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Directors Report of Tata Elxsi Ltd.

Mar 31, 2017

DIRECTORS'' REPORT TO THE MEMBERS

1 The Directors are pleased to present the Twenty Eighth Annual Report on the business and operations of the Company along with the Audited Statements of Accounts for the financial year ended March 31, 2017.

2. Result of Operations - Extract

Rs,In Crores

2016-17

2015-16

Revenue from Operations

1233.04

1075.21

Other income

16.37

11.86

Total Income

1249.41

1087.07

Profit before financial expenses, depreciation and exceptional items

288.42

258.95

Less: Financial expenses

-

-

Depreciation

26.92

22.61

Profit for the year

261.50

236.34

Less: Provision for Income tax

88.21

81.53

Profit after tax

173.29

154.81

Add: Profit brought forward

277.21

184.86

Amount available for appropriation

450.50

339.67

Dividend on Equity Shares

-

43.59

Tax on Dividend

-

8.87

General Reserve

10.00

10.00

Balance Profit carried to Balance Sheet

440.50

277.21

3. Dividend

Your Directors recommend for your approval, a dividend of 160% (Rs, 16/- per share) for the year ended 31st March, 2017, compared to 140% (Rs,14 per share) in the previous year.

This will involve an outgo of Rs, 59.96 crores compared to Rs, 52.46 crores in the previous year, including dividend distribution tax.

The Company has adopted a Dividend Distribution Policy (DDP), a copy of which is available in the Investors section of the company website: https://tataelxsi.com/investors/investor-relations.html.

4. Reserves

Your Directors have approved a transfer of Rs, 10 crores to the General Reserves for the year ended 31st March, 2017, as against an amount of Rs,10 crores in the previous year.

5. Review of Operations

The total income during the year under review increased by 15% from Rs, 1087.07 crores in the previous year to Rs, 1249.41 crores.

The Profit Before Tax (PBT) increased by 11% from Rs, 236.34 crores in the previous year to Rs, 261.50 crores. The Profit After Tax (PAT) increased by 12% from Rs, 154.81 crores in the previous year to Rs, 173.29. Crores.

During the year under review, your Company continued its momentum of growth despite the global slowdown in IT and R&D spend, and adverse currency impact, especially with the British Pound, which depreciated over 20%, during the year.

The growth was driven primarily by Your Company''s concerted effort in growing its revenues from design and technology services, and focusing on select industry segments. This was supported by effective cost control and improved utilization.

6. MANAGEMENT DISCUSSION AND ANALYSIS

Industry Outlook

In FY2017, IT-BPM exports from India is expected to reach USD 117 billion, a 7.6% year-on-year growth. ER&D (Engineering Research & Development) continues to be the fastest growing segment at 10.5%, driven by global OEMs increasingly embedding software & services into their products.

Business Analysis

Our operations are classified into two business segments, i.e. Software Development & Services and Systems Integration & Support.

Software Development and Services

This business segment grew by 15.7% from Rs, 1008.17 crores in the previous year to Rs, 1166.45 crores in FY17. The segment profit increased by 10.5% from Rs, 259.66 crores in the previous year to Rs, 286.97 crores during FY17.

The software development and services segment consists of two distinct business divisions:

Embedded Product Design

The Embedded Product Design (EPD) division provides technology consulting, new product design, development, and testing services for the broadcast, consumer electronics, healthcare, telecom and transportation industries.

We see an exponential increase in the technological complexity required to develop and deliver new products and services. In addition, advanced technologies like Artificial Intelligence, Virtual Reality, Cloud based applications and IoT (Internet of Things) are being integrated into consumer contexts, services and products.

Your company is actively investing in developing capabilities in these technologies and providing solutions and services for the emerging technologies such as IoT (Internet of Things), cloud, mobility, and artificial intelligence.

Customer experience is going to be the key differentiator for businesses of the future. The ability to provide users with products, solutions and services that humanize the complexity of the underlying technologies and make them intuitive and easy to use will drive customer delight, loyalty and business growth.

This presents us with a unique opportunity to leverage our technological capabilities, user centric design and creative experience, and position ourselves as an integrated design and technology services provider.

Tata Elxsi was awarded the ''Best in Engineering Innovation'' award by Electronics Maker at the Best of Industry Awards ceremony 2016, in recognition of our excellence in delivering innovation to customers, including technology consulting, new product design, development, and testing services.

The key sectors addressed by EPD include:

Transportation

We offer electronics, software development and system design services for the automotive, rail and aerospace industry.

We leverage our cross-technology expertise in multimedia, imaging, connectivity technologies and well-established processes for automotive software development, to support both car manufacturers and system suppliers in product development and engineering.

We are also working on emerging requirements for mass transportation and urban mobility solutions for smart cities of the future.

We are actively investing in developing solutions and software components that help accelerate time to market and innovation for our customers. This includes solutions for next-gen infotainment, driverless cars and V2X.

We participated in leading trade shows and events such as the CES 2017 (Consumer Electronics Show) in Las Vegas and Car HMI Europe 2016 in Germany, where we showcased our capabilities and new product offerings for autonomous vehicles, connected cars and next-gen infotainment.

We are members of leading consortiums and technology standards bodies related to the automotive industry such as Genivi and AUTOSAR, and actively participate in associated events such as Genivi All Member Meet in California and Automotive Linux Summit in Japan.

Broadcast and Communications

We address the complete product development lifecycle from R&D, new product development and testing to maintenance engineering for Broadcast, Consumer Electronics and Communications.

We engage with leading Broadcast and Communications service providers across the world for the development of value-added applications, and help them reduce engineering costs associated with development and deployment through cost-effective offshore services.

Emerging technologies such as IoT (Internet of Things) and Analytics are creating new opportunities to drive operational efficiency, reduce costs, deliver new services to consumers and enable new streams of revenues for operators and product manufacturers.

We are investing in developing capability to support customers in these new technologies and help them in their digital transformation journey.

With the advent of a variety of screens, platforms and communication technologies, the complexity of test automation has scaled up exponentially for the broadcast industry.

We have developed a Test Automation solution that incorporates Artificial Intelligence to enable operators automate their entire testing.

We continue to participate in leading international industry events and standards bodies, to strengthen our leadership position and keep abreast of technology trends.

Tata Elxsi featured in the leading broadcast event IBC 2016 (International Broadcasting Convention), with a session on the topic "What Caught My Eye: Future business opportunities". We also featured in RDK Americas Summit 2017, with a session titled ''RDK Machine Learning = Predictive Analytics That Satisfy'', where we shared our insights on rise of Predictive Analytics fueled by Machine Learning.

Industrial Design and Visualization

Tata Elxsi helps customers develop endearing brands and products by using design and technology as a strategic tool for business success. It has supported the launch of multiple brands and products across the world, winning various international awards for design and innovation.

This division services a broad spectrum of industries including automotive, consumer electronics, retail & consumer goods and healthcare.

As an added offering, we offer visualization services to help customers & marketing organizations communicate their product capabilities better to their end consumers.

Tata Elxsi has won the coveted international iF Design Award 2017, for Kochi Metro Rail Limited. Our comprehensive passenger experience design to develop India''s first seamless and integrated transport system for Kochi Metro, impressed the 58 professional judges from around the world.

Tata Elxsi was awarded the ''Best Industrial Design Studio'' award 2016 by Pool Magazine - India''s first International Design Magazine. The jury recognized our overall approach to work and business and appreciated our work ethics, teamwork, customer response, organizational response and open & transparent methodologies.

Systems Integration and Support

During the year under review, our Systems Integration & Support segment reported a turnover of '' 66.58 crores and profit of '' 8.35 crores.

We implement and integrate complete systems and solutions for High-Performance Computing, Computer Aided Design, Virtual Reality, Storage, and Disaster Recovery. We also provide Professional Services for maintenance and support of IT infrastructure in India and overseas.

We continue to focus on increasing the share of software sales and support services in this segment, for improved margins.

We are also expanding our solution portfolio, with technologies like 3D printing to cater to emerging industry needs. Threats, concerns and risks

Protectionist government policies and tightening of Visa rules, especially in the US, may create barriers for on-site deployment of India-based talent. We are focusing on maximizing offshore project execution, and hiring locally wherever necessary and possible, in order to mitigate the impact of such policies.

Currency volatility continues to be a risk. Our revenues are well distributed amongst various currencies and geographies, thereby reducing the impact from any single geography or currency to some extent.

As a technology-led design company, we continue to invest in acquiring and retaining the best talent, as well as continuous skill development, to help absorb the rapid changes in technologies and deliver greater value to our customers.

We constantly endeavor to stay ahead of the technology curve by building capabilities and solutions to meet the current and future needs of our customers.

For example, in the area of autonomous driving, we have developed an indigenous autonomous vehicle middleware platform ''Autonomai'', that integrates futuristic technologies such as AI and deep learning to help OEMs (Original Equipment Manufacturers) and system suppliers rapidly build driverless cars of the future.

Internal Control Systems and their adequacy

We believe that internal control and risk management are necessary prerequisites of the principle of governance. Our Management is committed to ensuring an effective internal control environment, commensurate with the size and complexity of the business, which provides assurance on the efficiency of operations and security of assets. We have an effective internal control system, which ensures that all our assets are safeguarded and protected against any losses.

We have co-sourced the internal audit function. We have entrusted quarterly internal audits to an external Audit firm of repute. In addition, the in-house internal audit team also regularly carries out audits of specific processes. Their annual audit plans are approved by the Audit Committee of the Board. Based on the internal audit reports, process owners undertake corrective actions in their respective areas and thereby strengthen the controls. Internal Audit Reports along with corrective actions are discussed with the Management and are reviewed by the Audit Committee of the Board, which also reviews the adequacy and effectiveness of our internal controls.

