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Directors Report of Tata Consultancy Services Ltd.

Mar 31, 2015

To the members,

The directors submit annual report of Tata Consultancy Services Limited (the "Company" or "TCS") along with the audited financial statements for the financial year ended March 31, 2015. Consolidated performance of the Company and its subsidiaries has been referred to wherever required.

1. Financial results

(Rs. crores)

Unconsolidated Consolidated

2014-15 2013-14 2014-15 2013-14

Revenue from operations 73,578.06 64,672.93 94,648.41 81,809.36

Operating expenditure 52,549.86 43,139.21 70,166.70 56,656.57

Earnings before interest, tax, depreciation and amortisation (EBITDA) 21,028.20 21,533.72 24,481.71 25,152.79

Other income (net) 4,466.73 3,114.71 3,229.91 1,636.74

Finance costs 79.57 23.41 104.19 38.52

Depreciation and amortisation expense 1,393.77 1,080.55 1,798.69 1,349.15

Profit before exceptional item and tax 24,021.59 23,544.47 25,808.74 25,401.86

Exceptional item 528.38 - 489.75 -

Profit before tax (PBT) 24,549.97 23,544.47 26,298.49 25,401.86

Tax expense 5,293.01 5,069.55 6,238.79 6,069.99

Profit for the year before minority interest 19,256.96 18,474.92 20,059.70 19,331.87

Minority interest - - 207.52 168.00

Profit for the year (PAT) 19,256.96 18,474.92 19,852.18 19,163.87

Adjustment for amalgamation of acquired subsidiaries 71.78 2,375.22 - -

Balance brought forward from previous year 36,420.45 24,602.85 39,504.51 29,529.97

Amount available for appropriation 55,749.19 45,452.99 59,356.69 48,693.84

Appropriations

Interim dividends on equity shares (excluding tax) 10,772.92 2,349.87 10,772.92 2,349.87

Proposed dividend on equity shares (excluding tax) 4,700.95 3,917.46 4,700.95 3,917.46

Dividend on redeemable preference shares (excluding tax) - 28.76 - 28.76

Tax on dividends (interim and proposed) 2,591.54 788.96 2,635.69 795.68

Write back of tax on dividends of prior year (20.97) - (20.97) -

Capital redemption reserve - 100.00 255.57 157.12

General reserve 1,925.69 1,847.49 1,953.64 1,883.41

Statutory reserve - - 46.24 57.03

Balance carried to balance sheet 35,779.06 36,420.45 39,012.65 39,504.51

(Rs. 1 crore = Rs. 10 million)

2. Dividend

Based on the Company''s performance, the directors are pleased to recommend for approval of the members a final dividend of Rs. 24 per share for the financial year 2014-15 taking the total dividend to Rs. 79 per share (previous year Rs. 32 per share), including a special dividend of Rs. 40 per share. The final dividend on equity shares, if approved by the members would involve a cash outflow of Rs. 5,640.86 crores including dividend tax. The total dividend on equity shares including dividend tax for the financial year 2014-15 would aggregate Rs. 18,065.41 crores (including special dividend and tax thereon), resulting in a payout of 93.81% and Rs. 8,877.98 crores (excluding special dividend and tax thereon), resulting in a payout of 46.10% of the unconsolidated profits of the Company.

3. Transfer to reserves

The Company proposes to transfer Rs. 1,925.69 crores to the general reserve out of the amount available for appropriation and an amount of Rs. 35,779.06 crores is proposed to be retained in the profit and loss account.

4. Company''s performance

On consolidated basis, revenue from operations for the financial year 2014-15 at Rs. 94,648.41 crores was higher by 15.69% over last year (Rs. 81,809.36 crores in 2013-14). Earnings before interest, tax, depreciation and amortisation (EBITDA) was Rs. 27,109.62 crores excluding a significant adjustment for one-time employee reward, registering a growth of 7.78% over EBITDA of Rs. 25,152.79 crores in 2013-14. The reported EBITDA aggregated Rs. 24,481.71 crores. Profit after tax (PAT) for the year was Rs. 21,911.85 crores excluding the said one-time adjustment for employee reward recording a growth of 14.34% over the PAT of Rs. 19,163.87 crores in 2013-14. The reported PAT aggregated Rs. 19,852.18 crores.

On unconsolidated basis, revenue from operations for the financial year 2014-15 at Rs. 73,578.06 crores, was higher by 13.77% over last year (Rs. 64,672.93 crores in 2013-14). Earnings before interest, tax, depreciation and amortisation (EBITDA) was Rs. 23,354.62 crores excluding the one-time employee reward registering a growth of 8.46% over the EBITDA of Rs. 21,533.72 crores in 2013-14. The reported EBITDA aggregated Rs. 21,028.20 crores. Profit after tax (PAT) for the year was Rs. 21,091.43 crores excluding the said one-time adjustment stated above recording a growth of 14.16% over the PAT of Rs. 18,474.92 crores in 2013-14. The reported PAT aggregated Rs. 19,256.96 crores.

5. Human resource development

Evolution of digital forces has transformed the way we live and work. TCS has built a digital and vivacious workplace which goes beyond constraints of time and distance. This reimagined workplace has enabled employees to interact and collaborate better with each other, thereby facilitating bonding of the global talent pool and building "One TCS" culture. ''Knome'', one of the interaction platforms, has transcended beyond just interaction platform to become an effective tool driving transparency, policy changes and even experimenting and crowd sourcing. It has transformed the way TCSers interact socially or professionally.

