Directors’ report Welcome to possible Directors' Report Dear Shareholders, Your Directors have pleasure in presenting their fourteenth annual report on the business and operations of your Company for the financial year ended March 31, 2013. Financial Performance ` in million Financial Particulars As at March 31, 2013 As at March 31, 2012 Revenue from operations 23,618 19,152 Other income 350 384 Total revenues 23,968 19,536 Employee benefit expense 14,274 12,261 Finance costs 10 5 Depreciation and amortisation expense 624 695 Other expenses 4,824 3,958 Total expenses 19,732 16,919 Profit before tax 4,236 2,617 Tax expense 847 430 Profit for the year 3,389 2,187 Global Economic & Business Environment Global economy has been on a gradual recovery path with a GDP growth of around 3.3% during 2013 as against 3.2% in 2012, led by a strong US, easing EU and a stabilizing China. The inflation in the Euro zone eased due to slow growth and in the US, it was under control at 2% despite expansionary monetary policy with modest inflationary pressures in emerging economies. The unemployment in the US has been on a slow decline whereas, housing markets were on a rebound. Policy action in the US and EU has bolstered confidence that led the equity markets to a rally; and capital flows of emerging economies picked up again. There are strong earnings in the US S&P and Dow Companies and these indexes are approaching historic all-time highs. Business Perspective Current business and consumer sentiments are expected to improve in 2013 and therefore, global IT spending to accelerate during 2013. We are a global IT Services Company that engineers meaningful technology solutions to help businesses and societies flourish. We place significant emphasis on collaborative spirit, unrelenting dedication towards our customers, expert thinking and high standards of corporate governance. Our endeavor is to create success for our customers through innovative solutions delivered by happy people at workplace. We have developed a comprehensive range of services allowing us to offer end-to-end IT Services to our clients. With delivery centers in India and overseas, we offer IT strategy consulting, application development and maintenance, data warehousing and business intelligence, package implementation, product architecture, design and engineering, embedded software, technical support, testing, infrastructure management services etc., to our customers. We believe that our comprehensive portfolio of service offerings helps our customers achieve their key business objectives. Your Company received good traction for its services and its expertise in chosen segments & continues to hold it in good stead. Your Company has also re-aligned its processes, updated services, enhanced technology offerings, restructured the organization, upgraded brand image and continue to deliver superior value to its customers. Your Company today is much more focused and is executing better than a year ago. Revenue for the year is ` 23,618 million signifying a growth of 23.3% in Rupee terms. We had 232 active customers as at March 31, 2013 of which 74 accounts had revenues in excess of US$ 1 million. EBITDA margins were at 20.6% as compared to 15.3% in the previous year. The main reason for the increase in EBITDA margins are rupee depreciation of about 14% (from ` 47.57 to ` 54.21) during the year. Our effective tax rate is about 20% as compared to about 16.4% in the previous year. PAT has increased by 55% to ` 3,389 million as compared to ` 2,187 million in the previous year mainly because of the reasons explained above. Dividend Based on the Company's consistent performance, your directors had declared a first interim dividend of ` 3/- per share on the equity shares of ` 10/- each (par value) on October 16, 2012 and were paid to the Shareholders who were on the Register of Members of the Company as on the record date at the closing hours of October 29, 2012. Your Directors have also declared a second interim dividend of ` 4/- per share on the equity shares of ` 10/- each (par value) for the year ended March 31, 2013 which is payable to the Shareholders who would be on the Register of Members of the Company as on the record date at the closing hours of May 06, 2013. Your Directors also recommended a final dividend of ` 5/- per share on the equity shares of ` 10/- each (par value) for the year ended March 31, 2013 which is payable on obtaining Shareholders' approval in the fourteenth Annual General Meeting, making the total dividend for the year 2012-13 to 120% of the paid up capital. Mindtree Limited Welcome to possible The dividend will be paid in compliance with all the applicable regulations. The dividend pay-out amount for the current year inclusive of additional tax on dividend will be ` 578 million as compared