MIRA INFORM REPORT

Report Date :

31.05.2011

IDENTIFICATION DETAILS

Name :	ECLERX SERVICES LIMITED
Registered Office :	Sonawalla Building, 1^st Floor, 29 Bank Street, Fort, Mumbai – 400023, Maharashtra
Country :	India
Financials (as on) :	31.03.2010
Date of Incorporation :	24.03.2000
Com. Reg. No.:	125319
Capital Investment / Paid-up Capital :	Rs.288.606 Millions
CIN No.: [Company Identification No.]	L72200MH2000PLC125319
TAN No.: [Tax Deduction & Collection Account No.]	MUME03752A
PAN No.: [Permanent Account No.]	AAACE7932L
Legal Form :	Public Limited Liability Company. Company’s Shares are Listed on the Stock Exchange
Line of Business :	Data Analytics and Process Outsourcing Services
No. of Shares:	3000 (Approximately)

RATING & COMMENTS

MIRA’s Rating :

A (60)

RATING		STATUS	PROPOSED CREDIT LINE
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large

Maximum Credit Limit :	USD 7981080
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and reputed company having fine track. Financial position of the company appears to be sound. Trade relations are fair. Business is active. Payments are reported to be correct and as per commitments. The company can be considered good for normal business dealings at usual trade terms and conditions.

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

INFORMATION DECLINED BY

Management Non Co-operative (Name not disclosed)

LOCATIONS

Registered Office :	Sonawalla Building, 1^st Floor, 29 Bank Street, Fort, Mumbai – 400023, Maharashtra, India
Tel. No.:	91-22-40914100
Fax No.:	91-22-40941212
E-Mail :	contact@eclerx.com, investor@eclerx.com
Website :	http://www.eclerx.com

DIRECTORS

AS ON 31.03.2010

Name :	Mr. P D Mundhra
Designation :	Executive Director
Qualifications :	MBA
Date of Appointment :	01.04.2006
Name :	Mr. V K Mundhra
Designation :	Director
Name :	Mr. Anjan Malik
Designation :	Non Executive Director
Name :	Mr. Pradeep Kapoor
Designation :	Non Executive Director
Name :	Mr. Anish Ghosal
Designation :	Non Executive Director
Name :	Mr. Vikram Limaye
Designation :	Non Executive Director
Name :	Mr. Jimmy Bilimoria
Designation :	Director
Name :	Mr. Sandeep Singhal
Designation :	Non Executive Non Independent Director

KEY EXECUTIVES

Name :	Mrs. Gaurav Tongia
Designation :	Company Secretary

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

AS ON 31.03.2011

Names of Shareholders	No. of Shares	Percentage of Holding
(A) Shareholding of promoter and Promoter Group
1) Indian
a) Individuals / Hindu Undivided Family	8564436	29.68
2) Foreign
a) Bodies corporate	8547683	29.62
(B) Public Shareholdings
1) Institutions
a) Mutual Funds	2367953	8.21
b) Foreign Institutional Investors	5780038	20.03
2) Non – Institution
a) Bodies corporate	488282	1.69
b) Individuals
i. Individual Shareholders holding nominal share capital upto Rs.0.100 Million	940538	3.26
ii. Individual Shareholders holding nominal share capital in excess Rs.0.100 Million	1294958	4.49
c) Any other
i) Trusts	2922	0.01
ii) NRI	830411	2.88
iii) Clearing Member	35213	0.12
iv) Foreign Nationals	2000	0.01
Total	28854434	100.00

BUSINESS DETAILS

Line of Business :

Data Analytics and Process Outsourcing Services

GENERAL INFORMATION

No. of Employees:	3000 (Approximately)
Bankers :	· Bank of India · Hongkong and Shanghai Banking Corporation Limited · Citibank N.A. · Kotak Mahindra Bank Limited · Standard Chartered Bank

