WNS (Holdings) Limited
As filed with the Securities and Exchange Commission on
July 25, 2006
Registration
No. 333-135590
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
WNS (Holdings) Limited
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrants name into English)
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Jersey, Channel Islands |
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7389 |
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330996780 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
Gate 4, Godrej & Boyce Complex
Pirojshanagar, Vikhroli(W)
Mumbai 400 079, India
(91-22) 6797-6100
(Address, including ZIP code, and telephone number,
including area code, of registrants principal executive
offices)
WNS North America Inc.
420 Lexington Avenue
Suite 2515, New York
NY 10170, USA
(212) 599-6960
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
Copies to:
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Michael W. Sturrock, Esq.
Latham & Watkins LLP
80 Raffles Place
#1420 UOB Plaza 2
Singapore 048624
(65) 6536-1161 |
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David W. Hirsch, Esq.
Cleary Gottlieb Steen & Hamilton LLP
Bank of China Tower
One Garden Road
Hong Kong
(852) 2521-4122 |
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date of
this Registration Statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, check the following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
number of the earlier effective registration statement for the
same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
CALCULATION OF REGISTRATION FEE
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Proposed maximum |
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Proposed maximum |
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Title of each class of |
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Amount to be |
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offering price |
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aggregate |
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Amount of |
securities to be registered |
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registered(1) |
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per share(2) |
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offering price(2) |
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registration fee(4) |
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Ordinary shares, par value 10 pence per share, each
represented by one American Depositary Share(3)
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12,763,708 |
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$20.00 |
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$255,274,160 |
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$27,314 |
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(1) |
Includes (i) ordinary shares represented by American
Depositary Shares initially offered and sold outside the United
States that may be resold from time to time in the United States
either as part of their distribution or within 40 days
after the later of the effective date of this registration
statement and the date the securities are first bona fide
offered to the public and (ii) additional ordinary shares
represented by American Depositary Shares which may be purchased
by the underwriters at their option to cover over-allotments, if
any. The ordinary shares are not being registered for the
purpose of sales outside the United States. |
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(2) |
Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(o). |
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(3) |
American Depositary Shares evidenced by American Depositary
Receipts issuable upon deposit of the ordinary shares registered
hereby are being registered pursuant to a separate Registration
Statement on
Form F-6
(333-135859). |
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(4) |
Registrant previously paid a registration fee of $25,658 in
connection with the registration statement on
Form F-1
(333-135590) filed with
the Commission on July 3, 2006. |
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such dates as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and
may be changed. Neither we nor the selling shareholders may sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell these securities
and is not soliciting offers to buy these securities in any
state where the offer or sale is not permitted.
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PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED
JULY 25, 2006
11,202,708 AMERICAN DEPOSITARY SHARES
WNS (Holdings) Limited
(organized under the laws of Jersey, Channel Islands)
Representing 11,202,708 ordinary shares
This is the initial public offering of our ordinary shares in
the form of American Depositary Shares, or ADSs. Each ADS
represents the right to receive one of our ordinary shares. The
ADSs are evidenced by American Depositary Receipts, or ADRs. See
Description of Share Capital and Description
of American Depositary Shares. We are offering 4,473,684
newly issued ordinary shares in the form of ADSs. The selling
shareholders identified in this prospectus are offering an
additional 6,729,024 ordinary shares in the form of ADSs. We
will not receive any of the proceeds from the sale of ADSs by
the selling shareholders. We anticipate that the initial public
offering price will be between $18.00 and $20.00 per ADS.
Prior to this offering, there has been no public market for our
ordinary shares and ADSs. We have applied for our ADSs to be
listed on the New York Stock Exchange under the symbol
WNS.
Investing in our ADSs involves risks. See Risk
Factors beginning on page 9 to read about factors you
should consider before buying our ADSs.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
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Per ADS | |
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Total | |
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Initial public offering price
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$ |
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$ |
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Underwriting discounts and commissions
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$ |
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$ |
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Proceeds before expenses to WNS (Holdings) Limited
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$ |
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$ |
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Proceeds before expenses to selling shareholders
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$ |
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$ |
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Certain of the selling shareholders have granted to the
underwriters an option to purchase up to an additional 1,561,000
ADSs to cover over-allotments at the initial public offering
price less underwriting discounts and commissions.
The underwriters expect to deliver the ADSs to purchasers
on ,
2006.
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Morgan Stanley |
Deutsche Bank Securities |
Merrill Lynch & Co. |
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Citigroup |
UBS Investment Bank |
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The date of this prospectus
is ,
2006
You should rely only on the information contained in this
prospectus. We and the selling shareholders have not authorized
anyone to provide you with information that is different. We,
the selling shareholders and the underwriters are not making an
offer of our ADSs in any jurisdiction or state where the offer
is not permitted. The information in this prospectus may only be
accurate as of the date of this prospectus.
TABLE OF CONTENTS
i
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus and does not contain all of the information that
you should consider before investing in our American Depositary
Shares, or ADSs. You should read this entire prospectus,
including Risk Factors and the financial statements
and related notes, before making an investment decision. This
prospectus includes forward-looking statements that involve
risks and uncertainties. See Special Note Regarding
Forward-Looking Statements.
Our Business
We are a leading provider of offshore business process
outsourcing, or BPO, services. We provide comprehensive data,
voice and analytical services that are underpinned by our
expertise in our target industry sectors. We transfer the
execution of the business processes of our clients, which are
typically companies located in Europe and North America, to our
delivery centers located primarily in India. We provide high
quality execution of client processes, monitor these processes
against multiple performance metrics, and seek to improve them
on an ongoing basis.
We began operations as an in-house unit of British Airways in
1996, and started focusing on providing business process
outsourcing services to third parties in fiscal 2003. According
to the National Association of Software and Service Companies,
or NASSCOM, an industry association in India, we were among the
top two India-based offshore business process outsourcing
companies in terms of revenue in 2004, 2005 and 2006. As of
March 31, 2006, we had 10,433 employees, of whom
approximately 9,700 were executing over 400 distinct business
processes on behalf of over 125 significant clients. Our largest
clients in terms of revenue contribution include leading global
corporations such as Air Canada, AVIVA, British Airways, First
Magnus Financial Corporation, GfK, IndyMac Bank, Marsh, SITA,
Tesco, Travelocity and Virgin Atlantic Airways. See
Business Clients. In fiscal 2006, our
top five clients represented 41.0% of our revenue, our top 20
clients represented 73.0% of our revenue and one of our clients
represented more than 10% of our revenue for this period.
We offer our services through industry-focused business units.
First, we serve clients in the travel industry including
airlines, travel intermediaries and other related service
providers, for whom we perform services such as customer service
and revenue accounting. Second, we serve clients in the banking,
financial services and insurance industry for whom we perform
services such as loan processing and insurance claims
management. Third, we serve clients in several other industries
including manufacturing, retail, logistics, utilities and
professional services, which we refer to as emerging businesses.
In addition to industry-specific services, we offer a range of
services across multiple industries, in areas such as finance
and accounting, human resources and supply chain management,
which we collectively refer to as enterprise services, and in
the areas of market, business and financial research and
analytical services, which we refer to as knowledge services.
Our industry focus allows us to target and outsource business
processes that are core to our clients businesses, and to
recruit and retain a highly capable employee base by offering
them an industry-focused career path within our organization.
The following graphic illustrates our organizational approach to
the market:
1
Between fiscal 2003 and fiscal 2006, our revenue grew at a
compound annual growth rate of 54.9%, faster than the projected
42.1% compound annual growth rate of the overall Indian offshore
business process outsourcing industry for the comparable period,
as estimated by a joint report published by NASSCOM and
McKinsey, or the NASSCOM-McKinsey report, in December 2005 and
NASSCOMs Handbook for ITES-BPO Industry-2005. During this
period, we grew primarily through organic means supplemented by
selective acquisitions. We believe that we have achieved rapid
growth and industry leadership through our understanding of the
industries in which our clients operate, our focus on
operational excellence, and our senior management team with
significant experience in the global outsourcing industry.
We believe that our track record of operational excellence has
been instrumental in expanding our existing client relationships
and winning new clients. Our program management methodologies
have enabled us to successfully transfer over 400 distinct
business processes from our clients facilities to our
delivery centers. Once we transfer these processes from our
clients facilities to our own, we execute them effectively
to deliver high quality services as measured against the
relevant performance metrics. In addition, we have
industry-recognized recruiting and human capital development
capabilities that we believe are critical in attracting,
developing and managing outstanding talent. In 2005, neoIT, an
industry consultant, ranked us number one in human capital
development among global business process outsourcing companies.
We have an experienced senior management team, the majority of
whom have been with us since we became a focused third party
service provider in May 2002. This team has managed our rapid
growth while increasing client satisfaction, as measured by our
in-house customer feedback surveys over the last three years.
Moreover, during this period, our team has been successful in
targeting, acquiring and integrating three businesses that have
provided us with essential capabilities for entry into new
industry sectors.
Our revenue is generated primarily from providing business
process outsourcing services. A portion of our revenue includes
amounts that we invoice to our clients for payments made by us
to third party automobile repair centers, or repair centers. We
evaluate our business performance based on revenue net of these
payments, or what we call revenue less repair payments, which is
not a measure prepared under generally accepted accounting
principles. We believe that revenue less repair payments
reflects more accurately the value of the business process
outsourcing services we directly provide to our clients. For
fiscal 2006, fiscal 2005 and fiscal 2004, our revenue was
$202.8 million, $162.2 million and
$104.1 million, respectively, and our revenue less repair
payments was $147.9 million, $99.0 million and
$49.9 million, respectively. During fiscal 2006, our net
income was $18.3 million and our operating income was
$19.9 million. During fiscal 2005 and fiscal 2004, our net
loss was $5.8 million and $6.7 million, respectively
and our operating loss was $4.4 million and
$7.0 million, respectively.
Market Opportunity
Businesses globally are outsourcing a growing proportion of
their business processes to streamline their organizations,
focus on their core operations, benefit from
best-in-class process
execution and increase shareholder returns. More significantly,
many of these businesses are outsourcing to offshore locations
such as India to access a high quality and cost effective
workforce. As a pioneer in the offshore business process
outsourcing industry, we are well positioned to benefit from the
combination of the outsourcing and offshoring trends.
The NASSCOM-McKinsey report estimates that the offshore business
process outsourcing industry will grow at a 37.0% compound
annual growth rate, from $11.4 billion in fiscal 2005 to
$55.0 billion in fiscal 2010. The NASSCOM-McKinsey report
estimates that India-based players accounted for 46% of offshore
business process outsourcing revenue in fiscal 2005 and India
will retain its dominant position as the most favored offshore
business process outsourcing destination for the foreseeable
future. It forecasts that the Indian offshore business process
outsourcing market will grow from $5.2 billion in revenue
in fiscal 2005 to $25.0 billion in fiscal 2010,
representing a compound annual growth rate of 36.9%.
Additionally, it identifies retail banking, insurance, travel
and hospitality and automobile manufacturing as the industries
with the greatest potential for offshore outsourcing. We provide
industry-focused business process outsourcing services to the
majority of these industries. However, we cannot assure you that
we will continue to benefit from the
2
opportunity presented by the Indian offshore business process
outsourcing market. See Risk
Factors Risks Related to our Business.
Our Competitive Strengths
Our principal competitive strengths include:
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Offshore business process outsourcing market leadership; |
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Deep industry expertise; |
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Experience in transferring operations offshore and running them
efficiently; |
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Diversified client base across multiple industries and
geographic locations; |
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Leadership in human capital development, as recognized by recent
awards from neoIT and Indias National Institute of
Personnel Managers; |
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Ability to manage the rapid growth of our organization; and |
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Experienced management team. |
Our Business Strategy
Our goal is to strengthen our leadership position in the
offshore business process outsourcing industry. We intend to
achieve this through our strategies to:
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Drive rapid growth through penetration of our existing client
base; |
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Enhance awareness of the WNS brand name; |
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Reinforce leadership in existing industries and penetrate new
industry sectors; and |
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Broaden industry expertise and enhance growth through selective
acquisitions. |
Our Corporate Information
WNS (Holdings) Limited was incorporated on February 18,
2002 under the laws of Jersey, Channel Islands and maintains a
registered office in Jersey at 22 Grenville Street,
St. Helier, Jersey JE4 8PX, Channel Islands. Our
principal executive office is located at Gate 4,
Godrej & Boyce Complex, Pirojshanagar,
Vikhroli (W), Mumbai 400 079, India and the telephone
number for this office is
(91-22) 6797-6100.
Our website address is www.wnsgs.com. Information contained on
our website is not a part of this prospectus.
Conventions used in this Prospectus
In this prospectus, references to US are to the
United States of America, its territories and its possessions.
References to UK are to the United Kingdom.
References to India are to the Republic of India.
References to $ or dollars or US
dollars are to the legal currency of the US and references
to Rs. or rupees or Indian
rupees are to the legal currency of India. References to
GBP or pounds sterling or
£ are to the legal currency of the UK and all
references to EUR or
are to Euros. References to pence are
to the legal currency of Jersey, Channel Islands. Our financial
statements are presented in US dollars and are prepared in
accordance with US generally accepted accounting principles, or
US GAAP. References to a particular fiscal year are
to our fiscal year ended March 31 of that year. Any
discrepancies in any table between totals and sums of the
amounts listed are due to rounding. Names of our clients are
listed in alphabetical order in this prospectus, unless
otherwise stated.
3
We also refer in various places within this prospectus to
revenue less repair payments, which is a non-GAAP
measure that is calculated as revenue less payments to
automobile repair centers and more fully explained in
Managements Discussion and Analysis of Financial
Condition and Results of Operations. The presentation of
this non-GAAP information is not meant to be considered in
isolation or as a substitute for our financial results prepared
in accordance with US GAAP.
We also refer to information regarding the business process
outsourcing industry, our company and our competitors from
market research reports, analyst reports and other publicly
available sources. Although we believe that this information is
reliable, we have not independently verified the accuracy and
completeness of the information. We caution you not to place
undue reliance on this data.
4
THE OFFERING
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ADSs that we are offering |
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4,473,684 ADSs. |
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ADSs that selling shareholders are offering |
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6,729,024 ADSs. |
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ADSs to be outstanding immediately after this offering |
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11,202,708 ADSs. |
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Number of shares per ADS |
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One ordinary share. |
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Ordinary shares to be outstanding immediately after this offering |
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39,801,857 ordinary shares. |
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The ADSs |
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Each ADS represents the right to receive one ordinary share. The
ADSs will be evidenced by American Depositary Receipts, or ADRs,
executed and delivered by Deutsche Bank Trust Company Americas,
as Depositary. |
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The Depositary will be the holder of the ordinary
shares underlying your ADSs and you will have rights as provided
in the deposit agreement and the ADRs. |
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Subject to compliance with the relevant requirements
set out herein, you may turn in your ADSs to the Depositary in
exchange for ordinary shares underlying your ADSs. |
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The Depositary will charge you fees for exchanges. |
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You should carefully read Description of American
Depositary Shares to better understand the terms of the
ADSs. You should also read the deposit agreement and the form of
the ADRs, which are exhibits to the registration statement that
includes this prospectus. |
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Offering price |
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We currently anticipate that the initial public offering price
will be between $18.00 and $20.00 per ADS. |
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Selling shareholders |
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See Principal and Selling Shareholders for
information on the selling shareholders in this offering. |
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Over-allotment option |
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Certain of the selling shareholders have granted to the
underwriters an option to purchase up to an additional 1,561,000
ADSs from us and them to cover over-allotments at the initial
public offering price less underwriting discounts and
commissions. |
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Use of proceeds |
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Our net proceeds from the sale of 4,473,684 ADSs in this
offering will total approximately $73.9 million after
deducting underwriting discounts and commissions and estimated
offering expenses which are payable by us. We intend to use the
net proceeds from this offering for general corporate purposes,
including capital expenditures and working capital, and for
possible acquisitions of businesses and delivery platforms. |
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The proceeds from the sale of 6,729,024 ADSs in this offering to
be sold by the selling shareholders will be paid to those
shareholders. We will not receive any of the proceeds from the
sale of those ADSs. See Use of Proceeds. |
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5
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Risk factors |
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See Risk Factors and other information included in
this prospectus for a discussion of the risks you should
carefully consider before deciding to invest in our ADSs. |
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Payment and settlement |
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The ADSs are expected to be delivered against payment
on ,
2006. The ADRs evidencing the ADSs will be deposited with a
custodian for, and registered in the name of a nominee of, The
Depository Trust Company, or DTC, in New York, New York. In
general, beneficial interests in the ADSs will be shown on, and
transfers of these beneficial interests will be effected only
through, records maintained by DTC and its direct and indirect
participants. |
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Listing and trading |
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We have applied for our ADSs to be listed on the New York Stock
Exchange, or NYSE. |
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Proposed NYSE symbol |
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WNS. |
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Depositary |
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Deutsche Bank Trust Company Americas. |
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Lock-up |
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We, the selling shareholders, our continuing directors,
executive officers and employee shareholders and certain of our
other existing shareholders have agreed with the underwriters
not to sell, transfer or dispose of any of our ordinary shares
or ADSs for a period of 180 days after the date of this
prospectus. See Underwriting. |
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Unless specifically stated otherwise, the information in this
prospectus:
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assumes an initial public offering price of $19.00 per ADS, the
midpoint of the range described above; |
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excludes (i) 3,875,655 ordinary shares issuable upon
exercise of outstanding options and 90,121 ordinary shares
reserved for future issuance under our Stock Incentive Plan as
of June 30, 2006; and (ii) 3,000,000 ordinary
shares reserved for future issuance under our 2006 Incentive
Award Plan (including 537,000 ordinary shares issuable upon
the exercise of options to be granted effective upon the pricing
of this offering (of which 320,000 are to be issued to certain
of our directors and executive officers and 217,000 are to be
issued to other employees) and 224,750 restricted share units to
be issued effective upon the pricing of this offering (of which
160,000 are to be issued to certain of our directors and
executive officers and 64,750 are to be issued to other
employees), each under the 2006 Incentive Award Plan). See
Management Employee Benefit Plans
Stock Incentive Plan and Management
Employee Benefit Plans WNS 2006 Incentive Award
Plan; and |
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assumes no exercise of the underwriters option to purchase
up to 1,561,000 additional ADSs to cover over-allotments. If the
underwriters exercise this option in full, 12,763,708 ADSs would
thereafter be outstanding. See Underwriting. |
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6
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary consolidated statement of operations data
for fiscal 2006, 2005 and 2004 and the summary consolidated
balance sheet data as of March 31, 2006 and 2005 have been
derived from the audited consolidated financial statements
appearing elsewhere in this prospectus. The following summary
consolidated balance sheet data as of March 31, 2004 have
been derived from our audited consolidated financial statements
not included in this prospectus. You should read this
information together with the consolidated financial statements
and related notes and the section entitled
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this prospectus. Our audited and unaudited consolidated
financial statements are prepared and presented in accordance
with US GAAP. Our historical results do not indicate results
expected for any future period.
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Year Ended March 31, | |
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2006 | |
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2005 | |
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2004 | |
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(US dollars in millions, except share and per | |
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share data) | |
Consolidated Statement of Operations Data:
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Revenue
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$ |
202.8 |
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$ |
162.2 |
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$ |
104.1 |
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Cost of
revenue(1)
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145.7 |
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140.3 |
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89.7 |
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Gross profit
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57.1 |
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21.9 |
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14.4 |
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Operating expenses:
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Selling, general and administrative
expenses(1)
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36.3 |
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24.9 |
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18.8 |
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Amortization of intangible assets
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0.9 |
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1.4 |
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2.6 |
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Operating income (loss)
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19.9 |
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(4.4 |
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(7.0 |
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Other income, net
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0.5 |
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0.2 |
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0.3 |
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Interest expense
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(0.4 |
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(0.5 |
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(0.1 |
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Income (loss) before income taxes
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19.9 |
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(4.7 |
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(6.8 |
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(Provision) benefit for income taxes
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(1.6 |
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(1.1 |
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0.0 |
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|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
18.3 |
|
|
|
(5.8 |
) |
|
|
(6.7 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.56 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
|
Diluted
|
|
$ |
0.52 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
Weighted-average shares outstanding (basic)
|
|
|
32,874,299 |
|
|
|
30,969,658 |
|
|
|
30,795,888 |
|
Weighted-average shares outstanding (diluted)
|
|
|
35,029,766 |
|
|
|
30,969,658 |
|
|
|
30,795,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
|
(US dollars in millions) | |
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
18.5 |
|
|
$ |
9.1 |
|
|
$ |
14.8 |
|
Accounts receivable, net
|
|
|
28.1 |
|
|
|
25.2 |
|
|
|
18.1 |
|
Other current assets
|
|
|
10.8 |
|
|
|
9.7 |
|
|
|
9.5 |
|
Total current assets
|
|
|
57.4 |
|
|
|
44.0 |
|
|
|
42.5 |
|
Deposits and deferred tax asset
|
|
|
4.3 |
|
|
|
2.6 |
|
|
|
1.3 |
|
Goodwill and intangible assets, net
|
|
|
42.5 |
|
|
|
26.7 |
|
|
|
27.6 |
|
Property and equipment, net
|
|
|
30.6 |
|
|
|
24.7 |
|
|
|
15.3 |
|
Total assets
|
|
|
134.8 |
|
|
|
98.0 |
|
|
|
86.6 |
|
Note payable
|
|
|
|
|
|
|
10.0 |
|
|
|
|
|
Total current liabilities
|
|
|
53.5 |
|
|
|
54.8 |
|
|
|
39.4 |
|
Deferred tax liabilities non-current
|
|
|
2.4 |
|
|
|
|
|
|
|
|
|
Other non-current liabilities
|
|
|
0.8 |
|
|
|
0.2 |
|
|
|
0.5 |
|
Total shareholders equity
|
|
|
78.2 |
|
|
|
43.0 |
|
|
|
46.7 |
|
Total liabilities and shareholders equity
|
|
|
134.8 |
|
|
|
98.0 |
|
|
|
86.6 |
|
7
The following tables set forth for the periods indicated
selected consolidated financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
|
(US dollars in millions, except | |
|
|
percentages and employee data) | |
Other Consolidated Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
202.8 |
|
|
$ |
162.2 |
|
|
$ |
104.1 |
|
|
Gross profit as a percentage of revenue
|
|
|
28.1 |
% |
|
|
13.5 |
% |
|
|
13.8 |
% |
|
Operating income (loss) as a percentage of revenue
|
|
|
9.8 |
% |
|
|
(2.7 |
)% |
|
|
(6.7 |
)% |
Other Unaudited Consolidated Financial and
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair
payments(2)
|
|
$ |
147.9 |
|
|
$ |
99.0 |
|
|
$ |
49.9 |
|
|
Gross profit as a percentage of revenue less repair payments
|
|
|
38.6 |
% |
|
|
22.1 |
% |
|
|
28.9 |
% |
|
Operating income (loss) as a percentage of revenue less repair
payments
|
|
|
13.4 |
% |
|
|
(4.4 |
)% |
|
|
(14.1 |
)% |
|
Number of employees (at period end)
|
|
|
10,433 |
|
|
|
7,176 |
|
|
|
4,472 |
|
Notes:
|
|
(1) |
Includes the following share-based compensation amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$ |
0.1 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
Selling, general and administrative expenses
|
|
|
1.8 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
(2) |
Revenue less repair payments is a non-GAAP measure. See the
explanation below, as well as Managements Discussion
and Analysis of Financial Condition and Results of
Operations Overview and notes to the
consolidated financial statements included in this prospectus.
The following table reconciles our revenue (a GAAP measure) to
revenue less repair payments (a non-GAAP measure): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
|
(US dollars in millions) | |
Revenue
|
|
$ |
202.8 |
|
|
$ |
162.2 |
|
|
$ |
104.1 |
|
Less: Payments to repair centers
|
|
$ |
54.9 |
|
|
$ |
63.2 |
|
|
$ |
54.2 |
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
|
|
$ |
147.9 |
|
|
$ |
99.0 |
|
|
$ |
49.9 |
|
|
|
|
|
|
|
|
|
|
|
We have two reportable segments for financial statement
reporting purposes WNS Global BPO and WNS Auto
Claims BPO. In our WNS Auto Claims BPO segment, we provide
claims handling and accident management services, where we
arrange for automobile repairs through a network of repair
centers. In our accident management services, we act as the
principal in our dealings with the repair centers and our
clients. The amounts invoiced to our clients for payments made
by us to repair centers is reported as revenue. As we wholly
subcontract the repairs to the repair centers, we use revenue
less repair payments as a primary measure to allocate resources
and measure operating performance.
Revenue less repair payments is a non-GAAP measure. We believe
that the presentation of this non-GAAP measure in this
prospectus provides useful information for investors regarding
the financial performance of our business and our two reportable
segments. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Results by Reportable Segment. The presentation of this
non-GAAP information is not meant to be considered in isolation
or as a substitute for our financial results prepared in
accordance with US GAAP. Our revenue less repair payments may
not be comparable to similarly titled measures reported by other
companies due to potential differences in the method of
calculation.
8
RISK FACTORS
This prospectus contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking
statements as a result of a number of factors, including those
described in the following risk factors and elsewhere in this
prospectus. You should consider the following risk factors
carefully in evaluating us and our business before investing in
our American Depositary Shares, or ADSs. If any of the following
risks actually occur, our business, financial condition and
results of operations could suffer, the trading-price of our
ADSs could decline and you may lose all or part of your
investment.
Risks Related to our Business
We may be unable to effectively manage our rapid growth
and maintain effective internal controls, which could have a
material adverse effect on our operations, results of operations
and financial condition.
Since we were founded in April 1996, and especially since
Warburg Pincus acquired a controlling stake in our company in
May 2002, we have experienced rapid growth and significantly
expanded our operations. Our revenue has grown at a compound
annual growth rate of 54.9% to $202.8 million in fiscal
2006 from $54.6 million in fiscal 2003. Our revenue less
repair payments has grown at a compound annual growth rate of
79.4% to $147.9 million in fiscal 2006 from
$25.6 million in fiscal 2003. We have established six
delivery centers in India, two in the UK and one in Sri Lanka.
Our employees have increased to 10,433 on March 31, 2006
from 2,348 on March 31, 2003. In fiscal 2007, we intend to
set up new delivery centers in Pune and Mumbai as well as to
expand our delivery center at Gurgaon, India. We intend to
continue expansion in the foreseeable future to pursue existing
and potential market opportunities.
This rapid growth places significant demands on our management
and operational resources. In order to manage growth
effectively, we must implement and improve operational systems,
procedures and internal controls on a timely basis. If we fail
to implement these systems, procedures and controls on a timely
basis, we may not be able to service our clients needs,
hire and retain new employees, pursue new business, complete
future acquisitions or operate our business effectively. Failure
to effectively transfer new client business to our delivery
centers, properly budget transfer costs or accurately estimate
operational costs associated with new contracts could result in
delays in executing client contracts, trigger service level
penalties or cause our profit margins not to meet our
expectations or our historical profit margins. As a result of
any of these problems associated with expansion, our business,
results of operations, financial condition and cash flows could
be materially and adversely affected.
A few major clients account for a significant portion of
our revenue and any loss of business from these clients could
reduce our revenue and significantly harm our business.
We have derived and believe that we will continue to derive in
the near term a significant portion of our revenue from a
limited number of large clients. For fiscal 2006 and fiscal
2005, our five largest clients accounted for 41.0% and 40.1% of
our revenue and 52.8% and 56.4% of our revenue less repair
payments. Our contract with one of our major clients, British
Airways, expires in March 2007. In May 2006, we entered into a
non-binding letter of intent with British Airways to extend the
term of this contract to May 2012, subject to negotiating and
entering into a definitive contract. If we fail to enter into a
definitive contract or if this contract is terminated for cause
or convenience, our client will have no obligation to purchase
services from us. For fiscal 2006 and fiscal 2005, British
Airways accounted for 7.2% and 10.1% of our revenue and 9.9% and
16.5% of our revenue less repair payments. Our contracts with
another major client, AVIVA, provide the client options,
exercisable at will after April 28, 2007 and
December 30, 2007, to require us to transfer the relevant
projects and operations to this client. See We
may lose some or all of the revenue generated by one of our
major clients. In May 2006, we entered into a non-binding
letter of intent with respect to one of the AVIVA contracts to
postpone the start of the option exercise period from
April 28, 2007 to after June 2007. See We
may lose some or all of the revenue generated by one of our
major clients.
In addition, the volume of work performed for specific clients
is likely to vary from year to year, particularly since we may
not be the exclusive outside service provider for our clients.
Thus, a major client in one year may
9
not provide the same level of revenue in any subsequent year.
The loss of some or all of the business of any large client
could have a material adverse effect on our business, results of
operations, financial condition and cash flows. A number of
factors other than our performance could cause the loss of or
reduction in business or revenue from a client, and these
factors are not predictable. For example, a client may demand
price reductions, change its outsourcing strategy or move work
in-house. A client may also be acquired by a company with a
different outsourcing strategy that intends to switch to another
business process outsourcing service provider or return work
in-house.
We may lose some or all of the revenue generated by one of
our major clients.
Our contracts with one of our five largest clients, AVIVA, to
provide business process outsourcing services grant AVIVA the
option to require us to transfer the relevant projects and
operations of our facilities at Sri Lanka and Pune to this
client. AVIVA may exercise these options at will after
April 28, 2007 for our facility in Sri Lanka and after
December 30, 2007 for the larger facility that we operate
in Pune. We understand that AVIVA is considering whether or not
to exercise the options, and we have been in discussions with
AVIVA about the timing and exercise of the options, although no
definitive agreements have been reached. In May 2006, we entered
into a non-binding letter of intent with AVIVA Offshore
Services, an affiliate of AVIVA and acting for AVIVA, to
postpone the start of the option exercise period for our
facility in Sri Lanka to on or after June 30, 2007. The
postponement of the start of this option exercise period is
subject to AVIVA and us negotiating and entering into a
definitive contract. If we fail to enter into this contract, the
start date for the exercise of the option will remain unchanged.
If either or both of these options is exercised, we will lose
some or all revenue from AVIVA and be required to transfer our
delivery center in Sri Lanka, one of our delivery centers in
Pune and all our employees located at these delivery centers to
AVIVA. For fiscal 2006 and fiscal 2005, this client accounted
for 9.8% and 6.2% of our revenue and 13.4% and 10.1% of our
revenue less repair payments. This loss of revenue would have a
material impact on our business, results of operations,
financial condition and cash flows, particularly during the
quarter in which the options takes effect.
We may in the future enter into similar contracts with other
clients, in which case we would be subject to risks similar to
those described above.
Our revenue is highly dependent on a few industries and
any decrease in demand for outsourced services in these
industries could reduce our revenue and seriously harm our
business.
A substantial portion of our clients are concentrated in the
travel industry and the banking, financial services and
insurance, or BFSI, industry. In fiscal 2006 and fiscal 2005,
30.9% and 28.9% of our revenue and 42.3% and 47.3% of our
revenue less repair payments were derived from clients in the
travel industry. During the same periods, clients in the BFSI
industry contributed 55.6% and 61.4% of our revenue and 39.1%
and 36.8% of our revenue less repair payments. Our business and
growth largely depend on continued demand for our services from
clients in these industries and other industries that we may
target in the future, as well as on trends in these industries
to outsource business processes. A downturn in any of our
targeted industries, particularly the travel or BFSI industries,
a slowdown or reversal of the trend to outsource business
processes in any of these industries or the introduction of
regulation which restricts or discourages companies from
outsourcing could result in a decrease in the demand for our
services and adversely affect our results of operations.
Other developments may also lead to a decline in the demand for
our services in these industries. For example, consolidation in
any of these industries or acquisitions, particularly involving
our clients, may decrease the potential number of buyers of our
services. Any significant reduction in or the elimination of the
use of the services we provide within any of these industries
would result in reduced revenue and harm our business. Our
clients may experience rapid changes in their prospects,
substantial price competition and pressure on their
profitability. Although such pressures can encourage outsourcing
as a cost reduction measure, they may also result in increasing
pressure on us from clients in these key industries to lower our
prices, which could negatively affect our business, results of
operations, financial condition and cash flows.
10
Our senior management team and other key team members in
our business units are critical to our continued success and the
loss of such personnel could harm our business.
Our future success substantially depends on the continued
service and performance of the members of our senior management
team and other key team members in each of our business units.
These personnel possess technical and business capabilities
including domain expertise that are difficult to replace. There
is intense competition for experienced senior management and
personnel with technical and industry expertise in the business
process outsourcing industry, and we may not be able to retain
our key personnel. Although we have entered into employment
contracts with our executive officers, certain terms of those
agreements may not be enforceable and in any event these
agreements do not ensure the continued service of these
executive officers. The loss of key members of our senior
management or other key team members, particularly to
competitors, could have a material adverse effect on our
business, results of operations, financial condition and cash
flows.
We may fail to attract and retain enough sufficiently
trained employees to support our operations, as competition for
highly skilled personnel is intense and we experience
significant employee attrition. These factors could have a
material adverse effect on our business, results of operations,
financial condition and cash flows.
The business process outsourcing industry relies on large
numbers of skilled employees, and our success depends to a
significant extent on our ability to attract, hire, train and
retain qualified employees. The business process outsourcing
industry, including our company, experiences high employee
attrition. In fiscal 2006, our attrition rate for
associates employees who execute business processes
for our clients following their completion of a six-month
probationary period was approximately 30%. There is
significant competition in India for professionals with the
skills necessary to perform the services we offer to our
clients. Increased competition for these professionals, in the
business process outsourcing industry or otherwise, could have
an adverse effect on us. A significant increase in the attrition
rate among employees with specialized skills could decrease our
operating efficiency and productivity and could lead to a
decline in demand for our services.
In addition, our ability to maintain and renew existing
engagements and obtain new businesses will depend, in large
part, on our ability to attract, train and retain personnel with
skills that enable us to keep pace with growing demands for
outsourcing, evolving industry standards and changing client
preferences. Our failure either to attract, train and retain
personnel with the qualifications necessary to fulfill the needs
of our existing and future clients or to assimilate new
employees successfully could have a material adverse effect on
our business, results of operations, financial condition and
cash flows.
Wage increases in India may prevent us from sustaining our
competitive advantage and may reduce our profit margin.
Salaries and related benefits of our operations staff and other
employees in India are among our most significant costs. Wage
costs in India have historically been significantly lower than
wage costs in the US and Europe for comparably skilled
professionals, which has been one of our competitive advantages.
However, because of rapid economic growth in India, increased
demand for business process outsourcing to India and increased
competition for skilled employees in India, wages for comparably
skilled employees in India are increasing at a faster rate than
in the US and Europe, which may reduce this competitive
advantage. In addition, if the US dollar or the pound sterling
declines in value against the Indian rupee, wages in the US or
the UK will decrease relative to wages in India, which may
further reduce our competitive advantage. We may need to
increase our levels of employee compensation more rapidly than
in the past to remain competitive in attracting the quantity and
quality of employees that our business requires. Wage increases
may reduce our profit margins and have a material adverse effect
on our financial condition and cash flows.
Our operating results may differ from period to period,
which may make it difficult for us to prepare accurate internal
financial forecasts and respond in a timely manner to offset
such period to period fluctuations.
Our operating results may differ significantly from period to
period due to factors such as client losses, variations in the
volume of business from clients resulting from changes in our
clients operations, the business
11
decisions of our clients regarding the use of our services,
delays or difficulties in expanding our operational facilities
and infrastructure, changes to our pricing structure or that of
our competitors, inaccurate estimates of resources and time
required to complete ongoing projects, currency fluctuation and
seasonal changes in the operations of our clients. For example,
our clients in the travel industry experience seasonal changes
in their operations in connection with the year-end holiday
season and the school year, as well as episodic factors such as
adverse weather conditions or strikes by pilots or air traffic
controllers. Transaction volumes can be impacted by market
conditions affecting the travel and insurance industries,
including natural disasters, health scares (such as severe acute
respiratory syndrome, or SARS, and avian influenza, or bird flu)
and terrorist attacks. In addition, some of our contracts do not
commit our clients to providing us with a specific volume of
business.
In addition, the long sales cycle for our services, which
typically ranges from three to 12 months, and the internal
budget and approval processes of our prospective clients makes
it difficult to predict the timing of new client engagements.
Revenue is recognized upon actual provision of services and when
the criteria for recognition are achieved. Accordingly, the
financial benefit of gaining a new client may be delayed due to
delays in the implementation of our services. These factors may
make it difficult for us to prepare accurate internal financial
forecasts or replace anticipated revenue that we do not receive
as a result of those delays. Due to the above factors, it is
possible that in some future quarters our operating results may
be significantly below the expectations of the public market,
analysts and investors.
Our clients may terminate contracts before completion or
choose not to renew contracts which could adversely affect our
business and reduce our revenue.
The terms of our client contracts typically range from three to
five years. Many of our client contracts can be terminated by
our clients with or without cause, with three to six
months notice and in most cases without penalty. The
termination of a substantial percentage of these contracts could
adversely affect our business and reduce our revenue. Contracts
representing 15.0% of our revenue and 20.5% of our revenue less
repair payments from our clients in fiscal 2006 will expire on
or before March 31, 2007. Failure to meet contractual
requirements could result in cancellation or non-renewal of a
contract. Some of our contracts may be terminated by the client
if certain of our key personnel working on the client project
leave our employment and we are unable to find suitable
replacements. In addition, a contract termination or significant
reduction in work assigned to us by a major client could cause
us to experience a higher than expected number of unassigned
employees, which would increase our cost of revenue as a
percentage of revenue until we are able to reduce or reallocate
our headcount. We may not be able to replace any client that
elects to terminate or not renew its contract with us, which
would adversely affect our business and revenue.
Some of our client contracts contain provisions which, if
triggered, could result in lower future revenue and have an
adverse effect on our business.
If our clients agree to provide us with a specified volume and
scale of business or to provide us with business for a specified
minimum duration, we may, in return, agree to include certain
provisions in our contracts with such clients which provide for
downward revision of our prices under certain circumstances. For
example, certain client contracts provide that if during the
term of the contract, we were to offer similar services to any
other client on terms and conditions more favorable than those
provided in the contract, we would be obliged to offer equally
favorable terms and conditions to the client. This may result in
lower revenue and profits under these contracts. Certain other
contracts allow a client in certain limited circumstances to
request a benchmark study comparing our pricing and performance
with that of an agreed list of other service providers for
comparable services. Based on the results of the study and
depending on the reasons for any unfavorable variance, we may be
required to make improvements in the service we provide or to
reduce the pricing for services to be performed under the
remaining term of the contract.
Some of our client contracts provide that during the term of the
contract and under specified circumstances, we may not provide
similar services to their competitors. Some of our contracts
also provide that, during the term of the contract and for a
certain period thereafter ranging from six to 12 months, we
may not provide similar services to certain or any of their
competitors using the same personnel. These restrictions may
hamper
12
our ability to compete for and provide services to other clients
in the same industry, which may result in lower future revenue
and profitability.
Some of our contracts specify that if a change of control of our
company occurs during the term of the contract, the client has
the right to terminate the contract. These provisions may result
in our contracts being terminated if there is such a change in
control, resulting in a potential loss of revenue.
Some of our client contracts also contain provisions that would
require us to pay penalties to our clients if we do not meet
pre-agreed service level requirements. Failure to meet these
requirements could result in the payment of significant
penalties by us to our clients which in turn could have an
adverse effect on our business, results of operations, financial
condition and cash flows.
We enter into long-term contracts with our clients, and
our failure to estimate the resources and time required for our
contracts may negatively affect our profitability.
The terms of our client contracts typically range from three to
five years. In many of our contracts we commit to long-term
pricing with our clients and therefore bear the risk of cost
overruns, completion delays and wage inflation in connection
with these contracts. If we fail to estimate accurately the
resources and time required for a contract, future wage
inflation rates or currency exchange rates, or if we fail to
complete our contractual obligations within the contracted
timeframe, our revenue and profitability may be negatively
affected.
Our profitability will suffer if we are not able to
maintain our pricing and asset utilization levels and control
our costs.
Our profit margin, and therefore our profitability, is largely a
function of our asset utilization and the rates we are able to
recover for our services. One of the most significant components
of our asset utilization is our seat utilization rate which is
the average number of work shifts per day, out of a maximum of
three, for which we are able to utilize our work stations, or
seats. If we are not able to maintain the pricing for our
services or an appropriate seat utilization rate, without
corresponding cost reductions, our profitability will suffer.
The rates we are able to recover for our services are affected
by a number of factors, including our clients perceptions
of our ability to add value through our services, competition,
introduction of new services or products by us or our
competitors, our ability to accurately estimate, attain and
sustain engagement revenue, margins and cash flows over
increasingly longer contract periods and general economic and
political conditions.
Our profitability is also a function of our ability to control
our costs and improve our efficiency. As we increase the number
of our employees and execute our strategies for growth, we may
not be able to manage the significantly larger and more
geographically diverse workforce that may result, which could
adversely affect our ability to control our costs or improve our
efficiency.
We have incurred losses in the past and have a limited
operating history. We may not be profitable in the future and
may not be able to secure additional business.
We have incurred losses in each of the three fiscal years from
fiscal 2003 through fiscal 2005. In future periods, we expect
our selling, general and administrative, or SG&A, expenses
to continue to increase. If our revenue does not grow at a
faster rate than these expected increases in our expenses, or if
our operating expenses are higher than we anticipate, we may not
be profitable and we may incur additional losses.
In addition, the offshore business process outsourcing industry
is a relatively new industry, and we have a limited operating
history. We started our business by offering business process
outsourcing services as part of British Airways in 1996. In
fiscal 2003, we enhanced our focus on providing business process
outsourcing services to third parties. As such, we have only
focused on servicing third-party clients for a limited time. We
may not be able to secure additional business or retain current
business with third-parties or add third-party clients in the
future.
13
If we cause disruptions to our clients businesses or
provide inadequate service, our clients may have claims for
substantial damages against us. Our insurance coverage may be
inadequate to cover these claims, and as a result our profits
may be substantially reduced.
Most of our contracts with clients contain service level and
performance requirements, including requirements relating to the
quality of our services and the timing and quality of responses
to the clients customer inquiries. In some cases, the
quality of services that we provide is measured by quality
assurance ratings and surveys which are based in part on the
results of direct monitoring by our clients of interactions
between our employees and our clients customers. Failure
to consistently meet service requirements of a client or errors
made by our associates in the course of delivering services to
our clients could disrupt the clients business and result
in a reduction in revenue or a claim for substantial damages
against us. For example, some of our agreements stipulate
standards of service that, if not met by us, will result in
lower payment to us. In addition, a failure or inability to meet
a contractual requirement could seriously damage our reputation
and affect our ability to attract new business.
Our dependence on our offshore delivery centers requires us to
maintain active data and voice communications between our main
delivery centers in India, Sri Lanka and the UK our
international technology hubs in the US and the UK and our
clients offices. Although we maintain redundant facilities
and communications links, disruptions could result from, among
other things, technical and electricity breakdowns, computer
glitches and viruses and adverse weather conditions. Any
significant failure of our equipment or systems, or any major
disruption to basic infrastructure like power and
telecommunications in the locations in which we operate, could
impede our ability to provide services to our clients, have a
negative impact on our reputation, cause us to lose clients,
reduce our revenue and harm our business.
Under our contracts with our clients, our liability for breach
of our obligations is generally limited to actual damages
suffered by the client and capped at a portion of the fees paid
or payable to us under the relevant contract. To the extent that
our contracts contain limitations on liability, such limitations
may be unenforceable or otherwise may not protect us from
liability for damages. In addition, certain liabilities, such as
claims of third parties for which we may be required to
indemnify our clients, are generally not limited under those
agreements. Although we have commercial general liability
insurance coverage, the coverage may not continue to be
available on reasonable terms or in sufficient amounts to cover
one or more large claims, and our insurers may disclaim coverage
as to any future claims. The successful assertion of one or more
large claims against us that exceed available insurance
coverage, or changes in our insurance policies (including
premium increases or the imposition of large deductible or
co-insurance requirements), could have a material adverse effect
on our business, reputation, results of operations, financial
condition and cash flows.
We are liable to our clients for damages caused by
unauthorized disclosure of sensitive and confidential
information, whether through a breach of our computer systems,
through our employees or otherwise.
We are typically required to manage, utilize and store sensitive
or confidential client data in connection with the services we
provide. Under the terms of our client contracts, we are
required to keep such information strictly confidential. Our
client contracts do not include any limitation on our liability
to them with respect to breaches of our obligation to maintain
confidentiality on the information we receive from them. We seek
to implement measures to protect sensitive and confidential
client data and have not experienced any material breach of
confidentiality to date. However, if any person, including any
of our employees, penetrates our network security or otherwise
mismanages or misappropriates sensitive or confidential client
data, we could be subject to significant liability and lawsuits
from our clients or their customers for breaching contractual
confidentiality provisions or privacy laws. Although we have
insurance coverage for mismanagement or misappropriation of such
information by our employees, that coverage may not continue to
be available on reasonable terms or in sufficient amounts to
cover one or more large claims against us and our insurers may
disclaim coverage as to any future claims. Penetration of the
network security of our data centers could have a negative
impact on our reputation, which would harm our business.
14
Failure to adhere to the regulations that govern our
business could result in our being unable to effectively perform
our services. Failure to adhere to regulations that govern our
clients businesses could result in breaches of contract
with our clients.
Our clients business operations are subject to certain
rules and regulations such as the Gramm-Leach-Bliley Act and the
Health Insurance Portability and Accountability Act in the US
and the Financial Services Act in the UK. Our clients may
contractually require that we perform our services in a manner
that would enable them to comply with such rules and
regulations. Failure to perform our services in such a manner
could result in breaches of contract with our clients and, in
some limited circumstances, civil fines and criminal penalties
for us. In addition, we are required under various Indian laws
to obtain and maintain permits and licenses for the conduct of
our business. If we do not maintain our licenses or other
qualifications to provide our services, we may not be able to
provide services to existing clients or be able to attract new
clients and could lose revenue, which could have a material
adverse effect on our business.
The international nature of our business exposes us to
several risks, such as significant currency fluctuations and
unexpected changes in the regulatory requirements of multiple
jurisdictions.
We have operations in India, Sri Lanka and the UK and we service
clients across Europe, North America and Asia. Our corporate
structure also spans multiple jurisdictions, with our parent
holding company incorporated in Jersey, Channel Islands, and
intermediate and operating subsidiaries incorporated in India,
Sri Lanka, Mauritius, the US and the UK. As a result, we are
exposed to risks typically associated with conducting business
internationally, many of which are beyond our control. These
risks include:
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significant currency fluctuations between the US dollar and
the pound sterling (in which our revenue is principally
denominated) and the Indian rupee (in which a significant
portion of our costs are denominated); |
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legal uncertainty owing to the overlap of different legal
regimes, and problems in asserting contractual or other rights
across international borders; |
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potentially adverse tax consequences, such as scrutiny of
transfer pricing arrangements by authorities in the countries in
which we operate; |
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potential tariffs and other trade barriers; |
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unexpected changes in regulatory requirements; |
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the burden and expense of complying with the laws and
regulations of various jurisdictions; and |
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terrorist attacks and other acts of violence or war. |
The occurrence of any of these events could have a material
adverse effect on our results of operations and financial
condition.
We may not succeed in identifying suitable acquisition
targets or integrating any acquired business into our
operations, which could have a material adverse effect on our
business, results of operations, financial condition and cash
flows.
Our growth strategy involves gaining new clients and expanding
our service offerings, both organically and through strategic
acquisitions. Historically, we have expanded some of our service
offerings and gained new clients through strategic acquisitions,
such as our acquisition of Trinity Partners Inc., or Trinity
Partners, in November 2005. It is possible that in the future we
may not succeed in identifying suitable acquisition targets
available for sale on reasonable terms, have access to the
capital required to finance potential acquisitions or be able to
consummate any acquisition. The inability to identify suitable
acquisition targets or investments or the inability to complete
such transactions may affect our competitiveness and our growth
prospects. In addition, our management may not be able to
successfully integrate any acquired business into our operations
and any acquisition we do complete may not result in long-term
benefits to us. For example, if we acquire a company, we could
experience difficulties in assimilating that companys
personnel, operations, technology
15
and software. In addition, the key personnel of the acquired
company may decide not to work for us. The lack of profitability
of any of our acquisitions could have a material adverse effect
on our operating results. Future acquisitions may also result in
the incurrence of indebtedness or the issuance of additional
equity securities and may present difficulties in financing the
acquisition on attractive terms. Acquisitions also typically
involve a number of other risks, including diversion of
managements attention, legal liabilities and the need to
amortize acquired intangible assets, any of which could have a
material adverse effect on our business, results of operations,
financial condition and cash flows.
Our facilities are at risk of damage by natural
disasters.
Our operational facilities and communication hubs may be damaged
in natural disasters such as earthquakes, floods, heavy rains,
tsunamis and cyclones. For example, in the recent floods in
Mumbai in July 2005, our operations were adversely affected as a
result of the disruption of the citys public utility and
transport services making it difficult for our associates to
commute to our office. Such natural disasters may lead to
disruption of information systems and telephone service for
sustained periods. Damage or destruction that interrupts our
provision of outsourcing services could damage our relationships
with our clients and may cause us to incur substantial
additional expenses to repair or replace damaged equipment or
facilities. We may also be liable to our clients for disruption
in service resulting from such damage or destruction. While we
currently have commercial liability insurance, our insurance
coverage may not be sufficient. Furthermore, we may be unable to
secure such insurance coverage at premiums acceptable to us in
the future or secure such insurance coverage at all. Prolonged
disruption of our services as a result of natural disasters
would also entitle our clients to terminate their contracts with
us.
Our business may not develop in ways that we currently
anticipate due to negative public reaction to offshore
outsourcing, recently proposed legislation or otherwise.
We have based our strategy of future growth on certain
assumptions regarding our industry, services and future demand
in the market for such services. However, the trend to outsource
business processes may not continue and could reverse. Offshore
outsourcing is a politically sensitive topic in the UK, the US
and elsewhere. For example, many organizations and public
figures in the UK and the US have publicly expressed concern
about a perceived association between offshore outsourcing
providers and the loss of jobs in their home countries.
In addition, there has been recent publicity about the negative
experiences, such as theft and misappropriation of sensitive
client data, of various companies that use offshore outsourcing,
particularly in India. Current or prospective clients may elect
to perform such services themselves or may be discouraged from
transferring these services from onshore to offshore providers
to avoid negative perceptions that may be associated with using
an offshore provider. Any slowdown or reversal of existing
industry trends towards offshore outsourcing would seriously
harm our ability to compete effectively with competitors that
operate out of facilities located in the UK or the US.
A variety of US federal and state legislation has been proposed
that, if enacted, could restrict or discourage US companies from
outsourcing their services to companies outside the US. For
example, legislation has been proposed that would require
offshore providers of services requiring direct interaction with
clients customers to identify to clients customers
where the offshore provider is located. Because some of our
clients are located in the US, any expansion of existing laws or
the enactment of new legislation restricting offshore
outsourcing could adversely impact our ability to do business
with US clients and have a material and adverse effect on our
business, results of operations, financial condition and cash
flows. In addition, it is possible that legislation could be
adopted that would restrict US private sector companies that
have federal or state government contracts from outsourcing
their services to offshore service providers. This would affect
our ability to attract or retain clients that have such
contracts.
Recent legislation introduced in the UK provides that if a
company transfers or outsources its business or a part of its
business to a transferee or a service provider, the employees
who were employed in such business are entitled to become
employed by the transferee or service provider on the same terms
and conditions as they had been employed before. The dismissal
of such employees as a result of such transfer of business is
deemed
16
unfair dismissal and entitles the employee to compensation. As a
result, we may become liable for redundancy payments to the
employees of our clients in the UK who outsource business to us.
We believe this legislation will not affect our existing
contracts with clients in the UK. However, we may be liable
under any service level agreements we may enter into in the
future pursuant to existing master services agreements with our
UK clients. In addition, we expect this legislation to have a
material adverse effect on potential business from clients in
the UK. However, as this legislation has only come into effect
in April 2006, we are not yet able to assess at this time the
potential impact of this new legislation on our results of
operation in the long term.
We face competition from onshore and offshore business
process outsourcing companies and from information technology
companies that also offer business process outsourcing services.
Our clients may also choose to run their business processes
themselves, either in their home countries or through captive
units located offshore.
The market for outsourcing services is very competitive and we
expect competition to intensify and increase from a number of
sources. We believe that the principal competitive factors in
our markets are price, service quality, sales and marketing
skills, and industry expertise. We face significant competition
from our clients own in-house groups, including, in some
cases, in-house departments operating offshore, or captive
units. Clients who currently outsource a significant proportion
of their business processes or information technology services
to vendors in India may, for various reasons, including to
diversify geographic risk, seek to reduce their dependence on
any one country. We also face competition from onshore and
offshore business process outsourcing and information technology
services companies. In addition, the trend toward offshore
outsourcing, international expansion by foreign and domestic
competitors and continuing technological changes will result in
new and different competitors entering our markets. These
competitors may include entrants from the communications,
software and data networking industries or entrants in
geographic locations with lower costs than those in which we
operate.
Some of these existing and future competitors have greater
financial, human and other resources, longer operating
histories, greater technological expertise, more recognizable
brand names and more established relationships in the industries
that we currently serve or may serve in the future. In addition,
some of our competitors may enter into strategic or commercial
relationships among themselves or with larger, more established
companies in order to increase their ability to address client
needs, or enter into similar arrangements with potential
clients. Increased competition, our inability to compete
successfully against competitors, pricing pressures or loss of
market share could result in reduced operating margins which
could harm our business, results of operations, financial
condition and cash flows.
We will incur increased costs as a result of being a
public company subject to the Sarbanes-Oxley Act of 2002 and our
management faces challenges in implementing those
requirements.
As a public company, we will incur additional legal, accounting
and other expenses that we do not incur as a private company.
The Sarbanes-Oxley Act of 2002, as well as new rules
subsequently implemented by the Securities and Exchange
Commission, or the Commission, and the New York Stock Exchange,
or NYSE, have imposed increased regulation and required enhanced
corporate governance practices of public companies. We are
committed to maintaining high standards of corporate governance
and public disclosure, and our efforts to comply with evolving
laws, regulations and standards in this regard are likely to
result in increased general and administrative expenses and a
diversion of management time and attention from
revenue-generating activities to compliance activities. For
example, we are in the process of creating additional board
committees and are reviewing and adopting comprehensive new
policies regarding internal controls over financial reporting
and disclosure controls and procedures. We are also in the
process of evaluating and testing our internal financial
reporting controls in anticipation of compliance with
Section 404 of the Sarbanes-Oxley Act of 2002 and have not
yet completed this process. We have formed internal evaluation
committees and engaged consultants and expect to upgrade our
computer software systems to assist us in such compliance. If we
do not implement the requirements of Section 404 in a
timely manner or with adequate compliance, we might be subject
to sanctions or investigation by regulatory authorities, such as
the Commission. Any such action could harm our business or
investors confidence in our company and could cause our
share price to fall. We will also incur additional costs
associated with our reporting requirements as a public company.
We also
17
expect these new rules and regulations to make it more difficult
and more expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs
to obtain the same or similar coverage. As a result, it may be
more difficult for us to attract and retain qualified candidates
to serve on our board of directors or as executive officers.
Our controlling shareholder, Warburg Pincus, will be able
to control or significantly influence our corporate
actions.
Immediately upon the completion of this offering, we expect that
Warburg Pincus will continue to beneficially own more than 50%
of our shares. As a result of its ownership position, Warburg
Pincus is expected to retain the ability to control or
significantly influence matters requiring shareholder and board
approval, including, without limitation, the election of
directors, significant corporate transactions such as
amalgamations and consolidations, changes of control of our
company and sales of all or substantially all of our assets.
These actions may be taken even if they are opposed by the other
shareholders, including those who purchase ADSs in this offering.
We have certain anti-takeover provisions in our articles
of association that may discourage a change of control.
Our articles of association contain anti-takeover provisions
that could make it more difficult for a third party to acquire
us without the consent of our board of directors. These
provisions include:
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a classified board of directors with staggered three-year terms;
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the ability of our board of directors to determine the rights,
preferences and privileges of our preferred shares and to issue
the preferred shares without shareholder approval, which could
be exercised by our board of directors to increase the number of
outstanding shares and prevent or delay a takeover attempt. |
These provisions could make it more difficult for a third party
to acquire us, even if the third partys offer may be
considered beneficial by many shareholders. As a result,
shareholders may be limited in their ability to obtain a premium
for their shares.
It may be difficult for you to effect service of process
and enforce legal judgments against us or our affiliates.
We are incorporated in Jersey, Channel Islands, and our primary
operating subsidiary, WNS Global Services Pvt. Ltd., is
incorporated in India. A majority of our directors and senior
executives are not residents of the US and virtually all of our
assets and the assets of those persons are located outside the
US. As a result, it may not be possible for you to effect
service of process within the US upon those persons or us. In
addition, you may be unable to enforce judgments obtained in
courts of the US against those persons outside the jurisdiction
of their residence, including judgments predicated solely upon
the securities laws of the US. See Enforcement of Civil
Liabilities.
Risks Related to India
A substantial portion of our assets and operations are
located in India and we are subject to regulatory, economic,
social and political uncertainties in India.
Our primary operating subsidiary, WNS Global Services Pvt. Ltd.,
is incorporated in India, and a substantial portion of our
assets and employees are located in India. We intend to continue
to develop and expand our facilities in India. The Indian
government, however, has exercised and continues to exercise
significant influence over many aspects of the Indian economy.
Indias government has provided significant tax incentives
and relaxed certain regulatory restrictions in order to
encourage foreign investment in specified sectors of the
economy, including the business process outsourcing industry.
Those programs that have benefited us include tax holidays,
liberalized import and export duties and preferential rules on
foreign investment and repatriation. We cannot assure you that
such liberalization policies will continue. Various factors,
including a collapse of the present coalition government due to
the withdrawal of support of coalition members, could trigger
significant changes in Indias economic liberalization and
deregulation policies and disrupt business and economic
conditions in India generally and our business in particular.
The government of India may decide to
18
introduce the reservation policy. According to this policy, all
companies operating in the private sector in India, including
our subsidiaries in India, would be required to reserve a
certain percentage of jobs for the economically underprivileged
population in the relevant state where such companies are
incorporated. If this policy is introduced, our ability to hire
employees of our choice may be restricted. Our financial
performance and the market price of our ADSs may be adversely
affected by changes in inflation, exchange rates and controls,
interest rates, government of India policies (including taxation
policies), social stability or other political, economic or
diplomatic developments affecting India in the future.
India has witnessed communal clashes in the past. Although such
clashes in India have, in the recent past, been sporadic and
have been contained within reasonably short periods of time, any
such civil disturbance in the future could result in disruptions
in transportation or communication networks, as well as have
adverse implications for general economic conditions in India.
Such events could have a material adverse effect on our
business, on the value of our ADSs and on your investment in our
ADSs.
If the government of India reduces or withdraws tax
benefits and other incentives it currently provides to companies
within our industry or if the same are not available for any
other reason, our financial condition could be negatively
affected.
Under the Indian Finance Act, 2000, our delivery centers in
India benefit from a ten-year holiday from Indian corporate
income taxes. As a result, our service operations, including any
businesses we acquire, have been subject to relatively low
Indian tax liabilities. We incurred minimal income tax expense
on our Indian operations in fiscal 2006 as a result of the tax
holiday, compared to approximately $4.7 million that we
would have incurred if the tax holiday had not been available
for that period. The Indian Finance Act, 2000, phases out the
tax holiday over a ten-year period from fiscal 2000 through
fiscal 2009. The tax holiday enjoyed by our delivery centers in
India expires in stages, on April 1, 2006 (for one of our
delivery centers located in Mumbai), on April 1, 2008 (for
one of our delivery centers located in Nashik) and on
April 1, 2009 (for our delivery centers located in Mumbai,
Pune, Nashik and Gurgaon). When our Indian tax holiday expires
or terminates, or if the Indian government withdraws or reduces
the benefits of the Indian tax holiday, our Indian tax expense
will materially increase and this increase will have a material
impact on our results of operations. In the absence of a tax
holiday, income derived from India would be taxed up to a
maximum of the then existing annual tax rate which, as of
March 31, 2006, was 33.66%.
US and Indian transfer pricing regulations require that any
international transaction involving associated enterprises be at
an arms-length price. We consider the transactions among
our subsidiaries and us to be on arms-length pricing
terms. If, however, the applicable income tax authorities review
any of our tax returns and determine that the transfer prices we
have applied are not appropriate, we may incur increased tax
liability, including accrued interest and penalties, which would
cause our tax expense to increase, possibly materially, thereby
reducing our profitability and cash flows.
Terrorist attacks and other acts of violence involving
India or its neighboring countries could adversely affect our
operations, resulting in a loss of client confidence and
adversely affecting our business, results of operations,
financial condition and cash flows.
Terrorist attacks and other acts of violence or war involving
India or its neighboring countries, may adversely affect
worldwide financial markets and could potentially lead to
economic recession, which could adversely affect our business,
results of operations, financial condition and cash flows. South
Asia has, from time to time, experienced instances of civil
unrest and hostilities among neighboring countries, including
India and Pakistan. In recent years, military confrontations
between India and Pakistan have occurred in the region of
Kashmir and along the India/ Pakistan border. There have also
been incidents in and near India such as a terrorist attack on
the Indian Parliament, troop mobilizations along the India/
Pakistan border and an aggravated geopolitical situation in the
region. Such military activity or terrorist attacks in the
future could influence the Indian economy by disrupting
communications and making travel more difficult. Resulting
political tensions could create a greater perception that
investments in Indian companies involve a high degree of risk.
Such political tensions could similarly create a perception that
there is a risk of disruption of services provided by
India-based companies, which could have a material adverse
effect on the market for our services.
19
Furthermore, if India were to become engaged in armed
hostilities, particularly hostilities that were protracted or
involved the threat or use of nuclear weapons, we might not be
able to continue our operations.
Restrictions on entry visas may affect our ability to
compete for and provide services to clients in the US, which
could have a material adverse effect on future revenue.
The vast majority of our employees are Indian nationals. The
ability of some of our executives to work with and meet our
European and North American clients and our clients from other
countries depends on the ability of our senior managers and
employees to obtain the necessary visas and entry permits. In
response to recent terrorist attacks and global unrest, US and
European immigration authorities have increased the level of
scrutiny in granting visas. Immigration laws in those countries
may also require us to meet certain other legal requirements as
a condition to obtaining or maintaining entry visas. These
restrictions have significantly lengthened the time requirements
to obtain visas for our personnel, which has in the past
resulted, and may continue to result, in delays in the ability
of our personnel to meet with our clients. In addition,
immigration laws are subject to legislative change and varying
standards of application and enforcement due to political
forces, economic conditions or other events, including terrorist
attacks. We cannot predict the political or economic events that
could affect immigration laws, or any restrictive impact those
events could have on obtaining or monitoring entry visas for our
personnel. If we are unable to obtain the necessary visas for
personnel who need to visit our clients sites, or if such
visas are delayed, we may not be able to provide services to our
clients or to continue to provide services on a timely basis,
which could have a material adverse effect on our business,
results of operations, financial condition and cash flows.
Currency fluctuations among the Indian rupee, the pound
sterling and the US dollar could have a material adverse effect
on our results of operations.
Although substantially all of our revenue is denominated in
pounds sterling or US dollars, a significant portion of our
expenses (other than payments to repair centers, which are
primarily denominated in pounds) are incurred and paid in Indian
rupees. We report our financial results in US dollars and our
results of operations would be adversely affected if the pound
sterling depreciates against the US dollar or the Indian rupee
appreciates against the US dollar. The exchange rates between
the Indian rupee and the US dollar and between the pound
sterling and the US dollar have changed substantially in recent
years and may fluctuate substantially in the future.
The average Indian rupee/ US dollar exchange rate in fiscal 2006
was approximately Rs.44.21 per $1.00 (based on the noon
buying rate), representing an appreciation of the Indian rupee
of 1.4% and 3.8% as compared with the average exchange rates in
fiscal 2005 and fiscal 2004. The average pound sterling/ US
dollar exchange rate in fiscal 2006 was approximately
£0.56 per $1.00 (based on the noon buying rate),
representing a depreciation of the pound sterling of 3.7% as
compared with the average exchange rates in fiscal 2005 and an
appreciation of the pound sterling of 5.1% as compared with the
average exchange rates in fiscal 2004. Our results of operations
may be adversely affected if the rupee appreciates significantly
against the pound sterling or the US dollar or the pound
sterling depreciates against the US dollar. In the future, we
may hedge our foreign currency exposure. We cannot assure you
that our hedging strategy will be successful.
If more stringent labor laws become applicable to us, our
profitability may be adversely affected.
India has stringent labor legislation that protects the
interests of workers, including legislation that sets forth
detailed procedures for dispute resolution and employee removal
and legislation that imposes financial obligations on employers
upon retrenchment. Though we are exempt from a number of these
labor laws at present, there can be no assurance that such laws
will not become applicable to the business process outsourcing
industry in India in the future. In addition, our employees may
in the future form unions. If these labor laws become applicable
to our workers or if our employees unionize, it may become
difficult for us to maintain flexible human resource policies,
discharge employees or downsize, and our profitability may be
adversely affected.
20
An outbreak of an infectious disease or any other serious
public health concerns in Asia or elsewhere could cause our
business to suffer.
The outbreak of an infectious disease in Asia or elsewhere could
have a negative impact on the economies, financial markets and
business activities in the countries in which our end markets
are located and could thereby have a material adverse effect on
our business. The outbreak of SARS in 2003 in Asia and the
outbreak of avian influenza, or bird flu, across Asia and
Europe, including the recent outbreak in India, have adversely
affected a number of countries and companies. Although we have
not been adversely impacted by these recent outbreaks, we can
give no assurance that a future outbreak of an infectious
disease among humans or animals will not have a material adverse
effect on our business.
Risks Related to this Offering
There is no prior public market for our shares or ADSs and
therefore we cannot assure you that an active trading market or
a specific ADS price will be established.
Currently, there is no public trading market for our shares or
ADSs. We have applied for our ADSs to be listed on the NYSE
under the symbol WNS. The initial public offering
price per ADS was determined by agreement among us, the selling
shareholders and the representatives of the underwriters and may
not be indicative of the market price of our ADSs after our
initial public offering. It is possible that an active trading
market will not develop and continue upon the completion of this
offering or that the market price of our ADSs will decline below
the initial public offering price.
Because the initial public offering price per ADS is
substantially higher than our book value per ADS, purchasers in
this offering will immediately experience a substantial dilution
in net tangible book value.
Purchasers of our ADSs will experience immediate and substantial
dilution in net tangible book value per ADS from the initial
public offering price per ADS. After giving effect to the sale
of 4,473,684 ADSs in this offering, after deducting underwriting
discounts, commissions and estimated offering expenses payable
by us, and the application of the net proceeds therefrom, our as
adjusted net tangible book value as of March 31, 2006 would
have been $110.2 million, or $2.77 per ADS. This represents
an immediate dilution in net tangible book value of $16.23 per
ADS to new investors purchasing ADSs in this offering. For a
calculation of the dilution purchasers in this offering will
incur, see Dilution.
Substantial future sales of our shares or ADSs in the
public market could cause our ADS price to fall.
