Edgar Filing: SIFY TECHNOLOGIES LTD

Form 20-F/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F/A

(Amendment No. 1)

(Mark One)

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended March 31, 2012.

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

¨	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)

Not Applicable

(Translation at Registrant’s name into English)

Chennai, Tamil Nadu, India

(Jurisdiction of incorporation or organization)

Tidel Park, 2nd Floor

4, Rajiv Gandhi Salai

Taramani, Chennai 600 113 India

(91) 44-2254-0770, Fax (91) 44 -2254 0771

(Address of principal executive office)

M.P.Vijay Kumar, Chief Financial Officer, (91) 44-2254-0770; vijaykumar.mp@sifycorp.com

Tidel Park, 2nd Floor, 4, Rajiv Gandhi Salai, Taramani, Chennai 600113 India

(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 registered

American Depository Shares, each represented by

One Equity Share, par value Rs.10 per share

NASDAQ Global Select 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 registered
None				Not Applicable

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

Not Applicable

(Title of class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

178,513,589 Equity Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


US GAAP ¨		International Financial Reporting Standards as issued by the International Accounting Standard Board x		Other ¨

If this is an annual report, indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

EXPLANATORY NOTE

This Amendment No. 1 on Form 20-F/A (this “Amendment No. 1”) to the Annual Report on Form 20-F for the year ended March 31, 2012, filed with the Securities and Exchange Commission on August 13, 2012 (the “Original Form 20-F”) by Sify Technologies Limited (the “Company”), is filed solely to file a correct copy of the final audit report of Price Waterhouse related to the consolidated financial statements of MF Global Sify Securities India Private Limited and its subsidiaries as of March 31, 2010. As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by our Chief Executive Officer and Chief Financial Officer are being filed as exhibits to this Amendment No.1 under Item 19.

Other than as described above, this Amendment No.1 does not, and does not purport to, amend, update or restate any other information or disclosure included in the Original Form 20-F or reflect any events that have occurred after the filing date of the Original Form 20-F. Among other things, forward-looking statements contained in the Original Form 20-F have not been revised to reflect events, results or developments that occurred or facts that became known to us after the original filing date, and such forward-looking statements should be read in their historical context.

Table of Contents


Item	Page
Item 18. Financial Statements		96
Item 19. Exhibits		194

Item 18.

FINANCIAL STATEMENTS

Consolidated Statements and other Financial Information

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Sify Technologies Limited

We have audited the accompanying consolidated statements of financial position of Sify Technologies Limited and subsidiaries (‘the Company’) as of March 31, 2012 and 2011 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the years ended March 31, 2012 and 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements, based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, based on our audit, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sify Technologies Limited and subsidiaries as of March 31, 2012 and 2011 and the results of their operations and their cash flows for the years ended March 31, 2012 and 2011, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sify Technologies Limited’s internal control over financial reporting as of March 31, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated August 13, 2012 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited the reclassification adjustments to the consolidated financial statements for the year ended March 31, 2010 to retrospectively apply the change in presentation described in note 34 under the heading “Reorganization of business segments”. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the consolidated financial statements for year ended March 31, 2010 of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the consolidated financial statements for the year ended March 31, 2010 taken as a whole.

ASA & Associates

Independent Registered Public Accounting Firm

Chennai, India

August 13, 2012

Report of KPMG, Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Sify Technologies Limited

We have audited, before the effects of the adjustments to retrospectively revise the segment disclosures as described in note 34 under the heading “reorganization of business segments”, the accompanying consolidated statements of income, comprehensive income, changes in equity and cash flows of Sify Technologies Limited and subsidiaries (‘the Company’) for the year ended March 31, 2010. The 2010 segment disclosures before the effects of the retrospective adjustments as discussed in note 34 under the heading “reorganization of business segments” are not presented herein. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements, based on our audit. We did not audit the consolidated financial statements of MF Global Sify Securities Private Limited (MF Global), (a 29.85% percent owned investee company). The Company’s equity in earnings of MF Global was Rs.91,135 (in thousands) for the year ended March 31, 2010. The consolidated financial statements of MF Global were audited by other auditors whose report has been furnished to us, and our opinion, in so far as it relates to the amounts included for MF Global, is based solely on the report of the other auditors.

In our opinion, based on our audit and the report of the other auditors, the 2010 consolidated financial statements referred to above, before the effects of the adjustments to retrospectively revise the segment disclosures as described in note 34 under the heading “reorganization of business segments” present fairly, in all material respects, the results of the operations and cash flows of Sify Technologies Limited and subsidiaries for the year ended March 31, 2010, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Board.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively revise the segment disclosures as described in note 34 under the heading “reorganization of business segments”, and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by a successor auditor.

KPMG

Chennai, India

November 30, 2010

Sify Technologies Limited

Consolidated Statement of Financial Position

(In thousands of Rupees, except share data and as otherwise stated)


			As at March 31,						As at March 31,
	Note		2012 Rs			2011 Rs			2012 Convenience translation into US$ thousands
									(Unaudited) Note 2(c)
Assets
Property, plant and equipment		5		3,860,287			3,760,473			75,455
Intangible assets		6		105,727			104,626			2,067
Investment in equity accounted investee		7		—			702,363			—
Lease prepayments		9		364,190			63,068			7,119
Other assets		10		1,073,479			672,843			20,983
Other investments		15		160			160			3
Deferred tax assets		11		—			—			—

Total non-current assets				5,403,843			5,303,533			105,627

Inventories		12		20,259			15,637			396
Trade and other receivables, net		13		3,335,223			3,185,913			65,192
Prepayments for current assets		14		198,033			190,191			3,871
Restricted cash		8		150,533			84,538			2,942
Cash and cash equivalents		8		742,235			458,559			14,508

Current assets before non-current asset held for sale				4,446,283			3,934,838			86,909
Non-current asset held for sale		7		732,692			—			14,322

Total current assets				5,178,975			3,934,838			101,231

Total assets				10,582,818			9,238,371			206,858

Equity		16
Share capital				1,329,203			858,832			25,981
Share premium				18,267,148			17,216,121			357,059
Share based payment reserve				221,710			190,325			4,334
Other components of equity				22,781			7,365			445
Accumulated deficit				(13,990,188	)		(13,606,851	)		(273,460	)

Total equity attributable to equity holders of the Company				5,850,654			4,665,792			114,359

Non-controlling interest				—			—			—

Total equity				5,850,654			4,665,792			114,359

Sify Technologies Limited

Consolidated Statement of Financial Position

(In thousands of Rupees, except share data and as otherwise stated)


			As at March 31,				As at March 31,
	Note		2012 Rs		2011 Rs		2012 Convenience
							translation into US$ thousands (Unaudited) Note 2(c)
Liabilities
Finance lease obligations, other than current installments		17		101,141		127,746		1,977
Borrowings		20		186,312		262,608		3,642
Employee benefits		18		50,066		47,788		979
Other liabilities		19		211,504		163,245		4,134

Total non-current liabilities				549,023		601,387		10,732

Finance lease obligations, current installments		17		75,785		60,507		1,481
Borrowings		20		543,031		1,035,802		10,614
Bank overdraft		8		798,180		678,901		15,602
Trade and other payables		21		2,382,352		1,783,388		46,568
Deferred income		22		383,793		412,594		7,502

Total current liabilities				4,183,141		3,971,192		81,767

Total liabilities				4,732,164		4,572,579		92,499

Total equity and liabilities				10,582,818		9,238,371		206,858

The accompanying notes form an integral part of these consolidated financial statements

100

Sify Technologies Limited

Consolidated Statement of Income

(In thousands of Rupees, except share data and as otherwise stated)


			Year ended March 31,									Year ended March 31,
	Note		2012 Rs			2011 Rs			2010 Rs			2012 Convenience
												translation into US$ thousands (Unaudited) Note2(c)
Revenue
— Rendering of services				6,809,663			6,283,569			5,657,140			133,105
— Sale of products				889,286			603,060			1,053,048			17,382
Total		23		7,698,949			6,886,629			6,710,188			150,487

Cost of goods sold and services rendered

— Rendering of services				(3,841,219	)		(3,655,994	)		(3,157,472	)		(75,082	)
— Sale of products				(819,554	)		(553,436	)		(939,066	)		(16,019	)

Total		25		(4,660,773	)		(4,209,430	)		(4,096,538	)		(91,101	)
Other income		26		37,377			72,693			131,789			731

Selling, general and administrative expenses		28		(2,547,209	)		(2,441,799	)		(2,482,415	)		(49,789	)
Depreciation and amortization		5 & 6		(691,560	)		(685,836	)		(656,797	)		(13,518	)

Impairment loss on intangibles including goodwill		6		—			(1,857	)		(47,269	)		—

Income from legal settlement		27		—			—			561,120			—

Profit / (loss) from operating activities				(163,216	)		(379,600	)		120,078			(3,190	)

Finance income		31		59,313			45,698			27,994			1,159

Finance expenses		31		(306,732	)		(258,622	)		(293,873	)		(5,996	)

Net finance income / (expense)		31		(247,419	)		(212,924	)		(265,879	)		(4,837	)

Share of profit of equity accounted investee		7		27,298			73,032			91,135			534

Profit / (loss) before tax				(383,337	)		(519,492	)		(54,666	)		(7,493	)

Income tax (expense) / benefit		11		—			—			81,479			—

Profit / (loss) for the year				(383,337	)		(519,492	)		26,813			(7,493	)

Attributable to:
Equity holders of the Company				(383,337	)		(519,492	)		17,027			(7,493	)

Non-controlling interest				—			—			9,786			—

				(383,337	)		(519,492	)		26,813			(7,493	)

Earnings / (loss) per share		32
Basic earnings /(loss) per share				(3.71	)		(8.20	)		0.33			(0.07	)
Diluted earnings/(loss) per share				(3.71	)		(8.20	)		0.33			(0.07	)

The accompanying notes form an integral part of these consolidated financial statements

101

Sify Technologies Limited

Consolidated Statement of Comprehensive Income

(In thousands of Rupees, except share data and as otherwise stated)


			Year ended March 31,
	Note		2012 Rs			2011 Rs			2010 Rs			2012 Convenience translation into US$ thousands Note 2(c)
												(Unaudited)
Profit / (loss) for the year				(383,337	)		(519,492	)		26,813			(7,493	)

Other comprehensive income
Foreign currency translation differences for foreign operations				3,006			(229	)		1,682			59
Defined benefit plan actuarial gains / (losses)				9,372			8,358			5,508			183
Change in fair value of available for sale investments, transferred to profit or loss				—			—			6,441			—
Share of gains and (losses) from equity accounted investees (net of taxes)				3,038			(4,138	)		(566	)		60

Other comprehensive income for the year, net of income tax				15,416			3,991			13,065			302

Total comprehensive income for the year		16		(367,921	)		(515,501	)		39,878			(7,191	)

Attributable to:
Equity holders of the Company				(367,921	)		(515,501	)		30,092			(7,191	)
Non-controlling interest				—			—			9,786			—

Total comprehensive income/(expense) for the year				(367,921	)		(515,501	)		39,878			(7,191	)

The accompanying notes form an integral part of these consolidated financial statements

102

Sify Technologies Limited

Consolidated Statement of Changes in Equity

(In thousands of Rupees, except share data and as otherwise stated)

For year ended March 31, 2012


Particulars	Share capital		Share premium		Share based payment reserve		Other components of equity		Retained earnings / (accumulated deficit)			Total			Non- controlling interest		Total equity
Balance at April 1, 2011		858,832		17,216,121		190,325		7,365		(13,606,851	)		4,665,792			—		4,665,792

Total comprehensive income for the year		—		—		—		15,416		(383,337	)		(367,921	)		—		(367,921	)

Transactions with owners, recorded directly in equity
Issue of share capital		470,371		1,051,027		—		—		—			1,521,398			—		1,521,398

Share-based payment transactions		—		—		31,385		—		—			31,385			—		31,385

Balance at March 31, 2012		1,329,203		18,267,148		221,710		22,781		(13,990,188	)		5,850,654			—		5,850,654

For year ended March 31, 2011


Particulars	Share capital		Share premium		Share based payment reserve		Other components of equity		Retained earnings / (accumulated deficit)			Total			Non- controlling interest		Total equity
Balance at April 1, 2010		546,332		16,528,621		180,124		3,374		(13,087,359	)		4,171,092			—		4,171,092

Total comprehensive income for the year		—		—		—		3,991		(519,492	)		(515,501	)		—		(515,501	)

Transactions with owners, recorded directly in equity
Issue of share capital		312,500		687,500		—		—		—			1,000,000			—		1,000,000

Share-based payment transactions		—		—		10,201		—		—			10,201			—		10,201

Balance at March 31, 2011		858,832		17,216,121		190,325		7,365		(13,606,851	)		4,665,792			—		4,665,792

103

Sify Technologies Limited

Consolidated Statement of Changes in Equity

(In thousands of Rupees, except share data and as otherwise stated)

For year ended March 31, 2010


Particulars	Share capital		Share premium			Share based payment reserve		Other components of equity			Retained earnings / (accumulated deficit)			Total			Non- controlling interest			Total equity
Balance at April 1, 2009		441,018		16,375,217			149,535		(9,691	)		(13,104,386	)		3,851,693			248,848			4,100,541

Total comprehensive income for the year		—		—			—		13,065			17,027			30,092			9,786			39,878

Transactions with owners, recorded directly in equity
Issue of share capital		105,300		737,537			—		—			—			842,837			—			842,837
Share options exercised		14		70											84			—			84
Share-based payment transactions		—		—			30,589		—			—			30,589			—			30,589
Changes in ownership interests in subsidiaries that do not result in a loss of control
Acquisition 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

The accompanying notes form an integral part of these consolidated financial statements.

104

Sify Technologies Limited

Consolidated Statements of Cash Flows

For the fiscal years ended March 31,

(In thousands of Rupees, except share data and as otherwise stated)


	Year ended March 31,
	2012 Rs			2011 Rs			2010 Rs			2012 Convenience translation into US$ thousands
										(Unaudited) Note 2(c)
Profit/(loss) for the year		(383,337	)		(519,492	)		26,813			(7,493	)
Adjustments for:
Depreciation and amortization		691,560			685,836			656,797			13,518
Impairment loss on intangibles including goodwill		—			1,857			47,269			—
Share of profit of equity accounted investee		(27,298	)		(73,032	)		(91,135	)		(534	)
(Gain) / loss on sale of property, plant and equipment		(680	)		(594	)		(2,414	)		(13	)
Provision for doubtful receivables		95,405			161,922			121,987			1,865
Realized loss on sale of investments		—			—			373			—
Stock compensation expense		31,385			10,201			30,589			613
Net finance (income) / expense		247,419			212,924			265,879			4,836
Income tax expense/(benefit)		—			—			(81,479	)		—
Unrealized (gain)/ loss on account of exchange differences		17,644			1,196			703			345
Amortization of leasehold prepayments		6,308			—			3,917			123

		678,406			480,818			979,299			13,260

Change in trade and other receivables		(105,449	)		(153,560	)		(585,805	)		(2,061	)
Change in inventories		(4,622	)		5,851			17,600			(90	)
Change in other assets		(326,006	)		(34,082	)		(64,112	)		(6,372	)
Change in trade and other payables		472,443			(26,597	)		517,497			9,235
Change in employee benefits		11,650			1,341			(3,984	)		228
Change in deferred income		(4,533	)		(5,972	)		63,762			(89	)

		721,889			267,799			924,257			14,111
Income taxes paid		(121,675	)		(42,440	)		(164,455	)		(2,379	)

Net cash from / (used in) operating activities		600,214			225,359			759,802			11,732

105

Sify Technologies Limited

Consolidated Statements of Cash Flows

For the fiscal years ended March 31,

(In thousands of Rupees, except share data and as otherwise stated)


	Year ended March 31,
	2012 Rs			2011 Rs			2010 Rs			2012 Convenience translation into US$ thousands
										(Unaudited) Note 2(c)
Cash flows from / (used in) investing activities
Acquisition of property, plant and equipment		(840,653	)		(674,558	)		(759,435	)		(16,432	)
Expenditure on intangible assets		(111,081	)		(120,710	)		(220,299	)		(2,171	)
Proceeds from sale of property, plant and equipment		1,029			3,109			5,979			20
Payment towards purchase of unquoted equity shares		—			(160	)		—			—
Finance income received		48,734			61,669			57,130			953
Short term investments (net)		—			—			19,942			—

Net cash from / (used in) investing activities		(901,971	)		(730,650	)		(896,683	)		(17,630	)

Cash flows from / (used in) financing activities
Proceeds from issue of share capital (including share premium)		1,500,000			1,000,000			84			29,320
Proceeds from issue of shares on exercise of ASOP (including share premium)		21,398			—			—			418
Proceeds from / (repayment) of borrowings (net)		(600,588	)		(103,860	)		8,409			(11,739	)
Finance expenses paid		(312,927	)		(293,265	)		(318,723	)		(6,117	)
Repayment of finance lease liabilities		(71,476	)		(51,175	)		(44,256	)		(1,397	)

Net cash from / (used in) financing activities		536,407			551,700			(354,486	)		10,485

Net increase / (decrease) in cash and cash equivalents		234,650			46,409			(491,367	)		4,587
Cash and cash equivalents at April 1		(135,804	)		(181,586	)		312,715			(2,654	)
Effect of exchange fluctuations on cash held		(4,258	)		(627	)		(2,934	)		(83	)

Cash and cash equivalents at March 31		94,588			(135,804	)		(181,586	)		1,850


Refer note 3 (c) and note 8 for the composition of cash and cash equivalents.

Supplementary information
Additions to property, plant and equipment represented by finance lease obligations		60,149			38,111			99,950			1,176

The accompanying notes form an integral part of these consolidated financial statements

106

SIFY TECHNOLOGIES LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of Rupees, except share data and as stated otherwise)

1. Reporting entity

Sify Technologies Limited, (‘Sify’ or ‘the Company’) formerly known as Sify Limited and Satyam Infoway Private Limited, is a leading internet services provider headquartered in Chennai, India. These Consolidated Financial Statements comprise the Company and its subsidiaries (Sify Software Limited (formerly Sify Networks Private Limited), Sify Technologies (Singapore) Pte. Limited, Sify International Inc., Hermit Projects Private Limited and Pace Info Com Park Private Limited) (together referred to as the ‘Group’ and individually as ‘Group entities’) and the Group’s interest in MF Global Sify Securities India Private Limited, an equity accounted investee. The Group is primarily involved in providing services, such as Network and IT Services, Online Portal and Content offerings and in selling hardware and software related to such services. Sify is listed on the NASDAQ Global Select Market in the United States.

2. Basis of preparation

a. Statement of compliance

The accompanying Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations as issued by the International Accounting Standards Board (IASB).

These Consolidated Financial Statements have been approved for issue by the Board of Directors on August 13, 2012.

b. Basis of measurement

These Consolidated Financial Statements have been prepared on the historical cost basis except for the following:

•

Available for sale financial assets are measured at fair value

•

Non-current asset held for sale measured at lower of carrying value and fair value less costs to sell.

•

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 recognized 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.

The above items have been measured at fair value and the methods used to measure fair values are discussed further in Note 4.

c. Functional and presentation currency

Items included in the financial statements of each Group entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). Indian rupee is the functional currency of Sify, its domestic subsidiaries and affiliates. The U.S. dollar is the functional currency of Sify’s foreign subsidiaries located in the United States and in Singapore.

The Consolidated Financial Statements are presented in Indian Rupees which is the Group’s presentation currency. All financial information presented in Indian Rupees has been rounded up to the nearest thousand except where otherwise indicated.

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Convenience translation (unaudited): Solely for the convenience of the reader, the financial statements as of and for the year ended March 31, 2012 have been translated into United States dollars (neither the presentation currency nor the functional currency of the Group) based on the reference rate in the City of Mumbai on March 31, 2012, for cable transfers in Indian rupees as published by the Reserve Bank of India which was Rs.51.16 per $1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted into United States dollar at such a rate or at any other rate on March 31, 2012 or at any other date.

d. Use of estimates and judgements

The preparation of Consolidated Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in future periods which are affected.

In particular, areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements include the following:

•

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

The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements.

a. Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power directly/indirectly to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are consolidated from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group.

(ii) Associates (equity accounted investees)

Associates are those entities where the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Associates are accounted for using the equity method (equity accounted investees) and are initially recognized at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The Consolidated Financial Statements include the Group’s share of the income and expenses and equity movements of equity accounted investees from the date that significant influence commences until the date that significant influence ceases. The investment would be classified as ‘held for sale’ when the carrying amount of the investment will be recovered through a sale transaction rather than through its continued use and such sale is highly probable. Such investments are measured at the lower of its carrying amount and fair value less cost to sell. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

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(iii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

b. Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies on initial recognition are translated to the respective functional currencies of Group entities at exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rates at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale financial assets that are not monetary items, are recognized directly in other comprehensive income.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Indian Rupees at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Indian rupees using average exchange rates during the period. Foreign currency differences are recognized in other comprehensive income. Such differences are captured in the foreign currency translation reserve “FCTR” within other components of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss.

c. Financial instruments

(i) Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognized initially at fair value plus any directly attributable transaction costs. However if the instrument is recognized as at fair value through profit or loss then any directly attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition non-derivative financial instruments are measured as described below:

Non-derivative financial assets

a) Available-for-sale financial assets

Available-for-sale (AFS) financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss in accordance with IAS 39.

Investments in equity and certain debt securities are initially recognized at fair value and classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items are recognized directly in other comprehensive income. When an investment is de-recognized, the cumulative gain or loss in equity is transferred to profit or loss. These are presented as current assets unless the management intends to dispose of the assets after 12 months from the balance sheet date.

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b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are presented as current assets, except for those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are initially measured at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest method, less any impairment loss. Loans and receivables are represented by trade receivables, unbilled revenue, cash and cash equivalents. Cash and cash equivalents comprise cash balances and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

c) Others

Other non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses.

Non-derivative financial liabilities

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the assets and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities to the other financial liabilities category. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.

