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Tata Consultancy Services Directors Report, TCS Reports by Directors
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Tata Consultancy Services
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Download Annual Report PDF Format 2014 | 2013 | 2012 | 2011
Directors Report Year End : Mar '14    Mar 13
The directors submit annual report of Tata Consultancy Services Limited
 (the Company) and Consolidated TCS along with the audited financial
 statements for the financial year ended March 31, 2014.
 
 1.  Financial results
 
 
                                                               (Rs.  crore)
 
                               Consolidated              Unconsolidated
                          2013-14       2012-13     2013-14     2012-13
 
 Revenue from operations 81,809.36    62,989.48   64,672.93   48,426.14
 
 Operating expenditure   56,656.57    44,949.57   43,139.21   34,119.87 
 
 Earnings before 
 interest, tax, 
 depreciation and 
 amortisation (EBITDA)   25,152.79    18,039.91   21,533.72   14,306.27
 
 Other income (net)       1,636.74     1,178.23    3,114.71    2,230.39
 
 Finance costs               38.52        48.49       23.41       30.62
 
 Depreciation and 
 amortisation expense     1,349.15     1,079.92    1,080.55      802.86
 
 Profit before
 tax (PBT)               25,401.86    18,089.73   23,544.47   15,703.18
 
 Tax expense              6,069.99     4,014.04    5,069.55    2,916.84 
 Profit for the year
 before minority
 interest                19,331.87    14,075.69   18,474.92   12,786.34
 
 Minority interest          168.00       158.38           -           -
 
 Profit after 
 tax (PAT)               19,163.87    13,917.31   18,474.92   12,786.34
 
 Adjustment for 
 amalgamation of 
 acquired
 subsidiaries                    -      (126.22)   2,375.22     (103.00)
 
 Balance brought 
 forward from 
 previous year           29,529.97    22,160.54   24,602.85   18,235.20
 
 Amount available 
 for appropriation       48,693.84    35,951.63   45,452.99   30,918.54
 
 Appropriations
 
 Interim dividends 
 on equity shares
 (excluding tax)          2,349.87     1,761.49    2,349.87    1,761.49 
 Proposed final
 dividend on equity 
 shares
 (excluding tax)          3,917.46     2,544.39    3,917.46    2,544.39 
 
 Proposed dividend
 on redeemable 
 preference shares 
 (excluding tax)             28.76        19.00       28.76       19.00
 
 Tax on dividends 
 (interim and 
 proposed)                  795.68       727.34      788.96      712.18
 
 Capital redemption 
 reserve                    157.12            -      100.00           -
 
 General reserve          1,883.41     1,352.79    1,847.49    1,278.63
 
 Statutory reserve           57.03        16.65           -           -
 
 Balance carried to 
 balance sheet           39,504.51    29,529.97   36,420.45   24,602.85
 
                                    (Rs. 1 crore = Rs. 10 million)
 
 
 2.  Issue of Equity Shares
 
 15,06,983 equity shares of the Company were issued and allotted, in the
 ratio of 13 equity shares of Rs. 1 each of the Company for every 4 equity
 shares of Rs. 10 each of TCS e-Serve Limited (e-Serve), to the equity
 shareholders (other than the Company) of erstwhile e-Serve on October
 7, 2013. This was pursuant to the Order of the Honble High Court of
 Judicature at Bombay, sanctioning amalgamation of e-Serve with the
 Company in terms of the Composite Scheme of Arrangement. As a result of
 this, the issued, subscribed and paid up capital of the Company has
 increased from Rs. 195.72 crores to Rs. 195.87 crores.
 
 3.  Redemption of preference shares and capital redemption reserve
 account 100,00,00,000 redeemable preference shares of Rs. 1 each
 aggregating Rs. 100 crores were redeemed at par on March 28, 2014, at the
 end of their tenure of six years. In terms of section 80(1)(d) of the
 Companies Act, 1956, a sum of Rs. 100 crores has been transferred to
 capital redemption reserve account.
 