The Company continues to grow its global scale and footprint with a diverse talent base of 319,656 employees representing 122 nationalities, deployed across 55 countries. From gender diversity point of view, the Company is one of the largest employers of women with 105,481 women employees and a number of senior positions held by women leaders. Efficient systems, processes and continuous investments in technology helps the Company manage this scale and complexity of a large, distributed and diverse workforce.

The Company has hired and integrated 67,123 employees across the globe in FY 2014-15. Through its Academic Interface Program (AIP), the Company continues its efforts to strengthen relationship with key institutes globally.

The Company continues its focus on retention through employee engagement initiatives and provides a holistic environment where employees get opportunities to realize their potential. ''Career Hub'' captures the career aspirations of employees and offers a framework to shape and propel their careers. ''Anytime and Anywhere'' learning, reinforced through the digital learning ecosystem, help employees to build their competencies across domains and technologies. Company''s performance driven culture helps and motivates employees to excel in their respective areas and progress within the organization.

Company''s Health and Safety Policy commits to provide a healthy and safe work environment to all employees. Company''s ''Fit4life'' initiative creates a culture of fitness in the organization by helping to build a fraternity of health and fitness conscious employees.

''SafetyFirst'' initiative was launched to make Safety and Wellbeing a part of the Company''s culture and to change employee behaviour and attitude to safety. From self-defence classes to using technology to track vehicles transporting our employees, this initiative promotes several other safety campaigns across the organization to improve safety awareness. Each and every TCSer is urged to reflect on the need to ensure personal safety and security at all times and make sure colleagues are safe too.

The Company also launched ''Purpose4life'' initiative to consolidate the employee volunteering programs for social cause under one umbrella so that larger programs which empower people to lead a better life could be taken up.

Employee inputs from PULSE, TCS'' annual global employee satisfaction and engagement survey, are analyzed to gain necessary insight into the needs of the diverse workforce. This helps the Company to design new interventions and take necessary steps to enhance the engagement level. The Company''s progressive workforce policies and benefits, various employee engagement and welfare initiatives like Maitree and Employee Assistance Program, have addressed stress management, promoted work life balance and helped the Company maintain a low attrition which was 14.9% during this year.

6. Quality initiatives

Sustained commitment to highest levels of quality, best-in-class service management, robust information security practices and mature business continuity processes helped the Company attain significant milestones during the year.

The Company continues to maintain the enterprise-wide highest maturity Level 5 for CMMI-DEV® (Development) version 1.3. The Company was re-assessed enterprise-wide at the highest maturity Level 5 for CMMI-SVC® (Services) version 1.3.

The Company successfully achieved the annual enterprise-wide ISO certification for ISO 20000:2011 (Service Management), ISO 9001:2008 (Quality Management), ISO 27001:2013 (Security Management) and ISO 22301:2012 (Business Continuity Management).

The Company is enterprise-wide certified for ISO 14001:2004 (Environmental Management) and BS OHSAS 18001:2007 (Occupational Health and Safety Management) which demonstrates TCS'' strong commitment to the environment and the occupational health and safety of its employees and business partners. The Company also continues to maintain the industry specific quality certifications viz., AS 9100 (Aerospace Industry), ISO 13485 (Medical Devices) and TL 9000 (Telecom Industry).

The cornerstone of these certifications is TCS'' integrated quality management system (iQMS™), a global process- driven and customer-focused system which provides ''One Global Service Standard''. iQMSTM is the backbone that supports TCS'' global network delivery model (GNDMTM).

At the annual ''Knowledge Management'', India summit, hosted by the Confederation of Indian Industries (CII) in March 2015, the Company was recognized as India''s ''Most Admired Knowledge Enterprise'' (MAKE) winner (1st place) for a third successive year. The Company has received the prestigious MAKE award for the 10th time in India as well as Asia. The Company also received the Global Independent Operating Unit (IOU) MAKE award for the 5th time in a row.

In December 2014, the Company received the ''Excellence Award'' in information security in the large IT Service category by the Data Security Council of India (DSCI).

7. Subsidiary companies

The Company has 60 subsidiaries as on March 31, 2015. There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiaries.

Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company''s subsidiaries in Form AOC-1 is attached to the financial statements of the Company. Pursuant to the provisions of section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.

TCS Foundation was incorporated as wholly-owned subsidiary of the Company on March 13, 2015 under Section 8 of the Act with the sole objective of undertaking Corporate Social Responsibility (CSR) activities of the Company and its subsidiaries.

During the year, the process of closure of following wholly-owned subsidiaries, which were not in operation, was completed:

a. Tata Consultancy Services Morocco SARL AU (w.e.f. May 30, 2014)

b. Computational Research Laboratories Inc. ( w.e.f. February 18, 2015)

c. TCS Management Pty Ltd. (w.e.f. March 23, 2015).

During the year, operations of following subsidiaries were reviewed and a restructuring process was carried out:

a. CMC Limited

At the respective meetings held on October 16, 2014, the Boards of the Company and its subsidiary CMC Limited (CMC) have approved a scheme of amalgamation between the Company and CMC ("Scheme") proposing amalgamation of CMC with the Company under Sections 391 to 394 of the Companies Act, 1956. The appointed date for the proposed scheme is April 1, 2015.