Upon the completion of this offering, we will have
39,801,857 shares outstanding. Of these shares, the
11,202,708 shares represented by ADSs offered hereby will
be freely tradable without restriction in the public market.
Upon the completion of this offering, our existing shareholders
will own 28,599,149 shares, which will represent 71.9% of
our outstanding share capital. Immediately following the
completion of this offering, the holders of 34,662 shares
(directly or in the form of ADSs) will be entitled to dispose of
their shares or ADSs if they qualify for an exemption from
registration under the Securities Act of 1933, as amended, or
the Securities Act, and the holders of an additional
28,564,487 shares (directly or in the form of ADSs) will be
entitled to dispose of their shares or ADSs following the
expiration of an initial
180-day
lock-up period if they qualify for an exemption from
registration under the Securities Act.
The market price for our ADSs may be volatile.
The market price for our ADSs is likely to be highly volatile
and subject to wide fluctuations in response to factors
including the following:
|
|
|
announcements of technological developments; |
|
|
regulatory developments in our target markets affecting us, our
clients or our competitors; |
|
|
actual or anticipated fluctuations in our quarterly operating
results; |
|
|
changes in financial estimates by securities research analysts; |
21
|
|
|
changes in the economic performance or market valuations of
other companies engaged in business process outsourcing; |
|
|
addition or loss of executive officers or key employees; |
|
|
sales or expected sales of additional shares or ADSs; and |
|
|
loss of one or more significant clients. |
In addition, securities markets generally and from time to time
experience significant price and volume fluctuations that are
not related to the operating performance of particular
companies. These market fluctuations may also have a material
adverse effect on the market price of our ADSs.
We will have broad discretion in how we use the proceeds
of this offering and we may not use these proceeds effectively.
This could affect our profitability and cause our ADS price to
decline.
Our management will have considerable discretion in the
application of the net proceeds of this offering, and you will
not have the opportunity, as part of your investment decision,
to assess whether we are using the proceeds appropriately. We
currently intend to use the net proceeds for general corporate
purposes, including capital expenditures and working capital and
for possible acquisitions of businesses, products and
technologies. We have not yet finalized the amount of net
proceeds that we will use specifically for each of these
purposes. We may use the net proceeds for corporate purposes
that do not improve our profitability or increase our market
value, which could cause our ADS price to decline.
We may be classified as a passive foreign investment
company in our current taxable year, which could result in
adverse United States federal income tax consequences to
US Holders.
The application of the passive foreign investment
company, or PFIC, rules to the company in its current
taxable year is uncertain. A non-US corporation will be
considered a PFIC for any taxable year if either (1) under
the PFIC income test, at least 75% of its gross income is
passive income or (2) under the PFIC asset test, at least
50% of its assets (determined on the basis of a quarterly
average) is attributable to assets that produce or are held for
the production of passive income for such taxable year. However,
the application of the PFIC asset test to a corporation that is
a controlled foreign corporation, or a CFC (as
defined under the United States federal income tax law), for its
taxable year in which it becomes a publicly traded corporation
after its first quarter is not clear. Because we currently are a
CFC, the application of the PFIC asset test to us in our current
taxable year is uncertain.
Under the least favorable interpretation of the PFIC asset test,
it is possible that we could be a PFIC in respect of our current
taxable year, depending largely on how and to what extent we use
the offering proceeds during our current taxable year, although
this will not be determinable until the end of our current
taxable year. Under more favorable interpretations of the PFIC
assets test, we believe that we would not be a PFIC for our
current taxable year, regardless of how and when we use the
offering proceeds. It may be reasonable for US Holders (as
defined under Taxation US Federal Income
Taxation) to apply a more favorable interpretation of this
test for purposes of determining and reporting the
US federal income tax consequences of their investment in
the ADSs or ordinary shares, although these holders should
consult their own tax advisers regarding the reasonableness of
this position. US Holders also should note that the United
States Internal Revenue Service, or IRS, could seek to apply the
least favorable interpretation.
We will notify US Holders regarding whether we believe that
we would be a PFIC for our current taxable year under the least
favorable interpretation of the PFIC asset test (unless there is
IRS or other official guidance supporting a more favorable
interpretation) promptly after the end of our current taxable
year. If we are treated as a PFIC for any taxable year during
which a US Holder owns an ADS or an ordinary share, adverse
US federal income tax consequences could apply to that
holder. See Taxation US Federal Income
Taxation Passive Foreign Investment Company.
22
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements
that are based on our current expectations, assumptions,
estimates and projections about our company and our industry.
The forward-looking statements are subject to various risks and
uncertainties. Generally, these forward-looking statements can
be identified by the use of forward-looking terminology such as
anticipate, believe,
estimate, expect, intend,
will, project, seek,
should and similar expressions. Those statements
include, among other things, the discussions of our business
strategy and expectations concerning our market position, future
operations, margins, profitability, liquidity and capital
resources. We caution you that reliance on any forward-looking
statement involves risks and uncertainties, and that although we
believe that the assumptions on which our forward-looking
statements are based are reasonable, any of those assumptions
could prove to be inaccurate, and, as a result, the
forward-looking statements based on those assumptions could be
materially incorrect. These factors include but are not limited
to:
|
|
|
technological innovation; |
|
|
telecommunications or technology disruptions; |
|
|
future regulatory actions and conditions in our operating areas; |
|
|
our dependence on a limited number of clients in a limited
number of industries; |
|
|
our ability to attract and retain clients; |
|
|
our ability to expand our business or effectively manage growth; |
|
|
our ability to hire and retain enough sufficiently trained
employees to support our operations; |
|
|
negative public reaction in the US or the UK to offshore
outsourcing; |
|
|
regulatory, legislative and judicial developments; |
|
|
increasing competition in the business process outsourcing
industry; |
|
|
political or economic instability in India, Sri Lanka and Jersey; |
|
|
worldwide economic and business conditions; and |
|
|
our ability to successfully consummate strategic acquisitions. |
These and other factors are more fully discussed in Risk
Factors, Managements Discussion and Analysis
of Financial Condition and Results of Operations and
elsewhere in this prospectus. In light of these and other
uncertainties, you should not conclude that we will necessarily
achieve any plans, objectives or projected financial results
referred to in any of the forward-looking statements. Except as
required by law, we do not undertake to release revisions of any
of these forward-looking statements to reflect future events or
circumstances.
23
USE OF PROCEEDS
Our net proceeds from the sale of 4,473,684 ADSs in this
offering will total approximately $73.9 million after
deducting underwriting discounts and commissions and estimated
offering expenses which are payable by us and assuming an
initial public offering price of $19.00 per ADS, the midpoint of
the estimated range of the initial public offering price. A
$1.00 increase (decrease) in the assumed initial public offering
price of $19.00 per ADS would increase (decrease) the net
proceeds to us from this offering by $4.2 million, after
deducting the estimated underwriting discounts and commissions
and estimated offering expenses payable by us and assuming no
other change to the number of ADSs offered by us as set forth on
the cover page of this prospectus.
We intend to use the net proceeds from this offering for general
corporate purposes, including capital expenditures and working
capital, and for possible acquisitions of businesses and
delivery platforms.
The amounts that we actually expend for working capital will
vary significantly depending on a number of factors, including
future revenue growth, if any, and the amount of cash that we
generate from operations. As a result, we will retain broad
discretion over the allocation of the net proceeds of this
offering. We also may use a portion of the net proceeds for the
acquisition of businesses or delivery platforms. We have no
current agreements or commitments for material acquisitions of
any businesses or delivery platforms. Pending their use, we
intend to invest our net proceeds in high-quality
interest-bearing investments.
The proceeds from this offering of ADSs to be sold by the
selling shareholders will be paid to those shareholders. We will
not receive any of the proceeds from the sale of those ADSs.
24
DIVIDENDS AND DIVIDEND POLICY
Subject to the provisions of the Companies (Jersey) Law, 1991,
or the 1991 Law, and our Articles of Association, we may by
ordinary resolution declare annual dividends to be paid to the
shareholders according to their respective rights and interests
in our profits available for distribution (our realized profits
less our realized losses). Any dividends we may declare must not
exceed the amount recommended by our board of directors. Our
board may also declare and pay an interim dividend or dividends,
including a dividend payable at a fixed rate, if paying an
interim dividend or dividends appears to the board to be
justified by our profits available for distribution. See
Description of Share Capital. We can also declare
dividends (1) out of our realized revenue profits less our
revenue losses, whether realized or unrealized, if our directors
who are to authorize the distribution reasonably believe that
immediately after the distribution has been made, we will be
able to discharge our liabilities as they fall due and
(2) with the sanction of a special resolution in general
meeting, out of our unrealized profits less our losses, whether
realized or unrealized, if our directors who are to authorize
the distribution make a prior statement that, having made full
enquiry into our affairs and prospects, they have formed the
opinion that
|
|
(a) |
immediately following the date on which the distribution is
proposed to be made, we will be able to discharge our
liabilities as they fall due; and |
|
(b) |
having regard to our prospects and to the intentions of our
directors with respect to the management of our business and to
the amount and character of the financial resources that will in
their view be available to us, we will be able to continue to
carry on business and we will be able to discharge our
liabilities as they fall due until the expiry of the period of
one year immediately following the date on which the
distribution is proposed to be made or until we are dissolved
under Article 150 of the 1991 Law, whichever first occurs. |
We have never declared or paid any dividends on our ordinary
shares. Any future determination to pay cash dividends will be
at the discretion of our board of directors and will be
dependent upon our results of operations and cash flows, our
financial position and capital requirements, general business
conditions, legal, tax, regulatory and any contractual
restrictions on the payment of dividends and any other factors
our board of directors deems relevant at the time.
Subject to the deposit agreement, holders of ADSs will be
entitled to receive dividends paid on the ordinary shares
represented by such ADSs.
25
CAPITALIZATION
The following table sets forth our capitalization as of
March 31, 2006:
|
|
|
on an actual basis; and |
|
|
as adjusted to give effect to the sale by us of
4,473,684 ADSs in this offering at an assumed initial
public offering price of $19.00 per ADS, the midpoint of
the estimated range of the initial public offering price, after
deducting underwriting discounts and commissions, estimated
offering expenses payable by us, and further assuming no other
change to the number of ADSs sold by us as set forth on the
cover page of this prospectus. |
The as adjusted information below is illustrative only and our
capitalization following the completion of this offering is
subject to adjustment based on the actual initial public
offering price of our ADSs and other terms of this offering
determined at pricing. You should read this table in conjunction
with Use of Proceeds, Selected Historical
Consolidated and Pro Forma Financial and Operating Data,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements and related notes that are included
elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
As of | |
|
|
March 31, 2006 | |
|
|
| |
|
|
Actual | |
|
As adjusted | |
|
|
| |
|
| |
|
|
(US dollars in | |
|
|
thousands, except share | |
|
|
and per share data) | |
Shareholders equity:
|
|
|
|
|
|
|
|
|
Ordinary shares, $0.15 (10 pence) par value; Authorized:
40,000,000(1) shares
|
|
|
|
|
|
|
|
|
|
Issued and outstanding: 35,321,511 shares, actual, and
39,795,195 as
adjusted(2)
|
|
$ |
5,290 |
|
|
|
5,961 |
|
|
Additional paid-in-capital
|
|
|
62,228 |
|
|
|
136,032 |
(3)(4) |
|
Ordinary shares subscribed
|
|
|
10 |
|
|
|
10 |
|
Retained earnings
|
|
|
4,104 |
|
|
|
4,104 |
|
Deferred share-based compensation
|
|
|
(582 |
) |
|
|
(582 |
) |
Accumulated other comprehensive income
|
|
$ |
7,114 |
|
|
$ |
7,114 |
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
$ |
78,164 |
|
|
$ |
152,639 |
(3) |
|
|
|
|
|
|
|
Total capitalization
|
|
$ |
78,164 |
|
|
$ |
152,639 |
(3) |
|
|
|
|
|
|
|
Notes:
|
|
(1) |
In May 2006, the authorized number of our ordinary shares was
increased to 50,000,000. |
|
|
(2) |
Excludes (i) 6,662 ordinary shares issued upon
exercise of options during the period April 1, 2006 to
June 30, 2006; (ii) 3,875,655 ordinary shares
issuable upon exercise of outstanding options and
90,121 ordinary shares reserved for future issuance under
our Stock Incentive Plan as of June 30, 2006; and
(iii) 3,000,000 ordinary shares reserved for future
issuance under our 2006 Incentive Award Plan (including
537,000 ordinary shares issuable upon the exercise of
options to be granted effective upon the pricing of this
offering (of which 320,000 are to be issued to certain of our
directors and executive officers and 217,000 are to be issued to
other employees) and 224,750 restricted share units to be issued
effective upon the pricing of this offering (of which 160,000
are to be issued to certain of our directors and executive
officers and 64,750 are to be issued to other employees), each
under the 2006 Incentive Award Plan). See
Management Employee Benefit Plans
Stock Incentive Plan and Management
Employee Benefit Plans WNS 2006 Incentive Award
Plan. |
|
|
(3) |
A $1.00 increase (decrease) in the assumed initial public
offering price of $19.00 per ADS, would increase (decrease)
each of additional paid-in capital, total shareholders
equity and total capitalization by $4.2 million. |
|
(4) |
Does not reflect the cost of directors and officers
insurance premiums of $0.6 million related to this offering. |
26
DILUTION
If you invest in our ADSs, your investment will be diluted to
the extent the initial public offering price per ADS exceeds the
net tangible book value per ADS immediately after this offering.
Our net tangible book value as of March 31, 2006 was
approximately $33.9 million, or $0.96 per ADS. Net
tangible book value per ADS represents the amount of our net
worth, or total tangible assets less total liabilities, divided
by the number of ordinary shares outstanding as of that date
(one ADS represents one ordinary share).
On a pro forma basis, after giving effect to the issuance of
4,473,684 ADSs at an assumed initial public offering price
of $19.00 per ADS, and after deducting the estimated
underwriting discounts and commissions and our estimated
offering expenses other than directors and officers
insurance premiums related to this offering (assuming that the
underwriters over-allotment option is not exercised), our
pro forma as adjusted net tangible book value as of
March 31, 2006 would have been $110.2 million, or
$2.77 per ordinary share. This amount represents an
immediate increase of $1.81 per ADS to the existing
shareholders and an immediate dilution of $16.23 per ADS
issued to the new investors purchasing ADSs offered hereby at
the assumed public offering price. The following table
illustrates this per ADS dilution:
|
|
|
|
|
|
|
|
|
|
Assumed initial public offering price per ADS
|
|
|
|
|
|
$ |
19.00 |
|
|
Pro forma net tangible book value per ADS as of March 31,
2006(1)
|
|
$ |
1.01 |
|
|
|
|
|
|
Increase in pro forma net tangible book value attributable to
this offering per ADS
|
|
$ |
1.76 |
|
|
|
|
|
Pro forma net tangible book value per ADS after this offering
|
|
|
|
|
|
$ |
2.77 |
|
|
|
|
|
|
|
|
Dilution per ADS to new
investors(2)
|
|
|
|
|
|
$ |
16.23 |
|
|
|
|
|
|
|
|
Note:
|
|
(1) |
Excludes $1.7 million of deferred offering costs at
March 31, 2006 which has been included in determining the
increase in pro forma net tangible book value attributable to
this offering. |
|
(2) |
If the underwriters over-allotment option is exercised in
full, the net tangible book value per ADS after this offering
would remain at $2.77 and dilution per ADS to new investors
would remain at $16.23. |
A $1.00 increase (decrease) in the assumed initial public
offering price of $19.00 per ADS would increase (decrease)
our pro forma net tangible book value after giving effect to
this offering by $4.2 million, the pro forma net tangible
book value per ADS after giving effect to this offering by
$0.11 per ADS and the dilution in pro forma net tangible
book value per ADS to new investors in this offering by
$0.89 per ADS, assuming no change to the number of shares
of ADSs offered by us as set forth on the cover page of this
prospectus, and after deducting underwriting discounts and
commissions and other expenses of this offering. The pro forma
information discussed above is illustrative only. Our net
tangible book value following the completion of this offering is
subject to adjustment based on the actual initial public
offering price of our ADSs and other terms of this offering
determined at pricing.
27
The following table sets forth on a pro forma basis as of
March 31, 2006 the differences between existing
shareholders and the new investors with respect to the number of
ADSs purchased from us, the total consideration paid and the
average price per ADS paid (before deducting the estimated
underwriting discounts and commissions and our estimated
offering expenses and assuming that the underwriters
over-allotment option is not exercised), assuming an initial
public offering price of $19.00 per ADS, the midpoint of
the estimated range of the initial public offering price. The
information in the following table is illustrative only and the
total consideration paid and average price per ADS is subject to
adjustment based on the actual initial public offering price of
our ADS and other terms of this offering determined at pricing.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average | |
|
|
Shares Purchased | |
|
Total Consideration | |
|
Average | |
|
Price | |
|
|
| |
|
| |
|
Price Per | |
|
Per | |
|
|
Number | |
|
Percentage | |
|
Amount | |
|
Percentage | |
|
Share | |
|
ADS | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Existing shareholders
|
|
|
35,321,511 |
|
|
|
88.8 |
% |
|
$ |
65,092,819 |
|
|
|
43.4 |
% |
|
$ |
1.84 |
|
|
$ |
1.84 |
|
New investors
|
|
|
4,473,684 |
|
|
|
11.2 |
% |
|
$ |
84,999,996 |
|
|
|
56.6 |
% |
|
$ |
19.00 |
|
|
$ |
19.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
39,795,195 |
|
|
|
100.0 |
% |
|
$ |
150,092,815 |
|
|
|
100.0 |
% |
|
$ |
3.77 |
|
|
$ |
3.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A $1.00 increase (decrease) in the assumed initial public
offering price of $19.00 per ADS would increase (decrease)
total consideration paid by new investors, total consideration
paid by all shareholders and the average price per ADS paid by
all shareholders by $4.5 million, $4.5 million and
$0.11 assuming no change in the number of ADS sold by us as set
forth above and without deducting underwriting discounts and
commissions and other expenses of this offering.
The foregoing tables do not include (i) 6,662 ordinary
shares issued upon exercise of options since March 31,
2006; (ii) 3,875,655 ordinary shares issuable upon
exercise of outstanding options and 90,121 ordinary shares
reserved for future issuance under our Stock Incentive Plan as
of June 30, 2006; and (iii) 3,000,000 ordinary
shares reserved for future issuance under our 2006 Incentive
Award Plan (including 537,000 ordinary shares issuable upon
the exercise of options to be granted effective upon the pricing
of this offering (of which 320,000 are to be issued to certain
of our directors and executive officers and 217,000 are to be
issued to other employees) and 224,750 restricted share
units to be issued effective upon the pricing of this offering
(of which 160,000 are to be issued to certain of our directors
and executive officers and 64,750 are to be issued to other
employees), each under the 2006 Incentive Award Plan). See
Management Employee Benefit Plans
Stock Incentive Plan and Management
Employee Benefit Plans WNS 2006 Incentive Award
Plan. If all of the shares referred to in (i) and
(ii) above had been issued on March 31, 2006, after
giving effect to this offering, our pro forma net tangible book
value would have been approximately $127.6 million, or
$2.92 per ADS, and the dilution in pro forma net tangible
book value to new investors would have been $16.08 per ADS.
In addition, the dilution to new investors will be
$16.08 per ADS if the underwriters exercise their option to
purchase additional ADSs in full.
28
EXCHANGE RATES
Substantially all of our revenue is denominated in pounds
sterling or US dollars and most of our expenses, other than
payments to repair centers, are incurred and paid in Indian
rupees. We report our financial results in US dollars. The
exchange rates among the Indian rupee, the pound sterling and
the US dollar have changed substantially in recent years and may
fluctuate substantially in the future. The results of our
operations are affected as the Indian rupee and the pound
sterling appreciate or depreciate against the US dollar and, as
a result, any such appreciation or depreciation will likely
affect the market price of our ADSs in the US.
The following table sets forth, for the periods indicated,
information concerning the exchange rates between Indian rupees
and US dollars based on the noon buying rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period End(1) | |
|
Average(1)(2) | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
Fiscal Year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 (through July 19, 2006)
|
|
|
Rs.46.81 |
|
|
|
Rs.45.45 |
|
|
|
Rs.46.81 |
|
|
|
Rs.44.39 |
|
|
2006
|
|
|
44.48 |
|
|
|
44.21 |
|
|
|
46.26 |
|
|
|
43.05 |
|
|
2005
|
|
|
43.62 |
|
|
|
44.86 |
|
|
|
46.45 |
|
|
|
43.27 |
|
|
2004
|
|
|
43.40 |
|
|
|
45.96 |
|
|
|
47.46 |
|
|
|
43.40 |
|
|
2003
|
|
|
47.53 |
|
|
|
48.43 |
|
|
|
49.07 |
|
|
|
47.53 |
|
|
2002
|
|
|
48.83 |
|
|
|
47.71 |
|
|
|
48.91 |
|
|
|
46.58 |
|
|
2001
|
|
|
46.85 |
|
|
|
45.74 |
|
|
|
47.47 |
|
|
|
43.63 |
|
Month:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2006 (through July 19, 2006)
|
|
|
Rs.46.81 |
|
|
|
Rs.46.18 |
|
|
|
Rs.46.81 |
|
|
|
Rs.45.84 |
|
|
June 2006
|
|
|
45.87 |
|
|
|
45.89 |
|
|
|
46.25 |
|
|
|
45.50 |
|
|
May 2006
|
|
|
46.22 |
|
|
|
45.20 |
|
|
|
46.22 |
|
|
|
44.69 |
|
|
April 2006
|
|
|
44.86 |
|
|
|
44.82 |
|
|
|
45.09 |
|
|
|
44.39 |
|
|
March 2006
|
|
|
44.48 |
|
|
|
44.38 |
|
|
|
44.58 |
|
|
|
44.11 |
|
|
February 2006
|
|
|
44.21 |
|
|
|
44.23 |
|
|
|
44.54 |
|
|
|
44.10 |
|
|
January 2006
|
|
|
43.96 |
|
|
|
44.20 |
|
|
|
44.92 |
|
|
|
43.89 |
|
|
December 2005
|
|
|
44.95 |
|
|
|
45.56 |
|
|
|
46.26 |
|
|
|
44.94 |
|
|
November 2005
|
|
|
45.87 |
|
|
|
45.63 |
|
|
|
45.87 |
|
|
|
45.02 |
|
|
October 2005
|
|
|
45.09 |
|
|
|
44.76 |
|
|
|
45.11 |
|
|
|
44.00 |
|
|
September 2005
|
|
|
43.94 |
|
|
|
43.85 |
|
|
|
43.98 |
|
|
|
43.75 |
|
|
August 2005
|
|
|
44.00 |
|
|
|
43.55 |
|
|
|
44.00 |
|
|
|
43.36 |
|
Notes:
|
|
(1) |
The noon buying rate at each period end and the average rate for
each period may differ from the exchange rates used in the
preparation of financial statements included elsewhere in this
prospectus. |
|
(2) |
Represents the average of the noon buying rate for all days
during the period. |
29
The following table sets forth, for the periods indicated,
information concerning the exchange rates between the pound
sterling and US dollars based on the noon buying rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period End(1) |
|
Average(1)(2) |
|
High |
|
Low |
|
|
|
|
|
|
|
|
|
Fiscal Year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 (through July 19, 2006)
|
|
|
GBP0.54 |
|
|
|
GBP0.55 |
|
|
|
GBP0.58 |
|
|
|
GBP0.53 |
|
|
2006
|
|
|
0.57 |
|
|
|
0.56 |
|
|
|
0.58 |
|
|
|
0.52 |
|
|
2005
|
|
|
0.53 |
|
|
|
0.54 |
|
|
|
0.57 |
|
|
|
0.51 |
|
|
2004
|
|
|
0.54 |
|
|
|
0.59 |
|
|
|
0.65 |
|
|
|
0.53 |
|
|
2003
|
|
|
0.63 |
|
|
|
0.65 |
|
|
|
0.70 |
|
|
|
0.61 |
|
|
2002
|
|
|
0.70 |
|
|
|
0.70 |
|
|
|
0.73 |
|
|
|
0.68 |
|
|
2001
|
|
|
0.70 |
|
|
|
0.68 |
|
|
|
0.71 |
|
|
|
0.63 |
|
Month:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2006 (through July 19, 2006)
|
|
|
GBP0.54 |
|
|
|
GBP0.54 |
|
|
|
GBP0.55 |
|
|
|
GBP0.54 |
|
|
June 2006
|
|
|
0.54 |
|
|
|
0.54 |
|
|
|
0.55 |
|
|
|
0.53 |
|
|
May 2006
|
|
|
0.53 |
|
|
|
0.54 |
|
|
|
0.55 |
|
|
|
0.53 |
|
|
April 2006
|
|
|
0.55 |
|
|
|
0.57 |
|
|
|
0.58 |
|
|
|
0.55 |
|
|
March 2006
|
|
|
0.57 |
|
|
|
0.57 |
|
|
|
0.58 |
|
|
|
0.57 |
|
|
February 2006
|
|
|
0.57 |
|
|
|
0.57 |
|
|
|
0.58 |
|
|
|
0.56 |
|
|
January 2006
|
|
|
0.56 |
|
|
|
0.57 |
|
|
|
0.57 |
|
|
|
0.56 |
|
|
December 2005
|
|
|
0.58 |
|
|
|
0.57 |
|
|
|
0.58 |
|
|
|
0.56 |
|
|
November 2005
|
|
|
0.58 |
|
|
|
0.58 |
|
|
|
0.58 |
|
|
|
0.56 |
|
|
October 2005
|
|
|
0.57 |
|
|
|
0.57 |
|
|
|
0.57 |
|
|
|
0.56 |
|
|
September 2005
|
|
|
0.57 |
|
|
|
0.55 |
|
|
|
0.57 |
|
|
|
0.54 |
|
|
August 2005
|
|
|
0.56 |
|
|
|
0.56 |
|
|
|
0.57 |
|
|
|
0.55 |
|
Notes:
|
|
(1) |
The noon buying rate at each period end and the average rate for
each period may differ from the exchange rates used in the
preparation of financial statements included elsewhere in this
prospectus. |
|
(2) |
Represents the average of the noon buying rate for all days
during the period. |
No representation is made that the Indian rupee or pound
sterling amounts have been, could have been or could be
converted into US dollars at such rates or any other rates.
The noon buying rates on July 19, 2006 were Rs.46.81 and
£0.54 per $1.00.
30
SELECTED HISTORICAL CONSOLIDATED AND PRO FORMA
FINANCIAL AND OPERATING DATA
The following selected historical consolidated statement of
operations data presented below for fiscal 2006, 2005, 2004 and
2003, and the selected historical consolidated balance sheet
data as of March 31, 2006, 2005 and 2004, have been derived
from our audited consolidated financial statements. Our
consolidated financial statements are prepared and presented in
accordance with US GAAP. Our historical results do not
necessarily indicate our results expected for any future period.
The selected pro forma financial data is derived from the
unaudited pro forma condensed combined statement of operations
included elsewhere in this prospectus. The unaudited pro forma
condensed combined statement of operations has been prepared to
reflect our acquisition of the business of Trinity Partners in
November 2005 as if it occurred on April 1, 2005. The pro
forma financial information combines historical condensed
consolidated statements of operations of our company and Trinity
Partners. The pro forma condensed combined statement of
operations does not purport to represent our results of
operations for fiscal 2006 or any future period.
We were incorporated on February 18, 2002, and we did not
produce consolidated financial statements for fiscal 2002. Our
predecessor entity, World Network Services Pvt. Ltd., an Indian
corporation, prepared financial statements for fiscal 2002 in
accordance with Indian generally accepted accounting principles,
or Indian GAAP, which were presented in Indian rupees. We
represent that selected financial data for fiscal 2002 cannot be
prepared and presented below in accordance with US GAAP with a
US dollar reporting currency, on a comparable basis without
incurring unreasonable effort or expense.
You should read the following information in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations, Pro Forma
Condensed Combined Statement of Operations and the
consolidated financial statements included elsewhere in this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(US dollars in millions, except share and per share data) | |
|
|
Unaudited | |
|
|
|
|
pro forma | |
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
210.4 |
|
|
$ |
202.8 |
|
|
$ |
162.2 |
|
|
$ |
104.1 |
|
|
$ |
54.6 |
|
Cost of
revenue(1)
|
|
|
149.5 |
|
|
|
145.7 |
|
|
|
140.3 |
|
|
|
89.7 |
|
|
|
42.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
60.9 |
|
|
|
57.1 |
|
|
|
21.9 |
|
|
|
14.4 |
|
|
|
11.8 |
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A(1)
|
|
|
40.7 |
|
|
|
36.3 |
|
|
|
24.9 |
|
|
|
18.8 |
|
|
|
10.9 |
|
|
Amortization of intangible assets
|
|
|
2.0 |
|
|
|
0.9 |
|
|
|
1.4 |
|
|
|
2.6 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
18.2 |
|
|
|
19.9 |
|
|
|
(4.4 |
) |
|
|
(7.0 |
) |
|
|
(0.9 |
) |
Other income, net
|
|
|
0.6 |
|
|
|
0.5 |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.3 |
|
Interest expense
|
|
|
(0.5 |
) |
|
|
(0.4 |
) |
|
|
(0.5 |
) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
18.3 |
|
|
|
19.9 |
|
|
|
(4.7 |
) |
|
|
(6.8 |
) |
|
|
(0.7 |
) |
(Provision) benefit for income taxes
|
|
|
(1.1 |
) |
|
|
(1.6 |
) |
|
|
(1.1 |
) |
|
|
0.0 |
|
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
17.2 |
|
|
$ |
18.3 |
|
|
|
(5.8 |
) |
|
|
(6.7 |
) |
|
|
(1.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.50 |
|
|
$ |
0.56 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
|
$ |
(0.07 |
) |
|
Diluted
|
|
$ |
0.47 |
|
|
$ |
0.52 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
|
$ |
(0.07 |
) |
Weighted-average shares outstanding (basic)
|
|
|
34,230,296 |
|
|
|
32,874,299 |
|
|
|
30,969,658 |
|
|
|
30,795,888 |
|
|
|
26,243,833 |
|
Weighted-average shares outstanding (diluted)
|
|
|
36,385,763 |
|
|
|
35,029,766 |
|
|
|
30,969,658 |
|
|
|
30,795,888 |
|
|
|
26,243,833 |
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, | |
|
|
|
|
| |
|
|
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
|
|
| |
|
| |
|
| |
|
|
|
|
(US dollars in millions) | |
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
18.5 |
|
|
$ |
9.1 |
|
|
$ |
14.8 |
|
|
|
|
|
Accounts receivable, net
|
|
|
28.1 |
|
|
|
25.2 |
|
|
|
18.1 |
|
|
|
|
|
Other current assets
|
|
|
10.8 |
|
|
|
9.7 |
|
|
|
9.5 |
|
|
|
|
|
Total current assets
|
|
|
57.4 |
|
|
|
44.0 |
|
|
|
42.5 |
|
|
|
|
|
Deposits and deferred tax asset
|
|
|
4.3 |
|
|
|
2.6 |
|
|
|
1.3 |
|
|
|
|
|
Goodwill and intangible assets, net
|
|
|
42.5 |
|
|
|
26.7 |
|
|
|
27.6 |
|
|
|
|
|
Property and equipment, net
|
|
|
30.6 |
|
|
|
24.7 |
|
|
|
15.3 |
|
|
|
|
|
Total assets
|
|
|
134.8 |
|
|
|
98.0 |
|
|
|
86.6 |
|
|
|
|
|
Note payable
|
|
|
|
|
|
|
10.0 |
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
53.5 |
|
|
|
54.8 |
|
|
|
39.4 |
|
|
|
|
|
Deferred tax liabilities non-current
|
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities
|
|
|
0.8 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
|
|
Total shareholders equity
|
|
|
78.2 |
|
|
|
43.0 |
|
|
|
46.7 |
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
134.8 |
|
|
|
98.0 |
|
|
|
86.6 |
|
|
|
|
|
The following tables set forth for the periods indicated
selected consolidated financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(US dollars in millions, except percentages and | |
|
|
employee data) | |
Other Consolidated Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
202.8 |
|
|
$ |
162.2 |
|
|
$ |
104.1 |
|
|
$ |
54.6 |
|
Gross profit as a percentage of revenue
|
|
|
28.1 |
% |
|
|
13.5 |
% |
|
|
13.8 |
% |
|
|
21.6 |
% |
Operating income (loss) as a percentage of revenue
|
|
|
9.8 |
% |
|
|
(2.7 |
)% |
|
|
(6.7 |
)% |
|
|
(1.6 |
)% |
Other Unaudited Consolidated Financial and Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair
payments(2)
|
|
$ |
147.9 |
|
|
$ |
99.0 |
|
|
$ |
49.9 |
|
|
$ |
25.6 |
|
Gross profit as a percentage of revenue less repair payments
|
|
|
38.6 |
% |
|
|
22.1 |
% |
|
|
28.9 |
% |
|
|
46.1 |
% |
Operating income (loss) as a percentage of revenue less repair
payments
|
|
|
13.4 |
% |
|
|
(4.4 |
)% |
|
|
(14.1 |
)% |
|
|
(3.6 |
)% |
Number of employees (at period end)
|
|
|
10,433 |
|
|
|
7,176 |
|
|
|
4,472 |
|
|
|
2,348 |
|
Notes:
|
|
(1) |
Includes the following share-based compensation amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(US dollars in millions) | |
|
|
Unaudited | |
|
|
|
|
pro forma | |
|
|
Cost of revenue
|
|
$ |
0.1 |
|
|
$ |
0.1 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
|
$ |
0.0 |
|
SG&A
|
|
|
2.3 |
|
|
|
1.8 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.1 |
|
32
|
|
(2) |
Revenue less repair payments is a non-GAAP measure. See the
explanation below, as well as Managements Discussion
and Analysis of Financial Condition and Results of
Operations Overview and notes to the
consolidated financial statements included in this prospectus.
The following table reconciles our revenue (a GAAP measure) to
revenue less repair payments (a non-GAAP measure): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(US dollars in millions) | |
Revenue
|
|
$ |
202.8 |
|
|
$ |
162.2 |
|
|
$ |
104.1 |
|
|
$ |
54.6 |
|
Less: Payments to repair centers
|
|
$ |
54.9 |
|
|
$ |
63.2 |
|
|
$ |
54.2 |
|
|
$ |
29.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
|
|
$ |
147.9 |
|
|
$ |
99.0 |
|
|
$ |
49.9 |
|
|
$ |
25.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have two reportable segments for financial statement
reporting purposes WNS Global BPO and WNS Auto
Claims BPO. In our WNS Auto Claims BPO segment, we provide
claims handling and accident management services, where we
arrange for automobile repairs through a network of repair
centers. In our accident management services, we act as the
principal in our dealings with the repair centers and our
clients. The amounts invoiced to our clients for payments made
by us to repair centers is reported as revenue. Since we wholly
subcontract the repairs to the repair centers, we use revenue
less repair payments as a primary measure to allocate resources
and measure operating performance.
Revenue less repair payments is a non-GAAP measure. We believe
that the presentation of this non-GAAP measure in this
prospectus provides useful information for investors regarding
the financial performance of our business and our two reportable
segments. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Results by Reportable Segment. The presentation of this
non-GAAP information is not meant to be considered in isolation
or as a substitute for our financial results prepared in
accordance with US GAAP. Our revenue less repair payments may
not be comparable to similarly titled measures reported by other
companies due to potential differences in the method of
calculation.
33
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The unaudited pro forma condensed combined statement of
operations gives effect to our acquisition of Trinity Partners
on November 16, 2005, as if it had occurred on
April 1, 2005. Historical consolidated financial
information has been adjusted to give effect to pro forma events
that are (1) directly attributable to the acquisition,
(2) factually supportable and (3) expected to have a
continuing impact on the combined results.
The unaudited pro forma condensed combined statement of
operations should be read in conjunction with our historical
unaudited condensed consolidated financial statements and
accompanying notes for fiscal 2006 and of Trinity Partners for
the period April 1, 2005 to November 15, 2005, which
are included elsewhere in this prospectus. The unaudited pro
forma condensed combined statement of operations is not
necessarily indicative of the operating results that would have
occurred if the acquisition had been completed at the date
indicated.
Our acquisition of Trinity Partners has been accounted using the
purchase method of accounting. Accordingly, we have allocated
the total purchase price to the assets acquired and liabilities
assumed based on our estimates of the fair value of such assets
and liabilities.
We expect to incur costs over the next year associated with
integrating the two businesses. The unaudited pro forma
condensed combined statement of operations do not reflect the
cost of any integration activities or benefits that may result
from synergies that may be derived from any integration
activities.
34
WNS (HOLDINGS) LIMITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR
FISCAL 2006
(UNAUDITED)
(US dollars in millions, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical Trinity | |
|
|
|
|
|
|
|
|
|
|
for the period from | |
|
|
|
|
|
|
|
|
Historical WNS | |
|
April 1, 2005 to | |
|
|
|
|
|
Pro forma | |
|
|
(Holdings) | |
|
November 15, | |
|
Pro forma | |
|
|
|
combined | |
|
|
for fiscal 2006 | |
|
2005 | |
|
adjustments | |
|
Note | |
|
for fiscal 2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Revenue
|
|
$ |
202.8 |
|
|
$ |
7.6 |
|
|
$ |
|
|
|
|
|
|
|
$ |
210.4 |
|
Cost of revenue
|
|
|
145.7 |
|
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
149.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
57.1 |
|
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
60.9 |
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
|
36.3 |
|
|
|
3.9 |
|
|
|
0.4 |
|
|
|
2.3 |
|
|
|
40.6 |
|
|
Amortization of intangible assets
|
|
|
0.9 |
|
|
|
|
|
|
|
1.2 |
|
|
|
2.4 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
19.9 |
|
|
|
(0.1 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
18.2 |
|
Other income, net
|
|
|
0.5 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
Interest expense
|
|
|
(0.4 |
) |
|
|
(0.0 |
) |
|
|
|
|
|
|
|
|
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
19.9 |
|
|
|
(0.0 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
18.3 |
|
(Provision) benefit for income taxes
|
|
|
(1.6 |
) |
|
|
|
|
|
|
0.5 |
|
|
|
2.5 |
|
|
|
(1.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
18.3 |
|
|
$ |
(0.0 |
) |
|
$ |
(1.1 |
) |
|
|
|
|
|
$ |
17.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.50 |
|
Diluted income per share
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.47 |
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
32,874,299 |
|
|
|
|
|
|
|
|
|
|
|
2.6 |
|
|
|
34,230,296 |
|
|
Diluted
|
|
|
35,029,766 |
|
|
|
|
|
|
|
|
|
|
|
2.6 |
|
|
|
36,385,763 |
|
See accompanying notes.
35
WNS (HOLDINGS) LIMITED
NOTES TO THE PROFORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS FOR FISCAL 2006
(UNAUDITED)
|
|
1. |
Acquisition and Basis of Presentation |
On November 16, 2005, WNS (Holdings) Limited (WNS
Holdings) acquired the entire share capital of Trinity
Partners for a total consideration of $19.8 million including
$0.2 million of transaction costs. The purchase price was
calculated as follows:
|
|
|
|
|
|
|
(US dollars in millions) | |
|
|
| |
Cash
|
|
$ |
6.8 |
|
Shares
|
|
|
12.8 |
|
Transaction costs
|
|
|
0.2 |
|
|
|
|
|
Total preliminary purchase price
|
|
$ |
19.8 |
|
|
|
|
|
The fair market value of shares issued reflects
2,107,901 shares of WNS Holdings issued to Trinity Partners
stockholders, valued at $6.06 per share, the fair market
value of WNS Holdingss ordinary shares at the time of the
acquisitions. Transaction costs include costs of legal,
accounting and tax advisors and other direct external costs.
Under purchase accounting, the total purchase price has been
allocated to Trinity Partners net tangible and
identifiable intangible assets based on their estimated fair
values at the date of the acquisition. The excess of the
purchase price over the net tangible and identifiable assets has
been recorded as goodwill. For pro forma purposes, WNS Holdings
has estimated the value of the client-related intangibles to be
$9.4 million (client contracts of $7.1 million and
client relationships of $2.3 million). The valuation of
client contract and client relationships was based on an income
based approach using projected cash flows and discounting it to
arrive at a present value. This asset is being amortized over
its estimated useful life of five years. The total purchase
price has been allocated as follows:
|
|
|
|
|
|
|
(US dollars in millions) | |
|
|
| |
Goodwill
|
|
$ |
8.9 |
|
Client-related intangible assets
|
|
|
9.4 |
|
Net assets acquired and liabilities assumed
|
|
|
1.5 |
|
|
|
|
|
Total purchase price allocation
|
|
$ |
19.8 |
|
|
|
|
|
The unaudited pro forma condensed combined statement of
operations is presented for informational purposes only. The pro
forma information is not necessarily indicative of what the
results of operations actually would have been had the
acquisition been completed at the date indicated. In addition,
it does not purport to project the future operating results of
the combined company. The costs of the transaction incurred by
WNS Holdings are included in the purchase price and those
incurred by Trinity Partners have been expensed prior to the
acquisition.
|
|
2.1 |
There were no intercompany transactions between WNS Holdings and
Trinity Partners for the period of this pro forma condensed
combined statement of operations. |
|
2.2 |
The pro forma combined provision for income taxes does not
necessarily reflect the amounts that would have resulted had WNS
Holdings and Trinity Partners filed consolidated income tax
returns, in the relevant income tax jurisdictions, during the
period presented. |
36
WNS (HOLDINGS) LIMITED
NOTES TO THE PROFORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS FOR FISCAL 2006
(UNAUDITED)
|
|
2.3 |
WNS Holdings granted 104,716 shares to certain selling
shareholders of Trinity Partners in connection with their
employment contracts. The fair value of such shares amounting to
approximately $0.6 million will be recognized as compensation
expense over the one year period of the employment contract. The
pro forma adjustment reflects the amortization of compensation
expense for the period from April 1, 2005 to
November 15, 2005 amounting to $0.4 million. For the period
from November 16, 2005 to March 31, 2006, the
amortization expense is included in the historical statement of
operations of WNS Holdings. |
|
2.4 |
Reflects the amortization of the client-related intangible
assets for the period from April 1, 2005 to
November 15, 2005 amounting to $1.2 million. For the period
from November 16, 2005 to March 31, 2006, the
amortization is included in the historical statement of
operations of WNS Holdings. |
|
2.5 |
The allocation of purchase price included a deferred tax
liability related to the difference between the book and tax
basis of the intangible assets. Pro forma adjustment reflects
the change in such deferred tax liability due to the
amortization of the intangible assets. |
|
2.6 |
The basic and diluted weighted average shares outstanding
include 2,107,901 shares issued related to the acquisition
of Trinity Partners as if such shares had been issued on
April 1, 2005. |
37
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with
Selected Historical Consolidated and Pro Forma Financial
and Operating Data and our consolidated financial
statements and the related notes included elsewhere in this
prospectus. Some of the statements in the following discussion
are forward-looking statements. See Special
Note Regarding Forward-Looking Statements.
Overview
We are a leading provider of offshore business process
outsourcing, or BPO, services. We provide comprehensive data,
voice and analytical services to our clients, which are
typically companies located in Europe and North America. As of
March 31, 2006, we had 10,433 employees across our nine
delivery centers. According to NASSCOM, we were among the top
two India-based offshore business process outsourcing companies
in terms of revenue in 2004, 2005 and 2006.
Although we typically enter into long-term contractual
arrangements with our clients, these contracts can usually be
terminated with or without cause by our clients and often with
short notice periods. Nevertheless, our client relationships
tend to be long-term in nature given the scale and complexity of
the services we provide coupled with risks and costs associated
with switching processes in-house or to other service providers.
We structure each contract to meet our clients specific
business requirements and our target rate of return over the
life of the contract. In addition, since the sales cycle for
offshore business process outsourcing is long and complex, it is
often difficult to predict the timing of new client engagements.
As a result, we may experience fluctuations in growth rates and
profitability from quarter to quarter, depending on the timing
and nature of new contracts. Our focus, however, is on deepening
our client relationships and maximizing shareholder value over
the life of a clients relationship with us.
Our revenue is generated primarily from providing business
process outsourcing services. We have two reportable segments
for financial statement reporting purposes WNS
Global BPO and WNS Auto Claims BPO. In our WNS Auto Claims BPO
segment we provide claims handling and accident management
services, where we arrange for automobile repairs through a
network of third party repair centers. In our accident
management services, we act as the principal in our dealings
with the third party repair centers and our clients. The amounts
we invoice to our clients for payments made by us to third party
repair centers is reported as revenue. Since we wholly
subcontract the repairs to the repair centers, we evaluate our
financial performance based on revenue net of payments to third
party repair centers which is a non-GAAP measure. We believe
that revenue less repair payments reflects more accurately the
value addition of the business process services that we directly
provide to our clients. See Results by
Reportable Segment. The presentation of this non-GAAP
information is not meant to be considered in isolation or as a
substitute for our financial results prepared in accordance with
US GAAP. Our revenue less repair payments may not be comparable
to similarly titled measures reported by other companies due to
potential differences in the method of calculation.
Between fiscal 2003 and fiscal 2006, our revenue grew from
$54.6 million to $202.8 million, representing a
compound annual growth rate of 54.9%, and our revenue less
repair payments grew from $25.6 million to
$147.9 million, representing a compound annual growth rate
of 79.4%. During this period, we grew both organically and
through acquisitions.
The following table reconciles our revenue (a GAAP measure) to
revenue less repair payments (a non-GAAP measure):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
|
(US dollars in millions) | |
Revenue
|
|
$ |
202.8 |
|
|
$ |
162.2 |
|
|
$ |
104.1 |
|
Less: Payments to repair centers
|
|
$ |
54.9 |
|
|
$ |
63.2 |
|
|
$ |
54.2 |
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
|
|
$ |
147.9 |
|
|
$ |
99.0 |
|
|
$ |
49.9 |
|
|
|
|
|
|
|
|
|
|
|
38
Our History and Milestones
We began operations as an in-house unit of British Airways in
1996, and became a focused third-party business process
outsourcing service provider in fiscal 2003. The following are
the key milestones in our operating history since Warburg Pincus
acquired a controlling stake in our company from British Airways
in May 2002 and inducted a new senior management team:
|
|
|
In fiscal 2003, we acquired Town & Country Assistance
Limited (which we subsequently rebranded as WNS Assistance and
which constitutes our reportable segment for financial statement
purposes, called WNS Auto Claims BPO), a UK-based automobile
claims handling company, thereby extending our service portfolio
beyond the travel industry to include insurance-based automobile
claims processing; |
|
|
In fiscal 2003, we invested in capabilities to begin providing
enterprise services and knowledge services to address the
requirements of emerging industry segments in the offshore
outsourcing context; |
|
|
In fiscal 2003 and 2004, we invested in our infrastructure to
expand our service portfolio from data-oriented processing to
include complex voice and blended data/voice service
capabilities, and commenced offering comprehensive processes in
the travel and banking, financial services and insurance, or
BFSI, industries; |
|
|
In fiscal 2004, we acquired the health claims management
business of Greensnow Inc.; |
|
|
In fiscal 2005, we opened facilities in Gurgaon, India and
Colombo, Sri Lanka, thereby expanding our operating footprint to
nine delivery centers across India, Sri Lanka and the
UK; and |
|
|
In fiscal 2006, we acquired Trinity Partners, a provider of
business process outsourcing services to financial institutions,
focusing on mortgage banking. |
As a result of these acquisitions and other corporate
developments, our financial results in corresponding periods may
not be directly comparable. Since fiscal 2003, the primary
driver of our revenue growth has been organic business
development, supplemented to a lesser extent by strategic
acquisitions.
Revenue
We generate revenue by providing business process outsourcing
services to our clients. In fiscal 2006, our revenue was
$202.8 million as compared to $162.2 million in fiscal
2005, representing an increase of 25.1%. In fiscal 2006, our
revenue less repair payments was $147.9 million as compared
to $99.0 million in fiscal 2005, representing an increase
of 49.4%.
We believe that we have been successful in achieving strong
revenue growth due to a number of factors, including our
understanding of our clients industries, our focus on
operational excellence and our world-class management team with
significant experience in the global outsourcing industry. We
have been successful in building a large client base that is
diversified across industries and geographies. Our client base
grew from 14 clients in May 2002 to more than
125 significant clients as of March 31, 2006 (for our
definition of significant clients, see
Business Clients). During fiscal 2006
and fiscal 2005, we added 47 and 46 significant clients,
respectively.
Our revenue is characterized by client, industry and geographic
diversity, as the analysis below indicates.
Revenue by Top Clients
Since the time of the Warburg Pincus investment in our company,
we have increased our client base and significantly reduced our
client concentration. Prior to this investment, our largest
client contributed over 90% of our revenue. In comparison,
during fiscal 2006, our largest client contributed 13.1% of our
revenue and 17.9% of our revenue less repair payments.
39
The following table sets forth the percentage of revenue and
revenue less repair payments that we derived from our largest
clients for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Less Repair | |
|
|
Revenue | |
|
Payments | |
|
|
| |
|
| |
|
|
Year Ended March 31, | |
|
Year Ended March 31, | |
|
|
| |
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Top five clients
|
|
|
41.0 |
% |
|
|
40.1 |
% |
|
|
44.8 |
% |
|
|
52.8 |
% |
|
|
56.4 |
% |
|
|
56.2 |
% |
Top ten clients
|
|
|
58.5 |
% |
|
|
61.4 |
% |
|
|
61.9 |
% |
|
|
65.5 |
% |
|
|
68.8 |
% |
|
|
67.2 |
% |
Top 20 clients
|
|
|
73.0 |
% |
|
|
76.1 |
% |
|
|
73.5 |
% |
|
|
78.1 |
% |
|
|
82.3 |
% |
|
|
80.5 |
% |
During fiscal 2006, we had one client that contributed more
than 10% of our revenue. During the same period, we had two
clients that individually contributed more than 10% of our
revenue less repair payments: AVIVA and Travelocity. These two
clients collectively contributed 31.3% of our revenue less
repair payments during fiscal 2006.
Revenue by Industry
For financial statement reporting purposes, we aggregate several
of our operating segments, except for WNS Auto Claims BPO (which
we market under the WNS Assistance brand) as it does not meet
the aggregation criteria under GAAP. See
Results by Reportable Segment.
To achieve in-depth domain expertise and provide
industry-specific services to our clients, we organize our
business delivery along industry-focused business units. These
business units seek to leverage our domain expertise to deliver
industry-specific services to our clients. Accordingly, our
industry-focused business units are:
|
|
|
travel; |
|
|
BFSI (which includes our WNS Auto Claims BPO segment); and |
|
|
emerging businesses (which includes manufacturing, logistics,
retail, utilities and professional services). |
In May 2002, when Warburg Pincus acquired a majority stake in
our business, we were primarily providing business process
outsourcing services to airlines. Since then we have expanded
our service portfolio across the travel industry and have also
established significant operations in BFSI and other industries,
which we include in our emerging businesses business unit. Our
revenue and revenue less repair payments are diversified along
these business units in the proportions and for the periods set
forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue | |
|
Revenue Less Repair Payments | |
|
|
| |
|
| |
|
|
Year Ended March 31, | |
|
Year Ended March 31, | |
|
|
| |
|
| |
Business units |
|
2006 | |
|
2005 | |
|
2004 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Travel
|
|
|
30.9 |
% |
|
|
28.9 |
% |
|
|
26.4 |
% |
|
|
42.3 |
% |
|
|
47.3 |
% |
|
|
55.2 |
% |
BFSI
|
|
|
55.6 |
% |
|
|
61.4 |
% |
|
|
66.3 |
% |
|
|
39.1 |
% |
|
|
36.8 |
% |
|
|
29.6 |
% |
Emerging businesses
|
|
|
13.5 |
% |
|
|
9.7 |
% |
|
|
7.3 |
% |
|
|
18.6 |
% |
|
|
15.9 |
% |
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Geography
The majority of our clients are located in Europe (primarily the
UK) and North America (primarily the US). Since the time of the
Warburg Pincus investment in our company in fiscal 2003, we have
invested in establishing a sales and marketing presence in North
America, which has resulted in an increasing proportion of our
revenue coming from North America. The share of our revenue from
North America has grown to 24.2% in fiscal 2006 from 9.8% in
fiscal 2004, and from zero in fiscal 2002. The share of our
revenue less repair payments from North America has grown to
33.2% in fiscal 2006 from 20.5% in fiscal 2004. We expect this
trend to continue on a revenue less repair payments basis in the
future.
40
The following table sets forth the composition of our revenue
and revenue less repair payments based on the location of our
clients in our key geographies for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue | |
|
Revenue Less Repair Payments | |
|
|
| |
|
| |
|
|
Year Ended March 31, | |
|
Year Ended March 31, | |
|
|
| |
|
| |
Locations |
|
2006 | |
|
2005 | |
|
2004 | |
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
UK
|
|
|
62.6 |
% |
|
|
65.1 |
% |
|
|
72.1 |
% |
|
|
49.6 |
% |
|
|
51.6 |
% |
|
|
60.7 |
% |
Europe (excluding the UK)
|
|
|
12.5 |
% |
|
|
17.1 |
% |
|
|
17.4 |
% |
|
|
16.3 |
% |
|
|
19.2 |
% |
|
|
17.4 |
% |
North America (primarily the US)
|
|
|
24.2 |
% |
|
|
17.3 |
% |
|
|
9.8 |
% |
|
|
33.2 |
% |
|
|
28.3 |
% |
|
|
20.5 |
% |
Rest of World
|
|
|
0.7 |
% |
|
|
0.5 |
% |
|
|
0.7 |
% |
|
|
0.9 |
% |
|
|
0.9 |
% |
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our Contracts
We provide our services under contracts with our clients, the
majority of which have terms ranging between three and five
years, with some being rolling contracts with no end dates.
Typically, these contracts can be terminated by our clients with
or without cause and with notice periods ranging from three to
six months. However, we tend to have long-term relationships
with our clients given the complex and comprehensive nature of
the business processes executed by us, coupled with the
switching costs and risks associated with relocating these
processes in-house or to other service providers.
Each client contract has different terms and conditions based on
the scope of services to be delivered and the requirements of
that client. Occasionally, we may incur significant costs on
certain contracts in the early stages of implementation, with
the expectation that these costs will be recouped over the life
of the contract to achieve our targeted returns. Each client
contract has corresponding service level agreements that define
certain operational metrics based on which our performance is
measured. Some of our contracts specify penalties or damages
payable by us in the event of failure to meet certain key
service level standards within an agreed upon time frame.
When we are engaged by a client, we typically transfer that
clients processes to our delivery centers over a two to
six month period. This transfer process is subject to a number
of potential delays. Therefore, we may not recognize significant
revenue until several months after commencing a client
engagement.
In the WNS Global BPO segment, we charge for our services
primarily based on three pricing models per
full-time-equivalent; per transaction; or cost-plus
as follows:
|
|
|
per full-time equivalent arrangements typically involve billings
based on the number of full-time employees (or equivalent)
deployed on the execution of the business process outsourced; |
|
|
per transaction arrangements typically involve billings based on
the number of transactions processed (such as the number of
e-mail responses, or
airline coupons or insurance claims processed); and |
|
|
cost-plus arrangements typically involve billing the
contractually agreed direct and indirect costs and a fee based
on the number of employees deployed under the arrangement. |
Our contract with one of our major clients, British Airways,
expires in March 2007. See Risk Factors Risks
Related to Our Business A few major clients account
for a significant portion of our revenue and any loss of
business from these clients could reduce our revenue and
significantly harm our business. In May 2006, we entered
into a non-binding letter of intent with British Airways to
extend the term of this contract to May 2012. The letter of
intent also contemplates that the basis for pricing for a
portion of this contract will change over a transition period
from a per full-time equivalent basis to a per
unit transaction price basis. This change could have the
effect of reducing the amount of revenue that we receive under
this contract for the same level of services. The change to a
per unit transaction price basis could also allow us
to share benefits from increases in efficiency in performing
services under this contract.
41
These changes to the British Airways contract are subject to
British Airways and us negotiating and entering into a
definitive contract. If we fail to enter into a definitive
contract, these changes will not take effect and the existing
agreement will expire in March 2007. In addition, our client
AVIVA has options which, if exercised, would require us to
transfer the relevant project and operations to this client. See
Risk Factors Risks Related to Our
Business We may lose some or all of the revenue
generated by one of our major clients.
A small part of our revenue is comprised of reimbursements of
out-of-pocket expenses
incurred by us in providing services to our clients.
In our WNS Auto Claims BPO segment, we earn revenue from claims
handling and accident management services. For claims handling,
we charge on a per claim basis or a fixed fee per vehicle over a
contract period. For automobile accident management services,
where we arrange for the repairs through a network of repair
centers that we have established, we invoice the client for the
amount of the repair. When we direct a vehicle to a specific
repair center, we receive a referral fee from that repair center.
Overall, we believe that we have established a sustainable
business model which offers revenue visibility over a
substantial portion of our business. We have done so by:
|
|
|
developing a broad client base which has resulted in limited
reliance on any particular client; |
|
|
seeking to balance our revenue base by targeting industries that
offer significant offshore outsourcing potential; |
|
|
addressing the largest markets for offshore business process
outsourcing services, which provide geographic diversity across
our client base; and |
|
|
focusing our service mix on diverse data, voice and analytical
processes, resulting in enhanced client retention. |
Expenses
The majority of our expenses is comprised of cost of revenue and
operating expenses. The key components of our cost of revenue
are payments to repair centers, employee costs and
infrastructure-related costs. Our operating expenses include
SG&A and amortization of intangible assets. Our
non-operating expenses include interest expenses, other income
and other expenses.
Cost of Revenue
Our WNS Auto Claims BPO segment includes automobile accident
management services, where we arrange for repairs through a
network of repair centers. The payments to repair centers
represent the largest component of cost of revenue. The value of
these payments in any given period is primarily driven by the
volume of accidents and the amount of the repair costs related
to such accidents.
Our next most significant component of cost of revenue is
employee costs. In addition to employee salaries, employee costs
include costs related to recruitment, training and retention.
Historically, our employee costs have increased primarily due to
increases in number of employees to support our growth and, to a
lesser extent, to recruit, train and retain employees. Salary
levels in India and our ability to efficiently manage and retain
our employees significantly influence our cost of revenue. See
Business Human Capital. We expect our
employee costs to increase as we continue to increase our
headcount to service additional business and as wages continue
to increase in India. See Risk Factors Risks
Related to Our Business Wage increases in India may
prevent us from sustaining our competitive advantage and may
reduce our profit margin. We seek to mitigate these cost
increases through improvements in employee productivity,
employee retention and asset utilization.
Our infrastructure costs are comprised of depreciation, lease
rentals, facilities management and telecommunication network
cost. Most of our leases for our facilities are long-term
agreements and have escalation clauses which provide for
increases in rent at periodic intervals commencing between three
and five years from the start of the lease. Most of these
agreements have clauses that cap escalation of lease rentals.
42
We create capacity in our operational infrastructure ahead of
anticipated demand as it takes six to nine months to build up a
new site. Hence, our cost of revenue as a percentage of revenue
may be higher during periods in which we carry such additional
capacity.
Once we are engaged by a client in a new contract, we normally
have a transition period to transfer the clients processes
to our delivery centers and accordingly incur costs related to
such transfer. Therefore, our cost of revenue in relation to our
revenue may be higher until the transfer phase is completed,
which may last for two to six months.
We entered into a particular contract with a new major client in
January 2004 for the outsourcing of their back-office and
contact center operations, in which we were required to bear the
cost of the clients resources located in North America
that were used by us to provide the business process outsourcing
services during a transfer period of approximately one year. The
payments for such client resources decreased over the transfer
period, which was substantially completed by December 2004. The
payment for use of these resources amounted to
$19.2 million and $7.7 million during fiscal 2005 and
2004, respectively. These costs were a significant component of
our cost of revenue during fiscal 2005 and fiscal 2004.
SG&A Expenses
Our SG&A expenses are primarily comprised of corporate
employee costs for sales and marketing, general and
administrative and other support personnel, travel expenses,
legal and professional fees, stock-based compensation expense,
brand building expenses, and other general expenses not related
to cost of revenue.
SG&A expenses as a proportion of revenue were 17.9% for
fiscal 2006 as compared with 15.3% for fiscal 2005. SG&A
expenses as a proportion of revenue less repair payments were
24.6% for fiscal 2006 as compared with 25.1% for fiscal 2005. We
expect SG&A expenses as a proportion of revenue less repair
payments to continue to decline over the next few years.
We expect our corporate employee costs for general and
administrative and other support personnel to increase in fiscal
2007 but at a lower rate than the increase in our revenue less
repair payments.
We expect the employee costs associated with sales and marketing
and related travel costs to increase in fiscal 2007. See
Business Business Strategy Enhance
awareness of the WNS brand name. Our sales team is
compensated based on achievement of business targets set at the
beginning of each fiscal year. Accordingly, we expect this
variable component of the sales team costs to increase in line
with overall business growth.
We also expect our insurance costs, compliance costs,
professional fees and expenses incurred to expand investor
relations activities to increase after we become a public
company. We estimate the collective cost of these items to
incrementally increase by approximately $2.5 million for
fiscal 2007.
We currently account for stock-based compensation expense under
the intrinsic value method, rather than the fair value method.
However, had compensation cost been accounted for using the fair
value method described in the Statement of Financial Accounting
Standards, or SFAS, No. 123, Accounting for
Stock-Based Compensation, our net income (loss) would
have been the pro forma amounts of approximately
$18.6 million, $(6.8) million and $(7.3) million
in fiscal 2006, 2005 and 2004, respectively. See Note 2 of
notes to our audited consolidated financial statements. We are
required to adopt prospectively SFAS No. 123(R),
Share-Based Payment, which will require us to
record an expense relating to options issued or modified after
April 1, 2006. This change in the standard will adversely
affect our operating results in the future as and when we make
new grants or modify existing grants.
43
During fiscal 2006, our company issued stock options with
exercise prices as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
|
|
|
Weighted | |
|
average fair | |
|
Weighted average | |
|
|
No of options | |
|
average | |
|
value | |
|
intrinsic value | |
Grants made during the quarter ended |
|
granted | |
|
exercise price | |
|
per share | |
|
per share | |
|
|
| |
|
| |
|
| |
|
| |
June 30, 2005
|
|
|
160,500 |
|
|
$ |
5.44 |
|
|
$ |
5.65 |
|
|
$ |
0.21 |
|
September 30, 2005
|
|
|
828,100 |
|
|
|
6.27 |
|
|
|
6.27 |
|
|
|
|
|
December 31, 2005
|
|
|
45,479 |
|
|
|
6.07 |
|
|
|
6.07 |
|
|
|
|
|
March 31, 2006
|
|
|
447,400 |
|
|
|
11.72 |
|
|
|
11.99 |
|
|
|
0.27 |
|
The intrinsic value method is being recognized as compensation
expense over the vesting period of those options.
We apply a methodology that considers a set of factors to
determine the fair value of our shares at the time we grant
stock options to our employees. Because we are a private company
and have been in a growth phase, such methodology considers a
range of factors that we believe impact the value of our shares.
If available, we consider recent sales of stock to third parties
to be a strong form of evidence of the fair value of our shares.
In the absence of contemporaneous third party sales of stock, we
believe that historical and projected revenue provide a reliable
and relevant measure to determine the fair value of our company
as a whole, which is then used to compute the per share fair
value. Other factors considered in determining fair value
include:
|
|
|
Achievement of major company milestones, such as key new client
wins and acquisitions; |
|
|
Public company comparables and private market transactions for
sale of equity; |
|
|
The absence of a public trading market for our shares; |
|
|
Our recent operating results at the time of a grant; |
|
|
The fact that we are majority owned by a single shareholder; and |
|
|
The likelihood of our company selling our shares to the public
in the future. |
Our company has consistently applied a valuation methodology on
a contemporaneous basis. Our valuation did not change
significantly during the quarters ended June 30, 2005 and
September 30, 2005, as there were no significant milestones
beyond our last significant milestone of having completed the
migration of a significant contract in February 2005.
On November 16, 2005, we completed our acquisition of
Trinity and began to integrate its operations into WNS. We also
had client wins in December 2005 that revised our projected
revenues. We estimated the fair value of our ordinary shares at
December 31, 2005 to be $9.50 to take into consideration these
factors as well as the appointment of advisors in preparation
for an initial public offering. We used the fair value of our
ordinary shares at December 31, 2005 to determine the
intrinsic value of 35,000 options granted in early January 2006.
In February 2006, we granted 412,400 options with an
exercise price of $12.20. We determined the fair value of our
ordinary shares in February 2006 to be $12.20 taking into
consideration the new client wins in January and
February 2006, substantial progress with respect to the
Trinity integration and the commencement of diligence and other
preparations for an initial public offering.
Amortization of Intangible Assets
Amortization of intangible assets is associated with our
acquisitions of Town & Country Assistance Limited in July
2002, Greensnow Inc.s health claims management business in
September 2003 and Trinity Partners in November 2005.
44
Non-Operating Income (Expense), Net
Non-operating income (expense), net is comprised of interest
expenses, other expenses and other income. Other expenses and
other income include interest income and foreign exchange gains
or losses. Interest expense primarily relates to interest
charges arising from short-term note payable.
Foreign Exchange
Exchange Rates
Although a substantial portion of our revenue and revenue less
repair payments is denominated in pounds sterling (70.2% and
59.1%, respectively, in fiscal 2006 and 77.4% and 62.9%,
respectively, in fiscal 2005) and US dollars (24.4% and
33.4%, respectively, in fiscal 2006 and 17.7% and 28.9%,
respectively, in fiscal 2005), most of our expenses (net of
payments to repair centers) (77.5% in fiscal 2006 and 80.0% in
fiscal 2005) are incurred and paid in Indian rupees. The
exchange rates between the Indian rupee and the US dollar and
between the pound sterling and the US dollar have changed
substantially in recent years and may fluctuate substantially in
the future. We report our financial results in US dollars and
our results of operations may be adversely affected if the pound
sterling depreciates against the US dollar or the Indian rupee
appreciates against the US dollar. See
Quantitative and Qualitative Disclosures About
Market Risk Components of Market Risk
Exchange Rate Risk.
In addition, we also carry current assets and current
liabilities such as accounts receivable and accounts payable in
foreign currencies on our balance sheet. The translation of such
balance sheet accounts denominated in foreign currencies into US
dollars (which is our reporting currency) is at the rate in
effect at the balance sheet date. Adjustments resulting from the
translation of our financial statements from functional currency
to reporting currency are accumulated and reported as other
comprehensive income (loss), which is a separate component of
shareholders equity. Foreign currency transaction gains
and losses are recorded as other income or expense.
Currency Regulation
Our Indian subsidiary, WNS Global Services Pvt Ltd., is
registered as an exporter of business process outsourcing
services with the Software Technology Parks of India, or STPI.
According to the prevailing foreign exchange regulations in
India, an exporter of business process outsourcing services
registered with the STPI is required to receive its export
proceeds in India within a period of 12 months from the
date of such exports in order to avail itself of the tax and
other benefits associated with STPI status. Units which are not
registered with STPI are required to receive these proceeds
within six months. In the event that such a registered exporter
has received any advance against exports in foreign exchange
from its overseas customers, it is required to render the
requisite services so that such advances are earned within a
period of 12 months from the date of such receipt. If WNS
Global Services Pvt. Ltd. does not meet these conditions, it
will be required to obtain permission from the Reserve Bank of
India to receive and realize such foreign currency earnings.