Other financial liabilities comprise loans and borrowings and trade and other payables.

(ii) Derivative financial instruments

These derivative contracts do not qualify for hedge accounting under IAS 39, and are initially recognized at fair value on the date the contract is entered into and subsequently re-measured at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognized immediately in profit or loss. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

d. Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or share options are recognized as a deduction from equity, net of any tax effects.

e. Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and where applicable accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. To the extent the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditure incurred on such asset. The capitalization rate is determined based on the weighted average of borrowing costs applicable to the borrowings of the Group which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing costs that the Group capitalizes during a period does not exceed the amount of borrowing costs incurred during that period. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

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When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within “other income / other expenses” in statement of income.

(i) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is de-recognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

(ii) Depreciation

Depreciation is recognized in the consolidated statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Management’s estimated useful lives for the years ended March 31, 2012, 2011 and 2010 were as follows:


	Estimate of useful life in years
Buildings		28
Plant and machinery comprising computers, servers etc.		3 – 5	*
Plant and machinery comprising other items		8	*
Furniture and fittings		5
Office equipment		5
Motor vehicles		3 – 5

*	Revised during the year ended March 31, 2008. Also refer note 5.

Depreciation method, useful lives and residual values are reviewed at each of the reporting date.

f. Business combinations and intangible assets

(i) Business combinations

Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuation are conducted by independent valuation experts.

Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3(Revised). The cost of acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.

Transactions costs that the group incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.

The acquisition of an asset or a group of assets that does not constitute a ‘business’ as per IFRS 3 is accounted for by identifying and recognizing the individual identifiable assets acquired and liabilities assumed. The cost of the group is allocated to such individual identifiable assets and liabilities on the basis of their relative fair values on the date of purchase.

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(ii) Goodwill

Goodwill represents the cost of a business acquisition in excess of the Group’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree.

Acquisitions prior to April 1, 2006

In respect of acquisitions prior to April 1, 2006, goodwill, if any, represents the amount recognized under the Group’s previous accounting framework, US GAAP.

Acquisitions on or after April 1, 2006

For acquisitions on or after April 1, 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), the Group reassesses the identification and measurement of identifiable assets, liabilities and contingent liabilities, and the measurement of the cost of acquisition, and recognizes any remaining excess in profit or loss immediately on acquisition.

Acquisition of non-controlling interest

Acquisition of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity-holders and therefore no goodwill is recognized as a result of such transactions.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investee.

(iii) Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the intangible asset. Borrowing costs that are directly attributable to the acquisition of qualifying intangible asset are capitalized as part of the cost of that asset. To the extent the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowings costs eligible for capitalization by applying a capitalization rate to the expenditure incurred on such asset. The capitalization rate is determined based on the weighted average of borrowing costs applicable to the borrowings of the Group which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing costs that the Group capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.

(iv) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, are recognized in profit or loss as incurred.

(v) Amortization of intangible assets with finite useful lives

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and previous year are as follows:

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	Estimate of useful life in years
Software	Not exceeding 3 years
Technical know-how		5 years
License fees		20 years
Portals and web development cost		5 years
Customer related intangibles		5 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

g. Leases

At the inception of a lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the substance of the lease arrangement.

Assets taken on finance lease:

A finance lease is recognized as an asset and a liability at the commencement of lease, at lower of the fair value of leased asset or the present value of the minimum lease payments. Initial direct costs, if any, are also capitalized and subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Assets taken on operating lease:

Other leases are operating leases and the leased assets are not recognized on the Group’s statement of financial position. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease.

Assets given on finance lease:

The Group is a dealer lessor for leasing various types of products sold to its customers. Profit or loss on sale of such products is recognized in accordance with the policy on outright sales. Finance income i.e., excess of gross minimum lease payments and normal selling price is recognized over the lease period.

Deposits provided to lessors:

The Group is generally required to pay refundable security deposits in order to obtain property leases from various lessors. Such security deposits are financial assets and are recorded at fair value on initial recognition. The difference between the initial fair value and the refundable amount of the deposit is recognized as a lease prepayment. The initial fair value is estimated as the present value of the refundable amount of security deposit, discounted using the market interest rates for similar instruments.

Subsequent to initial recognition, the security deposit is measured at amortized cost using the effective interest method with the carrying amount increased over the lease period up to the refundable amount. The amount of increase in the carrying amount of deposit is recognized as interest income. The lease prepayment is amortized on a straight line basis over the lease term as a lease rental expense.

h. Inventories

Inventories comprising traded hardware and software are measured at the lower of cost (determined using first-in first-out principle) and net realizable value. Cost comprises cost of purchase and all directly attributable costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

i. Construction contracts in progress

Construction contracts in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognized to date less progress billing and recognized losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contracts and activities based on normal operating capacity.

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Construction contract in progress is presented as part of trade and other receivable in statement of financial position for all contracts in which costs incurred plus recognized profit exceed progress billings. If progress billings exceeds cost incurred plus recognized profits, then the difference is presented as deferred income / revenue in the statement of financial position.

j. Impairment

Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset is considered to be impaired and impairment losses are recognized, if objective evidence indicates that one or more events such as a loss event, the significant financial difficulty of the issuer, a breach of contract, the disappearance of an active market, which have had a negative effect on the estimated future cash flows of that asset. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

Financial assets measured at amortized cost

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Available-for-sale financial assets

Significant or prolonged decline in the fair value of the security below its cost and the disappearance of an active trading market for the security are objective evidence that the security is impaired. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. The cumulative loss that was recognized in the equity is transferred to the consolidated income statement upon impairment. Such impairment loss is recognized in the consolidated income statement.

Loans and receivables

Impairment loss in respect of loans and receivables measured at amortized cost are calculated as the difference between their carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Such impairment loss is recognized in the consolidated income statement.

Reversal of impairment loss

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in other comprehensive income and presented within equity.

Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year at December 31.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are allocated to the cash generating units on a reasonable and consistent basis.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of units on a pro rata basis.

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Reversal of impairment loss

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized directly in other comprehensive income and presented within equity.

k. Employee benefits

Employee benefits are accrued in the period in which the associated services are rendered by employees of the Group, as detailed below:

(a) Defined contribution plan (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. The Group does not have any legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Obligation for contributions to the plan is recognized as an employee benefit expense in profit or loss when incurred.

(b) Defined benefit plans (Gratuity)

In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering all employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee’s last drawn salary and the years of employment with the Group. The Company’s net obligation in respect of the gratuity plan is calculated by estimating the amount of future benefits that the employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service cost and the fair value of plan assets are deducted. The discount rate is the yield at the reporting date on risk free government bonds that have maturity dates approximating the terms of the Company’s obligations. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.

The Group recognizes all actuarial gains and losses arising from defined benefit plans directly in other comprehensive income and presented within equity. The Company has an employees’ gratuity fund managed by the Life Insurance Corporation of India (LIC).

(c) Short term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(d) Compensated leave of absence

The employees of the Group are entitled to compensated absence. The employees can carry forward a portion of the unutilized accrued absence and utilize it in future periods or receive cash compensation at retirement or termination of employment for the unutilized accrued compensated absence. The Group recognizes an obligation for compensated absences in the period in which the employee renders the services. The Group provides for the expected cost of compensated absence as the additional amount that the Group expects to pay as a result of the unused entitlement that has accumulated based on actuarial valuations at the balance sheet date, carried out by an independent actuary.

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l. Share-based payment transactions

The grant date fair value of options granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in equity recognized in connection with a share based payment transaction is presented as a separate component in equity. The amount recognized as an expense is adjusted to reflect the actual number of share options that vest. In respect of options whose terms and conditions are modified, the Group includes the incremental fair value of the options in the measurement of the amounts recognized for services received from the employees. The incremental fair value is the difference between the fair value of the modified option and that of the original option both estimated as at the date of the modification. If the modification occurs during the vesting period, the incremental fair value granted is included in the measurement of the amount recognized for services received over the period from the modification date until the date when the modified equity instruments vest, in addition to the amount based on the grant date fair value of the original equity instruments, which is recognized over the remainder of the original vesting period. If the modification occurs after vesting date, the incremental fair value granted is recognized immediately, or over the vesting period if the employee is required to complete an additional period of service before becoming unconditionally entitled to those modified equity instruments.

m. Provisions

Provisions are recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

A provision for onerous contracts is recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment loss on the assets associated with that contract.

n. Revenue

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. Transfers of risks and rewards vary depending on the individual terms of the contract of sale.

Revenue from services rendered is recognized in the consolidated income statement in proportion to the stage of completion of the transaction at the reporting date.

The revenue recognition in respect of the various streams of revenue is described below:

(i) Enterprise services

Enterprise services revenue broadly consist revenue from Network services and IT services.

(c) Revenue from Network Services: These primarily include connectivity services including installation of a connectivity link, and to a lesser extent, sale of hardware and software (purchased from third party vendors). In certain cases, these elements are sold as a package consisting all or some of the elements. In these cases the Group applies the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction with different revenue allocations for each component. These multiple element arrangements are recognized as separable elements because each element constitutes a separate earnings process, each element has a fair value that is reliable, verifiable and objectively determinable, and the undelivered element is not essential to functionality of the delivered elements. In this arrangement involving delivery of multiple elements, the units of accounting are determined based on whether the delivered items have a value to the customer on a stand-alone basis, whether there is objective and reliable evidence of fair value of the undelivered elements and if the arrangement includes a general right of return relative to the delivered item, whether delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Group. The arrangement consideration is allocated to the units of accounting based on their relative fair values. Revenue on delivered items is recognized when the revenue recognition criteria applicable to that unit of accounting are met.

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The Group provides connectivity for a fixed period of time at a fixed rate regardless of usage. Connectivity is the last element that is provided in the case of a bundled contract. The connectivity charges are the same when sold alone or as part of a package. The revenue attributable to connectivity services is recognized ratably over the period of the contract.

In circumstances where there is multi element arrangement that includes hardware or software sales and last mile connectivity services, revenue from sale of hardware/software is recognized only upon completion of the services relating to last mile connectivity. Installation consists of commissioning of the last mile connectivity to the customer premises either through the Group’s wireless mode of delivery or through the carrier exchange. When the customer has such last mile connectivity, the Group does not charge any installation fee. Due to the short duration, the revenue attributable to the installation of the link is recognized on completion of the installation work. All revenues are shown exclusive of sales tax and service tax.

The Company provides NLD (National Long Distance) and ILD (International Long Distance) services through company’s network. The Company carries international voice traffic using the back-bone and delivers voice traffic to Direct Inter-connect Operators. Revenue is recognized based upon metered call units of voice traffic terminated on the Company’s network.

(d) Revenue from IT services: Web hosting service revenues primarily include co-location services. In certain cases, the Group also sells related hardware/software to its web hosting customers. This hardware as well as software are purchased from outside vendors and are freely traded in the market. The Group treats each element as a separate component of the arrangement which have separate earnings process. The value of the hosting service is determined based on fair value from similar services provided separately by the Group. When hardware and/or software is also included with hosting services and sold as a package, the revenue is allocated to the respective element based on their relative fair values. Revenue from hosting services is recognized over the period during which the service is provided.

The Company also deals in hardware and software. These are standard products that are freely traded in and purchased from the market, have standard specifications and are not otherwise customized for the specific needs of a customer. The software sold by the Group is off-the-shelf software, such as antivirus utilities and firewalls. The fair value for the hardware and software is available from the market. The revenue attributable to hardware/software is recognized on delivery. Trading transactions relating to standard hardware and software and involving arrangement of purchases from suppliers and sales to customers are reported on gross basis or on net basis, by carrying out a fact-specific evaluation of such transactions.

The Company generates revenue from construction of data centers. Revenue from such contracts includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognized as incurred unless they create an asset related to future contract activity. The stage of completion is assessed by reference to the cost incurred until date to the total estimated costs. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss.

The Group remotely manages the Information Technology infrastructure of global enterprises from India. The contracts are on time and material basis. Revenue in relation to ‘time’ is measured as the agreed rate per unit of time multiplied by the units of time expended. The element of revenue related to materials is measured in accordance with the terms of the contract. The revenue from on-demand storage / cloud offering is recognized based on the class of offering and usage of services.

(ii) Commercial and consumer services

This stream of revenue includes revenues from internet access services and online portal services

(b) Internet access services : It include Internet access at homes and businesses through dial-up or cable operator and internet access through a network of cybercafés. It also includes revenues from Voice over Internet Protocol (‘VoIP’) or Internet telephony.

Dial-up Internet access is sold to customers either for a specified number of hours or for an unlimited usage within a specified period of time. Customers purchase “user accounts” or “top-ups” that enable them to access the Internet for a specified quantum of usage or for a specified period of time all within a contracted period. The amount received from customers on the sale of these user accounts or top-ups are not refundable. The revenue from sale of user accounts or top-ups is measured based on usage (where access is for a specified quantum of usage) or based on the time of usage (where access is for a specified period of time) by the customer. Any unused hours at the end of the contracted period are recognized as revenue.

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VoIP services are mainly provided through Internet Telephony Booths at e-ports (formerly iway’s) cybercafés and to a smaller extent through Cable TV operators, (CTOs). The user purchases the packs that enable them to use the Internet telephone facility through CTOs and revenue is recognized on the basis of usage by the customer. The customers use Internet telephony facilities at the iway cybercafés and make the payment to the extent of usage of the facility.

Internet access at homes and businesses through cable networks, a franchised network of cable operators in India. Customers buy “user accounts” for a specified usage or volume of data transfer or for a specified period of time all within a contracted period. Revenues are recognized on actual usage by customer (where access is for a specified quantum of usage) and based on time (where access is for a specified period of time). Any unused hours at the end of the contracted period are recognized as revenue.

In the case of franchised cybercafé operators, the Group enters into an agreement with the franchisee that establishes the rights and obligations of each party and grants each franchisee a non-exclusive license to operate the cybercafé using the Group’s logo, brand and trade names. The cybercafés are owned and operated by the franchisees. The franchisee procures the retail space, invests in furniture, interior decor, PCs, and point of sale signage and employs and trains the franchisee staff. The franchisee is responsible for the maintenance of the premises and interface with customers. The Group provides the complete backend support, including bandwidth, the authentication/usage engine and the billing and collection system.

In the case of franchised cable network operators and franchised cybercafé operators, the Group enters into a standard arrangement with franchisees that provides for the payment to the Company, of an initial non-refundable franchisee fee in consideration for establishing the franchisee relationship and providing certain initial services. The fee covers the following upfront services rendered by the Group:

•

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.

The initial franchisee fee revenue is recognized as revenue when all of the obligations required of the Group have been substantially accomplished or provided. Internet access revenue and Internet telephony revenues are recognized based on usage by the customer.

After the commencement of the franchisee operations, the Company renders subsequent services to the franchised cybercafés in form of providing bandwidth for establishing connectivity through supply of Sify cybercafé cards (typically called as ‘user accounts’ or ‘top ups’), providing backend support, the authentication/usage engine and the billing and collection system. The cybercafé cards enable the users to access the internet for a specified quantum of usage within a contracted period. As revenue from these subsequent services constitute continuing services, the revenue from such services are recognised based on the usage as the access is for a specified quantum of usage within a specified time. Any unused hours at the end of the contracted period are recognised as revenue.

The Company, along with provisioning of bandwidth on a recurring basis, renders other services on an integrated basis including backend support, authentication / usage engine and the billing and collection system to the franchisees. In such services, the Company, through application software, helps the franchisee to keep online track of the usage of Sify cybercafé cards by the customers and also helps in authenticating the customer log-ins at different Cyber cafes. Such services to the franchisees are billed and recorded as deferred revenue when the customer purchases the card and revenue is recognised over the period of provisioning of such services (i.e when the bandwidth is used by the customers).

(b) Online portal services: The Group enters into contracts with customers to serve advertisements in its portal and the Group is paid on the basis of impressions, click-throughs or leads and in each case the revenue is recognized based on actual impressions/click-throughs/leads delivered. Revenue from advertisements displayed on portals is recognized ratably over the period of contract

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In the case of electronic commerce transactions, there are no performance obligations or minimum guarantees. The Group acts in the capacity of an agent rather than as the principal for these transactions, and the revenue recognized on a net basis is the amount of the commission earned by the Group.

In the case of value-added services that are rendered using Sify’s mobile telephone short code 54545, revenue is recognized upon delivery of the content/ring tones to the end subscriber and confirmation by the mobile phone service provider.

(iii) Software services

The Group provides e-learning software development services to facilitate web-based learning in various organizations. The contracts executed by the Company are not similar i.e. the efforts required to execute these contracts at each stage of development process differ from customer to customer and the contract is executed based on specific requirements regarding content/information of the customer. Thus the e-learning packages are specifically designed for the customer and accordingly, are accounted for as customized programmes. These services include information presentation, structured content delivery, content digitization and simulation based training. These services are generally provided on a fixed price basis. Revenue under such contracts is recognized when the outcome of the transaction can be estimated reliably by reference to the stage of completion of transaction at the reporting date. The stage of completion being determined based on the actual time spent to the total estimated time. The revenue from Application Services such as online assessment, document management services, web development, mailing solutions and supply chain software are recognized over the period of the contract.

(iv) Deferred income

Deferred income represents billing in excess of revenue recognized.

o. Export entitlements

Income in respect of import duty credit entitlement arising from export of services under the “Served from India Scheme” of the Government of India is recognized in the year of exports, provided there is no significant uncertainty as to the amount of entitlement and availment of the credit.

p. Finance income and expense

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, fair value gains on financial assets at fair value through profit or loss . Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date when the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Finance expense comprises interest expense on loans and borrowings, bank charges, unwinding of the discount on provision, losses on disposal of available-for-sale financial assets, fair value losses on financial assets at fair value through profit or loss that are recognized in statement of income.

q. Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as expenses in the period in which they are incurred. To the extent the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowings costs eligible for capitalization by applying a capitalization rate to the expenditure incurred on such asset. The capitalization rate is determined based on the weighted average of borrowing costs applicable to the borrowings of the Group which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing costs that the Group capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.

r. Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date.

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Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Deferred taxation arising on investments in subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred taxation arising on the temporary differences arising out of undistributed earnings of the equity method accounted investee is recorded based on the managment’s intention. If the intention is to realize the undistributed earnings through sale, deferred tax is measured at the capital gains tax rates that are expected to be applied to temporary differences when they reverse. However, when the intention is to realize the undistributed earnings through dividend, the Group’s share of the income and expenses of the equity method accounted investee is recorded in the statement of income, after considering any taxes on dividend payable by the equity method accounted investee and no deferred tax is set up in the Group’s books as the tax liability is not with the group.

s. Earnings / (loss) per share

The Group presents basic and diluted earnings / (loss) per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Where ordinary shares are issued but not fully paid, they are treated in the calculation of basic earnings per share as a fraction of an ordinary share to the extent that they were entitled to participate in dividends during the period relative to a fully paid ordinary share. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which includes share options granted to employees. To the extent that partly paid shares are not entitled to participate in dividends during the period they are treated as the equivalent of warrants or options in the calculation of diluted earnings per share.

t. Recent accounting pronouncements

(i)

In October 2010, the IASB issued an amendment to IFRS 7 “Disclosures—Transfers of financial assets”. The purpose of the amendment is to enhance the existing disclosures in IFRS 7 when an asset is transferred but is not derecognized and introduce new disclosures for assets that are derecognized but the entity continues to have a continuing exposure to the asset after the sale. The amendment is effective for fiscal years beginning on or after July 1, 2011. Earlier application is permitted.

(ii)

In December, 2011, the IASB issued an amendment to IFRS 7 “Disclosures—offsetting financial assets and financial liabilities”. The amended standard requires additional disclosures where financial assets and financial liabilities are offset in the balance sheet. These disclosures would provide users with information that is useful in (a) evaluating the effect or potential effect of netting arrangements on an entity’s financial position and (b) analyzing and comparing financial statements prepared in accordance with IFRSs and U.S. GAAP. The amendment is effective retrospectively for fiscal years beginning on or after January 1, 2013. Earlier application is permitted.

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(iii)

IFRS 9 Financial Instruments: In November 2009, the International Accounting Standards Board issued IFRS 9, Financial Instruments: Recognition and Measurement, to reduce the complexity of the current rules on financial instruments as mandated in IAS 39. The effective date for IFRS 9 is annual periods beginning on or after January 1, 2015 with early adoption permitted. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss. IFRS 9, was further amended in October 2010, and such amendment introduced requirements on accounting for financial liabilities. This amendment addresses the issue of volatility in the profit or loss due to changes in the fair value of an entity’s own debt. It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable to the entity’s own credit risk in the other comprehensive income. The company is required to adopt IFRS 9 by accounting year commencing April 1, 2015.

(iv)

IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements and IFRS 12, Disclosure of Interests in Other Entities: In May 2011, the International Accounting Standards Board issued IFRS 10, IFRS 11 and IFRS 12. The effective date for IFRS 10, IFRS 11 and IFRS 12 is annual periods beginning on or after January 1, 2013 with early adoption permitted.

IFRS 10 Consolidated Financial Statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. IFRS 10 replaces the consolidation requirements in SIC-12 Consolidation of Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. The standard provides additional guidance for the determination of control in cases of ambiguity such as franchisor franchisee relationship, de facto agent, silos and potential voting rights.

IFRS 11 Joint Arrangements determines the nature of an arrangement by focusing on the rights and obligations of the arrangement, rather than its legal form. IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities-Non-monetary Contributions by Venturers. IFRS 11 addresses only forms of joint arrangements (joint operations and joint ventures) where there is joint control whereas IAS 31 had identified three forms of joint ventures, namely jointly controlled operations, jointly controlled assets and jointly controlled entities. The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities, which is the equity method.

IFRS 12 Disclosure of Interests in Other Entities is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. One major requirement of IFRS 12 is that an entity needs to disclose the significant judgments and assumptions it has made in determining:

(d) the type of joint control when the joint arrangement is structured through a separate vehicle.

