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Directors Report of Nelco Ltd.

Sep 30, 2014

Dear Members,

The Directors present their Seventy second Annual Report together with the Audited Statement of Accounts for the year ended 30th September, 2014.

1. Financial Results

The summarized financial results (Standalone) are indicated below:-

(Rupees in Lakhs)

Particulars For the year ended For the year ended 30.09.2014 (Rs.) 30.09.2013 (Rs.)

Net Sales / Income from Operations 10,276.45 10,971.86

Operating Expenditure 10,251.75 11,215.70

Operating Profit /(Loss) 24.70 (243.84)

Add : Other Income 320.67 131.33 Less : Interest 886.91 954.91

Profit / (Loss) Before Tax & Depreciation and Exceptional items (541.54) (1,067.42)

Less : Depreciation 570.74 569.37

Profit / (Loss) Before Tax and Exceptional items (1,112.28) (1,636.79)

Exceptional Items

Add:- Decreetal dues received including interest & cost ** 1,240.90 -

Profit / (Loss) Before Tax 128.62 (1,636.79)

Less : Provision for Tax (including provision for Deferred Tax and Fringe Benefit Tax) - -

Net Profit / (Loss) After Tax 128.62 (1,636.79)

Balance Brought Forward (1,623.77) 13.02

Balance available for appropriation (1,495.15) (1,623.77)

Appropriated as under :

Proposed Dividend - -

Tax on Dividend - -

Transfer to General Reserve - -

Balance to be Carried Forward (1,495.15) (1,623.77)

** Refer to note no. 27 on notes to accounts.

Due to inadequacy of profits, the Board of Directors has not recommended any dividend for the year ended 30th September, 2014.

2. Financial Highlights

During the period under review, the total income was Rs. 10,276.46 lakhs as against Rs. 10,971.86 lakhs in the previous year. The Company reported a profit after tax of Rs.128.62 lakhs as against a loss after tax of Rs. 1636.79 lakhs in the previous year.

The segment wise performance (Standalone) for the year was as follows :

Automation & Control earned total revenue of Rs. 2,430 lakhs (Rs 3,356 lakhs in previous year) and incurred a segment loss of Rs. 746 lakhs (loss of Rs. 1,164 lakhs in previous year). In order to reduce further losses, the Board had decided to explore various options of restructuring including restricting the operations of this Business Segment which comprises of Integrated Security & Surveillance Solutions (ISSS) and Unattended Ground Sensors (UGS) solutions for Defense.

Network Systems earned a total revenue of Rs. 7,821 lakhs (Rs.7,599 lakhs in previous year) and reported a segment profit of Rs. 1,547 lakhs (profit of Rs. 1,520 lakhs in previous year)

Interest amounted to Rs. 824 lakhs (Rs. 887 lakhs in previous year). Other un-allocable income (net of expenses) is Rs. 151 lakhs as against un-allocable expenses (net of income) of Rs. 1,106 lakhs in the previous year.

The Notes forming part of the Accounts referred to in Auditors'' Report of the Company are self-explanatory and, therefore, do not call for any further explanation under Section 217(3) of the Companies Act, 1956.

3. Subsidiary Company

Tatanet Services Ltd. (TNSL) is a Wholly Owned Subsidiary of the Company. It holds the requisite licenses for providing the Shared Hub VSAT services. For the financial year ended 31st March, 2014, TNSL has posted revenue from operations of Rs.4,626.39 lakhs as against Rs. 4,039.00 lakhs in the previous year and profit after Tax of Rs.83.45 lakhs as against loss after Tax of Rs.116.29 lakhs in the previous year.

Vide General Circular No.: 2/201 1 dated 8th February, 2011, the Ministry of Corporate Affairs, Govt. of India has granted a general exemption to companies from attaching the Balance Sheet, the Statement of Profit and Loss and other documents referred to in Section 212 (1) of the Companies Act, 1956 in respect of its subsidiary companies, subject to fulfillment of the conditions mentioned therein.