A majority of the payments we receive from our clients are
denominated in pounds sterling, US dollars and Euros. For most
of our clients, our operating subsidiaries in the UK and the US
enter into contractual agreements directly with our clients for
the provision of business process outsourcing services by WNS
Global Services Pvt. Ltd. WNS Global Services Pvt. Ltd. holds
the foreign currency it receives in an export earners foreign
currency account. All foreign exchange requirements, such as for
the import of capital goods, expenses incurred during overseas
travel by employees and discharge of foreign exchange expenses
or liabilities, can be met using the foreign currency in the
export earners foreign currency account in India. As and when
funds are required by us, the funds in the export earners
foreign currency account may be transferred to an ordinary
rupee- denominated account in India.
There are currently no Jersey, UK or US foreign exchange control
restrictions on the payment of dividends on our ordinary shares
or on the conduct of our operations.
45
Income Taxes
We operate in multiple tax jurisdictions including India, the UK
and the US. As a result, our effective tax rate will change from
year to year based on recurring factors such as the geographical
mix of income before taxes, state and local taxes, the ratio of
permanent items to pretax book income and the implementation of
various global tax strategies, as well as non-recurring events.
Our Indian operations are eligible to claim income tax exemption
with respect to profits earned from export revenue by various
delivery centers registered with STPI. This benefit is available
from the date of commencement of operations to March 31,
2009, subject to a maximum of ten years. We had six such
delivery centers in India in fiscal 2006 and five in fiscal
2005. The tax benefits of these delivery centers expire in
stages from April 1, 2006 to March 31, 2009.
As a result of the tax benefits described above, our income
derived from our business process outsourcing service operations
are not subject to corporate tax in India. The additional income
tax expense we would otherwise have had to pay at the statutory
rate in India, if the tax exemption was not available, would
have been approximately $4.7 million for fiscal 2006,
$0.8 million for fiscal 2005 and nil for fiscal 2004. When
our tax holiday expires or is withdrawn by Indian tax
authorities, our tax expense will materially increase. In the
absence of a tax holiday, income derived from India would be
taxed up to a maximum of the then existing annual tax rate
which, as of March 31, 2006, was 33.66%.
Results of Operations
The following table sets forth certain financial information as
a percentage of revenue and revenue less repair payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
Revenue Less Repair Payments |
|
|
|
|
|
|
|
Year Ended March 31, |
|
Year Ended March 31, |
|
|
|
|
|
|
|
2006 |
|
2005 |
|
2004 |
|
2006 |
|
2005 |
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
Unaudited |
|
Unaudited |
Cost of revenue
|
|
|
71.9 |
% |
|
|
86.5 |
% |
|
|
86.2 |
% |
|
|
61.4 |
% |
|
|
77.9 |
% |
|
|
71.1 |
% |
Gross profit
|
|
|
28.1 |
% |
|
|
13.5 |
% |
|
|
13.8 |
% |
|
|
38.6 |
% |
|
|
22.1 |
% |
|
|
28.9 |
% |
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
|
17.9 |
% |
|
|
15.3 |
% |
|
|
18.1 |
% |
|
|
24.6 |
% |
|
|
25.1 |
% |
|
|
37.7 |
% |
|
Amortization of intangible assets
|
|
|
0.4 |
% |
|
|
0.9 |
% |
|
|
2.5 |
% |
|
|
0.6 |
% |
|
|
1.4 |
% |
|
|
5.2 |
% |
Operating income (loss)
|
|
|
9.8 |
% |
|
|
(2.7 |
)% |
|
|
(6.7 |
)% |
|
|
13.4 |
% |
|
|
(4.4 |
)% |
|
|
(14.1 |
)% |
Non-operating income (expense), net
|
|
|
0.0 |
% |
|
|
(0.2 |
)% |
|
|
0.3 |
% |
|
|
0.0 |
% |
|
|
(0.3 |
)% |
|
|
0.5 |
% |
(Provision) benefit for income taxes
|
|
|
(0.8 |
)% |
|
|
(0.7 |
)% |
|
|
(0.0 |
)% |
|
|
(1.1 |
)% |
|
|
(1.1 |
)% |
|
|
(0.1 |
)% |
Net income (loss)
|
|
|
9.0 |
% |
|
|
(3.6 |
)% |
|
|
(6.5 |
)% |
|
|
12.3 |
% |
|
|
(5.8 |
)% |
|
|
(13.5 |
)% |
The following table reconciles revenue less repair payments to
revenue across our business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, |
|
|
|
|
|
2006 |
|
2005 |
|
2004 |
|
|
|
|
|
|
|
Revenue
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Less: Payments to repair centers
|
|
|
27.1 |
% |
|
|
39.0 |
% |
|
|
52.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
|
|
|
72.9 |
% |
|
|
61.0 |
% |
|
|
47.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006 Compared to Fiscal 2005
Revenue. Revenue in fiscal 2006 was $202.8 million,
an increase of 25.1% over revenue of $162.2 million in
fiscal 2005. This increase in revenue of $40.6 million was
primarily attributable to an increase in revenue from existing
clients of $30.4 million on account of an expansion of the
number of processes that we executed for these clients and an
increase in volumes for the existing processes. The increase in
revenue from new clients was $10.2 million, including an
increase of $6.0 million attributable to the acquisition of
Trinity Partners during the fiscal year. We also experienced a
higher percentage growth in revenue from North American clients
due to our increased investment in our salesforce in North
America. Revenue from the UK, Europe
46
(excluding the UK) and North America (primarily the US)
accounted for $126.9 million, $25.4 million and
$49.1 million, respectively, of our revenue for fiscal
2006, representing increase (decrease) of 20.2%, (8.3)% and
75.5%, respectively, from fiscal 2005.
Revenue Less Repair Payments. Revenue less repair
payments in fiscal 2006 was $147.9 million, an increase of
49.4% over our revenue less repair payments of
$99.0 million in fiscal 2005. This increase in revenue less
repair payments of $48.9 million was primarily attributable
to an increase in revenue less repair payments from existing
clients of $39.2 million on account of an expansion of the
number of processes that we executed for these clients and an
increase in volumes for the existing processes. The increase in
revenue less repair payments from new clients was
$9.7 million, including an increase of $6.0 million
that was attributable to the acquisition of Trinity Partners
during the fiscal year. Contract prices across the various types
of processes remained stable over this period. We realized
increases in revenue less repair payments across each of our
business units in fiscal 2006. Revenue less repair payments from
the UK, Europe (excluding the UK) and North America (primarily
the US) accounted for $73.3 million, $24.1 million and
$49.1 million, respectively, of our revenue in fiscal 2006,
representing increases of 43.7%, 26.3% and 75.5%, respectively,
from fiscal 2005.
Cost of Revenue. Cost of revenue in fiscal 2006 was 71.9%
of revenue as compared to 86.5% of revenue in fiscal 2005. Cost
of revenue in fiscal 2006 was $145.7 million, an increase
of 3.9% over our cost of revenue of $140.3 million in
fiscal 2005. Employee costs increased by $20.1 million and
travel costs increased by $3.4 million over this period due
to an increase in headcount. In addition, infrastructure costs
increased by $9.4 million due to the opening of two new
operating centers, one each in Gurgaon and Nashik, and the
expansion of existing centers. These increases were offset in
part by a decline in payments made to repair centers, from
$63.2 million in fiscal 2005 to $54.9 million in
fiscal 2006. In addition, our cost of revenue in fiscal 2005
included a $19.2 million payment for client resources
located in North America that we bore while transferring this
clients processes to our offshore delivery centers (see
Overview Expenses
Cost of Revenue). Further, included in the cost of revenue
in fiscal 2006 was $3.2 million relating to Trinity
Partners.
Gross Profit. Gross profit in fiscal 2006 was
$57.1 million, or 28.1% of revenue, as compared to
$21.9 million, or 13.5% of revenue, in fiscal 2005. Gross
profit as a percentage of revenue less repair payments was 38.6%
in fiscal 2006 compared to 22.1% in fiscal 2005. The lower gross
profit in fiscal 2005 was due to the payment for client
resources in North America during the transfer period described
above. We also recognized $2.4 million of revenue during
fiscal 2006 that had been deferred from fiscal 2005, as all
revenue recognition criteria had not been met at the end of
fiscal 2005.
SG&A Expenses. SG&A expenses in fiscal 2006 were
$36.3 million, an increase of 46.0% over our SG&A
expenses of $24.9 million in fiscal 2005. Non-operating
employee compensation and related travel expenses were higher by
$5.4 million largely on account of our increased marketing
efforts in North America and the expansion of our management
team. Share-based compensation costs included in non-operating
employee compensation increased by $1.6 million in fiscal
2006 as compared to fiscal 2005. Other SG&A cost elements
such as facilities costs, professional fees and depreciation
increased by $6.0 million in fiscal 2006 as compared to
fiscal 2005. SG&A expenses as a percentage of revenue were
17.9% in fiscal 2006 compared to 15.3% in fiscal 2005. SG&A
expenses as a percentage of revenue less repair payments were
24.6% in fiscal 2006 compared to 25.1% in fiscal 2005, as our
revenue less repair payments grew more rapidly than our SG&A
expenses.
Amortization of Intangible Assets. Amortization of
intangible assets was $0.9 million in fiscal 2006, a
decrease of 39.5% over $1.4 million in fiscal 2005. The
decrease was on account of intangible assets acquired through
our acquisition of Town & Country Assistance in fiscal
2003, the majority of which were amortized through fiscal 2005
offset in part by the amortization related to intangible assets
of $0.7 million from our acquisition of Trinity Partners in
fiscal 2006.
Operating Income (Loss). Income from operations in fiscal
2006 was $19.9 million compared to a loss from operations
of $(4.4) million in fiscal 2005, due to the reasons
discussed above. Income from operations as a percentage of
revenue was 9.8% in fiscal 2006, compared to a loss from
operations as a percentage of revenue of (2.7)% in fiscal 2005.
Income from operations as a percentage of revenue less repair
payments was 13.4% in
47
fiscal 2006, compared to a loss from operations as a percentage
of revenue less repair payments of (4.4)% in fiscal 2005.
Other Income, Net. Other income, net in fiscal 2006 was
$0.5 million, an increase from $0.2 million in fiscal 2005.
Interest Expense. Interest expense in fiscal 2006 was
$0.4 million, a decrease from $0.5 million in fiscal 2005.
(Provision) Benefit for Income Taxes. Provision for
income taxes in fiscal 2006 was $1.6 million, an increase
of 47.4% over our provision for income taxes of
$1.1 million in fiscal 2005, due to an increase of
$0.9 million in taxes paid in the UK related to our auto
claims business and a decrease of $0.4 million in the rest
of our business in fiscal 2006.
Net Income (Loss). Net income in fiscal 2006 was
$18.3 million compared to a net loss of $(5.8) million
in fiscal 2005. We had a net income in fiscal 2006 as compared
to a net loss in fiscal 2005 due to our revenue growth, as well
as the lower cost of onshore client resources as described
above. Net margins were 9.0% in fiscal 2006 as compared to
(3.6)% in fiscal 2005. Net margins as percentage of revenue less
repair payments were 12.3% in fiscal 2006 as compared to (5.8)%
in fiscal 2005.
Fiscal 2005 Compared to Fiscal 2004
Revenue. Revenue in fiscal 2005 was $162.2 million,
an increase of 55.8% over our revenue of $104.1 million in
fiscal 2004. This increase in revenue of $58.1 million was
attributable in part to an increase in revenue from existing
clients of $30.8 million on account of an expansion of the
number of processes for these clients that we executed and an
increase in volumes for the existing processes. The increase in
revenue from new clients was $27.3 million. Each of our
business units experienced growth during fiscal 2005 as compared
to fiscal 2004. We also experienced a higher percentage growth
in revenue from North America relative to the UK and Europe
(excluding the UK), due to the ramp up of a few significant
clients. Revenue from the UK, Europe (excluding the UK) and
North America (primarily the US) accounted for
$105.6 million, $27.7 million and $28.0 million,
respectively, of our revenue in fiscal 2005, representing
increases of 40.7%, 53.1% and 174.6%, respectively, from the
prior fiscal year.
Revenue Less Repair Payments. Revenue less repair
payments in fiscal 2005 was $99.0 million, an increase of
98.4% over our revenue less repair payments of
$49.9 million in fiscal 2004. This increase in revenue less
repair payments of $49.1 million was attributable to an increase
in revenue less repair payments from existing clients of
$33.1 million on account of an expansion of the number of
processes that we executed for these clients, an increase in
volumes for the existing processes and an increase in revenue
from new clients of $16.0 million. Contract prices across the
various types of processes remained stable over this period.
Each of our business units experienced growth during fiscal 2005
as compared to fiscal 2004. We also experienced a higher
percentage growth in revenue less repair payments from North
America relative to Europe, due to the ramp up of a few
significant clients. Revenue from the UK, Europe (excluding the
UK) and North America (primarily the US) were
$51.0 million, $19.1 million and $28.0 million in
fiscal 2005, respectively, representing increases of 68.9%,
120.6% and 174.6%, respectively, from fiscal 2004.
Cost of Revenue. Cost of revenue in fiscal 2005 was 86.5%
of revenue as compared to 86.2% of revenue in fiscal 2004. Cost
of revenue in fiscal 2005 was $140.3 million, an increase
of 56.4% over our cost of revenue of $89.7 million in
fiscal 2004. This increase was primarily on account of an
increase in headcount because of which employee costs increased
by $15.9 million and travel costs increased by
$2.7 million over this period. Infrastructure costs
increased by $11.5 million due to the setting up of new
facilities. Payments made to automobile repair centers increased
by $9.0 million over this period, from $54.2 million
in fiscal 2004 to $63.2 million in fiscal 2005. In
addition, our cost of revenue in fiscal 2005 included a
$19.2 million payment for client resources located in North
America that we bore while transferring this clients
processes to our offshore delivery centers (see
Overview Expenses
Cost of Revenue). This represented a $11.5 million
increase from the corresponding expense of $7.7 million
incurred by us for this purpose in fiscal 2004.
Gross Profit. Gross profit in fiscal 2005 was
$21.9 million, or 13.5% of revenue, as compared to
$14.4 million, or 13.8% of revenue, in fiscal 2004. Gross
profit as a percentage of revenue less repair payments was 22.1%
in
48
fiscal 2005 compared to 28.9% in fiscal 2004. Gross profit in
fiscal 2005 and fiscal 2004 was negatively impacted during these
periods because of the cost of client resources located in North
America that we used during the corresponding fiscal periods
while transferring this clients processes to our operating
centers (see Overview
Expenses Cost of Revenue).
SG&A Expenses. SG&A expenses in fiscal 2005 were
$24.9 million, an increase of 32.2% over our SG&A
expenses of $18.8 million in fiscal 2004. Non-operating
employee compensation and related travel expenses were higher by
$4.5 million, largely on account of our increased marketing
efforts in North America and the expansion of our management
team. Other SG&A cost elements such as facilities costs,
professional fees and depreciation increased by
$1.5 million in fiscal 2005 as compared to fiscal 2004.
SG&A expenses as a percentage of revenue were 15.3% in
fiscal 2005 compared to 18.1% in fiscal 2004. SG&A expenses
as a percentage of revenue less repair payments were 25.1% in
fiscal 2005 compared to 37.7% in fiscal 2004, as our revenue
grew more rapidly than our SG&A expenses.
Amortization of Intangible Assets. Amortization of
intangible assets was $1.4 million and $2.6 million in
fiscal 2005 and fiscal 2004. The decrease was primarily on
account of intangible assets of $6.5 million acquired
through our acquisitions in prior periods being largely
amortized by the end of fiscal 2004.
Operating Income (Loss). Losses from operations in fiscal
2005 were $(4.4) million, a decrease of 37.6% from our
losses from operations of $(7.0) million in fiscal 2004.
Loss from operations as a percentage of revenue was (2.7)% in
fiscal 2005, compared to (6.8)% in fiscal 2004. Income from
operations as a percentage of revenue less repair payments was
(4.4)% in fiscal 2005, compared to (14.1)% in fiscal 2004.
Higher revenue, our ability to grow our revenue more rapidly
than our SG&A expenses and a lower amortization of
intangible assets helped us reduce our losses from operations.
This was partially offset by the higher cost of revenue as a
result of cost of client resources located in North America that
we bore during the corresponding fiscal periods while
transferring this clients processes to our offshore
delivery centers.
Other Income, Net. Other income, net in fiscal 2005 was
$0.2 million, a decrease from $0.3 million in fiscal
2004.
Interest Expense. Interest expense in fiscal 2005 was
$0.5 million, an increase from $0.1 million in fiscal
2004.
(Provision) Benefit for Income Taxes. Provision for
income tax in fiscal 2005 was $1.1 million, an increase of
$1.1 million as compared to fiscal 2004. This was primarily
on account of our current taxes for fiscal 2004 being offset by
deferred taxes. Of this increase, $0.6 million related to
taxes in the UK on our auto claims business and
$0.5 million related to the rest of our business.
Net Income (Loss). Net losses in fiscal 2005 were
$(5.8) million, a decrease of 14.0% from our net losses of
$(6.7) million in fiscal 2004. Net margins were (3.6)% in
fiscal 2005 compared to (6.5)% in fiscal 2004. Net margins as a
percentage of revenue less repair payments in fiscal 2005 were
(5.8)% as compared to (13.5)% in fiscal 2004.
Results by Reportable Segment
For purposes of evaluating operating performance and allocating
resources, we have organized our company by operating segments.
See Notes to Consolidated Financial Statements
Note 13. For financial statement reporting purposes,
we aggregate the segments that meet the criteria for aggregation
as set forth in SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information,
(SFAS No. 131). We have separately
reported our auto claims segment (or WNS Assistance), as it does
not meet the aggregation criteria under SFAS No. 131.
Accordingly, pursuant to SFAS No. 131, we have two
reportable segments: WNS Global BPO and WNS Auto Claims BPO.
WNS Global BPO is primarily delivered out of our offshore
delivery centers in India and Sri Lanka. This segment includes
all of our business activities with the exception of WNS Auto
Claims BPO. WNS Auto Claims BPO is our automobile claims
management business called WNS Assistance, which is primarily
based in the UK and is part of our BFSI business unit. See
Business Business Process Outsourcing Service
49
Offerings. We report WNS Auto Claims BPO as a separate
segment for financial statement reporting purposes since a
substantial part of our reported revenue in this business
consists of amounts invoiced to our clients for payments made by
us to automobile repair centers, resulting in lower long-term
gross margins when measured on the basis of revenue, relative to
the WNS Global BPO segment.
Amounts we invoice our clients for the automobile repair costs
that we pay to repair centers is recognized as revenue because
we act as principal in our dealings with the repair centers and
our clients in our WNS Auto Claims BPO business. We are
responsible for the repairs, including determining the repair
center to be used and negotiating labor rates with such repair
centers. We also bear the credit risk of recovery of these
payments from our clients beyond certain advance payments from
our clients. However, since we wholly subcontract the repairs to
the repair centers, we evaluate our business performance based
on our revenue net of these payments to repair centers, which we
call revenue less repair payments. Though a non-GAAP measure, we
believe that revenue less repair payments reflects more
accurately the value of our services to our clients, and we use
revenue less repair payments as the primary measure to allocate
resources and evaluate segmental performance. We also use
segment operating income (loss), which is defined as segment
income (loss) before unallocated costs, as a secondary measure
to evaluate segment performance during a period. Operating
margins in our WNS Auto Claims BPO segment, when calculated on
the basis of revenue less repair payments, are comparable to
operating margins in our WNS Global BPO segment.
Our management allocates resources based on segment revenue less
repair payments and measures segment performance based on
revenue less repair payments and to a lesser extent on segment
operating income. The accounting policies of our reportable
segments are the same as those of our company. See
Critical Accounting Policies. We may in
the future change our reportable segments based on how our
business evolves.
The following table shows revenue and revenue less repair
payments for our two reportable segments for the periods
indicated:
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|
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|
|
|
Year Ended March 31, | |
|
Year Ended March 31, | |
|
Year Ended March 31, | |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
|
WNS | |
|
WNS Auto | |
|
WNS | |
|
WNS Auto | |
|
WNS | |
|
WNS Auto | |
|
|
Global | |
|
Claims | |
|
Global | |
|
Claims | |
|
Global | |
|
Claims | |
|
|
BPO | |
|
BPO | |
|
BPO | |
|
BPO | |
|
BPO | |
|
BPO | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(US dollars in millions) | |
Segment
revenue(1)
|
|
$ |
125.2 |
|
|
$ |
79.6 |
|
|
$ |
78.6 |
|
|
$ |
85.2 |
|
|
$ |
37.9 |
|
|
$ |
67.3 |
|
Less: Payments to repair centers
|
|
$ |
|
|
|
$ |
54.9 |
|
|
$ |
|
|
|
$ |
63.2 |
|
|
$ |
|
|
|
$ |
54.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
(1)
|
|
$ |
125.2 |
|
|
$ |
24.7 |
|
|
$ |
78.6 |
|
|
$ |
22.0 |
|
|
$ |
37.9 |
|
|
$ |
13.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$ |
8.7 |
|
|
$ |
1.8 |
|
|
$ |
6.9 |
|
|
$ |
1.5 |
|
|
$ |
4.3 |
|
|
$ |
1.0 |
|
Other costs
|
|
$ |
99.0 |
|
|
$ |
17.8 |
|
|
$ |
77.8 |
|
|
$ |
17.1 |
|
|
$ |
38.4 |
|
|
$ |
11.5 |
|
Segment operating income (loss)
|
|
$ |
17.5 |
|
|
$ |
5.1 |
|
|
$ |
(6.1 |
) |
|
$ |
3.4 |
|
|
$ |
(4.8 |
) |
|
$ |
0.6 |
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
Note:
|
|
(1) |
Segment revenue includes inter-segment revenue of
$2.0 million for fiscal 2006, $1.6 million for fiscal
2005 and $1.1 million for fiscal 2004. |
In fiscal 2006, WNS Global BPO accounted for 60.8% of our
revenue and 83.3% of our revenue less repair payments, compared
to 47.5% of our revenue and 77.8% of our revenue less repair
payments in fiscal 2005.
WNS Global BPO
Segment Revenue. Revenue in the WNS Global BPO segment
increased by 59.3% to $125.2 million in fiscal 2006 from
$78.6 million in fiscal 2005. The revenue for fiscal 2006
included revenue of $6.0 million from Trinity Partners,
which we acquired during this period. Revenue in this segment
increased by 107.5% to $78.6 million in fiscal 2005 from
$37.9 million in fiscal 2004. Increases during both these
periods were driven
50
by an increase in the volume of transactions executed for
clients. Contract prices across the various types of processes
remained substantially stable over these periods.
Segment Operating Income (Loss). Segmental operating
profit in the WNS Global BPO segment increased to
$17.5 million in fiscal 2006 from an operating loss of
$(6.1) million in fiscal 2005. Segmental loss increased by
26.0% to $(6.1) million in fiscal 2005 from
$(4.8) million in fiscal 2004. These changes were primarily
attributable to the impact of our bearing the cost of client
resources in North America of $19.2 million in fiscal 2005,
as explained above (see Overview
Expenses Cost of Revenue).
WNS Auto Claims BPO
Segment Revenue. Revenue in the WNS Auto Claims BPO
segment decreased by 6.6% to $79.6 million in fiscal 2006
from $85.2 million in fiscal 2005. Payments made to repair
centers in fiscal 2006 were $54.9 million, a decrease of
13.1% from $63.2 million in fiscal 2005. This was primarily
due to a loss of a significant client. Revenue less repair
payments in this segment increased by 12.2% to
$24.7 million in fiscal 2006 from $22.0 million in
fiscal 2005, driven by the growth in new claims processing
clients as well as continued increases in claims processed on
behalf of our existing clients. Revenue in this segment
increased by 26.6% to $85.2 million in fiscal 2005 from $67.3
million in fiscal 2004. Payments made to repair centers in
fiscal 2005 were $63.2 million and $54.2 million in the
corresponding period in 2004. Revenue less repair payments in
this segment increased by 67.4% to $22.0 million in fiscal 2005
from $13.1 million in fiscal 2004, primarily driven by the ramp
up of services to a significant automobile insurance client who
engaged us in fiscal 2004. Contract prices across the various
types of processes in this segment have been stable over the
period under discussion.
Segment Operating Income (Loss). Segmental operating
income increased by 53.4% to $5.1 million in fiscal 2006
from $3.3 million in fiscal 2005. The increase of
$1.8 million was due to a 12.2% increase in revenue less
repair payments in fiscal 2006. As claims management revenue is
recognized over the period that claims are processed (two to
six months), a portion of such revenue is deferred at the
end of a period. Claims management revenue deferred at
March 31, 2005 was higher than claims management revenue
deferred at March 31, 2006 by $1.7 million. Segmental
operating income increased to $3.3 million in fiscal 2005
from $0.6 million in fiscal 2004.
Quarterly Results
The following table presents unaudited quarterly financial
information for each of our last eight fiscal quarters on a
historical basis. We believe the quarterly information contains
all adjustments necessary to fairly present this information. As
a business process outsourcing services provider, we anticipate
and respond to demand from our clients. Accordingly, we have
limited control over the timing and circumstances under which
our services are provided. Typically, we show slight decreases
in our first-quarter margins as a result of salary increases.
For these and other reasons, we can experience variability in
our operating results from quarter to quarter. The operating
results for any quarter are not necessarily indicative of the
results for any future period.
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|
Fiscal 2006 | |
|
Fiscal 2005 | |
|
|
| |
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| |
|
|
Three Months Ended | |
|
Three Months Ended | |
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| |
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| |
|
|
Mar 2006(1) | |
|
Dec 2005(1) | |
|
Sep 2005 | |
|
Jun 2005 | |
|
Mar 2005 | |
|
Dec 2004 | |
|
Sep 2004 | |
|
Jun 2004 | |
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|
(US dollars in millions) | |
Revenue
|
|
$ |
52.9 |
|
|
$ |
49.8 |
(2) |
|
$ |
48.9 |
|
|
$ |
51.2 |
(2) |
|
$ |
49.0 |
|
|
$ |
42.5 |
|
|
$ |
36.5 |
|
|
$ |
34.1 |
|
Cost of revenue
|
|
|
37.3 |
|
|
|
34.1 |
|
|
|
35.6 |
|
|
|
38.7 |
|
|
|
37.1 |
(5) |
|
|
37.9 |
|
|
|
32.8 |
|
|
|
32.5 |
|
Gross profit
|
|
|
15.6 |
|
|
|
15.7 |
|
|
|
13.4 |
|
|
|
12.4 |
|
|
|
11.9 |
(5) |
|
|
4.6 |
|
|
|
3.7 |
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|
|
1.6 |
|
Operating expenses:
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|
|
SG&A
|
|
|
11.4 |
(3) |
|
|
9.7 |
(4) |
|
|
8.2 |
|
|
|
7.1 |
|
|
|
6.8 |
|
|
|
6.3 |
|
|
|
5.7 |
|
|
|
6.1 |
|
|
Amortization of intangibles assets
|
|
|
0.5 |
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.7 |
|
Operating income (loss)
|
|
|
3.7 |
(3) |
|
|
5.8 |
(4) |
|
|
5.1 |
|
|
|
5.3 |
|
|
|
5.1 |
(5) |
|
|
(1.9 |
) |
|
|
(2.3 |
) |
|
|
(5.2 |
) |
Non-operating income (expense)
|
|
|
0.2 |
|
|
|
(0.0 |
) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
0.2 |
|
|
|
(0.4 |
) |
|
|
0.5 |
|
|
|
(0.6 |
) |
(Provision) benefit for income taxes
|
|
|
(0.3 |
) |
|
|
0.1 |
|
|
|
(0.5 |
) |
|
|
(0.9 |
) |
|
|
(0.6 |
) |
|
|
(0.4 |
) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Net income (loss)
|
|
|
3.7 |
|
|
|
5.9 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
|
4.7 |
|
|
|
(2.6 |
) |
|
|
(1.9 |
) |
|
|
(5.9 |
) |
51
The following table sets forth for the periods indicated
selected consolidated financial data:
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|
Fiscal 2006 | |
|
Fiscal 2005 | |
|
|
| |
|
| |
|
|
Three Months Ended | |
|
Three Months Ended | |
|
|
| |
|
| |
|
|
Mar 2006(1) | |
|
Dec 2005(1) | |
|
Sep 2005 | |
|
Jun 2005 | |
|
Mar 2005 | |
|
Dec 2004 | |
|
Sep 2004 | |
|
Jun 2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Gross profit (loss) as a percentage of revenue
|
|
|
29.5 |
% |
|
|
31.5 |
% |
|
|
27.3 |
% |
|
|
24.3 |
% |
|
|
24.4 |
% (5) |
|
|
10.9 |
% |
|
|
10.2 |
% |
|
|
4.8 |
% |
Operating income (loss) as a percentage of revenue
|
|
|
7.0 |
%(3) |
|
|
11.6 |
%(4) |
|
|
10.4 |
% |
|
|
10.4 |
% |
|
|
10.3 |
% (5) |
|
|
(4.5 |
)% |
|
|
(6.3 |
)% |
|
|
(15.2 |
)% |
Gross profit (loss) as a percentage of revenue less repair
payments
|
|
|
37.6 |
% |
|
|
40.8 |
% |
|
|
38.4 |
% |
|
|
37.5 |
% |
|
|
39.1 |
% (5) |
|
|
19.0 |
% |
|
|
16.1 |
% |
|
|
7.8 |
% |
Operating income (loss) as a percentage of revenue less repair
payments
|
|
|
9.0 |
%(3) |
|
|
15.0 |
%(4) |
|
|
14.6 |
% |
|
|
16.0 |
% |
|
|
16.5 |
% (5) |
|
|
(7.9 |
)% |
|
|
(10.0 |
)% |
|
|
(24.9 |
)% |
The following table reconciles our revenue (a GAAP measure) to
revenue less repair payments (a non-GAAP measure):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006 | |
|
Fiscal 2005 | |
|
|
| |
|
| |
|
|
Three Months Ended | |
|
Three Months Ended | |
|
|
| |
|
| |
|
|
Mar 2006(1) | |
|
Dec 2005(1) | |
|
Sep 2005 | |
|
Jun 2005 | |
|
Mar 2005 | |
|
Dec 2004 | |
|
Sep 2004 | |
|
Jun 2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(US dollars in millions) | |
Revenue
|
|
$ |
52.9 |
|
|
$ |
49.8 |
(2) |
|
$ |
48.9 |
|
|
$ |
51.2 |
(2) |
|
$ |
49.0 |
|
|
$ |
42.5 |
|
|
$ |
36.5 |
|
|
$ |
34.1 |
|
Less: Payments to repair centers
|
|
|
11.5 |
|
|
|
11.3 |
|
|
|
14.1 |
|
|
|
18.0 |
|
|
|
18.5 |
|
|
|
18.2 |
|
|
|
13.3 |
|
|
|
13.2 |
|
Revenue less repair payments
|
|
|
41.4 |
|
|
|
38.4 |
(2) |
|
|
34.8 |
|
|
|
33.2 |
(2) |
|
|
30.6 |
|
|
|
24.3 |
|
|
|
23.2 |
|
|
|
20.9 |
|
Notes:
|
|
(1) |
The financial information for the quarters ended March 2006
and December 2005 reflects the acquisition of Trinity Partners
in November 2005. |
|
(2) |
Revenue and revenue less repair payments in the quarters ended
December 2005 and June 2005 include $2.4 million and
$0.8 million, respectively, of revenue deferred from fiscal
2005. Costs associated with this revenue were however recognized
in fiscal 2005. |
|
(3) |
SG&A expenses in the quarter ended March 2006 include
$0.7 million for consulting and auditing fees, representing
a portion of the professional fees relating to our preparations
for becoming a public company. In addition, costs related to a
recruitment drive were higher relative to the prior quarters in
fiscal 2006. |
|
(4) |
SG&A expenses in the quarter ended December 2005 include
share-based compensation cost of $1.4 million, of which
$1.2 million related to the repurchase and modification of
options. |
|
(5) |
Cost of revenue in the quarter ended March 2005 decreased
significantly from levels in the preceding quarters due to
completion of payments for client resources located in North
America during the transfer period as described in
Overview Expenses Cost
of Revenue. |
Liquidity and Capital Resources
Historically, our sources of funding have principally been from
cash flow from operations supplemented by equity and short-term
debt financing as required. Our capital requirements have
principally been for the establishment of operations facilities
to support our growth and acquisitions.
During fiscal 2006 and fiscal 2005, our net income (loss) was
$18.3 million and ($5.8) million, respectively. By
implementing our growth strategy (see Business
Business Strategy), we intend to generate higher revenue
in the future in an effort to maintain our profitable position.
As of March 31, 2006, we had cash and cash equivalents of
$18.5 million. We typically seek to invest our available
cash on hand in bank deposits or short-term money market
accounts. As of March 31, 2006, we had an unused line of
credit of Rs.370 million ($8.3 million) from Hong Kong
and Shanghai Banking Corporation, Mumbai Branch.
52
Cash Flows from Operating Activities
Cash flows provided by operating activities were
$34.8 million for fiscal 2006 and $1.8 million for
fiscal 2005. The increase in cash flows from operating
activities in fiscal 2006 as compared to fiscal 2005 was
attributable to increased revenue as well as the completion of
payment for client resources in North America associated with
one significant client contract in fiscal 2005. While it is
possible that WNS might enter into a similar client contract in
the future, WNS has no current client contracts with similar
arrangements or current plans to enter into any such similar
client contracts.
Cash flows provided by operating activities were
$1.8 million for fiscal 2005 and $11.6 million for
fiscal 2004. The decrease in cash flows from operating
activities in fiscal 2005 as compared to fiscal 2004 was
attributable to the payment for client resources in North
America associated with one significant client contract,
partially offset by increased revenue.
Cash Flows from Investing Activities
Cash flows used in investing activities were $18.7 million
in fiscal 2006 as compared with $18.3 million used in
fiscal 2005. The increase in cash flows used in investing
activities in fiscal 2006 from fiscal 2005 was primarily
attributable to an acquisition on November 16, 2005, in
which we made a cash payment of $3.9 million, net of cash
acquired, as part of the purchase consideration for the
acquisition of Trinity Partners. This was offset by lower
capital expenditures of $14.9 million in fiscal 2006 as
compared with $18.3 million in fiscal 2005. These capital
expenditures were incurred primarily for leasehold improvements,
purchase of computers, furniture, fixtures and other office
equipment associated with expanding the capacity of our delivery
centers.
Cash flows used in investing activities were $18.3 million
for fiscal 2005 and $9.4 million for fiscal 2004. The
increase in cash flows used in investing activities in fiscal
2005 from fiscal 2004 was primarily attributable to investments
of $18.3 million in capital expenditures in fiscal 2005 as
compared with $8.7 million in fiscal 2004. These capital
expenditures were incurred primarily for leasehold improvement,
purchase of computers, furniture, fixtures and office equipment
associated with expanding the capacity of our delivery centers.
Cash Flows from Financing Activities
Cash outflows from financing activities were $6.4 million
in the fiscal 2006 as compared with cash inflows from financing
activities of $10.2 million in fiscal 2005 primarily
because of a $9.9 million loan (net proceeds) we received
from a significant client in fiscal 2005, which was fully repaid
in fiscal 2006. We also received $3.9 million from the
issue of shares upon the exercise of options and the sale of
shares to a director during fiscal 2006 as compared with
$0.7 million received from the issue of shares in fiscal
2005.
Cash inflows from financing activities were $10.2 million
in fiscal 2005 as compared with cash outflows from financing
activities of $0.1 million in fiscal 2004 because of a
$9.9 million loan (net proceeds) we received from a
significant client in fiscal 2005.
We believe that our cash flow from operating activities (without
relying on the proceeds of this offering) will be sufficient to
meet our estimated capital expenditures, working capital and
other cash needs until at least March 31, 2007, the end of
fiscal 2007.
Our business strategy requires us to continuously expand our
delivery capabilities. We expect to incur capital expenditure on
setting up new delivery centers or expanding existing delivery
centers and setting up related technology to enable offshore
execution and management of clients business processes. We
expect our capital expenditure needs in fiscal 2007 to be
approximately $22 million, which includes $3 million
for updating technology and processes. We expect to meet this
estimated capital expenditure from cash generated from operating
activities. We may in the future consider making acquisitions
which we expect to be able to finance partly or fully from the
net proceeds of this offering and cash generated from operating
activities. If we have significant growth through acquisitions
or require additional operating facilities beyond those
currently planned to service new client contracts, we may need
to obtain further financing. We cannot assure you that
additional financing, if needed, will be available on favorable
terms or at all.
53
Contractual Obligations
Our principal commitments consist of obligations under operating
leases for office space, which represent minimum lease payments
for office space, purchase obligations for property and
equipment and capital leases for computers. We have no ongoing
commercial commitments, such as drawn lines of credit,
guarantees or standby purchase orders that would affect our
liquidity over the next five years. The following table sets out
our total future contractual obligations as of March 31,
2006 on a consolidated basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period | |
|
|
| |
|
|
|
|
Less than | |
|
2-3 | |
|
4-5 | |
|
More than | |
|
|
Total | |
|
1 Year | |
|
Years | |
|
Years | |
|
5 Years | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(US dollars in thousands) | |
Operating leases
|
|
$ |
88,036 |
|
|
$ |
21,091 |
|
|
$ |
36,731 |
|
|
$ |
26,369 |
|
|
$ |
3,845 |
|
Purchase obligations
|
|
|
4,309 |
|
|
|
4,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
|
195 |
|
|
|
193 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
92,540 |
|
|
$ |
25,593 |
|
|
$ |
36,733 |
|
|
$ |
26,369 |
|
|
$ |
3,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements or obligations.
Quantitative and Qualitative Disclosures About Market Risk
General
Market risk is attributable to all market sensitive financial
instruments including foreign currency receivables and payables.
The value of a financial instrument may change as a result of
changes in the interest rates, foreign currency exchange rates,
commodity prices, equity prices and other market changes that
affect market risk sensitive instruments.
Our exposure to market risk is primarily a function of our
revenue generating activities and any future borrowings in
foreign currency. The objective of market risk management is to
avoid excessive exposure of our earnings to loss. Most of our
exposure to market risk arises from our revenue and expenses
that are denominated in different currencies.
The following risk management discussion and the estimated
amounts generated from analytical techniques are forward-looking
statements of market risk assuming certain market conditions
occur. Our actual results in the future may differ materially
from these projected results due to actual developments in the
global financial markets.
Risk Management Procedures
We manage market risk through our treasury operations. Our
senior management and our board of directors approve our
treasury operations objectives and policies. The
activities of our treasury operations include management of cash
resources, implementation of hedging strategies for foreign
currency exposures, borrowing strategies and ensurance of
compliance with market risk limits and policies.
Components of Market Risk
Exchange Rate Risk
Our exposure to market risk arises principally from exchange
rate risk. Although substantially all of our revenue less repair
payments is denominated in pounds sterling, US dollars and
Euros, approximately 77.5% of our expenses (net of payments to
repair centers made as part of our WNS Auto Claims BPO segment)
are incurred and paid in Indian rupees. The exchange rates among
the Indian rupee, the pound sterling and the US dollar have
changed substantially in recent years and may fluctuate
substantially in the future. See Foreign
Exchange Exchange Rates.
Our exchange rate risk primarily arises from our foreign
currency-denominated receivables and payables. Based upon our
level of operations during fiscal 2006, a sensitivity analysis
shows that a 5.0% appreciation in
54
the pound sterling against the US dollar would have increased
revenue less repair payments in fiscal 2006 by approximately
$4.4 million. Similarly, a 5.0% depreciation in the Indian
rupee against the US dollar would have decreased our expenses
incurred and paid in Indian rupee in fiscal 2006 by
approximately $5.0 million. Conversely, a 5.0% appreciation
in the Indian rupee against the US dollar would have increased
our expenses incurred and paid in Indian rupees during the
fiscal 2006 by approximately $5.0 million.
Interest Rate Risk
We do not carry any interest rate risk on our current short-term
borrowing as the rate is contractually fixed for the entire term
of such borrowing.
Credit Risk
Financial instruments that potentially subject us to
concentrations of credit risk consist principally of cash
equivalents, accounts receivable from related parties, accounts
receivables from others and bank deposits. By their nature, all
such financial instruments involve risk including the credit
risk of non-performance by counter parties. Our cash
equivalents, bank deposits and restricted cash are invested with
banks with high investment grade credit ratings. Accounts
receivable are typically unsecured and are derived from revenue
earned from clients primarily based in Europe and North America.
We monitor the credit worthiness of our clients to which we have
granted credit terms in the normal course of the business. As of
March 31, 2006 and 2005, 73% and 96%, respectively, of
accounts receivable from related parties was receivables from
British Airways. We believe there is no significant risk of loss
in the event of non-performance of the counter parties to these
financial instruments, other than the amounts already provided
for in our financial statements.
Control Deficiencies
In May 2006, as part of our most recent audit process, our
independent auditors notified our audit committee of certain
significant deficiencies in our internal controls. A significant
deficiency is a control deficiency that adversely affects the
companys ability to initiate, authorize, record, process
or report external financial data reliably such that there is
more than a remote likelihood that a consequential misstatement
of the companys financial statements will not be prevented
or detected. The significant deficiencies noted by our
independent auditors related to our lack of sufficient senior
personnel with US GAAP knowledge, the manual nature and
inadequate review procedures of our financial statement closing
process, and the lack of a formal approval process of related
party transactions with companies in which members of our
management have controlling ownership interest. Our audit
committee and management have discussed these actions with our
independent auditors and we are addressing them by making better
use of our management information reporting system, hiring US
GAAP qualified consultants and seeking additional US GAAP
qualified employees, strengthening our financial statement
closing process and implementing additional approval procedures
for related party transactions.
Critical Accounting Policies
The discussion and analysis of our financial condition and
results of operations are based on our consolidated financial
statements which have been prepared in accordance with US GAAP.
Note 2 to our audited consolidated financial statements
describes our significant accounting policies and is an
essential part of our consolidated financial statements.
We believe the following to be critical accounting policies. By
critical accounting policies, we mean policies that
are both important to the portrayal of our financial condition
and financial results and require critical management judgments
and estimates. Although we believe that our judgments and
estimates are appropriate, actual future results may differ from
our estimates.
Revenue Recognition
We generate revenue by providing business process outsourcing
services to our clients. Business process outsourcing services
involve providing back-office administration, data management,
contact center
55
management and automobile claims handling services. We recognize
revenue when we have persuasive evidence of an arrangement,
services have been rendered, the fee is determinable and
collectibility is reasonably assured. We conclude that we have
persuasive evidence of an arrangement when we enter into an
agreement with our clients with terms and conditions that
describe the service and the related payments and are legally
enforceable. We consider revenue to be determinable when the
services have been provided in accordance with the agreement.
When the terms of the agreement specify service level parameters
that must be met, we monitor such service level parameters and
determine if there are any service credits or penalties that we
need to account for. Revenue is recognized net of any service
credits that are due to a client. A substantial portion of our
revenue is from large companies, where we do not believe we have
a significant credit risk. We have certain minimum commitment
arrangements, whereby the contracts either provide for a minimum
revenue commitment on an annual basis or a cumulative basis over
multiple years, stated in terms of annual minimum amounts. Where
a minimum commitment is specific to an annual period, any
revenue shortfall is invoiced and recognized at the end of this
period. When the shortfall in a particular year can be offset
with revenues received in excess of minimum commitments in a
subsequent year, we recognize deferred revenue for the shortfall
which has been invoiced and received. To the extent we have
sufficient experience to conclude that the shortfall will not be
satisfied by excess revenues in a subsequent period, the
deferred revenue will be recognized as revenue in that period.
In order to determine whether we have sufficient experience, we
consider several factors which include (i) the historical
volume of business done with a client as compared with initial
projections of volume as agreed to by the client and us,
(ii) the length of time for which we have such historical
experience, (iii) future volume expected based on
projections received from the client and (iv) our internal
expectations of the ongoing volume with the client. Otherwise
the deferred revenue will remain until such time we can conclude
that it will not receive revenues in excess of the minimum
commitment. For certain agreements, we have retroactive
discounts related to meeting agreed volumes. In such situations,
we record revenue at the discounted rate, although we initially
bill at the higher rate, unless we can determine that the agreed
volumes will not be met.
We invoice our clients depending on the terms of the
arrangement, which include billing based on a per employee, per
transaction or cost-plus basis. Amounts billed or payments
received, where all the conditions for revenue recognition have
not been met, are recorded as deferred revenue and are
recognized as revenue when all recognition criteria have been
met. However, the costs related to the performance of such work
are recognized in the period the services are rendered.
Certain contracts allow us to invoice our clients for
out-of-pocket expenses
incurred to render services to our clients and we recognize such
reimbursements as revenue.
We provide automobile claims handling services, which include
claims handling and administration, or claims handling, and
arranging for repairs with repair centers across the UK and the
related payment processing for such repairs, or accident
management. With respect to claims handling, we enter into
contracts with our clients to process all their claims over the
contract period, where the fees are determined either on a per
claim basis or is a fixed payment for the contract period. Where
our contracts are on a per claim basis, we invoice the client at
the inception of the claim process. We estimate the processing
period for the claims and recognize revenue over the estimated
processing period, which generally ranges from two to six
months. The processing time may be greater for new clients and
the estimated service period is adjusted accordingly. The
processing period is estimated based on historical experience
and other relevant factors, if any. Where the fee is a fixed
payment for the contract period, revenue is recognized on a
straight line basis over the period of the contract. In certain
cases, the fee is contingent upon the successful recovery of a
claim by the client. In these circumstances, the revenue is not
recognized until the contingency is resolved.
In order to provide automobile accident management services, we
negotiate with and set up a network of repair centers where
vehicles involved in an accident can be repaired. We are the
principal in these transactions between the repair center and
the client. The repair centers bill us for the negotiated costs
of the repair and we invoice such costs to the client. We
recognize the amounts invoiced to the client as revenue as we
have determined that we meet the criteria established by
Emerging Issues Task Force Consensus, or EITF,
No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an
Agent. Factors considered in determining that we are
the principal in the transaction include
whether: (i) we negotiate the labor rates with
56
repair centers; (ii) we determine which repair center
should be used; (iii) we are responsible for timely and
satisfactory completion of repairs; and (iv) we bear the
credit risk. In certain circumstances, a portion of the repair
costs may be insured. In such situations, the payment received
from the insurance company is not recognized as revenue or cost
of revenue. We invoice the repair center for referral fees and
recognize it as revenue.
Business Combinations
Our acquisitions have been accounted under the purchase method
of accounting. We identify tangible and intangible assets that
we have acquired and estimate the fair values on the date of the
acquisition. We determine the fair values of the acquired assets
taking into consideration information supplied by the management
of the acquired entities, external valuations and other relevant
information. We primarily determine the valuations based on an
estimate of the future discounted cash flow projections. We also
estimate the useful lives of the assets acquired to determine
the period over which we will depreciate or amortize the assets.
Where there are significant differences between the tax bases
and book bases of the assets acquired or liabilities assumed, we
also create deferred tax assets or liabilities at the date of
the acquisition. The determination of fair values require
significant judgment both by management and by outside
specialists engaged to assist in this process. The remainder of
the purchase price, if any, is recorded as goodwill.
Goodwill, Intangible Assets and Property and
Equipment
We determine reporting units based on our analysis of segments
and estimate the goodwill to be allocated to each reporting unit.
The goodwill impairment test is a two-step process, which
requires us to make judgments in determining what assumptions to
use in the calculation. The first step of the process consists
of estimating the fair value of each of our reporting units,
based on a discounted cash flow model, using revenue and profit
forecasts and comparing those estimated fair values with the
carrying values which include the allocated goodwill. If the
estimated fair value is less than the carrying value, a second
step is performed to compute the amount of the impairment by
determining the implied fair value of goodwill. The
determination of a reporting units implied fair value of
goodwill requires the allocation of the estimated fair value of
the reporting unit to the assets and liabilities of the
reporting unit. Any unallocated fair value representing the
implied fair value of goodwill is then compared to its
corresponding carrying value. If the carrying value exceeds the
implied fair value of goodwill, the difference is recognized as
an impairment charge.
The implied fair value of reporting units is determined by our
management and is generally based upon future cash flow
projections for the reporting unit, discounted to present value.
We consider external valuations when management considers it
appropriate to do so.
We amortize intangible assets with definite lives over the
estimated useful lives and review them for impairment, if
indicators of impairment arise. We estimate the useful lives of
intangible assets after consideration of historical results and
anticipated results based on our current plans.
We initially record purchased property and equipment, which
includes amounts recorded under capital leases, at cost.
Advances paid towards the acquisition of property and equipment
and the cost of property and equipment not put to use before the
balance sheet date are reported under the caption capital
work-in-progress.
Depreciation and amortization of property and equipment are
computed using the straight-line method over the estimated
useful lives of the assets. We estimate the useful lives of
intangible assets after consideration of historical results and
anticipated results based on our current plans.
We perform impairment reviews of intangible assets and property
and equipment when events or circumstances indicate that the
value of the assets may be impaired. Indicators of impairment
include operating or cash flow losses, significant decreases in
market value or changes in the physical condition of the
property and equipment. When indicators of impairment are
present, the evaluation of impairment is based upon a comparison
of the carrying amount of the intangible asset or property and
equipment to the estimated future undiscounted net cash flows
expected to be generated by the asset. If estimated future
undiscounted
57
cash flows are less than the carrying amount of the asset, the
asset is considered impaired. The impairment expense is
determined by comparing the estimated fair value of the
intangible asset or property and equipment to its carrying
value, with any shortfall from fair value recognized as an
expense in the current period. The estimate of undiscounted cash
flows and the fair value of assets require several assumptions
and estimates.
We cannot predict the occurrence of future events that might
adversely affect the reported value of goodwill, intangible
assets or property and equipment. Such events include, but are
not limited to, strategic decisions made in response to economic
and competitive conditions, the impact of the environment on our
customer base, and material negative change in relationship with
significant customers.
Income Taxes
We apply the asset and liability method of accounting for income
taxes as described in SFAS No. 109,
Accounting for Income Taxes. Under this
method, deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using tax rates expected to apply to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date. We recognize valuation allowances to reduce the deferred
tax assets to an amount that is more likely than not to be
realized. In assessing the likelihood of realization, we
consider estimates of future taxable income.
We also evaluate potential exposures related to tax
contingencies or claims made by the tax authorities in various
jurisdictions and determine if a reserve is required. A reserve
is recorded if we believe that a loss is probable and the amount
can be reasonably estimated. These reserves are based on
estimates and subject to changing facts and circumstances
considering the progress of ongoing audits, case law and new
legislation. We believe that the reserves established are
adequate in relation to the potential for any additional tax
assessments.
Recently Issued Accounting Standards
In December 2004, SFAS No. 123(R), Share-Based
Payment, was issued which establishes standards for
transactions in which an entity exchanges its equity instruments
for goods or services. We will adopt this standard effective
April 1, 2006 for all new grants and modification of old
grants. We have determined that under the transition provisions
of this standard, we would continue to account for non-vested
equity awards outstanding at the date of adoption of the
standard under the intrinsic value method as we had used the
minimum-value method for determining fair value of stock options
while we were a non-public company. We believe that the adoption
of this standard may have a significant impact on our
companys results of operations, although it will have no
impact on our companys overall financial position. The
impact of adoption of this standard cannot be predicted at this
time as it will depend on levels of share-based payments made in
the future.
In June 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections,
(SFAS No. 154) which is a replacement of APB
Opinion No. 20, Accounting Changes and FASB Statement
No. 3, Reporting Accounting Changes in Interim Financial
Statements. SFAS No. 154 changes the accounting for and
reporting of changes in accounting principles and error
corrections by requiring retrospective application to prior
period financial statements unless impracticable. This statement
is effective in fiscal years beginning after December 15,
2005. We do not expect the adoption of SFAS No. 154 to have
a significant impact on our financial statements.
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements
No. 133 and 140,
(SFAS No. 155). SFAS No. 155
permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise
would require bifurcation, clarifies which interest-only strips
and principal-only strips are not subject to the
58
requirements of Statement No. 133, establishes a
requirement to evaluate interests in securitized financial
assets to identify interests that are freestanding derivatives
or that are hybrid financial instruments that contain an
embedded derivative requiring bifurcation, clarifies that
concentrations of credit risk in the form of subordination are
not embedded derivatives, and amends Statement No. 140 to
eliminate the prohibition on a qualifying special purpose entity
from holding a derivative financial instrument that pertains to
a beneficial interest other than another derivative financial
instrument. SFAS No. 155 is effective for all
financial instruments acquired or issued after the beginning of
an entitys first fiscal year that begins after
September 15, 2006. We have not completed our evaluation of
the effect of SFAS No. 155.
59
BUSINESS
Overview
We are a leading provider of offshore business process
outsourcing, or BPO, services. We provide comprehensive data,
voice and analytical services that are underpinned by our
expertise in our target industry sectors. We transfer the
business processes of our clients, which are typically companies
located in Europe and North America, to our delivery centers
located primarily in India. We provide high quality execution of
client processes, monitor these processes against multiple
performance metrics, and seek to improve them on an ongoing
basis.
We began operations as an in-house unit of British Airways in
1996, and started focusing on providing business process
outsourcing services to third parties in fiscal 2003. According
to the National Association of Software and Service Companies,
or NASSCOM, an industry association in India, we were among the
top two India-based offshore business process outsourcing
companies in terms of revenue in 2004, 2005 and 2006. As of
March 31, 2006, we had 10,433 employees, of whom
approximately 9,700 were executing over 400 distinct business
processes on behalf of over 125 significant clients. Our largest
clients in terms of revenue contribution include leading global
corporations such as Air Canada, AVIVA, British Airways, First
Magnus Financial Corporation, GfK, IndyMac Bank, Marsh, SITA,
Tesco, Travelocity and Virgin Atlantic Airways. See
Clients.
We design, implement and operate comprehensive business
processes for our clients, involving data, voice and analytical
components. Our services include industry-specific processes
that are tailored to address our clients business and
industry practices, particularly in the travel and banking,
financial services and insurance, or BFSI, industries. We also
offer services applicable across multiple industries, in areas
such as finance and accounting, human resources and supply chain
management, which we collectively refer to as enterprise
services, and in the areas of market, business and financial
research and analytics, which we refer to as knowledge services.
Our comprehensive service portfolio allows us to penetrate our
clients and the industries we serve.
Between fiscal 2003 and fiscal 2006, our revenue grew at a
compound annual growth rate of 54.9%, faster than the projected
42.1% compound annual growth rate of the overall Indian offshore
business process outsourcing industry for the comparable period
as estimated by the NASSCOM-McKinsey report, in December 2005
and NASSCOMs Handbook for ITES-BPO Industry-2005. During
this period, we grew both organically and through acquisitions.
We believe we have achieved rapid growth and industry leadership
through our understanding of the industries in which our clients
operate, our focus on operational excellence, and a senior
management team with significant experience in the global
outsourcing industry. Our revenue is characterized by client,
industry, geographic and service diversity, which we believe
offers us a sustainable business model.
We generate revenue primarily from providing business process
outsourcing services. A portion of our revenue includes payments
which we make to automobile repair centers. We evaluate our
business performance based on revenue net of these payments,
since we believe that revenue less repair payments reflects more
accurately the value of the business process outsourcing
services we directly provide to our clients. For fiscal 2006,
our revenue was $202.8 million, our revenue less repair
payments was $147.9 million and our net income was
$18.3 million.
Industry Overview
Businesses globally are outsourcing a growing proportion of
their business processes to streamline their organizations,
focus on core operations, create flexibility, benefit from
best-in-class process execution and thereby increase shareholder
returns. More significantly, many of these businesses are
outsourcing to offshore locations such as India to access a high
quality and cost-effective workforce. We are a pioneer in the
offshore business process outsourcing industry and are well
positioned to benefit from the combination of the outsourcing
and offshoring trends.
60
The global business process outsourcing industry is large and
growing rapidly. According to International Data Corporation, or
IDC, the global business process outsourcing market was
$422 billion in 2005 and is projected to grow at a 10.9%
compound annual growth rate from 2004 through 2009 to
$641 billion. In comparison, IDC forecasts the information
technology services market (excluding business process
outsourcing) to grow at a compound annual growth rate of 6.0%
over this same period, from $417 billion to
$553 billion. This data implies that the business process
outsourcing market is not only growing at nearly twice the rate
of that of information technology services, but also is
projected to surpass it in size by 2006.
The offshore business process outsourcing industry is growing at
a significantly faster rate than the overall global business
process outsourcing industry. The NASSCOM-McKinsey report
estimates that the offshore business process outsourcing market
will grow at a 37.0% compound annual growth rate, from
$11.4 billion in revenue in fiscal 2005 to
$55.0 billion in revenue in fiscal 2010. The same report
estimates that the total value of business processes that could
have been provided by offshore business process outsourcing
providers in fiscal 2005 represents an addressable market of
approximately $120 billion to $150 billion.
Accordingly, we believe that offshore business process
outsourcing has significant growth potential because we believe
it constitutes less than 10% of the current addressable market
described above. NASSCOM has identified retail banking,
insurance, travel and hospitality and automobile manufacturing
as the industries with the greatest potential for offshore
outsourcing. We provide industry-focused business process
outsourcing services to the majority of these industries.
The following charts set forth the relative growth rate and size
of the global business process outsourcing industry and the
global information technology industry, in addition to the
expected growth rate of the Indian offshore business process
outsourcing industry:
We believe that India is widely considered to be the most
attractive destination for offshore business process
outsourcing. According to the NASSCOM-McKinsey report,
India-based players account for 46% of offshore business process
outsourcing revenue in fiscal 2005, and India will retain its
position as the most favored offshore business process
outsourcing destination for the foreseeable future. The key
factors for Indias predominance include its large, growing
and highly educated English-speaking workforce coupled with a
business and regulatory environment that is conducive to the
growth of the business process outsourcing industry.
While a limited number of global corporations such as General
Electric, British Airways (through our subsidiary, WNS India
Private Limited) and American Express set up in-house business
process outsourcing facilities in India in the mid-1990s,
offshore business process outsourcing growth only accelerated
significantly from 2000 onwards with the emergence of third
party providers. This has been followed by a shift in focus
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from largely call center related outsourcing in areas such as
tele-marketing and client service to a wider range of business
processes such as finance and accounting, insurance claims
administration and market research analysis. This shift in focus
has given rise to an India-based offshore industry capable of
providing a wide range of complex services.
Offshore business process outsourcing is typically a long-term
strategic commitment for companies. The processes that companies
outsource are frequently complex and integrated with their core
operations. These processes require a high degree of
customization and, often, a multi-stage offshore transfer
program. Clients would therefore incur high switching costs to
transfer these processes back to their home locations or to
other business process outsourcing providers. As a result, once
an offshore business process outsourcing provider gains the
confidence of a client, the resulting business relationship is
usually characterized by multi-year contracts with predictable
annual revenue.
Given the long-term, strategic nature of these engagements,
companies undertake a highly rigorous process in evaluating
their offshore business process outsourcing provider. We believe
a client typically seeks the following key attributes in a
potential offshore business process outsourcing provider:
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established reputation and industry leadership; |
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demonstrated ability to execute a diverse range of
mission-critical and often complex business processes; |
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capability to scale employees and infrastructure without a
diminution in quality of service; and |
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ability to innovate, add new operational expertise and drive
down costs. |
As the offshore business process outsourcing industry evolves
further, we believe that scale, reputation and leadership will
become more important factors in this selection process.
Competitive Strengths
We believe that we have the following seven competitive
strengths necessary to maintain and enhance our position as a
leading provider of offshore business process outsourcing
services:
Offshore business process outsourcing market
leadership
We have received recognition as an industry leader from various
industry bodies. For example:
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NASSCOM named us one of the top two Indian offshore business
process outsourcers in 2005 and 2004; |
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neoIT ranked us as the best performing business process
outsourcing company in 2005; and |
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Global Outsourcing named us the leading insurance outsourcer in
India in 2005. |
We have provided leadership to the offshore business process
outsourcing industry as demonstrated by our anticipation of key
industry trends. For example, since our emergence as a focused
third party business process outsourcing provider, we have
proactively targeted two of the most attractive industry
sectors, BFSI and travel. In addition, we have focused our
service portfolio on complex processes, avoiding services that
are less integral to our clients operations, such as
telemarketing and collections, which characterized the offshore
business process outsourcing industry at that time.
We believe our early differentiation from other players and the
substantial length of our working relationship with many
industry-leading clients has significantly contributed to our
reputation as a trusted provider of offshore business process
outsourcing services. We believe that this reputation is a key
differentiator in our attracting and winning clients.
62
Deep industry expertise
We have established expertise in the industries we target. We
have developed our business by creating focused business units
that provide industry-specific services. Our industry-focused
strategy allows us to retain and enhance expertise thereby
enabling us to:
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offer a suite of services that can deliver a comprehensive
industry-focused business process outsourcing program; |
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leverage our existing capabilities to win additional clients and
identify new industry-specific service offerings; |
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cultivate client relationships that may involve few processes
upon initial engagement to develop deeper engagements ultimately
involving a number of integrated processes; and |
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recruit and retain talented employees by offering them
industry-focused career paths. |
We have achieved market leadership in several of the industries
we target. For example, we were ranked as the leading insurance
outsourcer in India by Global Outsourcing in 2005, and we
believe we have the largest and most diverse operations in the
offshore travel business process outsourcing market.
Experience in transferring processes offshore and running
them efficiently
Many of the business processes that are outsourced by clients to
us are mission critical and core to their operations, requiring
substantial project management expertise. We have developed a
sophisticated program management methodology intended to ensure
smooth transfer of business processes from our clients
facilities to our delivery centers. For example, our highly
experienced program management team has transferred over 400
distinct business processes for over 125 significant clients in
the last three years.
We focus on managing our client processes effectively on an
ongoing basis. Our process delivery is managed by independent
empowered teams and measured regularly against pre-defined
operational metrics. We have also invested in a 250-person
quality assurance team that satisfies the International Standard
Organization 9001:2000 standards for quality management systems,
and applies Six Sigma, a statistical methodology for improving
consistent quality across processes, and other process
re-engineering methodologies to further improve our process
delivery.
The composition of our revenue enables us to continuously
optimize the efficiency of our operations to achieve higher
asset utilization. This is driven by our combination of data and
voice services across the different time zones of North America
and Europe.
Diversified client base across multiple industries and
geographic locations
We have a large, diversified client base of over 125 significant
clients across Europe and North America, including clients who
are market leaders within their respective industries. We have
clients across the multiple sectors of the travel and BFSI
industries as well as other industries such as manufacturing,
logistics, retail, utilities and professional services. To date,
many of our clients have transferred a limited number of their
business processes offshore. We believe, therefore, that we have
a significant opportunity to increase the revenue we generate
from these clients in the future as they decide to expand their
commitment to offshore business process outsourcing.
Industry-recognized leadership in human capital
development
We are recognized as a leader in human resources management
among offshore business process outsourcing companies. We have
won a number of awards, including being ranked number one in
human capital development in 2005 by neoIT, an industry
consultant, and being ranked number one in the Asia Pacific
region for excellence in human resources by Indias
National Institute of Personnel Managers. Our market leadership
and organizational culture enables us to attract and retain high
quality employees.
63
Our extensive recruiting process utilizes sophisticated tools
such as the Predictive Index, a psychometric tool we use to help
us screen candidates on multiple parameters and to appropriately
match employees to the most suitable positions. We have
established the WNS Learning Academy, which provides ongoing
training to our employees for the purpose of continuously
improving their leadership and professional skills. We seek to
promote our team leaders and operations managers from within,
thereby offering internal advancement opportunities and clear
long-term career paths.
Ability to manage the rapid growth of our
organization
We have invested significant management effort toward ensuring
that our organization is positioned to continuously scale to
meet the robust demand for offshore business process outsourcing
services. We are capable of evaluating over 5,000 potential
employees and recruiting, hiring and training over 450 employees
each month, enabling us to rapidly expand and support our
clients. We have also established a highly scalable operational
infrastructure consisting of nine delivery centers in multiple
locations supported by a world-class information technology
and communications network infrastructure.
Experienced management team
We benefit from the effective leadership of a global management
team with diverse backgrounds including extensive experience in
outsourcing. Most of our core senior management team members
have been with us since fiscal 2003, and have successfully
executed the growth strategy that has increased our client base
from 14 clients as of May 2002 to over 125 significant
clients as of March 31, 2006 and increased our revenue from
$104.1 million in fiscal 2004 to $202.8 million in
fiscal 2006 and our revenue less repair payments from
$49.9 million in fiscal 2004 to $147.9 million in
fiscal 2006. Moreover, we believe that our management has
successfully guided our rapid expansion while increasing client
satisfaction, as demonstrated by our in-house customer feedback
surveys. In addition to our senior management team, our middle
management team provides us with the critical leadership depth
needed to manage our rapid growth.
Business Strategy
Our objective is to strengthen our position as a leading
offshore business process outsourcing provider. To achieve this,
we will seek to expand our client base and further develop our
industry expertise, enhance our brand to attract new clients,
develop organically new business services and industry-focused
operating units and make selective acquisitions. The key
elements of our strategy are described below.
Drive rapid growth through penetration of our existing
client base
We have a large and diverse existing client base that includes
many leading global corporations, most of whom have transferred
only a limited number of their business processes offshore. We
intend to leverage our expertise in providing comprehensive
process solutions by seeking to identify additional processes
that can be transferred offshore, cross-selling new services,
adding technology-based offerings, and expanding and deepening
our existing relationships. We have dedicated account managers
tasked with maintaining a thorough understanding of our
clients outsourcing roadmaps as well as identifying and
advocating new offshoring opportunities. As a result of this
strategy, we have a strong track record of extending the scope
of our client relationships over time.
Enhance awareness of the WNS brand name
Our reputation for operational excellence among our clients has
been instrumental in attracting and retaining new clients as
well as talented and qualified employees. We believe we have
benefited from strong
word-of-mouth brand
equity in the past. However, as the scale of the offshore
business process outsourcing market grows, we will seek to
increase client awareness of the WNS brand in our target markets
and among potential employees. We also intend to focus on
building market awareness of our industry expertise through
exposure in industry publications and participation in industry
conferences. In order to achieve this enhanced awareness, we are
investing in hiring new senior marketing professionals.
64
Reinforce leadership in existing industries and penetrate
new industry sectors
We have a highly successful industry-focused operating model
through which we have established a leading offshore business
process outsourcing practice in the travel and BFSI sectors. We
intend to leverage our in-depth knowledge of these industries to
penetrate additional sectors within these industries. For
example, in the travel sector, we believe that there are
potential opportunities we can exploit in the hotel,
cruise-liner and car rental sectors. In addition, we intend to
develop our existing expertise in emerging businesses such as
the manufacturing, logistics, retail, utilities and professional
services industries. We intend to leverage our enterprise
services and knowledge services, which are applicable across
multiple industries, to first penetrate these targeted
industries and thereafter build specific industry expertise to
achieve scale with an objective of establishing new
industry-focused business units.