IFRS 12 also expands the disclosure requirements for subsidiaries with non-controlling interest, joint arrangements and associates that are individually material. IFRS 12 introduces the term “structured entity” by replacing Special Purpose entities and requires enhanced disclosures by way of nature and extent of, and changes in, the risks associated with its interests in both its consolidated and unconsolidated structured entities.

(v)

IFRS 13 Fair Value Measurement: In May 2011, the International Accounting Standards Board issued IFRS 13, Fair Value Measurement to provide specific guidance on fair value measurement and requires enhanced disclosures for all assets and liabilities measured at fair value, and not restricted to financial assets and liabilities. The standard introduces a precise definition of fair value and a consistent measure for fair valuation across assets and liabilities, with a few specified exceptions. The effective date for IFRS 13 is annual periods beginning on or after January 1, 2013 with early adoption permitted. The company is required to adopt IFRS 13 by accounting year commencing April 1, 2013.

(vi)

IAS 1 (Amended) Presentation of Financial Statements: In June 2011, the International Accounting Standard Board published amendments to IAS 1 Presentation of Financial Statements. The amendments to IAS 1, Presentation of Financial Statements, require companies preparing financial statements in accordance with IFRS to group items within other comprehensive income that may be reclassified to the profit or loss separately from those items which would not be recyclable in the profit or loss section of the income statement. It also requires the tax associated with items presented before tax to be shown separately for each of the two groups of other comprehensive income items (without changing the option to present items of other comprehensive income either before tax or net of tax).

The amendments also reaffirm existing requirements that items in other comprehensive income and profit or loss should be presented as either a single statement or two consecutive statements. This amendment is applicable to annual periods beginning on or after July 1, 2012, with early adoption permitted. The company is required to adopt IAS 1 (Amended) by accounting year commencing April 1, 2013.

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(vii)

IAS 19 (Amended) Employee Benefits: In June 2011, International Accounting Standards Board issued IAS 19 (Amended), Employee Benefits. The effective date for adoption of IAS 19 (Amended) is annual periods beginning on or after January 1, 2013, though early adoption is permitted.

IAS 19 (Amended) has eliminated an option to defer the recognition of gains and losses through re-measurements and requires such gain or loss to be recognized through other comprehensive income in the year of occurrence to reduce volatility. The amended standard requires immediate recognition of effects of any plan amendments. Further it also requires assets in profit or loss to be restricted to government bond yields or corporate bond yields, considered for valuation of Projected Benefit Obligation, irrespective of actual portfolio allocations. The actual return from the portfolio in excess of or less than such yields is recognized through other comprehensive income.

These amendments enhance the disclosure requirements for defined benefit plans by requiring information about the characteristics of defined benefit plans and risks that entities are exposed to through participation in those plans. The amendments need to be adopted retrospectively. The company is required to adopt IAS 19 (Amended) by accounting year commencing April 1, 2013.

(viii)

In December, 2011, the IASB issued an amendment to IAS 32 “Offsetting financial assets and financial liabilities”. The purpose of the amendment is to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. This includes clarifying the meaning of “currently has a legally enforceable right to set-off” and also the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendment is effective retrospectively for fiscal years beginning on or after January 1, 2014. Earlier application is permitted. We are currently evaluating the impact these amendments will have on our consolidated financial statements.

The company is currently evaluating the requirements of above pronouncements and has not yet determined the impact on the consolidated financial statements.

4. Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(i) Property, plant and equipment

The fair value of property, plant and equipment recognized as a result of a business combination is an estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approach using quoted market prices for similar items when available and replacements costs when appropriate.

(ii) Inventories

The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

(iii) Intangible assets

The fair value of intangible assets acquired in the business combinations is based on discounted cash flows expected to be derived from the use and eventual sale of assets (terminal value).

(iv) Investments in equity and debt securities

The fair value of available-for-sale financial assets is determined by reference to their quoted price at the reporting date. When the fair value of the financial asset cannot be measured reliably, it is measured at cost.

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(v) Trade and other receivables

The fair value of trade and other receivables, excluding construction contracts in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. However in respect of such financial instruments, fair value generally approximates the carrying amount due to the short term nature of such assets. This fair value is determined for disclosure purposes or when acquired in a business combination.

(vi) Derivatives

The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, the fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk free interest rate (based on government bonds). The fair value of foreign currency option contracts is determined based on the appropriate valuation techniques, considering the terms of the contract. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counter party when appropriate.

(vii) Non derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

(viii) Share-based payment transactions

The fair value of employee stock options is measured using the Black-Scholes method. Measurement inputs include share price on grant date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), expected term of the instrument (based on historical experience and general option holder behavior), expected dividends, and the risk free interest rate (based on government bonds).

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5. Property, plant and equipment

The following table presents the changes in property, plant and equipment during the year ended March 31, 2012


	Cost								Accumulated depreciation								Carrying amount as at March 31, 2012
Particulars	As at April 01, 2011		Additions		Disposals		As at March 31, 2012		As at April 1, 2011		Depreciation for the year		Deletions		As at March 31, 2012		Carrying amount as at March 31, 2012
Building		777,419		—		—		777,419		204,826		27,841		—		232,667		544,752
Plant and machinery		5,433,359		350,204		51,639		5,731,924		3,335,610		504,532		51,494		3,788,648		1,943,276
Computer equipments		563,776		66,303		474		629,605		478,705		31,711		415		510,001		119,604
Office equipment		234,125		3,304		82		237,347		129,932		21,133		82		150,983		86,364
Furniture and fittings		713,359		27,985		1,350		739,994		503,102		62,034		1,205		563,931		176,063
Vehicles		2,929		2,907		1,089		4,747		2,929		807		1,089		2,647		2,100
Total		7,724,967		450,703		54,634		8,121,036		4,655,104		648,058		54,285		5,248,877		2,872,159

Add: Construction in progress																		988,128

Total		7,724,967		450,703		54,634		8,121,036		4,655,104		648,058		54,285		5,248,877		3,860,287

The following table presents the changes in property, plant and equipment during the year ended March 31, 2011


	Cost								Accumulated depreciation								Carrying amount as at March 31, 2011
Particulars	As at April 01, 2010		Additions		Disposals		As at March 31, 2011		As at April 1, 2010		Depreciation for the year		Deletions		As at March 31, 2011		Carrying amount as at March 31, 2011
Building		777,419		—		—		777,419		177,072		27,754		—		204,826		572,593
Plant and machinery		5,302,696		199,591		68,928		5,433,359		2,929,688		474,168		68,246		3,335,610		2,097,749
Computer equipments		517,904		46,736		864		563,776		429,631		49,854		780		478,705		85,071
Office equipment		228,418		6,214		507		234,125		107,252		23,181		501		129,932		104,193
Furniture and fittings		706,148		15,731		8,520		713,359		445,437		64,442		6,777		503,102		210,257
Vehicles		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		3,069,863

Add: Construction in progress																		690,610

Total		7,538,776		268,272		82,081		7,724,967		4,095,271		639,399		79,566		4,655,104		3,760,473

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The following table presents the changes in property, plant and equipment during the year ended March 31, 2010


	Cost								Accumulated depreciation								Carrying amount as at March 31, 2010
Particulars	As at April 01, 2009		Additions		Disposals		As at March 31, 2010		As at April 1, 2009		Depreciation for the year		Deletions		As at March 31, 2010		Carrying amount as at March 31, 2010
Building		769,663		7,756		—		777,419		148,401		28,671		—		177,072		600,347
Plant and machinery		4,733,122		827,043		257,469		5,302,696		2,765,920		420,314		256,546		2,929,688		2,373,008
Computer equipments		497,223		26,462		5,781		517,904		367,972		66,709		5,050		429,631		88,273
Office equipment		162,132		68,106		1,820		228,418		96,955		12,070		1,773		107,252		121,166
Furniture and fittings		628,279		101,188		23,319		706,148		389,771		77,608		21,942		445,437		260,711
Vehicles		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		3,443,505

Add: Construction in progress																		8,517

Total		6,798,688		1,030,555		290,467		7,538,776		3,775,439		606,732		286,900		4,095,271		3,452,022

Change in estimated useful life

On the basis of a comprehensive evaluation during the year ended March 31, 2008, the Group had revised the estimated useful lives of its networking equipment (included under plant and machinery) and computers. As a result, the expected useful life of its networking equipment has been increased from 5 to 8 years and the expected useful life of computers has been decreased from 5 to 3 years. The effects of such changes on the depreciation expense for the years ended March 31, 2010, 2011, 2012 and 2013 are as follows:


	2010		2011			2012		2013		2014
Decrease / (increase) in depreciation expense		61,498		(17,674	)		12,108		91,511		134,919

Leased assets

The Group’s leased assets include certain buildings, plant and machinery acquired under finance leases. As at March 31, 2012 the net carrying amount of buildings, plant and machinery and vehicles acquired under finance leases is Rs.234,608 (March 31, 2011: Rs.244,926), Rs.226,594 (March 31, 2011: Rs.217,625) and Rs.2,100 (March 31, 2011 : Nil) respectively. During the year, the Group acquired leased assets of Rs.60,149 (March 31, 2011 : Rs 38,111).

In case prepayments are made towards buildings accounted for as finance leases, such prepayments are capitalized as ‘Leasehold Buildings’ (included in buildings) on the commencement of the lease term under the head ‘Property, plant and equipment’ and depreciated in accordance with the depreciation policy for similar owned assets.

Capital Commitments

As of March 31, 2012 and March 31, 2011, the Company was committed to spend approximately Rs.717,266 (net of advances Rs.493,774) and Rs.521,562 (net of advances Rs.691,338) respectively, under agreements to purchase property, plant and equipment.

Construction in progress

Amounts paid towards acquisition of property, plant and equipment outstanding at each balance sheet date and the cost of property, plant and equipment that are not ready to be put into use are disclosed under construction-in-progress. As of March 31, 2012, Construction work in progress includes Rs.685,027 (March 31, 2011 : Rs.682,825) paid towards acquisition of building under construction on a leasehold land belonging to Pace Info Com Park Private Limited by way of acquisition of the entire shareholding of its holding company M/s Hermit Projects Private Limited. Also refer note 37.

Capitalisation of expenses

The Company has capitalized expenses amounting to Rs.18,540 (March 31, 2011: Nil) which are directly attributable to the construction of building.

125

Security

As at March 31,2012 property, plant and equipment with a carrying amount of Rs.2,408,857 (March 31, 2011: Rs.2,615,097) are subject to a registered charge to secure bank borrowings.

6. Intangible assets

Intangible assets comprise the following:


	March 31, 2012		March 31, 2011
Goodwill		14,595		14,595
Other intangible assets		91,132		90,031

		105,727		104,626

(i) Goodwill

The following table presents the changes in goodwill during the years ended March 31, 2012 and 2011


	March 31, 2012		March 31, 2011
Balance at the beginning of the year		14,595		14,595
Effect of movement in exchange rates		—		—
Impairment loss recognized during the year		—		—

Net carrying amount of goodwill		14,595		14,595

The amount of goodwill as at March 31, 2012 and March 31, 2011 has been allocated to the Commercial and Consumer segment.

Impairment testing for cash-generating units containing goodwill

In May 2006, the Group acquired travel business for a consideration of US$ 2.5 million in cash along with an option to purchase 125,000 shares of Sify Technologies Limited and certain earn out payments aggregating to USD 0.5 million (Rs. 22,444). The assets acquired consist of system software, customer contracts and goodwill which collectively were considered as a cash generating unit (CGU) by management. The said business operates from India and United States.

During the year ended March 31, 2010, triggered by certain adverse market conditions such as decrease in revenue and increase in the cost of services, and other technological matters, the Group tested the carrying value of the above business for impairment. The recoverable amount of these intangibles including goodwill were determined based on the higher of the value in use (using discounted cash flow approach) and fair value less cost to sell. Fair value less cost to sell, being the higher of the two was determined as the recoverable amount of the CGU. Based on this assessment, the carrying value of the CGU was higher than its recoverable amount and as a result of the above, the group has recorded an impairment of the above intangibles including goodwill amounting to Rs 47,269 during the year ended March 31, 2010 and adjusted the carrying value of these intangibles accordingly.

During the year ended March 31, 2011, due to further decrease in revenue and continued losses in its travel business, the Group has tested the carrying value of the remaining intangibles and the recoverable amount of these intangibles were determined as Nil. Hence an impairment charge was recorded for Rs 1,857, equal to the carrying value of the remaining intangibles as on the date of impairment testing.

The above impairment charges relate to Commercial and Consumer segment.

126

(ii) Other intangibles

The following table presents the changes in intangible assets during the years ended March 31, 2012, 2011 and 2010.


	Technical know- how		Portals and web content		Customer related intangibles		Software		License fees		Total
(A) Cost
Balance as at March 31, 2009		82,753		52,730		200,570		319,215		50,000		705,268
Acquisitions during the year		—		—		—		51,468		—		51,468
Disposals during the year		—		52,730		—		—		—		52,730
Balance as at March 31, 2010		82,753		—		200,570		370,683		50,000		704,006
Acquisitions during the year		—		—		—		23,397		—		23,397
Disposals during the year		—		—		—		—		—		—
Balance as at March 31, 2011		82,753		—		200,570		394,080		50,000		727,403
Acquisitions during the year		—		—		—		44,603		—		44,603
Disposals during the year		—		—		—		—		—		—
Balance as at March 31, 2012		82,753		—		200,570		438,683		50,000		772,006

(B) Amortization
Balance as at March 31, 2009		82,753		52,730		169,847		256,621		5,906		567,857
Amortization for the year		—		—		6,144		41,421		2,500		50,065
Impairment loss on intangibles		—		—		22,148		1,737		—		23,885
Disposals during the year		—		52,730		—		—		—		52,730
Balance as at March 31, 2010		82,753		—		198,139		299,779		8,406		589,077
Amortization for the year		—		—		837		43,101		2,500		46,438
Impairment loss on intangibles		—		—		1,594		263		—		1,857
Balance as at March 31,2011		82,573		—		200,570		343,143		10,906		637,372
Amortization for the year		—		—		—		41,002		2,500		43,502
Impairment loss on intangibles		—		—		—		—		—		—
Balance as at March 31,2012		82,573		—		200,570		384,145		13,406		680,874

(C) Carrying amounts
As at March 31, 2010		—		—		2,431		70,904		41,594		114,929
As at March 31, 2011		—		—		—		50,937		39,094		90,031
As at March 31, 2012		—		—		—		54,538		36,594		91,132

Capital commitments

As of March 31, 2012, the Company was committed to spend approximately Rs.4,243 (net of advances Rs.539,889) (March 31, 2011: Rs.65,813 (net of advances Rs.393,849) respectively, under agreements to purchase intangible assets.

Capitalized borrowing costs

During the years ended March 31, 2012, 2011 and 2010, the Company capitalized interest cost of Rs.13,541, Rs.35,852and Rs.24,553 respectively. The rate of capitalization of interest cost for the year ended March 31, 2012, 2011 and 2010 was approximately 13.79%, 10.44%and 12.81% respectively.

127

7. Investment in equity accounted investees

In March 2006, MF Global Overseas Limited (MFG), a group incorporated in United Kingdom acquired 70.15% of equity share capital of MF Global Sify Securities Private Limited (MF Global), formerly Man Financial-Sify Securities India Private Limited (‘MF Global) from Refco Group Inc., USA (‘Refco’). As at March 31, 2012, 29.85% of MF Global equity shares is held by the Company. The remaining 70.15% is owned by MFG, an unrelated third party. MFG is a subsidiary of MF Global Limited, Bermuda. A summary of key financial information of MF Global and its subsidiaries which is not adjusted for the percentage ownership held by the Group is presented below:


Balance sheet	March 31, 2012		March 31, 2011
Total assets		3,506,913		4,546,919

Total liabilities		1,052,325		2,193,943
Shareholders’ equity		2,454,588		2,352,976

Total Liabilities and shareholders’ equity		3,506,913		4,546,919


Statement of operations	For the year ended
	March 31, 2012		March 31, 2011		March 31, 2010
Revenues		1,169,577		1,818,283		1,612,545
Net profit		92,622		241,840		307,543

During October 2010, Sify Technologies Ltd, the minority shareholder of MF Global holding 29.85 percent of the outstanding shares of the MF Global, requested MF Global’s Board of Directors to reconsider certain costs charged to the MF Global by MF Global Holdings Ltd and its affiliated and associated group companies, who hold 70.15 percent of the outstanding shares of the MF Global. These charges are currently recorded in the financial statements of the MF Global for year ended 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 of MF Global remains uncertain and any financial adjustment that may arise is not presently known and accordingly no adjustment related to this matter has been provided for in MF Global’s consolidated financial statements. Any financial adjustment that may arise on resolution of the said matter would be expected to be handled prospectively and therefore would be reported in the period in which it is resolved. Consequently, no adjustment related to the said matter was considered by Sify for equity method of accounting for MF Global. The auditors of MF Global have included an emphasis of matter with an explanatory paragraph in their audit report issued on the consolidated financial statements of MF Global for the three years ended March 31, 2012 in connection with such recorded cross charges. The effect of such recorded cross charge is not material to the financial statements of Sify.

On October 31, 2011, MF Global Holding Limited, USA, sought bankruptcy protection through a chapter 11 filing in the U.S. Bankruptcy Court in New York. Consequent to this, MFG also filed for bankruptcy proceedings in the United Kingdom and 3 individual administrators were appointed as Joint administrators (the “Joint administrators”) for MFG which holds the shares in the Joint Venture Company.

The Company was informed by the Joint Administrators that they were in the process of seeking bids for the stakes held by MFG in the Joint Venture Company. The Company believes that the auction process is in violation of the share holders’ agreement entered between MFG and the Company.

Hence, the Company filed a petition under section 9 of the Arbitration and Conciliation Act 1996 in Bombay High Court, seeking interim relief by restraining the Joint Administrators and MFG from proceeding with the proposed auction in respect of the sale of shares held by MFG in the Joint Venture Company in violation of share holders agreement dated November 25, 2005. A hearing on the petition was held on December 16, 2011. The Hon’ble High Court granted an ad-interim injunction restraining MFG Overseas Limited through its Joint Administrators from disposing off its shares in MF Global in violation of the Shareholder Agreement. The petition was adjourned for further proceedings. In parallel, the Company without prejudice to its legal rights under the petition was in discussion with the Joint Administrators of MFG for an early amicable settlement in this regard.

On March 23, 2012, the Board of Directors of the Company, approved to realize the value of the investment by sale to prospective buyers.

128

On March 27, 2012, the Company entered into an agreement relating to sale and purchase of shares in MF Global Sify Securities India Private Limited by and among Sify, MF Global Sify Securities Pvt Ltd., MF Global Overseas Limited, the joint administrators of MF Global Overseas and entities affiliated with the Phillip Capital Group, whereby the Company agreed to sell its entire 29.85% interest in MF Global to Phillip Capital Group.

The consummation of the transaction was subject to certain closing conditions, including regulatory and statutory approvals from the Government of India and the stock exchanges in India.

Additionally, in connection with the execution of the Agreement, on March 27, 2012, the Company, MF Global Sify Securities Private Limited, MF Global Overseas Limited and the Joint Administrators entered into a settlement and release agreement pursuant to which the Company and MF Global Overseas Limited agreed to settle, effective upon the closing of the transactions contemplated by the Agreement, their pending dispute in the Bombay High Court, India regarding certain matters, including the termination of shareholders agreement governing their respective interests in MF Global.

Hence, effective March 23, 2012, the above investment was classified as held for sale and measured accordingly as per IFRS 5. The above investment does not form part of any of the operating segments of the Company.

Subsequently, on August 2, 2012, in pursuance of the Agreement dated March 27, 2012 and after obtaining all the statutory and regulatory approvals, the Company completed the sale of its entire stake and the rights therein in MF Global for a cash consideration of Rs.1,390,200 (USD 25 million) to Phillip Capital Group, Singapore and MF Global Management Employees Trust, India. Consequently, with effect from such date, MF Global ceased to be an associate of the Company. Further, as per the settlement and release agreement, the Company has initiated steps to withdraw the arbitration proceedings filed against MFG and others in the Bombay High court, India and any other existing disputes also stands resolved. Consequently, no financial adjustments would arise in future in the Consolidated financial statements of the Company on account of disputes relating to cross charges.

8. Cash and cash equivalents

Cash and cash equivalents as per consolidated statement of financial position, as at March 31, 2012 amounted to Rs.742,235 (March 31, 2011: Rs.458,559). This excludes cash-restricted of Rs.150,533 (March 31, 2011: Rs.84,538), representing deposits held under lien against working capital facilities availed and bank guarantees given by the Group towards future performance obligations.

(a) Restricted cash

March 31, 2012

March 31, 2011

March 31, 2010

Non current

Against future performance obligation

—

Current

Bank deposits held under lien against borrowings / guarantees from banks / Government authorities

150,533

84,538

360,909

Total restricted cash

150,533

84,538

360,909

(b) Non restricted cash


Current

Cash and bank balances	742,235		458,559		517,789

Total cash (a+b)	892,768		543,097		878,698

Bank overdraft used for cash management purposes	(798,180	)	(678,901	)	(1,060,284	)
Less: Non current restricted cash	—		—		—

Cash and cash equivalents for the statement of cash flows	94,588		(135,804	)	(181,586	)

9. Lease prepayments


	March 31, 2012		March 31, 2011
Towards land and buildings*		364,190		63,068

		364,190		63,068

*	Includes Rs.306,199 (March 31, 2011: Nil) paid for acquiring leasehold rights of land for construction of Data center in Noida, India. Also refer note 37.

129

The prepayment towards land is amortized over the period of the lease on a straight line basis. In respect of buildings under operating lease, prepayments are amortized over the lease term on a straight line basis.

10. Other assets


	March 31, 2012		March 31, 2011
Non current
Other deposits and receivables (see note below)		1,073,479		672,843

		1,073,479		672,843

Current
Net investment in leases		—		—

		—		—

Financial assets included in other assets		252,386		212,969

(a)	Includes Rs.539,888 (March 31 2011: Rs. 459,872) paid to Emirates Integrated Telecommunications Company PJSC in relation to supply of bandwidth capacity from the Europe India Gateway (undersea cable network) and borrowing cost capitalized thereon.

