Form 6-k
United States Securities and Exchange Commission
Washington, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended December 31, 2009
Commission File Number 000-27663
SIFY TECHNOLOGIES LIMITED
(Translation of registrants name into English)
Tidel Park, Second Floor
No. 4, Rajiv Gandhi Salai, Taramani
Chennai 600 113, India
(91) 44-2254-0770
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form
20-F or Form 40-F. Form 20F þ Form 40 F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b) (1). Yes o No þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b) (7). Yes o No þ
Indicate by check mark whether the registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934. Yes o No þ
If Yes is marked, indicate below the file number assigned to registrant in connection with Rule
12g3-2(b). Not applicable.
Table of Contents
SIFY TECHNOLOGIES LIMITED
FORM 6-K
For the Quarter ended December 31, 2009
INDEX
Page 2 of 46
Currency of Presentation and Certain Defined Terms
Unless the context otherwise requires, references herein to we, us, the Company or Sify are
to Sify Technologies Limited, a limited liability Company organized under the laws of the Republic
of India. References to U.S. or the United States are to the United States of America, its
territories and its possessions. References to India are to the Republic of India. In January
2003, we changed the name of our Company from Satyam Infoway Limited to Sify Limited. In October
2007, we again changed our name from Sify Limited to Sify Technologies Limited. Sify,
SifyMax.in,, Sify e-ports and Sify online are trademarks used by us for which we have already
obtained the registration certificates in India. All other trademarks or trade names used in this
quarterly report are the property of their respective owners.
In this report, references to $, US$, Dollars or U.S. dollars are to the legal currency of
the United States, and references to Rs. rupees or Indian Rupees are to the legal currency of
India. References to a particular fiscal year are to our fiscal year ended March 31 of that year.
For your convenience, this report contains translations of some Indian rupee amounts into U.S.
dollars which should not be construed as a representation that those Indian rupee or U.S. dollar
amounts could have been, or could be, converted into U.S. dollars or Indian rupees, as the case may
be, at any particular rate, the rate stated below, or at all. Except as otherwise stated in this
report, all translations from Indian rupees to U.S. dollars contained in this report have been
based on the reference rate in the City of Mumbai on December 31, 2009 for cable transfers in
Indian rupees as published by the Reserve Bank of India (RBI) which was Rs.46.68 per $1.00.
Our financial statements are prepared in Indian rupees and presented in accordance with
International Financial Reporting Standards, or IFRS as issued by International Accounting
Standards Board (IASB). In this report, any discrepancies in any table between totals and the sums
of the amounts listed are due to rounding.
Information contained in our websites, including our principal corporate website, www.sifycorp.com,
is not part of this report.
Forward-looking Statements
In addition to historical information, this Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Act of 1934, as amended. The forward-looking statements contained herein are subject to risks and
uncertainties that could cause actual results to differ materially from those reflected in the
forward-looking statements. For a discussion of some of the risks and important factors that could
affect the Companys future results and financial condition, please see the sections entitled Risk
Factors and Managements Discussion and Analysis of Financial Condition and Results of
Operations, and our most recent Annual Report on Form 20-F.
The forward-looking statements contained herein are identified by the use of terms and phrases such
as anticipate, believe, could, estimate, expect, intend, may, plan, objectives,
outlook, probably, project, will, seek, target and similar terms and phrases. Such
forward-looking statements include, but are not limited to, statements concerning:
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our expectations as to future revenue, margins, expenses and capital requirements; |
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our exposure to market risks, including the effect of foreign currency exchange rates and interest rates on our financial results; |
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the effect of the international economic slowdown on our business; |
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projections that our cash and cash equivalents, along with cash generated from operations will be sufficient to meet certain of
our obligations; and |
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the effect of future tax laws on our business. |
You are cautioned not to place undue reliance on these forward-looking statements, which reflect
managements analysis only as of the date of this Report. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise. In addition, you should carefully review the other information in this Report,
our other periodic reports and other documents filed with the United States Securities and Exchange
Commission (the SEC) from time to time. Our filings with the SEC are available on its website at
www.sec.gov.
Page 3 of 46
Sify Technologies Limited
Unaudited Condensed Consolidated Interim Statement of Financial Position
(In thousands of Rupees, except share data and as otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December31, |
|
|
|
|
|
|
|
As at |
|
|
2009 |
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
Convenience |
|
|
|
|
|
|
|
2009 |
|
|
2009 |
|
|
translation into |
|
|
|
Note |
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Property, plant and equipment |
|
|
5 |
|
|
|
3,544,019 |
|
|
|
3,260,914 |
|
|
|
75,922 |
|
Intangible assets |
|
|
6 |
|
|
|
133,689 |
|
|
|
177,872 |
|
|
|
2,864 |
|
Investment in equity accounted investee |
|
|
7 |
|
|
|
606,365 |
|
|
|
542,901 |
|
|
|
12,990 |
|
Restricted cash |
|
|
8 |
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
Lease prepayments |
|
|
9 |
|
|
|
307,952 |
|
|
|
311,185 |
|
|
|
6,597 |
|
Other assets |
|
|
|
|
|
|
543,009 |
|
|
|
496,325 |
|
|
|
11,632 |
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
|
8,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
|
|
|
|
5,135,034 |
|
|
|
4,798,721 |
|
|
|
110,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
17,065 |
|
|
|
39,088 |
|
|
|
366 |
|
Trade and other receivables, net |
|
|
10 |
|
|
|
3,175,850 |
|
|
|
2,455,526 |
|
|
|
68,034 |
|
Prepayments for current assets |
|
|
|
|
|
|
167,520 |
|
|
|
128,548 |
|
|
|
3,588 |
|
Restricted cash |
|
|
8 |
|
|
|
56,368 |
|
|
|
1,329,756 |
|
|
|
1,208 |
|
Cash and cash equivalents |
|
|
8 |
|
|
|
811,325 |
|
|
|
380,042 |
|
|
|
17,380 |
|
Other investments |
|
|
|
|
|
|
|
|
|
|
13,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
4,228,128 |
|
|
|
4,346,834 |
|
|
|
90,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
9,363,162 |
|
|
|
9,145,555 |
|
|
|
200,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Share capital |
|
|
|
|
|
|
546,318 |
|
|
|
441,018 |
|
|
|
11,703 |
|
Share premium |
|
|
|
|
|
|
16,528,551 |
|
|
|
16,375,217 |
|
|
|
354,082 |
|
Share based payment reserve |
|
|
|
|
|
|
177,460 |
|
|
|
149,535 |
|
|
|
3,802 |
|
Other components of equity |
|
|
|
|
|
|
2,099 |
|
|
|
(9,691 |
) |
|
|
45 |
|
Accumulated deficit |
|
|
|
|
|
|
(12,946,488 |
) |
|
|
(13,104,386 |
) |
|
|
(277,345 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to equity holders of the Company |
|
|
|
|
|
|
4,307,940 |
|
|
|
3,851,693 |
|
|
|
92,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
248,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
4,307,940 |
|
|
|
4,100,541 |
|
|
|
92,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 4 of 46
Sify Technologies Limited
Condensed Consolidated Interim Statement of Financial Position
(Unaudited)
(In thousands of Rupees, except share data and as otherwise stated)
|
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|
|
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As at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
As at |
|
|
2009 |
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
Convenience |
|
|
|
|
|
|
|
2009 |
|
|
2009 (a) |
|
|
translation into |
|
|
|
Note |
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease obligations, other than current instalments |
|
|
|
|
|
|
142,674 |
|
|
|
122,382 |
|
|
|
3,056 |
|
Borrowings |
|
|
12 |
|
|
|
460,284 |
|
|
|
201,389 |
|
|
|
9,860 |
|
Employee benefits |
|
|
11 |
|
|
|
68,185 |
|
|
|
64,300 |
|
|
|
1,461 |
|
Other liabilities |
|
|
|
|
|
|
160,172 |
|
|
|
134,116 |
|
|
|
3,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities |
|
|
|
|
|
|
831,315 |
|
|
|
522,187 |
|
|
|
17,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease obligations current instalments |
|
|
|
|
|
|
40,895 |
|
|
|
32,943 |
|
|
|
876 |
|
Borrowings |
|
|
12 |
|
|
|
871,957 |
|
|
|
1,182,770 |
|
|
|
18,679 |
|
Bank overdraft |
|
|
8 |
|
|
|
953,686 |
|
|
|
1,397,083 |
|
|
|
20,430 |
|
Trade and other payables |
|
|
|
|
|
|
1,888,192 |
|
|
|
1,555,230 |
|
|
|
40,450 |
|
Deferred income |
|
|
|
|
|
|
469,177 |
|
|
|
354,801 |
|
|
|
10,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
4,223,907 |
|
|
|
4,522,827 |
|
|
|
90,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
5,055,222 |
|
|
|
5,045,014 |
|
|
|
108,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities |
|
|
|
|
|
|
9,363,162 |
|
|
|
9,145,555 |
|
|
|
200,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements
|
|
|
(a) |
|
Derived from the audited consolidated financial statements |
Page 5 of 46
Sify Technologies Limited
Unaudited Condensed Consolidated Interim Statement of Income
(In thousands of Rupees, except share data and as otherwise stated)
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
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|
Quarter ended |
|
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|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
|
|
|
Quarter ended |
|
|
December 31, |
|
|
Nine months ended |
|
|
December 31, |
|
|
|
|
|
|
|
December 31, |
|
|
2009 |
|
|
December 31, |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
translation into |
|
|
2009 |
|
|
2008 |
|
|
translation into |
|
|
|
Note |
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
Revenue |
|
|
13 |
|
|
|
1,725,847 |
|
|
|
1,550,767 |
|
|
|
36,972 |
|
|
|
5,112,294 |
|
|
|
4,625,393 |
|
|
|
109,518 |
|
Cost of goods sold and services rendered |
|
|
14 |
|
|
|
(1,061,788 |
) |
|
|
(886,048 |
) |
|
|
(22,746 |
) |
|
|
(3,131,506 |
) |
|
|
(2,695,475 |
) |
|
|
(67,085 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
40,062 |
|
|
|
27,112 |
|
|
|
858 |
|
|
|
102,361 |
|
|
|
60,697 |
|
|
|
2,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
|
|
|
|
|
|
(611,289 |
) |
|
|
(700,482 |
) |
|
|
(13,095 |
) |
|
|
(1,887,246 |
) |
|
|
(2,142,145 |
) |
|
|
(40,429 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
(185,955 |
) |
|
|
(126,800 |
) |
|
|
(3,984 |
) |
|
|
(483,094 |
) |
|
|
(360,168 |
) |
|
|
(10,349 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss on intangibles including goodwill |
|
|
|
|
|
|
|
|
|
|
(15,200 |
) |
|
|
|
|
|
|
(47,269 |
) |
|
|
(15,200 |
) |
|
|
(1,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from legal settlement |
|
|
|
|
|
|
561,120 |
|
|
|
|
|
|
|
12,021 |
|
|
|
561,120 |
|
|
|
|
|
|
|
12,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) from operating activities |
|
|
|
|
|
|
467,997 |
|
|
|
(150,651 |
) |
|
|
10,026 |
|
|
|
226,660 |
|
|
|
(526,898 |
) |
|
|
4,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
17 |
|
|
|
2,238 |
|
|
|
27,436 |
|
|
|
48 |
|
|
|
22,588 |
|
|
|
92,693 |
|
|
|
484 |
|
|
Finance expenses |
|
|
17 |
|
|
|
(83,828 |
) |
|
|
(80,294 |
) |
|
|
(1,796 |
) |
|
|
(227,652 |
) |
|
|
(166,097 |
) |
|
|
(4,877 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance expense |
|
|
|
|
|
|
(81,590 |
) |
|
|
(52,858 |
) |
|
|
(1,748 |
) |
|
|
(205,064 |
) |
|
|
(73,404 |
) |
|
|
(4,393 |
) |
|
Share of profit of equity accounted investee |
|
|
7 |
|
|
|
28,394 |
|
|
|
1,525 |
|
|
|
609 |
|
|
|
64,609 |
|
|
|
38,622 |
|
|
|
1,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (Loss) before tax |
|
|
|
|
|
|
414,801 |
|
|
|
(201,984 |
) |
|
|
8,887 |
|
|
|
86,205 |
|
|
|
(561,680 |
) |
|
|
1,847 |
|
|
Income tax (expense) / benefit |
|
|
|
|
|
|
|
|
|
|
(45,038 |
) |
|
|
|
|
|
|
81,479 |
|
|
|
(85,368 |
) |
|
|
1,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/ (Loss) for the period |
|
|
|
|
|
|
414,801 |
|
|
|
(247,022 |
) |
|
|
8,887 |
|
|
|
167,684 |
|
|
|
(647,048 |
) |
|
|
3,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company |
|
|
|
|
|
|
414,801 |
|
|
|
(258,548 |
) |
|
|
8,887 |
|
|
|
157,898 |
|
|
|
(685,056 |
) |
|
|
3,382 |
|
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
11,526 |
|
|
|
|
|
|
|
9,786 |
|
|
|
38,008 |
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
414,801 |
|
|
|
(247,022 |
) |
|
|
8,887 |
|
|
|
167,684 |
|
|
|
(647,048 |
) |
|
|
3,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings / loss per share |
|
|
|
|
|
|
7.78 |
|
|
|
(6.04 |
) |
|
|
0.17 |
|
|
|
3.15 |
|
|
|
(15.74 |
) |
|
|
0.07 |
|
Diluted earnings/ loss per share |
|
|
|
|
|
|
7.77 |
|
|
|
(6.04 |
) |
|
|
0.17 |
|
|
|
3.15 |
|
|
|
(15.74 |
) |
|
|
0.07 |
|
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements
Page 6 of 46
Sify Technologies Limited
Unaudited Condensed Consolidated Interim Statement of Comprehensive Income
(In thousands of Rupees, except share data and as otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
|
|
|
|
|
|
|
|
|
Nine months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended |
|
|
|
|
|
|
|
|
|
|
ended |
|
|
|
|
|
|
|
Quarter ended |
|
|
December 31, |
|
|
Nine months ended |
|
|
December 31, |
|
|
|
|
|
|
|
December 31, |
|
|
2009 |
|
|
December 31, |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
translation into |
|
|
2009 |
|
|
2008 |
|
|
translation into |
|
|
|
Note |
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (Loss) for the period |
|
|
|
|
|
|
414,801 |
|
|
|
(247,022 |
) |
|
|
8,887 |
|
|
|
167,684 |
|
|
|
(647,048 |
) |
|
|
3,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences of foreign operations |
|
|
|
|
|
|
1,358 |
|
|
|
2,573 |
|
|
|
29 |
|
|
|
2,056 |
|
|
|
(394 |
) |
|
|
44 |
|
Defined benefit plan actuarial gains / (losses) |
|
|
|
|
|
|
2,854 |
|
|
|
(15,085 |
) |
|
|
61 |
|
|
|
4,438 |
|
|
|
(17,499 |
) |
|
|
95 |
|
Change in fair value of available for sale investments, transferred to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,441 |
|
|
|
(3,691 |
) |
|
|
138 |
|
Change in fair value of available for sale investments |
|
|
|
|
|
|
|
|
|
|
(2,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of gains and (losses) from equity accounted investees |
|
|
|
|
|
|
(2,671 |
) |
|
|
338 |
|
|
|
(57 |
) |
|
|
(1,145 |
) |
|
|
(1,521 |
) |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income for the period |
|
|
|
|
|
|
1,541 |
|
|
|
(14,316 |
) |
|
|
33 |
|
|
|
11,790 |
|
|
|
(23,105 |
) |
|
|
252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive profit / (loss) for the period |
|
|
|
|
|
|
416,342 |
|
|
|
(261,338 |
) |
|
|
8,920 |
|
|
|
179,474 |
|
|
|
(670,153 |
) |
|
|
3,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company |
|
|
|
|
|
|
416,342 |
|
|
|
(272,864 |
) |
|
|
8,920 |
|
|
|
169,688 |
|
|
|
(708,161 |
) |
|
|
3,634 |
|
Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
11,526 |
|
|
|
|
|
|
|
9,786 |
|
|
|
38,008 |
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive profit / (loss) for the period |
|
|
|
|
|
|
416,342 |
|
|
|
(261,338 |
) |
|
|
8,920 |
|
|
|
179,474 |
|
|
|
(670,153 |
) |
|
|
3,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements
Page 7 of 46
Sify Technologies Limited
Unaudited Condensed Consolidated Interim Statement of Changes in Equity
(In thousands of Rupees, except share data and as otherwise stated)
For Nine months ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
based |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Share |
|
|
Share |
|
|
payment |
|
|
components |
|
|
Accumulated |
|
|
|
|
|
|
controlling |
|
|
|
|
Particulars |
|
capital |
|
|
premium |
|
|
reserve |
|
|
of equity |
|
|
deficit |
|
|
Total |
|
|
interest |
|
|
Total equity |
|
Balance at April 1, 2009 |
|
|
441,018 |
|
|
|
16,375,217 |
|
|
|
149,535 |
|
|
|
(9,691 |
) |
|
|
(13,104,386 |
) |
|
|
3,851,693 |
|
|
|
248,848 |
|
|
|
4,100,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income/ (loss) for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,790 |
|
|
|
157,898 |
|
|
|
169,688 |
|
|
|
9,786 |
|
|
|
179,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded directly in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of Share Capital |
|
|
105,300 |
|
|
|
737,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
842,837 |
|
|
|
|
|
|
|
842,837 |
|
Share-based payment transactions |
|
|
|
|
|
|
|
|
|
|
27,925 |
|
|
|
|
|
|
|
|
|
|
|
27,925 |
|
|
|
|
|
|
|
27,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in ownership interests in subsidiaries that
do not result in a gain or loss of control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of non-controlling interest |
|
|
|
|
|
|
(584,203 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(584,203 |
) |
|
|
(258,634 |
) |
|
|
(842,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
546,318 |
|
|
|
16,528,551 |
|
|
|
177,460 |
|
|
|
2,099 |
|
|
|
(12,946,488 |
) |
|
|
4,307,940 |
|
|
|
|
|
|
|
4,307,940 |
|
For nine months ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
based |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
Share |
|
|
Share |
|
|
payment |
|
|
components |
|
|
Accumulated |
|
|
|
|
|
|
controlling |
|
|
|
|
Particulars |
|
capital |
|
|
premium |
|
|
reserve |
|
|
of equity |
|
|
deficit |
|
|
Total |
|
|
interest |
|
|
Total equity |
|
Balance at April 1, 2008 |
|
|
441,018 |
|
|
|
16,368,647 |
|
|
|
149,398 |
|
|
|
(9,817 |
) |
|
|
(12,254,262 |
) |
|
|
4,694,984 |
|
|
|
199,907 |
|
|
|
4,894,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income / (loss) for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,105 |
) |
|
|
(685,056 |
) |
|
|
(708,161 |
) |
|
|
38,008 |
|
|
|
(670,153 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded directly in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment transactions |
|
|
|
|
|
|
|
|
|
|
47,347 |
|
|
|
|
|
|
|
|
|
|
|
47,347 |
|
|
|
|
|
|
|
47,347 |
|
Others |
|
|
|
|
|
|
6,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,570 |
|
|
|
|
|
|
|
6,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
|
441,018 |
|
|
|
16,375,217 |
|
|
|
196,745 |
|
|
|
(32,922 |
) |
|
|
(12,939,318 |
) |
|
|
4,040,740 |
|
|
|
237,915 |
|
|
|
4,278,655 |
|
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements.
