Directors Report of Dhanus Technologies Ltd.

Dec 31, 2011

The Directors are pleased to present the 18th Annual Report together with the statement of audited accounts of the Company for the financial year ended on December 31, 2011.

Financial Highlights

The following table summarizes the financial highlights of your Company, on a standalone basis, for the financial year under review:

(Amount in Rs.)

Particulars Year ended Year ended 31st December, 2011 31st December, 2010 (12 months) (18 months)

Total Income 53,65,07,714 119,29,85,522

Profit Before Interest, Depreciation and Taxes 7,26,35,079 39,83,74,913

Less: (a) Interest 1,87,82,500 4,30,58,343

(b) Depreciation 17,71,48,232 37,01,00,290

Profit/(Loss) Before Tax (12,32,95,653) (1,47,83,720)

Less: Provision for - (a) Provision for Current Tax 10,72,000 1,21,90,000

(b) Deferred Tax (1,03,70,322) (1,68,84,584)

Profit/(Loss) After Tax (11,39,97,331) (1,00,89,136)

Note: The figures for the current year are for a period of 12 months as against 18 months in the previous period and hence, are not comparable.

Financial Review

The turnover of the Company for the financial year ended 31st December, 2011, reported a decrease of 55.03% from Rs. 11929.85 lakhs in the previous year to Rs. 5365.08 lakhs in the year under review.

The Company has reported a Profit before interest, depreciation and tax of Rs. 726.35 lakhs and after providing Rs. 187.83 lakhs towards interest, Rs. 1771.48 lakhs towards depreciation and adjusting Rs. 92.98 lakhs towards tax, the net loss amounts to Rs. 1139.97 lakhs.

Business Review

During the current financial year ended December 31, 2011, the businesses across all verticals met with a substantial setback on account of factors both external and beyond the control of the management and internal relating to issues such as marketing structure and reach, product pricing etc. Dhanus has, over the past two years, been trying to make efforts to reverse the downslide in business by attempting to restructure its businesses and salvage the Company's business clientele and marketing reach.

Telecom

With the Company facing a recession throughout the year under review, and on account of growing financial instability and economic downturn across various parts of the globe, more significantly in Europe, and making an impact in India, the tourism industry suffered substantially thus adversely influencing the overseas travels of Indians. The Company's telecom services were thus impacted as Indians traveling abroad happen to be the exclusive target customer segment in this vertical. V-tel continues to contribute a major share to the Company's top line. The Company continues to make efforts to arrest this negative trend by reviewing and drawing new plans both on the product and marketing front.

Telematics

The Company's telematics vertical brand 'Fleetrac' showed a significant negative growth on account of recession in the transportation and automobile sector. The Company is having a relook at the Company's marketing strategies, client reach, pricing policies and strategies. Your Company plans to revisit its business model in this segment and review its financial viability and thereafter decide on its renewed launch.

IT/ITES

The marginal reversal in the recessionary conditions in the US did not do much in terms of reviving the fortunes of the outsourcing business of your Company. Morover, the anti-sourcing sentiments prevailing in the US also added to lack of fresh business from the US. This has affected the Company's main customer segment, and the anti-outsourcing sentiments prevailing in the US on account of large scale unemployment continued to impact this segment of Company's business this year too. The BPO business had sustained a negative growth in its business and the Company succumbed to pricing and margin pressures.

Trading Activities

The Company had forayed into a new business segment viz., Trading Activity in November 2010. The Company primarily was engaged in the trading of computer products, accessories and peripheral items. The Company started this business in the first week of November, 2010 and did robust business in this segment initially, although with nominal margin levels. However, the Company continued this business till June 2011 anticipating increased volume of business and also upward scalability in the profit margins. The Company however realized that it was not to happen and it was essentially a low-margin with not much of perceptible scalability and therefore decided to suspend this activity in the second quarter of the financial year under review till a comprehensive review of this segment of business and its viability is analyzed.

Current strategy:

The Company's primary aim is to be a global communications company, utilizing emerging technologies to provide convergent communication services. The business model of the Company revolves around its core competence i.e., Telecom & Networking.

The Company proposes to review its entire gamut of existing businesses, marketing structure and strategy and adopt a pragmatic approach in analyzing its ability to achieve a dedicated revival plan in each of these businesses.

The Company's business opportunities are undoubtedly high in various parts of the world wherever there is a perceptible presence of Indian diaspora.

Management Discussion and Analysis

A detailed report on Management Discussion & Analysis for the financial year ended December 31, 2011 as stipulated under Clause 49 of the listing agreement with the Stock Exchanges in India is provided as a separate chapter in this Annual Report.

Issue of Convertible Warrants

As mentioned in our earlier Report for the financial year 2009-10, your Company made firm financial arrangements to take advantage of business opportunities that may arise in future, as the Company believes that it needs to have an inorganic- growth approach till a self-sustaining financial strength is reached.

The Company therefore issued 15,00,00,000 Convertible Equity Warrants to select group of investors/allottees on February 21, 2011. Thereafter, on receipt of full consideration, your Company converted 8,32,68,333 Warrants into Equity Shares of equivalent amount on March 31, 2011 and the balance 6,67,31,667 Warrants into Equity Shares of equivalent amount on July 9, 2011.