Banking Relations :	-
Auditors :
Name :	C M Gabhawala and Company Chartered Accountant
Address :	42 Nanik Niwas, 30 Dr. D D Sathe Marg, Girgaum, Mumbai – 400004, Maharashtra, India
Tel No.:	91-22-23823923/ 23824641/ 23841752
Fax No.:	91-22-23850931
Email :	cmgco@hathway.com
Name :	Walker Chandiok and Company Chartered Accountant
Associates/Subsidiaries :	· eClerx Limited, United Kingdom (wholly owned subsidiary) · eClerx LLC, United States of America (wholly owned subsidiary) · eClerx Investments Limited, British Virgin Island (wholly owned subsidiary) · eClerx Private Limited, Singapore (wholly owned subsidiary) (w. e. f. January 28, 2010) · Igentica Travel Solutions Limited (99.4% held by eClerx Investments Limited, BVI) · * Igentica Limited (100% held by Igentica Travel Solutions Limited) · * Electrobug Technologies Limited (100% held by Igentica Travel Solutions Limited) · * E-Bug Pricing Intelligence Limited (100% held by Electrobug Technologies Limited) · These companies have been wound up on March 17, 2009.

CAPITAL STRUCTURE

AS ON 31.03.2010

Authorised Capital :

No. of Shares	Type	Value	Amount
30000000	Equity Shares	Rs.10/- each	Rs.300.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
19031099	Equity Shares	Rs.10/- each	Rs.190.310 Millions

{Of the above shares 16,547,700 (P.Y. 16,503,273) equity shares of Rs. 10 each have been issued for consideration other than cash by way of regular bonus shares and bonus shares accrued to shares issued by way of employee stock options, by capitalising free reserves}

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2010	31.03.2009	31.03.2008
SHAREHOLDERS FUNDS
1] Share Capital		190.310	189.270	188.690
2] Stock Options Outstanding		2.300	0.980	0.890
3] Stock Options Pending Allotment		0.170	0.000	0.000
4] Reserves & Surplus		1802.490	1462.210	1133.120
5] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1995.270	1652.460	1322.700
LOAN FUNDS
1] Secured Loans		0.000	0.000	39.970
2] Unsecured Loans		0.000	0.000	0.000
TOTAL BORROWING		0.000	0.000	39.970
DEFERRED TAX LIABILITIES		0.000	0.000	0.000
TOTAL		1995.270	1652.460	1362.670
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		190.330	197.960	112.460
Capital work-in-progress		22.070	0.260	68.910
INVESTMENT		908.580	450.590	787.680
DEFERREX TAX ASSETS		7.220	7.140	2.280
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	0.000	0.000	0.000
	Sundry Debtors	392.250	450.590	245.720
	Cash & Bank Balances	453.340	189.200	124.490
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	497.120	301.160	215.570
Total Current Assets		1342.710	940.950	585.780
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditors	127.780	97.900	77.210
	Other Current Liabilities	490.290	136.260	60.040
	Provisions	249.000	244.420	57.190
Total Current Liabilities		867.070	478.580	194.440
Net Current Assets		475.640	462.370	391.340
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		1995.270	1652.460	1362.670

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2010	31.03.2009	31.03.2008
	SALES
		Sales	2570.210	1970.850	1169.810
		Other Income	54.270	48.720	64.740
		TOTAL (A)	2624.480	2019.570	1234.550
Less	EXPENSES
		Employee compensation and related expenses	833.580	577.310	390.760
		General and administration expenses	846.600	660.460	276.620
		Selling and marketing expenses	62.270	33.670	24.970
		TOTAL (B)	1742.450	1271.440	692.350
Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		882.030	748.130	542.200
Less	FINANCIAL EXPENSES (D)		0.000	0.360	2.570
	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		882.030	747.770	539.630
Less/ Add	DEPRECIATION/ AMORTISATION (F)		68.540	72.260	44.370
	PROFIT BEFORE TAX (E-F) (G)		813.490	675.510	495.260
Less	TAX (H)		87.570	69.080	56.200
	PROFIT AFTER TAX (G-H) (I)		725.920	606.430	439.060
Add	PREVIOUS YEARS’ BALANCE BROUGHT FORWARD		492.290	223.800	205.570
Less	APPROPRIATIONS
		Interim Dividend	143.360	47.440	107.590
		Tax on Interim Dividend	24.370	8.060	18.290
		Proposed Final Dividend	190.310	189.270	37.740
		Tax on Proposed Final Dividend	31.610	32.180	6.420
		Transfer to General Reserve	72.590	60.990	250.790
	BALANCE CARRIED TO THE B/S		755.970	492.290	223.800
	EARNINGS IN FOREIGN CURRENCY
		Export Earnings	2426.160	1804.240	956.330
	TOTAL EARNINGS		2426.160	1804.240	956.330
	IMPORTS
		Capital Goods	39.570	37.380	35.150
	TOTAL IMPORTS		39.570	37.380	35.150
	Earnings Per Share (Rs.)		38.23	32.07	--

