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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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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Director’s Report

The Board of Directors present their Twenty First Annual Report on the business and operations of the Company and the financial statements for the year ended 31st March, 2016. The Management Discussion and Analysis (MDAR) is an integral part of this report.

Financial Results

The highlights of the financial performance of the Company are as follows:

(Rs. in Lakhs)

Particulars

Year ended 31.03.2016

Year ended 31.03.2015

Sales and other income

59,503

27,103

Earnings Before Interest & Tax (EBIT)

904

985

Profit / (Loss) Before Tax (PBT) and before exceptional items

331

293

Exceptional Items / Extra-ordinary Items

213

24

Profit / (Loss) Before Tax

544

317

Profit / (Loss) After Tax (PAT)

431

229

Add: Brought forward from previous year

198

(31)

Total available for appropriations

629

198

Surplus / (Deficit) in Profit and Loss Account

629

198

Business results and key highlights of operations

For the year ended 31st March, 2016, the Company reported Sales Revenue and Other Income of Rs. 595.03 Cr as against Rs. 271.03 Cr in the previous year. Sales include Rs.135.54 Cr from Servicetec business (Previous year Rs.94.10 Cr) and Rs.299.46 Cr from Distribution service business.

The Servicetec business recorded a robust growth of over 40% in revenue and established itself as a strong player in the ‘Exclusive Branded Service Centre'' delivery model. With strategic tie-up with leading international brands, the Company operates over 60 such exclusive centres across India. The Company also focused on the ‘Repair Factory'' model where high level repair services are carried out for these brands. The Company is becoming a preferred choice for major brands in the Mobile Phones and Computers and other IT products for their warranty and repair services.

The market for Dot Matrix Printers (DMP) continued to decline given the preference for end users for new technology laser printers. However, the Company has mitigated this impact by improving POS (Point-of-Sale) business. The market for POS products is growing at a CAGR of 12% riding on the demand from retail sector. The Company focuses on customer-centric products like Thermal Printers, Scanners, Label Printers and has recorded good volume growth. Meeting customer needs through innovative products and solutions helped the Company retain market share in many of these categories. Company''s market share in dot matrix printers is strong and the business is profitable and generates valuable cash flow.

During the year, the Company forayed into ‘Distribution Services'' by tying up with one of the reputed international mobile phone manufacturers to distribute their products in India through e-commerce route. Though the revenue from this line of business is high, the margins are low due to the inherent nature of the business of distribution. The Company is building up valuable experience by distribution through leading e-commerce portals.

The e-auction business provides a robust transparent platform for various manufacturers in disposing off their scrap and surplus materials and realize good value. The Company launched a new product - ‘e-procurement'' during the year to offer integrated services to customers.

Growing the business

Our Company believes that ‘Servicetec Business'' remains the major focus in the future for profitable growth; which will come from expanding our service footprints to more cities, (Tier 2/3), where the demand for mobile phone service is increasing. The Company plans to tie up with more leading brands in computers, mobile phones and other consumer electronics products by offering warranty services through multiple delivery models. With the demand for Out-of-Warranty services increasing, we envisage to set up consumer service centre’s under ‘Multi-Brand Outlet'' (MBO) model. This will help consumers get reliable and high quality services for their devices.

In the ‘Products Business'' the Company expects the POS category to grow at 12-15% in the future, driven by expanding retail sector. Other sectors like hotels, hospitals, manufacturing also need these products for various customer applications. With the impending movement to GST, it will become mandatory for all retail establishments to generate invoices, which will help grow the category. The Company plans to launch appropriate products for various segments and also work closely with the system integrators in making our products available to the customers. The field team will also be trained to focus more on this growing category, supported by a strong inside-sales team.