Bonus Shares

Your Company decided to capitalize its existing reserves by issuing Bonus Shares to its Equity Shareholders in the ratio of 12:5 (i.e., 12 equity shares for every 5 equity shares held as on the Record Date). Your Company, after receiving the requisite approvals from the Stock Exchanges, successfully made the allotment of 40,30,62,312 Bonus Shares.

Public Deposits

Your Company has not accepted any public deposits.

Directors

In compliance with the provisions of the Companies Act, 1956 and in accordance with the Company's Articles of Association, Shri. G. Rathan Kumar and Shri. A.D. Sudhindra, Directors, retire by rotation at this Annual General Meeting scheduled on September 25, 2012 and, being eligible, offer themselves for re-appointment.

It needs to be mentioned here that the Company had seven Directors at the end of financial year 2009-10. However, one of the independent Directors expired consequent to which the strength of the Board reduced to six at the end of the financial year ended 31st December, 2011. Amongst the remaining six, the resignation of two independent Directors was accepted by the Board in its meeting on 18th March, 2012. In the same meeting, three Additional Directors were appointed bringing the strength of the Board to seven. The Additional Directors would come up for confirmation as Directors in the ensuing Annual General Meeting.

During the year and the intervening period post the closure of the financial year and the date of this Report, the following developments in the Board took place:

Shri. Darshan Suryakant Shah, Non-Executive and Independent Director of the Company resigned on February 24, 2012 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on March 18, 2012.

Shri. R. Radhakrishna, Non-Executive and Independent Director of the Company resigned on August 9, 2011 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on March 18, 2012.

Consequent to the untimely demise of Shri. S. Manoharan, Non-Executive & Independent Director, his name was removed from the Board in its meeting on May 14, 2011.

During the period between the end of the financial year 2011 and the date of this Report, Shri. Kumar Raichand Madan, Shri. U. Parthasarathy and Shri. S. Sriram were appointed as Additional Directors w.e.f March 18, 2012. They will hold office till the conclusion of the ensuing Annual General Meeting of the Company. The Board welcomes Shri. Kumar Raichand Madan, Shri. U. Parthsarathy and Shri. S. Sriram on board and looks forward to their active participation on various deliberations.

The Board appreciates the contributions made by Shri. Darshan Suryakant Shah, Shri. R. Radhakrishna and Shri. S. Manoharan during their tenure as Directors of the Company.

The Board of Directors inform the members that all the directors of your Company have confirmed that, in terms of Section 274(1)(g) of the Companies Act, 1956, they are not disqualified to act as directors of your Company.

Directors Responsibility Statement

Pursuant to the requirements of sub-section 2AA of Section 217 of the Companies (Amendment) Act 2001, the Directors confirm that:

(i) In preparation of the annual accounts, the applicable accounting standards have been followed and proper explanations have been provided for material departures, wherever applicable.

(ii) The Directors have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at 31st December, 2011 and the loss of the Company for the financial year ended 31st December, 2011.

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Company's Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the annual accounts on a going concern basis.

Auditors

M/s. P.C. Acharya & Co., Chartered Accountants, the Statutory Auditors, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. The Audit Committee and your Board recommend their reappointment as Auditors of the Company for a further period of one year and to fix their remuneration. They have furnished to the Company a certificate of their eligibility for appointment as auditors, pursuant to section 224 (1B) of the Companies Act, 1956.

The Board of Directors shall subsequent to their appointment determine the terms and conditions of their appointment, scope of work, and allocation of responsibilities such as statutory audit, internal audit, taxation, tax audit etc and to accordingly fix their remuneration.

Auditor's Report

With regard to the qualifications and emphasis of matter contained in the Auditor's Report of Dhanus Technologies Limited, our explanations are given below:

i. Note (b) and (c) of the 4th para of the Auditor's Report - Note 1.2 (a) and (b) of Schedule 1 & 2 - Notes to Accounts to the financial statements

The Company has four business verticals and has a large number of debtors and creditors as its business across various service verticals is of retail nature. Also, the Company's services and products have a wide geographical reach as well. Consequently, the reconciliation and control accounts of receivables and payables are not fully complete, although substantially covered. The Company however believes that non-reconciliation in such accounts will not have any serious and perceptible impact on the revenues and expenses recognized.

ii. Note (d) of the 4th para of the Auditor's Report

The Company has maintained a proper system of accounts. The Company confirms that the purported deviation from Accounting Standards prescribed under AS-6, AS-9, AS-10, AS-22 and AS-28 will in no way have any material adverse impact on the Profit & Loss Account and also the Asset Liability position of the Company. The Company shall however make extra efforts to bring the systems in line with the accounting Standards expected of the Company.

iii. Note (e) & (f) of the 4th para of the Auditor's Report

The Company agrees that reconciliation of Trade Receivables and Payables is yet to be fully completed. However, the Company firmly believes that non-reconciliation and control accounts of receivables and payables will not have any serious and perceptible impact on the revenues and expenses recognized as substantial and critical reconciliations have not provided any adverse indication or cause for concern.