11. Deferred tax assets and liabilities

The tax effects of significant temporary differences that resulted in deferred tax assets and a description of the items that created these differences is given below


Recognized deferred tax assets / (liabilities)	Assets / (liabilities)
	March 31, 2012			March 31, 2011
Deferred tax assets
Carry forward capital losses		97,409			90,892

		97,409			90,892

Deferred tax liabilities
Property, plant and equipment		—			—
Intangible assets		(1,386	)		(83	)
Investment in equity accounted investees		(96,023	)		(90,809	)

		(97,409	)		(90,892	)

Net deferred tax asset recognized in balance sheet		—			—

In assessing the realizability of the deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets and tax loss carry forwards is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realize the benefits of those recognized deductible differences. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

130

Movement in temporary differences during the year


	Balance as at April 1, 2010			Recognized in income statement			Recognized in Equity			Balance as at March 31, 2011			Recognized in income statement			Recognized in Equity			Balance as at March 31, 2012
Property, plant and equipment		(76	)		76			—			—			(1,060	)		—			(1,060	)
Intangible assets		(189	)		106			—			(83	)		(244	)		—			(327	)
Tax loss carry forwards		82,869			8,875			(852	)		90,892			7,174			(657	)		97,409
Investment in equity accounted investees		(82,604	)		(9,057	)		852			(90,809	)		(5,870	)		657			(96,022	)

		—			—			—			—			—			—			—

Unrecognized deferred tax assets / (liabilities)


	As at March 31, 2012		As at March 31, 2011
Deductible temporary differences		178,091		157,928
Unrecognized tax losses		3,463,628		3,084,218
		3,641,719		3,242,146

Considering the probability of availability of future taxable profits in the period in which tax losses expire, deferred tax assets have not been recognized in respect of tax losses carried forward by the Group. The above tax losses expire at various dates until 2025.

Deferred tax liabilities as at March 31, 2012 and March 31, 2011 have not been recognized on undistributed profits of its subsidiaries since the group expects to realize the same in a tax free manner.

Sec.79 of the Indian Income Tax Act denies carry forward of losses incurred in earlier years in case of change in the beneficial interest in the shares outstanding by more than 51%. As a result of the private placement of shares during the year ended March 31, 2011, there was a change in the registered shareholders by more than 51%. The above provision is not applicable to companies in which public are substantially interested. Sec. 2(18) of the Indian Income Tax Act, among other things, defines a company listed in a recognized Stock Exchange in India as a Company in which public are substantially Interested. Based on the non-discrimination clause available in the India—United States of America tax treaty, when the capital of the company is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Country, the company shall not be subjected to more burdensome position than the similar enterprises of the Contracting Country. Based on the above clause, the Company being listed in US Stock Exchange should not be discriminated for being not listed in India and be treated on par with a Company listed in India. Hence, the Company believes that it is out of the purview of Sec.79 of the Indian Income Tax Act. Further as disclosed in Item 7 of this Annual Report, there has been no change in the beneficial ownership of Shares by more than 51% compared to earlier years and the Board of Directors of the Company have continued to be the same. Hence based on the advice, the Company believes that it can carry forward and set-off the above losses incurred by it in earlier years.

Income tax expense recognized in profit or loss


	March 31, 2012			March 31, 2011			March 31, 2010
Current tax expense / (benefit)
Current period		—			—			(90,003	)
		—			—			(90,003	)

Deferred tax expense
Origination and reversal of temporary differences		7,174			8,875			22,895
Recognition of previously unrecognized tax losses		(7,174	)		(8,875	)		(14,371	)
Reversal of previously recognized tax losses		—			—			—
		—			—			8,524

Total income tax expense / (benefit)		—			—			(81,479	)

131

Income tax directly recognized in other comprehensive income

March 31,
2012

March 31,
2011

March 31,
2010

Actuarial (gains) or losses

—

Tax effect of changes in the fair value of other investments

—

Tax effect on share of profit of associate recognized in OCI

—

Tax effect on foreign currency translation differences

—

Income tax benefit / (expense) recognized directly in equity

—

Reconciliation of effective tax rate

A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before taxes is summarized below:


	Year ended March 31, 2012			Year ended March 31, 2011			Year ended March 31, 2010
Profit / (loss) before income taxes		(383,337	)		(519,492	)		(54,666	)
Enacted tax rates in India		32.45	%		33.22	%		33.99	%
Computed expected tax expense / (benefit)		(124,373	)		(172,575	)		(18,581	)
Effect of:
Share based payment expense not deductible for tax purposes		10,082			2,697			8,188
Unrecognized deferred tax assets on losses incurred during the year (net of temporary differences, if any)		123,148			194,140			41,370
Unrecognized deferred tax asset on temporary differences		—			—			—
Share of profit of equity accounted investee taxed at a lower rate		(2,952	)		(9,217	)		(12,203	)
Recognition of previously unrecognized tax losses		(5,905	)		(15,045	)		(18,774	)
Reversal of tax expense consequent to merger (Refer note 40)		—			—			(81,479	)
Others		—			—			—

		—			—			(81,479	)

12. Inventories

Inventories comprise:


	March 31, 2012		March 31, 2011
Communication hardware		8,328		2,824
Application software		11,931		12,813

		20,259		15,637

The entire carrying amount of inventories as at March 31, 2012 and 2011 are secured in connection with bank borrowings.

13. Trade and other receivables

Trade and other receivables comprise:


	March 31, 2012		March 31, 2011
(i) Trade receivables, net		2,411,946		1,839,966
(ii) Other receivables including deposits		851,335		1,251,690
(iii) Construction contract in progress		71,942		94,257

		3,335,223		3,185,913

132

(i)

Trade receivables as of March 31, 2012 and March 31, 2011 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, 2012			March 31, 2011
Trade receivables from related parties		—			—
Other trade receivables		2,605,188			2,055,974

		2,605,188			2,055,974
Less: Allowance for doubtful receivables		(193,242	)		(216,008	)

Balance at the end of the year		2,411,946			1,839,966

The activity in the allowance for doubtful accounts receivable is given below:


	For the year ended
	March 31, 2012			March 31, 2011
Balance at the beginning of the year		216,008			170,706
Add : Additional provision, net		95,405			161,922
Less : Bad debts written off		(118,171	)		(116,620	)

Balance at the end of the year		193,242			216,008

(ii)	Other receivables comprises of the following items:


	March 31, 2012		March 31, 2011
Advances and other deposits (Refer Note (a) and (c) below)		407,934		684,016
Withholding taxes (Refer Note (b) below)		439,502		560,456
Employee advances		3,899		7,218

		851,335		1,251,690

Financial assets included in other receivables		122,214		354,115

Notes:

Advances and other deposits primarily comprises of receivables in the form of deposits, service tax and other advances given in the ordinary course of business.

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.

14. Prepayments for current assets

Prepayments for current assets comprise of the following:


	March 31, 2012		March 31, 2011
Prepayments for purchase of bandwidth		90,399		71,256
Prepayments related to insurance		1,432		7,026
Prepayments-others		97,449		106,845
Lease prepayments		8,753		5,064

		198,033		190,191

133

15. Other investments

Other Investments comprise investment in unquoted equity instruments classified as available for sale financial assets which are carried at cost. The details of such investments are given below:


	March 31, 2012		March 31, 2011
Investment in equity shares of Vashi Railway Station Commercial Complex Limited		150		150
Investment in equity shares of Sify Empower India Foundation		10		10

		160		160

134

16. Share capital and share premium

No of shares


	Year ended March 31,
	2012		2011		2010
Issued as at April 01		178,351,498		53,351,498		42,820,082
Issued for cash*		—		125,000,000		—
Issued for consideration other than cash		—		—		10,530,000
Exercise of share options		162,091		—		1,416

Issued as at March 31		178,513,589		178,351,498		53,351,498

*	Paid up Rs.6.25 (March 31, 2011: Rs.2.50) per share

As at March 31, 2012 the authorized share capital comprises 180,000,000 ordinary shares (as of March 31, 2011, the number of authorized shares was 180,000,000) of Rs.10 each. The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to vote at meetings of the Group. All shares rank equally with regard to Group’s residual assets.

During the year ended March 31, 2010 the company has issued 10,530,000 ordinary shares of Rs.10 each to the erstwhile shareholders of Sify Communication Limited as per the scheme of amalgamation. Refer note 40.

Further during the year ended March 31, 2010, 1,416 ordinary shares have been issued consequent to exercise of options under the Associate stock option plan.

During the year ended March 31, 2011, on August 4, 2010, the Board of Directors of the company approved the issuance, in a private placement, of upto an aggregate of 125,000,000 of the company’s equity shares, par value Rs.10 per share (“Equity shares”), for an aggregate purchase price of approxiamately US$ 86 million, to a group of investors affiliated with the company’s promoter group, including entities affiliated with Mr Raju Vegesna, the company’s Chief Executive officer and Managing Director and Mr Ananda Raju Vegesna, Executive and brother of Mr Raju Vegesna (the “Offering”). The company’s shareholders approved the terms of the Offering at the Company’s Annual General Meeting held on September 27, 2010. On October 22 2010, the company entered into a Subscription Agreement with Mr Ananda Raju Vegesna, acting as representative (the “Representative”) of the purchasers in connection with the offering. The company issued 125,000,000 equity shares to the Representative on October 30, 2010. Also refer note 42.

Further during the year ended March 31, 2012, 162,091 ordinary shares have been issued consequent to exercise of options under the Associate stock option plan.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Share based payment reserve

Share based payment reserve represents the stock compensation expense recognized in the statement of changes in equity.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale securities until the investments are derecognized or impaired.

Recognized actuarial gain / loss

Recognized actuarial gain / loss represent the cumulative actuarial gain / loss recognized in other comprehensive income and presented within equity.

135

17. Finance lease obligations

The Group leases routers and other equipments under finance lease arrangements. The following is a schedule of future minimum finance lease commitments as at March 31, 2012:


	March 31, 2012							March 31, 2011
	Future minimum lease payments		Interest			Present value minimum lease payments		Future minimum lease payments		Interest			Present value minimum lease payments
Less than one year		91,924		(16,139	)		75,785		77,975		(17,468	)		60,507
Between one and five years		113,752		(12,611	)		101,141		144,357		(16,611	)		127,746

Total		205,676		(28,750	)		176,926		222,332		(34,079	)		188,253

18. Employee benefits


	March 31, 2012		March 31, 2011
Gratuity payable		19,515		19,116
Compensated absences		30,551		28,672

		50,066		47,788

Gratuity cost

The components of gratuity costs recognized in the consolidated income statement for the years ending March 31, 2012, March 31, 2011 and March 31, 2010 consist of the following:


	March 31, 2012			March 31, 2011			March 31, 2010
Service cost		15,892			22,275			14,498
Interest cost		4,449			3,786			4,501
Expected return on plan asset		(3,214	)		(2,875	)		(2,963	)

		17,127			23,186			16,036

Details of employee benefit obligation and plan asset are as follows:


	March 31, 2012			March 31, 2011
Present value of projected benefit obligation at the end of the year		62,610			59,571
Funded status of the plans		(43,095	)		(40,455	)

Recognized (asset) / liability		19,515			19,116

The following table set out the status of the gratuity plan:


Change in defined benefit obligation	March 31, 2012			March 31, 2011			March 31, 2010
Projected benefit obligation at the beginning of the year		59,571			51,046			43,389
Service cost		15,892			22,275			14,498
Interest cost		4,449			3,786			4,501
Actuarial (gain) / loss		(9,372	)		(8,358	)		(5,957	)
Benefits paid		(7,930	)		(9,178	)		(5,385	)

Projected benefit obligation at the end of the year		62,610			59,571			51,046

136


Change in plan assets	March 31, 2012			March 31, 2011			March 31, 2010
Fair value of plan assets at the beginning of the year		40,455			34,293			28,307
Expected return on plan assets		3,214			2,875			2,965
Actuarial gain / (loss)		—			—			(449	)
Employer contributions		7,356			12,465			8,855
Benefits paid		(7,930	)		(9,178	)		(5,385	)

Fair value of plan assets at the end of the year		43,095			40,455			34,293

Actual return on plan assets		3,214			2,875			2,513

Actuarial assumptions at end of the year:

The principal actuarial assumptions as on March 31, 2012, 2011 and 2010 were as follows:

March 31, 2012

March 31, 2011

March 31, 2010

Discount rate

8.60

% P.a

8.00

% P.a

8.15

% P.a

Long-term rate of compensation increase

8.00

% P.a

8.00

% P.a

8.00

% P.a

Expected long term rate of return on plan assets

8.00

% P.a

8.00

% P.a

8.00

% P.a

Average future working life time

8.40

years

8.60

years

11.06

years

Discount rate: The discount rate is based on prevailing market yields of Indian Government securities as at the end of the year for the estimated term of the obligations.

Long term rate of compensation increase: The estimates of future salary increases considered take into account inflation, seniority, promotion and other factors.

Expected long term rate of return on plan assets: This is based on the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

Assumptions regarding future mortality are based on published statistics and mortality tables.

The Group assesses these assumptions with the projected long-term plans of growth and prevalent industry standards.

Historical information


	March 31, 2012		March 31, 2011
Experience adjustment on plan liabilities		5,044		8,064
Experience adjustment on plan assets		—		—

Contributions: The Group expects to contribute Rs.15,000 (March 31 2011: Rs.15,000) to its gratuity fund during the year ending March 31, 2012.

Plan assets: The Gratuity plan’s weighted-average asset allocation at March 31, 2012 and March 31, 2011, by asset category is as follows:


	March 31, 2012			March 31, 2011
Funds managed by insurers		100	%		100	%

Actuarial gains and losses recognized in other comprehensive income

The amount of actuarial gains and losses recognized in other comprehensive income for the years ending March 31, 2012, 2011 and 2010 are as follows:

March 31, 2012

March 31, 2011

March 31, 2010

Actuarial gain / (loss)

9,372

8,358

5,508

9,372

8,358

5,508

137

Contributions to defined contribution plans

19. Other liabilities


	March 31, 2012		March 31, 2011
Franchisee deposits and other liabilities		211,504		163,245

		211,504		163,245

Financial liabilities included in other liabilities		187,236		163,245

Internet access services at home and through a network of cybercafés is provided through a franchised network of cable operators in India and cybercafé operators. The Group enters into an agreement with the franchisee that establishes the rights and obligations of each party and grants each franchisee a non-exclusive license to operate the cybercafé using the Group’s logo, brand and trade names. The agreement provides for payment to the Company, of an initial security deposit in consideration for establishing the franchisee relationship and providing certain initial services.

20. Borrowings


	March 31, 2012		March 31, 2011
Current
Term bank loans (Refer note 1 below)		110,000		216,000
Other working capital facilities (Refer note 2 below)		265,906		679,542
Borrowings from others (Refer note 3 below)		167,125		140,260

		543,031		1,035,802

Non current
Term bank loans (Refer note 1 below)		—		113,880
Borrowings from others (Refer note 3 below)		186,312		148,728

		186,312		262,608

The Group has borrowings which include:

Term bank loans bear interest ranging from 15.50% to 16.50% 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.

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. Further, these facilities are additionally secured by equitable mortgage over the land and building of M/s Pace Info Com Park Private Limited, subsidiary company and also by guarantee issued by the said subsidiary. Foreign currency demand loan bear an interest of Libor +650 bps. Other working capital borrowings bear interest ranging from 13.50% to 16.50% p.a. Such facilities are renewable every year.

Borrowings from others are secured against relevant assets and software. These loans carry an interest rate ranging from 12% p.a to 15% p.a.

138

21. Trade and other payables


	March 31, 2012		March 31, 2011
Trade payables		1,219,368		814,777
Advance from customers		50,939		86,073
Accrued expenses		1,021,810		808,399
Other payables		90,235		74,139

		2,382,352		1,783,388

Financial liabilities included in trade and other payables		2,325,447		1,725,907

22. Deferred income

Deferred income includes the following amounts of unearned income:


	March 31, 2012		March 31, 2011
Enterprise services		296,509		339,549
Commercial and consumer segment		36,118		28,966
Software services		51,166		44,079

		383,793		412,594

23. Revenue


	Year ended
	March 31, 2012		March 31, 2011		March 31, 2010
Rendering of services
Service revenue*		5,920,142		5,460,236		5,356,852
Initial franchise fee		6,395		10,992		11,369
Installation service revenue		883,126		812,341		288,919

		6,809,663		6,283,569		5,657,140

Sale of products		889,286		603,060		1,053,048

		7,698,949		6,886,629		6,710,188

*	Including revenue arising from construction contracts (refer note 24)

24. Construction contracts in progress


	Year ended
	March 31, 2012		March 31, 2011		March 31, 2010
Contract revenue recognized for the year		207,942		268,064		86,214
Aggregate amounts of costs incurred and recognized profits (less recognized losses) upto the reporting date for contracts in progress		185,725		109,570		86,214
Advances received for contracts inprogress		—		27,860		16,441
Amount of retentions		12,602		—		—
Gross amount due from customers for contract work presented as an asset		99,998		231,090		86,214

139

25. Cost of goods sold and services rendered

Cost of goods sold and services rendered information is presented before any depreciation or amortization that is direct and attributable to revenue sources. The Group’s asset base deployed in the business is not easily split into a component that is directly attributable to a business and a component that is common / indirect to all the businesses. Since a gross profit number without depreciation and amortization does not necessarily meet the objective of such a disclosure, the Group has not disclosed gross profit numbers but disclosed all expenses, direct and indirect, in a homogenous group leading directly from revenue to operating income.

26. Other income


	Year ended
	March 31, 2012		March 31, 2011		March 31, 2010
Duty credit entitlement		—		38,006		82,486
Others		37,377		34,687		49,303

		37,377		72,693		131,789

27. Income from legal settlement

During the year ended March 31, 2010, the Company received Rs 561,120 in connection with settlement of legal matters. This is pursuant to a legal suit filed by the company in the prior years. The said receipt has been recorded as income from legal settlement in the consolidated statement of income during the year ended March 31, 2010.

28. Selling, general and administrative expenses


	Year ended
	March 31, 2012		March 31, 2011		March 31, 2010
Personnel expenses		550,299		561,385		745,067
Marketing and promotion expenses		312,530		394,057		482,554
Administrative and other expenses*		1,684,380		1,486,357		1,238,770

		2,547,209		2,441,799		2,466,391

*	Includes foreign exchange gain / (loss) of Rs.37,650, Rs.12,941 and Rs.9,397 for the years ended March 31, 2012, 2011 and 2010 respectively.

29. Personnel expenses


	Year ended
	March 31, 2012		March 31, 2011		March 31, 2010
Salaries and wages		1,314,023		1,211,183		1,269,638
Contribution to provident fund and other funds		77,840		77,164		77,197
Staff welfare expenses		17,426		22,296		27,499
Employee stock compensation expense		31,385		10,201		30,589

		1,440,674		1,320,844		1,404,923

Attributable to cost of goods sold and services rendered		890,375		759,459		659,856
Attributable to selling, general and administration expenses		550,299		561,385		745,067

140

30. Share-based payments

Share based payments are designed as equity-settled plans. Under the equity settled plans, the Group had issued stock options under Associate Stock Option Plan (ASOP) 1999, ASOP 2000, ASOP 2002, ASOP 2005 and ASOP 2007. Each option entitles the holder to purchase one American Depository Share (ADS) at an exercise price determined by the Compensation committee on the date of the grant. There are no options outstanding in respect of ASOP 1999, ASOP 2000, ASOP 2002 and ASOP 2005 plans as at April 1, 2009. Our stock option plans are detailed as under:

(i) Associate Stock Option Plan 2007

In September 2007, the Shareholders of the Group approved a new scheme for allotment of stock options to employees, the Associate Stock Option Plan 2007. Consequent upon the introduction of ASOP 2007 plan, 797,600 unissued stock options pertaining to Associate Stock Option Plan 2005 are no longer available for issuance.

The options vest over a period of 4 years as follows:


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.

The stock options can be exercised within a period of twelve months from the date of last vesting.

As the number of stock options and the price of those options were made known to each allottee, the Plan has been considered as a fixed price grant. Stock option activity under the ASOP 2007 Plan is as follows:


No. of options granted, exercised and forfeited	Number of options			Weighted average exercise price in Rs.		Number of options			Weighted average exercise price in Rs.		Number of options			Weighted average exercise price in Rs.
No. of options granted, exercised and forfeited	2012			2012		2011			2011		2010			2010
Outstanding at the beginning of the year		841,200			146.58		1,078,800			149.21		1,211,900			152.51
Granted during the year		—			—		6,000			74.41		50,000			89.34
Replaced (Refer to notes below)		—			—		—			—		—			—
Replacement options granted (Refer to notes below)		—			—		—			—		—			—
Forfeited during the year		(27,995	)		109.33		(81,801	)		152.37		(93,616	)		153.58
Expired during the year		(49,946	)		144.52		(161,799	)		158.52		(88,068	)		158.01
Exercised during the year		(162,061	)		131.99		—			—		(1,416	)		59.02

Outstanding at the end of the year		601,168			152.26		841,200			146.58		1,078,800			149.21

Vested and Exercisable at the end of the year		579,140			153.59		566,908			151.36		437,210			155.55
Weighted average grant date fair value of grants during the year		—			—		—			—		—			—

The fair value of stock options granted has been measured using the Black Scholes model at the date of the grant. The Black Scholes model includes assumptions regarding dividend yields, expected volatility, expected term (or “option life”) and risk free interest rates. In respect of the options granted, the expected term is estimated based on the vesting term, contractual term as well as expected exercise behavior of the employees receiving the option. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares. Dividend yield of the options is based on the recent dividend activity. Risk-free interest rates are based on the government securities yield in effect at the time of the grant. These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in the future periods, stock compensation expense could be materially impacted in future years.

