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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
 Or
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
 For the fiscal year ended March 31, 2011.
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
 For the transition period from  to
 o
    
    SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
 Date of event requiring this shell Company report
 Commission file number 000-27663
 Sify Technologies Limited
 (Exact name of Registrant as specified in its charter)
 (Translation at Registrants name into English)
 (Jurisdiction of incorporation or organization)
 (Address of principal executive office)
 (Name,Telephone,Email and/or Facsimile number and Address of Company Contact Person)
 Securities registered or to be registered pursuant to Section 12(b) of the Act
 Title of each class
    
    Name of each Exchange on which registeredAmerican Depository Shares, each represented by 
one Equity Share, par value Rs.10 per share
    
    Nasdaq Global Market
 Securities registered or to be registered pursuant to Section 12(g) of the Act
 Title of each class
    
    Name of each Exchange on which registeredNone
    
    Not Applicable
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act
  (Title of class)
    o No þ
  o No þ
   Yes þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  US GAAP o
    
    International Financial Reporting Standards as
    
    Other oissued by the International Accounting Standard Board þ
  Yes o þ




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Table of Contents
 Item
    
    PageCurrency of Presentation and Certain Defined Terms
    
    
    1Forward-Looking Statements
    
    
    2PART IItem 1. Identity of Directors, Senior Management and Advisers
    
    
    3Item 2. Offer Statistics and Expected Timetable
    
    
    3Item 3. Key Information
    
    
    3Item 4. Information on the Company
    
    
    24Item 4A. Unresolved Staff Comments
    
    
    39Item 5. Operating and Financial Review and Prospects
    
    
    39Item 6. Directors, Senior Management and Employees
    
    
    61Item 7. Major Shareholders and Related Party Transactions
    
    
    67Item 8. Financial Information
    
    
    70Item 9. The Offer and Listing
    
    
    72Item 10. Additional Information
    
    
    73Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    88Item 12. Description of Securities Other Than Equity Securities
    
    
    89PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    90Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds
    
    
    90Item 15. Controls and Procedures
    
    
    90Item 16A. Audit Committee Financial Expert
    
    
    93Item 16B. Code of Ethics
    
    
    93Item 16C. Principal Accountant Fees and Services
    
    
    94Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    94Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    94Item 16F. Change in Registrants Certifying Accountant
    
    
    94Item 16G. Corporate Governance
    
    
    95PART IIIItem 17. Financial Statements
    
    
    96Item 18. Financial Statements
    
    
    96Item 19. Exhibits
    
    
    198Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 15.1Exhibit 15.2Exhibit 15.3




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Currency of Presentation and Certain Defined Terms
 Sify SifyMax.in Sify e-ports Sify online
   www.sifycorp.com
  1




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Forward-Looking Statements
    2




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PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers.
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 Selected Financial Data
 Summary of Consolidated Financial Data
   3




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Sify Technologies Limited  Consolidated Statement of Income
 Year ended 
March 31,2011Conveniencetranslation intoUS$ inthousands,(In thousands of Rupees,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    except share andexcept share data and as
    
    2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    per share dataotherwise stated)
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    (See Note1)Revenue
    
    
    6,886,629
    
    
    
    6,710,188
    
    
    
    6,162,161
    
    
    
    6,006,215
    
    
    
    5,447,347
    
    
    
    154,236Cost of goods sold and
services rendered
    
    
    (4,209,430
    )
    
    
    (4,096,538
    )
    
    
    (3,613,349
    )
    
    
    (3,419,122
    )
    
    
    2,939,329
    
    
    
    (94,276
    )Other income
    
    
    72,693
    
    
    
    131,789
    
    
    
    89,105
    
    
    
    46,152
    
    
    
    66,320
    
    
    
    1,628Selling, general and
administrative expenses
    
    
    (2,441,799
    )
    
    
    (2,482,415
    )
    
    
    (2,813,425
    )
    
    
    (2,434,715
    )
    
    
    (2,094,971
    )
    
    
    (54,688
    )Depreciation and
amortization
    
    
    (685,836
    )
    
    
    (656,797
    )
    
    
    (498,872
    )
    
    
    (394,337
    )
    
    
    (463,780
    )
    
    
    (15,360
    )Impairment loss on
intangibles including
goodwill
    
    
    (1,857
    )
    
    
    (47,269
    )
    
    
    (15,200
    )
    
    
    
    
    
    
    
    
    
    
    (42
    )Income from legal settlement
    
    
    
    
    
    
    561,120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Profit / (loss) from
operating activities
    
    
    (379,600
    )
    
    
    120,078
    
    
    
    (689,580
    )
    
    
    (195,807
    )
    
    
    15,587
    
    
    
    (8,502
    )Finance income
    
    
    45,698
    
    
    
    27,994
    
    
    
    122,565
    
    
    
    161,783
    
    
    
    154,192
    
    
    
    1,023Finance expenses
    
    
    (258,622
    )
    
    
    (293,873
    )
    
    
    (251,660
    )
    
    
    (57,682
    )
    
    
    (25,550
    )
    
    
    (5,792
    )Net
finance income / (expense)
    
    
    (212,924
    )
    
    
    (265,879
    )
    
    
    (129,095
    )
    
    
    104,101
    
    
    
    128,642
    
    
    
    (4,769
    )Share of profit of equity
accounted investee (net of
income tax)
    
    
    73,032
    
    
    
    91,135
    
    
    
    64,091
    
    
    
    181,127
    
    
    
    61,030
    
    
    
    1,636Profit / (loss) before tax
    
    
    (519,492
    )
    
    
    (54,666
    )
    
    
    (754,584
    )
    
    
    89,421
    
    
    
    205,259
    
    
    
    (11,635
    )Income tax (expense) /
benefit
    
    
    
    
    
    
    81,479
    
    
    
    (97,049
    )
    
    
    (63,975
    )
    
    
    66,113
    
    
    
    Profit / (loss) for the year
    
    
    (519,492
    )
    
    
    26,813
    
    
    
    (851,633
    )
    
    
    25,446
    
    
    
    271,372
    
    
    
    (11,635
    )Attributable to:Equity holders of the
Company
    
    
    (519,492
    )
    
    
    17,027
    
    
    
    (900,574
    )
    
    
    (4,696
    )
    
    
    240,841
    
    
    
    (11,635
    )Non-controlling interest
    
    
    
    
    
    
    9,786
    
    
    
    48,941
    
    
    
    30,142
    
    
    
    30,531
    
    
    
    (519,492
    )
    
    
    26,813
    
    
    
    (851,633
    )
    
    
    25,446
    
    
    
    271,372
    
    
    
    (11,635
    )Earnings / (loss) per shareBasic earnings /(loss) per
share
    
    
    (8.20
    )
    
    
    0.33
    
    
    
    (20.77
    )
    
    
    (0.11
    )
    
    
    5.64
    
    
    
    (0.18
    )Diluted earnings/(loss) per
share
    
    
    (8.20
    )
    
    
    0.33
    
    
    
    (20.77
    )
    
    
    (0.11
    )
    
    
    5.63
    
    
    
    (0.18
    )
  4




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Particulars  (Rupees in thousands, except share 
and per share data)
 Conveniencetranslationinto US$ inthousands,except shareand per sharedata(Rupees in thousands, except
    
    March 31,
    
    
    (see note 2)share and per share data)
    
    2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2011Rs
    
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    RsBalance Sheet data:Cash and cash equivalents
including restricted cash
    
    
    543,097
    
    
    
    878,698
    
    
    
    1,710,798
    
    
    
    1,507,327
    
    
    
    3,071,157
    
    
    
    12,163Net current assets
    
    
    (36,354
    )
    
    
    (46,814
    )
    
    
    (175,993
    )
    
    
    1,294,199
    
    
    
    2,435,290
    
    
    
    814Total assets
    
    
    9,238,371
    
    
    
    9,345,824
    
    
    
    9,145,555
    
    
    
    7,710,760
    
    
    
    7,321,891
    
    
    
    206,906Total equity attributable to
equity shareholders of the
Company
    
    
    4,665,792
    
    
    
    4,171,092
    
    
    
    3,851,693
    
    
    
    4,694,984
    
    
    
    4,538,906
    
    
    
    104,497Cash Flow DataNet cash provided by (used in):Operating activities
    
    
    225,359
    
    
    
    759,802
    
    
    
    (371,556
    )
    
    
    (839,869
    )
    
    
    116,262
    
    
    
    5,047Investing activities
    
    
    (730,650
    )
    
    
    (896,683
    )
    
    
    (1,174,156
    )
    
    
    (756,300
    )
    
    
    (708,316
    )
    
    
    (16,364
    )Financing activities
    
    
    551,700
    
    
    
    (354,486
    )
    
    
    968,797
    
    
    
    (585,200
    )
    
    
    847,939
    
    
    
    (12,356
    )
 Notes1.
    
    The convenience translation to U.S. Dollars was performed at the reference rate in the
City of Mumbai for cable transfers as published by Reserve Bank of India on March 31, 2011
of Rs.44.65 per $1.00, 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 this rate or at all.2.
    
    Reference to shares and per share amounts refer to our equity shares. Our outstanding
equity shares include equity shares held by a depository underlying our ADSs. Effective
September 24, 2002, one ADS represented one equity share.  5




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Exchange Rates
   High
    
    
    LowMonth
    
    Rs.
    
    
    Rs.September 2011
    
    
    49.67
    
    
    
    45.90August 2011
    
    
    46.13
    
    
    
    44.05July 2011
    
    
    44.69
    
    
    
    43.95June 2011
    
    
    45.10
    
    
    
    44.61May 2011
    
    
    45.38
    
    
    
    44.30April 2011
    
    
    44.68
    
    
    
    44.04
  PeriodFiscal Year Ended
    
    end
    
    
    Average
    
    
    High
    
    
    LowMarch 31
    
    Rs.
    
    
    Rs.
    
    
    Rs.
    
    
    Rs.2011
    
    
    44.65
    
    
    
    45.58
    
    
    
    47.57
    
    
    
    44.032010
    
    
    45.14
    
    
    
    47.36
    
    
    
    50.53
    
    
    
    44.942009
    
    
    50.95
    
    
    
    45.91
    
    
    
    52.06
    
    
    
    39.892008
    
    
    40.02
    
    
    
    40.13
    
    
    
    43.05
    
    
    
    38.482007
    
    
    43.10
    
    
    
    45.12
    
    
    
    46.83
    
    
    
    42.78
   Capitalization and indebtedness
  Reasons for the offer and use of proceeds
   6




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Risk Factors
  Risks Related to our Company and Industry
 We may incur losses in the future and we may not achieve or maintain profitability.
  Our profits may be impacted consequent to the withdrawal of incentive for exports availed under the
Serve from India Scheme on account of changes in Indian Government policy.
     The global economic environment, increased pricing pressure and decreased utilization rates could
negatively impact our revenues and operating results.
     7




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Currency fluctuations may affect the results or our operations or the value of our ADSs.
     We may encounter legal confrontations as the Information Technology Act 2000 lacks specificity as
to issues on online processes and/or Internet.
  Intense competition in our businesses could prevent us from improving our profitability and we may
be required to further modify the rates we charge for our services in response to new pricing
models introduced by new and existing competition which would significantly affect our revenues.
    8




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Margin squeeze may affect the results or our operations.
  Procuring power at lower costs for data centers by the competitors may put us at a disadvantage in
terms of pricing for our data center operations.
  We have added a number of new lines of business in the past years, including the operation and
licensing of public Internet cafés, as well as the provision of broadband services, security
services, e-learning software development services, managed network services and infrastructure
management services.
  
    
    continue to develop and upgrade our technology;
    
    maintain and develop strategic relationships with business partners;
    
    offer compelling online services and content;
  Despite our best efforts to optimize costs, our future operating results could fluctuate in part
because our expenses are relatively fixed in the short term while future revenues are uncertain,
and any adverse fluctuations could negatively impact the price of our ADSs.
  
    
    the range of corporate network/data services provided by us and the usage thereof by
our customers;
    
    the number of subscribers to our ISP services and the prevailing prices charged.
    
    advertising revenue generated by our online portal services.
  9




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
    
    the timing and nature of any agreements we enter into with strategic partners of our
corporate network/data services division;
    
    services, products or pricing policies introduced by our competitors;
    
    capital expenditure and other costs relating to our operations;
    
    the timing and nature of our marketing efforts;
    
    our ability to successfully integrate operations and technologies from any
acquisitions, joint ventures or other business combinations or investments;
    
    the introduction of alternative technologies; and
    
    technical difficulties or system failures affecting the telecommunication
infrastructure in India, the Internet generally or the operation of our websites.
   Security breaches could damage our reputation or result in liability to us.
   We face a competitive labor market for skilled personnel and therefore are highly dependent on our
existing key personnel and on our ability to hire additional skilled employees.
  The failure to keep our technical knowledge confidential could erode our competitive advantage.
   10




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Compliance with new and changing corporate governance and public disclosure requirements adds
uncertainty to our compliance policies and increases our costs of compliance.
 ,
    We may inadvertently fail to comply with local laws of other countries in connection with the
negotiation and execution of operational agreements.
  Our financial results are impacted by the financial results of entities that we do not control.
  Our inter-city network is leased from other service providers and is dependent on their quality and
availability.
   11




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The legal system in India does not protect intellectual property rights to the same extent as the
legal system of the United States, and we may be unsuccessful in protecting our intellectual
property rights.
    Our current infrastructure and its scalability may not accommodate increased use while maintaining
acceptable overall performance.
  Our increasing work with governmental agencies may expose us to additional risks.
  
    
    Such projects may be subject to a higher risk of reduction in scope or termination than
other contracts due to political and economic factors such as changes in government,
pending elections or the reduction in, or absence of, adequate funding;
    
    Terms and conditions of government contracts tend to be more onerous than other
contracts and may include, among other things, extensive rights of audit, more punitive
service level penalties and other restrictive covenants. Also, the terms of such contracts
are often subject to change due to political and economic factors;
    
    Government contracts are often subject to more extensive scrutiny and publicity than
other contracts. Any negative publicity related to such contracts, regardless of the
accuracy of such publicity, may adversely affect our business or reputation;
    
    Participation in government contracts could subject us to stricter regulatory
requirements, which may increase our cost of compliance; and
    
    Such projects may involve multiple parties in the delivery of services and require
greater project management efforts on our part. Any failure in this regard may adversely
impact our performance.
  12




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
    
    In addition, we operate in jurisdictions in which local business practices may be
inconsistent with international regulatory requirements, including anti-corruption and
anti-bribery regulations prescribed under the U.S. Foreign Corrupt Practices Act (FCPA),
which, among other things, prohibits giving or offering to give anything of value with the
intent to influence the awarding of government contracts. Although we believe that we have
adequate policies and enforcement mechanisms to ensure legal and regulatory compliance with
the FCPA, and other similar regulations, it is possible that some of our employees,
subcontractors, agents or partners may violate any such legal and regulatory requirements,
which
may expose us to criminal or civil enforcement actions, including penalties. If we fail to
comply with legal and regulatory requirements, our business and reputation may be harmed.
 We do not plan to pay dividends in the foreseeable future.
  Risks Related to the ADSs and Our Trading Market
 The interests of our significant shareholder, Mr Raju Vegesna, our Chairman and Chief Executive
Officer may differ from your interests.
  
    
    altering our Articles of Association;
    
    issuing additional shares of capital stock, except for pro rata issuances to existing
shareholders;
    
    commencing any new line of business; and
    
    commencing a liquidation.
  An investor in our ADSs may not be able to exercise preemptive rights for additional shares and may
thereby suffer dilution of such investors equity interest in us.
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ADS holders may be restricted in their ability to exercise voting rights.
 Depository)
   The market price of our ADSs has been and may continue to be highly volatile.
  
    
    perception of the level of political and economic stability in India;
    
    actual or anticipated variations in our quarterly operating results;
    
    announcement of technological innovations;
    
    conditions or trends in the corporate network/data services, Internet and electronic
commerce industries;
    
    the competitive and pricing environment for corporate network/data services and Internet
access services in India and the related cost and availability of bandwidth;
    
    the perceived attractiveness of investment in Indian companies;
    
    acquisitions and alliances by us or others in the industry;
    
    changes in estimates of our performance or recommendations by financial analysts;
    
    market conditions in the industry and the economy as a whole;
    
    introduction of new services by us or our competitors;
    
    changes in the market valuations of other Internet service companies;
    
    announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
    
    our failure to integrate successfully our operations with those of any acquired
companies;
  14




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
    
    additions or departures of key personnel; and
    
    other events or factors, many of which are beyond our control.
  An active or liquid market for the ADSs is not assured.
  The future sales of securities by us or existing shareholders may reduce the price of our ADSs.
  The current capital and credit market conditions may adversely affect our access to capital, the
cost of capital, and ability to execute our business plan.
   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 require
compliance with new and changing regulations framed by Securities Exchange Board of India, listing
requirements of stock exchange, corporate governance, accounting and public disclosure requirements
which might add uncertainty to our compliance policies and increases
our costs of compliance.
    15




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Risks Related to Investments in Indian Companies
  Changes in the policies of the Government of India could delay the further liberalization of the
Indian economy and adversely affect economic conditions in India generally, which could impact our
business and prospects.
  Regional conflicts in South Asia could adversely affect the Indian economy, disrupt our operations
and cause our business to suffer.
  Terrorist attacks or a war could adversely affect our business, results of operations and financial
condition.
  The markets in which we operate are subject to the risk of earthquakes, floods and other natural
disasters.
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We are subject to foreign investment restrictions under Indian law that limit our ability to
attract foreign investors which, together with the lack of a public market for our equity shares,
may adversely impact the value of our ADSs.
   The Government of India may change its regulation of our business or the terms of our license to
provide Internet access services, Voice over Internet Protocol (VoIP) and VPN services without our
consent, and any such change could decrease our revenues and/or increase our costs, which would
adversely affect our operating results.
    In the event that the Government of India or the Government of another country changes its tax
policies in a manner that is adverse to us, our tax expense may materially increase, reducing our
profitability.
  Risks Related to the Internet Market in India
   17




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The success of our business depends on the acceptance of the Internet in India, which may be slowed
or halted by high bandwidth costs and other technical obstacles in India.
  We may fail to exploit the market for WiMax services because of lack of access to spectrum.
   We may be compelled to surrender the spectrum that was allotted to us earlier.
  We may lose our broadband services to retail segment to competitors, and we do not control the
delivery of broadband services to the homes of our customers.
   Our connectivity business may stagnate with a declining contribution.
  We may not be able to retain and acquire customers for our data centers.
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Our datacenters may not be competitive enough in terms of green features.
  We may lose relevance and revenues if we do not position our business models in line with current
and future technology trends.
  We may fail to augment our skills and capability to best manage our services over Internet Protocol
and data networks.
  It may not be possible for us to retain our brand equity if we do not resort to huge investments
for brand development.
  We may not meet the selection criteria set for high value contracts by the Governments.
  The success of our business depends on our software development of our capability.
  We may fail to offer end-to-end managed services to sustain our position.
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We may not get repeat corporate orders to optimize the capacity utilisation.
  Absence of policy support will hamper Internet and Data Services.
   Constant improvement of technology standards/ skills and evolving tools and applications are
essential to sustain our position in remote management of IT infrastructure.
   The continued recession in the United States affects sales of our e-Learning and IMS services.
  Emergence of Enterprise Software Suites may hamper our growth in eLearning stream.
  We may not be able to grow our business if online advertising in our markets does not expand.
  
    
    our ability to attract and retain advertisers at profitable rates in light of
intense competition;
    
    our ability to generate and continue to grow a large community of users with
demographics attractive to advertisers;
    
    advertisers acceptance of the Internet as an effective and sustainable medium;
    
    the effectiveness of our advertising delivery, tracking and reporting systems; and
    
    our ability to adapt, including technologically, to new forms of Internet
advertising
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If we do not continue to develop and offer compelling content, products and services, our ability
to attract new customers or maintain the engagement of our existing consumers could be adversely
affected.
   The viability of our cyber café services depends on the success of the franchisees to generate or
sustain adequate profitability.
  Our cybercafés may not fetch premium prices due to competition from unorganized sector.
  Heightened security concerns for cybercafés issued by the governments will discourage franchisees
to operate such cybercafés.
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The expected growth for broadband services to retail segment may come down.
  Our pricing for broadband services to retail segment may not be competitive.
  The high cost of accessing the Internet in India limits our pool of potential customers and
restricts the amount of revenues that our Internet access services division might generate.
  The success of our business depends on the acceptance and growth of electronic commerce in India,
which is uncertain, and, to a large extent, beyond our control.
  
    
    inconsistent quality of service;
    
    the need to deal with multiple and frequently incompatible vendors;
    
    inadequate legal infrastructure relating to electronic commerce in India;
    
    a lack of security of commercial data, such as credit card numbers; and
    
    very few Indian companies accepting credit card numbers over the Internet.
   22




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Risks Related to the Internet
 Our business may not be compatible with delivery methods of Internet access services developed in
the future.
  We are subject to quality of service (QOS) guidelines issued by TRAI. Failure to comply with one or
more guidelines may expose us into fines/penalties.
  
    
    All Internet service providers shall provide adequate information to subscribers
regarding Internet/broadband services being offered and marketed by them.
    
    All Internet service providers shall provide information regarding contention ratios
or the number of users competing for the same bandwidth, adopted by them to provide
Internet/broadband service in their tariff plans submitted to TRAI, manual of practice,
call centers and on their websites
    
    All Internet service providers shall quarterly publish contention ratio for
different Internet/broadband services on their website to facilitate subscribers to
take informed decision.
    
    All Internet service providers must use the contention ratios better than specified
ratios for different services to ensure sufficient bandwidth for providing good quality
of service to their subscribers.
   We may be liable to third parties for information retrieved from the Internet.
   23




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##### Table of Contents



Item 4. Information on the Company
 History and Development
   sifycorp.com
  www.sify.com
 Online Online Online Online
 iways iways
    24




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##### Table of Contents



Initial Public Offering and Subsequent Financing Transactions
          Acquisition of Minority Interest in Subsidiary
   25




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##### Table of Contents



Principal Capital Expenditures
  Investment Strategy
  Sify Software Limited (formerly Sify Networks Private Limited)
   Globe Travels, USA.
    26




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##### Table of Contents



India World Communication Limited
  Sify International Inc
  Business Overview
  
    
    Corporate Network/Data Services. We offer end-to-end network services, hosting, application
and security services that provide our corporate customers with comprehensive Internet and
private network access. Our services enable our corporate customers to offer a full range of
business-to-business and electronic commerce related services. We provide NLD (National Long
Distance) and ILD (International Long Distance) services through our network. We carry voice
traffic, both national and international, using the IP back-bone and deliver voice traffic to
Direct Inter-connect Operators. We also provide managed infrastructure services and managed
security services in all aspects of infrastructure services, network security and hosting,
with digital certificates based authentication service and VPN solutions. We have launched
system integration service during the year 2009-10. We are the first service provider in India
to be ISO 9001:2000 certified in network operations, data center operations and customer
relationship management.
    
    Internet Access Services. We offer public Internet access to consumers through a retail chain
of e-ports (formerly iway)cybercafés. We also have agreements with certain cable television
operators through which we offer Internet access through cable. As of March 31, 2011, we had
approximately 10 million retail Internet access subscribers.
    
    Online Portal Services. We operate 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. We
also offer related content sites specifically tailored to Indian interests worldwide.
    
    Others.We facilitate web based learning for various organizations by digitizing and
uploading content to facilitate the same. We also provide remote infrastructure management
services such as Data center management, Network management, Security management and Desktop
management to support the clients from offshore command centers, on a 24 x 7 basis.
 www.sify.com www.sifymax.in www.samachar.com Sify.com SifyMax.in
     27




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Industry Overview
 Development of the Internet
 Special Communications Needs of Businesses
 The Opportunity in India
     28




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##### Table of Contents



Sify Business Model
   
    
    End-to-end network solutions for business customers.We provide our business
customers with a comprehensive range of Internet, connectivity, security and
consulting, hosting and managed service solutions complemented by a broad base of
web-based business applications. Our corporate services range from dedicated Internet
access, virtual private networks, security, web implementation, electronic commerce
solutions and web hosting. Our end-to-end solutions enable our corporate customers to
address their networking and data communication needs efficiently without having to
assemble products and services from different value-added resellers, Internet service
providers and information technology firms.
    
    National private Internet protocol network backbone and Wireless delivery on
the last mile. We operate a large national Internet protocol data network in India. As
of March 31, 2011, we owned and operated 662 points of presence serving more than 625
towns and cities across India. Our network provides the platform to deliver Internet
access and the backbone to provide a full range of corporate network/data services to
consumers. A significant portion of our last mile delivery for corporates, and almost
the entire e-port cybercafé network and hispeed / broadband delivery to homes, is on
the wireless mode, thereby enabling us to implement and deliver superior services
compared to the wire line medium.
    
    Internet content and electronic commerce websites customized for the Indian
market. We view the Indian market as a series of specific market segments with unique
cultural and topical interests, rather than an extension of a homogeneous, worldwide
Internet market. We have assembled a team of India-based employees familiar with the
local culture, language and business environments in our markets to develop Internet
content and electronic commerce websites tailored for the Indian market. We regularly
incorporate new and original third-party content suited to our local and regional
audiences to enhance our customers online experience and to attract new users both
within India and abroad. As a result of our local market knowledge, we are able to
place contents in our websites which will attract more users to our websites and to
create brand awareness for our SifyOnlineaccess service.
    
    Managed Infrastructure services and Managed Security Services. We have customer
engagements in all aspects of infrastructure services, networks security and hosting,
with digital certificates based authentication service. We have experience in providing
information assurance and compliance certification in accordance with frameworks such
as Committee of Sponsoring Organizations of the Treadway Commission (COSO) / Control
Objectives for Information and related Technology (COBIT). We believe that our managed
infrastructure and security services utilise our experience and skill sets to provide
constant value to our customers, better service levels and reduced costs. We constantly
look at ways to efficiently manage customer assets remotely thus providing focused
superior service at lower cost.
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Strategy
  
    
    Invest in the continued enhancement and expansion of our network infrastructure
to support customer growth, enter into new markets and accommodate increased customer
usage.We intend to continue to increase the capacity and geographic reach of our
network in order to support subscriber growth, enter new markets and accommodate
increased customer usage. We are committed to using proven technologies and equipment
and to providing superior network performance. Our network is based on Internet
Protocol, or IP, and we are the first Indian service provider to have made our network
Multi Protocol Label Switching (MPLS) compliant. As of March 31, 2011, we have acquired
adequate capacity of bandwidth lines, all from major telecommunications companies,
which ensures that there is an assured supply of bandwidth service being provided to
Sifys customers without any disruptions. We have also leased intercity links from
multiple suppliers including BSNL, Bharti, and Power Grid corporation, such that each
one of our nodes is accessible from at least two other nodes, if not by two long
distance operators. We believe that as the size and capacity of our network
infrastructure grows, its structure and national coverage will create economies of
scale. Being vendor neutral, we are able to procure bandwidth in a cost effective manner.
Over the past five years we have designed and built four data centers in Mumbai,
Chennai, Bangalore and Airoli. We intend to invest in additional data centers, and are
currently building a data center at Noida near New Delhi.
    
    Increase penetration in our existing markets by expanding awareness of the
Sify brand name to capitalize on our first mover advantage in India.We intend to
capitalize on our first-to-market advantage in India to establish national service and
a brand name in advance of other private competitors. As of March 31, 2011, we had
approximately 0.3 million retail Internet subscribers and 1,860 operative cybercafés,
of which 6 were owned by us and 1,854 were franchised. Approximately 99% of these
e-portsare on broadband, which provides the user with significantly faster access
speeds. Our marketing strategy includes print and radio advertising, direct mailing
campaigns targeting personal computer owners and operating cybercafés. We are also
actively promoting our broadband services to homes through cable television operators.
As of March 31, 2011, we have more than 1,685 cable television operators across 203
cities in India. We believe that increased focus by GOI on delivery of broadband
services, availability of broadband content, reduced cost of personal computers
coupled with increased purchasing capacity of the middle class in India will drive this
business forward in the future. We are also continuously working on better alternative
technologies to overcome the last mile challenges and to offer superior connectivity to
homes.
    
    Expand our services with new technologies to enable our customers to use the
Internet more effectively.We continually seek to expand the breadth of our service
offerings with new technologies. We have previously introduced a number of other
services, including VoIP, video conferencing, e-mail designed for regional Indian
dialects, a user customized portal site and micro-payments.
    
    Provide more value added services by leveraging on the rapid growth of wireless
Internet and mobile services in India and strengthen our Internet portal with more
content tailored to Indian interests worldwide.Our portals www.sify.comand
www.samachar.com, function as initial gateways to the Internet, the users starting
point for web browsing and other Internet services, for our consumer Internet service
provider subscribers and cybercafé users. We believe that our portals are media rich
and user friendly, and the portals are interactive websites offering hyperlinks to a
wide variety of websites and services, including our own websites. Our websites cater
to a variety of Indian interests within and outside of India. To achieve our goal of
developing the premier Internet portal focused on the Indian market, we intend to
continue to expand and improve the quality of www.sify.com, and are developing
additional content oriented towards topical and cultural interests of Indians
worldwide.
    
    Expand our customer distribution channels through strategic alliances to take
advantage of the sales and marketing capabilities of our strategic partners.We intend
to continue to expand our customer acquisition channels, for both our consumer Internet
access and corporate network/data services. We have arrangements with leading personal
computer manufacturers to bundle our SifyOnlineInternet access service with the sale
of their personal computers in India.
    
    Pursue selective strategic investments, alliances and acquisitions to expand
our customer base, increase utilization of our network and add new technologies to our
service mix.We believe that our growth can be supplemented by selective acquisitions
of complementary businesses. We may seek to expand our market presence in our
corporate network business through the acquisition of web hosting, data center, web
implementation and/or systems integration companies serving India, the United States or
other markets. We will also consider acquisitions of Internet service providers that
have a significant or growing customer base in our current or targeted markets.
    
    Expand into international markets for providing managed network services.Our
network and application level support can be provided remotely with a minimum of
on-site presence. We are seeking to provide these services to international markets.
The tools utilized to provide these services were developed in-house on Linux/open
source platforms, and we plan to upgrade these tools in the future to meet customer
requirements. We expect our expertise in network management, to enable us to perform
these services to international customers at lower costs. We also intend to provide
managed security solutions, including monitoring and vulnerability assessment, in
addition to managed firewall and intrusion detection services.
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
    
    Superior end-user performance and customer support.We believe that we provide a
high level of customer service, network performance and technical support to maximize
customer satisfaction. A significant number of our employees are engaged in our
customer service or technical support departments, which operate 24-hours-a-day,
seven-days-a-week. Our network engineers continually monitor network traffic and
congestion points to deliver high quality consistent network performance. Our backend
processes are ISO 9001:2000 compliant for network operations, data center operations and
customer care. Our strategy of providing superior network performance and customer
service is designed to result in significant customer growth from referrals and industry
recognition.
 Service Offerings
 Corporate network/data services
  
    
    SiteConnect (TM) which offers site-to-site managed MPLS-enabled IPVPN solutions for
securely connecting regional and large branch offices within India to the corporate
Intranet.
    
    GlobalSite Connect, an international site-to-site managed MPLS-enabled IPVPN solution, is
used for securely connecting international branch offices to the corporate offices. It
provides connectivity anywhere in the world through Sifys alliances and partnerships with
global overseas service providers such as Global Crossing (GC), Asia Net.Com (ANC), and PCCW
Global to name a few.
    
    ExpressConnect, which offers a premium range of high-performance Internet bandwidth
solutions for connecting regional offices, branch offices and remote locations to the
corporate network. These solutions complement our SiteConnect range of MPLS enabled IPVPN
solutions, provide high-speed bandwidth in those situations where basic connectivity and
cost are the top concerns.
    
    RoamConnect, is our national and international remote access VPN, which is used for
securely connecting employees, while they are traveling, to the corporate intranet.
RoamConnect features single number access to SifyNet from anywhere in the country and
provides access from anywhere in the world through Sifys alliances with overseas service
providers such as Verizon, IPASS and Fiberlink.
    
    PartnerConnect is our remote access VPN offering, for providing secure and restricted
dial-up access to business partners such as dealers, distributors and suppliers to the
corporate extranet.
   Application Services
  31




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System integration, Security and Assurance Services.
 Data Centers
 Cloud service.
 On Demand Storage.
 Digital Certification
 Remote Management Services
  VOIP Services.
 ILD Voice & hubbing, D
  32




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##### Table of Contents



Internet Access Services iway)
 iway
 Public Internet Access. iway iways)
 iways) iway)
 iway
 Sify e-port. iways sify e-port e-port Xpress
 Sify Mylife. Sify Mylife
 Broadband Internet for SOHO / SMB Category:
 Voice over Internet Protocol s to
 VoIP for home: Sifytalk Sifytalk
  33




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Broadband/High Speed Internet to Home:
    Internet Access Services
  Online Portal Services www.sify.com, www.samachar.com
  
    
    The finance channel of Sify http://sify.com/finance/ covers the entire
spectrum of equity markets, business news, insurance, mutual funds, loans, SME news and
a host of paid and free financial services.
    
    The sports channel http://sify.com/sports/ covers the entire gamut of Indian and
international sports with special focus on cricket.
    
    We also host WWE updates as a standalone service http://wwe.sify.com/ for users.
    
    The food channel www.bawarchi.com focuses on Indian recipes and cooking and is
especially popular among non-resident Indians (NRIs) audiences with over 90% of its
content being user generated
    
    Our NRI news portal, www.samachar.com, focuses on Indian news and allows NRIs
to stay connected to India by aggregating news from across all popular newspapers and
other news portals. This portal provides a range of news in English and five Indian
languages. Apart from Samachar we have another India targeted news channel
http://sify.com/news/ which offers national and international general, political and
offbeat news.
  34




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
    
    The online shopping mall http://shopping.sify.com/, stocks products from Indias
leading brands and products. We believe that it offers competitive prices and a secure
and convenient method of payment. Users can buy using their credit or debit card, pay
cash on delivery or send a check.
    