iv. Note (g) of the 4th para of the Auditor's Report

The inability to quantify the value of current assets including debtors, loans and advances from a mark to market perspective will not have any material impact on the asset liability position of the Company. The Company's fixed assets being very large in number as it primarily comprises of high-value routers, switches, servers, computing systems, integrators etc., the Company is in the process of completing the physical verification of its fixed assets. The Company certifies that it fully owns the title to the assets and the cost of purchase and depreciation levied on them is accurate and in terms of generally accepted accounting principles. Kindly refer to Note 1.1 on Fixed Assets and corresponding write up on depreciation on assets.

v Note (h) of the 4th para of the Auditor's Report

The Board agrees with the statement that the investment in M/s Borusan Telekom, Turkey is possibly irrecoverable. The Company however proposes to attempt recovering the initial advance given towards share purchase, although the Company agrees that the attempt may be an exercise in futility and accordingly appropriate steps in this regard would be followed to write off the investment after all possible efforts towards recovery are completely exhausted.

The Company disagrees with the view that the amount advanced to M/s Sreeven Infocom Limited is irrecoverable. Sreeven Infocom is a healthy company and the Company is in talks with the management of Sreeven Infocom to recover the amount advanced earlier.

Since the qualifications made by the Auditor's in the Report on the Consolidated financial statements is similar to the ones made in the Standalone financial statements, the above explanations apply equally to those as well.

Audit Committee

The Audit Committee consists of three members namely Shri. G. Rathan Kumar, Justice (Retd.) Shri. S. Kalyanam and Shri. U. Parthasarathy, all of whom are independent. Shri. G. Rathan Kumar is the Chairman of the Audit Committee. All members of the Audit Committee possess sufficient knowledge and experience in the field of Finance and Accounts.

Subsidiary Companies

Dhanus Global Medicare Limited, India and Dhanus Technologies Inc., USA continues to be wholly owned subsidiaries of your company. The statement under section 212 of the Companies Act, 1956 along with a statement of additional information of subsidiaries is attached herewith.

Listing

The Equity Shares continue to be listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). Both these exchanges have nation-wide terminals and therefore, shareholders/investors are not facing any difficulty in trading the shares of the Company from any part of the country. The Company has paid the annual listing fee for the year 2012-13 to the BSE and NSE and the annual custodial fee to National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo.

Information as required under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is annexed as an Annexure to this Report.

Particulars of Employees

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 as amended, there was no employee during the year drawing remuneration more than the stipulated amount in the said rules.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed compliance report on Corporate Governance systems and practices together with a certificate from the statutory auditors confirming compliance with the conditions of corporate governance stipulated in the said clause is annexed to this report.

The Board laid down a "Code of Conduct" for all Board members and senior management of the Company and the "Code of Conduct" has been posted on the website of the Company, www.dhanus.net.

Acknowledgements

Your Directors take this opportunity to place on record their sincere appreciation for the continued support and confidence reposed by the clients, business associates and the shareholders. The Directors also convey their appreciation to the employees at all levels for their enormous personal efforts as well as collective contribution.

For and on behalf of the Board of Directors

Place: Chennai Capt. D.S. Srinivasan A.D. Sudhindra

Dated: August 18, 2012 Managing Director Director

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Dec 31, 2010

The Directors are pleased to present the 17th Annual Report together with the statement of Audited Accounts of the Company for the eighteen-month period and financial year ended December 31, 2011.

Financial Highlights

The following table summarizes the financial highlights of your Company on a standalone basis for the financial year under review:

(Amount in Rs.)

Particulars FY 2009-10 FY 2008-09 (18 months) (12 Months)

Total Income 119,29,85,522 117,58,71,655

Profit Before interest, Depreciation and Taxes 39,83,74,913 56,69,79,401

Less: (a) Interest 4,30,58,343 2,40,33,180

(b) Depreciation 37,01,00,290 33,39,72,731

Profit / (Loss) Before Tax (1,47,83,720) 20,89,73,490

Less: (a) Provision for Current Tax 1,21,90,000 1,34,60,000

(b) Deferred Tax (1,68,84,584) (24,84,850)

(c) Fringe Benefit Tax - 22,84,578

Profit / (Loss) After Tax (1,00,89,136) 19,57,13,762

Add: Balance brought forward from Previous year 105,26,16,862 85,69,03,100

Profit Available for appropriation 104,25,27,726 105,26,16,862 Transfer to General Reserve

Balance carried to Balance Sheet 104,25,27,726 105,26,16,862

Financial Review

The turnover of the Company for the eighteen-month period and year ended 31st December, 2010, reported an increase of 1.46% from Rs. 11758.71 lakhs in the previous year to Rs. 11929.85 lakhs in the year/period under review.

The Company has reported a Profit before interest, depreciation and tax of Rs. 3983.75 lakhs and after providing Rs. 430.58 lakhs towards interest, Rs. 3701.00 lakhs towards depreciation and adjusting Rs. 46.94 lakhs towards tax, the net loss amounts to Rs. 100.89 lakhs.

Business Review

During the current financial year 2009-10 comprising an eighteen-month period, the businesses across various verticals had a major setback on account of multiple factors largely external and beyond the control and maneuverability of the management. Dhanus has, over the past eighteen months, been making extraordinary efforts to arrest the downslide in business and simultaneously restructure and consolidate its different verticals, strengthen its business systems and marketing reach, so as to reverse this recessionary trend across businesses.