Pursuant to an Order of the High Court of Judicature at Bombay, a meeting of the equity shareholders of the Company has been scheduled on April 28, 2015, for the purpose of seeking approval of the shareholders for the Scheme. The shareholders of CMC have, at their meeting held on March 5, 2015, duly approved the Scheme.

The Company holds 51.12% stake in CMC. CMC is engaged in procurement, installation, commissioning and maintenance of computer and networking systems, providing education and training, designing, developing and implementing software technologies and applications as well as providing professional services in India and overseas.

The amalgamation will enable the Company to consolidate CMC''s operations in a single company with rationalized structure, enhanced reach and greater financial strength.

As per the terms of the Scheme, shareholders of CMC will receive 79 equity shares of Rs. 1 each of the Company for 100 equity shares of Rs. 10 each of CMC. The swap ratio has been arrived at based on the valuation report prepared by B.S.R. & Associates LLP. The Scheme is subject to court, regulatory, shareholders and other necessary approvals. If approved, the paid-up share capital of the Company, will increase from Rs. 195.87 crores to Rs. 197.04 crores.

b. WTI Advanced Technology Limited

Pursuant to the Scheme of Amalgamation sanctioned by the Hon''ble High Court of Bombay vide its order dated March 27, 2015, WTI Advanced Technology Limited (WTI) was amalgamated with the Company with effect from appointed date, April 1, 2014. Consequently, the entire business, assets, liabilities, duties and obligations of WTI have been transferred to and vested in the Company with effect from April 1, 2014.

WTI was engaged in information technology and information technology engineering services mainly comprising geographic information systems, computer aided design, engineering services and business associate services which are complementary to the business of the Company.

c. Tata Consultancy Services Japan, Limited

Nippon TCS Solution Center Limited, IT Frontier Corporation (ITF) and Tata Consultancy Services Japan Limited merged on July 1, 2014 to form a consolidated entity - Tata Consultancy Services Japan, Limited, wherein Tata Consultancy Services Asia Pacific Pte. Limited (a wholly-owned subsidiary of the Company) holds 51% stake and Mitsubishi Corporation holds the balance 49% stake. ITF, a subsidiary of Mitsubishi, brings its long standing relationships with Japanese corporations, talented workforce and competencies in industries like retail, distribution and trading.

This strategic alliance with Mitsubishi has enabled the Company to leverage the mutual strengths in Japanese market to have scale, strong local presence and capability to offer full range of TCS'' global services to Japanese customers and accelerate growth in Japan market.

d. Tata Consultancy Services (Africa) (Pty) Limited

On September 16, 2014, the Company acquired additional 40% ownership interest in Tata Consultancy Services (Africa) (Pty) Limited (TCS Africa) from Tata Africa Holdings (SA) Pty Limited and thereby making TCS Africa a wholly owned subsidiary of the Company. TCS Africa is the holding company of Tata Consultancy Services (South Africa) (Pty) Limited, which is engaged in IT services and consulting business catering to the customers in South Africa region.

8. Directors'' responsibility statement

Pursuant to Section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability, confirm that:

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

ii. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company 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 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;

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

v. they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively;

vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors and external consultants and the reviews performed by management and the relevant board committees, including the audit committee, the board is of the opinion that the Company''s internal financial controls were adequate and effective during the financial year 2014-15.

9. Directors and key managerial personnel

Mr. S. Ramadorai, Vice Chairman, stepped down from the Board of the Company on October 6, 2014 on attaining the age of 70 years as per the Company''s policy. He was associated with the Company for over four decades in various capacity. Under his leadership as Chief Executive Officer and Managing Director, TCS was transformed into a global software company. The Board places on record its appreciation of the invaluable contribution and guidance provided by him.

Pursuant to the provisions of Section 149 of the Act, which came into effect from April 1, 2014, Mr. Aman Mehta, Mr. V. Thyagarajan, Prof. Clayton M. Christensen, Dr. Ron Sommer, Dr. Vijay Kelkar and Mr. O. P. Bhatt were appointed as independent directors at the annual general meeting of the Company held on June 27, 2014. The terms and conditions of appointment of independent directors are as per Schedule IV of the Act. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as independent director during the year.

Mr. Cyrus Mistry retires by rotation and being eligible has offered himself for re-appointment.

During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company.

Mr. N. Chandrasekaran was appointed the Chief Executive Officer and Managing Director of the Company for a period of five years with effect from October 6, 2009. The Board of Directors at its Meeting held on September 3, 2014, has re-appointed him as the Chief Executive Officer and Managing Director of the Company for a further period of five years from October 6, 2014, subject to the approval of the members.

As part of leadership development, Ms. Aarthi Subramanian was appointed as Additional Director with effect from March 12, 2015. The Board has also appointed her as Executive Director with effect from the same date for a period of three years. She is the Global Head of Delivery Excellence Group responsible for governance of service delivery, compliance and risk management. Ms. Aarthi Subramanian holds a B. Tech in Computer Science and a Masters in Engineering Management from University of Kansas (USA) and has over 25 years of experience across multiple industry solutions in different markets.