    Movies channel on Sify http://sify.com/movies/ is one of the key channels which offer
updates from Bollywood/ Hollywood and all regional film industries. The content includes
movie reviews, industry news, video galleries, photo galleries, downloads (photos) etc.
    
    Games channel of Sify http://games.sify.com/ offers multiple scoring non scoring
games. Games include cricketing games, racing games, football
specific games etc.
  Corporate Customers
  Customer Service and Technical Support
  Sales and Marketing
 Corporate Offerings
 Consumer Offerings
  Technology and Network Infrastructure
   
    
    Internet access services,
    
    IP/ MPLS Virtual private networks,
    
    Internet based Voice services
  35




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Geographic Coverage
 Network Architecture
   Network Operations Center
 Data Centre Infrastructure.
 Competition
 General
 Corporate Network/Data Services
 Internet Access Services
  36




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##### Table of Contents



Online Portal Services
  
    
    Larger production and technical staff;
    
    Greater name recognition and larger marketing budgets and resources; and
    
    Substantially greater financial, technical and other resources.
  Intellectual Property
     Government Regulation
   37




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
    
    make recommendations on (i) the need and timing for the introduction of new
service providers, (ii) the terms and conditions of licenses granted to service
providers, (iii) the revocation of licenses for non-compliance, (iv) measures
to facilitate competition and promote efficiency in the operation of telecommunications
services so as to facilitate growth in such services, (v) technological improvements in
the services provided by service providers, (vi) the type of equipment to be used by
service providers, (vii) measures for the development of telecommunications technology
and the telecommunications industry and (viii) the efficient management of the available
spectrum;
    
    discharge the following functions: (i) ensure compliance of the terms and
conditions of licenses, (ii) fix the terms and conditions of interconnectivity between
service providers, (iii) ensure technical compatibility and effective interconnection
between service providers, (iv) regulate revenue sharing arrangements between service
providers, (v) establish standards of quality of service, (vi) establish time periods
for providing local and long distance telecommunications circuits between service
providers, (vii) maintain and keep for public inspection a register of interconnect
agreements and (viii) ensure effective compliance of universal service obligations;
    
    levy fees and other charges at such rates and in respect of such services as
may be determined by regulation; and
    
    perform such other functions as may be entrusted to it by the Government of
India or as may be necessary to carry out the provisions of the Telecom Regulatory
Authority of India Act.
  
    
    to call on service providers to furnish information relating to their
operations;
    
    to appoint persons to make official inquiries;
    
    to inspect the books of service providers; and
    
    to issue directives to service providers to ensure their proper functioning.
      38




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Organizational Structure
  Property, Plant and Equipment
  
 Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
   39




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Operating Results
  Liquidity and Capital Resources
  Research and Development
  Trend Information
  Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
   Corporate network/data services
   40




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Internet access services
   Sify Mylife. Sify Mylife
 Online portal services and content offerings
  Other services-Infrastructure Management Services
  Other services-eLearning Services
    Revenues
 Corporate network/data services
  Internet access services
   41




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##### Table of Contents



Online portal services and content offerings
 www.sifymall.com
 Other services
    Enterprise Service:
 Commercial and Consumer Service:
 Software Service:
 Expenses
 Cost of goods sold and services rendered
 Corporate network/data services
   42




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Internet access services
  Online portal services and content offerings
  Selling, general and administrative expenses
  Depreciation and amortization
  Impairment
   pro rata basis.
 Inventories
  Deferred tax
   43




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Stock compensation expense
  Results of Operations
  Fiscal2011
    
    
    2010
    
    
    2009%
    
    
    %
    
    
    %Revenues
    
    
    100
    
    
    
    100
    
    
    
    100Cost of goods sold and services rendered
    
    
    61.12
    
    
    
    61.05
    
    
    
    58.64Other income/(expense)
    
    
    1.06
    
    
    
    1.96
    
    
    
    1.44Selling, general and administrative expenses
    
    
    35.46
    
    
    
    36.99
    
    
    
    45.65Depreciation and amortization expenses
    
    
    9.96
    
    
    
    9.79
    
    
    
    8.34Impairment loss on intangibles including goodwill
    
    
    0.03
    
    
    
    0.70
    
    
    
    0.25Income from legal settlement
    
    
    
    
    
    
    8.36
    
    
    
    Profit /(loss) from operating activities
    
    
    (5.51
    )
    
    
    1.79
    
    
    
    (11.19
    )Finance income
    
    
    0.66
    
    
    
    0.42
    
    
    
    1.99Finance expenses
    
    
    (3.76
    )
    
    
    (4.38
    )
    
    
    (4.08
    )Net finance income/(Loss)
    
    
    (3.10
    )
    
    
    (3.96
    )
    
    
    (2.09
    )Share of profit of equity accounted investee
    
    
    1.06
    
    
    
    1.36
    
    
    
    1.04Profit before tax
    
    
    (7.54
    )
    
    
    (0.81
    )
    
    
    (12.24
    )Income tax (expense)/ benefit
    
    
    
    
    
    
    1.21
    
    
    
    (1.57
    )Net profit/(loss) for the year
    
    
    (7.54
    )
    
    
    0.40
    
    
    
    (13.81
    )
 Results of year ended March 31, 2011 compared to year ended March 31, 2010
 Revenues
   44




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Other income
 Cost of goods sold and services rendered
     45




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Selling, general and administrative expenses
 Depreciation and Amortization expenses
 Impairment loss:
    Net finance income / expense
  46




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Share of profit of investment in associate
 Income tax expense
 Profit
 Results of year ended March 31, 2010 compared to year ended March 31, 2009
 Revenues
        47




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Other income
 Income from legal settlement.
 Cost of goods sold and services rendered
     Selling, general and administrative expenses
  48




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Depreciation and Amortization expenses
 Impairment loss:
   
    
    Cash flows were projected based on a 5 year business plan. Cash flows were arrived at as an
excess of revenue over the related costs for the same period after giving due effect to
non-cash charges and finance charges, if applicable, together with changes in working capital.
    
    Management believes that this forecast period is justified due to the long term nature of
the travel business.
    
    The projected revenue growth included in the cash flow projections was 10% during the
projected period. Management believes that this growth percentage was reasonable and is in
line with the average trend of the industry.
    
    The projected increase in cost was 5% for call center cost and 10% for administrative
costs.
    
    A pre-tax discount rate of 22.26% was applied in determining the recoverable amount of the
cash generating unit. The discount rate was estimated based on an industry average weighted
average cost of capital.
    
    In view of the expected long term market conditions, a terminal year end growth rate of 2%
is estimated.
  Net finance income
 Share of profit of investment in associate
 Income tax expense
 Profit
  49




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Results of year ended March 31, 2009 compared to year ended March 31, 2008
 Revenues
         50




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Other income
 Cost of goods sold and services rendered
     Selling, general and administrative expenses
  51




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Depreciation and Amortization expenses
 Impairment loss:
 Net finance income
 Share of profit of investment in associate
 Income tax expense
 Foreign Exchange Fluctuations and Forwards
  Liquidity and capital resources
  2011
    
    
    2010
    
    
    2009
    
    
    
    2011Rs. In 000
    
    
    Rs. in 000
    
    
    Rs. in 000
    
    
    
    US $ in 000Profit / (loss) before tax
    
    
    (519,492
    )
    
    
    26,813
    
    
    
    (851,633
    )
    
    
    
    (11,635
    )Other adjustments for non-cash items
    
    
    1,000,310
    
    
    
    952,486
    
    
    
    856,486
    
    
    
    
    22,404Income taxes paid
    
    
    (42,440
    )
    
    
    (164,455
    )
    
    
    (108,560
    )
    
    
    
    (951
    )Net decrease (increase) in working capital
    
    
    (213,019
    )
    
    
    (55,042
    )
    
    
    (258,173
    )
    
    
    
    (4,771
    )Net cash from / (used in) operating activities
    
    
    225,359
    
    
    
    759,802
    
    
    
    (371,556
    )
    
    
    
    5,047Net cash from / (used in) investing activities
    
    
    (730,650
    )
    
    
    (896,683
    )
    
    
    (1,174,156
    )
    
    
    
    (16,363
    )Net cash from / (used in) financing activities
    
    
    551,700
    
    
    
    (354,486
    )
    
    
    968,797
    
    
    
    
    12,356Effect of exchange rate changes on cash and
cash equivalents
    
    
    (627
    )
    
    
    (2,934
    )
    
    
    945
    
    
    
    
    (14
    )Net increase / (decrease) in cash and cash
equivalents
    
    
    46,409
    
    
    
    (491,367
    )
    
    
    (576,920
    )
    
    
    
    1,039
  52




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Capital expenditure
  Research and development
  Trends
  Off-balance sheet arrangements
  Contractual obligations
  Payments due by period (Rs 000s)Less
    
    
    
    
    
    
    
    
    
    
    More than 5Contractual Obligations
    
    Total
    
    
    than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsLong Term Debt Obligations
    
    
    262,609
    
    
    
    
    
    
    
    230,205
    
    
    
    32,404
    
    
    
    Short Term Borrowings
    
    
    1,035,803
    
    
    
    1,035,803
    
    
    
    
    
    
    
    
    
    
    
    Finance Lease Obligations
    
    
    188,253
    
    
    
    60,507
    
    
    
    110,986
    
    
    
    16,760
    
    
    
    Non-cancellable Operating Lease obligations
    
    
    1,884,544
    
    
    
    105,693
    
    
    
    220,433
    
    
    
    368,541
    
    
    
    1,189,877Europe India Gateway Obligations
    
    
    65,813
    
    
    
    65,813
    
    
    
    
    
    
    
    
    
    
    
    Purchase Obligations
    
    
    521,562
    
    
    
    521,562
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,958,584
    
    
    
    1,789,378
    
    
    
    561,624
    
    
    
    417,705
    
    
    
    1,189,877
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Recent Accounting Pronouncements
 IFRS 9, Financial instruments
 IFRIC 19, Extinguishing Financial Liabilities with Equity
Instruments
  
    
    IFRS 10, Consolidated financial statements.
    
    IFRS 11, Joint arrangements.
    
    IFRS 12, Disclosure of interests in other entities.
    
    IAS 27 (Revised 2011),
Consolidated and separate financial statements, which
has been amended for the issuance of IFRS 10 but retains the current guidance on
separate financial statements.
    
    IAS 28 (Revised 2011),
Investments in associates, which has been amended for
conforming changes on the basis of the issuance of IFRS 10 and IFRS 11.
  IAS-19 Employee benefits
 
    
    requires recognition of changes in the net defined benefit liability/(asset),
including immediate recognition of defined benefit cost, disaggregation of defined
benefit cost into components, recognition of re-measurements in other comprehensive
income, plan amendments, curtailments and settlements.
    
    introduced enhanced disclosures about defined benefit plans.
    
    modified accounting for termination benefits, including distinguishing benefits
provided in exchange for services from benefits provided in exchange for the
termination of employment, and it affected the recognition and measurement of
termination benefits.
    
    provided clarification regarding various issues, including the classification of
employee benefits, current estimates of mortality rates, tax and administration
costs and risk-sharing and conditional indexation features.
    
    incorporated, without change, the IFRS Interpretations Committees requirements
set forth in IFRIC 14 IAS 19The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction.
  Critical Accounting Policies
   55




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##### Table of Contents



Revenue Recognition
  
    
    Corporate network/data services, which provides Internet, connectivity, security and
consulting, hosting, voice and managed service solutions;
    
    Internet access services, from homes and through cybercafés (e-ports);
    
    Online portal services and content offerings; and
    
    Other services such as development of e-learning software
   
    
    the amount of revenue can be measured reliably;
    
    it is probable that the economic benefits will flow to the seller;
    
    the stage of completion at the balance sheet date can be measured reliably; and
    
    the costs incurred, or to be incurred, in respect of the transaction can be measured reliably.
  (i)
    
    Corporate network/data services
    56




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##### Table of Contents



(ii) Internet access services
       57




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##### Table of Contents




    
    conducting a market survey and deciding on the best location for the cybercafé or cable head
end;
    
    installing the broadband receiver equipment on the roof top of the cybercafé or the cable
head end and connecting it to one of Sifys broadcasting towers;
    
    obtaining the regulatory approvals for clearance of the site for wireless transmission at the
allotted frequency range;
    
    installing the wiring from the receiver unit to the individual PCs in the cybercafé or the
transmitting equipment in the cable head end;
    
    assisting in obtaining facilities, including computers and interiors for the cybercafés; and
    
    providing the operations manual with instructions and guidelines for running the cybercafé
or distributing Internet access through cable network.
  (iii) Online portal services
    (iv) Other services
  Accounting Estimates
    58




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##### Table of Contents



Allowance for accounts receivable
   Business Combinations, Goodwill and Intangible Assets
     Estimated Useful Lives of Property, Plant and Equipment
 Property, Plant and Equipment
 Impairment
 Financial assets:
   59




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##### Table of Contents



Financial assets measured at amortized cost:
  Available-for-sale financial assets:
  Loans and receivables:
  Reversal of impairment loss:
  Non-financial assets:
   pro rata basis.
 Reversal of impairment loss:
  Income taxes:
   60




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Item 6. Directors, Senior Management and Employees
 Directors and Executive Officers
  Name
    
    Age
    
    DesignationRaju Vegesna
    
    51
    
    Chairman, CEO and Managing DirectorAnanda Raju Vegesna
    
    51
    
    Executive DirectorC B Mouli (1)
    
    64
    
    Director, Chairman & Financial Expert of Audit CommitteeS K Rao (1) (2) (3)
    
    67
    
    DirectorT H Chowdary (2) (3)
    
    79
    
    Director & Chairman of Compensation & Nominating CommitteesP S Raju (2)
    
    57
    
    DirectorS R Sukumara (1) (2) (3)
    
    66
    
    DirectorM P Vijay Kumar
    
    41
    
    Chief Financial OfficerC V S Suri
    
    51
    
    Chief Operating OfficerPijush Kanti Das (4)
    
    57
    
    President - Corporate AffairsNatesh Mani
    
    51
    
    President - Consumer Infrastructure BusinessBaskar R Sayyaparaju
    
    44
    
    President - International BusinessVenkata Rao Mallineni
    
    43
    
    Head- Software ServicesPranesh Babu
    
    45
    
    Chief Technology OfficerC R Rao
    
    51
    
    Vice President - Head  HR & Administration
 
 (1)
    
    Member of the Audit Committee.(2)
    
    Member of the Compensation Committee.(3)
    
    Member of the Nominating Committee.(4)
    
    Resigned as of May 27, 2011.  61




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.
         62




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Director Compensation
  Officer Compensation
  Summary Compensation Table(Rs. Million)Name
    
    Salary(1)
    
    
    BonusC V S Suri
    
    
    1.07
    
    
    
    Bhaskar R Sayyaparaju
    
    
    6.35
    
    
    
    M P Vijay Kumar
    
    
    7.09
    
    
    
    P J Nath
    
    
    6.34
    
    
    
    Natesh Mani
    
    
    5.10
    
    
    
    Pijush Kanti Das
    
    
    2.28
    
    
    
    1.05Venkat Rao Mallineni
    
    
    3.74
    
    
    
    Pranesh Babu K
    
    
    4.06
    
    
    
    0.65C R Rao
    
    
    3.32
    
    
    
    0.49David Appasamy
    
    
    0.36
    
    
    
    0.03Ajith K N
    
    
    0.30
    
    
    
    0.02
 
 (1)
    
    Includes provident fund contributions.  63




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##### Table of Contents



Rs. inName
    
    millionC V S Suri
    
    
    0.08Bhaskar R Sayyaparaju
    
    
    0.30M P Vijay Kumar
    
    
    0.33P J Nath
    
    
    0.30Natesh Mani
    
    
    0.26Pijush Kanti Das
    
    
    0.07Venkat Rao Mallineni
    
    
    0.18Pranesh Babu K
    
    
    0.16C R Rao
    
    
    0.18David Appasamy
    
    
    0.01Ajith K N
    
    
    0.05
       64




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Board Composition
  
    
    at least two-thirds of our directors shall be subject to re-election by our
shareholders; and
    
    at least one-third of our directors who are subject to re-election shall be up
for re-election at each annual meeting of our shareholders.
      Board Committees
  Audit Committee
         65




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Compensation Committee
         Nominating Committee
        Employees
  Stock Ownership
  Equity SharesBeneficially OwnedBeneficial Owner
    
    Number
    
    
    PercentRaju Vegesna
*(1)
    
    
    154,011,051
    
    
    
    86.30
    %T. H. Chowdary
    
    
    
    
    
    
    C B Mouli
    
    
    
    
    
    
    P S Raju
    
    
    
    
    
    
    S K Rao
    
    
    
    
    
    
    S R Sukumara
    
    
    
    
    
    
    C V S Suri
    
    
    
    
    
    
    
  
   66




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Employee Stock Option Plan
    
 Item 7. Major Shareholders and Related Party Transactions
 Principal Shareholders
      Equity SharesBeneficially ownedShareholder
    
    Number
    
    
    PercentInfinity Capital Ventures, LP, 11601 Wilshire Boulevard, Suite 1900, Los Angeles, CA 90025
    
    
    13,902,860
    
    
    
    7.79Vegesna Family Trust, LP, 11601 Wilshire Boulevard, Suite 1900, Los Angeles, CA, 90025
    
    
    578,191
    
    
    
    0.32Infinity Satcom Universal Private Limited, Visakhapatnam
    
    
    14,530,000
    
    
    
    8.14Ramanand Core Investment Company Private Limited, Visakhapatnam
    
    
    125,000,000
    
    
    
    70.05
  67




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Details of significant change in the percentage ownership held by the major shareholders:
 2008-09
    
    
    2009-10
    
    
    2010-11Name of the shareholder
    
    No. of shares
    
    
    %
    
    
    No. of shares
    
    
    %
    
    
    No. of shares
    
    
    %Infinity Capital Ventures, LP, USA
    
    
    17,902,860
    
    
    
    41.81
    
    
    
    13,902,860
    
    
    
    26.06
    
    
    
    13,902,860
    
    
    
    7.80Vegesna Family Trust, USA
    
    
    578,191
    
    
    
    1.35
    
    
    
    578,191
    
    
    
    1.08
    
    
    
    578,191
    
    
    
    0.38Infinity Satcom Universal Private Limited
    
    
    
    
    
    
    
    
    
    
    14,530,000
    
    
    
    27.24
    
    
    
    14,530,000
    
    
    
    8.15Ramanand Core Investment Company Private Limited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,000,000
    
    
    
    70.09
   United States Shareholders
  Host country Shareholders
  Control of Registrant
     
    
    altering our Articles of Association;
    
    issuing additional shares of capital stock, except for pro rataissuances to existing
shareholders;
    
    commencing any new line of business; and
    
    commencing a liquidation.
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Forfeiture of equity shares issued in a private placement
    Sale of shares in a private transaction
  Merger of Sify Communications Limited with Sify Technologies Limited
 th
  Issuance of Equity Shares in private placement to the promoter group:
   69




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Related Party Transactions
     Loans to employees
  
 Item 8. Financial Information
 Financial Statements
  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 the Sifys initial
public offering of American Depositary Shares as defendants. This class action is brought on
behalf of a purported class of purchasers of the Sifys ADSs from the time of the Sifys
Initial Public Offering (IPO) in October 1999 through December 2000. The central allegation
in this action is that the underwriters in the Sifys IPO solicited and received undisclosed
commissions from, and entered into undisclosed arrangements with, certain investors who
purchased the Sifys 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.
  70




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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 Sifys 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 Sify 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 Sify. On June 26, 2003, the plaintiffs in the
consolidated IPO class action lawsuits currently pending against the 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 Courts 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 Sifys
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 Sify 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 Sifys 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 Sifys
insurers. Sify believes, the maximum exposure under this settlement is approximately USD
338,983, an amount which it believes is fully recoverable from the its insurers.b)
    
    Proceedings before Department of Telecommunications
 (i)
    
    License fees
 
    
    On October 12, 2009 (as later clarified by the DoT), the Department of
Telecommunications (DOT) raised a demand on the Company for INR 14 million after
correcting the arithmetical error in the Assessment letter.
    
    On February 26, 2010 DOT raised a demand on Sify Communications (erstwhile subsidiary
merged with this Company) for INR 26 million.
 The above demands were made by the DoT on the premise that all amounts of income (whether
direct or indirect) including certain items like other income, interest on deposits, gain on
foreign exchange fluctuation, profit on sale of assets & provision written back, that have not
got anything to do with telecom operations of the Company or arise in connection with the
Telecom business of the Company, are to be considered as income for the purpose of calculation
of the license fee.The Company has responded to the above 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, in which Order the TDSAT 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. The TDSAT Order however has been challenged and is presently pending before
the Supreme Court. Till such time the Supreme Court pronounces its final verdict on this case,
the TDSAT Order continues to be in force and the Company currently continues to pay the license
fee in accordance with the TDSAT Order. The Company 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 the Company.
  71




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(ii)
    
    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 (US $7.68
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. It also believes that it has adequate legal defence 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.
 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, 2011, 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. However in the event of adverse judgement in all these cases, the
maximum financial exposure would be Rs 9,051 (March 31, 2010: Rs 9,051).
 Dividends
   
 Item 9. The Offer and Listing
 Trading Markets
  Price History
  Prior Fiscal Years
 High
    
    
    LowFiscal year ended
    
    $
    
    
    $March 31, 2011
    
    
    3.89
    
    
    
    1.18March 31, 2010
    
    
    1.76
    
    
    
    1.59March 31, 2009
    
    
    5.30
    
    
    
    0.42March 31, 2008
    
    
    10.47
    
    
    
    4.00March 31, 2007
    
    
    14.78
    
    
    
    7.43
  72




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High
    
    
    LowFiscal year ended March 31, 2010
    
    $
    
    
    $First Quarter
    
    
    1.74
    
    
    
    1.66Second Quarter
    
    
    2.26
    
    
    
    2.17Third Quarter
    
    
    1.75
    
    
    
    1.70Fourth Quarter
    
    
    1.76
    
    
    
    1.59
 High
    
    
    LowFiscal year ended March 31, 2011
    
    $
    
    
    $First Quarter
    
    
    1.91
    
    
    
    1.30Second Quarter
    
    
    3.22
    
    
    
    1.18Third Quarter
    
    
    3.05
    
    
    
    1.66Fourth Quarter
    
    
    3.89
    
    
    
    2.12
 Most recent six months
 High
    
    
    LowMonth
    
    Rs.
    
    
    Rs.September 2011
    
    
    5.05
    
    
    
    3.99August 2011
    
    
    5.67
    
    
    
    4.00July 2011
    
    
    6.42
    
    
    
    3.99June 2011
    
    
    5.98
    
    
    
    3.86May 2011
    
    
    8.04
    
    
    
    4.23April 2011
    
    
    8.54
    
    
    
    3.61
 
 Item 10. Additional Information
        73




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Memorandum and Articles of Association
    1.
    
    To develop and provide Internet service, Internet Telephony, Infrastructure based services,
Virtual Private Network and other related data, voice and video services, wide area
communication network, value added services on the network, lease or other transfers of
network, software, peripherals and related products, and to provide marketing services.2.
    
    To provide security products for corporate, carry on the business of consulting,
software and hardware, integrated platform(s) for the e-commerce solutions, applications,
information technology, security and all other kinds of technology solutions or services,
and to acquire, maintain, operate, manage and undertake technology and infrastructure for this
purpose.3
    
    To develop, service & sell/lease data based through direct or electronic media, to
develop a wide area communication network of sell / lease the network or provide value added
services on the network to develop, service, buy / sell computers, software, peripherals and
related products to provide marketing services rising direct as well as electronic media;
  74




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4
    
    To undertake the designing and development of systems and applications software either for
its own use or for sale in India or for export outside India and to design and develop such
systems and application software for or on behalf of manufacturers, owners and users of
computer systems and digital / electronic equipments in India or elsewhere in the world;5
    
    To set up and run electronic data processing centres and to carry on the business of data
processing, word processing, software consultancy, system studies, management consultancy,
techno-economic feasibility studies of projects, design and development of management
information systems, share / debenture issues management and / or registration and
share/debenture transfer agency;6.
    
    To undertake and execute feasibility studies for Computerisation, setting up of all kind
of computer systems and digital/electronic equipments and the selection, acquisition and
installation thereof whether for the Company or its customers or other users;7
    
    To conduct, sponsor or otherwise participate in training programmes, courses, seminar
conferences in respect of any of the objects of the Company and for spreading or imparting the
knowledge and use of computers and computer
programming languages including the publication of books, journals, bulletins, study / course
materials, circulars and news-letters; and to undertake the business as agents, stockist,
distributors, franchise holders or otherwise for trading or dealing in computer systems,
peripherals, accessories, parts and computer consumables, continuous and non-continuous
stationery, ribbons and other allied products and things and standard software packages.8
    
    To conduct e-commerce for sale of all kinds of products and services through direct or
electronic media as well as on and off line e-commerce including travel related services, buying
and selling of products and services / merchandise, software, data information etc., in India and
abroad.
    Board of Directors
  (a)
    
    no director of the Company can vote on a proposal, arrangement or contract in
which he is materially interested;(b)
    
    the directors of the Company cannot vote on a proposal in the absence of an
independent quorum for compensation to themselves or their body;(c)
    
    each of our directors is entitled to receive a sitting fee not exceeding
Rs.20,000 for every meeting of the Board of Directors and each meeting of a Committee of
the Board of Directors, as well as all traveling and out-of-pocket expenses incurred in
attending such meetings;(d)
    
    the directors are empowered to borrow moneys through board meetings up to the
prescribed limit and beyond that with the approval of the shareholders through a General
Meeting;(e)
    
    retirement of directors are determined by rotation and not based on age limit;
and(f)
    
    no director is required to hold any qualification shares.
  75




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For additional information, please see Item 6. Director, Senior Management and Employees 
Board Composition, -Board Committees and -Director Compensation, and -Officer Compensation
of this Annual Report on Form 20-F .
 Dividends
      
    
    the rate of dividend to be declared may not exceed 10% of its paid up capital or the
average of the rate at which dividends were declared by the Company in the prior five years,
whichever is less;
    
    the total amount to be drawn from the accumulated profits earned in the previous years
and transferred to the reserves may not exceed an amount equivalent to 10% of its paid up
capital and free reserves, and the amount so drawn is to be used first to set off the losses
incurred in the fiscal year before any dividends in respect of preference or equity shares
are declared; and
    
    the balance of reserves after withdrawals shall not fall below 15% of its paid up
capital.
  76




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Voting Rights
    
    
    amendments of the memorandum of association to alter the objects of the Company and
to change the registered office of the Company under section 146 of the Indian Companies
Act;
    
    the issuance of shares with differential rights with respect to voting, dividend or
other provisions of the Indian Companies Act;
    
    the sale of the whole or substantially the whole of an undertaking or facilities of
the Company;
    
    providing loans, extending guarantees or providing a security in excess of the limits
allowed under Section 372A of the Indian Companies Act;
    
    varying the rights of the holders of any class of shares or debentures;
    
    the election of a director by minority shareholders; and
    
    the buyback of shares.
 Bonus Shares
  Consolidation and Subdivision of Shares
  Preemptive Rights and Issue of Additional Shares
   77




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Annual General Meetings of Shareholders
   2011 Annual General Meeting
   
    
    Adopted of audited financials for the year ended March 31, 2011 as per Indian
GAAP.
    
    Reappointment of Dr S K Rao as director.
    
    Appointment of M/s ASA & Associates as statutory auditors in the place of M/s CKS
Associates.
 Limitations on the Rights to Own Securities
  Register of Shareholders; Record Dates; Transfer of Shares
      78




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Disclosure of Ownership Interest
  Audit and Annual Report
 www.sifycorp.com
  Company Acquisition of Equity Shares
    Liquidation Rights
   79




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Redemption of Equity Shares
  Discriminatory Provisions in Articles
  Alteration of Shareholder Rights
   Provisions on Changes in Capital
  Material Contracts
  Exchange Controls
 General
  Foreign Direct Investment
    80




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Subsequent Transfers
   Issue of shares by Indian companies under ADR / GDR
     Takeover Code
  Fungibility of ADSs
    81




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##### Table of Contents



Transfer of ADSs and Surrender of ADSs
  Government of India Approvals
  
    
    the ADSs must be offered at a price determined by the lead manager of such offering;
    
    all equity holders may participate;
    
    the issuer must obtain special shareholder approval; and
    
    the proceeds must be repatriated to India within one month of the closure of the
issue.
 Ownership Restrictions
      82




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Voting Rights of Deposited Equity Shares Represented by ADSs
      Taxation
 Indian Taxation
 General
   83




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##### Table of Contents



Residence
   Taxation of Distributions
 Minimum Alternate Tax
 Fringe Benefits Tax
 Taxation of Capital Gains
   84




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##### Table of Contents



Withholding Tax on Capital Gains
 Buy-back of Securities
 Stamp Duty and Transfer Tax
 Wealth Tax
 Gift Tax and Estate Duty
 Service Tax
  85




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##### Table of Contents



Income Tax Matters
  Material United States Federal Tax Consequences
    Ownership of ADSs
 Dividends
   86




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##### Table of Contents



Sale or Exchange of Equity shares or ADSs
 Estate Taxes
 Passive Foreign Investment Company
 
    
    75% or more of its gross income for the taxable year is passive income; or
    
    on a quarterly average for the taxable year by value (or, if it is not a publicly
traded corporation and so elects, by adjusted basis) 50% or more of its assets produce or
are held for the production of passive income.
   
    
    pay an interest charge together with tax calculated at maximum ordinary income rates on
excess distributions (as that term is defined in relevant provisions of the U.S. tax
laws), and on any gain on a sale or other disposition of equity shares or ADSs;
    
    if a qualified electing fund election is made (as that term is defined in relevant
provisions of the U.S. tax laws), include in their taxable income their pro rata share of
undistributed amounts of our income; or
    
    if the equity shares are marketable (as that term is defined in relevant provisions
of the U.S. tax laws), and a mark-to-market election is made, mark-to-market the equity
shares each taxable year and recognize ordinary gain and, to the extent of prior ordinary
gain, ordinary loss for the increase or decrease in market value for such taxable year.
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Backup Withholding Tax and Information Reporting Requirements
  Documents on Display
 www.sec.gov,
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
 General
  Risk Management Procedures
    88




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Item 12. Description of Securities Other Than Equity Securities
    (i)
    
    a fee not in excess of US $5.00 per 100 ADSs is charged for each
issuance of ADS upon deposit of Shares, excluding certain issuances
described below;(ii)
    
    a fee not in excess of US $5.00 per 100 ADSs is charged for each
surrender of ADSs, property and cash in exchange for the underlying
deposited securities;(iii)
    
    a fee not in excess of US $2.00 per 100 ADSs for each distribution
of cash dividend or other cash distribution pursuant to the deposit
agreement;(iv)
    
    a fee not in excess of US $2.00 per 100 ADSs for the distribution of
ADSs pursuant to stock dividends or other free distributions or an
exercise of rights; and(v)
    
    a fee not in excess of $5.00 per 100 ADSs for depositary services.
         Direct and Indirect Payments by the Depositary to Sify
  Fee
    
    Amount in $USDFinancial Audit Fees
    
    
    23,469.59US Legal Counsel Fees
    
    
    151,543.92Internet, telephone and mail charges
    
    
    855.45Printing and mailing
    
    
    34,706.63Processing Fees
    
    
    6,692.02Processing Fees for Annual General Meeting
    
    
    25.00Text Conversion charges
    
    
    450.00Total amount received
    
    
    217,742.61
  89




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PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and procedures
 Disclosure Controls and Procedures
   Managements annual report on internal control over financial reporting
 1)
    
    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:
 
    
    pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets.
    
    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
    
    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.
  90




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##### Table of Contents



2)
    
    Management assessed the effectiveness of our internal control over financial reporting as of
March 31, 2011. In conducting its assessment of internal control over financial reporting,
management based its evaluation on the framework in Internal Control  Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on our assessment, management has concluded that our internal control over financial reporting
was effective as of March 31, 2011.3)
    
    Our independent registered
public accounting firm, ASA & Associates, has audited the
consolidated financial statements included in this Annual Report on Form 20-F, and as part of
their audit, has issued their report, included herein, on the effectiveness of our internal
control over financial reporting as of March 31, 2011.
  91




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Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated
Framework
    Internal Control 
Integrated Framework
  ASA & Associates
Independent Registered Public Accounting Firm
  92




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##### Table of Contents



Changes in internal control over financial reporting
      
    
    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.
    
    augmented the IFRS expertise in our accounting team by imparting specific training to
evaluate the trading transactions from a Gross Versus Net reporting.
    
    performed an accounting evaluation of all the transactions of purchase of products for
onward sales in the System Integration business and noted that the accounting controls
surrounding appropriateness of the Gross versus Net reporting are operating effectively.
  
 Item 16A. Audit Committee financial expert
  
 Item 16
B. Code of
Ethics
  www.sifycorp.com
   93




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Item 16C.
    
    Principal Accountant Fees and Services
  Fiscal year endedType of Service
    

march 31,2011
    
    

march 31,2010(a) Audit Fees
    
    Rs.2.00 million
    
    Rs.12.45 million(b) Audit Related Fees
    
    Nil
    
    Nil(c) Tax Fees
    
    Nil
    
    Nil(d) All Other Fees
    
    Nil
    
    Nil
   
 Item 16D.
    
    Exemptions from the Listing Standards for Audit Committees
  
 Item 16E.
    
    Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 16F: Change in Registrants Certifying Accountant
       94




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Item 16 G. Corporate Governance
    95




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PART III
 
 Item 17.
    
    Financial Statements
  
 Item 18.
    
