FFirstirst SSource_Mfinal.inddource_Mfinal.indd 1 221/06/20121/06/2012 77:54:22:54:22 AAMM CONTENTS PAGE Corporate Information 02 Letter from the Chairman 03 Message from the Managing Director & CEO 04 Company Highlights & Global Recognition 05 Financial Highlights 06 Awards & Accolades 08 Directors’ Report 09 Management Discussion & Analysis Report 13 Report on Corporate Governance 30 CONSOLIDATED FINANCIAL STATEMENTS Auditors’ Report 39 Balance Sheet 40 Profit and Loss Account 41 Cash Flow Statement 42 Notes to the Accounts 44 Statement Pursuant to Section 212 of the 66 Companies Act, 1956 STANDALONE FINANCIAL STATEMENTS Auditors’ Report 67 Balance Sheet 70 Profit and Loss Account 71 Cash Flow Statement 72 Notes to the Accounts 74 Notice of Annual General Meeting 92 Attendance Sheet and Proxy Form Registered Office: 5th floor, Paradigm 'B' Wing, Mindspace, Link Road, Malad (West), Mumbai - 400 064. India. www.firstsource.com Statutory Auditors: B S R and Co., Chartered Accountants, 1st Floor, Lodha Excelus, Apollo Mills Compound, N.M.Joshi Marg, Mahalaxmi, Mumbai - 400 011, India. Bankers: Axis Bank Ltd., Barclays Bank Plc, Bank of Philippines, Citibank, N.A., Capital One Bank, DBS Bank Ltd., Deutsche Bank AG, HDFC Bank Ltd., ICICI Bank Ltd., Key Bank, Kotak Mahindra Bank Ltd., Standard Chartered Bank, The PNC Financial Services Group, Yes Bank Ltd., JP Morgan Bank, Bank of America, Indian Overseas Bank, GE Capital, Canara Bank. FFirstirst SSource_Mfinal.inddource_Mfinal.indd 4 222/06/20122/06/2012 111:52:221:52:22 AAMM FFirstirst SSource_Mfinal.inddource_Mfinal.indd 5 222/06/20122/06/2012 111:52:271:52:27 AAMM FFirstirst SSource_Mfinal.inddource_Mfinal.indd 6 222/06/20122/06/2012 111:52:271:52:27 AAMM FFirstirst SSource_Mfinal.inddource_Mfinal.indd 7 221/06/20121/06/2012 77:54:49:54:49 AAMM FFirstirst SSource_Mfinal.inddource_Mfinal.indd 9 221/06/20121/06/2012 77:54:51:54:51 AAMM FFirstirst SSource_Mfinal.inddource_Mfinal.indd 1100 221/06/20121/06/2012 77:54:51:54:51 AAMM DIRECTORS’ REPORT Dear Members, The Directors take great pleasure in presenting their Eleventh Annual Report on the business and operations of your Company and the audited financial statements for the year ended March 31, 2012. FINANCIAL RESULTS The performance of the Company for the financial year 2011-12 is summarised below: (` in Million) Particulars Consolidated Standalone FY 2011-12 FY 2010-11 FY 2011-12 FY 2010-11 Total Income 22,936.4 20,759.1 8,561.8 7,589.2 Profit Before Interest and Depreciation 2237.3 3038.2 1673.0 1537.5 Interest and Finance Charges (net) 584.9 394.4 655.6 268.1 Depreciation 892.6 890.8 598.8 573.8 Profit Before Tax 759.8 1,753.0 418.6 695.6 Provision for Taxation (including Deferred Tax Charge/ Credit) 137.7 349.3 -35.0 32.7 Profit After Tax Before Minority Interest 622.1 1,403.7 453.6 662.9 Minority Interest 1.8 18.6 - - Net Profit After Tax 620.3 1,385.1 453.6 662.9 Balance Brought Forward 5,664.8 4,279.7 2,947.9 2,285.0 Appropriations - - Accumulated Balance in Profit & Loss Account 6285.1 5,664.8 3,401.5 2,947.9 Earning Per Share (`) – Basic 1.44 3.22 1.05 1.54 Earning Per Share (`) – Diluted 1.44 2.91 1.05 1.52 RESULT OF OPERATIONS have a maturity period of 5 years and 1 day and they are listed on The consolidated total income increased from ` 20759.1 Million to Singapore Exchange Securities Trading Limited. Upto March 31, 2012, ` 22,936.4 Million, a growth of 10.5% over the previous financial year. the Company had repurchased and cancelled its FCCBs of the nominal amount of USD 105.2 Million. The nominal amount of Bonds outstanding The consolidated Net Profit After Tax reduced from ` 1,385.1 Million after cancellation as on March 31, 2012 was USD 169.8 Million. to ` 620.3 Million, decline of 55.2% over the previous financial year. The detailed analysis of the consolidated results forms part of the GLOBAL DELIVERY FOOTPRINT Management Discussion & Analysis (MD&A) Report provided separately The Company, on a consolidated basis had 48 global delivery centers as part of the Annual Report. as on March 31, 2012. The centers are located across India, USA, UK, Philippines and Sri Lanka. 