 4.  Dividend
 
 Based on the Companys performance, the directors are pleased to
 recommend for approval of the members, a final dividend of Rs. 20 per
 share for the financial year 2013-14, taking the total dividend to Rs. 32
 per share (previous year Rs. 22 per share) on 195,87,27,979 equity shares
 (195,72,20,996 equity shares as at March 31, 2013) of Rs. 1 each.  The
 final dividend on equity shares, if approved by the members, would
 involve a cash outflow of Rs. 4,583.23 crores including dividend tax. The
 total cash outflow on account of dividend on equity shares (interim as
 well as proposed) including dividend tax for the financial year 2013-14
 would aggregate Rs. 7,051.40 crores, resulting in a payout of 38.24% of
 the unconsolidated profits of the Company.
 
 The redeemable preference shares, allotted on March 28, 2008, are
 entitled to pro-rata dividend for the financial year 2013-14. The
 redeemable preference shares are also entitled to a fixed cumulative
 dividend of 1% per annum and a variable non-cumulative dividend of 1%
 of the difference between the rate of dividend declared during the year
 on the equity shares of the Company and the average rate of dividend
 declared on the equity shares of the Company for the three years
 preceding the year of issue of the said redeemable preference shares.
 Accordingly, the directors have recommended, for approval of the
 members, a dividend of 29 paise per share on 100,00,00,000 redeemable
 preference shares of Rs. 1 each for the financial year 2013-14.
 
 5.  Transfer to reserves
 
 The Company proposes to transfer Rs. 1,847.49 crores to the general
 reserve out of the amount available for appropriation and an amount of
 Rs. 36,420.45 crores is proposed to be retained in the statement of profit
 and loss.
 
 6.  Companys performance
 
 For the financial year ended March 31, 2014, the Company has recorded a
 strong revenue and margin performance. There was holistic growth across
 markets and industries during the financial year. Europe led the growth
 in major markets, while UK and North America continued to grow in line
 with the Company average.  All major industry verticals grew in double
 digits led by retail, manufacturing, life sciences & healthcare and
 BFSI during the year. The Companys full services capabilities continue
 to be leveraged by customers with new service lines growing at a fast
 pace led by consulting, assurance services, infrastructure services and
 engineering & industrial solutions.
 
 On consolidated basis, revenue from operations for the financial year
 2013-14 at Rs. 81,809.36 crores was higher by 29.88% over last year
 (Rs. 62,989.48 crores in 2012-13). Earnings before interest, tax,
 depreciation and amortisation (EBITDA) at Rs. 25,152.79 crores was higher
 by 39.43% over last year (Rs. 18,039.91 crores in 2012-13). Profit after
 tax (PAT) at Rs. 19,163.87 crores was higher by 37.70% over last year
 (Rs. 13,917.31 crores in 2012-13).
 
 On unconsolidated basis, revenue from operations for the financial year
 2013-14 at Rs. 64,672.93 crores was higher by 33.55% over last year
 (Rs. 48,426.14 crores in 2012-13). EBITDA at Rs. 21,533.72 crores was higher
 by 50.52% over last year (Rs. 14,306.27 crores in 2012-13). PAT at
 Rs. 18,474.92 crores was higher by 44.49% over last year (Rs. 12,786.34
 crores in 2012-13).
 
 7.  Strategic acquisition
 
 During the financial year 2013-14, the Company through its subsidiary
 Tata Consultancy Services Netherlands BV (TCS Netherlands BV), acquired
 French IT services company Alti S.A. (Alti), regarded as one of the top
 five system integrator companies in France with leading French
 corporations in the banking, financial services & insurance, energy &
 utilities, retail & CPG, manufacturing and life science sectors as its
 key customers. Altis acquisition has strengthened TCS ability and
 footprint to service its customers in France and other regions,
 leveraging its strong talent pool. The acquisition has also brought its
 seven subsidiaries namely, Planaxis Technologies Inc., Alti HR S.A.S.,
 Alti Infrastructures Systemes & Reseaux S.A.S., Alti NV, TESCOM
 (France) Software Systems Testing S.A.R.L., Alti Switzerland S.A. and
 Teamlink into TCS fold.
 
