESPONSIBILITY STATEMENT

Your Directors confirm that in preparation of financial statements for the year ended March 31, 2011, they

have-

• followed the applicable accounting standards along with proper explanation relating to material

departures, wherever applicable;

DIRECTORS’ REPORT

TCS e-Serve America Inc. Annual Report 2010 - 2011

TCS e-SERVE AMERICA, INC.

• selectedsuchaccountingpoliciesandappliedthemconsistentlyandmadejudgmentsandestimates

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

Corporation at the end of the financial period and of the profit of the Corporation for that period;

• takenproperandsufficientcareforthemaintenanceofadequateaccountingrecords,forsafeguarding

the assets of the Corporation and for preventing and detecting fraud and other irregularities; and

• preparedtheannualaccountsonagoingconcernbasis.

AUDITORS

Messrs Deloitte Haskins & Sells, Chartered Accountants, have audited the attached financial statements of

the Corporation for the year ended March 31, 2011, to enable the Holding Company comply with the

provisions of the Companies Act, 1956 of the Republic of India.

DISCLOSURE OF PARTICULARS

The particulars as prescribed under Sub-Section (1)(e) of Section 217 of the Companies Act, 1956, read with

the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988, are set out in an annexure

– I to this report. There were no employees drawing remuneration in excess of the limits prescribed under

Section 217(2A) of the Companies Act, 1956 and the rules made there under.

ACKNOWLEDGEMENTS

The Board takes this opportunity to thank all its stakeholders for their support.

On behalf of the Board of Directors

Abid Ali Neemuchwala Satyanarayan Hegde Dharmesh Gandhi

Director Director Director

Date : July 11, 2011

43

ANNEXURE-I TO THE DIRECTORS’ REPORT

Particulars pursuant to the Companies (Disclosure of particulars in the report of Board of Directors) Rules,

1988, are furnished hereunder:

(a) Conservation of Energy: Continuous steps are taken to use the energy conservatively, by (i) installing

energysavingdeviceswherevernecessaryand(ii)preventiveupkeepofalltheequipment.

(b) Technology Absorption: Technology is an essential and integral part of delivery to your customers.

Your Company strives to remain abreast of state-of-the-art systems and has used tested, proven &

appropriate technology to minimize time to delivery and improve maintainability.

As an ongoing process, your Company is strengthening itself in getting appropriate tools for Information

& Network Management to ensure that it remains in the forefront of technology delivery.

(c) Foreign Exchange Earnings: N.A.

Foreign Exchange Outgo : N.A.


AUDITORS’ REPORT

TO THE MEMBERS OF TCS e-Serve America Inc.

1. We have audited the attached Balance Sheet of TCS e-Serve America Inc. (the “Company”) as at 31st March, 2011, the Profit

and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These

financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these

financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that

we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the

financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by

the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion.

3. Further to our comments we report as follows:

a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary

for the purposes of our audit;

b) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement

with the books of account;

c) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are

in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956; and

d) in our opinion and to the best of our information and according to the explanations given to us, the said accounts

give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in

conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011;

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

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

For DELOITTE HASKINS & SELLS

Chartered Accountants


Sanjiv V. Pilgaonkar

Partner

(Membership No.: 39826)

MUMBAI, 12th April ,2011

45


BALANCE SHEET

AS AT MARCH 31, 2011

Schedule As at March 31, 2011




USD USD INR INR

SOURCES OF FUNDS:

SHAREHOLDERS' FUNDS

Share Capital A 276,000 276,000 12,306,840 12,306,840

Reserves and Surplus B 571,852 78,081 25,498,881 3,481,632

LOAN FUNDS

Unsecured Loans C 776,787 978,012 34,636,949 43,609,555

TOTAL FUNDS EMPLOYED 1,624,639 1,332,093 72,442,670 59,398,027

APPLICATION OF FUNDS:

FIXED ASSETS

Gross Block D 44,350 44,350 1,977,567 1,977,567

Less :- Accumulated Depreciation 22,155 7,371 987,892 328,673

Net Block 22,195 36,979 989,675 1,648,894

Capital Work-in-Progress - - - -

22,195 36,979 989,675 1,648,894

DEFERRED TAX ASSETS (Refer Note 7 of Schedule L) 20,205 6,810 900,941 303,658

CURRENT ASSETS, LOANS AND ADVANCES

Unbilled Revenues 353,223 346,682 15,750,215 15,458,549

Sundry Debtors E 689,334 708,084 30,737,403 31,573,466

Cash and Bank Balances F 769,916 558,664 34,330,554 24,910,828

Loans and Advances G 136,792 51,785 6,099,556 2,309,093

1,949,265 1,665,215 86,917,728 74,251,936

CURRENT LIABILITIES AND PROVISIONS

Current Liabilities H 305,449 344,946 13,619,956 15,381,142

Provisions I 61,577 31,965 2,745,718 1,425,319

367,026 376,911 16,365,674 16,806,461

NET CURRENT ASSETS 1,582,239 1,288,304 70,552,054 57,445,475

TOTAL ASSETS (NET) 1,624,639 1,332,093 72,442,670 59,398,027

NOTES TO THE ACCOUNTS L


For Deloitte Haskins & Sells On behalf of BoardChartered Accountants

Sanjiv V. Pilgaonkar Dharmesh Gandhi Abid Ali Neemuchwala Satyanarayan HegdePartner Treasurer President Sr. Vice President, Corporate Secretary &

General Counsel Mumbai, April 12, 2011



PROFIT AND LOSS ACCOUNT


Schedules For year ended March

31, 2011

For year ended March

31, 2010


31, 2011


31, 2010

USD USD INR INR

INCOME

Transaction Processing Services 4,193,495 1,977,829 186,987,942 88,191,395

Miscellaneous income 58,562 - 2,611,280 -

4,252,057 1,977,829 189,599,222 88,191,395

EXPENDITURE

Employee costs J 2,422,267 1,189,333 108,008,886 53,032,358

Operation and Other expenses K 1,105,208 648,971 49,281,225 28,937,617

3,527,475 1,838,304 157,290,111 81,969,975

PROFIT / (LOSS) BEFORE INTEREST, DEPRECIATION AND TAXES 724,582 139,525 32,309,111 6,221,420

Interest 8,215 3,211 366,307 143,178

Depreciation D 14,784 7,371 659,219 328,673

PROFIT / (LOSS) BEFORE TAXES 701,583 128,943 31,283,585 5,749,569

PROVISION FOR TAXES

Federal Income Tax (Current year includes $ 1,567 (` 69, 873) for earlier years; previous year NIL) 221,207 51,600 9,863,620 2,300,844

State Income Tax - 5,100 - 227,409

Deferred tax expense / (benefit) (13,395) (6,810) (597,283) (303,658)

NET PROFIT / (LOSS) FOR THE YEAR 493,771 79,053 22,017,248 3,524,974

Balance brought forward from previous year 78,081 (972) 3,481,633 (43,341)

AMOUNT AVAILABLE FOR APPROPRIATION 571,852 78,081 25,498,881 3,481,633

APPROPRIATIONS

Balance carried to Balance Sheet 571,852 78,081 25,498,881 3,481,633

571,852 78,081 25,498,881 3,481,633

NOTES TO THE ACCOUNTS L

Earnings per share

Basic and Diluted (Nominal value per equity share of USD 10) (Refer Note 5 of Schedule L) 17.89 6.71 797.73 299.28





47


CASH FLOW STATEMENT



31, 2011


31, 2010


31, 2011


31, 2010 USD USD INR INR

Cash flow from operating activities:

Net profit before tax 701,583 128,943 31,283,585 5,749,568

Adjusted for:

Depreciation 14,784 7,371 659,219 328,673

Finance charges 8,215 3,211 366,307 143,178

Operating profit before working capital changes 724,582 139,525 32,309,111 6,221,419

Increase in trade and other receivables (31,793) (1,071,151) (1,417,651) (47,762,622)