26 of the Company’s delivery centers are The standalone total income increased from ` 7,589.2 Million to located in 15 cities in India, 14 are in the USA, 5 are in UK and 2 in ` 8561.8 Million, a growth of 12.8% over the previous financial year. Philippines and 1 in Sri Lanka. The Company’s established global delivery The standalone Profit After Tax declined from ` 662.9 Million to ` 453.6 footprint enables it to deliver wide range of services and strengthens Million, decline of 31.6% over the previous financial year. relationships with existing customers. The reduction in net profits in the financial year 2011-12 was due to During the year, the Company incurred capital expenditure of increase in finance charges and overall escalation in costs during the ` 582.6 Million mainly towards refurbishment and maintenance of existing year under review. With a view to conserve cash reserves to meet delivery centers and creation of additional capacity in Philippines, India, the current financial obligations of the Company, the Directors do not USA, UK and Sri Lanka. recommend any dividend for fiscal 2012. QUALITY INITIATIVES CHANGE IN REGISTERED OFFICE The Company follows the global best practices for process excellence and During the year, the Company has shifted its Registered Office from is certified by COPC Inc. (Customer Operations Performance Center). 6th Floor, Peninsula Chambers, Ganpatrao Kadam Marg, Lower Parel, The Company’s delivery centers in Bangalore and Chennai in India and Mumbai - 400 013 to 5th Floor, Paradigm ‘B’ Wing, Mindspace, Link Firstsource Dialog Solutions (Pvt.) Limited, joint venture subsidiary of Road, Malad (West), Mumbai - 400 064. the Company in Sri Lanka have been recertified for COPC® 2000 CSP Standard v 4.4. Also, as part of the Quality Management System, the INCREASE IN SHARE CAPITAL Company has embraced ISO 9001:2008. The Company continues to follow process improvement methodologies like Six Sigma, Lean and During the year, the Company issued 138,125 equity shares of the face Kaizen. value of `10 each on the exercise of stock options under the Employee Stock Option Schemes of the Company. Consequently, the outstanding, AWARDS AND ACCOLADES issued, subscribed and paid-up equity share capital of the Company The Company received the following awards and accolades during the increased from 430,638,182 shares to 430,776,307 shares of ` 10 each year: as on March 31, 2012. l 2011 CII Quality Awards Winners in Service Category REPURCHASE OF FOREIGN CURRENCY CONVERTIBLE BONDS l 2011 Golden Peacock Award for Innovation Management in The Company had issued Zero Coupon Foreign Currency Convertible IT, BPO sector Bonds (FCCBs) of USD 275 Million in December 2007. The FCCBs l 2012 UHG Semi Annual Quality Challenge Winner 9 ANNUAL REPORT 2011-2012 HUMAN RESOURCES d) Options vested during the year 2011-12: 11,036,875 On a consolidated basis, the Company has grown from 26,413 full- e) Options exercised during the year 2011-12: 138,125 time employees as of March 31, 2011 to 30,086 employees as of f) Total number of shares arising as a result of exercise of options March 31, 2012. The statement of particulars required pursuant to during the year 2011-12: 138,125 Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011, forms part of this g) Options lapsed during the year 2011-12: 6,100,625* Report. However, as permitted under the Companies Act, 1956, this *The stock options which are cancelled/ lapsed/ forfeited can be re- issued Report and Accounts are being sent to all members and other entitled by the Company. persons excluding the above statement. Those interested in obtaining a h) Variation of terms of options during the year 2011-12: Nil copy of the said statement may write to the Company Secretary at the Registered Office. The statement is also available for inspection at the i) Money realised by exercise of options during the year 2011-12 ` registered office during working hours upto the date of the forthcoming (Amount in ): 2,514,456 Annual General Meeting (AGM). j) Total number of options in force: 53,959,720 PUBLIC DEPOSITS k) Employee wise details of options granted to: i) Senior Managerial personnel during the year 2011-12: Mr. Rajesh During the year, the Company has not accepted any deposits under Subramaniam - 4,000,000 and Mr. Thomas Watters: 1,000,000 Section 58A of the Companies Act, 1956. ii) Any other employee, who has been granted options amounting DIRECTORS to 5% or more of options granted during the year 2011-12: Nil iii) Identified employees who were granted options, equal to or During the year, Mr. Rajesh Subramaniam was appointed as Deputy exceeding 1% of the issued capital of the Company, during the Managing Director & Chief Financial Officer (Dy. MD & CFO) of the year 2011-12: Nil Company w.e.f. August 1, 2011. l) Diluted Earnings Per Share (EPS) pursuant to issue of shares Mr. Alexander Matthew Vallance, Managing Director & CEO (MD & CEO) on exercise of options calculated in accordance with Accounting resigned effective May 15, 2012 and the Board approved appointment Standard (AS) 20 - ’Earnings Per Share’: i) Standalone EPS – of Mr. Rajesh Subramaniam as MD & CEO of the Company effective ` 1.05 per share.