Accordingly, the said documents are not being attached with the Balance Sheet of the Company. A gist of the financial performance of Tatanet Services Ltd. ("TNSL"), the subsidiary company is contained in the report. The Annual Accounts of TNSL are open for inspection by any Member / Investor and the Company will make available these documents / details upon request by any Member of the Company or to any Investor of TNSL who may be interested in obtaining the same. Further, the Annual Accounts of TNSL will be kept open for inspection by any investor at the Company''s Registered Office and that of the TNSL and would be posted on the website of the Company www.nelco.in.

4. Human Resource Management

The company believes that employees are its most valuable resource and has implemented effective Human Resource management practices, which has helped in making the Organization robust, progressive and dynamic. The company as a step towards nurturing talent and building competencies, has introduced a new E-learning initiative, "GyanJyoti", in collaboration with Tata Management Training Centre (TMTC) and Harvard Business Publishing (HBP) for employees. This self paced E-learning system covers 44 modules in General Management in the areas of managing Self, Others and Business. An Employee Engagement & Satisfaction survey was conducted by AON Hewitt. Engagement Action Planning (EAP) workshops were conducted across the company to communicate the survey findings and facilitate formulation of action plans for improving engagement. The Company launched "HR Connect" to provide a formal structured process for better engagement. The Company emphasizes Ethics, Safety and Innovation as part of its work culture. Its entry, "Unmanned Aviation Pilot weather briefing system", last year had been selected for the Final National round of Tata Innovista - 2014 which is a popular, annual, Group wide program to showcase and recognise the best innovations. The Company maintained cordial industrial relations during the period under review.

5. Internal Controls and Systems

The Company has an adequate system of internal controls to ensure that all assets are safeguarded and accounted for and business transactions are authorized and recorded. An external established audit firm carries out internal audit. This audit is based on an Annual Audit Plan and includes regular reviews by the Audit Committee of Directors to ensure adequacy of controls and adherence to laid down procedures and systems. The Board of Directors also carries out Company Wide Risk Assessment and Management on a systematic and regular basis.

6. Quality Systems

The Company''s manufacturing facility has been approved & certified by Directorate General of Quality Assurance (DGQA), an establishment under Ministry of Defence, Govt. of India through their regular Audits verification System. The Company''s in-house Development Department has been recognized by the Department of Science and Industrial Research (DSIR), an establishment under Ministry of Science & Technology Govt. of India. The company has been certified for ISO 20000 & ISO 27001 and its wholly owned subsidiary - Tatanet Services Ltd., with TL 9000.

7. Public Fixed Deposits

The Company has neither accepted nor renewed any public fixed deposits during the period under review. However, there were deposits amounting to Rs. 0.05 lakhs as on 30th September, 2014 which remain outstanding as some of the deposit holders have not claimed the repayment. In accordance with the provisions of Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2011, unclaimed deposits with interest aggregating to Rs. 0.48 lakhs were transferred during the financial year 2011-12 to the Investor Education and Protection Fund.

8. Safety, Health and Environment

The Company accords high priority to health, safety, and environment, treating these as integral part of all its activities. The operations of the Company are not of a hazardous nature. However, the Company emphasizes on maintaining a healthy and safe environment in and around its facilities as well as contract sites where projects are under execution. To ensure success of the safety initiatives, the Company involves the line management along with contract workforce in all initiatives rolled out from time to time. Safety Awareness is inculcated through regular Safety Awareness Programs, basic fire safety training, mock drills, regular Safety Committee meetings and capturing employees'' voices through safety observation and near miss reporting. The employees working at project sites are given requisite training for ensuring safety during work. Periodic Safety Audit is carried out and action taken to eliminate unsafe conditions.

9. Disclosure of Particulars

Particulars required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the prescribed format as Annexure "A" to the Directors'' Report.

