Tata Elxsi Directors Report, Tata Elxsi Reports by Directors

Tata Elxsi

BSE: 500408|NSE: TATAELXSI|ISIN: INE670A01012|SECTOR: Computers - Software
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Directors Report Year End : Mar '16    Mar 15
1.  The Directors are pleased to present the Twenty-seventh Annual
 Report on the business and operations of the Company along with the
 Audited Statements of Accounts for the financial year ended March 31,
 2.  Result of Operations - Extract                         
                                                         Rs, In Crores
                                                  2015-16      2014-15
 Sales and Services                               1075.21       849.40
 Other income                                       11.86         4.14
 Total Income                                     1087.07       853.54
 Profit before financial expenses, 
 depreciation and exceptional items
                                                   258.95       180.71
 Less: Financial expenses - 
       Depreciation                                 22.61        24.73
 Profit for the year                               236.34       155.98
 Less: Provision for Income tax                     81.53        53.08
 Profit after tax                                  154.81       102.90
 Add: Profit brought forward                       184.86       146.34
 Balance available for appropriation 
 which has been appropriated as
 under:                                            339.67       249.24
 Depreciation on transition to
 of the Companies Act, 2013 on                          -        13.30 
 tangible fixed assets with Nil 
 useful life
 Proposed dividend                                   43.59       34.25
 Dividend tax thereon net of 
 reversal thereof                                     8.87        6.83
 Transfer to General Reserve                         10.00       10.00
 Balance of profit carried to 
 Balance Sheet                                       277.21     184.86
 Total appropriations                               339.67      249.24
 3.  Dividend
 Your Directors recommend for your approval, a dividend of 140 % (Rs, 14
 /- per share) for the year ended 31st March, 2016, compared to 110%
 (Rs,11 per share) in the previous year.
 This will involve an outgo of Rs, 52.46 crores compared to Rs,41.08 crores
 in the previous year, including dividend distribution tax.
 4.  Reserves
 Your Directors have approved a transfer of Rs,10 crores to the General
 Reserve for the year ended 31st March, 2016, 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 27 % from Rs,
 853.54 crores in the previous year to Rs,1087.07 crores.
 The Profit Before Tax (PBT) increased by 52 % from Rs, 155.98 crores in
 the previous year to Rs,236.34 crores. The Profit After Tax (PAT)
 increased by 50 % from Rs,102.90 crores in the previous year to Rs, 154.81
 During the year under review, your Company for the first time crossed
 the 1000 crore mark in turnover in rupee terms.  This was possible due
 to the concerted effort in scaling up the embedded product design and
 industrial design services business coupled with better utilisation of
 available resources.
 Industry Outlook
 As per NASSCOM, Indian IT services have grown by 12%, with IT services
 and software products maintaining a double digit growth due to higher
 adoption of SMAC (Social, Mobile, Analytics, and Cloud Services) and
 IoT (Internet of Things).
 Also, the presence of a single government has boosted the confidence of
 the industry in''Digital India'' and''Make in India'' with the domestic
 market accounting to two-thirds of the revenue addition in FY 16.
 The fusion of humans and machines is the next big thing for the
 information and communications technology industries, which will impact
 almost all industry verticals.
 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 29% from Rs,781.85 crores in the previous
 year to Rs, 1008.17 crores in FY16. The segment profit increased by 47%
 from Rs, 176.33 crores in the previous year to Rs,259.66 crores during
 As per NASSCOM, Indian IT exports are expected to grow by 10-12% and
 Engineering R&D and product development to grow at 12.6% in FY 17.
 As technologies, industries and markets converge, each intersection
 presents both challenges and opportunities for companies to innovate
 and deliver new and enhanced products and services. New services are
 also emerging from the increasing connectedness of people and devices.
 This presents us with an unique opportunity to leverage our technology
 capabilities, user centric design and creative experience, and position
 ourselves as a complete solutions and service provider.
 The software development and services segment consists of three
 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 offer electronics, software development and system design services
 for the automotive and aerospace industry.
 Software content in cars is increasing, especially in areas such as
 in-vehicle infotainment, active safety systems, telemetric, electric
 and hybrid power trains.
 We are leveraging 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 with some leading aerospace OEMs and suppliers for avionics and
 electronics design.
 We are also working on emerging requirements for mass transportation
 and urban mobility solutions for smart cities of the future.
 Apart from active participation in leading consortiums and technology
 standards bodies related to the automotive industry, we participated in
 leading trade shows and events such as the VDI-ELIV Congress in Baden
 Baden  Germany, showcasing our automotive technology development
 capabilities and solutions for safety, comfort and infotainment.
