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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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BSE Live

Feb 24, 12:22
107.00 1.65 (1.57%)
Volume
AVERAGE VOLUME
5-Day
8,828
10-Day
8,547
30-Day
10,339
4,165
  • Prev. Close

    105.35

  • Open Price

    108.95

  • Bid Price (Qty.)

    106.80 (153)

  • Offer Price (Qty.)

    107.00 (26)

NSE Live

Feb 24, 12:22
107.00 1.70 (1.61%)
Volume
AVERAGE VOLUME
5-Day
72,835
10-Day
63,656
30-Day
58,149
19,177
  • Prev. Close

    105.30

  • Open Price

    103.00

  • Bid Price (Qty.)

    107.00 (211)

  • Offer Price (Qty.)

    107.40 (6)

Annual Report

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Director’s Report

The Directors are pleased to present the Thirteenth Annual Report and the audited accounts for the year ended 31st March, 2008. This report include the Management Discussion and Analysis. FINANCIAL RESULTS The highlights of the financial performance of the Company are as follows:- (In lakhs) Particulars Year ended Year ended 31st March, 2008 31st March, 2007 Sales 20764.02 27241.80 Other Income 764.56 472.04 Sales and other income 21528.58 27713.84 Earnings Before Interest & Tax (EBIT) 533.97 949.73 Profit/ Loss Before Tax (PBT) before extraordinary items (69.31) 185.63 Income from Extraordinary Items (Net) 1559.65 Profit Before Tax 1490.34 185.63 Add/(less) Deferred Tax written back 38.23 101.24 Less : Provision for Tax 223.00 101.11 Investment allowance 27.46 Profit After Tax (PAT) 1278.11 185.76 Profit brought forward from previous year 645.64 614.96 Add / (Less): Tax relating to earlier years (168.14) Total available for appropriations 1755.61 800.72 - Proposed Dividend 176.73 132.55 - Tax on Dividend 30.03 22.53 - Transfer to General Reserve - - Surplus in Profit and Loss account 1548.85 645.64 The current year financial figures are not comparable due to changes in business configuration as detailed below. The comparable numbers in terms of Net Sales and Earnings before Interest and Tax are as under:- (In lakhs) Year ended Year ended 31st March, 2008 31st March, 2007 (A) Net Sales reported 20764 27242 Less : Net Sales from discontinued businesses during the year* 1335 8645 Net Sales from continuing business 19429 18597 (B) EBIT reported 534 950 Less: EBIT from discontinued businesses during the year (390) 162 EBIT from continuing business 923 788 Growth from continuing business in terms of sales during the year has been 4.5%, while in terms of profitability the growth in EBIT has been 17% Income from Exceptional items during the year represents income arising out of sale of the Companys CMS Business at Tumkur to INCAP Contract Manufacturing Services Private Limited, Bangalore on 31st May 2007, net of expenses incurred on such Sale. Pursuant to the approval of the shareholders through postal ballot on 9th April 07, the Company has transferred its erstwhile Contract Customer Support business (CCS) to TVS-E Servicetec Ltd at cost effective from 1st July07. DIVIDEND The Directors are pleased to recommend dividend of Re 1.00 per share for the financial year ended 31st March 2008. The dividend if approved by shareholders, would absorb Rs. 176.73 lakhs (excluding taxes) and be paid to all the equity holders, whose names appear in the Register of Members of the Company as on 21st Aug 2008 (beginning of the day) in case of shares held in electronic form and as on 5th September, 2008 in respect of shares held in physical form. REVIEW OF PERFORMANCE The companys core business is manufacture, sale and distribution of printers, supplies, keyboards, POS and solution products. The company has restructured its business last year. The products on comparison (excluding components and set top boxes) to last year registered a 3% growth with revenue of Rs. 183.4 Crores during the year as against Rs. 177.6 Crores during the corresponding period in previous year. The market share in terms of value for Dot Matrix Printers was at 37.0% on an average during the year as compared to 35.5% during the corresponding period in previous year. Volume share went up from 35.7% to 37.3%. Key board business grew by 11% and supplies business by 16%. During the year, a series of new products were launched especially in the Point of Sale category and key boards. During the year under review, the process efficiencies were driven hard to yield substantial cost savings of Rs 5.7 Crores and reduction of working capital. This enabled the business to sustain its profitability in a fiercely competitive market. FINANCE: During the year under review, the company has restructured its debts and reduced the borrowing substantially over Rs. 43 Cr. This will help your company in reducing the finance cost and improve the capital structure in future. BUSINESS RESTRUCTURE Pursuant to the decision of the board to restructure the business and to divest the non core activities, following actions have been taken; A. Sale of Contract Manufacturing Services business; B. Transfer of Contract Customer Support business, and C. Sale of non core investment CONTRACT MANUFACTURING SERVICES (CMS) BUSINESS As stated last year, the CMS division of the company operating at Tumkur together with all its assets and business was transferred and sold for a total consideration of RS 42.42 Cr on May 31, 2007. CONTRACT CUSTOMER SUPPORT (CCS; BUSINESS The erstwhile CCS Business of the company, was transferred at cost to the then wholly owned subsidiary company, TVS-E