to ` 188 million in the previous year. In view of the improved predictability and stability of the Company’s operations, the Board intends to maintain similar or better levels of dividend payout over the next few years. However, the actual dividend payout in each year will be subject to the investment requirements of the annual operating plan for the year and any other strategic priorities identified by the Company. Transfer to Reserves We propose to transfer ` 339 million to the general reserve in accordance with the Companies (Transfer of Profit to Reserves) Rules, 1975. Your Company also proposes to retain ` 9,198 million in the statement of profit and loss on standalone basis. Changes to Equity Share Capital Your Company also issued 991,132 equity shares of ` 10/- each to various Mindtree Minds on exercise of stock options. Consequently, the paid-up equity share capital has increased from ` 405,439,230 to ` 415,350,550 as on March 31, 2013. Board Committees The details of various Committees of the Board are provided in the Corporate Governance Report. Infrastructure In 2011-12, your Company has added a new facility at Chennai in Ramanujan IT City comprising of 73,000 sq. ft. area spread over two floors. This has enhanced our seating capacity by 717 seats. This facility boasts of two world class Network Operations Centers. We are in the process of adding another 1,500 seats at this campus. The proposed new facility at Mindtree East Campus, Bangalore, is slated to be ready by June 2013, thus giving us an ability to add about 1,800 seats as and when business requirements demand for it. We have also added 2,50,000 sq. ft. of area at Global Village, with a seating capacity of about 2,500. As soon as we receive necessary statutory approvals, we will commence construction of Mindtree Kalinga at Orissa. We will work towards making this operational during 2014. With a view to broaden our presence near site, we have started operations at our first U.S Development Center at Gainesville. Currently your Company has about 2 million sq. ft. of built up space with 12,375 seats and an ability to ramp up additional seats quickly, as and when needed. Your Company is also glad to announce that, two of its facilities, Mindtree East Campus at, Whitefield, Bangalore and Mindtree Hyderabad are certified as “LEED GOLD” for Commercial Interiors. We are aspiring to get a LEED Platinum rating for Mindtree East Campus, Phase 2 building and Mindtree Kalinga and also LEED GOLD for Phase 5 at Bangalore, Global Village. Subsidiaries With the dissolution of Mindtree Software (Shenzhen) Co. Ltd. with effect from September 6, 2012, we had one subsidiary company for the financial year ended on March 31, 2013, namely, Mindtree Software (Shanghai) Co. Ltd., As per Section 212 of the Companies Act, 1956, companies are required to attach the directors' report, balance sheet and profit & loss account of its subsidiaries. The Ministry of Corporate Affairs vide its circular No. 2/2011 dated February 8, 2011 has provided an exception, to companies from complying with Section 212, provided, such companies publish the audited consolidated financial statements in annual report. The annual report for 2012-13 does not contain the financial statements of our subsidiary(ies). The audited annual accounts and related information of our subsidiary(ies), where applicable will be made available upon request. People The total number of Mindtree Minds as at March 31, 2013 was 11,591 as against 11,000 as at March 31, 2012. During the year, your Company saw a decrease in attrition levels towards the end of the financial year and the annual attrition for the year was at 13.39% as against 18.2% in the year before. During the year under review, your Company has focused on people engagement practices, career aspirations management and innovative practices in learning and development and compensation, which have all worked in favour of retention of our talent. Your Company's multiple-award winning HR practices and great work environment helped to attract and retain talent. Your Company's People Function works to align people's interests to the business goals. This creates a favorable environment and promotes innovation and merit. This strong alignment of our people's interests and business interests, led the organization to achieve its objectives and thus create value for people and customers. We have dedicated programs to help our people build new skills and competencies which promote knowledge sharing, building effective teams, etc., Your Company continues to innovate in knowledge management to ensure learning is captured & disseminated across teams. A future-ready organization needs to continuously evaluate its leadership capital. At different stages in an organization's growth, we need different calibre of leaders.