Broaden industry expertise and enhance growth through
selective acquisitions
Our acquisition strategy is focused on adding new capabilities
and industry expertise. Our acquisition track record
demonstrates our ability to integrate, manage and develop the
specific capabilities we acquire. Our intention is to continue
to pursue targeted acquisitions in the future and to rely on our
integration capabilities to expand the growth of our business.
Business Process Outsourcing Service Offerings
We offer our services to three main categories of clients
through industry-focused business units. First, we serve clients
in the travel industry, including airlines, travel
intermediaries and other related service providers, for whom we
perform services such as customer service and revenue
accounting. Second, we serve clients in the BFSI industry, for
whom we perform services such as loan processing and insurance
claims management. Third, we serve clients in several other
industries including manufacturing, retail, logistics, utilities
and professional services, which we refer to as emerging
businesses. In addition to industry-specific services, we offer
a range of services across multiple industries, in areas such as
finance and accounting, human resources and supply chain
management, which we collectively refer to as enterprise
services, and in the areas of market, business and financial
research and analytical services, which we refer to as knowledge
services. This structure is depicted in the graphic below:
To achieve in-depth understanding of our clients
industries and provide industry-specific services, each business
unit is staffed by a dedicated team of managers and employees
engaged in providing business process outsourcing client
solutions, and has its own operations, sales, finance, human
resources and training teams. In addition, each business unit
draws upon common support services from our information
technology, corporate
65
communications, corporate finance, risk management and legal
departments, which we refer to as our corporate-enabling units.
Travel
According to the NASSCOM-McKinsey report, the travel and
hospitality industry presented an addressable offshore business
process outsourcing opportunity estimated to be between
$10 billion and $12 billion in fiscal 2005. The
current penetration by offshore business process outsourcing
providers is approximately 3%, leaving considerable growth
potential. We believe that we currently have the largest and
most diverse service offering among offshore business process
outsourcing service providers in the travel domain.
Our service portfolio includes processes that support air, car,
hotel, marine and packaged travel services offered by our
clients. The key travel industry sectors we serve include:
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airlines; |
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travel intermediaries; and |
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others such as global distribution systems and network providers. |
We serve a diverse client base in this business unit that
includes Air Canada, British Airways, SITA and Travelocity. We
also serve 15 other airlines and nine travel intermediaries. As
of March 31, 2006, we had approximately 4,600 employees
working in this business unit, several hundred of whom possess
International Air Transport Association, or IATA,
certifications. In fiscal 2006 and fiscal 2005, this business
unit represented 30.9% and 28.9% of our revenue and 42.3% and
47.3% of our revenue less repair payments.
The following graphic illustrates the key areas in which we
provide services to clients in this business unit:
Case Study. We were retained by a major airline client
that was faced with increasing competitive pressure from
low-cost carriers and needed to reduce its costs. We worked with
this client to develop an offshore business process outsourcing
strategy to fundamentally alter its service delivery model with
the goal of increasing its cost efficiency. We initially started
providing business process outsourcing services to this client
with 12 employees handling a single process. As of
March 31, 2006, approximately 1,250 employees were
executing over 80 different processes for this client,
which included a variety of complex processes. We categorize
these processes into six broad areas:
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customer interaction: customer complaint resolution, loyalty
program management; |
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passenger revenue accounting: refunds, fare audit, ticket coupon
matching, sales accounting; |
66
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cargo operations and accounting: scheduling, booking, flight
planning, mail revenue accounting; |
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revenue management: seat allocation, processing meal requests,
yield maximization through inventory management, fare filing,
fare construction and quotation; |
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reporting and analytics: aircraft load factor, costs, market
share, revenue and competition reports; and |
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other miscellaneous services: updating employee records,
calculation of medical leave and overtime for staff. |
We believe that by transferring these processes to us, the
client has achieved significant cost savings, and increased its
levels of end-customer satisfaction. These benefits are in
addition to process-specific productivity improvements such as
higher quality and accuracy levels.
BFSI
According to the NASSCOM-McKinsey report, two sectors of the
BFSI industry presented an addressable offshore business process
outsourcing opportunity estimated to be between $60 billion
and $75 billion in fiscal 2005, with current penetration
estimated to be below 9%. Of this addressable market,
approximately $35 billion to $40 billion is
attributable to the retail banking sector and approximately
$25 billion to $35 billion is attributable to the
insurance sector. In 2005, we were ranked as the leading
insurance outsourcer in India by Global Outsourcing. We also
have growing expertise in the retail and mortgage banking, and
asset management sectors.
The key BFSI industry sectors we serve are:
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integrated financial institutions; |
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mortgage banks and investors in mortgage-backed securities; |
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financial advisory service providers; |
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life, property and casualty, and health insurers; |
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insurance brokers and loss assessors; and |
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self-insured auto fleet owners. |
We serve a diverse client base in this business unit that
includes AVIVA, First Magnus Financial Corporation, IndyMac Bank
and Marsh. We also serve a large US-based financial advisory
provider, a top ten UK auto insurer, a large insurance loss
adjuster, several self-insured fleet owners and several
mortgage-related companies. As of March 31, 2006, we had
approximately 2,600 employees working in this business
unit. In fiscal 2006 and fiscal 2005, revenue from this business
unit represented 55.6% and 61.4% of our revenue and revenue less
repair payments from this business unit represented 39.1% and
36.8% of our revenue less repair payments.
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The following graphic illustrates the key areas in which we
provide services to clients in this business unit:
In the areas of retail and mortgage banking, we offer an
integrated service delivery solution called Digital Loan
Management, or DLM, which combines automated mortgage processing
with offshore delivery. Our BFSI business unit also includes our
auto claims business, branded WNS Assistance, which is comprised
of our WNS Auto Claims BPO segment. WNS Assistance offers a
blended onshore-offshore delivery model that enables us to
handle the entire automobile insurance claims cycle. We offer
comprehensive accident management services to our clients where
we arrange for repair of automobiles through a network of repair
centers. We also offer claims management services where we
process accident insurance claims for our clients. Our employees
receive telephone calls reporting automobile accidents, generate
electronic insurance claim forms and arrange for automobile
repairs in cases of automobile damage. We also provide third
party claims handling services including the administration and
settlement of property and bodily injury claims while providing
repair management and rehabilitation services to our insured and
self-insured fleet clients and the end-customers of our
insurance company clients. Our service for uninsured losses
focuses on recovering repair costs and legal expenses directly
from negligent third parties. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations Results by Reportable Segment.
Case Study. We were engaged by a leading
US residential mortgage lender, measured by volume, to
develop and execute its long-term offshore business process
outsourcing strategy, based on our domain expertise and specific
focus on mortgage banking. We executed the engagement in a
phased manner where low-risk processes such as document indexing
were moved offshore first, followed by more complex processes
which required a significant degree of specialized training and
customization. Since the inception of this relationship in 2003,
we have deployed over 400 employees on more than 30 business
processes, including integrated data and voice processes, such
as loan set-up, underwriting and closing. In moving these
processes offshore, the client has benefited by reducing its
operational costs, obtaining quicker turnaround times on
transactions, improving accuracy, quality and capacity
management, and gaining an ability to focus on its core
competencies of customer acquisition and new product development.
Emerging Businesses
Our emerging businesses unit addresses the needs of the
manufacturing, logistics, retail, utilities and professional
services industries. We believe these industries are at a
nascent stage of offshore business process outsourcing adoption,
and therefore present significant opportunities for growth.
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We serve a diverse client base including Centrica, GfK and
Tesco. As of March 31, 2006, we had approximately 2,500
employees in this business unit. In fiscal 2006 and fiscal 2005,
this business unit represented 13.5% and 9.7% of our revenue and
18.6% and 15.9% of our revenue less repair payments.
Our strategy for the emerging businesses unit is to nurture and
develop emerging industry-specific capabilities up to a point of
critical mass from which new industry-focused operating units
may emerge. We utilize two core service capabilities to
penetrate emerging businesses. These capabilities are broadly
classified as:
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Enterprise Services, focused on finance and accounting, human
resource and supply chain management services; and |
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Knowledge Services, focused on market, business and financial
research and analytical services. |
Enterprise Services
Our enterprise services business unit focuses on various
functions that are critical to our clients businesses.
These functions include corporate and transactional accounting,
payroll and benefits administration, order entry and tracking,
and inbound supply chain and vendor management. The following
graphic illustrates the key enterprise services we provide:
Case Study. One of the leading global players in the
retail industry retained us in July 2003 to outsource its
300-person finance and accounting and payroll operations. The
client selected us based on our reputation for operational
excellence and experience in transferring processes offshore.
Our senior program managers worked with the client for three
months on a diagnostic study to create a roadmap for offshoring
various business functions. This involved undertaking a detailed
evaluation of existing business processes and technology
solutions and preparing a transfer plan. Commencing in October
2003, we started the transfer of the corporate and commercial
payables processes. In a short span of six months, through our
interaction with the client and evaluation of existing business
processes, we started to gain an in-depth understanding of the
clients business processes. As a result, the client
accelerated the transfer of larger, more complex and critical
processes such as invoice reconciliation, supplier dispute
handling, payroll processing and benefits administration to us.
By September 2004, we were handling comprehensive payables and
payroll functions for this client. We have delivered process
efficiencies and business improvements for the client, including
cycle-time optimization, reduction in usage of one-time vendors,
reduction in duplicate payment recoveries and increase in
invoice pass rates, while continually building stronger control
frameworks and enhancing levels of service for the clients
business.
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Knowledge Services
In the knowledge services area, we offer market, business and
financial research and analytical services. Our services include
complex and high-end analytics which require specialized skill
sets. Many of our employees in this area have graduate degrees
in statistics, management or accounting, which we believe
enables us to secure higher rates for their services as compared
to the rates for our other processes. The following graphic
illustrates the key knowledge services we provide:
Case Study. A leading UK-based market research firm
retained us in 2000 to outsource its data processing
requirements. This relationship commenced with a two-member team
collating and tabulating market research data using
sophisticated statistical analysis. In 2003, we expanded our
relationship with this client to provide similar services for
its North American operations. In 2004, we further expanded our
service offerings to include data collection and telephone
interviews to collect questionnaire responses. We also started
providing research support services which are designed to assist
the clients service staff by undertaking tasks such as
checking the quality of the outputs from various functions,
graphically representing the data, basic data interpretation and
advanced statistical analysis. As of January 2006, we had over
140 employees working on over 700 market research projects for
this client. We believe that our services have enabled the
client to compete more effectively in its market.
Sales and Marketing
The offshore business process outsourcing services sales cycle
is time consuming and complex in nature. The extended sales
cycle generally includes initiating client contact, submitting
requests for information and proposals for client business,
facilitating client visits to our operational facilities,
performing diagnostics studies and conducting pilot
implementations to test our delivery capabilities. Due to the
complex nature of our sales cycle, we have organized our sales
teams by business units and staffed them with professionals who
have specialized industry knowledge. This industry focus enables
our sales teams to better understand the prospective
clients business needs and offer appropriate
industry-focused solutions.
As of March 31, 2006, we had 70 sales and sales
support professionals, with 20 based in the UK,
23 based in the US and 27 based in India. Our sales
teams work closely with our sales support team in India, which
provides critical analytical support throughout the sales cycle.
Our front-line sales teams are responsible for identifying and
initiating discussions with prospective clients, and selling
services in new areas to existing clients. We have strategically
recruited our sales teams primarily from the US and the UK.
70
We also assign dedicated account managers to each of our key
clients. These managers work
day-to-day with the
client and our service delivery teams to address the
clients needs. More importantly, by using the detailed
understanding of the clients business and outsourcing
objectives gained through this close interaction, our account
managers actively identify and target additional processes that
can be outsourced to us. Through this methodology, we have
developed a strong track record of increasing our sales to
existing clients over time.
Clients
As of March 31, 2006, we had a diverse client base of over
125 significant clients across a variety of industries and
process types, including companies that we believe are among the
leading players in their respective industries. We define
significant clients as those who represent an ongoing business
commitment to us, which includes substantially all of our
clients within our WNS Global BPO segment and some of our
clients within our WNS Auto Claims BPO segment. In addition, as
of March 31, 2006, we had over 230 ancillary clients
related to our WNS Auto Claims BPO segment. These clients offer
only occasional business to us because of the small size of
their automobile fleets and the consequent infrequent
requirement of our auto claims services.
We believe the diversity in our client profile differentiates us
from our competitors. See Managements Discussion and
Analysis of Financial Condition Overview
Revenue for additional information on our client base.
In fiscal 2006, the following were among our top 25 clients
(including their affiliates) by revenue:
|
|
|
Air Canada
|
|
Marsh |
AVIVA
|
|
SITA |
British Airways
|
|
Tesco |
First Magnus Financial Corporation
|
|
Travelocity |
GfK
|
|
Virgin Atlantic Airways |
IndyMac Bank
|
|
|
The table below sets forth the number of our clients by revenue
less repair payments for the periods indicated. We believe that
the growth in the number of clients who generate more than
$1 million of annual revenue less repair payments indicates
our ability to extend the depth of our relationships with
existing clients over time.
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
Below $1 million
|
|
|
109 |
|
|
|
88 |
|
$1 million to $5 million
|
|
|
18 |
|
|
|
15 |
|
$5 million to $10 million
|
|
|
0 |
|
|
|
1 |
|
More than $10 million
|
|
|
4 |
|
|
|
3 |
|
Competition
Competition in the business process outsourcing services
industry is intense and growing steadily. See Risk
Factors Risks Related to Our Business We
face competition from onshore and offshore based business
process outsourcing companies and from information technology
companies that also offer business process outsourcing services.
Our clients may also choose to run their business processes
themselves, either in their home countries or through captive
units located offshore. We compete primarily with:
|
|
|
Focused business process outsourcing service companies based in
offshore locations like India, such as Genpact and ExlService
Holdings Inc.; |
|
|
Business process outsourcing divisions of numerous information
technology service companies located in India such as Progeon,
owned by Infosys Technologies Limited, Tata Consultancy Services
Limited and Wipro BPO, owned by Wipro Technologies Limited; and |
|
|
Global companies such as Accenture Ltd, Affiliated Computer
Services Inc., Electronic Data Systems or, EDS, and
International Business Machines Corporation, or IBM, which
provide an array of products |
71
|
|
|
and services including broad-based information technology,
software, consulting and business process outsourcing services. |
In addition, departments of certain companies may choose to
perform their business processes in-house, in some cases via an
owned and operated facility in an offshore location such as
India. Their employees provide these services as part of their
regular business operations.
While companies such as Infosys (through its business process
outsourcing subsidiary, Progeon) and Tata Consulting can offer
clients integrated information technology and business
outsourcing services, we believe these companies focus on
information technology as their core business. Global companies
such as Accenture and IBM have significant client relationships
and information technology capabilities, but we believe these
companies are at a disadvantage in the offshore business process
outsourcing business on account of their relatively limited
offshore focus.
We compete against other offshore business process
outsourcing-focused entities like Genpact and ExlServices
Holdings Inc. by seeking to provide industry-focused services
with an offshore focus and building on our track record of
operational excellence.
Intellectual Property
We use a combination of our clients software systems,
third-party software platforms and systems and, in some cases,
our own proprietary software and platforms to provide our
services. Our principal proprietary software includes our
platform for passenger revenue accounting called JADE, which we
use in our travel business unit. In addition, we have an
exclusive license to use an auto claims software platform called
Claimsflo in the insurance market until 2012. Our proprietary
and licensed software allows us to market our services with an
integrated solution that combines a technology platform with our
core business process outsourcing service offering.
We customarily enter into licensing and non-disclosure
agreements with our clients with respect to the use of their
software systems and platforms. Our contracts usually provide
that all intellectual property created for the use of our
clients will be assigned to them. Our employees are also
required to sign confidentiality agreements as a condition to
their employment.
We have registered the trademark WNS and
WNS-Extending Your Enterprise in the US and India
(in certain relevant categories) and have applied to register
these trademarks in the European Union.
Technology
We have a dedicated team of technology experts who support
clients at each stage of their engagement with us. The team
conducts diagnostic studies for prospective clients and designs
and executes technology solutions to enable offshore execution
and management of the clients business processes. We also
have wireless-area-network, or WAN, local-area-network, or LAN,
and desktop teams that focus on creating and maintaining our
large pool of approximately 6,100 workstations and seek to
ensure that our associates face minimal loss in time and
efficiency in their work processes.
We have a well-developed international telecommunications
infrastructure. We use a global wide area network, which we
refer to as the WNSNet to connect our clients data centers
in the UK, Europe, North America and Asia with our delivery
centers. WNSNet has extensive security and virus protection
capabilities built in to protect the privacy of our clients and
their customers and to protect against computer virus attacks.
We believe our telecommunications network is adaptable to our
clients legacy systems as well as to new and emerging
technologies. Our telecommunications network is supported by a
24/7 network management system. Our network is designed to
eliminate any
single-point-of-failure
in the delivery of services to clients.
Process and Quality Assurance and Risk Management
Our process and quality assurance compliance programs are
critical to the success of our operations. We have an
independent quality assurance team to monitor, analyze, provide
feedback on and report process
72
performance and compliance. Our company-wide quality management
system, which includes over 250 quality assurance analysts,
satisfies the International Standard Organization 9001:2000
standards for quality management systems. We have adopted the
Six Sigma, a statistical methodology for improving consistent
quality across processes quality management principles as a way
of improving the operation of our clients processes and
providing a consistent level of service quality to our clients.
As of December 31, 2005, more than 70 of our projects were
being run according to Six Sigma principles. We undertake
periodic audits of both our information systems policy and
implemented controls.
Our risk management framework focuses on two important elements:
business continuity planning and information security.
Our approach to business continuity planning involves
implementation of an organization-wide business continuity
management framework which includes continual self-assessment,
strategy formulation, execution and review. Our business
continuity strategy leverages our expanding network of delivery
centers for operational and technological risk mitigation in the
event of a disaster. To manage our business continuity planning
program, we employ a dedicated team of experienced
professionals. A customized business continuity strategy is
developed for key clients, depending on their specific
requirements. For mission-critical processes, operations are
typically split across multiple delivery centers in accordance
with client-approved customized business continuity plans.
Our approach to information security involves implementation of
an organization-wide information security management system, or
ISMS, which complies with the British Standards 7799:2002 for
optimal implementation of systems to manage organizational
information security risks. This standard seeks to ensure that
sensitive company information remains secure. Currently,
information security systems at five delivery centers are
British Standards 7799:2002 certified, and we expect to seek
similar certifications in our other delivery centers.
In addition, our clients, particularly those in the BFSI
industry, are governed by several regulations specific to their
industries in their home jurisdictions. We identify the
process-specific compliance requirements of our clients
typically related to regulations such as the Health Insurance
Portability and Accountability Act and the Financial Services
Act in the UK and help them maintain compliance in their
business processes by implementing control and monitoring
procedures. The control and monitoring procedures defined by
this function are separate from and in addition to our periodic
internal audits.
Human Capital
As of March 31, 2006, we had 10,433 employees, of whom
approximately 9,700 were employees who execute client
operations, or associates. Approximately 9,200 associates are
based in India, with around 250 in each of Sri Lanka and the UK.
Most of our associates hold university degrees. As of
March 31, 2005 and 2004, we had 7,176 and 4,472 employees.
Our employees are not unionized and we have never experienced
any work stoppages. We believe that our employee relations are
good. We focus heavily on recruiting, training and retaining our
employees.
We believe that we have developed effective human resource
strategies and a strong track record in recruiting. As part of
our recruiting strategy we encourage candidates to view joining
our organization as choosing a long-term career in the field of
travel, BFSI or another specific industry or service area. We
use a combination of recruitment from college campuses and
professional institutes, via recruitment agencies, job portals,
advertisements and walk-in applications. In addition, a
significant number of our applicants are referrals by existing
employees. We currently recruit an average of 450 employees
per month.
In fiscal 2006, our overall attrition rate for all associates,
following a six-month probationary period, was approximately
30%. We believe this rate is lower than that of our competitors
in the offshore business process outsourcing industry.
73
Training and Development
We devote significant resources to the training and development
of our associates. Our training typically covers modules in
leadership and client processes, including the functional
aspects of client processes such as quality and transfer.
Training for new associates may also include behavioral and
process training as well as culture, voice and accent training,
as required by our clients. We have established the WNS Learning
Academy where we offer specialized skills development, such as
interviewing, coaching and presentation skills, and leadership
development programs for associates as they move up the
corporate hierarchy. The WNS Learning Academy is staffed with
over 100 full-time trainers. We customize our training
programs in accordance with the nature of the clients
business, the country in which the client operates and the
services the client requires. By offering such training
programs, we seek to ensure that associates who assume
leadership positions within our organization are equipped with
the necessary skills.
Facilities
We currently have an installed capacity of approximately 6,100
workstations, or seats, that can operate on an uninterrupted
24/7 basis and can be staffed on a three-shift per day basis. We
lease all of our properties, and most of our leases are
renewable at our option. We also have two sales offices in the
US and one in the UK. The following table describes, as of
March 31, 2006, each of our delivery centers, including
centers under construction, and sets forth our lease expiration
dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Space | |
|
Number of | |
|
|
|
Extendable | |
Location |
|
(square feet) | |
|
Workstations/Seats | |
|
Lease Expiration(3) | |
|
Until(4) | |
|
|
| |
|
| |
|
| |
|
| |
India:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mumbai
|
|
|
84,429 |
|
|
|
1,059 |
|
|
|
April 30, 2008 |
|
|
|
May 15, 2011 |
|
|
|
|
15,323 |
|
|
|
177 |
|
|
|
April 30, 2008 |
|
|
|
April 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,752 |
|
|
|
1,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gurgaon
|
|
|
90,995 |
|
|
|
763 |
|
|
|
October 31, 2008 |
|
|
|
April 30, 2014 |
|
|
Pune-WNS
|
|
|
142,800 |
|
|
|
1,778 |
|
|
|
December 31, 2006 |
|
|
|
March 31, 2010 |
|
|
Pune-NTrance(1)
|
|
|
66,460 |
|
|
|
900 |
|
|
|
March 10, 2007 |
|
|
|
March 9, 2014 |
|
|
Nashik
|
|
|
13,825 |
|
|
|
277 |
|
|
|
April 30, 2007 |
|
|
|
December 30, 2009 |
|
|
|
|
32,686 |
|
|
|
550 |
|
|
|
September 30, 2007 |
|
|
|
December 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,511 |
|
|
|
827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pune-WNS
(2)
|
|
|
36,700 |
|
|
|
354 |
|
|
|
February 2, 2011 |
|
|
|
February 2, 2011 |
|
|
Mumbai(2)
|
|
|
37,000 |
|
|
|
411 |
|
|
|
May 1, 2015 |
|
|
|
May 1, 2015 |
|
|
|
|
69,811 |
|
|
|
776 |
|
|
|
May 30, 2009 |
|
|
|
May 30, 2015 |
|
|
|
|
13,770 |
|
|
|
205 |
|
|
|
May 1, 2015 |
|
|
|
May 1, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,581 |
|
|
|
1,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gurgaon
(2)
|
|
|
51,244 |
|
|
|
661 |
|
|
|
September 30, 2010 |
|
|
|
March 31, 2015 |
|
Sri
Lanka:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colombo
|
|
|
30,000 |
|
|
|
376 |
|
|
|
July 31, 2007 |
|
|
|
July 31, 2007 |
|
UK:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ipswich
|
|
|
43,802 |
|
|
|
143 |
|
|
|
August 27, 2010 |
|
|
|
August 27, 2010 |
|
|
Broadstairs
|
|
|
7,200 |
|
|
|
120 |
|
|
|
December 31, 2007 |
|
|
|
December 31, 2007 |
|
Notes:
|
|
(1) |
We use these delivery centers to provide services to one of our
major clients. Our contracts with this client provide the client
with an option to require us to transfer the relevant project
and operations, including these delivery centers to |
74
|
|
|
that client. See Risk
Factors Risks Related to Our Business We
may lose some or all of the revenue generated by one of our
major clients.
|
|
(2) |
Under construction. Number of
workstations/seats is based on our estimates of
workstations/seats available upon completion of construction of
the respective facilities.
|
|
(3) |
In each of our Mumbai and Nashik
facilities, we have two separate lease agreements with different
expiration/ extension option dates.
|
|
(4) |
Reflects the expiration date if
each of our applicable extension options are exercised.
|
Our delivery centers are equipped with fiber optic connectivity
and have backups to their power supply designed to achieve
uninterrupted operations. In fiscal 2007, we intend to open new
delivery centers in Pune and Mumbai, and to expand our
operations by creating additional workstations in Gurgaon.
Regulations
Due to the industry and geographic diversity of our operations
and services, our operations are subject to a variety of rules
and regulations, and several Indian, Sri Lankan, UK and US
federal and state agencies regulate various aspects of our
business. See Risk Factors Risks Related to
our Business Failure to adhere to the regulations
that govern our business could result in us being unable to
effectively perform our services. Failure to adhere to
regulations that govern our clients business could have an
adverse impact on our operations.
Regulation of our industry by the Indian government affects our
business in several ways. We benefit from certain tax incentives
promulgated by the Indian government, including a tax holiday
from Indian corporate income taxes for the operation of most of
our Indian facilities, which will begin to expire in stages from
April 1, 2006 through March 31, 2009. As a result of
these incentives, our operations have been subject to lower
Indian tax liabilities. In addition to this tax holiday, our
Indian subsidiaries are also entitled to certain benefits under
relevant state legislation/regulations. These benefits include
preferential allotment of land in industrial areas developed by
the state agencies, incentives for captive power generation,
rebates and waivers in relation to payments for transfer of
property and registration (including for purchase or lease of
premises) and commercial usage of electricity. Our subsidiaries
in India are also subject to certain currency transfer
restrictions. See Managements Discussion and
Analysis of Financial Condition and Results of
Operations Critical Accounting Policies
Income Taxes and Managements Discussion and
Analysis of Financial Condition and Results of
Operations Critical Accounting Policies
Foreign Currency Translation.
Legal Proceedings
We are defendants in legal proceedings relating to our leasehold
rights for a property on which part of our operations facility
in Nashik, India, is situated. The plaintiffs contend that the
lease is invalid and seek to evict us from this facility. This
suit has not yet been admitted to the courts. We believe that
the suit is without merit and will vigorously defend it. In the
event that our defense is not successful, we expect the direct
financial impact of an unsuccessful defense would be minimal,
although an eviction could cause a disruption to our operations
if we are unable to find a suitable alternative location. Except
for the above, as of the date of this prospectus, we are not a
party to any other legal proceedings that could reasonably be
expected to materially harm our company.
On June 6, 2006, we received a notice from the Indian
Office of Service Tax requiring us to explain why the tax
authorities should not recover from us service tax amounting to
Rs. 157.9 million for the period March 1, 2003 to
January 31, 2005 in respect of the business process
outsourcing services provided by us to certain of our clients.
In addition, the notice asks us to explain why penalty and
interest should not be assessed in connection with this tax. We
have been advised by legal counsel that this tax demand, if
levied, is not tenable under Indian law. We are in the process
of preparing and filing our response to the notice in
consultation with legal counsel and we intend to contest the
demand, if any.
75
MANAGEMENT
Directors and Executive Officers
Effective upon the completion of this offering, our board of
directors will consist of seven directors.
The following table sets forth certain information regarding our
directors and executive officers as of the date of this
prospectus and individuals who will become our directors
effective upon the completion of this offering. This table also
indicates which individuals will continue as our directors
following the completion of this offering.
|
|
|
|
|
|
|
Name |
|
Age | |
|
Designation |
|
|
| |
|
|
Directors
|
|
|
|
|
|
|
Ramesh N. Shah
|
|
|
57 |
|
|
Chairman of
Board(1)(2) |
Neeraj Bhargava
|
|
|
42 |
|
|
Co-Founder of WNS (Holdings) Limited, Director and Group Chief
Executive
Officer(2) |
Zubin Dubash
|
|
|
46 |
|
|
Director and Group Chief Financial
Officer(3) |
Pulak Prasad
|
|
|
37 |
|
|
Director(2) |
Nitin Sibal
|
|
|
32 |
|
|
Director(3) |
Miriam Strouse
|
|
|
35 |
|
|
Director(3) |
Jeremy Young
|
|
|
40 |
|
|
Director(2) |
Guy Sochovsky
|
|
|
29 |
|
|
Director(2) |
Timothy Hammond
|
|
|
41 |
|
|
Director(3) |
New Directors
|
|
|
|
|
|
|
Eric B. Herr
|
|
|
58 |
|
|
Director(4) |
Deepak S. Parekh
|
|
|
61 |
|
|
Director(4) |
Executive
Officers(5)
|
|
|
|
|
|
|
David Charles Tibble
|
|
|
53 |
|
|
Co-Founder of WNS (Holdings) Limited and Chairman, WNS UK |
Anup Gupta
|
|
|
34 |
|
|
Chief Executive Officer Travel Services |
Edwin Donald Harrell
|
|
|
41 |
|
|
Chief Executive Officer WNS Assistance |
J.J. Selvadurai
|
|
|
45 |
|
|
Chief Executive Officer Enterprise Services |
Other Managers
|
|
|
|
|
|
|
Alan Stephen Dunning
|
|
|
49 |
|
|
Co-Founder of WNS (Holdings) Limited, Managing Director, WNS UK |
Lyndon Rodrigues
|
|
|
45 |
|
|
Chief Information Officer |
Amit Bhatia
|
|
|
37 |
|
|
Chief Executive Officer Knowledge Services |
Notes:
|
|
(1) |
Currently acting as Interim Chief Executive Officer
Banking, Financial Services and Insurance, or BFSI, (excluding
WNS Assistance). |
|
(2) |
Individuals who will continue as our directors following the
completion of this offering. |
|
(3) |
Individuals who will resign as our directors effective upon the
completion of this offering. |
|
(4) |
Individuals who will become our directors effective upon the
completion of this offering. |
|
(5) |
Other than executive officers who also are directors. |
Summarized below is relevant biographical information covering
at least the past five years for each of our current directors,
individuals who will become our directors effective upon the
completion of this offering, executive officers and other
managers.
76
Directors
Ramesh N. Shah is our Chairman and was appointed to our
board of directors on July 14, 2005. Mr. Shah is based
in New York. In addition to his role as Chairman of the Board,
he mentors our North American sales team and manages key
external stakeholder relationships. He is also the interim chief
executive officer of our BFSI business unit (excluding WNS
Assistance). Prior to WNS, he was the chief executive officer
for the Retail Banking division at GreenPoint Bank and has held
senior positions at American Express, Shearson and Natwest.
Mr. Shah received a Master of Business Administration from
Columbia University and a Bachelor of Arts degree from Bates
College. The business address for Mr. Shah is 420 Lexington
Avenue, Suite 2515, New York, New York 10170, USA.
Neeraj Bhargava is a co-founder of WNS (Holdings) Limited
and Group Chief Executive Officer and was appointed to our board
of directors on May 17, 2004. Mr. Bhargava is based in
Mumbai, India. Mr. Bhargavas responsibilities as
Chief Executive Officer include executing our business strategy
and managing the overall performance and growth of our
organization. Prior to co-founding WNS (Holdings) Limited in
2002, Mr. Bhargava served as managing partner of eVentures
India, a venture fund developing businesses in offshore
services. He was also a partner at McKinsey & Company,
where he worked in the New York, London and Mumbai offices. He
co-authored the 1999 McKinsey-NASSCOM report on the business
process outsourcing sector. Mr. Bhargava received a Master
of Business Administration from the Stern School of Business,
New York University, and a Bachelor of Arts degree in Economics
from St. Stephens College, Delhi University. The business
address for Mr. Bhargava is Gate 4, Godrej &
Boyce Complex, Pirojshanagar, Vikhroli West, Mumbai 400 079,
India.
Zubin Dubash is our Group Chief Financial Officer and was
appointed to our board of directors on January 26, 2006.
Mr. Dubash is based in Mumbai, India.
Mr. Dubashs responsibilities as Chief Financial
Officer include finance and accounting, legal and regulatory
compliance and risk management. Prior to joining us,
Mr. Dubash was an executive director of the Indian Hotels
Company Limited (a Tata Group company). Mr. Dubash received
a Bachelor of Commerce Degree from Sydenham College, Bombay
University in 1979 and a Master of Business Administration from
The Wharton School in 1986. He is a member of Institute of
Chartered Accountants in England and Wales. Mr. Dubash is
also a director of Trent Limited (a Tata Group company). The
business address for Mr. Dubash is Gate 4,
Godrej & Boyce Complex, Pirojshanagar, Vikhroli West,
Mumbai 400 079, India.
Pulak Prasad was appointed to our board of directors as a
nominee of Warburg Pincus on February 21, 2002.
Mr. Prasad joined Warburg Pincus in 1998 and focuses on the
firms investment activities in India. Previously he was an
engagement manager with McKinsey & Company, primarily
working with financial institutions and technology companies in
India, the US and South Africa. In addition, he worked with
Unilever in India. He received a Bachelor of Technology degree
from the Indian Institute of Technology, Delhi and a Post
Graduate Diploma in Management from the Indian Institute of
Management, Ahmedabad. In addition to serving as our director,
he is also a director of Bharti Tele-Ventures Limited,
Rediff.com India Limited, Venture Infotek Global Private
Limited, Sintex Industries Limited and Radhakrishna Foodlands
Private Limited. The business address of Mr. Prasad is
Warburg Pincus Private Limited, Express Towers, 7th Floor,
Nariman Point, Mumbai 400 021, India.
Nitin Sibal was appointed to our board of directors as a
nominee of Warburg Pincus on February 21, 2002.
Mr. Sibal joined Warburg Pincus in 2000. Prior to joining
Warburg Pincus, he was with Goldman Sachs in Singapore. He
received a Bachelor of Science degree in Economics from the
University of Pennsylvania and a Master of Business
Administration from The Wharton School. In addition to serving
as our director, he is also a director of Max India Limited and
Max Healthcare Institute Limited. The business address of
Mr. Sibal is 7th Floor, Express Towers, Nariman Point,
Mumbai 400 021, India.
Miriam Strouse was appointed to our board of directors as
a nominee of Warburg Pincus on July 3, 2002.
Mrs. Strouse joined Warburg Pincus in 2002 and focuses on
business process outsourcing and human capital management
investing. Previously, Mrs. Strouse was a principal at
General Atlantic Partners. Mrs. Strouse also worked as a
financial analyst at Credit Suisse First Boston. She received a
Bachelor of Arts degree in history and African studies from
Trinity College and an Honors diploma in African studies from the
77
University of Cape Town in South Africa. Mrs. Strouse is
also a director of Bridgepoint Education and Tiltgrange Limited.
The business address for Mrs. Strouse is Warburg Pincus,
466 Lexington Avenue, 10th Floor, New York, New York
10017, USA.
Jeremy Young was appointed to our board of directors as a
nominee of Warburg Pincus on May 5, 2004. Mr. Young
held various positions at Baxter Healthcare International, Booz,
Allen & Hamilton International and Cellular Transplant/
Cytotherapeutics before he joined Warburg Pincus in 1992. He
received a Master of Arts degree in English from Cambridge
University and a Master of Business Administration from Harvard
Business School. He focuses on business services and is also a
director of WP Maverick Ltd, Fibernet Communications and
Warburg Pincus Roaming II S.A. The business address for
Mr. Young is Warburg Pincus International LLC, Almack
House, 28 King Street, St. James, London,
SW1Y 6QW, England.
Guy Sochovsky was appointed to our board of directors as
a nominee of Warburg Pincus on January 26, 2006.
Mr. Sochovsky joined Warburg Pincus in February 2000 and
focuses on business services investments. Prior to joining
Warburg Pincus, Mr. Sochovsky was with Goldman Sachs in
London. He received a Bachelor of Arts, Honors degree in Modern
History from Oxford University in 1997. Mr. Sochovsky is
also a director of Warburg Pincus Roaming II S.A. The
business address for Mr. Sochovsky is Warburg Pincus
International LLC, Almack House, 28 King Street,
St. James, London, SW1Y 6QW, England.
Timothy Hammond was appointed to our board of directors
as a nominee of British Airways on March 1, 2006.
Mr. Hammond has been a Senior Manager in Investments and
Joint Ventures at British Airways for five years. Prior to
joining British Airways, he was the chief financial officer for
the e-procurement
portal OneSea.com. Before joining OneSea.com, Mr. Hammond
worked as an investment banker for 12 years, including two
years as a director at Merrill Lynch in New York. He received a
Master of Arts degree in Medical Sciences from Cambridge
University. The business address for Mr. Hammond is British
Airways plc, Waterside, P.O. Box 365, Harmondsworth,
Middlesex, UB7 OGB, England.
New Directors
Eric B. Herr will become a member of our board of
directors effective upon the completion of this offering.
Mr. Herr is based in the United States. He currently serves
as the Chairman of the board of directors for Workscape Inc.
(since 2005) and as a director of Taleo Corporation (since
2002). He also serves as the Chairman of the audit committee of
Taleo Corporation. Previously, Mr. Herr served as Chief
Financial Officer of Autodesk, Inc. (1990 to 1997).
Mr. Herr received a Master of Arts degree in Economics from
Indiana University and a Bachelor of Arts degree in Economics
from Kenyon College. The business address for Mr. Herr is
P.O. Box 719, Bristol, NH 03222, USA.
Deepak S. Parekh will become a member of our board of
directors effective upon the completion of this offering.
Mr. Parekh is based in Mumbai, India. He currently serves
as the Chairman (since 1993) and Chief Executive Officer of
Housing Development Finance Corporation Limited
(HDFC), a housing finance company in India which he
joined in 1978. Mr. Parekh is the non-executive Chairman
(since 1998) of one of our clients, GlaxoSmithKline
Pharmaceuticals Ltd. Mr. Parekh is also a director on the
board of several Indian public companies such as Siemens Ltd.
(since 2003), HDFC Chubb General Insurance Co. Ltd. (since
2002), HDFC Standard Life Insurance Co. Ltd. (since 2000), HDFC
Asset Management Co. Ltd (since 2000) and The Indian Hotels Co.
Ltd. (since 2000). He was a board member of ICI India Ltd (1997
to 2003), National Thermal Power Corporation (2002 to 2003), The
Dharamsi Morarji Chemicals Co. Ltd. (1988 to 2003), Pathfinder
Investment Co. Pvt. Ltd (1994 to 2004), Automart India Ltd.
(2000 to 2002) and Asset Reconstruction Company (I) Ltd.
(2002 to 2004). He was awarded the Businessman of the
Year in 1996 from Business India. Mr. Parekh was also
awarded the Padma Bhushan in 2006 for his
contribution in the field of trade and industry. The Padma
Bhushan is an award conferred by the President of India
and is given for distinguished services in any field.
Mr. Parekh received a Bachelor of Commerce degree from the
Bombay University and holds a Financial Chartered Accountant
degree from England and Wales. The business address for
Mr. Parekh is Housing Development Finance Corporation
Limited, Ramon House, H.T. Parekh Marg, 169 Backbay
Reclamation, Churchgate, Mumbai 400020, India.
78
Executive Officers
David Charles Tibble is a co-founder of WNS (Holdings)
Limited and Chairman, WNS UK. He is based in the UK and has
been instrumental in our development as a business process
outsourcing industry leader over the last four years.
Mr. Tibble served as our Chairman from 2002 to 2006 and
currently mentors our emerging businesses unit. He also manages
several critical client and external relationships. Prior to
joining us, Mr. Tibble served as Group Finance Director of
Hays plc, a FTSE 100 listed outsourcing company in the UK,
where he founded and headed their 6,000-person Business Process
Outsourcing division which operates in the UK, France, Poland,
Holland, India and Sri Lanka. Mr. Tibble is a certified
Fellow of the Institute of Chartered Accountants and has a
Bachelor of Arts degree in Economics from University of East
Anglia. The business address for Mr. Tibble is Ash House,
Fairfield Avenue, Staines, Middlesex, TW18 4AN, England.
Anup Gupta serves as Chief Executive Officer of our
travel business unit. Mr. Gupta is based in Mumbai, India
and has led the establishment of many new initiatives at WNS.
Prior to joining our company in 2002, he was a Principal at
eVentures India, a News Corp. and SoftBank backed-venture fund,
where he developed many companies in the offshore services
areas. Previously, Mr. Gupta was a management consultant
with Booz Allen & Hamilton where he worked on client
engagements in India, Asia and Europe. Mr. Gupta holds a
graduate diploma in management from the Indian Institute of
Management, Calcutta, and a Bachelors in Technology degree from
the Indian Institute of Technology. The business address for
Mr. Gupta is Gate 4, Godrej & Boyce Complex,
Pirojshanagar, Vikhroli West, Mumbai 400 079, India.
Edwin Donald Harrell joined our company as Executive Vice
President for insurance services and has served as the Chief
Executive Officer of WNS Assistance since October 2005. Prior to
joining our company, Mr. Harrell was a consultant to the
insurance business sector and has worked closely with WNS
Assistance since 1994. In 2001, Mr. Harrell was part of the
team who set up our back-office processing center in India
connected on a real-time basis to our UK operation. This process
facilitated the integrated functioning of our onshore and
offshore teams, resulting in significant savings of processing
costs, cycle time and indemnified costs to our clients.
Mr. Harrell graduated from Chantry High School, Ipswich,
UK. The business address for Mr. Harrell is Ash House,
Fairfield Avenue, Staines, Middlesex, TW18 4AN, England.
J.J. Selvadurai serves as Chief Executive Officer of our
enterprise services business unit. Mr. Selvadurai is a
business process outsourcing industry specialist with over
20 years of experience in offshore outsourcing. He
pioneered such services in Sri Lanka and set up and managed many
processing centers in the Philippines, India, Pakistan and the
UK. Mr. Selvadurai is a certified electronic data
management and processing trainer. Prior to joining WNS in 2002,
Mr. Selvadurai was Asia Managing Director (Business Process
Outsourcing services) of Hays plc, a FTSE 100 B2B
services company. Mr. Selvadurai is certified in data
management and is a member of the data processing institute. The
business address for Mr. Selvadurai is Ash House, Fairfield
Avenue, Staines, Middlesex, TW18 4AN, England.
Other Managers
Alan Stephen Dunning is a co-founder of WNS (Holdings)
Limited and Managing Director, WNS UK. He is based in the
UK and served as the Chief Executive Officer of our travel
business unit until recently. Mr. Dunning is currently
responsible for managing key client relationships in the travel
business unit, apart from focusing on new product development
and providing overall leadership to our UK team. Prior to
joining us, Mr. Dunning was Managing Director of Speedwing
(the British Airways subsidiary that previously owned our
business). Mr. Dunning received a Bachelor of Arts degree
from Leicester University, UK.
Lyndon Rodrigues serves as Chief Information Officer.
Mr. Rodrigues is based in the UK. He is responsible for
technology solution design, implementation and our overall
technology infrastructure. Prior to joining our company,
Mr. Rodrigues was with Citigroup Investments, where he was
part of the core team specializing in business process
outsourcing transactions in India. Before joining Citigroup, he
was with Hays plcs business process outsourcing division,
where he managed solutions design and processes to implement new
outsourced business ventures for Hays plc in Asia and Eastern
Europe. He received his Bachelor of Science degree in business
company systems from the City University, London.
79
Amit Bhatia serves as Chief Executive Officer of our
knowledge services business. Mr. Bhatia is based in
Gurgaon, India. Mr. Bhatia has over 15 years of
experience managing onshore and offshore research and analytical
operations with specialization in business and financial
research. Prior to joining WNS, he served as the Country Manager
for FreeMarkets Inc. where he was responsible for building and
leading the consulting business and offshore operations in
India. He also
co-founded and led the
McKinsey Knowledge Center in New Delhi, the consulting
firms global knowledge management business servicing
McKinseys more than 80 offices around the world.
Mr. Bhatia has a Bachelors degree in Commerce from Shri Ram
College of Commerce, Delhi University and a Masters degree in
Finance from The Delhi School of Economics. He is also a
qualified Cost & Works accountant.
Board Structure and Compensation
Composition of the Board of Directors
Our board of directors currently consists of nine directors.
Pursuant to the terms of an investment agreement among us and
certain shareholders described under Principal and Selling
Shareholders, British Airways has the right to designate
one director and Warburg Pincus has the right to designate a
majority of the directors to serve on our board of directors.
British Airways has the right to designate one director on our
board of directors. Warburg Pincus may, in its absolute
discretion, invite British Airways to designate an additional
director on our board of directors, provided such director is
not domiciled in the UK. In addition, British Airways has the
right to designate two non-voting board representatives on our
board of directors. These board representatives are entitled to
attend and speak but not to vote at meetings of our board of
directors. This investment agreement will terminate upon the
completion of this offering, at which time the contractual right
of any shareholder to designate a person to serve on our board
of directors will terminate.
We will be deemed to be a controlled company under
the rules of the NYSE, and we will qualify for the
controlled company exception to the board of
directors and committee composition requirements under the rules
of the NYSE. However, we do not intend to rely on this
controlled company exception. Effective upon the
completion of this offering, Zubin Dubash, Nitin Sibal, Miriam
Strouse and Timothy Hammond will resign as our directors and the
appointment of Eric Herr and Deepak Parekh as our directors will
become effective. As a result, our board of directors, following
the completion of this offering, will consist of seven
directors. Messrs. Herr and Parekh satisfy the
independence requirements of the NYSE rules. We
intend to have a majority of independent directors within one
year of the completion of this offering.
We adopted an amended and restated Memorandum and Articles of
Association on May 22, 2006. This amended and restated
Memorandum and Articles of Association will come into effect
immediately prior to the completion of this offering. Our
amended and restated memorandum and articles of association
provide that our board of directors consists of not less than
three directors, and such maximum number as our directors may
determine from time to time.
All directors hold office until the expiry of their term of
office, their resignation or removal from office for gross
negligence or criminal conduct by a resolution of our
shareholders or until they cease to be directors by virtue of
any provision of law or they are disqualified by law from being
directors or they become bankrupt or make any arrangement or
composition with their creditors generally or they become of
unsound mind. Upon the completion of this offering, the term of
office of the directors will be divided into three classes:
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Class I, whose term will expire at the annual general
meeting to be held in 2007; |
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Class II, whose term will expire at the annual general
meeting to be held in 2008; and |
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Class III, whose term will expire at the annual general
meeting to be held in 2009. |
At each annual general meeting after the initial classification
or special meeting in lieu thereof, the successors to directors
whose terms will then expire serve from the time of election
until the third annual meeting following election or special
meeting held in lieu thereof. Any additional directorships
resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as
possible,
80
each class will consist of one-third of the directors. This
classification of the board of directors may have the effect of
delaying or preventing changes in control of management of our
company.
There are no family relationships among any of our directors or
executive officers. The employment agreements governing the
services of two of our directors provide for benefits upon
termination of employment as described below.
The employment agreement we entered into with Mr. Neeraj
Bhargava on March 31, 2002 provides that if
Mr. Bhargavas employment is terminated by us without
cause (as defined in the employment agreement), he will be
entitled to receive his base salary for a period of
12 months after the date of such termination, in addition
to all accrued and unpaid salary, accrued and unused vacation
and any unreimbursed expenses. Mr. Bhargava would also be
entitled to health benefits during those 12 months to the
extent permitted under our health plans.
If Mr. Bhargavas employment is terminated by reason
of his death or disability or by us for cause, he will be
entitled to receive all accrued and unpaid salary through the
date of such termination, accrued and unused vacation and any
unreimbursed expenses. If Mr. Bhargava voluntarily resigns
by giving us 30 days notice in writing (as provided
in the employment agreement), we may, at our discretion, pay him
his then current salary and continue benefits for the duration
of the unexpired notice period.
We expect to enter into a new three-year employment agreement
with Mr. Bhargava which will renew automatically for
additional one-year increments, unless either we or
Mr. Bhargava elect not to renew the term. Mr. Bhargava
will serve as our chief executive officer and will receive
compensation, health and other benefits and perquisites
commensurate with his position. In addition, Mr. Bhargava
will receive a grant of stock options and restricted stock units
under his employment agreement that will vest over a three-year
period, subject to his continued employment with us.
If Mr. Bhargavas employment is terminated by us
without cause or by Mr. Bhargava for good reason (each as
defined in the employment agreement) and Mr. Bhargava
executes a general release and waiver of claims against us,
subject to his continued compliance with certain non-competition
and confidentiality obligations, Mr. Bhargava will be
entitled to receive severance payments and benefits from us as
follows: (i) 24 months of base salary and healthcare
benefits from his date of termination; (ii) a lump sum
payment equal to twice his effective target bonus; and
(iii) accelerated vesting of the stock options and
restricted stock units granted under this employment agreement
through the end of the month of termination. If we experience a
change of control while Mr. Bhargava is employed under this
agreement, all of the stock options and restricted stock units
granted to Mr. Bhargava under this employment agreement
will vest and the stock options will become exercisable on a
fully accelerated basis.
The employment agreement we entered into with Mr. Ramesh
Shah on July 14, 2005 provides that if Mr. Shahs
employment is terminated by us without cause (as defined in the
employment agreement), he will be entitled to receive his base
salary for 12 months after the termination, in addition to
all accrued and unpaid salary, earned bonus, accrued and unused
vacation and all benefits as set out in the employment agreement.
If Mr. Shahs employment is terminated by us for
cause, he will be entitled to receive all accrued and unpaid
salary through the date of such termination. If Mr. Shah
voluntarily resigns by giving us a notice in writing of six
months (as provided in the employment agreement), he will be
entitled to receive his then current salary and continue
benefits through the date of his termination of employment.
We expect to enter into a new three-year employment agreement
with Mr. Shah which will renew automatically for additional
one-year increments, unless either we or Mr. Shah elect not
to renew the term. Mr. Shah will serve as our chairman and
will receive compensation, health and other benefits and
perquisites commensurate with his position. In addition,
Mr. Shah will receive a grant of stock options and
restricted stock units under his employment agreement that will
vest over a three-year period, subject to his continued
employment with us.
If Mr. Shahs employment is terminated by us without
cause or by Mr. Shah for good reason (each as defined in
the employment agreement) and Mr. Shah executes a general
release and waiver of claims against us,
81
subject to his continued compliance with certain non-competition
and confidentiality obligations, Mr. Shah will be entitled
to receive severance payments and benefits from us as follows:
(i) 24 months of base salary and healthcare benefits
from his date of termination; (ii) a lump sum payment equal
to twice his effective target bonus; and (iii) accelerated
vesting of the stock options and restricted stock units granted
under this employment agreement through the end of the month of
termination. If we experience a change of control while
Mr. Shah is employed under this agreement, all of the stock
options and restricted stock units granted to Mr. Shah
under this employment agreement will vest and the stock options
will become exercisable on a fully accelerated basis.
We expect to enter into a new three-year employment agreement
with Mr. Dubash which will renew automatically for
additional one-year increments, unless either we or
Mr. Dubash elect not to renew the term. Mr. Dubash
will serve as our chief financial officer and will receive
compensation, health and other benefits and perquisites
commensurate with his position. In addition, Mr. Dubash
will receive a grant of stock options and restricted stock units
under his employment agreement that will vest over a three-year
period, subject to his continued employment with us.
If Mr. Dubashs employment is terminated by us without
cause or by Mr. Dubash for good reason (each as defined in
the employment agreement) and Mr. Dubash executes a general
release and waiver of claims against us, subject to his
continued compliance with certain non-competition and
confidentiality obligations, Mr. Dubash will be entitled to
receive severance payments and benefits from us as follows:
(i) 24 months of base salary and healthcare benefits
from his date of termination; (ii) a lump sum payment equal
to twice his effective target bonus; and (iii) accelerated
vesting of the stock options and restricted stock units granted
under this employment agreement through the end of the month of
termination. If we experience a change of control while
Mr. Dubash is employed under this agreement, all of the
stock options and restricted stock units granted to
Mr. Dubash under this employment agreement will vest and
the stock options will become exercisable on a fully accelerated
basis.
Committees of the Board
Upon the completion of this offering, our board of directors
will have three standing committees: an Audit Committee, a
Compensation Committee and a Nominating and Corporate Governance
Committee.
Audit Committee
The audit committee will comprise three directors: Messrs. Eric
Herr (Chairman), Deepak Parekh and Guy Sochovsky.
Messrs. Herr and Parekh satisfy the independence
requirements of
Rule 10A-3 of the
Securities Exchange Act of 1934, as amended, or the Exchange
Act. We intend to comply with the
Sarbanes-Oxley Act of
2002 and the NYSE rules, which require that the audit committee
be composed solely of directors who will satisfy the
independence requirements of the NYSE rules and
Rule 10A-3 of the
Exchange Act within one year from the date of this prospectus.
The principal duties and responsibilities of our audit committee
will be as follows:
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to serve as an independent and objective party to monitor our
financial reporting process and internal control systems; |
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to review and appraise the audit efforts of our independent
accountants and exercise ultimate authority over the
relationship between us and our independent accountants; and |
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to provide an open avenue of communication among the independent
accountants, financial and senior management and the board of
directors. |
The audit committee will have the power to investigate any
matter brought to its attention within the scope of its duties.
It will also have the authority to retain counsel and advisors
to fulfill its responsibilities and duties. We anticipate that
Mr. Herr will serve as our audit committee financial
expert, within the requirements of the rules promulgated by the
Commission relating to listed-company audit committees.
82
Compensation Committee
The compensation committee will comprise three directors:
Messrs. Ramesh Shah (Chairman), Eric Herr and Deepak
Parekh. We intend to comply with the requirements of the NYSE
rules, which require that the compensation committee be composed
solely of independent directors within one year of the
completion of this offering. The scope of this committees
duties include determining the compensation of our executive
officers and other key management personnel. The compensation
committee also approves, allocates and administers the Stock
Incentive Plan, reviews performance appraisal criteria and sets
standards for and decides on all employee shares options
allocations when delegated to do so by our board of directors.
In addition, we expect that our compensation committee will also
administer our 2006 Incentive Award Plan.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee will comprise
three directors: Messrs. Deepak Parekh (Chairman), Eric
Herr and Jeremy Young. We intend to comply with the requirements
of the NYSE rules, which require that the nominating and
corporate governance committee be composed solely of independent
directors within one year of the completion of this
offering. The principal duties and responsibilities of the
nominating and governance committee will be as follows:
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to assist the board of directors by identifying individuals
qualified to become board members and members of board
committees, to recommend to the board of directors nominees for
the next annual meeting of shareholders, and to recommend to the
board of directors nominees for each committee of the board of
directors; |
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to monitor our corporate governance structure; and |
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to periodically review and recommend to the board of directors
any proposed changes to the corporate governance guidelines
applicable to us. |
Directors and Executive Compensation
The aggregate compensation we paid our directors and executive
officers for fiscal 2006 was $2,765,683, which includes
$1,776,215 paid towards salary, $752,057 paid towards bonus and
$237,412 for social security, medical and other benefits. The
total compensation paid to our most highly compensated executive
during fiscal 2006 was $545,730 (of which $365,859 was comprised
of salary, $141,750 was comprised of bonus payments and $38,121
was comprised of social security, medical and other benefits).
Effective upon the pricing of this offering, certain of our
directors and executive officers will be granted 320,000 options
and 160,000 restricted share units under the 2006 Incentive
Award Plan. The options will be exercisable at the actual public
offering price of our ADSs sold in this offering.
Under the 2006 Incentive Award Plan, our independent directors
will each receive an option to purchase 14,000 shares
initially and an option to purchase 7,000 shares upon
reelection to our board of directors at each annual meeting of
shareholders thereafter. The options granted to independent
directors will be non-qualified options with a per share
exercise price equal to 100% of the fair market value of a share
on the date that the option is granted. Options granted to
independent directors will become exercisable in cumulative
annual installments of
331/3
% on each of the first, second and third anniversaries of
the date of grant.
83
Outstanding Options
The following table sets forth information concerning options
granted to our directors and executive officers which are
outstanding as of June 30, 2006. As of June 30, 2006,
our directors and executive officers as a group (directly and
indirectly) held options under our Stock Incentive Plan to
purchase 1,268,334 representing less than 3.2% of our expanded
share capital on the following terms:
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Number of Ordinary | |
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Shares Underlying | |
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Exercise Price | |
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Name |
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Options Outstanding(1) | |
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per Share(2) | |
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Expiration Date | |
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Ramesh N. Shah
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250,000 |
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£3.50/ $6.14 |
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July 14, 2015 |
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Neeraj Bhargava
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220,001 |
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£1.00/ $1.75 |
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July 1, 2012 |
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150,000 |
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£1.45/ $2.54 |
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January 1, 2014 |
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150,000 |
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£3.50/ $6.14 |
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September 1, 2015 |
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Zubin Dubash
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200,000 |
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£1.50/ $2.63 |
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September 6, 2014 |
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75,000 |
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£3.50/ $6.14 |
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September 1, 2015 |
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20,000 |
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£7.00/ $12.28 |
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February 21, 2016 |
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Pulak Prasad
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Nitin Sibal
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Miriam Strouse
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Jeremy Young
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Guy Sochovsky
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Timothy Hammond
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David Charles Tibble
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Anup Gupta
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28,000 |
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£1.00/ $1.75 |
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August 1, 2012 |
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22,000 |
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£1.40/ $2.46 |
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July 18, 2013 |
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5,000 |
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£3.00/ $5.26 |
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April 11, 2015 |
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70,000 |
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£3.50/ $6.14 |
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September 1, 2015 |
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20,000 |
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£7.00/ $12.28 |
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February 21, 2016 |
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Edwin Donald Harrell
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25,000 |
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£7.00/ $12.28 |
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February 21, 2016 |
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J.J. Selvadurai
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33,333 |
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£1.45/$2.54 |
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January 1, 2014 |
|
Note:
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(1) |
The information in this table excludes the following options and
restricted share units to be issued effective upon the pricing
of this offering to the following directors and executive
officers under the WNS 2006 Incentive Award Plan: Ramesh
N. Shah 115,000 options and 57,500 restricted
share units, Neeraj Bhargava 135,000 options and
67,500 restricted share units, Zubin Dubash 25,000
options and 12,500 restricted share units, Anup
Gupta 20,000 options and 10,000 restricted share
units, Edwin Harrell 5,000 options and 2,500
restricted share units and J.J. Selvadurai
20,000 options and 10,000 restricted share units. |
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(2) |
US dollar amounts based on convenience translation of $1.00 =
£0.57 as of March 31, 2006. |
Employee Benefit Plans
We maintain employee benefit plans in the form of certain
statutory and incentive plans covering substantially all of our
employees.
Provident Fund
In accordance with Indian law, all of our employees in India are
entitled to receive benefits under the Provident Fund, a defined
contribution plan to which both we and the employee contribute
monthly at a pre-determined rate (currently 12% of the
employees base salary). These contributions are made to
the Government Provident Fund and we have no further obligation
under this fund apart from our monthly contributions. We
contributed an aggregate of $1.8 million in fiscal 2006,
$1.0 million in fiscal 2005 and $0.7 million in fiscal
2004 to the Government Provident Fund.
84
In accordance with Indian law, we provide for gratuity pursuant
to a defined benefit retirement plan covering all of our
associates in India. Our gratuity plan provides for a lump sum
payment to vested employees on retirement or on termination of
employment in an amount based on the employees salary and
length of service with us. We provide the gratuity benefit
through actuarially determined contributions pursuant to a
non-participating annuity contract administered and managed by
the Life Insurance Corporation of India, or LIC. Under this
plan, LIC assumes the obligation to make the gratuity payments
to our associates. We contributed an aggregate of
$0.2 million, $0.1 million and $0.1 million in
fiscal 2006, fiscal 2005 and fiscal 2004, respectively, to LIC
(which represented the gratuity cost for the period).
Compensated Absence
Our liability for compensated absences is determined on an
actual basis for the entire unused vacation balance standing to
the credit of each employee as at year-end and were charged to
income in the year in which they accrue.
Stock Incentive Plan
We adopted the 2002 Stock Incentive Plan on July 3, 2002,
or the Stock Incentive Plan, to help attract and retain the best
available personnel to serve us and our subsidiaries as
officers, directors and employees.
Administration. The Stock Incentive Plan is administered
by our board of directors, which may delegate its authority to a
committee (in either case, the Administrator). The
Administrator has complete authority, subject to the terms of
the Stock Incentive Plan and applicable law, to (1) select
the persons who may participate in the Stock Incentive Plan;
(2) determine the terms and conditions of any stock options
granted under the Stock Incentive Plan, including the number of
shares, exercise price, vesting provisions and restrictions
applicable to any such stock options; and (3) make all
other determinations necessary or advisable for the
administration of the Stock Incentive Plan.
Eligibility. Under the Stock Incentive Plan, the
Administrator is authorized to grant stock options to our
officers, directors and employees, and those of our
subsidiaries, subject to the terms and conditions of the Stock
Incentive Plan. Eligible officers, directors and employees will
be selected to participate in the Stock Incentive Plan in the
sole discretion of the Administrator. Certain additional
limitations on eligibility apply to certain of our non-US
service providers.
Number of Shares Authorized. As of June 30, 2006, an
aggregate of 6,082,042 shares of our ordinary shares have
been authorized for grant under the Stock Incentive Plan, of
which 2,116,266 stock options were issued and exercised and
stock options to purchase 3,875,655 ordinary shares were
issued and outstanding. Options granted under the Stock
Incentive Plan that are forfeited or canceled, settled in cash,
that expire or are repurchased by us at the original purchase
price shall remain available for future grant under the Stock
Incentive Plan.
Stock Options. Stock options vest and become exercisable
as determined by the Administrator and set forth in individual
stock option agreements, but may not, in any event, be exercised
later than ten years after their grant dates. In addition, stock
options may be exercised prior to vesting in some cases. Upon
exercise, an optionee must tender the full exercise price of the
stock option in cash, check or other form acceptable to the
Administrator, at which time the stock options are generally
subject to applicable income, employment and other withholding
taxes. Stock options may, in the sole discretion of the
Administrator as set forth in applicable award agreements,
continue to be exercisable for a period following an
optionees termination of service. Shares issued in respect
of exercised stock options may be subject to additional transfer
restrictions. Any grants of stock options under the Stock
Incentive Plan to US participants will be in the form of
nonqualified stock options. Optionees, other than optionees who
are employees of our subsidiaries in India, are entitled to
exercise their stock options for shares or ADSs in the company.
Corporate Transactions. If we engage in a merger or
similar corporate transaction, except as may otherwise be
provided in an individual award agreement, outstanding stock
options will be terminated unless they are
85
assumed by a successor corporation. In addition, the
Administrator has broad discretion to adjust the Stock Incentive
Plan and any stock options thereunder to account for any changes
in our capitalization.
Amendment and Termination. Unless terminated sooner, the
Stock Incentive Plan will remain in effect for a period of ten
years, continuing through July 2, 2012, after which the
Stock Incentive Plan will terminate and no stock options will be
granted under the Stock Incentive Plan. Our board of directors
may, however, amend, suspend or terminate the Stock Incentive
Plan at any time, provided that any such amendment, suspension
or termination must not impact any holder of outstanding stock
options without such holders consent.
Transferability of Stock Options. Each stock option may
be exercised during the optionees lifetime only by the
optionee. No stock option may be sold, pledged, assigned,
hypothecated, transferred or disposed of by an optionee other
than by express permission of the Administrator (only in the
case of employees of non-Indian subsidiaries), by will or by the
laws of descent and distribution.
WNS 2006 Incentive Award Plan
We adopted the WNS (Holdings) Limited 2006 Incentive Award Plan,
or the 2006 Incentive Award Plan, on June 1, 2006. Awards
granted under the 2006 Incentive Award Plan will become
effective upon the pricing of this offering, whereupon we will
terminate the Stock Incentive Plan described above. Upon
termination of the Stock Incentive Plan, the shares that would
otherwise have been available for the grant under the Stock
Incentive Plan will effectively be rolled over into the 2006
Incentive Award Plan, and any awards outstanding will remain in
full force and effect in accordance with the terms of the Stock
Incentive Plan.
The purpose of the 2006 Incentive Award Plan is to promote the
success and enhance the value of our company by linking the
personal interests of the directors, employees and consultants
of our company and our subsidiaries to those of our shareholders
and by providing these individuals with an incentive for
outstanding performance. The 2006 Incentive Award Plan is
further intended to provide us with the ability to motivate,
attract and retain the services of these individuals.
Shares Available for Awards. Subject to certain
adjustments set forth in the 2006 Incentive Award Plan, the
maximum number of shares that may be issued or awarded under the
2006 Incentive Award Plan is equal to the sum of
(x) 3,000,000 shares, (y) any shares that remain
available for grant under the Stock Incentive Plan, and
(z) any shares subject to outstanding awards under the
Stock Incentive Plan. The maximum number of shares which may be
subject to awards granted to any one participant during any
calendar year is 500,000 shares and the maximum amount that
may be paid to a participant in cash during any calendar year
with respect to cash-based awards is $10,000,000. To the extent
that an award terminates or is settled in cash, any shares
subject to the award will again be available for the grant. Any
shares tendered or withheld to satisfy the grant or exercise
price or tax withholding obligation with respect to any award
will not be available for subsequent grant. Except as described
below with respect to independent directors, no determination
has been made as to the types or amounts of awards that will be
granted to specific individuals pursuant to the 2006 Incentive
Award Plan.
Administration. The 2006 Incentive Award Plan is
administered by our board of directors, which may delegate its
authority to a committee. We anticipate that the compensation
committee of our board of directors will administer the 2006
Incentive Award Plan, except that our board of directors will
administer the plan with respect to awards granted to our
independent directors. The plan administrator will determine
eligibility, the types and sizes of awards, the price and timing
of awards and the acceleration or waiver of any vesting
restriction, provided that the plan administrator will not have
the authority to accelerate vesting or waive the forfeiture of
any performance-based awards.
Eligibility. Our employees, consultants and directors and
those of our subsidiaries are eligible to be granted awards,
except that only employees of our company and our qualifying
corporate subsidiaries are eligible to be granted options that
are intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code.