    Financial Statements
 Consolidated Statements and other Financial Information
  96




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Report of Independent Registered Public Accounting Firm
 
    Internal Control  Integrated Framework
 ASA & Associates
Independent Registered Public Accounting Firm
  97




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##### Table of Contents



Report of KPMG, Independent Registered Public Accounting Firm
       
  98




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Sify Technologies Limited
 Consolidated Statement of Financial Position
 As at March 31,2011 Conveniencetranslation intoAs at March 31,
    
    
    US$ thousands(In thousands of Rupees, except share data and as
    
    
    
    
    
    2011
    
    
    2010
    
    
    (Unaudited)otherwise stated)
    
    Note
    
    
    Rs
    
    
    Rs
    
    
    Note 2(c)AssetsProperty, plant and equipment
    
    
    5
    
    
    
    3,760,473
    
    
    
    3,452,022
    
    
    
    84,221Intangible assets
    
    
    6
    
    
    
    104,626
    
    
    
    129,524
    
    
    
    2,344Investment in equity accounted investee
    
    
    7
    
    
    
    702,363
    
    
    
    633,469
    
    
    
    15,730Lease prepayments
    
    
    9
    
    
    
    63,068
    
    
    
    273,911
    
    
    
    1,412Other assets
    
    
    10
    
    
    
    672,843
    
    
    
    554,358
    
    
    
    15,069Other investments
    
    
    15
    
    
    
    160
    
    
    
    
    
    
    
    4Deferred tax assets
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    Total non-current assets
    
    
    
    
    
    
    5,303,533
    
    
    
    5,043,284
    
    
    
    118,780Inventories
    
    
    12
    
    
    
    15,637
    
    
    
    21,488
    
    
    
    350Trade and other receivables, net
    
    
    13
    
    
    
    3,185,913
    
    
    
    3,195,012
    
    
    
    71,353Prepayments for current assets
    
    
    14
    
    
    
    190,191
    
    
    
    191,318
    
    
    
    4,260Restricted cash
    
    
    8
    
    
    
    84,538
    
    
    
    360,909
    
    
    
    1,893Cash and cash equivalents
    
    
    8
    
    
    
    458,559
    
    
    
    517,789
    
    
    
    10,270Total current assets
    
    
    
    
    
    
    3,934,838
    
    
    
    4,286,516
    
    
    
    88,126Total assets
    
    
    
    
    
    
    9,238,371
    
    
    
    9,329,800
    
    
    
    206,906Equity
    
    
    16Share capital
    
    
    
    
    
    
    858,832
    
    
    
    546,332
    
    
    
    19,235Share premium
    
    
    
    
    
    
    17,216,121
    
    
    
    16,528,621
    
    
    
    385,579Share based payment reserve
    
    
    
    
    
    
    190,325
    
    
    
    180,124
    
    
    
    4,263Other components of equity
    
    
    
    
    
    
    7,365
    
    
    
    3,374
    
    
    
    165Accumulated deficit
    
    
    
    
    
    
    (13,606,851
    )
    
    
    (13,087,359
    )
    
    
    (304,745
    )Total equity attributable to equity
holders of the Company
    
    
    
    
    
    
    4,665,792
    
    
    
    4,171,092
    
    
    
    104,497Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total equity
    
    
    
    
    
    
    4,665,792
    
    
    
    4,171,092
    
    
    
    104,497
  99




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Sify Technologies Limited
 Consolidated Statement of Financial Position
  As at March 31,2011Conveniencetranslation intoAs at March 31,
    
    
    US$ thousands(In thousands of Rupees, except share data and as
    
    
    
    
    
    2011
    
    
    2010
    
    
    (Unaudited)otherwise stated)
    
    Note
    
    
    Rs
    
    
    Rs
    
    
    Note 2(c)LiabilitiesFinance lease obligations,
other than current
installments
    
    
    17
    
    
    
    127,746
    
    
    
    155,347
    
    
    
    2,861Borrowings
    
    
    20
    
    
    
    262,608
    
    
    
    449,424
    
    
    
    5,881Employee benefits
    
    
    18
    
    
    
    47,788
    
    
    
    54,807
    
    
    
    1,070Other liabilities
    
    
    19
    
    
    
    163,245
    
    
    
    165,800
    
    
    
    3,657Total non-current liabilities
    
    
    
    
    
    
    601,387
    
    
    
    825,378
    
    
    
    13,469Finance lease obligations,
current installments
    
    
    17
    
    
    
    60,507
    
    
    
    45,970
    
    
    
    1,355Borrowings
    
    
    20
    
    
    
    1,035,802
    
    
    
    952,846
    
    
    
    23,198Bank overdraft
    
    
    8
    
    
    
    678,901
    
    
    
    1,060,284
    
    
    
    15,205Trade and other payables
    
    
    21
    
    
    
    1,783,388
    
    
    
    1,855,664
    
    
    
    39,941Deferred income
    
    
    22
    
    
    
    412,594
    
    
    
    418,566
    
    
    
    9,241Total current liabilities
    
    
    
    
    
    
    3,971,192
    
    
    
    4,333,330
    
    
    
    88,940Total liabilities
    
    
    
    
    
    
    4,572,579
    
    
    
    5,158,708
    
    
    
    102,409Total equity and liabilities
    
    
    
    
    
    
    9,238,371
    
    
    
    9,329,800
    
    
    
    206,906
   100




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Sify Technologies Limited
Consolidated Statement of Income
 Year ended March 31,2011Conveniencetranslation intoYear ended March 31,
    
    
    US$ thousands(In thousands of Rupees, except share data and as
    
    
    
    
    
    2011
    
    
    2010
    
    
    2009
    
    
    (Unaudited)otherwise stated)
    
    Note
    
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    Note2(c)Revenue- Rendering of services
    
    
    
    
    
    
    6,283,569
    
    
    
    5,657,140
    
    
    
    5,519,140
    
    
    
    140,729- Sale of products
    
    
    
    
    
    
    603,060
    
    
    
    1,053,048
    
    
    
    643,021
    
    
    
    13,507Total
    
    
    23
    
    
    
    6,886,629
    
    
    
    6,710,188
    
    
    
    6,162,161
    
    
    
    154,236Cost of goods sold and services
rendered- Rendering of services
    
    
    
    
    
    
    (3,655,994
    )
    
    
    (3,157,472
    )
    
    
    (3,033,798
    )
    
    
    (81,881
    )- Sale of products
    
    
    
    
    
    
    (553,436
    )
    
    
    (939,066
    )
    
    
    (579,551
    )
    
    
    (12,395
    )Total
    
    
    25
    
    
    
    (4,209,430
    )
    
    
    (4,096,538
    )
    
    
    (3,613,349
    )
    
    
    (94,276
    )Other income
    
    
    26
    
    
    
    72,693
    
    
    
    131,789
    
    
    
    89,105
    
    
    
    1,628Selling, general and
administrative expenses
    
    
    28
    
    
    
    (2,441,799
    )
    
    
    (2,482,415
    )
    
    
    (2,813,425
    )
    
    
    (54,688
    )Depreciation and amortization
    
    
    5 & 6
    
    
    
    (685,836
    )
    
    
    (656,797
    )
    
    
    (498,872
    )
    
    
    (15,360
    )Impairment loss on intangibles
including goodwill
    
    
    6
    
    
    
    (1,857
    )
    
    
    (47,269
    )
    
    
    (15,200
    )
    
    
    (42
    )Income from legal settlement
    
    
    27
    
    
    
    
    
    
    
    561,120
    
    
    
    
    
    
    
    Profit / (loss) from operating
activities
    
    
    
    
    
    
    (379,600
    )
    
    
    120,078
    
    
    
    (689,580
    )
    
    
    (8,502
    )Finance income
    
    
    31
    
    
    
    45,698
    
    
    
    27,994
    
    
    
    122,565
    
    
    
    1,023Finance expenses
    
    
    31
    
    
    
    (258,622
    )
    
    
    (293,873
    )
    
    
    (251,660
    )
    
    
    (5,792
    )Net finance income / (expense)
    
    
    31
    
    
    
    (212,924
    )
    
    
    (265,879
    )
    
    
    (129,095
    )
    
    
    (4,769
    )Share of profit of equity
accounted investee
    
    
    7
    
    
    
    73,032
    
    
    
    91,135
    
    
    
    64,091
    
    
    
    1,636Profit / (loss) before tax
    
    
    
    
    
    
    (519,492
    )
    
    
    (54,666
    )
    
    
    (754,584
    )
    
    
    (11,635
    )Income tax (expense) / benefit
    
    
    11
    
    
    
    
    
    
    
    81,479
    
    
    
    (97,049
    )
    
    
    Profit / (loss) for the year
    
    
    
    
    
    
    (519,492
    )
    
    
    26,813
    
    
    
    (851,633
    )
    
    
    (11,635
    )Attributable to:Equity holders of the Company
    
    
    
    
    
    
    (519,492
    )
    
    
    17,027
    
    
    
    (900,574
    )
    
    
    (11,635
    )Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    9,786
    
    
    
    48,941
    
    
    
    (519,492
    )
    
    
    26,813
    
    
    
    (851,633
    )
    
    
    (11,635
    )Earnings / (loss) per share
    
    
    32Basic earnings /(loss) per share
    
    
    
    
    
    
    (8.20
    )
    
    
    0.33
    
    
    
    (20.77
    )
    
    
    (0.18
    )Diluted earnings/(loss) per share
    
    
    
    
    
    
    (8.20
    )
    
    
    0.33
    
    
    
    (20.77
    )
    
    
    (0.18
    )
   101




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Sify Technologies Limited
 Consolidated Statement of Comprehensive Income
 2011Conveniencetranslationinto US$Year ended March 31,
    
    
    thousands(In thousands of Rupees, except share data and as
    
    
    
    
    
    2011
    
    
    2010
    
    
    2009
    
    
    Note 2(c)otherwise stated)
    
    Note
    
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    (Unaudited)Profit / (loss) for the year
    
    
    
    
    
    
    (519,492
    )
    
    
    26,813
    
    
    
    (851,633
    )
    
    
    (11,635
    )Other comprehensive incomeForeign currency translation
differences for foreign operations
    
    
    
    
    
    
    (229
    )
    
    
    1,682
    
    
    
    (1,256
    )
    
    
    (5
    )Defined benefit plan actuarial gains /
(losses)
    
    
    
    
    
    
    8,358
    
    
    
    5,508
    
    
    
    (4,346
    )
    
    
    187Change in fair value of available for
sale investments, transferred to
profit or loss
    
    
    
    
    
    
    
    
    
    
    6,441
    
    
    
    
    
    
    
    Change in fair value of available for
sale investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,361
    )
    
    
    Share of gains and (losses) from
equity accounted investees (net of
taxes)
    
    
    
    
    
    
    (4,138
    )
    
    
    (566
    )
    
    
    296
    
    
    
    (93
    )Other comprehensive income for the
year, net of income tax
    
    
    
    
    
    
    3,991
    
    
    
    13,065
    
    
    
    (10,667
    )
    
    
    89Total comprehensive income for the year
    
    
    16
    
    
    
    (515,501
    )
    
    
    39,878
    
    
    
    (862,300
    )
    
    
    (11,546
    )Attributable to:Equity holders of the Company
    
    
    
    
    
    
    (515,501
    )
    
    
    30,092
    
    
    
    (911,241
    )
    
    
    (11,546
    )Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    9,786
    
    
    
    48,941
    
    
    
    Total comprehensive income/(expense)
for the year
    
    
    
    
    
    
    (515,501
    )
    
    
    39,878
    
    
    
    (862,300
    )
    
    
    (11,546
    )
  
  102




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##### Table of Contents



Sify Technologies Limited
Consolidated Statement of Changes in Equity
 For year ended March 31, 2011
 Share
    
    
    
    
    
    
    Retainedbased
    
    
    Other
    
    
    earnings /
    
    
    
    
    
    
    Non-Share
    
    
    Share
    
    
    payment
    
    
    components
    
    
    (accumulated
    
    
    
    
    
    
    controllingParticulars
    
    capital
    
    
    premium
    
    
    reserve
    
    
    of equity
    
    
    deficit)
    
    
    Total
    
    
    interest
    
    
    Total equityBalance at April 1, 2010
    
    
    546,332
    
    
    
    16,528,621
    
    
    
    180,124
    
    
    
    3,374
    
    
    
    (13,087,359
    )
    
    
    4,171,092
    
    
    
    
    
    
    
    4,171,092Total comprehensive income for
the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,991
    
    
    
    (519,492
    )
    
    
    (515,501
    )
    
    
    
    
    
    
    (515,501
    )Transactions with owners,
recorded directly in equityIssue of share capital
    
    
    312,500
    
    
    
    687,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    
    
    
    
    1,000,000Share-based payment transactions
    
    
    
    
    
    
    
    
    
    
    10,201
    
    
    
    
    
    
    
    
    
    
    
    10,201
    
    
    
    
    
    
    
    10,201Balance at March 31, 2011
    
    
    858,832
    
    
    
    17,216,121
    
    
    
    190,325
    
    
    
    7,365
    
    
    
    (13,606,851
    )
    
    
    4,665,792
    
    
    
    
    
    
    
    4,665,792
  103




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##### Table of Contents



Sify Technologies Limited
Consolidated Statement of Changes in Equity
 For year ended March 31, 2010
 Share
    
    
    
    
    
    
    Retainedbased
    
    
    Other
    
    
    earnings /
    
    
    
    
    
    
    Non-Share
    
    
    Share
    
    
    payment
    
    
    components
    
    
    (accumulated
    
    
    
    
    
    
    controllingParticulars
    
    capital
    
    
    premium
    
    
    reserve
    
    
    of equity
    
    
    deficit)
    
    
    Total
    
    
    interest
    
    
    Total equityBalance at April 1, 2009
    
    
    441,018
    
    
    
    16,375,217
    
    
    
    149,535
    
    
    
    (9,691
    )
    
    
    (13,104,386
    )
    
    
    3,851,693
    
    
    
    248,848
    
    
    
    4,100,541Total comprehensive income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,065
    
    
    
    17,027
    
    
    
    30,092
    
    
    
    9,786
    
    
    
    39,878Transactions with owners, recorded
directly in equityIssue of share capital
    
    
    105,300
    
    
    
    737,537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842,837
    
    
    
    
    
    
    
    842,837Share options exercised
    
    
    14
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    84Share-based payment transactions
    
    
    
    
    
    
    
    
    
    
    30,589
    
    
    
    
    
    
    
    
    
    
    
    30,589
    
    
    
    
    
    
    
    30,589Changes in ownership interests in
subsidiaries that do not result in a
loss of controlAcquisition of non-controlling interest
    
    
    
    
    
    
    (584,203
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (584,203
    )
    
    
    (258,634
    )
    
    
    (842,837
    )Balance at March 31, 2010
    
    
    546,332
    
    
    
    16,528,621
    
    
    
    180,124
    
    
    
    3,374
    
    
    
    (13,087,359
    )
    
    
    4,171,092
    
    
    
    
    
    
    
    4,171,092
  104




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##### Table of Contents



Sify Technologies Limited
Consolidated Statement of Changes in Equity
 For year ended March 31, 2009
 Share
    
    
    
    
    
    
    Retainedbased
    
    
    Other
    
    
    earnings /
    
    
    
    
    
    
    Non-Share
    
    
    Share
    
    
    payment
    
    
    components
    
    
    (accumulated
    
    
    
    
    
    
    controllingParticulars
    
    capital
    
    
    premium
    
    
    reserve
    
    
    of equity
    
    
    deficit)
    
    
    Total
    
    
    interest
    
    
    Total equityBalance at April 1, 2008
    
    
    441,018
    
    
    
    16,368,647
    
    
    
    149,398
    
    
    
    976
    
    
    
    (12,265,055
    )
    
    
    4,694,984
    
    
    
    199,907
    
    
    
    4,894,891Total comprehensive income for
the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,667
    )
    
    
    (900,574
    )
    
    
    (911,241
    )
    
    
    48,941
    
    
    
    (862,300
    )Transactions with owners,
recorded directly in equityShare-based payment transactions
    
    
    
    
    
    
    
    
    
    
    61,380
    
    
    
    
    
    
    
    
    
    
    
    61,380
    
    
    
    
    
    
    
    61,380Stock options lapsed
    
    
    
    
    
    
    
    
    
    
    (61,243
    )
    
    
    
    
    
    
    61,243
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    
    
    
    
    6,570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,570
    
    
    
    
    
    
    
    6,570Balance at March 31, 2009
    
    
    441,018
    
    
    
    16,375,217
    
    
    
    149,535
    
    
    
    (9,691
    )
    
    
    (13,104,386
    )
    
    
    3,851,693
    
    
    
    248,848
    
    
    
    4,100,541
   105




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##### Table of Contents



Sify Technologies Limited  Consolidated Statements of Cash Flows
 For the fiscal years ended March 31,
 2011Conveniencetranslationinto US$Year ended March 31,
    
    
    thousands(In thousands of Rupees, except share data and as
    
    2011
    
    
    2010
    
    
    2009
    
    
    (Unaudited)otherwise stated)
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    Note 2(c)Profit/(loss) for the year
    
    
    (519,492
    )
    
    
    26,813
    
    
    
    (851,633
    )
    
    
    (11,635
    )Adjustments for:Depreciation and amortization
    
    
    685,836
    
    
    
    656,797
    
    
    
    498,872
    
    
    
    15,360Impairment loss on intangibles including goodwill
    
    
    1,857
    
    
    
    47,269
    
    
    
    15,200
    
    
    
    42Share of profit of equity accounted investee
    
    
    (73,032
    )
    
    
    (91,135
    )
    
    
    (64,091
    )
    
    
    (1,636
    )(Gain) / loss on sale of property, plant and equipment
    
    
    (594
    )
    
    
    (2,414
    )
    
    
    (828
    )
    
    
    (13
    )Provision for doubtful receivables
    
    
    161,922
    
    
    
    121,987
    
    
    
    84,346
    
    
    
    3,626Provision for finance lease receivables
    
    
    
    
    
    
    
    
    
    
    6,929
    
    
    
    Realized loss on sale of investments
    
    
    
    
    
    
    373
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    10,201
    
    
    
    30,589
    
    
    
    61,380
    
    
    
    229Net finance (income) / expense
    
    
    212,924
    
    
    
    265,879
    
    
    
    129,095
    
    
    
    4,769Income tax expense/(benefit)
    
    
    
    
    
    
    (81,479
    )
    
    
    97,049
    
    
    
    Unrealized (gain)/ loss on account of exchange
differences
    
    
    1,196
    
    
    
    703
    
    
    
    455
    
    
    
    27Amortization of leasehold prepayments
    
    
    
    
    
    
    3,917
    
    
    
    8,403
    
    
    
    Provision for infrastructure costs
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    480,818
    
    
    
    979,299
    
    
    
    (4,823
    )
    
    
    10,853Change in trade and other receivables
    
    
    (153,560
    )
    
    
    (585,805
    )
    
    
    (314,349
    )
    
    
    (3,439
    )Change in inventories
    
    
    5,851
    
    
    
    17,600
    
    
    
    (1,337
    )
    
    
    131Change in other assets
    
    
    (34,082
    )
    
    
    (64,112
    )
    
    
    224,625
    
    
    
    (763
    )Change in trade and other payables
    
    
    (26,597
    )
    
    
    517,497
    
    
    
    (171,261
    )
    
    
    (596
    )Change in employee benefits
    
    
    1,341
    
    
    
    (3,984
    )
    
    
    17,704
    
    
    
    30Change in deferred income
    
    
    (5,972
    )
    
    
    63,762
    
    
    
    (13,555
    )
    
    
    (134
    )267,799
    
    
    
    924,257
    
    
    
    (262,996
    )
    
    
    5,998Income taxes paid
    
    
    (42,440
    )
    
    
    (164,455
    )
    
    
    (108,560
    )
    
    
    (951
    )Net cash from / (used in) operating activities
    
    
    225,359
    
    
    
    759,802
    
    
    
    (371,556
    )
    
    
    5,047
  106




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##### Table of Contents



Sify Technologies Limited
 Consolidated Statements of Cash Flows
 For the fiscal years ended March 31,
  2011Conveniencetranslation intoYear ended March 31,
    
    
    US$ thousands(In thousands of Rupees, except share data and as
    
    2011
    
    
    2010
    
    
    2009
    
    
    (Unaudited)otherwise stated)
    
    Rs
    
    
    Rs
    
    
    Rs
    
    
    Note 2(c)Cash flows from / (used in) investing activitiesAcquisition of property, plant and equipment
    
    
    (674,558
    )
    
    
    (759,435
    )
    
    
    (1,170,905
    )
    
    
    (15,107
    )Expenditure on intangible assets
    
    
    (120,710
    )
    
    
    (220,299
    )
    
    
    (165,247
    )
    
    
    (2,703
    )Proceeds from sale of property, plant and equipment
    
    
    3,109
    
    
    
    5,979
    
    
    
    2,393
    
    
    
    69Net investment in leases
    
    
    
    
    
    
    
    
    
    
    5,111
    
    
    
    Payment towards purchase of unquoted equity shares
    
    
    (160
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Finance income received
    
    
    61,669
    
    
    
    57,130
    
    
    
    154,492
    
    
    
    1,381Short term investments (net)
    
    
    
    
    
    
    19,942
    
    
    
    
    
    
    
    Net cash from / (used in) investing activities
    
    
    (730,650
    )
    
    
    (896,683
    )
    
    
    (1,174,156
    )
    
    
    (16,364
    )Cash flows from / (used in) financing activitiesProceeds from issue of share capital (including share
premium)
    
    
    1,000,000
    
    
    
    84
    
    
    
    
    
    
    
    22,396Proceeds from / (repayment) of borrowings (net)
    
    
    (103,860
    )
    
    
    8,409
    
    
    
    1,227,733
    
    
    
    (2,326
    )Finance expenses paid
    
    
    (293,265
    )
    
    
    (318,723
    )
    
    
    (249,908
    )
    
    
    (6,568
    )Repayment of finance lease liabilities
    
    
    (51,175
    )
    
    
    (44,256
    )
    
    
    (9,028
    )
    
    
    (1,146
    )Net cash from / (used in) financing activities
    
    
    551,700
    
    
    
    (354,486
    )
    
    
    968,797
    
    
    
    12,356Net increase / (decrease) in cash and cash equivalents
    
    
    46,409
    
    
    
    (491,367
    )
    
    
    (576,920
    )
    
    
    1,039Cash and cash equivalents at April 1
    
    
    (181,586
    )
    
    
    312,715
    
    
    
    888,690
    
    
    
    (4,067
    )Effect of exchange fluctuations on cash held
    
    
    (627
    )
    
    
    (2,934
    )
    
    
    945
    
    
    
    (14
    )Cash and cash equivalents at March 31
    
    
    (135,804
    )
    
    
    (181,586
    )
    
    
    312,715
    
    
    
    (3,042
    )Refer note 3 (c) and note 8 for the composition of cash and cash equivalents.Supplementary informationAdditions to property, plant and equipment
represented by finance lease obligations
    
    
    38,111
    
    
    
    99,950
    
    
    
    158,962
    
    
    
    854
   107




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##### Table of Contents



SIFY TECHNOLOGIES LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands of Rupees, except share data and as stated otherwise)
 1. Reporting entity
  2. Basis of preparation
 a. Statement of compliance
   b. Basis of measurement
  
    
    Available for sale financial assets are measured at fair value
 
    
    Derivative financial instruments are measured at fair value
 
    
    Financial instruments at fair value through profit or loss are measured at fair value.
 
    
    The defined benefit asset is recognised as the net total of the plan assets, plus
unrecognized past service cost and unrecognized actuarial losses, less unrecognized actuarial
gains and the present value of the defined benefit obligation.
 
    
    In relation to lease prepayments, the initial fair value of the security deposit, is
estimated as the present value of the refundable amount, discounted using the market interest
rates for similar instruments. The difference between the initial fair value and the
refundable amount of the deposit is recognized as a lease prepayment.
  c. Functional and presentation currency
   Convenience translation (unaudited):
  108




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##### Table of Contents



d. Use of estimates and judgements
  :
 
    
    Measurement of the recoverable amounts of cash-generating units containing goodwill
(Note 6)
 
    
    Useful lives of property, plant and equipment (Note 3 e and Note 5)
 
    
    Useful lives of intangible assets (Note 3 f and Note 6)
 
    
    Lease classification (Note 3 g, 9, 17 and 33)
 
    
    Utilization of tax losses (Note 11)
 
    
    Measurement of defined employee benefit obligations (Note 18)
 
    
    Measurement of share-based payments (Note 30 and Note 37)
 
    
    Valuation of financial instruments (Note 3 c, 4, 38 and 39)
 
    
    Provisions and contingencies (Note 3 m and 35)
 3. Significant accounting policies
  a. Basis of consolidation
 (i) Subsidiaries
  (ii) Associates (equity accounted investees)
   109




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##### Table of Contents



(iii) Transactions eliminated on consolidation
  b. Foreign currency
 (i) Foreign currency transactions
  (ii) Foreign operations
  c. Financial instruments
 (i) Non-derivative financial instruments
   Non-derivative financial assets
 a) Available-for-sale financial assets
    110




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##### Table of Contents



b) Loans and receivables
  c) Others
  Non-derivative financial liabilities
    (ii) Derivative financial instruments
   d. Share capital
  e. Property, plant and equipment
   111




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##### Table of Contents



(i) Subsequent costs
  (ii) Depreciation
  Estimate of useful lifein yearsBuildings
    
    
    28Plant and machinery comprising computers, servers etc.
    
    
    3  5
    *Plant and machinery comprising other items
    
    
    8
    *Furniture and fittings
    
    
    5Office equipment
    
    
    5Motor vehicles
    
    
    3  5
 *
    
    Revised during the year ended March 31, 2008. Also refer note 5.  f. Business combinations and intangible assets
 (i) Business combinations
     112




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##### Table of Contents



(ii) Goodwill
  Acquisitions prior to April 1, 2006
  Acquisitions on or after April 1, 2006
  Acquisition of non-controlling interest
  Subsequent measurement
  (iii) Other intangible assets
  (iv) Subsequent expenditure
  (v) Amortisation of intangible assets with finite useful lives
  Estimate of useful life inyearsSoftware
    
    Not exceeding 3 yearsTechnical know-how
    
    5 yearsLicense fees
    
    20 yearsPortals and web development cost
    
    5 yearsCustomer related intangibles
    
    5 years
  113




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##### Table of Contents



g. Leases
  Assets taken on finance lease:
  Assets taken on operating lease:
  Assets given on finance lease:
  Deposits provided to lessors:
   h. Inventories
  i. Construction contracts in progress
   114




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##### Table of Contents



j. Impairment
 Financial assets
  Financial assets measured at amortized cost
  Available-for-sale financial assets
  Loans and receivables
  Reversal of impairment loss
  Non-financial assets
    pro rata basis.
  115




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##### Table of Contents



Reversal of impairment loss
  k. Employee benefits
  (a) Defined contribution plan (Provident fund)
  (b) Defined benefit plans (Gratuity)
   (c) Short term benefits
  (d) Compensated leave of absence
   116




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##### Table of Contents



l. Share-based payment transactions
   m. Provisions
   n. Revenue
    117




---



##### Table of Contents



(i) Corporate network/data services
        118




---



##### Table of Contents



(ii) Internet access services
       
    
    conducting a market survey and deciding on the best location for the cybercafé or cable head
end;
    
    installing the broadband receiver equipment on the roof top of the cybercafé or the cable
head end and connecting it to one of Sifys broadcasting towers;
    
    obtaining the regulatory approvals for clearance of the site for wireless transmission at the
allotted frequency range;
    
    installing the wiring from the receiver unit to the individual PCs in the cybercafé or the
transmitting equipment in the cable head end;
    
    assisting in obtaining facilities, including computers and interiors for the cybercafés; and
    
    providing the operations manual with instructions and guidelines for running the cybercafé
or distributing Internet access through cable network.
  (iii) Online portal services
   119




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##### Table of Contents



(iv) Other services
  (v) Deferred income
  o. Export entitlements
  p. Finance income and expense
   q. Borrowing costs
  r. Income taxes
   120




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##### Table of Contents



s. Earnings / (loss) per share
  t. Recent accounting pronouncements
 IFRS 9, Financial instruments
 IFRIC 19, Extinguishing Financial Liabilities with Equity
Instruments
  
    
    IFRS 10, Consolidated financial statements.
 
    
    IFRS 11, Joint arrangements.
 
    
    IFRS 12, Disclosure of interests in other entities.
 
    
    IAS 27 (Revised 2011), Consolidated and separate financial statements, which
has been amended for the issuance of IFRS 10 but retains the current guidance on
separate financial statements.
 
    
    IAS 28 (Revised 2011), Investments in associates, which has been amended for
conforming changes on the basis of the issuance of IFRS 10 and IFRS 11.
  121




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##### Table of Contents



IAS-19 Employee benefits
 
    
    requires recognition of changes in the net defined benefit liability/(asset),
including immediate recognition of defined benefit cost, disaggregation of defined
benefit cost into components, recognition of re-measurements in other comprehensive
income, plan amendments, curtailments and settlements.
 
    
    introduced enhanced disclosures about defined benefit plans.
 
    
    modified accounting for termination benefits, including distinguishing benefits
provided in exchange for services from benefits provided in exchange for the
termination of employment, and it affected the recognition and measurement of
termination benefits.
 
    
    provided clarification regarding various issues, including the classification of
employee benefits, current estimates of mortality rates, tax and administration
costs and risk-sharing and conditional indexation features.
 
    
    incorporated, without change, the IFRS Interpretations Committees requirements
set forth in IFRIC 14 IAS 19The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction.
  4. Determination of fair values
  (i) Property, plant and equipment
  (ii) Inventories
  (iii) Intangible assets
  (iv) Investments in equity and debt securities
   122




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##### Table of Contents



(v) Trade and other receivables
  (vi) Derivatives
  (vii) Non derivative financial liabilities
  (viii) Share-based payment transactions
   123




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##### Table of Contents



5. Property, plant and equipment
  Cost
    
    
    Accumulated depreciation
    
    
    CarryingamountAs at
    
    
    
    
    
    
    
    
    
    
    As at
    
    
    As at
    
    
    
    
    
    
    
    
    
    
    As at
    
    
    as atApril 01,
    
    
    
    
    
    
    
    
    
    
    March 31,
    
    
    April 1,
    
    
    Depreciation
    
    
    
    
    
    
    March 31,
    
    
    March 31,Particulars
    
    2010
    
    
    Additions
    
    
    Disposals
    
    
    2011
    
    
    2010
    
    
    for the year
    
    
    Deletions
    
    
    2011
    
    
    2011Building
    
    
    777,419
    
    
    
    
    
    
    
    
    
    
    
    777,419
    
    
    
    177,072
    
    
    
    27,754
    
    
    
    
    
    
    
    204,826
    
    
    
    572,593Plant and machinery
    
    
    5,302,696
    
    
    
    199,591
    
    
    
    68,928
    
    
    
    5,433,359
    
    
    
    2,929,688
    
    
    
    474,168
    
    
    
    68,246
    
    
    
    3,335,610
    
    
    
    2,097,749Computer equipments
    
    
    517,904
    
    
    
    46,736
    
    
    
    864
    
    
    
    563,776
    
    
    
    429,631
    
    
    
    49,854
    
    
    
    780
    
    
    
    478,705
    
    
    
    85,071Office equipment
    
    
    228,418
    
    
    
    6,214
    
    
    
    507
    
    
    
    234,125
    
    
    
    107,252
    
    
    
    23,181
    
    
    
    501
    
    
    
    129,932
    
    
    
    104,193Furniture and fittings
    
    
    706,148
    
    
    
    15,731
    
    
    
    8,520
    
    
    
    713,359
    
    
    
    445,437
    
    
    
    64,442
    
    
    
    6,777
    
    
    
    503,102
    
    
    
    210,257Vehicles
    
    
    6,191
    
    
    
    
    
    
    
    3,262
    
    
    
    2,929
    
    
    
    6,191
    
    
    
    
    
    
    
    3,262
    
    
    
    2,929
    
    
    
    Total
    
    
    7,538,776
    
    
    
    268,272
    
    
    
    82,081
    
    
    
    7,724,967
    
    
    
    4,095,271
    
    
    
    639,399
    
    
    
    79,566
    
    
    
    4,655,104
    
    
    
    3,069,863Add: Construction in progress
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    690,610Total
    
    
    7,538,776
    
    
    
    268,272
    
    
    
    82,081
    
    
    
    7,724,967
    
    
    
    4,095,271
    
    
    
    639,399
    
    
    
    79,566
    
    
    
    4,655,104
    
    
    
    3,760,473
  Cost
    
    
    Accumulated depreciation
    
    
    CarryingamountAs at
    
    
    
    
    
    
    
    
    
    
    As at
    
    
    As at
    
    
    
    
    
    
    
    
    
    
    As at
    
    
    as atApril 01,
    
    
    
    
    
    
    
    
    
    
    March 31,
    
    
    April 1,
    
    
    Depreciation
    
    
    
    
    
    
    March 31,
    
    
    March 31,Particulars
    
    2009
    
    
    Additions
    
    
    Disposals
    
    
    2010
    
    
    2009
    
    
    for the year
    
    
    Deletions
    
    
    2010
    
    
    2010Building
    
    
    769,663
    
    
    
    7,756
    
    
    
    
    
    
    
    777,419
    
    
    
    148,401
    
    
    
    28,671
    
    
    
    
    
    
    
    177,072
    
    
    
    600,347Plant and machinery
    
    
    4,733,122
    
    
    
    827,043
    
    
    
    257,469
    
    
    
    5,302,696
    
    
    
    2,765,920
    
    
    
    420,314
    
    
    
    256,546
    
    
    
    2,929,688
    
    
    
    2,373,008Computer equipments
    
    
    497,223
    
    
    
    26,462
    
    
    
    5,781
    
    
    
    517,904
    
    
    
    367,972
    
    
    
    66,709
    
    
    
    5,050
    
    
    
    429,631
    
    
    
    88,273Office equipment
    
    
    162,132
    
    
    
    68,106
    
    
    
    1,820
    
    
    
    228,418
    
    
    
    96,955
    
    
    
    12,070
    
    
    
    1,773
    
    
    
    107,252
    
    
    
    121,166Furniture and fittings
    
    
    628,279
    
    
    
    101,188
    
    
    
    23,319
    
    
    
    706,148
    
    
    
    389,771
    
    
    
    77,608
    
    
    
    21,942
    
    
    
    445,437
    
    
    
    260,711Vehicles
    
    
    8,269
    
    
    
    
    
    
    
    2,078
    
    
    
    6,191
    
    
    
    6,420
    
    
    
    1,360
    
    
    
    1,589
    
    
    
    6,191
    
    
    
    Total
    
    
    6,798,688
    
    
    
