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TVS Electronics Ltd.

BSE: 532513 | NSE: TVSELECT |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE236G01019 | SECTOR: Computers - Hardware

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Feb 20, 16:00
105.70 -1.45 (-1.35%)
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Feb 20, 15:59
105.30 -1.80 (-1.68%)
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71,065
30-Day
61,541
30,686
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Annual Report

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Director’s Report

The Directors have pleasure in presenting the Eleventh Annual Report and the audited statements of accounts for the year ended 31st March, 2006. FINANCIAL RESULTS (Rupees in Crores) Period ended Particulars Year ended 31st March, 2005 31st March, 2006 (15 Months) Sales and other income 265.72 317.40 Cost of goods sold 189.60 221.67 Contribution Margin 76.12 95.73 Administrative & other expenses 68.94 85.55 Earnings Before Interest & Tax (EBIT) 7.18 10.18 Profit Before Tax (PBT) 2.88 5.49 Tax (0.29) 1.48 Profit After Tax (PAT) 3.17 4.01 Profit brought forward from previous year 4.50 5.04 Add/(Less): Tax relating to earlier years (0.01) 0.27 Total available for appropriations 7.66 9.32 -Proposed Dividend 1.32 1.59 -Tax on Dividend 0.19 0.23 -Transfer to General Reserve - 3.00 Surplus in Profit and Loss account 6.15 4.50 DIVIDEND The Directors are pleased to recommend a dividend of Re.0.75 per equity share of Rs.10/- each for the year. The dividend, if approved by the shareholders, would absorb Rs.1.32 Crores and the proposed dividend will be paid to all those shareholders whose names appear in the Register of Members of the Company as on 21st September, 2006 (beginning of the day) in case of shares held in electronic form and as on 28th September, 2006 in respect of shares held in physical form. REVIEW OF PERFORMANCE The net turnover of the company was Rs.259 Crores for the year. On a comparable basis this represents a growth of 16% over a turnover of Rs.223 Crores, excluding Payment Systems in the corresponding period of the previous year. The Products and Solutions (P&S) business group consisting of Printers, Supplies, Keyboards, POS and Solutions, registered 11% growth with revenue of Rs.178 Crores excluding Payment system products during the year compared to Rs.161 Crores during the corresponding period in previous year. The market share in value terms for DMP was at 41% on an average during the year as compared to 40% during the corresponding period in previous year. The Customer Support (CS) business group consisting of contract manufacturing for OEMs, traded products like Set Top Box and field support business generated revenue of Rs. 81 Crores during the year as against Rs.62 Crores last year, thereby registering 31% growth. The Contract Manufacturing business grew by 17% during the year generating revenue of Rs. 65 Crores compared to Rs.56 Crores during the corresponding period in previous year. FINANCE The businesses have generated a net cash of Rs.18.45 Crores from operations during the year under review. It is significant to note that there has been a reduction in the Companys borrowings from Rs.95.30 Crores to Rs.88.60 Crores. During the year, we had undertaken a close review of working capital and fixed assets for improving capital productivity. Based on a detailed analysis and assessment, a sum of Rs.31.63 Crores was charged off. The Company launched Total Cost Management Program to improve cost productivity by driving efficiencies in manufacturing and supply chain achieving a savings of Rs.7 Crores during the year. The Company has transferred its unutilised property at Nandambakkam to its wholly owned subsidiary, Sravanaa Properties Ltd., for a sum of Rs.45 crores with a purpose to develop the property in view of burgeoning real estate market for IT Park in Chennai. This will provide the economic support for the growth of the existing businesses. DEPOSITS The company has not accepted any fresh deposits and renewals during the year under review. Unclaimed deposits amounting to Rs.1.27 lakhs at the end of 31st March, 2006 will be credited to the Investor Education and Protection Fund after a lapse of seven years. DIRECTORS Mr. Srini Nageshwar and Mr. R R Nair, Directors, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. During the year, Dr Sridhar Mitta who was co-opted as Additional Director by the Board on 25th January 2006, in terms of Section 260 of the Companies Act, 1956, will hold office up to the date of the ensuing Annual General Meeting of the Company. Notice has been received from a member of the Company proposing his candidature for the office of the Director in terms of Section 257 of the Companies Act, 1956. Mr S Shreenivasa Rao, Director resigned with effect from 31st March, 2006 from the Directorship due to personal