The resolutions seeking approval of the Members for the appointment of Mr. N. Chandrasekaran and Ms. Aarthi Subramanian have been incorporated in the notice of the forthcoming annual general meeting of the Company along with brief details about them. The Company has received a notice under Section 160 of the Act along with the requisite deposit proposing the appointment of Ms. Aarthi Subramanian.

Pursuant to the provisions of Section 203 of the Act, which came into effect from April 1, 2014, the appointments of Mr. N. Chandrasekaran, Chief Executive Officer and Managing Director, Mr. Rajesh Gopinathan, Chief Financial Officer and Mr. Suprakash Mukhopadhyay, Company Secretary as key managerial personnel of the Company were formalised.

10. Number of meetings of the board

Seven meetings of the board were held during the year. For details of the meetings of the board, please refer to the corporate governance report, which forms part of this report.

11. Board evaluation

The board of directors has carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed by Securities and Exchange Board of India ("SEBI") under Clause 49 of the Listing Agreements ("Clause 49").

The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning, etc.

The performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc.

The Board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role.

In a separate meeting of independent Directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated, taking into account the views of executive directors and non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual directors was also discussed.

12. Policy on directors'' appointment and remuneration and other details

The Company''s policy on directors'' appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the corporate governance report, which forms part of the directors'' report.

13. Internal financial control systems and their adequacy

The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

14. Audit committee

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report.

15. Auditors

Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, Deloitte Haskins & Sells LLP, (''DHS LLP''), Chartered Accountants, were appointed as statutory auditors of the Company from the conclusion of the nineteenth annual general meeting (AGM) of the Company held on June 27, 2014 till the conclusion of the twenty second AGM to be held in the year 2017, subject to ratification of their appointment at every AGM.

16. Auditors'' report and secretarial auditors'' report

The auditors'' report and secretarial auditors'' report does not contain any qualifications, reservations or adverse remarks. Report of the secretarial auditor is given as an annexure which forms part of this report.

17. Risk management

The Board of the Company has formed a risk management committee to frame, implement and monitor the risk management plan for the Company. The committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.

18. Particulars of loans, guarantees and investments

The particulars of loans, guarantees and investments have been disclosed in the financial statements.

19. Transactions with related parties

None of the transactions with related parties falls under the scope of Section 188(1) of the Act. Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure I in Form AOC-2 and the same forms part of this report.

20. Corporate social responsibility

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure II of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the website of the Company.

21. Extract of annual return

As provided under Section 92(3) of the Act, the extract of annual return is given in Annexure III in the prescribed Form MGT-9, which forms part of this report.

22. Particulars of employees

The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

c. The percentage increase in the median remuneration of employees in the financial year: 4.6%

d. The number of permanent employees on the rolls of Company: 319,656

e. The explanation on the relationship between average increase in remuneration and Company performance:

On an average, employees received an annual increase of 10% in India. The individual increments varied from 6% to 14%, based on individual performance.

Employees outside India received wage increase varying from 2% to 6%. The increase in remuneration is in line with the market trends in the respective countries. In order to ensure that remuneration reflects Company performance, the performance pay is also linked to organization performance, apart from an individual''s performance.

i. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

The average annual increase was around 10%. However, during the course of the year, the total increase is approximately 14%, after accounting for promotions and other event based compensation revisions.

Increase in the managerial remuneration for the year was 13.9%.

k. The key parameters for any variable component of remuneration availed by the directors:

The members have, at the AGM of the Company on June 27, 2014 approved payment of commission to the non-executive directors within the ceiling of 1% of the net profits of the Company as computed under the applicable provisions of the Act. The said commission is decided each year by the board of directors and distributed amongst the non-executive directors based on their attendance and contribution at the board and certain committee meetings, as well as the time spent on operational matters other than at meetings.

l. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year:

None.

m. Affirmation that the remuneration is as per the remuneration policy of the Company:

The Company affirms remuneration is as per the remuneration policy of the Company.

n. The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

23. Disclosure requirements

As per Clause 49 of the listing agreements entered into with the stock exchanges, corporate governance report with auditors'' certificate thereon and management discussion and analysis are attached, which form part of this report.

As per Clause 55 of the listing agreements entered into with the stock exchanges, a business responsibility report is attached and forms part of this annual report.

Details of the familiarization programme of the independent directors are available on the website of the Company (URL: www.tcs.com/investors).

Policy for determining material subsidiaries of the Company is available on the website of the Company (URL: www.tcs.com/investors).

Policy on dealing with related party transactions is available on the website of the Company (URL: www.tcs.com/investors).

The Company has formulated and published a Whistle Blower Policy to provide Vigil Mechanism for employees including directors of the Company to report genuine concerns. The provisions of this policy are in line with the provisions of the Section 177(9) of the Act and the revised Clause 49 of the Listing Agreements with stock exchanges (URL: www.tcs.com/investors).

24. Deposits from public

The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.