141

The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

The fair value of services received in return for share options granted under ASOP 2007 is based on the fair value of share options granted measured using Black Scholes model, with the following inputs:


No. of options granted, exercised and forfeited	Year ended March 31, 2012		Year ended March 31, 2011	Year ended March 31, 2010
Weighted average share price		—	82.68	99.26
Weighted average exercise price		—	74.41	89.34
Expected volatility		—	110.5% - 124.7%	115.8% - 136.7%
Option life		—	3 – 4.5 years	3 – 4.5 years
Expected dividends		—	—	—
Risk-free interest rate		—	2.61%	2.43% - 2.69%

A summary of information about fixed price stock options outstanding as at March 31, 2012 is furnished below:


	Range of exercise price in Rs.		Number outstanding at March 31, 2012		Weighted average exercise price in Rs.		Weighted average remaining contractual life		Number exercisable at March 31, 2012		Weighted average exercise price in Rs.
ASOP 2007		51.51-188.32		601,168		152.26		1.00		579,140		153.39

Modification

During the year ended March 31, 2008, the stock options issued under ASOP 2005 and ASOP 2007 had been out of money for most time of the vesting period. As a result, the Group’s compensation committee allowed certain employees in their approval dated January 22, 2008 to surrender their (a) unvested (b) vested and (c) unexercised stock options and obtain fresh options at a discount of 10% of the market price under ASOP 2007 prevalent at the date of modification in lieu of the surrendered stock options. This modification resulted in the revision in the exercise price as well as the service period over which the stock options vest. Consequent upon modification, 497,200 stock options of ASOP 2005 plan and 123,900 stock options of ASOP 2007 plan were replaced with an allotment of equal number of fresh options to those who surrendered.

The incremental fair value of the stock options replaced was determined by reference to the difference between the fair value of the replaced stock options and the fair value of the cancelled stock options at the date of grant of new stock options. The incremental fair value as a result of such modification in respect of modified options amounted to Rs.20,959 during the year ended March 31, 2008. In respect of modification that has occurred during the vesting period, the incremental fair value granted is included in the measurement of the amount recognized, for services received over the period from the modification date until the date when the modified equity instruments vest, in addition to the amount based on the grant date fair value of the original equity instruments, which is recognized over the remainder of the original vesting period. In respect of the modification that has occurred after vesting date, the incremental fair value granted is recognized immediately or over the vesting period if the employee is required to complete an additional period of service before becoming unconditionally entitled to those modified equity instruments. The incremental cost recognized in respect of such modified options amounted to Rs.17,967, Rs.2,954 and Rs.5,039 for the years ended March 31, 2012, 2011 and 2010 respectively.

The assumptions that were used in arriving at the incremental fair value are as summarized below:


Assumptions	Pre modification	Post modification
Current market price	174.83	174.83
Exercise price	308.34-578.38	157.35
Expected term	3 – 4.5 years	3 – 4.5 years
Volatility	53.83% - 77.82%	53.01% - 77.82%

Dividend yield	0%	0%
Discount rate	2.5%	2.5%

142

31. Financial income and expense


	Year ended
	March 31, 2012			March 31, 2011			March 31, 2010
Interest income on bank deposits		16,468			21,360			19,489
Others		42,845			24,338			8,505
Finance income		59,313			45,698			27,994
Interest expense on lease obligations		20,089			20,117			16,476
Bank charges (including letter of credit, bill discounting and buyer’s credit charges)		129,133			96,721			100,241
Interest expense on borrowings		157,510			141,784			177,156
Finance expense		(306,732	)		(258,622	)		(293,873	)

Net finance income / (expense) recognized in profit or loss		(247,419	)		(212,924	)		(265,879	)

32. Earnings / (loss) per share

The calculation of basic earnings / (loss) per share for the years ended March 31, 2012, 2011 and 2010 is based on the earnings / (loss) attributable to ordinary shareholders of Rs. (383,337), Rs. (519,492) and Rs.17,027 respectively and a weighted average number of shares outstanding of 103,313,278, 63,317,251, and 50,840,358 respectively, calculated as follows:


	Year ended
	March 31, 2012			March 31, 2011			March 31, 2010
Net profit / (loss ) – as reported		(383,337	)		(519,492	)		17,027

Weighted average number of shares – basic		103,313,278			63,317,251			50,840,358
Basic earnings / (loss) per share		(3.71	)		(8.20	)		0.33

Weighted average number of shares – diluted		103,313,278			63,317,251			50,853,293
Diluted earnings / (loss) per share		(3.71	)		(8.20	)		0.33

Weighted average number of ordinary shares basic


	Year ended March 31,
	2012		2011		2010
Issued fully paid ordinary shares at April 01		53,351,498		53,351,498		42,820,082
Effect of shares issued on exercise of stock options		98,392		—		166
Effect of partly paid shares (Note 1)		49,863,388		9,965,753		—
Effect of shares issued consequent to amalgamation of Sify Communications Limited		—		—		8,020,110

Weighted average number of equity shares and equivalent shares outstanding		103,313,278		63,317,251		50,840,358

Weighted average number of ordinary shares diluted


	Year ended March 31,
	2012		2011		2010
Weighted average number of ordinary shares (basic)		103,313,278		63,317,251		50,840,358
Effect of stock options		—		—		12,935

Weighted average number of equity shares outstanding (diluted)		103,313,278		63,317,251		50,853,293

143

As the Company incurred a net loss attributable to ordinary shareholders for the years ended March 31, 2012 and 2011, 601,168 and 841,200 ordinary shares arising out of potential exercise of outstanding stock options as at March 31, 2012 and 2011 respectively were not included in the computation of diluted earnings per share, as their effect was anti-dilutive.

Note 1:

During the year ended March 31, 2011, 125,000,000 ordinary shares were issued to the existing promoter group on a private placement basis. As of March 31, 2012, these shares were partly paid up to the extent of Rs.6.25 (March 31, 2011 : Rs.2.50) per share. Refer note 16 to the consolidated financial statements.

33. Operating leases

The Group leases office buildings and other equipment under operating lease arrangements that are renewable on a periodic basis at the option of both the lessor and the lessee. Some of the leases include rent escalation clauses. Rental expenses under these leases were Rs.339,139, Rs.326,507 and Rs.329,332 for the years ended March 31, 2012, 2011and 2010 respectively. The schedule of future minimum rental payments in respect of operating leases is set out below:

As at March 31, 2012


Lease obligations	Total		Less than 1 year		1-5 years		More than 5 years
Non-cancellable operating lease obligations		1,778,901		109,762		479,262		1,189,877

As at March 31, 2011


Lease obligations	Total		Less than 1 year		1-5 years		More than 5 years
Non-cancellable operating lease obligations		1,884,543		105,693		588,973		1,189,877

34. Segment reporting

The primary operating segments of the Group are:

•	Enterprise Services; such as Network Services and IT Services, providing Internet, connectivity, Voice ILD/NLD, Hosting , security and consulting, managed service solutions;

•	Commercial and Consumer services ; primarily comprising of Internet access services, from homes and through cybercafés, connectivity to SMBs , SOHOs and Online portal services and content offerings; and

•	Software services, such as application services and development of e-learning software.

The Chief Operating Decision Maker (“CODM”), i.e, The Board of Directors and the senior management, evaluate the Group’s performance and allocate resources to various strategic business units that are identified based on the products and services that they offer and on the basis of the market served. The measure of profit / loss reviewed by the CODM is “Earnings/loss before interest, taxes, depreciation and amortization” also referred to as “segment operating income / loss”. Revenue in relation to segments is categorized based on items that are individually identifiable to that segment. Bandwidth costs, which form a significant part of the total expenses, is allocated primarily to Network Services and then routed through as part of a cost transfer mechanism to Commercial and Consumer segment. Manpower costs of Technology resources rendering services to support Infrastructure operations, Managed services and Application services, are identified to an operating segment specifically. The Group believes that the resulting allocations are reasonable.

Certain expenses, such as depreciation, technology infrastructure and administrative overheads, which form a significant component of total expenses, are not allocable to specific segments as the underlying services are used interchangeably. Management believes that it is not practical to provide segment disclosure of these expenses and, accordingly, they are separately disclosed as “unallocated” and adjusted only against the total income of the Group.

A significant part of the fixed assets used in the Group’s business are not identifiable to any of the reportable segments and can be used interchangeably between segments. As a result the measures of segment assets and liabilities are not regularly reviewed by the CODM and hence disclosures relating to segment assets and liabilities have not been provided.

144

The Group’s operating segment information for the years ended March 31, 2012, 2011 and 2010, are presented below:

Year ended March 31, 2012


	Enterprise services			Commercial and Consumer Services			Software Services			Total
Segment revenue		6,675,853			390,045			633,051			7,698,949
Allocated segment expenses		(5,169,236	)		(473,210	)		(587,949	)		(6,230,395	)

Segment operating income / (loss)		1,506,617			(83,165	)		45,102			1,468,554
Unallocated expenses:
Selling, general and administrative expenses											(977,587	)
Depreciation and amortization											(691,560	)
Other income / (expense), net											37,377
Finance income											59,313
Finance expenses											(306,732	)
Share of profit of equity accounted investee											27,298

Profit / (loss) before tax											(383,337	)
Income tax (expense) / benefit											—

Profit / (loss) for the year											(383,337	)

Year ended March 31, 2011 (As adjusted)


	Enterprise services			Commercial and Consumer Services			Software Services			Total
Segment revenue		5,752,879			526,366			607,384			6,886,629
Allocated segment expenses		(4,403,435	)		(724,283	)		(506,936	)		(5,634,654	)
Impairment loss onintangibles		—			(1,857	)		—			(1,857	)

Segment operating income / (loss)		1,349,444			(199,774	)		100,448			1,250,118
Unallocated expenses:
Cost of goods sold											(36,222	)
Selling, general and administrative expenses											(980,353	)
Depreciation and amortization											(685,836	)
Other income / (expense), net											72,693
Finance income											45,698
Finance expenses											(258,622	)
Share of profit of equity accounted investee											73,032

Profit / (loss) before tax											(519,492	)
Income tax (expense) / benefit											—

Profit / (loss) for the year											(519,492	)

Year ended March 31, 2010 (As adjusted)


	Enterprise services			Commercial and Consumer Services			Software Services			Total
Segment revenue		5,268,530			844,771			596,887			6,710,188
Allocated segment expenses		(3,996,925	)		(1,080,236	)		(519,069	)		(5,596,230	)
Impairment loss on intangibles including goodwill		—			(47,269	)		—			(47,269	)

Segment operating income / (loss)		1,271,605			(282,734	)		77,818			1,066,689
Unallocated expenses:
Cost of goods sold											(45,853	)
Selling, general and administrative expenses											(936,870	)

145


Depreciation and amortization	(656,797	)
Other income / (expense), net	131,789
Income from legal settlement	561,120
Finance income	27,994
Finance expenses	(293,873	)
Share of profit of equity accounted investee	91,135

Profit / (loss) before tax	(54,666	)
Income tax (expense) / benefit	81,479

Profit / (loss) for the year	26,813

Year Reconciliations


	Cost of goods sold		Selling, general and administrative expenses		Finance expenses		Total
Year ended March 31, 2012
Allocated segment expenses		4,660,773		1,569,622		—		6,230,395
Unallocated segment expenses		—		977,587		306,732
Total as per income statement		4,660,773		2,547,209		306,732

Year ended March 31, 2011
Allocated segment expenses		4,173,208		1,461,446		—		5,634,654
Unallocated segment expenses		36,222		980,353		258,622
Total as per income statement		4,209,430		2,441,799		258,622

Year ended March 31, 2010
Allocated segment expenses		4,050,685		1,545,545		—		5,596,230
Unallocated segment expenses		45,853		936,870		293,873
Total as per income statement		4,096,538		2,482,415		293,873

Reorganization of business segments

We have been historically operating with three segments of business viz Corporate network/data services, Internet access services (including Online portal services and content offerings) and others (e-Learning and Infrastructure Management services). The Industry in which these segments compete has witnessed newer competitions, business models resulting in dynamic market changes. In order to leverage the versatility and the organizational capability, the Chief Operations Decision Maker (CODM) has evaluated options of integrating certain services to address customers across segments, achieve better marketability, flexibility and scale. Based on the management decision, certain changes to the business structure are made effective April 1, 2011. Consequently ‘Application services’ have been realigned out of ‘Corporate Data/Networking’ (revised segment—Enterprise Services) and have been reported as a part of Software Services. ‘Infrastructure Management Services’ have been realigned out of ‘Other Services’ and have been reported as a part of Enterprise Services. The Corresponding revenues and costs have been regrouped into the respective segments. Manpower cost of Technology division, comprising of Infrastructure, Managed Services and Software, is now identified as a specific operating cost to all relevant segment.

Consequently the revised operating segments are as below:

Enterprise Service: Connectivity and voice services will be offered as Network Services, while Data Center Hosting and Managed Services, along with System Integration, will comprise IT services. They will service both domestic and International clients from large corporate and mid-market customers.

Commercial and Consumer Service: The scope of the Consumer business is being expanded to include SOHOs and SMBs apart from the cybercafés, Portals and broadband-to-home services, offering network, IT services and applications through the Cloud.

146

Software Service: The application services and e-learning would from Software services. This business line will offer applications through the Cloud, primarily targeted at enterprise and international customers.

These reorganization of operating segments did not have any effect on reported consolidated operating income, income before income taxes, net income or per share amounts. The following table provides the amounts reclassified for all prior periods.

Revenue reclassifications

For the year ended March 31, 2011

Previous operating

segments

Corporate network /
data services

Consumer one

Other services

Total

As previously reported

5,671,909

526,366

688,354

6,886,629

Revenue from Managed services

411,085

—

(411,085

)

—

Revenue from application services

(330,115

)

—

330,115

—

Revised operating segments

5,752,879

526,366

607,384

6,886,629

Enterprise
services

Commercial and
consumer services

Software services

For the year ended March 31, 2010

Previous operating

segments

Corporate network /
data services

Consumer one

Other services

Total

As previously reported

5,335,268

844,771

530,149

6,710,188

Revenue from Managed services

289,146

—

(289,146

)

—

Revenue from application services

(355,884

)

—

355,884

—

Revised Revenue

5,268,530

844,771

596,887

6,710,188

Revised operating segments

Enterprise
services

Commercial and
consumer services

Software services

Operating and unallocated cost reclassifications:

For the year ended March 31, 2011


Previous operating segments	Corporate network / data services			Consumer one			Other services			Unallocated expenses and income
As previously reported		4,026,865			639,463			536,176			2,201,760
Cost of goods sold		309,580			45,094			134,129			(488,802	)
Finance expenses		(52,916	)		(2,210	)		(1,527	)		56,653
Operating expenses		119,906			41,936			(161,842	)		—
Revised Costs		4,403,435			724,283			506,936			1,769,610
Revised operating segments		Enterprise services			Commercial and consumer services			Software services

147

For the year ended March 31, 2010


Previous operating segments	Corporate network / data services			Consumer one			Other services			Unallocated expenses and income
As previously reported		3,929,727			898,397			406,063			1,483,398
Cost of goods sold		293,922			41,137			96,895			(431,954	)
Finance expenses		(66,656	)		(2,557	)		(698	)		69,911
Operating expenses		(160,068	)		143,259			16,809			—
Revised Costs		3,996,925			1,080,236			519,069			1,121,355
Revised operating segments		Enterprise services			Commercial and consumer services			Software services

Geographic segments

The Group has two geographic segments India and rest of the world. Revenues from the geographic segments based on domicile of the customer are as follows:


Description	India		Rest of the world		Total
Revenues
Year ended March 31, 2012		4,864,915		2,834,034		7,698,949
Year ended March 31, 2011		4,495,801		2,390,828		6,886,629
Year ended March 31, 2010		4,950,352		1,759,836		6,710,188

The Group does not disclose information relating to non-current assets located in India and rest of the world as the necessary information is not available and the cost to develop it would be excessive.

The revenue from transactions with a single external customer did not exceed more than 10% of the total revenue of the Company for each of the three years ended March 31, 2012.

35. Contingencies

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, 2012. Income tax claims against the company as at March 31, 2012 amounted to Rs.84,981 (March 31, 2011: Rs.84,981).

b)	Contingencies due to certain service tax claims as at March 31, 2012 amounted to Rs.421,730 (March 31, 2011: Rs 243,610).

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.

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, 2012.

148

e)	Liability on customer letter of credit discounted amounted to Rs.87,793 (March 31, 2011: Nil).

f)	In respect of contingencies arising on legal proceedings, refer Note 36.

36. 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 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 Sify’s ADSs from the time of Sify’s Initial Public Offering (“IPO”) in October 1999 through December 2000. The central allegation in this action is that the underwriters in Sify’s IPO solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased 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.

On April 2, 2009, the parties lodged with the Court a motion for preliminary approval of a proposed settlement between all parties, including the Company and its former officers and directors. The proposed settlement provides the plaintiffs with $586 million in recoveries from all defendants. Under the proposed settlement, the Issuer Defendants collectively would be responsible for $100 million, which would be paid by the Issuers’ insurers, on behalf of the Issuer Defendants and their officers and directors.

Accordingly, any direct financial impact of the proposed settlement is expected to be borne by the 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 were several notices of appeal filed. Most were filed by the same parties that objected to the settlement in front of the District Court. These appeals were consolidated into a single appeal and briefing schedule was held. On January 9, 2012, the class counsel and issuer defendant’s counsel entered into a Settlement Agreement, which agreement includes an agreement to dismiss the above appeal. Thus the above appeal has been dismissed with prejudice confirming the Settlement agreement entered before the District Court.

The Company believes, the maximum exposure under this settlement is approximately USD 338,983, an amount which its insurer will pay as per the Settlement Agreement on behalf of the Company.

(b)	Proceedings before the 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 Sify Technologies for Rs.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 Sify Technologies Limited) for Rs.26 million.

The above demands were made by the DoT on the premise that all amounts of income (whether direct or indirect) including items such as other income, interest on deposits, gain on foreign exchange fluctuation, profit on sale of assets & provision written back, that are in anyway related to 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 replied suitably on the above demand notice.

Various service providers approached Telecom Disputes Settlement & Appellate Tribunal (‘TDSAT’) to clarify what items of income should be included in the calculation of license fee and what items of income should not be included in such calculation. TDSAT by its order clarified on the above. The TDSAT order was challenged by DoT in Surpreme Court of India and the Supreme Court has set aside the TDSAT order. The service providers through their associations have filed a review petition in Supreme Court of India against the order. Sify believes that the above demands are not tenable under law nor fit into the definition of Adjusted Gross Revenue as defined by DoT. The Company believes it has adequate defenses for these demands and are awaiting the outcome of the review petition.

149

(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 $ 7.05 million) towards spectrum charges payable from the date of issue of allocation letter for 170 Base Stations. As per the notice, in case no payment is received within 15 days from the date of issue of the notice, then it would be presumed that the Company is no longer interested for the frequency assignments in 3.3-3.4 GHz band.

Whilst the Company received allotment letter for Spectrum in 3.3 GHz band (3303.5/3353.5 MHz) (Total 12 MHz) the Company had neither started any operations in this frequency band nor had applied for any Operating License from DOT/ Wireless Planning Commission (WPC). Sify believes that the obligation to make payment will arise only after obtaining the operating license from DOT/WPC. Sify also believes that it has adequate legal defences for these demands, as the Company has not yet obtained any operative license, hence such demand is not tenable Nevertheless, the Company has as a commitment to hold and use the spectrum in the above band has paid INR 11.56 million towards 40 Base Stations and has surrendered the remaining 130 Base Stations. The Company believes that the ultimate outcome of these actions will not have a material adverse effect.

(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, 2012, 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.129,041 (March 31, 2011: Rs 9,051).

37. Related parties

The related parties where control / significant influence exists are subsidiaries and associates. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director whether executive or otherwise. Key management personnel includes the board of directors and other senior management executives. The other related parties are those with whom the Group has had transaction during the years ended March 31, 2012, 2011 and 2010 are as follows:


Particulars	Country of incorporation		% of Ownership interest
			March 31, 2012		March 31, 2011
Holding Company
Infinity Satcom Universal Private Limited				—		—
Raju Vegesna Infotech & Industries Private Limited (Refer note 16 and note 42)				—		—
Ramanand Core Investment Company Private Limited				—		—
Subsidiaries
Sify International Inc.		USA		100		100
Sify Software Limited (Formerly Sify Networks Private Limited)		India		100		100
Sify Technologies (Singapore) Pte. Limited (Incorporated on December 7, 2009)		Singapore		100		100
Hermit Projects Private Limited (Acquired on November 28, 2011)		India		100		100
Pace Info Com Park Private Limited (Acquired on November 28, 2011)		India		100		100
Associates
MF Global-Sify Securities India Private Limited		India		29.85		29.85
Others (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		—		—
Raju Vegesna Developers Private Limited		India		—		—

150

The following is a summary of the related party transactions for the year ended March 31, 2012:


Transactions	Holding Company		Associates		Others		Key Management Personnel***
Consultancy services received		—		—		—		240
Sitting fees paid		—		—		—		1,280
Salaries and other short term benefits		—		—		—		37,385
Contributions to defined contribution plans		—		—		—		1,602
Share based payment transactions		—		—		—		1,041
Issue of shares on private placement basis**		1,500,000		—		—		—
Advance lease rentals and refundable deposits refunded*		—		—		2,175		—
Refundable lease deposit paid****		—		—		—		—
Lease rentals paid****		150		—		3,129		—
Amount of outstanding balances
Advance lease rentals and refundable deposits made****		—		—		2,558		—

The following is a summary of the related party transactions for the year ended March 31, 2011:


Transactions	Holding Company		Associates		Others		Key Management Personnel***
Consultancy services received		—		—		—		240
Sitting fees paid		—		—		—		1,200
Salaries and other short term benefits		—		—		—		40,328
Contributions to defined contribution plans		—		—		—		1,913
Share based payment transactions		—		—		—		4,226
Issue 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 balances
Debtors		—		—		—		—
Advance lease rentals and refundable deposits made****		—		—		2,558		—

The following is a summary of the related party transactions for the year ended March 31, 2010:


Transactions	Associates		Others		Key Management Personnel***
Consultancy services received		—		—		240
Sitting fees paid		—		—		1,240
Salaries and other short term benefits		—		—		52,441
Contributions to defined contribution plans		—		—		2,427
Share based payment transactions		—		—		9,486
Issuance of shares on amalgamation of erstwhile Sify Communications limited with Sify Technologies limited		—		842,837		—
Amount of outstanding balances
Debtors		—		—		—
Advance lease rentals and refundable deposits made*		—		282,825		—

151

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 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. To give effect to the above arrangement, VALS had entered into a Memorandum of Understanding on 16th June 2008 with M/s. Advance India Projects Limited (AIPL) and M/s. Pace Info com Private Limited (PACE), wherein PACE is an allottee of the land situated at B-07, Sector-132, Noida and VALS had through a Special Purpose Vehicle Hermit Projects Private Limited (HERMIT) decided to acquire the shares of PACE including the land held by it. VALS has paid a sum of Rs.285,000 to AIPL at the time of signing the MoU.

