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Tata Consultancy Services

BSE: 532540|NSE: TCS|ISIN: INE467B01029|SECTOR: Computers - Software
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« Mar 15
Chairman's Speech (Tata Consultancy Services) Year : Mar '16
Dear Shareholders,
 
 The Company delivered a strong performance during 2015-16 and crossed
 the trillion rupee revenue milestone, with reported revenues of
 Rs.1,08,646 crore at an annual growth of 14.8 per cent. Operating margins
 were an industry benchmark at 26.4 per cent for the year, well within
 our target range of 26-28 per cent.
 
 TCS remained the most profitable company in the Indian IT services
 industry posting net margins of 22.4 per cent and annual net profit of
 Rs.24,292 crore. This performance has enabled your Company to retain its
 position as the most valuable company in India with a market
 capitalization of Rs.4,95,770 crore (US$ 74.84 billion) as on March 31,
 2016.
 
 We have continued our practice to consistently reward our shareholders.
 In FY16, our total dividend pay-out was Rs.43.50 per share including Rs.27
 per share proposed as final dividend. The earnings per share for the
 company increased toRs.123.28.
 
 Strong Core Performance
 
 Your Company''s customer-centric business model and its philosophy in
 building new capabilities has led to increased participation in our
 customers'' IT spend. The core business portfolio has performed very
 well with all key segments posting steady growth led by Banking &
 Financial Services, Retail, Manufacturing and Life Sciences - all these
 industries grew above the company average growth rate on a constant
 currency basis.
 
 In terms of markets, growth was well distributed with North America
 growing 10.8 per cent, Europe by 12.9 per cent and United Kingdom by
 8.3 per cent in constant currency terms. India crossed $ 1 billion
 milestone in annual revenues while overall revenues from new Growth
 Markets exceeded $ 3.3 billion on in FY16.
 
 From a services perspective, growth was led by Infrastructure services,
 Products & Platforms and Assurance services. Digital services grew by
 52.2 per cent annually with revenues crossing the $ 2 billion mark.
 
 There were some headwinds in the business environment for your Company.
 Adverse cross currency movements severely impacted the reported US$
 revenue of 16.55 billion by 4.8 per cent. This resulted in lower US$
 revenue growth of 7.1 per cent year-on-year compared to 11.9 per cent
 growth in constant currency terms. Diligenta, our life and pensions
 subsidiary in the UK continued to experience some slowdown while the
 broader insurance vertical also remained weak.  Our investment in Japan
 is yet to pick up momentum.
 
 Your Company''s talent development initiatives continued to support
 business growth. At the end of FY16, TCS had a diverse base of 3,53,
 843 employees in 55 countries from 129 nationalities including 33.8 per
 cent women professionals. We continued to enjoy the highest retention
 in the industry at 14.7 per cent LTM (last 12 months) for IT
 professionals. Our employee engagement programs like Fit4Life,
 Purpose4Life and Safety First are helping create awareness about health
 and fitness as well as enabling our employees to engage with the
 community to make a positive impact.
 
 It is the commitment and dedication of these TCSers across the world
 that has helped your Company perform on a sustained basis. On behalf of
 all the shareholders, I would like to thank every TCSer for their drive
 and passion that has helped this organization maintain its growth and
 momentum.
 
 Today, customers see your Company as a partner of choice for their
 transformation initiatives. This is evident from the strength of the
 customer revenue metrics which have shown exceptional improvement in
 FY16.  We added eight new customers in the 0  million band taking
 the total to 37 customers, while 37 new customers were added in the
   million band totaling 298 customers. Our customer satisfaction
 scores also reached an all-time high, reflecting this trend.
 
 Digital Technology Trends
 
 Demand for our services is being driven by the acceleration in the
 adoption of Digital. Digital is creating new opportunities for
 enterprises to drive Efficiency and Simplification across the business.
 Most brick and mortar businesses were built in a pre-digital era.
 Therefore, to thrive in the Digital economy, enterprises are on a quest
 to deliver unique customer experiences, gain real-time access to
 insights, improve workforce productivity and create a hyper-connected
 eco-system.
 
 The impact of Digital Technologies has further intensified in the
 past twelve months. We are living in a digital age, characterized by an
 accelerating trend of hyper-connectivity between humans and also
 between humans and smart devices. As you go through this annual report,
 we have attempted to showcase some of the key technology and business
 trends that are shaping the future of TCS and that of our customers.
 