86
Awards
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|
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Options. The plan administrator may grant options on
shares. The per share option exercise price of all options
granted pursuant to the 2006 Incentive Award Plan will not be
less than 100% of the fair market value of a share on the date
of grant. No incentive stock option may be granted to a grantee
who owns more than 10% of our outstanding shares unless the
exercise price is at least 110% of the fair market value of a
share on the date of grant. To the extent that the aggregate
fair market value of the shares subject to an incentive stock
option become exercisable for the first time by any optionee
during any calendar year exceeds $100,000, such excess will be
treated as a nonqualified option. The plan administrator will
determine the methods of payment of the exercise price of an
option, which may include cash, shares or other property
acceptable to the plan administrator (and may involve a cashless
exercise of the option). The term of options granted under the
2006 Incentive Award Plan may not exceed 10 years from the
date of grant. However, the term of an incentive stock option
granted to a person who owns more than 10% of our outstanding
shares on the date of grant may not exceed five years. |
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|
Under the 2006 Incentive Award Plan, our independent directors
will each receive an option to purchase 14,000 shares
initially and an option to purchase 7,000 shares upon
reelection to our board of directors at each annual meeting of
shareholders thereafter. The options granted to independent
directors will be non-qualified options with a per share
exercise price equal to 100% of the fair market value of a share
on the date that the option is granted. Options granted to
independent directors will become exercisable in cumulative
annual installments of
331/3
% on each of the first, second and third anniversaries of
the date of grant. |
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Restricted Shares. The plan administrator may grant
shares subject to various restrictions, including restrictions
on transferability, limitations on the right to vote and/or
limitations on the right to receive dividends. |
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Share Appreciation Rights. The plan administrator may
grant share appreciation rights representing the right to
receive payment of an amount equal to the excess of the fair
market value of a share on the date of exercise over the fair
market value of a share on the date of grant. The term of share
appreciation rights granted may not exceed ten years from the
date of grant. The plan administrator may elect to pay share
appreciation rights in cash, in shares or in a combination of
cash and shares. |
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|
Performance Shares and Performance Shares Units. The plan
administrator may grant awards of performance shares denominated
in a number of shares and/or awards of performance share units
denominated in unit equivalents of shares and/or units of value,
including dollar value of shares. These awards may be linked to
performance criteria measured over performance periods as
determined by the plan administrator. |
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|
Share Payments. The plan administrator may grant share
payments, including payments in the form of shares or options or
other rights to purchase shares. Share payments may be based
upon specific performance criteria determined by the plan
administrator on the date such share payments are made or on any
date thereafter. |
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|
Deferred Shares. The plan administrator may grant awards
of deferred shares linked to performance criteria determined by
the plan administrator. Shares underlying deferred share awards
will not be issued until the deferred share awards have vested,
pursuant to a vesting schedule or upon the satisfaction of any
vesting conditions or performance criteria set by the plan
administrator. Recipients of deferred share awards generally
will have no rights as shareholders with respect to such
deferred shares until the shares underlying the deferred share
awards have been issued. |
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Restricted Share Units. The plan administrator may grant
restricted share units, subject to various vesting conditions.
On the maturity date, we will transfer to the participant one
unrestricted, fully transferable share for each vested
restricted share unit scheduled to be paid out on such date. The
plan administrator will specify the purchase price, if any, to
be paid by the participant for such shares. |
87
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Performance Bonus Awards. The plan administrator may
grant a cash bonus payable upon the attainment of performance
goals based on performance criteria and measured over a
performance period determined appropriate by the plan
administrator. Any such cash bonus paid to a covered
employee within the meaning of Section 162(m) of the
Internal Revenue Code may be a performance-based award as
described below. |
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Performance-Based Awards. The plan administrator may
grant awards other than options and share appreciation rights to
employees who are or may be covered employees, as
defined in Section 162(m) of the Internal Revenue Code, that are
intended to be performance-based awards within the meaning of
Section 162(m) of the Internal Revenue Code in order to
preserve the deductibility of these awards for federal income
tax purposes. Participants are only entitled to receive payment
for performance-based awards for any given performance period to
the extent that pre-established performance goals set by the
plan administrator for the period are satisfied. The plan
administrator will determine the type of performance-based
awards to be granted, the performance period and the performance
goals. Generally, a participant will have to be employed by us
on the date the performance-based award is paid to be eligible
for a performance-based award for any period. |
Adjustments. In the event of certain changes in our
capitalization, the plan administrator has broad discretion to
adjust awards, including without limitation, (i) the
aggregate number and type of shares that may be issued under the
2006 Incentive Award Plan, (ii) the terms and conditions of
any outstanding awards, and (iii) the grant or exercise
price per share for any outstanding awards under such plan to
account for such changes. The plan administrator also has the
authority to cash out, terminate or provide for the assumption
or substitution of outstanding awards in the event of a
corporate transaction.
Change in Control. In the event of change in control of
our company in which outstanding awards are not assumed by the
successor, such awards will generally become fully exercisable
and all forfeiture restrictions on such awards will lapse. Upon,
or in anticipation of, a change in control, the plan
administrator may cause any awards outstanding to terminate at a
specific time in the future and give each participant the right
to exercise such awards during such period of time as the plan
administrator, in its sole discretion, determines.
Vesting of Full Value Awards. Full value awards
(generally, any award other than an option or share appreciation
right) will vest over a period of at least three years (or, in
the case of vesting based upon attainment of certain performance
goals, over a period of at least one year). However, full value
awards that result in the issuance of an aggregate of up to 5%
to the total issuable shares under the 2006 Incentive Award Plan
may be granted without any minimum vesting periods. In addition,
full value awards may vest on an accelerated basis in the event
of a participants death, disability, or retirement, or in
the event of our change in control or other special
circumstances.
Non-transferability. Awards granted under the 2006
Incentive Award Plan are generally not transferable.
Termination or Amendment. Unless terminated earlier, the
2006 Incentive Award Plan will remain in effect for a period of
ten years from its effective date, after which no award may be
granted under the 2006 Incentive Award Plan. With the approval
of our board of directors, the plan administrator may terminate
or amend the 2006 Incentive Award Plan at any time. However,
shareholder approval will be required for any amendment
(i) to the extent required by applicable law, regulation or
stock exchange rule, (ii) to increase the number of shares
available under the 2006 Incentive Award Plan, (iii) to
permit the grant of options or share appreciation rights with an
exercise price below fair market value on the date of grant,
(iv) to extend the exercise period for an option or share
appreciation right beyond ten years from the date of grant, or
(v) that results in a material increase in benefits or a
change in eligibility requirements. Any amendment or termination
must not materially adversely affect any participant without
such participants consent.
88
RELATED PARTY TRANSACTIONS
We have entered into a master services agreement dated
May 20, 2002, with one of our principal shareholders,
British Airways. This agreement provides that we will render
business process outsourcing services to British Airways and its
affiliates as per services level agreements agreed between us
and British Airways. The agreement has a term of five years and
expires in March 2007, but can be terminated by British Airways
upon three months notice. In May 2006, we entered into a
non-binding letter of intent with British Airways to extend the
term of the contract to May 2012, subject to negotiating and
entering into a definitive contract. For fiscal 2006, 2005 and
2004, British Airways accounted for $14.7 million,
$16.4 million and $16.3 million of our revenue,
representing 7.2%, 10.1% and 15.7% of our revenue and
representing 9.9%, 16.5% and 32.7% of our revenue less repair
payments.
In fiscal 2003, we entered into agreements with certain
affiliates of another of our principal shareholders, Warburg
Pincus, to provide business process outsourcing services. For
fiscal 2006, 2005 and 2004, these affiliates, in the aggregate
accounted for $1.6 million, $1.1 million and
$0.9 million, representing 0.8%, 0.7% and 0.9% of our
revenue and 1.1%, 1.1% and 1.8% of our revenue less repair
payments. We have also entered into agreements with certain
other affiliates of Warburg Pincus under which we purchase
equipment and certain enterprise resource planning services from
them. For fiscal 2006, 2005 and 2004, these affiliates in the
aggregate accounted for $193,000, $19,000 and $43,000 in
expenses.
In fiscal 2004, we entered into an agreement with Flovate
Technologies, a company in which Edwin Harrell, one of our
executive officers, is a majority shareholder, under which we
license certain software. In fiscal 2006, 2005 and 2004,
payments by us to Flovate Technologies pursuant to this
agreement amounted to $3.1 million, $3.3 million and
$2.9 million in the aggregate.
In fiscal 2006, WP International Holdings II LLC, an affiliate
of our majority shareholder, Warburg Pincus, extended a loan of
£74,783 to our executive officer, Edwin Harrell. The
purpose of this loan was to assist Mr. Harrell to finance
the purchase of our ordinary shares upon exercise of his stock
options. The loan was repaid by Mr. Harrell in April 2006.
In fiscal 2006, WP International Holdings II LLC, an
affiliate of our majority shareholder, Warburg Pincus, extended
a loan of £139,999 to one of our executive officers,
J. J. Selvadurai. The purpose of this loan was to
assist Mr. Selvadurai to finance the purchase of our
ordinary shares upon exercise of his stock options. The loan was
repaid by Mr. Selvadurai in March 2006.
89
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding beneficial
ownership of our ordinary shares as of June 30, 2006, and
as adjusted to reflect the sale of ADSs in this offering, held
by:
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each person who is known to us to have more than 5.0% beneficial
share ownership; |
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each of our directors and executive officers; |
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all of our directors and executive officers as a group; |
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all of our employees as a group; and |
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each selling shareholder. |
As used in this table, beneficial ownership means the sole or
shared power to vote or direct the voting or to dispose of or
direct the sale of any security. A person is deemed to be the
beneficial owner of securities that can be acquired within
60 days upon the exercise of any option, warrant or right.
Ordinary shares subject to options, warrants or rights that are
currently exercisable or exercisable within 60 days are
deemed outstanding for computing the ownership percentage of the
person holding the options, warrants or rights, but are not
deemed outstanding for computing the ownership percentage of any
other person. The amounts and percentages as of June 30,
2006 are based upon our ordinary shares outstanding as of that
date and the amounts and percentages for our ordinary shares
after this offering are based upon (i) 39,801,857 ordinary
shares to be outstanding immediately after the offering,
assuming no exercise of the underwriters over-allotment
option; and (ii) 39,833,857 ordinary shares to be
outstanding immediately after the offering assuming the
underwriters over-allotment option is exercised in full.
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Shareholding of WNS (Holdings) Limited | |
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Immediately after the Offering | |
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Shareholding of WNS | |
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Number of Shares | |
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Number of Shares | |
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Excluding Exercise of | |
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Including Exercise of | |
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(Holdings) Limited as | |
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sold in the | |
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sold in the | |
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the Over-Allotment | |
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the Over-Allotment | |
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of June 30, 2006 | |
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Offering | |
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Offering | |
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Options | |
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Option | |
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(excluding | |
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(including | |
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Shareholders Name |
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Shares | |
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Percentage | |
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optional shares) | |
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optional shares) | |
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Shares | |
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Percentage | |
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Shares | |
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Percentage | |
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5% or Greater Beneficial Share Owner
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Warburg Pincus
(1)
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22,856,644 |
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64.70 |
% |
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1,490,000 |
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22,856,644 |
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57.43 |
% |
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21,366,644 |
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53.64 |
% |
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466 Lexington Avenue |
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New York, New York 10017 |
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British Airways plc
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5,160,000 |
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14.61 |
% |
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5,160,000 |
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5,160,000 |
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Waterside P.O. Box 365 |
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Harmondsworth, Middlesex |
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Theodore Agnew
(2)
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1,956,228 |
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5.54 |
% |
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1,075,925 |
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1,075,925 |
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880,303 |
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2.21 |
% |
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880,303 |
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2.21 |
% |
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85 Gracechurch SV |
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London EC3V 0AA |
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90
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholding of WNS (Holdings) Limited | |
|
|
|
|
|
|
|
|
|
|
Immediately after the Offering | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Shareholding of WNS | |
|
Number of Shares | |
|
Number of Shares | |
|
Excluding Exercise of | |
|
Including Exercise of | |
|
|
(Holdings) Limited as | |
|
sold in the | |
|
sold in the | |
|
the Over-Allotment | |
|
the Over-Allotment | |
|
|
of June 30, 2006 | |
|
Offering | |
|
Offering | |
|
Options | |
|
Option | |
|
|
| |
|
(excluding | |
|
(including | |
|
| |
|
| |
Shareholders Name |
|
Shares | |
|
Percentage | |
|
optional shares) | |
|
optional shares) | |
|
Shares | |
|
Percentage | |
|
Shares | |
|
Percentage | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Directors and Executive Officers
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ramesh N. Shah
(4)
|
|
|
233,333 |
|
|
|
0.66 |
% |
|
|
|
|
|
|
|
|
|
|
233,333 |
|
|
|
0.58 |
% |
|
|
233,333 |
|
|
|
0.58 |
% |
Neeraj
Bhargava(5)
|
|
|
320,001 |
(6) |
|
|
0.90 |
% |
|
|
|
|
|
|
32,000 |
|
|
|
320,001 |
|
|
|
0.80 |
% |
|
|
288,001 |
|
|
|
0.72 |
% |
Zubin Dubash
|
|
|
66,667 |
(6) |
|
|
0.19 |
% |
|
|
|
|
|
|
|
|
|
|
66,667 |
|
|
|
0.16 |
% |
|
|
66,667 |
|
|
|
0.16 |
% |
Pulak
Prasad(7)
|
|
|
22,856,644 |
|
|
|
64.70 |
% |
|
|
|
|
|
|
1,490,000 |
|
|
|
22,856,644 |
|
|
|
57.43 |
% |
|
|
21,366,644 |
|
|
|
53.64 |
% |
Nitin
Sibal(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miriam
Strouse(7)
|
|
|
22,856,644 |
|
|
|
64.70 |
% |
|
|
|
|
|
|
1,490,000 |
|
|
|
22,856,644 |
|
|
|
57.43 |
% |
|
|
21,366,644 |
|
|
|
53.64 |
% |
Jeremy
Young(7)
|
|
|
22,856,644 |
|
|
|
64.70 |
% |
|
|
|
|
|
|
1,490,000 |
|
|
|
22,856,644 |
|
|
|
57.43 |
% |
|
|
21,366,644 |
|
|
|
53.64 |
% |
Guy
Sochovsky(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Hammond
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Charles Tibble
|
|
|
1,088,182 |
|
|
|
3.08 |
% |
|
|
88,182 |
|
|
|
88,182 |
|
|
|
1,000,000 |
|
|
|
2.51 |
% |
|
|
1,000,000 |
|
|
|
2.51 |
% |
Anup Gupta
|
|
|
51,667 |
(6) |
|
|
0.15 |
% |
|
|
|
|
|
|
|
|
|
|
51,667 |
|
|
|
0.13 |
% |
|
|
51,667 |
|
|
|
0.13 |
% |
Edwin Donald Harrell
|
|
|
75,000 |
|
|
|
0.21 |
% |
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
0.19 |
% |
|
|
75,000 |
|
|
|
0.19 |
% |
J.J. Selvadurai
|
|
|
283,333 |
|
|
|
0.80 |
% |
|
|
|
|
|
|
15,000 |
|
|
|
283,333 |
|
|
|
0.71 |
% |
|
|
268,333 |
|
|
|
0.68 |
% |
All our directors and executive officers as a group
(ten persons)(10)
|
|
|
24,974,827 |
|
|
|
69.63 |
% |
|
|
88,182 |
|
|
|
1,625,182 |
|
|
|
24,886,645 |
|
|
|
62.52 |
% |
|
|
23,349,645 |
|
|
|
58.61 |
% |
Employees(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees (excluding our directors and executive officers)
|
|
|
3,495,469 |
|
|
|
9.52 |
% |
|
|
130,401 |
|
|
|
169,401 |
|
|
|
3,365,068 |
|
|
|
8.45 |
% |
|
|
3,326,068 |
|
|
|
8.34 |
% |
Selling Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warburg Pincus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
466 Lexington Avenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York 10017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warburg Pincus Private Equity VIII L.P.
|
|
|
11,428,322 |
|
|
|
32.35 |
% |
|
|
|
|
|
|
745,000 |
|
|
|
11,428,322 |
|
|
|
28.71 |
% |
|
|
10,683,322 |
|
|
|
26.82 |
% |
|
Warburg Pincus International Partners, L.P.
|
|
|
10,971,190 |
|
|
|
31.06 |
% |
|
|
|
|
|
|
715,200 |
|
|
|
10,971,190 |
|
|
|
27.56 |
% |
|
|
10,255,990 |
|
|
|
25.75 |
% |
|
Warburg Pincus Netherlands International Partners I, CV
|
|
|
457,132 |
|
|
|
1.29 |
% |
|
|
|
|
|
|
29,800 |
|
|
|
457,132 |
|
|
|
1.14 |
% |
|
|
427,332 |
|
|
|
1.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
22,856,644 |
|
|
|
64.70 |
% |
|
|
|
|
|
|
1,490,000 |
|
|
|
22,856,644 |
|
|
|
57.43 |
% |
|
|
21,366,644 |
|
|
|
53.64 |
% |
British Airways plc
|
|
|
5,160,000 |
|
|
|
14.61 |
% |
|
|
5,160,000 |
|
|
|
5,160,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waterside |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.O. Box 365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harmondsworth, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middlesex |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neeraj Bhargava
(5)
|
|
|
320,001 |
(6) |
|
|
0.90 |
% |
|
|
|
|
|
|
32,000 |
|
|
|
320,001 |
|
|
|
0.80 |
% |
|
|
288,001 |
|
|
|
0.72 |
% |
|
93 Chitrakoot
Altamount Road
Mumbai 400026
India |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholding of WNS (Holdings) Limited | |
|
|
|
|
|
|
|
|
|
|
Immediately after the Offering | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Shareholding of WNS | |
|
Number of Shares | |
|
Number of Shares | |
|
Excluding Exercise of | |
|
Including Exercise of | |
|
|
(Holdings) Limited as | |
|
sold in the | |
|
sold in the | |
|
the Over-Allotment | |
|
the Over-Allotment | |
|
|
of June 30, 2006 | |
|
Offering | |
|
Offering | |
|
Options | |
|
Option | |
|
|
| |
|
(excluding | |
|
(including | |
|
| |
|
| |
Shareholders Name |
|
Shares | |
|
Percentage | |
|
optional shares) | |
|
optional shares) | |
|
Shares | |
|
Percentage | |
|
Shares | |
|
Percentage | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Theodore
Agnew(2)
|
|
|
1,956,228 |
|
|
|
5.54 |
% |
|
|
1,075,925 |
|
|
|
1,075,925 |
|
|
|
880,303 |
|
|
|
2.21 |
% |
|
|
880,303 |
|
|
|
2.21 |
% |
|
85 Gracechurch SV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
London EC3V 0AA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bolton Agnew
|
|
|
391,241 |
|
|
|
1.11 |
% |
|
|
215,183 |
|
|
|
215,183 |
|
|
|
176,058 |
|
|
|
0.44 |
% |
|
|
176,058 |
|
|
|
0.44 |
% |
|
Oulton Hall
Norwich
Norfolk NR11 6NY
UK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Charles Tibble
|
|
|
1,088,182 |
|
|
|
3.08 |
% |
|
|
88,182 |
|
|
|
88,182 |
|
|
|
1,000,000 |
|
|
|
2.51 |
% |
|
|
1,000,000 |
|
|
|
2.51 |
% |
|
Ash House |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fairfield Avenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middlesex TW18 4AN |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vivek Shivpuri
|
|
|
327,149 |
|
|
|
0.93 |
% |
|
|
|
|
|
|
14,000 |
|
|
|
327,149 |
|
|
|
0.82 |
% |
|
|
313,149 |
|
|
|
0.79 |
% |
|
7520, East Placita |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ventana Nayes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tuscon, Arizona 85750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amit Gujral
|
|
|
314,696 |
|
|
|
0.89 |
% |
|
|
|
|
|
|
10,000 |
|
|
|
314,696 |
|
|
|
0.80 |
% |
|
|
304,696 |
|
|
|
0.77 |
% |
|
7563, East Placita De |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
La Vina |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tuscon, Arizona 85750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.J. Selvadurai
|
|
|
283,333 |
|
|
|
0.80 |
% |
|
|
|
|
|
|
15,000 |
|
|
|
283,333 |
|
|
|
0.71 |
% |
|
|
268,333 |
|
|
|
0.67 |
% |
|
31, The Goffs |
|
|
|
|
|
|
|
|
|
|
|
|
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Eastbourne, |
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East Sussex |
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BN21 1HF |
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UK |
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John Walker
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130,401 |
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0.37 |
% |
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130,401 |
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130,401 |
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8, Vellyview Drive |
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Rushmere, St. Andrew |
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Ipswich, Suffolk |
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IP4 5UW |
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UK |
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Ajay Ratanlal Bohora
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50,000 |
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0.14 |
% |
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50,000 |
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50,000 |
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Bohora Park |
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Gangapur Road |
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Nashik 422002 |
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India |
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Nicola Casado
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9,333 |
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0.03 |
% |
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9,333 |
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9,333 |
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Calle Constantino |
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Rodriguez 15
Chalet 6 |
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Pozuelo de Alarcon |
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28223, Madrid |
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Spain |
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92
Notes:
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(1) |
The shareholders are Warburg Pincus Private Equity VIII,
L.P., or WP VIII, Warburg Pincus International Partners,
L.P., or WPIP, and Warburg Pincus Netherlands International
Partners I, CV, or WPCV1. Warburg Pincus Partners, LLC, a
subsidiary of Warburg Pincus & Co., or WP, is the sole
general partner of WP VIII, WPIP and WPCV1. WP VIII,
WPIP and WPCV1 are managed by Warburg Pincus LLC, or WP LLC.
Charles R. Kaye and Joseph P. Landy are Managing General
Partners of WP and Managing Members of WP LLC and may be deemed
to control the Warburg Pincus entities. Messrs. Kaye and
Landy disclaim beneficial ownership of all shares held by the
Warburg Pincus entities. |
|
(2) |
Of the 1,956,228 shares held by Theodore Agnew, 1,304,161 are
indirectly held via a trust, known as Theodore Agnew Personal
Settlement, which is controlled by Theodore Agnew and Bolton
Agnew, and the remainder are held directly by Theodore Agnew.
The 1,075,925 shares to be sold in this offering will be
sold by Theodore Agnew Personal Settlement. Following this
offering, Theodore Agnew Personal Settlement will hold 228,263
(0.57%) of our outstanding ordinary shares, assuming no exercise
of the underwriters over-allotment option and 228,263
(0.57%) assuming the underwriters over-allotment option is
exercised in full. |
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(3) |
Does not include 160,000 restricted share units to be issued to
certain of our directors and executive officers effective upon
the pricing of this offering. |
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(4) |
All of the 233,333 shares held by Ramesh Shah are
indirectly held via a trust which is controlled by Ramesh Shah. |
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(5) |
Of the options exercisable for 320,001 shares beneficially
owned by Neeraj Bhargava, 100,000 options are indirectly
held via a trust which is controlled by Neeraj Bhargava, and the
remainder are held directly. The 32,000 shares to be sold
in this offering assuming exercise of the underwriters
over- allotment option will be sold by Neeraj Bhargava directly. |
|
(6) |
Options exercisable within 60 days of June 30, 2006. |
|
(7) |
Pulak Prasad, Miriam Strouse and Jeremy Young, directors of our
company, are Managing Directors and members of Warburg Pincus
LLC. All shares indicated as owned by Pulak Prasad, Miriam
Strouse and Jeremy Young are included because of their
affiliation with the Warburg Pincus entities. Pulak Prasad,
Miriam Strouse and Jeremy Young disclaim beneficial ownership of
all shares held by the Warburg Pincus entities. |
|
(8) |
Nitin Sibal and Guy Sochovsky are Vice Presidents of Warburg
Pincus LLC. Nitin Sibal and Guy Sochovsky do not have voting or
investment discretion with respect to the shares of our company
held by Warburg Pincus, and therefore they are not deemed to
beneficially own such shares. |
|
(9) |
Timothy Hammond is a senior manager of British Airways. Timothy
Hammond does not have voting or investment discretion with
respect to the shares of our company held by British Airways,
and therefore he is not deemed to beneficially own such shares. |
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(10) |
Includes the shares beneficially owned by Pulak Prasad, Miriam
Strouse and Jeremy Young, nominee directors of Warburg Pincus,
because of their affiliation with the Warburg Pincus entities.
Pulak Prasad, Miriam Strouse and Jeremy Young disclaim
beneficial ownership of all shares held by the Warburg Pincus
entities. |
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(11) |
Does not include 64,750 restricted share units to be issued
to our employees effective upon the pricing of this offering.
See Management Outstanding Options. |
|
As of June 30, 2006, there were approximately
44 holders of our shares, of which 11 (holding 70.65% of
our outstanding share capital) had registered addresses in the
US.
We entered into an Investment Agreement dated May 8, 2002,
or the Investment Agreement, with among others, Warburg Pincus
Private Equity VIII, L.P., and its affiliates, plus Warburg
Pincus International Partners, L.P., and its affiliates,
collectively Warburg Pincus; British Airways and David Charles
Tibble, or Mr. Tibble. The Investment Agreement includes
terms relating to the purchase of shares of our share capital
and matters relating to our control and management. Pursuant to
the Investment Agreement, Warburg Pincus acquired
12,040,000 shares of our share capital representing 68.4%,
British Airways acquired 5,160,000 of our ordinary shares
representing 29.3% and Mr. Tibble acquired 400,000 of our
ordinary shares representing 2.3% of our then issued and
outstanding share capital. As per the Investment Agreement,
British Airways has the right to nominate one director on our
board of directors. Warburg Pincus may, in its absolute
discretion, invite British Airways to nominate an additional
director on our board of directors, provided such director is
not domiciled in the UK. In addition, British Airways has
the right to appoint two non-voting board representatives on our
board of directors. Warburg Pincus has the right at all times to
appoint such number of
93
directors to our board of directors as is necessary to maintain
a majority. The Investment Agreement will terminate upon the
completion of this offering, and the director nomination rights
described above will cease to apply upon the completion of this
offering. We do not intend to enter into any further investor or
shareholders agreements.
In July 2002, Warburg Pincus purchased an additional
10,429,835 shares of our company. In February, May and
October 2005, Warburg Pincus purchased an aggregate of
386,809 shares from certain individual shareholders.
We have entered into a Registration Rights Agreement dated
May 20, 2002, or the Registration Rights Agreement,
pursuant to which we have granted, subject to certain
conditions, to our shareholders, Warburg Pincus and British
Airways (so long as British Airways holds not less than 20% of
our ordinary shares on a fully diluted basis), certain demand
registration rights which entitle these shareholders to require
us to use our reasonable efforts to prepare and file a
registration statement under the Securities Act. Pursuant to the
Registration Rights Agreement, we have also granted, subject to
certain conditions, to Warburg Pincus and British Airways
certain piggy-back registration rights entitling these
shareholders to sell their respective ordinary shares in a
registered offering of the company. We have agreed to bear the
expenses incurred in connection with such registrations,
excluding underwriting discounts and commissions and certain
shareholder legal fees. We have also agreed, under certain
circumstances, to indemnify the underwriters in connection with
such registrations. Our shareholders, Warburg Pincus and British
Airways, have agreed to indemnify us and the underwriters in
connection with any such registrations provided that their
obligation to indemnify is limited to the amount of sale
proceeds received by them.
Pursuant to the terms of the Registration Rights Agreement, we
are prohibited from entering into any merger, consolidation or
reorganization in which the company will not be the surviving
corporation unless the successor corporation agrees to assume
the obligations and duties of the company under the Registration
Rights Agreement. We are also prohibited, except with the prior
written consent of Warburg Pincus and British Airways, from
entering into similar agreements granting registration rights to
any shareholder or prospective shareholder. The Registration
Rights Agreement expires in May 2007.
94
DESCRIPTION OF SHARE CAPITAL
General
We were incorporated in Jersey, Channel Islands, as a private
limited company (with registered number 82262) on
February 18, 2002 pursuant to the 1991 Law.
The address of our share registrar and secretary is Mourant
& Co Secretaries Limited at 22 Grenville Street,
St. Helier, Jersey JE4 8PX. Our register of members is
maintained at 22 Grenville Street, St. Helier, Jersey
JE4 8PX. We intend to appoint Capita IRG (Offshore) Limited
to replace Mourant & Co Secretaries Limited as our share
registrar and secretary after this offering in September 2006 at
which time our registered office will be changed to and our
share register will be maintained at Victoria Chambers,
Liberation Square, 1/3 The Esplanade, St. Helier, Jersey JE2
3QA, Channel Islands.
We converted from a private limited company to a public limited
company on January 4, 2006 when we acquired more than
30 shareholders as calculated in accordance with
Article 17A of the 1991 Law. We gave notice of this to the
Jersey Financial Services Commission, or JFSC, in accordance
with Article 17(3) of the 1991 Law on January 12, 2006.
Set forth below are summaries of the provisions of our articles
of association which will come into effect immediately prior to
the completion of this offering.
Introduction
The rights of shareholders described in this section are
available only to persons who hold our certificated shares.
Investors who purchase the ADSs will not hold our certificated
shares and therefore will not be directly entitled to the rights
conferred on our shareholders by our Articles of Association or
the rights conferred on shareholders of a Jersey company by the
1991 Law, including, without limitation: the right to receive
dividends and the right to attend and vote at shareholders
meetings; the rights described in Other Jersey
Law considerations Mandatory purchases and
acquisitions and Other Jersey Law
considerations Compromises and arrangements,
the right to apply to a Jersey court for an order on the grounds
that the affairs of a company are being conducted in a manner
which is unfairly prejudicial to the interests of its
shareholders; and the right to apply to the JFSC to have an
inspector appointed to investigate the affairs of a company.
Investors are entitled to receive dividends and to exercise the
right to vote in accordance with the deposit agreement. For
additional information, see Description of American
Depositary Shares.
Investors who purchase the ADSs in the offering must look
solely to the depositary bank for the payment of dividends, for
the exercise of voting rights attaching to the ordinary shares
represented by their ADSs and for all other rights arising in
respect of the ordinary shares.
Share Capital
The authorized share capital is £5,100,000 divided
into 50,000,000 ordinary shares of 10 pence each and
1,000,000 preferred shares of 10 pence each. As of June 30,
2006, 35,328,173 of our ordinary shares are issued and
14,671,827 are available for issue. None of our shares have any
redemption rights.
Preferred Shares
Pursuant to Jersey law and our Memorandum and Articles of
Association, our board of directors by resolution may establish
one or more classes of preferred shares having such number of
shares, designations, dividend rates, relative voting rights,
liquidation rights and other relative participation, optional or
other special rights, qualifications, limitations or
restrictions as may be fixed by the board without any further
shareholder approval. Such rights, preferences, powers and
limitations as may be established could also have the effect of
discouraging an attempt to obtain control of us.
95
Capacity
Under the 1991 Law, the doctrine of ultra vires in its
application to companies is abolished and accordingly the
capacity of a Jersey company is not limited by anything in its
memorandum or articles or by any act of its members.
Memorandum and Articles of Association
Our activities are regulated by our Memorandum and Articles of
Association. We adopted an amended and restated Memorandum and
Articles of Association by special resolution of our
shareholders passed on May 22, 2006. This amended and
restated Memorandum and Articles of Association will come into
effect immediately prior to the completion of this offering. The
material provisions of our amended and restated Memorandum and
Articles of Association are described herein. In addition to our
Memorandum and Articles of Association, our activities are
regulated by (among other relevant legislation) the 1991 Law.
Our Memorandum of Association states our company name, that we
are a public company, that we are a par value company, our
authorized share capital and that the liability of our
shareholders is limited to the amount (if any) unpaid on their
shares. Below is a summary of some of the provisions of our
Articles of Association. It is not, nor does it purport to be,
complete or to identify all of the rights and obligations of our
shareholders.
Changes in Capital or our Memorandum and Articles of
Association
Subject to the 1991 Law and our Articles of Association, we may
by special resolution at a general meeting:
|
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increase our authorized or paid up share capital; |
|
|
consolidate and divide all or any part of our shares into shares
of a larger amount; |
|
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sub-divide all or any part of our shares into shares of smaller
amount than is fixed by our memorandum of association; |
|
|
convert any of our issued or unissued shares into shares of
another class; |
|
|
convert all our issued par value shares into no par value shares
and vice versa; |
|
|
convert any of our
paid-up shares into
stock, and reconvert any stock into any number of
paid-up shares of any
denomination; |
|
|
convert any of our issued limited shares into redeemable shares
which can be redeemed; |
|
|
cancel shares which, at the date of passing of the resolution,
have not been taken or agreed to be taken by any person, and
diminish the amount of the authorized share capital by the
amount of the shares so cancelled; |
|
|
reduce our issued share capital; or |
|
|
alter our Memorandum or Articles of Association. |
General meetings of shareholders
We may at any time convene general meetings of shareholders. We
hold an annual general meeting for each fiscal year. Under the
1991 Law, no more than eighteen months may elapse between the
date of one annual general meeting and the next.
Annual general meetings and meetings calling for the passing of
a special resolution require 21 days notice of the
place, day and time of the meeting in writing to our
shareholders. Any other general meeting requires no less than
14 days notice in writing. Our directors may, at
their discretion, and upon a request made in accordance with the
1991 Law by shareholders holding not less than one tenth of our
total voting rights our directors shall, convene a general
meeting. Our business may be transacted at a general meeting
only when a quorum of shareholders is present. Two shareholders
entitled to attend and to vote on the business to be transacted
(or a proxy for a shareholder or a duly authorized
representative of a corporation which is a
96
shareholder) and holding shares conferring not less than
one-third of the total voting rights, constitute a quorum
provided that if at any time all of our issued shares are held
by one shareholder, such quorum shall consist of the shareholder
present in person or by proxy.
The annual general meetings deal with and dispose of all matters
prescribed by our Articles of Association and by the 1991 Law
including:
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the consideration of our annual financial statements and report
of our directors and auditors; |
|
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the election of directors (if necessary); |
|
|
the appointment of auditors and the fixing of their remuneration; |
|
|
the sanction of dividends; and |
|
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the transaction of any other business of which notice has been
given. |
We have not held an annual general meeting since our
incorporation in 2002. Failure to hold an annual general meeting
is an offence by our company and its directors under the 1991
Law and carries a potential fine of up to £5,000 for our
company and each director. Our representative in Jersey has
communicated to the Registrar of Companies in Jersey regarding
our failure to hold annual general meetings. The Registrar of
Companies has advised that if we held an annual general meeting
as soon as practicable, it would not initiate a prosecution
against us or our directors. We held an extraordinary general
meeting on May 22, 2006 which will be treated as, so far as
practicable, our annual general meetings for the years 2003,
2004 and 2005.
Voting rights
Subject to any special terms as to voting on which any shares
may have been issued or may from time to time be held, at a
general meeting, every shareholder who is present in person
(including any corporation present by its duly authorized
representative) shall on a show of hands have one vote and every
shareholder present in person or by proxy shall on a poll have
one vote for each share of which he is a holder. In the case of
joint holders only one of them may vote and in the absence of
election as to who is to vote, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted
to the exclusion of the votes of the other joint holders.
A shareholder may appoint any person (whether or not a
shareholder) to act as his proxy at any meeting of shareholders
(or of any class of shareholders) in respect of all or a
particular number of the shares held by him. A shareholder may
appoint more than one person to act as his proxy and each such
person shall act as proxy for the shareholder for the number of
shares specified in the instrument appointing the person a
proxy. If a shareholder appoints more than one person to act as
his proxy, each instrument appointing a proxy shall specify the
number of shares held by the shareholder for which the relevant
person is appointed his proxy. Each duly appointed proxy has the
same rights as the shareholder by whom he was appointed to speak
at a meeting and vote at a meeting in respect of the number of
shares held by the shareholder for which the relevant proxy is
appointed his proxy.
For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment
thereof or in order to make a determination of shareholders for
any other proper purpose, our directors may fix in advance a
date as the record date for any such determination of
shareholders.
Shareholder resolutions
An ordinary resolution requires the affirmative vote of a simple
majority (i.e., more than 50%) of our shareholders entitled to
vote in person (or by corporate representative in case of a
corporate entity) or by proxy at a general meeting.
A special resolution requires the affirmative vote of a majority
of not less than two-thirds of our shareholders entitled to vote
in person (or by corporate representative in the case of a
corporate entity) or by proxy at a general meeting.
97
Our articles prohibit the passing of shareholder resolutions by
written consent to remove an auditor or to remove a director
before the expiry of his term of office.
Dividends
Subject to the provisions of the 1991 Law and of the Articles of
Association, we may, by ordinary resolution, declare dividends
to be paid to shareholders according to their respective rights
and interests in our profits available for distribution.
However, no dividend shall exceed the amount recommended by our
directors.
Subject to the provisions of the 1991 Law, we may declare and
pay an interim dividend or dividends, including a dividend
payable at a fixed rate, if an interim dividend or dividends
appears to us to be justified by our profits available for
distribution.
Except as otherwise provided by the rights attached to any
shares, all dividends shall be declared and paid according to
the amounts paid up (as to both par and any premium) otherwise
than in advance of calls, on the shares on which the dividend is
paid. All dividends unclaimed for a period of ten years after
having been declared or become due for payment shall, if we so
resolve, be forfeited and shall cease to remain owing by us.
We may, with the authority of an ordinary resolution, direct
that payment of any dividend declared may be satisfied wholly or
partly by the distribution of assets, and in particular of paid
up shares or debentures of any other company, or in any one or
more of those ways.
We may also with the prior authority of an ordinary resolution,
and subject to such conditions as we may determine, offer to
holders of shares the right to elect to receive shares, credited
as fully paid, instead of the whole, or some part, to be
determined by us, of any dividend specified by the ordinary
resolution.
For the purposes of determining shareholders entitled to receive
a dividend or distribution, our directors may fix a record date
for any such determination of shareholders. A record date for
any dividend or distribution may be on or at any time before any
date on which such dividend or distribution is paid or made and
on or at any time before or after any date on which such
dividend or distribution is declared.
Ownership limitations
Our Articles of Association and the 1991 Law do not contain
limits on the number of shares that a shareholder may own.
Transfer of shares
Every shareholder may transfer all or any of his shares by
instrument of transfer in writing in any usual form or in any
form approved by us. The instrument must be executed by or on
behalf of the transferor and, in the case of a transfer of a
share which is not fully paid up, by or on behalf of the
transferee. The transferor is deemed to remain the holder until
the transferees name is entered in the register of
shareholders.
We may, in our absolute discretion and without giving any
reason, refuse to register any transfer of a share or
renunciation of a renounceable letter of allotment unless:
|
|
|
it is in respect of a share which is fully paid up; |
|
|
it is in respect of only one class of shares; |
|
|
it is in favor of a single transferee or not more than four
joint transferees; |
|
|
it is duly stamped, if so required; and |
|
|
it is delivered for registration to our registered office for
the time being or another place that we may from time to time
determine accompanied by the certificate for the shares to which
it relates and any other evidence as we may reasonably require
to prove the right of the transferor or person renouncing to
make the transfer or renunciation. |
98
Share register
We maintain our register of members in Jersey. It is open to
inspection during business hours by shareholders without charge
and by other persons upon payment of a fee not exceeding
£5. Any person may obtain a copy of our register of members
upon payment of a fee not exceeding £0.50 per page and
providing a declaration under oath as required by the 1991 Law.
Variation of rights
If at any time our share capital is divided into different
classes of shares, the special rights attached to any class,
unless otherwise provided by the terms of issue of the shares of
that class, may be varied or abrogated with the consent in
writing of the holders of the majority of the issued shares of
that class, or with the sanction of an ordinary resolution
passed at a separate meeting of the holders of shares of that
class, but not otherwise. To every such separate meeting all the
provisions of our Articles of Association and of the 1991 Law
relating to general meetings or to the proceedings thereat shall
apply, mutatis mutandis, except that the necessary quorum
shall be two persons holding or representing at least one-third
in nominal amount of the issued shares of that class but so that
if at any adjourned meeting of such holders a quorum as above
defined is not present, those holders who are present in person
shall be a quorum.
The special rights conferred upon the holders of any class of
shares issued with preferred or other special rights shall be
deemed to be varied by the reduction of the capital paid up on
such shares and by the creation of further shares ranking in
priority thereto, but shall not (unless otherwise expressly
provided by our Articles or by the conditions of issue of such
shares) be deemed to be varied by the creation or issue of
further shares ranking after or pari passu therewith. The
rights conferred on holders of ordinary shares shall be deemed
not to be varied by the creation, issue or redemption of any
preferred or preference shares.
Capital calls
We may, subject to the provisions of our Articles of Association
and to any conditions of allotment, from time to time make calls
upon the members in respect of any monies unpaid on their shares
(whether on account of the nominal value of the shares or by way
of premium) provided that (except as otherwise fixed by
the conditions of application or allotment) no call on any share
shall be payable within 14 days of the date appointed for
payment of the last preceding call, and each member shall
(subject to being given at least 14 clear days notice
specifying the time or times and place of payment) pay us at the
time or times and place so specified the amount called on his
shares.
If a member fails to pay any call or installment of a call on or
before the day appointed for payment thereof, we may serve a
notice on him requiring payment of so much of the call or
installment as is unpaid, together with any interest (at a rate
not exceeding ten per cent. per annum to be determined by us)
which may have accrued and any expenses which may have been
incurred by us by reason of such non-payment. The notice shall
name a further day (not earlier than fourteen days from the date
of service thereof) on or before which and the place where the
payment required by the notice is to be made, and shall state
that in the event of non-payment at or before the time and at
the place appointed, the shares on which the call was made will
be liable to be forfeited.
Borrowing powers
Our Articles of Association contain no restrictions on our power
to borrow money or to mortgage or charge all or any part of our
undertaking, property and assets.
Issue of shares and preemptive rights
Subject to the provisions of the 1991 Law and to any special
rights attached to any shares, we may allot or issue shares with
those preferred, deferred or other special rights or
restrictions regarding dividends, voting, return of capital or
other matters as our directors from time to time determine. We
may issue shares that are redeemable or are liable to be
redeemed at our option or the option of the holder in accordance
with our
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Articles of Association. Subject to the provisions of the 1991
Law, the unissued shares at the date of adoption of our Articles
of Association and shares created thereafter shall be at the
disposal of our directors. We cannot issue shares at a discount
to par value. Securities, contracts, warrants or other
instruments evidencing any preferred shares, option rights,
securities having conversion or option rights or obligations may
also be issued by the directors without the approval of the
shareholders or entered into by us upon a resolution of the
directors to that effect on such terms, conditions and other
provisions as are fixed by the directors, including, without
limitation, conditions that preclude or limit any person owning
or offering to acquire a specified number or percentage of
shares in us in issue, other shares, option rights, securities
having conversion or option rights or obligations of us or the
transferee of such person from exercising, converting,
transferring or receiving the shares, option rights, securities
having conversion or option rights or obligations.
There are no pre-emptive rights for the transfer of our shares
either within the 1991 Law or our Articles of Association.
Immediately after the issue of ordinary shares and ADSs as
contemplated by this prospectus, assuming that the
underwriters over-allotment option is exercised in full,
10,166,143 ordinary shares from our authorized share
capital described above will be available for allotment and
issue.
Directors powers
Our business shall be managed by the directors who may exercise
all of the powers that we are not by the 1991 Law or our
Articles of Association required to exercise in a general
meeting. Accordingly, the directors may (among other things)
borrow money, mortgage or charge all of our property and assets
(present and future) and issue securities.
Meetings of the board of directors
A director may, and the secretary on the requisition of a
director shall, at any time, summon a meeting of the directors
by giving to each director and alternate director not less than
twenty-four hours notice of the meeting provided that
any meeting may be convened at shorter notice and in such
manner as each director or his alternate director shall approve
provided further that unless otherwise resolved by the
directors notices of directors meetings need not be in
writing.
Subject to our Articles of Association our board of directors
may meet for the conducting of business, adjourn and otherwise
regulate its proceedings as it sees fit. The quorum necessary
for the transaction of business may be determined by the board
of directors and unless otherwise determined shall be three
persons, each being a director or an alternate director of whom
two shall not be executive directors. Where more than three
directors are present at a meeting, a majority of them must not
be executive directors in order for the quorum to be constituted
at the meeting. A duly convened meeting of the board of
directors at which a quorum is present is necessary to exercise
all or any of the boards authorities, powers and
discretions.
Our board of directors may from time to time appoint one or more
of their number to be the holder of any executive office on such
terms and for such periods as they may determine. The
appointment of any director to any executive office shall be
subject to termination if he ceases to be a director. Our board
of directors may entrust to and confer upon a director holding
any executive office any of the powers exercisable by the
directors, upon such terms and conditions and with such
restrictions as they think fit, and either collaterally with or
to the exclusion of their own powers and may from time to time
revoke, withdraw, alter or vary all or any of such powers.
Remuneration of directors
Our directors shall be entitled to receive by way of fees for
their services as directors any sum that we may, by ordinary
resolution in general meeting from time to time determine. That
sum, unless otherwise directed by the ordinary resolution by
which it is voted, shall be divided among the directors in the
manner that they agree or, failing agreement, equally. The
remuneration (if any) of an alternate director shall be payable
out of the remuneration payable to the director appointing him
as may be agreed between them.
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The directors shall be repaid their traveling and other expenses
properly and necessarily expended by them in attending meetings
of the directors or members or otherwise on our affairs.
If any director shall be appointed agent or to perform extra
services or to make any special exertions, the directors may
remunerate such director therefor either by a fixed sum or by
commission or participation in profits or otherwise or partly
one way and partly in another as they think fit, and such
remuneration may be either in addition to or in substitution for
his above mentioned remuneration.
Directors interests in contracts
Subject to the provisions of the 1991 Law, a director may hold
any other office or place of profit under us (other than the
office of auditor) in conjunction with his office of director
and may act in a professional capacity to us on such terms as to
tenure of office, remuneration and otherwise as we may determine
and, provided that he has disclosed to us the nature and extent
of any of his interests which conflict or may conflict to a
material extent with our interests at the first meeting of the
directors at which a transaction is considered or as soon as
practical after that meeting by notice in writing to the
secretary or has otherwise previously disclosed that he is to be
regarded as interested in a transaction with a specific person,
a director notwithstanding his office (1) may be a party
to, or otherwise interested in, any transaction or arrangement
with us or in which we are otherwise interested, (2) may be
a director or other officer of, or employed by, or a party to
any transaction or arrangement with, or otherwise interested in,
any body corporate promoted by us or in which we are otherwise
interested and (3) shall not, by reason of his office, be
accountable to us for any benefit which he derives from any such
office or employment or from any such transaction or arrangement
or from any interest in any such body corporate and no such
transaction or arrangement shall be liable to be avoided on the
ground of any such interest or benefit.
Restrictions on directors voting
A director, notwithstanding his interest, may be counted in the
quorum present at any meeting at which any contract or
arrangement in which he is interested is considered and, subject
as provided above, he may vote in respect of any such contract
or arrangement. A director, notwithstanding his interest, may be
counted in the quorum present at any meeting at which he is
appointed to hold any office or place of profit under us, or at
which the terms of his appointment are arranged, but the
director may not vote on his own appointment or the terms
thereof or any proposal to select that director for re-election.
Number of directors
Our board shall determine the maximum and minimum number of
directors provided that the minimum number of directors shall be
not less than three.
Directors appointment, resignation, disqualification
and removal
Our board is divided into three classes that are, as nearly as
possible, of equal size. Each class of directors (other than
initially) is elected for a three-year term of office but the
terms are staggered so that the term of only one class of
directors expires at each annual general meeting. Any additional
directorships resulting from an increase in the number of
directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of one-third of
the directors. This classification of the board of directors may
have the effect of delaying or preventing changes in control of
management of our company. Our board of directors shall have
power (unless they determine that any vacancy should be filled
by us in general meeting) at any time and from time to time to
appoint any person to be a director, either to fill any vacancy
or as an addition to the existing directors. A vacancy for these
purposes only will be deemed to exist if a director dies,
resigns, ceases or becomes prohibited or disqualified by law
from acting as a director, becomes bankrupt or enters into an
arrangement or composition with his creditors, becomes of
unsound mind or is removed by us from office for gross
negligence or criminal conduct by ordinary resolution. A vacancy
for these purposes will not be deemed to exist upon the expiry
of the term of office of a director. At any general meeting at
which a director retires or at which a directors period of
office expires we shall elect, by ordinary resolution of the
general
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meeting, a director to fill the vacancy, unless our directors
resolve to reduce the number of directors in office. Where the
number of persons validly proposed for election or re-election
as a director is greater than the number of directors to be
elected, the persons receiving the most votes (up to the number
of directors to be elected) shall be elected as directors and an
absolute majority of the votes cast shall not be a pre-requisite
to the election of such directors.
The directors shall hold office until they resign, they cease to
be a director by virtue of a provision of the 1991 Law, they
become disqualified by law or the terms of our Articles of
Association from being a director, they become bankrupt or make
any arrangement or composition with their creditors generally or
they become of unsound mind or they are removed from office by
us for gross negligence or criminal conduct by ordinary
resolution in general meeting.
A director is not required to hold any of our shares.
Capitalization of profits and reserves
Subject to our Articles of Association, we may, upon the
recommendation of our directors, by ordinary resolution resolve
to capitalize any of our undistributed profits (including
profits standing to the credit of any reserve account), any sum
standing to the credit of any reserve account as a result of the
sale or revaluation of an asset (other than goodwill) and any
sum standing to the credit of our share premium account or
capital redemption reserve.
Any sum which is capitalized shall be appropriated among our
shareholders in the proportion in which such sum would have been
divisible amongst them had the same been applied in paying
dividends and applied in (1) paying up the amount (if any)
unpaid on the shares held by the shareholders, or
(2) issuing to shareholders, fully paid shares (issued
either at par or a premium) or (subject to our Articles of
Association) our debentures.
Unclaimed dividends
Any dividend which has remained unclaimed for a period of ten
years from the date of declaration thereof shall, if the
directors so resolve, be forfeited and cease to remain owing by
us and shall thenceforth belong to us absolutely.
Indemnity, limitation of liability and officers liability
insurance
In so far as the 1991 Law allows and to the fullest extent
permitted thereunder, we may indemnify any person who was or is
involved in any manner (including, without limitation, as a
party or a witness), or is threatened to be made so involved, in
any threatened, pending or completed investigation, claim,
action, suit or proceeding, whether civil, criminal,
administrative or investigative including, without limitation,
any proceeding by or in the right of ours to procure a judgment
in our favor, but excluding any proceeding brought by such
person against us or any affiliate of ours by reason of the fact
that he is or was an officer, secretary, servant, employee or
agent of ours, or is or was serving at our request as an
officer, secretary, servant, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against all expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such
proceeding. Such indemnification shall be a contract right and
shall include the right to receive payment in advance of any
expenses incurred by the indemnified person in connection with
such proceeding, provided always that this right is permitted by
the 1991 Law.
Subject to the 1991 Law, we may enter into contracts with any
officer, secretary, servant, employee or agent of ours and may
create a trust fund, grant a security interest, make a loan or
other advancement or use other means (including, without
limitation, a letter of credit) to ensure the payment of such
amounts as may be necessary to effect indemnification as
provided in the indemnity provisions in our Articles of
Association.
Our directors are empowered to arrange for the purchase and
maintenance in our name and at our expense of insurance cover
for the benefit of any current or former officer of ours, our
secretary and any current or former agent, servant or employee
of ours against any liability which is incurred by any such
person by reason of the fact that he is or was an officer of
ours, our secretary or an agent, servant or employee of ours.
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Subject to the 1991 Law, the right of indemnification, loan or
advancement of expenses provided in our Articles of Association
is not exclusive of any other rights to which a person seeking
indemnification may otherwise be entitled, under any statute,
memorandum or articles of association, agreement, vote of
shareholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office. The provisions of our
Articles of Association inure for the benefit of the heirs and
legal representatives of any person entitled to indemnity under
our Articles of Association and are applicable to proceedings
commenced or continuing after the adoption of our Articles of
Association whether arising from acts or omissions occurring
before or after such adoption.
If any provision or provisions of our Articles of Association
relative to indemnity are held to be invalid, illegal or
unenforceable for any reason whatsoever: (i) the validity,
legality and enforceability of the remaining provisions thereof
shall not in any way be affected or impaired; and (ii) to
the fullest extent possible, the provisions of our Articles of
Association relative to indemnity shall be construed so as to
give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
Nothing in our Articles of Association prohibits us from making
loans to officers, our secretary, servants, employees or agents
to fund litigation expenses prior to such expenses being
incurred.
Distribution of assets on a winding-up
Subject to any particular rights or limitations attached to any
shares, if we are wound up, our assets available for
distribution among our shareholders shall be applied first in
repaying to our shareholders the amount paid up (as to both par
and any premium) on their shares respectively, and if such
assets shall be more than sufficient to repay to our
shareholders the whole amount paid up (as to both par and any
premium) on their shares, the balance shall be distributed among
our shareholders in proportion to the amount which at the time
of the commencement of the winding up had been actually paid up
(as to both par and any premium) on their shares respectively.
If we are wound up, we may, with the approval of a special
resolution and any other sanction required by the 1991 Law,
divide the whole or any part of our assets among our
shareholders in specie and our liquidator or, where there is no
liquidator, our directors, may, for that purpose, value any
assets and determine how the division shall be carried out as
between our shareholders or different classes of shareholders.
Similarly, with the approval of a special resolution and subject
to any other sanction required by the 1991 Law, all or any of
our assets may be vested in trustees for the benefit of our
shareholders.
Other Jersey Law considerations
Purchase of own shares
The 1991 Law provides that we may, with the sanction of a
special resolution, purchase any of our shares which are fully
paid, pursuant to a contract approved in advance by the
shareholders. No shareholder whose shares we propose to purchase
is entitled to vote on the resolutions sanctioning the purchase
or approving the purchase contract.
We may fund the purchase of our own shares out of our
distributable profits or out of the proceeds of a new issue of
shares made specifically for this purpose (or out of a
combination of both). If the shares are to be purchased at a
premium to their nominal value, we may fund the premium out of
our share premium account, our distributable profits or the
proceeds of a new issue of shares made specifically for this
purpose (or a combination of those sources).
We cannot purchase our shares if, as a result of such purchase,
only redeemable shares would be in issue. Any shares that we
purchase must be cancelled.
Mandatory purchases and acquisitions
The 1991 Law provides that where a person (which we refer to as
the offeror) makes an offer to acquire all of the
shares (or all of the shares of any class of shares) in a
company (other than any shares already held by the offeror at
the date of the offer), if the offeror has by virtue of
acceptances of the offer acquired or
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contracted to acquire not less than 90 per cent. in value
of the shares (or class of shares) to which the offer relates,
the offeror by notice may compulsorily acquire the remaining
shares. A holder of any such shares may apply to the Jersey
court for an order that the offeror not be entitled to purchase
the holders shares or that the offeror purchase the
holders shares on terms different to those of the offer.
Where, prior to the expiry of the offer period, the offeror has
by virtue of acceptances of the offer acquired or contracted to
acquire not less than 90 per cent. in value of all of the
shares of the target company, the holder of any shares (or class
of shares) to which the offer relates who has not accepted the
offer may require the offeror to acquire those shares. In such
circumstances, each of the offeror and the holder of the shares
are entitled to apply to the Jersey court for an order that the
offeror purchase the holders shares on terms different to
those of the offer.
Compromises and arrangements
Where a compromise or arrangement is proposed between a company
and its creditors, or a class of them, or between the company
and its shareholders, or a class of them, the Jersey court may
on the application of the company or a creditor or member of it
or, in the case of a company being wound up, of the liquidator,
order a meeting of the creditors or class of creditors, or of
the shareholders of the company or class of shareholders (as the
case may be), to be called in a manner as the court directs.
If a majority in number representing 3/4ths in value of the
creditors or class of creditors, or shareholders or class of
shareholders (as the case may be), present and voting either in
person or by proxy at the meeting agree to a compromise or
arrangement, the compromise or arrangement, if sanctioned by the
court, is binding on all creditors or the class of creditors or
on the shareholders or class of shareholders, and also on the
company or, in the case of a company in the course of being
wound up, on the liquidator and contributories of the company.
No pre-emptive rights
Neither our Articles of Association nor the 1991 Law confers any
pre-emptive rights on our shareholders.
No mandatory offer requirements
In some countries, the trading and securities legislation
contains mandatory offer requirements when shareholders have
reached certain share ownership thresholds. There are no
mandatory offer requirements under Jersey legislation.
Non-Jersey Shareholders
There are no limitations imposed by Jersey law or by our
Articles of Association on the rights of non-Jersey shareholders
to hold or vote on our ordinary shares or securities convertible
into our ordinary shares.
Rights of Minority Shareholders
Under Article 141 of the 1991 Law, a shareholder may apply
to court for relief on the ground that our affairs are being
conducted or have been conducted in a manner which is unfairly
prejudicial to the interests of our shareholders generally or of
some part of our shareholders (including at least the
shareholder making the application) or that an actual or
proposed act or omission by us (including an act or omission on
our behalf) is or would be so prejudicial. What amounts to
unfair prejudice is not defined in the 1991 Law. There may also
be common law personal actions available to our shareholders.
Under Article 143 of the 1991 Law (which sets out the types
of relief a court may grant in relation to an action brought
under Article 141 of the 1991 Law), the court may make an
order regulating our affairs, requiring us to refrain from doing
or continuing to do an act complained of, authorizing civil
proceedings and providing for the purchase of shares by us or by
any of our other shareholders.
Jersey Law and our Memorandum and Articles of Association
The content of our Memorandum and Articles of Association
reflect the requirements of the 1991 Law. Jersey company law
draws very heavily from company law in England and there are
various similarities between the
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1991 Law and the English Companies Act 1985 (as amended).
However, the 1991 Law is considerably more limited in content
than the English Companies Act 1985 and there are some notable
differences between English and Jersey company law. There are,
for example, no provisions under Jersey law (as there are under
English law):
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controlling possible conflicts of interests between us and our
directors, such as loans by us or directors, and contracts
between us and our directors other than a duty on directors to
disclose an interest in any transaction to be entered into by us
or any of our subsidiaries which to a material extent conflicts
with our interest; |
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specifically requiring particulars to be shown in our accounts
of the amount of loans to officers or directors emoluments
and pensions, although these would probably be required to be
shown in our accounts in conformity to the requirement that
accounts must be prepared in accordance with generally accepted
accounting principles; |
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requiring us to file details of charges other than charges of
Jersey realty; or |
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as regards statutory preemption provisions in relation to
further issues of shares. |
Comparison of Jersey Law and Delaware Law
Set forth below is a comparison of certain shareholder rights
and corporate governance matters under Delaware law and Jersey
law:
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Corporate Law Issue |
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Delaware Law |
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Jersey Law |
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Special Meetings of Shareholders
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Shareholders of a Delaware corporation generally do not have the
right to call meetings of shareholders unless that right is
granted in the certificate of incorporation or by-laws. However,
if a corporation fails to hold its annual meeting within a
period of 30 days after the date designated for the annual
meeting, or if no date has been designated for a period of
13 months after its last annual meeting, the Delaware Court
of Chancery may order a meeting to be held upon the application
of a shareholder. |
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Under the 1991 Law, directors shall, notwithstanding anything in
a Jersey companys articles of association, call a general
meeting on a shareholders requisition. A
shareholders requisition is a requisition of shareholders
holding not less than one-tenth of the total voting rights of
the shareholders of the company who have the right to vote at
the meeting requisitioned.
Failure to call an annual general meeting in accordance with the
requirements of the 1991 Law is a criminal offense on the part
of a Jersey company and its directors. The JFSC may, on the
application of any officer, secretary or shareholder call, or
direct the calling of, an annual general meeting. |
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Interested Director Transactions
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Interested director transactions are not voidable if
(i) the material facts as to the interested directors
relationship or interests are disclosed or are known to the
board of directors and the board in good faith authorizes the
transaction by |
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A director of a Jersey company who has an interest in a
transaction entered into or proposed to be entered into by the
company or by a subsidiary which conflicts or may conflict with
the interests of the company and of which the |
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Corporate Law Issue |
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Delaware Law |
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Jersey Law |
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the affirmative vote of a majority of the disinterested
directors, (ii) the material facts are disclosed or are
known to the shareholders entitled to vote on such transaction
and the transaction is specifically approved in good faith by
vote of the majority of shares entitled to vote on the matter or
(iii) the transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the board of
directors, a committee or the shareholders. |
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director is aware, must disclose the interest to the company.
Failure to disclose an interest entitles the company or a member
to apply to the court for an order setting aside the transaction
concerned and directing that the director account to the company
for any profit. A transaction is not voidable and a director is
not accountable notwithstanding a failure to disclose if the
transaction is confirmed by special resolution and the nature
and extent of the directors interest in the transaction
are disclosed in reasonable detail in the notice calling the
meeting at which the resolution is passed. Without prejudice to
its power to order that a director account for any profit, a
court shall not set aside a transaction unless it is satisfied
that the interests of third parties who have acted in good faith
thereunder would not thereby be unfairly prejudiced and the
transaction was not reasonable and fair in the interests of the
company at the time it was entered into. |
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Cumulative Voting
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Delaware law does not require that a Delaware corporation
provide for cumulative voting. However, the certificate of
incorporation of a Delaware corporation may provide that
shareholders of any class or classes or of any series may vote
cumulatively either at all elections or at elections under
specified circumstances. |
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There are no provisions in the 1991 Law relating to cumulative
voting. |
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Approval of Corporate Matters by Written Consent
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Unless otherwise specified in a Delaware corporations
certificate of incorporation, action required or permitted to be
taken by shareholders at an annual or special meeting may be
taken by shareholders without a meeting, without notice and
without a vote, if consents, in writing, setting forth the
action, are signed by |
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Insofar as the memorandum or articles of a Jersey company do not
make other provision in that behalf, anything which may be done
at a meeting of the company (other than remove an auditor) or at
a meeting of any class of its shareholders may be done by a
resolution in writing signed by or on behalf of each |
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Corporate Law Issue |
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Delaware Law |
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Jersey Law |
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shareholders with not less than the minimum number of votes that
would be necessary to authorize the action at a meeting. All
consents must be dated. No consent is effective unless, within
60 days of the earliest dated consent delivered to the
corporation, written consents signed by a sufficient number of
holders to take action are delivered to the corporation. |
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shareholder who, at the date when the resolution is deemed to be
passed, would be entitled to vote on the resolution if it were
proposed at a meeting. A resolution shall be deemed to be passed
when the instrument, or the last of several instruments, is last
signed or on such later date as is specified in the resolution. |
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Business Combinations
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With certain exceptions, a merger, consolidation or sale of all
or substantially all the assets of a Delaware corporation must
be approved by the board of directors and a majority of the
outstanding shares entitled to vote thereon. |
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A sale or disposal of all or substantially all the assets of a
Jersey company must be approved by the board of directors and,
only if the Articles of Association of the company require, by
the shareholders in general meeting. A merger between two or
more Jersey companies must be documented in a merger agreement
which must be approved by special resolution of each of the
companies merging. |
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Limitations on Directors Liability
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A Delaware corporation may include in its certificate of
incorporation provisions limiting the personal liability of its
directors to the corporation or its shareholders for monetary
damages for many types of breach of fiduciary duty. However,
these provisions may not limit liability for any breach of the
duty of loyalty, acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law,
the authorization of unlawful dividends, shares repurchases or
shares barring redemptions, or any transaction from which a
director derived an improper personal benefit. Moreover, these
provisions would not be likely to bar claims arising under US
federal securities laws. |
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The 1991 Law does not contain any provisions permitting Jersey
companies to limit the liability of directors for breach of
fiduciary duty.
Any provision, whether contained in the articles of association
of, or in a contract with, a Jersey company or otherwise,
whereby the company or any of its subsidiaries or any other
person, for some benefit conferred or detriment suffered
directly or indirectly by the company, agrees to exempt any
person from, or indemnify any person against, any liability
which by law would otherwise attach to the person by reason of
the fact that the person is or was an officer of the company is
void (subject to what is said below). |
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Corporate Law Issue |
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Delaware Law |
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Jersey Law |
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Indemnification of Directors and Officers
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A Delaware corporation may indemnify a director or officer of
the corporation against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred in defense of an action, suit or
proceeding by reason of his or her position if (i) the
director or officer acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the corporation and (ii) with respect to any
criminal action or proceeding, the director or officer had no
reasonable cause to believe his or her conduct was unlawful. |
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The prohibition referred to above does not apply to a provision
for exempting a person from or indemnifying the person against
(a) any liabilities incurred in defending any proceedings
(whether civil or criminal) (i) in which judgment is given
in the persons favor or the person is acquitted,
(ii) which are discontinued otherwise than for some benefit
conferred by the person or on the persons behalf or some
detriment suffered by the person, or (iii) which are
settled on terms which include such benefit or detriment and, in
the opinion of a majority of the directors of the company
(excluding any director who conferred such benefit or on whose
behalf such benefit was conferred or who suffered such
detriment), the person was substantially successful on the
merits in the persons resistance to the proceedings, (b)
any liability incurred otherwise than to the company if the
person acted in good faith with a view to the best interests of
the company, (c) any liability incurred in connection with
an application made to the court for relief from liability for
negligence, default, breach of duty or breach of trust under
Article 212 of the 1991 Law in which relief is granted to the
person by the court or (d) any liability against which the
company normally maintains insurance for persons other than
directors. |
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Appraisal Rights
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A shareholder of a Delaware corporation participating in certain
major corporate transactions may, under certain circumstances,
be entitled to appraisal rights pursuant to which the
shareholder may receive cash in the amount of the fair value of
the shares held by that shareholder (as determined by a court)
in lieu |
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The 1991 Law does not confer upon shareholders any appraisal
rights. |
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Corporate Law Issue |
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Delaware Law |
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Jersey Law |
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of the consideration the shareholder would otherwise receive in
the transaction. |
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Shareholder Suits
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Class actions and derivative actions generally are available to
the shareholders of a Delaware corporation for, among other
things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions,
the court has discretion to permit the winning party to recover
attorneys fees incurred in connection with such action. |
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Under Article 141 of the 1991 Law, a shareholder may apply to
court for relief on the ground that a companys affairs are
being conducted or have been conducted in a manner which is
unfairly prejudicial to the interests of its shareholders
generally or of some part of its shareholders (including at
least the shareholder making the application) or that an actual
or proposed act or omission by the company (including an act or
omission on its behalf) is or would be so prejudicial. There may
also be common law personal actions available to shareholders. |
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Under Article 143 of the 1991 Law (which sets out the types of
relief a court may grant in relation to an action brought under
Article 141 of the 1991 Law), the court may make an order
regulating the affairs of a company, requiring a company to
refrain from doing or continuing to do an act complained of,
authorizing civil proceedings and providing for the purchase of
shares by a company or by any of its other shareholders. |
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Inspection of Books and Records
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All shareholders of a Delaware corporation have the right, upon
written demand, to inspect or obtain copies of the
corporations shares ledger and its other books and records
for any purpose reasonably related to such persons
interest as a shareholder. |
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The register of shareholders and books containing the minutes of
general meetings or of meetings of any class of shareholders of
a Jersey company must during business hours be open to the
inspection of a shareholder of the company without charge. The
register of directors and secretaries must during business hours
(subject to such reasonable restrictions as the company may by
its articles or in general meeting impose, but so that not less
than two hours in each business day be allowed |
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Corporate Law Issue |
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Delaware Law |
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Jersey Law |
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for inspection) be open to the inspection of a shareholder or
director of the company without charge. |
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Amendments to Charter
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Amendments to the certificate of incorporation of a Delaware
corporation require the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon or
such greater vote as is provided for in the certificate of
incorporation; a provision in the certificate of incorporation
requiring the vote of a greater number or proportion of the
directors or of the holders of any class of shares than is
required by Delaware corporate law may not be amended, altered
or repealed except by such greater vote. |
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The Memorandum and Articles of Association of a Jersey company
may only be amended by special resolution (being a two-thirds
majority) passed by shareholders in general meeting or by
written resolution signed by all the shareholders entitled to
vote. |
Listing
We have applied for our ADSs to be listed on the NYSE under the
trading symbol WNS.
Governance Standards for Listed Companies
We are subject to the NYSE listing standards, although, because
we are a foreign private issuer, those standards are
considerably different from those applied to US companies. Under
the NYSE rules, we need to only (i) establish an
independent audit committee that has specified responsibilities;
(ii) provide prompt certification by our chief executive
officer of any material non-compliance with any corporate
governance rules of the NYSE; (iii) provide periodic
(annual and interim) written affirmations to the NYSE with
respect to our corporate governance practices, and
(iv) provide a brief description of significant differences
between our corporate governance practices and those followed by
US companies.