During the year, on October 30, 2010, the Board of Directors have approved to cancel the MoU for lease arrangement and have decided to acquire the property which is under construction from the third party directly. On 12th January 2011, through a Memorandum of Amendment, the company with the intention to acquire the said land, had substituted its name with that of VALS and through such amendment VALS had agreed to assign all rights, responsibilities, obligations, title etc. in favour of the company, thus making the company eligible to acquire PACE through HERMIT and subsequently the land and also making liable to pay the entire consideration of Rs.1,140,000. Hence the Company has paid VALS an amount of Rs.2,175 i.e., difference between the amount paid by the Company to VALS and the amount paid by VALS to AIPL.

During the year, the Company acquired the leasehold rights alongwith the building under construction through acquisition of entire shares HERMIT which in turn holds the entire shares of PACE, the original allottee of the land.

**	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.

****	During the year, the Company has entered into a lease agreement with M/s Raju Vegesna Infotech and Industries Private Limited, the holding Company, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of Rs.75 per month.

****

During the year, the Company has entered into a lease agreement with M/s Raju Vegesna Developers Private Limited, a Company in which Mr Ananda Raju Vegesna, Executive Director of the Company and Mr Raju Vegesna, Chairman and Managing director of the Company exercise significant influence, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of Rs.30 per month.

152

38. Financial instruments

Financial instruments by category

The carrying value and fair value of financial instruments by each category as at March 31, 2012 were as follows:


Particulars	Note		Loans and receivables		Financial assets / liabilities at fair value through profit and loss		Available for sale		Other financial liabilities		Total carrying value		Total fair value
Assets
Cash and cash equivalents		8		892,768		—		—		—		892,768		892,768
Other assets		10		252,386		—		—		—		252,386		252,386
Trade receivables		13		2,411,946		—		—		—		2,411,946		2,411,946
Other receivables		13		122,214		—		—		—		122,214		122,214
Derivative financial instrument				—		2,891		—		—		2,891		2,891
Other investments		15		—		—		160		—		160		160
Liabilities
Bank overdraft		8		—		—		—		798,180		798,180		798,180
Finance lease liabilities		17		—		—		—		176,926		176,926		176,926
Other liabilities		19		—		—		—		187,236		187,236		187,236
Borrowings from banks		20		—		—		—		375,906		375,906		375,906
Borrowings from others		20		—		—		—		353,435		353,435		353,435
Trade and other payables		21		—		—		—		2,325,447		2,325,447		2,325,447

The carrying value and fair value of financial instruments by each category as at March 31, 2011 were as follows:


Particulars	Note		Loans and receivables		Financial assets / liabilities at fair value through profit and loss		Available for sale		Other financial liabilities		Total carrying value		Total fair value
Assets
Cash and cash equivalents		8		543,097		—		—		—		543,097		543,097
Other assets		10		212,969		—		—		—		212,969		212,969
Trade receivables		13		1,839,966		—		—		—		1,839,966		1,839,966
Other receivables		13		354,115		—		—		—		354,115		354,115
Other investments		15		—		—		160		—		160		160
Liabilities
Bank overdraft		8		—		—		—		678,091		678,091		678,091
Finance lease liabilities		17		—		—		—		188,253		188,253		188,253
Other liabilities		19		—		—		—		163,245		163,245		163,245
Borrowings from banks		20		—		—		—		1,009,422		1,009,422		1,009,422
Borrowings from others		20		—		—		—		288,988		288,988		288,988
Trade and other payables		21		—		—		—		1,725,907		1,725,907		1,725,907

Details of financial assets pledged as collateral

The carrying amount of financial assets as March 31, 2012 and 2011 that the Group has provided as collateral for obtaining borrowings and other facilities from its bankers are as follows:


	March 31, 2012		March 31, 2011
Cash and cash equivalents		892,768		543,097
Other assets		252,386		212,969
Trade receivables		2,411,946		1,839,966
Other receivables		122,214		354,115

		3,679,314		2,950,147

153

Derivative financial instruments

Foreign exchange forward contracts and options are purchased to mitigate the risk of changes in foreign exchange rates associated with certain payables, receivables and forecasted transactions denominated in certain foreign currencies. These derivative contracts do not qualify for hedge accounting under IAS 39, and are initially recognized at fair value on the date the contract is entered into and subsequently re-measured at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognized immediately in profit or loss. The counterparties for these contracts are generally banks or financial institutions. The following table gives details in respect of the notional amount of outstanding foreign exchange and option contracts as on March 31, 2012 and 2011:


	As of
	March 31, 2012		March 31, 2011
Forward contracts
In U.S. Dollars (Sell)		—		—
In U.S Dollars (Buy)		—		—
Option contracts
In U.S Dollars (Sell)		1,500		—
In U.S Dollars (Buy)		—		—

The Company recognized a net gain on derivative financial instruments of Rs.2,891 for the year ended March 31, 2012 and a net gain of Rs.6,998 during the year ended March 31, 2010.

The forward exchange contracts and option contracts mature between one and twelve months. The table below summarizes the notional amounts of derivative financial instruments into relevant maturity groupings based on the remaining period as at the end of the year:


	As of
	March 31, 2012		March 31, 2011
Sell:
Not later than one month		26,500		—
Later than one month and not later than three months		53,000		—
Later than three months and not later than six months		—		—
Later than six months and not later than one year		—		—

		79,500		—


	As of
	March 31, 2012		March 31, 2011
Buy:
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

Recognized in profit or loss


	Year ended
	March 31, 2012			March 31, 2011			March 31, 2010
Loans and receivables
Interest income on bank deposits		16,468			21,360			19,489
Interest income from other loans and receivables		3,706			3,871			8,505
Impairment loss of trade receivables		(193,232	)		(161,922	)		(121,987	)
Impairment loss on finance lease receivables		—			—			—

154


Financial assets at fair value through profit or loss
Net change in fair value of derivative financial instruments	2,891		—		6,998

Other financial liabilities
Interest expenses on lease obligations	(20,089	)	(20,117	)	(16,476	)
Interest expenses on borrowings from banks, others and overdrafts	(157,510	)	(161,897	)	(177,156	)

Recognized directly in other comprehensive income

Year ended

March 31, 2012

March 31, 2011

March 31, 2010

Net change in fair value of available-for-sale financial assets

—

39. Financial Risk Management

The Group has exposure to the following risks from its use of financial instruments:

•

Credit risk

•

Liquidity risk

•

Market risk

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board of Directors have established a risk management policy to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed periodically to reflect changes in market conditions and the Group’s activities. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the risk management framework. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk: Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s trade receivables, treasury operations and other activities that are in the nature of leases.

Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Management considers that the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. The group is not exposed to concentration of credit risk to any one single customer since the services are provided to and products are sold to customers who are spread over a vast spectrum. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of the customers to which the Company grants credit terms in the normal course of the business.

Cash and cash equivalents and other investments

In the area of treasury operations, the Group is presently exposed to counter-party risks relating to short term and medium term deposits placed with public-sector banks, and also to investments made in mutual funds.

Guarantees

The Group’s policy is to provide financial guarantees only to subsidiaries.

The Chief Financial Officer is responsible for monitoring the counterparty credit risk, and has been vested with the authority to seek Board’s approval to hedge such risks in case of need.

155

Exposure to credit risk

The gross carrying amount of financial assets, net of any impairment losses recognized represents the maximum credit exposure. The maximum exposure to credit risk as at March 31, 2012 and 2011 was as follows:


	March 31, 2012		March 31, 2011
Cash and cash equivalents		892,768		543,097
Other assets		252,386		212,969
Trade receivables		2,411,946		1,839,966
Other receivables		122,214		354,115
Derivative financial instruments		2,891		—
Other investments		160		160

		3,682,365		2,950,307

Financial assets that are past due but not impaired

There is no other class of financial assets that is past due but not impaired other than trade receivables. The age analysis of trade receivables have been considered from the date of invoice. The ageing of trade receivables, net of allowances that are past due, is given below:


Period (in days)	March 31, 2012		March 31, 2011
Past due 181 — 270 days		168,171		143,919
Past due 271 — 365 days		173,385		50,796
More than 365 days		524,788		97,596

		866,344		292,311

See note 13 for the activity in the allowance for impairment of trade account receivables.

Financial assets that are not past due

Cash and cash equivalents, other assets, other receivables and finance lease receivables are neither past due nor impaired. Of the total trade receivables that are not past due as at March 31, 2012 amounting to Rs.1,545,602 (March 31, 2011: Rs.1,329,698) impairment to the extent of Rs Nil (March 31, 2011: Rs Nil) has been recorded.

Details of collateral and other credit enhancements held


	March 31, 2012		March 31, 2011
Security deposits received for internet access services		4,915		7,432

Liquidity risks: Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses, servicing of financial obligations. In addition, the Group has concluded arrangements with well reputed Banks, and has unused lines of credit that could be drawn upon should there be a need. The Company is also in the process of negotiating additional facilities with Banks for funding its requirements.

156

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

As at March 31, 2012


	Carrying amount		Contractual cash flows		0-12 months		1-3 years		3-5 years
Non-derivative financial liabilities
Bank overdrafts		798,180		798,180		798,180		—		—
Finance lease liabilities		176,926		205,675		91,923		99,521		14,231
Other liabilities		187,236		187,236		187,236		—		—
Borrowing from banks		375,906		381,269		381,269		—		—
Borrowings from others		353,435		416,449		202,842		185,060		28,547
Trade and other payables		2,325,447		2,325,447		2,325,447		—		—

		4,217,130		4,314,256		3,986,897		284,581		42,778

As at March 31, 2011


	Carrying amount		Contractual cash flows		0-12 months		1-3 years		3-5 years
Non-derivative financial liabilities
Bank overdrafts		678,901		678,901		678,901		—		—
Finance lease liabilities		188,253		247,355		65,148		123,922		58,284
Other 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		34,633
Trade and other payables		1,725,907		1,725,907		1,725,907		—		—

		4,054,716		4,228,657		3,738,998		396,741		92,917

Market risk: Market risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Group is exposed to market risk primarily related to foreign exchange rate risk (currency risk), interest rate risk and the market value of its investments. Thus the Group’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

Currency risk: The Group’s exposure in USD, Euro and other foreign currency denominated transactions gives rise to Exchange Rate fluctuation risk. Group’s policy in this regard incorporates:

•

Forecasting inflows and outflows denominated in US$ for a twelve-month period

•

Estimating the net-exposure in foreign currency, in terms of timing and amount

•

Determining the extent to which exposure should be protected through one or more risk-mitigating instruments to maintain the permissible limits of uncovered exposures.

•

Carrying out a variance analysis between estimate and actual on an ongoing basis, and taking stop-loss action when the adverse movements breaches the 5% barrier of deviation, subject to review by Audit Committee.

The Group’s exposure to foreign currency risk as at March 31, 2012 was as follows:

All amounts in respective currencies as mentioned (in thousands)


	USD			CAD		CHF			EUR			GBP			DHS			HKD			SGD
Cash and cash equivalents		758			—		—			—			—			—			—
Trade receivables		17,046			5		539			12			136			—			—			6
Trade payables		(9,031	)		—		(15	)		(52	)		(1	)		(59	)		(10	)		—
Gross balance sheet exposure		8,773			5		524			(40	)		135			(59	)		(10	)		6
Forward exchange / option contracts		(1,500	)		—		—			—			—			—			—			—
Net exposure		7,273			5		524			(40	)		135			(59	)		(10	)		6

157

The Group’s exposure to foreign currency risk as at March 31, 2011 was as follows:

All amounts in respective currencies as mentioned (in thousands)


	USD			CAD		CHF			Euro			GBP			DHS			HKD			AED			SGD
Cash and cash equivalents		495			—		—			—			—			—			—
Trade receivables		9,700			4		522			20			116			1			—			1			2
Trade 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		4,507			4		504			(281	)		115			(31	)		(10	)		(24	)		(81	)

Sensitivity analysis

A 10% strengthening of the rupee against the respective currencies as at March 31, 2012 and 2011 would have increased / (decreased) other comprehensive income and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2011.


	Other comprehensive income		Profit or loss
March 31, 2012		—		40,782
March 31, 2011		—		14,366

A 10% weakening of the rupee against the above currencies as at March 31, 2012 and 2011 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Interest Rate Risk: Interest rate risk is the risk that an upward movement in interest rates would adversely affect the borrowing costs of the group.

Profile

At the reporting date the interest rate profile of the Group’s interest –bearing financial instruments were as follows:


	Carrying amount
	March 31, 2012		March 31, 2011
Fixed rate instruments
Financial assets - Fixed deposits with banks		400,629		84,765

Financial liabilities
- Borrowings from banks		48,476		529,437
- Borrowings from others		353,435		288,988

Variable rate instruments
Financial liabilities
- Borrowings from banks		327,430		326,000
- Bank overdrafts		798,180		678,901

Fair value sensitivity for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.

158

Cash flow sensitivity for variable rate instruments

An increase of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis has been performed on the same basis as 2011.


	Equity		Profit or loss
March 31, 2012		—		(11,256	)
March 31, 2011		—		(10,049	)

A decrease of 100 basis points in the interest rates at the reporting date would have had equal but opposite effect on the amounts shown above, on the basis that all other variable remain constant.

40. Acquisition of non-controlling interest in subsidiary

The Board of Directors and shareholders of the Company at their meeting held on November 24, 2008 approved the merger of Sify’s subsidiary Sify Communications Limited, subject to approval by the Honorable High Court of Madras and other statutory authorities. Subsequently, the Company obtained the approval of Honorable High Court on June 26, 2009 which is binding on the Company and its subsidiary Sify Communications Limited and as part of the merger, the Company issued 10,530,000 equity shares to Infinity Satcom Universal Pvt. Limited (a company promoted by the principal shareholders of Sify) and acquired the remaining 26% equity interest of Sify Communications Limited. Although the merger was approved by the High Court on June 26, 2009, which is considered as the acquisition date for accounting purposes, for Income-tax purpose the effect of merger is retrospectively applied from April 1, 2008. The acquisition of this non-controlling interest has been accounted as a transaction with equity holders in their capacity as equity holders and accordingly no goodwill has been recognized. As a result of the acquisition of non-controlling interest, the following adjustments were incorporated in the consolidated financial statements for the year ended March 31, 2010:

•

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.

•

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

The Ministry of Finance of the Government of India (‘MoF’) issued a press release dated March 31, 2006, making amendments to the ‘Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993’ (‘the Scheme’). The amendments included a statement that unlisted Companies which had accessed FCCBs, ADR/GDRs in terms of guidelines of May 22, 1998 and are not making profit, be permitted to comply with listing condition on the domestic stock exchanges within three years of having started making profit. Further, the press release states that no fresh issues of FCCBs, ADR/GDRs by such companies will be permitted without listing first in the domestic exchanges. Hence the Company would not be able to raise funds by issuing ADRs until such time the Company complies with the ‘Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme 1993’ and lists in the domestic stock exchanges as per the above press release.

42. Issue of shares on a private placement basis to the existing promoter group

On August 4, 2010, the Board of Directors of the company approved the issuance, in a private placement, of upto an aggregate of 125,000,000 of the company’s equity shares, par value Rs.10 per share (“Equity shares”), for an aggregate purchase price of Rs.4,000,000, to a group of investors affiliated with the company’s promoter group, including entities affiliated with Mr Raju Vegesna, the company’s Chief Executive officer and Managing Director and Mr Ananda Raju Vegesna, Executive Director and brother of Mr Raju Vegesna (the “Offering”). The company’s shareholders approved the terms of the Offering at the Company’s Annual General Meeting held on September 27, 2010.

159

On October 22 2010, the company entered into a Subscription Agreement with Mr Ananda Raju Vegesna, acting as representative (the “Representative”) of the purchasers in connection with the Offering. In pursuance of the Agreement, the company issued and allotted 125,000,000 equity shares to M/s Raju Vegesna Infotech and Industries Private Limited (“RVIIPL”), a promoter group company. In accordance with Indian law, the purchase price is to be paid at such time as determined by Board of Directors of the company.

On August 14, 2011, the company received a letter from RVIIPL expressing its intention to transfer the above partly paid shares to its wholly owned subsidiary M/s Ramanand Core Investment Company Private limited (“RCICPL”). The company, on August 26, 2011, registered such transfer of partly paid shares in the name of RCICPL.

On September 7, 2011, the parties entered into an amendment to the Subscription Agreement (the “Amendment”) extending the validity of the agreement period to September 26, 2013. This Amendment provides the Board of Directors of the Company with additional time to call upon the purchasers to pay the balance money, in accordance with the terms of the Subscription Agreement, at any time before September 26, 2013.

As on March 31, 2012, these shares are partly paid to the extent of Rs.6.25 per share. Until the full purchase price is paid by the purchasers, the company retains a lien on the equity shares purchased in connection with the Offering. As of March 31, 2012, entities affiliated with our Chief Executive Officer, Raju Vegesna, beneficially owned approximately 86.27% of our outstanding equity shares, which includes the 125,000,000 shares (partly paid with proportionate voting rights) issued in connection with the above Offering.

160

MF Global Sify Securities India Private Limited

IFRS Consolidated Financial Statements

As at March 31, 2012 and 2011 and for the year ended March 31, 2012, 2011 and 2010

161

Index


Particulars	Page No.
Report of Independent Registered Public Accounting Firm		163-164
Consolidated Statement of Balance Sheet		165
Consolidated Statement of Income		166
Consolidated Statement of Comprehensive Income		167
Consolidated Statement of Changes in Equity		168
Consolidated Statement of Cash Flow		169
Notes to the Consolidated Financial Statements		170

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of MF Global Sify Securities India Private Limited

In our opinion, the accompanying Consolidated Statement of Balance Sheet, and the related Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flow (collectively “consolidated financial statements) present fairly, in all material respects, the financial position of MF Global Sify Securities India Private Limited and its subsidiaries (collectively “the Company”) at March 31, 2012 and & March 31, 2011 and the results of their operations and their cash flows for the year ended March 31, 2012 & March 31, 2011 in conformity with International Financial Reporting Standards as issued by the International Accounting Standard Board. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

Without qualifying our opinion, we draw your attention to

Note 2.1 to the Consolidated Financial Statements which states that on October 31, 2011, MF Global Holdings Ltd (the “ultimate parent company”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. Such liquidation of the Ultimate Parent Company has negatively impacted the scale of operations of the Company. The shareholders of the Company have entered into Share Purchase Agreement (SPA) with an international brokerage house for acquiring its respective stake in the Company for which necessary regulatory approvals have been received & formalities relating to completion of such acquisition are pending. The revival of the scale of operations and resultant profitability of the Company is dependent upon successful completion of such acquisition of the Company.

Note 8.1.2 to the Consolidated Financial Statements which states that brokerage aggregating to Rs. 12,019 (000) from Institutional Clients have neither been disputed nor denied by the respective clients. However, these amounts have remained overdue as the Institutional clients are awaiting the clarity about the change of ownership of the Company.

Note 26 to the Consolidated Financial Statements, which describes the uncertainty related to the outcome of the ongoing discussions between the Company’s shareholders concerning the reconsideration of certain costs charged to the Company by MF Global Holdings Limited and its affiliated and associated group companies for the two years ended March 31, 2008 and March 31, 2009 which is being carried as a liability in the accounts.

Note 30.1 to the Consolidated Financial Statements which states that as on October 31, 2011, MF Global Holdings Ltd (the “ultimate parent company”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. Consequently, the Company has not obtained confirmation of outstanding balances with related parties as at March 31, 2012. The Company has confirmed that there were no significant transactions with such parties after the date of filing such petitions and therefore the Consolidated Financial Statements have been prepared from the book balances which are subject to reconciliation / confirmations from the respective parties.

We conducted our audit of these consolidated financial statements for the year ended March 31, 2012 and March 31, 2011 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

ASA & ASSOCIATES

Independent Registered Public Accounting Firm

Mumbai , India

July 30, 2012

163

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of MF Global Sify Securities India Private Limited

In our opinion, the accompanying consolidated statements of income, comprehensive income, changes in equity and cash flow for the period ended March 31, 2010 present fairly, in all material respects, of MF Global Sify Securities India Private Limited and its subsidiaries (collectively “the Company”) the results of their operations and their cash flows for the period ended March 31, 2010, in conformity with International Financial Reporting Standards as issued by the International Accounting Standard Board. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

Without qualifying our opinion, we draw your attention to Note 26 to the consolidated financial statements, which describes the uncertainty related to the outcome of the ongoing discussions between the Company’s shareholders concerning the reconsideration of certain costs charged to the Company by MF Global Holdings Limited and its affiliated and associated group companies for the year ended March 31, 2009 and March 31, 2008.