 During the financial year, TCS has announced that a joint venture (JV)
 would be formed in Saudi Arabia by TCS Netherlands BV and GE. The JV
 will be the first all-women business process service center in Saudi
 Arabia.
 
 8.  Restructuring of unlisted subsidiary companies
 
 i) TCS e-Serve Limited (e-Serve) and TCS e-Serve International Limited
 (TEIL):
 
 Pursuant to the Composite Scheme of Arrangement (Scheme) sanctioned by
 the Honble High Court of Bombay vide its Order dated September 6,
 2013, e-Serve was amalgamated with the Company and the SEZ undertaking
 of TEIL was demerged and transferred to the Company both with effect
 from the appointed date i.e. April 1, 2013. Consequently, the entire
 business, assets, liabilities, duties and obligations of e-Serve and
 SEZ undertaking of TEIL have been transferred to and vested in the
 Company with effect from April 1, 2013. TEIL, a wholly-owned subsidiary
 of erstwhile e-Serve, has become a direct subsidiary of the Company as
 a result of the above.
 
 ii) Tata Information Technology (Shanghai) Company Limited (TITL)
 
 Pursuant to the merger agreement between TITL and Tata Consultancy
 Services (China) Company Limited (TCS China), TITL merged into TCS
 China with effect from November 5, 2013. As a result of the merger, the
 consolidated holding of Tata Consultancy Services Asia Pacific Pte.
 Limited and MS CJV Investments Corporation (subsidiaries of the
 Company), in TCS China went up from 74.63% to 90.00%.
 
 9.  Human resource development
 
 The speed of change in todays world makes it imperative to focus on
 forward-looking policies, lean processes, shaping talents for tomorrow
 and invest in futuristic systems and applications.
 
 TCS continual pursuit of innovation and progressive processes for
 creating organisation of tomorrow are yielding desired results as is
 evident from market leading retention rates of 88.7%. Effective
 engagement interventions, strong processes and systems enable the
 Company to manage complexities associated with the scale of 300,464
 employees representing 118 nationalities deployed across 55 countries.
 
 The Company remained highest recruiter in the industry by doing a gross
 addition of 61,200 employees and net addition of 24,268 employees
 across the globe. The gross addition includes 1,263 employees
 in-sourced from customer organisations globally.
 
 Campus placement drive was conducted in engineering and management
 institutes in India resulting in job offers to 24,859 engineering
 students and 575 management students to join during 2014-15. Outside
 India, trainees were recruited from established institutes in USA,
 Canada, China, Uruguay and Hungary.
 
 The Company continued its effort to strengthen relationship with key
 institutes globally through its academic interface programme (AIP)
 which benefited 626 institutes in India and 301 institutes in other
 countries.
 
 Effective competency development programmes ensure preparedness of TCS
 work force to effectively manage fast paced changes in the industry and
 build leaders to manage growth. The focus on Anytime Anywhere
 Learning using digital technology has opened new horizon of learning
 experience.
 
 TCS has a well established framework of engagement and collaboration
 across diverse workforce segments. The Vivacious TCS initiative,
 using social platforms, provide avenues for collaboration for a diverse
 and globally spread employee base bringing about a transformation in
 communication and employee connect initiatives.  The annual employee
 satisfaction survey, Pulse, along with other engagement initiatives,
 provide necessary insight and help in understanding distinct employee
 needs and developing appropriate interventions.
 
 The performance driven culture challenges every employee to scale up
 and grow. A wide range of competency enhancement opportunities,
 challenging assignments and rotation across units and countries help
 employees in their career progression and meeting aspirations. The
 coaching and mentoring programmes enable employees to get constant
 feedback and career guidance to achieve and exceed their performance
 targets thus realising their potential.
 