Telecom

With the Company facing a recession throughout this eighteen-month period under review, and the growing menace of instability and terrorism across various parts of the globe, tourism as an industry suffered substantially thus adversely impacting overseas travels of Indians. There was therefore a perceptible drop in the volume of Indian travelers going abroad either for business, studies or vacation. The Companys telecom services were thus impacted as Indians traveling abroad happen to be the exclusive target customer segment in this vertical. V-tel though continues to contribute a major share to the Companys top line. The Company is making all attempts to arrest this negative trend by strategizing new plans both on the product and marketing front.

Telematics

The Companys telematics vertical brand Fleetrac also showed a negative growth on account of recession in the transportation and automobile sector. The Company is exploring opportunities in various states and is also simultaneously attempting to come out with modified and more consumer-friendly features.

IT/ITES

The extended recessionary conditions prevailing in the US that started sometime in 2008 has affected the Companys main customer segment, and the anti-outsourcing sentiments encouraged by the current administration in the US on account of large scale unemployment there has impacted this segment of Companys business overwhelmingly. The Software services division took a substantial toll in terms of not being able to grab any fresh order throughout the year. The BPO business also has sustained a negative growth in its business.

New Business Initiative

To tide over this recessionary phase and also in order to sustain and consolidate, your Company has forayed into a new business segment viz., Trading Activity. The Company primarily is engaged in the trading of computer products, accessories and peripheral items. The Company started this business in the first week of November, 2010 and has been doing robust business in this segment, although with nominal margin levels. However, the Company proposes to continue to do this business and understand its scalability and sustainability for the next couple of months and decide on charting a future course of action in this segment on seeing its performance. The profitability of this new business initiative is currently very low, very thin margins to be precise, which is likely to improve in the current financial year.

The Companys current strategy remains unchanged:

The Company aims to be a global communications company, utilizing emerging technologies to provide convergent communication services. The business model of the Company revolves around its core competence i.e., Telecom & Networking.

The Company seeks to further enhance its position as a leading provider of integrated IT services. The Company proposes to have a multi-pronged strategy to achieve its business growth path.

The Companys business opportunities are undoubtedly high in various parts of the world wherever there is a perceptible presence of Indian diaspora. The Company intends to leverage this opportunity in the coming months and years by marketing its product to this target segment of Indians travelling abroad for either business or pleasure, once it tides over the current recessionary phase.

Management Discussion and Analysis

A detailed report on Management Discussion & Analysis for the eighteen-month period and financial year ended December 31, 2010 as stipulated under Clause 49 of the listing agreement with the Stock Exchanges in India is provided as a separate chapter in the Annual Report.

Issue of Convertible Warrants

As mentioned earlier above, your Company aims to be a Global Communications company. As large part of the Companys business segments happen to be capital Intensive, highly competitive and subject to rapid technology obsolescence, it was in the best interest of the Company to make firm financial arrangements sufficiently in advance to take advantage of lucrative business opportunities coming its way.

The Company therefore proposed to raise funds by way of issue of Convertible Equity Warrants to select group of investors/allottees. The purpose of issue of the warrants convertible into Equity shares is to achieve the long term plans of the Company and to meet funding requirements including but not limited to investment for meeting its business requirements, funding Companys growth plans through organic and inorganic avenues and working capital requirements in order to improve operations and enhance infrastructure facilities. The shareholders gave their approval, in the Extra Ordinary General Meeting held on December 18, 2010, to the issue of 15,00,00,000 Convertible Warrants to the proposed allottees.

None of the Promoters, Directors or Key Management Personnel would be subscribing to the proposed issue.

The Board, on the receipt of upfront money, has since allotted the said Convertible Warrants to all the proposed allotees in the month of February, 2011.

Increase in Authorised Capital

The Shareholders of the Company in order to give effect to the recommendation of issue of Convertible Equity Warrants, issue of Bonus Equity Shares, raising funds through issue of FCCBs, ADR, GDR and/or other Financial Instruments and Qualified Institutional Placement and to meet any future requirements, approved the increase in Authorised Share Capital of the Company from Rs. 40 crores (Rupees forty crores only) to Rs. 600 crores (Rupees six hundred crores only) in the above general meeting.

Public Deposits

Your Company has not accepted any public deposits.

Directors

In compliance with the provisions of the Companies Act, 1956 and in accordance with the Companys Articles of Association, Justice (Retd.) Shri. S. Kalyanam, Shri. A.D. Sudhindra and Shri. S. Manoharan, Directors, retire by rotation at this Annual General Meeting scheduled on March 31, 2011 and, being eligible, offer themselves for re-appointment.

During the year the following developments in the Board took place:

Shri. P.K. Bhattacharjee, Non-Executive and Independent Director of the Company resigned on 8"1 January, 2010 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on January 31, 2010.

Shri. T.S. Srinivasan, Non-Executive and Independent Director of the Company resigned on 18th March, 2010 and ceased to be a Director. His resignation was accepted by the Board in its meeting held on May 22, 2010.

Shri. S. Muthukrishnan, Vice Chairman and Whole-time Director resigned on 27th February, 2010 and ceased to the Director and Vice Chairman of the Company. His resignation was accepted by the Board in its meeting held on May 22, 2010.