QUARTERLY

PARTICULARS	30.06.2010	30.09.2010	31.12.2010	31.03.2011
	1^st Quarter	2^nd Quarter	3^rd Quarter	4^th Quarter
Net Sales	770.790	821.650	871.300	955.380
Total Expenditure	492.920	529.390	511.850	561.930
PBIDT (Excl OI)	277.870	292.260	359.450	393.450
Other Income	66.610	38.250	61.480	74.150
Operating Profit	344.480	330.510	420.930	467.600
Interest	0.000	0.000	0.000	0.000
Exceptional Items	0.000	0.000	0.000	(126.770)
PBDT	344.480	330.510	420.930	340.830
Depreciation	14.780	22.600	24.670	26.760
Profit Before Tax	329.690	307.910	396.050	314.070
Tax	39.390	35.640	39.050	48.020
Provisions and contingencies	0.000	0.000	0.000	0.000
Profit After Tax	290.300	272.270	357.000	266.040
Extraordinary Items	0.000	0.000	0.000	0.000
Prior Period Expenses	0.000	0.000	0.000	0.000
Other Adjustments	0.000	0.000	0.000	0.000
Net Profit	290.300	272.270	357.000	260.040

KEY RATIOS

PARTICULARS		31.03.2010	31.03.2009	31.03.2008
PAT / Total Income	(%)	27.66	30.03	35.56
Net Profit Margin (PBT/Sales)	(%)	31.66	34.28	42.34
Return on Total Assets (PBT/Total Assets}	(%)	53.06	59.31	40.11
Return on Investment (ROI) (PBT/Networth)		0.41	0.41	0.37
Debt Equity Ratio (Total Liability/Networth)		0.43	0.29	0.37
Current Ratio (Current Asset/Current Liability)		1.55	1.97	3.01

LOCAL AGENCY FURTHER INFORMATION

SUNDRY CREDITORS DETAILS:

PARTICULARS	RS. IN MILLIONS 31.03.2010	RS. IN MILLIONS 31.03.2009	RS. IN MILLIONS 31.03.2008
Sundry Creditors for Goods and Services*	127.780	97.900	77.210

FINANCIALS:

The year marked completion of 10 years by the Company and the Company recorded a turnover of more than Rs. 2,500.000 millions for the first time in its history.

The total income increased to Rs. 2,624.380 millions from Rs. 2,023.310 millions in the prior year, at a growth rate of 30%. EBITDA amounted to Rs. 898.090 millions (34% of total revenue) versus Rs. 774.09 millions (38% of total revenues). The Company earned Net Profit After Tax (PAT) for the year of Rs. 735.370 millions versus Rs. 617.820 millions during the prior registering Year on Year (YoY) growth of 19%.

INDUSTRY OVERVIEW

India’s IT and ITES exports continue to play an important role for the country, accounting for 25% of India’s overall exports, with 90% of these revenues largely deriving from the USA and Europe. According to the National Association of Software and Service Companies (NASSCOM), India’s software and services exports are forecasted to post double-digit export revenue growth of 13% to 15% to reach up to USD 57 billion in the year to March 2011.