Financial Analysis

20016-17

Rs,

Crores

2015-16

Rs,

Crores

Change over previous year

%

Percentage of Income

2016-17

2015-16

Sales and services

1233.04

1075.21

14.68

98.69

98.91

Other income

16.37

11.86

38.03

1.31

1.09

Total Revenues

1249.41

1087.07

14.93

100.00

100.00

Cost of sales

74.72

69.98

6.77

5.98

6.44

Personnel expenses

669.34

576.49

16.11

53.57

53.03

Financial expenses

-

-

-

-

-

Depreciation/ Amortization

26.92

22.61

19.06

2.15

2.08

Other expenses

216.93

181.65

19.42

17.36

16.71

Total Expenditure

987.91

850.73

16.13

79.06

78.26

Profit before tax and exceptional items

261.50

236.34

10.64

20.94

21.74

Tax expenses

88.21

81.53

8.19

7.06

7.50

Profit after tax for the year

173.29

154.81

11.94

13.88

14.24

Analysis of Overheads

Items

2016-17 Rs, crores

2015-16 Rs, crores

Variance %

Operating lease rent

15.84

15.73

0.70

Communication expenses

10.79

9.70

11.24

Inland travel and conveyance

8.24

8.03

2.61

Overseas travel

54.13

50.23

7.76

Consultant fees for software development

53.06

45.13

17.57

Provision for doubtful debts/ advances

0.58

0.82

-29.27

Significant Ratio Analysis

Sl.

No.

Particulars

Unit

31.03.17

31.03.16

1

Earnings before interest, depreciation and tax/Sales

%

23.39

24.08

2

Profit before taxes/ Sales

%

21.21

21.98

3

Profit after taxes/ Sales

%

14.05

14.40

4

Current Ratio

No. of times

4.14

2.32

5

Debt Equity Ratio

Ratio

6

Earnings per share

Rs,

55.65

49.72

Human Resources

Your Company recognizes the critical importance of its human capital. As a technology-led design company, we continue to attract and retain top talent. Capacity addition, through the induction of fresh engineers and lateral hires are driven by the annual business planning exercise. Your Company takes significant initiatives to increase efficiency through Leadership training, Performance management, Talent development, Employee engagement and Succession planning.

Our total headcount including consultants was 5205 as of March 31, 2017.

Quality initiatives

We have instituted very strong quality processes in the execution of our software development projects, and implemented robust information security management processes to assure our global customer base of the required level of confidentiality and protection of data and information. We have also been assessed and certified organization wide for industry-specific standards such as ISO 9001:2008 and ISO 27001:2013. Additionally, for Medical Engineering BU we have ISO 13485:2012 certification and for Automotive and Transportation BU we have Transportation SPICE OML5 certification.

Tata Business Excellence Model (TBEM)

Tata Business Excellence Model (TBEM) is a ''customized-to-Tata'' adaptation of the globally renowned Malcolm Baldrige model. The TBEM philosophy has been molded to deliver a combination of strategic direction and concerted effort to maximize business performance. This is managed through an annual process of assessment and assurance.

TBEM is administered and coordinated through TBExG, a division of Tata Sons. Its criterion is designed to help Tata organizations use an integrated approach to organizational performance management that results in:

- Delivery of ever-improving value to customers and stakeholders, contributing to organizational sustainability

- Improvement of overall organizational performance practices, effectiveness and capabilities

- Organizational and personal learning

As one of the key companies within Tata group, Tata Elxsi is covered under TBEM and assessed on an annual basis by a select team constituted by TQMS.

During this year''s assessment we crossed an important milestone and have been recognized as an ''Emerging Industry Leader''.

7. Directors and Key Managerial Personnel

In terms of Section 152 of the Companies Act, 2013 Dr. Gopichand Katragadda retires by rotation and being eligible offers himself for re-appointment.

Mr. Piyush Mankad, Independent Director, retired from the Board with effect from November 19, 2016 in terms of his appointment. The Board placed on record their appreciation for the valuable contributions and guidance rendered by Mr. Mankad during his tenure on the Board and the Committees in which he was member.

The Board, on the recommendation of the Nomination & Remuneration Committee, had at its meeting held on July

26, 2016 appointed Mr. Sudhakar Rao as an Additional Director (Independent Director) of the Company with effect from August 01, 2016. In terms of section 161(4) of the Companies Act, 2013 Mr. Sudhakar Rao holds office up to the date of the ensuing Annual General meeting and being eligible offers himself for re-appointment. Notice has been received from a member u/s 161 of the Companies Act, 2013, proposing Mr. Sudhakar to the office of the Directorship of the Company. The Board recommends the appointment of Mr. Sudhakar Rao as an Independent Director to hold office up to July 31, 2021.

The Board, on the recommendation of Nomination & Remuneration Committee, at its meetings held on October 27, 2016 and April 27, 2017 has, subject to the approval of the members, re-appointed Mr. Madhukar Dev as the Managing Director & Chief Executive Officer (MD&CEO) of the Company for a period of 2 years 8 months and 16 days with effect from 16.01.2017 up to 1.10.2019.

During the year under review, Five (5) Board meetings were held and have been well attended by the Directors. The calendar of meetings for the year 2017-18 has been circulated to all the directors detailing the schedule of Board and Committee meetings during 2017-18.

The Independent Directors have submitted their declaration that they fulfill the requirements as stipulated in Section 149 (6) of the Companies Act, 2013. Pursuant to Clause VII (1) of Schedule IV of the Companies Act, 2013 the Independent Directors had separate meetings on 28th April, 2016 during 2016-17.

Pursuant to the provisions of section 203 of the Companies Act, 2013, the Key Managerial Personnel (KMP) of the company are Mr. Madhukar Dev, MD & CEO, Mr. K. Ramaseshan, CFO and Mr. G. Vaidyanathan, Company secretary. There is no change in the KMP during the year.

8. Directors'' Responsibility Statement

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 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 2016-17.

Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

(a) In the preparation of the annual accounts the applicable accounting standards had been followed along with proper explanations relating to material departures;

(b) The directors had 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 our state of affairs at the end of the financial year and of our profit and loss for that period.

(c) The Directors had taken proper and sufficient care, for the maintenance of adequate accounting records, in accordance with the provisions of Companies Act 2013, for safeguarding our assets and for preventing and detecting fraud and other irregularities;

(d) The Directors have prepared the annual accounts on a going concern basis;

(e) The directors had laid down internal financial controls to be followed by us and that such internal Controls are adequate and were operating effectively;

(f) The Directors have devised proper systems to ensure compliance with provisions of all applicable laws and that such systems were adequate and operating effectively.

9. Particulars on Remuneration

The statement showing the names of the top ten employees in terms of remuneration drawn and the information required under Section 197(12) of the Companies Act 2013 Read with Rule 5(2) and 5(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 forms part of the Directors'' Report and have not been attached. However, in terms of first proviso to Section 136(1) the particulars as referred above are available for inspection at our Registered office during business hours on working days, up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

Particulars pursuant to Section 197(12) of the Companies Act 2013 Read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 are provided as under.

(i) The ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year:

Non-Executive Director

Ratio to median remuneration

Mr. N G Subramaniam

9.17

Mr.Patrick McGoldrick

5.59

Mrs. S. Gopinath

9.39

Dr. G Katragadda

2.68

Pro. M.S. Ananth

3.13

Mr. Sudhakar Rao1

-

Mr. Piyush Mankad *

-

Executive Director

Mr. Madhukar Dev, MD & CEO

78.33

*since the information is part of the year, the same is not comparable (For Non-Executive Directors (NEDs) only commission is considered).

(ii) Percentage increase in the remuneration of the Directors and KMPs for the financial year:

Directors, Managing Director & CEO, Chief Financial Officer and Company Secretary

% increase in the remuneration of Directors/ KMP in the Financial year

Mr. N G Subramaniam

31.68

Mr. Patrick McGoldrick

14.36

Mrs. S. Gopinath

26.80

Dr. G Katragadda

6.50

Prof. M.S. Ananth*

-

Mr. Sudhakar Rao*

-

Mr. Piyush Mankad*

-

Mr. Madhukar Dev, MD & CEO

25.25

Mr. K.Ramaseshan, CFO

13.69

Mr. G Vaidyanathan, Company Secretary

42.35

(v) 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 increase in salaries of employees other than managerial personnel in 2016-17 was 11.5 %. Percentage increase in the managerial remuneration for the year was 20%.

(vi) The Company hereby affirms that the remuneration is as per the remuneration policy of the company.

The Board has adopted a Remuneration Policy as also the Charter for the Nomination & Remuneration Committee (NRC). The Policy covers the Policy on remuneration to our Managing Director, Key Managerial Personnel and other officers. The Charter lays down the Rights, Roles and Responsibilities of the NRC. A Policy on Board diversity has also been adopted by the Board. A comprehensive Governance Guidelines for Board effectiveness has also been adopted by the Board on the recommendation of NRC. The Guidelines lay down the following:

- Composition and Role of the Board (Role of the Chairman, Directors, size of the Board, Managing Director, Executive Director, Non-Executive Directors, Independent Directors, their term, tenure and Directorship).

- Board appointment. Industrial Development.

- Directors'' remuneration (Guided by Remuneration policy).

- Subsidiary oversight.

- Code of Conduct (Managing Director, Executive Director, Non-Executive Directors, Independent Directors).

- Board effectiveness review.

- Mandate of the Board Committee.

The Remuneration Policy and the Charter for NRC are available at http://www.tataelxsi.com/company/board-of-directors/related links/Policies

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

The particulars pursuant to section 134 (m) of the Companies Act, 2013 is attached with this report as Annexure-A.

11. Business Responsibility Report (BRR)

In terms of the regulation 34(2) (f) Securities Exchange Board of India (Listing Obligations and Disclosures Requirements) Regulations, 2015 (''Listing Regulations") the Business Responsibility Report is attached as Annexure-B.

12. Risk Management Policy

The Board has adopted a Risk Management Policy to identify and categorize various risks, implement measures to minimize impact of these risks where it is deemed necessary and possible, and a process to monitor them on a regular basis. More details are given under Section-6 of Corporate Governance Report.

13. Corporate Social Responsibility

Corporate Social Responsibility (CSR) committee has been constituted for the purposes of recommending and monitoring the CSR initiatives of the Company.

The Board on the recommendation of CSR Committee adopted a CSR Policy. The same is available on Company''s website at (http://www.tataelxsi.com/company/corporate-sustainability). The CSR objectives are designed to serve societal, local and national goals in the locations that we operate in, create a significant and sustained impact on local communities and provide opportunities for our employees to contribute to these efforts through volunteering.

The Annual Report on the CSR initiatives undertaken by the Company as per the Companies (Corporate Social Responsibilities Policy) Rules, 2014 is annexed as Annexure-C. The detail of the CSR Committee and its composition is given in section-7 of the Corporate Governance Report.

14. Corporate Governance

In terms of Regulation 34(3) and 53(f) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 the Corporate Governance Report, the Management Discussion & Analysis Statement, and the Auditors'' Certificate regarding Compliance of Conditions of Corporate Governance are part of this Annual Report.

15. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Ms. Jayashree Parthasarthy, a Company Secretary-in-Practice, was appointed to undertake the Secretarial Audit. The Report of the Secretarial Audit for the year ended 31st March,

2017 is attached to the Directors'' Report at page No. 39.

16. Prevention of Sexual Harassment

We have zero tolerance for sexual harassment at workplace and have adopted a Policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under for prevention and Redressal of complaints of sexual harassment at workplace.

No concerns have been raised under POSH during the year 2016-17.

17. Vigil Mechanism

Our company has established a "Vigil Mechanism" for its employees and Directors, enabling them to report any concerns of unethical behavior, suspected fraud or violation of the Company''s ''Code of Conduct''.

To this effect, the Board has adopted a ''Whistle Blower Policy'' (WBP), which is overseen by the Audit Committee. The policy provides safeguards against victimization of the Whistle Blower. Employees and other stakeholders have direct access to the Chairperson of the Audit Committee for lodging concerns if any, for review.

The said policy has been posted on our intranet where all the employees have access. Our Company conducts ''Policies Awareness Campaign'' regularly for its employees at its various centers, and the WBP also features in the campaign amongst others.

18. Others

There are no loans, guarantees and investments made by us u/s 186 of the Companies Act, 2013 during the year under review.

The extract of Annual Return in MGT-9 is attached and forms part of the Directors'' report. We have neither accepted nor renewed any deposit during the year under review.

The Unclaimed Dividend in respect to the financial year 2009-10 is due for remittance to Investors'' Education & Protection Fund (IEPF) on August 31, 2017 in terms of Section 125 of the Companies Act, 2013.

There are no material changes and commitments affecting the Company''s financial position between the end of the financial year to which this financial statement relate and the date of this report.

19. Auditors

Delloitte Haskins & Sells (DHS), Chartered Accountants, the Statutory Auditors, who have been appointed at the Annual General Meeting, held on 18th July, 2014 for a period of 3 years retires at the conclusion of the ensuing Annual General Meeting. The Board places on record their appreciation for the valuable contribution on the Audit and review front made by Deloitte Haskins & Sells (DHS) during their long association with the Company.

The Board has consented to recommend to the members the appointment of M/s BSR & Co. LLP, Chartered Accountants, as the statutory auditors of the company for a period of 5 years from the conclusion of 28th Annual General Meeting up to the conclusion of the 33rd Annual General meeting to be held in the year 2022 subject to ratification of their reappointment by the members at each AGM to be held between the above periods. M/s. BSR & Co. LLP has confirmed vide their certificate dated April 12, 2017 that they in compliance to the conditions provided in Section 139(1) read with Section 141 of the Companies Act, 2013.

20. Acknowledgements

Your Directors wish to thank employees, customers, partners, suppliers, and above all, our shareholders and investors for their continued support and co-operation.

On behalf of the Board of Directors

N.G. Subramaniam

Chairman

Bengaluru, 27th April, 2017


Mar 31, 2015

THE MEMBERS

1. The Directors are pleased to present the Twenty sixth Annual Report on the business and operations of the Company along with the Audited Statements of Accounts for the financial year ended March 31, 2015.

2. Result of Operations - Extract

(Rs. Crores) Standalone Consolidated 2014-151 2013-14 2014-151 2013-14

Sales and Service 849.40 772.10 849.40 774.79

Other income 4.14 15.68 3.35 12.54

Total Income 853.54 787.78 852.75 787.33

Profit before financial expenses, depreciation and exceptional items 181.52 151.80 180.66 149.00

Less: Financial expenses - 1.83 - 1.83

Depreciation 25.54 34.99 25.54 34.99

Profit for the year 155.98 114.99 155.12 112.19

Less: Provision for Income tax 53.08 39.88 53.10 39.93

Profit after tax ~ 102.90 75.11 102.02 72.26

Add: Profit brought forward 146.34 111.36 146.37 114.24

Balance available for appropriation which has been appropriated as 249.24 186.47 248.39 186.50 under:

Depreciation on transition to Schedule-II of the Companies Act, 2013 on 13.30 - 13.30 - tangible fixed assets with Nil remaining useful life

Proposed dividend 34.25 28.02 34.25 28.02

Dividend tax thereon net of reversal thereof 6.82 4.11 6.82 4.11

Transfer to General Reserve 10.00 8.00 10.00 8.00

Balance of profit carried to Balance Sheet 184.87 146.34 184.02 146.37

Total appropriations 249.24 186.47 248.39 186.50

3. Dividend

Your Directors recommend for your approval, a dividend of 110% (Rs. 11/- per share) for the year ended 31st March, 2015, compared to 90% (Rs.9 per share) in the previous year.

This will involve an outgo of Rs. 41.07 crores compared to Rs. 32.13 crores in the previous year, including dividend distribution tax.

4. Reserves

Your Directors have approved a transfer of Rs. 10 crores to the General Reserves for the year ended 31st March, 2015, as against an amount of Rs. 8 crores in the previous year.

5. Review of Operations

The total income during the year under review increased by 8% from 787.78 crores in the previous year to Rs. 853.54 crores.

The Profit Before Tax (PBT) increased by 36% from 114.99 crores in the previous year to Rs. 155.98 crores.

The Profit After Tax (PAT) increased by 37% from 75.11 crores in the previous year to Rs. 102.90 crores.

During the year under review, our concerted effort in growing revenues from the embedded product design and industrial design services, increasing the composition of software sales and support services in the Systems Integration business, and balanced control of operational costs, resulted in improved top line and bottom line performance.

7. Directors and Key Managerial Personnel

In terms of Section 161 of the Companies Act, 2013 Mr. N.G. Subramaniam and Dr. G. Katragadda, Non - Executive and Not-Independent Directors, who have been appointed as Additional Directors retire at the ensuing Annual General Meeting. We have received a Notice under Section 160 (1) of the Companies Act, 2013 from a member proposing the candidatures of Mr. N.G. Subramaniam and Dr. G. Katragadda to the office of Directorship, whose terms of office shall be determined for retirement by rotation.

Mr. S. Ramadorai, the then Chairman, retired from the Board with effect from October 06, 2014, on attaining the age of 70 years as per our policy. The Board placed on record their appreciation for the exemplary leadership and guidance rendered by Mr. Ramadorai during his tenure on the Board.

Mrs. Sudha Madhavan, CFO, resigned from her position w.e.f. September 19, 2014 to seek other career opportunities.

The Board on the recommendation of the Audit Committee, appointed Mr.K. Ramaseshan as our CFO w.e.f. January 21, 2015.

During the year under review, Seven (7) Board meetings were held and well attended by the Directors. We have circulated the Calendar of meetings for the year 2015-16 to the Directors.

The Independent Directors have submitted their declaration that they fulfill the requirements as stipulated in Section 149 (6) of the Companies Act, 2013. Pursuant to Clause VII (1) of Schedule IV of the Companies Act, 2013. The Independent Directors had a separate meeting on 25th March,2015.

8. Directors'' Responsibility Statement

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 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.

Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

(a) in the preparation of the annual accounts the applicable accounting standards had been followed along with proper explanations relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of our state of affairs at the end of the financial year and of our profit and loss for that period.

(c) the Directors had taken proper and sufficient care, for the maintenance of adequate accounting records, in accordance with the provisions of Companies Act 2013, for safeguarding our assets and for preventing and detecting fraud and other irregularities;

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

(e) the directors had laid down internal financial controls to be followed by us and that such internal Controls are adequate and were operating effectively.

(f) the Directors have devised proper systems to ensure compliance with provisions of all applicable laws and that such systems were adequate and operating effectively.

10. Particulars on Remuneration

The information required under Section 197(12) of the Companies Act 2013 Read with Rule 5(2) and 5(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 forms part of the Directors'' Report and have not been attached. However, in terms of first proviso to Section 136(1) the particulars as referred above are available for inspection at our Registered office during business hours on working days, up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

Particulars pursuant to Section 197(12) of the Companies Act 2013 Read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 are provided in Annexure-A.

Our Board has adopted a Remuneration Policy as also the Charter for the Nomination & Remuneration Committee (NRC). The Policy covers the Policy on remuneration to our Managing Director, Key Managerial Personnel and other officers. The Charter lays down the Rights, Roles and Responsibilities of the NRC. A Policy on Board diversity has also been adopted by the Board. A comprehensive Governance Guidelines for Board effectiveness has also been adopted by the Board on the recommendation of NRC. The Guidelines lay down the following:

- Composition and Role of the Board (Role of the Chairman, Directors, size of the Board, Managing Director, Executive Director, Non-Executive Directors, Independent Directors, their term, tenure and Directorship).

- Board appointment, Industrial Development.

- Directors remuneration (Guided by Remuneration policy).

- Subsidiary oversight.

- Code of Conduct (Managing Director, Executive Director, Non-Executive Directors, Independent Directors).

- Board effectiveness review.

- Mandate of the Board Committee.

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

The particulars pursuant to section 134 (m) of the Companies Act, 2013 is attached with this report as Annexure-B.

12. Risk Management Policy

We have adopted a Risk Management Policy to identify and categorize various risks, implement measures to minimize impact of these risks where it is deemed necessary and possible, and a process to monitor them on a regular basis. More details are given under Section-6 of Corporate Governance Report.

13. Corporate Social Responsibility

We have constituted a CSR committee for the purposes of recomending and monitoring the CSR initiatives of the Company.

The Board on the recommendation of CSR Committee adopted a CSR Policy. The same is available on Company''s website at (http://www.tataelxsi.com/company/corporate-sustainability). The CSR objectives are designed to serve societal, local and national goals in the locations that we operate in, create a significant and sustained impact on local communities and provide opportunities for our employees to contribute to these efforts through volunteering.

The Annual Report on the CSR initiatives undertaken by the Company as per the Companies (Corporate Social Responsibilities Policy) Rules, 2014 is annexed as Annexure-C. The details of the CSR Committee and its composition is given in section-7 of the Corporate Governance Report.

14. Subsidiary Company, Statement under Section 129 of the Companies Act, 2013 and Consolidated Financial Statements

Our wholly owned subsidiary, Tata Elxsi (Singapore) Pte. Ltd. did not accrue any revenue during the year under review. There has been an expenditure of Rs. 0.06 crores during the year under review. Our Board of Directors have given their consent to the closure of Subsidiary and the same is under process. The details of subsidiary as required under the provisions of the Companies Act, 2013 are given in page No. 93 Members interested in obtaining a copy of the Audited annual accounts of the subsidiary company may write to the Company Secretary.