 The digital world we inhabit today has very different characteristics
 from what we have seen in the past.  It is forcing all of us -
 individuals, enterprises and governments - to learn new ways to engage
 with our stakeholders. In addition, widespread adoption of Digital
 technologies by business is leading to the evolution of the Smart
 Enterprise – companies that can respond in real time and provide unique
 personalized experiences for its customers.
 
 Smart Enterprises are quick to recognize that in a Digital world,
 experience supersedes features. This was not the case even five years
 ago, when we would buy a product based on its features alone without
 even opening the box! But now it''s the experience of the product or
 service that determines our buying behavior. The reason we focus on
 experience today is because new features are only one software release
 away. Whatever the product, be it a smart watch or even a car, every
 software release brings new and enriched features.
 
 For a Smart Enterprise to respond in real-time or ahead of time
 requires dematerialization of an enterprise where physical assets now
 have a Digital interface.  Once dematerialized, all enterprise''s assets
 - technology, infrastructure, operations, logistics, customer data and
 content - become software driven and therefore now available for
 seamless correlation and deriving proactive insights. For example, as
 goods from cars to cans become more ''intelligent'', a dematerialized
 smart enterprise can execute, respond, plan and predict in real-time
 using insights gleaned from big data.
 
 To succeed, Smart Enterprises have to be Agile by default. Agility is
 the ability of an enterprise to move with speed and respond to changes
 in its environment swiftly (for example, when launching new products).
 Your Company is proactively increasing its use of Agile/ DevOps
 (Development   Operations) methodologies to radically decrease the time
 to market of new solutions, while bringing about greater collaboration
 between IT and business.
 
 Further, to make sense of voluminous and unstructured data that is
 increasing exponentially, Smart Enterprises are using Artificial
 Intelligence technologies for developing machine learning and deep
 learning capabilities. Software robots are playing a bigger role in our
 lives – from algorithmic trading and advisory services in financial
 markets to map bots which give us daily driving directions.
 Additionally, cloud-based models are enabling ''anywhere-anytime-any
 device'' access to data which is creating a significant shift in
 business models and enterprise IT architectures.
 
 TCS Leadership in the Digital Economy
 
 Your Company has been at the forefront of this Digital revolution by
 making strategic investments across multiple dimensions ahead of time
 to ensure that we are well equipped to capture this big opportunity.
 Today, we are Digital partners for 52% of our customers across multiple
 segments such as Mobility and Pervasive Computing, Cloud, Big Data,
 Artificial Intelligence & Robotics – all of which have grown at a
 compounded quarterly growth rate of 8-12 per cent during FY16. We have
 built the right technology talent combined with deep domain expertise
 and an understanding of the customer''s business.
 
 The Digital economy and disruptions in technologies are changing the
 skills requirements in our industry.  Recognizing the need to build the
 right Digital talent, your Company has made significant investments to
 upgrade skills of its employees as well as increase its focus on hiring
 specialized talent.
 
 TCS has created a world-class Digital Learning Platform - an integrated
 ecosystem that combines virtual, physical and experiential learning
 with high quality content that is available anywhere, anyplace, anytime
 and on any device. I am delighted to share that we have trained over
 1,20,000 TCSers in multiple digital technologies during FY16.
 
 Digital transformations entail new ways of collaboration among teams
 that consist of players with multiple niche skills – from design to
 psychology – in order to deliver a ''customer-first'' experience. Towards
 this, we have invested in a new Design Studio in Silicon Valley,
 staffed with top notch professionals with diverse skill sets. It is a
 collaborative space where customers can co-create with TCS in a typical
 start-up ''garage'' environment. A new executive briefing centre was also
 launched for next-generation engagement with customers using immersive
 technologies in Mumbai.
 
 Your Company''s significant investments in Digital has resulted in a
 growing portfolio of Digital products and platforms. TCS'' strategic
 bets in TCS BancsTM for Financial Services and iONTM for the Education
 sector have performed well. We also continue to invest in digital
 platform solutions for key industries, horizontal functions (Account
 Payable, HR) as well as technology assets. The new cloud platforms
 together delivered 2 million in revenues in FY16, a growth of 37 per
 cent year on year.
 
 In June last year, we launched ignioTM, our flagship automation product
 for enterprise IT that helps customers analyse, plan and predict their
 IT needs.  With its cognitive capabilities, ignioTM is technologically
 an advanced enterprise automation product in the market. Within nine
 months of its launch it had signed up 16 customers. TCS has also filed
 24 patents for ignioTM till date.
 
 Today''s digital enterprises also face an increased exposure to cyber
 security threats from phishing attacks, Advanced Persistent Threat
 (APT) and hyper-connected universe, data confidentiality and data
 sensitivity. TCS has taken proactive steps to combat these threats and
 ensure uninterrupted service delivery to customers. We also continue to
 reinforce our stringent security policies and procedures.
 