This is a very bullish background to be operating within, and certainly after a difficult 2008-09, in which their industry faced a difficult period due to weakness in client markets and sustained unemployment in developed nations the fourth quarter of 2009 began exhibiting signs of improvement in business sentiment. Deals increased significantly, led by USA and Europe, as a large number of delayed contracts in ‘pipeline’ materialised. Improving market sentiment manifested in greater business volumes, and commensurate increase in people, technology and process investments by customers.

There continues to be broader acceptance of off-shoring and outsourcing as a critical component of cost reduction strategies, and this is helping the ITES/IT industry. Demographic demand for outsourcing continues to extend beyond just the very large global enterprises to the medium sized ones, and from the large financial services firms (that have been early adopters) to broader industry segments. Customer sophistication is increasing and vendors are increasingly required to provide solutions-based offerings. So instead of simply providing skilled “labour” or cost arbitrage, customers today require their vendors to provide consultative thinking, processes redesign and automation to bring about step jump improvements in their business processes. This requires the Indian IT/ITES industry to accelerate its investment in understanding its customers business and to increase the sophistication of its service offering. The organisations that are able to move up the value chain in this way are increasing their share of large customer budgets.

A trend consolidating over the past year is that of offshoring to India from mid-cost markets such Singapore and Eastern Europe – an increasing sign of confidence in the quality and size of the Indian talent markets. Additionally, as offshoring extends to a larger variety and size of customers and geographies, vendor sophistication grows, cost competitiveness increases and more and more customers understand the cost and management overhead of offshore captives, there is an increased acceptance of the third-party outsourcing model. A maturing vendor community that has demonstrated an ability to provide service benefits such as process re-engineering and continuous improvement, the ability to support complex processes across time zone and a track record of providing services at fixed prices in the face of rampage wage inflation periods, has substantially increased customer confidence and the Company continues to expect this to be very positive trend for Indian IT/ITES vendors.

The credit crisis and the damaged balance sheets of the western economies however continue to cast a pall of uncertainty over customer markets. Some immediate impacts on western corporations have been, increased capital requirements, higher regulatory burdens and reduced operational independence. Additionally, tax burdens have increased, as have employee and consumer protectionism. Clearly, these all add substantial cost to their customer’s businesses, which in turn, they expect will manifest as cost pressure on vendors. For instance, the new Value-Added Tax (VAT) rule introduced in January 2010 by the European Union on services delivered from Non-European Union (EU) nations such as India is expected to make off-shoring costlier for banking, healthcare and other industries and it is likely that some of the impact will be borne by vendors. Finally, many western governments are expected to be increasingly comfortable with weaker currencies and this, in turn will reintroduce an element of currency risk to the outsourcing business that has been absent over the past two years.

BUSINESS OVERVIEW

eClerx Services Limited (eClerx) is a Knowledge Process Outsourcing (KPO) Company providing data analytics, data management and process improvement solutions to global enterprise clients. eClerx supports its clients through two business units – Financial Services and Sales and Marketing Support.

OPERATIONAL REVIEW

During 2009-10, total revenues were Rs. 2,570.21 million, a growth of 30% over the previous year. The Company increased its operating margin to Rs. 933.72 million a growth of 27%. The Company’s results again demonstrate the differentiated and core nature of its services and its ability to navigate through challenging market conditions. During the year, the Company substantially broadened its range of services to clients, thus expanding the addressable market for its services. An increasing number of these newer services are core and critical for clients, and thus continue to increase the Company’s closeness to clients.

The last year also saw further vendor consolidation in the client community. The Company won an increasing share of business from strategic clients, and lost share in accounts where the Company was a peripheral vendor. This is reflected ultimately in higher client concentration, with 82% of the Company’s revenues attributing to its top five clients against a corresponding figure of 75% in the prior year.

The Company takes pride in the high quality of its client base–of its approximately 45 clients, 20 are Fortune 500 names whilst the rest are large enterprise clients. The Company continues to be successful in winning a high proportion of repeat business from existing clients, a barometer of client satisfaction with the Company’s services. Additionally, the large percentage of maturing contracts that continue to be renewed each year validates the annuity nature of the Company’s business model.

The Company has also made significant progress in reducing its currency concentration with increased penetration in Europe. This led to revenue in USD reducing from 77% during 2008-09 to 73% during the year.