    1,030,555
    
    
    
    290,467
    
    
    
    7,538,776
    
    
    
    3,775,439
    
    
    
    606,732
    
    
    
    286,900
    
    
    
    4,095,271
    
    
    
    3,443,505Add: Construction in progress
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,517Total
    
    
    6,798,688
    
    
    
    1,030,555
    
    
    
    290,467
    
    
    
    7,538,776
    
    
    
    3,775,439
    
    
    
    606,732
    
    
    
    286,900
    
    
    
    4,095,271
    
    
    
    3,452,022
  124




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##### Table of Contents



CarryingCost
    
    
    Accumulated depreciation
    
    
    amountAs at
    
    
    
    
    
    
    
    
    As at
    
    
    As at
    
    
    
    
    
    
    
    
    
    
    As at
    
    
    as atApril 01,
    
    
    
    
    
    
    
    
    March 31,
    
    
    April 1,
    
    
    Depreciation
    
    
    
    
    
    
    March 31,
    
    
    March 31,Particulars
    
    2008
    
    
    Additions
    
    
    Disposals
    
    
    2009
    
    
    2008
    
    
    for the year
    
    
    Deletions
    
    
    2009
    
    
    2009Building
    
    
    769,663
    
    
    
    
    
    
    
    
    
    
    
    769,663
    
    
    
    120,924
    
    
    
    27,477
    
    
    
    
    
    
    
    148,401
    
    
    
    621,262Plant and machinery
    
    
    3,683,632
    
    
    
    1,097,317
    
    
    
    47,827
    
    
    
    4,733,122
    
    
    
    2,526,445
    
    
    
    286,805
    
    
    
    47,330
    
    
    
    2,765,920
    
    
    
    1,967,202Computer equipments
    
    
    438,597
    
    
    
    58,824
    
    
    
    198
    
    
    
    497,223
    
    
    
    297,049
    
    
    
    71,001
    
    
    
    78
    
    
    
    367,972
    
    
    
    129,251Office equipment
    
    
    116,691
    
    
    
    47,090
    
    
    
    1,649
    
    
    
    162,132
    
    
    
    83,928
    
    
    
    14,673
    
    
    
    1,646
    
    
    
    96,955
    
    
    
    65,177Furniture and fittings
    
    
    422,939
    
    
    
    208,486
    
    
    
    3,146
    
    
    
    628,279
    
    
    
    339,750
    
    
    
    52,720
    
    
    
    2,699
    
    
    
    389,771
    
    
    
    238,508Vehicles
    
    
    9,174
    
    
    
    
    
    
    
    905
    
    
    
    8,269
    
    
    
    3,846
    
    
    
    2,981
    
    
    
    407
    
    
    
    6,420
    
    
    
    1,849Total
    
    
    5,440,696
    
    
    
    1,411,717
    
    
    
    53,725
    
    
    
    6,798,688
    
    
    
    3,371,942
    
    
    
    455,657
    
    
    
    52,160
    
    
    
    3,775,439
    
    
    
    3,023,249Add: Construction in progress
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237,665Total
    
    
    5,440,696
    
    
    
    1,411,717
    
    
    
    53,725
    
    
    
    6,798,688
    
    
    
    3,371,942
    
    
    
    455,657
    
    
    
    52,160
    
    
    
    3,775,439
    
    
    
    3,260,914
 Change in estimated useful life
  2008
    
    
    2009
    
    
    2010
    
    
    2011Decrease / (increase) in depreciation expense
    
    
    110,315
    
    
    
    98,650
    
    
    
    61,498
    
    
    
    (17,674
    )
 Leased assets
   Capital Commitments
  Construction in progress
  Security
   125




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##### Table of Contents



6. Intangible assets
  March 31, 2011
    
    
    March 31, 2010Goodwill
    
    
    14,595
    
    
    
    14,595Other intangible assets
    
    
    90,031
    
    
    
    114,929104,626
    
    
    
    129,524
 (i) Goodwill
  March 31, 2011
    
    
    March 31, 2010Balance at the beginning of the year
    
    
    14,595
    
    
    
    40,461Effect of movement in exchange rates
    
    
    
    
    
    
    (2,482
    )Impairment loss recognised during the year
    
    
    
    
    
    
    (23,384
    )Net carrying amount of goodwill
    
    
    14,595
    
    
    
    14,595
  Impairment testing for cash-generating units containing goodwill
      126




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##### Table of Contents



(ii) Other intangibles
  Technical
    
    
    Portals
    
    
    Customerknow-
    
    
    and web
    
    
    related
    
    
    
    
    
    
    Licensehow
    
    
    content
    
    
    intangibles
    
    
    Software
    
    
    fees
    
    
    Total(A) CostBalance as at March 31, 2008
    
    
    82,753
    
    
    
    52,730
    
    
    
    199,554
    
    
    
    271,116
    
    
    
    50,000
    
    
    
    656,153Acquisitions during the year
    
    
    
    
    
    
    
    
    
    
    1,016
    
    
    
    48,099
    
    
    
    
    
    
    
    49,115Balance as at March 31, 2009
    
    
    82,753
    
    
    
    52,730
    
    
    
    200,570
    
    
    
    319,215
    
    
    
    50,000
    
    
    
    705,268Acquisitions during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,468
    
    
    
    
    
    
    
    51,468Disposals during the year
    
    
    
    
    
    
    52,730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,730Balance as at March 31, 2010
    
    
    82,753
    
    
    
    
    
    
    
    200,570
    
    
    
    370,683
    
    
    
    50,000
    
    
    
    704,006Acquisitions during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,397
    
    
    
    
    
    
    
    23,397Disposals during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as at March 31, 2011
    
    
    82,753
    
    
    
    
    
    
    
    200,570
    
    
    
    394,080
    
    
    
    50,000
    
    
    
    727,403(B) AmortizationBalance as at April 1, 2008
    
    
    82,753
    
    
    
    52,730
    
    
    
    149,926
    
    
    
    235,827
    
    
    
    3406
    
    
    
    524,642Amortization for the year
    
    
    
    
    
    
    
    
    
    
    19,921
    
    
    
    20,794
    
    
    
    2,500
    
    
    
    43,215Balance as at March 31, 2009
    
    
    82,753
    
    
    
    52,730
    
    
    
    169,847
    
    
    
    256,621
    
    
    
    5,906
    
    
    
    567,857Amortization for the year
    
    
    
    
    
    
    
    
    
    
    6,144
    
    
    
    41,421
    
    
    
    2,500
    
    
    
    50,065Impairment loss on intangibles
    
    
    
    
    
    
    
    
    
    
    22,148
    
    
    
    1,737
    
    
    
    
    
    
    
    23,885Disposals during the year
    
    
    
    
    
    
    52,730
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,730Balance as at March 31, 2010
    
    
    82,753
    
    
    
    
    
    
    
    198,139
    
    
    
    299,779
    
    
    
    8,406
    
    
    
    589,077Amortization for the year
    
    
    
    
    
    
    
    
    
    
    837
    
    
    
    43,101
    
    
    
    2,500
    
    
    
    46,438Impairment loss on intangibles
    
    
    
    
    
    
    
    
    
    
    1,594
    
    
    
    263
    
    
    
    
    
    
    
    1,857Balance as at March 31,2011
    
    
    82573
    
    
    
    
    
    
    
    200,570
    
    
    
    343,143
    
    
    
    10,906
    
    
    
    637,372(C) Carrying amountsAs at March 31, 2009
    
    
    
    
    
    
    
    
    
    
    30,723
    
    
    
    62,594
    
    
    
    44,094
    
    
    
    137,411As at March 31, 2010
    
    
    
    
    
    
    
    
    
    
    2,431
    
    
    
    70,904
    
    
    
    41,594
    
    
    
    114,929As at March 31, 2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,937
    
    
    
    39,094
    
    
    
    90,031
 Capital commitments
  Capitalized borrowing costs
   127




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##### Table of Contents



7. Investment in equity accounted investees
  Balance sheet
    
    March 31, 2011
    
    
    March 31, 2010Total assets
    
    
    4,546,919
    
    
    
    3,974,094Total liabilities
    
    
    2,193,943
    
    
    
    1,851,919Shareholders equity
    
    
    2,352,976
    
    
    
    2,122,175Total Liabilities and shareholders equity
    
    
    4,546,919
    
    
    
    3,974,094
 For the year endedStatement of operations
    
    March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Revenues
    
    
    1,818,283
    
    
    
    1,612,545
    
    
    
    1,413,643Net profit
    
    
    241,840
    
    
    
    307,543
    
    
    
    216,917
  8. Cash and cash equivalents
  March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009(a) Restricted cashNon currentAgainst future performance obligation
    
    
    
    
    
    
    
    
    
    
    1,000CurrentBank
deposits held under lien against borrowings / guarantees from banks
    
    
    84,538
    
    
    
    360,909
    
    
    
    1,329,756Total restricted cash
    
    
    84,538
    
    
    
    360,909
    
    
    
    1,329,756(b) Non restricted cashCurrentCash and bank balances
    
    
    458,559
    
    
    
    517,789
    
    
    
    380,042Total cash (a+b)
    
    
    543,097
    
    
    
    878,698
    
    
    
    1,710,798Bank overdraft used for cash management purposes
    
    
    (678,901
    )
    
    
    (1,060,284
    )
    
    
    (1,397,083
    )Less: Non current restricted cash
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Cash and cash equivalents for the statement of cash flows
    
    
    (135,804
    )
    
    
    (181,586
    )
    
    
    312,715
  128




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##### Table of Contents



9. Lease prepayments
 March 31, 2011
    
    
    March 31, 2010Towards buildings*
    
    
    63,068
    
    
    
    273,91163,068
    
    
    
    273,911
 *
    
    Includes Rs. Nil (March 31, 2010: Rs 189,903) paid to VALS Developers Private Limited. Also
refer note 37.  10. Other assets
 March 31, 2011
    
    
    March 31, 2010Non currentOther deposits (see notes below)
    
    
    672,843
    
    
    
    554,358672,843
    
    
    
    554,358CurrentNet investment in leases
    
    
    
    
    
    
    
    
    
    
    Financial assets included in other assets
    
    
    212,969
    
    
    
    249,744
 (a)
    
    Includes Rs. Nil (March 31 2010: Rs.32,098) paid to VALS Developers Private Limited. Also refer
note 37.(b)
    
    Includes Rs. 459,872 (March 31 2010: Rs. 304,614) paid to Emirates Integrated
Telecommunications Company PJSC in relation to supply of capacity from the Europe India Gateway and
borrowing cost capitalized thereon. 11. Deferred tax assets and liabilities
  Assets / (liabilities)Recognised deferred tax assets / (liabilities)
    
    March 31, 2011
    
    
    March 31, 2010Deferred tax assetsCarry forward capital losses
    
    
    90,892
    
    
    
    82,86990,892
    
    
    
    82,869Deferred tax liabilitiesProperty, plant and equipment
    
    
    
    
    
    
    (76
    )Intangible assets
    
    
    (83
    )
    
    
    (189
    )Investment in equity accounted investees
    
    
    (90,809
    )
    
    
    (82604
    )(90,892
    )
    
    
    (82,869
    )Net deferred tax asset recognized in balance sheet
    
    
    
    
    
    
    
  129




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##### Table of Contents



Movement in temporary differences during the year
 Balance
    
    
    Recognised
    
    
    
    
    
    
    Balance
    
    
    Recognised
    
    
    
    
    
    
    Balanceas at
    
    
    in
    
    
    Recognised
    
    
    as at
    
    
    in
    
    
    Recognised
    
    
    as atApril 1,
    
    
    income
    
    
    in
    
    
    March 31,
    
    
    income
    
    
    in
    
    
    March 31,2009
    
    
    statement
    
    
    Equity
    
    
    2010
    
    
    statement
    
    
    Equity
    
    
    2011Property, plant and equipment
    
    
    1,796
    
    
    
    (1872
    )
    
    
    
    
    
    
    (76
    )
    
    
    76
    
    
    
    
    
    
    
    Intangible assets
    
    
    2,212
    
    
    
    (2401
    )
    
    
    
    
    
    
    (189
    )
    
    
    106
    
    
    
    
    
    
    
    (83
    )Allowance
for doubtful trade and other receivables
    
    
    4,516
    
    
    
    (4,516
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax loss carry forwards
    
    
    67,735
    
    
    
    14,371
    
    
    
    763
    
    
    
    82,869
    
    
    
    8,875
    
    
    
    (852
    )
    
    
    90,892Investment
in equity accounted investees
    
    
    (67,735
    )
    
    
    (14,106
    )
    
    
    (763
    )
    
    
    (82,604
    )
    
    
    (9,057
    )
    
    
    852
    
    
    
    (90,809
    )8,524
    
    
    
    (8,524
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Unrecognized deferred tax assets / (liabilities)
 As at March 31, 2011
    
    
    As at March 31, 2010Deductible temporary differences
    
    
    157,928
    
    
    
    172,136Unrecognized tax losses
    
    
    3,084,218
    
    
    
    3,360,0933,242,146
    
    
    
    3,532,229
   Income tax expense recognized in profit or loss
 March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Current tax expense / (benefit)Current period
    
    
    
    
    
    
    (90,003
    )
    
    
    90,003
    
    
    
    (90,003
    )
    
    
    90,003Deferred tax expenseOrigination and reversal of temporary differences
    
    
    8,875
    
    
    
    22,895
    
    
    
    17,862Recognition of previously unrecognized tax losses
    
    
    (8,875
    )
    
    
    (14,371
    )
    
    
    (10,854
    )Reversal of previously recognized tax losses
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    8,524
    
    
    
    38Total income tax expense / (benefit)
    
    
    
    
    
    
    (81,479
    )
    
    
    97,049
  130




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##### Table of Contents



Income tax directly recognised in other comprehensive income
 March 31,2011
    
    
    March 31,2010
    
    
    March 31,2009Actuarial (gains) or losses
    
    
    
    
    
    
    
    
    
    
    Tax effect of changes in the fair value of other investments
    
    
    
    
    
    
    
    
    
    
    Tax effect on share of profit of associate recognised in OCI
    
    
    
    
    
    
    
    
    
    
    Tax effect on foreign currency translation differences
    
    
    
    
    
    
    
    
    
    
    Income tax benefit / (expense) recognized directly in equity
    
    
    
    
    
    
    
    
    
    
    
 Reconciliation of effective tax rate
  Year ended
    
    
    Year ended
    
    
    Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Profit / (loss) before income taxes
    
    
    (519,492
    )
    
    
    (54,666
    )
    
    
    (754,584
    )Enacted tax rates in India
    
    
    33.22
    %
    
    
    33.99
    %
    
    
    33.99
    %Computed expected tax expense / (benefit)
    
    
    (172,575
    )
    
    
    (18,581
    )
    
    
    (256,483
    )Effect of:Share based payment expense not deductible for tax purposes
    
    
    2,697
    
    
    
    8,188
    
    
    
    16,149Unrecognized
deferred tax assets on losses incurred during the year (net of temporary differences, if any)
    
    
    194,140
    
    
    
    41,370
    
    
    
    359,669Unrecognized deferred tax asset on temporary differences
    
    
    
    
    
    
    
    
    
    
    Share of profit of equity accounted investee taxed at a lower rate
    
    
    (9,217
    )
    
    
    (12,203
    )
    
    
    (8,582
    )Recognition of previously unrecognized tax losses
    
    
    (15,045
    )
    
    
    (18,774
    )
    
    
    (13,203
    )Reversal of tax expense consequent to merger (Refer note 40)
    
    
    
    
    
    
    (81,479
    )
    
    
    Others
    
    
    
    
    
    
    
    
    
    
    (501
    )
    
    
    
    (81,479
    )
    
    
    97,049
 12. Inventories
  March 31, 2011
    
    
    March 31, 2010Communication hardware
    
    
    2,824
    
    
    
    19,826Application software
    
    
    12,813
    
    
    
    1,66215,637
    
    
    
    21,488
   131




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##### Table of Contents



13. Trade and other receivables
  March 31, 2011
    
    
    March 31, 2010(i) Trade receivables, net
    
    
    1,839,966
    
    
    
    1,912,348(ii) Other receivables including deposits
    
    
    1,251,690
    
    
    
    1,196,450(iii) Construction contract in progress
    
    
    94,257
    
    
    
    86,2143,185,913
    
    
    
    3,195,012
 (i)
    
    Trade receivables as of March 31, 2011 and March 31, 2010 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 collateralized except to the extent of
refundable deposits received from cybercafé franchisees and from cable television operators.
The Groups exposure to credit and currency risks and impairment losses related to trade and
other receivables, excluding construction work in progress is disclosed in note 39. Trade
receivables consist of: March 31, 2011
    
    
    March 31, 2010Trade receivables from related parties
    
    
    
    
    
    
    Other trade receivables
    
    
    2,055,974
    
    
    
    2,083,0542,055,974
    
    
    
    2,083,054Less: Allowance for doubtful receivables
    
    
    (216,008
    )
    
    
    (170,706
    )Balance at the end of the year
    
    
    1,839,966
    
    
    
    1,912,348
  For the year endedMarch 31, 2011
    
    
    March 31, 2010Balance at the beginning of the year
    
    
    170,706
    
    
    
    116,295Add: Additional provision, net
    
    
    161,922
    
    
    
    121,987Less: Bad debts written off
    
    
    (116,620
    )
    
    
    (67,576
    )Balance at the end of the year
    
    
    216,008
    
    
    
    170,706
 (ii)
    
    Other receivables comprises of the following items: March 31, 2011
    
    
    March 31, 2010Advances and other deposits (Refer Note (a) and (c) below)
    
    
    684,016
    
    
    
    657,609Withholding taxes (Refer Note (b) below)
    
    
    560,456
    
    
    
    530,146Employee advances
    
    
    7,218
    
    
    
    8,6951,251,690
    
    
    
    1,196,450Financial assets included in other receivables
    
    
    354,115
    
    
    
    322,833
  a)
    
    Advances and other deposits primarily comprises of receivables in the form of custom duty
credit entitlement, service tax and other advances given in the ordinary course of business. b)
    
    Includes withholding taxes recoverable from the Department of Income-tax for which the
Company has filed tax returns for refund. The Company expects to realize such refund of
withholding taxes within the next 12 months.  132




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##### Table of Contents



14. Prepayments for current assets
  March 31, 2011
    
    
    March 31, 2010Prepayments for purchase of bandwidth
    
    
    71,256
    
    
    
    79,402Prepayments related to insurance
    
    
    7,026
    
    
    
    17,680Prepayments-others
    
    
    106,845
    
    
    
    57,245Lease prepayments
    
    
    5,064
    
    
    
    36,991190,191
    
    
    
    191,318
 15. Other investments
  March 31, 2011
    
    
    March 31, 2010Investment in equity shares of Vashi Railway Station Commercial Complex Limited
    
    
    150
    
    
    
    Investment in equity shares of Sify Empower India Foundation
    
    
    10
    
    
    
    160
    
    
    
    
  133




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##### Table of Contents



16. Share capital and share premium
 No of shares
 Year ended March 31,2011
    
    
    2010
    
    
    2009Issued as at April 01
    
    
    53,351,498
    
    
    
    42,820,082
    
    
    
    55,637,082Issued for cash*
    
    
    125,000,000
    
    
    
    
    
    
    
    Issued for consideration other than cash
    
    
    
    
    
    
    10,530,000
    
    
    
    Exercise of share options
    
    
    
    
    
    
    1,416
    
    
    
    Shares forfeited**
    
    
    
    
    
    
    
    
    
    
    (12,817,000
    )Issued as at March 31
    
    
    178,351,498
    
    
    
    53,351,498
    
    
    
    42,820,082
 *
    
    Paid up Rs.2.50 per share**
    
    Paid up Re.1/- per share       Translation reserve
   134




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##### Table of Contents



Share based payment reserve
  Fair value reserve
  Recognised actuarial gain / loss
  17. Finance lease obligations
  March 31, 2011
    
    
    March 31, 2010Present
    
    
    
    
    
    
    
    
    
    
    PresentFuture
    
    
    
    
    
    
    value
    
    
    Future
    
    
    
    
    
    
    valueminimum
    
    
    
    
    
    
    minimum
    
    
    minimum
    
    
    
    
    
    
    minimumlease
    
    
    
    
    
    
    lease
    
    
    lease
    
    
    
    
    
    
    leasepayments
    
    
    Interest
    
    
    payments
    
    
    payments
    
    
    Interest
    
    
    paymentsLess than one year
    
    
    77,975
    
    
    
    (17,468
    )
    
    
    60,507
    
    
    
    65,148
    
    
    
    (19,178
    )
    
    
    45,970Between one and
five years
    
    
    144,357
    
    
    
    (16,611
    )
    
    
    127,746
    
    
    
    182,206
    
    
    
    (26,859
    )
    
    
    155,347Total
    
    
    222,332
    
    
    
    (34,079
    )
    
    
    188,253
    
    
    
    247,354
    
    
    
    (46,037
    )
    
    
    201,317
 18. Employee benefits
 March 31, 2011
    
    
    March 31, 2010Gratuity payable
    
    
    19,116
    
    
    
    16,753Compensated absences
    
    
    28,672
    
    
    
    38,05447,788
    
    
    
    54,807
 Gratuity cost
  March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Service cost
    
    
    22,275
    
    
    
    14,498
    
    
    
    12,067Interest cost
    
    
    3,786
    
    
    
    4,501
    
    
    
    3,038Expected return on plan asset
    
    
    (2,875
    )
    
    
    (2,963
    )
    
    
    (1,672
    )23,186
    
    
    
    16,036
    
    
    
    13,433
  March 31, 2011
    
    
    March 31, 2010Present value of projected benefit obligation at the end of the year
    
    
    59,571
    
    
    
    51,046Funded status of the plans
    
    
    40,455
    
    
    
    34,293Recognised (asset) / liability
    
    
    19,116
    
    
    
    16,753
  135




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##### Table of Contents



Change in defined benefit obligation
    
    March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Projected benefit obligation at the beginning of the year
    
    
    51,046
    
    
    
    43,389
    
    
    
    27,332Service cost
    
    
    22,275
    
    
    
    14,498
    
    
    
    12,067Interest cost
    
    
    3,786
    
    
    
    4,501
    
    
    
    3,038Actuarial (gain) / loss
    
    
    (8,358
    )
    
    
    (5,957
    )
    
    
    3,662Benefits paid
    
    
    (9,178
    )
    
    
    (5,385
    )
    
    
    (2,710
    )Projected benefit obligation at the end of the year
    
    
    59,571
    
    
    
    51,046
    
    
    
    43,389
 Change in plan assets
    
    March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Fair value of plan assets at the beginning of the year
    
    
    34,293
    
    
    
    28,307
    
    
    
    18,740Expected return on plan assets
    
    
    2,875
    
    
    
    2,965
    
    
    
    1,672Actuarial gain / (loss)
    
    
    
    
    
    
    (449
    )
    
    
    (684
    )Employer contributions
    
    
    12,465
    
    
    
    8,855
    
    
    
    11,290Benefits paid
    
    
    (9,178
    )
    
    
    (5,385
    )
    
    
    (2,711
    )Fair value of plan assets at the end of the year
    
    
    40,455
    
    
    
    34,293
    
    
    
    28,307Actual return on plan assets
    
    
    2,875
    
    
    
    2,513
    
    
    
    988
 Actuarial assumptions at end of the year:
 The principal actuarial assumptions as on March 31, 2011, 2010 and 2009 were as follows:
 March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Discount rate
    
    
    8.00% P.a
    
    
    
    8.15% P.a
    
    
    
    7.95% P.aLong-term rate of compensation increase
    
    
    8.00% P.a
    
    
    
    8.00% P.a
    
    
    
    8.00% P.aExpected long term rate of return on plan assets
    
    
    8.00% P.a
    
    
    
    8.00% P.a
    
    
    
    8.00% P.aAverage future working life time
    
    
    8.60 years
    
    
    11.06 years
    
    
    10.99 years
 Discount rate: .
 Long term rate of compensation increase:
 Expected long term rate of return on plan assets:
   Historical information
 March 31, 2011
    
    
    March 31, 2010Experience adjustment on plan liabilities
    
    
    8,064
    
    
    
    (4,818
    )Experience adjustment on plan assets
    
    
    
    
    
    
    (450
    )
 Contributions: The Group expects to contribute Rs.15,000 (March 31 2010: Rs12,000) to its gratuity
fund during the year ending March 31, 2012.
  136




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Plan assets:The Gratuity plans weighted-average asset allocation at March 31, 2011 and March 31,
2010, by asset category is as follows:
 March 31, 2011
    
    
    March 31, 2010Funds managed by insurers
    
    
    100
    %
    
    
    100
    %
 Actuarial gains and losses recognised in other comprehensive income
  March 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Actuarial gain / (loss)
    
    
    8,358
    
    
    
    5,508
    
    
    
    (4,346
    )8,358
    
    
    
    5,508
    
    
    
    (4,346
    )
 Contributions to defined contribution plans
  19. Other liabilities
 March 31, 2011
    
    
    March 31, 2010Franchisee deposits and other liabilities
    
    
    163,245
    
    
    
    165,800163,245
    
    
    
    165,800
  20. Borrowings
 March 31, 2011
    
    
    March 31, 2010CurrentTerm bank loans (Refer note 1 below)
    
    
    216,000
    
    
    
    216,000Other working capital facilities (Refer note 2 below)
    
    
    679,542
    
    
    
    697,165Borrowings from others (Refer note 3 below)
    
    
    140,260
    
    
    
    39,6811,035,802
    
    
    
    952,846Non currentTerm bank loans (Refer note 1 below)
    
    
    113,880
    
    
    
    325,940Borrowings from others (Refer note 3 below)
    
    
    148,728
    
    
    
    123,484262,608
    
    
    
    449,424
  1.
    
    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.  137




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##### Table of Contents



2.
    
    Working capital facilities include Letter of credit discounted, buyers credit and foreign
currency demand loan. These are secured by pari-passu charge on current assets of the Company
and moveable assets of the company, both present and future. Foreign currency demand loan
bear an interest of Libor +550 bps. Other working capital borrowings bear interest ranging
from 11% to 14% p.a. Such facilities are renewable every year.3.
    
    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. 21. Trade and other payables
 March 31, 2011
    
    
    March 31, 2010Trade payables
    
    
    814,777
    
    
    
    989,020Advance from customers
    
    
    86,073
    
    
    
    37,047Accrued expenses
    
    
    808,399
    
    
    
    686,452Other payables
    
    
    74,139
    
    
    
    143,1451,783,388
    
    
    
    1,855,664Financial liabilities included in trade and other payables
    
    
    1,725,907
    
    
    
    1,798,764
 22. Deferred income
  March 31, 2011
    
    
    March 31, 2010Corporate network/data services
    
    
    339,549
    
    
    
    328,309Internet access services
    
    
    28,966
    
    
    
    24,941Other services
    
    
    44,079
    
    
    
    65,316412,594
    
    
    
    418,566
 23. Revenue
 Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Rendering of servicesService revenue*
    
    
    5,460,236
    
    
    
    5,356,852
    
    
    
    5,253,535Initial franchise fee
    
    
    10,992
    
    
    
    11,369
    
    
    
    30,489Installation service revenue
    
    
    812,341
    
    
    
    288,919
    
    
    
    235,1166,283,569
    
    
    
    5,657,140
    
    
    
    5,519,140Sale of products
    
    
    603,060
    
    
    
    1,053,048
    
    
    
    643,0216,886,629
    
    
    
    6,710,188
    
    
    
    6,162,161
 *
    
    Including revenue arising from construction contracts (refer note 24)  138




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24. Construction contracts in progress
 Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Contract revenue recognised for the year
ended March 31, 2011
    
    
    268,064
    
    
    
    86,214
    
    
    
    Aggregate amounts of costs incurred and
recognized profits (less recognised
losses) upto the reporting date for
contracts in progress
    
    
    109,570
    
    
    
    86,124
    
    
    
    Advances received for contracts in progress
    
    
    27,860
    
    
    
    16,441
    
    
    
    Gross amount due from customers for
contract work presented as an asset
    
    
    231,090
    
    
    
    86,214
    
    
    
    
 25. Cost of goods sold and services rendered
  26. Other income
 Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Duty credit entitlement
    
    
    38,006
    
    
    
    82,486
    
    
    
    79,278Others
    
    
    34,687
    
    
    
    49,303
    
    
    
    9,82772,693
    
    
    
    131,789
    
    
    
    89,105
 27. Income from legal settlement
  28. Selling, general and administrative expenses
 Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Personnel expenses
    
    
    561,385
    
    
    
    745,067
    
    
    
    987,585Marketing and promotion expenses
    
    
    394,057
    
    
    
    482,554
    
    
    
    608,318Administrative and other expenses*
    
    
    1,486,357
    
    
    
    1,238,770
    
    
    
    1,217,5222,441,799
    
    
    
    2,466,391
    
    
    
    2,813,425
 *
    
    Includes foreign exchange
gain / (loss) of Rs.12,941, Rs.9,397 and Rs.21,320 for the years ended
March 31, 2011, 2010 and 2009 respectively.   139




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##### Table of Contents



29. Personnel expenses
 Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Salaries and wages
    
    
    1,211,183
    
    
    
    1,269,638
    
    
    
    1,532,378Contribution to provident fund and other funds
    
    
    77,164
    
    
    
    77,197
    
    
    
    70,354Staff welfare expenses
    
    
    22,296
    
    
    
    27,499
    
    
    
    38,225Employee stock compensation expense
    
    
    10,201
    
    
    
    30,589
    
    
    
    61,3801,320,844
    
    
    
    1,404,923
    
    
    
    1,702,337Attributable to cost of goods sold and services rendered
    
    
    759,459
    
    
    
    659,856
    
    
    
    714,752Attributable
to selling, general and administration expenses
    
    
    561,385
    
    
    
    745,067
    
    
    
    987,585
 30. Share-based payments
  (i) Associate Stock Option Plan 2005
   One sixth of the options:
    
    At the end of one year from the date of the grantFive sixth of the options:
    
    At the end of each quarter during the second and third year from the date of the grant in eight
equal installments.
   Weighted average exerciseNo. of options granted, exercised and
    
    Number of options
    
    
    price in Rs.forfeited
    
    2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009Outstanding at the beginning of the year
    
    
    
    
    
    
    
    
    
    
    326,093
    
    
    
    
    
    
    
    
    
    
    
    328.84Granted during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited during the year
    
    
    
    
    
    
    
    
    
    
    (29,167
    )
    
    
    
    
    
    
    
    
    
    
    449.16Expired during the year
    
    
    
    
    
    
    
    
    
    
    (296,926
    )
    
    
    
    
    
    
    
    
    
    
    317.02Exercised during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Replaced
during the year (Refer to notes below)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at the end of the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested and exercisable at the end of
the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average grant date fair value
of grants during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  140




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(ii) Associate Stock Option Plan 2007
   One sixth of the option quantity:
    
    At the end of one year from the date of the grant.Five sixth of the option quantity:
    
    At the end of each quarter during the second, third and fourth year from the date of the
grant in twelve equal installments.
   Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    average
    
    
    
    
    
    
    averageexercise
    
    
    Number
    
    
    exercise
    
    

    Number
    
    
    exerciseNumber
    
    
    price in
    
    
    of
    
    
    price in
    
    
    of
    
    
    price inNo. of options granted, exercised
    
    of options
    
    
    Rs.
    
    
    options
    
    
    Rs.
    
    
    options
    
    
    Rs.and forfeited
    
    2011
    
    
    2011
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009Outstanding at the beginning
of the year
    
    
    1,078,800
    
    
    
    149.21
    
    
    
    1,211,900
    
    
    
    152.51
    
    
    
    1,200,400
    
    
    
    157.35Granted during the year
    
    
    6,000
    
    
    
    74.41
    
    
    
    50,000
    
    
    
    89.34
    
    
    
    142,500
    
    
    
    117.46Replaced (Refer to notes
below)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Replacement options
granted (Refer to notes
below)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited during the year
    
    
    (81,801
    )
    
    
    152.37
    
    
    
    (93,616
    )
    
    
    153.58
    
    
    
    (131,000
    )
    
    
    158.77Expired during the year
    
    
    (161,799
    )
    
    
    158.52
    
    
    
    (88,068
    )
    
    
    158.01
    
    
    
    
    
    
    
    Exercised during the year
    
    
    
    
    
    
    
    
    
    
    (1,416
    )
    
    
    59.02
    
    
    
    
    
    
    
    Outstanding at the end
of the year
    
    
    841,200
    
    
    
    146.58
    
    
    
    1,078,800
    
    
    
    149.21
    
    
    
    1,211,900
    
    
    
    152.51Vested and Exercisable
at the end of the year
    
    
    566,908
    
    
    
    151.36
    
    
    
    437,210
    
    
    
    155.55
    
    
    
    185,167
    
    
    
    157.35Weighted average grant
date fair value of grants
during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71.82
   141




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##### Table of Contents



Year ended
    
    Year ended
    
    Year endedMarch 31,
    
    March 31,
    
    March 31,No. of options granted, exercised and forfeited
    
    2011
    
    2010
    
    2009Weighted average share price
    
    82.68
    
    99.26
    
    130.41Weighted average exercise price
    
    74.41
    
    89.34
    
    117.46Expected volatility
    
    110.5%  124.7%
    
    115.8%  136.7%
    
    53.5%  120.0%Option life
    
    3  4.5 years
    
    3  4.5 years
    
    3  4.5 yearsExpected dividends
    
    
    
    
    
    Risk-free interest rate
    
    2.61%
    
    2.43%  2.69%
    
    1.64%  3.45%
  WeightedNumber
    
    
    Weighted
    
    
    average
    
    
    Number
    
    
    WeightedRange of
    
    
    outstanding at
    
    
    average
    
    
    remaining
    
    
    exercisable at
    
    
    averageexercise price
    
    
    March 31,
    
    
    exercise price
    
    
    contractual
    
    
    March 31,
    
    
    exercise pricein Rs.
    