 Driving Research & Innovation
 
 Your Company has been pursuing a two-pronged Research and Innovation
 (R&I) agenda. Our in-house R&I programs have been refined to focus on
 foundational research in areas like deep learning, nano-materials,
 cognitive computing and genomics as well as engage in industry-centric
 innovations like the use of block chain technology in banking,
 connected cars or smart homes.
 
 Your Company remains focused on Intellectual Property creation. At the
 end of FY16, the company has applied for 2,842 patents cumulatively,
 including 565 applied during the past 12 months, of which the company
 has been granted 341 patents.
 
 However, as an organization we are humble enough to recognize that it
 is impossible to innovate in isolation.  Therefore, to complement the
 in-house R&I efforts, your Company has built a global start-up
 partnership ecosystem called COINTM (Co-Innovation Network) which
 actively engages with technology start-ups, academia and venture
 capitalists to identify innovative ideas on an ongoing basis from over
 1,400 companies on our radar.
 
 Additionally we continue to build our strategic academic partnerships.
 In FY16 your Company made a US million gift to Pittsburgh-based
 Carnegie Mellon University, which was the all-time largest corporate
 gift to the university and the largest gift from outside the U.S. This
 donation will fund a new 40,000 square feet facility, the TCS Building,
 which will support education, cutting-edge research and house
 state-of-the-art facilities. In India, your Company also announced
 plans to set up the FC Kohli Center on Intelligent Systems at IIIT
 Hyderabad which will coordinate research in related domains across
 different centre''s of the university.
 
 In March, in collaboration with Nashik city and MIT Media Labs, your
 Company began a unique social innovation program. The TCS Digital
 Impact Square is an open Social Innovation Platform to address real
 life challenges by engaging with students and entrepreneurs from across
 India and providing them with internships to build solutions to
 challenging social issues using Digital technologies and human centric
 design principles.
 
 Beyond Business: Key Social Initiatives
 
 Your Company made a significant impact in the community with new
 programs and initiatives.  TCS stepped forward to extend its support
 towards the ''Swachh Bharat, Swachh Vidyalaya'' initiative, announced by
 India''s Prime Minister Shri Narendra Modi on August 15, 2014. As the
 largest corporate contributor to the program, your Company has built
 dedicated toilets for girl students in 1,472 schools in Andhra Pradesh,
 Telangana, Bihar and Tamil Nadu, changing lives of over 80,000 students
 in the process by giving them the opportunity to live a healthy
 childhood and gain an education.
 
 Another landmark initiative was the social transformation of All India
 Institute of Medical Sciences – India''s pre-eminent public healthcare
 institution - where using process re-engineering and technology, a TCS
 team worked tirelessly for six months to re-engineer and deploy new
 processes to reduce waiting times by 66 per cent to less than two hours
 benefitting over three million patients annually.
 
 The TCS STEM (Science, Technology, Engineering, Math) program expanded
 its reach, inspiring young minds. It is designed to empower students to
 master digital technologies through innovative technology learning
 platforms. TCS contributed to US2020 program to launch a new online
 platform which aims to connect more STEM professionals to grassroots
 volunteering opportunities, acknowledged by the US White House in a
 press statement.
 
 Your Company will continue to look for ways to make significant social
 interventions using digital platforms and technologies in the areas of
 health and education going forward.
 
 Last but not least, I am delighted to share that your Company has been
 recognized and rewarded by peers and stakeholders. TCS was rated as the
 world''s most powerful brand in IT Services and also retained its
 position as the fastest growing brand within its industry over the last
 6 years. Among other major accolades, TCS ranked number 1 in Europe for
 Customer Satisfaction by White lane Research for third year in a row.
 Your Company also appeared in the global Forbes 100 most innovative
 global companies list for the eighth consecutive year and topped the
 Business Today 500 list for the third year in a row.
 
 Looking ahead, as global businesses aspire to become Smart Enterprises
 by accelerating adoption of digital, your Company is very well
 positioned in this regard.  Our rich customer base, domain expertise
 and deep understanding of the customer landscape, technology
 investments and IP combined with our global scale puts us in pole
 position to make a significant impact in the Digital world.
 
 I would like to thank shareholders for all their support and
 encouragement during the year.
 
 With Warm Regards Yours Sincerely
 
 N Chandrasekaran
 
 Chief Executive Officer and Managing Director April 18, 2016
Source : Dion Global Solutions Limited
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