25. Conservation of energy, technology absorption, foreign exchange earnings and outgo Conservation of energy:

TCS continues to work on reducing carbon footprint in all its areas of operations through initiatives like (a) green infrastructure,^) green IT (data centers, laptops and servers etc, (c) operational energy efficiency, (d) procurement of renewable energy through onsite solar power generating units. TCS continues to add LEED certified green buildings to its real estate portfolio. Green data center continues to be a focus area with data center power management initiative extended to 23 key data centers. FY15 saw operational efficiency emerging as a main pillar for achieving the target. TCS leveraged its IT capabilities with the remote energy monitoring centre (REMC) initiative, involving real time monitoring and controls aided by smart meters and MIS, to optimise the operational energy efficiency across its offices. The initiative covered 90 TCS offices which account for over 98% of our total power consumption. The estimated savings achieved in the FY15 was approximately 10 million units. TCS was recognised for its commitment to climate change management and improvement in carbon performance with inclusion in the Global 500 Carbon Performance Leadership Index (CPLI) 2014 published by CDP. This is the second year in a row that TCS has been included in this prestigious index.

TCS has enterprise wide certification under IS0 14001:2004 (Environmental Management System) for its 100 offices globally.

Data on reduction in energy consumption and consequent reduction in carbon footprint have been provided in the Business Responsibility Report.

Technology absorption, adaption and innovation:

The Company continues to use the latest technologies for improving the productivity and quality of its services and products. The Company''s operations do not require significant import of technology.

Research and Development (R&D): Specific areas in which R&D was carried out by the Company

As the digital customer is disrupting business models in several industries today, TCS research and innovation teams are working with business units on meeting this challenge.

Two key business units, banking & financial services and insurance & healthcare will have their own innovation units on the established 4E model. This will help the Company to scale up innovation in these specific domains in a structured way, supplementing innovation at the corporate level. The Company hopes to deploy innovation management in other industry units in a phased manner.

''Intelligent Cities'' initiative has grown this year to meet the needs of several global governments looking for

intelligent infrastructures. TCS iCity Lab, in collaboration with Singapore Management University has achieved its major research objectives across the intelligent city domain, including citizen frameworks for ageing and chronic disease management, as well as personalised community healthcare services.

To enable better user experience TCS'' ''Accessibility CoE'' released a set of tools based on universal design. TCS innovation has invested in an application programming interfaces (APIs) initiative as APIs are seen as the building blocks of a digital enterprise.

Several TCS explore projects in research areas of software, applications and systems progressed creating more IPR for the Company. In the software area, researchers are mining operational process models to facilitate training and transformation and also modelling human behaviour in the workplace. Research in the applications area deepened explorations in several areas including ''Enterprise Contextual Intelligence'', ''Digital Health'' and ''Digital Manufacturing''. The systems research team worked on ''Analytics as a Service'', ''Human Sensing'', ''Performance Prediction and Optimization'' among other things. Many mature projects have moved from research to business. One example of close coupling of TCS research and business is: TCS Research''s ''Energy Carbon View Tool'' and engineering and industrial services unit''s ''Data Acquisition and Management System'' have together been implemented in more than 75 buildings to monitor and save energy.

TCS researchers published 300 quality papers in various journals and conferences. 509 patents were filed this year taking the tally of filed patents to 2,277. Total number of granted patents is 206.

TCS ''Co-Innovation Network'' has expanded its footprint to include Canada, Finland, Israel and the London Financial Technologies (FinTech) hubs. Many co-innovation events including a start-up boot camp for FinTech companies was held this year. TCS research scholar programme is supporting 200 PhD scholars and the programme has been extended for the next five years.

TCS research has been socialized well in FY15. Our flagship event in North America, The ''TCS Innovation Forum 2014'', was well received with 185 clients and partners attending, ''TCS Evangelize'' held 39 innovation days and workshops for customers. TCS continues to be in Forbes list of Top 100 innovation companies. It scored 96 percentile in innovation management on the Dow Jones Sustainability Index. A ''TCS Research Solution'' won the best demo award for mobile based blood pressure monitor at SenSys 2014, Memphis, USA. TCS was placed in CII''s Industrial Innovation Awards List for 2014.

Looking forward, TCS R&D will deepen exploration in current areas of research that have yielded benefits to customers and explore new areas in software, applications and systems.

Expenditure on R&D

TCS innovation labs are located in India and other parts of the world. These R&D centers, as certified by Department of Scientific & Industrial Research (DSIR) function from Pune, Chennai, Bengaluru, Delhi- NCR, Hyderabad, Kolkata and Mumbai.

26. Acknowledgement

The directors thank the Company''s employees, customers, vendors, investors and academic institutions for their continuous support.

The directors also thank the government of various countries, government of India, the governments of various states in India and concerned government departments / agencies for their co-operation.

The directors appreciate and value the contributions made by every member of the TCS family.

On behalf of the board of directors,

Mumbai Cyrus Mistry

April 16, 2015 Chairman


Mar 31, 2013

To the Members,

The Directors submit the Annual Report of the Company along with the audited financial statements for the financial year ended March 31, 2013.