Page 8 of 46
Sify Technologies Limited
Unaudited Condensed Consolidated Interim Statement of Cash Flows
(In thousands of Rupees, except share data and as otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
Nine Months ended December 31 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
2009 |
|
|
2008 |
|
|
translation into |
|
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
Cash flows from / (used in) operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (Loss) for the period |
|
|
167,684 |
|
|
|
(647,048 |
) |
|
|
3,592 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
483,094 |
|
|
|
360,168 |
|
|
|
10,349 |
|
Impairment loss on intangibles including goodwill |
|
|
47,269 |
|
|
|
15,200 |
|
|
|
1,013 |
|
Share of profit of equity accounted investee |
|
|
(64,609 |
) |
|
|
(38,622 |
) |
|
|
(1,384 |
) |
Loss/ (gain) on sale of property, plant and equipment |
|
|
(2,868 |
) |
|
|
(93 |
) |
|
|
(61 |
) |
Provision for doubtful receivables and advances |
|
|
89,069 |
|
|
|
97,666 |
|
|
|
1,908 |
|
Stock compensation expense |
|
|
27,925 |
|
|
|
47,347 |
|
|
|
598 |
|
Net finance expense / (income) |
|
|
205,064 |
|
|
|
73,404 |
|
|
|
4,393 |
|
Loss on sale of Investments |
|
|
373 |
|
|
|
|
|
|
|
8 |
|
Income tax expense / (benefit) |
|
|
(81,479 |
) |
|
|
85,368 |
|
|
|
(1,745 |
) |
Unrealized (gain)/ loss on account of exchange differences |
|
|
(3,247 |
) |
|
|
(1,460 |
) |
|
|
(70 |
) |
Amortization of leasehold prepayments |
|
|
3,070 |
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
871,345 |
|
|
|
(8,070 |
) |
|
|
18,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in trade and other receivables |
|
|
(549,636 |
) |
|
|
(806,164 |
) |
|
|
(11,775 |
) |
Change in inventories |
|
|
22,023 |
|
|
|
(35,926 |
) |
|
|
472 |
|
Change in other assets |
|
|
(82,723 |
) |
|
|
111,572 |
|
|
|
(1,772 |
) |
Change in trade and other payables |
|
|
491,660 |
|
|
|
304,655 |
|
|
|
10,533 |
|
Change in employee benefits |
|
|
8,324 |
|
|
|
36,658 |
|
|
|
178 |
|
Change in deferred revenue |
|
|
114,377 |
|
|
|
122,415 |
|
|
|
2,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
875,370 |
|
|
|
(274,860 |
) |
|
|
18,753 |
|
Income taxes paid |
|
|
(161,250 |
) |
|
|
(237,296 |
) |
|
|
(3,454 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash from / (used in) operating activities |
|
|
714,120 |
|
|
|
(512,156 |
) |
|
|
15,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from / (used in) investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment |
|
|
(665,463 |
) |
|
|
(879,222 |
) |
|
|
(14,256 |
) |
Expenditure on intangible assets |
|
|
(197,873 |
) |
|
|
(93,040 |
) |
|
|
(4,239 |
) |
Proceeds from sale of property, plant and equipment |
|
|
4,300 |
|
|
|
872 |
|
|
|
92 |
|
Net investment in leases |
|
|
|
|
|
|
12,040 |
|
|
|
|
|
Finance income received |
|
|
69,165 |
|
|
|
134,480 |
|
|
|
1,482 |
|
Short term investments |
|
|
19,942 |
|
|
|
|
|
|
|
427 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(769,929 |
) |
|
|
(824,870 |
) |
|
|
(16,494 |
) |
|
|
|
|
|
|
|
|
|
|
Page 9 of 46
Sify Technologies Limited
Unaudited Condensed Consolidated Interim Statement of Cash Flows
(In thousands of Rupees, except share data and as otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
Nine months ended December 31 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Convenience |
|
|
|
2009 |
|
|
2008 |
|
|
translation into |
|
|
|
Rs. |
|
|
Rs. |
|
|
US$ (Note 2(b)) |
|
Cash flows from / (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from / (repayment of) borrowings, net |
|
|
(61,620 |
) |
|
|
556,950 |
|
|
|
(1,320 |
) |
Finance expenses paid |
|
|
(249,911 |
) |
|
|
(157,433 |
) |
|
|
(5,354 |
) |
Repayment of finance lease liabilities |
|
|
(34,675 |
) |
|
|
(2,246 |
) |
|
|
(743 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used) in financing activities |
|
|
(346,206 |
) |
|
|
397,271 |
|
|
|
(7,417 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(402,015 |
) |
|
|
(939,755 |
) |
|
|
(8,612 |
) |
Cash and cash equivalents at April 1 |
|
|
312,715 |
|
|
|
888,690 |
|
|
|
6,699 |
|
Effect of exchange fluctuations on cash held |
|
|
3,307 |
|
|
|
(143 |
) |
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at period end |
|
|
(85,993 |
) |
|
|
(51,208 |
) |
|
|
(1,842 |
) |
|
|
|
|
|
|
|
|
|
|
Supplementary information |
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property plant and equipment represented by finance lease obligations |
|
|
72,621 |
|
|
|
125,729 |
|
|
|
1,556 |
|
The accompanying notes form an integral part of these unaudited condensed consolidated interim financial statements
Page 10 of 46
SIFY TECHNOLOGIES LIMITED
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(In thousands of Rupees, except share, per share data and as stated otherwise)
1. Reporting entity
Sify Technologies Limited, (Sify or the Company) formerly known as Sify Limited, is a leading
internet services provider headquartered in Chennai, India. These Unaudited Condensed Consolidated
Interim Financial Statements as at and for the three months and nine months ended December 31, 2009
comprise the Company and its subsidiaries (Sify Software Limited, Sify International Inc and Sify
Technologies Singapore Pte Limited) (together referred to as the Group and individually as Group
entities) and the Groups interest in MF Global Sify Securities Private Limited, an equity
accounted investee. The Group is primarily involved in providing services, such as Corporate
Network and Data Services, Internet Access Services, Online Portal and Content offerings and in
selling hardware and software related to such services. Sify is listed in the NASDAQ Global market
in the United States.
2. Basis of preparation
a. Statement of compliance
The Unaudited Condensed Consolidated Interim Financial Statements of the Group have been prepared
in accordance with International Financial Reporting Standard (IFRS), IAS 34 Interim Financial
Reporting. They do not include all of the information required for full annual financial
statements, and should be read in conjunction with the consolidated financial statements of the
Group as at and for the year ended March 31, 2009.
These Unaudited Condensed Consolidated Interim Financial Statements have been approved for issue by
the Board of Directors on November 30, 2010.
b. Functional and presentation currency
Items included in the financial statements of each Group entity are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). Indian
rupee is the functional currency of Sify, its domestic subsidiaries and affiliates. US dollar is
the functional currency of Sifys foreign subsidiary located in the US and in Singapore.
The Unaudited Condensed Consolidated Interim Financial Statements are presented in Indian Rupees
which is the Groups presentation currency. All financial information presented in Indian Rupees
has been rounded up to the nearest thousand except where otherwise indicated.
Convenience translation: Solely for the convenience of the reader, the financial statements as of
and for the three months and nine months ended December 31, 2009 have been translated into United
States dollars (neither the presentation currency nor the functional currency) based on the
reference rate in the City of Mumbai on December 31, 2009, for cable transfers in Indian rupees as
published by the Reserve Bank of India which was Rs. 46.68 per $1.00. No representation is made
that the Indian rupee amounts have been, could have been or could be converted into United States
dollar at such a rate or at any other rate on December 31, 2009 or at any other date.
c. Use of estimates and judgements
The preparation of these Unaudited Condensed Consolidated Interim Financial Statements in
conformity with IFRS requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses during the period. Accounting estimates could change from period to period. Actual results
may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period of change and future periods,
if the change affects both and, if material, their effects are disclosed in the notes to the
financial statements.
In preparing the Unaudited Condensed Consolidated Interim Financial Statements, the significant
judgements made by management in applying the Groups accounting policies and key sources of
estimating uncertainties were the same as that were applied to the consolidated financial
statements as at and for the year ended March 31, 2009.
Page 11 of 46
d. |
|
Correction of an immaterial error in the unaudited condensed consolidated interim statement
of income for the quarter and six months ended September 30, 2009 |
Certain amounts previously reported in the unaudited condensed consolidated interim statement
of income for the quarter and six months ended September 30, 2009 and furnished in form 6-K have
been corrected in preparing the unaudited condensed consolidated statement of income for the nine
months period ended December 31, 2009. Specifically, the trading transactions relating to standard
hardware and software involving arrangement of purchases from suppliers and sales to customers were
reported on gross basis instead of net basis. This immaterial error has resulted in overstatement
of revenue and cost of goods sold by Rs 100,840 (US $2,160) for the three months and six months
ended September 30, 2009. This immaterial error has been corrected in the interim statement of
income for the nine months period ended December 31, 2009.
The details of such correction is set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported for the quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revised for the quarter ended |
|
|
|
ended September 30, 2009 |
|
|
Adjustments |
|
|
September 30, 2009 |
|
|
|
|
|
|
|
Cost of |
|
|
|
|
|
|
|
|
|
|
Cost of |
|
|
|
|
|
|
|
|
|
|
Cost of |
|
|
|
|
|
|
|
|
|
|
goods |
|
|
Net |
|
|
|
|
|
|
goods |
|
|
Net |
|
|
|
|
|
|
goods |
|
|
Net |
|
Details |
|
Revenue |
|
|
sold |
|
|
profit |
|
|
Revenue |
|
|
sold |
|
|
profit |
|
|
Revenue |
|
|
sold |
|
|
profit |
|
Rs (000s) |
|
|
1,838,742 |
|
|
|
1,154,607 |
|
|
|
(117,825 |
) |
|
|
(100,840 |
) |
|
|
(100,840 |
) |
|
|
|
|
|
|
1,737,902 |
|
|
|
1,053,767 |
|
|
|
(117,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported for the six months |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revised for the six months ended |
|
|
|
ended September 30, 2009 |
|
|
Adjustments |
|
|
September 30, 2009 |
|
|
|
|
|
|
|
Cost of |
|
|
|
|
|
|
|
|
|
|
Cost of |
|
|
|
|
|
|
|
|
|
|
Cost of |
|
|
|
|
|
|
|
|
|
|
goods |
|
|
Net |
|
|
|
|
|
|
goods |
|
|
Net |
|
|
|
|
|
|
goods |
|
|
Net |
|
Details |
|
Revenue |
|
|
sold |
|
|
profit |
|
|
Revenue |
|
|
sold |
|
|
profit |
|
|
Revenue |
|
|
sold |
|
|
profit |
|
Rs (000s) |
|
|
3,487,287 |
|
|
|
2,170,558 |
|
|
|
(247,116 |
) |
|
|
(100,840 |
) |
|
|
(100,840 |
) |
|
|
|
|
|
|
3,386,447 |
|
|
|
2,069,718 |
|
|
|
(247,116 |
) |
3. Significant accounting policies
The accounting policies applied by the group in these Unaudited Condensed Consolidated Interim
Financial Statements are the same as those applied by the Group in its consolidated financial
statements as at and for the year ended March 31 2009, except for new accounting policies adopted
by the Group as described below.
(i) |
|
Presentation of financial statements: The Group has applied revised IAS 1 Presentation
of Financial Statements (2007), which has became effective as of April 1, 2009. As a
result, the Group presents in the consolidated statement of changes in equity all owner
changes in equity, whereas all non-owner changes in equity are presented in the
consolidated statement of comprehensive income. Furthermore, the Group has included two
statements to display all items of income and expense recognized during the period i.e., a
Statement of Income and a Statement of Comprehensive Income. This presentation has been
applied in these Unaudited Condensed Consolidated Interim Financial Statements as of and
for the three months and nine months ended December 31, 2009. Comparative information has
been re-presented so that it also is in conformity with the revised standard. Since the
change in accounting policy only impacts presentation aspects, there is no impact on
earnings/ loss per share. |
|
|
|
Revenue recognition from construction contracts: Upto the periods ended March 31, 2009, the
Company did not derive any revenues from construction contracts. During the quarter ended
June 30, 2009, the Company started generating revenues from a construction contract. Contract
revenue includes the initial amount agreed in the contract plus any variations in contract
work, claims and incentive payments, to the extent that it is probable that they will result
in revenue and can be measured reliably. As soon as the outcome of a construction contract can
be estimated reliably, contract revenue is recognised in profit or loss in proportion to the
stage of completion of the contract. Contract expenses are recognised as incurred unless they
create an asset related to future contract activity. The stage of completion is assessed by
reference to the cost incurred till date to the total estimated costs. When the outcome of a
construction contract cannot be estimated reliably, contract revenue is recognised only to the
extent of contract costs incurred that are likely to be recoverable. An expected loss on a
contract is recognised immediately in profit or loss. |
Page 12 of 46
4. Recent accounting pronouncements
a) Standards early adopted by the Company
|
|
|
IFRS 3 (Revised), Business Combinations, as amended, is applicable for annual
periods beginning on or after July 1, 2009. This standard was early adopted by the Group as
at April 1, 2009. Business Combinations consummated after April 1, 2009 will be
recorded under this standard. IFRS 3 (Revised) primarily requires the acquisition-related
costs to be recognized as period expenses in accordance with the relevant IFRS. Costs incurred
to issue debt or equity securities are required to be recognized in accordance with IAS 39.
Consideration, after this amendment, will include fair values of all interests previously held
by the acquirer. Re-measurement of such interests to fair value would be carried out through
net profit in the statement of comprehensive income. Contingent consideration is required to
be recognized at fair value even if not deemed probable of payment at the date of acquisition. |
|
|
|
|
IFRS 3 (Revised) provides an explicit option on a transaction-by-transaction basis, to measure
any Non-controlling interest (NCI) in the entity acquired at fair value of their proportion of
identifiable assets and liabilities or at full fair value. The first method will result in a
marginal difference in the measurement of goodwill from the existing IFRS 3; however the
second approach will require recording goodwill on NCI as well as on the acquired controlling
interest. Upon consummating a business combination in future, the company is likely to adopt
the first method for measuring NCI. |
|
|
|
|
IAS 27, as amended, is applicable for annual periods beginning on or after July
1, 2009. Earlier adoption is permitted provided IFRS 3 (Revised) is also early adopted. This
standard was early adopted by the Company as at April 1, 2009. It requires a mandatory
adoption of economic entity model which treats all providers of equity capital as
shareholders of the entity. Consequently, a partial disposal of interest in a subsidiary in
which the parent company retains control does not result in a gain or loss but in an
increase or decrease in equity. Additionally purchase of some or all of the non-controlling
interests is treated as treasury transaction and accounted for in equity and a partial
disposal of interest in a subsidiary in which the parent company loses control triggers
recognition of gain or loss on the entire interest. A gain or loss is recognized on the
portion that has been disposed off and a further holding gain is recognized on the interest
retained, being the difference between the fair value and carrying value of the interest
retained. This Standard requires an entity to attribute their share of net profit / loss and
reserves to the non-controlling interests even if this results in the non-controlling
interests having a deficit balance. Consistent with the provisions of IFRS 3 (Revised), the
Group accounted for its acquisition of 26% non-controlling interest in Sify Communications
Limited on June 26, 2009 as an equity transaction. Also refer to note 21. |
b) Recently adopted accounting pronouncements
|
|
|
The Company adopted IAS 1
(revised), Presentation of Financial Statements,
effective April 1, 2009. The revision aims to improve users ability to analyze and compare
the information given in financial statements. IAS 1 sets overall requirements for the
presentation of financial statements, guidelines for their structure and minimum
requirements for their content. The revisions include non-mandatory changes in the titles of
some of the financial statements to reflect their function more clearly (for example, the
balance sheet is renamed as statement of financial position). The revised IAS 1 resulted in
consequential amendments to other standards and interpretations. The Group has applied
revised IAS 1 Presentation of Financial Statements (2007), which has became effective as of
April 1, 2009. As a result, the Group presents in the consolidated statement of changes in
equity all owner changes in equity, whereas all non-owner changes in equity are presented in
the consolidated statement of comprehensive income. Furthermore, the Group has included two
statements to display all items of income and expense recognized during the period i.e., a
Statement of Income and a Statement of Comprehensive Income. Comparative information has
been re-presented so that it also is in conformity with the revised standard. Since the
change in accounting policy only impacts presentation aspects, there is no impact on
earnings/ loss per share. |
|
|
|
|
IFRIC 18 Transfer of assets from customers defines the treatment for
property, plant and equipment transferred by customers to companies or for cash received to
be invested in property, plant and equipment that must be used to either connect the
customer to a network or to provide the customer with ongoing access to a supply of goods or
services or to both. The item of property, plant and equipment is to be initially recognized
by the Company at fair value with a corresponding credit to revenue. If an ongoing service
is identified as a part of the agreement, the period over which revenue will be recognized
for that service would be determined by the terms of the agreement with the customer. If the
period is not clearly defined, then revenue should be recognized over a period no longer
than the useful life of the transferred asset used to provide the ongoing service. This
interpretation is applicable prospectively to transfers of assets from customers received on
or after July 1, 2009. The Company has adopted this interpretation prospectively for all
assets transferred after July 1, 2009. There has been no impact on the Groups consolidated
financial statements as a result of the adoption of this interpretation. |
Page 13 of 46
|
|
|
In March 2009, the Amendments to IFRS 7 Financial Instrument disclosure,
amended certain disclosure requirements in the standard. As a result, entities are
required to classify fair value measurements for financial instruments measured at fair
value in the statement of financial position, using a three level fair value hierarchy that
reflects the significance of inputs used in the measurements. In addition, the amendments
enhance disclosure requirements on the nature and extent of liquidity risks to which
an entity is exposed. The Amendments to IFRS 7 apply for annual periods beginning on or after
January 1, 2009 and provides an exception in the first year of application for providing
comparative information. |
c) Standards issued but not yet effective
|
|
|
A number of new standards, amendments to standards and interpretations are not yet effective
for the period December 31, 2010, and have not been applied in preparing these unaudited
condensed consolidated interim financial statements: |
|
|
|
|
Improvements to IFRS- In April 2009, the IASB issued Improvements to IFRSs
a collection of amendments to twelve International Financial Reporting Standards as part
of its program of annual improvements to its standards, which is intended to make
necessary, but non-urgent, amendments to standards that will not be included as part of
another major project. The latest amendments were included in exposure drafts of proposed
amendments to IFRS published in October 2007, August 2008, and January 2009. The amendments
resulting from this standard mainly have effective dates for annual periods beginning on or
after January 1, 2010, although entities are permitted to adopt them earlier. In May 2010,
the IASB issued Improvements to IFRS 2010, which comprises 11 amendments to 7 standards.