    
    2011
    
    
    in Rs.
    
    
    life
    
    
    2011
    
    
    in Rs.ASOP 2007
    
    
    51.51-188.32
    
    
    
    841,200
    
    
    
    146.58
    
    
    
    1.00
    
    
    
    566,908
    
    
    
    151.36
 Modification
    142




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##### Table of Contents



Assumptions
    
    Pre modification
    
    Post modificationCurrent market price
    
    174.83
    
    174.83Exercise price
    
    308.34  578.38
    
    157.35Expected term
    
    3  4.5 years
    
    3  4.5 yearsVolatility
    
    53.83%  77.82%
    
    53.01%  77.82%Dividend yield
    
    0%
    
    0%Discount rate
    
    2.5%
    
    2.5%
 31. Financial income and expense
 Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Interest income on bank deposits
    
    
    21,360
    
    
    
    19,489
    
    
    
    116,495Interest income from leases
    
    
    
    
    
    
    
    
    
    
    435Others
    
    
    24,338
    
    
    
    8,505
    
    
    
    5,635Finance income
    
    
    45,698
    
    
    
    27,994
    
    
    
    122,565Interest expense on lease obligations
    
    
    20,117
    
    
    
    16,476
    
    
    
    2,243Bank charges (including letter of credit,
bill discounting and buyers credit charges)
    
    
    96,721
    
    
    
    100,241
    
    
    
    86,216Interest expense on borrowings
    
    
    141,784
    
    
    
    177,156
    
    
    
    163,201Finance expense
    
    
    (258,622
    )
    
    
    (293,873
    )
    
    
    (251,660
    )Net finance income / (expense) recognised
in profit or loss
    
    
    (212,924
    )
    
    
    (265,879
    )
    
    
    (129,095
    )
 32. Earnings / (loss) per share
  Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Net profit / (loss)  as reported
    
    
    (519,492
    )
    
    
    17,027
    
    
    
    (900,574
    )Weighted average number of shares  basic
    
    
    63,317,251
    
    
    
    50,840,358
    
    
    
    43,350,320Basic earnings / (loss) per share
    
    
    (8.20
    )
    
    
    0.33
    
    
    
    (20.77
    )Weighted average number of shares  diluted
    
    
    63,317,251
    
    
    
    50,853,293
    
    
    
    43,350,320Diluted earnings / (loss) per share
    
    
    (8.20
    )
    
    
    0.33
    
    
    
    (20.77
    )
 Weighted average number of ordinary shares basic
 Year ended March 31,2011
    
    
    2010
    
    
    2009Issued fully paid ordinary shares at April 01
    
    
    53,351,498
    
    
    
    42,820,082
    
    
    
    42,820,082Effect of shares issued on exercise of stock options
    
    
    
    
    
    
    166
    
    
    
    Effect of partly paid shares (Note 1)
    
    
    9,965,753
    
    
    
    
    
    
    
    530,238Effect of shares issued consequent to amalgamation
of Sify Communications Limited
    
    
    
    
    
    
    8,020,110
    
    
    
    Weighted average number of equity shares and
equivalent shares outstanding
    
    
    63,317,251
    
    
    
    50,840,358
    
    
    
    43,350,320
  143




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##### Table of Contents



Weighted average number of ordinary shares diluted
 Year ended March 31,2011
    
    
    2010
    
    
    2009Weighted average number of ordinary shares (basic)
    
    
    63,317,251
    
    
    
    50,840,358
    
    
    
    43,350,320Effect of stock options
    
    
    
    
    
    
    12,935
    
    
    
    Weighted average number of equity shares outstanding (diluted)
    
    
    63,317,251
    
    
    
    50,853,293
    
    
    
    43,350,320
  Note 1:
    
    During the year, 125,000,000 ordinary shares were issued to the existing promoter group on
a private placement basis. As of March 31, 2011, these shares were partly paid up to the
extent of Rs 2.50 per share. Refer note 16 to the consolidated financial statements.
 33. Operating leases
  As at March 31, 2011
 Less
    
    
    
    
    
    
    More than 5Lease obligations
    
    Total
    
    
    than 1 year
    
    
    1-5 years
    
    
    yearsNon-cancellable operating lease obligations
    
    
    1,884,543
    
    
    
    105,693
    
    
    
    588,973
    
    
    
    1,189,877
 As at March 31, 2010
 Less
    
    
    
    
    
    
    More than 5Lease obligations
    
    Total
    
    
    than 1 year
    
    
    1-5 years
    
    
    yearsNon-cancellable operating lease obligations
    
    
    1,608,509
    
    
    
    119,871
    
    
    
    407,890
    
    
    
    1,080,748Non-cancellable obligations towards
proposed lease *
    
    
    2,423,554
    
    
    
    22,850
    
    
    
    520,808
    
    
    
    1,879,896
 *
    
    For details on proposed lease, refer Note 37 on related parties. 34. Segment reporting
  
    
    Corporate network/data services, which provides Internet, connectivity, security and
consulting, hosting and managed service solutions;
    
    Internet access services, from homes and through cybercafés,
    
    Online portal services and content offerings; and
    
    Other services, such as development of e-learning software.
  144




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Year ended March 31, 2011
 Corporatenetwork /
    
    
    Internet
    
    
    Online
    
    
    Consumerdata
    
    
    access
    
    
    portal
    
    
    one
    
    
    Otherservices
    
    
    services
    
    
    services
    
    
    (Sub-total)
    
    
    services
    
    
    TotalA
    
    
    B
    
    
    A+BSegment revenue
    
    
    5,671,909
    
    
    
    403,925
    
    
    
    122,441
    
    
    
    526,366
    
    
    
    688,354
    
    
    
    6,886,629Allocated segment expenses
    
    
    (4,026,865
    )
    
    
    (539,404
    )
    
    
    (100,059
    )
    
    
    (639,463
    )
    
    
    (536,176
    )
    
    
    (5,202,504
    )Impairment loss on intangibles
    
    
    
    
    
    
    
    
    
    
    (1,857
    )
    
    
    (1,857
    )
    
    
    
    
    
    
    (1,857
    )Segment operating income /
(loss)
    
    
    1,645,044
    
    
    
    (135,479
    )
    
    
    20,525
    
    
    
    (114,954
    )
    
    
    152,178
    
    
    
    1,682,268Unallocated expenses:Cost of goods sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (525,024
    )Selling, general and
administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (980,354
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (685,836
    )Other income / (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,693Finance income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,698Finance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (201,969
    )Share of profit of equity
accounted investee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,032Profit / (loss) before tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (519,492
    )Income tax (expense) / benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Profit / (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (519,492
    )
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Year ended March 31, 2010
 Corporatenetwork /
    
    
    Internet
    
    
    Online
    
    
    Consumerdata
    
    
    access
    
    
    portal
    
    
    one
    
    
    Otherservices
    
    
    services
    
    
    services
    
    
    (Sub-total)
    
    
    services
    
    
    TotalA
    
    
    B
    
    
    A+BSegment revenue
    
    
    5,335,268
    
    
    
    713,929
    
    
    
    130,842
    
    
    
    844,771
    
    
    
    530,149
    
    
    
    6,710,188Allocated segment expenses
    
    
    (3,929,727
    )
    
    
    (757,431
    )
    
    
    (140,966
    )
    
    
    (898,397
    )
    
    
    (406,063
    )
    
    
    (5,234,187
    )Impairment loss on
intangibles including
goodwill
    
    
    
    
    
    
    
    
    
    
    (47,269
    )
    
    
    (47,269
    )
    
    
    
    
    
    
    (47,269
    )Segment operating income /
(loss)
    
    
    1,405,541
    
    
    
    (43,502
    )
    
    
    (57,393
    )
    
    
    (100,895
    )
    
    
    124,086
    
    
    
    1,428,732Unallocated expenses:Cost of goods sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (477,807
    )Selling, general and
administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (936,842
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (656,797
    )Other income / (expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,789Income from legal settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    561,120Finance income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,994Finance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (223,990
    )Share of profit of equity
accounted investee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,135Profit / (loss) before tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,666
    )Income tax (expense) / benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,479Profit / (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,813
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Year ended March 31, 2009
 Corporatenetwork /
    
    
    Internet
    
    
    Online
    
    
    Consumerdata
    
    
    access
    
    
    portal
    
    
    one
    
    
    Otherservices
    
    
    services
    
    
    services
    
    
    (Sub-total)
    
    
    services
    
    
    TotalA
    
    
    B
    
    
    A+BSegment revenue
    
    
    4,305,235
    
    
    
    1,128,182
    
    
    
    177,324
    
    
    
    1,305,506
    
    
    
    551,420
    
    
    
    6,162,161Allocated segment expenses
    
    
    (2,842,889
    )
    
    
    (1,295,332
    )
    
    
    (220,967
    )
    
    
    (1,516,299
    )
    
    
    (473,008
    )
    
    
    (4,832,196
    )Impairment loss on goodwill
    
    
    
    
    
    
    
    
    
    
    (15,200
    )
    
    
    (15,200
    )
    
    
    
    
    
    
    (15,200
    )Segment operating income /
(loss)
    
    
    1,462,346
    
    
    
    (167,150
    )
    
    
    (58,843
    )
    
    
    (225,993
    )
    
    
    78,412
    
    
    
    1,314,765Unallocated expenses:Cost of goods sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (484,478
    )Selling, general and
administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,130,221
    )Depreciation and
amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (498,872
    )Other income / (expense),
net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,105Finance income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,565Finance expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (231,539
    )Share of profit of equity
accounted investee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,091Profit / (loss) before tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (754,584
    )Income tax (expense) /
benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,049
    )Profit / (loss) for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (851,633
    )
 Year Reconciliations
 Selling, generalandadministrativeCost of goods sold
    
    
    expenses
    
    
    Finance expenses
    
    
    TotalYear ended March 31, 2011Allocated segment expenses
    
    
    3,684,406
    
    
    
    1,461,445
    
    
    
    56,653
    
    
    
    5,202,504Unallocated segment expenses
    
    
    525,024
    
    
    
    980,354
    
    
    
    201,969Total as per income statement
    
    
    4,209,430
    
    
    
    2,441,799
    
    
    
    258,622Year ended March 31, 2010Allocated segment expenses
    
    
    3,618,731
    
    
    
    1,545,573
    
    
    
    69,883
    
    
    
    5,234,187Unallocated segment expenses
    
    
    477,807
    
    
    
    936,842
    
    
    
    223,990Total as per income statement
    
    
    4,096,538
    
    
    
    2,482,415
    
    
    
    293,873Year ended March 31, 2009Allocated segment expenses
    
    
    3,128,871
    
    
    
    1,683,204
    
    
    
    20,121
    
    
    
    4,832,196Unallocated segment expenses
    
    
    484,478
    
    
    
    1,130,221
    
    
    
    231,539Total as per income statement
    
    
    3,613,349
    
    
    
    2,813,425
    
    
    
    251,660
  147




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Geographic segments
  Rest of theDescription
    
    India
    
    
    world
    
    
    TotalRevenuesYear ended March 31, 2011
    
    
    4,495,801
    
    
    
    2,390,828
    
    
    
    6,886,629Year ended March 31, 2010
    
    
    4,950,352
    
    
    
    1,759,836
    
    
    
    6,710,188Year ended March 31, 2009
    
    
    5,071,137
    
    
    
    1,091,024
    
    
    
    6,162,161
  35. 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 March 31, 2011.
Income tax claims against the company as at March 31, 2011 amounted to Rs. 84,981 (March 31, 2010: Nil)b)
    
    Contingencies due to certain service tax claims as at March 31, 2011 amounted to Rs 243,610
(March 31, 2010: Rs. 33,280).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 March 31,
2011.d)
    
    In respect of contingencies arising on legal proceedings, refer Note 36.
 36. Legal proceedings
 (b)
    
    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 the Sifys initial
public offering of American Depositary Shares as defendants. This class action is brought on
behalf of a purported class of purchasers of the Sifys ADSs from the time of the Sifys
Initial Public Offering (IPO) in October 1999 through December 2000. The central allegation
in this action is that the underwriters in the Sifys IPO solicited and received undisclosed
commissions from, and entered into undisclosed arrangements with, certain investors who
purchased the Sifys 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 Sifys 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 Sify 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 Sify. On June 26, 2003, the plaintiffs in the
consolidated IPO class action lawsuits currently pending against the 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 Courts granting of
class certification.
  148




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##### Table of Contents



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 Sifys
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 Sify 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 Sifys 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 Sifys
insurers. Sify believes, the maximum exposure under this settlement is approximately USD
338,983, an amount which it believes is fully recoverable from the its insurers.b)
    
    Proceedings before Department of Telecommunications
 (ii)
    
    License fees
 
    
    On October 12, 2009 (as later clarified by the DoT), the Department of
Telecommunications (DOT) raised a demand on the Company for INR 14 million after
correcting the arithmetical error in the Assessment letter.
    
    On February 26, 2010 DOT raised a demand on Sify Communications (erstwhile
subsidiary merged with this Company) for INR 26 million.
 The above demands were made by the DoT on the premise that all amounts of income (whether
direct or indirect) including certain items like other income, interest on deposits, gain on
foreign exchange fluctuation, profit on sale of assets & provision written back, that have not
got anything to do with telecom operations of the Company or arise in connection with the
Telecom business of the Company, are to be considered as income for the purpose of calculation
of the license fee.The Company has responded to the above 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, in which Order the TDSAT 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. The TDSAT Order however has been challenged and is presently pending before
the Supreme Court. Till such time the Supreme Court pronounces its final verdict on this case,
the TDSAT Order continues to be in force and the Company currently continues to pay the license
fee in accordance with the TDSAT Order. The Company 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 the Company.(ii) 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 (US $7.68
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.
  149




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##### Table of Contents



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. It 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.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, 2011, 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. However in the event of adverse judgement in all these cases, the
maximum financial exposure would be Rs 9,051 (March 31, 2010: Rs 9,051).
 37. Related parties
  Country
    
    
    % of Ownership interestof
    
    
    March 31,
    
    
    March 31,Particulars
    
    incorporation
    
    
    2011
    
    
    2010Holding CompanyRaju Vegesna Infotech & Industries Private
Limited (Refer note 16 and note 42)
    
    
    
    
    
    
    
    
    
    
    SubsidiariesSify International Inc.
    
    USA
    
    
    100
    
    
    
    100Sify Software Limited (Formerly Sify Networks
Private Limited)
    
    India
    
    
    100
    
    
    
    100Sify Technologies (Singapore) Pte. Limited
(Incorporated on December 7, 2009)
    
    Singapore
    
    
    100
    
    
    
    100AssociatesMF Global-Sify Securities India Private Limited
    
    India
    
    
    29.85
    
    
    
    29.85Others (Entities in which the Key Management
Personnel have controlling interest /
significant influence and relatives of Key
Management Personnel)Radhika Vegesna
    
    India
    
    
    
    
    
    
    Server Engines LLC
    
    USA
    
    
    
    
    
    
    Server Engines India Private Limited
    
    India
    
    
    
    
    
    
    VALS Developers Private Limited
    
    India
    
    
    
    
    
    
    Infinity Satcom Universal Private Limited
    
    India
    
    
    
    
    
    
    
  150




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KeyHolding
    
    
    
    
    
    
    
    
    
    
    ManagementTransactions
    
    Company
    
    
    Associates
    
    
    Others
    
    
    Personnel***Consultancy services received
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240Sitting fees paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,200Salaries and other short term benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,328Contributions to defined contribution plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,913Share based payment transactions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,226Issue of shares on private placement basis**
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    Advance lease rentals and refundable
deposits refunded
    
    
    
    
    
    
    
    
    
    
    282,825
    
    
    
    Refundable lease deposit paid****
    
    
    
    
    
    
    
    
    
    
    2,558
    
    
    
    Lease rentals paid****
    
    
    
    
    
    
    
    
    
    
    2,558
    
    
    
    Amount of outstanding balancesDebtors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Advance lease rentals and refundable
deposits made****
    
    
    
    
    
    
    
    
    
    
    2,558
    
    
    
    
  KeyManagementTransactions
    
    Associates
    
    
    Others
    
    
    Personnel***Consultancy services received
    
    
    
    
    
    
    
    
    
    
    240Sitting fees paid
    
    
    
    
    
    
    
    
    
    
    1,240Salaries and other short term benefits
    
    
    
    
    
    
    
    
    
    
    52,441Contributions to defined contribution plans
    
    
    
    
    
    
    
    
    
    
    2,427Share based payment transactions
    
    
    
    
    
    
    
    
    
    
    9,486Issuance of shares on amalgamation of erstwhile
Sify Communications limited with Sify Technologies
limited
    
    
    
    
    
    
    842,837
    
    
    
    Amount of outstanding balancesDebtors
    
    
    
    
    
    
    
    
    
    
    Advance lease rentals and refundable deposits made*
    
    
    
    
    
    
    282,825
    
    
    
    
  KeymanagementTransactions
    
    Associates
    
    
    Others
    
    
    personnel***Sale of goods / services
    
    
    6,600
    
    
    
    734
    
    
    
    Advance lease rentals and refundable deposits made*
    
    
    
    
    
    
    282,825
    
    
    
    Consultancy services received
    
    
    
    
    
    
    
    
    
    
    240Sitting fees paid
    
    
    
    
    
    
    
    
    
    
    1,220Salaries and other short term benefits
    
    
    
    
    
    
    
    
    
    
    50,672Contributions to defined contribution plans
    
    
    
    
    
    
    
    
    
    
    2,389Share based payments
    
    
    
    
    
    
    
    
    
    
    33,579Amount of outstanding balancesDebtors
    
    
    524
    
    
    
    174
    
    
    
    Advance lease rentals and refundable deposits made*
    
    
    
    
    
    
    282,825
    
    
    
    
 *
    
    Represents deposits made to VALS Developers Private Limited (VALS).VALS was owned and controlled
by Raju Vegesna Infotech & Industries Private Limited, in which Mr. Raju Vegesna, our principal
share holder and
Chief Executive Officer, was holding 94.66% equity in his personal capacity. During the year ended
March 31, 2009, Sify entered into an agreement for Sub Lease with VALS Developers Private Limited
to take on lease on long term basis the proposed 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 terms of this Agreement for Sub Lease, 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  151




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##### Table of Contents



Sub Lease, 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. On October 30, 2010,with
the consent of VALS, the Board of Directors have cancelled the Agreement for Sub lease and has
decided to acquire the building along with land directly through acquisition of Pace Info Com Park
Private Limited (PACE), an unrelated third party, which is the owner of the land and building for
total consideration of Rs.1,140,000. The above deposits would be adjusted against the consideration
payable for acquiring the shares of PACE. To give effect to the above, the company has entered into
an amendment Agreement with all concerned parties and VALS has assigned its rights and obligations
to the company and the company paid Rs.400,000 as part consideration for the above purchase.
Subsequently on May 24, 2011 and on June 9, 2011, the company has paid a further sum of Rs.50,000
each as part consideration for the above purchase. On September 28, 2011, the company has paid a
further sum of Rs.127,000 as per terms of MoU and are in the process of acquiring the shares of
PACE through Hermit Projects Private Limited.**
    
    Also refer note 16 in relation to transactions relating to issue of equity shares on private
placement basis to Raju Vegesna Infotech & Industries Private Limited.***
    
    Some of the key management personnel of the Group are also covered under the Groups gratuity
plan along with other employees of the Group. Proportionate amounts of gratuity accrued under the
gratuity plan have not been separately computed or included in the above disclosure.****
    
    The company has entered into a lease agreement with Ms Radhika Vegesna, Daughter of Mr. Ananda
Raju Vegesna, Executive Director of the company, to lease the premises owned by her for a period of
three years effective June 1, 2010 on a rent of Rs.256 per month and payment of refundable security
deposit of Rs.2,558. This arrangement will be automatically renewed for a further period of two
blocks of three years with all the terms remaining unchanged. 38. Financial instruments
 Financial instruments by category
  Financialassets /liabilitiesat fairvaluethrough
    
    
    
    
    
    
    Other
    
    
    TotalLoans and
    
    
    profit and
    
    
    Available
    
    
    financial
    
    
    carrying
    
    
    Total fairParticulars
    
    Note
    
    
    receivables
    
    
    loss
    
    
    for sale
    
    
    liabilities
    
    
    value
    
    
    valueAssetsCash and cash equivalents
    
    
    8
    
    
    
    543,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    543,097
    
    
    
    543,097Other assets
    
    
    10
    
    
    
    212,969
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212,969
    
    
    
    212,969Trade receivables
    
    
    13
    
    
    
    1,839,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,839,966
    
    
    
    1,839,966Other receivables
    
    
    13
    
    
    
    354,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    354,115
    
    
    
    354,115Other investments
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    160
    
    
    
    160LiabilitiesBank overdraft
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    678,091
    
    
    
    678,091
    
    
    
    678,091Finance lease liabilities
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,253
    
    
    
    188,253
    
    
    
    188,253Other liabilities
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,245
    
    
    
    163,245
    
    
    
    163,245Borrowings from banks
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,009,422
    
    
    
    1,009,422
    
    
    
    1,009,422Borrowings from others
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288,988
    
    
    
    288,988
    
    
    
    288,988Trade and other payables
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,725,907
    
    
    
    1,725,907
    
    
    
    1,725,907
  152




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##### Table of Contents



Financialassets /liabilitiesat fairvaluethrough
    
    
    
    
    
    
    Other
    
    
    TotalLoans and
    
    
    profit and
    
    
    Available
    
    
    financial
    
    
    carrying
    
    
    Total fairParticulars
    
    Note
    
    
    receivables
    
    
    loss
    
    
    for sale
    
    
    liabilities
    
    
    value
    
    
    valueAssetsCash and cash equivalents
    
    
    8
    
    
    
    878,698
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    878,698
    
    
    
    878,698Other assets
    
    
    10
    
    
    
    249,744
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249,744
    
    
    
    249,744Trade receivables
    
    
    13
    
    
    
    1,912,348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,912,348
    
    
    
    1,912,348Other receivables
    
    
    13
    
    
    
    315,835
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315,835
    
    
    
    315,835Derivative financial instruments
    
    
    13
    
    
    
    
    
    
    
    6,998
    
    
    
    
    
    
    
    
    
    
    
    6,998
    
    
    
    6,998LiabilitiesBank overdraft
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,060,284
    
    
    
    1,060,284
    
    
    
    1,060,284Finance lease liabilities
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201,317
    
    
    
    201,317
    
    
    
    201,317Other liabilities
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165,800
    
    
    
    165,800
    
    
    
    165,800Borrowings from banks
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,239,105
    
    
    
    1,239,105
    
    
    
    1,239,105Borrowings from others
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,165
    
    
    
    163,165
    
    
    
    163,165Trade and other payables
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,798,764
    
    
    
    1,798,764
    
    
    
    1,798,764
 Details of financial assets pledged as collateral
  March 31, 2011
    
    
    March 31, 2010Cash and cash equivalents
    
    
    543,097
    
    
    
    878,698Other assets
    
    
    212,969
    
    
    
    249,744Trade receivables
    
    
    1,839,966
    
    
    
    1,912,348Other receivables
    
    
    354,115
    
    
    
    315,8352,950,147
    
    
    
    3,356,625
 Derivative financial instruments
  As ofMarch 31, 2011
    
    
    March 31, 2010Forward contractsIn U.S. Dollars (Sell)
    
    
    
    
    
    
    In U.S Dollars (Buy)
    
    
    
    
    
    
    Option contractsIn U.S Dollars (Sell)
    
    
    
    
    
    
    67,710In U.S Dollars (Buy)
    
    
    
    
    
    
    
   153




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##### Table of Contents



As ofMarch 31, 2011
    
    
    March 31, 2010Sell:Not later than one month
    
    
    
    
    
    
    33,855Later than one month and not later than three months
    
    
    
    
    
    
    33,855Later than three months and not later than six months
    
    
    
    
    
    
    Later than six months and not later than one year
    
    
    
    
    
    
    
    
    
    
    67,710
 As ofMarch 31, 2011
    
    
    March 31, 2010Buy:Not later than one month
    
    
    
    
    
    
    Later than one month and not later than three months
    
    
    
    
    
    
    Later than three months and not later than six months
    
    
    
    
    
    
    Later than six months and not later than one year
    
    
    
    
    
    
    
    
    
    
    
 Interest, (expenses), gains and (losses) recognized on financial assets and liabilities
 Recognised in profit or loss
 Year endedMarch 31, 2011
    
    
    March 31, 2010
    
    
    March 31, 2009Loans and receivablesInterest income on bank deposits
    
    
    21,360
    
    
    
    19,489
    
    
    
    116,495Interest income from leases
    
    
    
    
    
    
    
    
    
    
    435Interest income from other loans and receivables
    
    
    3,871
    
    
    
    8,505
    
    
    
    5,635Impairment loss of trade receivables
    
    
    (161,922
    )
    
    
    (121,987
    )
    
    
    (84,346
    )Impairment loss on finance lease receivables
    
    
    
    
    
    
    
    
    
    
    (6,929
    )Financial assets at fair value through profit or lossNet change in fair value of derivative financial
instruments
    
    
    
    
    
    
    6,998
    
    
    
    2,997Other financial liabilitiesInterest expenses on lease obligations
    
    
    (20,117
    )
    
    
    (16,476
    )
    
    
    (2,243
    )Interest expenses on borrowings from banks, others
and overdrafts
    
    
    (161,897
    )
    
    
    (177,156
    )
    
    
    (163,201
    )
 Recognised directly in other comprehensive income
 Year endedMarch 31, 2011
    
    

March
31, 2010
    
    
    March 31, 2009Net change
in fair value of
available-for-sale
financial assets
    
    
    
    
    
    
    
    
    
    
    (5,361
    )
 39. Financial Risk Management
  
    
    Credit risk
    
    Liquidity risk
    
    Market risk
  154




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##### Table of Contents



Credit risk
 Trade and other receivables
  Cash and cash equivalents and other investments
  Guarantees
   Exposure to credit risk
  March 31, 2011
    
    
    March 31, 2010Cash and cash equivalents
    
    
    543,097
    
    
    
    878,698Other assets
    
    
    212,969
    
    
    
    249,744Trade receivables
    
    
    1,839,966
    
    
    
    1,912,348Other receivables
    
    
    354,115
    
    
    
    315,835Derivative financial instruments
    
    
    
    
    
    
    6,998Other investments
    
    
    160
    
    
    
    2,950,307
    
    
    
    3,363,623
 Financial assets that are past due but not impaired
  Period (in days)
    
    March 31, 2011
    
    
    March 31, 2010Past due 181 - 270 days
    
    
    143,919
    
    
    
    160,979Past due 271 - 365 days
    
    
    50,796
    
    
    
    29,346More than 365 days
    
    
    97,596
    
    
    
    114,932292,311
    
    
    
    305,257
  155




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##### Table of Contents



Financial assets that are not past due
  Details of collateral and other credit enhancements held
 March 31, 2011
    
    
    March 31, 2010Security deposits received for internet access services
    
    
    7,432
    
    
    
    16,236
 Liquidity risks
  As at March 31, 2011
 Carrying
    
    
    Contractualamount
    
    
    cash flows
    
    
    0-12 months
    
    
    1-3 years
    
    
    3-5 yearsNon-derivative financial liabilitiesBank overdrafts
    
    
    678,901
    
    
    
    678,901
    
    
    
    678,901
    
    
    
    
    
    
    
    Finance lease liabilities
    
    
    188,253
    
    
    
    247,354
    
    
    
    65,148
    
    
    
    123,922
    
    
    
    58,284Other liabilities
    
    
    163,245
    
    
    
    163,245
    
    
    
    163,245
    
    
    
    
    
    
    
    Borrowing from banks
    
    
    1,009,422
    
    
    
    1,044,455
    
    
    
    930,067
    
    
    
    114,388
    
    
    
    Borrowings from others
    
    
    288,988
    
    
    
    368,794
    
    
    
    175,730
    
    
    
    158,431
    
    
    
    34,633Trade and other payables
    
    
    1,725,907
    
    
    
    1,725,907
    
    
    
    1,725,907
    
    
    
    
    
    
    
    4,054,716
    
    
    
    4,228,656
    
    
    
    3,738,998
    
    
    
    396,741
    
    
    
    92,917
 As at March 31, 2010
 Carrying
    
    
    Contractualamount
    
    
    cash flows
    
    
    0-12 months
    
    
    1-3 years
    
    
    3-5 yearsNon-derivative financial liabilitiesBank overdrafts
    
    
    1,060,284
    
    
    
    1,060,284
    
    
    
    1,060,284
    
    
    
    
    
    
    
    Finance lease liabilities
    
    
    201,317
    
    
    
    247,354
    
    
    
    65,148
    
    
    
    123,922
    
    
    
    58,284Other liabilities
    
    
    165,800
    
    
    
    165,800
    
    
    
    165,800
    
    
    
    
    
    
    
    Borrowing from banks
    
    
    1,239,105
    
    
    
    1,333,922
    
    
    
    972,962
    
    
    
    360,960
    
    
    
    Borrowings from others
    
    
    163,165
    
    
    
    207,828
    
    
    
    57,041
    
    
    
    91,247
    
    
    
    59,540Trade and other payables
    
    
    1,798,764
    
    
    
    1,798,764
    
    
    
    1,798,764
    
    
    
    
    
    
    
    4,628,435
    
    
    
    4,813,952
    
    
    
    4,119,999
    
    
    
    576,129
    
    
    
    117,824
  156




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##### Table of Contents



Market risk:
 Currency risk
 
    
    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.
  All amounts in respective currencies as mentioned (in thousands)USD
    
    
    CAD
    
    
    CHF
    
    
    Euro
    
    
    GBP
    
    
    DHS
    
    
    HKD
    
    
    AED
    
    
    SGDCash and cash equivalents
    
    
    495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade receivables
    
    
    9,700
    
    
    
    4
    
    
    
    522
    
    
    
    20
    
    
    
    116
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    2Trade payables
    
    
    (5,688
    )
    
    
    
    
    
    
    (18
    )
    
    
    (301
    )
    
    
    (1
    )
    
    
    (32
    )
    
    
    (10
    )
    
    
    (25
    )
    
    
    (83
    )Gross balance sheet
exposure
    
    
    4,507
    
    
    
    4
    
    
    
    504
    
    
    
    (281
    )
    
    
    115
    
    
    
    (31
    )
    
    
    (10
    )
    
    
    (24
    )
    
    
    (81
    )Forward exchange /
option contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net exposure
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  All amounts in respective currencies as mentioned (in thousands)USD
    
    
    CAD
    
    
    CHF
    
    
    Euro
    
    
    GBP
    
    
    DHS
    
    
    HKDCash and cash equivalents
    
    
    1,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trade receivables
    
    
    8,869
    
    
    
    168
    
    
    
    209
    
    
    
    32
    
    
    
    96
    
    
    
    1
    
    
    
    Trade payables
    
    
    (4,764
    )
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    (12
    )
    
    
    
    
    
    
    (11
    )Gross balance sheet
exposure
    
    
    5,303
    
    
    
    168
    
    
    
    209
    
    
    
    1
    
    
    
    84
    
    
    
    1
    
    
    
    (11
    )Forward exchange /
option contracts
    
    
    (1,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net exposure
    
    
    3,803
    
    
    
    168
    
    
    
    209
    
    
    
    1
    
    
    
    84
    
    
    
    1
    
    
    
    (11
    )
 Sensitivity analysis
  Othercomprehensiveincome
    
    
    Profit or lossMarch 31, 2011
    
    
    
    
    
    
    (21,063
    )March 31, 2010
    
    
    
    
    
    
    (19,367
    )
  Interest Rate Risk:
  157




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##### Table of Contents



Profile
  Carrying amountMarch 31, 2011
    
    
    March 31, 2010Fixed rate instrumentsFinancial assets- Fixed deposits with banks
    
    
    84,765
    
    
    
    531,192Financial liabilities- Borrowings from banks
    
    
    529,437
    
    
    
    697,165- Borrowings from others
    
    
    288,988
    
    
    
    163,165Variable rate instrumentsFinancial liabilities- Borrowings from banks
    
    
    326,000
    
    
    
    541,940- Bank overdrafts
    
    
    678,901
    
    
    
    1,060,284
 Fair value sensitivity for fixed rate instruments
  Cash flow sensitivity for variable rate instruments
  Equity
    
    
    Profit or lossMarch 31, 2011
    
    
    
    
    
    
    (10,049
    )March 31, 2010
    
    
    
    
    
    
    (16,022
    )
  40. Acquisition of non-controlling interest in subsidiary
  
    
    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 year ended March 31, 2010.
  158




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##### Table of Contents




    
    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.
 41. IPO listing
  i.
    
    to provide extension of time for listing the shares in the Indian stock exchangesii.
    
    to grant a special permission to issue shares on rights basis to the existing shareholders
  42. Subsequent events
 (i) Transfer of shares among the Existing Promoter Group
      159




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(ii) Capital infusion by the Existing Promoter Group
   (iii) Amendment to the Subscription Agreement with Existing Promoter Group
     160




---



##### 



MF Global Sify Securities India Private Limited
 IFRS Consolidated Financial Statements
 As at March 31, 2011 and 2010 and for the year ended March 31, 2011, 2010 and 2009





Index
 Particulars
    
    Page No.Report of Independent Registered Public Accounting Firm
    
    
    162Consolidated Statement of Balance Sheet
    
    
    163Consolidated Income Statement
    
    
    164Consolidated Statement of Comprehensive Income
    
    
    165Consolidated Statement of Changes in Equity
    
    
    166Consolidated Statement of Cash Flow
    
    
    167Notes to the consolidated financial statements
    
    
    168
 
 161




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     ASA & ASSOCIATES
Independent Registered Public Accounting Firm
 
  162




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 Consolidated Statement of Balance Sheet
 As at March 31,Note
    
    
    2011
    
    
    2010ASSETSCash and bank balance
    
    
    11
    
    
    
    281,486
    
    
    
    148,213Cash-restricted
    
    
    12
    
    
    
    2,959,063
    
    
    
    2,489,847Interest bearing deposits with bank
    
    
    13
    
    
    
    93,362
    
    
    
    295,659Receivable from broker-dealers and clearing organizations
    
    
    9
    
    
    
    18,580
    
    
    
    65,884Receivable
from customers (net of provision of Rs. 60,600 and Rs. 22,300 respectively)
    
    
    8
    
    
    
    447,770
    
    
    
    437,207Available-for-sale securities:Marketable, at market value
    
    
    14
    
    
    