1. Financial results

(Rs. crores)

Unconsolidated Consolidated 2012-2013 2011-2012 2012-2013 2011-2012

Revenue from operations 48,426.14 38,104.23 62,989.48 48,893.83

Operating expenditure 34,119.87 26,718.51 44,949.57 34,458.52

Earnings before interest, tax, depreciation and amortisation (EBITDA) 14,306.27 11,385.72 18,039.91 14,435.31

Other income (net) 2,230.39 2,685.18 1,178.23 428.17

Finance costs 30.62 16.40 48.49 22.23

Depreciation and amortisation expense 802.86 688.17 1,079.92 917.94

Profit before tax (PBT) 15,703.18 13,366.33 18,089.73 13,923.31

Tax expense 2,916.84 2,390.35 4,014.04 3,399.86

Profit for the year before minority interest 12,786.34 10,975.98 14,075.69 10,523.45

Minority interest - - 158.38 109.96

Profit for the year (PAT) 12,786.34 10,975.98 13,917.31 10,413.49

Adjustment for amalgamation of Retail FullServe Limited and Computational Research Laboratories Limited (103.00) - (126.22) -

Balance brought forward from previous year 18,235.20 14,069.20 22,160.54 18,635.05

Amount available for appropriation 30,918.54 25,045.18 35,951.63 29,048.54

Appropriations

Interim dividends on equity shares 1,761.49 1,761.49 1,761.49 1,761.49

Proposed final dividend on equity shares 2,544.39 1,565.77 2,544.39 1,565.77

Special dividend on equity shares - 1,565.78 - 1,565.78

Proposed dividend on redeemable preference shares 19.00 22.00 19.00 22.00

Tax on dividends on equity & preference shares (interim and proposed) 712.18 797.34 727.34 806.86

General reserve 1,278.63 1,097.60 1,352.79 1,166.10

Statutory reserve - - 16.65 -

Balance carried to balance sheet 24,602.85 18,235.20 29,529.97 22,160.54

(Rs. 1 crore = Rs. 10 million)

2. Dividend

Based on the Companys performance, the Directors are pleased to recommend for approval of the members a final dividend of Rs. 13 per share for the financial year 2012-13 taking the total dividend to Rs. 22 per share (previous year Rs. 17 per share excluding special dividend of Rs. 8 per share) on the capital of 195,72,20,996 equity shares of Rs. 1 each. The final dividend on the equity shares, if approved by the members would involve a cash outflow of Rs. 2,976.81 crores including dividend tax. The total cash outflow on account of dividend (interim as well as proposed) including dividend tax for the financial year 2012-13 would aggregate Rs. 5,014.83 crores resulting in a payout of 39.29% of the unconsolidated profits of the Company.

The redeemable preference shares allotted on March 28, 2008 are entitled to a fixed cumulative dividend of 1% per annum and a variable non-cumulative dividend of 1% of the difference between the rate of dividend declared during the year on the equity shares of the Company and the average rate of dividend declared on the equity shares of the Company for the three years preceding the year of issue of the said redeemable preference shares. Accordingly, the Directors have recommended, for approval of the members, a dividend of nineteen paise (Rs. 0.19) per share on 100,00,00,000 redeemable preference shares of Rs. 1 each for the financial year 2012-13.

3. Transfer to reserves

The Company proposes to transfer Rs. 1,278.63 crores to the general reserve out of the amount available for appropriation and an amount of Rs. 24,602.85 crores is proposed to be retained in the statement of profit and loss.

4. Companys performance

During the financial year 2012-13, the global economic environment was on a slow growth path. There were signs of faster growth in certain geographies, primarily in the emerging markets. The prevailing uncertainties were challenging, which called for much higher level of efficiency and preparedness for participants in the market.

In the financial year 2012-13, on consolidated basis, the Company has achieved well-rounded growth with steady profitability. The Company had excellent growth across markets - United Kingdom (44%), Latin America (40%), North America (27%), Europe (21%), Asia Pacific (27%), Middle East Africa (28%) and India (16%). All the industry segments have registered double digit growth.

For the first time, the Company crossed USD 3 billion revenue in a quarter during Q4 of the financial year 2012-13.

On consolidated basis, revenue from operations for the financial year 2012-13 at Rs. 62,989.48 crores was higher by 28.8% over last year (Rs. 48,893.83 crores in 2011-12). Earnings before interest, tax, depreciation and amortisation (EBITDA) at Rs. 18,039.91 crores was higher by 25.0% over last year (Rs. 14,435.31 crores in 2011-12). Profit after tax (PAT) for the year at Rs. 13,917.31 crores was higher by 33.7% over last year (Rs. 10,413.49 crores in 2011-12).

On unconsolidated basis, revenue from operations for the financial year 2012-13 at Rs. 48,426.14 crores was higher by 27.1% over last year (Rs. 38,104.23 crores in 2011-12).Earnings before interest, tax, depreciation and amortisation (EBITDA) at Rs. 14,306.27 crores was higher by 25.7% over last year (Rs. 11,385.72 crores in 2011-12). Profit after tax (PAT) for the year at Rs. 12,786.34 crores was higher by 16.5% over last year (Rs. 10,975.98 crores in 2011-12).

5. Strategic acquisition

The Company has made acquisitions over the past few years either directly or through its subsidiaries. During the year 2012-13, the Company acquired Computational Research Laboratories Limited (CRL). CRL was a wholly owned subsidiary of Tata Sons Limited. The acquisition of CRL, a pioneering start-up company in the area of high performance computing solutions in India, enabled the Company to extend its suite of solutions and offer integrated high performance computing applications and Cloud services to its large base of customers.