Particulars of Employees: In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of the employees are set out in the Annexure "B" to the Directors'' Report. However, having regard to the provisions of Section 219 (1 )(b)(iv) of the Companies Act, 1956, the Annual Report is being sent to all Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

10. Directors

Ms. Hema Hattangady was appointed as an Additional Director with effect from 1st October, 2014 in accordance with Article 125 of the Articles of Association of the Company and Section 161 of the Companies Act, 2013 (the Act). Ms. Hattangady holds office only upto the date of the forthcoming AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying his intention to propose Ms. Hattangady''s appointment as a Director.

The Company has, pursuant to the provisions of Clause 49 of the Listing Agreements entered into with Stock Exchanges, appointed Mr. R. R. Bhinge, Mr. P K. Ghose, Mr. R. Savoor, Mr. K. Raghuraman, Mr. K. Ramachandran and Ms. Hema Hattangady as Independent Directors of the Company. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49. In accordance with the provisions of Section 149(4) and proviso to Section 152(5) of the Companies Act, 2013, these Directors are being appointed as Independent Directors to hold office as per their tenure of appointment mentioned in the Notice of the forthcoming AGM of the Company.

In accordance with the requirements of the Act and the Articles of Association of the Company, Mr. S.Ramakrishnan retires by rotation and is eligible for re-appointment.

11. Auditors

Messrs. Deloitte Haskins & Sells LLP (DHS), who are the statutory auditors of your Company, hold office until the conclusion of the forthcoming seventy second Annual General Meeting (AGM). It is proposed to re-appoint DHS as statutory auditors of the Company from the conclusion of the seventy second AGM till the conclusion of the seventy fifth AGM to be held in the year 2018, subject to ratification of their appointment at every AGM. DHS has, under Section 141 of the Act, furnished a certificate of its eligibility for re-appointment. The Members year on year will be requested, to ratify their appointment as Auditors and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the Members is invited to Item No.3 of the Notice.

M/s P D. Dani & Co., Cost Accountant, was appointed Cost Auditors of your Company for FY14.

In accordance with the requirement of the Central Government and pursuant to Section 233B of the Companies Act, 1956, your Company carries out an audit of cost accounts relating to Telecommunication (ISP) activities and Electronic Products. The Cost Audit Report and the Compliance Report of your Company for the Financial Year ended 30th September, 2013 by M/s P D. Dani & Co, has been filed with the Ministry of Corporate Affairs within the prescribed time.

12. Corporate Governance

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors'' Certificate, are included in the Annual Report.

13. Directors'' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the operating management, confirm that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures therefrom;

2. They have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

3. They have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. They have prepared the annual accounts on a going concern basis.

14. Acknowledgements

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, Bankers and Financial Institutions. The Directors are thankful to the Government of India and the various Ministries and Regulatory authorities. We also appreciate and value the contributions made by all our employees.

On behalf of the Board of Directors

R.R. Bhinge Chairman

Mumbai, 27th November, 2014


Sep 30, 2010

The Directors present their Sixty Eighth Annual Report together with the Audited Statement of Accounts for the period ended 30th September, 2010.

1. FINANCIAL RESULTS

The summarized financial results are indicated below:-

(Rupees in 000)

For the For the

12 Months 18 Months

Period Ended Period Ended

30.09.2010 30.09.2009

(Rs.) (Rs.)

Net Sales / Income from Operations 1,394,554 3,404,475

Operating Expenditure 1,492,660 3,168,805

Operating Profit /(Loss) (98,106) 235,670

Add : Other Income 33,678 57,979

Less: Interest 127,256 182,528

Profit/(Loss) Before Tax and Depreciation and Exceptional Items (191,684) 111,121

Less: Depreciation 43,696 83,345

Profit/(Loss) Before Tax and Exceptional Items (235,380) 27,776

Exceptional Items

Less: Deferred Revenue Expenditure (Voluntary Retirement Scheme) (10,575) 31,722

Add : Profit on sale of Long term Investments (Associate) - 135,375

Add:- Profit on sale of Business 530,247 -

Profit Before Tax 284,292 131,429

Less : Provision for Tax (including provision for Deferred Tax and

Fringe Benefit Tax 70,270 98,630

Net Profit After Tax 214,022 32,799

Balance Brought Forward 33,216 16,434

Balance available for ]appropriation 247,238 49,233

Appropriated as under:

Proposed Dividend 45,635 13,690

Tax on Dividend 7,580 2,327

Transfer to General Reserve 25,000 -

Balance to be Carried Forward 169,023 33,216

2. DIVIDEND

The Directors of your Company are pleased to recommend for the approval of the shareholders a dividend of 20%, including 10% as special dividend (Rs.2/- per share including Re. 1/- as special dividend) (Previous year 6%).

3. FINANCIAL HIGHLIGHTS

The period under review is for 12 months as compared to the previous years figures which were for 18 months. During the period under review, the total income was Rs. 1,394,554(000) as against Rs. 3,404,475(000) in previous year. The Company reported Profit before tax of Rs. 2,84,292(000) as against Rs.131,429(000) for the previous year. The Profit after tax was Rs. 214,022(000) as against Rs. 32,799(000) in the previous year.

4. SALE OF BUSINESSES

Your Company has constantly faced the challenge of achieving growth in terms of revenue and profitability due to diverse portfolio, limited offerings and lack of critical mass. Despite having core competencies, execution of prestigious projects and references built over the years by Traction Electronics, Industrial Drives, and Supervisory Control and Data Acquisition (SCADA) consisting of Industrial Supervisory Control Data Acquisition System (I-SCADA) and Power Sector Supervisory Control and Data Acquisition System (PS - SCADA) businesses ("Businesses"), these businesses were facing major challenges in achieving sustained viability in the future. The Board of Directors of your Company at its meeting held on 29th April, 2010, approved the transfer of these Businesses as a "going concern" on a slump sale basis to Crompton Greaves Limited ("CGL") for a total consideration not exceeding Rs. 92.00 crores, subject to necessary statutory consents and approval by the Members.

On 14th June, 2010, the Members approved through postal ballot, the sale of these Businesses to CGL by passing an ordinary resolution pursuant to sections 293(1 )(a) and 192A of the Companies Act, 1956, read with the Companies (Passing of Resolution by Postal Ballot), Rules, 2001 .The votes cast assenting to the Ordinary Resolution were 1,16,19,913 shares (99.96%) of the total valid votes polled. On 28th July, 2010 i.e. the Closing Date, the Businesses were transferred as a going concern to CGL on slump sale basis for a consideration of Rs. 81 crores. The additional Rs. 11 crores has not been received as the financial parameters to be met by 30* September, 2010 were not achieved.

While your Company transferred the Traction Electronics, Industrial Drives and the I - SCADA businesses to CGL on 28th July 2010, the PS - SCADA business shall be transferred at a later date after obtaining the requisite clearances from relevant Government / Public Sector Authorities. Pending this transfer, the Company received the entire amount of consideration i.e. Rs. 81 crores.

Following the sale of these businesses, the Company intends to focus on building its position in Strategic Electronics, Network Systems (Tatanet) and pursue further synergistic opportunities in related areas.

5. SUBSIDIARY COMPANY

The financial statement and reports of the subsidiary company, Tatanet Services Limited (TNSL) for the financial year 2009-10 are attached. The revenue of TNSL for the year ended 31st March, 2010 was Rs. 289,975(000) [Rs. 252,368(000) for the year ended 31s* March, 2009.

6. HUMAN RESOURCE MANAGEMENT

There is consistent focus on development of Human Resources (HR). HR plans have been defined with appropriate measurement indicators keeping in mind both long term goals and short term requirements. Employeesvoices are captured through Open Houses, the forum through which employees are encouraged to voice their concerns, suggest innovative ideas and also seek answers from the top management on issues of common interest. The Company constantly reviews facilities and benefits to enhance overall employee well being. Employee Satisfaction / Engagement Surveys are carried out through external agency to formally assess the voice of employees. Action plans have been prepared and are being implemented to increase employee engagement.