15. Corporate Governance

Pursuant to Clause 49 of the Listing Agreement, the Corporate Governance Report, the Management Discussion & Analysis Statement, and the Auditors'' Certificate regarding Compliance of Conditions of Corporate Governance are part of this Annual Report.

16. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Ms. Jayashree Parthasarthy, a Company Secretary in Practice, was appointed to undertake the Secretarial Audit. The Report of the Secretarial Audit for the year ended 31st March, 2015 is attached to the Directors'' Report at page No. 27.

17. Prevention of Sexual Harassment

We have zero tolerance for sexual harassment at workplace and have adopted a Policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and Redressal of complaints of sexual harassment at workplace.

During the year FY15, we received one (1) complaint related to sexual harassment; the same has been disposed of and appropriate action taken. There are no pending complaints for FY15.

18. Vigil Mechanism

Our company has established a "Vigil Mechanism" for its employees and Directors, enabling them to report any concerns of unethical behaviour, suspected fraud or violation of the Company''s ''Code of Conduct''.

To this effect the Board has adopted a ''Whistle Blower Policy'' (WBP), which is overseen by the Audit Committee. The policy provides safeguards against victimization of the Whistle Blower. Employees and other stakeholders have direct access to the Chairperson of the Audit Committee for lodging concerns if any, for review.

The said policy has been posted on our intranet where all the employees have access. Our Company conducts ''Policies Awarness Campaign'' regularly for its employees at its various centres, and the WBP also features in the campaign amongst others.

19. Others

There are no loans, guarantees and investments made by us u/s 186 of the Companies Act, 2013 during the year under review.

The extract of Annual Return in MGT-9 is attached and forms part of the Directors''report.

We have neither accepted nor renewed any deposit during the year under review.

The Unclaimed Dividend in respect to the financial year 2007-08 is due for remittance to Investors'' Education & Protection Fund (IEPF) on 27th August, 2015 in terms of Section 125 of the Companies Act, 2013.

There are no material changes and commitments affecting our financial position between the end of the financial year to which this financial statement relate and the date of this report.

20. Auditors

Delloitte Haskins & Sells (DHS), Chartered Accountants, the Statutory Auditors, who have been appointed for a period of 3 years and whose reappointment is to be ratified at the ensuing Annual General Meeitng, have confirmed that their certificate dated April 21, 2014 issued pursuant to the provisions of Section 139(1) of the Companies Act, 2013 holds good for the period of re-appointment.

21. Acknowledgements

Your Directors wish to thank employees, customers, partners, suppliers, and above all, our shareholders and investors for their continued support and co-operation.

On behalf of the Board of Directors

N.G. Subramaniam Chairman

Bengaluru, 28th April, 2015


Mar 31, 2014

TO THE MEMBERS

1. The Directors present the Twenty-Fifth Annual Report, along with the Audited Statements of Accounts of your Company, for the year ended March 31, 2014.

2. Financial Highlights:

During the financial year 2013-14, the operations of your Company resulted in the following:

(Rs. Crores)

Unconsolidated Consolidated

2013-14 2012-13 2013-14 2012-13

Sales and Service 772.10 604.68 774.79 621.67

Other income 15.68 6.23 12.54 4.84

Total Income 787.78 610.91 787.33 626.51

Profit before financial expenses, depreciation and exceptional items 151.81 75.29 149.01 76.90

Less: Financial expenses 1.83 3.91 1.83 3.91

Depreciation 34.99 23.72 34.99 23.72

Exceptional Items – 15.90 – 15.90

Profit for the year 114.99 31.76 112.19 33.37

Less: Provision for Income tax 39.88 10.77 39.93 10.99

Share of loss from associate Company – – – 1.07

Profit after tax 75.11 20.99 72.26 21.31

Add: Profit brought forward 111.36 111.09 114.24 113.65

Balance available for appropriation which has been appropriated as under: 186.47 132.08 186.50 134.96

Proposed dividend 28.02 15.57 28.02 15.57

Dividend tax thereon net of reversal thereof 4.11 2.65 4.11 2.65

Transfer to General Reserve 8.00 2.50 8.00 2.50

Balance of Profit carried to Balance Sheet 146.34 111.36 146.37 114.24

Total appropriations 186.47 132.08 186.50 134.96

3. Dividend:

Your Directors recommend for your approval, a dividend of 90% (Rs. 9 per share) [previous year 50% (Rs.5.00 per share)] for the year ended 31st March 2014, involving an outgo of Rs. 28.02 crores compared to Rs. 15.57 crores in the previous year. Additionally, the dividend distribution tax will involve an outlay of Rs. 4.11 crores compared to Rs. 2.65 crores in the previous year. The total payout ratio is 43% for this year as compared to 87% in the previous year.

4. Review of Operations:

The total consolidated income during the year under review was Rs. 787.33 crores as against Rs. 626.51 crores in the previous year, registering an increase of 26%.

The Profit Before Tax (PBT) was Rs. 112.19 crores, as against Rs. 33.37 crores in the previous year. The Profit Before Tax increased by 236% over the previous year. The Profit After Tax (PAT) was Rs. 72.26 crores, as against Rs. 21.31 crores in the previous year, registering an increase of 239%.

During the year under review, your Company''s concerted effort in growing its revenues from the embedded and industrial design services, focussing on solutions and services in the systems integration business, and containing costs of its animation and visual effects business, resulted in improved top line and bottom line performance.

More details are set out in the attached Management Discussion and Analysis Statement.

A business-wise analysis of your Company''s two main segments viz. Software Development & Services and Systems Integration & Support follow hereunder:

Software Development & Services:

The services constituting this segment are Embedded Product Design, Industrial Design and Visual Computing Labs. This segment reported revenue of Rs. 682.70 crores in FY14 against Rs. 552.95 crores in the previous year, registering an increase of 23% over the previous year. The segment''s Profit was Rs. 137.90 crores.

Embedded Product Design

The Embedded Product Design helps customers develop electronic products by providing design of hardware, implementation of technologies such as audio, video, imaging and connectivity onto the hardware, and developing software applications and user interface that enable users to use the product and its functionality with ease and convenience. It addresses the automotive, aerospace, broadcast, consumer electronics, communications, healthcare, and semiconductor industries.

Embedded Product Design division worked with a leading Japanese automotive OEM to design and develop a complete Electronic Control Unit (ECU) for a hybrid electric vehicle, including software and hardware. The hybrid vehicle was successfully released in the market in June 2013.

The division supported India''s Mars Orbiter mission – Mangalyaan, by designing the Data Control Hardware which was installed in the Mars Orbiter and launched into space on November 05, 2013.

The division announced the licensing of its in-house developed Ultra High Definition (UHD) video decoder software to a US based company, which will enable very high-quality video on embedded devices.

Your Company participated in leading industry events such as the International Broadcast Conference (IBC) – Amsterdam, Consumer Electronics Show (CES) - Las Vegas and Mobile World Congress (MWC) – Barcelona, to showcase its capability and innovations to the global market. It also presented technical papers on topics such as next-generation vehicle security at the VDI conference in Germany.

Industrial Design

The Industrial Design division helps customers deliver a superior product or service through design. In the case of products, this includes the form, color, branding and textures, as well as the way the product interfaces with the user. The division also help customers improve their service delivery by studying, analyzing, and providing design interventions that improve end-user experience at every touch point.

It worked with GVK to design the experiential services for various consumer touch points at Mumbai International Airport''s new integrated Terminal 2, and helped redefine the passenger experience, while enhancing efficiencies and productivity for the airport staff at T2. As part of this project, the division designed entertainment zones, customer service zones, general and lifestyle seating areas from the security to the boarding gates. Other elements included designing pay/help phones, charging stations, housing of ATM vending machine, internet workstations/ kiosks amongst others.

The division worked with St. James'' Court, A Taj Hotel and Taj 51 Buckingham Gate, Suites and Residences to redefine the visual identity of the hotel. This involved developing the brand identity for both the hotels. Over 100 collaterals were designed including stationery, promotional collaterals, amenities, and service and communication collaterals amongst others.

Your Company was declared winner of the first Automotive Grade Linux (AGL) User Experience Contest in the "Best User Experience" category. The AGL contest was centered on the theme ''Designing the Future of Automotive Infotainment User Experience''. Your Company''s concept Human Machine Interface (HMI) won the award for its intuitive and effortless navigation.

Visual Computing Labs (VCL)

Visual Computing Labs provides high-end animation and Visual Effects (VFX) services. It caters to the entertainment industry by providing these services for feature films, episodic television serials and high-end gaming. It also caters to the marketing and advertising industry by providing these services for TV ad commercials and corporate videos for visualization and new product launches.

The division won the coveted Film fare 2014 award and the Star Guild Award 2014 for Best Visual Effects for a feature film, for its work in Dhoom 3.

The division was also recognized for its stellar work in delivering Visual Effects for Bhaag Milkha Bhaag.

Systems Integration & Support:

During the year under review, the segment turnover and Profit were Rs. 92.08 crores and Rs. 8.43 crores respectively.

This business segment, designs and implements solutions, using contemporary hardware and application software for in-house R&D and design centers of organizations. It provides solutions for Computer Aided Design and Manufacturing (CAD/CAM), Virtual Reality and High Performance Computing. It also supports enterprises in effectively managing their IT infrastructure, including storage, computing and networking.

This business delivered improved results through its focus on a solution-centric approach that drives higher composition of software and support services in the business mix to improve revenues and margins.

5. Finance:

The interest cost for FY14 was Rs.1.83 crores, as against Rs. 3.91 crores in the previous year. Borrowings as at the end of FY14 were NIL, compared to Rs. 58.51 crores in the previous year.

6. Corporate Social Responsibility (CSR):

The Board, pursuant to the provisions of section 135 of the Companies Act, 2013, has at its meeting held on 2nd April, 2014 constituted a CSR committee with the following Directors as members:

Mrs. Shyamala Gopinath, Chairperson

Mr. Piyush Mankad, Member

Mr. Madhukar Dev, Member

7. Directors:

Pursuant to the provisions of section 149 read with Schedule IV of the Companies Act, 2013, Mrs. Shyamala Gopinath, Dr. R. Natarajan, Mr. P. Mankad and Mr. P McGoldrick have given declaration that they meet the criteria for independence as provided therein. Accordingly, the above named directors are proposed to be appointed as independent directors for a term of five (5) years from the date of the ensuing Annual General Meeting or attainment of retirement age for independent Directors prescribed under the Revised Guidelines (2012) for Composition of Board of Directors, Committees of the Board and Retirement Age of Directors as may be revised from time to time, whichever is earlier.