6. Status of restructuring of unlisted subsidiary companies

i. Retail FullServe Limited (RFL) and Computational Research Laboratories Limited (CRL):

RFL and CRL, both wholly owned subsidiaries engaged in similar business as that of the Company, have amalgamated with the Company with effect from the Appointed Date, i.e., April 1, 2012 and October 1, 2012 respectively, in terms of the scheme of amalgamation sanctioned by the High Court of Judicature at Bombay by its Order dated March 22, 2013. The amalgamation would lead to efficient utilisation of resources and enhanced growth of the consolidated entity.

ii. TCS e-Serve Limited (e-Serve) and TCS e-Serve International Limited (TEIL):

On October 19, 2012, the Board of Directors of the Company, e-Serve and TEIL have approved a composite scheme of arrangement ("Scheme") between the Company, e-Serve, TEIL and their respective shareholders under Sections 391 to 394 of the Companies Act, 1956 ("Act"), proposing amalgamation of e-Serve with the Company and demerger of SEZ undertaking of TEIL into the Company.

e-Serve and TEIL are engaged in the business of providing information technology enabled services (ITES) and business process outsourcing services (BPO) for its customers primarily in the banking, financial services and insurance domain. e-Serves operations include delivering core business process services, analytics/ insights and support services for both data and voice processes. The Scheme will lead to operational synergy.

In the year 2008-09, the Company had acquired Citigroup Inc.s (Citi) 96.26% interest in e-Serve (then known as Citigroup Global Services Limited), the India-based captive BPO of Citi. TEIL is a wholly owned subsidiary of e-Serve.

The Appointed Date proposed for the Scheme is April 1, 2013. Pursuant to an Order of the High Court of Judicature at Bombay, a meeting of the equity shareholders of the Company has been scheduled on Friday, May 31, 2013, for the purpose of seeking approval of the shareholders.

7. Human resource development

TCS draws its strength from a highly engaged and motivated workforce, whose collective passion and commitment has helped the organisation scale new heights. The Company has a diverse workforce of 2,76,196 employees representing 118 nationalities.

Human Resource policies and processes have evolved to stay relevant to the changing demographics, enhance organisational agility and remain compliant with the changing regulatory requirements.

In financial year 2012-13, the Company remained the highest recruiter in the industry, with a gross addition of 69,728 and net addition of 37,613 employees across the globe. Campus placement drive was conducted in 371 engineering institutes in India resulting in 24,531 job offers to students to join in the financial year 2013-14. All the students who were given job offer last year were inducted into the organisation during financial year 2012-13. Trainees were recruited from established institutes across the globe.

The Company continued its effort to strengthen relationship with key institutes globally through its academic interface programme which benefited 616 institutes in India and 288 institutes in other countries.

Individual and organisational capability building remained one of the strategic focus areas. A total of 12,789 person years of effort were invested in enhancing the proficiency levels of the employees and in developing a steady stream of business leaders ready to take on the challenges as per growing requirements of the organisation.

The workforce management strategy was executed optimally to deliver a sustained utilisation rate throughout the year helping business grow while maintaining employee costs at the desired level.

The robust and mature talent management and talent engagement processes of the Company helped create an environment where performance is rewarded, opportunities are provided for career growth and people are encouraged to realise their potential. Focused initiatives towards health and safety and other non-work related employee engagement programmes helped develop the personality and confidence level of the employees enhancing their motivation and engagement with the organisation. The relentless drive to create "One TCS Culture" across the organisation helped the Company integrate its diverse global talent base into a cohesive high performing unit. These initiatives have delivered the desired results as is evident from the low attrition rate of 10.6% achieved during this year, a benchmark in the industry.

8. Quality initiatives

Sustained commitment to highest levels of quality, best-in-class service management and robust information security practices helped the Company attain a number of milestones during the year.

The Company continues to maintain the enterprise-wide highest maturity Level 5 for CMMI-DEV® (Development) and CMMI-SVC® (Services) models.

The Company achieved annual enterprise-wide ISO certification for ISO 20000:2011 (Service Management), ISO 9001:2008 (Quality Management) and ISO 27001:2005 (Security Management).

The Company is enterprise-wide certified for ISO 14001:2004 (Environmental Management) and BS OHSAS 18001:2007 (Occupational Health and Safety Management) which demonstrates TCS strong commitment to the environment and the occupational health & safety of its employees and business partners. The Company also continues to maintain the industry specific quality certifications viz., AS 9100 (Aerospace Industry), ISO 13485 (Medical Devices) and TL 9000 (Telecom Industry).

The cornerstone of these certifications is TCS integrated quality management system (iQMSTM), a global process- driven and customer-focused system which provides One Global Service Standard and is the backbone supporting the TCS global network delivery model (GNDMTM).

The Company was recognised as Indias most admired knowledge enterprise (MAKE) winner (1st place) this year and has received the prestigious MAKE award for the 8th time in India as well as Asia. The Company also received the global individual operating unit (IOU) MAKE award for the 3rd time in a row. TCS won the QuEST forum India quality award 2012 for being the first telecom software company in the world to implement the advanced surveillance and recertification procedure (ASRP) methodology for TL 9000.