    40,776
    
    
    
    877Not readily marketable (at estimated fair value)
    
    
    14
    
    
    
    92,868
    
    
    
    11,447Deposits with clearing organizations
    
    
    
    
    
    
    173,783
    
    
    
    110,969Interest accrued but not due
    
    
    
    
    
    
    67,124
    
    
    
    71,443Other assets
    
    
    10
    
    
    
    245,800
    
    
    
    220,282Intangible assets:Computer software
    
    
    5.1
    
    
    
    19,271
    
    
    
    28,424Memberships in exchanges
    
    
    5.2
    
    
    
    5,733
    
    
    
    5,782Property, plant and equipment
    
    
    6
    
    
    
    21,827
    
    
    
    70,159Deferred tax asset (Net)
    
    
    7
    
    
    
    79,476
    
    
    
    17,901Total assets
    
    
    
    
    
    
    4,546,919
    
    
    
    3,974,094EQUITYCapital and reserves attributable to the Equity holdersOrdinary shares
    
    
    15
    
    
    
    518,942
    
    
    
    518,942Additional paid in capital
    
    
    
    
    
    
    28,968
    
    
    
    28,968Retained earnings
    
    
    
    
    
    
    1,806,071
    
    
    
    1,564,231Currency translations
    
    
    
    
    
    
    (232
    )
    
    
    953Fair value adjustments
    
    
    
    
    
    
    (774
    )
    
    
    9,081Total Equity
    
    
    
    
    
    
    2,352,975
    
    
    
    2,122,175LIABILITIESPayable to broker dealers and clearing organizations
    
    
    9
    
    
    
    264,504
    
    
    
    139,965Payable to customers
    
    
    
    
    
    
    1,272,571
    
    
    
    1,177,517Borrowings
    
    
    17
    
    
    
    53,000
    
    
    
    3,508Accounts payable, accrued expenses, and other liabilities
    
    
    19
    
    
    
    505,605
    
    
    
    394,327Employee benefit obligation
    
    
    18
    
    
    
    98,264
    
    
    
    136,602Total Liabilities
    
    
    
    
    
    
    2,193,944
    
    
    
    1,851,919Total liabilities and Equity
    
    
    
    
    
    
    4,546,919
    
    
    
    3,974,094
   For and on behalf of the Board
 Vineet Bhatnagar
  163




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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 Consolidated Income Statement
 Years ended March 31,Note
    
    
    2011
    
    
    2,010
    
    
    2009IncomeCommissions
    
    
    
    
    
    
    1,391,162
    
    
    
    1,201,594
    
    
    
    914,969Depository and clearing fees
    
    
    
    
    
    
    33,919
    
    
    
    35,488
    
    
    
    34,456Interest on fixed deposits with banks
    
    
    
    
    
    
    198,412
    
    
    
    238,491
    
    
    
    325,547Other Income
    
    
    23
    
    
    
    194,790
    
    
    
    136,972
    
    
    
    138,671Total Income
    
    
    
    
    
    
    1,818,283
    
    
    
    1,612,545
    
    
    
    1,413,643ExpensesEmployee compensation and benefits
    
    
    21
    
    
    
    794,535
    
    
    
    607,775
    
    
    
    515,234Exchange expenses and clearance fees
    
    
    
    
    
    
    220,153
    
    
    
    165,769
    
    
    
    130,904Brokerage to other broker-dealers
    
    
    
    
    
    
    136,470
    
    
    
    152,002
    
    
    
    95,859Communications and data processing
    
    
    
    
    
    
    30,100
    
    
    
    28,168
    
    
    
    27,585Bank Interest and guarantee commission
    
    
    
    
    
    
    1,751
    
    
    
    7,616
    
    
    
    28,883Depreciation and amortization
    
    
    
    
    
    
    67,692
    
    
    
    37,398
    
    
    
    38,348Occupancy
    
    
    
    
    
    
    75,728
    
    
    
    75,210
    
    
    
    69,933Write back of provision
    
    
    
    
    
    
    
    
    
    
    (57,500
    )
    
    
    Provision for receivable from customers
    
    
    22
    
    
    
    38,300
    
    
    
    
    
    
    
    2,925Advertisement and business promotion
    
    
    
    
    
    
    60,339
    
    
    
    45,593
    
    
    
    34,987Other expenses
    
    
    20
    
    
    
    85,628
    
    
    
    82,111
    
    
    
    125,693Total Expenses
    
    
    
    
    
    
    1,510,696
    
    
    
    1,144,142
    
    
    
    1,070,351Profit before income tax
    
    
    
    
    
    
    307,587
    
    
    
    468,403
    
    
    
    343,292Income tax expense
    
    
    24
    
    
    
    65,747
    
    
    
    160,860
    
    
    
    126,375Profit for the year attributable to the Equity holders
    
    
    
    
    
    
    241,840
    
    
    
    307,543
    
    
    
    216,917
   For and on behalf of the Board
 Vineet Bhatnagar
  164




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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 Consolidated Statement of Comprehensive Income
 Years ended March 31,2011
    
    
    2010
    
    
    2009Net income for the year
    
    
    241,840
    
    
    
    307,543
    
    
    
    216,917Other comprehensive incomeAvailable for sale financial assets- Net change in fair value
    
    
    (9,855
    )
    
    
    1,527
    
    
    
    (10,473
    )Foreign currency translation differencesCurrency translation differences
    
    
    (1,185
    )
    
    
    (5,657
    )
    
    
    9257(11,040
    )
    
    
    (4,130
    )
    
    
    (1,216
    )Total comprehensive income for the year
    
    
    230,800
    
    
    
    303,413
    
    
    
    215,701
   For and on behalf of the Board
 Vineet Bhatnagar
  165




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 Consolidated Statement of Changes in Equity
 AdditionalNumber of ordinary
    
    
    Par
    
    
    
    
    
    
    paid -in
    
    
    Retained
    
    
    Currency
    
    
    Fair Value
    
    
    Totalshares
    
    
    value
    
    
    Share Capital
    
    
    capital
    
    
    earnings
    
    
    transalation
    
    
    adjustment
    
    
    EquityBalance at April 1, 2008
    
    
    51,894,182
    
    
    
    10
    
    
    
    518,942
    
    
    
    28,968
    
    
    
    1,039,771
    
    
    
    (2,647
    )
    
    
    18,027
    
    
    
    1,603,061Currency translation differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,257
    
    
    
    
    
    
    
    9,257Fair value gains, net of tax on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,473
    )
    
    
    (10,473
    )Net income directly recognised in equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,257
    
    
    
    (10,473
    )
    
    
    (1,216
    )Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216,917
    
    
    
    
    
    
    
    
    
    
    
    216,917Total recognised income and expense for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216,917
    
    
    
    9,257
    
    
    
    (10,473
    )
    
    
    215,701Balance at March 31, 2009
    
    
    51,894,182
    
    
    
    10
    
    
    
    518,942
    
    
    
    28,968
    
    
    
    1,256,688
    
    
    
    6,610
    
    
    
    7,554
    
    
    
    1,818,762Currency translation differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,657
    )
    
    
    
    
    
    
    (5,657
    )Fair value gains, net of tax on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,527
    
    
    
    1,527Net income directly recognised in equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,657
    )
    
    
    1,527
    
    
    
    (4,130
    )Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307,543
    
    
    
    
    
    
    
    
    
    
    
    307,543Total recognised income and expense for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307,543
    
    
    
    (5,657
    )
    
    
    1,527
    
    
    
    303,413Balance at March 31, 2010
    
    
    51,894,182
    
    
    
    10
    
    
    
    518,942
    
    
    
    28,968
    
    
    
    1,564,231
    
    
    
    953
    
    
    
    9,081
    
    
    
    2,122,175Currency translation differences
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,185
    )
    
    
    
    
    
    
    (1,185
    )Fair value gains, net of tax on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,855
    )
    
    
    (9,855
    )Net income directly recognised in equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,185
    )
    
    
    (9,855
    )
    
    
    (11,040
    )Profit for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    241,840
    
    
    
    
    
    
    
    
    
    
    
    241,840Total recognised income and expense for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    241,840
    
    
    
    (1,185
    )
    
    
    (9,855
    )
    
    
    230,800Balance at March 31, 2011
    
    
    51,894,182
    
    
    
    10
    
    
    
    518,942
    
    
    
    28,968
    
    
    
    1,806,071
    
    
    
    (232
    )
    
    
    (774
    )
    
    
    2,352,975
 *
    
    Retain earning includes reserves amounting to Rs. 1,023 on amalgamation of subsidiary
company- MF Global Capital India Private Limited ,with the company.   For and on behalf of the Board
 Vineet Bhatnagar
  166




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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 Consolidated Statement of Cash Flow
 Year ended March 31,Note
    
    
    2011
    
    
    2010
    
    
    2009Cash flows from operating activitiesProfit before income tax
    
    
    
    
    
    
    307,587
    
    
    
    468,403
    
    
    
    343,292Adjustments forDepreciation and amortization
    
    
    
    
    
    
    67,692
    
    
    
    37,398
    
    
    
    38,348Profit on sale of Available-for-sale securities
    
    
    
    
    
    
    (23,603
    )
    
    
    
    
    
    
    (6,724
    )Provision on receivable from customers
    
    
    8
    
    
    
    38,300
    
    
    
    (57,700
    )
    
    
    2,925Interest on fixed deposits with banks
    
    
    
    
    
    
    (198,412
    )
    
    
    (238,491
    )
    
    
    (325,547
    )Stock appreciation rights
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss on Sale of Property Plant & Equipment
    
    
    6
    
    
    
    
    
    
    
    13Interest Income
    
    
    
    
    
    
    (16,278
    )
    
    
    (5,566
    )
    
    
    (5,174
    )Dividend Income
    
    
    
    
    
    
    (1,616
    )
    
    
    (283
    )
    
    
    (167
    )Others
    
    
    
    
    
    
    (9,582
    )
    
    
    3,963
    
    
    
    (2,617
    )Movements in working capitalCash-restricted
    
    
    12
    
    
    
    (469,216
    )
    
    
    (141,985
    )
    
    
    3,066,861Interest bearing deposits with banks
    
    
    
    
    
    
    202,297
    
    
    
    (188,164
    )
    
    
    (90,995
    )Deposits with clearing organizations
    
    
    
    
    
    
    (62,814
    )
    
    
    9,896
    
    
    
    30,650Receivable from broker-dealers and clearing organizations
    
    
    9
    
    
    
    47,304
    
    
    
    (23,656
    )
    
    
    312,213Receivable from customers
    
    
    8
    
    
    
    (48,863
    )
    
    
    (207,514
    )
    
    
    755,753Interest accrued but not due
    
    
    
    
    
    
    
    
    
    
    Other assets
    
    
    10
    
    
    
    19,051
    
    
    
    (3,856
    )
    
    
    5,237Payable to broker dealers and clearing organizations
    
    
    9
    
    
    
    124,539
    
    
    
    (87,821
    )
    
    
    (2,756,446
    )Payable to customers
    
    
    
    
    
    
    95,053
    
    
    
    192,442
    
    
    
    (1,509,559
    )Accounts payable, accrued expenses, and other liabilities
    
    
    19
    
    
    
    111,278
    
    
    
    42,369
    
    
    
    (330,331
    )Stock appreciation rights
    
    
    16
    
    
    
    (38,338
    )
    
    
    88,907
    
    
    
    23,973Cash provided by operations
    
    
    
    
    
    
    144,379
    
    
    
    (111,645
    )
    
    
    (448,308
    )Interest received
    
    
    
    
    
    
    16,278
    
    
    
    5,566
    
    
    
    5,174Interest received on fixed deposits placed
    
    
    
    
    
    
    202,731
    
    
    
    269,218
    
    
    
    457,503Income taxes paid
    
    
    
    
    
    
    (171,891
    )
    
    
    (149,524
    )
    
    
    (151,697
    )Net cash provided by/(used in) by operating activities
    
    
    
    
    
    
    191,497
    
    
    
    13,615
    
    
    
    (137,328
    )Cash flows from investing activitiesPurchase of Available for Sale Securities: Marketable, At Market Value
    
    
    
    
    
    
    (39,899
    )
    
    
    (877
    )
    
    
    168,004Available for Sale Securities: Not readily marketable (at estimated fair value)
    
    
    
    
    
    
    (57,818
    )
    
    
    
    
    
    
    Dividend Income
    
    
    
    
    
    
    1,616
    
    
    
    283
    
    
    
    167Expenditure on furniture and equipment
    
    
    
    
    
    
    (4,760
    )
    
    
    (14,288
    )
    
    
    (35,695
    )Expenditure on Computer Software
    
    
    
    
    
    
    (5,671
    )
    
    
    (25,342
    )
    
    
    (12,118
    )Sale of furniture and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,278Net cash (used in) / provided in investing activities
    
    
    
    
    
    
    (106,532
    )
    
    
    (40,224
    )
    
    
    122,636Cash flows from financing activitiesProceeds from loan from associate company
    
    
    
    
    
    
    841,500
    
    
    
    383,700
    
    
    
    270,000Repayment of loan to associate company
    
    
    
    
    
    
    (788,500
    )
    
    
    (383,700
    )
    
    
    (270,000
    )(Repaymnet of) / Proceeds from borrowings
    
    
    
    
    
    
    (3,508
    )
    
    
    (1,137
    )
    
    
    (100,414
    )Net cash provided by / (used in) financing activities
    
    
    
    
    
    
    49,492
    
    
    
    (1,137
    )
    
    
    (100,414
    )Effect of foreign exchange fluctuation on Cash and Bank balances
    
    
    
    
    
    
    (1,184
    )
    
    
    (5,657
    )
    
    
    9,257Net increase / (decrease) in cash and bank balance
    
    
    
    
    
    
    133,273
    
    
    
    (33,403
    )
    
    
    (105,849
    )Cash and bank balance at beginning of the period
    
    
    
    
    
    
    148,213
    
    
    
    181,616
    
    
    
    287,465Cash and bank balance at end of the period
    
    
    
    
    
    
    281,486
    
    
    
    148,213
    
    
    
    181,616
   For and on behalf of the Board
 Vineet Bhatnagar
Managing Director
  167




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 Notes to the consolidated financial statements
 1.
    
    General information
 MF Global Sify Securities India Private Limited and its consolidated subsidiaries
(hereinafter referred to as MF or the group) are engaged as a stock and commodity broker
for foreign institutional investors (FIIs), mutual funds, domestic financial institutions
and retail investors. The group also acts as a depository participant and provides
depository services to FIIs, mutual funds, domestic financial institutions and retail
investors.
 MF Global Sify Securities India Private Limited (MF Global Sify) was incorporated on
December 29, 1999 in India as a private limited company under the Companies Act, 1956. The
address of its registered office is 2nd Floor, C block, Modern Centre, 101 K. K.
Marg, Jacob Circle, Mahalaxmi, Mumbai  400 011. MF Global Sify has one wholly owned
subsidiary, MF Global Commodities India Private Limited, incorporated in India. MF Global
Commodities India Private Limited has one wholly owned subsidiary, MF Global Middle East
DMCC incorporated in Dubai.
 MF Global Overseas Limited (MFG) (formerly Man Financial Holdings Limited ), a company
incorporated in the United Kingdom holds 70.15% of MF Global Sify and Sify Technologies
Limited (Sify) holds the balance, 29.85% of MF Global Sifys equity shares. The ultimate
holding company of MF Global Sify is MF Global Holdings Limited (a company incorporated in
the state of Delaware, USA and listed on the New York Stock Exchange).
 These consolidated financial statements have been approved for issue by the Board of
Directors on October 11, 2011.
 2.
    
    Summary of significant accounting policies
 2.1.
    
    Basis of preparation
 These consolidated financial statements have been prepared in accordance with the
International Financial Reporting Standards (IFRS), as issued by the International
Accounting Standards Board (IASB). They have been prepared under the historical cost
convention, on accrual basis as modified for certain financial instruments which are
measured at fair value.
 The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.
 The preparation of financial statements in accordance with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise judgement in the
process of applying the groups accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 4.2.1.1.
    
    Standards, amendments and interpretations effective as at 31 March 2011
 
    
    IAS 1 (revised), Presentation of financial statements. The revised standard
prohibits the presentation of items of income and expenses (that is non-owner changes
in equity) in the statement of changes in equity, requiring non-owner changes in
equity to be presented separately from owner changes in equity. All non-owner changes
in equity are required to be shown in a performance statement.Entities can choose whether to present one performance statement (the statement of
comprehensive income) or two statements (the income statement and statement of
comprehensive income).The group has elected to present two statements: an income statement and a statement of
comprehensive income. The consolidated financial statements have been prepared under the
revised disclosure requirements.
    
    IFRS 2 (Amendment), Share-based payment. It clarifies that only service conditions
and performance conditions are vesting conditions. All other features need to be
included in the grant date fair value and do not impact the number of awards expected
to vest or the valuation subsequent to grant date. The amendment also specifies that
all cancellations, whether by the entity or by other parties, should receive the same
accounting treatment. The group will apply the amendment from 1 April 2009. The Group
has applied amendments from April 1, 2009, however this does not have any significant
impact on consolidated statements.
    
    IFRS 7 Financial instruments  Disclosures (amendment)  effective 1 January
2009, the amendment requires enhanced disclosures about fair value measurement and
liquidity risk. In particular, the amendment requires disclosure of fair value
measurements by level of a fair value measurement hierarchy. As the change in
accounting policy only results in additional disclosures, there is no impact on
earnings per share.
    
    IFRIC 14, IAS 19  The limit on a defined benefit asset, minimum funding
requirements and their interaction; IFRIC 14 provides guidance on assessing the limit
in IAS 19 on the amount of the surplus that can be recognized as an asset. It also
explains how the pension asset or liability may be affected by a statutory or
contractual minimum-funding requirement. The Group has applied IFRIC14, IAS 19
effective April 1, 2008.
 2.1.2. Amendments and interpretations effective as at 31 March 2011 but not relevant
 The following standards, amendments and interpretations to published standards are
effective as at 31 March 2011 but are not relevant to the groups operations:
 
    
    IFRS 8 Operating Segments
    
    IAS 23 (amendment), Borrowing costs.
    
    IFRIC 13, Customer loyalty programmes.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
    
    IFRIC 15, Agreements for the construction of real estate.
    
    IFRIC 16, Hedges of a net investment in a foreign operation.
 2.1.3.
    
    Standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted by the group
 The following standards, amendments and interpretations to existing standards have been
published and are mandatory for the groups financial year beginning on 1 April 2009 or
later periods, but the group has not early adopted them:
 
    
    IAS 27 (Revised), Consolidated and Separate Financial Statements. It requires a
mandatory adoption of the 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. Purchase of some or all of the
non-controlling interests (also known as minority interests) (NCI) is treated as a
treasury transaction and accounted for in equity. 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 recognised on the portion that has been
disposed of; a further holding gain is recognised on the interest retained, being the
difference between the fair value of the interest and book value of the interest.The revised standard requires an entity to attribute their share of net income and
reserves to the NCI even if this results in the NCI having a deficit balance.The group will apply IAS 27 (Revised) from 1 April 2011. The group does not expect the
adoption of this standard to have a material effect on the consolidated financial
statements.
    
    IFRS 3 (Revised), Business Combinations. It has expanded the scope to include
combinations by contract alone and combination of mutual entities and slightly amended
the definition of business as capable of being conducted rather than are conducted
and managed. All the acquisition-related costs are to be recognised as period expenses
in accordance with the appropriate IFRS. Costs incurred to issue debt or equity
securities will be recognised in accordance with IAS 39.Consideration would include fair value of all interests previously held by the acquirer.
Remeasurement of such interests to fair value would be through the income statement.
Contingent consideration is required to be recognised at fair value even if not deemed
probable of payment at the date of acquisition. All subsequent changes in debt
contingent consideration are recognised in income statement and not in goodwill as
required in the existing standard.IFRS 3 (Revised) provides an explicit option, available on a transaction-by-transaction
basis, to measure any NCI in the entity acquired at fair value of their proportion of
identifiable assets and liabilities or full fair value. The first will result in
measurement of goodwill little different from existing IFRS 3; the second approach will
record goodwill on the NCI as well as on the acquired controlling interest.The group will apply IFRS 3 (Revised) from 1 April 2011. The effect of the
standards from future periods will depend on the nature and significance of any
acquisitions that are subject to this standard.
    
    IFRS 9 Financial Instruments introduces new requirements for classifying and
measuring financial assets. IFRS 9 specifies how an entity should classify and measure
its financial assets. It requires all financial assets to be classified in their
entirety on the basis of the entitys business model for managing the financial assets
and the contractual cash flow characteristics of the financial assets.The standard is mandatory for the group effective from April 1, 2013 with early adoption
permitted. The group is in process of assessing the applicability date of the standard
and its impact on the consolidated financial statements.
    
    Revised IAS 24 (revised), Related party disclosures, issued in November 2009. It
supersedes IAS 24, Related party disclosures, issued in 2003. The revised standard
clarifies and simplifies the definition of a related party and removes the requirement
for government-related entities to disclose details of all transactions with the
government and other government-related entities. When the revised standard is applied,
the group and the parent will need to disclose any transactions between its
subsidiaries and its associates.The standard is mandatory for the group effective from April 1, 2011 with early adoption
permitted. The group is in process of assessing the applicability date of the standard
and its impact on the consolidated financial statements.
    
    IFRS 5 (Amendment), Non-current assets held-for-sale and discontinued operations
(and consequential amendment to IFRS 1, First-time adoption). The amendment clarifies
that all of a subsidiarys assets and liabilities are classified as held for sale if a
partial disposal sale plan results in loss of control. The group will apply the IFRS 5
(Amendment) prospectively to all partial disposals of subsidiaries from 1 April 2011.
    
    IFRIC 17, Distributions of non-cash assets to owners.IFRIC 17 clarifies how an
entity should measure distributions of assets, other than cash, when it pays dividends
to its owners. The group will apply IFRIC 17 from 1 April 2011.
    
    IAS 1 (Amendment), Presentation of financial statements. The amendment clarifies
that classification of a liability, that can at the option of the counterparty be
settled by the issue of the entitys equity instruments, on the basis of the
requirements to transfer cash or other assets rather than on settlement better reflects
the liquidity and solvency position of an entity. The group will apply the IAS 1
(Amendment) from 1 April 2011. It is not expected to have an impact on the groups
financial statements.
    
    IAS 7 (Amendment), Statement of cash flows is part of the IASBs annual
improvements project published in April 2009. The amendment clarifies that only an
expenditure that results in a recognised asset can be classified as a cash flow from
investing activities. The group will apply the IAS 1 (Amendment) from 1 April 2010. It
is not expected to have an impact on the groups financial statements.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
    
    IAS 17 (Amendment), Leases.The amendment modified the criteria for classification
of lease that includes both land and buildings elements requiring an entity to assess
the classification of each element as a finance or an operating lease separately in the
same way as leases of other assets. The group will apply the IAS 17 (Amendment) from
April 1, 2011. The Company is in process of assessing the impact, if any.
 2.1.4.
    
    Amendments and interpretations to existing standards that are not yet effective and not
relevant for the groups operations
 The following interpretations to existing standards have been published and are
mandatory for the groups accounting period beginning on 1 April 2009 or later periods but
are not relevant for the groups operations:
 
    
    IFRIC 13, Customer loyalty programmes,clarifies that where goods or services are
sold together with a customer loyalty incentive, the arrangement is a multipleelement
arrangement and the consideration receivable from the customer is allocated between the
components of the arrangement using fair values.
    
    IFRIC 15, Agreements for construction of real estates,clarifies whether IAS 18,
Revenue, or IAS 11, Construction contracts, should be applied to particular
transactions.
    
    IFRIC 16, Hedges of a net investment in a foreign operation, clarifies the
accounting treatment in respect of net investment hedging. This includes the fact that
net investment hedging relates to differences in functional currency not presentation
currency, and hedging instruments may be held anywhere in the group. The requirements
of IAS 21, The effects of changes in foreign exchange rates, do apply to the hedged
item.
    
    IFRIC 18, Transfers of assets from customers. IFRIC 18 clarifies the accounting for
arrangements where an item of property, plant and equipment, which is provided by the
customer, is used to provide an ongoing service. The interpretation applies
prospectively to transfers of assets from customers received on or after 1 July 2009,
although some limited retrospective application is permitted.
    
    IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments addresses
the accounting by an entity when the terms of a financial liability are renegotiated
and result in the entity issuing equity instruments to a creditor of the entity to
extinguish all or part of the financial liability.
    
    IAS 38 (Amendment), Intangible assets. The amendment deletes the wording that states
that there is rarely, if ever support for use of a method that results in a lower
rate of amortisation than the straight-line method. The amendment did not have an
impact on the groups operations, as all intangible assets are amortised using the
straight-line method.
 2.2.
  Consolidation
 The Company is a subsidiary of MF Global Holdings Limited, a company incorporated in the
State of Delaware, USA. MF Global Holdings Limited is listed on the New York Stock Exchange.
 Domestic and foreign subsidiaries considered for consolidation are as follows:
 Percentage of
    
    
    Percentage ofCountry of
    
    
    holding as at
    
    
    holding as atincorporation
    
    
    March 31, 2011
    
    
    March 31, 2010Direct subsidiaries1
    )
    
    MF Global Commodities India Private Limited
    
    India
    
    
    100
    %
    
    
    100
    %2
    )
    
    MF Global Capital India Private Limited
    
    India
    
    
    
    
    
    
    100
    %Indirect Subsidiary1
    )
    
    MF Global Middle East DMCC
    
    Dubai
    
    
    100
    %
    
    
    100
    %
 The reporting date for all the above companies is March 31.
 Subsidiaries are all entities over which the group has the power to govern the financial and
operating policies so as to obtain economic benefits from its activities, generally
accompanying a shareholding of more than one half of the voting rights. Subsidiaries are
fully consolidated from the date on which control is transferred to the group.
 All significant intercompany transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated but considered
an impairment indicator of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the group.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 2.3.
    
    Foreign currency translation
 a)
    
    Functional and presentation currency
 Items included in the financial statements in each of the groups entities 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 MF Global Sify and its
domestic subsidiaries. US dollar is the functional currency of MF Global Middle East Limited
DMCC located in Dubai. These consolidated financial statements are presented in Indian Rupee
(INR), which is the groups presentation currency. The results and financial position are
translated into presentation currency as follows:
 
    
    assets and liabilities for each balance sheet presented are translated as at
the closing rate at that balance sheet date;
    
    income and expenses for each income statement are translated at an average
exchange rate; and
    
    all resulting exchange differences are recognised as a separate component of
equity.b)
    
    Transactions and balances
 Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at yearend
exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognized in the income statement.2.4.
    
    Cash and bank balanceCash and bank balance include cash in hand and at bank, and shortterm deposits with an
original maturity period of three months or less. The Groups exposure to credit
risk is represented by the carrying value of the assets. Bank overdrafts that are an
integral part of cash management and where there is a legal right of setoff against
positive cash balances are included in cash and bank balance. Otherwise bank overdrafts are
classified as borrowings.2.5.
    
    Restricted CashIndividual entities within the group are members of exchange, where cash or securities
are deposited or bank guarantees are issued to conduct day-to-day trading and clearance
activities. As required by the respective exchange, margin obligations towards clearing
organizations are determined based on open positions by clearing organizations of the
exchanges.The group classifies bank fixed deposits as restricted cash on the balance sheet, when they
are either placed with banks as margin for bank guarantees issued to clearing organisation
or specifically earmarked as liens to clearing organizations towards margin.2.6.
    
    Interest bearing deposits with banksInterest bearing deposits with bank represent fixed term deposits placed with banks
earning fixed rate of interest. At the balance sheet date, these deposits are measured at
amortised cost using effective interest method.2.7.
    
    ReceivablesReceivables are recognized initially at fair value. They are subsequently measured at
amortised cost using the effective interest method, net of provision for impairment, if the
effect of discounting is considered material. The carrying amounts, net of provision for
impairment, reported in the balance sheet approximate the fair value due to their short
realisation period. A provision for impairment of trade receivables is established when
there is objective evidence that Group will not be able to collect all amounts due according
to the original terms of receivables. The provision is established at amounts considered to
be appropriate, based primarily upon Groups past credit loss experience and an evaluation
of potential losses on the receivables. The amount of the provision is recognized in the
income statement. Receivables include receivables from broker-dealers and clearing
organizations and receivables from customers, whereas the securities owned by customers are
held as collateral for receivables.2.8.
    
    Financial instrumentsFinancial assets and financial liabilities are recognised in the consolidated balance
sheet, when the Group becomes a party to the contractual provisions of an instrument, at
fair value adjusted for transaction costs, except for financial assets classified at fair
value through profit or loss where transaction costs are immediately recognised in the
consolidated income statement. Financial assets are de-recognised when the rights to receive
cash flows from the investments have expired or where they have been transferred and the
Group has also transferred substantially all risks and rewards of ownership. Financial
liabilities are de-recognised when the obligation under the liability has been discharged or
cancelled.Financial assets principally comprise investments, receivable from broker dealers, clearing
organisations, customers and other receivables, bank deposits and cash and bank balance.
Financial liabilities principally comprise bank overdraft, and payables to broker dealers,
clearing organisations, customers, other payables and accrued expenses.Financial assets and liabilities are offset and the net amount reported in the balance sheet
if, and only if, there is a legally enforceable right to set off the recognised amounts and
there is an intention to settle on a net basis, or to realise an asset and settle the
liability simultaneously. In many cases, even though there is a legal right to set off is in
place, the lack of an intention to settle on a net basis results in the related assets and
liabilities being presented gross in the balance sheet.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 2.9.
    
    Financial assetsThe financial assets of the group are classified into following categories: loans and
receivables and available for sale. The classification of financial assets depends on the
purpose for which the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition.
 a)
    
    Loans and Receivables
 Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. The entitys loans and receivables
comprise receivable from broker dealers, clearing organisations, customers and other
receivables, investments in bank deposits and cash and bank balance and loans to staff
classified under other assets in balance sheet (Notes 2.10, 2.11 and 2.12).
 b)
    
    Available for sale
 Available for sale financial assets are non-derivatives that are either designated in this
category or not classified in any other categories. Available for sale consists of
marketable securities, which are investments in units of mutual funds and are reported at
fair values. Securities not readily marketable represent investments in equity shares of
BSEL, obtained by MF Global Sify pursuant to the exchange transaction under the Bombay
Stock Exchange (Corporatisation and Demutualization) scheme 2005.
 After initial recognition, investments, which are classified as available-for-sale, are
measured at fair value. Gains or losses, on available-for-sale investments are recognised as
a separate component of equity until the investment is sold, collected or otherwise disposed
of, or until the investment is determined to be impaired, at which time the cumulative gain
or loss previously reported in equity is transferred to the consolidated income statement.
For investments that are actively traded in organised financial markets, fair value is
determined by reference to quoted market price at the close of business on the balance sheet
date. For investments where there is no quoted market price, fair value is determined by
using valuation techniques.
 MF assesses at each balance sheet date whether there is objective evidence that a financial
asset or a group of financial assets is impaired. In the case of securities classified as
available for sale, a significant or prolonged decline in the fair value of the security
below its cost is considered as an indicator that the equity securities are impaired. If any
such evidence exists for available-for-sale financial assets, the cumulative loss 
measured as the difference between the cost and the current fair value, less any impairment
loss on that financial asset previously recognised in profit or loss  is removed from
equity and recognised in the income statement. Impairment losses recognised in the income
statement on equity instruments are not reversed through the income statement. Impairment
testing of trade receivables is described in Note 2.10.
 2.10.
    
    Derivatives and Trading
 Financial assets at fair value through profit or loss are financial assets held for
trading or upon initial recognition are designated by the group as at fair value through
profit or loss. A financial asset is primarily classified as held for trading in this
category if acquired principally for the purpose of selling in the short-term. Derivatives
are also categorised as held for trading unless they are designated as hedges. Assets in
this category are classified as current assets. Gains or losses arising from changes in the
fair value of the financial assets at fair value through profit or loss category are
presented in the income statement within other (losses)/gains  net in the period in
which they arise. Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured at their fair value at
each reporting date.2.11.
    
    Property, plant and equipment
 Property, plant and equipment are stated at actual cost less accumulated depreciation
and any accumulated impairment losses. The cost of an item of premise and equipment
comprises its purchase price and any costs directly attributable to bringing the asset into
use, while maintenance and repairs are charged to expense when incurred.
 On April 1, 2010, the Company changed (with retrospective effect) its method of calculating
depreciation on fixed assets, from the Written Down Value method (WDV) to the Straight
Line Method (SLM) at the rates based on managements estimates of useful lives. Management
believes that such change will result in a more appropriate presentation of financial
statements.
 The company adopted the straight line method (SLM) of depreciation so as to write off 100%
of the cost of the assets based on managements estimates of the useful lives of all the
assets. Estimated useful lives over which assets are depreciated are as follows:
 Rates (SLM) adopted by theType of assets
    
    CompanyComputer systems
    
    3 yearsOffice equipments
    
    3 yearsFurniture and fixtures
    
    5 yearsVehicles
    
    4 years
 The residual values and useful economic lives of premises and equipment are reviewed
annually.Depreciation on leasehold improvements is provided using the straightline method over the
shorter of the lease term or the useful life of the asset.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 2.12.
    