8. Directors Responsibility Statement:

Pursuant to Section 217 (2AA) of the Companies Act, 1956, your Directors, based on the representations received from the Operations Management, conform 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 that 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 Companies Act, 1956, 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.

9. Personnel:

Your Company''s workforce composition is aligned to the delivery of design and creative services. The Embedded Product Design, Industrial Design, and Systems Integration divisions are mainly comprised of graduates and post- graduates in engineering and design. Visual Computing Labs employ creative professionals with proficiency in the software tools that are used to deliver animation and VFX services.

Your Company recognizes the critical importance of its human capital. Capacity addition, through the induction of fresh engineers and lateral hires are driven by the annual business planning exercise. Capacity addition is continuously monitored and managed, depending on the business demand and near-term projections. Your Company undertakes significant initiatives to increase efficiency through improved operations, training and retooling, leadership development, and other measures.

10. Disclosure of Particulars:

The information required under Section 217 (2A) of the Companies Act, 1956 and the Rules made there under, is provided in Annexure-B forming part of the 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 Shareholders interested in obtaining a copy of the same may write to the Company Secretary.

11. Subsidiary Company, Statement under Section 212 of the Companies Act, 1956 and Consolidated Financial Statements:

The Company''s wholly owned subsidiary, Tata Elxsi (Singapore) Pte. Ltd. recorded a turnover of Rs. 2.69 crores and Profits before Tax of Rs. 1.01 crores during the year 2013-14, as against the previous year''s turnover of Rs. 17.21 crores and Profit before Tax of Rs. 1.93 crores. The Board of Directors of your Company has given their consent for not attaching to its Balance Sheet, the documents relating to its subsidiary specified in Section 212 (1) of the Companies Act, 1956 in terms of the General Circular no. 2/2011 of the MCA.

In terms of the said circular, a statement in one page containing specified financial details of the subsidiary company is to be included in the consolidated annual financial statements of the parent Company. The annual accounts of the subsidiary and the related detailed information will be made available to the holding and subsidiary company''s investors seeking such information at any point of time. The annual accounts of the subsidiary will also be kept available for inspection by any investor at the head office of the parent and subsidiary Company respectively.

As required pursuant to the Accounting Standards of the Institute of Chartered Accountants of India (ICAI) and the Listing Agreement with the Stock Exchanges, the stand-alone annual accounts of your Company, along with the consolidated financial statements of your Company and the subsidiary Company made up to 31st March 2014, are also presented.

12. Corporate Governance:

Pursuant to Clause 49 of the Listing Agreement, the Corporate Governance Report, the Management Discussion & Analysis Statement, and the Auditors'' Certificate regarding Compliance of Conditions of Corporate Governance are part of this Annual Report.

13. Auditors

Deloitte Haskins & Sells (DHS), Chartered Accountants, who are the Statutory auditors of the Company, hold office till the Conclusion of the Forthcoming AGM and are eligible for re-appointment. Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the rules framed there under, it is proposed to appoint DHS as Statutory auditors of the Company from the Conclusion of the Forthcoming Annual General Meeting till the Conclusion of the 28th Annual General Meeting to be held in the year 2017, subject to ratification of appointment at every AGM.

14. Acknowledgements:

The Directors wish to thank the Company''s employees, customers, partners, suppliers, and above all, its shareholders and investors for their continued support and co-operation.

On behalf of the Board of Directors

S. RAMADORAI

Chairman

Mumbai, April 22, 2014


Mar 31, 2013

1. The Directors present the Twenty-Fourth Annual Report, along with the Audited Statements of Accounts of your Company, for the year ended March 31, 2013.

2. Financial Highlights:

During the financial year 2012-13, the operations of your Company resulted in the following:

(Rs. Crores)

Unconsolidated Consolidated 2012-13 2011-12 2012-13 2011-12

Sales and Service 604.69 514.46 621.67 538.71

Other income 6.23 6.12 4.84 4.20

Total Income 610.92 520.58 626.51 542.91

Profit before financial expenses, depreciation and exceptional items 75.30 73.20 76.91 78.21

Less : Financial expenses 3.91 2.33 3.91 2.33

Depreciation 23.73 20.52 23.73 20.52

Exceptional Items 15.90 - 15.90 -

Profit for the year 31.76 50.35 33.37 55.36

Less : Provision for Income tax 10.77 16.40 10.99 16.65

Share of loss from associate Company - - 1.07 4.12

Profit after tax 20.99 33.95 21.31 34.59

Add: Profit brought forward 111.08 107.47 113.65 109.40

Balance available for appropriation which has been appropriated 132.07 141.42 134.96 143.99 as under:

Proposed dividend 15.57 21.80 15.57 21.80

Dividend tax thereon net of reversal thereof. 2.65 3.54 2.65 3.54

Transfer to General Reserve 2.50 5.00 2.50 5.00

Balance of profit carried to Balance Sheet 111.35 111.08 114.24 113.65

Tbtal appropriations 132.07 141.42 134.96 143.99

3. Dividend:

Your Directors recommend for your approval, a dividend of 50% (Rs. 5.00 per share) [previous year 70% (Rs.7.00 per share)] for the year ended 31st March 2013, involving an outgo of Rs. 15.57 crores compared to Rs. 21.80 crores in the previous year. Additionally, the dividend distribution tax will involve an outlay of Rs. 2.65 crores compared to Rs. 3.54 crores in the previous year,. The total payout ratio is 87% for this year as compared to 75% in the previous year.

4. Review of Operations:

The total consolidated income during the year under review was Rs. 626.51 crores as against Rs. 542.91 crores in the previous year, registering an overall increase of 15.4%.

The Profit after Tax (PAT) was Rs. 21.31 crores, as against Rs. 34.59 crores in the previous year. The decrease in profit is mainly due to retiring of the corporate guarantee given to bank for securing the loan for its JV entity, A2E2 and share of loss in the said JV entity.

During the previous years, VCL undertook two significant initiatives to help scale its business. It expanded its studio in Los Angeles in anticipation of a large volume of work from Hollywood and entered into a Joint Venture to develop and produce its own IP. While both initiatives showed initial promise, the outcomes were not up to expectations and impacted the bottom-line of the company significantly. The normalised PBT before the impact of these two is higher in FY13 than in FY12. Your company has taken suitable actions after due consideration on both initiatives to ensure the bottom line is not further impacted.

More details are set out in the attached Management Discussion and Analysis Statement.

A business-wise analysis of your Company''s two main segments viz. Software Development & Services, and Systems Integration & Support follows hereunder:

Software Development & Services:

The businesses constituting this segment are Embedded Product Design, Industrial Design, and Visual Computing Labs. This segment reported a revenue of Rs. 552.95 crores in FY13, registering an increase of 21.7% over the previous year. The segment''s profit was Rs. 62.39 crores.

Embedded Product Design:

The Embedded Product Design division provides technology consulting, new product design and development, and testing services for the broadcast consumer electronics, healthcare, telecom, and transportation industries. It also creates and licenses intellectual property and software components, helping customers create product differentiation, and reduce development costs and time-to-market.

Industrial Design:

The Industrial Design division helps customers develop winning brands and products by using design as a strategic tool for business success. It provides an end-to-end design and innovation service for new products from consumer research and ideation, to interaction design, prototyping, and manufacturing support. It addresses the FMCG, Automotive, Healthcare, Consumer Electronics, and Retail sectors.

It has designed award-winning packaging in the food, beverage, personal, and home care segments, for leading brands in India and overseas.

It also executed several projects for interior and exterior styling of vehicles and the design of cutting-edge products for consumer electronics and healthcare.

In the interaction design area, its design for an interactive e-sales book for Mahindra and Mahindra won the award for the best User Interface Design at the CII Design Excellence Awards 2012.

In the FMCG packaging area, its packaging design for Ocean Herbal, a new Ayurvedic personal care brand, was conferred with the India Design Mark (I Mark). The ''I Mark'' is a prestigious design standard given by the Indian Design Council.

This division has been successfully certified for ISO 13485:2003, a management systems standard relating to the design and development of medical devices.

Visual Computing Labs:

Visual Computing Labs (VCL) offers Animation, Visual Effects (VFX) and 3D stereoscopic content for feature films, episodic television and advertising. It also offers custom content development for visualization and product marketing.

This year VCL won several national and international awards including the "Best VFX Shot of the year" and "Best Animated Feature Film (Theatrical)" awards at the prestigious FICCI Frames BAF Awards 2013.

It won the "Best Special Effects" award for ''Ek Tha Tiger'' at the Star Guild Awards 2013 (also known as Apsara Awards). It also won the "Best Animated Feature Film (Theatrical)" award for ''Arjun - The Warrior Prince'' at the Infocom-Assocham EME Awards 2013.

Systems Integration & Support:

During the year under review, the segment turnover and profit were Rs. 68.72 crores and Rs. 1.70 crores respectively.

This business segment integrates, installs and commissions complete systems and solutions for areas such as Computer Aided Design, Analysis and Manufacturing, Virtual Reality, High Performance Computing and Storage for enterprise customers. It provides best-of-breed solutions through partnerships and distribution agreements with leading international software and hardware vendors. It also provides infrastructure management, support and maintenance services.

This business will continue to focus on a solutions-centric approach that drives higher composition of software and services in the business mix to improve margins.

5. Finance:

Interest cost for FY13 was Rs. 3.91 crores, as against Rs. 2.33 crores in the previous year. Borrowings as at the end of FY13 was Rs. 58.51 crores, compared to Rs. 34.16 crores in the previous year.

6. Directors:

Mr. P.G. Mankad and Mr. P. McGoldrick retire by rotation and being eligible, offer themselves for re-appointment.

7. Directors Responsibility Statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, your 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 that 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 Companies Act, 1956, 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.

8. Personnel:

Your Company recognizes the critical importance of its human capital. Capacity addition through the induction of fresh engineers and lateral hires are driven by the annual business planning exercise. Capacity addition is continuously monitored and changed, depending on the business demand. Your Company takes significant initiatives to increase efficiency through training, leadership development, and other measures.

9. Disclosure of Particulars:

Information required under Section 217(2A) of the Companies Act, 1956 and the Rules made there under, is provided in Annexure-B forming part of the 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 Shareholders interested in obtaining a copy of the same may write to the Company Secretary.