Since the Company is in the high tech and high visibility areas of telecommunication (Tatanet Division) and Electronic Security and Surveillance (Strategic Electronics Division), maintaining the talent pool and competence building for the core areas of strength and the challenge of attracting and retaining talent continues. The Company has initiated measures like employee referral scheme, competency mapping, providing growth opportunities to existing employees and strengthening the Performance Management System (PMS) to include assessment on Tata Leadership Practices, training need assessment, identification of high potential employees and development plan for employees. Recruitment cycle time has been reduced and the attrition rates have been kept at a manageable level. The PMS recognizes individual and segment wise contribution through performance linked pay, thereby motivating employees ownership and responsibility. RACE (Reward and Recognition for Achievement and Contribution towards Excellence), a comprehensive reward and recognition scheme, has been put in place for motivation of employees for excellence in performance. In Tatanet Division, UNWIND, a monthly informal gathering on the last Friday of each month, has been successfully serving as a forum to foster teamwork in an informal manner.

The Company maintained cordial industrial relations during the period under review. The total manpower employed during the period was 336, after the transfer of the employees of the Businesses hived off to CGL.

7. INTERNAL CONTROLS AND SYSTEMS

The Company has an adequate system of internal controls to ensure that all assets are safeguarded and accounted for and business transactions are authorised and recorded. An external established audit firm carries out internal audit. This audit is based on an Annual Audit Plan and includes regular reviews by the Audit Committee of Directors to ensure adequacy of controls and adherence to laid down procedures and systems. The Board of Directors also carries out Company Wide Risk Assessment and Management on a systematic and regular basis.

8. QUALITY SYSTEMS AND TATA BUSINESS EXCELLENCE MODEL (TBEM)

The Company has focused on continuous improvement through internationally recognized Quality Management Systems viz. TL 9000 and ISO 9001 for Tatanet and ISG respectively. Tatanet has already got certified in ISO 20000 (Information Technology Management System) and ISO 27001 (Information Security Management System). This certification for Tatanet has been a key step towards success in its Managed Services revenue stream. During the period under review,Tatanet has participated as a Strategic Business Unit in TBEM external assessment by Tata Quality Management Services (TQMS). Tatanet implemented Balanced Score Card (BSC), Strategy Deployment Matrix (SDM), Quality Function Deployment (QFD), Process Management and improvement, etc. After the TBEM external assessment,Tatanet has scored 457 points and has been awarded the Serious Adoption Award in TBEM. ISG has been gearing up for revised ISO 9000:2008 certification from the current ISO 9000:2000 certification by Standardization, Testing and Quality Certification (STQC) audit.

9. FIXED DEPOSITS

The Company has neither accepted nor renewed any fixed deposits during the period under review. However, there were outstanding unclaimed deposits amounting to Rs.154,000/-as on 30th September, 2010 which remain outstanding as some of the deposit holders have not claimed the repayment despite follow up by the Company.

In accordance with the provisions of Investor Education Protection Fund (Awareness and Protection of Investors) Rules, 2001, an amount of unclaimed deposits with interest aggregating to Rs. 10,579/- has been transferred during the financial year 2009-10 to the Investor Education and Protection Fund.

10. SAFETY, HEALTH AND ENVIRONMENT

The Company accords high priority to health, safety, and environment. The operations of the Company are not of a hazardous nature. However, the Company emphasizes on maintaining a healthy and safe environment in and around its facilities as well as contract sites where ongoing projects are under execution. Safety Awareness is inculcated through regular Safety Awareness Programs, basic fire safety training, mock drills, regular Safety Committee meetings and capturing employeesvoices through safety observation and near miss reporting. The employees working at project sites are given requisite training for ensuring safety during work. Periodic Safety Audit is carried out and action taken to eliminate unsafe conditions.

There has been no incidence of any accidents reported in the past several years. The Company also has a disaster management system to take care of exigencies.