Effective dates, early application and transitional requirements are addressed on a
standard-by-standard basis. The majority of the amendments will be effective January 1,
2011. The Company is evaluating the impact, these amendments will have on the Groups
consolidated financial statements. |
|
|
|
|
In November 2009, the IASB issued IFRS 9, Financial instruments, to
introduce certain new requirements for classifying and measuring financial assets. IFRS 9
divides all financial assets that are currently in the scope of IAS 39 into two
classifications those measured at amortized cost and those measured at fair value. The
standard along with proposed expansion of IFRS 9 for classifying and measuring financial
liabilities, de-recognition of financial instruments, impairment, and hedge accounting will
be applicable from the year 2013, although entities are permitted to adopt earlier. The
Company is evaluating the impact which this new standard will have on the Groups financial
statements. |
|
|
|
|
In November 2009, the IASB issued IFRIC 19, Extinguishing Financial Liabilities with
Equity Instruments; to introduce requirements when an entity renegotiates the terms of a
financial liability with its creditor and the creditor agrees to accept the entitys shares
and other equity instruments to settle the financial liability fully or partially. This
interpretation is effective from annual periods beginning on or after July 1, 2010. |
|
|
|
|
In October 2009, the IASB issued Classification of Rights Issue Amendment to IAS 32
Financial Instruments: Presentation with an effective date of February 1,2010. |
|
|
|
|
In November 2009, the IASB revised IAS 24 Related Party Disclosures with an effective
date of January 1,2011. |
|
|
|
|
In November 2009, the IASB issued Prepayments of a Minimum Funding Requirement -
Amendments to IFRIC 14, IAS19 the Limit on a Defined Benefit Asset, Minimum Funding
Requirement and their Interaction, with an effective date of January 1, 2011. |
Page 14 of 46
5. Property, plant and equipment
The following table presents the changes in property, plant and equipment during the nine months
ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
Cost |
|
|
Accumulated depreciation |
|
|
amount as |
|
|
|
As at |
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
Depreciation |
|
|
|
|
|
|
As at |
|
|
at |
|
|
|
April 1, |
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
April 1, |
|
|
for the |
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
Particulars |
|
2009 |
|
|
Additions |
|
|
Disposals |
|
|
2009 |
|
|
2009 |
|
|
period |
|
|
Deletions |
|
|
2009 |
|
|
2009 |
|
Building |
|
|
769,663 |
|
|
|
7,756 |
|
|
|
|
|
|
|
777,419 |
|
|
|
148,401 |
|
|
|
21,706 |
|
|
|
|
|
|
|
170,107 |
|
|
|
607,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and machinery |
|
|
4,733,122 |
|
|
|
767,114 |
|
|
|
214,831 |
|
|
|
5,285,405 |
|
|
|
2,765,920 |
|
|
|
329,848 |
|
|
|
218,128 |
|
|
|
2,877,640 |
|
|
|
2,407,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer equipment |
|
|
497,223 |
|
|
|
11,909 |
|
|
|
5,780 |
|
|
|
503,352 |
|
|
|
367,972 |
|
|
|
33,332 |
|
|
|
5,079 |
|
|
|
396,225 |
|
|
|
107,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office equipment |
|
|
162,132 |
|
|
|
82,291 |
|
|
|
4,171 |
|
|
|
240,252 |
|
|
|
96,955 |
|
|
|
13,044 |
|
|
|
1,011 |
|
|
|
108,988 |
|
|
|
131,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and fittings |
|
|
628,279 |
|
|
|
86,112 |
|
|
|
14,784 |
|
|
|
699,607 |
|
|
|
389,771 |
|
|
|
47,142 |
|
|
|
14,347 |
|
|
|
422,566 |
|
|
|
277,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vehicles |
|
|
8,269 |
|
|
|
|
|
|
|
1,034 |
|
|
|
7,235 |
|
|
|
6,420 |
|
|
|
1,419 |
|
|
|
604 |
|
|
|
7,235 |
|
|
|
|
|
Total |
|
|
6,798,688 |
|
|
|
955,182 |
|
|
|
240,600 |
|
|
|
7,513,270 |
|
|
|
3,775,439 |
|
|
|
446,491 |
|
|
|
239,169 |
|
|
|
3,982,761 |
|
|
|
3,530,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Construction -in- progress |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,798,688 |
|
|
|
955,182 |
|
|
|
240,600 |
|
|
|
7,513,270 |
|
|
|
3,775,439 |
|
|
|
446,491 |
|
|
|
239,169 |
|
|
|
3,982,761 |
|
|
|
3,544,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the changes in property, plant and equipment during the year
ended March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
|
Cost |
|
|
Accumulated depreciation |
|
|
amount as |
|
|
|
As at |
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
Depreciation |
|
|
|
|
|
|
As at |
|
|
at |
|
|
|
April 01, |
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
April 1, |
|
|
for the |
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
Particulars |
|
2008 |
|
|
Additions |
|
|
Disposals |
|
|
2009 |
|
|
2008 |
|
|
year |
|
|
Deletions |
|
|
2009 |
|
|
2009 |
|
Building |
|
|
769,663 |
|
|
|
|
|
|
|
|
|
|
|
769,663 |
|
|
|
120,924 |
|
|
|
27,477 |
|
|
|
|
|
|
|
148,401 |
|
|
|
621,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and machinery |
|
|
3,683,632 |
|
|
|
1,097,317 |
|
|
|
47,827 |
|
|
|
4,733,122 |
|
|
|
2,526,445 |
|
|
|
286,805 |
|
|
|
47,330 |
|
|
|
2,765,920 |
|
|
|
1,967,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer equipments |
|
|
438,597 |
|
|
|
58,824 |
|
|
|
198 |
|
|
|
497,223 |
|
|
|
297,049 |
|
|
|
71,001 |
|
|
|
78 |
|
|
|
367,972 |
|
|
|
129,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office equipment |
|
|
116,691 |
|
|
|
47,090 |
|
|
|
1,649 |
|
|
|
162,132 |
|
|
|
83,928 |
|
|
|
14,673 |
|
|
|
1,646 |
|
|
|
96,955 |
|
|
|
65,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and fittings |
|
|
422,939 |
|
|
|
208,486 |
|
|
|
3,146 |
|
|
|
628,279 |
|
|
|
339,750 |
|
|
|
52,720 |
|
|
|
2,699 |
|
|
|
389,771 |
|
|
|
238,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vehicles |
|
|
9,174 |
|
|
|
|
|
|
|
905 |
|
|
|
8,269 |
|
|
|
3,846 |
|
|
|
2,981 |
|
|
|
407 |
|
|
|
6,420 |
|
|
|
1,849 |
|
Total |
|
|
5,440,696 |
|
|
|
1,411,717 |
|
|
|
53,725 |
|
|
|
6,798,688 |
|
|
|
3,371,942 |
|
|
|
455,657 |
|
|
|
52,160 |
|
|
|
3,775,439 |
|
|
|
3,023,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Construction-in-Progress |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
5,440,696 |
|
|
|
1,411,717 |
|
|
|
53,725 |
|
|
|
6,798,688 |
|
|
|
3,371,942 |
|
|
|
455,657 |
|
|
|
52,160 |
|
|
|
3,775,439 |
|
|
|
3,260,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased assets
The Groups leased assets include certain buildings, plant and machinery and motor vehicles
acquired under finance leases. As at December 31, 2009 the net carrying amount of buildings, plant
and machinery and vehicles acquired under finance leases is Rs 257,826 (March 31, 2009:
Rs.260,968), Rs. 196,004 (March 31, 2009: Rs. 135,595) and Nil (March 31, 2009: Rs.2,l59)
respectively.
Page 15 of 46
In case prepayments are made towards building accounted as for as finance leases, such prepayments
are capitalized as Leasehold Buildings (included in buildings) on the commencement of the lease
term under the head Property, plant and equipment and depreciated in accordance with the
depreciation policy for similar owned assets.
Construction in progress
Amounts paid towards acquisition of property, plant and equipment outstanding at each balance sheet
date and the cost of property, plant and equipment that are not ready for use are disclosed under
construction in progress.
6. Intangible assets
Intangible assets comprise the following:
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Goodwill |
|
|
14,595 |
|
|
|
40,461 |
|
Other Intangibles |
|
|
119,094 |
|
|
|
137,411 |
|
|
|
|
|
|
|
|
Total |
|
|
133,689 |
|
|
|
177,872 |
|
|
|
|
|
|
|
|
In May 2006, the Group acquired travel business for a consideration of USD 2.5 million
(Rs. 112,220 thousands) in cash along with an option to purchase 125,000 shares of Sify
Technologies Limited and certain earn out payments aggregating to USD 0.5 million (Rs.
22,444 thousands). The assets acquired consist of System software, customer contracts
and goodwill. The said business operates from India and United States.
During the nine months ended December 31, 2010, triggered by certain adverse market
conditions such as decrease in revenue and increase in the cost of services, and other
technological matters, the Group tested the carrying value of the above business for
impairment. The recoverable amount of these intangibles including goodwill were
determined based on the higher of the value in use (using discounted cash flow approach)
and fair value less cost to sell. Fair value less cost to sell, being the higher of the
two was determined as the recoverable amount of the CGU. Based on this assessment, the
carrying value of the CGU was higher than its recoverable amount and as a result of the
above, the group has recorded an impairment of the above intangibles including goodwill
amounting to Rs 47,269 (US$ 1,013) and adjusted the carrying value of these intangibles
accordingly. The above impairment relates to online portal services segment.
The following table presents the changes in goodwill during the nine months ended
December 31, 2009 and the year ended March 31, 2009
(i) Goodwill
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
Particulars |
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Balance at the beginning of the period / year |
|
|
40,461 |
|
|
|
50,796 |
|
Effect of exchange rate fluctuation |
|
|
(2,482 |
) |
|
|
4,865 |
|
Less: Impairment loss |
|
|
(23,384 |
) |
|
|
(15,200 |
) |
|
|
|
|
|
|
|
Net carrying amount of goodwill |
|
|
14,595 |
|
|
|
40,461 |
|
|
|
|
|
|
|
|
During the nine months ended December 31, 2009, the group has impaired goodwill relating to its
travel business to the extent of Rs 23,384. The amount of goodwill as at December 31, 2009 and
March 31, 2009 has been allocated to Online Portals Segment.
Page 16 of 46
(ii) Other intangibles
The following table presents the changes in other intangible assets for the nine months ended
December 31, 2009 and year ended March 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portals and |
|
|
Customer |
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical |
|
|
web |
|
|
related |
|
|
|
|
|
|
License |
|
|
|
|
|
|
know-how |
|
|
content |
|
|
intangibles |
|
|
Software |
|
|
fees |
|
|
Total |
|
(A) Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at April 1, 2009 |
|
|
82,753 |
|
|
|
52,730 |
|
|
|
200,570 |
|
|
|
319,215 |
|
|
|
50,000 |
|
|
|
705,268 |
|
Other acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,171 |
|
|
|
|
|
|
|
42,171 |
|
Deletions |
|
|
|
|
|
|
52,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,730 |
|
Balance as at December 31, 2009 |
|
|
82,753 |
|
|
|
|
|
|
|
200,570 |
|
|
|
361,386 |
|
|
|
50,000 |
|
|
|
694,709 |
|
(B) Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at April 1, 2009 |
|
|
82,753 |
|
|
|
52,730 |
|
|
|
169,847 |
|
|
|
256,621 |
|
|
|
5,906 |
|
|
|
567,857 |
|
Amortization for the period |
|
|
|
|
|
|
|
|
|
|
5,307 |
|
|
|
29,421 |
|
|
|
1,875 |
|
|
|
36,603 |
|
Impairment loss on intangibles |
|
|
|
|
|
|
|
|
|
|
22,148 |
|
|
|
1,737 |
|
|
|
|
|
|
|
23,885 |
|
Deletions |
|
|
|
|
|
|
52,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,730 |
|
Balance as at December 31, 2009 |
|
|
82,753 |
|
|
|
|
|
|
|
197,302 |
|
|
|
287,779 |
|
|
|
7,781 |
|
|
|
575,615 |
|
(C) Carrying amounts as at December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
3,268 |
|
|
|
73,607 |
|
|
|
42,219 |
|
|
|
119,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portals and |
|
|
Customer |
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical |
|
|
web |
|
|
related |
|
|
|
|
|
|
License |
|
|
|
|
|
|
know-how |
|
|
content |
|
|
intangibles |
|
|
Software |
|
|
fees |
|
|
Total |
|
(A) Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at April 1, 2008 |
|
|
82,753 |
|
|
|
52,730 |
|
|
|
199,554 |
|
|
|
271,116 |
|
|
|
50,000 |
|
|
|
656,153 |
|
Other acquisitions |
|
|
|
|
|
|
|
|
|
|
1,016 |
|
|
|
48,099 |
|
|
|
|
|
|
|
49,115 |
|
Balance as at March 31, 2009 |
|
|
82,753 |
|
|
|
52,730 |
|
|
|
200,570 |
|
|
|
319,215 |
|
|
|
50,000 |
|
|
|
705,268 |
|
(B) Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at April 1, 2008 |
|
|
82,753 |
|
|
|
52,730 |
|
|
|
149,926 |
|
|
|
235,827 |
|
|
|
3,406 |
|
|
|
524,642 |
|
Amortization for the year |
|
|
|
|
|
|
|
|
|
|
19,921 |
|
|
|
20,794 |
|
|
|
2,500 |
|
|
|
43,215 |
|
Balance as at March 31, 2009 |
|
|
82,753 |
|
|
|
52,730 |
|
|
|
169,847 |
|
|
|
256,621 |
|
|
|
5,906 |
|
|
|
567,857 |
|
(C) Carrying amounts as at March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
30,723 |
|
|
|
62,594 |
|
|
|
44,094 |
|
|
|
137,411 |
|
During the nine months ended December 31, 2009, the group has impaired intangible assets
relating to its travel business to the extent of Rs 23,886. The above impairment loss is related to
Online Portals segment.
7. Investments in associates
In March 2006, MF Global Overseas Limited (MFG), a Group incorporated in United Kingdom acquired
70.15% of equity share capital of MF Global Sify Securities Private Limited, formerly Man
Financial-Sify Securities India Private Limited (MF Global) from Refco Group Inc., USA (Refco).
As at December 31, 2009 and March 31, 2009, 29.85% of MF Global equity shares is held by the
Company. The remaining 70.15% is owned by MFG, an unrelated third party. MFG is a subsidiary of MF
Global Limited, Bermuda.
Page 17 of 46
A summary of key unaudited financial information of MF Global and its subsidiaries which is not
adjusted for the percentage ownership held by the Group is presented below:
Balance sheet
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Total assets |
|
|
4,546,547 |
|
|
|
3,435,921 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,515,167 |
|
|
|
1,617,159 |
|
Shareholders equity |
|
|
2,031,380 |
|
|
|
1,818,762 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
|
4,546,547 |
|
|
|
3,435,921 |
|
|
|
|
|
|
|
|
Statement of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
Revenues |
|
|
403,488 |
|
|
|
266,034 |
|
|
|
1,192,850 |
|
|
|
1,113,313 |
|
Net profit |
|
|
95,124 |
|
|
|
5,108 |
|
|
|
216,447 |
|
|
|
129,385 |
|
During October 2010, Sify Technologies Ltd, the minority shareholder of MF Global holding 29.85
percent of the outstanding shares of the MF Global, requested MF Globals Board of Directors to
reconsider certain costs charged to the MF Global by MF Global Holdings Ltd and its affiliated and
associated group companies, who hold 70.15 percent of the outstanding shares of the MF Global.
These charges are currently recorded in the financial statements of the MF Global for year ended
31st Mar 2008 aggregating to INR 43,478,911 and 31st March 2009 aggregating to INR 15,374,528.
The resolution of this matter between the shareholders of MF Global remains uncertain and any
financial adjustment that may arise is not presently known and accordingly no adjustment related to
this matter has been provided for in MF Globals consolidated financial statements. Any financial
adjustment that may arise on resolution of the said matter would be expected to be handled
prospectively and therefore would be reported in the period in which it is resolved. Consequently,
no adjustment related to the said matter was considered by Sify for equity method of accounting for
MF Global. The auditors of MF Global have included an emphasis of matter with an
explanatory paragraph in their audit report issued on the consolidated financial statements of MF
Global for the quarter and nine months ended December 31,2009 in connection with such recorded
cross charges. The effect of such recorded cross charge is not material to the financial statements
of Sify.
8. Cash and cash equivalents
Cash and cash equivalents as at December 31, 2009 amounted to Rs.811,325 (Rs.380,042 as at March
31, 2009). This excludes cash-restricted of Rs.56,368 as at December 31, 2009 (Rs.1,330,756 as at
March 31, 2009), representing deposits held under lien against working capital facilities availed
and bank guarantees given by the Group towards future performance obligations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
As at |
|
|
As at |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
December 31, 2008 |
|
|
March 31, 2008 |
|
(a) Restricted cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Against future performance obligation |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
|
1,000 |
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank deposits held under lien against borrowings from banks |
|
|
56,368 |
|
|
|
1,329,756 |
|
|
|
868,958 |
|
|
|
877,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restricted cash |
|
|
56,368 |
|
|
|
1,330,756 |
|
|
|
869,958 |
|
|
|
878,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Non restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and bank balances |
|
|
811,325 |
|
|
|
380,042 |
|
|
|
433,600 |
|
|
|
628,745 |
|
Total cash (a+b) |
|
|
867,693 |
|
|
|
1,710,798 |
|
|
|
1,303,558 |
|
|
|
1,507,327 |
|
Bank overdraft used for cash management purposes |
|
|
(953,686 |
) |
|
|
(1,397,083 |
) |
|
|
(1,353,766 |
) |
|
|
(617,637 |
) |
Less:- Non current restricted cash |
|
|
|
|
|
|
(1,000 |
) |
|
|
(1,000 |
) |
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents for the statement of cash flows |
|
|
(85,993 |
) |
|
|
312,715 |
|
|
|
(51,208 |
) |
|
|
888,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 18 of 46
9. Lease prepayments
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
December 31,2009 |
|
|
March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
Towards buildings |
|
|
307,952 |
|
|
|
311,185 |
|
|
|
|
|
|
|
|
|
|
|
307,952 |
|
|
|
311,185 |
|
|
|
|
|
|
|
|
Prepayments made towards buildings accounted for as operating leases are amortised over the lease
term on a straight line basis.