Servicetec Limited on 1st July 2007. TRANSFER SALE OF INVESTMENTS The shareholdings in TVS-E Servicetec Limited were transferred to TVS Investments Limited on 11 Oct 2007 at par. The entire shareholdings in TVS Finance and Services Limited was also sold at cost to TVS Investments Limited. A part of the shareholdings in Modular Infotech Private Limited was also transferred at par to TVS Investments Limited. OPERATIONS The focus will be on (a) driving leadership position in the dot-matrix printer market; (b) growing key boards and supplies business and (c) establishing Point of Sale (POS) products business. POS has the potential to be the growth engine for TVS-E and is being resourced accordingly. During the year, a new plant was set-up at Sela Qui, near Dehradhun, Uttarkhand. Within a short period, the plant scaled up to reach the planned capacity. The company also established a UNIT II near the plant, in Uttarakhand and has moved the production lines from Kala Amb, Himachal and also Guindy, Chennai. This will facilitate consolidation of products and reduction in cost. Eventually the manufacturing operations at Kala Amb, Himachal and Guindy, Chennai will cease. DEPOSITS The Company has not accepted any fresh deposits and renewals during the year under review. Unclaimed deposits amounting to Rs. 46,000 at the end of 31st March 2008 will be credited to Investor Education Protection Fund, with interest thereon. DIRECTORS Mr. Gopal Srinivasan, Whole-time Director relinquished the position on 22nd April 2008. However, he continues to be a Director on the board. The board places on record its appreciation for the significant contributions and leadership provided by Mr. Gopal Srinivasan to the company. Mr. H. Lakshmanan and Mr S. R.Vijayakar Directors retire by rotation at the ensuing annual general meeting, and being eligible, offer themselves for re-appointment. Mr. R. Ramaraj was appointed as an additional director and will hold office till this Annual General Meeting. Notice has been received from one of the members of the Company under Section 257 of the Companies Act, 1956 along with requisite deposit signifying his intention to propose the candidature of Mr R. Ramaraj for appointment as Director. Necessary resolutions are being placed before the members for approval. MANAGER Mr. M. Somasundaram, has been appointed as Manager under the Companies Act 1956 with the designation of Executive Vice President of the Company for a period of 3 years effective April 1, 2008. The necessary resolution in this regard will be placed at the ensuing Annual General Meeting of the Company for approval by the shareholders. SUBSIDIARY COMPANIES During the year under review, as part of restructuring the business, the entire shareholding in Sravanaa Properties Limited was transferred to TVS Capital Funds Limited on 11 Oct 2007. The company also promoted Tumkur Property Holdings Limited and Prime Property Holdings Limited on 24th Oct 2007 and 9th Nov 2007 respectively to acquire the non core assets at Tumkur and Chennai. The reports and accounts of the subsidiary companies Viz. Prime Property Holdings Limited and Tumkur Property Holdings Limited (consolidated) along with the statement pursuant to section 212 of the Companies Act, 1956 are attached. 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-appointrrent EMPLOYEE STOCK OPTION PLAN 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) in 2003 1,60,000 options granted to ten employees lapsed on account of their resignation. 51000 stock options are still in force as at March 31, 2008 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 at 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, 2008. 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, 1993 are set out in Annexure A to this Report. The Board considered issue of ESOP / ESPP to the employees and have empowered at Remuneration / Compensation Committee of the Board to decide and recommend. 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 are set out in the Annexure B to the Directors Report. REPORT ON ENERGY CONSERVATION AND R&D ACTIVITIES 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 Sec. 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 As required by Sec.217(2AA) of the Companies Act, 1956, the Directors hereby state: i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; ii) that 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 the state of affairs of the company at the end of the financial year (namely 31st Mach 2008) and of the profit and loss of the company for that period; iii) that 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) that 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, a Management Discussion and Analysis Report and a Corporate Governance Report are made a part of this Annual Report. In compliance with Sec 292A of the Companies Act 1956 read with the Listing Agreement the Company has set up an audit committee with Mr. Srini Nageshwar, Mr. S R Vijayakar, Mr. H Lakshmanan and Dr Sridhar Mitta as its Members. 