MANAGEMENT DISCUSSION AND ANALYSIS

As required under Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, a detailed Report on Management Discussions and Analysis is given below:

Economy

The country topped the World Bank''s growth outlook and grew at 7.6% in 2015-16 and is expected to grow at 7-8% in 2016-17 driven by many favourable macro factors and decisive Government programs and interventions. Inflation is forecast at around 4-5% in 2016-17 helping stability in prices.

The impact of Make in India and other policy initiatives have led to increased FDI inflows. The main aim of Make in India campaign is to take the share of Manufacturing in GDP from the current 16% to over 25% by the year 2022, to create 100 million jobs by then.

Macro trends, Industry Structure and Development Retail Industry

The Indian retail industry is expected to double to $1 trillion by 2020 due to rising income, urbanization, consumer preferences etc. The retail sector witnessed high growth with organized retailing formats gaining prominence, especially in Tier 1 and Tier 2 cities.

The kirana stores will continue to be the largest contributor to value share and are likely to account for 60% share.

Small & Medium Industry

The government is leading the efforts through Make in India and Digital India initiatives to bolster the share of SME in India''s GDP to 20-25 per cent by the end of 2025. Currently, there are approximately 48 million SMEs in India, employing around 40 per cent of the country''s labour and contributing to 17 per cent of India''s GDP. The government has launched many programs to grow this sector.

Smartphone Industry

India surpassed US to become second biggest smartphone market in the world by crossing 100 million units with an annual growth rate of 15% and user base of 220 million. India manufactured mobile phone worth Rs. 54,000 crore and 20 mobile phone brands have started assembling in India. India''s mobile phone manufacturing is expected to significantly grow in excess of 50% and the premium smartphone segment growing to 5 million in 2016.

Post sales service market

The mobile and laptop repair market in India is Rs. 6000 Crore in size and is expected to grow at 20% by 2018. With the entry of global players and existence of a few organized national players in the warranty market and many unorganized players in the out of warranty segment, this market is expected to grow exponentially. Your Company envisages increasing opportunities in this space with high device growth, improved connectivity and social networking.

Payment Industry

The Payment industry in India is in transition with the entry of small finance banks, payment banks, mobile wallets, prepaid cash cards with an ultimate aim of driving financial inclusion. Debit card transactions climbed 37% CAGR over past 5 years while credit cards grew at 21% CAGR. With initiatives like Jan Dhan Yojana, Unified Payments Interface, Mobile ATM etc, big jump was seen in new accounts opening and usage of cards. Business opportunity arises from such increasing trend for cashless transaction.

E-Commerce Industry

The e-Commerce market in India is expected to quadruple to $60-70 billion over the next 5 years. Lower costs of connectivity, smartphone proliferation, improving network and logistics infrastructure, easy payment mechanism and superior value propositions are expanding the industry at a rapid pace. Your Company is well positioned to leverage these opportunities.

Outlook

a) Increasing mobile phone penetration and up trading of these devices, driven by aggressive marketing by national and international brands and service providers have expanded the need for high quality after sales services either on an exclusive basis for a brand or on multi-brand offering basis across India. Our Company has developed an excellent network of walk-in stores for reputed international brands and also of Authorized Service Partners. The quality and excellence of the service offerings through these networks have made the Company a preferred choice of the Brands which the Company expects to leverage fully for profitable growth.

b) The need for warranty and post warranty services continues to be critical for customers due to increasing sale of devices, catering to enterprises, retail trade and household sector. The entrenched experience of Our Company and the excellence of services culture developed over the years under the reputed brand ‘TVS'' should enable the Company to leverage the warranty services for the devices through multiple delivery modes like on-site, walk-in centres and repair factories.

c) Over the last few decades, the consumer appliances sector witnessed good growth and organized retail formats have gained prominence. Growing e-Commerce opportunities and increased use of debit and credit cards have ushered in an online consumer culture in India. As Indian retail sector continues to grow impressively, our Company plans to serve customers by offering products that are robust for Indian environment while providing fast and reliable service. It will leverage the touch points of sales and service partners to focus on the POS business.