10. Trade and other receivables
Trade and other receivables comprise:
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
(i) Trade receivables, net |
|
|
1,992,924 |
|
|
|
1,504,927 |
|
(ii) Other receivables including deposits |
|
|
1,182,926 |
|
|
|
950,599 |
|
|
|
|
|
|
|
|
|
|
|
3,175,850 |
|
|
|
2,455,526 |
|
|
|
|
|
|
|
|
Trade receivable as at December 31, 2009 and March 31, 2009 are stated net of allowance for
doubtful receivables. The Group maintains an allowance for doubtful receivables based on its age
and collectability. Trade receivables are not collateralised except to the extent of refundable
deposits received from cybercafé franchisees and from cable television operators. Trade receivables
consist of:
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Trade receivables from related parties |
|
|
|
|
|
|
698 |
|
Due from customers |
|
|
2,140,466 |
|
|
|
1,620,524 |
|
|
|
|
|
|
|
|
|
|
|
2,140,466 |
|
|
|
1,621,222 |
|
Less: Allowance for doubtful receivables |
|
|
(147,542 |
) |
|
|
(116,295 |
) |
|
|
|
|
|
|
|
Balance at the end of the period |
|
|
1,992,924 |
|
|
|
1,504,927 |
|
|
|
|
|
|
|
|
The activity in the allowance for doubtful accounts receivable is given below:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
Year ended |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Balance at the beginning of the period |
|
|
116,295 |
|
|
|
83,316 |
|
Add : Additional provision |
|
|
89,069 |
|
|
|
84,346 |
|
Less : Bad debts written off |
|
|
(57,822 |
) |
|
|
(51,367 |
) |
|
|
|
|
|
|
|
Balance at the end of the period |
|
|
147,542 |
|
|
|
116,295 |
|
|
|
|
|
|
|
|
Page 19 of 46
11. Employee benefits
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
Gratuity payable |
|
|
22,547 |
|
|
|
15,082 |
|
Compensated absences |
|
|
45,638 |
|
|
|
49,218 |
|
|
|
|
|
|
|
|
|
|
|
68,185 |
|
|
|
64,300 |
|
|
|
|
|
|
|
|
Gratuity cost
The components of gratuity cost recognized in the income statement for the three months and nine
months ended December 31, 2009 and 2008 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Three months ended |
|
|
Nine months ended |
|
|
Nine months ended |
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
Service cost |
|
|
3,625 |
|
|
|
3,017 |
|
|
|
10,873 |
|
|
|
9,051 |
|
Interest cost |
|
|
1,126 |
|
|
|
759 |
|
|
|
3,376 |
|
|
|
2,278 |
|
Expected returns on plan assets |
|
|
(741 |
) |
|
|
(419 |
) |
|
|
(2,222 |
) |
|
|
(1,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gratuity costs recognized
in statement of income |
|
|
4,010 |
|
|
|
3,357 |
|
|
|
12,027 |
|
|
|
10,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of employee benefit obligations and plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Present value of projected benefit obligation at the end of the period / year |
|
|
48,220 |
|
|
|
43,389 |
|
Funded status of the plans |
|
|
(25,673 |
) |
|
|
(28,307 |
) |
|
|
|
|
|
|
|
Liability recognized in the statement of financial position |
|
|
22,547 |
|
|
|
15,082 |
|
|
|
|
|
|
|
|
The following table set out the status of the gratuity plan:
|
|
|
|
|
|
|
|
|
Change in projected benefit obligation |
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Projected benefit obligation at the beginning of the period / year |
|
|
43,390 |
|
|
|
27,333 |
|
Service cost |
|
|
10,873 |
|
|
|
12,067 |
|
Interest cost |
|
|
3,376 |
|
|
|
3,038 |
|
Actuarial (gain)/ loss |
|
|
(4,994 |
) |
|
|
3,662 |
|
Benefits paid |
|
|
(4,425 |
) |
|
|
(2,710 |
) |
|
|
|
|
|
|
|
Projected benefit obligation at the end of the period / year |
|
|
48,220 |
|
|
|
43,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets |
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Fair value of plan assets at the beginning of the period / year |
|
|
28,307 |
|
|
|
18,740 |
|
Expected return on plan assets |
|
|
2,222 |
|
|
|
1,672 |
|
Actuarial gain / (loss) |
|
|
(556 |
) |
|
|
(684 |
) |
Employer contributions |
|
|
125 |
|
|
|
11,289 |
|
Benefits paid |
|
|
(4,425 |
) |
|
|
(2,710 |
) |
|
|
|
|
|
|
|
Fair value of plan assets at the end of the period / year |
|
|
25,673 |
|
|
|
28,307 |
|
|
|
|
|
|
|
|
Page 20 of 46
Actuarial Assumptions at reporting date:
|
|
|
|
|
|
|
|
|
|
|
As at |
|
|
As at |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Discount rate |
|
|
7.70% p.a |
|
|
|
7.95% p.a |
|
Long-term rate of compensation increase |
|
|
8.00% p.a |
|
|
|
8.00% p.a |
|
Rate of return on plan assets |
|
|
8.00% p.a |
|
|
|
8.00% p.a |
|
The Group assesses these assumptions with the projected long-term plans of growth and prevalent
industry standards.
Actuarial gains and losses recognised in other comprehensive income
The amount of actuarial gains and losses recognized directly in other comprehensive income for the
nine months ended December 31, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
Nine months ended |
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
Actuarial gain / (loss) |
|
|
4,438 |
|
|
|
(18,743 |
) |
|
|
|
|
|
|
|
|
|
|
4,438 |
|
|
|
(18,743 |
) |
|
|
|
|
|
|
|
12. Borrowings
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Current |
|
|
|
|
|
|
|
|
Loan secured against fixed deposits from banks (Refer note 1 below) |
|
|
|
|
|
|
310,000 |
|
Term loans from banks (Refer note 2 below) |
|
|
216,000 |
|
|
|
331,944 |
|
Other working capital facilities from banks (Refer note 3 below) |
|
|
622,796 |
|
|
|
540,826 |
|
Borrowings from others (Refer note 4 below) |
|
|
33,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
871,957 |
|
|
|
1,182,770 |
|
|
|
|
|
|
|
|
Non current |
|
|
|
|
|
|
|
|
Term loans from banks (Refer note 2 below) |
|
|
373,726 |
|
|
|
201,389 |
|
Borrowings from others (Refer note 4 below) |
|
|
86,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
460,284 |
|
|
|
201,389 |
|
|
|
|
|
|
|
|
The Group has borrowings which include:
|
1. |
|
Loan secured against fixed deposits of Rs. Nil as at December 31, 2009 (Rs. 310,000 as at
March 31, 2009) represent bank loans for working capital requirements. These borrowings bear
interest ranging from 10%-11.90% p.a. and are repayable within one year from the balance
sheet date. |
|
|
2. |
|
Term bank loans bear interest ranging from 9.50% to 13.50% p.a. The term loans are secured
by way of pari-passu first charge over the unencumbered movable fixed assets acquired out of
such term loans availed by the Company. Further these loans are collaterally secured by way
of equitable mortgage over the office premises and also by way of pari passu second charge on
the entire current assets of the Company. |
|
|
3. |
|
Letter of credit discounted (including buyers credit) is secured by pari-passu charge on
current assets of the Company and moveable assets of the company, both present and future.
These borrowings bear interest ranging from 11% to 14% p.a. Such facilities are renewable
every year. |
|
|
4. |
|
Borrowings from others are secured against relevant assets and software. However, the
Company is in the process of obtaining no objection certificate from the bank with whom such
relevant assets and software are hypothecated. |
Page 21 of 46
13. Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Rendering of services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue |
|
|
1,370,299 |
|
|
|
1,336,228 |
|
|
|
4,102,300 |
|
|
|
3,954,445 |
|
Initial franchise fee |
|
|
1,336 |
|
|
|
8,292 |
|
|
|
9,682 |
|
|
|
25,164 |
|
Installation service revenue |
|
|
49,943 |
|
|
|
58,380 |
|
|
|
189,045 |
|
|
|
187,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,421,578 |
|
|
|
1,402,900 |
|
|
|
4,301,027 |
|
|
|
4,167,387 |
|
Sale of products |
|
|
304,269 |
|
|
|
147,867 |
|
|
|
811,267 |
|
|
|
458,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,725,847 |
|
|
|
1,550,767 |
|
|
|
5,112,294 |
|
|
|
4,625,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Cost of goods sold and services rendered
Cost of goods sold and services rendered information is presented before any depreciation or
amortization that is direct and attributable to revenue sources. The Groups asset base deployed in
the business is not easily split into a component that is directly attributable to a business and a
component that is common / indirect to all the businesses. Since a gross profit number without
depreciation and amortization does not necessarily meet the objective of such a disclosure, the
Group has not disclosed gross profit numbers but disclosed all expenses, direct and indirect, in a
homogenous group leading directly from revenue to operating margin.
15. Personnel expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Salaries and wages |
|
|
285,664 |
|
|
|
399,031 |
|
|
|
974,834 |
|
|
|
1,168,269 |
|
Contribution to provident fund and other funds |
|
|
13,732 |
|
|
|
35,441 |
|
|
|
43,835 |
|
|
|
69,892 |
|
Staff welfare expenses |
|
|
8,515 |
|
|
|
10,103 |
|
|
|
22,994 |
|
|
|
30,623 |
|
Employee Stock compensation expense |
|
|
14,752 |
|
|
|
15,970 |
|
|
|
27,926 |
|
|
|
47,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322,663 |
|
|
|
460,545 |
|
|
|
1,069,589 |
|
|
|
1,316,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Cost of goods sold and services rendered |
|
|
151,867 |
|
|
|
184,980 |
|
|
|
512,079 |
|
|
|
556,947 |
|
Attributable to selling, general and administrative
expenses |
|
|
170,796 |
|
|
|
275,565 |
|
|
|
557,510 |
|
|
|
759,184 |
|
16. Share-based payments
Share-based payments are designed as equity-settled plans. Under the equity settled plans, the
Group had issued stock options under Associate Stock Option Plan (ASOP) 1999, ASOP 2000, ASOP 2002,
ASOP 2005 and ASOP 2007.
The terms and conditions of ASOP are disclosed in the Consolidated Financial Statements as at and
for the year ended March 31, 2009.
During the three months ended December 31, 2009, the Company has granted 10,000 options under ASOP
2007. The fair value of share options granted during the three months ended December 31, 2009 was
estimated using the following assumptions:
1. |
|
Dividend Yield 0% |
|
2. |
|
Assumed Volatility 119.00% 136.77% |
|
3. |
|
Risk free rate 2.46% |
|
4. |
|
Expected term 3.0 4.5 yrs |
The basis of measuring fair value is consistent with that disclosed in the Consolidated Financial
Statements as at and for the year ended March 31, 2009. Compensation cost recognized for the three
months and nine months ended December 31, 2009 is Rs.14,752 and Rs.27,926 respectively (Rs.15,970
and Rs.47,347 for the three months and nine months ended December 31, 2008 respectively).
Page 22 of 46
17. Net finance income and expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Interest income on bank deposits |
|
|
952 |
|
|
|
22,337 |
|
|
|
15,426 |
|
|
|
76,158 |
|
Interest income from leases |
|
|
|
|
|
|
2,695 |
|
|
|
|
|
|
|
12,238 |
|
Others |
|
|
1,286 |
|
|
|
2,404 |
|
|
|
7,162 |
|
|
|
4,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
2,238 |
|
|
|
27,436 |
|
|
|
22,588 |
|
|
|
92,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on financial liabilities leases |
|
|
4,227 |
|
|
|
99 |
|
|
|
11,783 |
|
|
|
370 |
|
Bank charges |
|
|
36,234 |
|
|
|
28,581 |
|
|
|
80,827 |
|
|
|
56,186 |
|
Other interest |
|
|
43,367 |
|
|
|
51,614 |
|
|
|
135,042 |
|
|
|
109,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense |
|
|
83,828 |
|
|
|
80,294 |
|
|
|
227,652 |
|
|
|
166,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance income / (expense) recognised in
profit or loss |
|
|
(81,590 |
) |
|
|
(52,858 |
) |
|
|
(205,064 |
) |
|
|
(73,404 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
18. Earnings / (Loss) per share
The calculation of basic earnings / (loss) per share for the quarter and nine months ended December
31, 2009 and 2008 is based on the earnings / (loss) attributable to ordinary shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net profit / (loss ) as reported |
|
|
414,801 |
|
|
|
(258,548 |
) |
|
|
157,898 |
|
|
|
(685,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares Basic |
|
|
53,350,082 |
|
|
|
42,820,082 |
|
|
|
50,057,064 |
|
|
|
43,523,852 |
|
Basic earnings / (loss) per share |
|
|
7.78 |
|
|
|
(6.04 |
) |
|
|
3.15 |
|
|
|
(15.74 |
) |
The calculation of diluted earnings / (loss) per share for the quarter and nine months ended
December 31, 2009 and 2008 is based on the earnings / (loss) attributable to ordinary shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
|
Nine months ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net profit / (loss ) as reported |
|
|
414,801 |
|
|
|
(258,548 |
) |
|
|
157,898 |
|
|
|
(685,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares diluted |
|
|
53,369,520 |
|
|
|
42,820,082 |
|
|
|
50,072,334 |
|
|
|
43,523,852 |
|
Diluted earnings /(loss) per share |
|
|
7.77 |
|
|
|
(6.04 |
) |
|
|
3.15 |
|
|
|
(15.74 |
) |
Page 23 of 46
19. Segment reporting
There has been no change in the composition of reportable segments for the nine months ended
December 31, 2009 as compared to the year ended March 31, 2009.
The primary operating segments of the Group are:
|
|
Corporate network/data services, which provides internet, connectivity, security and
consulting, hosting and managed service solutions; |
|
|
|
Internet access services, from home and through cybercafés; |
|
|
|
Online portal services and content offerings; and |
|
|
|
Other services, such as development of content for e-learning. |
Quarter ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
network / |
|
|
Internet |
|
|
Online |
|
|
|
|
|
|
|
|
|
|
|
|
data |
|
|
access |
|
|
portal |
|
|
Consumer |
|
|
Other |
|
|
|
|
|
|
services |
|
|
services |
|
|
services |
|
|
one |
|
|
services |
|
|
Total |
|
|
|
|
|
|
|
A |
|
|
B |
|
|
A+B |
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
1,389,325 |
|
|
|
158,272 |
|
|
|
34,904 |
|
|
|
193,176 |
|
|
|
143,346 |
|
|
|
1,725,847 |
|
Allocated segment expenses |
|
|
(1,066,696 |
) |
|
|
(164,898 |
) |
|
|
(33,310 |
) |
|
|
(198,208 |
) |
|
|
(92,197 |
) |
|
|
(1,357,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income / (loss) |
|
|
322,629 |
|
|
|
(6,626 |
) |
|
|
1,594 |
|
|
|
(5,032 |
) |
|
|
51,149 |
|
|
|
368,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(128,807 |
) |
Selling, general and
administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216,903 |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(185,955 |
) |
Other income / (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,062 |
|
Income from legal settlement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
561,120 |
|
Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,238 |
|
Finance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,094 |
) |
Share of profit of equity
accounted investee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit or (loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
414,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax(expense)/benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit or (loss) for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
414,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 24 of 46
Quarter ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
network / |
|
|
Internet |
|
|
Online |
|
|
|
|
|
|
|
|
|
|
|
|
data |
|
|
access |
|
|
portal |
|
|
Consumer |
|
|
Other |
|
|
|
|
|
|
services |
|
|
services |
|
|
services |
|
|
one |
|
|
services |
|
|
Total |
|
|
|
|
|
|
|
A |
|
|
B |
|
|
A+B |
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
1,095,962 |
|
|
|
265,302 |
|
|
|
44,770 |
|
|
|
310,072 |
|
|
|
144,733 |
|
|
|
1,550,767 |
|
Allocated segment expenses |
|
|
(685,956 |
) |
|
|
(317,287 |
) |
|
|
(56,279 |
) |
|
|
(373,566 |
) |
|
|
(112,638 |
) |
|
|
(1,172,160 |
) |
Impairment loss on goodwill |
|
|
|
|
|
|
|
|
|
|
(15,200 |
) |
|
|
(15,200 |
) |
|
|
|
|
|
|
(15,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income / (loss) |
|
|
410,006 |
|
|
|
(51,985 |
) |
|
|
(26,709 |
) |
|
|
(78,694 |
) |
|
|
32,095 |
|
|
|
363,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(128,478 |
) |
Selling, general and
administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(285,892 |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(126,800 |
) |
Other income / (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,112 |
|
Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,436 |
|
Finance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80,294 |
) |
Share of profit of equity
accounted investee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit or (loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201,984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax(expense)/benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45,038 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(247,022 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate network / |
|
|
Internet |
|
|
Online |
|
|
|
|
|
|
|
|
|
|
|
|
data |
|
|
access |
|
|
portal |
|
|
Consumer |
|
|
Other |
|
|
|
|
|
|
services |
|
|
services |
|
|
services |
|
|
one |
|
|
services |
|
|
Total |
|
|
|
|
|
|
|
A |
|
|
B |
|
|
A+B |
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
4,017,054 |
|
|
|
582,284 |
|
|
|
104,461 |
|
|
|
686,745 |
|
|
|
408,496 |
|
|
|
5,112,295 |
|
Allocated segment expenses |
|
|
(2,971,223 |
) |
|
|
(600,000 |
) |
|
|
(111,901 |
) |
|
|
(711,901 |
) |
|
|
(304,545 |
) |
|
|
(3,987,669 |
) |
Impairment loss on intangibles
including goodwill |
|
|
|
|
|
|
|
|
|
|
(47,269 |
) |
|
|
(47,269 |
) |
|
|
|
|
|
|
(47,269 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income / (loss) |
|
|
1,045,831 |
|
|
|
(17,716 |
) |
|
|
(54,709 |
) |
|
|
(72,425 |
) |
|
|
103,951 |
|
|
|
1,077,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(363,792 |
) |
Selling, general and
administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(724,681 |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(483,094 |
) |
Other income / (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,361 |
|
Income from legal settlement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
561,120 |
|
Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,588 |
|
Finance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(170,263 |
) |
Share of profit of equity
accounted investee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit or (loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax(expense)/benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 25 of 46
Nine months ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
network / |
|
|
Internet |
|
|
Online |
|
|
|
|
|
|
|
|
|
|
|
|
data |
|
|
access |
|
|
portal |
|
|
Consumer |
|
|
Other |
|
|
|
|
|
|
services |
|
|
services |
|
|
services |
|
|
one |
|
|
services |
|
|
Total |
|
|
|
|
|
|
|
A |
|
|
B |
|
|
A+B |
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
3,177,625 |
|
|
|
888,792 |
|
|
|
144,325 |
|
|
|
1,033,117 |
|
|
|
414,651 |
|
|
|
4,625,393 |
|
Allocated segment expenses |
|
|
(2,079,672 |
) |
|
|
(1,004,502 |
) |
|
|
(168,343 |
) |
|
|
(1,172,845 |
) |
|
|
(359,810 |
) |
|
|
(3,612,327 |
) |
Impairment loss on goodwill |
|
|
|
|
|
|
|
|
|
|
(15,200 |
) |
|
|
(15,200 |
) |
|
|
|
|
|
|
(15,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income / (loss) |
|
|
1,097,953 |
|
|
|
(115,710 |
) |
|
|
(39,218 |
) |
|
|
(154,928 |
) |
|
|
54,841 |
|
|
|
997,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(364,551 |
) |
Selling, general and
administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(860,746 |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(360,168 |
) |
Other income / (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,697 |
|
Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,693 |
|
Finance expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(166,093 |
) |
Share of profit of equity
accounted investee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit or (loss) before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(561,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax(expense)/benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit or (loss) for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(647,048 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. Capital commitments
Contracts pending to be executed on capital account as at December 31, 2009 and not provided for
amounted to Rs.44,371 (net of advances Rs.13,510), [March 31, 2009 Rs.322,607 (net of advances
Rs,177,183)]. In addition, the Company has a commitment to make payments aggregating to Rs.466,800
(USD 10 million) to Emirates Integrated Telecommunications Company PJSC under the agreement supply
of capacity from the Europe India Gateway, of which the Company has already made payments amounting
to Rs.261,414 (USD 5.60 million) as at December 31, 2009.