Increase in trade payables 39,565 327,351 1,764,204 14,596,581

Cash generated from operations 732,354 (604,275) 32,655,664 (26,944,622)

Income tax paid (267,312) (87,000) (11,919,442) (3,879,330)

Net cash provided by operating activities (a) 465,042 (691,275) 20,736,222 (30,823,952)Cash flow from investing activities:

Purchase of fixed assets (44,350) - (1,977,567) -

Net cash used by investing activities (b) (44,350) - (1,977,567) - Cash flow from financing activities:

Repayment of Borrowings (200,000) - (8,918,000) -

Interest paid (9,440) (199) (420,930) (8,873)

Proceeds from Borrowings - 970,000 - 43,252,300

Proceeds from issue of Shares - 275,000 - 12,262,250

Net cash used by financing activities (c) (209,440) 1,244,801 (9,338,930) 55,505,677 Net decrease in cash and cash equivalents (a + b + c) 211,252 553,526 9,419,725 24,681,725

Cash and cash equivalents at the beginning of the year:

Balances with scheduled banks on current accounts and fixed deposits 558,664 5,138 24,910,828 229,103

558,664 5,138 24,910,828 229,103

Cash and cash equivalents as at the end of the year:

Balances with scheduled banks on current accounts and fixed deposits 769,916 558,664 34,330,554 24,910,828

Total Cash and Bank Balance as per Schedule F 769,916 558,664 34,330,554 24,910,828 Notes :

Figures in the brackets are outflows/deductions.

Previous year's figures have been regrouped where necessary.












USD USD INR INR

SCHEDULE 'A'

SHARE CAPITAL

Authorised :

Equity: 276,000 276,000 12,306,840 12,306,840

27,600 equity shares of USD 10 each(Previous year 27,600 equity shares of USD 10 each)

276,000 276,000 12,306,840 12,306,840

Issued, Subscribed and Paid up

27,600 equity shares of USD 10 each 276,000 276,000 12,306,840 12,306,840

(Previous year 27,600 equity shares of USD 10 each)

276,000 276,000 12,306,840 12,306,840

Note:

27,600 equity shares (Previous year : 27,600 equity shares) of USD 10/- each are held by TCS e-Serve International Limited, the holding company. Tata Sons Limited is the ultimate holding company.

SCHEDULE 'B'

RESERVES AND SURPLUS

Balance in Profit & Loss Account 571,852 78,081 25,498,881 3,481,632

Total 571,852 78,081 25,498,881 3,481,632

SCHEDULE 'C'

UNSECURED LOANS

Short Term loan from TCS e-Serve International Limited, the holding company 775,000 975,000 34,557,250 43,475,250

(Repayable on demand)

Interest accrued and due 1,787 3,012 79,699 134,305

776,787 978,012 34,636,949 43,609,555

49

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USD USD INR INR

SCHEDULE 'E'

SUNDRY DEBTORS

Over six months (Unsecured)

(i) Considered good - - - -

(ii) Considered doubtful - - - -

- - - -

Others (Unsecured)

(i) Considered good 689,334 708,084 30,737,403 31,573,466

(ii) Considered doubtful - - - -

689,334 708,084 30,737,403 31,573,466

Less: Provision for doubtful debts - - - -

689,334 708,084 30,737,403 31,573,466

SCHEDULE 'F'

CASH AND BANK BALANCES

Bank Balances

with Foreign banks

In Current Account 769,916 558,664 34,330,554 24,910,828

769,916 558,664 34,330,554 24,910,828

Balance outstanding as at year end

Bank of America, N.A., Texas 769,916 558,390 34,330,554 24,898,610

Bank of America, N.A., Kansas - 274 - 12,218

Maximum balance balance outstanding at any time during the year

Bank of America, N.A., Texas 1,221,086 1,258,908 54,448,225 56,134,708

Bank of America, N.A., Kansas 614 500 27,378 22,295

51







USD USD INR INR

SCHEDULE 'G'