 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. Increasingly,
 major operators are bundling voice, video and data services and
 providing consumers with a converged triple play service, thereby
 blurring the lines between a conventional telecom operator and a Pay TV
 service provider. 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
 We are investing in developing capability to support customers in these
 new technologies and help them in their digital transformation journey.
 We continue to participate in leading international industry events and
 standards bodies, to strengthen our leadership position and keep
 abreast of technology trends in concerned industry sectors. Tata Elxsi
 was featured with a keynote session titled''New Disrup to rs - the
 Internet of Things revolution'' at the International Broadcasting
 Convention (IBC), the leading event for the broadcasting and
 communications industry, in Amsterdam in September 2015.
 Industrial Design (ID)
 The Industrial Design division helps customers develop endearing brands
 and products by using design and technology as a strategic tool for
 business success.
 This division services a broad spectrum of industries including
 automotive, consumer electronics, retail & consumer goods and
 We have worked for leading Metro projects in India, including the
 Chennai & Kochi Metro to enhance the passenger experience in the use of
 the metro services, right from design of signage systems to branding,
 coach interiors and station aesthetics.
 Products designed by us have been awarded the I Mark, which signify
 good design not only in terms of form and aesthetic appeal, but also in
 terms of product quality, functionality, safety, sustainability,
 usability and social responsibility.
 We participated in the''Make in India Week'', which aimed to showcase
 the potential of design, innovation and sustainability across India''s
 manufacturing sectors in the coming decade. This event also showcased
 products with the I Mark to the international community.
 We conducted an annual design event''Connect D'' in order to promote
 design thinking amongst the next generation of designers and help them
 create new connected experiences. The event is intended to engage with
 students and help them to think critically about the latest technology
 and its implications for the present and future. The 4th edition of the
 contest received an overwhelming response from design students from
 across the country, which concluded in June 2015.
 Visual Computing Labs (VCL)
 VCL provides high-end content and 3D Animation services, addressing
 content development for feature films, television, advertising
 commercials and custom corporate content.
 VCL has been awarded with FICCI BAF 2016 for the''Best VFX in a
 Commercial'' in the Afterlife Series. Our work for feature films,
 including''Neerja'' which was released in February 2016, has won much
 appreciation and critical acclaim.
 Systems Integration and Support
 During the year under review, our Systems Integration & Support segment
 reported a turnover of Rs,67.03 crores and profit of Rs,6.72 crores.
 We implement and integrate complete systems and solutions for
 High-Performance Computing, CAD/CAM/CAE/PLM, Broadcast, Virtual
 Reality, Storage, and Disaster Recovery. We also provide Professional
 Services for maintenance and support of IT infrastructure in India and
 We continue to focus on increasing the share of software sales and
 support services in this segment, for improved margins.
 Threats, concerns and risks
 According to NASSCOM, despite the political uncertainty across major
 economies of the world, currency fluctuations and changing nature of
 the business, the industry has still sustained a double digit growth
 and may continue to do so with the emergence of new technologies such
 as internet of things, analytics, and social media.
 Our revenues are well distributed amongst various currencies and
 geographies, thereby reducing the impact from any single geography or
 currency to some extent.
 Protectionist government policies in key markets such as the US and
 Europe may create barriers in on-site deployment of India-based talent.
 Economic uncertainty aggravated by plunging oil prices, plummeting
 Chinese markets hurt the Indian IT sector.