Operating leases: The Group leases office buildings and other equipments under operating lease
arrangements that are renewable on a periodic basis at the option of both the lessor and the
lessee. The schedule of future minimum rental payments in respect of operating leases is set out
below:
As at December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less |
|
|
|
|
|
|
More |
|
Lease obligations |
|
Total |
|
|
than 1 year |
|
|
1-5 years |
|
|
than 5 years |
|
Non-cancellable operating lease obligations |
|
|
1,639,666 |
|
|
|
122,699 |
|
|
|
408,182 |
|
|
|
1,108,785 |
|
Non-cancellable obligations towards proposed lease * |
|
|
2,423,554 |
|
|
|
|
|
|
|
549,538 |
|
|
|
1,874,016 |
|
As at March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less |
|
|
|
|
|
|
More |
|
Lease obligations |
|
Total |
|
|
than 1 year |
|
|
1-5 years |
|
|
than 5 years |
|
Non-cancellable operating lease obligations |
|
|
1,801,477 |
|
|
|
135,165 |
|
|
|
585,564 |
|
|
|
1,080,748 |
|
Non-cancellable obligations towards proposed lease * |
|
|
2,423,554 |
|
|
|
|
|
|
|
549,538 |
|
|
|
1,874,016 |
|
|
|
|
* |
|
VALS Developers Private Limited (VALS) is owned and controlled by Raju Vegesna Infotech &
Industries Private Limited, in which Mr. Raju Vegesna, our principal share holder and Chief
Executive Officer, is holding 94.66% equity in his personal capacity. During the year ended
March 31, 2009, Sify entered into a Memorandum of Understanding (MoU) for long term lease
with VALS Developers Private Limited to obtain land and building which is in the process of
being constructed. The lease agreement, when final and executed, was expected to have an
initial non-cancellable term of 5 years, with a further option for Sify to renew or cancel the
lease for the incremental five year terms. In connection with this memorandum of understanding,
Sify has paid a security deposit of Rs.125,700 and advance rental of Rs.157,125 to VALS. As per
the terms of the MOU, the security
deposit will be refunded at the end of lease term and the advance rental would be adjusted over
a period of 15 months from the commencement of the lease. Subsequently on October 30,2010, the
Board of Directors have proposed to cancel the MoU for lease arrangement and has decided to
acquire the property which is under construction from the third party directly. The above
deposits would be adjusted against the consideration payable for acquiring the property. |
Page 26 of 46
21. Legal proceedings
a) The Group and certain of its officers and directors are named as defendants in a
securities class action lawsuit filed in the United States District Court for the Southern District
of New York. This action, which is captioned In re Satyam Infoway Ltd. Initial Public Offering
Securities Litigation, also names several of the underwriters involved in Sifys initial public
offering of American Depositary Shares as defendants. This class action is brought on behalf of a
purported class of purchasers of Sifys ADSs from the time of Sifys Initial Public Offering
(IPO) in October 1999 through December 2000. The central allegation in this action is that the
underwriters in Sifys IPO solicited and received undisclosed commissions from, and entered into
undisclosed arrangements with, certain investors who purchased Sifys ADSs in the IPO and the
aftermarket. The complaint also alleges that Sify violated the United States Federal Securities
laws by failing to disclose in the IPO prospectus that the underwriters had engaged in these
allegedly undisclosed arrangements. More than 300 issuers have been named in similar lawsuits.
In July 2002, an omnibus motion to dismiss all complaints against issuers and individual defendants
affiliated with issuers was filed by the entire group of issuer defendants in these similar
actions. In October 2002, the cases against the Companys executive officers who were named as
defendants in this action were dismissed without prejudice. In February 2003, the court in this
action issued its decision on defendants omnibus motion to dismiss. This decision denied the
motion to dismiss the Section 11 claim as to the Company and virtually all of the other issuer
defendants. The decision also denied the motion to dismiss the Section 10(b) claim as to numerous
issuer defendants, including the Company. On June 26, 2003, the plaintiffs in the consolidated IPO
class action lawsuits currently pending against Sify and over 300 other issuers who went public
between 1998 and 2000, announced a proposed settlement with Sify and the other issuer defendants.
The proposed settlement provided that the insurers of all settling issuers would guarantee that the
plaintiffs recover $1 billion from non-settling defendants, including the investment banks who
acted as underwriters in those offerings. In the event that the plaintiffs did not recover $1
billion, the insurers for the settling issuers would make up the difference. This proposed
settlement was terminated on June 25, 2007, following the ruling by the United States Court of
Appeals for the Second Circuit on December 5, 2006, reversing the District Courts granting of
class certification.
On August 14, 2007, the plaintiffs filed Amended Master Allegations. On September 27, 2007, the
Plaintiffs filed a Motion for Class Certification. Defendants filed a Motion to Dismiss the focus
cases on November 9, 2007. On March 26, 2008, the Court ruled on the Motion to Dismiss, holding
that the plaintiffs had adequately pleaded their Section 10(b) claims against the Issuer Defendants
and the Underwriter Defendants in the focus cases. As to the Section 11 claim, the Court dismissed
the claims brought by those plaintiffs who sold their securities for a price in excess of the
initial offering price, on the grounds that they could not show cognizable damages, and by those
who purchased outside the previously certified class period, on the grounds that those claims were
time barred. This ruling, while not binding on the Companys case, provides guidance to all of the
parties involved in this litigation. On October 2, 2008, plaintiffs requested that the class
certification motion in the focus cases be withdrawn without prejudice. On October 10, 2008, the
Court signed an order granting that request. On April 2, 2009, the parties lodged with the Court a
motion for preliminary approval of a proposed settlement between all parties, including the Company
and its former officers and directors. The proposed settlement provides the plaintiffs with $586
million in recoveries from all defendants. Under the proposed settlement, the Issuer Defendants
collectively would be responsible for $100 million, which would be paid by the Issuers insurers,
on behalf of the Issuer Defendants and their officers and directors.
Accordingly, any direct financial impact of the proposed settlement is expected to be borne by the
Companys insurers. On June 12, 2009, the Federal District Court granted preliminary approval of
the proposed settlement. On October 6, 2009, the District Court issued an order granting final
approval of the settlement. Subsequent to the final approval of Settlement agreement by the
District court, there are several notices of appeal filed. Most were filed by the same parties
that objected to the settlement in front of the District Court. These will likely be consolidated
into a single appeal and briefing schedule will be provided shortly. Any direct financial impact of
the preliminary approved settlement is expected to be borne by the Companys insurers. The Company
believes, the maximum exposure under this settlement is approximately
US$ 338,983, an amount which
the Company believes is fully recoverable from the Companys insurer.
Page 27 of 46
(b) Proceedings before Department of Telecommunications
|
|
|
On October 12, 2009, Department of Telecommunications (DOT) raised a demand on Sify
Technologies for INR 14 million after correcting the arithmetical error in the Assessment
letter issued by the DoT. |
|
|
|
On February 26, 2010 DOT raised a demand on Sify Communications Limited (erstwhile
subsidiary merged with Sify Technologies Limited) for INR 26 million. |
These demands were primarily alleged that Sify has not paid license fee on the following;
|
|
|
Certain items of income have been considered by DOT as licensed activities for payment
of licensee fee as the information was not available to DOT. |
|
|
|
Certain items like other income, interest on deposits, gain on foreign exchange
fluctuation, profit on sale of assets, provision written back has been considered by DOT as
income eligible for licensed activities as against the Companys claim that they are not
liable for license fee. |
|
|
|
|
The Company has responded to the above said demand notices stating that the above demands are
not tenable as the demands were not in accordance with the Telecom Disputes Settlement &
Appellate Tribunal (TDSAT) Order which has clarified in its Order that the items of income
which are liable for license fee and items of income on which license fees are not liable to
be paid. However the TDSAT Order has been challenged in Supreme Court by DoT and Associations
of service providers and finality would be arrived only after the decision of the Court. The
Company currently pays license fee in accordance with the TDSAT Order and Sify believes that
it has adequate legal defenses for these demands and the ultimate outcome of these actions
will not have a material adverse effect on Sify. |
(ii) During the period, in November 2009, the Company received a demand notice pertaining to the
allocation of spectrum in the 3.3-3.4 GHz frequency, from DoT, demanding INR 345 million towards
spectrum charges payable from the date of issue of allocation letter for 170 Base Stations. As per
the notice, in case no payment is received within 15 days from the date of issue of the notice,
then it would be presumed that the Company is no longer interested for the frequency assignments in
3.3-3.4 GHz band.
Whilst the Company received allotment letter for Spectrum in 3.3 GHz band (3303.5/3353.5 MHz)
(Total 12 MHz) the Company had neither started any operations in this frequency band nor had
applied for any Operating License from DoT/ Wireless Planning Commission (WPC). Sify believes that
the obligation to make payment will arise only after obtaining the operating license from DoT/WPC.
Sify also believes that it has adequate legal defences for these demands, as the Company has not
yet obtained any operative license, hence such demand is not tenable Nevertheless, the Company has
as a commitment to hold and use the spectrum in the above band has paid INR 11.56 million towards
40 Base Stations and has surrendered the remaining 130 Base Stations. The Company believes that
the ultimate outcome of these actions will not have a material adverse effect on Sify.
c) The Group is party to additional legal actions arising in the ordinary course of business.
Based on the available information, as at March 31, 2010, Sify believes that it has adequate legal
defences for these actions and that the ultimate outcome of these actions will not have a material
adverse effect on Sify. However in the event of adverse judgement in all these cases, the maximum
financial exposure would be Rs 9,051 (March 31, 2009: Rs 9,200)
22. Acquisition of non-controlling interest in subsidiary
The Board of Directors and shareholders of the Company at their meeting held on November 24, 2008
approved the merger of Sifys subsidiary Sify Communications Limited, subject to approval by the
Honourable High Court of Madras and other statutory authorities. Subsequently, the Company obtained
the approval of Honourable High Court on June 26, 2009 which is binding on the Company and its
subsidiary Sify Communications Limited and as part of the merger, the Company issued 10,530,000
equity shares to Infinity Satcom Universal Pvt. Limited (a company promoted by the principal
shareholders of Sify) and acquired the remaining 26% equity interest of Sify Communications
Limited. Although the merger was approved by the High Court on June 26, 2009, which is considered
as the acquisition date for accounting purposes, for Income-tax purpose the effect of merger is
retrospectively applied from April 1, 2008. The acquisition of this non-controlling interest has
been accounted as a transaction with equity holders in their capacity as equity holders and
accordingly no goodwill has been recognized. As a result of the acquisition of non-controlling
interest, the following adjustments were incorporated in the unaudited condensed consolidated
interim financial statements for the nine months ended December 31, 2009:
|
|
As a consequence of the merger, the Company was eligible under the Indian
Income-tax laws to consolidate the Income-tax returns of Sify and Sify Communications Limited
retrospectively from April 1, 2008. Accordingly, the taxable income reported by Sify
Communications Limited for the period subsequent to April 1, 2008 has been off-set against the
previously fully reserved business losses of the Company. This resulted in the reversal of
income tax liabilities aggregating to Rs.90,003 and a write off of deferred tax assets of
Rs.8,524 during the nine months ended December 31, 2009. |
|
|
|
Consequent to the approval of the merger by the Honorable High Court on June 26,
2009, the Company was obliged to issue 10,530,000 shares which the Company has duly issued on
July 16, 2009, and accordingly, the fair value of shares to be issued as at June 26, 2009 has
been considered as the consideration for the acquisition of the non-controlling interest. The
difference between the fair value of the consideration paid and the face value of equity
shares issued is recorded as share premium and the difference between the fair value of the
consideration paid and the carrying amount of non-controlling interests is recorded as an
adjustment in equity and is included as part of share premium. |
Page 28 of 46
23. IPO Listing
The Ministry of Finance of the Government of India (MoF) issued a press release dated March 31,
2006, making amendments to the Issue of Foreign Currency Convertible Bonds and Ordinary Shares
(through Depository Receipt Mechanism) Scheme 1993 (the Scheme). The amendments included a
statement that unlisted Companies which had accessed FCCBs, ADR/GDRs in terms of guidelines of May
22, 1998 and are not making profit, be permitted to comply with listing condition on the domestic
stock exchanges within three years of having started making profit. Further, the press release
states that no fresh issues of FCCBs, ADR/GDRs by such companies will be permitted without listing
first in the domestic exchanges. Since the Company has made one time book profits in the financial
year 2006-07, the Company has applied to MoF through its letter dated September 10, 2009,
requesting the MOF:
i. |
|
to provide extension of time for listing the shares in the Indian stock exchanges |
|
ii. |
|
to grant a special permission to issue shares on rights basis to the existing shareholders |
Subsequently on November 9, 2009, the MoF has informed that the Companys request was not in
accordance with the existing policy. The Company again on March 4, 2010 has applied to MoF
reiterating its previous request and the Ministry of Finance has again informed the Company that
such request is not in accordance with the existing policy. The Company, based on a legal opinion,
believes that there are no financial implications that would arise in connection with said press
release by MoF.
24. Contingencies
a) During the previous years, the Group had received assessment orders from the Income-tax
Department of India for various financial years disallowing certain expenditure like bandwidth
charges and foreign currency payments for non-deduction of withholding taxes. The Company appealed
against those order before Commissioner of Income Tax (Appeals) (CIT(A)) and received favourable
orders. The department has filed appeals before Income Tax Appellate Tribunal (ITAT) disputing
CIT(A) orders. The group believes that the appeal by the department is not sustainable and
consequently no loss contingency is necessary as at December 31, 2009.
b) Contingencies due to certain service tax claims as at December 31, 2009 amounted to Rs 33,280
(March 31, 2009: Rs.19,637).
c) Additionally, the Group is also involved as a party to lawsuits, claims and proceedings, which
arise in the ordinary course of business. The Group does not foresee any material contingency out
of the pending issues.
d) The Group during the year ended March 31, 2009 entered into a contract with Emirates Integrated
Telecom for the construction and supply of capacity from the Europe India Gateway. As per the
contract with Emirates, the Group is required to pay its share of decommissioning costs if any that
may arise in the future. No provision has been made by the Group for such decommissioning costs as
the amount of provision cannot be measured reliably as at December 31, 2009.
25. Related party transactions
The following is a summary of significant transactions with related parties:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
Nine months ended |
|
Transactions |
|
December 31, 2009 |
|
|
December 31, 2008 |
|
Consultancy services received |
|
|
180 |
|
|
|
180 |
|
Sale of services (Refer Note 1 below) |
|
|
|
|
|
|
6,473 |
|
Issuance of shares on amalgamation of erstwhile Sify Communications
limited with Sify Technologies limited |
|
|
842,837 |
|
|
|
|
|
Amount of outstanding balances |
|
|
|
|
|
|
|
|
Debtors |
|
|
|
|
|
|
523 |
|
Advance lease rentals and refundable deposits made (Refer note 2 below) |
|
|
282,825 |
|
|
|
282,825 |
|
Page 29 of 46
Note
|
|
|
1. |
|
Represents invoices raised in relation to services rendered to MF Global Sify Securities Private
Limited, an equity accounted affiliate. |
|
2. |
|
Represents deposits made to VALS Developers Private Limited (VALS).VALS is owned and
controlled by Raju Vegesna Infotech & Industries Private Limited, in which Mr. Raju Vegesna,
our principal share holder and Chief Executive Officer, is holding 94.66% equity in his
personal capacity. During the year ended March 31, 2009, Sify entered into a Memorandum of
Understanding (MoU) for long term lease with VALS Developers Private Limited to obtain land
and building which is in the process of being constructed. The lease agreement, when final
and executed, was expected to have an initial non-cancellable term of 5 years, with a further
option for Sify to renew or cancel the lease for the incremental five year terms. In
connection with this memorandum of understanding, Sify has paid a security deposit of
Rs.125,700 and advance rental of Rs.157,125 to VALS. As per the terms of the MOU, the security
deposit will be refunded at the end of lease term and the advance rental would be adjusted
over a period of 15 months from the commencement of the lease. Subsequently on October
30,2010, the Board of Directors have proposed to cancel the MoU for lease arrangement and has
decided to acquire the property which is under construction from the third party directly. The
above deposits would be adjusted against the consideration payable for acquiring the property. |
26. Financial risk management
The Groups financial risk management objectives and policies are consistent with that disclosed in
the consolidated financial
statements as of and for the year ended March 31, 2009.
Credit risk: Credit risk is the risk of financial loss to the Group if a customer or counterparty
to a financial instrument fails to meet its contractual obligations and arises principally from the
Groups trade receivables, treasury operations and other activities that are in the nature of
leases.
Trade and other receivables
The Groups exposure to credit risk is influenced mainly by the individual characteristics of each
customer. Management considers that the demographics of the Groups customer base, including the
default risk of the industry and country in which customers operate, has less of an influence on
credit risk. The group is not exposed to concentration of credit risk to any one single customer
since the services are provided to and products are sold to customers who are spread over a vast
spectrum. Credit risk is managed through credit approvals, establishing credit limits and
continuously monitoring the credit worthiness of the customers to which the Company grants credit
terms in the normal course of the business.
Cash and cash equivalents and other investments
In the area of treasury operations, the Group is presently exposed to counter-party risks relating
to short term and medium term deposits placed with public-sector banks, and also to investments
made in mutual funds.
Guarantees
The Groups policy is to provide financial guarantees only to subsidiaries.