reasons. Mr S Shreenivasa Rao had association of nearly one decade with various TVS Group Companies. The Board of Directors wish to place on record their deep sense of appreciation for the valuable contribution made by him. SUBSIDIARY COMPANY During the year, the Company acquired 100% of the equity share capital of Sravanaa Properties Ltd., which is engaged in property development, by acquiring 50,000 equity shares of Rs.10/- each for cash at par amounting to Rs.5 lakhs. The reports and accounts of the Subsidiary Company (Consolidated) along with the Statement pursuant to Section 212 of the Companies Act, 1956 are annexed. AUDITORS M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai, the Auditors of the Company retire at the ensuing Annual General Meeting and are eligible for re-appointment. EMPLOYEE STOCK OPTION SCHEME Out of the total obligation of 2,11,000 options issued to the eligible employees of the Company under the Employees Stock Option Scheme (ESOP) 79,000 options granted to nine employees lapsed on account of their resignation. 1,32,000 stock options are still in force as at March 31, 2006 and these options were issued at the rate of Rs.70/- per share and entitles the holder thereof to apply for and be allotted one equity share of the company of the nominal value of Rs.10/- each on payment of the exercise price during the exercise period. No fresh ESOP options have been issued during the financial year ended 31st March, 2006. As required by the Securities and Exchange Board of India, the details of the stock option scheme was disclosed in the notice calling the previous Annual General Meeting of the shareholders for the meeting held on 8th August, 2005. Details of the options granted and options in force as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure A to this Report. PERSONNEL As required by the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, the name and other particulars of the employees is set out in Annexure B to the Directors Report. AWARDS AND RECOGNITIONS The company has won many awards and recognitions in 2005-06. This list amongst others include the following: * Products & Solutions Business Group has been certified for ISO 9001:2000 Quality Management systems by TUVRheinland (India) Pvt. Ltd * TVS-E has been ranked among the top 3 India IT Brands-PC Quest 2005. * Bhoomi Brand Award from 360 Magazine for Best Dot Matrix Printers 2005. * Bhoomi Brand Award from 360 Magazine for Best Keyboards 2005. * VAR INDIA Award for Best Dot Matrix Printers 2005. * VAR INDIA Award for Best Keyboards 2005. REPORT ON ENERGY CONSERVATION AND R&D ACTIVITIES During the year, the Company invested Rs.4.42 Crores which is 2.06% of its core products sale in Research and Development. Information relating to energy conservation, foreign exchange earned and spent and research and development activities undertaken by the Company in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosures of particulars in the report of Board of Directors) Rules, 1988 are given in Annexure C to the Directors Report. DIRECTORS RESPONSIBILITY STATEMENT In terms of Section 217(2AA) of the Companies Act, 1956, the Directors hereby state that i) in the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures; ii) 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 a fair view of the state of affairs of the Company at the end of the financial year (namely 31st March, 2006) and of the profit of the Company for that year; iii) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the Directors had prepared the annual accounts on a going concern basis CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges where the shares of the company are listed, Corporate Governance Report is made part of the Annual Report. In compliance of Section 292A of the Companies Act, 1956 the company has constituted the Audit Committee consisting of Mr. Srini Nageshwar, Mr. S R Vijayakar and Mr. H Lakshmanan as its members. During the year. Dr Sridhar Mitta was appointed member of the Audit Committee in the meeting held on 25th January 2006. The Company has constituted an Investors Grievance Committee to deal with complaints and grievances of the Investors. The Company has also constituted a Remuneration/Compensation Committee consisting of four Directors of which Mr. R R Nair, Mr. Srini Nageshwar, Mr. S R Vijayakar are independent Directors and Mr H Lakshmanan as its Member. The members of the remuneration committee also acts as the compensation committee which administers and superintends the stock option plan of the Company. MANAGEMENT DISCUSSION AND ANALYSIS As required under Clause 49 of the Listing Agreement, a detailed Report on Management Discussions and Analysis is given below: 1. The Industry and Trends The Indian personal computer market continues its robust growth and is growing at the rate of 20% this year. The sales of PCs in India was 4.6 Mn units