We conducted our audit of these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the management, and evaluating the overall consolidated financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

Price Waterhouse

Firm Registration No. 301112E

Place: Mumbai

Date: November 26, 2010

164

MF Global Sify Securities India Private Limited

(All amounts in Indian Rupees thousands, except as otherwise stated)

CONSOLIDATED STATEMENT OF BALANCE SHEET


		As at
	Note	March 31, 2012			March 31, 2011
ASSETS
Cash and bank balance	11		146,980			281,486
Cash-restricted	12		2,324,000			2,959,063
Interest bearing deposits with bank	13		70,777			93,362
Receivable from broker-dealers and clearing organizations	9		170,660			18,580
Receivable from customers (net of provision of Rs. 86,300 and Rs. 60,600 respectively)	8		340,998			447,770
Available-for-sale securities:
Marketable, at market value	14		41,005			133,644
Deposits with clearing organizations			78,613			173,783
Interest accrued but not due			57,301			67,124
Other assets	10		208,999			245,800
Intangible assets:
Computer software	5.1		7,886			19,271
Memberships in exchanges	5.2		6,385			5,733
Property, plant and equipment	6		11,021			21,827
Deferred tax asset (Net)	7		42,288			79,476

Total assets			3,506,913			4,546,919

EQUITY
Capital and reserves attributable to the Equity Holders
Ordinary shares	15		518,942			518,942
Additional paid in capital			28,968			28,968
Retained earnings			1,898,693			1,806,071
Currency translations			8,759			(232	)
Fair value adjustments			(774	)		(774	)

Total Equity			2,454,588			2,352,975

LIABILITIES
Payable to broker-dealers and clearing organizations	9		184,659			264,504
Payable to customers			684,802			1,272,571
Borrowings	17		—			53,000
Accounts payable, accrued expenses and other liabilities	19		181,357			505,605
Employee benefit obligation	18		1,507			98,264

Total Liabilities			1,052,325			2,193,944

Total liabilities and equity			3,506,913			4,546,919

The accompanying notes form an integral part of these consolidated financial statements

These financial statements have been approved by the Board of Directors on July 29, 2012

For and on behalf of the Board

Vineet Bhatnagar

Managing Director

165

MF Global Sify Securities India Private Limited

(All amounts in Indian Rupees thousands, except as otherwise stated)

CONSOLIDATED INCOME STATEMENT


		Year ended
	Note	March 31, 2012		March 31, 2011		March 31, 2010
INCOME
Commissions			774,266		1,391,162		1,201,594
Depository and clearing fees			30,123		33,919		35,488
Interest on fixed deposits held as margin			256,869		198,412		238,491
Other Income	23		108,319		194,790		136,972

Total Income			1,169,577		1,818,283		1,612,545

EXPENSES
Employee compensation and benefits	21		517,075		794,535		607,775
Exchange expenses and clearance fees			152,642		220,153		165,769
Brokerage to other broker-dealers			95,940		136,470		152,002
Communications and data processing			28,373		30,100		28,168
Bank interest and guarantee commission			2,651		1,751		7,616
Depreciation and amortization			29,672		67,692		37,398
Occupancy			60,907		75,728		75,210
Write back of provision			—		—		(57,500	)
Provision for receivable from customers	22		25,700		38,300		—
Advertisement and business promotion			31,370		60,339		45,593
Other expenses	20		70,330		85,628		82,111

Total Expenses			1,014,660		1,510,696		1,144,142

Profit before income tax			154,917		307,587		468,403
Income tax expense	24		62,295		65,747		160,860

Profit for the year attributable to the Equity holders			92,622		241,840		307,543

The accompanying notes form an integral part of these consolidated financial statements

These financial statements have been approved by the Board of Directors on July 29, 2012

For and on behalf of the Board

Vineet Bhatnagar

Managing Director

166

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,

2012

2011

2010

Net income for the year

92,622

241,840

307,543

Other comprehensive income

Available for sale financial assets

- Net change in fair value

—

(9,855

)

1,527

Foreign currency translation differences

Currency translation differences

8,991

(1,185

)

(5,657

)

8,991

(11,040

)

(4,130

)

Total comprehensive income for the year

101,613

230,800

303,413

The accompanying notes form an integral part of these consolidated financial statements

These financial statements have been approved by the Board of Directors on July 29, 2012

For and on behalf of the Board

Vineet Bhatnagar

Managing Director

167

MF Global Sify Securities India Private Limited

(All amounts in Indian Rupees thousands, except as otherwise stated)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Number of ordinary
shares

Par
value

Share Capital

Additional
paid -in
capital

Retained
earnings

Currency
transalation

Fair Value
adjustment

Total
Equity

Balance as at April 1, 2009

51,894,182

518,942

28,968

1,256,688

6,610

7,554

1,818,762

Currency translation differences

(5,657

)

(5,657

)

Fair value gains, net of tax on available-for-sale financial assets

1,527

1,527

Net income directly recognised in equity

—

(5,657

)

1,527

(4,130

)

Profit for the year

307,543

307,543

Total recognised income and expense for the year

307,543

(5,657

)

1,527

303,413

Balance as at March 31, 2010

51,894,182

518,942

28,968

1,564,231

953

9,081

2,122,175

Currency 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

241,840

Total recognised income and expense for the year

241,840

(1,185

)

(9,855

)

230,800

Balance as at March 31, 2011

51,894,182

518,942

28,968

1,806,071

(232

)

(774

)

2,352,975

Currency translation differences

8,991

8,991

Fair value gains, net of tax on available-for-sale financial assets

—

Net income directly recognised in equity

—

8,991

—

8,991

Profit for the year

92,622

92,622

Total recognised income and expense for the year

92,622

8,991

—

101,613

Balance as at March 31, 2012

51,894,182

518,942

28,968

1,898,693

8,759

(774

)

2,454,588

The accompanying notes form an integral part of these consolidated financial statements

These financial statements have been approved by the Board of Directors on July 29, 2012

For and on behalf of the Board

Vineet Bhatnagar

Managing Director

168

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		2012			2011			2010
Cash flows from operating activities
Profit before income tax				154,917			307,587			468,403
Adjustments for
Depreciation and amortization				29,672			67,692			37,398
Profit on sale of Available-for-sale securities				—			(23,603	)		—
Provision on receivable from customers		8		25,700			38,300			(57,700	)
Interest on fixed deposits with banks				(256,869	)		(198,412	)		(238,491	)
Loss(profit) on Sale of Property Plant & Equipment		6		(39	)		—			13
Interest and other financial costs				956			—			—
Interest Income				(6,567	)		(16,278	)		(5,566	)
Dividend Income				(3,897	)		(1,616	)		(283	)
Others				(592	)		(9,582	)		3,963

Movements in working capital
Cash-restricted		12		1,387,563			(469,216	)		(141,985	)
Interest bearing deposits with banks				22,585			202,297			(188,164	)
Deposits with clearing organizations				95,170			(62,814	)		9,896
Receivable from broker-dealers and clearing organizations		9		(152,080	)		47,304			(23,656	)
Receivable from customers		8		81,072			(48,863	)		(207,514	)
Other assets		10		(132,647	)		19,051			(3,857	)
Payable to broker dealers and clearing organizations		9		(79,845	)		124,539			(87,821	)
Payable to customers				(587,768	)		95,053			192,442
Accounts payable, accrued expenses, and other liabilities		19		(345,141	)		111,278			42,370
Stock appreciation rights		16		(96,757	)		(38,338	)		88,907
Cash provided by operations				135,433			144,379			(111,645	)

Interest received				6,567			16,278			5,566
Interest received on fixed deposits placed				266,692			202,731			269,218
Income taxes paid				144,341			(171,891	)		(149,524	)

Net cash provided by/(used in) by operating activities				553,033			191,497			13,615

Cash flows from investing activities
Purchase of Available for Sale Securities: Marketable, At Market Value				133,644			(39,899	)		(877	)
Available for Sale Securities: Not readily marketable (at estimated fair value)				—			(57,818	)		—
Dividend Income				3,897			1,616			283
Expenditure on furniture and equipment				(6,463	)		(4,760	)		(14,288	)
Expenditure on Computer Software				(1,001	)		(5,671	)		(25,342	)
Sale of Property Plant & Equipment				(39	)		—			—

Net cash (used in) / provided in investing activities				130,038			(106,532	)		(40,224	)

Cash flows from financing activities
Proceeds from loan from associate company				425,400			841,500			383,700
Repayment of loan to associate company				(478,400	)		(788,500	)		(383,700	)
Interest and other finance charges paid				(956	)
(Repaymnet of) / Proceeds from borrowings				—			(3,508	)		(1,137	)

Net cash provided by / (used in) financing activities				(53,956	)		49,492			(1,137	)

Effect of foreign exchange fluctuation on Cash and Bank balances				8,991			(1,184	)		(5,657	)
Net increase / (decrease) in cash and bank balance				638,106			133,273			(33,403	)
Cash and bank balance at beginning of the period				281,486			148,213			181,616

Cash and cash equivalents at the end of the year				919,592			281,486			148,213

Cash and cash equivalents comprise of:
Balances with Banks				126,087			281,486			148,213
Demand deposits (less than 3 months maturity)				752,500			—			—
Highly liquid investments				41,005			—			—

Total				919,592			281,486			148,213

The accompanying notes form an integral part of these consolidated financial statements

These financial statements have been approved by the Board of Directors on July 29, 2012

For and on behalf of the Board

Vineet Bhatnagar

Managing Director

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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 2^nd Floor, C block, Modern Centre, 101 K. K. Marg, Jacob Circle, Mahalaxmi, Mumbai – 400 011. MF Global Sify has one wholly owned subsidiary in India, MF Global Commodities India Private Limited, which 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 July 29, 2012.

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.

As on October 31, 2011, MF Global Holdings Ltd (the “ultimate parent company”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. Such liquidation of the ultimate parent company has negatively impacted the scale of operations of the Company. On March 27, 2012, MF Global Overseas Limited & Sify Technologies Limited has entered into Share Purchase Agreements (SPA) with an international brokerage house for acquiring its 70.15% and 29.85% stake respectively in the Company. In respect of such acquisition, the Company has received necessary regulatory approvals and acquisition is expected to be completed shortly. The Management believes that this acquisition is expected to substantially revive the business of the Company.

2.1.1.

Amendments and interpretations effective as at March 31, 2012 but not relevant

The following standards, amendments and interpretations to published standards are effective as at March 31, 2012 but are not relevant to the group’s operations:

•

IFRIC 3, (Revised) Business combinations.

•

IFRS 8 – Operating Segments.

•

IFRIC 13, ‘Customer loyalty programmers’.

•

IFRIC 15, ‘Agreements for the construction of real estate’.

•

IFRIC 16, ‘Hedges of a net investment in a foreign operation’.

•

IFRIC 18, Transfers of assets from customers.

•

IFRIC 19, ‘Extinguishing Financial Liabilities with Equity Instruments’

•

IAS 17,(Amended) Leases;

•

IAS 24, (revised), ‘Related party disclosures’

The Management has reviewed the above amendments and interpretation to standards and find that none of them are applicable or relevant to the activities of the company during the year.

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2.1.2.

Recent Accounting Pronouncements

The following Standards and amendments are not yet mandatorily effective and have not been early adopted by the Company;

•

IFRS 7 “Disclosures—offsetting financial assets and financial liabilities”.

•

IFRS 9, “Financial instruments”,

•

IFRS 10, “Consolidated financial statements”.

•

IFRS 11, “Joint arrangements”.

•

IFRS 12, “Disclosure of interests in other entities”.

•

IFRS 13 Fair Value Measurement

•

IAS 1 (Amended) Presentation of Financial Statements

•

IAS-19 (Amended) “Employee benefits”

•

IAS 27 (Revised 2011), “Consolidated and separate financial statements”

•

IAS 28 (Revised 2011), “Investments in associates”

•

IAS 32 “Offsetting financial assets and financial liabilities”

All the standards mentioned above are effective for annual periods beginning on or after January 1, 2013; earlier application is permitted. We are in the process of determining the impact of these amendments on our consolidated financial statements and the company does not believe that the adoption of these standards will have a material effect on its consolidated financial statements.

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:


	Country of incorporation		Percentage of holding as at March 31, 2012			Percentage of holding as at March 31, 2011
Direct subsidiaries
1) MF Global Commodities India Private Limited		India		100	%		100	%

Indirect Subsidiary
1) 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.

The financial statements of the Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. These financial statements are prepared by applying uniform accounting policies in use at the Group.

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.

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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 balance

Cash 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 Cash

Individual 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 banks

Interest 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.

Receivables

Receivables 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 instruments

Financial 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.

2.9.

Financial assets

The 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’.

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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:


Type of assets	Rates (SLM) adopted by the Company
Computer systems		3 years
Office equipments		3 years
Furniture and fixtures		5 years
Vehicles		4 years

Tangible assets costing less than Rs.15 are fully depreciated in the year of purchase.

Depreciation on addition of Property, plant and equipment is charged considering the month of purchase as full month.

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.

The fair value of property, plant and equipment recognized as a result of a business combination is an estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approach.

2.12.

Intangible assets

All intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses.

a) Software

Capitalised 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.

The residual values and useful economic lives of intangible assets are reviewed annually.

The fair value of intangible assets acquired in the business combinations is expected to be derived from the use and realisable value.

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b) Trading rights in Stock Exchange

BSE membership

MF 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 membership

MF 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 assets

Assets 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.

Payables

Payables 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 overdraft

Borrowings 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.

Provisions

Provisions 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 tax

The 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 32.445%. 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.

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.

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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 benefits

Employee 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

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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d) Other

Other revenues consist of revenues earned in the normal course of operations and other non operating revenue. The same is accounted on accrual basis.

2.20.

Leases

Leases 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 factors

The 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 Risk

The 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 Risk

The 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 for a short , medium or long-term. Investments in fixed deposits placed with banks earn fixed rate of interest. As at March 31, 2012 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 7.73% p.a. and 6.49% p.a. during the year ended March 31, 2012 and March 31, 2011, 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 5.36 months and 7.35 months as at March 31, 2012 and March 31, 2011, respectively.

As at March 31, 2012, 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.12,129 ( Previous year Rs. 18,064)

Price Risk

The 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 Risk

The group has minimal transactional currency exposure arising from operations in currencies other than its functional currency.

Credit Risk

Credit 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.

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.

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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 deposits
Investment grade	2012		2011
Highest safety		100		100
High 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, 2012 and March 31, 2011, group’s bad debts as a percentage of broking income were 3.31% and 2.75%, 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.

177

As at March 31, 2012

Within 6

6 months

months

to 1 year

2 to 3 years

After 3 years

Total

Financial Liabilities

Payable to broker-dealers and clearing organizations

184,659

184,659

Payable to customers

684,803

684,803

Accounts payable, accrued expenses and other liabilities

181,357

181,357

1,050,819

—

1,050,819

Within 6
months

6 months to
1 year

2 to 3 years

After 3 years

Total

The group has at its disposal following financial assets in addition to unused lines of credit

Cash and bank balance

146,980

146,980

Cash-restricted

892,500

1,431,000

500

2,324,000

Interest bearing deposits with bank

49,277

21,500

70,777

Deposits with clearing organizations

—

78,613

78,613

Receivable from broker-dealers and clearing organizations

170,660

170,660

Receivable from customers

340,998

340,998

Available-for-sale securities Marketable, at market value

41,005

41,005

Interest accrued but not due

57,302

57,302

1,698,722

1,452,500

500

78,613

3,230,335

As at March 31, 2011

Within 6
months

6 months
to 1 year

2 to 3
years

After 3
years

Total

Financial Liabilities

Payable to broker-dealers and clearing organizations

264,504

264,504

Payable to customers

1,272,571

1,272,571

Borrowings

53,000

—

53,000

Accounts payable, accrued expenses and other liabilities

505,605

505,605

2,095,680

—

2,095,680

Within 6
months

6 months
to 1 year

2 to 3
years

After 3
years

Total

The group has at its disposal following financial assets in addition to unused lines of credit

Cash and bank balance

281,486

281,486

Cash-restricted

2,832,900

126,163

2,959,063

Interest bearing deposits with bank

86,523

6,839

93,362

Deposits with clearing organizations

173,783

173,783

Receivable from broker-dealers and clearing organizations

18,580

18,580

Receivable from customers

447,770

447,770

Available-for-sale securities Marketable, at market value

40,776

40,776

Interest accrued but not due

67,124

67,124

3,775,159

133,002

—

173,783

4,081,944

3.2.

Capital risk management

The 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, 2012 and March 31, 2011.

3.3.

Fair value estimation

The 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.

178

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 estimates

In 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. When the fair value of the financial asset cannot be measured reliably, it is measured at cost.

•

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. 1,197.

179

5.	*Intangible assets*

5.1. Software


	Computer software			Web development costs		Total
Cost
As at March 31, 2010		88,691			207,422		296,113
Additions		5,671			—		5,671
Disposals		—			—		—
Exchange difference		(2	)		—		(2	)

As at March 31, 2011		94,360			207,422		301,782
Additions		1,003			—		1,003
Disposals		—			—		—
Exchange difference		29			—		29

As at March 31, 2012		95,392			207,422		302,814

Accumulated amortisation and impairment
As at March 31, 2010		60,505			207,422		267,927
Charge for the year		14,587			—		14,587
Disposals		—			—		—
Exchange difference		(3	)		—		(3	)

As at March 31, 2011		75,089			207,422		282,511
Charge for the year		12,386			—		12,386
Disposals		—			—		—
Exchange difference		31			—		31

As at March 31, 2012		87,506			207,422		294,928

Net book amount as at
March 31, 2012		7,886			—		7,886
March 31, 2011		19,271			—		19,271

5.2.

Membership in exchanges

Membership in exchanges consists of:

BSE membership of Rs.1,257 and Rs 1,257 as at March 31, 2012 and 2011 respectively, and

DGCX membership of Rs. 5,128 and Rs. 4,476 as at March 31, 2012 and 2011, 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 BSEL

Equity 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 for the year ended March 31, 2012 and March 31, 2011 respectively.

180

6.	Property, plant and equipment*


	Furniture and Fixtures			Computers Systems			Office equipments			Vehicles			Total
Cost
As at March 31, 2010		8,317			177,927			37,780			13,101			237,125
Additions		50			4,498			212			—			4,760
Disposals		—			—						—			—
Exchange difference		(14	)		(9	)		(8	)		(10	)		(41	)

As at March 31, 2011		8,353			182,416			37,984			13,091			241,844
Additions		160			5,652			635			—			6,447
Disposals		—			(553	)		—			(10,369	)		(10,922	)
Exchange difference		189			123			124			128			564

As at March 31, 2012		8,702			187,638			38,743			2,850			237,933

Accumulated depreciation
As at March 31, 2010		4,011			142,704			13,375			6,876			166,966
Charge for the year		2,739			25,595			20,233			4,506			53,073
Disposals		—												—
Exchange difference		(7	)		(7	)		(4	)		(4	)		(22	)

As at March 31, 2011		6,743			168,292			33,604			11,378			220,017
Charge for the year		1,555			10,497			4,774			1,838			18,664
Disposals		—			(553	)		—			(10,369	)		(10,922	)
Exchange difference		(105	)		(74	)		(393	)		(275	)		(847	)

As at March 31, 2012		8,193			178,162			37,985			2,572			226,912

Net book amount as at
March 31, 2012		509			9,476			758			278			11,021
March 31, 2011		1,610			14,124			4,380			1,713			21,827

Change in estimates

On the basis of comprehensive evaluation on April 1, 2010, the Group has changed its method of calculating depreciation on fixed assets from the Written Down Value method (‘WDV’) to the Straight Line method (“SLM”) at the revised rates based on management’s estimates of useful lives of the assets.

In view of such changes, the charge of depreciation for the current year is Nil (Previous year higher by Rs. 31,395 (of which Rs.28,180 pertains to earlier periods upto March 31, 2010 and Rs. 3,232 pertains to the Previous year.) and the profit for the year is lower by Nil (Previous Year Rs.31,395.) Correspondingly, the net block of the Fixed Asset is lower by Nil (Previous Year Rs. 31,395).

As it is impracticable to estimate the effect of such changes on depreciation for the future periods, the same is not disclosed.

7.	*Deferred income tax*

The movement in deferred tax assets and liabilities during the respective years is as follows:


	2012			2011
At April 1		79,476			17,901
Property, plant and equipment		1,511			10,479
Provision on receivable from customers		7,870			12,765
Gratuity		(27	)		891
Stock appreciation rights		(31,881	)		24,404
Provision for bonus		(13,033	)		12,106
Stamp duty		(1,628	)		930

At March 31		42,288			79,476

Comprised Of:
Deferred tax assets		42,288			79,476
Deferred tax liabilities		—			—

		42,288			79,476

181

An analysis of the gross deferred tax asset and liability balances is as follows:


	2012		2011
Deferred tax assets:
Property, plant and equipment		12,819		11,308
Provision on receivable from customers		27,999		20,129
Stock appreciation rights		—		31,881
Provision for bonus		—		13,033
Stamp duty		920		2,548
Gratuity		550		577

		42,288		79,476

The analysis of deferred tax assets and deferred tax liabilities is as follows:


	March 31, 2012		March 31, 2011
Deferred tax assets:
– Deferred tax asset to be recovered after more than 12 months		41,739		33,985
– Deferred tax asset to be recovered within 12 months		549		45,491

		42,288		79,476


Deferred tax assets:	Property Plant and Equipment		Provision on receivable from customers		Stock appreciation rights			Provision for Bonus			Gratuity			Stamp Duty			Grand Total
Opening Balance as on April 1, 2011		829		7,364		7,477			927			—			1,618			18,215
Charged / (Credited) to Other Comprehensive Income		10,479		12,765		24,404			12,106			577			930			61,261
Effect of Change in Tax rates																		—

As at March 31, 2011		11,308		20,129		31,881			13,033			577			2,548			79,476
Charged / (Credited) to Other Comprehensive Income		1,511		7,870		(31,881	)		(13,033	)		(28	)		(1,628	)		(37,188	)

As at March 31, 2012		12,819		27,999		—			—			549			920			42,288

182

8.1.1.