d) Modern retail formats are expected to grow three fold during the next 5 years. Three key trends to drive growth in modern trade are rapid consumer evolution and up trading; supply-side improvements and positive regulatory environment. These have the potential to significantly grow Point of Sale products.

e) Unorganized retail, with flexible credit options and convenient shopping locations, will continue to dominate the retail sector. Smaller cities are likely to witness growth and retail players should gear up to tap the potential in these cities. The Company visualizes opportunity for its POS products and solutions offering value for money, in these smaller centres.

f) Micro industries are expected to make a sizeable contribution to the small and medium sized businesses. It is anticipated that IT services will be their largest overall spending category. Overall business sentiment for conventional IT hardware business remains muted. Tablets & Phablets are taking the share of PC sales. Our Company visualizes increasing opportunities for the POS products and solutions in banking and e-Governance space. IT spends are also expected to increase across various sectors like Retail, Hospitality, Manufacturing, Education, Banking Financial Services & Insurance.

Business Risks & Opportunities

The Company''s key imperative over the medium term is to sustain current revenue streams even as we build a strategic framework and drive Servicetec business leveraging the macro trends and business opportunities as described elsewhere.

Key success factors (and therefore risks) are predicated on timely execution of the plans, building the internal capabilities by attracting and retaining talent and keeping pace with technological and market changes. The Board and management of our Company are confident of proactively managing the risks.

Internal Control Systems and their adequacy

The Company ensures that all transactions are authorized, recorded and reported and has adequate internal control systems to ensure that assets are safeguarded and protected against any loss. The key processes are aligned with ISO9001:2008 system and audited periodically for compliance.

The scope and authority of the Internal Auditors are clearly defined. The findings and recommendations of the Internal Auditors are reviewed by the Audit committee of the Board on a periodical basis and necessary corrective actions by the process owners are taken.

Risk Management process

Our Company has an established sound risk management process which is overseen by the Audit Committee through a structured framework. Strategic, operational and financial risks are identified and mitigation measures are put in place by the Company and reviewed periodically.

The Company follows the policy of hedging forex risk on its imports by taking full cover.

At present, in the opinion of the Board of Directors, there are no risks which may threaten the existence of the Company.

Business Planning and Information Technology

The Company has moved applications and data base to ‘Cloud'' based server as planned at the beginning of the year. This has resulted in de-risking the storage of critical information in our own hardware. Going forward, the Company will work on upgrading the software for applications to the current level and help run the business operations in an efficient manner.

The Company introduced ‘data analytics'' during the year by capturing relevant information across various businesses. The information dash boards helped the management and operating teams to have real time information to control various processes and take pro-active steps to manage operations.

Human Resource Development

The Company has developed structured HR policies and programs in the areas of resourcing, performance management system, competency based training and development and talent management to support the current and future needs of the organization.

Leadership development is a key focus area and the Company continues to develop internal talent through structured talent assessment programs, job rotation and cross functional team assignments.

Learning & Development is another focus area wherein technical training is given to employees through Internal trainers. Employees are also encouraged to participate in external programs to acquire new skills and update their knowledge based on latest trends in the industry.

The Company continues to engage the employees through different forums. The annual Management Kick-off (MKO) meeting is organized for annual goals deployment and followed by a midyear goal alignment meeting, for review. As part of the “Awards, Recognition & Communication” (ARC) program, the Company recognizes the employees for their exceptional performance throughout the year.

Safety

Safety training and safety audit are frequently conducted which enables the Company to maintain accident free performance at the Factories for several years.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) activities have been embedded in the value system of the Company for many decades. The Company continues to be actively engaged in CSR initiatives for development of the society through partnerships and continued to focus on to helping lesser privileged communities in areas like education, health & hygiene, culture & heritage and actively participated in other welfare projects.