during the year as compared to 3.6 Mn units during the previous year. Compounded Annual Growth Rate for the PC market is likely to be 23% for the next 5 years. Similarly DMPs market was 5 Mn units during the year as compared to 4.3 Mn units during the previous year growing by 16%. Similarly T4+ market is predicted to grow in excess of 30% for DMR The key growth drivers are expansion in retail automation, e-governance initiatives by both Central and State Governments, banking automation, e-learning and rural ICT (Information Communication & Technology). The total IT spend for the coming year is estimated at Rs.35 Billion for Banking & Financial Services Institution (BFSI) as per DQ-IDC annual mega spenders survey. This translates into opportunity for transaction printers and Point of Sale printers. The Company will benefit by these trends, as demands for its products will continue to grow. The Company is also exploring entry into non-impact printer market. The Companys field support extends to as much as 300 towns through its 500 strong Authorised Service Partners. As computerization is reaching even the smaller towns, the company is poised to expand its customer service net work to benefit from this demand for services. In contract manufacturing, large foreign Electronic Manufacturing Service (EMS) companies have made significant investments in India with facilities at global scale. We are challenged in generating new customers meeting our profit criteria. Therefore the effort is on scoping ways and means to leverage economic benefit based on the current experience. 2. Review of Performance Our company continues to maintain its leadership in Dot Matrix Printer segment with a market share of over 41 % in value terms during the year. The DMP market grew by 16% in volume terms during the year as against 13% in previous year. Our company has been recently ranked as No.2 by Gartner in the Asia Pacific Dot Matrix Printer market and as one of the fastest growing companies in Asia Pacific region comprising India Sub continent, China, ASEAN countries and Australia-New Zealand. The keyboard business also rode the market growth and generated revenue of Rs. 22 Crores against Rs.16 Crores last year. TVS-E mechanical key boards continue to hold a dominant market share and enjoys Brand preference by customers. Our geographic expansion drive in T3+ market has resulted in sales value growth in excess of 40% during the year. A technology group has been formed to focus on creating products for growth. Significant investment has been made for new product development to support market demand and growth. The customer support business continues to acquire new clients in IT and Telecom sectors. The field support business grew by over 50% as compared to the previous year. The drive on internal efficiencies resulted in cost savings in excess of Rs.7 Crores and the migration to Himachal Pradesh during the year was successful as a result of meticulous planning and execution by dedicated teams. 3. Risks & Opportunities The major risk for DMP products is from the non impact printers and we are responding by constantly improving the print quality and speed coupled with our entry into non impact printing during the forthcoming year. The presence of foreign companies in the IT hardware products poses a global competitive scenario for us in India and we are challenged in the market for our products and services. The continuous fall in prices for DMP products poses a tough challenge for the organisation and we are geared to meet the same through rigorous cost management projects year on year. The price increase of base metals and plastics continue to exert pressure on profitability which we have to face in the coming year. The organisation has been responding to these challenges through global sourcing and also migrating to Himachal Pradesh to support profitable growth. The sustained growth in PC products and introduction of VAT in 23 States has given a tremendous boost to the printing business as the need for more invoice and bill printing will drive demand for dot matrix printers. Large scale departmental automation by the Indian Government and implementation of core-banking solutions by all the large banks offer wide scope for Dot Matrix Printers. We continue to strategise products and services in the areas of non impact printing; special printing solutions and explore growth outside India during the coming years. As far as contract manufacturing is concerned the organisation is exploring ways and means of realising economic value from the current operations. 4. Internal Control Systems & their adequacy The organisation has a well established system of internal control with schedule of authority and powers, besides operating policy guidelines. The system of internal controls and internal audit ensures not only compliance but also acts as a measure of performance. The audit committee of the Board reviews the findings and recommendations of the internal audit report periodically. 