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, 2012, receivables of Rs. 85,310 (March 31, 2011: Rs. 10,193) 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,
	2012		2011
up to 6 months		255,688		437,577
more than 6 months		85,310		10,193

		340,998		447,770

Receivables are tested individually for impairment. Based on such testing as at March 31, 2012, receivables of Rs. 86,300 (March 31, 2011: Rs. 60,600) were impaired and provided for. The amount of the provision was Rs. 86,300 as at March 31, 2012 (March 31, 2011: Rs. 60,600).

The ageing of these receivables is as follows:


	As at March 31,
	2012		2011
up to 6 months		17,525		45,796
more than 6 months		68,775		14,804

		86,300		60,600

The carrying amounts of the group’s receivables are denominated in Indian Rupees (INR):


As at March 31,
2012		2011
	340,998		447,770

	340,998		447,770

Movements on the group’s provision for impairment of trade receivables are as follows:


	As at March 31,
	2012		2011		2010
As at the beginning of the year		60,600		22,300		80,000
Provision for impairment		25,700		38,300		—
Write back of provision		—		—		(57,700	)

As at the closing of the year		86,300		60,600		22,300

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above.

8.1.2.

Trade receivables include brokerage aggregating to Rs. 12,019 from Institutional Clients, invoiced on account of trades executed on their behalf. While these parties, with whom regular business has discontinued, have neither disputed nor denied such claims. However the amounts have remained outstanding as the Institutional Clients are awaiting clarity about the change of ownership of the Company. The Management is confident of recovery of these amounts.

183

9. Receivable from and payable to broker-dealer and clearing organisations

Amounts receivable from and payable to broker-dealers and clearing organizations (non-interest bearing) within six months from the balance sheet date consist of the following:

As at March 31

2012

2011

Receivable

Payable

Receivable

Payable

Clearing organizations

- Unsettled trade

159,809

29,965

8,208

38,638

Broker-dealer

10,851

154,694

10,372

225,866

Total

170,660

184,659

18,580

264,504

10.	*Other assets*


	As at March 31,
	2012		2011
Prepaid expenses		11,553		14,544
Advance tax (net of provisions)		134,726		168,746
Deposits		28,900		32,663
Loans and advances (to staff)		6,110		12,594
Gratuity Trust		3,994		2,228
Others*		23,716		15,025

		208,999		245,800

*	includes Advances to vendors towards expenses, delayed payment charges from clients, withholding tax recoverable, etc.

11.	*Cash and Bank Balance*

Cash and bank balance consist of:


	As at March 31,
	2012		2011		2010
Cash in hand		11		0		32
Cash at bank		146,969		281,486		148,181

		146,980		281,486		148,213

12.	*Cash – restricted*

Restricted cash as of March 31, 2012 includes fixed deposits of Rs. Nil (Rs. 100,000 as of March 31, 2011) placed with banks as margins for bank guarantees issued to clearing organizations and fixed deposits of Rs.2,324,000 (Rs. 2,859,062 as of March 31, 2011) specifically earmarked as liens to clearing organizations towards margins.

Excess margin placed in the form of fixed deposits or bank guarantees can be withdrawn by giving one-day notice to the clearing organizations of the exchange.

Bank guarantees outstanding are Rs. Nil as at March 31, 2012 (March 31, 2011: Rs. 200,000). Bank guarantees are generally provided to the Exchanges for the purposes of Margins. An exchange may invoke these guarantees if they suffer any losses or damage through the breach of any of the covenants contained in the agreements.

13.	*Interest bearing deposits with banks*

The net decrease in interest bearing deposits with banks by Rs. 657,648 during the year is primarily on account of cash money repaid to customers.

184

14.	Available for sale securities

Available for sale securities include following:


	As at March 31,
	2012				2011
(a) Equity Shares (Quoted)	Quantity		Amount		Quantity		Amount
Patni Computers Systems Limited		—		—		18,096		8,633
Piramal Health Care Limited		—		—		4,888		2,037
Siemens Limited		—		—		34,171		30,106

Total (a)		—		—		57,155		40,776

Templeton India—Dividend reinvestment plan		4,100,471		41,005		9,286,667		92,868

Total (b)		4,100,471		41,005		9,286,667		92,868

The fair value of unlisted securities is determined based on the valuations provided by Bombay Stock Exchange Limited. This value is considered as fair value of investment in the net worth computation of trading member.

15.	Share capital and Dividend distribution


	As at March 31,
	2012		2011
Authorised capital
70,000,000 ordinary shares of Rs.10/- per share		700,000		700,000

As at March 31, 2012, 51,894,182 ordinary shares (March 31, 2011: 51,894,182 ordinary shares) of Rs.10/- each, issued and fully paid–up aggregating to Rs.518,942 (March 31, 2012 Rs. 518,942)

Dividend distribution

Dividends payable to equity shareholders are based on the net income available for distribution as reported in the stand–alone financial statements of MF Global Sify prepared in accordance with Indian GAAP. The net income in accordance with IFRS may, in certain years, either not be fully available or will be additionally available for distribution to equity shareholders.

Under the Companies Act, 1956 of India dividends may be paid out of the profits of a Company in the year in which the dividend is declared or out of the undistributed profits of previous fiscal years. Before declaring a dividend greater than 10% of the par value of its equity shares, a company is required to transfer to its reserves a minimum percentage of its profits for that year, ranging from 2.5% to 10%, depending on the dividend percentage to be declared in such year. Dividends declared are subject to a dividend distribution tax of 16.22%.

16.	*Share–based payments*

Employee’s Stock Appreciation Scheme

The group had introduced the ‘Stock Appreciation Rights Plan 2006 ‘ (‘SARs Plan 2006’), ‘Stock Appreciation Rights Plan 2007’ (‘SARS Plan 2007’) and and ‘Stock Appreciation Rights Plan 2008’ (‘SARS Plan 2008’) during the years ended March 31, 2007, March 31, 2008 and March 31, 2009, respectively, and granted stock appreciation rights to eligible employees. The group believes that such awards better align the interests of its employees with those of its shareholders. As per the SARS Plan, the stock appreciation rights shall vest with the employee and shall be settled in cash on the day following the fourth anniversary of the grant date. The Board of Directors of the Company has preponed the vesting date of the SARS Plan 2007 and SARS Plan 2008 from March 31, 2011 and March 31, 2012 to July 31, 2010 and March 31, 2011, respectively. The exercise price for the grant is Rs. Nil. SARs are accounted as cash settled share-based payments.

The group has granted a total of 711,247 SARs under the SARs Plan 2006, 809,500 SARs under the SARs Plan 2007 and 1,386,000 SARs under the SARs Plan 2008 to the employees. The weighted-average fair value of SARs as at March 31, 2011 is Rs 70 per unit (2010: Rs. 86 per unit) for SARs Plan 2006, SARs plan 2007 and SARs plan 2008, respectively. The forfeited SARs are reissued to the other eligible employees, where the vesting period is from the date of reissue to the vesting date as per the initial grant of SARs. The Company has carried out an independent fair valuation of the stock appreciation rights as of March 31, 2011. The total unrecognized compensation costs relating to SARs to be recognized in the future over the remaining vesting period is estimated to be Rs. Nil and Rs. 111,718 as of March 31, 2011 and March 31, 2010 respectively.

The fair value of each SARs is estimated on the date of grant using a Black-Scholes valuation model that uses the following variables:

Stock Price: Current value of the underlying asset is derived through a valuation exercise, wherein the profit earning capacity has been considered as an appropriate method of valuation.

185

The valuation has been undertaken based on the methodology of Price Earning Capacity Value (PECV Method) for the valuation of SARS every year.

PECV Method requires determination of three parameters, which are relevant to the company whose shares are being valued. These are

•

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.

The above parameters are approved by the Board of Directors. In accordance of this, an independent valuer has provided the valuation certificate at Balance Sheet date.

In the valuation as at March 31, 2011 the corporate tax rate is considered at 32.445% and Expected rate of return is determined at 7.81%.

Changes in number of SARs representing stock options outstanding were as follows:


	As at March 31,
	2012		2011			2010
As at the beginning of the year		—		2,879,747			2,898,747
Granted during the year							—
Exercised		—		(2,558,394	)		—
Forfeited		—		(321,353	)		(120,008	)
Reissued		—		—			100,508
Lapsed							—

As at the end of the year		—		—			2,879,747

Exercisable at the end of the year		—		—			—
Approximate remaining vesting period in years		—		—			1.24

17.	*Borrowings*

Aggregate maturities of the borrowings are as follows:


	As at March 31,
	2012		2011
On demand or within one year		—		53,000
In one to three years		—		—
In three to five years		—		—

		—		53,000

186

18.

Employee benefit obligation


	Years ended March 31,
	2012		2011		2010
Gratuity		1,507		1,432		856
Stock appreciation rights		—		96,832		135,746

		1,507		98,264		136,602

The movement in the defined benefit obligation of gratuity over the period is as follows:


	Years ended March 31,
	2012			2011		2010
Opening defined benefit obligation		17,403			9,861		9,700
Current service cost		2,640			2,879		2,853
Interest cost		1,359			715		679
Actuarial losses/ (gains)		(1,829	)		3,948		(3,373	)
Benefits paid		(836	)		—

Closing defined benefit obligation		18,737			17,403		9,859

The movement in the fair value of plan assets of the year is as follows:


	Years ended March 31,
	2012			2011			2010
Beginning of year		18,198			12,237			11,200
Expected return on plan assets		1,728			1,343			1,025
Actuarial (losses)/gains		(81	)		(278	)		11
Employer contributions		2,214			6,732			—
Benefits paid		(836	)		(1,836	)		—

Closing fair value of plan assets		21,223			18,198			12,236

The amounts recognised in the income statement in respect of gratuity are as follows:


	Years ended March 31,
	2012			2011			2010
Current service cost		2,640			2,879			2,853
Interest cost		1,359			715			679
Actuarial loss		(1,747	)		6,061			(3,384	)
Expected return on plan asset		(1,728	)		(1,344	)		(1,025	)

		524			8,311			(877	)

The principal actuarial assumptions used were as follows:


	Years ended March 31,
	2012			2011			2010
Discount rate		8.00	%		8.00	%		7.00	%
Expected return on plan assets		9.15	%		9.25	%		9.25	%
Long term rate of compensation increase		6.00	%		6.00	%		6.00	%
Mortality rates at various age groups are taken as per 1994-96 Life Insurance Corporation (LIC) Ultimate table

19.

Accounts payables, accrued expenses and other liabilities


	As at March 31,
	2012		2011		2010
Accruals		55,360		41,758		41,489
Withholding tax payable		15,868		85,062		71,382
Bonus payable		16,567		255,242		157,410
Other payables		93,562		123,543		124,046

Total		181,357		505,605		394,327

187

20.

Other expenses


	Year ended March 31,
	2012		2011		2010
Professional fees		11,085		12,087		11,059
Travelling and conveyance		9,272		18,901		16,068
Books & periodicals, postage, printing and stationary		28,533		29,120		25,817
Loss on account of error trades (net)		2,583		10,923		12,602
Repairs & maintenance		424		818		145
Currency loss on revaluation of current		9,205		—		—
Insurance premium		1,590		1,248		963
Others		7,638		12,531		15,457

Total		70,330		85,628		82,111

21.

Employee benefit expense


	Year ended March 31
	2012		2011		2010
Salaries and bonus		505,907		670,766		508,264
Defined contribution plans		3,992		4,047		3,452
Defined benefit plans		2,169		9,134		159
Staff welfare expenses		5,007		14,677		6,796
Share–based compensation expense		—		95,911		89,104

		517,075		794,535		607,775

Share based compensation expense has increased during the year due to increase in fair value of SARS .

22.

Provision for doubtful debts

The Company’s allowance for doubtful accounts is based upon management’s continuing review and evaluation of factors such as collateral value, aging and the financial condition of the customers. The allowance is assessed to reflect the best estimate of probable losses due to client defaults that have been incurred as of the balance sheet date. Any changes in the estimate are included in the operating results for the current period. In circumstances where a specific customer’s inability to meet its financial obligation is known, the Company records a specific provision against accounts receivable to reduce the receivable to the amount that it reasonably believes will be collected. The bad debt expense aggregating to Rs. 25,700 is recognised for the years ended March 31, 2012 (March 31, 2011: Rs 38,300).

23.

Other income


	Year ended March 31,
	2012		2011		2010
Profit on sale of available-for-sale securities		—		23,603		—
Delayed payment charges (*)		23,219		60,014		24,999
Research fees		8,851		—		3,072
Referral fees (**)		46,000		57,745		51,160
Interest		6,567		16,278		5,566
Dividend		3,897		1,617		283
Currency fluctuation fain		119		912		7,960
Expenses reversal (***)		—		—		17,567
Principal trading activity		3,493		4,056		—
Miscellaneous income		16,173		30,565		26,365

		108,319		194,790		136,972

(*)	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 year 2010, on account of mutual agreement between the stakeholders.

188

24.

Income tax expense


	Year ended March 31,
	2012		2011			2010
Current tax		25,106		127,322			122,679
Deferred tax (Note 7)		37,189		(61,575	)		38,181

		62,295		65,747			160,860

The tax on MF’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:


	Year ended March 31,
	2012			2011			2010
Net income before taxes		154,917			307,587			468,403
Enacted tax rates in India		32.445	%		33.220	%		33.990	%

Computed tax expense		50,263			102,180			159,210

Income exempt from tax:
Dividend		(1,264	)		(536	)		(96	)
Non-deductible expenses:
Contribution to co-investment plan		—			734			751
Others including donations, IT interest etc.		773			678			1,228
Recharges by parent and affiliate companies		—			—			980
Excess Provisions for earlier years reverse back in current year		7,207			(26,491	)		—
Income charged at lower rate		—			(7,171	)		—
(Gain) / loss in subsidiaries		(442	)		(4,209	)		(3,294	)
Others		5,758			562			2081

Income taxes recognized in the statement of income		62,295			65,747			160,860

25.

Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

As at March 31, 2012

Loans and

Available

receivables

for sale

Total

Assets as per Balance Sheet

Cash and bank balance

146,980

146,980

Cash-restricted

2,324,000

2,324,000

Interest bearing deposits with bank

70,777

70,777

Deposits with clearing organizations

78,613

78,613

Receivable from broker-dealers and clearing organizations

170,660

170,660

Receivable from customers

340,998

340,998

Available-for-sale securities:

Marketable, at market value

41,005

41,005

Not readily marketable (at estimated fair value)

—

Interest accrued but not due

57,302

57,302

Other assets

208,999

208,999

3,398,329

41,005

3,439,334


	Other
	financial
	liabilities		Total
Liabilities as per Balance Sheet
Payable to broker dealers and clearing organizations		184,659		184,659
Payable to customers		684,802		684,802
Borrowings		—		—
Accounts payable, accrued expenses and other liabilities		181,357		181,357

		1,050,818		1,050,818

189

As at March 31, 2011

Loans and
receivables

Available
for sale

Total

Assets as per Balance Sheet

Cash and bank balance

281,486

281,486

Cash-restricted

2,959,063

2,959,063

Interest bearing deposits with bank

93,362

93,362

Deposits with clearing organizations and others

173,783

173,783

Receivable from broker-dealers and clearing organizations

18,580

18,580

Receivable from customers

447,770

447,770

Available-for-sale securities:

Marketable, at market value

40,776

40,776

Not readily marketable (at estimated fair value)

92,868

92,868

Interest accrued but not due

67,124

67,124

Other assets

251,868

251,868

4,293,036

133,644

4,426,680


	Other financial liabilities		Total
Liabilities as per Balance Sheet
Payable to broker-dealers and clearing organizations		264,504		264,504
Payable to customers		1,272,571		1,272,571
Borrowings		53,000		53,000
Accounts payable, accrued expenses and other liabilities		505,605		505,605

		2,095,680		2,095,680

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.

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. 43,479 and March 31, 2009 aggregating to Rs. 15,375. 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.

26.

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.

27.

Commitments and contingencies

Contingent Liabilities

(i)Guarantee given by scheduled banks on behalf of the company in favour of commodity Exchange Rs. Nil (March 31, 2011 Rs. 200,000).

190

(ii) Claims against the company not acknowledged as debts Rs. 15,030 (March 31, 2011 Rs. 15,030). In the said claim, based on the facts and merits of the case, the Company is hopeful of succeeding and as such does not expect any significant liability to crystallize.

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, 2012, are approximately as listed below:


	As at March 31,
	2012		2011
Not later than 1 year		13,728		59,409
Later than 1 year and not later than 5 years		12,821		20,346
Later than 5 years		—		—

Total minimum lease commitments		26,549		79,755

Rent expense for the current year aggregated to Rs. 44,273 (2011: Rs. 59,979) 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.

28.

Capital commitment

Estimated amount of contract (net of advances) remaining to be executed on capital account and not provided for is Rs. 400 (March 31, 2011: Rs. 314)

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 party
Holding enterprises:		MF Global Overseas Limited

Ultimate Holding company:		MF Global Holdings Limited

Party having substantial interest:		Sify Technologies Limited

Other related parties with whom transactions have taken place:

Nature of relationship		Related party
Subsidiary Companies:		MF Global Commodities India Private Limited
		MF Global Middle East DMCC

Fellow subsidiary Companies:		MF Global India Private Limited
(where transactions exist)		MF Global Holdings HK Limited MF Global Hong Kong Limited MF Global Australia Limited MF Global Singapore Limited MF Global Finance & Investment Services India Private Limited MF Global Centralised Services India Private Limited MF Global UK Limited MF Global Inc (DE) MF Global Futures Trust Company Limited

Key management personnel:		Mr. Vineet Bhatnagar
		Mr. Rajendra Bhambhani
		Mr. Randy MacDonald (resigned w.e.f. November 28, 2011)
		Michael Charles Blomfield (appointed w.e.f. June 22, 2011 and resigned w.e.f. November 28, 2011
		Abizer Diwanji (appointed w.e.f. November 28, 2011)

191

b)	*Transactions involving services*


	Year ended March 31,
	2012		2011			2010
Services provided by MF to :

Holding Companies
Reimbursement of expenses		549		—			539

Fellow subsidiary Companies
Referral fees		48,449		57,750			51,162
Research fees		173
Brokerage income		18,673		5,333
Reimbursement of expenses		3,676		5,165			5,646

		71,520		68,248			57,347

Services received by MF from :

Holding Companies
Bank guarantee commission		—		72			497
Insurance premium		—		—			(17,567	)

Fellow subsidiary Companies
Lease line charges
IB commission expense		4,001		4,691			2,006
Interest expense		956		1,562			888
Membership & subscription		2,197		6,368			3,266

		7,154		12,693			(10,910	)

Loan (taken) and repaid (Net)		5,300		(5,300	)		383,700

c)	Key management compensation


	Year ended March 31,
	2012		2011		2010
Salaries and other short-term employee benefits		138,362		122,410		71,361
Other long-term benefits (Co-investment plan)		—		—		2,208
Share-based payments		—		—		19,653

		138,362		122,410		93,222

d)	Year-end balances arising from transactions involving services


*Due To Related Parties*
MF Global Holdings Ltd.	36,985	32,857
MF Global UK Ltd.	33,662	57,953
MF Global Inc. DE	9,220	6,372
MF Global Holdings USA Inc.	2,308	2,014
MF Global Singapore Pte Ltd.	206	1,028
MF Global Holdings HK Ltd.	243	—
MF Global Finance and Investment Services India Private Limited	—	53,000
MF Global Australia Limited	143	125

	82,767	153,349

*Due from Related Parties*
MF Global Inc. DE	256	179
MF Global Mauritius Pvt. Ltd.	153	1,116
MF Global Singapore Pte Ltd.	5,014	1,243
MF Global Holdings HK Ltd.	—	109
MF Global HK Ltd.	308	269
MF Global UK Ltd.	6,953	7,765
MF Global Futures Trust Company Limited	13	—
MF Global India Pvt. Ltd.	1,550	1,153
MF Global FXA Securites Limited	231	200

	14,478	12,034

192

29.1.

As stated in Note – 1, MF Global Holdings Ltd (the “ultimate parent company”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. Meanwhile, the affairs of other affiliated Company of MF Global Group are being managed by the Administrator / Liquidators.

The Company has reconciled outstanding receivables / payables with the related parties on monthly basis in the ERP system till September 30, 2011. In view of the above petitions, the Company has not obtained confirmation of outstanding balances with related parties as at March 31, 2012. There were no significant transactions with such parties after the date of filing such petitions. Under these circumstances, the Financials Statements have been prepared from the book balances which are subject to reconciliation / confirmations from the respective parties. Moreover, MF Global Overseas Limited and Sify Technologies Ltd. have entered into Share Purchase Agreements (SPA) with an international brokerage house for acquiring its 70.15% and 29.85% respectively. In respect of such acquisition, the Company has received necessary regulatory approvals and acquisition is expected to be completed shortly.

For and on behalf of the Board

Vineet Bhatnagar

Managing Director

193

ITEM 19.

Exhibits


Number			Description

	1	.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, 2011between 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)

	8	.1	List of Subsidiaries. (18)

	11	.1	Code of Conduct and Conflict of Interest Policy (6)

194



12.1		Rule 13a-14(a) Certification of Chief Executive Officer

12.2		Rule 13a-14(a) Certification of Chief Financial Officer

13.1		Section 1350 Certification of Chief Executive Officer

13.2		Section 1350 Certification of Chief Financial Officer

15.1		Consent of ASA & Associates in respect of the Sify Technologies Limited (18)

15.2		Consent of KPMG in respect of the Sify Technologies Limited (18)

15.3		Consent of Price Waterhouse in respect of the MF Global Sify Securities India Private Limited (18)

15.4		Consent of ASA & Associates in respect of MF Global Sify Securities India Private Limited (18)

(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.

(18)	Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission on August 13, 2012 and incorporated herein by reference.

195

SIGNATURES

The company hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.


	SIFY TECHNOLOGIES LIMITED

	By:	/s/ Kamal Nath
	Name:	Kamal Nath
	Title:	Chief Executive Officer

	By:	/s/ M P Vijay Kumar
	Name:	M P Vijay Kumar
Date: August 24, 2012	Title:	Chief Financial Officer

196