10. Subsidiary Company, Statement under Section 212 of the Companies Act, 1956 and Consolidated Financial Statements:

The Company''s wholly owned subsidiary, Tata Elxsi (Singapore) Pte. Ltd. recorded a turnover of Rs.17.21 crores and Profits before Tax of Rs. 1.93 crores during the year 2012-13, as against the previous year''s turnover of Rs. 26.54 crores and Profit before Tax of Rs. 2.82 crores. The Board of Directors of your Company has given their consent for not attaching to its Balance Sheet, the documents relating to its subsidiary specified in Section 212 (1) of the Companies Act, 1956 in terms of the General Circular no. 2/2011 of the MCA.

In terms of the said circular, a statement in one page containing specified financial details of the subsidiary company is to be included in the consolidated annual financial statements of the parent Company. The annual accounts of the subsidiary and the related detailed information will be made available to the holding and subsidiary companies investors seeking such information at any point of time. The annual accounts of the subsidiary will also be kept available for inspection by any investor at the head office of the parent and subsidiary Company respectively.

As required pursuant to the Accounting Standards of the Institute of Chartered Accountants of India (ICAI) and the Listing Agreement with the Stock Exchanges, the stand-alone annual accounts of your Company, along with the consolidated financial statements of your Company and the subsidiary Company made up to 31st March 2013, are also presented.

11. Corporate Governance:

Pursuant to Clause 49 of the Listing Agreement, the Corporate Governance Report, the Management Discussion & Analysis Statement, and the Auditors'' Certificate regarding Compliance of Conditions of Corporate Governance are part of this Annual Report.

12. Acknowledgements:

The Directors wish to thank the Company''s employees, customers, partners, suppliers, and above all, its shareholders and investors for their continued support and co-operation.

On behalf of the Board of Directors

S. RAMADORAI

Chairman

Bangalore, April 19, 2013


Mar 31, 2012

1. The Directors present the Twenty-Third Annual Report, together with the Audited Statements of Accounts of your Company for the year ended March 31, 2012.

2. Financial Highlights:

During the financial year 2011-12, the operations of your Company resulted in the following:

(Rs Crores)

Unconsolidated Consolidated

2011-121 2010-11 2011-121 2010-11

Sales and Service 514.46 411.01 538.71 415.91

Other income 6.12 3.86 4.20 3.86

Total Income 520.58 414.87 542.91 419.77

Profit before financial expenses and depreciation 73.20 50.20 78.21 51.05

Less : Financial expenses 2.33 1.88 2.33 1.88

Depreciation 20.52 17.20 20.52 17.20

Profit for the year 50.35 31.12 55.36 31.97

Less : Provision for Income tax 16.40 (0.61) 16.65 (0.55)

Share of loss from associate Company - - 4.12 -

Profit after tax 33.95 31.73 34.59 32.52

Add: Profit brought forward 107.47 105.99 109.40 107.13

Balance available for appropriation which has been 141.42 137.72 143.98 139.65

appropriated as under:

Proposed dividend. 21.80 21.80 21.80 21.80

Dividend tax thereon net of reversal thereof. 3.54 3.45 3.54 3.45

Transfer to General Reserve 5.00 5.00 5.00 5.00

Balance of profit carried to Balance Sheet 111.08 107.47 113.64 109.40

Total appropriations 141.42 137.72 143.98 139.65

3. Dividend:

Your Directors recommend for your approval a dividend of 70% (Rs 7.00 per share) [previous year 70% (Rs 7.00 per share)] for the year ended 31st March 2012, involving an outgo of Rs 21.80 crores (previous year Rs 21.80 crores). Additionally, dividend distribution tax will involve an outlay of Rs 3.54 crores (previous year Rs 3.45 crores), involving a payout ratio of 73%.

4. Review of Operations:

The total income (consolidated) during the year under review was Rs 542.91 crores, as against Rs 419.77 crores in the previous year, registering an overall increase of 30%. NASSCOM, the premier trade body for Indian IT-ITES industry, had projected a growth of 16% from exports for IT and ITES firms in FY 2012 and your Company grew more than the industry average, supported strongly by volume growth, and partly by rupee depreciation. The Profit after tax was Rs 34.59 crores, as against Rs 32.52 crores in the previous year.

NASSCOM has forecasted that exports from India's information technology sector will grow more slowly for the financial year ending March 31, 2013 and has forecasted a guidance of 11-14% for the likely growth in FY 2013. Your Company is well prepared to continue the growth momentum, despite the volatile environment, leveraging its niche portfolio and global presence.

More details are set out in the attached Management Discussion and Analysis Statement.

A business-wise analysis of your Company's two main segments viz. Software Development & Services, and Systems Integration & Support follows hereunder:

Software Development & Services:

The businesses constituting this segment are Embedded Product Design, Industrial Design, and Visual Computing Labs. Business in this segment registered an increase of 27% to Rs 454.25 crores during FY12 from Rs 358.20 crores in FY11. The segment's profit increased from Rs 36.81 crores to Rs 55.69 crores, mainly on account of increased business volume.

Embedded Product Design:

The Embedded Product Design division provides technology consulting, new product development, system integration, and testing services for the broadcast, industrial and consumer electronics, transportation, wireless communications, and convergence industries. It also creates and licenses intellectual property and software components, helping customers create product differentiation, and reduce development costs and time-to-market.

Apart from the recessionary trends in Europe, the outlook for Japan is still weak, and has potential implications for business from the semiconductor, consumer electronics, and automotive industries. Your company is taking adequate steps to overcome these risks, by focusing on key customers in these geographies, to ensure revenue protection and diversifying into new geographies.

Your Company is incubating a medical electronics practice by leveraging its existing medical device customer base from the industrial design division and embedded systems expertise of the Embedded Product Design division.

Medical device engineering and R&D services is expected to grow steadily over the next few years. Your Company plans to target and grow services for this industry, in order to address the growing demand for medical devices from emerging markets and convergence of medical products with communications and information technology.

Industrial Design:

The Industrial Design division helps customers develop winning brands and products by using design as a strategic tool for business success. Its expertise extends across consumer insight, branding, product design, packaging design, transportation design, visual design, design engineering, and manufacturing support.

This division has worked with prestigious FMCG brands in packaging design. It has developed award-winning designs in the food, beverage, personal and home care segments, for leading brands in India and Overseas.

Apart from executing several projects for interior and exterior styling of vehicles, it has also developed cutting edge products for the consumer electronics and healthcare industry.

Visual Computing Labs:

Visual Computing Labs offers Animation, Visual Effects (VFX), and 3D stereoscopic content for feature films, episodic television and advertising. It also offers custom content development for visualization and product marketing, and is a leading provider of engineering and animation services for mobile, online and console games.

During the year, your Company continued its efforts to provide strong sales thrust from the overseas VFX studio, that was set up at Santa Monica near Hollywood, and to improve collaboration with Indian operations.

Your Company entered into a Joint Venture Agreement with M/s A Squared Entertainment, LLC, USA (A2E) on September 30, 2011 to create, develop, and distribute original brands, including animated entertainment, digital gaming, and originally designed consumer products. The new Company, M/s A Squared Elxsi Entertainment (A2E2), LLC, has been incorporated at Delaware, USA.

During the year, A2E2 completed its first IP "Martha & Friends", an animated series featuring a 10-year old Martha Stewart. Your Company contributed significantly to the development of this IP. Other forthcoming projects of the joint venture include "Secret Millionaire's Club" an animated series featuring billionaire Warren Buffett.

During the year, the Joint Venture has incurred significant efforts, because of projects under development and expects to monetize those brands / IPs developed in the next fiscal year.

Both partners of the JV - Tata Elxsi and A2E, will be assigned equity capital in the new company. Allocation of units to the two partners is pending completion of all due formalities associated with the allocation of units. Therefore, your Company for the purpose of consolidation for this fiscal year is taking only its share of loss in A2E2.

Systems Integration & Support:

During the year, the segment turnover and profit were Rs 84.45 crores and Rs 8.40 crores respectively, compared to Rs57.71 crores and Rs 6.77 crores respectively during 2010-11.

This business has improved its turnover significantly by 46%, while focusing on a solutions centric approach that includes more of software and services to better protect margins.

5. Finance:

Interest cost was Rs 2.33 crores as against Rs 1.88 crores in the previous year. Borrowings as at the year end was Rs 34.16 crores, compared to Rs 25.43 crores in the previous year.

6. Directors:

Mr. S. Ramadorai and Dr. R. Natarajan retire by rotation and being eligible, offer themselves for reappointment.

Mrs. Shyamala Gopinath, who has been appointed as an Additional Director with effect from 18th August 2011, holds office up to the conclusion of the ensuing Annual General Meeting. The Company has received a notice from a member u/s 257 of the Companies Act, 1956 proposing Mrs. S. Gopinath to the office of Directorship whose terms of office will be determined by retirement by rotation.

In accordance with the Guidelines on Composition of Board adopted by your Company's Board of Directors, Mr. H.H. Malgham stepped down from your Company's Board effective 23rd July 2011 on attaining the maximum age permissible for Directors under the guidelines. Mr. Malgham was the Chairman of the Audit and Remuneration Committees. He was also the member of the Executive and Investors Grievance Committees. The Directors place on record their appreciation for the valuable contribution made by him during his tenure in the Board and different Committees of the Board.

7. Directors Responsibility Statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, your 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 that 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 Companies Act, 1956, 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.

8. Personnel:

Your company recognizes the critical importance of its human capital. Capacity addition through the induction of fresh engineers and lateral hires are driven by the annual business planning exercise. Capacity addition is continuously monitored and changed depending on business demand. Your company takes significant initiatives to increase efficiency through training, leadership development, and other measures.

9. Disclosure of Particulars:

Information required under Section 217(2A) of the Companies Act, 1956 and the Rules made there under, is provided in Annexure-B forming part of the 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 Shareholders interested in obtaining a copy of the same may write to the Company Secretary.

10. Subsidiary Company, Statement under Section 212 of the Companies Act, 1956 and Consolidated Financial Statements:

The Company's wholly owned subsidiary, Tata Elxsi (Singapore) Pte. Ltd. recorded a turnover of Rs 26.54 crores and Profits before Tax of Rs 2.82 crores during the year 2011-12, as against the previous year's turnover of Rs 4.90 crores and Profit before tax of Rs 0.85 crores. The Board of Directors of your Company has given their consent for not attaching to its Balance Sheet, the documents relating to its subsidiary specified in Section 212 (1) of the Companies Act, 1956 in terms of the General Circular no. 2/2011 of the MCA.