5. Business Planning and Information Technology In order to achieve the overall corporate goals, the company has a robust process of business planning system ensuring active involvement and ownership, ultimately leading to achievement of planned business results. The processes include medium term strategy formulation, annual and quarterly plans and periodic reviews driving the organisation on weekly axis supported by dashboard and scorecards The introduction of SAP an Enterprise Resource Planning (ERP) system during the year under review has facilitated effective and efficient information dissemination for decision making. 6. Quality Management The company has a TQM vision with a strong focus on road map of essential building blocks. The investment in Six Sigma during earlier years continues to drive the process improvements. Efforts are on in the area of New Product Development thereby building robustness and speed for New Product Introduction. The projects for improving the Customer Satisfaction Index (CSI) directly contribute to business success. The Total Employee Involvement (TEI) program supports the drive for quality. The companys manufacturing plants located at Tumkur and Guindy are ISO 9001 certified. 7. Human Resource Development Performance and Leadership are the corner stones for HR in the organisation. Significant investment year after year is made on people through extensive training programs. The annual planning process with goal setting workshops facilitate performance standards which is supported through digitised performance management systems for evaluation. In order to encourage employees to continuously excel in their endeavour, performance linked compensation is implemented throughout the organisation. The position evaluation and value operationalisation have further built strong MR fundamentals. 8. Safety Safety of products to customers and safe manufacturing practices are critical part of our value system. Continuous training and audits are conducted during the year. We maintain our consistent track record in terms of zero reportable accidents in the factories for several years now. 9. Corporate Social Responsibility We are actively engaged in corporate social responsibilities through employees, organising medical programs, blood donation camps and village rehabilitation programs. We impart digital techniques in social transformation at schools and hospitals. Free education program and medical services are part of our consistent social commitment. In recognition of the humanitarian services, the Government of India has conferred on the Company with `Nirmal Gram Puraskar Award towards implementation of sanitation program in Thiruvidanthai. The Rotary Club of Bangalore recently conferred the Company with `Best Corporate Citizen Award. GENERAL The Directors wish to place on record their appreciation for the committed service of employees of the Company for its success. The Directors would also like to express their grateful appreciation for the assistance and co-operation received from the customers, dealer partners, bankers, financial institutions, business partners and its Group Companies TVS Investments Limited and Sundaram-Clayton Limited during the year. The Directors thank the shareholders for the continued confidence and trust placed by them with the Company. For and on behalf of the Board Chennai VENU SRINIVASAN June 28, 2006 Chairman Cautionary Statement: The Statements made in the Management Discuss/on and Analysis section of the above Report describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence Companys operations include global/domestic supply and demand conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations. Annexure `A to the Directors Report for the year ended 31st March, 2006 Statement as at 31.3.2006 pursuant to Clause 12 (Disclosure in the Directors Report) of the SEBI (ESOP & ESPS) Guidelines, 1999. Employees Stock Option Scheme 2003 (ESOP-2003) a) Options Granted : 2,11,000 options granted on 1.1.2003. b) Pricing Formula : Average of the market price quoted in the National Stock Exchange three months preceding the date of grant, rounded off to the nearest rupee. c) Options Vested : 2,05,933 d) Options Exercised : Nil e) The total no. of ordinary shares arising as a result of exercise of options : Nil f) Options lapsed : 79,000 g) Variation of terms of options : Nil h) Money realized by exercise of options : Nil i) Total no. of options in force : 1,32,000 j) (i) Details of options granted to Senior Managerial Personnel during the year : Nil (ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of options granted during the year : Nil (iii) Identified employees who were granted options, during any one year, equal to or exceeding 1 % of the issued capital (excluding outstanding warrants & conversions) of the Company at the time of grant : Nil k) Diluted earnings per share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with the International Accounting Standard (IAS 33) : Not Applicable For and on behalf of the Board Chennai VENU SRINIVASAN June 28, 2006 Chairman Notes: 1. Years of experience include experience prior to joining the company also. 2. Remuneration comprises of salary, dearness allowances wherever applicable, house rent allowance, special allowance, conveyance allowance. Contribution to Provident Fund. Super-Annuation Fund, Medical Insurance Premia, Leave travel assistance and other benefits but does not include onetime compensation paid under Voluntary Separation Scheme. 