    Intangible assetsAll intangible assets are stated at cost less accumulated amortisation and any
accumulated impairment losses.a)     SoftwareCapitalised costs of computer software obtained for internal use represents costs incurred
to purchase computer software from third parties. These capitalised costs are amortised over
the period of three years on a straightline basis, if the estimated useful lives are
beyond one year. However, if the estimated useful life of an asset is short i.e. less than a
year, it is charged to the income statement. They are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable.
 b)
    
    Trading rights in Stock Exchange
 BSE membershipMF Global Sify acquired The Stock Exchange, Mumbai (the BSE) membership card on December
6, 2000. During the year 2005-06, a scheme, The Bombay Stock Exchange (Corporatisation and
Demutualization) Scheme 2005 (the Scheme) was approved by the Securities Exchange Board
of India with effect from August 19, 2005 which converted the BSE from an Association of
Person to a corporate body in the name of Bombay Stock Exchange Limited (BSEL).In accordance with the scheme, the members of the erstwhile BSE, in exchange of their
erstwhile BSE membership cards (rights) received membership rights of BSEL (i.e. right to
trade on BSEL without placement of cash deposit) as well as equity shares of BSEL. (refer to
note 5.2  Membership in Exchanges)DGCX membershipMF Global Middle East DMCC (DMCC) is registered with and has been granted a trading
license by the Dubai Multi Commodities Centre on February 7, 2006. The United Arab Emirates
Securities and Commodities Authority issued the DMCC a license on June 18, 2006 to operate
as a broker on the Dubai Gold and Commodities Exchange (DGCX). DMCC has been admitted as a
member of the DGCX on September 1, 2006. DMCC has paid and capitalized US $100 thousand
towards the license of DGCX, which is assessed for impairment.Trading rights in stock exchanges have indefinite useful life and are carried at cost less
any accumulated impairment. They are reviewed for impairment annually or whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.2.13.
    
    Impairment of nonfinancial assetsAssets that have an indefinite useful life are not subject to amortisation and are
tested for impairment annually or whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Both external as well as internal indicators are
considered by the group for impairment testing. An impairment loss is recognized for the
amount by which the assets carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an assets fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cashgenerating units). Nonfinancial assets that
suffered impairment are reviewed for possible reversal of the impairment at each reporting
date.2.14.
    
    PayablesPayables include payables to broker-dealers and clearing organizations and payable to
customers. The payable to broker-dealers and clearing organizations are at fair values
because of their nature of short-term maturity. Amount payable to customers include amounts
due on cash and margin transactions. These are recognized initially at fair value and
subsequently measured at amortised cost using the effective interest method.2.15.
    
    Borrowings  Bank overdraftBorrowings are recognized initially at fair value, net of transaction costs incurred.
Borrowings are subsequently stated at amortised cost; any difference between the proceeds
(net of transaction costs) and the redemption value is recognized in the income statement
over the period of the borrowings using the effective interest method.2.16.
    
    ProvisionsProvisions are recognised when the group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. In the event that the time
value of money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects a current market assessment of the time value of
money and, where appropriate, the risks specific to the liability. Where discounting is
used, the increase in the provision due to the passage of time is recognised as a finance
cost.2.17.
    
    Current and deferred income taxThe current income tax charge is calculated on the basis of the tax laws in the
countries where the group operates and generates taxable income. The tax rate of MF Global
Sify and its Indian Subsidiaries is 33.2175%. MF Global Middle East DMCC, the Dubai based
subsidiary operates in a tax free jurisdiction. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulations are
subject to interpretation and establishes provisions, where appropriate, on the basis of
amounts expected to be paid to the tax authorities.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.Deferred income tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.Deferred income tax is provided on temporary differences, if any, arising on investments in
subsidiaries, except where the timing of the reversal of the temporary difference is
controlled by the group and it is probable that the temporary difference will not reverse in
the foreseeable future.Current and deferred income tax are recognized in the income statement, except when the tax
relates to items charged or credited directly to equity, in which case the tax is also dealt
with directly in equity.2.18.
    
    Employee benefitsEmployee benefits are accrued in the period in which the associated services are
rendered by employees of the group. The group provides employees with retirement benefits
through both defined benefit and defined contribution schemes. Contributions to the defined
contribution scheme are charged to the consolidated income statement as they become payable
in accordance with the rules of the scheme.
 a)
    
    Provident Fund
 In accordance with Indian law, all employees receive benefits from a provident fund, which
is a defined contribution plan. Both the employee and employer make monthly contributions
to the plan, each equal to a specified percentage of employees basic salary. The group has
no further obligations under the plan beyond its monthly contributions.
 b)
    
    Gratuity
 The Gratuity Plan is a defined benefit plan that, at retirement or termination of
employment, provides all employees with a lump sum payment, which is a function of the
respective employees salary and completed years of service with the group. The group
provides the gratuity benefit through annual contributions to a fund managed by the Life
Insurance Corporation of India (LIC). Under this scheme, the settlement obligation remains
with the group, although the LIC administers the scheme and determines the contribution
premium required to be paid by the group. The liability recognised in the balance sheet in
respect of gratuity plan is the present value of the defined benefit obligation at the
balance sheet date less the fair value of plan assets, if any, together with adjustments for
unrecognised pastservice costs. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of Government of India securities (representing risk-free interest
rates) and that have terms to maturity approximating to the terms of the related gratuity
liability.
 Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to income statement in the period in which they arise.
 c)
    
    Sharebased payment
 The groups employees participate in share-based payment plans; that is stock appreciation
rights plan sponsored by MF and co-investment plan sponsored by Man Group plc. The group
follows IFRS 2, Share Based Payment(IFRS 2).
 For Equity settled share based payments; the fair value of the employee services received in
exchange for the share awards and options granted is recognised as an expense.
Equity-settled share-based payments are measured at the fair value of the equity instruments
at the grant date and expensed, together with a corresponding increase in equity, on a
straight-line basis over the vesting period, based on the Groups estimate of shares that
will eventually vest.
 For cash settled share based payments; the fair value of the employee services received in
exchange for the stock appreciation rights is recognised as an expense. The cost of
cash-settled transactions is measured initially at fair value at the grant date. The fair
value of each tranche of rights issued under the plan is expensed over the period until
vesting, with recognition of a corresponding liability. The liability is remeasured at each
balance sheet date up to and including the settlement date, with changes in fair value
recognised in the consolidated income statement.
 The impact of non-market vesting conditions is included in assumptions about the number of
options that are expected to vest. At each balance sheet date, the group revises its
estimates of the number of options that are expected to become exercisable. It recognises
the impact of the revision of original estimates, if any, in the income statement.
 2.19.
    
    Revenue Recognition
 a)
    
    Commission, clearing fees, depository fee income
 Commission, clearing fees and related expenses are recorded on a trade-date basis as
securities transactions occur. Depository fee income earned from customer is recognized in
the period in which services are rendered.
 b)
    
    Dividend and Interest Income
 Dividend income is recognised when the right to receive the payment is established. Interest
income is recognised on accrual basis using the effective interest rate method.
 c)
    
    Principal transactions
 Principal transactions include revenues from proprietary transactions. The Company records
in Principal transactions the gains or losses on repurchase and resale agreements accounted
for as sales and purchase transactions.
 The Company does not separately amortize purchase premiums and discounts associated with
proprietary transactions, as these are a component of the recorded fair value. Changes in
the fair value of such securities are recorded as unrealized gains and losses within
Principal transactions in the consolidated statements of operations.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 d)
    
    Other
 Other revenues consist of revenues the Company earns from other normal business
operations that are not otherwise included elsewhere. These include fees from clients and
other.2.20.
    
    LeasesLeases in which a significant portion of the risks and rewards of ownership are retained
by the lessor are classified as operating leases. Payments made under operating leases (net
of any incentives received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease. All leases are classified as operating
leases.Under these arrangements, interest free deposits have been given to the lessor and are
refundable at the end of lease term. The group recognises the security deposit at fair value
using the market rate of interest for a deposit of similar term. The difference between the
amount of security deposit and fair value is considered as prepaid lease rental, which is a
non-financial asset.The security deposit initially recognised at fair value will accrete to the amount of
security deposit received through accruals as interest income over the term of security
deposit and prepaid lease rental will be charged to income statement as lease rental over
the lease term.
 3.
    
    Financial risk management objectives and policies
 3.1.
    
    Financial risk factorsThe group is exposed to a variety of financial risks. The principal risks are business
risk, interest rate risk, price risk, foreign currency risk, credit risk and cash liquidity
risk. Each of these risks is discussed in detail below. The group monitors financial risks
on a consolidated basis. The groups overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the
financial performance. The group has a risk management structure and processes to monitor,
evaluate and manage the principal risks in conducting business.Business RiskThe groups results of operations will be affected by many factors including economic,
political and market conditions, broad trends in the brokerage and finance industry, changes
in level of trading activity in the broader market place, price levels and price volatility
in the derivative, equity and commodity markets, legislative and regulatory changes and
competition, among other factors. In particular, the revenues of the group are
substantially dependent on the volume of client transactions that it executes and clears,
the volatility in the principal markets in which it operates and the prevailing interest
rates.Interest rate RiskThe group is exposed to interest rate risk primarily due to changes in interest rates on
bank fixed deposits that impact the amount of interest income the group earns. Interest
income is earned on fixed deposits placed with banks out of the groups funds and margin
monies placed by clients. The group monitors the movement of interest rates to determine
whether deposits need to be placed at fixed or floating interest rates. Investments in
fixed deposits placed with banks earn fixed rate of interest. As at March 31, 2010 the
carrying value of bank deposits approximates fair value of these deposits as having original
maturity of less than a year. The weighted average rate of interest earned on bank fixed
deposits amounted to 6.49% p.a. and 6.97% p.a. during the year ended March 31, 2011 and
March 31, 2010, respectively.The group rolls-over fixed deposits on maturity based on the market condition and business
needs; the weighted average remaining term of fixed deposits as at the balance sheet date is
approximately 7.35 months and 4.8 months as at March 31, 2011 and March 31, 2010,
respectively.As at March 31, 2011, a 100 bps increase / decrease in interest rates, with all other
variables held constant , would have resulted in an increase / decrease in Interest Income
by Rs.18,064 ( Previous year Rs. 10,377)Price RiskThe group is subject to price risk in respect of investments held by the group in listed
and unlisted equity shares and investment in money market mutual funds, which are held as
available for sale securities. The impact of price risk on carrying value of these shares is
not material compared to the size and operations of the group. Investments in money market
funds are subject to minimum price risk due to their investment in instruments of highest
safety call money market instruments. Highest Safety represents a credit rating equivalent
of AAA.Foreign Exchange RiskThe group has minimal transactional currency exposure arising from operations in
currencies other than its functional currency.Credit RiskCredit risk is the possibility that the group may suffer a loss from the failure of
clients or counterparties to meet their financial obligations at all or in a timely manner.
The group acts as an agent in providing execution and clearing services for exchange-traded
products. The groups clients security activities are transacted on either cash or margin
basis. In the event that a client fails to satisfy its obligations for cash transactions,
the group may be required to purchase or sell financial instruments at the prevailing market
price to fulfil the clients obligations. The clients are required to maintain margin
accounts with collateral sufficient to support their open trading positions. Initially, the
group establishes each clients margin requirements to levels it believes are sufficient to
cover their open positions. However, later if the clients subsequent trading activity or
adverse market conditions may cause the clients previous margin payments to be inadequate
to support their trading obligations, the group then serves as the exchange clearing member
for the trade and thus the group would cover any shortfall and thereby expose itself to
potential losses.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 The Credit exposure also arises in relation to fixed deposits placed with Banks. The group
places fixed deposits with highly rated banks , which are reviewed on an on-going basis.The groups policy is to place fixed deposits with credit worthy banks. The following table
depicts that the majority of the groups fixed deposits are placed in highly rated banks :
 % of fixed depositsInvestment grade
    

2011
    
    

2010Highest safety
    
    
    100
    
    
    
    100High safety
    
    
    
    
    
    
    Adequate safety
    
    
    
    
    
    
    100
    
    
    
    100
 Highest Safety represents a credit rating equivalent of AAA, A1+, P1+; High Safety
represents a credit rating equivalent of AA; and Adequate Safety represents a credit rating
of A.
 The credit exposure also arises in relation to the deposits placed with exchanges and
clearing corporations, which is required as per the rules of the exchanges / clearing
corporation for the company membership. The risk is inherent in our industry and is largely
controlled and influenced by the regulatory bodies that impose rules on the exchanges and
clearing houses.
 All exchanges and clearing houses are financially sound organisations and the Company is
therefore not exposed to significant credit risk.Risk Management Process and Mitigation
 The group has a separate risk management department, which monitors, evaluates and
manages the risks. Client-wise position limits are set by the risk department based on the
collateral placed by the respective clients. The risk department is responsible for making
daily risk reports based on day-end positions of clients. Client orders are directed to the
exchange only if the risk parameters set by the risk department are met. The risk
department monitors client activity levels to ensure exposures are within the risk
parameters of the group. Intra-day margin calls are made on the clients to reflect market
movements on the client positions and may result in clients being asked to reduce positions.
Generally, the group reserves the right to liquidate any client position immediately in the
event of a failure to meet a margin call. For the year ended March 31, 2011 and March 31,
2010, groups bad debts as a percentage of broking income were 2.75% and 0.01%,
respectively. For clearing business, the group generally mandates that initial margin be
paid by the clients as deposit before they commence trading. The clients are required to
provide collateral as margin to secure the performance of their obligations.
 The group employs the following techniques to monitor the market environment and clients
risk of default based upon the exposure created by their open positions:
 
    
    establishing risk parameters based on analysis of current and historical prices and
price volatility;
    
    intra-day and end of day risk limit monitoring, including intra-day position and
trade monitoring to identify any accounts trading beyond pre-set limits and parameters;
    
    market risk analysis and evaluation of adequacy of margin requirements for traded
products;
    
    intra-day stress analysis for material market moves or accounts with material
position taking and
    
    approval of margin requirements, limits and risk control of new instruments
 Cash Liquidity Risk
 In normal conditions, the groups core business of providing execution and clearing
brokerage services is self-financing because the operations generate sufficient revenues to
pay expenses as they become due. As a result, the group generally does not face a
substantial cash liquidity risk  that is a risk that the group will be unable to raise
cash quickly enough to meet payment obligations as they arise. The group has sufficient
readily available liquid assets and credit facilities to ensure that the group can meet
financial obligations as they become due under both normal and distressed market conditions.
The group also has committed credit lines from banks to support the business in respect of
settlement and intraday requirements. The group evaluates liquidity needs by analysing the
impact of liquidity stress scenarios. The following table analyses the Groups financial
assets, liabilities and commitments. The amounts disclosed are the contractual undiscounted
cash flows.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 Year ended March 31, 2011
 Within 6
    
    
    6 months tomonths
    
    
    1 Year
    
    
    2 to 3 years
    
    
    After 3 years
    
    
    TotalFinancial LiabilitiesPayable to broker dealers and clearing organizations
    
    
    264,504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264,504Payable to customers
    
    
    1,272,570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,272,570Borrowings
    
    
    53,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,000Accounts payable, accrued expenses, and other liabilities
    
    
    505,605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    505,6052,095,679
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,095,679
 Within 6
    
    
    6 months tomonths
    
    
    1 Year
    
    
    2 to 3 years
    
    
    After 3 years
    
    
    TotalThe group has at its disposal following financial assets
in addition to unused lines of credit.Cash and Bank balance
    
    
    281,486
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    281,486Cash-restricted
    
    
    2,832,900
    
    
    
    126,163
    
    
    
    
    
    
    
    
    
    
    
    2,959,063Interest bearing deposits with bank
    
    
    86,523
    
    
    
    6,839
    
    
    
    
    
    
    
    
    
    
    
    93,362Deposits with clearing organizations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173,783
    
    
    
    173,783Receivable from broker-dealers and clearing organizations
    
    
    18,580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,580Receivable from customers
    
    
    447,770
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    447,770Available-for-sale securities Marketable, at market value
    
    
    40,776
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,776Interest accrued but not due
    
    
    67,124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,1243,775,159
    
    
    
    133,002
    
    
    
    
    
    
    
    173,783
    
    
    
    4,081,944
 Year ended March 31, 2010
 Within 6
    
    
    6 months
    
    
    2 to 3
    
    
    After 3months
    
    
    to 1 Year
    
    
    years
    
    
    years
    
    
    TotalFinancial LiabilitiesPayable to broker dealers and clearing organizations
    
    
    139,965
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139,965Payable to customers
    
    
    1,177,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,177,517Borrowings
    
    
    3,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,508Accounts payable, accrued expenses, and other liabilities
    
    
    394,327
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394,3271,715,317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,715,317
 Within 6
    
    
    6 months
    
    
    2 to 3
    
    
    After 3months
    
    
    to 1 Year
    
    
    years
    
    
    years
    
    
    TotalThe group has at its disposal following financial assets
in addition to unused lines of credit.Cash and bank balance
    
    
    148,213
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,213Cash-restricted
    
    
    2,179,803
    
    
    
    310,044
    
    
    
    
    
    
    
    
    
    
    
    2,489,847Interest bearing deposits with bank
    
    
    107,445
    
    
    
    188,214
    
    
    
    
    
    
    
    
    
    
    
    295,659Deposits with clearing organizations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,969
    
    
    
    110,969Receivable from broker-dealers and clearing organizations
    
    
    65,884
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,884Receivable from customers
    
    
    437,207
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437,207Available-for-sale securities Marketable, at market value
    
    
    877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    877Available-for-sale securities not readily marketable, at
fair value
    
    
    11,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,447Interest accrued but not due
    
    
    71,443
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,4433,022,319
    
    
    
    498,258
    
    
    
    
    
    
    
    110,969
    
    
    
    3,631,546
 Available credit facilities (undrawn) as at March 31
 As at March 31,2011
    
    
    2010Fund based facilities (working capital)
    
    
    
    
    
    
    500,000Nonfund facilities
    
    
    
    
    
    
    1,060,000Total
    
    
    
    
    
    
    1,560,000
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 3.2.
    
    Capital risk managementThe objectives of the Group when managing capital are to safeguard the groups ability
to continue as a going concern in order to provide returns for shareholders and to maintain
minimal debt. Capital of the group is equity as shown in the consolidated balance sheet.
The exchange in which the group is a member has stipulated minimum net worth that must be
maintained. In order to maintain or adjust the capital structure, the group may adjust the
amount of dividends to shareholders, issue new shares or sell assets to reduce debt. The
group has embedded in its regulatory compliance framework the necessary test to ensure the
continuous and full compliance with the net worth criteria set by the Exchange at each
entity level. The group has complied with the net worth requirement at each entity level
during the year and as at March 31, 2011 and March 31, 2010.3.3.
    
    Fair value estimationThe fair value of financial instruments traded in active markets (such as
available-for-sale securities) is based on the quoted market price at the balance sheet
date. The quoted market price used for financial assets held by the group is the closing
market price. The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques except for the investment in equity
 shares of Bombay Stock Exchange Limited.The fair value of Investment in the equity shares of BSEL is provided by BSEL. The fair
value provided by BSEL is used for valuing investment in shares for the purposes of
computation of net worth of trading member.However the Investment in BSEL have been sold by the company during the financials year
March 31, 2011. Please refer to note 14 for further details.The carrying value, less impairment provision of trade receivables, is assumed to
approximate their fair values.
 4.
    
    Critical accounting estimates and judgements
 4.1.
    
    Critical accounting estimatesIn the process of applying the groups accounting policies, management has made estimates
and judgements in preparing the financial statements.Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable
under the circumstances.MF makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.Valuation of financial assets where there is no quoted price  This determination requires
significant judgement particularly in determining changes in fair value since the last
formal valuation.Impairment of non-financial assets  The recoverable amount of an asset or a cash-generating
unit is determined based on value-in-use calculations prepared on the basis of managements
assumptions and estimates.Income taxes  There are transactions and calculations for which the ultimate tax
determination is uncertain and would get finalized on completion of assessment by tax
authorities. Where the final tax outcome is different from the amounts that were initially
recorded, such differences will impact the income tax and deferred tax provisions in the
period in which such determination is made.Defined benefit schemes  Gratuity Liability  The costs of and period-end obligations
under defined benefit schemes are determined using an actuarial valuation. The actuarial
valuation involves making assumptions about discount rates, expected rates of return on
assets, future salary increases, mortality rates and future pension increases. Due to the
long-term nature of these schemes, such estimates are subject to significant uncertainty.
The group reviews its assumptions annually in conjunction with its independent actuary and
considers this adjustment appropriate given the geographical and demographic profile of the
scheme.Share-based payment transactions  Share-based payments are measured at fair value by an
independent valuer using the Black-Scholes model and expensed over the vesting period based
on the groups estimate of shares that will eventually vest.4.2.
    
    Critical accounting judgements in applying the entitys accounting policy
 4.2.1.
    
    Revenue recognition
 MF estimates that fixed deposits placed with banks will be held till maturity while
determining the accrued interest, which is unpaid on the balance sheet date. In the event 1%
of such deposit is withdrawn before its its maturity date the Interest income will be lower
by Rs. 733.
 
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 5.
    
    Intangible assets
 5.1.
    
    Software
 WebComputer
    
    
    DevelopmentSoftware
    
    
    Costs
    
    
    TotalCostAs at March 31, 2009
    
    
    63,614
    
    
    
    207,452
    
    
    
    271,066Additions
    
    
    25,104
    
    
    
    
    
    
    
    25,104Disposals
    
    
    
    
    
    
    (30
    )
    
    
    (30
    )Exchange difference
    
    
    (27
    )
    
    
    
    
    
    
    (27
    )As at March 31, 2010
    
    
    88,691
    
    
    
    207,422
    
    
    
    296,113Additions
    
    
    5,671
    
    
    
    
    
    
    
    5,671Disposals
    
    
    
    
    
    
    
    
    
    
    Exchange difference
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )As at March 31, 2011
    
    
    94,360
    
    
    
    207,422
    
    
    
    301,782Accumulated amortisation and impairmentAs at March 31, 2009
    
    
    47,540
    
    
    
    207,452
    
    
    
    254,992Charge for the year
    
    
    12,992
    
    
    
    
    
    
    
    12,992Disposals
    
    
    
    
    
    
    (30
    )
    
    
    (30
    )Exchange difference
    
    
    (27
    )
    
    
    
    
    
    
    (27
    )As at March 31, 2010
    
    
    60,505
    
    
    
    207,422
    
    
    
    267,927Charge for the year
    
    
    14,587
    
    
    
    
    
    
    
    14,587Disposals
    
    
    
    
    
    
    
    
    
    
    Exchange difference
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )As at March 31, 2011
    
    
    75,089
    
    
    
    207,422
    
    
    
    282,511Net book amount as atMarch 31, 2011
    
    
    19,271
    
    
    
    
    
    
    
    19,271March 31, 2010*
    
    
    28,424
    
    
    
    
    
    
    
    28,424
  5.2.
    
    Membership in ExchangesMembership in exchanges consists of:
 a)
    
    BSE membership of Rs.1,257 and Rs 1,257 as at March 31, 2011 and 2010
respectively, andb)
    
    DGCX membership of Rs.4,476 and Rs. 4,525 as at March 31, 2011 and 2010,
respectively. DGCX membership value underwent a change due to foreign currency
translation.
 BSE membership
 The carrying value of the erstwhile BSE membership card in the books of MF Global Sify
was Rs.13,570 in August 2005. Consequent to the corporatisation of the BSE, MF Global Sify
computed the fair value of the membership rights of BSEL and shares of BSEL as follows:
 Membership rights of BSEL
    
    On the basis of the benefits which MF Global
Sify would get over the current deposit based
membership right of BSELEquity shares of BSEL
    
    On the basis of the fair value of the equity
shares of BSEL determined by management
 The fair value of the membership rights of BSEL is calculated by present value over 10 years
of opportunity costs incurred on current deposit and admission fees required for new
membership on the date of the balance sheet. The interest rate and present value is
determined @ 8% p.a. On the balance sheet date the current deposit requirement is Rs. 1,000
and admission fees (non  refundable) is Rs. 250.
 In accordance with the above methodology, an impairment charge arose in BSE membership
rights of Rs. Nil and Rs. 3,130, which was written off to the consolidated income statement
during the year ended March 31, 2011 and March 31, 2010 respectively.
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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 
 6.
    
    Property, Plant and Equipment*
 March 31, 2010
    
    
    238
    
    
    
    
    
    
    
    238
 Furniture and
    
    
    Computers
    
    
    OfficeFixtures
    
    
    Systems
    
    
    equipments
    
    
    Vehicles
    
    
    TotalCostAs at March 31, 2009
    
    
    8,182
    
    
    
    165,061
    
    
    
    36,861
    
    
    
    13,215
    
    
    
    223,319Additions
    
    
    288
    
    
    
    12,982
    
    
    
    1,018
    
    
    
    
    
    
    
    14,288Disposals
    
    
    
    
    
    
    (6
    )
    
    
    (7
    )
    
    
    
    
    
    
    (13
    )Exchange difference
    
    
    (153
    )
    
    
    (110
    )
    
    
    (92
    )
    
    
    (114
    )
    
    
    (469
    )As at March 31, 2010
    
    
    8,317
    
    
    
    177,927
    
    
    
    37,780
    
    
    
    13,101
    
    
    
    237,125Additions
    
    
    50
    
    
    
    4,498
    
    
    
    212
    
    
    
    
    
    
    
    4,760Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange difference
    
    
    (14
    )
    
    
    (9
    )
    
    
    (8
    )
    
    
    (10
    )
    
    
    (41
    )As at March 31, 2011
    
    
    8,353
    
    
    
    182,416
    
    
    
    37,984
    
    
    
    13,091
    
    
    
    241,844Accumulated depreciationAs at March 31, 2009
    
    
    3,170
    
    
    
    125,391
    
    
    
    9,485
    
    
    
    4,733
    
    
    
    142,779Charge for the year
    
    
    913
    
    
    
    17,395
    
    
    
    3,923
    
    
    
    2,175
    
    
    
    24,406Disposals
    
    
    
    
    
    
    (5
    )
    
    
    (1
    )
    
    
    
    
    
    
    (6
    )Exchange difference
    
    
    (72
    )
    
    
    (77
    )
    
    
    (32
    )
    
    
    (32
    )
    
    
    (213
    )As at March 31, 2010
    
    
    4,011
    
    
    
    142,704
    
    
    
    13,375
    
    
    
    6,876
    
    
    
    166,966Charge for the year
    
    
    2,739
    
    
    
    25,595
    
    
    
    20,233
    
    
    
    4,506
    
    
    
    53,073Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exchange difference
    
    
    (7
    )
    
    
    (7
    )
    
    
    (4
    )
    
    
    (4
    )
    
    
    (22
    )As at March 31, 2011
    
    
    6,743
    
    
    
    168,292
    
    
    
    33,604
    
    
    
    11,378
    
    
    
    220,017Net book
amountAs at
March 31, 2011
    
    
    1,610
    
    
    
    14,124
    
    
    
    4,380
    
    
    
    1,713
    
    
    
    21,827As at March 31, 2010
    
    
    4,306
    
    
    
    35,223
    
    
    
    24,405
    
    
    
    6,225
    
    
    
    70,159
 Change in Estimates
    7.
    
    Deferred income tax
 The movement in deferred tax assets and liabilities during the respective years is as
follows:
 2011
    
    
    2010At April 1
    
    
    17,901
    
    
    
    56,082Property Plant and Equipment
    
    
    10,479
    
    
    
    (3,422
    )Provision on receivable from customers
    
    
    12,765
    
    
    
    (19,783
    )Gratuity
    
    
    891
    
    
    
    59Stock appreciation rights
    
    
    24,404
    
    
    
    (8,060
    )Provision for Bonus
    
    
    12,106
    
    
    
    (8,593
    )Stamp duty
    
    
    930
    
    
    
    1,618At March 31
    
    
    79,476
    
    
    
    17,901Comprised Of:Deferred Tax Assets
    
    
    79,476
    
    
    
    18,215Deferred Tax Liabilities
    
    
    
    
    
    
    (314
    )79,476
    
    
    
    17,901
  180




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 An analysis of the gross deferred tax asset and liability balances is as follows:
 2011
    
    
    2010Deferred tax assets:Property Plant and Equipment
    
    
    11,308
    
    
    
    829Provision on receivable from customers
    
    
    20,129
    
    
    
    7,364Stock appreciation rights
    
    
    31,881
    
    
    
    7,477Provision for Bonus
    
    
    13,033
    
    
    
    927Stamp Duty
    
    
    2,548
    
    
    
    1,618Gratuity
    
    
    577
    
    
    
    79,476
    
    
    
    18,215Deferred tax liabilities:Nil
    
    
    
    
    
    
    (314
    )
    
    
    
    (314
    )
  March 31,
    
    
    March 31,2011
    
    
    2010Deferred tax assets: Deferred tax asset to be recovered after more than 12 months
    
    
    33,985
    
    
    
    9,811 Deferred tax asset to be recovered within 12 months
    
    
    45,491
    
    
    
    8,40479,476
    
    
    
    18,215Deferred tax liabilities: Deferred tax liability to be recovered after more than 12 months
    
    
    
    
    
    
    314 Deferred tax liability to be recovered within 12 months
    
    
    
    
    
    
    314Deferred tax Assets (net)
    
    
    79,476
    
    
    
    17,901
 Provision onreceivable
    
    
    StockProperty Plant
    
    
    from
    
    
    appreciation
    
    
    ProvisionDeferred tax assets:
    
    and Equipment
    
    
    customers
    
    
    rights
    
    
    for Bonus
    
    
    Gratuity
    
    
    Stamp Duty
    
    
    Grand TotalOpening Balance as on April 1, 2009
    
    
    4,251
    
    
    
    27,147
    
    
    
    15,537
    
    
    
    9,520
    
    
    
    
    
    
    
    
    
    
    
    56,455Charged / (Credited) to Other
Comprehensive Income
    
    
    (3,325
    )
    
    
    (19,166
    )
    
    
    (6,605
    )
    
    
    (8,375
    )
    
    
    
    
    
    
    1,618
    
    
    
    (35,853
    )Effect of Change in Tax rates
    
    
    (97
    )
    
    
    (617
    )
    
    
    (1,455
    )
    
    
    (218
    )
    
    
    
    
    
    
    
    
    
    
    (2,387
    )As at March 31, 2010
    
    
    829
    
    
    
    7,364
    
    
    
    7,477
    
    
    
    927
    
    
    
    
    
    
    
    1,618
    
    
    
    18,215Charged / (Credited) to Other
Comprehensive Income
    
    
    10,479
    
    
    
    12,765
    
    
    
    24,404
    
    
    
    12,106
    
    
    
    577
    
    
    
    930
    
    
    
    61,261Effect of Change in Tax rates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As at March 31, 2011
    
    
    11,308
    
    
    
    20,129
    
    
    
    31,881
    
    
    
    13,033
    
    
    
    577
    
    
    
    2,548
    
    
    
    79,476
 Deferred tax liabilities:
    
    
    
    
    
    
    
    
    
    Gratuity
    
    Grand TotalOpening Balance as on April 1, 2009
    
    
    
    
    
    
    
    
    
    
    373
    
    
    
    373Charged / (Credited) to Other
    
    
    
    
    
    
    
    
    
    
    (53
    )
    
    
    (53
    )Comprehensive IncomeEffect of Change in Tax rates
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )As at March 31, 2010
    
    
    
    
    
    
    
    
    
    
    314
    
    
    
    314Charged / (Credited) to Other
    
    
    
    
    
    
    
    
    
    
    (314
    )
    
    
    (314
    )Comprehensive IncomeEffect of Change in Tax rates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As at March 31, 2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  181




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 8.
    
    Receivables from customers
 Receivables from customers that are due for less than six months are generally not
considered impaired. In respect of receivables that are neither past due nor impaired, as at
the reporting date, there are no indications that the customers will not meet their payment
obligations.
 As at March 31, 2011, receivables of Rs.10,193 (March 31, 2010: Rs. 672) were past due but
not impaired. There are no indications that these customers will not meet their payment
obligations. The ageing analysis of receivables, which are not impaired, is as follows:
 As at March 31,2011
    
    
    2010Up to 6 months
    
    
    437,577
    
    
    
    436,535more than 6 months
    
    
    10,193
    
    
    
    672447,770
    
    
    
    437,207
 Receivables are tested individually for impairment. Based on such testing as at March 31,
2011, receivables of Rs 60,600. (March 31, 2010: Rs. 22,300) were impaired and provided for.
The amount of the provision was Rs. 60,600 as at March 31, 2011 (March 31, 2010: Rs.
22,300).
 The ageing of these receivables is as follows:
 As at March 31,2011
    
    
    2010Up to 6 months
    
    
    45,796
    
    
    
    5,020more than 6 months
    
    
    14,804
    
    
    
    17,28060,600
    
    
    
    22,300
 The carrying amounts of the groups receivables are denominated in Indian Rupees (INR):
 As at March 31,2011
    
    
    2010447,770
    
    
    
    437,207447,770
    
    
    
    437,207
 Movements on the groups provision for impairment of trade receivables are as follows:
 As at March 31,2011
    
    
    2010
    
    
    2009As at the beginning of the year
    
    
    22,300
    
    
    
    80,000
    
    
    
    77,075Provision for impairment
    
    
    38,300
    
    
    
    
    
    
    
    2,925Write back of provision
    
    
    
    
    
    
    (57,700
    )
    
    
    As at the closing of the year
    
    
    60,600
    
    
    
    22,300
    
    
    
    80,000
 The maximum exposure to credit risk at the reporting date is the fair value of each class of
receivable mentioned above
 182




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 9.
    
    Receivable from and payable to broker-dealer and clearing organisations
  As at March 312011
    
    
    2010Receivable
    
    
    Payable
    
    
    Receivable
    
    
    PayableClearing organizations- Unsettled trade
    
    
    8,208
    
    
    
    38,638
    
    
    
    60,250
    
    
    
    8,327Broker-Dealer
    
    
    10,372
    
    
    
    225,866
    
    
    
    5,634
    
    
    
    131,638Total
    
    
    18,580
    
    
    
    264,504
    
    
    
    65,884
    
    
    
    139,965
 10.
    
    Other assets
 As at March 31,2011
    
    
    2010Prepaid expenses
    
    
    14,544
    
    
    
    19,890Advance tax (net of provisions)
    
    
    168,746
    
    
    
    124,124Deposits
    
    
    32,663
    
    
    
    30,976Loans and advances (to staff)
    
    
    12,594
    
    
    
    22,168Gratuity Trust
    
    
    2,228
    
    
    
    3,232Others*
    
    
    15,025
    
    
    
    19,892245,800
    
    
    
    220,282
 *
    
    includes Advances to vendors towards expenses, delayed payment charges from clients,
withholding tax recoverable, etc. 11.
    
    Cash and Bank Balance
  As at March 31,2011
    
    
    2010
    
    
    2009Cash in hand
    
    
    0.49
    
    
    
    32.00
    
    
    
    20Cash at bank
    
    
    281,485.27
    
    
    
    148,181.00
    
    
    
    181,596281,485.76
    
    
    
    148,213.00
    
    
    
    181,616
 12.
    