The provisions of Section 135 of the Companies Act, 2013 is not applicable to the Company and hence there was no requirement to constitute a CSR Committee, although the board periodically engages in CSR agenda of the Company. During the year, the Company undertook the following initiatives and also encouraged our employees to participate in various CSR activities.

Chennai floods:

Chennai witnessed unprecedented rains during the month of December 2015 resulting in partial damage/ full washout of house hold items of some of our employees. As an organization, employees volunteered and contributed their one day basic salary to extend possible support and an equal amount was contributed by the Company. The Company provided food and relief materials to hundreds of affected people in the relief camps.

“Project SAHAAI”

Under the guidance of the management, around 40 employees volunteered to support the initiative of rehabilitating the flood hit “Micro Entrepreneurs” around the ecosystem and around 120 “Micro Entrepreneurs” were put back on to each of their respective businesses in a week''s time. These include petty shops, small ironing outfits, cycle repair shops and road side vendors.

During the year, the Company extensively conducted eye camps, health and hygiene, education support and provided infrastructure support to the schools.

Cautionary Statement:

Statements in the Management Discussion and Analysis Report describing the Company''s objectives, projections, estimates and expectations may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company''s operations, include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets, changes in Government regulations, tax laws and other statutes and incidental factors.

Code of Business Conduct and Ethics

The Board of Directors at their meeting held on 5th November 2014 approved the Code of Business Conduct and Ethics (Code) in terms of Schedule IV of Companies Act, 2013 and as per listing regulations. All the members of the Board and senior management personnel have confirmed compliance with the Code for the year ended 31st March, 2016. The Annual Report contains a declaration to this effect signed by the Managing Director and Company Secretary as Compliance Officer for the Code. The Code is available on the Company''s Website www.tvs-e.in.

Vigil Mechanism / Whistle Blower policy

The Company has established a vigil mechanism, which is overseen by the Audit Committee. The Chairman of the Audit Committee has been appointed as the Ombudsman of the Vigil mechanism. The policy provides a formal mechanism for all directors, employees to report to the management, their genuine concerns or grievances about unethical behaviour, actual or suspected fraud and any violation of the Company''s Code of Business Conduct and Ethics policy. The Company has also provided direct access to the Chairman of the Audit Committee on reporting issues concerning Company. The Policy is available on the Company''s Website www.tvs-e.in.

Prevention of Insider Trading

The Company has complied with the provisions of SEBI (Prevention of Insider Trading) Regulations, which is to be complied with effect from 15th May, 2015. The Company has adopted Fair Practices Code (FPC) as per the regulations. The Board and the designated employees of the Company have confirmed compliance with the FPC as applicable as on 31st March 2016. Code of Conduct for Insider Trading Regulation and the Fair Practices Code are available on the Company''s Website www.tvs-e.in.

Holding Company

Sundaram Investment Limited, our Promoter Company has changed its name to TVS Investments Limited, which was approved by the Registrar of Companies with effect from 2nd May 2016. The Promoter Company holds 60.15% as on 31st March 2016 (previous year 61.92%).

Subsidiary Company

Prime Property Holdings Limited (PPH), is the Company''s Wholly Owned Subsidiary, which holds 100% of 50,000 Equity Shares of the Company at Rs.10/- each.

The Board of Directors of the Company have approved a Scheme of Amalgamation of PPH with the Company, under Sections 391-394 of Companies Act, 1956 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. [SEBI( LODR) Regulations] The Appointed Date for amalgamation is fixed on 1st April, 2016. The Scheme will be subject to the approval of the Honourable High Court of Madras. The Company is in the process of filing necessary applications with the concerned statutory authorities.

Consolidated Accounts

The accounts of the subsidiary Company, Prime Property Holdings Limited are consolidated with the accounts of the Company in accordance with the provisions of Section 129 of the Companies Act, 2013 and Regulation 33 of SEBI (LODR) Regulations, 2015 and Accounting Standard 21 (AS 21) prescribed by The Institute of Chartered Accountants of India. The consolidated accounts duly audited by the Statutory Auditors and the consolidated financial information forms part of the Annual Report.