3. Besides, the above employees are entitled to Gratuity as per Rules 4. Employee Stock Options as approved by Compensation Committee in terms of SEBI (Employee Stock Opation Scheme and Employee Stock Purchase Scheme) Guidelines 1999 have been issued to certain employees of the company, 5. Terms of employment of all the employees mentioned above are contractual. 6. None of the above employees is related to any of the directors. 7. None of the employees either individually or together with spouse or children holds more than two percent of the equity shares of the company. For and on behalf of the Board Chennai VENU SRINIVASAN 28th June, 2006 Chairman Annexure C to the Directors Report Annexure C to the Directors Report for the year ended 31st March, 2006 Information as required under Section 217(1) (e) of the Companies Act, 1956. A. CONSERVATION OF ENERGY (a) Measures taken: a. Timer Units and Energy Savers have been installed to control and optimise energy consumption in most of the electrical appliances at the factories. b. Introduced new type of Motors for use with Dot Matrix Printers which saves upto 40% of the power compared to the earlier versions of the Motors. c. Introduced Optimised design in UPS to save battery discharge during no load conditions. (b) Proposed measures: a. Development of new series of Printers with energy save mode in High Speed Dot Matrix Printers. b. New design (switched mode design) to provide faster charging which improves the efficiency. B. TECHNOLOGY ABSORPTION 1. Specific areas in which R&D was carried out by the Company: i) Dot Matrix Printers * Print Heads Design and Development of new high speed 9 Wire & 24 Wire Print Heads * New carriage Motor driver 1C for 30% faster printing speeds * Design and Development of Entry level Transaction printer for small print width applications-Miniprinters * Development of new type Ribbon cassettes for non black printing applications ii) Retail Computer System * Customisation of POS system for INDIAN markets with local language content and support. iii) General: As a part of value enhancement, the company has successfully: * Completed the implementation of built in UNICODE emulation for 9 Indian Languages for its MSP 4XX series of printers. * Developed the capability to design new heat sinks for optimising the thermal performance of the print head to meet the customer requirements and exceed competitor printer specifications. 2. Future plan of action New product launches are planned this year, to offer higher value performance for our customers through in house design which meets international standards of quality and reliability. * Printers-High Speed Dot Matrix Printers and Miniprinters. * Consumables-New Print Heads and Ribbons 3. Expenditure on R&D Capital Expenditure : Rs. 128.58 Lakhs Revenue Expenditure : Rs.313.24 Lakhs Total expenditure as a percentage of total turnover : 1.70 % 4. Technology absorption, adoption and Innovations a) Efforts in brief All R&D Personnel have been trained in NPI program for new product development and also in their respective domain by experts in the field of print head manufacturing. b) Benefits derived as a result of the above efforts During the year new competencies have been built in the following areas: - New driver ICs for Bipolar stepper motor - Design of new heat sinks for print head optimisation - Design of electro magnets for optimisation of power and temperature in print head - Development of printers to meet UNICODE standards - Design of miniprinters for transaction printing segments c) Technology absorption The company has been focusing on developing in-house strengths for the design and manufacturing of printers, print heads, ribbon consumables, Keyboard and Retail Computer System. All the products developed in-house confirms to all international product quality certifications to establish the leadership position in the respective category. C. EXPORT ACTIVITIES The Company exported Un-interruptible power systems & Printers. (a) Total Forex earned : Rs. 3,675.61 Lakhs (b) Total Forex used : Rs.10,120.26 Lakhs For and on behalf of the Board Chennai VENU SRINIVASAN June 28, 2006 Chairman

Director’s Report