We will be deemed to be a controlled company under
the rules of the NYSE, and we will qualify for the
controlled company exception to the board of
directors and committee composition requirements under the rules
of the NYSE. However, we do not intend to rely on this
controlled company exception. The NYSE listing
standards permit companies listing in conjunction with their
initial public offering to meet the majority independent board
requirement within one year of listing and to phase in their
independent audit, compensation and nomination committees by
requiring one independent member at the time of listing, a
majority of independent members within 90 days of listing
and fully independent committees within one year of listing.
Effective upon the completion of this offering, Mr. Eric
Herr and Mr. Deepak Parekh will become members of our board
of directors and they will serve on each of our audit committee,
compensation committee and nominating and corporate governance
committee. Each of Messrs. Herr and Parekh satisfy the
independence requirements of the NYSE listing
standards and the independence requirements of
Rule 10A-3 of the Exchange Act. Accordingly, upon the
completion of this offering, each of our committees will
comprise a majority of independent members. We intend to have a
majority independent board and fully independent committees
within a year of the completion of this offering.
Transfer Agent and Registrar
The transfer agent and registrar for our ADSs will be Deutsche
Bank Trust Company Americas.
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DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Deutsche Bank Trust Company Americas (Deutsche Bank)
has agreed to act as the depositary bank for the American
Depositary Shares. Deutsche Banks depositary offices are
located at 60 Wall Street, New York, New York 10005. American
Depositary Shares are frequently referred to as ADSs
and represent ownership interests in securities that are on
deposit with the depositary bank. ADSs are normally represented
by certificates that are commonly known as American Depositary
Receipts, or ADRs. The depositary bank typically appoints a
custodian to safekeep the securities on deposit. In this case,
the custodian is State Street Bank and Trust Company, located at
One Canada Square, Canary Wharf, London, E14 5AF, United
Kingdom.
We will appoint Deutsche Bank as depositary bank pursuant to a
deposit agreement. A draft copy of the deposit agreement is on
file with the Commission under cover of a Registration Statement
on Form F-6. You
may obtain a copy of the deposit agreement from the SECs
Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549 and via the Commissions
website, www.sec.gov.
We are providing you with a summary description of the material
terms of the ADSs and of your material rights as an owner of
ADSs. Please remember that summaries by their nature lack the
precision of the information summarized and that a holders
rights and obligations as an owner of the ADSs will be
determined by reference to the terms of the deposit agreement
and not by this summary. We urge you to review the deposit
agreement in its entirety as well as the form of ADR attached to
the deposit agreement.
Each ADS represents the right to receive one ordinary share on
deposit with the custodian. An ADS will also represent the right
to receive any other property received by the depositary bank or
the custodian on behalf of the owner of the ADS but that has not
been distributed to the owners of ADSs because of legal
restrictions or practical considerations.
If you become an owner of ADSs, you will become a party to the
deposit agreement and therefore will be bound by its terms and
by the terms of the ADR that represents your ADSs. The deposit
agreement and the ADR specify our rights and obligations as well
as your rights and obligations as owner of ADSs and those of the
depositary bank. As an ADS holder you appoint the depositary
bank to act on your behalf in certain circumstances. The deposit
agreement is governed by New York law. However, our obligations
to the holders of ordinary shares will continue to be governed
by the laws of Jersey, which may be different from the laws in
the US.
As an owner of ADSs, you may hold your ADSs either by means of
an ADR registered in your name or through a brokerage or
safekeeping account. If you decide to hold your ADSs through
your brokerage or safekeeping account, you must rely on the
procedures of your broker or bank to assert your rights as ADS
owner. Please consult with your broker or bank to determine what
those procedures are. This summary description assumes you have
opted to own the ADSs directly by means of an ADR registered in
your name and, as such, we will refer to you as the
holder. When we refer to you, we assume
the reader owns ADSs and will own ADSs at the relevant time.
Dividends and Distributions
As a holder, you generally have the right to receive the
distributions we make on the securities deposited with the
custodian. Your receipt of these distributions may be limited,
however, by practical considerations and legal limitations.
Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of
a specified record date.
Distributions of Cash
Whenever we make a cash distribution for the securities on
deposit with the custodian, we will deposit the funds with the
custodian. Upon receipt of confirmation of the deposit of the
requisite funds, the depositary bank will arrange for
distribution to the holders, subject to the applicable laws and
regulations, if any, of Jersey.
111
Distributions of Ordinary Shares
Whenever we make a free distribution of ordinary shares for the
securities on deposit with the custodian, we will deposit the
applicable number of ordinary shares with the custodian. Upon
receipt of confirmation of such deposit, the depositary bank
will either distribute to holders new ADSs representing the
ordinary shares deposited or modify the
ADS-to-ordinary shares
ratio, in which case each ADS you hold will represent rights and
interests in the additional ordinary shares so deposited. Only
whole new ADSs will be distributed. Fractional entitlements will
be sold and the proceeds of such sale will be distributed as in
the case of a cash distribution.
The distribution of new ADSs or the modification of the
ADS-to-ordinary shares
ratio upon a distribution of ordinary shares will be made net of
the fees, expenses, taxes and governmental charges payable by
holders under the terms of the deposit agreement. In order to
pay such taxes or governmental charges, the depositary bank may
sell all or a portion of the new ordinary shares so distributed.
No such distribution of new ADSs will be made if it would
violate a law (for example, the US securities laws) or if it is
not operationally practicable. If the depositary bank does not
distribute new ADSs as described above, it may sell the ordinary
shares received and will distribute the proceeds of the sale as
in the case of a distribution of cash.
Distributions of Rights
Whenever we intend to distribute rights to purchase additional
ordinary shares, we will give prior notice to the depositary
bank and we will assist the depositary bank in determining
whether it is lawful and reasonably practicable to distribute
rights to purchase additional ADSs to holders.
The depositary bank will establish procedures to distribute
rights to purchase additional ADSs to holders and to enable such
holders to exercise such rights if it is lawful and reasonably
practicable to make the rights available to holders of ADSs, and
if we provide all of the documentation contemplated in the
deposit agreement (such as opinions to address the lawfulness of
the transaction). You may have to pay fees, expenses, taxes and
other governmental charges to subscribe for the new ADSs upon
the exercise of your rights. The depositary bank is not
obligated to establish procedures to facilitate the distribution
and exercise by holders of rights to purchase new ordinary
shares other than in the form of new ADSs.
The depositary bank will not distribute the rights to you if:
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we do not timely request that the rights be distributed to you
or we request that the rights not be distributed to you; |
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we fail to deliver satisfactory documents to the depositary
bank; or |
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it is not reasonably practicable to distribute the rights. |
The depositary bank will sell the rights that are not exercised
or not distributed if such sale is lawful and reasonably
practicable. The proceeds of such sale will be distributed to
holders as in the case of a cash distribution.
If the depositary bank is unable to sell the rights, it will
allow the rights to lapse.
Other Distributions
Whenever we intend to distribute property other than cash,
ordinary shares or rights to purchase additional ordinary
shares, we will notify the depositary bank in advance and will
indicate whether we wish such distribution to be made to you. If
so, we will assist the depositary bank in determining whether
such distribution to holders is lawful and reasonably
practicable.
If it is reasonably practicable to distribute such property to
you and if we provide all of the documentation contemplated in
the deposit agreement, the depositary bank will distribute the
property to the holders in a manner it deems practicable.
112
The distribution will be made net of fees, expenses, taxes and
governmental charges payable by holders under the terms of the
deposit agreement. In order to pay such taxes and governmental
charges, the depositary bank may sell all or a portion of the
property received.
The depositary bank will not distribute the property to you and
will sell the property if:
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we do not timely request that the property be distributed to you
or if we ask that the property not be distributed to you; |
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we do not deliver satisfactory documents to the depositary
bank; or |
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the depositary bank determines that all or a portion of the
distribution to you is not reasonably practicable. |
The proceeds of such a sale will be distributed to holders as in
the case of a cash distribution.
Redemption
Whenever we decide to redeem any of the shares on deposit with
the custodian, we will notify the depositary bank. If it is
reasonably practicable and if we provide all of the
documentation contemplated in the deposit agreement, the
depositary bank will mail notice of the redemption to the
holders.
The custodian will be instructed to surrender the shares being
redeemed against payment of the applicable redemption price. The
depositary bank will convert the redemption funds received into
US dollars upon the terms of the deposit agreement and will
establish procedures to enable holders to receive the net
proceeds from the redemption upon surrender of their ADSs to the
depositary bank. You may have to pay fees, expenses, taxes and
other governmental charges upon the redemption of your ADSs. If
less than all ADSs are being redeemed, the ADSs to be redeemed
will be selected by lot or on a pro rata basis, as the
depositary bank may determine.
Changes Affecting Ordinary Shares
The ordinary shares held on deposit for your ADSs may change
from time to time. For example, there may be a change in nominal
or par value, a split-up, cancellation, consolidation or
reclassification of such ordinary shares or a recapitalization,
reorganization, merger, consolidation or sale of assets.
If any such change were to occur, your ADSs would, to the extent
permitted by law, represent the right to receive the property
received or exchanged in respect of the ordinary shares held on
deposit. The depositary bank may in such circumstances deliver
new ADSs to you or call for the exchange of your existing ADSs
for new ADSs. If the depositary bank may not lawfully distribute
such property to you, the depositary bank may sell such property
and distribute the net proceeds to you as in the case of a cash
distribution.
Issuance of ADSs upon Deposit of Ordinary Shares
If permitted under applicable law, the depositary bank may
create ADSs on your behalf if you or your broker deposit
ordinary shares with the custodian. The depositary bank will
deliver these ADSs to the person you indicate only after you
obtain all necessary government approvals and pay any applicable
issuance fees and any charges and taxes payable for the transfer
of the ordinary shares to the custodian.
The issuance of ADSs may be delayed until the depositary bank or
the custodian receives confirmation that all required approvals
have been given and that the ordinary shares have been duly
transferred to the custodian. The depositary bank will only
issue ADSs in whole numbers.
If you are permitted to make a deposit of ordinary shares, you
will be responsible for transferring good and valid title to the
depositary bank. As such, you will be deemed to represent and
warrant that:
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the ordinary shares are duly authorized, validly issued, fully
paid, non-assessable and legally obtained; |
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all preemptive (and similar) rights, if any, with respect to
such ordinary shares have been validly waived or exercised; |
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you are duly authorized to deposit the ordinary shares; |
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the ordinary shares presented for deposit are free and clear of
any lien, encumbrance, security interest, charge, mortgage or
adverse claim, and are not, and the ADSs issuable upon such
deposit will not be, restricted securities (as
defined in the deposit agreement); and |
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the ordinary shares presented for deposit have not been stripped
of any rights or entitlements. |
If any of the representations or warranties are incorrect in any
way, we and the depositary bank may, at your cost and expense,
take any and all actions necessary to correct the consequences
of the misrepresentations.
Withdrawal of Ordinary Shares Upon Cancellation of ADSs
As a holder, you will be entitled to present your ADSs to the
depositary bank for cancellation and then receive the
corresponding number of underlying ordinary shares at the
custodians offices. Your ability to withdraw the ordinary
shares may be limited by US and Jersey law considerations
applicable at the time of withdrawal. In order to withdraw the
ordinary shares represented by your ADSs, you will be required
to pay to the depositary the fees for cancellation of ADSs and
any charges and taxes payable upon the transfer of the ordinary
shares being withdrawn. You assume the risk for delivery of all
funds and securities upon withdrawal. Once canceled, the ADSs
will not have any rights under the deposit agreement.
If you hold an ADR registered in your name, the depositary bank
may ask you to provide proof of identity and genuineness of any
signature and certain other documents as the depositary bank may
deem appropriate before it will cancel your ADSs. The withdrawal
of the ordinary shares represented by your ADSs may be delayed
until the depositary bank receives satisfactory evidence of
compliance with all applicable laws and regulations. Please keep
in mind that the depositary bank will only accept ADSs for
cancellation that represent a whole number of securities on
deposit.
You will have the right to withdraw the securities represented
by your ADSs at any time except:
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during temporary delays that may arise because (i) the
transfer books for the ordinary shares or ADSs are closed, or
(ii) ordinary shares are immobilized on account of a
shareholders meeting or a payment of dividends; |
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when obligations to pay fees, taxes and similar charges are due;
and |
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when restrictions are imposed because of laws or regulations
applicable to ADSs or the withdrawal of the securities on
deposit. |
The deposit agreement may not be modified to impair your right
to withdraw the securities represented by your ADSs except to
comply with mandatory provisions of law.
Voting Rights
As a holder, you generally have the right under the deposit
agreement to instruct the depositary bank to exercise the voting
rights for the ordinary shares represented by your ADSs. The
voting rights of holders of ordinary shares are described in
Description of Share Capital Memorandum and
Articles of Association Voting rights.
At our request, the depositary bank will send to you by mail or
electronic transmission any notice of shareholders meeting
received from us together with information explaining how to
instruct the depositary bank to exercise the voting rights of
the securities represented by ADSs.
If the depositary bank timely receives voting instructions from
a holder of ADSs, it will endeavor to vote or cause the
custodian to vote the shares represented by the holders
ADSs in accordance with such voting instructions.
Please note that the ability of the depositary bank to carry out
voting instructions may be limited by practical and legal
limitations and by the terms of the securities on deposit. We
cannot assure you that you will receive voting materials in time
to enable you to return voting instructions to the depositary
bank in a timely manner.
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Securities for which no voting instructions have been received
will not be voted. In addition, the depositary bank is not
responsible for failing to carry out voting instructions or for
the manner of carrying out voting instructions.
Fees and Charges
As an ADS holder, you will be required to pay the following
service fees to the depositary bank:
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Service |
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Fees |
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Issuance of ADSs
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Up to $0.05 per ADS issued |
Cancellation of ADSs
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Up to $0.05 per ADS canceled |
Distribution of ADSs
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Up to $0.05 per ADS issued |
Distribution of cash dividends or other cash distribution
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Up to $0.02 per ADS held |
Annual servicing fee (payable only to the extent no fee for the
distribution of cash dividends or other cash distribution is
payable)
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Currently no fee, but may in future be up to $0.02 per ADS held |
As an ADS holder you will also be responsible to pay certain
fees and expenses incurred by the depositary bank and certain
taxes and governmental charges such as:
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fees for the transfer and registration of ordinary shares (i.e.,
upon deposit and withdrawal of ordinary shares); |
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expenses incurred for converting foreign currency into US
dollars; |
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expenses for cable, telex and fax transmissions and for delivery
of securities; and |
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taxes and duties upon the transfer of securities (i.e., when
ordinary shares are deposited or withdrawn from deposit). |
We have agreed to pay certain other charges and expenses of the
depositary bank. Note that the fees and charges you may be
required to pay may vary over time and may be changed by us and
by the depositary bank. You will receive prior notice of such
changes. The depositary bank will provide you with a copy of its
latest fee schedule without charge upon request.
Amendments and Termination
We may agree with the depositary bank to modify the deposit
agreement at any time without your consent. We undertake to give
holders not less than 30 days prior notice of any
modifications that would materially prejudice any of their
substantial rights under the deposit agreement. For example, any
amendments or supplements which are reasonably necessary for the
ADSs to be registered under the Securities Act or to be eligible
for book-entry settlement, in each case without imposing or
increasing any fees or charges you may be required to pay, will
not be considered to materially prejudice any of your
substantial rights.
You will be bound by the modifications to the deposit agreement
if you continue to hold your ADSs after the modifications to the
deposit agreement become effective. The deposit agreement cannot
be amended to prevent you from withdrawing the ordinary shares
represented by your ADSs (except in order to comply with
applicable law).
We have the right to direct the depositary bank to terminate the
deposit agreement, in which case the depositary bank will give
notice to you at least 90 days prior to termination. The
depositary bank may also terminate the agreement if it has told
us that it would like to resign or we have removed the
depositary bank and we have not appointed a new depositary bank
within 90 days; in such instances, the depositary bank will
give notice to you at least 30 days prior to termination.
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Upon termination, the following will occur under the deposit
agreement:
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For a period of six months after termination, you will be able
to request the cancellation of your ADSs and the withdrawal of
the ordinary shares represented by your ADSs and the delivery of
all other property held by the depositary bank in respect of
those ordinary shares on the same terms as prior to the
termination. During such six months period the depositary
bank will continue to collect all distributions received on the
ordinary shares on deposit (i.e., dividends) but will not
distribute any such property to you until you request the
cancellation of your ADSs. |
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After the expiration of such six months period, the
depositary bank may sell the securities held on deposit. The
depositary bank will hold the proceeds from such sale and any
other funds then held for the holders of ADSs in a non-interest
bearing account. At that point, the depositary bank will have no
further obligations to holders other than to account for the
funds then held for the holders of ADSs still outstanding. |
Books of Depositary
The depositary bank will maintain ADS holder records at its
depositary office. You may inspect such records at such office
during regular business hours but solely for the purpose of
communicating with other holders in the interest of business
matters relating to the ADSs and the deposit agreement.
The depositary bank will maintain in New York facilities to
record and process the issuance, cancellation, combination,
split-up and transfer
of ADRs.
These facilities may be closed from time to time, to the extent
not prohibited by law.
Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositary
banks obligations to you. Please note the following:
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We and the depositary bank are obligated only to take the
actions specifically stated in the deposit agreement. The
depositary bank shall have no liability to us or the holders of
the ADSs in the absence of gross negligence or willful
misconduct. |
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The depositary bank disclaims any liability for any failure to
carry out voting instructions, for any manner in which a vote is
cast or for the effect of any vote, provided it acts in good
faith and in accordance with the terms of the deposit agreement. |
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The depositary bank disclaims any liability for any failure to
determine the lawfulness or practicality of any action, for the
content of any document forwarded to you on our behalf or for
the accuracy of any translation of such a document, for the
investment risks associated with investing in ordinary shares,
for the validity or worth of the ordinary shares, for any tax
consequences that result from the ownership of ADSs, for the
credit worthiness of any third party, for allowing any rights to
lapse under the terms of the deposit agreement, for the
timeliness of any of our notices or for our failure to give
notice. |
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We and the depositary bank will not be obligated to perform any
act that is inconsistent with the terms of the deposit agreement. |
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We and the depositary bank disclaim any liability if we are
prevented or forbidden from acting on account of any law or
regulation, any provision of our Articles of Association or
Memorandum of Association, any provision of any securities on
deposit or by reason of any act of God or war or other
circumstances beyond our control. |
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We and the depositary bank disclaim any liability by reason of
any exercise of, or failure to exercise, any discretion provided
for the deposit agreement or in our Articles of Association or
Memorandum of Association or in any provisions of securities on
deposit. |
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We and the depositary bank further disclaim any liability for
any action or inaction in reliance on the advice or information
received from legal counsel, accountants, any person presenting
ordinary shares for deposit, any holder of ADSs or authorized
representative thereof, or any other person believed by either
of us in good faith to be competent to give such advice or
information. |
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We and the depositary bank also disclaim liability for the
inability by a holder to benefit from any distribution,
offering, right or other benefit which is made available to
holders of ordinary shares but is not, under the terms of the
deposit agreement, made available to you. |
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We and the depositary bank may rely without any liability upon
any written notice, request or other document believed to be
genuine and to have been signed or presented by the proper
parties. |
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We and the depositary bank also disclaim liability for any
consequential or punitive damages for any breach of the terms of
the deposit agreement. |
Pre-Release Transactions
The depositary bank may, in certain circumstances, issue ADSs
before receiving a deposit of ordinary shares or release
ordinary shares before receiving ADSs. These transactions are
commonly referred to as pre-release transactions.
The depositary bank may limit the aggregate size of pre-release
transactions and impose a number of conditions on such
transactions (i.e., the need to receive collateral, the type of
collateral required, the representations required from brokers,
etc.). The depositary bank may retain the compensation received
from the pre-release transactions.
Taxes
You will be responsible for the taxes and other governmental
charges payable on the ADSs and the securities represented by
the ADSs. We, the depositary bank and the custodian may deduct
from any distribution the taxes and governmental charges payable
by holders and may sell any and all property on deposit to pay
the taxes and governmental charges payable by holders. You will
be liable for any deficiency if the sale proceeds do not cover
the taxes that are due.
The depositary bank may refuse to issue ADSs, to deliver
transfer, split and combine ADRs or to release securities on
deposit until all taxes and charges are paid by the applicable
holder. The depositary bank and the custodian may take
reasonable administrative actions to obtain tax refunds and
reduced tax withholding for any distributions on your behalf.
However, you may be required to provide to the depositary bank
and to the custodian proof of taxpayer status and residence and
such other information as the depositary bank and the custodian
may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any
claims with respect to taxes based on any tax benefit obtained
for you.
Foreign Currency Conversion
The depositary bank will arrange for the conversion of all
foreign currency received into US dollars if such conversion is
practicable, and it will distribute the US dollars in accordance
with the terms of the deposit agreement. You may have to pay
fees and expenses incurred in converting foreign currency, such
as fees and expenses incurred in complying with currency
exchange controls and other governmental requirements.
If the conversion of foreign currency is not practicable or
lawful, or if any required approvals are denied or not
obtainable at a reasonable cost or within a reasonable period,
the depositary bank may take the following actions in its
discretion:
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distribute the foreign currency to holders for whom the
distribution is lawful and practicable; or |
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hold the foreign currency (without liability for interest) for
the applicable holders. |
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SHARES AVAILABLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our
ordinary shares or ADSs. We cannot make any prediction as to the
effect, if any, that sales of ordinary shares or ADSs or the
availability of ordinary shares or ADSs for sale will have on
the market price of our ADSs. The market price of our ADSs could
decline because of the sale of a large number of ordinary shares
or ADSs or the perception that such sales could occur. These
factors could also make it more difficult for us to raise funds
through future offerings of our securities. See Risk
Factors Risks Related to this Offering
Substantial future sales of our shares or ADSs in the public
market could cause our ADS price to fall.
Sale of Restricted Shares
Upon the completion of this offering, we will have
39,801,857 ordinary shares outstanding, including ordinary
shares represented by ADSs assuming the underwriters do not
exercise their option to purchase additional ADSs (or 39,833,857
ordinary shares if the underwriters exercise their option in
full). The 11,202,708 ADSs sold in this offering (or
12,763,708 ADSs if the underwriters exercise their option
in full) representing such number of outstanding ordinary shares
will be freely tradable in the US under the Securities Act,
except that any ADSs purchased by our affiliates, as that term
is defined in Rule 144 under the Securities Act, may
generally only be sold in compliance with the limitations of
Rule 144 described below. As defined in Rule 144, an
affiliate of an issuer is a person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by
or is under common control with the issuer. The remaining
28,599,149 ordinary shares (or 27,070,149 ordinary
shares if the underwriters exercise their option in full) may be
sold in the United States only if registered or if they qualify
for an exemption from registration under the Securities Act,
including Rule 144, Rule 144(k) or Rule 701 or
Regulation S. The ordinary shares outstanding after the
offering may be deposited with the depositary and, subject to
the terms of the deposit agreement, ADSs representing these
ordinary shares will be issued.
Immediately following the completion of this offering, the
holders of approximately 34,662 ordinary shares will be entitled
to dispose of their ordinary shares if registered or if they
qualify for an exemption from registration under the Securities
Act. Upon the expiration of the
180-day
lock-up period described below, holders of
28,564,487 ordinary shares will be entitled to dispose of their
shares if registered or if they qualify for an exemption from
registration under the Securities Act. An additional 1,946,228
ordinary shares will be issuable upon exercise of options that
are currently outstanding and will be vested and exercisable
within 60 days after June 30, 2006.
Rule 144
In general, pursuant to Rule 144 under the Securities Act,
a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities within the meaning of
Rule 144 for at least one year, and including the holding
period of any prior owner except an affiliate, would be entitled
to sell within any three-month period a number of shares that
does not exceed the greater of one percent of the then
outstanding ordinary shares (including ordinary shares
represented by ADSs) or the average weekly trading volume of
ordinary shares (including ordinary shares represented by ADSs)
or the average weekly trading volume of reported through the
NYSE during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current
public information about our company.
Rule 144(k)
Pursuant to Rule 144(k) under the Securities Act, any
person (or persons whose shares are aggregated) who is not
deemed to have been our affiliate at any time during the three
months preceding a sale, and who has beneficially owned shares
or ADSs for at least two years (including any immediately prior
period of ownership holders who are also not our affiliates),
would be entitled to sell these shares or ADSs without regard to
the volume limitations, manner of sale provisions, public
information requirements or notice requirements of Rule 144.
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Rule 701
Securities issued in reliance on Rule 701 under the
Securities Act are also restricted and may be sold by
shareholders other than affiliates of ours subject only to the
manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its one-year holding
period requirement.
Options/ Equity Awards
We intend to file a registration statement under the Securities
Act to register approximately 6,965,776 ordinary shares
reserved for issuance or sale under our equity incentive plans.
As of June 30, 2006, there were options outstanding under
our Stock Incentive Plan to purchase a total of
3,875,655 ordinary shares, of which 1,946,228 options
to purchase ordinary shares were exercisable within
60 days. Shares issued upon the exercise of share options
after the effective date of this registration statement will be
eligible for resale in the public market without restriction,
subject to Rule 144 limitations applicable to affiliates
and the lock-up
agreements described below.
Lock-up Agreements
We, each of our selling shareholders, our continuing directors,
our executive officers, our employee shareholders and certain of
our other shareholders have agreed that, without the prior
written consent of the representatives on behalf of the
underwriters, it will not, during the period ending
180 days after the date of the prospectus:
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offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of directly or indirectly, any
shares, or any securities convertible into or exercisable or
exchangeable for ordinary shares or ADSs; |
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request or demand that we file a registration statement related
to the ordinary shares or ADSs; or |
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enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of ordinary shares or ADSs; |
whether any such transaction described above is to be settled by
delivery of ordinary shares or ADSs or such other securities, in
cash or otherwise. The restrictions described in this paragraph
do not apply to:
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the sale of shares or ADSs to the underwriters; |
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transactions by any person other than us relating to share, ADSs
or other securities acquired in open market transactions after
the completion of this offering of the ordinary shares or ADSs; |
and, subject to the recipient of shares or ADSs agreeing to
abide by the restrictions described in this paragraph, these
restrictions do not apply to:
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the issuance by us of shares upon the exercise of an option or a
warrant or the conversion of a security outstanding on the date
of this prospectus of which the underwriters have been advised
in writing; |
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the issuance by us of shares, or options to purchase shares,
pursuant to our Stock Incentive Plan or our 2006 Incentive Award
Plan; |
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the issuance by us of shares in connection with our acquisition
of or merger with or into any other company (provided
that the amount of shares issued in connection with any such
transaction does not in the aggregate exceed 10% of our total
shares outstanding at the time of this offering); |
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the filing by us of any registration statement on Form S-8
relating to the offering of securities pursuant to the terms of
a stock incentive plan in effect on the date of the underwriting
agreement; |
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transfers by a selling shareholder of shares or any security
convertible into shares as a bona fide gift; and |
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distributions by a selling shareholder of shares or any security
convertible into shares to limited partners or stockholders of
the selling shareholder. |
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The 180-day
lock-up period is
subject to adjustment under certain circumstances. If
(1) during the last 17 days of the
180-day
lock-up period, we
issue an earnings release or material news or a material event
relating to us occurs;, or (2) prior to the expiration of
the 180-day
lock-up period, we
announce that we will release earnings results during the
16-day period beginning
on the last day of the
180-day lock-up, the
lock-up will continue
to apply until the expiration of the
18-day period beginning
on the issuance of the earnings release or the occurrence of the
material news or material event; provided that in the case of
clause (2) above, if no earnings results are released
during the 16-day
period, the lock-up
will terminate on the last day of the
16-day period.
Morgan Stanley & Co. International Limited, in its sole
discretion, may release any of the securities subject to these
lock-up agreements at
any time without notice.
Immediately following the completion of this offering,
shareholders subject to
lock-up agreements will
hold 28,564,487 ordinary shares representing approximately
71.8% of our then outstanding ordinary shares, or
27,035,487 ordinary shares representing approximately 67.9%
if the underwriters exercise their option to purchase additional
ADSs in full.
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TAXATION
The following summary of the material Jersey and US federal
income tax consequences of an investment in the ordinary shares
and ADSs is based upon laws and relevant interpretations thereof
in effect as of the date of this prospectus, all of which are
subject to change, and does not deal with all possible tax
consequences relating to an investment in the ordinary shares
and ADSs, such as the tax consequences under State, local and
other (for example, non-Jersey, non-US federal) tax laws.
Accordingly, each prospective investor should consult his or her
tax advisor regarding the tax consequences of an investment in
the ordinary shares and ADSs. To the extent that the discussion
relates to matters of Jersey tax law, it is the opinion of
Mourant du Feu & Jeune, our Jersey counsel. To the
extent that the discussion relates to matters of US federal
income tax law, it is the opinion of Latham & Watkins
LLP, our special US counsel.
Jersey Tax Consequences
General
The following summary of the anticipated tax treatment in Jersey
in relation to the payments on the ordinary shares is based on
the taxation law and practice in force at the date of this
prospectus, and does not constitute legal or tax advice and
prospective investors should be aware that the relevant fiscal
rules and practice and their interpretation may change. We
encourage you to consult your own professional advisors on the
implications of subscribing for, buying, holding, selling,
redeeming or disposing of ordinary shares and the receipt of
interest and distributions, whether or not on a winding-up, with
respect to the ordinary shares under the laws of the
jurisdictions in which they may be taxed.
We are an exempt company within the meaning of
Article 123A of the Income Tax (Jersey) Law, 1961, as
amended, for the calendar year ending December 31, 2006. We
will be required to pay an annual exempt company charge, which
is currently £600, in respect of each subsequent calendar
year during which we wish to continue to have exempt
company status. The retention of exempt
company status is conditional upon the Comptroller of
Income Tax being satisfied that no Jersey resident has a
beneficial interest in us, except as permitted by published
concessions granted by the Comptroller from time to time. The
Comptroller of Income Tax has indicated that where more than ten
persons are beneficially interested in an exempt company, a
holding by Jersey residents of less than 10% of the share
capital shall not be treated as a beneficial interest. The
Comptroller of Income Tax has confirmed to us that no holding of
ADSs held by Jersey residents will be treated as a beneficial
interest in shares which would cause us to lose our exempt
company status.
As an exempt company, we will not be liable for
Jersey income tax other than on Jersey source income, except by
concession bank deposit interest on Jersey bank accounts. For so
long as we are an exempt company, payments in
respect of the shares will not be subject to any taxation in
Jersey, unless the shareholder is resident in Jersey, and no
withholding in respect of taxation will be required on those
payments to any holder of shares.
On June 3, 2003, the European Union, or the EU, Council of
Economic and Finance Ministers reached political agreement on
the adoption of a Code of Conduct on Business Taxation. Jersey
is not a member of the EU; however, the Policy &
Resources Committee of the States of Jersey has announced that,
in keeping with Jerseys policy of constructive
international engagement, it intends to propose legislation to
replace the Jersey exempt company regime by January 1, 2008
with a general zero rate of corporate tax.
Currently, there is no double tax treaty or similar convention
between the US and Jersey.
As part of an agreement reached in connection with the EU
Savings Tax Directive income in the form of interest payments,
and in line with steps taken by other relevant third countries,
Jersey introduced with effect from July 1, 2005 a retention
tax system in respect of payments of interest, or other similar
income, made to an individual beneficial owner resident in an EU
Member State by a paying agent established in Jersey (the terms
beneficial owner and paying agent are
defined in the EU Savings Tax Directive). The retention tax
system applies for a transitional period prior to the
implementation of a system of automatic communication to EU
Member States of information regarding such payments. The
transitional period will only end after all EU Member States
apply automatic exchange of information and EU Member States
unanimously agree that the
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US has committed to exchange of information upon request. During
this transitional period, such an individual beneficial owner
resident in an EU Member State is entitled to request a paying
agent not to retain tax from such payments but instead to apply
a system by which the details of such payments are communicated
to the tax authorities of the EU Member State in which the
beneficial owner is resident.
The retention tax system and disclosure arrangements are
implemented by means of bilateral agreements with each of the EU
Member States, the Taxation (Agreements with European Union
Member States) (Jersey) Regulations 2005 and Guidance Notes
issued by the Policy & Resources Committee of the
States of Jersey. Based on these provisions and the current
practice of the Jersey tax authorities, dividend distributions
to shareholders and income realized by shareholders in a Jersey
company upon the sale, refund or redemption of shares do not
constitute interest payments for the purposes of the retention
tax system and therefore neither a Jersey company nor any paying
agent appointed by it in Jersey is obliged to levy retention tax
in Jersey under these provisions in respect thereof. However,
the retention tax system could apply in the event that an
individual resident in an EU Member State, otherwise receives an
interest payment in respect of a debt claim (if any) owed by a
company to the individual.
Taxation of Dividends
Under existing Jersey law, provided that the ordinary shares and
ADSs are not held by, or for the account of, persons resident in
Jersey for income tax purposes, payments in respect of the
ordinary shares and ADSs, whether by dividend or other
distribution, will not be subject to any taxation in Jersey and
no withholding in respect of taxation will be required on those
payments to any holder of our ordinary shares or ADSs.
Shareholders who are resident in Jersey for Jersey income tax
purposes suffer deduction of tax on payment of dividends by us
at the standard rate of Jersey income tax for the time being in
force.
Taxation of Capital Gains and Estate and Gift Tax
Under current Jersey law, there are no death or estate duties,
capital gains, gift, wealth, inheritance or capital transfer
taxes. No stamp duty is levied in Jersey on the issue or
transfer of ordinary shares or ADSs. In the event of the death
of an individual sole shareholder, duty at rates of up to 0.75%
of the value of the ordinary shares or ADSs held may be payable
on the registration of Jersey probate or letters of
administration which may be required in order to transfer or
otherwise deal with ordinary shares or ADSs held by the deceased
individual sole shareholder.
US Federal Income Taxation
The following discussion describes the material US federal
income tax consequences to US Holders (defined below) under
present law of an investment in the ADSs or ordinary shares.
This summary applies only to US Holders that hold the ADSs
or ordinary shares as capital assets and that have the
US dollar as their functional currency. This discussion is
based on the tax laws of the US as in effect on the date of this
prospectus and on US Treasury regulations in effect or, in
some cases, proposed, as of the date of this prospectus, as well
as judicial and administrative interpretations thereof available
on or before such date. All of the foregoing authorities are
subject to change, which change could apply retroactively and
could affect the tax consequences described below.
The following discussion does not address the tax consequences
to any particular investor or to persons in special tax
situations, such as:
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banks; |
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certain financial institutions; |
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insurance companies; |
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broker dealers; |
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traders that elect to
mark-to-market; |
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tax-exempt entities; |
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persons liable for alternative minimum tax; |
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real estate investment trusts; |
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regulated investment companies; |
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US expatriates; |
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persons holding ADSs or ordinary shares as part of a straddle,
hedging, conversion or integrated transaction; |
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persons that actually or constructively own 10% or more of our
voting stock; or |
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persons holding ADSs or ordinary shares through partnerships or
other pass-through entities. |
In particular, it is noted that we are a controlled
foreign corporation for US federal income tax
purposes, and therefore, if you are a US shareholder owning
10% or more of our voting stock directly, indirectly and/or
under the applicable attribution rules, the US federal income
tax consequences to you of owning our ADSs or ordinary shares
may be significantly different than those described below in
several respects. If you own 10% or more of our voting stock
directly, indirectly and/or under the applicable attribution
rules, you should consult your own tax advisors regarding the US
federal income tax consequences of your investment in our ADSs
or ordinary shares.
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX
ADVISORS ABOUT THE APPLICATION OF THE US FEDERAL TAX RULES
TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL
AND NON-US TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF ADSs OR ORDINARY SHARES.
The discussion below of the US federal income tax
consequences to US Holders will apply if you
are a beneficial owner of ADSs or ordinary shares and you are,
for US federal income tax purposes:
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a citizen or resident of the US; |
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a corporation (or other entity taxable as a corporation)
organized under the laws of the US, any State thereof or the
District of Columbia; |
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an estate whose income is subject to US federal income taxation
regardless of its source; or |
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a trust that (1) is subject to the supervision of a court
within the US and the control of one or more US persons or
(2) has a valid election in effect under applicable US
Treasury regulations to be treated as a US person. |
If you are a partner in a partnership or other entity taxable as
a partnership that holds ADSs or ordinary shares, your tax
treatment will depend on your status and the activities of the
partnership.
The discussion below assumes that the representations contained
in the deposit agreement are true and that the obligations in
the deposit agreement and any related agreement will be complied
with in accordance with their terms. If you hold ADSs, you
should be treated as the holder of the underlying ordinary
shares represented by those ADSs for US federal income tax
purposes.
Dividends
Subject to the passive foreign investment company rules
discussed below, the gross amount of distributions made by us
with respect to the ADSs or ordinary shares (including the
amount of any taxes withheld therefrom) will be includable in
your gross income in the year received (or deemed received) as
dividend income to the extent that such distributions are paid
out of our current or accumulated earnings and profits as
determined under US federal income tax principles. To the
extent, if any, that the amount of any such distribution exceeds
our current or accumulated earnings and profits, it will be
treated first as a tax-free return of your tax basis in the ADSs
or ordinary shares (thereby increasing the amount of any gain or
decreasing the
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amount of any loss realized on the subsequent sale or
disposition of such ADSs or ordinary shares) and thereafter as
capital gain. However, we do not intend to calculate our
earnings and profits under US federal income tax principles.
Therefore, a US Holder should expect that a distribution will be
treated as a dividend even if that distribution would otherwise
be treated as a non-taxable return of capital or as capital gain
under the rules described above. No dividends received deduction
will be allowed for US federal income tax purposes with respect
to dividends paid by us. With respect to non-corporate US
Holders, including individual US Holders, for taxable years
beginning before January 1, 2011, dividends should be
qualified dividend income, which is taxed at the
lower applicable capital gains rate provided that (1) we
are not a passive foreign investment company (as discussed
below) for either our taxable year in which the dividend was
paid or the preceding taxable year, (2) certain holding
period requirements are met and (3) the ADSs or ordinary
shares, as applicable, are readily tradable on an established
securities market in the US. Under IRS authority, common shares,
or ADSs representing such shares, are considered to be readily
tradable on an established securities market in the US if they
are listed on the NYSE, as our ADSs are expected to be. You
should consult your own tax advisors regarding the availability
of the lower rate for dividends paid with respect to ADSs or
ordinary shares.
The amount of any distribution paid in pounds sterling will be
equal to the US dollar value of such pounds sterling on the date
such distribution is received by the depositary, in the case of
ADSs, or by you, in the case of ordinary shares, regardless of
whether the payment is in fact converted into US dollars at that
time. Gain or loss, if any, realized on the sale or other
disposition of such pounds sterling will be US source ordinary
income or loss, subject to certain exceptions and limitations.
The amount of any distribution of property other than cash will
be the fair market value of such property on the date of
distribution.
Subject to the source of income discussion below, for foreign
tax credit purposes, dividends distributed by us with respect to
ADSs or ordinary shares will constitute foreign source income.
However, for periods in which 50% or more of our shares are
actually or constructively owned by US Holders, it is possible
that certain portions of dividends paid by us could be treated
as income from sources within the United States, depending on
whether 10% or more of our income is treated for US tax purposes
as income from sources within the US. You are urged to consult
your tax advisors regarding the foreign tax credit limitation
and source of income rules with respect to distributions on the
ADSs or ordinary shares.
Sale or Other Disposition of ADSs or Ordinary
Shares
Subject to the passive foreign investment company rules
discussed below, upon a sale or other disposition of ADSs or
ordinary shares, you will recognize a capital gain or loss for
US federal income tax purposes in an amount equal to the
difference between the amount realized and your tax basis in
such ADSs or ordinary shares. If the consideration you receive
for the ADSs or ordinary shares is not paid in US dollars, the
amount realized will be the US dollar value of the payment
received. The US dollar value of such a payment will be
determined on the date of receipt of payment if you are a cash
basis taxpayer and on the date of disposition if you are an
accrual basis taxpayer. However, if the ADSs or ordinary shares
are treated as traded on an established securities market and
you are either a cash basis taxpayer or an accrual basis
taxpayer who has made a special election (which must be
applied consistently from year to year and cannot be changed
without the consent of the IRS), you will determine the US
dollar value of the amount realized in a foreign currency by
translating the amount received at the spot rate of exchange on
the settlement date of the sale. Your initial tax basis in your
ADSs or ordinary shares will equal the cost of such ADSs or
ordinary shares, as applicable. If you use foreign currency to
purchase ADSs or ordinary shares, the cost of the ADSs or
ordinary shares, as applicable, will be the US dollar value of
the foreign currency purchase price on the date of purchase.
However, if the ADSs or ordinary shares are treated as traded on
an established securities market and you are either a cash basis
taxpayer or an accrual basis taxpayer who has made a special
election (which must be applied consistently from year to
year and cannot be changed without the consent of the IRS), you
will determine the US dollar value of the cost of such ADSs or
ordinary shares, as applicable, by translating the amount paid
at the spot rate of exchange on the settlement date of the
purchase. Subject to certain exceptions and limitations, any
such gain or loss will be US source gain or loss and will be
treated as long-term capital gain or loss, if your holding
period in the ADSs or ordinary shares exceeds one year. Subject
to the passive
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foreign investment company rules discussed below and other
limitations, if you are a non-corporate US Holder, including an
individual US Holder, any long-term capital gain will be subject
to US federal income tax at preferential rates. The
deductibility of capital losses is subject to significant
limitations.
Passive Foreign Investment Company
A non-US corporation is considered a PFIC, for any taxable
year if either
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at least 75% of its gross income is passive income, or |
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under the PFIC asset test at least 50% of the value of its
assets (determined on the basis of a quarterly average) is
attributable to assets that produce or are held for the
production of passive income. |
We will be treated as owning our proportionate share of the
assets and our proportionate share of the income of any other
corporation in which we own, directly or indirectly, 25% or more
(by value) of the stock.
Based on our current and anticipated operations and composition
of our assets, we do not expect to be a PFIC in our future
taxable years, although we can make no assurances in this
regard. However, the application of the PFIC asset test in
respect of our current taxable year is uncertain because we
currently are a CFC and the application of the PFIC asset test
to a CFC in respect of its taxable year in which it becomes
publicly traded after its first quarter is not clear.
If a CFC is a publicly traded corporation for the
taxable year, the asset test is applied based on the value of
its assets. Otherwise, the asset test is applied based on the
adjusted bases of its assets as determined for the purposes of
computing earnings and profits under US tax principles. In both
cases, the determination is made on the basis of a quarterly
average. It is not clear, however, how the asset test should be
applied to a CFC in respect of its taxable year in which it
becomes a publicly traded corporation after the first quarter.
We will be a CFC for our current taxable year ending on
March 31, 2007, and are expected to become a publicly
traded corporation sometime during our second quarter. As a
result, it is not clear how the asset test will apply to us in
respect of our current tax year. If the asset test must be
applied entirely based on the adjusted bases of our assets
during our current taxable year (the least favorable
interpretation of the asset test), our PFIC status would largely
depend on how, and how quickly, we use the cash that we raise in
this offering. However, if a more favorable interpretation of
the asset test can be applied (for example, if the value of our
assets can be used for this purpose for at least the quarters
during which our ADSs are traded on the NYSE), we believe that
we would not be a PFIC in respect of our current taxable year,
regardless of how and when we use the offering proceeds.
It may be reasonable for US Holders to adopt a more
favorable interpretation of the asset test for purposes of
determining and reporting the US federal income tax
consequences of their investment in the ADSs or ordinary shares,
although US Holders should consult their own tax advisers
regarding the reasonableness of this position. US Holders
also should note that the IRS could seek to apply the least
favorable interpretation of the asset test. We will notify
US Holders regarding whether we believe that we would be a
PFIC for our current taxable year under the least favorable
interpretation of that test (unless there is IRS or other
official guidance supporting a more favorable interpretation)
promptly after the end of our current taxable year.
If we are a PFIC for any taxable year during which you hold ADSs
or ordinary shares, you will be subject to special tax rules
with respect to any excess distribution that you
receive and any gain you recognize from a sale or other
disposition (including a pledge) of the ADSs or ordinary shares,
unless you make a
mark-to-market
election as discussed below. Distributions you receive in a
taxable year that are greater than 125% of the average annual
distributions you received during the shorter of the three
preceding taxable years or your holding period for the ADSs or
ordinary shares will be treated as an excess distribution. Under
these special tax rules,
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the excess distribution or gain will be allocated ratably over
your holding period for the ADSs or ordinary shares, |
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the amount allocated to the current taxable year, and any
taxable year prior to the first taxable year in which we became
a PFIC, will be treated as ordinary income, and |
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the amount allocated to each other year will be subject to tax
at the highest tax rate in effect for that year and the interest
charge normally applicable to underpayments of tax will be
imposed on the resulting tax attributable to each such year. |
The tax liability for amounts allocated to years prior to the
year of disposition or excess distribution cannot be
offset by any net operating losses for such years, and gains
(but not losses) realized on the sale of the ADSs or ordinary
shares cannot be treated as capital, even if you hold the ADSs
or ordinary shares as capital assets.
In addition, if we are a PFIC, to the extent any of our
subsidiaries are also PFICs, you may be deemed to own shares in
such subsidiaries that are directly or indirectly owned by us in
that proportion which the value of the shares you own so bears
to the value of all of our shares, and may be subject to the
adverse tax consequences described above with respect to the
shares of such subsidiaries that you would be deemed to own.
If we are a PFIC, you may avoid taxation under the rules
described above by making a qualified electing fund
election to include your share of our income on a current basis,
provided that we agree to furnish you annually with certain tax
information. However, we do not presently intend to prepare or
provide such information.
Alternatively, if the ADSs are marketable stock (as
defined below), you can avoid taxation under the unfavorable
PFIC rules described above in respect of the ADSs by making a
mark-to-market election in respect of the ADSs by the due date
(determined with regard to extensions) for your tax return in
respect of your first taxable year during which we are treated
as a PFIC. If you make a
mark-to-market election
for the ADSs or ordinary shares, you will include in income in
each of your taxable years during which we are a PFIC an amount
equal to the excess, if any, of the fair market value of the
ADSs or ordinary shares as of the close of your taxable year
over your adjusted basis in such ADSs or ordinary shares. You
are allowed a deduction for the excess, if any, of the adjusted
basis of the ADSs or ordinary shares over their fair market
value as of the close of the taxable year. However, deductions
are allowable only to the extent of any net
mark-to-market gains on
the ADSs or ordinary shares included in your income for prior
taxable years. Amounts included in your income under a
mark-to-market
election, as well as gain on the actual sale or other
disposition of the ADSs or ordinary shares, are treated as
ordinary income. Ordinary loss treatment also applies to the
deductible portion of any
mark-to-market loss on
the ordinary shares, as well as to any loss realized on the
actual sale or disposition of the ADSs or ordinary shares, to
the extent that the amount of such loss does not exceed the net
mark-to-market gains
previously included for such ADSs or ordinary shares. Your basis
in the ADSs or ordinary shares will be adjusted to reflect any
such income or loss amounts. Further, distributions would be
taxed as described above under
Dividends, except that the preferential
dividend rates with respect to qualified dividend
income would not apply. You will not be required to
recognize mark-to-market gain or loss in respect of your taxable
years during which we were not at any time a PFIC.
The mark-to-market
election is available only for marketable stock,
which is stock that is traded in other than de minimis
quantities on at least 15 days during each calendar
quarter on a qualified exchange, including the NYSE, or other
market, as defined in the applicable US Treasury regulations. We
expect that the ADSs will be listed on the NYSE and
consequently, if you hold ADSs the
mark-to-market election
would be available to you, provided that the ADSs are traded in
sufficient quantities. US Holders of ADSs or ordinary shares
should consult their own tax advisors as to whether the ADSs or
ordinary shares would qualify for the
mark-to-market election.
You also generally can make a deemed sale election
in respect of any time we cease being a PFIC, in which case you
will be deemed to have sold, at fair market value, your ADSs or
ordinary shares (and shares of our PFIC subsidiaries, if any,
that you are deemed to own) on the last day of our taxable year
immediately prior to our taxable year in respect of which we are
not a PFIC. If you make this deemed sale election, you generally
would be subject to the unfavorable PFIC rules described above
in respect of any gain realized on such deemed sale, but as long
as we are not a PFIC for future years, you would not be subject
to the PFIC rules for those future years.
If you hold ADSs or ordinary shares in any year in which we are
a PFIC, you would be required to file IRS Form 8621
regarding distributions received on the ADSs or ordinary shares
and any gain realized on the
126
disposition of the ADSs or ordinary shares. You should consult
your own tax advisors regarding the potential application of the
PFIC rules to your ownership of ADSs or ordinary shares and the
elections discussed above.
US Information Reporting and Backup Withholding
Dividend payments with respect to ADSs or ordinary shares and
proceeds from the sale, exchange or redemption of ADSs or
ordinary shares may be subject to information reporting to the
IRS and possible US backup withholding at a current rate of 28%.
Backup withholding will not apply, however, to a US Holder who
furnishes a correct taxpayer identification number and makes any
other required certification or who is otherwise exempt from
backup withholding and establishes such exempt status. US
Holders should consult their tax advisors regarding the
application of the US information reporting and backup
withholding rules.
Backup withholding is not an additional tax. Amounts withheld as
backup withholding may be credited against your US federal
income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing
the appropriate claim for refund with the IRS and furnishing any
required information.
127
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated the date of this prospectus, the
underwriters named below, for whom Morgan Stanley & Co.
International Limited, Deutsche Bank Securities Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated are acting
as representatives, have severally agreed to purchase, and we
and the selling shareholders have agreed to sell to them,
severally, the number of ADSs indicated below:
|
|
|
|
|
|
|
|
Number of |
Name |
|
ADSs |
|
|
|
Morgan Stanley & Co. International Limited
|
|
|
|
|
Deutsche Bank Securities Inc.
|
|
|
|
|
Merrill Lynch, Pierce, Fenner & Smith Incorporated
|
|
|
|
|
Citigroup Global Markets Inc.
|
|
|
|
|
UBS Securities LLC
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,202,708 |
|
|
|
|
|
|
The underwriters are offering the ADSs subject to their
acceptance of the ADSs from us and the selling shareholders and
subject to prior sale. The underwriting agreement provides that
the obligations of the several underwriters to pay for and
accept delivery of the ADSs offered by this prospectus are
subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriters are
obligated, severally and not jointly, to take and pay for all of
the ADSs offered by this prospectus if any such ADSs are taken.
However, the underwriters are not required to take or pay for
the ADSs covered by the underwriters over-allotment option
described below. Morgan Stanley & Co. International
Limited will offer ADSs in the US through its registered broker
dealers in the US.
The underwriters initially propose to offer part of the ADSs
directly to the public at the public offering price listed on
the cover page of this prospectus and part to certain dealers at
a price that represents a concession not in excess of
$ per
ADS under the public offering price. Any underwriter may allow,
and such dealer may allow, a concession not in excess of
$ per
ADS to other underwriters or to certain dealers. After the
initial offering of the ADSs, the offering price and other
selling terms may from time to time be varied by the
representatives.
Certain of the selling shareholders have granted to the
underwriters an option, exercisable for 30 days from the
date of this prospectus, to purchase up to an aggregate of
1,561,000 additional ADSs at the public offering price set
forth on the cover page of this prospectus, less underwriting
discounts and commissions. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the ADSs offered by
this prospectus. To the extent the option is exercised, each
underwriter will become obligated, subject to certain
conditions, to purchase about the same percentage of the
additional ADSs as the number listed next to the
underwriters name in the preceding table bears to the
total number of ADSs listed next to the names of all
underwriters in the preceding table. Assuming an initial public
offering price of $19.00 per ADS, the midpoint of the estimated
range of the initial public offering price, if the
underwriters option is exercised in full, the total price
to the public would be $242.5 million, the total
underwriters discounts and commissions would be
$15.8 million, total proceeds to us would be
$79.5 million and total proceeds to the selling
shareholders would be $147.3 million. If the
underwriters option is not exercised, the total price to
the public would be $212.9 million, the total
underwriters discounts and commissions would be
$13.8 million, total proceeds to us would be
$79.5 million and total proceeds to the selling
shareholders would be $119.5 million. However, the amount
of net proceeds that we actually receive from this offering may
change depending on final offering size and price per ADS. See
Use of Proceeds for the sensitivity analysis
with respect to such changes.
The underwriting discounts and commissions have been determined
by negotiations among us, the selling shareholders and the
representatives and are a percentage of the offering price to
the public. Among the
128
factors considered in determining the discounts and commissions
were the size of the offering, the nature of the security to be
offered and the discounts and commissions charged in comparable
transactions.
We estimate that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately
$5.6 million, including registration fees of
$0.2 million, printing and delivery expenses of
approximately $0.4 million, directors and officers
insurance premiums related to this offering of approximately
$0.6 million, accounting and legal professional fees of
approximately $4.0 million and other expenses of
approximately $0.4 million. The selling shareholders are
paying the underwriting discounts and commissions relating to
the shares they are selling, and we are bearing the other
expenses of this offering described above.
The underwriters have informed us that they do not intend sales
to discretionary accounts to exceed five percent of the total
number of ADSs offered by them.
We have applied for our ADSs to be approved for listing on the
NYSE under the symbol WNS.
We, each of the selling shareholders, our continuing directors,
our executive officers, our employee shareholders and certain of
our other shareholders have agreed that, without the prior
written consent of Morgan Stanley & Co. International
Limited on behalf of the underwriters, it will not, during the
period ending 180 days after the date of this prospectus:
|
|
|
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any
shares or ADSs, or any securities convertible into or
exercisable or exchangeable for shares or ADSs; |
|
|
request or demand that we file a registration statement related
to the ordinary shares or the ADSs; or |
|
|
enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of shares or ADSs; |
whether any such transaction described above is to be settled by
delivery of shares, ADSs or such other securities, in cash or
otherwise. The restrictions described in this paragraph do not
apply to:
|
|
|
the sale of shares or ADSs to the underwriters; or |
|
|
transactions by any person other than us relating to shares,
ADSs or other securities acquired in open market transactions
after the completion of the offering of the ADSs; |
and, subject to the recipient of shares or ADSs agreeing to
abide by the restrictions described in this paragraph, these
restrictions do not apply to:
|
|
|
the issuance by us of shares upon the exercise of an option or a
warrant or the conversion of a security outstanding on the date
of this prospectus of which the underwriters have been advised
in writing; |
|
|
the issuance by us of shares, or options to purchase shares,
pursuant to our Stock Incentive Plan or our 2006 Incentive Award
Plan; |
|
|
the issuance by us of shares in connection with our acquisition
of or merger with or into any other company (provided
that the amount of shares issued in connection with any such
transaction does not in the aggregate exceed 10% of our total
shares outstanding at the time of this offering); |
|
|
the filing by us of any registration statement on Form S-8
relating to the offering of securities pursuant to the terms of
a stock incentive plan in effect on the date of the underwriting
agreement; |
|
|
transfers by a selling shareholder of shares or any security
convertible into shares as a bona fide gift; and |
|
|
distributions by a selling shareholder of shares or any security
convertible into shares to limited partners or stockholders of
the selling shareholder. |
The 180-day
lock-up period is
subject to adjustment under certain circumstances. If
(1) during the last 17 days of the
180-day
lock-up period, we
issue an earnings release or material news or a material event
relating to us occurs; or (2) prior to the expiration of
the 180-day
lock-up period, we
announce that we will
129
release earnings results during the
16-day period beginning
on the last day of the
180-day lock-up, the
lock-up will continue
to apply until the expiration of the
18-day period beginning
on the issuance of the earnings release or the occurrence of the
material news or material event; provided that in the case of
clause (2) above, if no earnings results are released
during the 16-day
period, the lock-up
will terminate on the last day of the
16-day period.
In order to facilitate the offering of the ADSs, the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of the ADSs. Specifically, the
underwriters may sell more ADSs than they are obligated to
purchase under the underwriting agreement, creating a short
position. A short sale is covered if the short position is no
greater than the number of ADSs available for purchase by the
underwriters under the over-allotment option. The underwriters
can close out a covered short sale by exercising the
over-allotment option or purchasing ADSs in the open market. In
determining the source of ADSs to close out a covered short
sale, the underwriters will consider, among other things, the
open market price of ADSs compared to the price available under
the over-allotment option. The underwriters may also sell ADSs
in excess of the over-allotment option, creating a naked short
position. The underwriters must close out any naked short
position by purchasing ADSs in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of
the ADSs in the open market after pricing that could adversely
affect investors who purchase in the offering. As an additional
means of facilitating the offering, the underwriters may bid
for, and purchase, ADSs in the open market to stabilize the
price of the ADSs. The underwriting syndicate may also reclaim
selling concessions allowed to an underwriter or a dealer for
distributing the ADSs in the offering, if the syndicate
repurchases previously distributed ADSs to cover syndicate short
positions or to stabilize the price of the ADSs. These
activities may raise or maintain the market price of the ADSs
above independent market levels or prevent or retard a decline
in the market price of the ADSs. Neither we nor any of the
underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions
described above may have on the price of the ADSs. In addition,
the underwriters are not required to engage in these activities,
and may end any of these activities at any time.
From time to time, certain of the underwriters have provided,
and continue to provide, investment banking and other services
to us, our affiliates and employees, for which they have
received and continue to receive customary fees and commissions.
We have provided and continue to provide, and may in the future
additionally provide, services to affiliates of certain of the
underwriters, in the ordinary course of our business.
Affiliated investment funds of Citigroup Global Markets Inc.,
one of our underwriters, beneficially own indirectly
approximately 1% of our ordinary shares through investments in
one of our shareholders who is selling shares in this offering.
An affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated holds a non-voting equity interest in Warburg
Pincus Partners, LLC, the general partner of Warburg Pincus
Private Equity VIII, L.P. and Warburg Pincus International
Partners, L.P., principal shareholders of our company.
We, the selling shareholders and the underwriters have agreed to
indemnify each other against certain liabilities, including
liabilities under the Securities Act.
The address of Morgan Stanley & Co. International
Limited is 25 Cabot Square, Canary Wharf, London
E14 4QA, United Kingdom. The address of Deutsche Bank
Securities Inc. is 60 Wall Street, New York, New
York 10005, USA. The address of Merrill Lynch, Pierce,
Fenner & Smith Incorporated is 4 World Financial
Center, North Tower, New York, New York 10080, USA. The
address of Citigroup Global Markets Inc. is 388 Greenwich
Street, New York, New York 10013, USA. The address of UBS
Securities LLC is 299 Park Avenue, New York, New
York 10171, USA.
Pricing of the Offering
Prior to this offering, there has been no public market for the
shares or the ADSs. The initial public offering price will be
determined by negotiations among us, the selling shareholders
and the representatives of the underwriters. Among the factors
considered in determining the initial public offering price will
be the future prospects of our company and our industry in
general, our sales, earnings and certain other financial
operating
130
information in recent periods, and the price-earnings ratios,
price-sales ratios, market prices of securities and certain
financial and operating information of companies engaged in
activities similar to those of our company. An active trading
market for the ADSs may not develop. It is also possible that
after the offering the ADSs will not trade in the public market
at or above the initial public offering price.
Electronic Offer, Sale and Distribution of ADSs
In connection with the offering, certain of the underwriters or
securities dealers may distribute prospectuses by electronic
means, such as e-mail.
In addition, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Deutsche Bank Securities Inc. will be
facilitating Internet distribution for this offering to certain
of its Internet subscription customers. Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Deutsche Bank
Securities Inc. intend to allocate a limited number of ADSs for
sale to its online brokerage customers. An electronic prospectus
will be available on the Internet websites maintained by Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Deutsche
Bank Securities Inc. Other than the prospectus in electronic
format, the information on the websites of Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Deutsche Bank
Securities Inc. is not part of this prospectus.
Selling Restrictions
No action has been taken in any jurisdiction (except in the US)
that would permit a public offering of the ADSs, or the
possession, circulation or distribution of this prospectus or
any other material relating to us, the selling shareholders or
the ADSs in any jurisdiction where action for that purpose is
required. Accordingly, the ADSs may not be offered or sold,
directly or indirectly, and neither this prospectus nor any
other offering material or advertisements in connection with the
ADSs may be distributed or published, in or from any country or
jurisdiction except in compliance with any applicable rules and
regulations of any such country or jurisdiction.
Australia. This prospectus is not a disclosure under
Chapter 6D of the Corporations Act 2001 (Cth), or the
Australian Corporations Act, has not been lodged with the
Australian Securities and Investments Commission and does not
purport to include the information required of a disclosure
document under Chapter 6D of the Australian Corporations
Act. Accordingly, (i) the offer of the ADSs under this
prospectus is only made to persons to whom it is lawful to offer
the ADSs without disclosure under Chapter 6D of the
Australian Corporations Act under one or more exemptions set out
in section 708 of the Australian Corporations Act,
(ii) this prospectus is made available in Australia only to
those persons as set forth in clause (i) above, and
(iii) the offeree must be sent a notice stating in
substance that by accepting this offer, the offeree represents
that the offeree is such a person as set forth in
clause (i) above, and, unless permitted under the
Australian Corporations Act, agrees not to sell or offer for
sale within Australia any ADSs sold to the offeree within
12 months after its transfer to the offeree under this
prospectus.
Canada. The distribution of the ADSs in Canada is being
made only on a private placement basis exempt from the
requirement that we prepare and file a prospectus with the
securities regulatory authorities in each province where trades
of the ADSs are made. Any resale of the ADSs in Canada must be
made under applicable securities laws which will vary depending
on the relevant jurisdiction, and which may require resales to
be made under available statutory registration and prospectus
exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the ADSs.
European Economic Area. In relation to each Member State
of the European Economic Area which has implemented the
Prospectus Directive (each, a Relevant Member
State), each underwriter, with effect from and including
the date on which the Prospectus Directive is implemented in
that Relevant Member State, or the Relevant Implementation Date,
has not made and will not make an offer of the ADSs to the
public in that Relevant Member State other than an offer
contemplated in a prospectus in relation to the ADSs which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive,
except that it may, with effect from
131
and including the Relevant Implementation Date, make an offer of
the ADSs to the public in that Relevant Member State at any time:
|
|
(a) |
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities; |
|
(b) |
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than
43,000,000 and
(3) an annual net turnover of more than
50,000,000, as
shown in its last annual or consolidated accounts; |
|
(c) |
by the underwriters to fewer than 100 natural or legal persons
(other than qualified investors as defined in the Prospectus
Directive) subject to obtaining the prior consent of Morgan
Stanley & Co. International Limited, Deutsche Bank
Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated; or |
|
(d) |
in any other circumstances falling within Article 3(2) of
the Prospectus Directive. |
provided that no such offer of ADSs shall result in a
requirement for the publication by us or any underwriter of a
prospectus pursuant to Article 3 of the Prospectus
Directive.
For the purposes of this provision, the expression an
offer of the ADSs to the public in relation to any
of the ADSs in any Relevant Member State means the communication
in any form and by any means of sufficient information on the
terms of the offer and the ADSs to be offered so as to enable an
investor to decide to purchase or subscribe for the ADSs, as the
same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State, and
the expression Prospectus Directive means Directive 2003/71/ EC
and includes any relevant implementing measure in each Relevant
Member State.
The European Economic Area selling restriction is in addition to
any other selling restrictions set forth in this prospectus.
Each person in a Relevant Member State who receives any
communication in respect of, or who acquires any ADSs under, the
offers contemplated in this prospectus will be deemed to have
represented, warranted and agreed to and with each underwriter
and us that:
|
|
(a) |
it is a qualified investor within the meaning of the law in that
Relevant Member State implementing Article 2(1)(e) of the
Prospectus Directive; and |
|
(b) |
in the case of any ADSs acquired by it as a financial
intermediary, as that term is used in Article 3(2) of the
Prospectus Directive, (i) the ADSs acquired by it in the
offer have not been acquired on behalf of, nor have they been
acquired with a view to their offer or resale to, persons in any
Relevant Member State other than qualified investors, as that
term is defined in the Prospectus Directive, or in circumstances
in which the prior consent of Morgan Stanley & Co.
International Limited, Deutsche Bank Securities Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated has been given to
the offer or resale; or (ii) where ADSs have been acquired
by it on behalf of persons in any Relevant Member State other
than qualified investors, the offer of those ADSs to it is not
treated under the Prospectus Directive as having been made to
such persons. |
For the purposes of this representation, the expression an
offer in relation to any ADSs in any Relevant Member
State means the communication in any form and by any means of
sufficient information on the terms of the offer and any ADSs to
be offered so as to enable an investor to decide to purchase or
subscribe for the ADSs, as the same may be varied in that
Relevant Member State by any measure implementing the Prospectus
Directive in that Relevant Member State.
France. No offer or sale of the ADSs is being made,
directly or indirectly, to the public in France and only
qualified investors (Investisseurs Qualifiés) as defined in
and in accordance with
Article L.411-2 of
the French Code Monétaire et Financier, as amended,
and Decree no. 98-880 dated 1 October 1998, as amended,
acting for their own account, are eligible to accept the
offering relating to the ADSs. This prospectus or any other
offering material relating to the Global Offering has not been
and shall not be distributed to the public in France. This
prospectus has not been submitted to the clearance of the
Autorité des marchés financiers.
132
Hong Kong. Each underwriter:
|
|
(a) |
has not offered or sold and will not offer or sell in Hong Kong,
by means of any document, any of the ADSs other than (a) to
professional investors as defined in the Securities
and Futures Ordinance (Cap. 571) of Hong Kong and any rules made
under that Ordinance; or (b) in other circumstances which
do not result in the document being a prospectus as
defined in the Companies Ordinance (Cap. 32) of Hong Kong
or which do not constitute an offer to the public within the
meaning of that Ordinance; and |
|
(b) |
has not issued or does not have in its possession for the
purposes of issue, and will not issue or have in its possession
for the purposes of issue, whether in Hong Kong or elsewhere,
any advertisement, invitation or document relating to the ADSs,
which is directed at or the contents of which are likely to be
accessed or read by, the public of Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other
than with respect of the ADSs which are or are intended to be
disposed of only to persons outside Hong Kong or only to
professional investors as defined in the Securities
and Futures Ordinance (Cap. 571) of Hong Kong and any rules made
under that Ordinance. |
Italy. The offering of the ADSs has not been registered
with the Commissione Nazionale per le Società e la
Borsa, or CONSOB, in accordance with Italian securities
legislation. Accordingly, (i) sales of the ADSs in the
Republic of Italy shall be effected in accordance with all
Italian securities, tax and other applicable laws and
regulations; and (ii) the ADSs have not been offered, sold
or delivered, and will not be offered, sold or delivered, and
copies of this prospectus or any other document relating to the
ADSs have not been distributed in the Republic of Italy unless
such offer, sale or delivery of the ADSs or distribution of
copies of this prospectus or other documents relating to the
ADSs in the Republic of Italy is to qualified investors
(operatori qualificati), as defined by Articles 25
and 31(2) of CONSOB Regulation no. 11522 of 1 July 1998 as
subsequently modified (Regulation 11522), except for
individuals referred to in Article 31(2) of
Regulation 11522 who exercise administrative, managerial or
supervisory functions at a registered securities dealing firm (a
Società di Intermediazione Mobiliare, or SIM),
management companies (società di gestione del
risparmio) authorized to manage individual portfolios on
behalf of third parties and fiduciary companies authorized to
manage individual portfolios pursuant to Article 60(4) of
Legislative Decree no. 415 of 23 July 1996 and copies of this
prospectus may not be reproduced or redistributed or passed on,
directly or indirectly, to any other person or published in
whole or in part. Any offer, sale or delivery of the ADSs or
distribution of copies of this prospectus in Italy must be made
solely by entities which are duly authorized to conduct such
activities in Italy and must be in full compliance with the
provisions contained in Legislative Decree no. 58 of 24 February
1998, Legislative Decree no. 385 of 1 September 1993 and
any other applicable laws and regulations and possible
requirements or limitations which may be imposed by the Italian
competent authorities.