Shri. V. Narayanaswamy ceased to be the Managing Director on expiry of his term on May 14, 2010 and the Board thought it appropriate to not renew his term and appointment. Thereafter, Shri. V. Narayanaswamy resigned as Director on August 29, 2010 and the same was accepted by the Board held on the same day.

During the year, the term of Shri. A.D. Sudhindra as whole-time director expired on September 30, 2010 and the Board decided not to renew his term and appointment as whole-time director. However, Shri. Sudhindra shall continue as a Non-Executive and Non-independent Director. He will continue as Non-Executive Chairman of the Company.

During the year, Shri. Darshan Suryakant Shah was appointed as Additional Director w.e.f November 20, 2010 and he will hold office till the conclusion of the ensuing Annual General Meeting of the Company. The Board welcomes Shri. Darshan Suryakant Shah on board and looks forward to an active participation on various deliberations.

Capt. D.S. Srinivasans re-appointment as Whole-Time Director and designation as Managing Director of the Company for a period of 3 years with effect from October 1, 2010 was approved by the shareholders in the Extra Ordinary General Meeting held on December 30, 2010.

The Board appreciates the contributions made by Shri. P.K. Bhattacharjee, Shri. T.S. Srinivasan, Shri. S. Muthukrishnan and Shri. V. Narayanaswamy during their tenure as Directors of the Company.

The Board of Directors inform the members that all the directors of your Company have confirmed that, in terms of Section 274(1 )(g) of the Companies Act, 1956, they are not disqualified to act as directors of your Company.

Directors Responsibility Statement

Pursuant to the requirements of sub-section 2AA of Section 217 of the Companies (Amendment) Act 2001, the Directors confirm that:

(i) In preparation of the annual accounts, the applicable accounting standards have been followed and proper explanations have been provided for material departures, wherever applicable.

(ii) The Directors have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at 31st December, 2010 and the loss of the Company for the eighteen-month period and financial year ended 31st December, 2010.

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companys Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the annual accounts on a going concern basis. Auditors

M/s. PC. Acharya&Co., Chartered Accountants and M/sS. Vasudevan & Associates, Chartered Accountants, the Auditors, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. The Audit Committee and your Board recommend their reappointment as Auditors of the Company for a further period of one year and to fix their remuneration. They have furnished to the Company a certificate of their eligibility for appointment as auditors, pursuant to section 224 (1B) of the Companies Act, 1956.

The Board of Directors shall subsequent to their appointment determine the terms and conditions of their appointment, scope of work, and allocation of responsibilities such as statutory audit, internal audit, taxation, tax audit etc and to accordingly fix their remuneration.

Auditors Report

With regard to the qualifications and emphasis of matter contained in the Auditors Report of Dhanus Technologies Limited, our explanations are given below:

i. Note (b) and (c) of the 4th para of the Auditors Report - Note 2a of Schedule 19 - Notes to Accounts to the financial statements

The Company has five business verticals (a new business segment was initiated in the last quarter of the financial year ended 31st December, 2010) and has a large number of debtors and creditors as its business across various service verticals is of retail nature. Also, the Companys services and products has a wide geographical reach as well. Consequently, the reconciliation and control accounts of receivables and payables are not fully complete, although substantially covered. The Company however believes that non-reconciliation in such accounts will not have any serious and perceptible impact on the revenues and expenses recognized.

ii. Note (d) of the 4th para of the Auditors Report

The Company has maintained a proper system of accounts. The Company confirms that the purported deviation from Accounting Standards prescribed under AS-6, AS-9, AS-10, AS-22 and AS-28 will in no way have any material adverse impact on the Profit & Loss Account and also the Asset Liability position of the Company. The Company shall however make extra efforts to bring the systems in line with the accounting Standards expected of the Company.

iii. Note (e) of the 4lh para of the Auditors Report

The inability to quantify the value of current assets including debtors, loans and advances from a mark to market perspective will not have any material impact on the asset liability position of the Company. The Companys fixed assets being very large in number as it primarily comprises of high-value routers, switches, servers, computing systems, integrators etc., the Company is in the process of completing the physical verification of its fixed assets. The Company certifies that it fully owns the title to the assets and the cost of purchase and depreciation levied on them is accurate and in terms of generally accepted accounting principles. Kindly refer to Note 1.2 on Fixed Assets and corresponding write up on depreciation on assets.

iv. Note (f) of the 4th para of the Auditors Report

The Board agrees with the statement that the investment in M/s Borusan Telekom, Turkey is possibly irrecoverable. The Company however proposes to attempt recovering the initial advance given towards share purchase, although the Company agrees that the attempt may be an exercise in futility and accordingly appropriate steps in this regard would be followed to write off the investment after all possible efforts towards recovery are completely exhausted.

The Company disagrees with the view that the amount advanced to M/s Sreeven Infocom is irrecoverable. Sreeven Infocom is a healthy company and the Company is in talks with the management of Sreeven Infocom to recover the amount advanced earlier.

Since the qualifications made by the Auditors in the Report on the Consolidated financial statements is similar to the ones made in the Standalone financial statements, the above explanations apply equally to those as well.