11. DISCLOSURE OF PARTICULARS

Particulars required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the prescribed format as Annexure A to the Directors Report.

Particulars of Employees: Information in accordance with Section 217(2A) of the Companies Act, 1956 (the Act) read with the Companies (Particulars of Employees) Rules, 1975, as amended, regarding employees is given in Annexure B to the Directors Report. However, having regard to the provisions of section 219(1) (b) (IV) of the Act, the Annual Report is being sent to all the Members excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

12. DIRECTORS

Mr. Z. J. Engineer retired as an Executive Director of the Company on 29h July, 2010. The Board expresses its sincere gratitude for the guidance and contribution of Mr. Engineer during his long and fruitful association with the Company.

In accordance with the requirements of the Companies Act, 1956 and Articles of Association of the Company, Mr. B. B. Dubash, Mr. S. Ramakrishnan and Mr. P. K. Ghose retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

13. AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, who are the Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

14. CORPORATE GOVERNANCE

To comply with the conditions of Corporate Governance, pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors Certificate, are included in the Annual Report.

15. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures therefrom;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) they have taken proper and sufficient care to the best of their knowledge and information, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

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

16. ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the support and Co-operation received from customers, vendors, investors, business associates, bankers, regulatory and governmental authorities. The Directors acknowledge the continued support and guidance from the Tata Group. The Directors appreciate the contribution made by employees at all levels.

On Behalf of the Board of Directors

P. R. Menon

Mumbai, 22nd November, 2010. Chairman




Sep 30, 2009

The Directors present their Sixty Seventh Annual Report together with the Audited Statement of Accounts for the period ended 30th September 2009.

1. FINANCIAL RESULTS

The summarised financial results are indicated below:-

(Rupees in 000)

For the For the 18 Months 12 Months Period Ended Period ended 30.09.2009 31.03.2008 (Rs.) (Rs)

Net Sales / Income from Operations 3,404,475 1,973,474

Operating Expenditure 3,168,805 1,764,913

Operating Profit 235,670 208,561

Add : Other Income 57,979 15,541

Less : Interest 182,528 108,226

Profit Before Tax and Depreciation and Exceptional Items 111,121 115,876

Less : Depreciation 83,345 43,638

Profit Before Tax and Exceptional Items 27,776 72,238 Exceptional Items

Less: Deferred Revenue Expenditure (Voluntary Retirement Scheme) 31,722 12,561 Add : Profit on sale of Long term Investments (Associate) 135,375

Profit Before Tax 131,429 59,677 Less : Provision for Tax (including provision for Deferred Tax and Fringe Benefit Tax) 98,630 15,352

Net Profit After Tax 32,799 44,325

Balance Brought Forward 16,434 (27,891)

Balance available for appropriation 49,233 16,434 Appropriated as under:

Proposed Dividend 13,690 NIL

Tax on Dividend 2,327 NIL

Balance to be Carried Forward 33,216 16,434

With the approval of the Registrar of Companies, Maharashtra, Mumbai, the financial year 2008-09 has been extended for a period of 6 months. Accordingly, the financial year 2008-09 has been for a period of 18 months ending on 30th September, 2009.

2. DIVIDEND

The Directors of your Company are pleased to recommend for the approval of the shareholders a dividend of 6% (Rs.0.60 per share) (FY08 dividend Nil).

3. MANAGEMENT DISCUSSION AND ANALYSIS (MD&A)

This Report includes MD&A as appropriate so that duplication and overlap between the Directors Report and a separate MD&A are avoided and the entire material is provided as a composite and comprehensive document.