    Cash  restricted
    13.
    
    Interest bearing deposits with banks
    183




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 14.
    
    Available for Sale Securities
  As at March 31,2011
    
    
    2010Amount
    
    
    
    
    
    
    Amount(a) Equity Shares (Quoted)
    
    Quantity
    
    
    (Rs.)
    
    
    Quantity
    
    
    (Rs.)Patni Computers Systems Limited.
    
    
    18,096
    
    
    
    8,633
    
    
    
    
    
    
    
    Piramal Health Care Limited
    
    
    4,888
    
    
    
    2,037
    
    
    
    
    
    
    
    Siemens Limited
    
    
    34,171
    
    
    
    30,106
    
    
    
    
    
    
    
    Rural Electrification Corporation Limited
    
    
    
    
    
    
    
    
    
    
    3,500
    
    
    
    877Bombay Stock Exchange Limited
    
    
    
    
    
    
    
    
    
    
    70,694
    
    
    
    11,447Total (a)
    
    
    57,155
    
    
    
    40,776
    
    
    
    74,194
    
    
    
    12,324Templeton India  Dividend reinvestment plan
    
    
    9,286,667
    
    
    
    92,868
    
    
    
    
    
    
    
    Total (b)
    
    
    9,286,667
    
    
    
    92,868
    
    
    
    
    
    
    
    
   15.
    
    Share capital and Dividend distribution
 As at March 31,2011
    
    
    2010Authorised capital70,000,000 ordinary shares of Rs.10/- per share
    
    
    700,000
    
    
    
    650,000
     16.
    
    Sharebased payments
 Employees Stock Appreciation Scheme
      184




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
   
    
    Corporate tax rate  Current period tax rate is considered as corporate tax
rate.
 
    
    Future maintainable profit  Future maintainable profit is derived based on
simple average adjusted PBT for each year. From the future maintainable profit,
corporate tax at the corporate tax rate has been deducted to derive future
maintainable profit after tax.
 
    
    Expected rate of return  Expected rate of return is determined based on the
average price earnings multiple of comparable companies on the basis of their 12
months average market prices.
    As at March 31,2011
    
    
    2010
    
    
    2009As at the beginning of the year
    
    
    2,879,747
    
    
    
    2,898,747
    
    
    
    1,512,747Granted during the year
    
    
    
    
    
    
    
    
    
    
    1,386,000Exercised
    
    
    (2,558,394
    )
    
    
    
    
    
    
    Forfeited
    
    
    (321,353
    )
    
    
    (120,008
    )
    
    
    (115,500
    )Reissued
    
    
    
    
    
    
    100,508
    
    
    
    115,500Lapsed
    
    
    
    
    
    
    
    
    
    
    As at the end of the year
    
    
    
    
    
    
    2,879,747
    
    
    
    2,898,747Exercisable at the end of the year
    
    
    
    
    
    
    
    
    
    
    Approximate remaining vesting period in years
    
    
    
    
    
    
    1.24
    
    
    
    2.98
 Co-investment plan
    17.
    
    Borrowings
 As at March 31,2011
    
    
    2010Car Loan
    
    
    
    
    
    
    3,508
    
    
    
    3,508
  As at March 31,2011
    
    
    2010On demand or within one year
    
    
    53,000
    
    
    
    1,266In one to three years
    
    
    
    
    
    
    2,242In three to five years
    
    
    
    
    
    
    53,000
    
    
    
    3,508
  185




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 18.
    
    Employee benefit obligation
 Years ended March 31,2011
    
    
    2010
    
    
    2009Gratuity
    
    
    1,432
    
    
    
    856
    
    
    
    844Stock appreciation rights
    
    
    96,832
    
    
    
    135,746
    
    
    
    46,85198,264
    
    
    
    136,602
    
    
    
    47,695
 The movement in the defined benefit obligation of gratuity over the period is as follows:
 Years ended March 31,2011
    
    
    2010
    
    
    2009Opening defined benefit obligation
    
    
    9,861
    
    
    
    9,700
    
    
    
    9,458Current service cost
    
    
    2,879
    
    
    
    2,853
    
    
    
    3,000Interest cost
    
    
    715
    
    
    
    679
    
    
    
    755Actuarial losses/ (gains)
    
    
    3,948
    
    
    
    (3,373
    )
    
    
    (3,471
    )Benefits paid
    
    
    
    
    
    
    
    
    
    
    (42
    )Closing defined benefit obligation
    
    
    17,403
    
    
    
    9,859
    
    
    
    9,700
 The movement in the fair value of plan assets of the year is as follows:
 Years ended March 31,2011
    
    
    2010
    
    
    2009Beginning of year
    
    
    12,237
    
    
    
    11,200
    
    
    
    7,686Expected return on plan assets
    
    
    1,343
    
    
    
    1,025
    
    
    
    832Actuarial (losses)/gains
    
    
    (278
    )
    
    
    11
    
    
    
    (129
    )Employer contributions
    
    
    6,732
    
    
    
    
    
    
    
    2,853Benefits paid
    
    
    (1,836
    )
    
    
    
    
    
    
    (42
    )Closing fair value of plan assets
    
    
    18,198
    
    
    
    12,236
    
    
    
    11,200
 The amounts recognised in the income statement in respect of gratuity are as follows:
 Years ended March 31,2011
    
    
    2010
    
    
    2009Current service cost
    
    
    2,879
    
    
    
    2,853
    
    
    
    3,000Interest cost
    
    
    715
    
    
    
    679
    
    
    
    755Actuarial loss
    
    
    6,061
    
    
    
    (3,384
    )
    
    
    (3,342
    )Expected return on plan asset
    
    
    (1,344
    )
    
    
    (1,025
    )
    
    
    (832
    )8,311
    
    
    
    (877
    )
    
    
    (419
    )
 The principal actuarial assumptions used were as follows:
 Years ended March 31,2011
    
    
    2010
    
    
    2009Discount rate
    
    
    8.00
    %
    
    
    7.00
    %
    
    
    8.00
    %Expected return on plan assets
    
    
    9.25
    %
    
    
    9.25
    %
    
    
    9.15
    %Long term rate of compensation increase
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %
  19.
    
    Accounts payables, accrued expenses and other liabilities
 As at March 31,2011
    
    
    2010
    
    
    2009Accruals
    
    
    41,758
    
    
    
    41,489
    
    
    
    35,541Withholding tax payable
    
    
    85,062
    
    
    
    71,382
    
    
    
    52,060Bonus Payable
    
    
    255,242
    
    
    
    157,410
    
    
    
    126,350Other payables
    
    
    123,543
    
    
    
    124,046
    
    
    
    138,007Total
    
    
    505,605
    
    
    
    394,327
    
    
    
    351,958
  186




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 20.
    
    Other Expenses
 Year ended March 31,2011
    
    
    2010
    
    
    2009Professional Fees
    
    
    12,087
    
    
    
    11,059
    
    
    
    10,590Travelling and conveyance
    
    
    18,901
    
    
    
    16,068
    
    
    
    15,872Books & Periodicals, Postage, printing and stationary
    
    
    29,120
    
    
    
    25,817
    
    
    
    33,466Loss on account of error trades (net)
    
    
    10,923
    
    
    
    12,602
    
    
    
    12,452Repairs & maintenance
    
    
    818
    
    
    
    145
    
    
    
    2,717Service fee expenses
    
    
    
    
    
    
    
    
    
    
    15,735Insurance Premium
    
    
    1,248
    
    
    
    963
    
    
    
    19,801Others
    
    
    12,531
    
    
    
    15,457
    
    
    
    15,060Total
    
    
    85,628
    
    
    
    82,111
    
    
    
    125,693
 21.
    
    Employee benefit expense
 Year ended March 312011
    
    
    2010
    
    
    2009Salaries and bonus
    
    
    670,766
    
    
    
    508,264
    
    
    
    483,382Defined contribution plans
    
    
    4,047
    
    
    
    3,452
    
    
    
    3,968Defined benefit plans
    
    
    9,134
    
    
    
    159
    
    
    
    285Staff welfare expenses
    
    
    14,677
    
    
    
    6,796
    
    
    
    2,896Sharebased compensation expense
    
    
    95,911
    
    
    
    89,104
    
    
    
    23,973730794,535
    
    
    
    607,775
    
    
    
    515,234
  22.
    
    Provision for Doubtful Debts
  23.
    
    Other income
 Year ended March 31,2011
    
    
    2010
    
    
    2009Profit on sale of available-for-sale securities
    
    
    23,603
    
    
    
    
    
    
    
    6,724Delayed payment charges (*)
    
    
    60,014
    
    
    
    24,999
    
    
    
    39,215Research fees
    
    
    
    
    
    
    3,072Referral fees (**)
    
    
    57,745
    
    
    
    51,160
    
    
    
    2,824Interest
    
    
    16,278
    
    
    
    5566
    
    
    
    51990Dividend
    
    
    1,617
    
    
    
    283
    
    
    
    5,174Currency Fluctuation Gain
    
    
    912
    
    
    
    7,960
    
    
    
    167Expenses Reversal (***)
    
    
    
    
    
    
    17,567
    
    
    
    Principal Trading Activity
    
    
    4,056
    
    
    
    
    
    
    
    Miscellaneous income
    
    
    30,565
    
    
    
    26,365
    
    
    
    32,577194,790
    
    
    
    136,972
    
    
    
    138,671
 (*)
    
    Delayed payment charges represents the penal charges levied to clients on account of delay
in settlement of their trade related obligations.(**)
    
    Referral fees consist of payments received for introducing clients to other MF Global
associated companies.(***)
    
    The amount of Rs 17,567 was provided in year 2009 on account of group recharges from
MF Global Holdings Limited (formerly known as MF Global Limited) has been reversed during
the current year on account of mutual agreement between the stakeholders.  187




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 24.
    
    Income tax expense
 Year ended March 31,2011
    
    
    2010
    
    
    2009Current tax
    
    
    127,322
    
    
    
    122679
    
    
    
    127269Deferred tax (Note 7)
    
    
    (61,575
    )
    
    
    38181
    
    
    
    (894
    )65,747
    
    
    
    160,860
    
    
    
    126,375
  Year ended March 31,2011
    
    
    2010
    
    
    2009Net income before taxes
    
    
    307,587
    
    
    
    468,403
    
    
    
    343,292Enacted tax rates in India
    
    
    33.22
    %
    
    
    33.99
    %
    
    
    33.99
    %Computed tax expense
    
    
    102,180
    
    
    
    159,210
    
    
    
    116,685Income exempt from tax:Dividend
    
    
    (536
    )
    
    
    (96
    )
    
    
    (57
    )Non-deductible expenses:Contribution to co-investment plan
    
    
    734
    
    
    
    751
    
    
    
    751Others including donations, IT interest etc.
    
    
    678
    
    
    
    1,228
    
    
    
    1,275Recharges by parent and affiliate companies
    
    
    
    
    
    
    980
    
    
    
    8,498Excess Provisions for earlier years reverse back in
current year
    
    
    (26,491
    )
    
    
    
    
    
    
    Income charged at lower rate
    
    
    (7,171
    )
    
    
    
    
    
    
    (Gain) / Loss in Subsidiaries
    
    
    (4,209
    )
    
    
    (3,294
    )
    
    
    (1,123
    )Others
    
    
    562
    
    
    
    2081
    
    
    
    346Income taxes recognized in the statement of income
    
    
    65,747
    
    
    
    160,860
    
    
    
    126,375
 25.
    
    Financial instruments by category
 The accounting policies for financial instruments have been applied to the line items
below:
 Loans and
    
    
    AvailableMarch 31, 2011
    
    receivables
    
    
    for sale
    
    
    TotalAssets as per balance sheetCash and Bank balance
    
    
    281,486
    
    
    
    
    
    
    
    281,486Cash-restricted
    
    
    2,959,063
    
    
    
    
    
    
    
    2,959,063Interest bearing deposits with bank
    
    
    93,362
    
    
    
    
    
    
    
    93,362Deposits with clearing organizations and others
    
    
    173,783
    
    
    
    
    
    
    
    173,783Receivable from broker-dealers and clearing organizations
    
    
    18,580
    
    
    
    
    
    
    
    18,580Receivable from customers
    
    
    447,770
    
    
    
    
    
    
    
    447,770Available-for-sale securities:Marketable, at market value
    
    
    
    
    
    
    40,776
    
    
    
    40,776Not readily marketable (at estimated fair value)
    
    
    
    
    
    
    92,868
    
    
    
    92,868Interest accrued but not due
    
    
    67,124
    
    
    
    
    
    
    
    67,124Other assets
    
    
    245,800
    
    
    
    
    
    
    
    245,8004,286,968
    
    
    
    133,644
    
    
    
    4,420,612
 Otherfinancialliabilities
    
    
    TotalLiabilities as per balance sheetPayable to broker dealers and clearing organizations
    
    
    264,504
    
    
    
    264,504Payable to customers
    
    
    1,272,570
    
    
    
    1,272,570Borrowings
    
    
    53,000
    
    
    
    53,000Accounts payable, accrued expenses, and other liabilities
    
    
    505,605
    
    
    
    505,6052,095,679
    
    
    
    2,095,679
  188




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 Loans and
    
    
    AvailableMarch 31, 2010
    
    receivables
    
    
    for sale
    
    
    TotalAssets as per balance sheetCash and Bank balance
    
    
    148,213
    
    
    
    
    
    
    
    148,213Cash-restricted
    
    
    2,489,847
    
    
    
    
    
    
    
    2,489,847Interest bearing deposits with bank
    
    
    295,659
    
    
    
    
    
    
    
    295,659Deposits with clearing organizations and others
    
    
    110,969
    
    
    
    
    
    
    
    110,969Receivable from broker-dealers and clearing organizations
    
    
    65,884
    
    
    
    
    
    
    
    65,884Receivable from customers
    
    
    437,207
    
    
    
    
    
    
    
    437,207Available-for-sale securities:Marketable, at market value
    
    
    
    
    
    
    877
    
    
    
    877Not readily marketable (at estimated fair value)
    
    
    
    
    
    
    11,447
    
    
    
    11,447Interest accrued but not due
    
    
    71,443
    
    
    
    
    
    
    
    71,443Other assets
    
    
    203,982
    
    
    
    
    
    
    
    203,9823,823,204
    
    
    
    12,324
    
    
    
    3,835,528
 OtherfinancialMarch 31, 2010
    
    liabilities
    
    
    TotalLiabilities as per balance sheetPayable to broker dealers and clearing organizations
    
    
    139,965
    
    
    
    139,965Payable to customers
    
    
    1,177,517
    
    
    
    1,177,517Borrowings
    
    
    3,508
    
    
    
    3,508Accounts payable, accrued expenses, and other liabilities
    
    
    394,327
    
    
    
    394,3271,715,317
    
    
    
    1,715,317
 The carrying amounts reported in the balance sheet for cash and cash equivalents,
receivables, amounts due to or from related parties, accounts payable and other liabilities
approximate their respective fair values due to their short maturity.
 26.
    
    During October 2010, Sify Technologies Limited, the minority shareholder of the Company
holding 29.85 percent of the outstanding shares of the Company, requested the Companys Board
of Directors to reconsider certain costs charged to the Company by MF Global Holdings Limited
(the majority shareholder) and its affiliated and associated group companies, who hold 70.15
percent of the outstanding shares of the Company. These charges are currently recorded in the
financial statements of the Company for year ended March 31, 2008 aggregating to Rs.
43,478,911 and March 31, 2009 aggregating to Rs. 15,374,528. The resolution of this matter
between the shareholders remains uncertain and any financial adjustment that may arise is not
presently known. 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.
 27.
    
    Merger of Subsidiary Company
 The Scheme of Amalgamation (the Scheme) of MF Global Capital India Private Limited
(MFGCIPL) [the Transferor Company] with MF Global Sify Securities India Private Limited
(MFGSSIPL) [the Transferee Company] was sanctioned by the Bombay High Court on March 25,
2011 and the order sanctioning the Scheme was filed with the Registrar of Companies at
Mumbai on April 15, 2011 (the Effective Date).
 Accordingly, pursuant to the Scheme, the undertaking of the erstwhile MFGCIPL (comprising
all of its properties and assets (whether movable or immovable, tangible or intangible)
such as security deposits, licenses, permits, quotas, approvals, leases, tenancy rights,
permissions, incentives if any, and all other rights, title, interests, contracts, consent,
approvals or powers of every nature and descriptions shall without any further act,
instrument or deed stand transferred to and vested in and/or deemed to be transferred to
and vested in the Transferee Company, free from all encumbrances, but subject to subsisting
charges and pledges, if any. All debts, liabilities, contingent liabilities, financial
commitments, duties and obligations pertaining to the Transferor Company, whether provided
for or not in the books of account of the Transferor Company and whether disclosed or
undisclosed in its Balance Sheet has been transferred to and vested with MFGSSIPL
retrospectively with effect from April 1, 2010 (the Appointed Date). The Scheme has
accordingly been given effect to in these financial statements.
 28.
    
    Commitments and contingencies
 a)
    
    Contingent Liabilities
 (i) Guarantee given by scheduled banks on behalf of the company in favour of commodity
Exchange Rs. 200,000 (PY ending March 31, 2010 Rs.190,000).
 (ii) Claims against the company not acknowledged as debts Rs. 15,030 (PY. ending March
31, 2010 Rs. 15,030).
  189




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##### Table of Contents



MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 b)
    
    Operating lease commitments  MF as lessee
 The group has obligations under long term operating leases with initial non-cancellable
terms in excess of one year. Aggregate annual rentals for office space as of March 31,
2011, are approximately as listed below:
 As at March 31,2011
    
    
    2010Not later than 1 year
    
    
    59,409
    
    
    
    59,087Later than 1 year and not later than 5 years
    
    
    20,346
    
    
    
    13,771Later than 5 years
    
    
    
    
    
    
    Total minimum lease commitments
    
    
    79,755
    
    
    
    72,858
 Rent expense for the current year aggregated to Rs. 59,979 (2010: Rs. 61,694) and is
included in the occupancy expense line item on the consolidated statements of income.
 c)
    
    Contingencies
 The group is a member of various exchanges that trade and clear securities, commodities
and/or futures contracts. Associated with its membership, the group may be required to pay a
proportionate share of the financial obligations of another member who may default on its
obligations to the exchange. While the rules governing different exchange memberships vary,
in general the groups exposure would be restricted only to the extent of amounts receivable
from the exchange and would arise only if the exchange had previously exhausted its
resources. However, based on its experience, the company expects the risk of loss to be
remote.
 29.
    
    Related party transactions
 The share capital of MF is held jointly by MF Global Overseas Limited and Sify
Technologies Limited. The ultimate holding company of MF Global Sify is MF Global Holdings
Limited.
 a)
    
    Related Party Relationship
 Related parties where control exists:Nature of Relationship
    
    Related PartyHolding enterprises:
    
    MF Global Overseas LimitedUltimate Holding company:
    
    MF Global Holdings LimitedParty having substantial interest:
    
    Sify Technologies LimitedOther related parties with whom transactions have taken place:Nature of Relationship
    
    Related PartySubsidiary companies:
    
    MF Global Commodities India Private LimitedMF Global Middle East DMCCFellow subsidiary companies:
    
    MF Global India Private Limited(where transactions exist)
    
    MF Global Holdings HK LimitedMF Global Hong Kong LimitedMF Global Australia LimitedMF Global Singapore LimitedMF Global Finance & Investment Services India Private LimitedMF Global Centralised Services India Private LimitedMF Global UK LimitedMF Global Inc (DE)Key management personnel:
    
    Mr. Vineet BhatnagarMr. Rajendra BhambhaniMr. Randy MacDonald#(#Joined with effect from July 28, 2010)Mr. Laurence OConnell*(*resigned with effect from May 25, 2010)
  190




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MF Global Sify Securities India Private Limited
 (All amounts in Indian Rupees thousands, except as otherwise stated)
 b)
    
    Transactions involving services
 Year ended March 31,2011
    
    
    2010
    
    
    2009Services provided by MF to:Holding companiesReimbursement of Expenses
    
    
    
    
    
    
    539
    
    
    
    3,205Fellow Subsidiary CompaniesReferral Fees
    
    
    57,750
    
    
    
    51,162
    
    
    
    51,992Brokerage Income
    
    
    5,333
    
    
    
    
    
    
    
    5,185Reimbursement of Expenses
    
    
    5,165
    
    
    
    5,646
    
    
    
    8,71568,248
    
    
    
    57,347
    
    
    
    69,097Services received by MF from:Holding companiesService Fees
    
    
    
    
    
    
    
    
    
    
    9,349Bank Guarantee Commission
    
    
    72
    
    
    
    497
    
    
    
    1,692Insurance Premium
    
    
    
    
    
    
    (17,567
    )
    
    
    17,842Purchase / AMC of Computer Hardware
    
    
    
    
    
    
    
    
    
    
    6,600Fellow Subsidiary CompaniesLease Line Charges
    
    
    
    
    
    
    
    
    
    
    1,675IB Commission Expense
    
    
    4,691
    
    
    
    2,006
    
    
    
    1,454Interest Expense
    
    
    1,562
    
    
    
    888
    
    
    
    1,039Service Fees
    
    
    
    
    
    
    
    
    
    
    6,386Membership & Subscription
    
    
    6,368
    
    
    
    3,266
    
    
    
    24712,693
    
    
    
    (10,910
    )
    
    
    46,284Loan Taken and Repaid (Net)
    
    
    (5,300
    )
    
    
    383,700
    
    
    
    270,000
 c)
    
    Key management compensation
 Year ended March 31,2011
    
    
    2010
    
    
    2009Salaries and other short-term employee benefits
    
    
    122,410
    
    
    
    71,361
    
    
    
    63,112Other long-term benefits (Co-Investment Plan)
    
    
    
    
    
    
    2,208
    
    
    
    2,208Share-based payments
    
    
    
    
    
    
    19,653
    
    
    
    5,420122,410
    
    
    
    93,222
    
    
    
    70,740
 d)
    
    Year-end balances arising from transactions involving services
 Due To Related PartiesMF Global Holdings Ltd.
    
    
    32,857
    
    
    
    34,005MF Global UK Ltd.
    
    
    57,953
    
    
    
    19,213MF Global Inc. DE
    
    
    6,372
    
    
    
    3,504MF Global Holdings USA Inc.
    
    
    2,014
    
    
    
    2,036MF Global Singapore Pte Ltd.
    
    
    1,028
    
    
    
    1,529MF Global Holdings HK Ltd.
    
    
    
    
    
    
    699MF Global Finance and Investment Services India Private Limited
    
    
    53,000
    
    
    
    MF Global Australia Limited
    
    
    125
    
    
    
    153,349
    
    
    
    60,986Due from Related PartiesMF Global Inc. DE
    
    
    179
    
    
    
    361MF Global Mauritius Pvt. Ltd.
    
    
    1,116
    
    
    
    1,399MF Global Singapore Pte Ltd.
    
    
    1,243
    
    
    
    2,347MF Global Holdings HK Ltd.
    
    
    109
    
    
    
    MF Global HK Ltd.
    
    
    269
    
    
    
    MF Global UK Ltd.
    
    
    1,697
    
    
    
    2,257MF Global Overseas Limited
    
    
    
    
    
    
    3,292MF Global India Pvt. Ltd.
    
    
    1,153
    
    
    
    MF Global Centralised Services India Pvt. Ltd.
    
    
    
    
    
    
    1,287MF Global FXA Securites Limited
    
    
    200
    
    
    
    5,966
    
    
    
    10,943
 For and on behalf of the Board
 Vineet Bhatnagar
  191




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##### Table of Contents



Item 19. Exhibits
 Number
    
    Description1.1
    
    
    Amended Articles of Association of Sify Technologies Limited. (1)1.2
    
    
    Memorandum of Association of Sify Technologies Limited. (2)1.3
    
    
    Amendment of Memorandum of Association. (3)2.1
    
    
    Deposit Agreement, dated as of October 18, 1999, among Sify Technologies Limited, Citibank, N.A. and holders from time to time of American
Depository Shares evidenced by American Depository Receipts issued thereunder (including, as an exhibit, the form of American Depository
Receipt). (4)2.2
    
    
    Amendment No. 1 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders from time to time of American Depository
Shares evidenced by American Depository Receipts issued thereunder (including, as an exhibit, the form of American Depository Receipt). (4)2.3
    
    
    Amendment No. 2 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders from time to time of American Depository
Shares evidenced by American Depository Receipts issued thereunder (including, as an exhibit, the form of American Depository Receipt). (5)2.4
    
    
    Subscription Agreement dated November 10, 2005 between Sify Technologies Limited and Infinity Capital Ventures, LP. (9)2.5
    
    
    Standstill Agreement dated November 10, 2005 by and among Sify Technologies Limited, Infinity Capital Ventures, LP and Mr Raju Vegesna. (9)2.6
    
    
    Shareholders Agreement dated December 20, 2005 between Sify Technologies Limited, Infinity Satcom Universal (P) Limited, and Sify
Communications Limited(erstwhile subsidiary). (10)2.7
    
    
    Shareholders Agreement dated November 25, 2005 between Sify Technologies Limited and Man Financial. (11)4.1
    
    
    Associate Stock Option Plan 2000 (6)4.2
    
    
    Associate Stock Option Plan 2002 (6)4.3
    
    
    Associate Stock Option Plan 2005 (12)4.4
    
    
    Associate Stock Option Plan 2007 (14)4.5
    
    
    Form of Indemnification Agreement. (7)4.6
    
    
    License Agreement for Provision of Internet Service, including Internet Telephony dated as of April 1, 2002 by and between Sify Technologies
Limited and the Government of India, Ministry of Communications and Information Technology, Department of Telecommunications, Telecom
Commission. (3)4.7
    
    
    Bank Guarantee, dated as of November 4, 1998. (2)4.8
    
    
    Agreement, dated November 10, 2004, between Sify Technologies Limited, Satyam Computer Services Limited, SAIF Investment Company Limited and
Venture Tech Solutions Pvt. Ltd. (8)4.9
    
    
    Subscription Agreement dated March 24, 2008 between Sify Technologies Limited and Infinity Satcom Universal Private Limited. (13)4.10
    
    
    Scheme of Amalgamation between Sify Communications Limited with Sify Technologies Limited and their respective shareholders (15)4.11
    
    
    Subscription agreement dated October 22, 2010 between Sify Technologies Limited and Mr Ananda Raju Vegesna, Representative of the entities
and affiliates in India of Mr Raju Vegesna, Chief Executive and Managing Director of the company. (16)4.12
    
    

Amendment to subscription agreement dated September 7, 2011 between Sify Technologies Limited and Mr Ananda Raju Vegesna, Representative of
the entities and affiliates in India of Mr Raju Vegesna, Chief Executive and Managing Director of the company. (17)
  192




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##### Table of Contents



Number
    
    Description8.1
    
    
    List of Subsidiaries.11.1
    
    
    Code of Conduct and Conflict of Interest Policy (6)12.1
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer12.2
    
    
    Rule 13a-14(a) Certification of Chief Financial Officer13.1
    
    
    Section 1350 Certification of Chief Executive Officer13.2
    
    
    Section 1350 Certification of Chief Financial Officer15.1
    
    
    Consent of ASA & Associates in respect of Sify Technologies Limited15.2
    
    
    Consent of Price Waterhouse in respect of MF Global Sify Securities Private Limited15.3
    
    
    Consent of KPMG in respect of Sify Technologies Limited
 
 (1)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on October
17, 2007 and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to Amendment No. 1 to the Registration Statement on Form F-1
filed with the Commission on October 4, 1999 and incorporated herein by reference.(3)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on October
17, 2007 and incorporated herein by reference.(4)
    
    Previously filed as an exhibit to the Post-Effective Amendment No. 1 to Form F-6 filed with
the Commission on January 5, 2000 and incorporated herein by reference.(5)
    
    Previously filed as an exhibit to the Registration Statement on Form S-8 (File No.
333-101322) filed with Commission on November 20, 2002 and incorporated herein by reference.(6)
    
    Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission on
June 29, 2004 and incorporated herein by reference.(7)
    
    Previously filed as an exhibit to Amendment No. 2 to the Registration Statement on Form F-2
filed with the Commission on October 13, 1999 and incorporated herein by reference.(8)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
November 30, 2004 and incorporated herein by reference.(9)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
November 21, 2005 and incorporated herein by reference.(10)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
December 7, 2005 and incorporated herein by reference.(11)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
December 23, 2005 and incorporated herein by reference.(12)
    
    Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission on
June 30, 2006 and incorporated herein by reference.(13)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on April
14, 2008 and incorporated herein by reference.(14)
    
    Previously filed as an exhibit to the Report on Form 20-F filed with the Commission on
October 11, 2008 and incorporated herein by reference.(15)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on January
23, 2009 and incorporated herein by reference.(16)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
November 15, 2010 and incorporated herein by reference.(17)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
September 8, 2011 and incorporated herein by reference.  193




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##### Table of Contents



SIGNATURES
  SIFY TECHNOLOGIES LIMITEDBy:
    /s/ Raju VegesnaName:
    Raju VegesnaTitle:
    Chief Executive OfficerBy:
    /s/ MP Vijay KumarName:
    M P Vijay KumarTitle:
    Chief Financial Officer   194




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##### Table of Contents



Exhibits
 Number
    
    Description1.1
    
    
    Amended Articles of Association of Sify Technologies Limited. (1)1.2
    
    
    Memorandum of Association of Sify Technologies Limited. (2)1.3
    
    
    Amendment of Memorandum of Association. (3)2.1
    
    
    Deposit Agreement, dated as of October 18, 1999, among Sify Technologies Limited, Citibank, N.A. and holders from time to time of American
Depository Shares evidenced by American Depository Receipts issued thereunder (including, as an exhibit, the form of American Depository
Receipt). (4)2.2
    
    
    Amendment No. 1 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders from time to time of American Depository
Shares evidenced by American Depository Receipts issued thereunder (including, as an exhibit, the form of American Depository Receipt). (4)2.3
    
    
    Amendment No. 2 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders from time to time of American Depository
Shares evidenced by American Depository Receipts issued thereunder (including, as an exhibit, the form of American Depository Receipt). (5)2.4
    
    
    Subscription Agreement dated November 10, 2005 between Sify Technologies Limited and Infinity Capital Ventures, LP. (9)2.5
    
    
    Standstill Agreement dated November 10, 2005 by and among Sify Technologies Limited, Infinity Capital Ventures, LP and Mr Raju Vegesna. (9)2.6
    
    
    Shareholders Agreement dated December 20, 2005 between Sify Technologies Limited, Infinity Satcom Universal (P) Limited, and Sify
Communications Limited(erstwhile subsidiary). (10)2.7
    
    
    Shareholders Agreement dated November 25, 2005 between Sify Technologies Limited and Man Financial. (11)4.1
    
    
    Associate Stock Option Plan 2000 (6)4.2
    
    
    Associate Stock Option Plan 2002 (6)4.3
    
    
    Associate Stock Option Plan 2005 (12)4.4
    
    
    Associate Stock Option Plan 2007 (14)4.5
    
    
    Form of Indemnification Agreement. (7)4.6
    
    
    License Agreement for Provision of Internet Service, including Internet Telephony dated as of April 1, 2002 by and between Sify Technologies
Limited and the Government of India, Ministry of Communications and Information Technology, Department of Telecommunications, Telecom
Commission. (3)4.7
    
    
    Bank Guarantee, dated as of November 4, 1998. (2)4.8
    
    
    Agreement, dated November 10, 2004, between Sify Technologies Limited, Satyam Computer Services Limited, SAIF Investment Company Limited and
Venture Tech Solutions Pvt. Ltd. (8)4.9
    
    
    Subscription Agreement dated March 24, 2008 between Sify Technologies Limited and Infinity Satcom Universal Private Limited. (13)4.10
    
    
    Scheme of Amalgamation between Sify Communications Limited with Sify Technologies Limited and their respective shareholders (15)8.1
    
    
    List of Subsidiaries.11.1
    
    
    Code of Conduct and Conflict of Interest Policy (6)12.1
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer12.2
    
    
    Rule 13a-14(a) Certification of Chief Financial Officer
  195




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##### Table of Contents



Number
    
    Description13.1
    
    
    Section 1350 Certification of Chief Executive Officer13.2
    
    
    Section 1350 Certification of Chief Financial Officer15.1
    
    
    Consent of ASA & Associates in respect of Sify Technologies Limited15.2
    
    
    Consent of Price Waterhouse in respect of MF Global Sify Securities Private Limited15.3
    
    
    Consent of KPMG in respect of Sify Technologies Limited
 
 (1)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on October
17, 2007 and incorporated herein by reference.(2)
    
    Previously filed as an exhibit to Amendment No. 1 to the Registration Statement on Form F-1
filed with the Commission on October 4, 1999 and incorporated herein by reference.(3)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on October
17, 2007 and incorporated herein by reference.(4)
    
    Previously filed as an exhibit to the Post-Effective Amendment No. 1 to Form F-6 filed with
the Commission on January 5, 2000 and incorporated herein by reference.(5)
    
    Previously filed as an exhibit to the Registration Statement on Form S-8 (File No.
333-101322) filed with Commission on November 20, 2002 and incorporated herein by reference.(6)
    
    Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission on
June 29, 2004 and incorporated herein by reference.(7)
    
    Previously filed as an exhibit to Amendment No. 2 to the Registration Statement on Form F-2
filed with the Commission on October 13, 1999 and incorporated herein by reference.(8)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
November 30, 2004 and incorporated herein by reference.(9)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
November 21, 2005 and incorporated herein by reference.(10)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
December 7, 2005 and incorporated herein by reference.(11)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
December 23, 2005 and incorporated herein by reference.(12)
    
    Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission on
June 30, 2006 and incorporated herein by reference.(13)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on April
14, 2008 and incorporated herein by reference.(14)
    
    Previously filed as an exhibit to the Report on Form 20-F filed with the Commission on
October 11, 2008 and incorporated herein by reference(15)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on January
23, 2009 and incorporated herein by reference(16)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
November 15, 2010 and incorporated herein by reference.(17)
    
    Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on
September 8, 2011 and incorporated herein by reference.  196