LOANS AND ADVANCES

Unsecured

Considered good

Loans and Advances to employees 1,825 16,385 81,377 730,607

Advances recoverable in cash or kind or for value to be received 58,562 - 2,611,280 -

Advance Tax - Fedral 76,405 35,400 3,406,899 1,578,486

136,792 51,785 6,099,556 2,309,093

SCHEDULE 'H'

CURRENT LIABILITIES

Sundry Creditors

Dues of Micro Enerprises and Small Enterprises - - - -

Dues of other creditors 300,950 344,946 13,419,346 15,381,142

Others 4,499 - 200,610 -

305,449 344,946 13,619,956 15,381,142

SCHEDULE 'I'

PROVISIONS

State Income Tax - 5,100 - 227,409

Employee benefits 61,577 26,865 2,745,718 1,197,910

61,577 31,965 2,745,718 1,425,319





31, 2011


31, 2010


31, 2011


31, 2010

USD USD INR INR

SCHEDULE 'J'

EMPLOYEE COSTS

Salaries and Incentives 1,977,361 974,092 88,170,527 43,434,762

Contribution to -

Social security and other benefit plans (overseas employees)" 191,827 115,125 8,553,566 5,133,424

Staff welfare expenses 253,079 100,116 11,284,793 4,464,172

2,422,267 1,189,333 108,008,886 53,032,358

SCHEDULE 'K'

OPERATION AND OTHER EXPENSES

Overseas business expenses -Employee Allowances 219,755 112,458 9,798,875 5,014,502

Overseas business expenses -Others 9,693 - 432,211 -

Services rendered by business associates and others 135,455 40,815 6,039,938 1,819,941

Cost of software licences 5,945 - 265,087 -

Communication expenses 74,018 - 3,300,463 -

Travelling and conveyance expenses 13,762 2,641 613,648 117,762

Rent 457,120 215,200 20,382,981 9,595,768

Legal and professional fees 71,719 29,292 3,197,950 1,306,130

Repairs & Maintenance - Others 219 84 9,765 3,746

Repairs & Maintenance - Plant & equipments 2,952 - 131,630 -

Recruitment and training expenses 1,619 209,056 72,191 9,321,807

Printing and stationery 1,710 219 76,249 9,765

Insurance 3,229 1,777 143,981 79,236

Rates and taxes 82,086 19,976 3,660,215 890,730

Entertainment 1,068 - 47,622 -

Payment to auditors (Refer Note 6 of Schedule L) 11,110 11,000 495,395 490,490

Bank Charges 2,996 1,339 133,592 59,706

Periodicals & journals - 164 - 7,313

Tata Brand Equity contribution 10,484 4,950 467,482 220,721

Other expenses 268 - 11,950 -

1,105,208 648,971 49,281,225 28,937,617

53


SCHEDULE L - NOTES FORMING PART OF THEFINANCIAL STATEMENTS

1. Background and principal activities

TCS e-Serve America Inc (the “Company”) is engaged in the business of providing Information Technology- Enabled Services (ITES) / Business Processing Outsourcing (BPO) services, primarily to Citigroup entities globally. The Company is not a company registered under the Companies Act, 1956 or a foreign company within the meaning of Section 591 of the Companies Act, 1956.

2. Significant accounting policies

2.1 Accounts are maintained by the Company in the reporting currency which is in US Dollars (USD). Financial Statements have also been reported in Indian Rupees (INR) using the closing spot rate of ` 44.59 as at March 31, 2011 for the convenience of reader.

2.2 Basis of preparation of financial statements

The financial statements are prepared in accordance with the generally accepted accounting principles in India (“Indian GAAP”) under the historical cost convention on an accrual basis of accounting to comply with the applicable Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956 (the “Accounting Standards”).

2.3 Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon the management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognised prospectively in current and future periods. Examples of such estimates include unbilled revenue, provision for income taxes.

2.4 Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset.

Depreciation is provided on the straight-line method based on the useful life of the assets, estimated at the time of acquisition or over the remaining useful life on a subsequent review is shorter than that envisaged, depreciation is provided at a higher rate based on management’s estimate of the useful life/remaining useful life.

