Macros para Solid Edge

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements as of and for the years ended March 31, 2006, 2007, 2008, 2009 and 2010 and for the quarter ended June 30, 2010, prepared in accordance with the Companies Act and Indian GAAP and restated in accordance with the ICDR Regulations, including the schedules, annexure and notes thereto and the reports thereon, included in the section titled “Financial Information” beginning on page no. 117of this Draft Red Herring Prospectus. Unless otherwise stated, the financial information used in this section is derived from our audited consolidated financial statements, as restated.

Indian GAAP differs in certain material respects from U.S. GAAP and IFRS. We have not attempted to quantify the impact of IFRS or U.S. GAAP on the financial data included in this Draft Red Herring Prospectus, nor do we provide a reconciliation of our financial statements to those under U.S. GAAP or IFRS. Accordingly, the degree to which the Indian GAAP financial statements included in this Draft Red Herring Prospectus will provide meaningful information is entirely dependent on the reader’s level of familiarity with the Companies Act, Indian GAAP and ICDR Regulations.

This discussion contains forward-looking statements and reflects our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those set forth in the sections titled "Risk Factors" and “Forward Looking Statements” beginning on page nos. XIV and page XIII, respectively. In this section, unless the context otherwise requires, a reference to "our Company" is a reference to NetAlter Software Limited and a reference to "we", "us" and "our" refers to NetAlter Software Limited and its subsidiaries and joint venture companies, on a consolidated basis.

Overview

We are a software development company having been incorporated on 13th May 2005, with an objective of developing solutions for the social, commercial and collaborative sphere. We presently operate from our corporate office situated in Mulund, Mumbai.

We are presently involved in research and development of NetAlter System by deploying the intellectual and knowledge innovations at our disposal. The NetAlter System comprises of a system, methods, computer programs, standards, infrastructure, search algorithm and a business method for an AI enabled Information Communication and Computation (ICC) framework operated by NetAlter Browser to present an alternative to to the present cyberspace (denoted by World Wide Web) by engaging client/server as well peer to peer framework. NetAlter System is also determined to facilitate migration of existing client-server solutions to secured Peer to Peer platform. For NetAlter System, we have obtained registration for the Patent in respect of ‘An Information Communication And Computation System’ with the Patent Office, Government of India. We have also filed applications for Patent in PCT, USA, Europe (EPO), Malaysia, New Zealand, China, Canada, Australia, Mexico, and Brazil for NetAlter System.

We are also engaged in developing and marketing social and business networking software products and its related tools and utilities. Our products comprises of Community Hotline, Community Online, Matrimonial Hotline, Matrimonial Online, Family Connect, Friend Connect, Contact Manager and Bhav2bahv. Our tools and utilities comprise of CD Wizard, CD Viewer, Email Manager and Web Manger.

142 The overview of the financial performance of our company based on re-stated audited financial information:

(` In lakhs)

Particulars Period ended

30/06/2010

FY 2010 FY 2009

Sales 16.00 60.05 25.59

Total Income 16.00 60.12 25.59

Net Expenditure 5.01 23.60 18.93

Net expenditure as % of total income 31.31% 39.25% 73.97%

EBITDA 10.99 36.52 6.66 EBITDA % margin 68.69% 60.74% 26.03% PBT 3.43 5.98 2.42 PBT % margin 21.44% 9.95% 9.46% PAT 2.83 6.92 1.26 PAT % margin 17.68% 11.51% 4.92% Networth 1,054.16 1,050.96 762.55

EPS (`) on face value of ` 10 per Equity Share

0.03 0.07 0.01

Return on Networth 0.27% 0.66% 0.17%

Note: Our Company has commenced commercial operations from FY 2009.

Significant Developments Subsequent to Last Financial year which can affect operation of our Company Except as stated in this Draft Red Hearing Prospectus, to our knowledge, no circumstances has arisen or developed since last financial year of reporting restated financial information as disclosed in the offer document which materially or adversely affect or likely to affect the trading or profitability of our company, or the value of our company’s assets or our ability to pay its liabilities within the next twelve months.

Factors Affecting Results of Operations

Our financials conditions and results are dependents on the following factors: 1. General Economic Conditions

Our financial condition is affected by the general economic condition prevailing in the country. The Indian economy has witnessed a robust growth over a period of time. Our operations are dependent on the demand from our customers which is linked to the economic condition of country and growth of the IT Industry. India was a latecomer to the Internet. The reasons were low PC penetration, lack of infrastructure and high Internet costs. This scenario has changed and Internet usage has increased significantly. We believe that the sustained growth in Internet usage in India and worldwide will offer opportunities for introduction of our products.

2. Proposed project

As described in the Section “Objects of the Issue” on page no. 27, we are actively engaged in research and development of our patented NetAlter System which comprises of a system, methods, computer program, standards, infrastructure, search algorithm and a business method for an AI enabled Information Communication and Computation (ICC) framework operated by NetAlter Service Browser to devise an alternative to the present world wide web by engaging universally distributed grid, supercomputing and peer to peer framework.

The successful completion of the project is a major factor which will significantly impact our operations in the coming years. Further, being a new concept, the success of the project also depends on the acceptance of the products by the prospective users.

143 3. Availability of skilled and experienced manpower

Our ability to successfully complete the development of NetAlter system and other software products depends largely on our ability to attract, train, motivate and retain highly skilled software professionals, including managers and other mid-level professionals. The attrition rates in the industry in which we operate have been high due to a highly competitive skilled labour market in India

4. Competition

The NetAlter System being developed by the Company is based on the P2P and client/server based system and currently face no competition from any other product in the market. However, going forward similar or more advanced technologies and products having more acceptability may be developed, which may pose a competition to the NetAlter System. NetAlter System will also face competition in the form of Internet based solutions.

5. Technology

The software and information technology market is characterised by rapid technological changes, evolving industry standards, changing consumer preferences and new product and service introductions. Our future success will depend on our ability to anticipate these advances and develop new product/service offerings to meet consumers’ needs.