The Chief Financial Officer is responsible for monitoring the counterparty credit risk, and has
been vested with the authority to seek Boards approval to hedge such risks in case of need.
Liquidity risk: Liquidity risk is the risk that the Group will encounter difficulty in meeting the
obligations associated with its financial liabilities that are settled by delivering cash or
another financial asset. The Groups approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its liabilities when due, under
normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Groups reputation. Typically the Group ensures that it has sufficient cash on demand to meet
expected operational expenses, servicing of financial obligations. In addition, the Group has
concluded arrangements with well reputed Banks, and has unused lines of credit that could be drawn
upon should there be a need. The Company is also in the process of infusing further capital from
its promoter group for funding its requirements.
Market risk: Market risk is the risk of loss of future earnings or fair values or future cash flows
that may result from a change in the price of a financial instrument. The value of a financial
instrument may change as a result of changes in the interest rates, foreign exchange rates and
other market changes that affect market risk sensitive instruments. Market risk is attributable to
all market risk sensitive financial instruments including foreign currency receivables and
payables. The Group is exposed to market risk primarily related to foreign exchange rate risk
(currency risk), interest rate risk and the market value of its investments. Thus the Groups
exposure to market risk is a function of investing and borrowing activities and revenue generating
and operating activities in foreign currencies.
Page 30 of 46
Currency risk: The Groups exposure in USD, Euro and other foreign currency denominated
transactions gives rise to Exchange Rate fluctuation risk. Groups policy in this regard
incorporates:
|
|
Forecasting inflows and outflows denominated in US$ for a twelve-month period |
|
|
|
Estimating the net-exposure in foreign currency, in terms of timing and amount |
|
|
|
Determining the extent to which exposure should be protected through one or more
risk-mitigating instruments to maintain the permissible limits of uncovered exposures. |
|
|
|
Carrying out a variance analysis between estimate and actual on an ongoing basis,
and taking stop-loss action when the adverse movements breaches the 5% barrier of deviation,
subject to review by Audit Committee. |
The following are the entities that comprise the group as of December 31, 2009 and March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
Particulars |
|
Country |
|
% of Ownership interest |
|
Significant subsidiaries |
|
of incorporation |
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
Sify International Inc |
|
US |
|
|
100 |
|
|
|
100 |
|
Sify Software Limited (formerly known as Sify Networks Private Limited) |
|
India |
|
|
100 |
|
|
|
100 |
|
Sify Technologies (Singapore) Pte Limited |
|
Singapore |
|
|
100 |
|
|
|
|
|
Associates |
|
|
|
|
|
|
|
|
|
|
MF Global-Sify Securities India Private Limited |
|
India |
|
|
29.85 |
|
|
|
29.85 |
|
28. Subsequent event
Issuance of shares to existing promoter group
On August 4, 2010, the Board of Directors of the company approved the issuance, in a private
placement, of upto an aggregate of 125,000,000 of the companys equity shares, par value Rs.10 per
share (Equity shares), for an aggregate purchase price of
approxiamately US$ 86 million, to a
group of investors affiliated with the companys promoter group, including entities affiliated with
Mr Raju Vegesna, the companys Chief Executive officer and Managing Director and Mr Ananda Raju
Vegesna, Executive and brother of Mr Raju Vegesna (the Offreing). The companys shareholders
approved the terms of the Offering at the Companys Annual General Meeting held on September 27,
2010.
On October 22, 2010, the company entered into a Subscription Agreement with Mr AnandaRaju
Vegesna, acting as representative (the Representative) of the purchasers in connection with the
offering. The company issued 125,000,000 equity shares to the Representative on October 30, 2010.
In accordance with Indian law, a portion of the purchase price was paid on October 30,2010, with
the remaining amount of the purchase price to be paid at such time as determined by the company.
Until the full purchase price is paid by the purchasers, the company retains a lien on the equity
shares purchased in connection with the Offering.
As a result of the consummation of the Offering, Mr Raju Vegesna beneficially holds
approxiamately 86.4% of the outstanding equity shares of the company.
Page 31 of 46
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of the financial condition and results of operations of our Company should
be read in conjunction with the Unaudited Condensed Consolidated Interim Financial Statements and
the related condensed notes included elsewhere in this report and the audited financial statements
and the related notes contained in our Annual Report on Form 20-F for the fiscal year ended March
31, 2009. This discussion contains forward-looking statements that involve risks and uncertainties.
For additional information regarding these risks and uncertainties, please see the section in this
report captioned Risk Factors.
Overview
Sify is among the largest Internet, networking and e-Commerce services companies in India,
offering end-to-end solutions with a comprehensive range of products delivered over a common
Internet backbone infrastructure. This Internet backbone reaches more than 570 cities and towns in
India. A significant part of our revenue is derived from Corporate Services, which include
corporate connectivity, network and communications solutions, security, network management services
and hosting. Our corporate service offerings are used by a number of Indias largest companies.
Consumer services include broadband home access, and the e-port cyber café chain across 250 cities
and towns and online portals, such as www.sify.com, www.samachar.com and
www.sifymax.in, that function as principal entry points and gateway for accessing the
Internet by providing useful web-related services and links and related content sites specifically
tailored to Indian interests worldwide. Our network services, Data Center operations and customer
relationship management are accredited ISO 9001:2000.
Revenues
The primary operating segments of the Group are:
|
|
Corporate network/data services, which provides corporate/network data services, security
and consulting, hosting and managed service solutions; |
|
|
Consumer One which includes |
|
|
|
Retail Internet access services, from homes and through cybercafés and |
|
|
|
Online portal and content offerings. |
|
|
Other services, such as development of content for e-learning and Remote Management Services. |
Corporate network/data services
Our corporate network/data services revenues primarily include revenue from sale of hardware and
software purchased from third party vendors, connectivity services revenue and, to a lesser extent,
revenues from the installation of the connectivity link and other ancillary services, such as
e-mail, document management and domain registration. Generally, these elements are sold as a
package consisting of all or some of the elements. We sell hardware and software purchased from
third party vendors to our high value corporate clients. Our connectivity services include IPVPN
services, Internet connectivity, last mile connectivity (predominantly through wireless), messaging
services, security services and web hosting for businesses. We provide these services for a fixed
period of time at a fixed rate regardless of usage, with the rate for the services determined based
on the type of service provided, scope of the engagement and the Service Level Agreement, or SLA.
Our web hosting service revenues are primarily generated from co-location services and connectivity
services. Our security services revenues include revenue from consulting services, vulnerability
assessment and penetration testing. We provide NLD (National Long Distance) and ILD (International
Long Distance) services and carry voice traffic for Inter-connect Operators. Revenue is recognized
based upon metered call units of voice traffic terminated on the Companys network.
Revenue recognition from construction contract
Contract revenue includes the initial amount agreed in the contract plus any variations in contract
work, claims and incentive payments, to the extent that it is probable that they will result in
revenue and can be measured reliably. As soon as the outcome of a construction contract can be
estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of
completion of the contract. Contract expenses are recognised as incurred unless they create an
asset related to future contract activity.
The stage of completion is assessed by reference to the cost incurred till date to the total
estimated costs. When the outcome of a construction contract cannot be estimated reliably, contract
revenue is recognised only to the extent of contract costs incurred that are likely to be
recoverable. An expected loss on a contract is recognised immediately in profit or loss.
Page 32 of 46
The revenue generated from trading transactions relating to standard hardware and software and
involving arrangement of purchases from suppliers and sales to customers are reported on gross
basis or on net basis, by carrying out a fact-specific evaluation of whether or not all significant
risks and rewards of ownership or property in the goods are transferred.
Consumer One Retail Internet access services and Online Portal and content offerings
|
|
Internet access services revenues are generated from the internet connectivity we provide
to our retail customers through public access and home access services. Home access services
are provided through broadband connectivity, which is provided through arrangements with Cable
Television Operators (CTOs). Our public access services are provided through franchised and
Company-owned cybercafés, or e-ports. Additionally, we generate revenue by providing
Internet Telephony services, allowing customers to make international telephone calls over the
Internet. |
|
|
Online portal services and content offerings revenues include advertising revenues from the
various channels of our Internet portal, www.sify.com. We enter into contracts with customers
to serve advertisements in the portal, and we are paid on the basis of impressions,
click-throughs or leads. Revenues also accrue from commissions earned on products and services
rendered through www.sifymall.com, and also from value-added services that are rendered using
our mobile telephone short code, 54545. |
Other services
Other services include revenue from e-learning. We develop and upload content for e-learning to
facilitate web-based learning in various organizations. We provide e-learning services on
time-and-materials or on a fixed-price basis.
In Note 19 to the Unaudited Condensed Consolidated Interim Financial Statements included in this
Report, we provide supplemental segment data, which provides separate revenue and operating income
(loss) information for each of these business segments.
Expenses
Corporate network/data services
Cost of goods sold and services rendered for the corporate network/data services division consists
of telecommunications costs necessary to provide services, customer support costs, and cost of
goods in respect of communication hardware and security services sold, the cost of providing
network operations, the cost of voice termination for voice and VoIP services and other direct
costs. Telecommunications costs include the costs of international bandwidth procured from TELCOs
and are required for access to the Internet, providing local telephone lines to our points of
presence, the costs of using third-party networks pursuant to service agreements, leased line costs
and costs towards spectrum fees payable to the Wireless Planning Commission or WPC for provision of
spectrum to enable connectivity to be provided on the wireless mode for the last mile. Other costs
include cost incurred towards our Annual Maintenance Contract (AMC), the cost of installation in
connectivity business, the costs incurred in providing Hosting services, and the Document
Management Services (DMS) costs for application services. In addition, the Government of India has
imposed an annual license fee of 6% of the adjusted gross revenue generated from IP-VPN services
and Voice services under the NLD/ILD license.
Consumer One Retail Internet access services and Online Portal and content offerings
|
|
Internet access services: Cost of goods sold and services rendered for the internet access
services division consists of primarily recurring telecommunications costs necessary to
provide service to subscribers, the cost of goods sold and services rendered include
commission paid to franchisees and cable television operators, voice termination charges for
VoIP services. The Government of India imposed an annual license fee of 6% of the adjusted
gross revenue from the provision of VoIP services. |
|
|
Online portal and content offerings: Cost of goods sold and services rendered for the
online portal services and content offerings includes the cost of procuring and managing
content for the websites and cost of ringtones downloaded by using our mobile telephone short
code 54545, the cost of procuring merchandise for e-commerce sales and the cost of bandwidth
used for online portal services. |
Other Services
Cost of revenues for the eLearning division includes the cost of direct labor that is involved in
the design and uploading of content for facilitating web-based learning.
Page 33 of 46
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of salaries and commissions for sales and
marketing personnel, salaries and related costs for executives, financial and administrative
personnel, sales, marketing, advertising and other brand building costs, travel costs, and
occupancy and overhead costs.
Depreciation and amortization
We depreciate our tangible assets on a straight-line basis over the estimated useful life of
assets, ranging from two to eight years and, in the case of buildings, 28 years. Intangible
excluding goodwill are amortised on a straight line basis over the estimated useful life of the
assets, ranging from three to twenty years. Goodwill is not amortised and is tested for impairment
annually.
Operating Results
Three months ended December 31, 2009 compared to three months ended December 31, 2008
Revenues. We recognized Rs.1726 million ($36.97 million) in revenues for the quarter ended December
31, 2009, as compared to Rs.1551 million for the quarter ended December 31, 2008, representing an
increase of Rs.175 million ($3.75 million), or 11%. This is primarily driven by Rs 293 million
($6.28 million) or 27 % from our corporate network/data services. The revenue growth has been
impacted by Rs 117 million ($2.51 million) or 38 % decrease from our Consumer One services
comprising of internet access services, online portals and content offerings and Rs 1 million
($0.02 million) or 1 % from Other services.
Revenue from Corporate network/data services has increased by Rs 293 million ($6.28 million), or
27%, from Rs 1096 million for three months ended December 31, 2008 to Rs 1,389 million ($29.76
million) for three months period ended December 31, 2009 primarily due to: (i) the increase of
Rs.82 million ($1.76 million) or 80 % from Hosting services from the new capacity created in Airoli
Data Centre and Bangalore Data Centre, (ii) the increase of Rs 153 million ($3.28 million) from
System Integration Services (including Hardware), (iii) the increase of Rs.124 million ($2.66
million) revenue from International Long Distance (ILD) Services, (iv) the increase of Rs.28
million ($0.60 million) or 38 % from Application services due to growth in business. The increase
is partially offset by a (a) decrease of Rs 73 million ($1.55 million) or 12 % in the revenue from
connectivity due to substantial price decrease and capacity migrations and (b) decrease of 21
million ($0.46 million) by other services.
Revenue from Consumer One services has decreased by Rs 117 million ($2.51 million) or 38 % from Rs
310 million for three months ended December 31, 2008 to Rs 193 million ($4.14 million) for three
months ended December 31, 2009. This is primarily on account of (a) Rs 107 million ($2.29 million)
or 40% decrease in revenue from our Internet Access services, and (b) Rs.10 million ($0.21 million)
or 22 % decrease in revenue from Portal services. Decrease in Internet Access Services is primarily
on account of (i) the decrease in Broadband service to the extent of Rs 64 million ($1.37 million)
or 38 %, due to loss of subscribers, (ii) the decrease in revenue from e-Port service to the extent
of Rs 35 million ($0.75 million) or 44 % due to drop in operational e-Ports and active subscribers,
(iii) decrease of Rs 6 million ($0.12 million) or 54 % from Voice revenue due to competition (iv)
decrease of revenue amounting to Rs 2 million ($0.04 million) or 40 % from other Internet access
services. Decrease in Portal services is primarily on account of decrease of Rs. 11 million ($0.23
million) or 26% from Portal business primarily due to drop in advertisements on account of economic
slowdown. This decrease were partially offset by an increase of Rs.1 million ($0.02 million) or 28
% in the revenue from online travel business.
Revenue from Other services has decreased by Rs 1 million ($0.04 million) or 1 %, from Rs 144
million for three months ended December 31, 2008 to Rs 143 million ($3.07 million) for three months
ended December 31, 2009. Such decrease is due to a decrease of Rs.12 million ($0.26 million) or 15%
in eLearning business due to deferment of projects by existing customers. This decrease was
partially set off by an increase of Rs. 11 million ($0.23 million) or 17% due to acquisition of new
projects in Remote management services.
Other income. Other income was Rs.40 million ($0.86 million) for the quarter ended December 31,
2009, compared to Rs.27 million for the quarter ended December 31, 2008, representing an increase
of Rs.13 million ($0.28 million), or 48%. Other income primarily comprises of income derived from
duty credit entitlements under the Served from India Scheme (issued by the Government of India)
in respect of the foreign exchange earnings from export of services. Increase in duty credit
entitlement is primarily on account of improvement in the export revenues during the current
quarter as compared to the previous quarter ended December, 2008.
Cost of goods sold and services rendered. The cost of goods sold and services rendered was Rs.1,062
million ($ 22.75 million) for the quarter ended December 31, 2009 compared to Rs.886 million for
the quarter ended December 31, 2008, representing an increase of Rs.176 million ($3.76 million), or
20 % . This increase was due to (i) Rs.152 million ($3.25 million) increase in hardware and
software costs due to increase in our System Integration business and (ii) Rs.154 million ($3.29
million) increases in IUC costs on account of cost pertaining to launch of new ILD services, (iii)
Rs.23 million ($0.5 million) increases in other direct costs on account of Application services,
and these increases have been partly offset by a decrease of (a) Rs.40 million ($0.85 million) in
Bandwidth cost due to capacity upgrades and reduction in bandwidth rates, (b) Rs.37 million ($0.79
million) revenue share paid to franchisees and cable television operators due to drop in broadband
& e-Port usage revenue, (c) Rs.46 million ($0.98 million) in Manpower in Technology towards technology departments due to optimization of resources (d) Rs.10 million ($0.22 million) voice
termination due to drop in usage, (e) Rs.5 million ($0.10 million) in e-commerce due to reduction
in business, (f) Rs.5 million ($0.10 million) in direct costs towards international business due to
optimization of resources and (g) Rs.15 million
($0.33 million) towards cost of site development.
Page 34 of 46
Selling, general and administrative expenses. Selling, general and administrative expenses were
Rs.611 million ($13.10 million) for the quarter ended December 31, 2009, compared to Rs.701 million
for the quarter ended December 31, 2008, representing a decrease of Rs.90 million ($1.93 million),
or 13 %. This decrease is mainly on account of decrease in personnel expenses and selling expenses,
general and administrative costs at infrastructure facilities.
Depreciation and Amortisation expenses. Depreciation and amortization expenses were Rs.186
million($ 3.98 million) for the quarter ended December 31, 2009, compared to Rs.142 million for the
quarter ended December 31, 2008, representing an increase of Rs.44 million ($0.94 million), or
(31%). The increase is attributable to addition in property, plant and equipment.
Income from legal settlement. The Company received Rs 561 million (US$ 12.43 million) in
connection with settlement of legal matters. The said receipt has been recorded as income from legal settlement during the
quarter.
Income tax expense. The income tax expense was Rs Nil ($ Nil) for the quarter ended December 31,
2009,compared to Rs.45 million for the quarter ended December 31, 2008, representing a decrease of
Rs.45 million ($0.96 million). The income tax expense of the previous year was on account of
profits earned from the erstwhile subsidiary Sify Communications Limited. Consequent to available
carry forward losses, there were no taxable profits for the quarter ended December 31, 2009.
Net finance expense. The net finance expense was Rs 82 million ($ 1.74 million) for the quarter
ended December 31, 2009, compared to Rs.53 for the quarter ended December 31, 2008, representing an
increase of Rs.29 million ($0.62 million), or (56 %). The finance income was Rs.2 million ($0.05
million) for the quarter ended December 31, 2009, compared to Rs.27 million for the quarter ended
December 31, 2008, representing a decrease of Rs.25 million ($0.54 million) due to closure of fixed
deposits for working capital purposes. The finance expense was Rs. 84 million ($1.80 million) for
the quarter ended December 31, 2009, compared to Rs.80 million for the quarter ended December 31,
2008, representing an increase of Rs.4 million ($0.09 million) due to increase in bank charges and
on account of increased bank borrowings.
Share of profit of investment in associate. The share of profit of investment in associate was Rs.
28 million ($ 0.60 million) for the quarter ended December 31, 2009, compared to Rs.2 million for
the quarter ended December 31, 2008, representing an increase of Rs.26 million ($0.57 million).
This was due to sluggish market for MF Global Sify Securities India Private Limited during the
corresponding quarter previous year.
Nine months ended December 31, 2009 compared to nine months ended December 31, 2008
Revenues. We recognized Rs. 5,112 million ($109.52 million) in revenues for the nine months ended
December 31, 2009, as compared to Rs.4,625 million for the nine months ended December 31, 2008,
representing an increase of Rs.487 million ($10.43 million), or 11 %. This is primarily driven by
an increase of Rs 839 million ($17.98 million) or 26 % in revenue from our Corporate network/data
services. The revenue growth has been impacted by Rs 346 million ($7.42 million) or 34 % decrease
from our Consumer One services comprising of Internet access services, online portals and content
offerings, and Rs.6 million ($0.13 million) or 1% decrease from our Other services.