In terms of the said circular, a statement in one page containing specified financial details of the subsidiary Company, is to be included in the consolidated annual financial statements of the parent Company. The annual accounts of the subsidiary and the related detailed information will be made available to the holding and subsidiary Companies investors seeking such information at any point of time. The annual accounts of the subsidiary will also be kept available for inspection by any investor at the head office of the parent and subsidiary Company respectively.

As required pursuant to the Accounting Standards of the Institute of Chartered Accountants of India and the Listing Agreement with the Stock Exchanges, the stand-alone annual accounts of your Company, along with the consolidated financial statements of your Company and the subsidiary Company made up to 31st March 2012, are also presented.

11. Corporate Governance:

Pursuant to Clause 49 of the Listing Agreement, the Corporate Governance Report, the Management Discussion & Analysis Statement, and the Auditors' Certificate regarding Compliance of Conditions of Corporate Governance are part of this Annual Report.

12. Voluntary Delisting of Company's Equity Shares

During the year under review your Company applied for voluntary delisting of its equity shares from Bangalore Stock Exchange and Delhi Stock Exchange in terms of the SEBI (Delisting of Securities) Regulation, 2009. The Bangalore Stock Exchange, vide its letter no. 03/2011/476 dated 15th November, 2011, delisted the Company's Equity shares from their stock exchange with effect from 15th November, 2011. The delisting of Company's equity Shares from Delhi Stock Exchange is yet to happen. The Company's equity shares continue to be listed with Bombay Stock Exchange (BSE) & National Stock Exchange (NSE) and are being actively traded in these exchanges.

13. Acknowledgements:

The Directors wish to thank the Company's employees, customers, partners, suppliers, and above all, its shareholders and investors for their continued support and co-operation.

On behalf of the Board of Directors

S. RAMADORAI

Chairman

Mumbai, May 07, 2012


Mar 31, 2011

1. The Directors present the Twenty-second Annual Report together with the Audited Statements of Accounts of your Company for the year ended March 31,2011.

2. Financial Highlights:

During the financial year 2010-11, the operations of your Company resulted in the following:

(Rs. Crores) Unconsolidated Consolidated 2010-11 2009-10 2010-11 2009-10

Sales and Service 411.01 376.37 415.91 388.17

Other income 3.86 0.95 3.86 0.95

Total Income 414.87 377.32 419.77 389.12

Profit before financial expenses and depreciation 50.20 67.95 51.05 68.94

Less : Financial expenses 1.88 1.74 1.88 1.74

Depreciation 17.20 16.58 17.20 16.58

Net profit for the year 31.12 49.63 31.97 50.62

Less: Provision for Income tax (0.61) 1.72 (0.55) 1.80

Profit after tax 31.73 47.91 32.52 48.82

Add: Profit brought forward 105.99 88.58 107.13 88.81

Balance available for appropriation which has been 137.72 136.49 139.65 137.63 appropriated as under:

Proposed dividend. 21.80 21.80 21.80 21.80

Dividend tax thereon net of reversal thereof. 3.45 3.70 3.45 3.70

Transfer to general reserve 5.00 5.00 5.00 5.00

Balance of profit carried to Balance Sheet 107.47 105.99 109.40 107.13 Total appropriations 137.72 136.49 139.65 137.63

3. Dividend:

Your Directors recommend for your approval a dividend of 70% (Rs.7.00 per share) [previous year 70% (Rs.7.00 per share)] for the year ended 31st March 2011, involving an outgo of Rs. 21.80 Cr. (previous year Rs.21.80 Cr.). Additionally, dividend distribution tax will involve an outlay of Rs.3.45 Cr. (previous year Rs.3.70 Cr.), involving a payout ratio of 79.6%.

4. Review of Operations:

On consolidated basis, the turnover during the year under review was Rs.415.91 Cr. as against Rs.388.17 Cr. in the previous year, registering an overall increase of 7.1%. The Profit after Tax was Rs.32.52 Cr. as against Rs.48.82 Cr. in the previous year.

The market registered slow but steady recovery in the key industry segments that your company operates in. Your company registered the increase in turnover by successfully implementing and executing on strategies for market focus, improved treasury and financial management, and improved efficiency and productivity.

More details are set out in the attached Management Discussion and Analysis Statement.

A business-wise analysis of your Companys two main segments viz. Software Development & Services and Systems Integration & Support follows hereunder:

Software Development & Services:

The businesses constituting this segment are Embedded Product Design, Industrial Design and Visual Computing Labs. Business in this segment registered an increase of 6.3% to Rs.358.19 Cr. during FY11 from Rs.336.94 Cr. in FY10. The segment profit decreased from Rs.57.67 Cr. to Rs.36.81 Cr., mainly on account of increased personnel expenses.

Embedded Product Design:

The Embedded Product Design division provides technology consulting, new product development, system integration and testing services for the broadcast, industrial and consumer electronics, transportation, wireless communications and convergence industries. It also creates and licenses intellectual property and software components, helping customers create product differentiation and reduce development costs and time-to-market.

Your company has identified certain growth markets for the future and is working towards building market traction and competencies to garner scale and market share in these selected industry segments.

Industrial Design:

The Industrial Design division helps customers develop winning brands and products by using design as a strategic tool for business success. Its expertise extends across consumer insight, branding, industrial design, visual design & merchandising, design engineering and manufacturing support.

This division has worked with prestigious FMCG brands in packaging design. It has developed award-winning designs in the food, beverage, personal and home care segments for leading brands in India and Overseas.

It has also executed several projects for interior and exterior styling of cars and transportation products, and is also targeting the growing Asian market in this segment.

Visual Computing Labs:

Visual Computing Labs offers Animation, Visual Effects (VFX) and 3D stereoscopic content for feature films, episodic television and advertising.

It also offers custom content development for visualization and product marketing, and is a leading developer of mobile, online and console games.

During the year, the Overseas VFX studio set up at Santa Monica near Hollywood commenced projects for several Hollywood productions. It has also built capability in its US and Mumbai studios, to deliver 3D Stereoscopic content related work.

Systems Integration & Support:

During the year, the segment turnover and results were Rs.57.71 Cr. and Rs.6.77 Cr. respectively, compared to Rs.51.23 Cr. and Rs.4.06 Cr. respectively during 2009-10.

This business has improved its turnover and profits, while focusing on a solutions centric approach which includes more of software and services. It also focused on growing the professional services business to enable better margins.

5. Finance:

Interest cost was Rs.1.88 Cr. against Rs.1.74 Cr. in the previous year. Borrowings, which were Rs.33.97 Cr. at the beginning of the year, reduced to Rs.25.43 Cr. at the end of the year.

6. Directors:

Mr. P.G. Mankad and Mr. P. McGoldrick retire by rotation and being eligible, offer themselves for reappointment.

Mr. Ramadorai, Chairman, has been appointed as the Advisor to the Prime Minister in the Prime Ministers National Skill Development Council in the rankof Cabinet Minister with effectfrom February 07,2011. The Directors place on record their heartiest congratulation and wishes Mr. Ramadorai all the best for this prestigious appointment.

7. Directors Responsibility Statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, your 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 that 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 Companies Act, 1956, 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.

8. Personnel:

Your Company recognizes the critical importance of its human capital and significant initiatives are planned for 2011-12 to increase capacity through the induction of fresh engineers and lateral hires from the industry, as also increased efficiency through technical training and other productivity enhancing inputs.

9. Disclosure of Particulars:

Information required under Section 217(2A) of the Companies Act, 1956 and the Rules made there under, is provided in Annexure-B forming part of the 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 Shareholders interested in obtaining a copy of the same may write to the Company Secretary.

10. Subsidiary Company, Statement under Section 212 of the Companies Act, 1956 and Consolidated Financial Statements:

The Companys wholly owned subsidiary, Tata Elxsi (Singapore) Pte. Ltd. recorded a turnover of Rs.4.90 Cr. and Profits before Tax of Rs.0.85 Cr during the year 2010-11 as against the previous years turnover of Rs.11.80 Cr. and Profit before Tax of Rs.0.99 Cr, which relates mainly to the Systems Integration segment business. Your Company has been granted exemption for this financial year by the Ministry of Corporate Affairs from attaching to its Balance Sheet the documents relating to its subsidiary specified in Section 212 (1) of the Companies Act, 1956.

In terms of the said exemption, a statement in one page containing specified financial details of the Subsidiary Company is to be included in the consolidated annual financial statements of the parent Company. The annual accounts of the subsidiary and the related detailed information will be made available to the holding and Subsidiary Companies investors seeking such information at any point of time. The annual accounts of the subsidiary will also be kept available for inspection by any investor at the head office of the parent and Subsidiary Company respectively.

As required pursuant to the Accounting Standards of the Institute of Chartered Accountants of India and the Listing Agreement with the Stock Exchanges, the stand-alone annual accounts of your Company along with the consolidated financial statements of your Company and the Subsidiary Company made upto 31st March, 2011, are also presented.

11. Corporate Governance:

Pursuant to Clause 49 of the Listing Agreement, the Corporate Governance Report, the Management Discussion & Analysis Statement and the Auditors Certificate regarding Compliance of Conditions of Corporate Governance are part of this Annual Report.

12. Acknowledgements:

The Directors wish to thank the Companys esteemed customers, partners, suppliers, and above all, its shareholders and investors for their continued support and co-operation.



On behalf of the Board of Directors

S. RAMADORAI Chairman

Mumbai, 27th April 2011


Mar 31, 2010

1.The Directors present the Twenty-first Annual Report together with the audited Statements of Accounts of your Company for the year ended March 31, 2010.