The Company does not have any associate or joint venture companies.

A Statement under Section 129(3) of the Companies Act, 2013 in Form AOC-1 is enclosed as Annexure A.

The Annual Accounts of PPH and related detailed information will be available for inspection by the shareholders at the Registered Office of the Company and the PPH and will also be made available to the shareholders upon request.

Dividend

Considering the current financial position of the Company, the Directors do not propose any dividend for the financial year ended 31st March, 2016.

Extract of Annual Return

The details of the Extract of Annual return is enclosed as Annexure B.

Number of Board Meetings

The Board of Directors met four times during 2015-16. The details of the Board Meetings and the attendance of the Directors are provided in the Corporate Governance Report.

Changes in the Share Capital

The paid up share capital of the Company as on 31st March 2016 is Rs.18,55,28,180/- consisting of 1,85,52,818 Equity Shares of Rs.10/- each. During the year, Company allotted 5,30,000 Equity shares of Rs.10/-each to a Non Executive Non Independent Director of the Company, pursuant to his exercise of stock options, in terms of the Employees Stock Option Scheme, 2011.

Particulars of Loans, Guarantees or Investments

During the year, the Company gave an unsecured loan of Rs.1.50 Cr to Prime Property Holdings Limited, its Wholly Owned Subsidiary, to enable them to meet the advance tax obligations and to pursue a new investment opportunity. The said inter corporate deposit carries an interest rate of 12.15% and is repayable before 31st March 2017.

The Company has not given any guarantees or provided any security in connection with any loan to any other body corporate or person covered under the provisions of Section 186 of Companies Act 2013.

The details of investments made by the Company are given in the financial statements.

Related Party Transactions

All the related party transactions entered in to are on ‘arm''s length'' basis and in the ordinary course of business and are in compliance of the provisions of the Companies Act, 2013 and the SEBI (LODR) Regulations. None of the transactions are in the nature of having any potential conflict with the interest of the Company at large. There were no material related party transactions during the year.

Omnibus approvals are obtained for related party transactions which are repetitive in nature. In respect of unforeseen transactions, specific approvals are obtained. All related party transactions are approved / reviewed by the Audit Committee on a quarterly basis, with all the necessary details and are presented to the Board and taken on record.

The details of transactions with related parties are provided in the financial statements.

The Related Party Transactions policy as approved by the Board is uploaded on the Company''s website at www.tvs-e.in

Directors

Retirement by Rotation

Ms. Srilalitha Gopal (DIN: 02329790), Director retires by rotation at the ensuing Annual General Meeting of the Company under Section 152(6) of the Companies Act, 2013 and being eligible offers herself for re-appointment. The Board recommends her re-appointment.

Appointment of Non Executive Non Independent Director

Mr. R S Raghavan (DIN 00260912) was appointed as an Additional Director (Non Executive Non Independent) under Section 161 of Companies Act, 2013 with effect from 4th May 2016, to hold office up to the date of the ensuing Annual General Meeting. The Company has received a notice under Section 160(1) of Companies Act, 2013 from a member proposing his appointment as a Director. A brief resume of Mr. R S Raghavan has been furnished in the Notice convening the Annual General Meeting.

Independent Directors

All independent Directors hold office for a fixed period of five years and are not liable to retire by rotation. An Independent Director representing small shareholder hold office for a period of 3 years. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 16 (1) (b) of the SEBI (LODR) Regulations. The terms of appointment of Independent Directors are available in the Company''s web site www.tvs-e.in.

Separate Meeting of Independent Directors

A separate meeting of Independent Directors for the year 2015-16 was held on 6th May 2015. The Independent Directors actively participated and provided guidance to the Company in all it spheres.