Japan. The ADSs may not be offered or sold, directly or
indirectly, in Japan or to, or for the account of, any resident
of Japan. As used in this paragraph, resident of
Japan means any person residing in Japan, including any
corporation or other entity organized under the laws of Japan.
Jersey. Each underwriter has not offered or sold, and
will not offer or sell, directly or indirectly, in Jersey or for
the account of any resident in Jersey, any of the ADSs.
Korea. Each underwriter has not offered or sold, and will
not offer or sell, directly or indirectly, in South Korea or to
or for the account of any resident of South Korea, any of the
ADSs acquired in connection with the distribution contemplated
by the underwriting agreement except:
|
|
|
in accordance with any exemption from the registration
requirements of the Korean Securities and Exchange Law, and |
|
|
in compliance with applicable provisions of South Korean law,
including, without limitation, the Foreign Exchange Transaction
Law and Regulations. |
The Netherlands. The ADSs may not be offered in the
Netherlands other than (i) to legal entities which are
authorized or regulated to operate in the financial markets or,
if not so authorized or regulated, whose
133
corporate purpose is solely to invest in securities,
(ii) to any legal entity which has two or more of
(1) an average of at least 250 employees during the last
financial year; (2) a total balance sheet of more than
43,000,000 and
(3) an annual net turnover of more than
50,000,000, as
shown in its last annual or consolidated accounts, (iii) to
any legal entity which and any natural person who has asked to
be considered as a professional market party and is registered
pursuant to the Dutch Exemption Regulation
(Vrijstellingsregeling Wte 1995), and (iv) in any
other circumstances which do not require the publication of a
prospectus pursuant to the Dutch Exemption Regulation.
Peoples Republic of China. The ADSs are not, and
will not be, offered or sold, directly or indirectly, in the PRC
(excluding Hong Kong for the purposes of this paragraph).
Singapore. This prospectus has not been registered as a
prospectus with the Monetary Authority of Singapore.
Accordingly, this prospectus and any other document or material
in connection with the offer or sale, or invitation for
subscription or purchase, of the ADSs may not be circulated or
distributed, nor may the ADSs be offered or sold, or be made the
subject of an invitation for subscription or purchase, whether
directly or indirectly, to persons in Singapore other than
(i) to an institutional investor under Section 274 of
the SFA, (ii) to a relevant person, or any person pursuant
to Section 275(lA), and in accordance with the conditions,
specified in Section 275 of the SFA, or
(iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
Where the ADSs are subscribed or purchased under
Section 275 by a relevant person which is:
|
|
(a) |
a corporation (which is not an accredited investor) the sole
business of which is to hold investments and the entire share
capital of which is owned by one or more individuals, each of
whom is an accredited investor; or |
|
(b) |
a trust (where the trustee is not an accredited investor) whose
sole purpose is to hold investments and each beneficiary is an
accredited investor, |
shares, debentures and units of shares and debentures of that
corporation or the beneficiaries rights and interest in
that trust shall not be transferable for six months after that
corporation or that trust has acquired the ADSs under
Section 275 except:
|
|
(1) |
to an institutional investor under Section 274 of the SFA
or to a relevant person, or any person pursuant to
Section 275(1A), and in accordance with the conditions,
specified in Section 275 of the SFA; |
|
(2) |
where no consideration is given for the transfer; or |
|
(3) |
by operation of law. |
United Kingdom. Each underwriter:
|
|
(a) |
is a person whose ordinary activities involve it in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of its business and (ii) has not
offered or sold and will not offer or sell the ADSs other than
to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of their business or who it is
reasonable to expect will acquire, hold, manage or dispose of
investments (as principal or agent) for the purposes of their
businesses where the issue of the ADSs would otherwise
constitute a contravention of Section 19 of the FSMA by us; |
134
|
|
(b) |
has only communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the FSMA) received by it in connection
with the issue or sale of the ADSs in circumstances in which
Section 21(1) of the FSMA does not apply to us; and |
|
(c) |
has complied and will comply with all applicable provisions of
the FSMA with respect to anything done by it in relation to the
ADSs in, from or otherwise involving the UK. |
United Arab Emirates. The ADSs have not been offered or
sold, and will not be offered or sold, directly or indirectly,
in the United Arab Emirates, except (i) in compliance with
all applicable laws and regulations of the United Arab Emirates,
and (ii) through persons or corporate entities authorized
and licensed to provide investment advice and/or engage in
brokerage activity and/or trade in respect of foreign securities
in the United Arab Emirates.
135
LEGAL MATTERS
The validity of the ordinary shares represented by the ADSs
offered by this prospectus will be the subject of a legal
opinion by Mourant du Feu & Jeune, our Jersey counsel.
US securities matters in connection with this offering will be
passed upon by Latham & Watkins LLP, our US counsel,
and certain matters relating to Indian law will be passed upon
in connection with this offering by Amarchand &
Mangaldas & Suresh A. Shroff & Co., our Indian
counsel. Latham & Watkins LLP may rely upon Mourant du
Feu & Jeune and Amarchand &
Mangaldas & Suresh A. Shroff & Co. with
respect to certain matters governed by Jersey and Indian law.
Certain matters in connection with this offering will be passed
upon on behalf of the underwriters by Cleary Gottlieb
Steen & Hamilton LLP, US counsel for the underwriters,
and AZB & Partners, Indian counsel for the
underwriters. Cleary Gottlieb Steen & Hamilton LLP may
rely upon AZB & Partners with respect to certain
matters governed by Indian law.
EXPERTS
The consolidated financial statements of WNS (Holdings) Limited
as of March 31, 2006, 2005 and 2004 and for each of the
three years in the fiscal period ended March 31, 2006
included in this prospectus have been so included in reliance on
the report of Ernst & Young, Express Towers, Nariman
Point, Mumbai, India, independent registered public accounting
firm, given on the authority of said firm as experts in auditing
and accounting.
The consolidated financial statements of Trinity Partners Inc.
as of and for the year ended March 31, 2005 included in
this prospectus have been so included in reliance on the report
of Ernst & Young, Express Towers, Nariman Point,
Mumbai, India, independent auditors, given on the authority of
such firm as experts in auditing and accounting.
Ernst & Young, a member of Ernst & Young
Global, is registered with the Public Company Accounting
Oversight Board. It is not a member of any professional body.
136
ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated in Jersey, Channel Islands. Most of our
directors and executive officers reside outside of the US.
Substantially all of the assets of these persons and
substantially all of our assets are located outside the US. As a
result, it may not be possible for investors to effect service
of process on these persons or us within the US, or to enforce
against these persons or us, either inside or outside the US, a
judgment obtained in a US court predicated upon the civil
liability provisions of the federal securities or other laws of
the US or any state thereof. A judgment of a US court is not
directly enforceable in Jersey, but constitutes a cause of
action which will be enforced by Jersey courts provided that:
|
|
|
the court which pronounced the judgment has jurisdiction to
entertain the case according to the principles recognized by
Jersey law with reference to the jurisdiction of the US courts; |
|
|
the judgment is final and conclusive it cannot be
altered by the courts which pronounced it; |
|
|
there is payable pursuant to the judgment a sum of money, not
being a sum payable in respect of tax or other charges of a like
nature or in respect of a fine or other penalty; |
|
|
the courts of the US have jurisdiction in the circumstances of
the case; |
|
|
the judgment can be enforced by execution in the jurisdiction in
which the judgment is given; |
|
|
the person against whom the judgment is given does not benefit
from immunity under the principles of public international law; |
|
|
there is no earlier judgment in another court between the same
parties on the same issues as are dealt with in the judgment to
be enforced; |
|
|
the judgment was not obtained by fraud, duress and was not based
on a clear mistake of fact; and |
|
|
the recognition and enforcement of the judgment is not contrary
to public policy in Jersey, including observance of the
principles of natural justice which require that documents in
the US proceeding were properly served on the defendant and that
the defendant was given the right to be heard and represented by
counsel in a free and fair trial before an impartial tribunal. |
It is the policy of Jersey courts to award compensation for the
loss or damage actually sustained by the person to whom the
compensation is awarded. Although the award of punitive damages
is generally unknown to the Jersey legal system, that does not
mean that awards of punitive damages are not necessarily
contrary to public policy. Whether a judgment was contrary to
public policy depends on the facts of each case. Exorbitant,
unconscionable, or excessive awards will generally be contrary
to public policy. Moreover, if a US court gives a judgment for
multiple damages against a qualifying defendant the amount which
may be payable by such defendant may be limited by virtue of the
Protection of Trading Interests Act 1980, an Act of the UK
extended to Jersey by the Protection of Trading Interests Act
1980 (Jersey) Order, 1983, which provides that such qualifying
defendant may be able to recover such amount paid by it as
represents the excess of such multiple damages over the sum
assessed as compensation by the court that gave the judgment. A
qualifying defendant for these purposes is a citizen
of the UK and Colonies, a body corporate incorporated in the UK,
Jersey or other territory for whose international relations the
United Kingdom is responsible or a person carrying on business
in Jersey.
Jersey courts cannot enter into the merits of the foreign
judgment and cannot act as a court of appeal or review over the
foreign courts. It is doubtful whether an original action based
on US federal securities laws can be brought before Jersey
courts. A plaintiff who is not resident in Jersey may be
required to provide security for costs in the event of
proceedings being initiated in Jersey.
We have appointed our operating subsidiary, WNS North America
Inc., as our agent to receive service of process with respect to
any action brought against us in the US District Court for the
Southern District of New York under the federal securities laws
of the US or of any state in the US or any action brought
against us in the Supreme Court of the State of New York in the
County of New York under the securities laws of the State of New
York.
137
Mourant du Feu & Jeune, our counsel as to Jersey law,
and Amarchand & Mangaldas & Suresh A.
Shroff & Co., our counsel as to Indian law, have
advised us that there is uncertainty as to whether the courts of
Jersey and India would:
|
|
|
recognize or enforce judgments of US courts obtained against us
or our directors or officers predicated upon the civil liability
provisions of the securities laws of the US or any state in the
US; or |
|
|
entertain original actions brought in each respective
jurisdiction against us or our directors or officers predicated
upon the securities laws of the US or any state in the US. |
Section 44A of the Code of Civil Procedure, 1908 (India),
or the Civil Code, as amended, provides that where a foreign
judgment has been rendered by a superior court in any country or
territory outside India which the Indian government has by
notification declared to be a reciprocating territory, such
foreign judgment may be enforced in India by proceedings in
execution as if the judgment had been rendered by the relevant
superior court in India. Section 44A of the Civil Code is
applicable only to monetary decrees not being in the nature of
amounts payable in respect of taxes or other charges of a
similar nature or in respect of fines or other penalties and
does not include arbitration awards. The US has not been
declared by the Indian government to be a reciprocating
territory for the purposes of Section 44A.
Amarchand & Mangaldas & Suresh A.
Shroff & Co., our counsel as to India laws has advised
us that a judgment of a foreign court may be enforced in India
only by a suit upon the judgment, subject to Section 13 of
the Civil Code and not by proceedings in execution. This
section, which is the statutory basis for the recognition of
foreign judgments, states that a foreign judgment is conclusive
as to any matter directly adjudicated upon except:
|
|
|
where the judgment has not been pronounced by a court of
competent jurisdiction; |
|
|
where the judgment has not been given on the merits of the case; |
|
|
where the judgment appears on the face of the proceedings to be
founded on an incorrect view of international law or a refusal
to recognize the law of India in cases where such law is
applicable; |
|
|
where the proceedings in which the judgment was obtained were
opposed to natural justice; |
|
|
where the judgment has been obtained by fraud; or |
|
|
where the judgment sustains a claim founded on a breach of any
law in force in India. |
The suit must be brought in India within three years from the
date of the judgment in the same manner as any other suit filed
to enforce a civil liability in India. Generally, there are
considerable delays in the disposal of suits by Indian courts.
It is unlikely that a court in India would award damages on the
same basis as a foreign court if an action is brought in India.
Furthermore, it is unlikely that an Indian court would enforce
foreign judgments if it viewed the amount of damages awarded as
excessive or inconsistent with Indian practice. A party seeking
to enforce a foreign judgment in India is required to obtain
prior approval from the Reserve Bank of India under the Indian
Foreign Exchange Management Act, 1999, to repatriate any amount
recovered pursuant to such execution. Any judgment in a foreign
currency would be converted into Indian rupees on the date of
judgment and not on the date of payment.
138
ADDITIONAL INFORMATION
We have filed with the Commission a registration statement on
Form F-1 with
respect to the ADSs and underlying ordinary shares being sold in
this offering. This prospectus constitutes a part of that
registration statement. This prospectus does not contain all the
information set forth in the registration statement and the
exhibits and schedules to the registration statement, because
some parts have been omitted in accordance with the rules and
regulations of the Commission. A related registration statement
on Form F-6 has
also been filed to register our ADSs as represented by the ADRs.
For further information with respect to us and our ADSs being
sold in this offering, you should refer to the registration
statement and the exhibits and schedules filed as part of the
registration statement. Statements contained in this prospectus
regarding the contents of any agreement, contract or other
document referred to are not necessarily complete; reference is
made in each instance to the copy of the contract or document
filed as an exhibit to the registration statement. You may
inspect a copy of the registration statement without charge at
the Commissions principal office in Washington, D.C.
Copies of all or any part of the registration statement may be
obtained after payment of fees prescribed by the Commission from
the Commissions Public Reference Room at the
Commissions principal office, 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information
regarding the operation of the Public Reference Room by calling
the Commission at
1-800-SEC-0330.
The Commission maintains a website at www.sec.gov that
contains reports, proxy and information statements and other
information regarding registrants that make electronic filings
through its Electronic Data Gathering, Analysis, and Retrieval,
or EDGAR, system. We have made all our filings with the
Commission using the EDGAR system.
Upon the completion of this offering, we will be subject to the
information requirements of the Exchange Act applicable to
foreign private issuers, which are different from the
requirements applicable to domestic US issuers. As a
foreign private issuer, we will be required to file reports,
including annual reports on
Form 20-F, reports
on Form 6-K and
other information with the Commission. We intend to submit to
the Commission quarterly reports on
Form 6-K, which
will include unaudited quarterly financial information, for the
first three quarters of each fiscal year, in addition to our
annual report on
Form 20-F which
will include audited annual financial information.
As a foreign private issuer, we are exempt from the rules under
the Exchange Act governing the furnishing and content of proxy
statements, and our directors, senior management and principal
shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of
the Exchange Act.
A copy of this document has been delivered to the Registrar
of Companies in accordance with Article 5 of the Companies
(General Provisions) (Jersey) Order 1992, as amended, and he has
given, and has not withdrawn, his consent to its circulation.
The Jersey Financial Services Commission has given, and has not
withdrawn, its consent under Article 2 of the Control of
Borrowing (Jersey) Order 1958, as amended, to the issue of
shares by WNS (Holdings) Limited. In giving these consents,
neither the Registrar of Companies nor the JFSC takes any
responsibility for the financial soundness of WNS (Holdings)
Limited or for the correctness of any statements made, or
opinions expressed, with regard to it. The JFSC is protected by
the Control of Borrowing (Jersey) Law 1947 against liability
arising from the discharge of its functions under that law.
139
The directors of WNS (Holdings) Limited whose names appear on
the signature pages of the registration statement of which this
prospectus is a part accept responsibility for the information
contained in this document. To the best of the knowledge and
belief of the directors of WNS (Holdings) Limited (who have
taken all reasonable care to ensure that such is the case), the
information contained in this document is in accordance with the
facts and does not omit anything likely to affect the import of
such information. Each of the directors of WNS (Holdings)
Limited accepts responsibility accordingly.
Nothing in this prospectus or anything communicated to
holders or potential holders of the ordinary shares or ADSs is
intended to constitute or should be construed as advice on the
merits of the purchase of or subscription for the ADSs or the
exercise of any rights attached thereto for the purposes of the
Financial Services (Jersey) Law 1998, as amended.
Any information supplied by you or on your behalf or derived in
the processing of any application made by you for ADSs may be
used by the Underwriters, the Depositary or us and/or disclosed
to their or our agents or advisers in connection with this
offering, for maintaining the shareholder register and the ADS
holders register, and communicating with shareholders or
holders of ADSs. For the purposes of the Data Protection
(Jersey) Law 2005, as amended or modified from time to time, by
applying for ADSs you will be deemed to agree and consent to the
use and disclosure of this information as aforesaid.
In any Member State of the European Economic Area that has
implemented the Prospectus Directive (each such member state, a
Relevant Member State), this communication is only
addressed to and is only directed at qualified investors in that
Relevant Member State within the meaning of the Prospectus
Directive.
This prospectus has been prepared on the basis that all offers
of ADSs in a Relevant Member State, other than an offer
contemplated in a prospectus in relation to the ADSs which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive,
will be made pursuant to an exemption under the Prospectus
Directive, as implemented in Relevant Member States, from the
requirement to produce a prospectus for offers of ADSs.
Accordingly, any person making or intending to make any offer
within the European Economic Area of ADSs which are the subject
of the offer contemplated in this prospectus should only do so
in circumstances in which no obligation arises for us or any of
the underwriters to produce a prospectus for such offer. Neither
we nor the underwriters have authorized, nor do we or they
authorize, the making of any offer of ADSs through any financial
intermediary, other than offers made by the underwriters which
constitute the final placement of ADSs contemplated in this
prospectus.
140
INDEX TO WNS (HOLDINGS) LIMITEDS CONSOLIDATED
FINANCIAL STATEMENTS
|
|
|
|
|
Consolidated Financial Statements
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
F-3 |
|
|
|
|
F-4 |
|
|
|
|
F-5 |
|
|
|
|
F-6 |
|
|
|
|
F-7 |
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
WNS (Holdings) Limited
We have audited the accompanying consolidated balance sheets of
WNS (Holdings) Limited as of March 31, 2006 and 2005,
and the related consolidated statements of operations,
shareholders equity, and cash flows for each of the three
years in the period ended March 31, 2006. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of WNS (Holdings) Limited at March 31,
2006 and 2005, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended March 31, 2006, in conformity with United States
generally accepted accounting principles.
ERNST & YOUNG
Mumbai, India
May 24, 2006
F-2
WNS (HOLDINGS) LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
18,549 |
|
|
$ |
9,099 |
|
|
Accounts receivable, net of allowance of $373 and $284,
respectively
|
|
|
25,976 |
|
|
|
22,702 |
|
|
Accounts receivable related parties
|
|
|
2,105 |
|
|
|
2,533 |
|
|
Funds held for clients
|
|
|
3,047 |
|
|
|
4,222 |
|
|
Employee receivables
|
|
|
922 |
|
|
|
779 |
|
|
Prepaid expenses
|
|
|
1,225 |
|
|
|
1,317 |
|
|
Prepaid income taxes
|
|
|
2,488 |
|
|
|
2,374 |
|
|
Deferred tax assets
|
|
|
353 |
|
|
|
432 |
|
|
Other current assets
|
|
|
2,730 |
|
|
|
536 |
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
57,395 |
|
|
|
43,994 |
|
Goodwill
|
|
|
33,774 |
|
|
|
26,550 |
|
Intangible assets, net
|
|
|
8,713 |
|
|
|
151 |
|
Property and equipment, net
|
|
|
30,623 |
|
|
|
24,670 |
|
Deposits
|
|
|
2,990 |
|
|
|
1,892 |
|
Deferred tax assets
|
|
|
1,308 |
|
|
|
722 |
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$ |
134,803 |
|
|
$ |
97,979 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
22,238 |
|
|
$ |
22,392 |
|
|
Accounts payable related parties
|
|
|
836 |
|
|
|
574 |
|
|
Note payable
|
|
|
|
|
|
|
10,000 |
|
|
Accrued employee costs
|
|
|
11,336 |
|
|
|
3,707 |
|
|
Deferred revenue
|
|
|
8,994 |
|
|
|
11,478 |
|
|
Income taxes payable
|
|
|
726 |
|
|
|
301 |
|
|
Obligation under capital leases current
|
|
|
184 |
|
|
|
315 |
|
|
Deferred tax liabilities
|
|
|
368 |
|
|
|
317 |
|
|
Other current liabilities
|
|
|
8,781 |
|
|
|
5,744 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
53,463 |
|
|
|
54,828 |
|
Obligation under capital leases non current
|
|
|
2 |
|
|
|
200 |
|
Deferred rent
|
|
|
824 |
|
|
|
|
|
Deferred tax liabilities non current
|
|
|
2,350 |
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
Ordinary shares, $0.15 (10 pence) par value Authorized:
40,000,000 shares,
|
|
|
|
|
|
|
|
|
|
Issued and outstanding: 35,321,511 and 31,194,553 shares,
respectively
|
|
|
5,290 |
|
|
|
4,585 |
|
|
Additional paid-in-capital
|
|
|
62,228 |
|
|
|
43,522 |
|
|
Ordinary shares subscribed: 4,346 and 82,333 shares, respectively
|
|
|
10 |
|
|
|
157 |
|
|
Retained earnings (accumulated deficit)
|
|
|
4,104 |
|
|
|
(14,225 |
) |
|
Deferred share-based compensation
|
|
|
(582 |
) |
|
|
(288 |
) |
|
Accumulated other comprehensive income
|
|
|
7,114 |
|
|
|
9,200 |
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
78,164 |
|
|
|
42,951 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$ |
134,803 |
|
|
$ |
97,979 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
WNS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third parties
|
|
$ |
186,500 |
|
|
$ |
144,666 |
|
|
$ |
86,805 |
|
|
Related parties
|
|
|
16,309 |
|
|
|
17,507 |
|
|
|
17,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202,809 |
|
|
|
162,173 |
|
|
|
104,058 |
|
Cost of revenue (a)(b)
|
|
|
145,730 |
|
|
|
140,254 |
|
|
|
89,659 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
57,079 |
|
|
|
21,919 |
|
|
|
14,399 |
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses (a)(b)
|
|
|
36,347 |
|
|
|
24,887 |
|
|
|
18,825 |
|
|
Amortization of intangible assets
|
|
|
856 |
|
|
|
1,416 |
|
|
|
2,600 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
19,876 |
|
|
|
(4,384 |
) |
|
|
(7,026 |
) |
Other income, net (a)
|
|
|
456 |
|
|
|
172 |
|
|
|
324 |
|
Interest expense
|
|
|
(429 |
) |
|
|
(496 |
) |
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
19,903 |
|
|
|
(4,708 |
) |
|
|
(6,761 |
) |
(Provision) benefit for income taxes
|
|
|
(1,574 |
) |
|
|
(1,068 |
) |
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
18,329 |
|
|
$ |
(5,776 |
) |
|
$ |
(6,720 |
) |
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
$ |
0.56 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
Diluted income (loss) per share
|
|
|
0.52 |
|
|
|
(0.19 |
) |
|
|
(0.22 |
) |
(a) |
Includes the following related party amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$ |
1,250 |
|
|
$ |
1,756 |
|
|
$ |
1,279 |
|
|
Selling, general and administrative expenses
|
|
|
481 |
|
|
|
402 |
|
|
|
291 |
|
|
Other income
|
|
|
250 |
|
|
|
|
|
|
|
|
|
(b) |
Includes the following share-based compensation amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$ |
127 |
|
|
$ |
35 |
|
|
$ |
34 |
|
|
Selling, general and administrative expenses
|
|
|
1,795 |
|
|
|
204 |
|
|
|
171 |
|
See accompanying notes.
F-4
WNS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
YEARS ENDED MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained | |
|
|
|
Accumulated | |
|
|
|
|
Ordinary shares | |
|
Additional | |
|
Ordinary | |
|
earnings | |
|
Deferred | |
|
other | |
|
Total | |
|
|
| |
|
paid-in- | |
|
shares | |
|
(accumulated | |
|
share-based | |
|
comprehensive | |
|
shareholders | |
|
|
Number | |
|
Par value | |
|
capital | |
|
subscribed | |
|
deficit) | |
|
compensation | |
|
income | |
|
equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Balance at April 1, 2003
|
|
|
30,795,888 |
|
|
$ |
4,510 |
|
|
$ |
42,447 |
|
|
$ |
|
|
|
$ |
(1,729 |
) |
|
$ |
(290 |
) |
|
$ |
2,481 |
|
|
$ |
47,419 |
|
Stock options exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233 |
|
Stock options forfeited
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Amortization of deferred share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188 |
|
|
|
|
|
|
|
188 |
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,720 |
) |
|
|
|
|
|
|
|
|
|
|
(6,720 |
) |
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,540 |
|
|
|
5,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,180 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2004
|
|
|
30,795,888 |
|
|
|
4,510 |
|
|
|
42,433 |
|
|
|
233 |
|
|
|
(8,449 |
) |
|
|
(88 |
) |
|
|
8,021 |
|
|
|
46,660 |
|
Shares issued for exercised options
|
|
|
398,665 |
|
|
|
75 |
|
|
|
667 |
|
|
|
(233 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
509 |
|
Stock options exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157 |
|
Stock options forfeited
|
|
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
Deferred share-based compensation
|
|
|
|
|
|
|
|
|
|
|
429 |
|
|
|
|
|
|
|
|
|
|
|
(429 |
) |
|
|
|
|
|
|
|
|
Amortization of deferred share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222 |
|
|
|
|
|
|
|
222 |
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,776 |
) |
|
|
|
|
|
|
|
|
|
|
(5,776 |
) |
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
|
|
1,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2005
|
|
|
31,194,553 |
|
|
|
4,585 |
|
|
|
43,522 |
|
|
|
157 |
|
|
|
(14,225 |
) |
|
|
(288 |
) |
|
|
9,200 |
|
|
|
42,951 |
|
Shares issued for exercised options
|
|
|
1,710,936 |
|
|
|
286 |
|
|
|
2,901 |
|
|
|
(157 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,030 |
|
Shares issued to a Director
|
|
|
150,000 |
|
|
|
26 |
|
|
|
876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
902 |
|
Shares issued for acquisition of Trinity Partners Inc.
|
|
|
2,266,022 |
|
|
|
393 |
|
|
|
13,354 |
|
|
|
|
|
|
|
|
|
|
|
(635 |
) |
|
|
|
|
|
|
13,112 |
|
Stock options exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Stock options forfeited
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
Deferred share-based compensation
|
|
|
|
|
|
|
|
|
|
|
166 |
|
|
|
|
|
|
|
|
|
|
|
(166 |
) |
|
|
|
|
|
|
|
|
Purchase of immature shares and modification of options
|
|
|
|
|
|
|
|
|
|
|
1,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,460 |
|
Amortization of deferred share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
456 |
|
|
|
|
|
|
|
456 |
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,329 |
|
|
|
|
|
|
|
|
|
|
|
18,329 |
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,086 |
) |
|
|
(2,086 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2006
|
|
|
35,321,511 |
|
|
$ |
5,290 |
|
|
$ |
62,228 |
|
|
$ |
10 |
|
|
$ |
4,104 |
|
|
$ |
(582 |
) |
|
$ |
7,114 |
|
|
$ |
78,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
WNS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
18,329 |
|
|
$ |
(5,776 |
) |
|
$ |
(6,720 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
11,308 |
|
|
|
9,857 |
|
|
|
7,949 |
|
|
|
Share-based compensation
|
|
|
1,922 |
|
|
|
239 |
|
|
|
205 |
|
|
|
Amortization of deferred financing cost
|
|
|
125 |
|
|
|
15 |
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
101 |
|
|
|
69 |
|
|
|
(104 |
) |
|
|
Gain on sale of property and equipment
|
|
|
(32 |
) |
|
|
|
|
|
|
(76 |
) |
|
|
Deferred income taxes
|
|
|
(1,028 |
) |
|
|
(71 |
) |
|
|
(324 |
) |
|
|
Changes in operating assets and liabilities, net of effect of
acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,976 |
) |
|
|
(8,687 |
) |
|
|
(4,859 |
) |
|
|
|
Other current assets
|
|
|
628 |
|
|
|
(503 |
) |
|
|
(2,813 |
) |
|
|
|
Deposits
|
|
|
(1,067 |
) |
|
|
(779 |
) |
|
|
(569 |
) |
|
|
|
Accounts payable
|
|
|
(290 |
) |
|
|
(1,990 |
) |
|
|
12,221 |
|
|
|
|
Deferred revenue
|
|
|
(2,193 |
) |
|
|
5,887 |
|
|
|
5,012 |
|
|
|
|
Other current liabilities
|
|
|
10,019 |
|
|
|
3,560 |
|
|
|
1,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
34,846 |
|
|
|
1,821 |
|
|
|
11,597 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, net of cash acquired
|
|
|
(3,862 |
) |
|
|
|
|
|
|
(778 |
) |
|
Purchase of property and equipment (See Note 12)
|
|
|
(14,893 |
) |
|
|
(18,267 |
) |
|
|
(8,735 |
) |
|
Proceeds from sale of property and equipment
|
|
|
77 |
|
|
|
|
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(18,678 |
) |
|
|
(18,267 |
) |
|
|
(9,425 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares issued and subscribed
|
|
|
3,942 |
|
|
|
666 |
|
|
|
233 |
|
|
Principal payments under capital leases
|
|
|
(299 |
) |
|
|
(372 |
) |
|
|
(296 |
) |
|
Proceeds from note payable, net of financing cost
|
|
|
|
|
|
|
9,860 |
|
|
|
|
|
|
Repayment of note payable
|
|
|
(10,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(6,357 |
) |
|
|
10,154 |
|
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(361 |
) |
|
|
566 |
|
|
|
651 |
|
Net change in cash and cash equivalents
|
|
|
9,450 |
|
|
|
(5,726 |
) |
|
|
2,760 |
|
Cash and cash equivalents at beginning of year
|
|
|
9,099 |
|
|
|
14,825 |
|
|
|
12,065 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$ |
18,549 |
|
|
$ |
9,099 |
|
|
$ |
14,825 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
440 |
|
|
$ |
424 |
|
|
$ |
4 |
|
|
Cash paid (refund) for income taxes
|
|
|
2,288 |
|
|
|
(749 |
) |
|
|
988 |
|
|
Assets acquired under capital leases
|
|
|
|
|
|
|
115 |
|
|
|
598 |
|
|
Shares issued for the acquisition of Trinity Partners Inc.
|
|
|
13,747 |
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
|
|
1. |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
WNS (Holdings) Limited (WNS Holdings) along with its
wholly-owned subsidiaries, is a global Business Process
Outsourcing (BPO) company with client service
offices in New York (US), London (UK) and delivery centers
in Ipswich (UK), Tucson (US), India and Sri Lanka. The
Companys clients are primarily in the travel, banking,
financial services and insurance industries. WNS Holdings is
incorporated in Jersey, Channel Islands and is controlled by the
Warburg Pincus Group.
|
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying consolidated financial statements include the
accounts of WNS Holdings and its wholly-owned subsidiaries (the
Company) and are prepared in accordance with United
States generally accepted accounting principles
(US GAAP). All significant inter-company
balances and transactions have been eliminated upon
consolidation. An acquired business is included in the
Companys Consolidated Statement of Operations with effect
from the date of the acquisition.
The Company uses the United States Dollar ($) as its
reporting currency.
The preparation of financial statements in accordance with US
GAAP requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
|
|
|
Foreign currency translation |
The Companys foreign operations use their respective local
currency as their functional currency. Accordingly, assets and
liabilities of foreign subsidiaries are translated into $ at
exchange rates in effect at the balance sheet date, while
revenue and expenses are translated at average exchange rates
prevailing during the year. Translation adjustments are reported
as a component of accumulated other comprehensive income
(loss) in shareholders equity.
Foreign currency denominated assets and liabilities are
translated into the functional currency at exchange rates in
effect at balance sheet date. Foreign currency transaction gains
and losses are recorded in the Consolidated Statement of
Operations within other income.
Business Process Outsourcing services comprise back office
administration, data management, contact center management and
auto claims handling services provided by subsidiaries in India,
Sri Lanka, United States and the United Kingdom. Depending on
the terms of the arrangement, revenue from back office
administration, data management and contact center management is
recognized on a per employee, per transaction or cost-plus
basis. Revenue is only recognized when persuasive evidence of an
arrangement exists, services have been rendered, the fee is
determinable and collectibility is reasonably assured. Amounts
billed or payments received, where all the conditions for
revenue recognition have not been met, are recorded as deferred
revenue and are recognized as revenue when all recognition
criteria have been met. However, the costs related to the
performance of such work are recognized in the period the
services are rendered.
The Company has certain minimum commitment arrangements, that
provide for a minimum revenue commitment on an annual basis or a
cumulative basis over multiple years, stated in terms of annual
minimum
F-7
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
amounts. Where a minimum commitment is specific to an annual
period, any revenue shortfall is invoiced and recognized at the
end of this period. When the shortfall in a particular year can
be offset with revenues received in excess of minimum
commitments in a subsequent year, the Company recognizes
deferred revenue for the shortfall which has been invoiced and
received. To the extent the Company has sufficient experience to
conclude that the shortfall will not be satisfied by excess
revenues in a subsequent period, the deferred revenue will be
recorded as revenue in that period. In order to determine
whether the Company has sufficient experience, the Company
considers several factors which include (i) the historical
volume of business done with a client as compared with initial
projections of volume as agreed to by the client and the
Company, (ii) the length of time for which the Company has
such historical experience, (iii) future volume expected
based on projections received from the client, and (iv) the
Companys internal expectations of ongoing volume with the
client. Otherwise the deferred revenue will remain until such
time when the Company can conclude that it will not receive
revenues in excess of the minimum commitment.
Revenue includes reimbursements of out-of-pocket expenses, with
the corresponding out of pocket expenses included in cost of
revenue.
Auto claims handling services include claims handling and
administration (Claims Handling) and arranging for
repairs with repair centers across the United Kingdom and the
related payment processing for such repairs (Accident
Management). With respect to Claims Handling, the Company
receives fees either on a per-claim basis or over a contract
period. Revenue is recognized over the estimated processing
period, which generally ranges from two to six months or on a
straight line basis over the period of the contract. In certain
cases, the fee is contingent upon the successful recovery of a
claim by the customer. In these circumstances, the revenue is
deferred until the contingency is resolved.
In order to provide Accident Management services, the Company
arranges for the repair through a network of repair centers. The
repair costs are invoiced to customers. In determining whether
the receipt from the customers related to payments to repair
centers should be recognized as revenue, the Company considers
the criteria established by EITF
No 99-19,
Reporting Revenue Gross as a Principal versus Net as an
Agent. When the Company determines that it is the
principal in providing Accident Management services, amounts
received from customers are recognized and presented as third
party revenue and the payments to repair centers are recognized
as cost of revenue in the Consolidated Statement of Operations.
Factors considered in determining whether the Company is the
principal in the transaction include whether (i) the
Company is the primary obligor, (ii) the Company negotiates
labor rates with repair centers, (iii) the Company
determines which repair center should be used, (iv) the
Company is responsible for timely and satisfactory completion of
repairs, and (v) the Company bears the risk that the
customer may not pay for the services provided (credit risk). If
there are circumstances where the above criteria are not met and
therefore the Company is not the principal in providing Accident
Management services, amounts received from customers would be
presented net of payments to repair centers in the Consolidated
Statement of Operations. Third party revenue also includes
referral fees from repair centers.
Cost
of revenue
Cost of revenue includes payments to repair centers, salaries
and related expenses, facilities costs including depreciation
and amortization on leasehold improvements, communication
expenses and out-of-pocket expenses.
Cost of revenue during a transfer period which includes process
set up, training, systems transfer and other personnel costs are
recognized as incurred.
F-8
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
In January 2004, WNS entered into a seven-year contract with a
new customer to outsource their back-office and contact center
operations. The contract contemplated a transfer period of
approximately one year during which the customers
resources were available to WNS. The cost of such
customers resources during the transfer period,
aggregating to $19,159 and $7,714 during the years ended
March 31, 2005 and 2004, respectively, is included in cost
of revenue.
Cash
and cash equivalents
The Company considers all highly liquid investments with an
initial maturity of up to three months to be cash equivalents.
Funds
held for clients
Some of the Companys agreements allow the Company to
temporarily hold funds on behalf of the client. The funds are
segregated from the Companys funds and there is usually a
short period of time between when the Company receives these
funds from an insurance company and when the clients are paid.
Accounts
receivable
Accounts receivable represent trade receivables, net of an
allowance for doubtful accounts. The allowance for doubtful
accounts represents the Companys best estimate of
receivables that are doubtful of recovery, based on a specific
identification basis.
The changes in the allowance for doubtful accounts for the years
ended March 31, 2006, 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Balance at the beginning of the year
|
|
$ |
284 |
|
|
$ |
210 |
|
|
$ |
277 |
|
Charged to operations
|
|
|
134 |
|
|
|
217 |
|
|
|
123 |
|
Write-off, net of collections
|
|
|
(20 |
) |
|
|
(83 |
) |
|
|
(227 |
) |
Reversal
|
|
|
(13 |
) |
|
|
(65 |
) |
|
|
|
|
Translation adjustment
|
|
|
(12 |
) |
|
|
5 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
$ |
373 |
|
|
$ |
284 |
|
|
$ |
210 |
|
|
|
|
|
|
|
|
|
|
|
Deferred
offering costs
Deferred offering costs related to a proposed initial public
offering of the Companys ordinary shares amounted to
$1,730 through the balance sheet date and is included in other
current assets. Accrued offering costs of an equivalent amount
is included in other current liabilities.
F-9
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
Property
and equipment
Property and equipment, which include amounts recorded under
capital leases, are recorded at cost. Depreciation and
amortization are computed using the straight-line method over
the estimated useful lives of the assets, which are as follows:
|
|
|
Asset description |
|
Asset life (in years) |
|
|
|
Computers and software
|
|
3 |
Furniture, fixtures and office equipment
|
|
4-5 |
Vehicles
|
|
3 |
Leasehold improvements
|
|
Lesser of estimated useful life or lease term |
Advances paid towards the acquisition of property and equipment
and the cost of property and equipment not put to use before the
balance sheet date are disclosed under the caption capital
work-in-progress in Note 4.
Property and equipment are reviewed for impairment if indicators
of impairment arise. The evaluation of impairment is based upon
a comparison of the carrying amount of the property and
equipment to the estimated future undiscounted net cash flows
expected to be generated by the property and equipment. If
estimated future undiscounted cash flows are less than the
carrying amount of the property and equipment, the asset is
considered impaired. The impairment expense is determined by
comparing the estimated fair value of the property and equipment
to its carrying value, with any shortfall from fair value
recognized as an expense in the current period.
|
|
|
Goodwill and intangible assets |
Goodwill is not amortized but is reviewed for impairment
annually or more frequently if indicators arise. The evaluation
is based upon a comparison of the estimated fair value of the
reporting unit to which the goodwill has been assigned to the
sum of the carrying value of the assets and liabilities for that
reporting unit. The fair values used in this evaluation are
estimated based upon discounted future cash flow projections for
the reporting unit. These cash flow projections are based upon a
number of estimates and assumptions.
Intangible assets are initially valued at fair market value
using generally accepted valuation methods appropriate for the
type of intangible assets. Intangible assets with definite lives
are amortized over the estimated useful lives and are reviewed
for impairment, if indicators of impairment arise. The
evaluation of impairment is based upon a comparison of the
carrying amount of the intangible asset to the estimated future
undiscounted net cash flows expected to be generated by the
asset. If estimated future undiscounted cash flows are less than
the carrying amount of the asset, the asset is considered
impaired. The impairment expense is determined by comparing the
estimated fair value of the intangible asset to its carrying
value, with any shortfall from fair value recognized as an
expense in the current period. Amortization of the
Companys definite lived intangible assets is computed
using the straight-line method over the estimated useful lives
of the assets, which are as follows:
|
|
|
|
|
Asset description |
|
Asset life (in months) | |
|
|
| |
Customer related intangibles
|
|
|
24-60 |
|
Know-how
|
|
|
24 |
|
Covenant not-to-compete
|
|
|
24 |
|
F-10
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
The Company applies the asset and liability method of accounting
for income taxes as described in Statement of Financial
Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under this
method, deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using tax rates expected to apply to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date. Valuation allowances are recognized to reduce the deferred
tax assets to an amount that is more likely than not to be
realized. In assessing the likelihood of realization, management
considers estimates of future taxable income.
The Company evaluates potential exposures related to tax
contingencies or claims made by the tax authorities in various
jurisdictions and determines if a reserve is required.
|
|
|
Defined contribution plans |
Eligible employees of the Company in India receive benefits from
a Provident Fund, administered by the Government of India, which
is a defined contribution plan. Both the employees and the
Company make monthly contributions to the Provident Fund equal
to a specified percentage of the eligible employees salary.
Eligible United States employees of the Company participate in a
savings plan (the Plan) under Section 401(k) of
the United States Internal Revenue Code (the Code).
The Plan allows for employees to defer a portion of their annual
earnings on a pre-tax basis through voluntary contributions to
the Plan. The Plan provides that the Company can make optional
contributions up to the maximum allowable limit under the Code.
Eligible United Kingdom employees of the Company contribute to a
defined contribution pension scheme operated in the United
Kingdom. The assets of the scheme are held separately from those
of the Company in an independently administered fund. The
pension expense represents contributions payable to the fund by
the Company.
The Company has no further obligation under defined contribution
plans beyond the contributions made to the plan. Contributions
are charged to income in the year in which they accrue and are
included in the Consolidated Statement of Operations.
Defined
benefit plan
Employees in India are entitled to benefits under the Payment of
Gratuity Act 1972, a defined benefit retirement plan covering
eligible employees of the Company. The plan provides for a
lump-sum payment to eligible employees at retirement, death,
incapacitation or on termination of employment, of an amount
based on the respective employees salary and tenure of
employment subject to a maximum of approximately $8 per employee.
The Company makes contributions to a fund administered and
managed by the Life Insurance Corporation of India
(LIC) to fund the gratuity liability of an Indian
subsidiary while the other Indian subsidiaries have unfunded
gratuity obligations. Under this scheme, the obligation to pay
gratuity remains with the Company, although LIC administers the
scheme. The gratuity liability and net periodic gratuity cost
has been actuarially determined after considering discount
rates, expected long term return on plan assets and increases in
F-11
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
compensation levels. Differences between the amount paid to LIC
and the net periodic gratuity cost is recorded as a prepaid
(accrued) pension cost.
Advertising
costs
Advertising costs are expensed as incurred and are included in
selling, general and administrative expenses. Advertising costs
for the years ended March 31, 2006, 2005 and 2004 were
$1,013, $544 and $252, respectively.
Earnings
per share
Basic income (loss) per share is computed using the
weighted-average number of ordinary shares outstanding during
the year. Diluted income (loss) per share is computed by
considering the impact of the potential issuance of ordinary
shares, using the treasury stock method, on the weighted average
number of shares outstanding. As the Company was in a loss
position for the years ended March 31, 2005 and 2004, the
potential ordinary shares were excluded from the calculation of
diluted income (loss) per share as the shares would have had an
anti-dilutive effect.
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
18,329 |
|
|
$ |
(5,776 |
) |
|
$ |
(6,720 |
) |
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average ordinary shares outstanding
|
|
|
32,874,299 |
|
|
|
30,969,658 |
|
|
|
30,795,888 |
|
|
Dilutive impact of stock options
|
|
|
2,155,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average ordinary shares outstanding
|
|
|
35,029,766 |
|
|
|
30,969,658 |
|
|
|
30,795,888 |
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
The Company uses the intrinsic value method of accounting
prescribed by the Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations including
Financial Accounting Standards Board (FASB)
Interpretation 44, Accounting for Certain
Transactions involving Stock Compensation, an
interpretation of APB Opinion 25, to account for its
employee share-based compensation plan. Under this method,
compensation expense is recorded over the vesting period of the
option, if the fair market value of the underlying stock exceeds
the exercise price at the measurement date, which typically is
the grant date.
The Company has provided pro forma disclosures as required by
SFAS No. 123, Accounting for Stock-Based
Compensation and SFAS 148, Accounting
for Stock-Based Compensation Transition and
Disclosure. Had compensation cost been determined in a
manner consistent with the fair value approach described in
F-12
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
SFAS No. 123, the Companys net income (loss) and
net income (loss) per share as reported would have changed to
amounts indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Net income (loss) as reported
|
|
$ |
18,329 |
|
|
$ |
(5,776 |
) |
|
$ |
(6,720 |
) |
Add: Share-based employee compensation expense included in
reported net income (loss), net of related tax effects
|
|
|
1,709 |
|
|
|
239 |
|
|
|
205 |
|
Less: Share-based employee compensation expense determined based
on the fair value of the options, net of related tax effects
|
|
|
(1,422 |
) |
|
|
(1,229 |
) |
|
|
(812 |
) |
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$ |
18,616 |
|
|
$ |
(6,766 |
) |
|
$ |
(7,327 |
) |
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
0.56 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
|
Pro forma
|
|
|
0.57 |
|
|
|
(0.22 |
) |
|
|
(0.24 |
) |
Diluted income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
0.52 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
|
Pro forma
|
|
|
0.53 |
|
|
|
(0.22 |
) |
|
|
(0.24 |
) |
The fair value of options was determined using the minimum value
method with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Risk free interest rate
|
|
|
7 |
% |
|
|
7 |
% |
|
|
7 |
% |
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life in years
|
|
|
6 |
|
|
|
5 |
|
|
|
5 |
|
In December 2004, SFAS No. 123(R),
Share-Based Payment, was issued, which
establishes standards of accounting for transactions in which an
entity exchanges its equity instruments for goods or services.
This standard will be adopted by the Company effective
April 1, 2006. Under the transition provisions of this
standard, non-public companies that used the minimum-value
method for determining fair value of stock options would
continue to account for non vested equity awards outstanding at
the date of adoption of the standard under the intrinsic value
method. All awards granted, modified or settled after the date
of adoption should be accounted for under the provision of the
new standard. Adoption of this standard may have a significant
impact on the Companys results of operations, although it
will have no impact on the Companys overall financial
position. The impact of adoption of this standard cannot be
predicted at this time as it will depend on levels of
share-based payments made in the future.
Fair
value of financial instruments
The carrying amounts reported in the balance sheets for cash and
cash equivalents, accounts receivable, employee receivables,
other current assets, accounts payable and other current
liabilities approximate their fair value due to the short
maturity of these items.
Concentration
of risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and
cash equivalents, funds held for clients and accounts
receivable. The Companys cash and cash equivalents are
invested with financial institutions and banks having high
investment grade credit ratings.
F-13
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
Accounts receivables are unsecured and are derived from revenue
earned from customers in the travel, banking, financial
services, insurance, and healthcare industries based primarily
in the United States and the United Kingdom. The Company
monitors the credit worthiness of its customers to whom it
grants credit terms in the normal course of its business.
Management believes there is no significant risk of loss in the
event of non-performance of the counter parties to these
financial instruments, other than the amounts already provided
for in the Consolidated Financial Statements.
Recently
issued accounting standards
In June 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections,
(SFAS 154) which is a replacement of APB
Opinion No. 20, Accounting Changes and FASB Statement
No. 3, Reporting Accounting Changes in Interim Financial
Statements. SFAS 154 changes the accounting for and
reporting of changes in accounting principles and error
corrections by requiring retrospective application to prior
period financial statements unless impracticable. This statement
is effective in fiscal years beginning after December 15,
2005. The Company does not expect the adoption of SFAS 154
to have a significant impact on its financial statements.
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements
No. 133 and 140,
(SFAS No. 155). SFAS No. 155
permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise
would require bifurcation, clarifies which interest-only strips
and principal-only strips are not subject to the requirements of
Statement No. 133, establishes a requirement to evaluate
interests in securitized financial assets to identify interests
that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring
bifurcation, clarifies that concentrations of credit risk in the
form of subordination are not embedded derivatives, and amends
Statement No. 140 to eliminate the prohibition on a
qualifying special purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
SFAS No. 155 is effective for all financial
instruments acquired or issued after the beginning of an
entitys first fiscal year that begins after
September 15, 2006. The Company has not completed its
evaluation of the effect of SFAS No. 155.
|
|
3. |
ACQUISITION OF TRINITY PARTNERS INC. |
On November 16, 2005, the Company acquired the entire share
capital of Trinity Partners Inc. (Trinity) for a
total consideration of $19,777, including $175 of transaction
costs. The total purchase consideration comprised of a cash
payment of $6,814 and 2,107,901 shares of WNS (Holdings) Limited.
Trinity, together with its wholly owned subsidiary in India,
provides business process outsourcing services and information
technology-delivery solutions to customers in the financial
services industry in the United States.
F-14
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
The acquisition has been accounted as a purchase with effect
from November 16, 2005 and the allocation of the total
purchase price based on managements estimates, to the
assets acquired and liabilities assumed, is as follows:
|
|
|
|
|
|
|
Amount | |
|
|
| |
Cash
|
|
$ |
2,952 |
|
Accounts receivable
|
|
|
1,494 |
|
Other assets
|
|
|
365 |
|
Property and equipment
|
|
|
1,285 |
|
Customer contracts
|
|
|
7,080 |
|
Customer relationships
|
|
|
2,340 |
|
Deferred tax asset
|
|
|
858 |
|
Goodwill
|
|
|
8,889 |
|
Current liabilities
|
|
|
(1,718 |
) |
Deferred tax liabilities
|
|
|
(3,768 |
) |
|
|
|
|
Total purchase price
|
|
$ |
19,777 |
|
|
|
|
|
The valuation of customer contracts and customer relationships
was based on an income-based approach using projected cash flows
and discounting them to arrive at a present value.
The acquired customer related intangibles are amortized over
their useful life which has been estimated to be 5 years.
The Company granted 104,716 shares to certain selling
shareholders in consideration for employment contracts. The fair
value of such shares amounting to approximately $635 is recorded
as compensation and is being recognized as compensation expense
over the period of the employment contract, which is one year.
An additional 53,405 shares were issued to another selling
shareholder who is a customer. The fair value of these shares
amounting to $324 is being amortized over the term of the
customer contract (5 years) and accounted for as a
reduction of revenue.
F-15
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
Pro forma consolidated results of operations assuming the
acquisition of Trinity at the beginning of the respective years
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
Revenue
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
202,809 |
|
|
$ |
162,173 |
|
|
Pro forma
|
|
|
210,356 |
|
|
|
167,684 |
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
18,329 |
|
|
$ |
(5,776 |
) |
|
Pro forma
|
|
|
17,168 |
|
|
|
(8,296 |
) |
Basic income (loss) per share
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
0.56 |
|
|
$ |
(0.19 |
) |
|
Pro forma
|
|
|
0.50 |
|
|
|
(0.25 |
) |
Diluted income (loss) per share
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
0.52 |
|
|
$ |
(0.19 |
) |
|
Pro forma
|
|
|
0.47 |
|
|
|
(0.25 |
) |
|
|
4. |
PROPERTY AND EQUIPMENT |
The major classes of property and equipment are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
Computers and software
|
|
$ |
27,021 |
|
|
$ |
23,295 |
|
Furniture, fixtures and office equipment
|
|
|
19,915 |
|
|
|
14,472 |
|
Vehicles
|
|
|
1,012 |
|
|
|
717 |
|
Leasehold improvements
|
|
|
9,857 |
|
|
|
8,564 |
|
Capital work-in-progress
|
|
|
1,874 |
|
|
|
613 |
|
|
|
|
|
|
|
|
|
|
|
59,679 |
|
|
|
47,661 |
|
Accumulated depreciation and amortization
|
|
|
(29,056 |
) |
|
|
(22,991 |
) |
|
|
|
|
|
|
|
Property and equipment, net
|
|
$ |
30,623 |
|
|
$ |
24,670 |
|
|
|
|
|
|
|
|
Depreciation and amortization expense amounted to $10,452,
$8,441 and $5,349 for the years ended March 31, 2006, 2005
and 2004, respectively. Capital work-in-progress includes
advances for property and equipment of $600 and $355 as at
March 31, 2006 and 2005, respectively.
Computers on capital leases at March 31, 2006 and 2005 were
$1,329 and $1,316, respectively. The related accumulated
amortization at March 31, 2006 and 2005 was $1,174 and
$497, respectively.
F-16
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
|
|
5. |
GOODWILL AND INTANGIBLES |
The components of intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006 | |
|
|
| |
|
|
|
|
Accumulated | |
|
|
|
|
Gross | |
|
amortization | |
|
Net | |
|
|
| |
|
| |
|
| |
Customer contracts
|
|
$ |
12,945 |
|
|
$ |
6,396 |
|
|
$ |
6,549 |
|
Customer relationships
|
|
|
2,340 |
|
|
|
176 |
|
|
|
2,164 |
|
Know-how
|
|
|
310 |
|
|
|
310 |
|
|
|
|
|
Covenant not-to-compete
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,695 |
|
|
$ |
6,982 |
|
|
$ |
8,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2005 | |
|
|
| |
|
|
|
|
Accumulated | |
|
|
|
|
Gross | |
|
amortization | |
|
Net | |
|
|
| |
|
| |
|
| |
Customer contracts
|
|
$ |
6,181 |
|
|
$ |
6,116 |
|
|
$ |
65 |
|
Know-how
|
|
|
315 |
|
|
|
249 |
|
|
|
66 |
|
Covenant not-to-compete
|
|
|
100 |
|
|
|
80 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,596 |
|
|
$ |
6,445 |
|
|
$ |
151 |
|
|
|
|
|
|
|
|
|
|
|
The estimated amortization expense based on current intangible
balances for the next five fiscal years beginning April 1, 2006
is as follows:
|
|
|
|
|
Year ending March 31 |
|
Amount | |
|
|
| |
2007
|
|
$ |
1,884 |
|
2008
|
|
|
1,884 |
|
2009
|
|
|
1,884 |
|
2010
|
|
|
1,884 |
|
2011
|
|
|
1,177 |
|
|
|
|
|
|
|
$ |
8,713 |
|
|
|
|
|
F-17
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
The changes in the carrying value of goodwill by segment (refer
to note 14) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WNS | |
|
WNS Auto | |
|
|
|
|
Global BPO | |
|
Claims BPO | |
|
Total | |
|
|
| |
|
| |
|
| |
Balance at April 1, 2003
|
|
$ |
3,604 |
|
|
$ |
18,774 |
|
|
$ |
22,378 |
|
|
Goodwill arising on acquisition
|
|
|
209 |
|
|
|
|
|
|
|
209 |
|
|
Foreign currency translation
|
|
|
302 |
|
|
|
3,084 |
|
|
|
3,386 |
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2004
|
|
|
4,115 |
|
|
|
21,858 |
|
|
|
25,973 |
|
|
Foreign currency translation
|
|
|
17 |
|
|
|
560 |
|
|
|
577 |
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2005
|
|
|
4,132 |
|
|
|
22,418 |
|
|
|
26,550 |
|
|
Goodwill arising on acquisition
|
|
|
8,889 |
|
|
|
|
|
|
|
8,889 |
|
|
Foreign currency translation
|
|
|
(65 |
) |
|
|
(1,600 |
) |
|
|
(1,665 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2006
|
|
$ |
12,956 |
|
|
$ |
20,818 |
|
|
$ |
33,774 |
|
|
|
|
|
|
|
|
|
|
|
The Companys (provision) benefit for income taxes
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Current taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic taxes
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Foreign taxes
|
|
|
(2,602 |
) |
|
|
(1,139 |
) |
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,602 |
) |
|
|
(1,139 |
) |
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign taxes
|
|
|
1,028 |
|
|
|
71 |
|
|
|
324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,028 |
|
|
|
71 |
|
|
|
324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,574 |
) |
|
$ |
(1,068 |
) |
|
$ |
41 |
|
|
|
|
|
|
|
|
|
|
|
Domestic taxes are nil as there are no statutory taxes
applicable in Jersey, Channel Islands. Foreign taxes are based
on enacted tax rates in each subsidiarys jurisdiction.
Income (loss) before income taxes for the years ended
March 31, 2006, 2005 and 2004, primarily arose in the
following jurisdictions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
Jurisdiction |
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
India
|
|
$ |
16,053 |
|
|
$ |
(7,416 |
) |
|
$ |
(6,632 |
) |
United States
|
|
|
(1,163 |
) |
|
|
420 |
|
|
|
289 |
|
United Kingdom
|
|
|
5,821 |
|
|
|
1,653 |
|
|
|
(546 |
) |
Other
|
|
|
(808 |
) |
|
|
635 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$ |
19,903 |
|
|
$ |
(4,708 |
) |
|
$ |
(6,761 |
) |
|
|
|
|
|
|
|
|
|
|
The Companys Indian operations are eligible to claim
income-tax exemption with respect to profits earned from export
revenue from an operating unit registered under the Software
Technology Parks of India
F-18
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
(STPI). The benefit is available from the date of
commencement of operations to March 31, 2009, subject to a
maximum of 10 years. The Company had eleven, nine and six
such locations for the years ended March 31, 2006, 2005 and
2004, respectively. The benefits expire in stages from
April 1, 2006 to March 31, 2009.
The additional income tax expense at the statutory rate in India
and Sri Lanka, if the tax exemption was not available, would
have been approximately $4,998 and $783 for the years ended
March 31, 2006 and 2005 (March 31, 2004: Nil). The
impact of such additional tax on basic and diluted income per
share for the year ended March 31, 2006 would have been
approximately $0.15 and $0.14, respectively (loss per share of
$(0.03) for the year ended March 31, 2005).
The following is a reconciliation of the Jersey statutory income
tax rate with the effective tax rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Net income (loss) before taxes
|
|
$ |
19,903 |
|
|
$ |
(4,708 |
) |
|
$ |
(6,761 |
) |
Enacted tax rates in Jersey
|
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
Statutory income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
(Provision) benefit due to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign minimum alternative taxes and state taxes
|
|
|
|
|
|
|
(8 |
) |
|
|
(63 |
) |
|
Differential foreign tax rates
|
|
|
(1,454 |
) |
|
|
(1,036 |
) |
|
|
102 |
|
|
Other
|
|
|
(120 |
) |
|
|
(24 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
(Provision) benefit for income taxes
|
|
$ |
(1,574 |
) |
|
$ |
(1,068 |
) |
|
$ |
41 |
|
|
|
|
|
|
|
|
|
|
|
The components of deferred tax assets and liabilities are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$ |
1,047 |
|
|
$ |
722 |
|
|
Net operating loss carry forward
|
|
|
1,418 |
|
|
|
555 |
|
|
Accruals deductible on actual payment
|
|
|
262 |
|
|
|
105 |
|
|
Share-based compensation
|
|
|
207 |
|
|
|
|
|
|
Other
|
|
|
156 |
|
|
|
46 |
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
3,090 |
|
|
|
1,428 |
|
Less: valuation allowances
|
|
|
(246 |
) |
|
|
(265 |
) |
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowances
|
|
|
2,844 |
|
|
|
1,163 |
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(48 |
) |
|
|
(9 |
) |
|
Intangibles
|
|
|
(3,485 |
) |
|
|
|
|
|
Tax on undistributed profits of a subsidiary
|
|
|
(368 |
) |
|
|
(317 |
) |
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(3,901 |
) |
|
|
(326 |
) |
|
|
|
|
|
|
|
Net deferred tax (liabilities) assets
|
|
$ |
(1,057 |
) |
|
$ |
837 |
|
|
|
|
|
|
|
|
F-19
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
The classification of deferred tax assets (liabilities) is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
Current
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
$ |
353 |
|
|
$ |
432 |
|
|
Deferred tax liabilities
|
|
|
(368 |
) |
|
|
(317 |
) |
|
|
|
|
|
|
|
Net current deferred tax (liabilities) assets
|
|
|
(15 |
) |
|
|
115 |
|
|
|
|
|
|
|
|
Non current
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
1,554 |
|
|
|
996 |
|
|
Less: valuation allowance
|
|
|
(246 |
) |
|
|
(265 |
) |
|
|
|
|
|
|
|
|
|
|
1,308 |
|
|
|
731 |
|
|
Deferred tax liabilities
|
|
|
(2,350 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
Net non current deferred tax (liabilities) assets
|
|
$ |
(1,042 |
) |
|
$ |
722 |
|
|
|
|
|
|
|
|
At March 31, 2006, the Company had net operating loss
carryforwards aggregating to $868 in the UK with no expiration
date and $2,759 in the US which expire between
2023-2026. The Company
has recorded a valuation allowance related to losses incurred by
an entity that currently does not have operations but could
potentially have taxable income in the future.
At March 31, 2006 and 2005, the Company maintained a
$1.4 million tax reserve for tax contingencies related to
tax return filings in various jurisdictions. Management reviews
the adequacy of the tax reserve at each reporting period and
makes adjustments when necessary based on current facts and
circumstances.
Deferred income taxes on undistributed earnings of foreign
subsidiaries, except for one subsidiary in India where
management expects to distribute the accumulated earnings, have
not been provided as such earnings are deemed to be permanently
reinvested.
Deferred revenue comprises of:
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
Claims handling
|
|
$ |
1,025 |
|
|
$ |
2,693 |
|
Advance billings
|
|
|
6,989 |
|
|
|
6,026 |
|
Minimum commitment received
|
|
|
|
|
|
|
1,547 |
|
Other
|
|
|
980 |
|
|
|
1,212 |
|
|
|
|
|
|
|
|
|
|
$ |
8,994 |
|
|
$ |
11,478 |
|
|
|
|
|
|
|
|
Other includes revenue deferred due to the absence of persuasive
evidence of an arrangement.
F-20
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
|
|
|
Defined
contribution plans |
During the years ended March 31, 2006, 2005 and 2004, the
Company contributed the following amounts to defined
contribution plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Provident fund India
|
|
$ |
$1,839 |
|
|
$ |
968 |
|
|
$ |
716 |
|
Pension scheme UK
|
|
|
404 |
|
|
|
445 |
|
|
|
261 |
|
401(k) plan US
|
|
|
225 |
|
|
|
191 |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,468 |
|
|
$ |
1,604 |
|
|
$ |
1,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
benefit plan gratuity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Change in projected benefit obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation at beginning of the year
|
|
$ |
494 |
|
|
$ |
384 |
|
|
$ |
221 |
|
Translation adjustment
|
|
|
(9 |
) |
|
|
(9 |
) |
|
|
37 |
|
Service cost
|
|
|
205 |
|
|
|
143 |
|
|
|
91 |
|
Interest cost
|
|
|
35 |
|
|
|
24 |
|
|
|
17 |
|
Benefits paid
|
|
|
(65 |
) |
|
|
(47 |
) |
|
|
(48 |
) |
Business combination
|
|
|
26 |
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss
|
|
|
73 |
|
|
|
(1 |
) |
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of the year
|
|
$ |
759 |
|
|
$ |
494 |
|
|
$ |
384 |
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at beginning of the year
|
|
$ |
333 |
|
|
$ |
336 |
|
|
$ |
221 |
|
Translation adjustment
|
|
|
(6 |
) |
|
|
(10 |
) |
|
|
31 |
|
Actual return
|
|
|
35 |
|
|
|
(26 |
) |
|
|
(20 |
) |
Actual contributions
|
|
|
154 |
|
|
|
23 |
|
|
|
112 |
|
Actual benefits
|
|
|
(65 |
) |
|
|
(47 |
) |
|
|
(48 |
) |
Gain (loss)
|
|
|
|
|
|
|
57 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
Plan assets at end of the year
|
|
$ |
451 |
|
|
$ |
333 |
|
|
$ |
336 |
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$ |
(308 |
) |
|
$ |
(161 |
) |
|
$ |
(48 |
) |
Unrecognized net loss
|
|
|
145 |
|
|
|
75 |
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
$ |
(163 |
) |
|
$ |
(86 |
) |
|
$ |
54 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation at end of the year
|
|
$ |
528 |
|
|
$ |
346 |
|
|
$ |
262 |
|
|
|
|
|
|
|
|
|
|
|
F-21
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Net periodic gratuity cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$ |
205 |
|
|
$ |
143 |
|
|
$ |
91 |
|
Interest cost
|
|
|
35 |
|
|
|
24 |
|
|
|
17 |
|
Expected return on plan asset
|
|
|
(27 |
) |
|
|
(26 |
) |
|
|
(20 |
) |
Amortization
|
|
|
8 |
|
|
|
20 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic gratuity cost for the year
|
|
$ |
221 |
|
|
$ |
161 |
|
|
$ |
91 |
|
|
|
|
|
|
|
|
|
|
|
The assumptions used in accounting for the gratuity plan are set
out as below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Discount rate
|
|
|
8.0% |
|
|
|
8.0% |
|
|
|
7.0% |
|
Rate of increase in compensation levels
|
|
9%-11% for 5 years and 7%-9% thereafter |
|
9.0% for 5 years and 7.0% thereafter |
|
9.0% for 5 years and 7.0% thereafter |
Rate of return on plan assets
|
|
|
7.5% |
|
|
|
7.0% |
|
|
|
7.5% |
|
The Company evaluates these assumptions annually based on its
long-term plans of growth and industry standards. The discount
rates are based on current market yields on government
securities adjusted for a suitable risk premium. Plan assets are
administered by the LIC and invested in lower risk assets,
primarily debt securities.
The Company expects to contribute $226 for the year ended
March 31, 2007. The expected benefit payments from the fund
as of March 31, 2006 are as follows:
|
|
|
|
|
Year ending March 31 |
|
Amount | |
|
|
| |
2007
|
|
$ |
173 |
|
2008
|
|
|
194 |
|
2009
|
|
|
274 |
|
2010
|
|
|
391 |
|
2011
|
|
|
514 |
|
2012-2016
|
|
|
1,466 |
|
|
|
|
|
|
|
$ |
3,012 |
|
|
|
|
|
The Company borrowed $10,000 from a customer during the year
ended March 31, 2005 at an interest rate of 5% per
annum. The borrowing was repayable, in three equal annual
installments beginning January 31, 2009 but could be
prepaid, in whole or in part, at any time without any penalty or
premium. Further, in the event of an initial public offering or
other events as specified in the agreement, the proceeds from
such event shall be applied towards the repayment of the note,
in the manner stipulated in the agreement. During the year ended
March 31, 2006, the Company prepaid the entire amount of
$10,000.
Legal expenses of $140 related to the above note were recorded
as deferred financing costs and was being amortized over the
period of repayment using an effective interest rate method.
However, upon the
F-22
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
prepayment of the note, the remaining unamortized amount was
expensed. Amortization expense for the years ended
March 31, 2006 and 2005 was $125 and $15, respectively.
WNS Holdings has one class of ordinary shares and the holder of
each share is entitled to one vote per share. Ordinary shares
subscribed relates to options exercised as of the year end but
the corresponding shares were issued subsequent to year end.