Headquartered in Mumbai, eClerx has operations in India and sales and marketing presence in the USA, UK, Ireland and in Singapore. In India, the Company operates out of three STP facilities in Mumbai and a SEZ facility in Pune. The Company has set up a 100% subsidiary in Singapore during the year to cater to the growing opportunities in the Asian market.

With the Mumbai and Pune facilities reaching high utilization levels, the Company has taken on lease additional space in Airoli, Navi Mumbai within a SEZ facility. The Company has taken 44,000 sq. ft. initially, with the option to add another 44,000sq. ft. Operations for Phase-I have commenced in the second quarter of 2010-11.

During the year, the Company increased its headcount by 45% and today employs approximately 3,000 employees. The Company aggressively hired and upgraded its talent pool, with a special focus on senior management, both in India and overseas. The Company maintains an attrition rate of approximately 30%.

Services

eClerx supports its clients through its two business units-Capital Markets and Sales and Marketing Support. Across both these units, the Company supports and improves processes that are core to its customers’ day to day business operations. The Company continues to focus on engagements where it can tap the largest percentage of client spend by leveraging its domain expertise and by bringing together consulting, project management and solution based service delivery.

In the Capital Markets division, the Company today provides end-to-end financial transaction support services such as trade booking, trade confirmation, asset servicing, cash settlements, client servicing, risk management and reference data integrity across all asset classes, and its services span both “sell-side” (the large banks) and “buy-side” (the funds and asset managers). Furthermore, the Company provides strategic and process consulting services, helping clients devise solutions to improve efficiency, reduce risk and meet regulatory and market demands.

Similarly in the Sales and Marketing Support division, the Company today supports clients in all elements of product and services marketing and sales–with a focus on online support to include content development and management, search engine management, web operations, pricing and customer analytics, product database management and catalog audits. The Company is also pursuing a strategy of creating a portfolio of platform attached services, by creating a suite of services that are complementary to industry standard IT platforms.

Currency

eClerx follows a consistent policy of hedging receivables for 12-18 months forward. During the year, the Company’s net losses on account of foreign exchange fluctuation stood at Rs. 159.74 million. The Company has around USD 46.45 million in hedges across the combination of forward and option at an average rate of around Rs. 49/USD. This is a more favourable hedge position than the Company had the previous year and hence losses on account of foreign exchange are expected to be lower in 2010-11.

Bonus issue

The Company was incorporated in March 2000 and completed 10 years in March 2010. Commemorating this milestone, the Board of Directors of the Company by resolution passed on June 7, 2010 recommended the issue of bonus equity shares in the ratio of 1 bonus equity share of Rs. 10 each for every 2 equity shares of Rs. 10 each held in the Company. The Board also recommended an increase in the authorised share capital from Rs. 300 million to Rs. 500 million. The shareholders of the Company accorded their approval to both the proposals via postal ballot, the results of which were announced on July 14, 2010. The record date for the purpose of ascertaining entitlement for bonus shares was fixed as July 26, 2010. Accordingly the bonus shares were allotted on July 28, 2010. The Company is currently in the process of effecting corporate action for crediting shares in demat account of shareholders of the Company holding shares in the electronic mode, while the share holders holding share in physical mode are being issued share certificates. The Bonus equity shares so issued shall rank pari-passu in all respect with the existing equity shares.

Swot Analysis

Strengths

· Industry-focused and value-added service provider of core, critical and “sticky” services to customers

· Increasing scale of operations–the Company has a team of almost 3,000 people, revenues of more than USD 50 million and direct presence in five countries

· The Company’s senior leadership team comes from the industries the Company supports, and helps the Company develop services and strategies that increases the Company’s closeness and relevance to its customers

· The Company has entered new services and developed new capabilities in each year of operation weaknesses

· High client concentration - 82% of the Company’s revenues attributes to five clients

· Concentrated currency billings - over 70% of the Company’s billings are in USD, which exposes the Company to volatility in currency rates opportunities

· Established leadership in the industries in which the Company operates and high client satisfaction means high brand recall and enhanced ability to sell services