Woman Director

In terms of Section 149 of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014 and Regulation 17 of the SEBI (LODR) Regulations, the Company has appointed Ms. Srilalitha Gopal (DIN: 02329790) who is serving on the Board of the Company, since the year 2011.

Chief Executive Officer

Mr. Prakash Katama, Chief Operating Officer, was appointed as the Chief Executive Officer of the Company with effect from 4th May 2016. He is an accomplished professional in Global Supply Chain Practices, with strong leadership and general management skills. His leadership will help the Company achieve its ambitious growth targets and catalyze its transformation into a customer services and solutions business. He is an Industrial Engineer with a degree from University of Texas, Austin, and played a significant role in setting up Nokia''s Indian operations. He is designated as a Key Managerial Person under Section 203 of Companies Act, 2013.

As part of Mr. Katama''s joining terms, Company agreed to invest through its subsidiary Company, Prime Property Holdings Limited (PPH) in Benani Foods Private Limited (BFPL), a Ready to Cook venture promoted by Mr. Katama and his associates The Company and PPH helped BFPL strengthen its leadership team and finance its growth through this investment. PPH has nominated a director to the Board of BFPL. This was done to ensure that Mr. Katama devotes his full time and efforts to Company and consequently he has since resigned from Board of BFPL.

On a standalone basis, this investment in BFPL is expected to do well, given its products profile which has appeal among the growing urban middle-class

Key Managerial Personnel

Mr. K E Ranganathan (DIN 00058990), Managing Director, Mr. Prakash Katama, Chief Executive Officer and Ms. S Nagalakshmi, Company Secretary and Compliance Officer are the Key Managerial Personnel of the Company under the provisions of the Companies Act, 2013.

Evaluation of the Board''s performance

The Board has carried out an evaluation of its own performance, and that of its directors individually and the sub committees of the Board. The manner in which the evaluation has been carried out is explained in the Corporate Governance report.

The Company has also devised a Policy on Board Diversity detailing the functional, strategic and structural diversity of the Board.

Remuneration Policy

The Company has adopted a Remuneration Policy of Directors and senior management personnel, detailing inter alia the procedure for Director''s appointment and remuneration including criteria for determining qualification.

The Policy ensures that (a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the Company successfully; (b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and (c) remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The Policy has been approved by the Nomination and Remuneration Committee and the Board. The Remuneration Policy document as approved by the Board is available on the Company Website www.tvs-e.in.

Statutory Auditors

The Company at the Annual General Meeting held on 4th September, 2014, appointed M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai (Registration No.004207S) as the statutory auditors of the Company, to hold office for the transitional period of three consecutive years, from the conclusion of the said Annual General Meeting, subject to ratification at every Annual General Meeting, at such remuneration in addition to service tax, out of pocket expenses, travelling and other expenses as may be approved by the Board of Directors of the Company.

It is proposed to re-appoint them as statutory auditors for the final year in the transitional period of three consecutive years, from the conclusion of this Annual General Meeting, subject to ratification by the members. The Company has obtained necessary certificate under Section 141 of the Companies Act, 2013 conveying their eligibility for re-appointment as statutory auditors of the Company for the year 2016-17. In terms of the SEBI (LODR) Regulations, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

Explanation to remarks in the Independent Auditors Report

1. With reference to the basis of qualified opinion, in the Independent Auditors report, Board wishes to state that the unsecured loan of Rs.1.50 Cr given to Prime Property Holdings Limited, (PPH) was to meet its advance tax obligations and to pursue a new investment opportunity. The Company has been advised by its legal counsel that utilization for the said purpose can be considered as utilization for the purpose of principal business activity of the subsidiary.

2. With reference to the remark made by the Auditors in para 10 of Annexure - 1, the Board wishes to state that the theft of mobile sets and the defalcation of cash were detected through internal fraud detection mechanism available in the Company. Since then, the Company has further strengthened the internal procedures as to verification of cash balances and monitoring control over quantities of mobile sets to avoid recurrence of such events.