4. BUSINESS SEGMENTS

The current business operation is structured along the following business segments: 4.1 Automation and Control: Industrial Systems Division (ISD)

ISD is further sub-structured along the following lines of business (LoB).

a. Strategic Electronics (SE)

Systems and solutions for defence and paramilitary organisations for security and surveillance, such as intrusion detection, integrated security systems, global positioning systems (GPS), automatic weather monitoring systems, scanners etc.

b. Energy Network Management System (ENMS)

Energy management, distribution management, automatic data logging and Supervisory Control and Data Acquisition (SCADA) systems for applications in power, oil and gas industry, railways etc.

c. Traction Electronics (Traction)

Power electronics equipment for the Indian Railways for their freight and passenger electric and diesel locomotives.

d. Drives Systems (Drives)

Integrated AC and DC drives systems for metal, mining, power, paper and process industries for energy optimization, control and automation.

e. Building Management Systems (BMS)

Integrated building management systems including Heating, Ventilation and Air Conditioning (HVAC) controls, fire alarms, access controls and CCTV for comfort, energy saving and security of buildings.

4.2 Tatanet Network Systems (Tatanet)

Tatanet provides solutions for management of network connectivity services and internet services over VSATs for corporates, banking and financial institutions and Small and Medium Enterprises (SMEs) for them to run ERP and other on-line office automation applications. It also provides solutions to manage bandwidth-on-demand services across industry verticals, interactive distance learning connectivity, IP multicast and digital streaming to some niche segments. In addition, the division participates in turnkey satellite communication systems supply and integration projects invited by customers primarily in Government and Public Sector.

5. FINANCIAL OVERVIEW

During the period under review, the total income was Rs.34,624.54 Lakhs (18 Months) as against Rs.19,890.15 Lakhs in the previous year (12 months). The profit before tax was Rs.1,314.29 lakhs (18 months) as against Rs. 596.77 Lakhs in the previous year (12 months).The net profit after tax was Rs.327.99 Lakhs (18 months) as against Rs.443.25 Lakhs in the previous year (12 months).

During the period under review, the Company has sold 5,70,000 equity shares of Rs.10/- each held in Nelito Systems Ltd. (Associate Company) to Af-Taab Investments Ltd. at a price of Rs.280/- per share, aggregating to Rs.1,596.00 Lakhs

6. A) AUTOMATION AND CONTROL DIVISION (ISD)

16. DISCLOSURE OF PARTICULARS

Particulars required pursuant to Section 217 (i) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988 are given in the prescribed format as Annexure A to the Directors Report.

Particulars of Employees: Information in accordance with Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, regarding employees is given in Annexure B to the Directors Report.

17. DIRECTORS

The Central Government vide its letter no. SRN.NO. A49424013-CL-VII dated 3rd June, 2009, as amended, has given an approval for the payment of remuneration to Mr. K. A. Mahashur, Executive Director as approved by the Shareholders at the 66th Annual General Meeting of the Company held on 8th August 2008 for the period from Is September 2008 to 12th June 2012.

The existing term of Mr. Z. J. Engineer as Executive Director of the Company will be expiring on 31st May 2010. The Board of Directors at its Meeting held on 27th November 2009 re-appointed Mr. Z. J. Engineer as Executive Director of the Company for the period from 1st June 2010 to 29th July 2010 subject to approval of the members and the Central Govternment, if required and all other approvals / consents / sanctions / permissions as may be necessary.

In accordance with the requirements of the Companies Act, 1956 and Articles of Association of the Company, Lt. Gen. Davinder Kumar (Retd.), Mr. R. R. Bhinge and Mr. V. K. Deshpande retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

18. AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, who are the Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

19. REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and Analysis Report, the Corporate Governance Report and Auditors Certificate on compliance of the conditions of Corporate Governance forms part of this Annual Report.

20. DIRECTORSRESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period;

(iii) they have taken proper and sufficient care to the best of their knowledge and information, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

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

21. ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the support and co-operation received from customers, vendors, investors, business associates, bankers, regulatory and governmental authorities. The Directors acknowledge the continued support and guidance from the Tata Group.The Directors appreciate the contribution r:;,- made by employees at all levels.

On behalf of the Board of Directors

P. R. Menon Mumbai, 27th November 2009. Chairman



 
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