The Company issues stock options to eligible employees under the
2002 Stock Incentive Plan (the Plan). The options
vest over a period of up to three years and have a ten-year
life. The Companys stock option activity for the years
ended March 31, 2006, 2005 and 2004 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
|
Shares arising | |
|
Weighted-average | |
|
Shares arising | |
|
Weighted-average | |
|
Shares arising | |
|
Weighted-average | |
|
|
from options | |
|
exercise price | |
|
from options | |
|
exercise price | |
|
from options | |
|
exercise price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Outstanding at beginning of the year
|
|
|
4,466,245 |
|
|
$ |
2.12 |
|
|
|
4,119,167 |
|
|
$ |
1.94 |
|
|
|
2,316,500 |
|
|
$ |
1.57 |
|
Granted
|
|
|
1,481,479 |
|
|
|
7.83 |
|
|
|
889,744 |
|
|
|
2.76 |
|
|
|
1,868,000 |
|
|
|
2.40 |
|
Forfeited
|
|
|
(298,384 |
) |
|
|
2.45 |
|
|
|
(144,001 |
) |
|
|
2.47 |
|
|
|
(65,333 |
) |
|
|
1.87 |
|
Exercise of options
|
|
|
(1,710,936 |
) |
|
|
1.80 |
|
|
|
(398,665 |
) |
|
|
1.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of the year
|
|
|
3,938,404 |
|
|
$ |
4.39 |
|
|
|
4,466,245 |
|
|
$ |
2.12 |
|
|
|
4,119,167 |
|
|
$ |
1.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at March 31, 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average | |
|
|
Range of | |
|
|
|
Weighted-average | |
|
remaining | |
|
|
exercise prices | |
|
Shares | |
|
exercise price | |
|
contractual life | |
|
|
| |
|
| |
|
| |
|
| |
Options outstanding
|
|
|
$ 1.53-$2.23 |
|
|
|
140,670 |
|
|
$ |
2.22 |
|
|
|
7.54 years |
|
|
|
|
2.37-$3.19 |
|
|
|
777,798 |
|
|
|
2.71 |
|
|
|
8.16 years |
|
|
|
|
5.65-$6.31 |
|
|
|
1,043,079 |
|
|
|
6.17 |
|
|
|
9.42 years |
|
|
|
|
12.26-$12.26 |
|
|
|
412,400 |
|
|
|
12.26 |
|
|
|
9.91 years |
|
Options vested and exercisable
|
|
|
1.53-$2.23 |
|
|
|
906,292 |
|
|
|
1.82 |
|
|
|
6.76 years |
|
|
|
|
2.37-$3.19 |
|
|
|
658,165 |
|
|
|
2.60 |
|
|
|
7.91 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,938,404 |
|
|
$ |
4.39 |
|
|
|
8.29 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares reserved at March 31, 2006 for the future issuance
of options was 34,034. The weighted-average fair value of
options granted during the years ended March 31, 2006, 2005
and 2004 was $2.34, $1.88 and $1.13, respectively.
F-23
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
During the year ended March 31, 2006, the Company issued
stock options with exercise prices as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
Weighted | |
|
Weighted | |
|
|
No. of | |
|
average | |
|
average fair | |
|
average | |
|
|
options | |
|
exercise | |
|
value per | |
|
intrinsic value | |
Grants made during the quarter ended |
|
granted | |
|
price | |
|
share | |
|
per share | |
|
|
| |
|
| |
|
| |
|
| |
June 30, 2005
|
|
|
160,500 |
|
|
$ |
5.44 |
|
|
$ |
5.65 |
|
|
$ |
0.21 |
|
September 30, 2005
|
|
|
828,100 |
|
|
|
6.27 |
|
|
|
6.27 |
|
|
|
|
|
December 31, 2005
|
|
|
45,479 |
|
|
|
6.07 |
|
|
|
6.07 |
|
|
|
|
|
March 31, 2006
|
|
|
447,400 |
|
|
|
11.72 |
|
|
|
11.99 |
|
|
|
0.27 |
|
The intrinsic value is being recognized as compensation expense
over the vesting period of those options.
The fair value of the Companys ordinary shares was
determined contemporaneously with the grants by management. The
exercise prices of options are denominated in pound sterling and
disclosed in US dollars.
During the year ended March 31, 2006, the Company recorded
compensation expense of approximately $972 related to the
purchase of immature shares (shares held by employees for less
than six months after exercise of stock options) by a principal
shareholder and, approximately $488 relating to modification of
options.
|
|
12. |
RELATED PARTY TRANSACTIONS |
|
|
|
Name of the related party |
|
Relationship |
|
|
|
Warburg Pincus
|
|
Principal shareholder |
British Airways Plc.
|
|
Principal shareholder and significant customer |
Flovate Technologies Limited (Flovate)
|
|
A company of which a member of management is a principal
shareholder. |
Datacap Software Pvt Ltd. (Datacap)
|
|
A company of which a member of management is a principal
shareholder. |
F-24
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
The transactions and the balance outstanding with these parties
are described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount receivable | |
|
|
|
|
(payable) at | |
|
|
Year ended March 31, | |
|
March 31, | |
|
|
| |
|
| |
Nature of transaction/related party |
|
2006 | |
|
2005 | |
|
2004 | |
|
2006 | |
|
2005 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
British Airways
|
|
$ |
14,663 |
|
|
$ |
16,369 |
|
|
$ |
16,335 |
|
|
$ |
1,530 |
|
|
$ |
2,424 |
|
|
Warburg Pincus and its affiliates
|
|
|
1,646 |
|
|
|
1,138 |
|
|
|
918 |
|
|
|
288 |
|
|
|
109 |
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flovate
|
|
|
1,216 |
|
|
|
1,745 |
|
|
|
1,278 |
|
|
|
|
|
|
|
(17 |
) |
|
Datacap
|
|
|
34 |
|
|
|
11 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warburg Pincus affiliate
|
|
|
193 |
|
|
|
19 |
|
|
|
43 |
|
|
|
|
|
|
|
(8 |
) |
|
Flovate
|
|
|
288 |
|
|
|
383 |
|
|
|
248 |
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warburg Pincus affiliate
|
|
|
559 |
|
|
|
1,859 |
|
|
|
|
|
|
|
(53 |
) |
|
|
(25 |
) |
|
Flovate
|
|
|
1,552 |
|
|
|
1,161 |
|
|
|
1,460 |
|
|
|
(783 |
) |
|
|
(524 |
) |
Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flovate
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
287 |
|
|
|
|
|
Other income, net comprises of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Foreign exchange (loss) gain, net
|
|
$ |
(402 |
) |
|
$ |
(102 |
) |
|
$ |
25 |
|
Interest income
|
|
|
439 |
|
|
|
264 |
|
|
|
210 |
|
Gain on sale of property and equipment
|
|
|
32 |
|
|
|
|
|
|
|
76 |
|
Other (See Note 12)
|
|
|
387 |
|
|
|
10 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
456 |
|
|
$ |
172 |
|
|
$ |
324 |
|
|
|
|
|
|
|
|
|
|
|
The Company had several operating segments including travel,
insurance, auto claims (WNS Assistance) and others, including
knowledge services and healthclaims.
The Company believes that the business process outsourcing
services that it provides to customers in industries such as
travel, insurance, Ntrance and others are similar in terms of
services, service delivery methods, use of technology, and
long-term gross profit and hence meet the aggregation criteria
under SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information.
However, WNS Assistance (WNS Auto Claims BPO), which
provides automobile claims handling services, does not meet the
aggregation criteria under SFAS No. 131. Accordingly,
the Company has determined that it has two reportable segments
WNS Global BPO and WNS Auto Claims BPO.
F-25
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
In order to provide Accident Management services, the Company
arranges for the repair through a network of repair centers.
Repair costs are invoiced to customers. Amounts invoiced to
customers for repair costs paid to the automobile repair centers
is recognized as revenue. The Company uses revenue less repair
payments as a primary measure to allocate resources and measure
segment performance. Revenue less repair payments is a non-GAAP
measure which is calculated as revenue less payments to repair
centers. The Company believes that the presentation of this
non-GAAP measure in the segmental information provides useful
information for investors regarding the segments financial
performance. The presentation of this non-GAAP information is
not meant to be considered in isolation or as a substitute for
the Companys financial results prepared in accordance with
US GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2006 | |
|
|
| |
|
|
WNS | |
|
WNS Auto | |
|
Inter | |
|
|
|
|
Global BPO | |
|
Claims BPO | |
|
segments (a) | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
Revenue from external customers
|
|
$ |
123,226 |
|
|
$ |
79,583 |
|
|
$ |
|
|
|
$ |
202,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue
|
|
|
125,229 |
|
|
|
79,583 |
|
|
|
(2,003 |
) |
|
|
202,809 |
|
Payments to repair centers
|
|
|
|
|
|
|
54,904 |
|
|
|
|
|
|
|
54,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
|
|
|
125,229 |
|
|
|
24,679 |
|
|
|
(2,003 |
) |
|
|
147,905 |
|
Depreciation
|
|
|
8,677 |
|
|
|
1,775 |
|
|
|
|
|
|
|
10,452 |
|
Other costs
|
|
|
99,040 |
|
|
|
17,762 |
|
|
|
(2,003 |
) |
|
|
114,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
|
17,512 |
|
|
|
5,142 |
|
|
|
|
|
|
|
22,654 |
|
Unallocated share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,922 |
) |
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(856 |
) |
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
456 |
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(429 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,903 |
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,574 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
|
$ |
12,689 |
|
|
$ |
2,204 |
|
|
$ |
|
|
|
$ |
14,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets, net of eliminations as at
March 31, 2006
|
|
$ |
92,415 |
|
|
$ |
42,388 |
|
|
$ |
|
|
|
$ |
134,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One customer in the WNS Global BPO segment accounted for 13% of
the Companys revenue for the year ended March 31,
2006.
(a) This represents invoices raised by WNS Global BPO on
WNS Auto Claims BPO for business process outsourcing services
rendered by the former to the latter.
F-26
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2005 | |
|
|
| |
|
|
WNS Global | |
|
WNS Auto | |
|
Inter | |
|
|
|
|
BPO | |
|
Claims BPO | |
|
segments (a) | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
Revenue from external customers
|
|
$ |
76,982 |
|
|
$ |
85,191 |
|
|
$ |
|
|
|
$ |
162,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue
|
|
|
78,595 |
|
|
|
85,191 |
|
|
|
(1,613 |
) |
|
|
162,173 |
|
Payment to repair centers
|
|
|
|
|
|
|
63,186 |
|
|
|
|
|
|
|
63,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
|
|
|
78,595 |
|
|
|
22,005 |
|
|
|
(1,613 |
) |
|
|
98,987 |
|
Depreciation
|
|
|
6,905 |
|
|
|
1,536 |
|
|
|
|
|
|
|
8,441 |
|
Other costs ((b))
|
|
|
77,772 |
|
|
|
17,116 |
|
|
|
(1,613 |
) |
|
|
93,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss)
|
|
|
(6,082 |
) |
|
|
3,353 |
|
|
|
|
|
|
|
(2,729 |
) |
Unallocated share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(239 |
) |
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,416 |
) |
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172 |
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(496 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,708 |
) |
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,068 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(5,776 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
|
$ |
16,343 |
|
|
$ |
1,924 |
|
|
$ |
|
|
|
$ |
18,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets, net of eliminations as at
March 31, 2005
|
|
$ |
48,709 |
|
|
$ |
49,270 |
|
|
$ |
|
|
|
$ |
97,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two customers in the WNS Global BPO segment accounted for over
10% each of the Companys revenue for the year ended
March 31, 2005.
(a) This represents invoices raised by WNS Global BPO on
WNS Auto Claims BPO for business process outsourcing services
rendered by the former to the latter.
(b) WNS Global BPO includes cost of customer resources of
$19,159 during a transfer period. Refer to Note 2, cost of
revenue.
F-27
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2004 | |
|
|
| |
|
|
WNS | |
|
WNS Auto | |
|
Inter | |
|
|
|
|
Global BPO | |
|
Claims BPO | |
|
segments (a) | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
Revenue from external customers
|
|
$ |
36,750 |
|
|
$ |
67,308 |
|
|
$ |
|
|
|
$ |
104,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment revenue
|
|
|
37,881 |
|
|
|
67,308 |
|
|
|
(1,131 |
) |
|
|
104,058 |
|
Payments to repair centers
|
|
|
|
|
|
|
54,164 |
|
|
|
|
|
|
|
54,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue less repair payments
|
|
|
37,881 |
|
|
|
13,144 |
|
|
|
(1,131 |
) |
|
|
49,894 |
|
Depreciation
|
|
|
4,326 |
|
|
|
1,023 |
|
|
|
|
|
|
|
5,349 |
|
Other costs ((b))
|
|
|
38,383 |
|
|
|
11,514 |
|
|
|
(1,131 |
) |
|
|
48,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss)
|
|
|
(4,828 |
) |
|
|
607 |
|
|
|
|
|
|
|
(4,221 |
) |
Unallocated share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(205 |
) |
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,600 |
) |
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324 |
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,761 |
) |
Benefit for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(6,720 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
|
$ |
6,126 |
|
|
$ |
2,609 |
|
|
$ |
|
|
|
$ |
8,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets, net of eliminations as at
March 31, 2004
|
|
$ |
40,582 |
|
|
$ |
45,990 |
|
|
$ |
|
|
|
$ |
86,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One customer in the WNS Global BPO segment accounted for 16% of
the Companys revenue and one customer in the WNS Auto
Claims BPO accounted for 10% of the Companys revenue for
the year ended March 31, 2004.
(a) This represents invoices raised by WNS Global BPO on
WNS Auto Claims BPO for business process outsourcing services
rendered by the former to the latter.
(b) WNS Global BPO includes cost of customer resources of
$7,714 during a transfer period. Refer to Note 2, cost of
revenue.
The Companys revenue by geographic area is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
UK
|
|
$ |
126,866 |
|
|
$ |
105,552 |
|
|
$ |
75,044 |
|
US
|
|
|
49,134 |
|
|
|
28,004 |
|
|
|
10,199 |
|
Europe (excludes UK)
|
|
|
25,421 |
|
|
|
27,730 |
|
|
|
18,104 |
|
Other
|
|
|
1,388 |
|
|
|
887 |
|
|
|
711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
202,809 |
|
|
$ |
162,173 |
|
|
$ |
104,058 |
|
|
|
|
|
|
|
|
|
|
|
F-28
WNS (HOLDINGS) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
MARCH 31, 2006, 2005 AND 2004
(Amounts in thousands, except share and per share data)
The Companys long-lived assets by geographic area are as
follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2006 | |
|
2005 | |
|
|
| |
|
| |
UK
|
|
$ |
23,720 |
|
|
$ |
26,194 |
|
India
|
|
|
29,324 |
|
|
|
23,595 |
|
US
|
|
|
18,621 |
|
|
|
641 |
|
Other
|
|
|
1,445 |
|
|
|
941 |
|
|
|
|
|
|
|
|
|
|
$ |
73,110 |
|
|
$ |
51,371 |
|
|
|
|
|
|
|
|
|
|
15. |
COMMITMENTS AND CONTINGENCIES |
Future minimum lease payments under capital leases and
non-cancelable operating leases consisted of the following at
March 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
Capital | |
|
Operating | |
Year ending March 31, |
|
leases | |
|
leases | |
|
|
| |
|
| |
2007
|
|
$ |
193 |
|
|
$ |
21,091 |
|
2008
|
|
|
2 |
|
|
|
19,021 |
|
2009
|
|
|
|
|
|
|
17,710 |
|
2010
|
|
|
|
|
|
|
17,252 |
|
2011
|
|
|
|
|
|
|
9,117 |
|
Thereafter
|
|
|
|
|
|
|
3,845 |
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$ |
195 |
|
|
$ |
88,036 |
|
|
|
|
|
|
|
|
Amounts representing interest
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease payments
|
|
$ |
186 |
|
|
|
|
|
|
|
|
|
|
|
|
Obligation under capital leases:
|
|
|
|
|
|
|
|
|
Long term
|
|
|
2 |
|
|
|
|
|
Current
|
|
|
184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
186 |
|
|
|
|
|
|
|
|
|
|
|
|
Rental expenses for operating leases with step rents is
recognized on a straight-line basis over the minimum lease term.
Rental expense recognized without a corresponding cash payment
is reported in the 2006 Consolidated Balance Sheet as deferred
rent. Rental expense for the years ended March 31, 2006,
2005 and 2004 was $6,535, $4,323 and $2,284, respectively.
|
|
|
Bank
guarantees and other |
Certain subsidiaries in India hold bank guarantees aggregating
$457 and $168 as at March 31, 2006 and 2005, respectively.
These guarantees have a remaining expiry term of approximately
three to four years.
Amounts payable for commitments to purchase of property and
equipment (net of advances), aggregated to $4,309 and $1,123 as
at March 31, 2006 and 2005, respectively.
At March 31, 2006, the Company had an unused line of credit
of Rs.370,000 ($8,331).
F-29
INDEX TO TRINITY PARTNERS INC.S CONSOLIDATED FINANCIAL
STATEMENTS
|
|
|
|
|
Consolidated Financial Statements
|
|
|
|
|
|
|
|
F-31 |
|
|
|
|
F-32 |
|
|
|
|
F-33 |
|
|
|
|
F-34 |
|
|
|
|
F-35 |
|
|
|
|
F-36 |
|
|
Unaudited Condensed Consolidated Financial Statements
|
|
|
|
|
|
|
|
F-45 |
|
|
|
|
F-46 |
|
|
|
|
F-47 |
|
|
|
|
F-48 |
|
F-30
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Trinity Partners Inc.
We have audited the accompanying consolidated balance sheet of
Trinity Partners Inc. as of March 31, 2005, and the related
consolidated statement of operations, stockholders equity
and cash flows for the year then ended. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit
of the Companys internal control over financial reporting.
Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Trinity Partners Inc. at March 31,
2005, and the consolidated results of its operations and its
cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG
Mumbai, India
December 1, 2005
F-31
TRINITY PARTNERS INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
3,729 |
|
|
Accounts receivable
|
|
|
24 |
|
|
Accounts receivable related parties
|
|
|
137 |
|
|
Unbilled receivables
|
|
|
21 |
|
|
Unbilled receivables related parties
|
|
|
717 |
|
|
Prepaid expenses
|
|
|
121 |
|
|
Other current assets
|
|
|
56 |
|
|
|
|
|
Total current assets
|
|
|
4,805 |
|
Property and equipment, net
|
|
|
2,174 |
|
Deposits
|
|
|
192 |
|
|
|
|
|
TOTAL ASSETS
|
|
$ |
7,171 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Accounts payable
|
|
$ |
130 |
|
|
Accrued employee costs
|
|
|
490 |
|
|
Deferred revenue
|
|
|
484 |
|
|
Current portion of long term debt
|
|
|
13 |
|
|
Other accrued expenses and current liabilities
|
|
|
171 |
|
|
|
|
|
Total current liabilities
|
|
|
1,288 |
|
Long term debt, net of current portion
|
|
|
27 |
|
|
Commitments and contingencies
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
Series A Preferred stock, $0.01 par value
3,367,000 shares authorized, issued and outstanding with
liquidation preference of $3,367
|
|
|
34 |
|
|
Series B Preferred stock, $0.01 par value
5,555,550 shares authorized, issued and outstanding with
liquidation preference of $5,556
|
|
|
56 |
|
|
Common stock, $0.01 par value
9,806,388 shares authorized; Nil shares issued and
outstanding
|
|
|
|
|
|
Additional paid-in-capital
|
|
|
9,284 |
|
|
Promissory notes
|
|
|
(372 |
) |
|
Deferred stock-based compensation
|
|
|
(609 |
) |
|
Accumulated deficit
|
|
|
(2,546 |
) |
|
Accumulated other comprehensive income
|
|
|
9 |
|
|
|
|
|
Total stockholders equity
|
|
|
5,856 |
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$ |
7,171 |
|
|
|
|
|
See accompanying notes.
F-32
TRINITY PARTNERS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2005
(Amounts in thousands)
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
Third Parties
|
|
$ |
54 |
|
|
Related Parties
|
|
|
5,376 |
|
|
|
|
|
Revenue
|
|
|
5,430 |
|
Cost of revenue
|
|
|
2,574 |
|
|
|
|
|
Gross profit
|
|
|
2,856 |
|
Operating expenses
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
3,781 |
|
|
|
|
|
Operating loss
|
|
|
(925 |
) |
Interest income
|
|
|
91 |
|
Interest expense
|
|
|
(1 |
) |
Foreign exchange gain, net
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(835 |
) |
Provision for income taxes
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(835 |
) |
|
|
|
|
See accompanying notes.
F-33
TRINITY PARTNERS INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
YEAR ENDED MARCH 31, 2005
(Amounts in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred | |
|
Series B preferred | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock | |
|
stock | |
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
| |
|
| |
|
Additional | |
|
|
|
Deferred | |
|
|
|
other | |
|
Total | |
|
|
|
|
Par | |
|
|
|
Par | |
|
paid-in- | |
|
Promissory | |
|
stock-based | |
|
Accumulated | |
|
comprehensive | |
|
stockholders | |
|
|
Number | |
|
value | |
|
Number | |
|
value | |
|
capital | |
|
notes | |
|
compensation | |
|
deficit | |
|
income | |
|
equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Balance at April 1, 2004
|
|
|
3,367,000 |
|
|
$ |
34 |
|
|
|
5,555,550 |
|
|
$ |
56 |
|
|
$ |
9,193 |
|
|
$ |
(522 |
) |
|
$ |
(2,023 |
) |
|
$ |
(1,711 |
) |
|
$ |
6 |
|
|
$ |
5,033 |
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(835 |
) |
|
|
|
|
|
|
(835 |
) |
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(832 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock incentive plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
210 |
|
|
Series A preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,204 |
|
|
|
|
|
|
|
|
|
|
|
1,204 |
|
|
Series B preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91 |
|
|
Amount waived under promissory notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
Payment received against promissory notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2005
|
|
|
3,367,000 |
|
|
$ |
34 |
|
|
|
5,555,550 |
|
|
$ |
56 |
|
|
$ |
9,284 |
|
|
$ |
(372 |
) |
|
$ |
(609 |
) |
|
$ |
(2,546 |
) |
|
$ |
9 |
|
|
$ |
5,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-34
TRINITY PARTNERS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 2005
(Amounts in thousands)
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
Net loss
|
|
$ |
(835 |
) |
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
280 |
|
|
|
Stock-based compensation
|
|
|
1,555 |
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable and unbilled receivables
|
|
|
(634 |
) |
|
|
Prepaid expenses and other current assets
|
|
|
(162 |
) |
|
|
Deposits
|
|
|
(118 |
) |
|
|
Deferred revenue
|
|
|
142 |
|
|
|
Accounts payable and other current liabilities
|
|
|
521 |
|
|
|
|
|
Net cash provided by operating activities
|
|
|
749 |
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(1,864 |
) |
|
|
|
|
Net cash used in investing activities
|
|
|
(1,864 |
) |
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
Debt repayment
|
|
|
(11 |
) |
|
Payments received against promissory note
|
|
|
100 |
|
|
|
|
|
Net cash provided by financing activities
|
|
|
89 |
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(33 |
) |
Net decrease in cash and cash equivalents
|
|
|
(1,059 |
) |
Cash and cash equivalents at beginning of year
|
|
|
4,788 |
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$ |
3,729 |
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Income taxes paid
|
|
$ |
28 |
|
|
Interest paid
|
|
|
1 |
|
See accompanying notes.
F-35
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
|
|
1. |
ORGANIZATION AND DESCRIPTION OF BUSINESS |
Trinity Partners Inc. (Trinity) is a provider of
business process outsourcing services and technology-enabled
delivery solutions to customers in the financial services
industry in the United States, with a significant focus on
mortgage banking solutions. Trinity is controlled by First
Magnus Financial Corporation, which is also a significant
customer of Trinity.
|
|
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accompanying consolidated financial statements include the
accounts of Trinity Partners Inc and its wholly-owned subsidiary
Trinity Business Process Management Private Limited
(Trinity BPM) (collectively, the
Company) and are prepared in accordance with United
States generally accepted accounting principles (US
GAAP). All significant inter-company balances and
transactions have been eliminated upon consolidation. The
Company uses the United States Dollar ($) as its
reporting currency.
The preparation of financial statements in accordance with US
GAAP requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
|
|
|
Foreign currency translation |
The functional currency of the Company is the $. The functional
currency for Trinity BPM is the Indian Rupee (INR).
Assets and liabilities of Trinity BPM are translated into $, at
the rate of exchange prevailing on the balance sheet date while
revenue and expenses are translated at average exchange rates
prevailing during the period. Translation adjustments are
reported as a component of accumulated other comprehensive
income in stockholders equity.
Foreign currency denominated assets and liabilities are
translated into the functional currency at exchange rates in
effect at balance sheet date. Foreign currency transaction gains
and losses are recorded in the consolidated statement of
operations within other income.
Revenue is generated from technology enabled business process
outsourcing services and consists of service charges for
processing customer transactions and is recognized as the
related services are performed on a per employee or per
transaction processed basis. Revenue includes amounts paid by
customers for equipment used by the Company to provide services
to the customer. Amount paid for such equipment is deferred and
recognised as revenue over the period of the contract on a
straight-line basis. Revenue also includes reimbursements of
out-of-pocket expenses.
Cost of revenue includes salaries and related expenses, project
related travel costs, communication expenses and facilities
costs including depreciation and amortization thereon.
F-36
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
Cash
and cash equivalents
The Company considers all highly liquid investments with an
initial maturity of up to three months to be cash equivalents.
Accounts
receivable and unbilled receivables
Accounts receivable represents trade receivables net of an
allowance for doubtful accounts. The allowance for doubtful
accounts represents the Companys best estimate of
receivables that are doubtful of recovery, based on a specific
identification basis (Nil at March 31, 2005).
Revenue for services delivered but not invoiced to customers are
recorded as unbilled receivables. Billings are done as
contractually agreed.
Property
and equipment
Property and equipment are recorded at cost. Depreciation and
amortization are computed using the straight-line method over
the estimated useful lives of the assets, which are as follows:
|
|
|
Asset description |
|
Asset life (in years) |
|
|
|
Computers
|
|
3-5 |
Furniture, fixtures and office equipment
|
|
3-4 |
Software
|
|
3 |
Vehicles
|
|
5 |
Leasehold improvements
|
|
Lesser of estimated useful life or lease term |
Advances paid towards the acquisition of property and equipment
and the cost of property and equipment not put to use before the
balance sheet date are disclosed under the caption capital
work-in-progress in
Note 3.
Property and equipment are reviewed for impairment if indicators
of impairment arise. The evaluation of impairment is based upon
a comparison of the carrying amount of the property and
equipment to the estimated future undiscounted net cash flows
expected to be generated by the property and equipment. If
estimated future undiscounted cash flows are less than the
carrying amount of the property and equipment, the asset is
considered impaired. The impairment expense is determined by
comparing the estimated fair value of the property and equipment
to its carrying value, with any shortfall from fair value
recognized as an expense in the current period.
Income
taxes
The Company applies the asset and liability method of accounting
for income taxes as described in the Statement of Financial
Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under this
method, deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using tax rates expected to apply to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date. Valuation allowances are recognized to reduce the deferred
tax assets amount that is more likely than not to be realized.
In assessing the likelihood of realization, management considers
estimates of future taxable income.
F-37
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
Employee
benefits
Defined
contribution plan
Eligible employees of the Company in India receive benefits from
a Provident Fund, administered by the Government of India, which
is a defined contribution plan. Both the employees and the
Company make monthly contributions to the Provident Fund equal
to a specified percentage of the eligible employees salary.
The Company has no further obligation under the defined
contribution plan beyond the contributions made to the plan.
Contributions are charged to income in the year in which they
accrue and are included in the Consolidated Statement of
Operations.
Defined
benefit plan
Employees in India are entitled to benefits under the Payment of
Gratuity Act 1972, a defined benefit retirement plan covering
eligible employees of the Company. The Plan provides for a
lump-sum payment to eligible employees at retirement, death,
incapacitation or on termination of employment, of an amount
based on the respective employees salary and tenure of
employment.
The gratuity liability and net periodic gratuity cost has been
actuarially determined after considering discount rates and
increases in compensation levels.
Stock-based
compensation
The Company uses the intrinsic value method of accounting
prescribed by the Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to
Employees and related interpretations including
Financial Accounting Standards Board (FASB)
Interpretation 44, Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB
Opinion 25, to account for its employee stock-based compensation
plan. Under this method, compensation expense is recorded over
the vesting period of the option if the fair market value of the
underlying stock exceeds the exercise price at the measurement
date, which typically is the grant date. The Company has
provided pro forma disclosures as required by
SFAS No. 123, Accounting for Stock-Based
Compensation and SFAS 148, Accounting
for Stock-Based Compensation Transition and
Disclosure. Had compensation cost been determined in a
manner consistent with the fair value approach described in
SFAS No. 123, the Companys net loss as reported
would have changed to amounts indicated below:
|
|
|
|
|
Net loss as reported
|
|
$ |
(835 |
) |
Add: Stock-based compensation expense included in reported net
loss
|
|
|
210 |
|
Less: Stock-based compensation expense determined under the fair
value method
|
|
|
(219 |
) |
|
|
|
|
Pro forma net loss
|
|
$ |
(844 |
) |
|
|
|
|
The fair value of options was determined using the minimum value
method with the following assumptions:
|
|
|
|
|
Risk free interest rate
|
|
|
4 |
% |
Dividend yield
|
|
|
|
|
Expected life in years
|
|
|
5 |
|
There were no options granted during the year ended
March 31, 2005.
In December 2004, SFAS No. 123(R),
Share-Based Payment, was issued, which
establishes standards for transactions in which an entity
exchanges its equity instruments for goods or services. This
standard is
F-38
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
applicable to the Company effective April 1, 2006. Under
the transition provisions of this standard, non-public companies
that used the minimum-value method for determining fair value of
stock options would continue to account for non vested equity
awards outstanding at the date of adoption of the standard under
the intrinsic value method. All awards granted, modified or
settled after the date of adoption should be accounted for under
the provision of the new standard. Adoption of this standard may
have a significant impact on the Companys results of
operations, although it will have no impact on the
Companys overall financial position. The impact of
adoption of this standard cannot be predicted at this time as it
will depend on levels of share-based payments made in the future.
|
|
|
Fair
value of financial instruments |
The carrying amounts reported in the balance sheet for current
assets and current liabilities approximate their fair value due
to the short maturity of these items.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash
equivalents and accounts receivable.
The Companys cash equivalents are invested with banks with
high investment grade credit ratings. Accounts receivable are
typically unsecured and are derived from revenue earned from
customers in the financial services industry based in the United
States. The Company monitors the credit worthiness of its
customers to whom it grants credit terms in the normal course of
business. As of March 31, 2005, approximately 95% of the
total of accounts receivable and unbilled receivables, were
receivable from First Magnus Financial Corporation
(FMFC), a principal stockholder and its affiliate.
|
|
3. |
PROPERTY AND EQUIPMENT |
The major classes of property and equipment were as follows:
|
|
|
|
|
Computers
|
|
$ |
1,075 |
|
Furniture, fixtures and office equipment
|
|
|
267 |
|
Software
|
|
|
160 |
|
Vehicles
|
|
|
74 |
|
Leasehold improvements
|
|
|
48 |
|
Capital work-in-progress
|
|
|
852 |
|
|
|
|
|
|
|
|
2,476 |
|
Accumulated depreciation and amortization
|
|
|
(302 |
) |
|
|
|
|
|
|
$ |
2,174 |
|
|
|
|
|
F-39
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
The components of deferred tax assets and liabilities are as
follows:
|
|
|
|
|
Deferred tax asset
|
|
|
|
|
Net operating loss carry forward
|
|
$ |
362 |
|
Deferred tax liability
|
|
|
|
|
Property and equipment
|
|
|
(47 |
) |
Net deferred tax asset
|
|
|
315 |
|
Less: Valuation allowance
|
|
|
(315 |
) |
|
|
|
|
Net deferred tax asset
|
|
|
|
|
|
|
|
|
At March 31, 2005, the Company had net loss carry forwards
aggregating to $890 relating to operations in the United States.
The United States operation has accumulated losses and,
accordingly, a valuation allowance has been provided for the net
deferred tax asset recognized.
Trinity BPM is eligible for a tax holiday until March 31,
2009 consequent to which profits are exempt from tax for the
period until March 31, 2009. Accordingly, no deferred tax
has been recognized for Trinity BPM since all temporary
differences will reverse within the tax holiday period ending on
March 31, 2009.
The Company has not incurred any tax expense for the year ended
March 31, 2005.
|
|
|
Defined
contribution plan |
Contributions to the provident fund for employees of Trinity BPM
amounted to $33 for the year ended March 31, 2005.
|
|
|
Defined
benefit plan gratuity |
|
|
|
|
|
Change in projected benefit obligations
|
|
|
|
|
Obligation at beginning of the year
|
|
|
|
|
Translation adjustment
|
|
|
|
|
Service cost
|
|
|
(2 |
) |
Interest cost
|
|
|
|
|
Benefits paid
|
|
|
|
|
Actuarial loss
|
|
|
(5 |
) |
|
|
|
|
Benefit obligation at end of the year (A)
|
|
$ |
(7 |
) |
|
|
|
|
Plan assets at the end of year (B)
|
|
|
|
|
|
|
|
|
Funded status (B-A)
|
|
$ |
(7 |
) |
Unrecognized net loss
|
|
|
5 |
|
|
|
|
|
Accrued gratuity cost
|
|
$ |
(2 |
) |
|
|
|
|
F-40
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
|
|
|
|
|
Net periodic gratuity cost
|
|
|
|
|
Service cost
|
|
$ |
2 |
|
Interest cost
|
|
|
|
|
Expected return on plan asset
|
|
|
|
|
Net actuarial loss recognized
|
|
|
|
|
|
|
|
|
Net periodic gratuity cost for the year
|
|
$ |
2 |
|
|
|
|
|
The assumptions used in accounting for the Gratuity Plan as at
March 31, 2005 were (i) a discount rate of 7.50% and
(ii) a rate of increase in compensation levels of
8% per annum for the first 4 years and 6.5% per
annum thereafter.
Debt represents borrowings from financial institutions for the
purchase of vehicles.
The Company has one class of common stock and the holder of each
share is entitled to one vote per share. There were no common
shares outstanding as of March 31, 2005.
The Company has two classes of preferred stock, Series A
and Series B, which are convertible into fully paid common
stock at any time after issue, without any additional
consideration based on a conversion ratio. The conversion ratio
will be determined at the time of conversion based on a
conversion price of $1 per share, adjusted for any common
stock subsequently issued at a price lower than $1 per
share. Each share of preferred stock carries voting rights
equivalent to each share of common stock on an as converted
basis. The preferred stock holders have a liquidation preference
of $1 per share plus any declared and unpaid dividends and
the balance would be shared ratably based on the shares held (on
an as converted basis for the preferred stock) between the
common stockholders and preferred stockholders.
Series A preferred stock was issued to the founder
employees of the Company on August 12, 2003 at a price of
$1 per share of which $0.01 per share was the cash
price and the balance $0.99 per share was attributed to the
assignment by founder employees of business plans and the
associated rights under an Assignment agreement entered in to
between the Company and the founder employees. Further, under
the Restricted Stock Purchase Agreement entered into between the
Company and the founder employees, the Company has the right to
repurchase the stock on termination of services of the employees
at the cash price of the issue. The right to repurchase lapses
equally over a period of 36 months, on completion of each
month of service by the employee. Accordingly, the difference
between the issue price and cash paid of $3,366 was recorded as
deferred stock-based compensation and is being amortized over
the period over which the repurchase right of the Company
lapses. The amortization expense for the year ended
March 31, 2005 was $1,204.
The Series B preferred stock issued on August 26,
2003, included 555,555 shares issued by the Company to the
founder employees in exchange for interest free promissory notes
due and payable in a single installment on the earlier of
August 26, 2008 or on the
91st day
from the termination of employment. The notes are secured by the
Series B preferred stock issued that is held by the Company
in escrow. Accordingly, the amount due under the promissory
notes is included as a component of stockholders equity.
F-41
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
Under the employment agreement with one of the founder employee,
for every month of completed service, the Company waives $4 of
the promissory note receivable from the employee, resulting in
variable accounting for this arrangement. Accordingly, at each
balance sheet date the Company has recorded stock-based
compensation cost for the excess of the fair value over the
issue price of the stock represented by the net amount
receivable under the promissory note. Stock-based compensation
cost recorded by the Company for this arrangement was $141 for
the year ended March 31, 2005.
|
|
8. |
EMPLOYEES STOCK INCENTIVE PLAN |
In November 2003, the Company established the 2003 Stock Option/
Issuance (the Plan), which provided for the issue of
stock options to eligible employees. Eligible employees would be
granted options which would have a ten-year term and a vesting
period of four years, with 25% of the options vesting
immediately after one year of service from the vesting
commencement date and the balance equally over the remaining
36 month period.
The Companys stock option activity for the year ended
March 31, 2005 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- | |
|
|
Shares arising | |
|
average exercise | |
|
|
from options | |
|
price | |
|
|
| |
|
| |
Outstanding at the beginning of the year
|
|
|
480,507 |
|
|
$ |
0.10 |
|
Exercised
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at the end of the year
|
|
|
480,507 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
The following table summarizes the status of the Company stock
options outstanding and exercisable at March 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- | |
|
|
|
|
|
|
average | |
|
|
Exercise | |
|
|
|
remaining | |
|
|
prices | |
|
Shares | |
|
contractual life | |
|
|
| |
|
| |
|
| |
Options outstanding
|
|
$ |
0.10 |
|
|
|
344,854 |
|
|
|
8.82 |
|
Options vested and exercisable
|
|
$ |
0.10 |
|
|
|
135,653 |
|
|
|
8.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
480,507 |
|
|
|
8.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
9. |
RELATED-PARTY TRANSACTIONS |
|
|
|
Relationship |
|
Name of the party |
|
|
|
Significant stockholder
|
|
First Magnus Financial Corporation (FMFC)
First Magnus Consulting LLC |
Founders and Key Managerial Personnel
|
|
Vivek Shivpuri
Amit Gujral
Arvind Srivastava |
F-42
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
Transactions with related parties are detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount | |
Nature of transaction/ |
|
|
|
receivable | |
related party |
|
Amount | |
|
(payable) | |
|
|
| |
|
| |
Revenue
|
|
|
|
|
|
|
|
|
|
FMFC
|
|
$ |
5,036 |
|
|
$ |
581 |
|
|
Affiliates of FMFC
|
|
|
444 |
|
|
|
273 |
|
Purchase of property and equipment
|
|
|
|
|
|
|
|
|
|
FMFC
|
|
|
86 |
|
|
|
|
|
Reimbursement of expenses paid on behalf of the party
|
|
|
|
|
|
|
|
|
|
FMFC
|
|
|
50 |
|
|
|
|
|
Waiver of Promissory notes
|
|
|
|
|
|
|
|
|
|
Vivek Shivpuri
|
|
|
50 |
|
|
|
|
|
Promissory notes (repaid in October, 2005)
|
|
|
|
|
|
|
|
|
|
Vivek Shivpuri
|
|
|
|
|
|
|
68 |
|
|
Amit Gujral
|
|
|
|
|
|
|
152 |
|
|
Arvind Srivastava
|
|
|
|
|
|
|
152 |
|
|
|
10. |
COMMITMENT AND CONTINGENCIES |
Future minimum lease payments under non-cancelable operating
leases for operating facilities consist of the following at
March 31, 2005:
|
|
|
|
|
Year ending March 31, |
|
Amount | |
|
|
| |
2006
|
|
$ |
643 |
|
2007
|
|
|
146 |
|
2008
|
|
|
146 |
|
2009
|
|
|
148 |
|
2010
|
|
|
150 |
|
The Company also has short term leases which, on expiry, are
renewable by mutual agreement between the Company and the
lessor, for accommodation provided to employees of the Company.
Rental expense for the year ended March 31, 2005 was $267.
Deposits includes time deposits made as collateral to the
bankers of Trinity BPM who have issued guarantees aggregating
$13 as at March 31, 2005 primarily to customs and sales tax
authorities in India. These guarantees have an approximate term
of three years and a remaining expiry term of approximately one
to two years.
F-43
TRINITY PARTNERS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
MARCH 31, 2005
(Amounts in thousands, except share and per share data)
On November 16, 2005, WNS (Holdings) Limited, a leading
business process outsourcing company with operations in India,
United Kingdom and the United States acquired the entire share
capital of Trinity for a consideration comprising of a cash
payment of $6,814 and 2,107,901 shares of WNS (Holdings)
Limited.
The vesting of all stock options accelerated as a result of the
change in control provision within the Plan and the holders of
such vested options were settled in cash or shares of WNS
(Holdings) Limited or, a combination thereof, at the same per
share price paid to the stockholders of Trinity.
F-44
TRINITY PARTNERS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
November 15, | |
|
March 31, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
2,952 |
|
|
$ |
3,729 |
|
|
Accounts receivable
|
|
|
59 |
|
|
|
24 |
|
|
Account receivable related parties
|
|
|
803 |
|
|
|
137 |
|
|
Unbilled receivables
|
|
|
23 |
|
|
|
21 |
|
|
Unbilled receivables related parties
|
|
|
610 |
|
|
|
717 |
|
|
Prepaid expenses
|
|
|
106 |
|
|
|
121 |
|
|
Other current assets
|
|
|
35 |
|
|
|
56 |
|
|
|
|
|
|
|
|
Total current assets
|
|
|
4,588 |
|
|
|
4,805 |
|
Property and equipment, net
|
|
|
1,365 |
|
|
|
2,174 |
|
Deposits
|
|
|
224 |
|
|
|
192 |
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$ |
6,177 |
|
|
$ |
7,171 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
864 |
|
|
$ |
130 |
|
|
Accrued employee costs
|
|
|
307 |
|
|
|
490 |
|
|
Deferred revenue
|
|
|
482 |
|
|
|
484 |
|
|
Current portion of long term debt
|
|
|
13 |
|
|
|
13 |
|
|
Other accrued expenses and current liabilities
|
|
|
312 |
|
|
|
171 |
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,978 |
|
|
|
1,288 |
|
Long term debt, net of current portion
|
|
|
17 |
|
|
|
27 |
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Series A Preferred stock, $0.01 par value
3,367,000 shares authorized, issued and outstanding with
liquidation preference of $3,367
|
|
|
34 |
|
|
|
34 |
|
Series B Preferred stock, $0.01 par value
5,555,550 shares authorized, issued and outstanding with
liquidation preference of $5,556
|
|
|
56 |
|
|
|
56 |
|
Common stock, $0.01 par value
9,806,388 shares authorized; 883,838 shares issued and
outstanding at November 15, 2005 and nil shares issued and
outstanding at March 31, 2005
|
|
|
9 |
|
|
|
|
|
Additional paid-in-capital
|
|
|
10,010 |
|
|
|
9,284 |
|
Promissory notes
|
|
|
|
|
|
|
(372 |
) |
Deferred stock-based compensation
|
|
|
(784 |
) |
|
|
(609 |
) |
Accumulated deficit
|
|
|
(5,064 |
) |
|
|
(2,546 |
) |
Accumulated other comprehensive (loss) income
|
|
|
(79 |
) |
|
|
9 |
|
|
|
|
|
|
|
|
Total Stockholders equity
|
|
|
4,182 |
|
|
|
5,856 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$ |
6,177 |
|
|
$ |
7,171 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-45
TRINITY PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Period from April 1 | |
|
|
to November 15 | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Revenue
|
|
|
|
|
|
|
|
|
|
Third parties
|
|
$ |
242 |
|
|
$ |
24 |
|
|
Related parties
|
|
|
7,346 |
|
|
|
2,720 |
|
|
|
|
|
|
|
|
Revenue
|
|
|
7,588 |
|
|
|
2,744 |
|
Cost of revenue
|
|
|
3,751 |
|
|
|
1,169 |
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,837 |
|
|
|
1,575 |
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
3,287 |
|
|
|
2,280 |
|
|
Transaction costs related to acquisition by WNS (Holdings)
Limited
|
|
|
628 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(78 |
) |
|
|
(705 |
) |
Interest income
|
|
|
47 |
|
|
|
57 |
|
Interest expense
|
|
|
(1 |
) |
|
|
(1 |
) |
Foreign exchange income (loss), net
|
|
|
14 |
|
|
|
(15 |
) |
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(18 |
) |
|
|
(664 |
) |
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(18 |
) |
|
$ |
(664 |
) |
|
|
|
|
|
|
|
See accompanying notes.
F-46
TRINITY PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Period from April 1 | |
|
|
to November 15 | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$ |
920 |
|
|
$ |
899 |
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
419 |
|
|
|
(559 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
419 |
|
|
|
(559 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Debt repayment
|
|
|
(9 |
) |
|
|
(5 |
) |
|
Payments received against promissory note
|
|
|
348 |
|
|
|
100 |
|
|
Dividends paid during the period
|
|
|
(2,500 |
) |
|
|
|
|
|
Proceeds from stock options exercised
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(2,073 |
) |
|
|
95 |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(43 |
) |
|
|
10 |
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(777 |
) |
|
|
445 |
|
Cash and cash equivalents at beginning of period
|
|
|
3,729 |
|
|
|
4,788 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$ |
2,952 |
|
|
$ |
5,233 |
|
|
|
|
|
|
|
|
See accompanying notes.
F-47
TRINITY PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
PERIOD FROM APRIL 1, 2005 TO NOVEMBER 15, 2005
(Amounts in thousands, except share and per share data)
The accompanying unaudited condensed consolidated financial
statements of Trinity Partners Inc. (the Company)
have been prepared in accordance with United States generally
accepted accounting principles for interim financial information
and with the instructions of Article 10 of
Regulation S-X.
Accordingly, they do not include all information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (including normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the period from April 1, 2005 through
November 15, 2005 are not necessarily indicative of the
results that may be expected for the year ending March 31,
2006.
The balance sheet at March 31, 2005, has been derived from
the audited financial statements at that date, but does not
include all of the information and footnotes required by United
States generally accepted accounting principles for complete
financial statements. For further information, refer to the
audited consolidated financial statements and footnotes thereto
of Trinity Partners Inc. for the year ended March 31, 2005.
During the period April 1, 2005 to November 15, 2005,
the Company issued 883,838 shares of common stock upon the
exercise of options and, paid a dividend of $2,500 to its
stockholders.
Components of comprehensive loss are as follows:
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|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
April 1 to | |
|
|
November 15 | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Net loss
|
|
$ |
(18 |
) |
|
$ |
(664 |
) |
Foreign currency translation adjustment
|
|
|
(88 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$ |
(106 |
) |
|
$ |
(668 |
) |
|
|
|
|
|
|
|
|
|
|
Defined contribution plan |
Contributions to the provident fund for employees of Trinity BPM
amounted to $49 and $15 for the period from April 1, 2005
to November 15, 2005 and from April 1, 2004 to
November 15, 2004, respectively.
F-48
TRINITY PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(UNAUDITED)
PERIOD FROM APRIL 1, 2005 TO NOVEMBER 15, 2005
(Amounts in thousands, except share and per share data)
Defined
benefit plan gratuity
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
April 1 to | |
|
|
November 15 | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Net periodic gratuity cost
|
|
|
|
|
|
|
|
|
Service cost
|
|
$ |
9 |
|
|
$ |
1 |
|
Interest cost
|
|
|
|
|
|
|
|
|
Expected return on plan asset
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic gratuity cost for the period
|
|
$ |
10 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
5. |
STOCK-BASED COMPENSATION |
Had compensation cost been determined in a manner consistent
with the fair value approach described in
SFAS No. 123, the Companys net loss as reported
would have changed to amounts indicated below:
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
April 1 to | |
|
|
November 15 | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Net loss as reported
|
|
$ |
(18 |
) |
|
$ |
(664 |
) |
Add: Stock-based employee compensation expense included in
reported net loss
|
|
|
94 |
|
|
|
146 |
|
Less: Stock-based employee compensation expense determined under
the fair value method
|
|
|
(96 |
) |
|
|
(152 |
) |
|
|
|
|
|
|
|
Pro forma net loss
|
|
$ |
(20 |
) |
|
$ |
(670 |
) |
|
|
|
|
|
|
|
|
|
6. |
SUBSEQUENT EVENT ACQUISITION BY WNS (HOLDINGS)
LIMITED |
On November 16, 2005, WNS (Holdings) Limited, a leading
business process outsourcing company with operations in India,
UK and the US acquired the entire share capital of Trinity for a
total consideration comprising of a cash payment of $6,814 and
2,107,901 shares of WNS (Holdings) Limited.
The vesting of all stock options accelerated as a result of the
change in control provision within the 2003 Stock Option/
Issuance and the holders of such vested options were settled in
cash or shares of WNS (Holdings) Limited or, a combination
thereof, at the same per share price paid to the stockholders of
Trinity.
F-49
11,202,708 American Depositary Shares
WNS (Holdings) Limited
(organized under the laws of Jersey, Channel Islands)
Representing 11,202,708 ordinary shares
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|
Morgan Stanley |
|
Deutsche Bank Securities |
|
Merrill Lynch & Co. |
|
|
|
Citigroup |
|
UBS Investment Bank |
Prospectus
dated ,
2006
Until ,
2006 (25 days after the date of the final prospectus), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers obligations
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
ITEM 6. |
INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
Our Articles of Association provide that, in so far as the 1991
Law allows, all of our present or former officers may be
indemnified out of our assets in respect of, among others, any
expenses incurred by them, judgments made against them or fines
imposed on them in respect of any claims, actions or proceedings
commenced against them. Officers, for these purposes, are
directors and liquidators.
Article 77 of the 1991 Law provides that a company or any
of its subsidiaries or any other person, may not indemnify any
person from, or against, any liability incurred by him as a
result of being an officer of the company except where the
company is indemnifying him against:
|
|
(a) |
any liabilities incurred in defending any proceedings (whether
civil or criminal): |
|
|
|
|
(i) |
in which judgment is given in his favor or he is
acquitted, or |
|
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|
|
(ii) |
which are discontinued otherwise than for some benefit conferred
by him or on his behalf or some detriment suffered by him, or |
|
|
|
|
(iii) |
which are settled on terms which include such benefit or
detriment and, in the opinion of a majority of the directors of
the company, he was substantially successful on the merits in
his resistance to the proceedings; or |
|
|
(b) |
any liability incurred otherwise than to the company if he acted
in good faith with a view to the best interests of the
company; or |
|
(c) |
any liability incurred in connection with an application made
under Article 212 of the 1991 Law in which relief is
granted to him by the court; or |
|
(d) |
any liability against which the company normally maintains
insurance for persons other than directors. |
The 1991 Law permits a company to purchase and maintain
insurance regarding the indemnification of its officers.
We maintain directors and officers insurance to protect our
officers and directors from specified liabilities that may arise
in the course of their service to us in those capacities.
We expect to enter into indemnification agreements with our
directors and officers, pursuant to which our company will agree
to indemnify them against a number of liabilities and expenses
incurred by such persons in connection with claims made by
reason of their being such a director or officer.
The form of underwriting agreement to be filed as
Exhibit 1.1 to this registration statement will also
provide for indemnification of our company and our officers and
directors.
|
|
ITEM 7. |
RECENT SALES OF UNREGISTERED SECURITIES |
During the past four years, we have issued the securities set
forth in the tables below.
We believe that each of the following issuances of ordinary
shares was exempt from registration under the Securities Act in
reliance on Regulation S, Section 4(2) or
Rule 701 of the Securities Act regarding transactions not
involving a public offering:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate | |
|
|
|
|
Date of Sale | |
|
Number of | |
|
Consideration in GBP/ | |
Purchaser |
|
or Issuance | |
|
Ordinary Shares | |
|
(US dollars) millions(1)(2) | |
|
|
| |
|
| |
|
| |
Warburg Pincus Private Equity VIII, L.P.
|
|
|
May 20, 2002 |
|
|
|
6,020,000 |
|
|
|
£6.00/$10.35 |
|
|
|
|
July 4, 2002 |
|
|
|
5,214,917 |
|
|
|
£5.20/$8.97 |
|
Warburg Pincus International Partners, L.P.
|
|
|
May 20, 2002 |
|
|
|
5,779,200 |
|
|
|
£5.76/$9.93 |
|
|
|
|
July 4, 2002 |
|
|
|
5,006,321 |
|
|
|
£4.99/$8.61 |
|
II-1
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate | |
|
|
|
|
Date of Sale | |
|
Number of | |
|
Consideration in GBP/ | |
Purchaser |
|
or Issuance | |
|
Ordinary Shares | |
|
(US dollars) millions(1)(2) | |
|
|
| |
|
| |
|
| |
Warburg Pincus Netherlands International Partners I, CV
|
|
|
May 20, 2002 |
|
|
|
144,480 |
|
|
|
£0.14/$0.25 |
|
|
|
|
July 4, 2002 |
|
|
|
125,158 |
|
|
|
£0.12/$0.22 |
|
Warburg Pincus Netherlands International Partners II, CV
|
|
|
May 20, 2002 |
|
|
|
96,320 |
|
|
|
£0.10/$0.17 |
|
|
|
|
July 4, 2002 |
|
|
|
83,439 |
|
|
|
£0.08/$0.14 |
|
British Airways plc
|
|
|
May 20, 2002 |
|
|
|
5,160,000 |
|
|
|
£5.16/$8.90 |
|
David Charles Tibble
|
|
|
May 20, 2002 |
|
|
|
400,000 |
|
|
|
£0.40/$0.69 |
|
|
|
|
July 4, 2002 |
|
|
|
130,401 |
|
|
|
£0.18/$0.31 |
|
|
|
|
August 15, 2002 |
|
|
|
157,781 |
|
|
|
£0.16/$0.27 |
|
|
|
|
June 8, 2004 |
|
|
|
133,333 |
|
|
|
£0.13/$0.23 |
|
|
|
|
November 30, 2004 |
|
|
|
133,333 |
|
|
|
£0.13/$0.23 |
|
|
|
|
August 16, 2005 |
|
|
|
133,334 |
|
|
|
£0.13/$0.23 |
|
Bolton Agnew
|
|
|
July 4, 2002 |
|
|
|
391,241 |
|
|
|
£0.54/$0.93 |
|
Theodore Thomas More Agnew
|
|
|
July 4, 2002 |
|
|
|
652,067 |
|
|
|
£0.90/$1.55 |
|
Theodore Agnew and Bolton Agnew ATO Theodore Agnew Personal
Settlement
|
|
|
July 4, 2002 |
|
|
|
1,304,161 |
|
|
|
£1.80/$3.10 |
|
First Magnus Financial Corporation
|
|
|
November 16, 2005 |
|
|
|
596,154 |
|
|
|
£2.10/ $3.60 |
|
First Magnus Consulting LLC
|
|
|
November 16, 2005 |
|
|
|
620,487 |
|
|
|
£2.17/ $3.74 |
|
Executive officers and other managers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4, 2002 |
|
|
|
130,401 |
|
|
|
£0.18/$0.31 |
|
|
|
|
May 4, 2005 |
|
|
|
83,333 |
|
|
|
£0.08/$0.14 |
|
|
|
|
September 27, 2005 |
|
|
|
50,496 |
|
|
|
£0.05/$0.09 |
|
|
|
|
October 25, 2005 |
|
|
|
132,837 |
|
|
|
£0.13/$0.23 |
|
|
|
|
October 25, 2005 |
|
|
|
75,000 |
|
|
|
£0.07/ $0.13 |
|
|
|
|
October 25, 2005 |
|
|
|
400,000 |
|
|
|
£0.40/ $0.69 |
|
|
|
|
October 25, 2005 |
|
|
|
175,000 |
|
|
|
£0.17/ $0.30 |
|
|
|
|
October 25, 2005 |
|
|
|
16,666 |
|
|
|
£0.02/ $0.42 |
|
|
|
|
November 28, 2005 |
|
|
|
150,000 |
|
|
|
£0.53/ $0.91 |
|
Employees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 24, 2005 |
|
|
|
52,779 |
|
|
|
£0.056/$0.099 |
|
|
|
|
August 5, 2005 |
|
|
|
33,333 |
|
|
|
£0.05/$0.09 |
|
|
|
|
September 27, 2005 |
|
|
|
66,666 |
|
|
|
£0.10/$0.17 |
|
|
|
|
October 25, 2005 |
|
|
|
48,000 |
|
|
|
£0.05/$0.08 |
|
|
|
|
October 25, 2005 |
|
|
|
4,666 |
|
|
|
£0.007/ $0.012 |
|
|
|
|
October 25, 2005 |
|
|
|
14,000 |
|
|
|
£0.01/ $0.02 |
|
|
|
|
October 25, 2005 |
|
|
|
14,000 |
|
|
|
£0.01/ $0.02 |
|
|
|
|
October 25, 2005 |
|
|
|
14,000 |
|
|
|
£0.01/ $0.02 |
|
|
|
|
October 25, 2005 |
|
|
|
14,000 |
|
|
|
£0.01/ $0.02 |
|
|
|
|
November 16, 2005 |
|
|
|
327,149 |
|
|
|
£1.15/ $1.97 |
|
|
|
|
November 16, 2005 |
|
|
|
314,696 |
|
|
|
£1.10/ $1.90 |
|
|
|
|
November 16, 2005 |
|
|
|
314,696 |
|
|
|
£1.10/ $1.90 |
|
|
|
|
November 16, 2005 |
|
|
|
90,606 |
|
|
|
£0.32/ $0.55 |
|
|
|
|
December 21, 2005 |
|
|
|
16,666 |
|
|
|
£0.02/ $0.04 |
|
|
|
|
January 13, 2006 |
|
|
|
666 |
|
|
|
£0.001/$0.0018 |
|
|
|
|
January 16, 2006 |
|
|
|
16,666 |
|
|
|
£0.02/$0.35 |
|
|
|
|
February 7, 2006 |
|
|
|
66,666 |
|
|
|
£0.10/$0.17 |
|
II-2
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|
|
|
|
|
|
|
|
Aggregate | |
|
|
|
|
Date of Sale | |
|
Number of | |
|
Consideration in GBP/ | |
Purchaser |
|
or Issuance | |
|
Ordinary Shares | |
|
(US dollars) millions(1)(2) | |
|
|
| |
|
| |
|
| |
|
|
|
March 10, 2006 |
|
|
|
667 |
|
|
|
£0.001/$0.0018 |
|
|
|
|
March 31, 2006 |
|
|
|
3,700 |
|
|
|
£0.004/$0.007 |
|
|
|
|
May 3, 2006 |
|
|
|
3,000 |
|
|
|
£0.003/$0.005 |
|
|
|
|
June 13, 2006 |
|
|
|
1,666 |
|
|
|
£0.002/$0.004 |
|
Ex-employees:
|
|
|
September 24, |
|
|
|
2,666 |
|
|
|
£0.003/$0.005 |
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
November 26, 2004 |
|
|
|
9,333 |
|
|
|
£0.009/$0.02 |
|
|
|
|
February 11, 2005 |
|
|
|
120,000 |
|
|
|
£0.12/$0.21 |
|
|
|
|
May 24, 2005 |
|
|
|
20,696 |
|
|
|
£0.029/$0.051 |
|
|
|
|
June 10, 2005 |
|
|
|
8,991 |
|
|
|
£0.01/$0.02 |
|
|
|
|
October 19, 2005 |
|
|
|
193,334 |
|
|
|
£0.27/$0.47 |
|
|
|
|
November 16, 2005 |
|
|
|
2,234 |
|
|
|
£0.008/ $0.01 |
|
|
|
|
December 21, 2005 |
|
|
|
3,000 |
|
|
|
£0.002/ $0.005 |
|
|
|
|
January 13, 2006 |
|
|
|
50,000 |
|
|
|
£0.07/$0.1207 |
|
|
|
|
March 10, 2006 |
|
|
|
1,775 |
|
|
|
£0.003/$0.005 |
|
|
|
|
April 10, 2006 |
|
|
|
1,996 |
|
|
|
£0.003/$0.005 |
|
Notes:
|
|
(1) |
No underwriting discount was provided or no commission was paid
in relation to these sales or issuances. |
|
(2) |
US dollar amounts based on convenience translation of £0.57
= $1.00 as of March 31, 2006. |
During the past four fiscal years, we have issued the following
options under our stock incentive plan, the WNS (Holdings)
Limited 2002 Stock Option Plan. We believe that each of the
following issuances of options was exempt from registration
under the Securities Act in reliance on Regulation S,
Section 4(2) or Rule 701 of the Securities Act
regarding transactions not involving a public offering:
|
|
|
|
|
Aggregate Number of options granted |
|
Aggregate Number of options granted(1) | |
|
|
| |
Fiscal 2003
|
|
|
2,455,500 |
|
Fiscal 2004
|
|
|
1,868,000 |
|
Fiscal 2005
|
|
|
889,744 |
|
Fiscal 2006
|
|
|
1,481,479 |
|
Fiscal 2007 (through June 30, 2006)
|
|
|
Nil |
|
Note:
|
|
(1) |
Includes 678,699 options which were cancelled post grant. |
|
|
ITEM 8. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) Exhibits:
Incorporated by reference to the Exhibit Index following
page II-7 hereof.
(b) Financial Statement Schedules:
Schedules have been omitted because the information required to
be set forth therein is not applicable or is shown in the
Financial Statements or the Notes thereto.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting
agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
II-3
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such
indemnification by it is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
|
|
(1) |
For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective. |
|
(2) |
For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and this offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. |
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on
Form F-1 and has
duly caused this Amendment No. 2 to the registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Mumbai, India on July
25, 2006.
|
|
|
|
|
Name: Ramesh N. Shah |
|
Title: Chairman |
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by
the following persons in the capacities indicated on
July 25, 2006.
|
|
|
|
|
Signature |
|
Title |
|
|
|
|
/s/ Ramesh N. Shah
Ramesh
N. Shah |
|
Chairman of Board |
|
*
Neeraj
Bhargava |
|
Director and Group Chief Executive Officer
(principal executive officer) |
|
/s/ Zubin Dubash
Zubin
Dubash |
|
Director and Group Chief Financial Officer
(principal financial officer and
principal accounting officer) |
|
*
Pulak
Prasad |
|
Director |
|
*
Nitin
Sibal |
|
Director |
|
*
Miriam
Strouse |
|
Director |
|
*
Jeremy
Young |
|
Director |
|
*
Guy
Sochovsky |
|
Director |
|
*
Timothy
Hammond |
|
Director |
|
|
By: |
|
/s/ Ramesh N. Shah
Ramesh
N. Shah |
|
Authorized Representative in the US |
II-5
|
|
|
|
|
Signature |
|
|
|
|
|
|
|
By: |
|
/s/ Ramesh N. Shah
Ramesh
N. Shah
Attorney-in-Fact |
|
|
|
|
By: |
|
/s/ Zubin Dubash
Zubin
Dubash
Attorney-in-Fact |
|
|
II-6
EXHIBIT INDEX
|
|
|
|
|
No. |
|
Description |
|
|
|
|
1 |
.1 |
|
Form of underwriting agreement.* |
|
3 |
.1 |
|
Memorandum of Association of WNS (Holdings) Limited, as amended.* |
|
3 |
.2 |
|
Articles of Association of WNS (Holdings) Limited, as amended.* |
|
4 |
.1 |
|
Form of Deposit Agreement among WNS (Holdings) Limited, Deutsche
Bank Trust Company Americas, as Depositary, and the holders and
beneficial owners of American Depositary Shares evidenced by
American Depositary Receipts issued thereunder.* |
|
4 |
.2 |
|
Form of American Depositary Receipt (included in
Exhibit 4.1).* |
|
4 |
.3 |
|
Specimen Ordinary Share Certificate.* |
|
5 |
.1 |
|
Opinion of Mourant du Feu & Jeune. |
|
8 |
.1 |
|
Opinion of Mourant du Feu & Jeune as to certain Jersey
tax matters (see Exhibit 5.1). |
|
8 |
.2 |
|
Opinion of Latham & Watkins LLP as to certain
US tax matters. |
|
10 |
.1 |
|
Stock Purchase Agreement dated November 8, 2005, by and
among WNS (Holdings) Limited, First Magnus Financial
Corporation, First Magnus Consulting LLC, Mr. Vivek
Shivpuri, Mr. Amit Gujral, Mr. Arvind Srivastava,
Mr. Francesco Paolo and Trinity Partners Incorporated.* |
|
10 |
.2 |
|
Lease Deed dated March 10, 2005 between M/s DLF Cyber City
and WNS Global Services (P) Ltd.* |
|
10 |
.3 |
|
Leave and Licence Agreement dated October 18, 2002 between
Godrej & Boyce Manufacturing Company Ltd. and World
Network Services Pvt. Ltd.* |
|
10 |
.4 |
|
Leave and Licence Agreement dated March 17, 2004 between
Sofotel Software Services Private Limited and WNS Global
Services Private Limited.* |
|
10 |
.5 |
|
Leave and Licence Agreement dated November 10, 2005 between
Godrej & Boyce Manufacturing Company Ltd. and WNS
Global Services Private Limited with respect to Plant 10.* |
|
10 |
.6 |
|
Form of director and executive officer indemnification
agreement.* |
|
10 |
.7 |
|
Registration Rights Agreement, dated May 20, 2002, among Warburg
Pincus Private Equity VIII, L.P., Warburg Pincus International
Partners, L.P., Warburg Pincus Netherlands International
Partners I, CV, Warburg Pincus Netherlands International
Partners II, CV, British Airways PLC and WNS (Holdings) Limited.* |
|
10 |
.8 |
|
Framework Agreement relating to the Supply of Services Agreement
dated 21 May 2002, by and among British Airways PLC, WNS
(UK) Limited and WNS (Holdings) Limited. #* |
|
10 |
.9 |
|
Letter of Intent dated May 18, 2006 relating to the
Framework Agreement between British Airways PLC and WNS Global
Services (UK) Ltd. #* |
|
10 |
.10 |
|
WNS (Holdings) Limited 2002 Stock Incentive Plan.* |
|
10 |
.11 |
|
Form of WNS (Holdings) Limited 2006 Incentive Award Plan.* |
|
10 |
.12 |
|
Leave and Licence Agreement dated May 31, 2006 between
Godrej & Boyce Manufacturing Company Ltd. and WNS
Global Services Private Limited with respect to Plant 11.* |
|
21 |
.1 |
|
List of subsidiaries of WNS (Holdings) Limited.* |
|
23 |
.1 |
|
Consent of Mourant du Feu & Jeune (see
Exhibit 5.1). |
|
23 |
.2 |
|
Consent of Latham & Watkins LLP (see Exhibit 8.2). |
|
23 |
.3 |
|
Consent of Ernst & Young, registered public accounting
firm with respect to WNS (Holdings) Limited. |
II-7
|
|
|
|
|
No. |
|
Description |
|
|
|
|
23 |
.4 |
|
Consent of Ernst & Young, independent auditors with respect
to Trinity Partners Inc. |
|
23 |
.5 |
|
Consent of Amarchand & Mangaldas & Suresh A.
Shroff & Co. |
|
23 |
.6 |
|
Consent of Eric B. Herr to be named as a director nominee.* |
|
23 |
.7 |
|
Consent of Deepak S. Parekh to be named as a director
nominee.* |
|
24 |
.1 |
|
Power of Attorney (contained on signature page).* |
|
|
* |
Previously filed. |
|
# |
Certain portions of this exhibit have been omitted pursuant to a
request for confidential treatment filed with the Commission.
The omitted portions have been filed with the Commission. |
II-8