Internal Auditors

The Company has appointed M/s. Grant Thornton India LLP, as Internal Auditors for the year 2016-17.

Cost Auditors

In terms of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audits) Rules, 2014, printers manufactured by the Company and falling under the specified Central Excise Tariff Act heading are covered under the ambit of mandatory cost audits from the financial years commencing on or after 1st April 2015.

The Audit Committee recommended and the Board of Directors appointed Mr. P Raju Iyer, Cost Accountant, Chennai as the Cost Auditor of the Company, to carry out the cost audit for 2016-17. The Company has also received the consent from Mr. P Raju Iyer for his appointment. A sum of Rs.1.50 Lakhs plus service tax, has been fixed by the Board of Directors in addition to the reimbursement of out of pocket expenses and is required to be ratified by the members at the ensuing Annual General Meeting as per Section 148(3) of Companies Act, 2013.

Secretarial Auditors

The Company appointed M/s. S Krishnamurthy & Co., Practicing Company Secretaries, Chennai to carry out Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report for the financial year 31st March, 2016 is enclosed as Annexure C.

The Board has appointed M/s. S Krishnamurthy & Co., Practicing Company Secretaries, Chennai as the Secretarial Auditors for the financial year 2016-17. Necessary consent has been received from them to act as Secretarial Auditors.

Clarification to the observations in the Secretarial Audit Report

The Secretarial Auditors Report for the year 2015-16 contains an observation that the Company is yet to appoint Chief Financial Officer. The Company has a Business Finance Controller, who is currently discharging the functions of Chief Financial Officer. The Company has shortlisted a few candidates and the recruitment is in the final stages of completion.

Employee Stock Option Plan

During the year, 3,00,000 stock options were granted under the Employees Stock Options Scheme 2011, to an employee of the Company. These options were issued at Rs.10/- per Equity Share and be allotted one Equity Share of the Company of the nominal value of Rs.10/- per Equity Share on payment of exercise price during the exercise period, subject to the criteria to be determined by the Nomination and Remuneration Committee of the Company. The current position of the Stock Options granted under Employees Stock Option Scheme 2011 are provided in this Report as Annexure D.

Credit Rating

During the year 2015-16 Brickwork Ratings India Private Limited has upgraded the Company''s Credit Rating from ‘BBB'' to ‘BBB ''. The Company has informed the Stock Exchanges accordingly.

Transfer to Investor Education and Protection Fund

The details of transfer to Investor Education and Protection Fund is provided in the Corporate Governance Report forming part of this Annual Report.

Particulars of Employees and related disclosures

The particulars of the employees covered by the provisions of Section 197 (12) of Companies Act, 2013 and the rules there under forms part of this report. However, as per the provisions of Section 136(1) of Companies Act, 2013, the annual report is being sent to all the members excluding this statement. This will be made available for inspection at the registered office of the Company during working hours.

Other particulars pursuant to Section 197(12) of Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

S.

No.

Name

Designation

Ratio to Median Remuneration

% increase in Remuneration

1

Gopal Srinivasan

Chairman

NA

NA

K E Ranganathan

Managing Director

1:34

Nil

D Sundaram

NENID

NA

NA

Srilalitha Gopal

NENID

NA

NA

Kenneth Tai

NEID

NA

NA

R Ramaraj

NEID

NA

NA

Praveen Chakravarty

NEID

NA

NA

Dr. Nagendra Palle

NEID

NA

NA

M. Lakshminarayan (from 06 05 2015)

NEID

NA

NA

M F Farooqui (from 06 05 2015)

NEID

NA

NA

Narayan K Seshadri (from 06 05 2015)

NENID

NA

NA

S Nagalakshmi

Company Secretary

NA

30%

2

Percentage Increase in the median remuneration of employees in the financial year

10.36%

3

The number of permanent employees in the rolls of the Company

421

4

Explanation in relationship between average increase in remuneration and Company performance

Company performance PBT increase

72%

Average increase in remuneration

11%

5

Comparison of the remuneration of the KMP and Company performance

Percentage increase in KMP remuneration

30%

6.