9. Awards/Recognitions

During the year, the Company received various awards and recognitions, some of which are given below:

India

- Awarded "Company of the Year" by Business Standard

- Ranked as Indias Most Valuable Company in BT 500 from Business Today

- Ranked No. 1 in India by Institutional Investors 2012 All-Asia Executive Team rankings

- Selected as Best Managed Board in India by Aon Hewitt - Mint Study 2012

- ICAI Gold Shield for Excellence in Financial Reporting (2011-12), third time in succession Global

- Rated as one of the worlds greenest companies by Newsweek Magazine

- Listed in Forbes Asias Fab 50

- Awarded Best Performing Consultancy Brand in Europe

- Recognized as leading IT Services and Outsourcing Firm in China

- Top honours at the Asian CIO Leadership Awards in Dubai

- Top Software Company at QuEST Forum India Quality Award 2012

- Three recognitions in UKs Business in the Communitys (BITC) Awards for Excellence 2012

- Caring Company Award 2012 for CSR activities in Hong Kong

10. Corporate Governance Report, Management Discussion and Analysis Report and Business Responsibility Report

As per Clause 49 of the Listing Agreements entered into with the Stock Exchanges, Corporate Governance Report with auditors certificate thereon and a Management Discussion and Analysis Report are attached and form part of this report.

As per Clause 55 of the Listing Agreements entered into with the Stock Exchanges, a Business Responsibility Report (BRR) is attached and forms part of the annual report. A number of CSR activities were taken up through various programmes under the theme "Impact through Empowerment", touching 21,68,815 beneficiaries globally. The BRR provides details of these programmes.

11. Directors responsibility statement

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

(i) in the preparation of the annual accounts for the financial year 2012-13, the applicable accounting standards have been followed and there are no material departures;

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

(iii) 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. They confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

12. Subsidiary companies and consolidated financial statements

The Company had 58 subsidiaries as on March 31, 2013. There has been no material change in the nature of the business of the subsidiaries.

As required under the Listing Agreements entered into with the Stock Exchanges, a consolidated financial statement of the Company and all its subsidiaries is attached. The consolidated financial statement has been prepared in accordance with the relevant accounting standards as prescribed under Section 211 (3C) of the Act. The consolidated financial statement discloses the assets, liabilities, income, expenses and other details of the Company and its subsidiaries.

Pursuant to the provision of Section 212(8) of the Act, the Ministry of Corporate Affairs vide its circular dated February 8, 2011 has granted general exemption from attaching the balance sheet, statement of profit and loss and other documents of the subsidiary companies with the balance sheet of the Company. A statement containing brief financial details of the Companys subsidiaries for the financial year ended March 31, 2013 is included in the annual report. The annual accounts of these subsidiaries and the related information will be made available to any member of the Company/its subsidiaries seeking such information and are available for inspection by any member of the Company/its subsidiaries at the registered office of the Company. The annual accounts of the said subsidiaries will also be available for inspection, at the head offices/registered offices of the respective subsidiary companies.

13. Fixed deposits

The Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet.

14. Directors

Mr. R. N. Tata retired as the Director and Chairman of the Board with effect from December 28, 2012 in accordance with the retirement age policy for Directors. The Directors place on record their appreciation of the invaluable contribution and guidance provided by Mr. R. N. Tata.

Mr. Cyrus Mistry has taken over as the Chairman of the Board from Mr. R. N. Tata with effect from December 28, 2012. Mr. Cyrus Mistry was appointed as Deputy Chairman on November 8, 2012.

Mr. S. Mahalingam, who was the Chief Financial Officer and Executive Director retired on February 9, 2013 in accordance with the retirement age policy for Directors. The Directors place on record their appreciation of the invaluable contribution made by him.

Dr. Vijay Kelkar, Mr.Ishaat Hussain and Mr. Aman Mehta, Directors, retire by rotation and being eligible have offered themselves for re-appointment.

15. Chief Financial Officer

Post retirement of Mr. S. Mahalingam as the Chief Financial Officer and Executive Director of the Company, Mr. Rajesh Gopinathan has been appointed as the Chief Financial Officer of the Company with effect from February 10, 2013. Mr. Rajesh Gopinathan has 17 years of experience and has been with TCS since 2001. He has held several key positions in finance, strategy and sales during his career with the Company and has worked in multiple geographies. He is an MBA from Indian Institute of Management, Ahmedabad and an engineer from Regional Engineering College, Trichy.

16. Auditors

M/s. Deloitte Haskins & Sells, Chartered Accountants, who are the statutory auditors of the Company, hold office, in accordance with the provisions of the Act till the conclusion of the forthcoming annual general meeting and are eligible for re-appointment.

17. Particulars of employees

The information required under Section 217(2A) of the Act and the Rules made thereunder, in respect of employees of the Company, is provided in annexure forming part of this report. In terms of Section 219(1 )(b)(iv) of the Act, the report and accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining copy of the same may write to the Company Secretary.

18. Conservation of energy, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed under Section 217(1)(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in an annexure to this report.

19. Acknowledgement

The Directors thank the Companys employees, customers, vendors, investors and academic institutions for their support.

The Directors also thank the Government of various countries, Government of India, State Governments in India and concerned Government Departments/Agencies for their co-operation.

The Directors appreciate and value the contributions made by every member of the TCS family globally.

On behalf of the Board of Directors,

Mumbai Cyrus Mistry

May 27, 2013 Chairman

 
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