Audit Committee

The Audit Committee consists of three members namely Shri. G. Rathan Kumar, Justice (Retd.) Shri. S. Kalyanam and Shri. R. Radhakrishna, all of whom are independent. Shri. G. Rathan Kumar is the Chairman of the Audit Committee. All members of the Audit Committee possess sufficient knowledge and experience in the field of Finance and Accounts.

Subsidiary Companies

Dhanus Global Medicare Limited, India and Dhanus Technologies Inc., USA continue to be wholly owned subsidiaries of your company. The statement under section 212 of the Companies Act, 1956 along with a statement of additional information of subsidiaries is attached herewith.

* An application has been made under Section 212(8) of the Companies Act, 1956 to the Ministry of Corporate Affairs, Government of India seeking exemption from publishing the detailed accounts of the subsidiary companies. Therefore, the accounts of Dhanus Global Medicare Limited and Dhanus Technologies Inc (wholly owned subsidiaries of your company) are not attached. Approval of the same is awaited. However, pursuant to Clause 41 of the listing agreement and as prescribed by Accounting Standard 21 issued by the Institute of Chartered Accountants of India, the audited consolidated financial statement incorporating accounts of the subsidiary companies are attached. However, the Company will make available the detailed financial statements of the subsidiary companies upon written request from a shareholder. The detailed financial statements and audit reports/management certification of the subsidiary companies are available for inspection, by any investor, at the registered and/or administrative office of the Company.

Listing

The Equity Shares continue to be listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). Both these exchanges have nation-wide terminals and therefore, shareholders/investors are not facing any difficulty in trading the shares of the Company from any part of the country. The Company has paid the annual listing fee for 2009-10 and 2010-11 to the BSE and NSE and the annual custody fee to National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo.

Information as required under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is annexed as an Annexure to this Report.

Particulars of Employees

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 as amended, there was no employee during the year drawing remuneration more than the stipulated amount in the said rules.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed compliance report on Corporate Governance systems and practices together with a certificate from the statutory auditors confirming compliance with the conditions of corporate governance stipulated in the said clause is annexed to this report.

The Board laid down a "Code of Conduct" for all Board members and senior management of the Company and the "Code of Conduct" has been posted on the website of the Company, www.dhanus.net.

Acknowledgements

Your Directors take this opportunity to place on record their sincere appreciation for the continued support and confidence reposed by the Banks, Financial Institutions, clients, business associates and the shareholders. The Directors also convey their appreciation to the employees at all levels for their enormous personal efforts as well as collective contribution.

For and on behalf of the Board of Directors

Place: Chennai Capt. D.S. Srinivasan A.D. Sudhindra

Dated: 28th February, 2011 Managing Director Director

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Jun 30, 2009

The Directors have pleasure in presenting the 16th Annual Report together with Audited Statement of Accounts of the Company for the year ended June 30, 2009 and the Auditors Report thereon.

Financial Results

Summarized financial results of the Company for the year under review are as presented below:

(Amount in Rs.)

Particulars 2008-09 2007-08

Total Income 117,44,66,255 197,48,01,307

Profit Before Interest, Depreciation and Taxes 56,69,79,401 92,03,03,187

Less: (a) Interest 2,40,33,180 1,30,86,959

(b) Depreciation 33,39,72,731 22,10,25,078

Profit Before Tax & Extra ordinary items 20,89,73,490 68,61,91,150

Less: Extraordinary Expenses - 6,36,91,840

Add: Depreciation written back - 42,64,508

Profit Before Tax 20,89,73,490 62,67,63,818

Less: (a) Provision for Current Tax 1,34,60,000 6,22,57,778

(b) Deferred Tax (24,84,850) 1,84,87,174

(c) Fringe Benefit Tax 22,84,578 34,10,628

Profit After Tax 19,57,13,762 54,26,08,238

Add: Balance brought forward from Previous year 85,69,03,100 37,42,94,862

Profit Available for appropriation 105,26,16,862 91,69,03,100

Transfer to General Reserve - 60,000,000

Balance carried to Balance Sheet 105,26,16,862 85,69,03,100

Financial Performance

The turnover of the Company for the year ended 30th June, 2009, reported a decrease of 40.53% from Rs. 19748.01 lakhs in the previous year to Rs. 11744.66 lakhs in the year under review.

Profit before depreciation and taxation was Rs. 5429.46 lakhs and after providing Rs. 3339.72 lakhs towards depreciation and Rs. 132.60 lakhs towards tax, the net profit amounts to Rs. 1957,14 lakhs.

Business Performance

Dhanus had been demonstrating a strong growth trajectory, amounting to over 100%, over the last couple of years. However, in the financial year 2008-09, the businesses across various verticals have had a major setback on account of factors purely external and beyond the control of the management. Dhanus however has been making conscious efforts to consolidate its verticals and strengthen its business systems and marketing reach in order to use this recession as an opportunity to rejuvenate and reinvent itself.