2 Financial Highlights

During the financial year 2009-10, the operations of your Company resulted in the following :

(Rs. Crores) 2009-10 2008-09 Sales and Service 376.37 418.52 Other income 0.95 0.14 Total Income 377.32 418.66 Profit before financial expenses and depreciation 67.95 81.41 Less : Financial expenses 1.74 3.77 Depreciation 16.58 15.95 Net profit for the year 49.63 61.69 Less : Provision for Income tax 1.72 3.59 Profit after tax 47.91 58.10 Add: Profit brought forward 88.58 61.97 Balance available for appropriation which has been appropriated as under: 136.49 120.07 Dividend 21.80 21.80 Dividend Tax thereon 3.70 3.70 Transfer to General Reserve 5.00 6.00 Balance of Profit carried to Balance Sheet 105.99 88.57 Total Appropriations 136.49 120.07

3. Dividend

Your Directors recommend for your approval a dividend of 70% (Rs. 7.00 per share) [previous year 70% (Rs. 7.00 per share)] for the year ended 31st March 2010, involving an outgo of Rs. 21.80 crores (previous year Rs. 21.80 crores). Additionally, dividend distribution tax at 17 % (including surcharge) will involve an outlay of Rs 3.70 crores (previous year Rs. 3.70 crores). Notwithstanding the drop in the Profits after Tax by17.54%, your Directors have kept the dividend at 70% involving a payout ratio of 53.22% which signals confidence in the future growth prospects of your Company.

4. Review of Operations

Your Company continued to face difficult conditions for the most part of 2009-10. While there was a gradual revival of demand for your Company’s services in select areas in terms of enquiries from its existing and new customers, the sales cycle did not significantly shorten and hence many of these opportunities could not get converted into business. Also, some of the traditional and existing large customers of your Company, due to difficult economic conditions being faced by them, continued with their reduced level of offtake of services from your Company. The Rupee also strengthened during the year - against the dollar by 12%, the Pound by 7%, the Euro by 11% and the Yen by 7% - resulting in lower export realizations. These factors contributed to the turnover dropping by10% from Rs. 418.51 crs to Rs. 376.37 crs with consequent impact on the Profits before Tax dropping by19.55% from Rs. 61.69 crs to Rs. 49.63 crs and Profits after Tax dropping by 17.54 % from Rs. 58.10 crs to Rs. 47.91 crs. Your Company expects that across-the-board growth in all its offerings will happen from the latter part of 2010-11 and is confident of getting back to its growth mode during this year itself.

IP related sales saw good traction during the year, especially in the broadband wireless area. Your Company has developed IP related to Wimax and is already working on development of IP and reference designs for LTE, which is an upcoming standard for 4G wireless.

Good traction was also seen in the technology domains catering to the broadcasting and transportation market verticals.

More details are set out in the attached Management Discussion and Analysis Statement.

A business-wise analysis of your Company’s two main segments viz. Software Development & Services and Systems Integration & Support follows hereunder.

Software Development & Services:

The businesses constituting this segment are Product Design Services (Design & Development of Hardware and Software), Innovation Design Engineering (Mechanical Design with a focus on Industrial Design) and Visual Computing Labs Division (Animation and Special Effects). For the reasons mentioned above, the business in this segment dropped to Rs 336.94 crs during 2009-10 from Rs. 378.43 cr. in the previous year with corresponding decrease in the segment results to Rs 57.67 cr. from Rs.70.55 cr..

Product Design Services:

Your Company’s Product Design Services (PDS) Division provides offerings in multiple domains such as Broadcast, Wireless, Transportation, Convergence, DSP, Graphics and Imaging and Semicon and services markets such as automotive, aerospace, consumer products, networking, semiconductors, multimedia, telecom and instrumentation with cost effective and timely product engineering services. Your Company is also moving towards solutions based offerings rather than point service engagements with a view to increasing its value proposition thereby. Your Company sees growth opportunities in the telecommunication and broadcasting domains where there have been good breakthroughs achieved during 2009-10, apart from accelerating its growth in the other key domain of transport electronics. Your Company has identified new business in defence and public safety, avionics and utilities and smartgrid applications which should drive its future growth.

Innovation Design Engineering Services:

This Division supports global corporations in the area of new brand/product introduction from concept to market. Its expertise lies in the areas of consumer insights, product/service innovation, industrial design, functional prototyping and engineering. It also engages in brand development and retail design. It services diverse industries ranging from FMCG, automotive, electronics and appliances to healthcare.

During the year, the Division entered into an alliance with a leading hospital to jointly develop innovative healthcare devices with an emphasis on user and functional efficiencies. It also further strengthened its range of services in the areas of branding, signages and virtual marketing. It was involved in the creation of the marketing content for the launch of a new vehicle for one of India’s leading automotive companies and also won a significant order for signages and graphic design from a metro transport operator. This is a testimony of the Division’s capabilities to address emerging areas of design where design is adding exponential value to the end product. Another area of growth for the Division is the defence and aerospace sector, considering the potential of design services for these industries. The expertise in these areas are scalable and the Division is hopeful of similar future opportunities.

Visual Computing Labs:

This Division delivers 3D computer graphics, animation and special effects in the pre-production, production and post-production of content for the film, television, gaming and advertising industry.

During the year, an overseas VFX studio was set up at Santa Monica near Hollywood, which is the heart of the global film industry, and staffed with local industry veterans to address the VFX requirements of the Hollywood industry. The studio represents a strategic move by the VCL Division to establish its capabilities and credibility in the local markets of Hollywood and overcome the constraint of having a remote studio located in India which was perceived as an obstacle to getting more business from the Hollywood industry. Hence, while the studio in Santa Monica would concentrate on the high end VFX work locally, the India studio would cater to the domestic markets and also address any lower end manpower intensive work obtained by the Santa Monica studio, with potential of sharing certain common infrastructure and resources. It is expected that the Santa Monica studio will accelerate the revenue growth from the Hollywood market and recover the higher operating costs that this studio incurs, during 2010-11 itself.

In the domestic market, the VCL Division continued to dominate in the area of VFX offerings for films. On the 3D animation side, the second animated theatrical project (after Roadside Romeo) which VCL commenced work on in 2008-09 is nearing completion. The

3D animation industry has remained challenging in 2009-10, with no new project announcements.

During the year, this Division also won several prestigious awards for its technical expertise, the most notable of which were two National awards from the President of India for the work done on the films “Roadside Romeo” and “Mumbai meri Jaan” . Some of the other international awards include Cairo International Film Festival, Golden Panda Award and London International Creative Competition.

Systems Integration & Support

This Segment is involved in value-added reselling involving systems integration and support for a wide range of technical computing hardware and software solutions involving high-end computing platforms, mechanical design automation tools, enterprise storage solutions, digital media and life sciences solutions through its tie-ups with global leaders in these respective areas. During the year, the segment turnover and results were Rs.39.43 crs. and Rs.3.08 crs. respectively, compared to Rs.40.09 crs. and Rs.2.34 crs. respectively during 2008-09.

Due to the low margins on hardware products, the Segment is focusing on a solutions centric approach which includes more of software and services and reducing its dependence on pure hardware business. The segment has geared itself to tap business opportunities in the high growth areas of security and surveillance, videoconferencing solutions, storage and server virtualization software and services etc..

5. Finance

Interest costs reduced to Rs.1.74 crs. (previous year Rs.3.77 cr.) mainly through reduced borrowing costs. The borrowings, which was Rs.13.07 crs at the beginning of the year, increased to Rs.33.97 crs. at the end of the year.

6. Directors

Consequent to the stepping down of Mr. Syamal Gupta as Chairman at the last Annual General Meeting pursuant to the Tata Group Retirement Policy, Mr. S. Ramadorai, who was Vice Chairman, took over as Chairman of your Company on 7th September 2009. Your Company will greatly benefit from Mr. Ramadorai’s Chairmanship and expertise and eminence in the IT industry.

Mr. C.P. Mistry, who was a Director of your Company from inception, stepped down from the Board on 26th October 2009 due to his other business commitments. Mr. Mistry has contributed significantly to the deliberations of the Board and the various Committees with which he was associated and your Board places on record its deep appreciation of the valuable services rendered by Mr. Mistry during his association with your Company.

Mr. S. Ramadorai and Mr. H.H.Malgham retire by rotation and being eligible, offer themselves for reappointment.

7. Directors Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, your 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 judgements 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 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 Companies Act,1956, 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.

8. Personnel

The difficult business conditions faced by your Company during 2009-10 constrained its abilities to reward and invest in its human resources as in earlier years. While wage revisions were frozen during the year, no business related lay-offs were enforced.

With the gradual revival of the IT industry, attrition levels, which was less than 10% during 2008-09 gradually increased and peaked during the second half of 2009-10. With improved business visibility for 2010-11, wage revisions were re-introduced and salaries

revised effective 2010-11. A series of other measures were also initiated to attract, retain and motivate employees which have been effective to a great extent in arresting attrition.

Your Company recognizes the critical importance of its human capital and significant initiatives are planned during 2010-11 to provide technical training, soft skills and other productivity enhancing inputs.

9. Disclosure of Particulars

The information required under Section 217(2A) of the Companies Act, 1956 and the Rules made thereunder, is provided in Annexure B forming part of the 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 a copy of the same may write to the Company Secretary.

10. Subsidiary Company, Statement under Section 212 of the Companies Act, 1956 and Consolidated Financial Statements

The Company’s wholly owned subsidiary, Tata Elxsi (Singapore) Pte. Ltd. recorded a turnover of Rs.11.80 crs. and Profits before Tax of Rs.0.99 crs. during the year 2009-10 as against the previous year’s turnover of Rs.2.00 crs and Profit before Tax of Rs.0.24 crs, which relates mainly to the Systems Integration segment business. Your Company has been granted exemption for this financial year by the Ministry of Corporate Affairs from attaching to its Balance Sheet the documents relating to its subsidiary specified in Section 212 (1) of the Companies Act, 1956.

In terms of the said exemption, a statement in one page containing specified financial details of the subsidiary company is to be included in the consolidated annual financial statements of the parent company. The annual accounts of the subsidiary and the related detailed information will be made available to the holding and subsidiary companies investors seeking such information at any point of time. The annual accounts of the subsidiary will also be kept available for inspection by any investor at the head office of the parent and subsidiary company respectively.

As required pursuant to the Accounting Standards of the Institute of Chartered Accountants of India and the Listing Agreement with the Stock Exchanges, the stand-alone annual accounts of your Company alongwith the consolidated financial statements of your Company and the subsidiary company made upto 31st March 2010, are also presented.

11. Corporate Governance

Pursuant to Clause 49 of the Listing Agreement, the Corporate Governance Report, the Management Discussion & Analysis Statement and the Auditors’ Certificate regarding Compliance of Conditions of Corporate Governance are part of this Annual Report.

12. Acknowledgements

The Directors wish to thank the Company’s esteemed customers, partners, suppliers, employees and above all, its shareholders and investors for their continued support and co-operation.

On behalf of the Board of Directors S. RAMADORAI Chairman Mumbai, 30th April 2010

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