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. A certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated by Clause 49 of the listing agreement is attached to this report. MANAGEMENT DISCUSSION AND ANALYSIS As required under Clause 49 of the Listing Agreement, a detailed Report on Management Discussions and Analysis is given below: A. The Industry and Trends The Indian IT market grew by 22% in 2007 driven by 20% growth from PC industry, 4% growth Printer market which is expected to grow at 9% in 2008. DMP market was 0.4 3 million units, 8% decline from the previous year. Transaction printing is growing at a healthy rate - driven by high investments in retail automation, expansion of con; banking solutions by all the major banks. The retail sector at 43% clocked the highest growth in IT in 2007-08 followed by the Utility sector. With entry of several organized players in the Retail industry and acceleration of automation by existing players, IT spend by Retail is expected to grow at healthy rate. DQ - IDC Mega users survey predicts a growth of 36% in IT spend by retail. IT spend by Banking, Insurance and Government are expected to continue at healthy rates. Growth of retail and increased IT spend by the industry throws up large opportunity for the company in the Point of Sale product category and solutions space in Banking and E-governance sphere. B. Review of Performance Our Transaction products & solutions business group, which includes the dot matrix printers, key boards, Point of Sale products and supplies, grew by 3.2% to Rs.183.4Crs. Market share of our company in DMP category went up from 35.7% to 37.3% in volume terms during the year. Keyboard business grew by 11% and supplies by 16%. We entered the Point of Sale category with mini dot- matrix printer in second half of the year. Subsequently we have expanded the product portfolio to include thermal printers, bar code readers and electronic cash registers. A separate sales channel is being set up to realize the full potential of the business. DMP category is being revitalized with own designed high speed printers and refreshing of existing models with USB. On the operations side, we have commissioned a new factory at Uttarakhand. Continued focus on Total Cost Management (TCM) yielded Rs 5.7 Crores, which enabled the business to be profitable in a competitive environment. C. Risks & Opportunities DMP category, which accounts for substantial part of the revenue of the business, is not growing due to applications migrating to alternate technologies. Our company intends to counter this through (a) driving leadership share in the category; (b) focusing on POS products, which are growing at 40% + ; (c) participating in the laser market through remanufactured laser toner and (d) exploiting export opportunities for DMP and key board. Price erosion and the commodity cost increase are the other two threats which can erode the profitability of the business. We have a robust Total Cost Management program which pro-actively addresses these threats. D. Internal Control Systems & their adequacy During the year the company has embarked on identification of key risks and safe guards / measures as a part of risk management framework. The Audit Committee of the board reviews the findings and recommendations of the interal audit reports periodically. The company has appointed V. Sankar Aiyer & Company, Chartered Accountants as Internal Auditors to carry out both concurrent and internal audits, which will help us to deploy adequate safe guards to mitigate the risks. E. Business Planning and Information Technology The Companys business planning system with strong ownership and involvement include medium term strategy formulation, annual and quarterly plans and periodic reviews which helps TVS-E Operating System (TOS to achieve its goals. F. Quality Management The Company has a TQM vision with a strong focus on essential building blocks. An exhaustive action plan lias been drawn up to improve the customer satisfaction significantly covering both product quality and postseles support. These initiatives are supported by Total Emplo/ee Involvement (TEI) programs. The Comparys manufacturing plants located at HP, Guindy and Uttarakhand are ISO 9001 certified. G. Human Resource Development Performance and Leadership are the corner stones for HR in the organization. Significant investment year after year is made on people through extensive training & development programs. Good amount of time & money have been invested to drive & embrace Change management processes across the Organization that will encourage people to go after the set directions and deliver future business plans. The annual planning process with goal setting workshops facilitate performance standards which is supported through digitized performance management systems for evaluation. In order to encourage employees to continuously excel in their endeavour, new policy on performance linked compensation is implemented throughout the organization. The position evaluation and value operationalization have further built strong HR fundamentals based on which Career progression plans are being developed through Session C process for the top talents. H. 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. I. Corporate Social Responsibility The company is actively engaged in social welfare activities through employees, organizing medical Programs like Eye Screening, health check for poors and under privileged , blood donation camps and village rehabilitation programs. The company also engaged in using digital techniques in social transformation at schools and hospitals. Free education programs and support are also part of our consistent social commitments. GENERAL The Directors wish to place on record their appreciation for the committed service of employees for its growth. 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 July 22, 2008 Chairman

Director’s Report