The Company had made a very well considered and strategic attempt to acquire a telecom company based out of Istanbul, Turkey, which would have facilitated a strong presence in Turkey and would have essentially provided a gateway to making inroads into and making the Companys presence felt in the European markets. The Company initially entered into a Share Purchase Agreement for 100% acquisition of Borusan Telekom, a 100% subsidiary of Borusan Holdings. The overall enterprise valuation of Borusan Telekom at the time of signing the Share Purchase Agreement was about USD 30 million. Given the Companys aggressive growth plans, through both the organic and inorganic route, it was felt at the time of signing that the valuation at which our Company was acquiring Borusan Telekom was not a cause for concern, but in fact a winning deal. However, in view of the volatile markets beginning May/ June 2008 and the slow pace of consolidation of economy in the last 12-15 months, the market capitalization of almost all companies came down by 50-60% as compared to what it was at the beginning of 2008. The bankruptcy of leading financial institutions, funds, and investment banks in the US and the vulnerability and possible collapse of European banks led to severe melt-down of global markets resulting in a ripple effect thereby further impacting valuations of companies across all sectors. In view of erosion in valuations of companies in the subsequent months, the Company firmly believed that the enterprise valuation of Borusan Telekom had reduced substantially and it would therefore not be prudent and in the best interest of the Company and its stakeholders to go ahead with the acquisition at the earlier agreed valuations. The Company accordingly conveyed its decision of not going ahead with the acquisition to the Stock Exchanges in October 2008.

Telecom

With recession having spread across the globe without discriminating any segment of industry or section of population, and added to that the dastardly acts of terrorism across the world and nearer home in Mumbai, there was a perceptible drop in the flow of Indian travelers abroad, be it for business or pleasure. The Companys telecom services were thus impacted as Indians traveling abroad happen to be the exclusive target customer segment in this vertical. The Companys V-tel portfolio however maintained a strong awareness and interest among the Indians travelling abroad. V-tel continues to contribute a major share to the Companys top line. V-tel Mobile introduced in May 2008, has been accepted on account of its service, technology, reduction in costs and ease of processing. However, on account of the reasons cited above, the take off of the product was nowhere comparable to the initial estimations. The current year too would continue to show a downward trend, but the Company however is working overtime in forming strategies and reinventing V-tel Mobile both on the marketing and price front in order to enable a handsome growth in this vertical in the following years.

Telematics

The Companys telematics vertical branded as Fleetrac showed a positive growth in spite of deep recession in the . transport sector. The Company had bagged major orders from Kerala private transport operators for a Passenger Information System, which enables passengers to ascertain the arrival and departure time of buses accurately on their mobile phones. The Company is in the process of installing the service. The Company is also exploring similar opportunities in other states.

IT/ITES

The acute recession prevailing in the US, being the main customer segment for the Company, and the anti-outsourcing sentiments prevailing in the US on account of large scale unemployment has impacted this segment of Companys business heavily The Software services division took a substantial toll in terms of reduction in orders and business as there was a serious fall in revenue. The BPO businesses also has taken a hit, but the impact would be largely felt in the immediate following year.

The Companys current strategy remains unchanged:

The Company aims to be a global communications company, utilizing emerging technologies to provide convergent communication services. The business model of the Company revolves around its core competence i.e., Telecom & Networking.

The Company seeks to further enhance its position as a leading provider of integrated IT services. The Company proposes to have a multi-pronged strategy to achieve its business growth path.

The Companys business opportunities are substantially high in various parts of the world wherever there is a perceptible presence of Indian diaspora. The Company intends to leverage this opportunity by marketing its product to this target segment of Indians travelling abroad for either business or pleasure.

Public Deposits

The Company has not accepted any public deposits.

Directors

In compliance with the provisions of the Companies Act, 1956 and in accordance with the Companys Articles of Association, Shri. G. Rathan Kumar, Shri. R. Radhakrishna and Shri T.S. Srinivasan retire by rotation at this Annual General Meeting and being eligible, offer themselves for re-appointment.

During the year, Mr. R. Venkatraman, Non-Executive and Non-independent Director of the Company expired on February 14, 2009. The Board mourns his untimely demise and absence and places on record its sincere appreciation of the wisdom and knowledge he brought to the various deliberations of the Board and recorded the contributions made by him during his tenure as Director of the Company.

The Board of Directors inform the members that all the directors of your Company have confirmed that in terms of Section 274(1) (g) of the Companies Act, 1956, they are not disqualified to act as directors of your Company.

Auditors

M/s. CNGSN & Associates, Chartered Accountants, the Statutory Auditors, will retire at the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. The Audit Committee and your Board recommend their reappointment as Auditors of the Company for a further period of one year and to fix their remuneration. They have furnished to the Company a certificate of their eligibility for appointment as auditors, pursuant to section 224 (1B) of the Companies Act, 1956.