Variations in the market capitalization of the Company, Price Earnings Ratio of the Company as at the closing date as at 31st March 2016 and the previous financial year and percentage increase / decrease in the market quotations of the shares of the Company as compared to the rate at which the Company came out with last public offer:

Particulars

2014-15

2015-16

Increase / Decrease

No. of Shares

1,80,22,818

1,85,52,818

5,30,000

Share Price (in Rs.)

BSE

32.90

102.25

210.79%

NSE

34.45

102.20

196.66%

EPS (in Rs.)

1.17

2.26

93.16%

PE Ratio (based on audited results)

29.44

45.22

53.60%

Company’s Market Cap (Rs. in Lakhs)

6,208.86

18,960.98

205.39%

The Company has not made any public offer till date, since its incorporation. Its shares were listed on Stock Exchanges due to a scheme of amalgamation of the erstwhile listed Company, namely TVS Electronics Limited sanctioned by the Hon''ble High Court of Madras vide its Order dated 5th August, 2003.

7.

Average percentile increase in the salaries of employees other than the managerial personnel during the year 2015-16 was 11% and for the managerial personnel was 16%.

8.

The key parameters for any variable component of remuneration availed by the Directors: Except for Mr. K E Ranganathan, Managing Director, none of the other directors have been paid any remuneration except sitting fees.

9.

The ratio of remuneration of the highest paid Director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year - Not applicable

10.

It is hereby affirmed that the remuneration paid is as per the Remuneration Policy of the Company.

E-Waste Management

The Company is well ahead in terms of e-waste management compliance directed by Government of India with effect from 1st May, 2012. The Company has registered and authorized collection, storage and disposal centres in the required locations and has complied with the statutory requirements relating to E-Waste Management.

Report on energy conservation, technology absorption, foreign exchange and research and development

Information relating to energy conservation, technology absorption, foreign exchange earned and spent and research and development activities undertaken by the Company in accordance with the provisions of Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 are given in Annexure E to the Board''s Report.

Corporate Governance

Pursuant to Regulation 34(3) read with Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, a Management Discussion and Analysis Report and a Corporate Governance Report are made part of this Annual Report.

A Certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to this Report.

Public Deposits

The Company has not accepted any deposits from the public within the meaning of Sections 73 to 76 of the Companies Act, 2013 for the year ended 31st March, 2016.

Other laws

During the year under review, the Company has not received any complaint of sexual harassment from any of the women employees of the Company in terms of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Awards and Recognitions

During the year, the Company has been awarded:

i) Kalinga Digital Media Private Limited Award for Top 100 Most Trusted Company 2015

ii) First Data Appreciation Award 2015

iii) DELL Appreciation Award for Outstanding Performance and Lasting Contribution in Onsite Services 2015

iv) Lenovo India Services Award 2015

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, cost and secretarial auditors and external consultants, advisors of the Company 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.

In terms of Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, further confirm:

i) that in the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed and that there were no material departures;

ii) that they 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 31st March, 2016 and of the profits of the Company for the year under review;

iii) that they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that they had prepared the annual accounts for the year ended 31st March, 2016 on a “going concern” basis;

v) that they had laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and were operating effectively;

vi) that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

The Directors wish to place on record their appreciation for the committed service of all the employees.

The Directors would also like to express their grateful appreciation for the assistance and co-operation received from the customers, dealer partners, business partners, bankers and its holding companies TVS Investments Limited (Formerly Sundaram Investment Limited) and T.V.Sundram Iyengar & Sons Private Limited.

The Directors thank the Shareholders for the continued confidence and trust placed by them in the Company.

For and on behalf of the Board

Chennai Gopal Srinivasan

4th May, 2016 Chairman

Director’s Report