 TCS commitment to employee health, safety and security extends beyond
 accidents and occupational health hazards to social wellbeing of
 employees. The Fit4life initiative is gaining popularity and people are
 getting conscious of their health. The Employee Assistance Programme
 helps employees to manage stress and lead a healthy life.
 
 These initiatives have delivered the desired results as is evident from
 the low attrition rate of 11.3% achieved during the year.
 
 10.  Quality Initiatives
 
 Sustained commitment to highest levels of quality, best-in-class
 service management and robust information security practices helped the
 Company attain significant milestones during the year.
 
 The Company was assessed enterprise-wide at the highest maturity Level
 5 for CMMI-DEV (Development) version 1.3. Enterprise-wide assessment
 for CMMI-SVC (Services) version 1.3 is currently in progress.
 
 The Company successfully achieved the annual enterprise-wide ISO
 certification for ISO 20000:2011 (Service Management), ISO 9001:2008
 (Quality Management) and the latest Security Management Standard ISO
 27001:2013.
 
 The Company is enterprise-wide certified for ISO 14001:2004
 (Environmental Management) and BS OHSAS 18001:2007 (Occupational Health
 and Safety Management) which demonstrates TCS strong commitment to the
 environment and the occupational health and safety of its employees and
 business partners. The Company also continues to maintain the industry
 specific quality certifications viz., AS 9100 (Aerospace Industry), ISO
 13485 (Medical Devices) and TL 9000 (Telecom Industry).
 
 The cornerstone of these certifications is TCS integrated quality
 management system (iQMSTM), a global process-driven and
 customer-focused system which provides One Global Service Standard.
 iQMSTM is the backbone that supports TCS global network delivery model
 (GNDMTM).
 
 11.  Corporate Governance Report, Management Discussion & Analysis
 Report and Business Responsibility Report
 
 As per clause 49 of the Listing Agreements entered into with the Stock
 Exchanges, Corporate Governance Report with auditors certificate
 thereon and Management Discussion and Analysis are attached and form
 part of this report.
 
 As per clause 55 of the Listing Agreements entered into with the Stock
 Exchanges, a Business Responsibility Report is attached and forms part
 of the annual report.
 
 12.  Directors responsibility statement
 
 Pursuant to the requirement of section 217(2AA) of the Companies Act,
 1956, and based on the representations received from the operating
 management, the directors hereby confirm that:
 
 (i) in the preparation of the annual accounts for the financial year
 2013-14, the applicable accounting standards have been followed and
 there are no material departures;
 
 (ii) they have selected such accounting policies and applied them
 consistently and made judgments and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company at the end of the financial year and of the profit of the
 Company for the financial year;
 
 (iii) they have taken proper and sufficient care to the best of their
 knowledge and ability for the maintenance of adequate accounting
 records in accordance with the provisions of the Companies Act, 1956.
 They confirm that there are adequate systems and controls for
 safeguarding the assets of the Company and for preventing and detecting
 fraud and other irregularities;
 
 (iv) they have prepared the annual accounts on a going concern basis.
 
 13.  Subsidiary companies and consolidated financial statements
 
 The Company had 64 subsidiaries as on March 31, 2014. There has been no
 material change in the nature of the business of the subsidiaries.
 
 As required under the Listing Agreements entered into with the Stock
 Exchanges, consolidated financial statements of the Company and all its
 subsidiaries is attached. The consolidated financial statements have
 been prepared in accordance with the relevant accounting standards as
 prescribed under section 211(3C) of the Companies Act, 1956. The
 consolidated financial statements disclose the assets, liabilities,
 income, expenses and other details of the Company and its subsidiaries.
 