Auditors Report

With regard to the qualifications and emphasis of matter contained in the Auditors Report of Dhanus Technologies Limited, our explanations are given below:

i. Note (b) and (c) of the 4th para of the Auditors Report - Note 2a of Schedule 19 - Notes on Accounts to the financial statements

The Company has four business verticals and has a large number of debtors and creditors as its business across various service verticals is of retail nature. Also, the Companys services and product reach has a wide geographical reach as well. On account of the volume of transactions, the reconciliation and control accounts of receivables and payables are not fully complete, although substantially covered. The Company however believes that non-reconciliation in such accounts will not have any material and perceptible impact on the revenues and expenses recognized.

ii. Note (d) of the 4thi para of the Auditors Report

The Company has maintained a proper system of accounts. The Company confirms that the purported deviation from Accounting Standards prescribed under AS-6, AS-9, AS-10, AS-22 and AS-28 will in no way have any material adverse impact on the Profit & Loss Account and also the Asset and Liability position of the Company. The Company shall however make extra efforts to bring the systems in line with the Accounting Standards.

iii. Note (e) of the 4th para of the Auditors Report

Kindly refer to reply to para (i) above. The Company certifies that the purported non-reconciliation will have no material adverse effect on the financials of the Company and consequently no adverse impact of income tax is envisaged in this regard.

iv. Note (f) of the 4th para of the Auditors Report - Note 2a of Schedule 19 - Notes on Accounts to the financial

statements Kindly refer to reply to para (i) above.

v. Note (g) of the 4th para of the Auditors Report

The inability to quantify the value of current assets including debtors, loans and advances from a mark to market perspective will not have any material impact on the asset and liability position of the Company. The Companys fixed assets being very large in number as it primarily comprises of software, high-value routers, switches, servers, computing systems, integrators etc., the Company is in the process of completing the physical verification of its fixed assets. The Company certifies that it fully owns the title and possession of the assets and the cost of purchase and depreciation levied on them is accurate and in line with generally accepted accounting principles (GAAP). Kindly refer to Note 1.2 on Fixed Assets and corresponding write-up on depreciation on assets.

vi. Note (h) of the 4th para of the Auditors Report

The Board agrees with the statement that the investment in M/s Borusan Telekom, Turkey is irrecoverable. Kindly refer to earlier para above on the proposed acquisition plan of Borusan Telekom. Although the Company proposes to attempt recovering the initial advance given towards share purchase, the Company agrees that the attempt may be an exercise in futility and accordingly appropriate steps in this regard would be followed to write off the investment in the subsequent financial year.

Since the qualifications made by the Auditors in the Report on the Consolidated financial statements is similar to the ones made in the Standalone financial statements, the above explanations apply equally to those as well.

Audit Committee

The Audit Committee consists of three members namely Mr. G. Rathan Kumar, Mr. T.S. Srinivasan and Justice (Retd.) Mr. S. Kalyanam, all of whom are independent. Mr. G. Rathan Kumar is the Chairman of the Audit Committee. All members of the Audit Committee possess sufficient knowledge and experience in the field of Finance and Accounts

Subsidiary Companies

Dhanus Global Medicare Limited, India and Dhanus Technologies Inc., USA continue to be wholly owned Subsidiaries of your company. The Statement under section 212 of the Companies Act, 1956 along with final accounts and statement of additional information is attached herewith.

An application has been made under Section 212 (8) of the Companies Act, 1956 to Ministry of Corporate Affairs, Government of India seeking exemption from publishing the detailed accounts of the subsidiary companies. Therefore, the accounts of Dhanus Global Medicare Limited and Dhanus Technologies Inc (wholly owned subsidiary of your company) are not attached. Approval of the same is awaited. However, pursuant to Clause 41 of listing agreement and as prescribed by Accounting Standard 21 issued by the Institute of Chartered Accountants of India, the audited consoli- dated financial statement incorporating accounts of the subsidiary companies are attached. However, the Company will make available the detailed financial statements of the subsidiary companies upon written request from a shareholder. The detailed financial statements and audit reports/management certification of the subsidiary companies are avail- able for inspection, by any investor, at the registered office of the Company

Listing

The Equity Shares continue to be listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). Both these exchanges have nation-wide terminals and therefore, shareholders/investors are not facing any difficulty in trading the shares of the Company from any part of the country. The Company has paid the annual listing fee for 2008-09 to the BSE and NSE and the annual custody fee to National Securities Depository Limited and Central Depository Services (India) Limited.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Out-go.

Information as required under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988, is annexed as an Annexure to this Report.

Particulars of Employees

Information as per sub-section 2A of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forming part of the Directors Report for the year ended 30 thJune 2009 is annexed to this report.

Clause 49 Requirement

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a compliance report on Corporate Governance together with a certificate from the statutory auditors confirming compliance with the conditions of corporate governance stipulated in the said clause is annexed to this report.

The Board laid down a "Code of Conduct" for all Board members and senior management of the Company and the "Code of Conduct" has been posted on the website of the Company, www.dhanus.net.

Directors Responsibility Statement

Pursuant to the requirements of sub-section 2AA of Section 217 of the Companies (Amendment) Act 2001, the Directors confirm that:

(i) In preparation of the annual accounts, the applicable accounting standards have been followed and proper explanations have been provided for material departures, wherever applicable

(ii) The Directors have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at 30th June, 2009 and the profit of the Company for the year ended 30th June, 2009.

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companys Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the annual accounts on a going concern basis.

Acknowledgement

Your Directors take this opportunity to place on record their sincere appreciation for the continued support and confidence reposed by the Banks, Financial Institutions, clients, business associates and the shareholders., The Directors also convey their appreciation to the employees at all levels for their enormous personal efforts as well as collective contribution.

For and on behalf of the Board

Sd/-

Place: Chennai Date. 30th September, 2009 V. Narayanaswamy Capt. D.S. Srinivasan Managing Director Jt. Managing Director