· A large pool of existing clients that can be grown to become strategic by replicating services

· Proven track record in continually broadening service portfolio which in turn increases addressable market place for the Company

· Demographic trend towards cost reduction and specifically third party outsourcing

· Increasing consulting and IT spend at customers to meet stringent regulatory, transparency and risk management, hence creating an opportunity for the Company to provide more value-added services threats

· Reduced customer profitability and increasing competition may affect pricing and profitability

· Increasing regulation for customers may require the Company to take on more business liability and/or additional cost

· Weakening western currencies may impact profitability

· Wage inflation in the Indian market may affect profitability

· Increasing percentage of business from Asia-Pacific countries may put downward pressure on prices and margins

· Increasing business complexity and customer demands means greater investment in sales and marketing and in people training, which again may affect profitability

· Increasing protectionism across western countries may affect business growth

Fixed Assets:

· Leasehold Improvement

· Computer

· Furniture and

· Fixture

· Office Equipment

Press Releases:

Judging Performance | Appraisal methods take centre stage

With revenues and profitability so dependent on the quality of human resources, it has become important to measure this in a scientific and unambiguous way. Companies are now beginning to look at performance management strategically and are modifying systems to suit business needs

By Rajeshwari Sharma

As human resources become increasingly critical to the growth of businesses, measuring human capital, identifying, developing, rewarding and managing employee performance is being looked at more strategically than ever before. With investors and other stakeholders evaluating company performance on a quarterly basis, appraisal systems are being tweaked regularly to suit changing business needs.

Beverages firm Coca-Cola India, for instance, recently replaced its five-point rating system with a four-point grading methodology to force reviewing managers to take that tough call on rating appraisees, and not take a median approach. “We found out, in many cases, that the appraiser would take the easy way out and assign a score of 2.5 or 2.7, rather than making the difficult choice of giving 2 or 3,” says Nalin Garg, vice-president, human resources, Coca-Cola India.

Five months ago, business process outsourcing company vCustomer Corp. went online with its performance management system. The company broke down quarterly reviews into monthly objectives, and put in place informal feedback sessions every month to avoid any surprises, both for the employee and the employer, at the end of the quarter.

At Jindal Stainless Ltd, raises and promotions of managers will now depend more on tangible deliverables. All managerial staff at the steel firm is evaluated on the basis of current performance—measured by supervisors (40% weightage), and an outside agency, which assesses the leadership potential of the appraisee, weighted at 40%, while 20% weightage is given to the assessment made by cross-functional teams (for all-round feedback). “Along with a sharpened focus on deliverables, this year, we plan to increase the variable component from 15% of the gross salary to 20%,” says S.K. Jain, senior vice-president, human resources, Jindal Stainless.

Like Jindal Stainless, electrical distribution company Schneider Electric India Pvt. Ltd has made it mandatory for reviewing managers to evaluate appraisees according to the specific levels and bands they fall under, and not in clustered groups. For example, regional managers in sales teams will be compared with each other or employees in similar job roles. “The idea is to compare apples with apples,” says Robin Singh, director, human resources, Schneider Electric.

From this year, data analytics and customized process solutions provider eClerx Services Ltd has linked part of the bonus given to managers to competency-based development. For instance, a manager who is found lacking in soft skills is sent for training to fill that gap. “We made this change to make sure managers take training and development to fill competency gaps seriously,” says Kishore Poduri, head of human resources at eClerx.

Through these changes, eClerx and others are aiming at a performance-driven culture—among the first few to do so.

For, says Ganesh Shermon, head of human capital advisory service at consultant KPMG India : “Most companies in India still have basic, ad hoc models that have neither clear objectives set out nor the recognition of the criticality of a performance management system.”

Increasingly, however, companies are moving from a traditional performance management approach to the balanced scorecard—a framework developed by Robert Kaplan and David Norton in the 1990s, which aligns business activities to the vision and strategy of the organization, and monitors the performance of the organization against strategic goals.