Revenue from Corporate network/data services has increased by Rs 839 million ($17.98 million), or
26.42%, from Rs 3,178 million for Nine months ended December 31, 2008 to Rs 4,017 million ($86.06
million) for nine months ended December 31, 2009 primarily due to (i) increase of Rs 191 million
($4.09 million) or 60.30 % in the revenue from Hosting Services on account of repeat business from
existing customers and revenue from capacity in Airoli Data Centre and Bangalore Data Centre, (ii)
increase of Rs 417 million ($8.94 million) in Managed Services from System Integration Services
(including hardware) (iii) increase of Rs 470 million ($10.06 million) or 394 % revenue from the
International Long Distance (ILD) Services and (iv) increase of Rs.38 million ($0.82 million) or
17% in application services due to growth in business. The increase is partially offset by (a) a
decrease of Rs 267 million ($5.69 million) or 14 % in the revenue from Connectivity due to price
decrease and customers deferring their expansion plan due to continuing economic slowdown, (b) a
decrease of Rs 13 million ($0.28 million) or 11% in the revenue from Security business due to
decrease in digital certification business.
Page 35 of 46
Revenue from Consumer One services has decreased by Rs 346 million ($7.42 million) or 34 % from Rs
1,033 million for nine months ended December 31, 2008 to Rs 687 million ($14.72 million) for nine
months ended December, 2009. This is primarily on account of (a) Rs 307 million ($6.57 million)
or 35% decrease in revenue from our Internet Access services, and (b) Rs.39 million ($0.83 million)
or 28 % decrease in revenue from Portal services. Decrease in Internet Access Services is primarily
on account of (i) the decrease in Broadband service to the extent of Rs 178 million ($3.81 million)
or 31 %, due to loss of subscribers, (ii) the decrease in revenue from e-Port service to the extent
of Rs 99 million ($2.12 million) or 38 % due to drop in operational e-Ports and active subscribers,
(iii) decrease of Rs 20 million ($0.42 million) or 49 % from Voice revenue due to competition (iv) decrease of revenue
amounting to Rs 9 million ($0.19 million) or 53 % from other Internet access services. Decrease in
Portal services is primarily on account of decrease of Rs. 46 million ($0.99 million) or 25% from
Portal business primarily due to drop in advertisements on account of economic slowdown. This
decrease were partially offset by an increase of Rs.6 million ($0.13 million) or 54 % in the
revenue from online travel business.
Revenue from Other services has decreased by Rs 6 million ($0.13 million) or 1 %, from Rs.415
million for nine months ended December 31, 2008 to Rs.409 million ($8.76 million) for nine months
ended December 31, 2009. Such decrease is due to an increase of Rs.46 million ($0.98 million) or
26% in Remote management services business on account of acquisition of new projects and by a
decrease of Rs.52 million ($1.11 million) or 22% due to deferment of projects by existing
customers.
Other income. Other income was Rs.102 million ($2.18 million) for nine months ended December 31,
2009, compared to Rs.61 million for nine months ended December 31, 2008, representing an increase
of Rs.41 million ($0.87 million), or 67 %. Other income primarily comprises of income derived from
duty credit entitlements under the Served from India Scheme (issued by the Government of India)
in respect of the foreign exchange earnings from export of services. Increase in duty credit
entitlement is primarily on account of improvement in the export revenues .
Cost of goods sold and services rendered. The cost of goods sold and services rendered was Rs.3,132
million ($ 67.08 million) for nine months ended December 31, 2009 compared to Rs.2,695 million for
nine months ended December 31, 2008, representing an increase of Rs.437 million ($9.36 million), or
16 %. This increase was due to (i) a Rs.353 million ($7.56 million) increase in hardware and
software costs due to increase in our System Integration business, (ii) a Rs.484 million ($10.37
million) increase in other direct costs on account of cost pertaining to launch of new ILD
services and Rs. 33 million ($0.71 million) increase in other direct costs in connection with DMS
and other services due to increase in business. These increases have been partly offset by a
decrease of (a) Rs.187 million ($4 million) in Bandwidth cost due to capacity upgrades and
reduction in bandwidth rates, (b) Rs.133 million ($2.84 million) revenue share paid to franchisees
and cable television operators and TRAI due to drop in broadband & e-Port usage revenue, (c) Rs.62
million ($1.32 million) in Manpower in Technology towards technology departments due to
optimization of resources (d) Rs.7 million ($0.15 million) voice termination due to drop in usage,
(e) Rs.16 million ($0.34 million) in direct costs towards international business due to
optimization of resources and (f) Rs.30 million ($0.65 million) towards cost of site development
and content management.
Selling, general and administrative expenses. Selling, general and administrative expenses were
Rs.1,887 million ($ 40.43 million) for nine months ended December 31, 2009, compared to Rs.2,142
million for nine months ended December 31, 2008, representing a decrease of Rs.255 million ($5.46
million), or 12 %. This decrease is mainly on account of decrease in operating costs, personnel
expenses, selling expenses, general and administrative costs at infrastructure facilities.
Depreciation and Amortisation expenses. Depreciation and amortization expenses were Rs.483 million
($ 10.35 million) for nine months ended December 31, 2009, compared to Rs.360 million for nine
months ended December 31, 2008, representing an increase of Rs.123 million ($2.63 million), or 34
%. The increase is attributable to addition in property, plant and equipment.
Impairment loss on intangibles including goodwill: During the nine months ended December 31, 2009,
triggered by certain adverse market conditions such as decrease in revenue and increase in the cost
of services, and other technological matters, which are confirmed by other subsequent events, the
group tested the carrying value of the above business for impairment. The recoverable amount of
these intangibles including goodwill were determined based on the higher of the value in use (using
discounted cash flow approach) and fair value less cost of sales. As a result of the above review,
the group has recorded an impairment of the above intangibles including goodwill amounting to Rs
47,269 ($ 1012) and adjusted the carrying value of these intangibles accordingly.
Income from legal settlement. The Company received Rs 561 million (US$ 12.43 million) in
connection with settlement of legal matters. This is pursuant to a legal suit filed by the company
in the prior years. The said receipt has been recorded as income form legal settlement during the
nine months ended December 31, 2009.
Income tax expense/(benefit). The income tax benefit was Rs.81 million ($ 1.70 million) for nine
months ended December 31, 2009,compared to an expense of Rs.85 million for nine months ended
December 31, 2008, due to merger of Sify Communications Limited (erstwhile subsidiary) with the
Company.
Net finance expense. The net finance expense was Rs. 205 million ($ 4.39 million) for nine months
ended December 31, 2009, compared to net finance expense of Rs.73 million for nine months ended
December 31, 2008, representing a increase of Rs.132 million ($2.82 million), or (180%). The
finance income was Rs.23 million ($0.48 million) for nine months ended December 31, 2009, compared
to Rs.93 million for nine months ended December 31, 2008, representing a decrease of Rs.70 million
($1.50 million) due to closure of fixed deposits for working capital purposes. The finance expense
was Rs. 228 million ($4.88 million) for nine months ended December 31, 2009, compared to
Rs.166million for the nine months ended December 31, 2008, representing an increase of Rs.62
million ($1.33 million) due to increase in bank charges and on account of increased bank
borrowings.
Page 36 of 46
Share of profit of investment in associate. The share of profit of investment in associate was
Rs.65 million ($ 1.39 million) for nine months ended December 31, 2009,compared to Rs.39 million
for nine months ended December 31, 2008, representing a increase of Rs.26 million ($0.57 million),
or 67 %. This was due to sluggish market for MF Global Sify Securities India Private Limited during
the corresponding period of the previous year.
Liquidity and Capital Resources
The following table summarizes our statement of cash flows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
Particulars |
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
U.S Dollars |
|
Earnings / (Loss) after tax |
|
|
167,684 |
|
|
|
(647,048 |
) |
|
|
3,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other adjustments for non-cash items |
|
|
703,661 |
|
|
|
638,978 |
|
|
|
15,075 |
|
Income taxes paid |
|
|
(161,250 |
) |
|
|
(237,296 |
) |
|
|
(3,454 |
) |
Net decrease (increase) in working capital |
|
|
4,025 |
|
|
|
(266,790 |
) |
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
Net cash from / (used in) operating activities |
|
|
714,120 |
|
|
|
(512,155 |
) |
|
|
15,299 |
|
Net cash from / (used in) investing activities |
|
|
(769,929 |
) |
|
|
(824,870 |
) |
|
|
(16,494 |
) |
Net cash from / (used in) financing activities |
|
|
(346,206 |
) |
|
|
397,271 |
|
|
|
(7,417 |
) |
Effect of exchange rate changes on cash and cash
equivalents |
|
|
3,307 |
|
|
|
(143 |
) |
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
Net increase / (decrease) in cash and cash equivalents |
|
|
(398,708 |
) |
|
|
(939,899 |
) |
|
|
(8,541 |
) |
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, we had a cash and cash equivalents of Rs.(86) million ($1.84 million),
including a positive working capital of Rs.20 million ($0.43 million), cash and bank balances of
Rs.868 million ($19.47 million), and bank borrowings of Rs.1,332 million ($28.54 million). Based
on the projected cash flows, capital infusion by promoters, available lines of credit including
fresh sanction of term loan, we will have sufficient resources to meet capital expenditure needs
and working capital requirements over the course of the next 12 months. The capital infusion of
Rs. 4,000 million ($ 88.63 million) will take place in tranches over a period as per companys
fund requirement. The Company obtained the approval of shareholders for this infusion at its
annual general meeting held on September 27, 2010. See note 27 in the notes to the unaudited
condensed consolidated interim financial statements.
Our principal sources of liquidity are our borrowings from banks and the cash flow that we
generate from our operations. Our external sources of credit include facilities sanctioned to us
by Indian banks. We have working capital facilities in the form of cash credit and overdraft
facilities of Rs.800 million ($ 17.14 million) and the same has been utilized fully as on December
31, 2009. Further, we were provided non-funded limits of Rs.1,350 million ($28.92 million)
(primarily in the form of bank guarantees and letters of credit) out of which Rs.92 million ($1.97
million) remained unutilized as of December 31, 2009. We believe that our cash and cash
equivalents, short-term investments and working capital lines are sufficient to meet our present
working capital requirements for the next 12 months. However, our ongoing working capital
requirements are significantly affected by the profitability of our operations and we continue to
periodically evaluate existing and new sources of liquidity and financing.
We are taking all steps to improve the cash position to meet our currently known requirements at
least over the next twelve months. In the light of the highly dynamic nature of our business,
however, we cannot assure you that our capital requirements and sources will not change
significantly in the future.
Cash balances held in Indian currency were Rs.868 million ($ 18.59 million) and Rs.1,710 million ($
27.91 million) as of December 31, 2009 and December 31, 2008, respectively. These amounts include
cash and cash equivalents and restricted cash.
Cash from operating activities for the nine months ended December 31, 2009 and cash used in
operating activities for nine months ended December 31, 2008 was Rs.714 million ($15.29 million)
and Rs.512 million respectively. This is primarily due to increase in trade and other receivables
by Rs.550 million ($ 11.78 million) and Rs.806 million for the nine months December 31, 2009 and
2008, increase in other assets by Rs. 83 million ($ 1.78 million) for the nine months December 31,
2009 and decrease of Rs.112 million for the nine months December 31, 2008, decrease in inventories
by Rs.22 million ($ 0.47 million) for the nine months December 31, 2009 and increase of Rs.36
million for the nine months December 31, 2008, increase in trade and other payables by Rs.492
million ($ 10.53 million) for the nine months December 31, 2009 and increase of Rs.305 million for
the nine months December 31, 2008, increase in deferred revenues by Rs.114 million ($ 2.45
million) and Rs.123 million for the nine months December 31, 2009 and 2008 and increase in employee
benefits by Rs.8 million ($ 0.18 million) and Rs.37 million for the nine months December 31, 2009
and 2008.
Page 37 of 46
Cash used in investing activities for the nine months ended December 31, 2009 and 2008 was Rs.769
million ($16.50 million) and Rs.825 million. These amounts were principally incurred for the
establishment of a new data center and purchase of routers, modems, ports, servers and other
capital equipment in connection with the expansion of our network of Rs.665 million ($
14.25million) and Rs.879 million for the nine months December 31, 2009 and 2008. Expenditure on
intangibles increased by Rs.198 million ( $ 4.24 million) and Rs.93 million for the nine months
ended December 31, 2009 and 2008. This is primarily on account of payment towards under sea cable
arrangement in Europe India Gateway contract. It is partially off-set by amounts contributed by
finance income amounting to Rs.69 million ($ 1.48 million) and Rs.134 million for the months
December 31, 2009 and 2008.
Cash used in financing activities for nine months ended December 31, 2009 was Rs.346 million ($
7.42 million) represented by repayments to banks to the extent of Rs.62 million ($1.32 million)
and payment of finance charges of Rs.250 million ($5.36 million) and repayment of finance lease
liabilities of Rs.35 million ($0.74 million) and cash from financing activities for the nine months
ended December 31, 2008 was Rs.397 million represented by borrowings from banks to the extent of
Rs.557 million and off-set by payment of finance charges of Rs.157 million and repayment of finance
lease liabilities of Rs.2 million.
Income Tax Matters
We have a substantial business loss being carry forward for financial reporting purposes. Under
Indian Tax law, loss carry forwards from a particular year may be used to offset taxable income
over the next eight years. The statutory corporate income tax rate and the surcharge thereon are
subject to change in line with the changes announced in the Union Budget each year. For fiscal year
2009, the corporate income tax rate is 30%, subject to a surcharge of 10% and education cess of 3%,
resulting in an effective tax rate of 33.99%. For Fiscal year 2010, the corporate Income Tax rate
is 30%, subject to a surcharge of 10%(if the Company makes taxable profits greater than Rs.10
million) and education cess of 3%, resulting in an effective tax rate of 30.9% for companies who
have taxable profits less than Rs.10 million and 33.99% for companies who have taxable profits
greater than Rs.10 million. Further in India, companies are subject to a Minimum Alternate Tax
(MAT) of 15% on the book profits of the Company. There were few changes in the income tax rates
which were introduced in the union budget 2010-11 of the Government of India. The key changes
included the reduction of the surcharge to 7.5% and the increase of MAT to 18% of book profits. We
cannot assure you that the current income tax rate will remain unchanged in the future. We also
cannot assure you that the surcharge will be in effect for a limited period of time or that
additional surcharges will not be levied by the Government of India. Currently, dividend income is
exempt from tax for shareholders. Domestic companies are liable to pay dividend distribution tax
at the rate of 15%.
Off-Balance Sheet Arrangement
We have not entered into any off balance sheet arrangement other than contractual obligations such
as operating lease arrangements disclosed below as defined by SEC final rule 67 (FR-67)
Disclosures in Managements Discussion and Analysis about off balance sheet arrangements and
aggregate contractual obligations.
Contractual obligations
Set forth below are our contractual obligations as of December 31, 2009:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period (Rs 000s) |
|
|
|
|
|
|
|
Less |
|
|
|
|
|
|
|
|
|
|
More than 5 |
|
Contractual obligations |
|
Total |
|
|
than 1 year |
|
|
1-3 years |
|
|
3-5 years |
|
|
years |
|
Long term debt obligations |
|
|
460,284 |
|
|
|
|
|
|
|
426,847 |
|
|
|
33,437 |
|
|
|
|
|
Short term borrowings |
|
|
871,957 |
|
|
|
871,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease obligations |
|
|
183,569 |
|
|
|
40,895 |
|
|
|
92,681 |
|
|
|
49,993 |
|
|
|
|
|
Non-cancellable operating lease obligations |
|
|
1,639,666 |
|
|
|
122,699 |
|
|
|
200,287 |
|
|
|
207,895 |
|
|
|
1,108,785 |
|
Proposed lease obligations |
|
|
2,423,554 |
|
|
|
|
|
|
|
279,950 |
|
|
|
269,588 |
|
|
|
1,874,016 |
|
Payments towards Europe India Gateway |
|
|
204,543 |
|
|
|
204,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase obligations |
|
|
44,371 |
|
|
|
44,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 38 of 46
Also refer Note a c below
Proposed lease obligations with VALS Developers Private Ltd
VALS Developers Private Limited (VALS) is owned and controlled by Raju Vegesna Infotech &
Industries Private Limited, in which Mr. Raju Vegesna, our principal share holder and Chief
Executive Officer, is holding 94.66% equity in his personal capacity. During the year ended March
31, 2009, Sify entered into a Memorandum of Understanding (MoU) for long term lease with VALS
Developers Private Limited to obtain land and building which is in the process of being
constructed. The lease agreement, when final and executed, was expected to have an initial
non-cancellable term of 5 years, with a further option for Sify to renew or cancel the lease for
the incremental five year terms. In connection with this memorandum of understanding, Sify has paid
a security deposit of Rs.125,700 and advance rental of Rs.157,125 to VALS. As per the terms of the
MOU, the security deposit will be refunded at the end of lease term and the advance rental would be
adjusted over a period of 15 months from the commencement of the lease. Subsequently on October
30,2010, the Board of Directors have proposed to cancel the MoU for lease arrangement and has
decided to acquire the property which is under construction from the third party directly. The
above deposits would be adjusted against the consideration payable for acquiring the property.
Note
a) Other liabilities amounting to Rs.160 Million ($3.43 million) primarily comprise of deposits
received from franchisees. For such amounts, the extent of the amount and the timing of payment /
cash settlement are not readily estimable or determinable, at present. Accordingly, we did not
include these under contractual obligations.
b) Standby letter of credit and guarantees has not been included in the above mentioned table of
contractual obligations.
c) In addition to the above noted contractual obligations, in accordance with IAS 19 Employee
Benefits, the total accrued liability for defined benefit plans recognised as of December 31, 2009,
was Rs.68 million ($ 146 million) and disclosed under employee benefits.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
General
Market risk is the risk of loss of future earnings, to fair values or to future cash flows
that may result from a change in the price of a financial instrument. The value of a financial
instrument may change as a result of changes in the interest rates, foreign currency exchange
rates, commodity prices, equity prices and other market changes that affect market risk sensitive
instruments. Market risk is attributable to all market risk sensitive financial instruments
including investments, foreign currency receivables, payables and debt. Our exposure to market risk
is a function of our investment and borrowing activities and our revenue generating activities in
foreign currency. The objective of market risk management is to avoid excessive exposure of our
earnings and equity to loss.
Risk Management Procedures
We manage market risk through a corporate treasury department, which evaluates and
exercises independent control over the entire process of market risk management. Our corporate
treasury department recommends risk management objectives and policies which are approved by senior
management and our Audit Committee. The activities of this department include management of cash
resources, implementing hedging strategies for foreign currency exposures, borrowing strategies,
and ensuring compliance with market risk limits and policies on a daily basis.