 We are focusing on maximizing offshore execution of projects and having
 a presence in multiple industries to mitigate the impact of such
 policies and risks caused by the cyclical nature of any one industry
 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 is assessed
 and strengthened with new/revised standard operating procedures and
 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 a reputed Audit firm  Ernst & Young. 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
                     2015-16  2014-15  Change over  Percentage of income
                                       year         2015-16      2014-15
                      crores      Rs, 
                               crores      %           %            %
 Sales and 
 services            1075.21   849.40     26.58       98.91        99.51
 Other income          11.86     4.14    186.47        1.09         0.49
 Total Revenues      1087.07   853.54     27.36      100.00       100.00
 Cost of sales         69.98    75.21    - 6.95        6.44         8.81
 expenses             576.49   460.61     25.16       53.03        53.96
 expenses                -        -        -           -             -
 Amortization          22.61    24.73     -8.57        2.08         2.90
 Other expenses       181.65   137.01     32.58       16.71        16.05
 Total Expenditure    850.73   697.56     21.96       78.26        81.73
 Profit before tax 
 and exceptional 
 items                236.34   155.98     51.52       21.74        18.27
 Tax                   81.53    53.08     53.60        7.50         6.22
 Profit after 
 tax for the year     154.81   102.90     50.45       14.24        12.06
 Analysis of Overheads
                                        2015-16     2014-15     Variance
 Items                                      Rs,                  
                                         crores      crores           %
 Operating lease rent                    15.73       14.01        12.28
 Communication expenses                   9.70        9.07         6.95
 Inland travel and conveyance             8.03        6.53        22.98
 Overseas travel                         50.23       41.29        21.65
 Consultant fees for software 
 development                             45.12       25.53        76.73
 Provision for doubtful debts/
 advances                                 0.82        0.49        67.35
 Significant Ratio Analysis     
 No.  Particulars                 Unit      31.03.16    31.03.15
 1    Earnings before 
      interest, depreciation 
      and tax/Sales                 %          24.08      21.27
 2    Profit before taxes/
      Sales                         %          21.98      18.36
 3    Profit after taxes/
      Sales                          %         14.39      12.11
 4    Current Ratio             No. of 
                                 times          2.32       1.92
 5    Debt Equity Ratio          Ratio           -          -
 6    Earnings per share           Rs,         49.72      33.05
 Human Resources
 As a technology-led design company we continue to attract and retain
 top talent. Leadership training, Performance management, Talent
 development, Employee engagement and Succession planning form the
 bedrock of our strategy. Benchmarking, Recognizing contributions,
 Improving Customer experience, and Keeping pace with changes are the
 pillars of our value system and help create an atmosphere of oneness
 and collaboration. Our employees are highly motivated and we develop
 the necessary capabilities and behaviours so that employees can deliver
 greater value to our customers and become trusted advisors. Our recent
 initiates of pre-connecting with colleges before we hire fresher''s are
 helping us to attract the best minds across campuses.  Our total
 headcount including consultants was 4452 as of March 31, 2016.
 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 Transportation BU we have Automotive
 SPICE OML5 certification.
 7.  Directors and Key Managerial Personnel
 In terms of Section 152 of the Companies Act, 2013 Mr. N.G. Subramaniam
 retires by rotation and being eligible offers himself for
 Dr. R. Natarajan, Independent Director, retired from the Board with
 effect from January 10, 2016 in terms of his appointment. The Board
 placed on record their appreciation for the valuable contributions and
 guidance rendered by Dr. Natarajan during his tenure on the Board and
 the Committees in which he was a member.
 The Board, on the recommendation of the Nomination and Remuneration
 Committee, had at its meeting held on January 04, 2016 appointed Prof.
 M.S. Ananth as an Additional Director (Independent Director) of the
 Company with effect from January 04, 2016. In terms of Section 161(1)
 Prof. Ananth 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 160 of the Companies Act, 2013,
 proposing Prof. Ananth to the office of the Directorship of the
 Company. The Board recommends the appointment of Prof. Ananth as an
 Independent Director to hold office up to November 14, 2020.
 During the year under review, Six (6) Board meetings were held and have
 been well attended by the Directors. The calendar of meetings for the
 year 2016-17 has been circulated to all the directors detailing the
 schedule of Board and Committee meetings during 2016-17.
 The Independent Directors have submitted their declaration that they
 fulfil 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, 2015 and 15th May, 2015 during 2015-16.
 Pursuant to the provisions of Section 203 of the Act, 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 including audit of
 internal financial controls over financial reporting by the statutory
 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 2015-16.
 Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the
 Board of Directors, to the best of their knowledge and ability, confirm
 (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
 (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 the assets of the
 Company, and for preventing and detecting fraud and other
 (d) the Directors have prepared the annual accounts on a going concern
 (e) the directors had laid down internal financial controls to be
 followed by the Company, and that such internal Controls are adequate
 and were operating effectively; and
 (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 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 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.
 The Remuneration Policy and the Charter for NRC are available at:
 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-B.
 11.  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 (page - 37).
 12.  Corporate Social Responsibility
 We have constituted a CSR committee 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
 ( 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
 (page - 38).
 13.  Closure of wholly owned Subsidiary Company
 During the year under review the formalities for closure of company''s
 wholly owned subsidiary, Tata Elxsi (Singapore) Pte. Ltd. has been
 completed. Presently the Company do not have any subsidiary Company.
 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, 2016 is attached to the Directors'' Report at page No. 30.
 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 2015-16.
 17.  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.
 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 2008-09 is due
 for remittance to Investors'' Education & Protection Fund (IEPF) on
 October 13, 2016 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 for a period of 3 years and whose
 re-appointment is to be ratified at the ensuing Annual General Meeting,
 have confirmed vide their letter dated April 22, 2016 that they are
 eligible for re-appointment.
 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 
 Bengaluru, 28th April, 2016
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