Class of asset Rate of depreciation

Computer equipment 33.33 %

The Company provides pro-rata depreciation from the month the asset is put to use and for any asset sold, up to the month of sale.

2.5 Revenue recognition

Revenues from Business Process Outsourcing (BPO) services are recognised on time and material contracts. Revenues from contracts priced on a time and material basis are recognised when services are rendered and related costs are incurred.

Unbilled revenues represent revenue earned but not yet billed.

2.6 Compensated absences

The Company provides for the cost of vacation earned but not availed based on the number of days of carry forward entitlement at each balance sheet date.


2.7 Cash and Cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term highly liquid investment, which have duration of up to three months from the date of acquisition.

2.8 Taxation

Federal and State taxes are computed in accordance with the tax laws applicable in US where the Company is incorporated.

Deferred tax expense or benefit is recognised on timing differences being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

In the event of unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient taxable income will be available to realise such assets. In other situations, deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realise these assets.

2.9 Earnings per share

The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders by weighted average number of equity shares outstanding during the reporting year.

3. Related party disclosures:

A. Names of related parties and nature of relationship:

Enterprises that directly, or indirectly through one or more intermediaries, control or are under common control with the Company:

Holding Company

Name of the Enterprise Nature of relationship

TCS e-Serve International Limited (TEIL) Holding Company

TCS e-Serve Limited (TESL) Holding Company of TEIL

Tata Consultancy Services Limited (TCSL) Holding Company of TESL

Tata Sons Limited Holding Company of TCSL

Fellow Subsidiary with whom the company has transactions


TATA America International Corporation



55

B. Transactions with related parties:

Nature of transactions Holding Company

Fellow Subsidiary Company

Holding Company


USD USD INR INR

Issue of share capital

TCS e-Serve International limited - - - -

275,000 - 12,262,250 -

Unsecured Loans

TCS e-Serve International limited 8,215 - 366,307 -

970,000 - 43,252,300 -

Unsecured Loans Repaid

TCS e-Serve International limited 209,440 - 9,338,913 -

- - - -

Interest Expenses

TCS e-Serve International Limited 8,215 - 366,307 -

3,211 - 143,178 -

Services rendered by business Associates

TCS e-Serve Limited 122,822 - 5,476,633 -

40,815 - 1,819,941 -

Rent

TATA America International Corporation - 457,120 - 20,382,981

- 215,200 - 9,595,768

Expenses Reimbursed:

TATA America International Corporation - 18,811 - 838,767

- 777 - 34,646

Tata Brand Equity contribution

Tata Sons Limited 10,484 - 467,482 -

4,950 - 220,721 -

Figures in italics are of previous year.




C. Balances with related parties:

Nature of transactions Holding Company


Holding Company


USD USD INR INR

Unsecured Loans

TCS e-Serve International limited (775,000) - (34,557,250) -

(975,000) - (43,475,250) -

Sundry Creditors

TATA America International Corporation (TAIC)

- (119,991) - (5,350,401)

- (215,977) - (9,630,414)

Tata Sons Limited (10,484) - (467,482) -

(4,950) - (220,721) -

Tata Consultancy Limited (17,148) - (764,646) -

- - - -

TCS e-Serve Limited - - - -

(40,815) - (1,819,941) -

Accrued Interest

TCS e-Serve International limited (1,787) - (79,699) -

(3,012) - (134,305) -

Figures in italics are of previous year.

4. Segment information

The Company has identified Industry segments as its primary segment and geographical segments as its secondary segment.

The Company is engaged in Business Process Outsourcing (transaction processing) services to the Banking & Financial Services Industry (BFSI), which is considered as a single segment.

The Company currently operates only in one Geographic segment i.e. Americas. Hence no disclosure is required under Accounting Standard 17 “Segment Reporting”.