Recent Accounting Pronouncements
a) |
|
Standards early adopted by the Company |
|
|
|
IFRS 3 (Revised), Business Combinations, as amended, is applicable for annual periods
beginning on or after July 1, 2009. This standard was early adopted by the Group as at April
1, 2009. Business Combinations consummated after April 1, 2009 will be recorded under this
standard. IFRS 3 (Revised) primarily requires the acquisition-related costs to be recognized
as period expenses in accordance with the relevant IFRS. Costs incurred to issue debt or
equity securities are required to be recognized in accordance with IAS 39. Consideration,
after this amendment, will include fair values of all interests previously held by the
acquirer. Re-measurement of such interests to fair value would be carried out through net
profit in the statement of comprehensive income. Contingent consideration is required to be
recognized at fair value even if not deemed probable of payment at the date of acquisition. |
Page 39 of 46
|
|
|
IFRS 3 (Revised) provides an explicit option on a transaction-by-transaction basis, to measure
any Non-controlling interest (NCI) in the entity acquired at fair value of their proportion of
identifiable assets and liabilities or at full fair value. The first method will result in a
marginal difference in the measurement of goodwill from the existing IFRS 3; however the
second approach will require recording goodwill on NCI as well as on the acquired controlling interest. Upon
consummating a business combination in future, the company is likely to adopt the first method
for measuring NCI. |
|
|
|
IAS 27, as amended, is applicable for annual periods beginning on or after July 1, 2009.
Earlier adoption is permitted provided IFRS 3 (Revised) is also early adopted. This standard
was early adopted by the Company as at April 1, 2009. It requires a mandatory adoption of
economic entity model which treats all providers of equity capital as shareholders of the
entity. Consequently, a partial disposal of interest in a subsidiary in which the parent
company retains control does not result in a gain or loss but in an increase or decrease in
equity. Additionally purchase of some or all of the non-controlling interests is treated as
treasury transaction and accounted for in equity and a partial disposal of interest in a
subsidiary in which the parent company loses control triggers recognition of gain or loss on
the entire interest. A gain or loss is recognized on the portion that has been disposed off
and a further holding gain is recognized on the interest retained, being the difference
between the fair value and carrying value of the interest retained. This Standard requires
an entity to attribute their share of net profit / loss and reserves to the non-controlling
interests even if this results in the non-controlling interests having a deficit balance.
Consistent with the provisions of IFRS 3 (Revised), the Group accounted for its acquisition
of 26% non-controlling interest in Sify Communications Limited on June 26, 2009 as an equity
transaction. Also refer to note 21. |
b) |
|
Recently adopted accounting pronouncements |
|
|
|
The Company adopted IAS 1
(revised), Presentation of Financial Statements, effective
April 1, 2009. The revision aims to improve users ability to analyze and compare the
information given in financial statements. IAS 1 sets overall requirements for the
presentation of financial statements, guidelines for their structure and minimum
requirements for their content. The revisions include non-mandatory changes in the titles of
some of the financial statements to reflect their function more clearly (for example, the
balance sheet is renamed as statement of financial position). The revised IAS 1 resulted in
consequential amendments to other standards and interpretations. The Group has applied
revised IAS 1 Presentation of Financial Statements (2007), which has became effective as of
April 1, 2009. As a result, the Group presents in the consolidated statement of changes in
equity all owner changes in equity, whereas all non-owner changes in equity are presented in
the consolidated statement of comprehensive income. Furthermore, the Group has included two
statements to display all items of income and expense recognized during the period i.e., a
Statement of Income and a Statement of Comprehensive Income. Comparative information has
been re-presented so that it also is in conformity with the revised standard. Since the
change in accounting policy only impacts presentation aspects, there is no impact on
earnings/ loss per share. |
|
|
|
IFRIC 18 Transfer of assets from customers defines the treatment for property, plant
and equipment transferred by customers to companies or for cash received to be invested in
property, plant and equipment that must be used to either connect the customer to a network
or to provide the customer with ongoing access to a supply of goods or services or to both.
The item of property, plant and equipment is to be initially recognized by the Company at
fair value with a corresponding credit to revenue. If an ongoing service is identified as a
part of the agreement, the period over which revenue will be recognized for that service
would be determined by the terms of the agreement with the customer. If the period is not
clearly defined, then revenue should be recognized over a period no longer than the useful
life of the transferred asset used to provide the ongoing service. This interpretation is
applicable prospectively to transfers of assets from customers received on or after July 1,
2009. The Company has adopted this interpretation prospectively for all assets transferred
after July 1, 2009. There has been no impact on the Groups consolidated financial
statements as a result of the adoption of this interpretation. |
|
|
|
In March 2009, the
Amendments to IFRS 7 Financial Instrument disclosure, amended
certain disclosure requirements in the standard. As a result, entities are required to
classify fair value measurements for financial instruments measured at fair value in the
statement of financial position, using a three level fair value hierarchy that reflects the
significance of inputs used in the measurements. In addition, the amendments enhance
disclosure requirements on the nature and extent of liquidity risks to which an entity is
exposed. The Amendments to IFRS 7 apply for annual periods beginning on or after January 1,
2009 and provides an exception in the first year of application for providing comparative
information. |
Page 40 of 46
c) |
|
Standards issued but not yet effective |
|
|
|
A number of new standards, amendments to standards and interpretations are not yet effective
for the period December 31, 2010, and have not been applied in preparing these unaudited
condensed consolidated interim financial statements: |
|
|
|
Improvements to IFRS- In April 2009, the IASB issued Improvements to IFRSs a
collection of amendments to twelve International Financial Reporting Standards as part of
its program of annual improvements to its standards, which is intended to make necessary,
but non-urgent, amendments to standards that will not be included as part of another major
project. The latest amendments were included in exposure drafts of proposed amendments to
IFRS published in October 2007, August 2008, and January 2009. The amendments resulting
from this standard mainly have effective dates for annual periods beginning on or after
January 1, 2010, although entities are permitted to adopt them earlier. In May 2010, the
IASB issued Improvements to IFRS 2010, which comprises 11 amendments to 7 standards.
Effective dates, early application and transitional requirements are addressed on a
standard-by-standard basis. The majority of the amendments will be effective January 1,
2011. The Company is evaluating the impact, these amendments will have on the Groups
consolidated financial statements. |
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In November 2009, the IASB issued IFRS 9, Financial instruments, to introduce certain
new requirements for classifying and measuring financial assets. IFRS 9 divides all
financial assets that are currently in the scope of IAS 39 into two classifications those
measured at amortized cost and those measured at fair value. The standard along with
proposed expansion of IFRS 9 for classifying and measuring financial liabilities,
de-recognition of financial instruments, impairment, and hedge accounting will be
applicable from the year 2013, although entities are permitted to adopt earlier. The
Company is evaluating the impact which this new standard will have on the Groups financial
statements. |
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In November 2009, the IASB issued IFRIC 19, Extinguishing Financial Liabilities with
Equity Instruments; to introduce requirements when an entity renegotiates the terms of a
financial liability with its creditor and the creditor agrees to accept the entitys shares
and other equity instruments to settle the financial liability fully or partially. This
interpretation is effective from annual periods beginning on or after July 1, 2010. |
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In October 2009, the IASB issued Classification of Rights Issue Amendment to IAS 32
Financial Instruments: Presentation with an effective date of February 1,2010. |
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In November 2009, the IASB revised IAS 24 Related Party Disclosures with an effective
date of January 1,2011. |
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In November 2009, the IASB issued Prepayments of a Minimum Funding Requirement -
Amendments to IFRIC 14, IAS19 the Limit on a Defined Benefit Asset, Minimum Funding
Requirement and their Interaction, with an effective date of January 1, 2011. |
Critical accounting policies
The accounting policies applied by the group in these Unaudited Condensed Consolidated Interim
Financial Statements are the same as those applied by the Group in its Consolidated Financial
Statements as at and for the year ended March 31 2009 except for the following:
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The Group has applied revised IAS 1 Presentation of Financial Statements (2007), which has
became effective as of April 1, 2009. As a result, the Group presents in the consolidated
statement of changes in equity all owner changes in equity, whereas all non-owner changes in
equity are presented in the consolidated statement of comprehensive income. Furthermore, the
Group has included two statements to display all items of income and expense recognized
during the period i.e., a Statement of Income and a Statement of Comprehensive Income.
This presentation has been applied in these Unaudited Condensed Consolidated Interim
Financial Statements as of and for the three months and nine months ended December 31, 2009.
Comparative information has been re-presented so that it also is in conformity with the
revised standard. Since the change in accounting policy only impacts presentation aspects,
there is no impact on earnings/ loss per share. |
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(ii) |
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During the quarter ended June 30, 2009, the Company started generating revenues from a
construction contract. Contract revenue includes the initial amount agreed in the contract
plus any variations in contract work, claims and incentive payments, to the extent that it is
probable that they will result in revenue and can be measured reliably. As soon as the
outcome of a construction contract can be estimated reliably, contract revenue is recognised
in profit or loss in proportion to the stage of completion of the contract. Contract expenses
are recognised as incurred unless they create an asset related to future contract activity.
The stage of completion is assessed by reference to the cost incurred till date to the total
estimated costs. When the outcome of a construction contract cannot be estimated reliably,
contract revenue is recognised only to the extent of contract costs incurred that are likely
to be recoverable. An expected loss on a contract is recognised immediately in profit or
loss. |
Also refer to Note 3 in unaudited condensed consolidated interim financial statements included
with this Report.
Page 41 of 46
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 6-K, our management, with
the participation of our Chief Executive Officer and Chief Financial Officer, has carried out an
evaluation of the effectiveness of our disclosure controls and procedures. The term disclosure
controls and procedures means controls and other procedures that are designed to ensure that
information required to be disclosed in the reports we file or submit under the Securities Exchange
Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the SEC. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in our reports that we file or submit under the Exchange Act is
accumulated and communicated to management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding our required disclosure. In
designing and evaluating our disclosure controls and procedures, management recognizes that any
controls and procedures, no matter how well conceived and operated, can only provide reasonable
assurance that the objectives of the disclosure controls and procedures are met.
Based on their evaluation as of December 31, 2009, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act,
are not effective as a result of a material weakness in internal control over financial reporting.
Internal control over financial reporting
1) |
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Our management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our
internal control over financial reporting is a process to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with International Financial Reporting Standards, as
issued by the International Accounting Standards Board. Our internal control over financial
reporting includes those policies and procedures that: |
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pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets. |
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provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with applicable accounting principles, and
that our receipts and expenditures are being made only in accordance with authorizations of
our management and directors; and |
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provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the
financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
2) |
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Management assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009. |
A material weakness is a control deficiency, or combination of control deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. Management identified the following
material weakness in internal control over financial reporting as of December 31, 2009:
During the period ended December 31, 2009, the controls over the accounting evaluation of
certain revenue transactions relating to the purchase of products for onward sales in the Systems
Integration business failed. Certain transactions which otherwise qualified for being accounted
on a net basis were reported on a gross basis as revenues and cost of goods sold. The root
cause of the error was the result of a failure in the operating effectiveness of an internal
control relating to carrying out an independent accounting review of the trading transactions of
the System Integration business. Whilst, the potential for error existed and the control
deficiency remained unremediated as at December 31, 2009 and March 31, 2010, the errors
identified were corrected prior to the finalization of the December 31, 2009 unaudited interim
financial statements and March 31, 2010 annual consolidated financial statements. Due to the
existence of this control deficiency, management concluded that there was a reasonable
possibility that a material misstatement of the companys annual financial statements may not
have been prevented or detected on a timely basis.
Page 42 of 46
Because of the material weakness described above, management has concluded that the Company did
not maintain effective internal control over financial reporting as on December 31, 2009, based
on criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
3) |
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The following are the change in our internal control over financial reporting identified in
connection with the evaluation required by paragraph(d) of 17 CFR 240.13a-15 or 240.13a-15 or
240.15d-15 that occurred during the period covered by the quarterly report that has materially
affected, or is reasonably likely to materially affect, our internal control over financial
reporting. |
In order to remediate the material weakness described above, during the months of August and
September 2010, the Company:
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introduced specific policies to ensure that all transactions relating to purchase of
products for onward sales in the System Integration business are subject to a fact specific
accounting evaluation to enforce operating effectiveness. |
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augment the IFRS expertise in our accounting team by imparting specific training to
evaluate the trading transactions from a Gross Versus Net reporting. |
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performed an accounting evaluation of all the transactions of purchase of products for
onward sales in the Systems and noted that the accounting controls surrounding
appropriateness of the Gross versus Net reporting are operating effectively. |
Page 43 of 46
Part II. Other Information
Item 1. Legal Proceedings
The company is subject to legal proceedings and claims, which have arisen in the ordinary course of
its business. These legal actions, when ultimately concluded and determined, will not, in the
opinion of management, have a material effect on the results of operations or the financial
position of the Company.
See Note 20 of notes to our Unaudited Condensed Consolidated Interim Financial Statements in Part I
above and Note 38 of the financial statements included in our Annual Report on Form 20-F for the
year ended March 31, 2009.
Item 1A. Risk Factors
For information regarding factors that could affect the Companys results of operations, financial
condition and liquidity, see the risk factors discussion set forth in Item 1A of our Annual Report
on Form 20-F for the fiscal year ended March 31, 2009 and the information under Forward-Looking
Statements included in this Report. There have been no material changes to our Risk Factors from
those disclosed in our Annual Report on Form 20-F for the fiscal year ended March 31, 2009, except
as set forth below:
We may be required to list our Equity Shares on an Indian stock exchange. If we were to list our
Equity Shares on an Indian stock exchange, conditions in the Indian securities market may affect
the price or liquidity of our Equity Shares.
On June 28, 2006, the Ministry of Finance of the Government of India issued amendments to the
Issue Of Foreign Currency Convertible Bonds And Ordinary Shares (Through Depositary Receipt
Mechanism) Scheme, 1993 (the Scheme). The amendments included a statement that Indian companies
that have issued depositary receipts and/or foreign currency convertible bonds prior to August 31,
2005 will be permitted to comply with listing conditions on the Indian stock exchanges within three
years of having started to make profits. At present, the manner in which the amendments to the
Scheme prescribed by the Ministry of Finance will be interpreted and implemented, and how they
would apply to us, is still uncertain.
We may be required by the Government of India at some point in time to list on a local Indian stock
exchange. We may not be able to comply with any timeline for listing and other standards imposed on
us, and based on the legal opinion we understand that there are no penal consequences for the said
non-compliance.
The Indian securities markets are smaller than securities markets in more developed economies and
are more volatile than the securities markets in other countries. Indian stock exchanges have in
the past experienced substantial fluctuations in the prices of listed securities.
Indian stock exchanges have also experienced problems that have affected the market price and
liquidity of the securities of Indian companies. These problems have included temporary exchange
closures, broker defaults, settlement delays and strikes by brokers. In addition, the governing
bodies of the Indian stock exchanges have from time to time restricted securities from trading,
limited price movements and restricted margin requirements. Further, from time to time, disputes
have occurred between listed companies and the Indian stock exchanges and other regulatory bodies that, in some cases, have had a negative effect
on market sentiment. If we were to list our Equity Shares on an Indian Stock Exchange and similar
problems occur in the future, they could harm the market price and liquidity of the Equity Shares
and this could have an adverse effect on the price of our ADSs.
If we fail to maintain an effective system of internal control over financial reporting, we may not
be able to accurately report our financial results or prevent or detect fraud. As a result, current
and potential investors could lose confidence in our financial reporting, which could harm our
business and have an adverse effect on our stock price.
During the period ended December 31, 2009, the controls over the accounting evaluation of
certain revenue transactions relating to the purchase of products for onward sales in the Systems
Integration business failed. Certain transactions which otherwise qualified for being accounted on
a net basis were reported on a gross basis as revenues and cost of goods sold. The root cause
of the error was the result of a failure in the operating effectiveness of an internal control
relating to carrying out an independent accounting review of the trading transactions of the System
Integration business. Whilst, the potential for error existed and the control deficiency remained
unremediated as at December 31, 2009 and March 31, 2010, the errors identified were corrected prior
to the finalization of the December 31, 2009 unaudited interim financial statements and March 31,
2010 annual consolidated financial statements. Due to the existence of this control deficiency,
management concluded that there was a reasonable possibility that a material misstatement of the
companys annual financial statements may not have been prevented or detected on a timely basis.
Page 44 of 46
Because of the material weakness described above, management has concluded that the Company
did not maintain effective internal control over financial reporting as on December 31, 2009, based
on criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
It is possible that in the future, material weaknesses could be identified in our internal
controls over financial reporting and we could be required to further implement remedial measures.
If we fail to maintain effective disclosure controls and procedures or internal control over
financial reporting, we could lose investor confidence in the accuracy and completeness of our
financial reports, which could have a material adverse effect on our stock price.
We may not be able to maintain our NASDAQ Global Market listing due to non filing and/or late
filing of periodic reports.
The Company has not filed its Form 20-F for the fiscal year ended March 31, 2010 before the due
date of October 15, 2010 and therefore did not comply with Nasdaq Listing Rule 5250(c)(1) for
continued listing. Consequent to this, the Company has received a Delinquency Letter dated October
18, 2010 from NASDAQ directing the Company to submit a plan to regain compliance before December
17, 2010. However, as the Company is filing the Form 20-F before that date, there is no
requirement to submit the plan to NASDAQ.
In the event of non filing and/or late filing of periodic reports in future, the Company may become
a delinquent issuer and may be compelled to submit a plan to regain compliance to the satisfaction
of NASDAQ supporting our request for an exception to timely filing.
If we fail to regain compliance prior to the expiration of a Nasdaq Staff exception or if Nasdaq
Staff does not accept our plan of compliance, our stocks may be delisted in NASDAQ and the trading
of our stocks may be moved to Over the Counter Bulletin Board (OTCBB) and Pink Sheets operated by
Pink OTC markets.
Delisting may result in loss of reputation and violation of covenants contained in our equity or
debt agreements.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
None.
Items 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
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Exhibit Number |
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Description of Document |
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12.1 |
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Rule 13a-14(a) Certification of Principal Executive Officer |
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12.2 |
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Rule 13a-14(a) Certification of Principal Financial Officer |
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13.1 |
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Section 1350 Certification of Principal Executive Officer |
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13.2 |
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Section 1350 Certification of Principal Financial Officer |
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99.1 |
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Report
of Independent Registered Public Accounting Firm of the Group |
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99.2 |
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Review
report of Independent Registered Public Accounting Firm of MF Global
Sify Securities India Private Limited, a significant associate in the
Group |
Page 45 of 46
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date:
November 30, 2010
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SIFY TECHNOLOGIES LIMITED
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By: |
/s/ MP Vijay Kumar
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Name: |
M P Vijay Kumar |
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Title: |
Chief Financial Officer |
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Page 46 of 46