Interestingly, there is an increasing amount of scrutiny on quality of work, with companies placing significant importance on qualitative measures. “It is no longer only about numbers and meeting targets. The means to the end (goals) has become very important,” says Shermon. “Companies want to know how employees are meeting their key performance areas. Is there a strategy and ethics involved in it?” says Shermon. “It is often seen that an employee may have met targets but also diluted a bit of the organization’s brand.”

“Appraisal is also about competencies or manifestation of the corporate behaviour an employee deploys while achieving goals and targets, in conformity with approved behaviour,” adds Shermon.

Some companies that have adopted balanced scorecards or other performance management methodologies—such as KPMG’s value-based management, Arthur Andersen’s value dynamics, Stern Stewart EVA—include Coca-Cola India,PepsiCo India Holdings Pvt. Ltd, Godrej and Boyce Manufacturing Co. Ltd, Syngenta India Ltd, Cargill India Pvt. Ltd, eClerx, HCL Technologies Ltd, Satyam Computer Services Ltd, Toyota Kirloskar Motors Ltd, Samsung India Electronics Pvt. Ltd, and public sector firms such as Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd.

Explaining the rationale of changing appraisal systems, Sanjay Bali, vice-president of human resources, Samsung India, says: “Measuring the quality of human resources on changing performance parameters in a scientific and unambiguous way is critical since revenues and profitability are so dependent on it.”

Thus, companies are adding and/or modifying more variants, metrics and key result areas to the performance measurement system to bring in objectivity and align individual goals with those of the organization. For example, a sales executive is now evaluated on parameters such as leadership skills and initiative, teamwork and cooperation, people skills and contribution to the overall corporate brand, in addition to key result areas such as sales generated, customer retention and acquisition. The definition of key performance areas is better articulated now and these have become more measurable than before.

For instance, all employees at PepsiCo get rated on business and people results, with 50% weightage on each parameter. People results comprise four key areas—values-based culture, inclusion and diversity, talent management and personal development. PepsiCo India executive director of human resources, Pavan Bhatia, reasons, “The kind of business we are in, it is important that all employees, starting from the frontline staff to the business head, focus on people results.” He adds, “Along with business results, building the capability of the next line of employees is very important.”

The appraisal system, which was put in place in 2006 by PepsiCo India, is now being adopted across the beverages company’s offices worldwide.

As organizations move from the concept of individual business units to entrepreneurial business units, where entrepreneurial capabilities are applied within an organization, people management and leadership skills are becoming key performance areas, even for junior employees. Companies are driving the leadership objective right from the lowest level in an organization.

K.K. Swamy, deputy managing director at Toyota Kirloskar Motors, says: “Employees across levels are measured on leadership competencies, only the weightage on leadership skills increases from junior to senior levels.”

Human resource consultants say the orientation to performance management has changed over the last several years—appraisal systems now play a far greater role in an organization’s overall strategy. “Companies want to get it right not just in terms of measuring current performance, but also measuring an employee’s potential,” says Anita Belani, country head, Watson Wyatt India Pvt. Ltd, a global human resource consulting firm.

Human resource managers say that while it is important to have measures in place, an unbiased, transparent measure mechanism is necessary. While PepsiCo India’s Bhatia has put in place a survey called Connect that tracks whether people results are being fulfilled, Schneider Electric’s Singh has made it known that an appraisal report will not be considered complete till the appraisee and the reviewing manager’s manager, who is often the chief executive, send their comments on the appraisal.

Singh says objectivity is not easily achieved since, culturally, employees in India are not geared to deal with performance rating professionally.

But, it is essential. “Performance management is the big picture of a company’s vision, and (of) how the contribution of individuals, teams, divisions and, ultimately, the organization as a whole can help realize it,” says Navyug Mohnot, chief executive officer of QAI India Ltd, a consulting firm that deploys process improvement and quality initiatives in organizations.

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.45.10
UK Pound	1	Rs.74.27
Euro	1	Rs.64.35

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	7
--PROFITABILIRY	1~10	6
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	6
--RESERVES	1~10	7
--CREDIT LINES	1~10	7
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		60

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
-	NB	New Business	-

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.