5. Earnings per share

The computation of earnings per share is set out below:

Particulars For the year ended March

31, 2011

For the year ended March

31, 2010


31, 2011


31, 2010

USD USD INR INR

Profit /(Loss) After Tax (A) 493,771 79,053 22,017,248 3,524,974

Weighted Average number of Equity shares at USD 10/- paid up share equivalent (Nos.) (B)

27,600.00 11,778.08 27,600.00 11,778.08

Nominal and paid up value of the equity shares- USD per share

10 10 10 10

Basic and Diluted earnings per share of face value of USD 10 for the year (A)/(B)

17.89 6.71 797.73 299.28



57

6. Auditors’ remuneration:

Particulars For the year ended March

31, 2011


31, 2010


31, 2011


31, 2010

USD USD INR INR

Audit fees 6,790 6,680 302,766 297,861

Others 4,320 4,320 192,629 192,629

7. Deferred Tax

Components of deferred tax liabilities and deferred tax assets are as follows :

Particulars As at March 31, 2011




USD USD INR INR

Deferred Tax Liability

Fixed Assets (3,022) (2,594) (134,763) (115,666)

Deferred Tax Assets

Amount Disallowed in previous year on payment basis

2,291 - 102,143 -

Provision for Compensated absences 20,936 9,404 933,561 419,324

Net Deferred Tax Assets 20,205 6,810 900,941 303,658

8. Benefit Plan

The Company has a profit sharing plan with a 401(k) feature. Eligible employees may elect to defer up to 50% of their total compensation each year, not to exceed the annual limitations established by the Internal Revenue Code. Company contributions were USD 22,633 (INR 1,009,205) and USD 6,532 (INR 291,261) for the year ended March 31, 2011 and March 31, 2010 respectively. Contribution to other benefit plans were USD 169,194 (INR 7,544,361)and USD 108,593 (INR 4,842,161) for the year ended March 31, 2011 and March 31, 2010 respectively.

9. Dues to Micro and Small Enterprises

On the basis of the information and records available with the management, there are no dues to Micro and Small Enterprises, which have registered with the competent authorities.

10. Previous year figures have been regrouped / reclassified wherever necessary.



On behalf of BoardFor TCS e-Serve America INC.

Dharmesh Gandhi Abid Ali Neemuchwala Satyanarayan HegdeTreasurer President Sr. Vice President, Corporate Secretary & General Counsel

Mumbai, April 12, 2011


I. Registration details

Registration number N A

State Code N A

Balance Sheet date 3 1 0 3 2 0 1 1

Date Month Year

II. Capital raised during the year (Amount in `)

Public Issue Rights Issue

N I L N I L

Bonus Issue Preferential allotment

N I L N I L

III. Position of mobilization and deployment of funds (Amount in `)

Total Liabilities Total Assets

7 2 4 4 2 6 7 0 7 2 4 4 2 6 7 0

Sources of funds

Paid-up capital Reserves & Surplus

1 2 3 0 6 8 4 0 2 5 4 9 8 8 8 1

Secured Loans Unsecured Loans

N I L 3 4 6 3 6 9 4 9

Application of funds

Net Fixed Assets Investments

9 8 9 6 7 5 N I L

Net Current Assets Miscellaneous expenditure

7 0 5 5 2 0 5 4 N I L

Accumulated losses Deferred tax asset

N I L 9 0 0 9 4 1

IV. Performance of Company (Amount in `)

Turnover Total Expenditure

1 8 6 9 8 7 9 4 2 1 5 8 3 1 5 6 3 7

+ - Profit / (Loss) before Tax + - Profit / (Loss) after Tax

3 3 1 2 8 3 5 8 5 3 2 2 0 1 7 2 4 8Earnings per share in ` Dividend Rate

7 9 7 . 7 3 N I L

V. Generic names of three principal products /services of Company (as per monetary terms)


Product description TRANSACTION PROCESSING


Product description CUSTOMER CARE


BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

Information required vide Part IV of Schedule VI of the Companies Act, 1956

59

NOTES


NOTES

TCS e-Serve International LimitedRegistered Office: Tower A, 2nd Floor, Building 6, W Block, DLF Phase III, Gurgaon – 122002

IT ServicesBusiness SolutionsOutsourcing


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