 Pursuant to the provision of section 212(8) of the Companies Act, 1956,
 the Ministry of Corporate Affairs vide its circular dated February 8,
 2011 has granted general exemption from attaching the balance sheet,
 statement of profit and loss and other documents of the subsidiary
 companies with the balance sheet of the Company.  A statement
 containing brief financial details of the Companys subsidiaries for
 the financial year ended March 31, 2014 is included in the annual
 report. The annual accounts of these subsidiaries and the related
 information will be made available to any member of the Company/its
 subsidiaries seeking such information and are available for inspection
 by any member of the Company/its subsidiaries at the registered office
 of the Company. The annual accounts of the said subsidiaries will also
 be available for inspection at the head offices/ registered offices of
 the respective subsidiary companies.
 
 14.  Fixed deposits
 
 The Company has not accepted any public deposits and as such, no amount
 on account of principal or interest on public deposits was outstanding
 as on the date of the balance sheet.
 
 15.  Directors
 
 The Company had, pursuant to the provisions of clause 49 of the Listing
 Agreements entered into with Stock Exchanges, appointed Mr. V.
 Thyagarajan, Prof. Clayton M. Christensen, Dr. Ron Sommer, Mr. O. P.
 Bhatt, Dr. Vijay Kelkar and Mr. Aman Mehta as Independent Directors of
 the Company.
 
 As per section 149(4) of the Companies Act, 2013 (Act), which came into
 effect from April 1, 2014, every listed public company is required to
 have at least one-third of the total number of directors as Independent
 Directors.  In accordance with the provisions of section 149 of the
 Act, these Directors are being appointed as Independent Directors to
 hold office as per their tenure of appointment mentioned in the Notice
 of the forthcoming Annual General Meeting (AGM) of the Company.
 
 Mr. Phiroz Vandrevala, Director, retires by rotation and being eligible
 has offered himself for re-appointment.
 
 16.  Auditors
 
 Deloitte Haskins & Sells LLP (DHS LLP), 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 LLP as statutory
 auditors of the Company from the conclusion of the forthcoming AGM till
 the conclusion of the twenty-second AGM to be held in the year 2017,
 subject to ratification of their appointment at every AGM.
 
 During the year, the Company had received intimation from DHS LLP
 stating that Deloitte Haskins & Sells had been converted into a limited
 liability partnership (LLP) under the provisions of the Limited
 Liability Partnership Act, 2008 with effect from November 20, 2013. In
 terms of Ministry of Corporate Affairs, Government of India, General
 Circular No. 9/2013 dated April 30, 2013, if a firm of Chartered
 Accountants, being an auditor in a Company under the Companies Act,
 1956, is converted into an LLP, then such an LLP would be deemed to be
 the auditor of the said Company. The Board of Directors of the Company
 have taken due note of this change.  Accordingly, the audit of the
 Company for financial year 2013-14 was conducted by DHS LLP.
 
 17.  Particulars of employees
 
 The information required under section 217(2A) of the Companies Act,
 1956 and the Rules made there under, in respect of employees of the
 Company, is provided in annexure forming part of this report. In terms
 of section 219(1)(b)(iv) of the Companies Act, 1956, the report and
 accounts are being sent to the shareholders excluding the aforesaid
 annexure. Any shareholder interested in obtaining copy of the same may
 write to the Company Secretary.
 
 18.  Conservation of energy, technology absorption, foreign exchange
 earnings and outgo
 
 The particulars as prescribed under section 217(1)(e) of the Companies
 Act, 1956, read with the Companies (Disclosure of Particulars in the
 Report of Board of Directors) Rules, 1988, are set out in an annexure
 to this report.
 
 19.  Acknowledgement
 
 The directors thank the Companys employees, customers, vendors,
 investors and academic institutions for their support.
 
 The directors also thank the government of various countries,
 Government of India, State Governments in India and concerned
 government departments/agencies for their co-operation.
 
 The directors appreciate and value the contributions made by every
 member of the TCS family globally.
 
 
 
                                On behalf of the Board of Directors,
 
 
 
 Mumbai                                                 Cyrus Mistry
 
 April 16, 2014                                             Chairman
Source : Dion Global Solutions Limited
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